---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 20-F





| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------------------



or



|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the year ended December 31, 2011

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from 
or



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------



Date of event requiring this shell company report



Commission
file number: 001-33799



EXCEED COMPANY LTD.

(Exact name of Registrant as specified in
its charter)



N/A

(Translation of Registrant’s name
into English)



British Virgin Islands

(Jurisdiction of incorporation or organization)



Unit F, 24/F, China Overseas Building

139 Hennessy Road, Wanchai

Hong Kong

(Address of principal executive offices)



Tai Yau Ting

Unit F, 24/F, China Overseas Building

139 Hennessy Road, Wanchai

Hong Kong



Tel: 852 2153 2771

(Name, Telephone, E-mail and/or Facsimile
Number and Address of Company Contact Person)



Securities registered or to be registered
pursuant to Section 12(b) of the Act:



|(Title of each class)                            | (Name of each exchange on which registered)
|------------------------------------------------ | -------------------------------------------
|Ordinary shares of par value US$0.0001 per share | The NASDAQ Global Select Market            



Securities registered or to be
registered pursuant to Section 12(g) of the Act:

None



Securities for which there is
a reporting obligation pursuant to Section 15(d) of the Act:

None



Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report: 29,436,060 ordinary shares,
par value US$0.0001 per share.



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 ̈
Yes  þ No



If this report is an annual or transaction
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

 ̈
Yes þ No



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

þ
Yes   ̈ No



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

 ̈
Yes   ̈ No



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

(check one):

 ̈
Large accelerated filer þ Accelerated filer  ̈
Non-accelerated filer



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing.

 ̈
U.S. GAAP þ International Financial Reporting Standards as issued by the International
Accounting Standard Boards   ̈ Other



If “Other” has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 ̈
Item 17   ̈ Item 18



If this is an annual report, indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 ̈
Yes  þ No











TABLE OF CONTENTS



|PART I    |  |                                                                              |  | 4 
|--------- |  | ---------------------------------------------------------------------------- |  | --
|          |  |                                                                              |  |   
|Item 1.   |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                        |  | 4 
|Item 2.   |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |  | 4 
|Item 3.   |  | KEY INFORMATION                                                              |  | 4 
|Item 4.   |  | INFORMATION ON THE COMPANY                                                   |  | 19
|Item 4A.  |  | UNRESOLVED STAFF COMMENTS                                                    |  | 33
|Item 5.   |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |  | 33
|Item 6.   |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |  | 54
|Item 7.   |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |  | 58
|Item 8.   |  | FINANCIAL INFORMATION                                                        |  | 60
|Item 9.   |  | THE OFFER AND LISTING                                                        |  | 61
|Item 10.  |  | ADDITIONAL INFORMATION                                                       |  | 62
|Item 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 69
|Item 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 70
|          |  |                                                                              |  |   
|PART II   |  |                                                                              |  | 71
|          |  |                                                                              |  |   
|Item 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 71
|Item 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 71
|Item 15.  |  | CONTROLS AND PROCEDURES                                                      |  | 71
|Item 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 71
|Item 16B. |  | CODE OF ETHICS                                                               |  | 72
|Item 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 72
|Item 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  | 72
|Item 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  | 72
|Item 16F. |  | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                 |  | 73
|Item 16G. |  | CORPORATE GOVERNANCE                                                         |  | 74
|          |  |                                                                              |  |   
|PART III  |  |                                                                              |  | 75
|          |  |                                                                              |  |   
|Item 17.  |  | FINANCIAL STATEMENTS                                                         |  | 75
|Item 18.  |  | FINANCIAL STATEMENTS                                                         |  | 75
|Item 19.  |  | EXHIBITS                                                                     |  | 75



2







CONVENTIONS WHICH APPLY TO THIS FORM



Except where the context otherwise requires
and for purposes of this form only:



| | · | “Acquisition” refers to the purchase by 2020 Chinacap Acquirco, Inc., or 2020, and Exceed of all the issued and
outstanding ordinary shares of Windrace pursuant to a sales and purchase agreement dated May 8, 2009;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “business combination” refers to the completion of the Acquisition, which was effective on October 21, 2009;
| | - | ------------------------------------------------------------------------------------------------------------



| | · | “China” or “PRC” refers to the People’s Republic of China;
| | - | ----------------------------------------------------------



| | · | “Elevatech” refers to Elevatech Limited;
| | - | ----------------------------------------



| | · | “Exceed” refers to Exceed Company Ltd.;
| | - | ---------------------------------------



| | · | “IFRS” refers to International Financial Reporting Standards;
| | - | -------------------------------------------------------------



| | · | “RichWise” refers to RichWise International Investment Group Limited;
| | - | ---------------------------------------------------------------------



| | · | “we”, “us”, “our Company” and “our” refer to Windrace and its consolidated
subsidiaries prior to the Acquisition and Exceed and its consolidated subsidiaries following the Acquisition;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Windrace” refers to Windrace International Company Limited;
| | - | ------------------------------------------------------------



| | · | “XDLong China” refers to Xidelong (China) Co. Ltd.;
| | - | ---------------------------------------------------



| | · | “XDLong Fujian” refers to Fujian Xidelong Sports Goods Co., Ltd.;
| | - | -----------------------------------------------------------------



| | · | “XDLong HK” refers to Hei Dai Lung Group Company Limited; and
| | - | -------------------------------------------------------------



| | · | “XDLong Investment” refers to Windrace Investment Holding Limited.
| | - | ------------------------------------------------------------------



This annual report contains translations
of Renminbi amounts, or RMB, into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted,
for all dates and periods through December 31, 2008, exchange rates of Renminbi into U.S. dollars are based on the noon buying
rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank
of New York. For January 1, 2009 and all later dates and periods, the exchange rate refers to the exchange rate as set forth in
the H.10 statistical release of the Federal Reserve Board. Translation of amounts in Renminbi into U.S. dollars was calculated
at the rate of US$ 1.00 = RMB6.2939 on December 31, 2011 solely for the convenience of the reader. We make no representation that
the Renminbi amounts referred to in this form could have been or could be converted into U.S. dollars at any particular rate or
at all. On April 20, 2012, the exchange rate was RMB6.3080 to US$1.00.



3









PART
I



Item 1.	IDENTITY OF DIRECTORS,
SENIOR MANAGEMENT AND ADVISORS



Not applicable.



Item 2.	OFFER STATISTICS
AND EXPECTED TIMETABLE



Not applicable.



Item 3.	KEY INFORMATION



| | A. | SELECTED FINANCIAL DATA
| | -- | -----------------------



The following selected
consolidated statements of operations data for the years ended December 31, 2007, 2008, 2009, 2010 and 2011 and the
consolidated balance sheets data as of December 31, 2007, 2008, 2009, 2010 and 2011 have been derived from our consolidated
financial statements. The report of Crowe Horwath (HK) CPA Limited, an independent registered public accounting firm, for
each of the years in the three year period ended December 31, 2011 is included elsewhere in this annual report on Form
20-F. Our selected consolidated statement of operations data for the years ended December 31, 2007 and 2008 and our
consolidated balance sheets as of December 31, 2007 and 2008 have been derived from our audited consolidated financial
statements, which are not included in this annual report on Form 20-F. You should read the selected consolidated financial
data in conjunction with those financial statements and the related notes and “Item 5. Operating and Financial Review
and Prospects” included elsewhere in this annual report on Form 20-F. Our consolidated financial statements are
prepared and presented in accordance with International Financial Reporting Standard as issued by the International
Accounting Standards Board. Our historical results do not necessarily indicate our results expected for any future
periods.



|                                                                        |  | For the year ended December 31,           |          
|----------------------------------------------------------------------- |  | ----------------------------------------- | ---------
|                                                                        |  | 2007                                      |          
|                                                                        |  | (in thousands, except for per share data) |          
|                                                                        |  | RMB                                       |          
|Consolidated
    Statements of Operations and Comprehensive Income Data |  |                                           |          
|Revenues                                                                |  |                                           | 1,296,402
|Cost of sales                                                           |  |                                           | (959,526 
|Gross profit                                                            |  |                                           | 336,876  
|Other income and gains                                                  |  |                                           | 889      
|Selling and distribution costs                                          |  |                                           | (137,077 
|Administrative expenses                                                 |  |                                           | (29,984  
|Aborted IPO expenses                                                    |  |                                           | ―        
|Research and development expenses                                       |  |                                           | (12,784  
|Finance costs                                                           |  |                                           | (1,352   
|Share of loss in jointly-controlled entity                              |  |                                           | ―        
|Gain from change in fair value of contingent
    share liability        |  |                                           | ―        
|Profit before tax                                                       |  |                                           | 156,568  
|Tax                                                                     |  |                                           | (21,783  
|Profit for the year                                                     |  |                                           | 134,785  
|Earnings per share (2)                                                  |  |                                           |          
|Basic                                                                   |  | RMB                                       | 23.48    
|Diluted                                                                 |  | RMB                                       | 23.48    



|                                      |  | As December 31, |        
|------------------------------------- |  | --------------- | -------
|                                      |  | 2007            |        
|                                      |  | (in thousands)  |        
|                                      |  | RMB             |        
|Consolidated
    Balance Sheets Data: |  |                 |        
|Cash and cash
    equivalents         |  |                 | 67,725 
|Working capital (3)                   |  |                 | (403   
|Total assets                          |  |                 | 597,011
|Total liabilities                     |  |                 | 281,784
|Total stockholders’ equity            |  |                 | 315,227





---



| | (1) | Translation of amounts in Renminbi into U.S. dollars was calculated at the rate of RMB6.2939 to US$1.00, which was the daily
exchange rate on December 31, 2011 as set forth in the H.10 statistical release of the Federal Reserve Board.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Calculated on the basis of the business combination completed on October 21, 2009. See also note 11 of our consolidated financial
statements included elsewhere in this form.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4







| | (3) | Working capital represents total current assets less total current liabilities.
| | --- | -------------------------------------------------------------------------------



| | (4) | Our previously issued financial statements as of and for
the years ended December 31, 2009 and 2010 have been revised to reflect the revision to our method of accounting in relation to
our conditional obligation to release and issue shares to the former shareholders of Windrace as part of the reverse recapitalization
transaction which became effective on October 21, 2009 (see Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS – OPERATING
RESULTS – Revisions to Previously Issued Financial Statements).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Exchange Rate Information



This annual report contains translations
of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. For all dates and periods through
December 31, 2008, exchange rates of Renminbi into U.S. dollars are based on the noon buying rate in The City of New York for cable
transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. For January 1, 2009 and all later
dates and periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve
Board. These rates are provided solely for your convenience and we make no representation that any Renminbi or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated
below, or at all.



The following table sets forth information
concerning the exchange rates in Renminbi and U.S. dollars for the periods indicated.



|     |  | Renminbi per U.S. Dollar (1) |       
|---- |  | ---------------------------- | ------
|     |  | Average (2)                  |       
|     |  |                              |       
|2007 |  |                              | 7.5806
|2008 |  |                              | 6.9193
|2009 |  |                              | 6.8295
|2010 |  |                              | 6.7603
|2011 |  |                              | 6.4475



|                              |  | Renminbi per U.S. Dollar Exchange Rate |       
|----------------------------- |  | -------------------------------------- | ------
|                              |  | High                                   |       
|October 2011                  |  |                                        | 6.3825
|November 2011                 |  |                                        | 6.3839
|December 2011                 |  |                                        | 6.2939
|January 2012                  |  |                                        | 6.3330
|February 2012                 |  |                                        | 6.3120
|March 2012 (through March 23) |  |                                        | 6.3315
|April 2012 (through April 20) |  |                                        | 6.3150





---



| | (1) | For December 2008 and prior periods, the exchange rate refers to the noon buying rate as reported by the Federal Reserve Bank
of New York. For January 2009 and later periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical
release of the Federal Reserve Board.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Annual averages are calculated using the average of the exchange rates on the last day of each month during the period.
| | --- | -----------------------------------------------------------------------------------------------------------------------



On April 20, 2012, the daily exchange rate
was RMB6.3080 to US$1.00.



| | B. | CAPITALIZATION AND INDEBTEDNESS
| | -- | -------------------------------



Not applicable.



| | C. | REASONS FOR THE OFFER AND USE OF PROCEEDS
| | -- | -----------------------------------------



Not applicable.



5







| | D. | RISK FACTORS
| | -- | ------------



Risks Relating to Our Business and Industry



Our products face intense competition, and we may not
have the resources necessary to compete.



We are a sports and leisure footwear, apparel
and accessories company in the PRC. This industry is highly competitive, with market players consisting of international and domestic
companies. Some of our competitors may have greater financial, research and development and design, marketing, distribution, management
or other resources. Our results of operations could be affected by a number of competitive factors, including entry by new competitors
into our current markets, expansion by existing competitors, better marketing and advertising leading to stronger brand equity
for the competitors, and competition with other companies for the production capacity of contract manufacturers. Our results of
operations and market position may be adversely impacted by these competitive pressures.



We cannot assure you that our strategies
will remain competitive or that we will continue to be successful in the future. Increased competition could result in a loss of
our market share. In particular, if our competitors adopt aggressive pricing policies, we may be forced to adjust the pricing of
our products in response. This could adversely affect our business, financial condition and results of operations.



Deterioration of economic conditions and a resulting decrease
in consumer demand for our products could materially adversely affect our financial condition and results of operations.



Demand for our products is largely dependent
upon prevailing economic conditions. The recent financial crisis and economic downturn in global markets have impacted, and could
further impact, the purchase orders from our distributors. While the global economy has evidenced initial signs of a recovery,
the extent of any recovery remains uncertain. In the event the demand for consumer products declines in China as a result of adverse
economic conditions globally or in China, demand for our sports products could decrease, which could materially adversely affect
our business, financial condition and results of operations.



We distribute our products mainly through Xidelong retail
selling locations, which are operated by independent third-party distributors and retailers over which we have limited control.



We distribute our products mainly through
Xidelong retail selling locations. Xidelong retail selling locations are operated by our distributors and offer our products exclusively
pursuant to the terms of our distribution arrangements. Some of the Xidelong retail selling locations, however, are operated by
third-party retailers selected by our distributors. Because we do not have contractual relationships with these third-party retailers,
we have limited control over their operations. We cannot assure you that our current distribution arrangements provide us with
sufficient control to ensure the Xidelong retail selling locations sell our products on an exclusive basis. In addition, if our
distributors or third-party retailers fail to provide quality customer service, our brand could become associated with poor customer
service, which could damage our brand image and reputation and could have a material adverse effect on our business, results of
operations and financial condition. Finally, if distributors experience financial difficulties, they may unilaterally attempt to
liquidate their inventory of our products through discounts at their Xidelong retail selling locations without our approval, which
could damage the image and the value of our brand.



Fluctuations in purchase orders from our distributors
could materially adversely affect our financial condition and results of operations.



We sell our
products to distributors for subsequent resale to consumers. Our distributors generally do not have any contractual obligation
to purchase a minimum quantity of our products or at a minimum price. We may need to lower the selling prices of our products at
any time due to changing market conditions. Further, the quantities specified by our distributors in their purchase orders may
be subsequently adjusted upward or downward on short notice. For instance, due to decreased consumer demand as a result of the
global financial crisis, we agreed with certain distributors to reduce their orders in 2008 to prevent excess inventory buildup.
If our distributors perform poorly or if we fail to maintain good relationships with our distributors
or retain them in our distribution network, our sales, financial condition and operating results could be materially adversely
affected.



6







We rely on our distributors for the expansion of our retail
sales network in different regions, but they may not be willing to accommodate the needs of our business plans.



Under our agreements with our distributors,
for each designated geographical area or region, we only appoint one distributor instead of multiple competing distributors. This
enables us to manage and monitor the distributor and the Xidelong retail selling locations in the designated region more effectively.
As of December 31, 2011, our distribution network consisted of 4,844 Xidelong retail selling locations covering 30 provinces and
municipalities in China. We rely on our existing and new distributors to assist us in exploring new markets for our products and
identifying potential locations for new stores. Some of our distributors, however, may also distribute other brands of sports and
leisurewear products, including brands of our competitors. Although these distributors are required to operate separate retail
selling locations for other brands’ products, we cannot assure you that they will always provide favorable retail store locations
and marketing resources to us. We cannot assure you that their expansion would be timely or sufficient in scope to satisfy the
needs of our business. Further, to the extent that any distributor for any particular region ceases to cooperate with us for any
reason and we are not able to find a suitable replacement distributor for that region in a timely manner, we could lose significant
business in that region.



We rely on several large distributors for a significant
portion of our sales.



We derive a significant portion of our sales
from several large distributors. For 2009, 2010 and 2011, sales to our top five distributors accounted for approximately 46.0%,
37.6% and 43.3%, respectively, of our total revenue. For 2009, 2010 and 2011, sales to our single largest distributor accounted
for approximately 13.0%, 8.7% and 12.6%, respectively, of our total revenue. We generally enter into distribution agreements with
our distributors for a term of three years. Each of our top five distributors has maintained their business relationships with
us for more than three years. We cannot assure you that our top distributors will renew their distribution agreements with us on
commercially acceptable terms or at all.



Further, our top distributors are not obliged
to continue to place orders with us at the same levels as before or at all. We cannot assure you that we will be able to obtain
orders from other distributors to replace any such lost sales. Any substantial reduction in purchases from our top distributors,
or any failure to renew their agreements with us, may result in a significant loss of sales, and our business, financial condition
and results of operation could be materially adversely affected.



Sales of substandard products at discounted prices could
have a material adverse effect on our brand name.



Our distributors are required to sell our
products at our suggested retail prices. During the years ended December 31, 2009, 2010 and 2011, a number of distributors
notified us of certain products with minor deviation from their manufacturing specifications. Because the deviation was harmless
and the quantities involved were immaterial, we allowed the distributors and their authorized third-party retailers to sell these
products at a discount without affecting our selling prices to such distributors. The levels of discount were decided and approved
by us on a case-by-case basis. Increased sales of products with deviation from their manufacturing specifications at discounted
prices could damage our brand image. If there are products with more significant deviation from their manufacturing specifications,
we could be required to reduce the selling prices of our products to distributors, which would adversely affect our business, financial
condition and results of operations.



Consolidation of distributors or concentration of retail
market share among a few distributors could increase our credit risk and impair our ability to sell our products.



Our distributors place orders for our products
in sales fairs organized by us. The sports and leisure footwear, apparel, and accessories retail markets in the PRC are dominated
by a few large sports and leisure footwear, apparel, and accessories distributors with many stores. The dominant distributors may
increase their market share by expanding through acquisitions or through the establishment of additional stores.



We provide credit terms to our distributors
based on our assessment of each distributor’s financial condition. The consolidation of distributors concentrates our credit
risk in a relatively small number of distributors and, if any of them were to experience a shortage of liquidity, it would increase
the risk of nonpayment of their outstanding payables to us. The loss of, or significant decrease in, sales to these distributors,
or their failure to pay us in a timely manner or at all, could materially adversely affect our business, financial condition and
results of operations.



In addition, any shifting concentration
of market share to a small number of distributors in a particular county or region increases our operational risks. If any one
of them substantially reduces their purchases of our products, we could be unable to find a sufficient number of other retail selling
locations for our products to sustain the same level of sales and revenues. Further, the consolidation of distributors could limit
our ability to negotiate contract terms in our favor. For example, due to a small number of distributors existing in the industry
to whom we can sell our products, our ability to sell products at the price level that we wish to could be adversely affected.
If the selling prices to the distributors decrease, our profitability could be adversely affected.



7







We may be unable to respond to changing market trends
and consumer preferences responsively.



Substantially all of our revenue is derived
from the sale of sports and leisurewear products, which are subject to rapidly changing consumer preferences. Our sales and profits
are sensitive to these changing preferences and our success depends on our ability to identify, originate and define product and
fashion trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner.



We sell our products only to distributors
and do not receive any reports on their resale of our products to consumers at Xidelong retail selling locations. We do not accept
returns of unsold products from distributors, nor do we track information on a real-time basis with respect to the inventory levels
and movements of our products at Xidelong retail selling locations. We rely on inventory reports submitted by our distributors
to identify whether selected products are gaining consumer acceptance. However, such reporting system requires the cooperation
of the distributors to report accurately and submit the relevant inventory data to us on a timely basis. If our distributors do
not provide accurate and timely inventory data, we are not able to assess accurately whether our sales to distributors track sales
of our products to consumers. Further, we are only able to obtain inventory data from the retail selling locations directly operated
by our distributors but not the authorized third-party retailers because we do not have contractual relationships with them. Therefore,
we rely on our distributors to monitor inventory levels and overall sales performance of the authorized third-party retailers.
If we are unable to track end-consumer sales accurately, we may not be able to assess market trends and preferences, which ultimately
could have a material adverse effect on our business, financial condition and results of operations.



Further, all of our products are subject
to changing consumer preferences that we cannot predict with certainty. Our new products may not receive consumer acceptance as
consumer preferences could shift rapidly to different types of performance or other sports footwear or apparel or away from these
types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes.
If we fail to anticipate accurately and respond to trends and shifts in consumer preferences by adjusting the mix of existing product
offerings, developing new products, designs and styles, or influencing sports and fitness preferences through vigorous marketing,
we could experience lower sales, excess inventories and lower profit margins, any of which could have an adverse effect on our
business, financial condition and results of operations.



Increases in labor, raw material and other production
costs in the PRC could materially adversely affect our profitability.



The sportswear manufacturing industry is
labor intensive. Labor costs in China have been increasing in recent years and our labor costs in the PRC could continue to increase
in the future. If labor costs in the PRC continue to increase, our production costs, including our own manufacturing and outsourcing
costs, will likely increase. This may in turn affect the selling prices of our products, which may then affect the demand for such
products and thereby adversely affect our sales, financial condition and results of operations. Increases in costs of raw materials
and components, such as cotton, natural and synthetic leather and semi-finished rubber soles; and increases in other production
costs, such as electricity costs, could have similar adverse effects, particularly if we are unable to identify and employ other
appropriate means to reduce our costs of production.



We purchase all of our raw materials on
an order-by-order basis with suppliers. The prices of certain of our key raw materials, such as synthetic leather, are subject
to factors beyond our control, such as fluctuations in crude oil prices. We could also experience difficulty in obtaining other
acceptable quality materials on a timely basis, and our procurement costs may increase due to increased demand or other factors.
We may not be able to pass on the increased costs to our customers by increasing the selling prices due to competitive pressure
in the markets. In such circumstances, our business, financial condition and results of operations could be adversely affected.



Interruptions in the supply of raw materials and components
could adversely affect our business, financial condition and results of operations.



Our manufacturing operations depend on adequate
supplies of raw materials and components. We purchase a large portion of our raw materials and components from a small number of
suppliers. For 2007 and 2008, our standard supply agreements were for one year. Starting from 2009, such agreements have been extended
to two years. Most of our raw materials suppliers are located in Quanzhou, which is adjacent to our production facility in Jinjiang.
Our contractual relationships with most of our suppliers have been in place since 2004. For 2009, 2010 and 2011, our top five raw
material suppliers and contract manufacturers accounted for approximately 43.7%, 45.8% and 44.2% respectively, of our total purchases
from raw material suppliers and contract manufacturers. During the same periods, our single largest supplier accounted for approximately
9.6%, 10.9% and 11.1%, respectively, of our total purchases. We cannot assure you that our top suppliers will continue to deliver
raw materials or components to us in a timely manner or at acceptable prices and quality, or at all. Any disruption in supply of
raw materials or components from our suppliers may adversely affect our business, financial condition and results of operations.



We rely on third-party contract manufacturers for a portion
of our footwear production and all of our apparel and accessories production.



We outsource
the production of a portion of our footwear and all of our apparel and accessories to contract manufacturers. For
2009, 2010 and 2011, our single largest contract manufacturer of footwear accounted for approximately 37.9%, 37.5% and 35.6%, respectively,
of our total purchases of footwear. For 2009, 2010 and 2011, our single largest contract manufacturer for apparel and accessories
accounted for approximately 17.7%, 14.7% and 12.2%, respectively, of our total purchases of apparel and accessories. For 2009,
2010 and 2011, our top five contract manufacturers for apparel and accessories accounted for approximately 64.3%, 56.1% and 45.7%,
respectively, of our total purchases of apparel and accessories.



8







We do not have any long term contracts with
these contract manufacturers. As such, we may be unable to renew these contracts when they expire on commercially acceptable terms,
or at all. Contract manufacturers may unilaterally terminate our supply contracts or increase their prices. As a result, we are
not assured of an uninterrupted supply of footwear, apparel and accessories of acceptable quality or at acceptable prices from
our contract manufacturers. We may not be able to offset any interruption or decrease in supply of our products by increasing production
at our own production facilities due to capacity constraints, and we may not be able to substitute suitable alternative contract
manufacturers in a timely manner at commercially acceptable terms, or at all. Any disruption in our supply of products from contract
manufacturers may adversely affect our business and could result in loss of sales and increase in production costs, which could
adversely affect our business, financial condition and results of operations.



Failure to effectively promote or maintain the Xidelong
brand could adversely affect our business and results of operations.



The image of the Xidelong brand is an important
factor in influencing consumer preferences and building brand loyalty. Promoting and maintaining the Xidelong brand is therefore
crucial to our success and growth within the PRC sportswear market. We have a branding and promotional department that deals mainly
with media arrangements, sponsorships, other endorsement activities and store image maintenance. For 2009, 2010 and 2011, we spent
approximately 11.9%, 11.7% and 10.7%, respectively, of our annual revenue on advertising and promotional activities.



We use a variety of media, such as television,
newspapers, magazines, the Internet and outdoor billboard displays to build both regional and national brand recognition. We have
incurred and expect to continue to incur significant costs and expenses arising out of our brand-building activities, including
store refurbishment and renovation, sponsorships and advertising in regional and national newspapers, magazines, the Internet,
television and billboard displays. These activities may not be successful in building the goodwill and profile of our brand.



We also collaborate with athletes, media
celebrities and industry experts on marketing and endorsement arrangements and they act as spokespersons for the Xidelong brand.
Our brand is therefore partly dependent on the public perception of these individuals, over which we have no control. Any
negative publicity, whether in the PRC or abroad, in relation to our brand or our brand representatives could have an adverse effect
on the public’s perception of our brands. These negative publicity could arise from poor performance by our endorsers in
their fields, our failure to continue to identify correctly promising athletes and or celebrities to use and endorse our products,
or our failure to enter into endorsement arrangements with prominent athletes and sports organizations.



If we are unsuccessful in promoting our
Xidelong brand among its targeted consumer groups, the goodwill and consumer acceptance of our Xidelong brand may be eroded, and
our business, financial condition, results of operations and prospects could be adversely affected.



Our sales could be affected by seasonality, weather conditions
and a number of other factors.



All of our products are sold to distributors
for subsequent resale to consumers in the PRC. Generally, PRC consumers’ spending behavior is stable year-on-year but varies
seasonally, particularly during the Chinese New Year in early spring, the Labor Day holiday in early May, the summer months and
the National Day holiday in early October.



We experience moderate fluctuations in our
aggregate sales volume during the year. Historically, revenues in the third and fourth fiscal quarters have slightly exceeded those
in the first and second fiscal quarters. However, sales of individual products could vary considerably from time to time as a result
of changes in seasonal and geographic demand for particular types of footwear, apparel and accessories. In addition, unexpected
and abnormal changes in climate could affect sales of our products that are timed for release during a particular season. Fluctuations
in our sales may also result from a number of other factors, including:



| | · | the timing of our competitors’ launch of new products;
| | - | ------------------------------------------------------



| | · | the timing of international and domestic sports events;
| | - | -------------------------------------------------------



| | · | consumer acceptance of our new and existing products;
| | - | -----------------------------------------------------



| | · | the size of the overall sportswear industry;
| | - | --------------------------------------------



| | · | economic and demographic conditions that affect consumer spending and retail sales; and
| | - | ---------------------------------------------------------------------------------------



| | · | the timing and purchase decisions of our distributors.
| | - | ------------------------------------------------------



As a result, we believe that comparisons
of our operating results between any interim periods may not be meaningful and that these comparisons may not be an accurate indicator
of our future performance.



9









Our operations could be disrupted for reasons beyond our
control, and our business, financial condition and results of operations could be adversely affected as a result.



Our manufacturing operations could be disrupted
for reasons beyond our control. The causes of disruptions may include extreme weather conditions, landslides, earthquakes, fires,
natural catastrophes, raw material supply disruptions, equipment and system failures, labor force shortages, energy shortages,
workforce actions or environmental issues. Any significant disruption to our operations could adversely affect our ability to make
and sell products, the productivity and profitability of our manufacturing facilities, our business, financial condition and results
of operations, and the operations of our distributors.



In May 2008, Wenchuan County of Sichuan
Province, a region that is approximately 360 kilometers away from Chongqing City, suffered an earthquake with an 8.0 magnitude
on the Richter Scale. As a result of the earthquake, 87 retail selling locations of our distributors were closed. We cannot assure
you that we will not suffer any further losses in the future as a result of similar events that are beyond our control.



We have a limited operating history, and our historical
financial information may not be indicative of our future performance.



Our business began when XDLong Fujian was
established in September 2001. We therefore have a limited history of operation and our historical financial information may not
necessarily reflect our future results of operations. There also may not be a sufficient basis to evaluate our future prospects.



In particular, since the commencement of
our apparel business in 2003, we have outsourced all of our apparel production to contract manufacturers. We have a limited operating
history in the sale and marketing of apparel. As a result, the historical operating results of our apparel business may not provide
a meaningful basis for evaluating the performance of our apparel business going forward and may not be indicative of our future
performance.



Also, we recently revised our previously
issued audited financial statements as of and for the years ended December 31, 2009 and 2010 to reflect the revision to our method
of accounting policy in relation to our conditional obligation to release and issue shares to the former shareholders of Windrace
as part of the reverse recapitalization transaction which became effective on October 21, 2009. The restatement is described in
detail in Note 2, “Revisions to Previously Issued Financial Statements” to our consolidated financial statements included
in this annual report on Form 20-F and Item 5.A. “OPERATING AND FINANCIAL REVIEW AND PROSPECTS – OPERATING RESULTS
– Revisions to Previously Issued Financial Statements”. Despite our best efforts to carefully consider and analyze
accounting implications of non-routine events, we cannot assure you that there will not be any further revisions or restatements
of our financial statements in the future, which may further complicate attempts to evaluate our business and prospects.



If we are unable to increase our production capacity due
to our internal production constraints or our inability to locate suitable contract manufacturers with sufficient production capacity
of their own, our operating results could be adversely affected.



We manufacture a significant portion of
our footwear at our production facility in Jinjiang. We outsource the manufacturing of a portion of our footwear and all of our
apparel and accessories to contract manufacturers. Although we produce a portion of our footwear products in our own production
facility, we expect to continue to rely on contract manufacturers for the production of a portion of our footwear and all of our
apparel and accessories. Therefore, our ability to continue to increase our sales depends on the successful expansion of our footwear
production capacity at our production facility and the availability of contract manufacturers with sufficient production capacity
of their own. If we are unable to continue to increase our internal production capacity or engage suitable contract manufacturers,
our business, financial condition and operating results could be adversely affected.



We may not be able to continue to grow at the same pace
or manage our growth effectively.



We have been expanding our business rapidly
and intend to continue to do so either through organic growth or through acquisitions and investments in related businesses as
we deem appropriate. Such expansion may place a significant strain on our managerial, operational and financial resources. Further,
we have no prior experience in engaging in the management and operation of retail selling locations or retail business. We will
need to manage our growth effectively, which may entail devising and implementing business plans, training and managing our growing
workforce, managing costs and implementing adequate control and reporting systems in a timely manner. We cannot assure you that
our personnel, procedures and controls will be managed effectively to support our future growth adequately. Failure to manage our
expansion effectively could affect our success in executing our business plan and adversely affect our business, financial condition
and results of operation. In addition, our growth in percentage terms could slow in the future. Accordingly, you should not rely
on our historic growth rate as an indicator for our future growth rate.



10







We may not be successful in implementing our expansion
plans and may be unable to secure sufficient funding for such plans to further grow our business.



Our expansion plans will require us to increase
investments in, and devote significant resources to, our brand promotion efforts, internal production capacities, research and
design capabilities and the Xidelong sales distribution network operated by our distributors. If we fail to implement our future
expansion plans, we may not achieve our growth target. Furthermore, our ability to obtain adequate funds to finance our expansion
plans depends on our financial condition and results of operations, as well as other factors that may be outside our control, such
as general market conditions, the performance of the PRC sportswear industry, and political and economic conditions in China. If
additional capital is unavailable, we could be forced to abandon some or all of our expansion plans, as a result of which our business,
financial condition and results of operations could be adversely affected.



Loss of any key executive personnel or any failure to
attract such personnel in the future could adversely impact our business and growth prospects.



Our future success will depend on the continued
service of our senior management. In particular, Mr. Lin Shuipan, chairman of the board and chief executive officer, has over 15
years’ experience in the sportswear industry and is responsible for our overall corporate strategies, planning and business
development. His experience and leadership is critical to our operations and financial performance. We do not maintain any “key-man”
insurance policy. If we lose the services of Mr. Lin or any of our key executive personnel and cannot replace them in a timely
manner, such loss may reduce our competitiveness, and may adversely affect our financial condition, operating results and future
prospects. In addition, our success depends significantly on other personnel and, in particular, our team of designers. Other international
and domestic competitors may be able to offer more favorable compensation packages to recruit personnel whom we consider desirable.
Our continued success will depend on our ability to attract and retain qualified personnel in order to manage our existing operations
as well as our future growth. We may not be able to attract, assimilate or retain the personnel whom we need. Our staff expenses
in relation thereto could increase significantly. This could adversely affect our ability to expand our business effectively.



Failure to develop technically innovative products could
adversely affect our competitiveness.



While design and aesthetics of our products
are important factors for consumer acceptance of our products, technical innovation in the design of footwear, apparel, and sports
equipment is also essential to the commercial success of our products. Research and development plays a key role in technical innovation.
We rely upon specialists in the fields of biomechanics, exercise physiology, engineering, industrial design and related fields,
and other experts to develop cutting edge performance products. While we strive to produce products that help reduce injury, enhance
athletic performance and maximize comfort, our failure to introduce technical innovation in our products could result in a decline
in consumer demand for our products.



Our research and development capabilities may be adversely
affected if we are unable to renew the technology cooperation agreement with the China Institute of Sport Science.



One element of our growth strategy is to
continue to design and manufacture products through further investment in product design and research and development initiatives.
We primarily rely on the China Institute of Sport Science for such research and development initiatives. We have renewed our technology
cooperation agreement with the China Institute of Sport Science, which expired in October 2011, for a term of another five years
upon mutual agreement of both parties. We cannot assure you that the China Institute of Sport Science will agree to renew the agreement
again when it expires on its terms in the future, nor can we assure you that after renewal, the China Institute of Sport Science
will comply with the terms and conditions of the agreement and the renewal provisions. If we do not renew the agreement or if the
China Institute of Sport Science does not honor the terms of the agreement for any reason, our research and development capabilities
may be adversely affected. This could in turn have an indirect adverse effect on our business, financial condition and results
of operations.



We could be involved in litigation on intellectual property
infringement or other litigation or regulatory proceedings, which could adversely affect our reputation, financial condition and
results of operations.



We may design products with elements that
could inadvertently infringe the copyright or other intellectual property rights of other parties, as a result of which they may
initiate litigation or other proceedings against us. Responding to and defending these proceedings may require substantial costs
and diversion of resources, and the result of these proceedings could be uncertain. Furthermore, our reputation could be adversely
affected.



We could be subject to other lawsuits and
regulatory actions relating to our business from time to time. Due to the inherent uncertainties of litigation and regulatory proceedings,
we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have an adverse impact
on our business, financial condition and results of operations. In addition, any significant litigation in the future, regardless
of its merits, could divert management’s attention from our operations and result in substantial legal fees.



11







If we are unable to protect adequately our intellectual
property, we may be involved in legal proceedings, which could be expensive and time consuming, and consumers may shift their preference
away from our products.



We believe
that our trademarks, patents, and other intellectual property rights are important to our brand, success and competitive position.
We consider the “” (Xidelong) and “”
trademarks to be among our most valuable assets, and we have registered these trademarks in the PRC. In addition, we own other
trademarks that we use in marketing our products. We periodically discover products that we believe are counterfeit reproductions
of our products or that otherwise infringe on our intellectual property rights. We may pursue litigation in the future to enforce
our intellectual property rights. Any such litigation could result in substantial costs and a diversion of our resources. If we
are unsuccessful in challenging a party’s products based on trademark or design or utility patent infringement, continued
sales of these products could adversely affect our sales and our brand and result in the shift of consumer preference away from
our products. The actions we take to establish and protect trademarks, patents, and other intellectual property rights may not
be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products on
grounds of violations of proprietary rights.



Changes in environmental laws and regulations in the PRC
could result in additional capital expenditures.



Our production facility is located in Jinjiang
and is subject to PRC environmental protection laws and regulations. These laws and regulations require enterprises engaged in
manufacturing that may generate industrial waste to adopt effective measures to control and properly dispose of such waste. The
relevant administrative department for environmental protection can levy fines for any violations of such environmental laws or
regulations. For material violations, the PRC government may suspend or close any or all of our operations. We cannot assure you
that the PRC government will not change the existing laws or regulations or impose additional or stricter laws or regulation. Compliance
with any of these additional or stricter laws or regulations may cause us to incur additional capital expenditure, which we may
be unable to pass on to customers through higher prices for our products.



We contract with third-party contract manufacturers
and raw material suppliers and do not exercise any control over the operations of our contract manufacturers or suppliers. We are
therefore not able to ensure their compliance with the applicable environmental laws. If our contract manufacturers or suppliers
violate any applicable laws, we may be named as a defendant in related legal proceedings and incur costs and resources in defending
ourselves. Any resulting negative publicity may also damage our brand and harm our brand building efforts. Our business, financial
condition and results of operations could be adversely affected as a result.



Our current insurance coverage may not be sufficient to
cover the risks related to our operations.



Our operations are subject to hazards and
risks normally associated with manufacturing operations, which may cause damage to persons or property. Currently, we maintain
insurance policies for damage to real property and for employer liability for personal injury of employees. We are not required
under PRC law to maintain, and we do not maintain, any product liability insurance. If we were found liable for any product liability
claim, we may be required to pay substantial damages. Even if we were successful in defending such a claim, we may incur substantial
financial and other resources in defending such a claim. Under such circumstances, our financial results could be adversely affected.
Depending on the outcome of any such claim, the reputation of our Xidelong brand could also be adversely affected. Further, we
do not maintain business interruption insurance or third-party liability insurance against claims for property damage, personal
injury and environmental liabilities. The occurrence of any of these events could result in interruption of our operations and
subject us to significant losses or liabilities. Any losses or liabilities that are not covered by our current insurance policies
could have a material adverse effect on our business, financial condition and results of operations.



Because the construction of our production facility in
Jinjiang was not in full compliance with PRC laws and regulations, we could be subject to fines and other penalties.



Pursuant to the State-owned Land Use Right
Transfer Contract for the grant of land use rights for the production site in Jinjiang, XDLong Fujian was required to commence
construction by February 28, 2006. However, XDLong Fujian did not commence construction by such date because we decided to construct
production facilities on another larger parcel of land owned by XDLong China. Currently, we have planned to construct additional
facilities on the XDLong Fujian parcel of land. On May 14, 2008, XDLong Fujian applied to the relevant local government agency
for the approval to postpone construction on the land. The local government agency has verbally confirmed that the local government
does not intend to repossess the parcel of land held for use by XDLong Fujian, or otherwise cancel the underlying contract. Management
of Exceed has concluded that the possibility of incurring impairment in value or loss of land use is remote.



Management based its conclusion on the fact
that the local government has been advised that we intend to commence construction on the parcel of land and that local government
officials have provided verbal assurances that they do not intend to take punitive action for our failure to commence construction.
Consistent with the objectives of the local government, the construction of the additional facilities in the Jinjiang area will
inject capital into the local economy and result in an expansion of our local workforce.



The land covers an area of approximately
15,000 square meters and XDLong Fujian paid approximately RMB531,000 of land grant fees to the government. If the local government
repossesses the land, we will lose our land use rights over the land and we will not be able to recover the land grant fees previously
paid to the government. In addition, we will not be able to construct additional facilities on the land to implement our expansion
plans.



12







Under PRC law, a company must apply to the
environmental protection authority in the PRC for an environmental protection examination and acceptance after completion of a
construction project. XDLong China has not applied for an environmental protection examination and acceptance for a construction
project that it finished. As a result, the environmental protection authority has the right to request XDLong China to rectify
such non-compliance by applying for an environmental protection examination and acceptance within a specified period. If XDLong
China fails to obtain an environmental protection examination and acceptance within the specified period of time, XDLong could
be subject to a fine up to RMB50,000 or be ordered to suspend its operations.



Certain of our facilities are located on a parcel of land
for which we have not obtained the certificate of land use rights.



We are constructing staff quarters on a
parcel of land with an aggregate site area of approximate 22,160 square meters adjacent to our XDLong China production complex
in Jinjiang. Pursuant to four sales and purchase agreements XDLong China entered into with independent third parties on May 17,
2010, May 20, 2010, November 18, 2010 and January 3, 2011, respectively, we acquired this parcel of land and we are in the process
of applying for the certificate of land use rights. Under the PRC laws, a certificate of land use rights is required for the construction
and use of our facilities. If we fail to obtain the certificate of land use rights for any reason, we may be fined or required
to relocate our staff quarters, which would adversely affect our business, results of operations and financial condition.



Difficulties in obtaining new credit facilities or acceleration
of payments under existing credit facilities could have an adverse effect on our liquidity.



As a result of the global financial downturn
that began in 2008, banks and other financial institutions tightened lending to businesses. As a result, businesses experienced
difficulties in obtaining credit at commercially acceptable terms, or at all. We obtained new bank borrowings of RMB90.5 million
in 2009 and RMB18.0 million in 2010. We did not obtain any new bank borrowings in 2011. We cannot assure you that we will continue
to be able to obtain additional funding when the need arises. If we are unable to obtain new credit facilities and are unable to
finance our liquidity or working capital requirements through cash flows from operating activities or other sources, our business,
financial condition and results of operations could be adversely affected.



Our risk management and internal control systems improvements
may not be adequate or effective, which could adversely affect our business, financial condition and results of operations.



We have established risk management and
internal control systems consisting of relevant organizational frameworks, policies, procedures and risk management methods that
we believe are appropriate for our business operations, and we seek to continue to improve such risk management and internal control
systems from time to time. However, due to the inherent limitations in the design and implementation of risk management and internal
control systems, we cannot assure you that our risk management and internal control systems will be sufficiently effective in identifying
and preventing all such risks.



In addition, as some of our risk management
and internal control policies and procedures are relatively new, we may need to establish and implement additional risk management
and internal control policies and procedures to further improve our systems from time to time. Our risk management and internal
control systems also depend on their implementation by our employees, and we cannot assure you that such implementation will not
involve any human errors or mistakes. If we fail to timely adapt and implement our risk management and internal control policies
and procedures, our business, results of operations and financial condition could be materially and adversely affected.



While we believe that we currently
have adequate internal control procedures in place, we are still exposed to potential risks from legislation requiring companies
to evaluate internal controls under Section 404 of the Sarbanes-Oxley Act of 2002.



We are subject to the reporting obligations
under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required under Section 404 of the Sarbanes-Oxley
Act of 2002, has adopted rules requiring public companies to include a report of management on the effectiveness of such companies’
internal control over financial reporting in their respective annual reports. Our management conducted an evaluation of the effectiveness
of our internal control over financial reporting and concluded that our internal control over financial reporting was effective
as of December 31, 2011.  Our management’s report was subject to attestation by our registered public accounting firm.
This annual report includes an attestation report since we are deemed to be an accelerated filer.



We cannot assure you that we will comply
with all of the requirements imposed in the attestation report or that we will receive a positive attestation from our independent
registered public accounting firm in the future. If we fail to maintain the effectiveness of our internal control over financial
reporting, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting
in accordance with the Sarbanes-Oxley Act. Moreover, effective internal control over financial reporting is necessary for us to
produce reliable financial reports. As a result, any failure to maintain effective internal control over financial reporting could
result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact
the trading price of our ordinary shares. Furthermore, we may need to incur additional costs and use additional management and
other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward.



13







If we become directly subject to
the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant
resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could
result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.



Recently, U.S. public
companies that have substantially all of their operations in China, particularly companies like us which have completed so-called
reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial
commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around
financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate
corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny,
criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value
and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement
actions, and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide
scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. If we become the subject
of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources
to investigate such allegations and/or defend our company. This situation will be costly and time consuming and could distract
our management from growing our company. If such allegations are not proven to be groundless, our company and business operations
will be severely affected and your investment in our stock could be rendered worthless.



Risks Relating to the PRC



Our future performance is dependent on the PRC economy
and the PRC consumer market in particular.



We derive all of our
revenue from sales of our products in the PRC. The success of our business depends on the condition and growth of the PRC consumer
market, which in turn depends on macro-economic conditions and individual income levels in the PRC. We cannot assure you that projected
growth rates of the PRC economy and the PRC consumer market will be realized under the current economic situation. Any future slowdowns
or declines in the PRC economy or consumer spending could adversely affect our business, operating results and financial condition.
We believe that consumer spending habits could be adversely affected during a period of recession in the economy or that uncertainties
regarding future economic prospects could also affect consumer spending habits, all of which may have an adverse effect on certain
enterprises operating within the consumer and retail sectors, including us. The consumer and retail market could be affected by
the changing operating conditions in the PRC. With accession of the PRC to the World Trade Organization, or WTO, changes and developments
in the consumer and retail market could be volatile and unpredictable. For instance, the reduction in tariffs on foreign products
after the liberalization of the PRC market and further entry of international brands may intensify the competition in the PRC market.
This could have a material adverse impact on our business, financial condition and results of operations.



Political, economic and social policies of the PRC government
and PRC laws and regulations could affect our business, financial condition and results of operations and could result in our inability
to sustain our growth.



The economy of the PRC differs from the
economies of most developed countries in a number of respects, including:



| | · | its structure;
| | - | --------------



| | · | level of government involvement;
| | - | --------------------------------



| | · | level of development;
| | - | ---------------------



| | · | level of capital reinvestment;
| | - | ------------------------------



| | · | control of capital reinvestment;
| | - | --------------------------------



| | · | control of foreign exchange; and
| | - | --------------------------------



| | · | allocation of resources.
| | - | ------------------------



Before the adoption of reforms and open
door policies beginning in 1978, China was primarily a planned economy. Since then, the PRC government has been reforming the PRC’s
economic system, and in recent years, has begun reforming the government structure. These reforms have resulted in significant
economic growth and social progress. Although the PRC government still owns a significant portion of the productive assets in the
PRC, economic reform policies since the late 1970s have emphasized autonomous enterprises and the utilization of market mechanisms,
especially where these policies apply to non-state-owned businesses such as our Company. Although we believe these reforms will
have a positive effect on our overall and long-term development, we cannot predict whether changes in the PRC’s political,
economic and social conditions, laws, regulations and policies will have an adverse impact on our current or future business, financial
condition and results of operations.



14







Among others, we are subject to PRC laws
and regulations on labor and employee benefits. In recent years, the PRC government has implemented policies to strengthen the
protection of employees and obligate employers to provide more benefits to their employees. In addition, an employment contract
law came into effect in China on January 1, 2008. The PRC employment contract law and related regulations require more benefits
to be provided to employees, such as increases in pay or compensation for termination of employment contracts. As a result, we
expect to incur higher labor costs, which could have an adverse impact on our current or future business, results of operations
or financial condition. Additional changes in the PRC’s political, economic and social conditions, laws, regulations and
policies could have an adverse effect on our business, financial condition and results of operations.



Failure to comply with the State Administration of Foreign
Exchange regulations relating to registration of interests before the establishment of offshore special purpose companies by our
beneficial owners could adversely affect our business, financial condition and results of operations.



On October 21, 2005, the State Administration
of Foreign Exchange, or SAFE, issued a public notice that became effective on November 1, 2005. The notice requires PRC residents
to register with the local State Administration of Foreign Exchange branch before establishing or controlling any company, referred
to in the notice as an “offshore special purpose company,” outside of the PRC for the purpose of capital financing
(the “No. 75 SAFE Initial Registration”). Besides that, an alteration registration shall be filed after completing
an investment in or acquisition of any operating subsidiaries in the PRC, which we refer to herein as a “round-trip investment,”
and any change of shareholding or any other material capital alteration in such offshore special purpose company involving a round-trip
investment shall also be filed within 30 days from the date of shareholding transfer or capital alteration. The registration conducted
under the above two situations is defined as the “No. 75 SAFE Alteration Registration.”



Our PRC beneficial owners must comply with
these requirements in connection with our future investments and financing activities. If our PRC beneficial owners fail to comply
with the relevant requirements, such failure could subject the beneficial owners to fines and legal sanctions, which could adversely
affect our business, financial condition and results of operations.



Our revenues are denominated in Renminbi, which is not
freely convertible for capital account transactions and could be subject to exchange rate volatility.



We are exposed to the risks associated with
foreign exchange controls and restrictions in China, as our revenues are denominated in Renminbi, which is currently not freely
exchangeable. The PRC government controls the convertibility of the Renminbi into foreign currencies. Under the rules promulgated
under the PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments
and operation-related expenditures, may be made in foreign currencies without prior approval but are subject to procedural requirements.
Strict foreign exchange control continues to apply to capital account transactions. These transactions must be approved by or registered
with the PRC State Administration of Foreign Exchange and repayment of loan principal, distribution of return on direct capital
investment and investments in negotiable instruments are also subject to restrictions. We cannot assure you that we will be able
to meet all of our foreign currency obligations or to remit profits out of China.



Fluctuation in the value of the Renminbi and of the U.S.
dollar could have a material adverse effect on your investment.



Any significant revaluation of the Renminbi
may have a material adverse effect on our revenues and financial condition as well as on the value of, and any dividends payable
on, our ordinary shares in foreign currency terms. For instance, a decline in the value of Renminbi against the U.S. dollar could
reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in us and the dividends we may
pay in the future, if any.



There remains significant international
pressure on the PRC government to liberalize further its currency policy, which could result in a further and more significant
appreciation in the value of the Renminbi against the U.S. dollar. The Renminbi could be revalued further against the U.S. dollar
or other currencies, or could be permitted to enter into a full or limited free float, which could result in an appreciation or
depreciation in the value of the Renminbi against the U.S. dollar or other currencies.



We rely principally on dividends paid by our subsidiaries
to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to pay dividends
to us could have a material adverse effect on our ability to conduct our business.



Our Company is a holding company incorporated
in the British Virgin Islands and relies principally on dividends paid by operating subsidiaries in the PRC for cash requirements,
including the funds necessary to service any debt we may incur. Applicable PRC laws, rules and regulations permit payment of dividends
by our PRC subsidiaries only out of their retained earnings, if any, determined in accordance with PRC accounting standards, which
differ in many aspects from generally accepted accounting principles in other jurisdictions. Based on PRC accounting standards,
our PRC subsidiaries are also required to set aside a certain percentage of their after-tax profit each year to their reserve fund
in accordance with the requirements of relevant laws and provisions in their respective articles of associations, which are not
available for distribution as cash dividends. As a result, our PRC subsidiaries are restricted in their ability to transfer a portion
of their net income to us, whether in the form of dividends, loans or advances. Further, if any of our subsidiaries incurs debt
in their own name in the future, the instruments governing the debt may restrict dividends or other distributions on its equity
interest to our Company. Any limitation on the ability of our subsidiaries to pay dividends could materially adversely limit our
ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and
conduct our business.



15







Any changes in PRC policies on enterprise income tax could
adversely affect our ability to pay dividends and our financial condition.



Our subsidiaries may trigger withholding
tax requirements in the future under the PRC Enterprise Income Tax Law and the Rules on the Implementation of Enterprise Income
Tax Law of the PRC, or Implementation Rules, depending on their classification as a PRC or non-PRC tax resident enterprise. Under
the PRC Enterprise Income Tax Law and Implementation Rules, dividend and profit distribution by a “resident enterprise”
to a “non-resident enterprise” will be subject a withholding tax rate of 5% if the latter is a Hong Kong company and
a withholding tax rate of 10% if the latter is a British Virgin Islands company. In contrast, qualified dividend and profit distribution
from equity investment between “PRC tax resident enterprises” are exempt from withholding tax and income tax. Among
other things, “qualified dividend and profit distribution” include investment income derived by a PRC tax resident
enterprise from the direct investment in other PRC tax resident enterprises, other than investment income from circulating stock
issued publicly by PRC tax resident enterprises and traded on stock exchanges where the holding period is less than 12 months.
“



Under the PRC Enterprise Income Tax Law,
“non-resident enterprises” are enterprises that do not have an establishment or place of business in the PRC, or that
have establishment or place of business but the relevant income is not effectively connected with the establishment or place of
business. If an enterprise incorporated outside of the PRC has “de facto management organization” within the PRC, it
may be recognized as a “resident enterprise” and may be subject to a 25% enterprise income tax on its worldwide income.
According to the Implementation Rules, “de facto management organization” means the institution that materially and
comprehensively manages and controls the enterprise’s business, personnel, finance and assets. Given the short history of
the tax law and the Implementation Rules, the way for an enterprise to qualify for tax exemptions remains unclear. Our ability
to pay dividends and our financial condition may be adversely affected as a result of the new tax law and other changes in PRC
policies and regulations on dividend distributions, withholding tax, and enterprise income tax.



All of our management is currently substantially
based in the PRC and may remain in the PRC after the new tax law takes effect. Therefore, we may be treated as a PRC resident enterprise
for purposes of the new tax law. The tax consequences of such treatment are currently unclear as they will depend on the implementation
regulations and on how local tax authorities apply or enforce the new tax law or the Implementation Rules.



The levy and collection of enterprise income
tax in China are handled by various local governments, which in turn submit such tax revenues to their respective higher administrative
authorities. Each local government has its own administrative practice with regard to the manner and the amount of tax submitted
by the local government to its higher administrative authorities. PRC enterprises, including us, have no participation in or control
over such administrative practices. Any discrepancies in implementation among the local governments of such administrative practice
could result in uncertainties over the amount of tax for which a PRC enterprise is liable.



Fluctuations in the exchange rate could adversely affect
us.



Substantially all of our revenues and expenditures
are denominated in Renminbi. As a result, fluctuations in the exchange rate between the U.S. dollars and the Renminbi will affect
our financial results in U.S. dollar terms without affecting our business or results of operations. The Renminbi’s exchange
rate with the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic
conditions. The exchange rate for conversion of Renminbi into foreign currencies is heavily influenced by intervention in the foreign
exchange market by the People’s Bank of China. From 1995 until July 2005, the People’s Bank of China intervened in
the foreign exchange market to maintain an exchange rate of approximately 8.3 Renminbi per U.S. dollar. On July 21, 2005, the PRC
government changed this policy and began allowing modest appreciation of the Renminbi versus the U.S. dollar. However, the Renminbi
is restricted to a rise or fall of no more than 0.5% per day versus the U.S. dollar, and the People’s Bank of China continues
to intervene in the foreign exchange market to prevent significant short-term fluctuations in the Renminbi exchange rate. Nevertheless,
under China’s current exchange rate regime, the Renminbi may appreciate or depreciate significantly in value against the
U.S. dollar in the medium to long term. There remains significant international pressure on the PRC government to adopt a substantial
liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi
against the U.S. dollar.



An outbreak of the H1N1 swine flu, H5N1 strain of bird
flu (Avian Flu), Severe Acute Respiratory Syndrome (SARS) or any other similar epidemic could, directly or indirectly, adversely
affect our business, financial condition and results of operations.



The outbreak of the H1N1 swine flu in North
America and Europe has caused governments to take measures to prevent the spread of the virus. In addition, there have been reports
of swine flu cases in Asia. If the H1N1 virus further spreads in Asia, including China, epidemic could negatively affect the Asian
economy. Past occurrences of epidemics have caused different degrees of damage to the national and local economies in China. China
encountered epidemics such as SARS and incidents of the Avian Flu, which is spread through poultry populations, and is capable
in certain circumstances of being transmitted to humans, causing death. If any of our employees are identified as a possible source
of swine flu, the Avian Flu or any other similar epidemic, we may be required to quarantine employees that are suspected of being
infected, as well as others that have come into contact with those employees. We may also be required to disinfect our affected
premises, which could cause a temporary suspension of our manufacturing capacity, thus adversely affecting operations. An outbreak
of swine flu or a recurrence of an outbreak of SARS, Avian Flu or any other similar epidemic could restrict the level of economic
activities generally and/or slow down or disrupt our business activities, which could in turn adversely affect our business, financial
condition and results of operations.



16







Power shortages in the PRC could disrupt our business.



Our manufacturing processes consume substantial
amounts of electricity supplied by local power grids. Certain cities in the PRC have experienced power shortages in the past or
have been subjected to restrictions in electricity consumption. A power shortage could affect or delay our production schedule.
We maintain backup power generators to provide electricity to our machinery and equipment in case of electricity supply interruptions.
However, there is no assurance that we will always have an adequate supply of electricity to meet our production requirements and
our results of operations may be adversely affected in the event of any material interruption in electricity supply. An extended
interruption in the power supply could also affect the operations of the Xidelong retail selling locations and result in a decrease
in revenue.



We may be subject to fines and legal sanctions if we or
our employees who are PRC citizens fail to comply with the PRC regulations relating to employee share options granted by overseas
listed companies to PRC citizens.



In March 2007, SAFE issued the Application
Procedures for Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding Plans or Share
Option Plans of Overseas Listed Companies, or the Stock Option Rule. Under the Stock Option Rule, PRC individuals who participate
in an employee stock holding plan or share option plan of an overseas listed company are required, through a PRC domestic agent
or PRC subsidiary of the overseas listed company, to register with SAFE and complete certain other procedures. As we are an overseas
listed company, we and our PRC employees who have been granted share options and/or restricted share units under our equity incentive
plans are subject to the Stock Option Rule. We and our employees intend to make such application and complete all the requisite
procedures in accordance with the Stock Option Rule. However, there exist significant uncertainties in practice with respect to
the interpretation and implementation of the Stock Option Rule, and we cannot assure you that we can complete all the procedures
in a timely manner. If SAFE or other PRC governmental authorities determine that we or our PRC employees have failed to comply
with the provisions of the Stock Option Rule, we or they could be subject to fines and legal sanctions, which could have a material
adverse effect on the implementation of our equity incentive plans and our business operations.



Risks Related to Investment in our Ordinary
Shares



The market price for our ordinary shares could be volatile.



The trading price of our ordinary
shares may be subject to fluctuations. During the period from October 13, 2009, the first day on which our ordinary shares
were listed on the NASDAQ Capital Market, and were transferred and being traded on the NASDAQ Global Market and NASDAQ Global
Select Market on June 28, 2010 and January 3, 2011, respectively. Until April 27, 2012, the trading prices of our ordinary
shares ranged from $1.96 to $13.69 per ordinary share and the closing sale price on April 27, 2012 was $2.09 per ordinary
share. The market price for our ordinary shares could continue to be volatile and subject to fluctuations in response to
factors including the following:



| | · | regulatory developments in our target markets affecting us, our customers or our competitors;
| | - | ---------------------------------------------------------------------------------------------



| | · | actual or anticipated fluctuations in our quarterly operating results;
| | - | ----------------------------------------------------------------------



| | · | changes in financial estimates by securities research analysts;
| | - | ---------------------------------------------------------------



| | · | changes in the economic performance or market valuations of other sportswear companies;
| | - | ---------------------------------------------------------------------------------------



| | · | additions or departures of our directors, executive officers and key research personnel; and
| | - | --------------------------------------------------------------------------------------------



| | · | release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares.
| | - | -----------------------------------------------------------------------------------------------





In addition, securities markets may from
time to time experience significant price and volume fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may have a material adverse effect on the market price of our ordinary shares. In addition,
the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have
listed their securities in the United States may affect the volatility in the price and trading volumes for our ordinary shares.
Some of these companies have experienced significant volatility. The trading performances of these companies’ securities
at the time of or after their offerings could affect the overall investor sentiment towards PRC companies listed in the United
States and consequently could impact the trading performance of our ordinary shares.



17







Substantial future sales or perceived sales of our ordinary
shares in the public market could cause the price of our ordinary shares to decline.



Sales of our ordinary shares in the public
market, or the perception that these sales could occur, could cause the market price of our ordinary shares to decline. Such sales
also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we
deem appropriate. If any existing shareholder or shareholders sell a substantial amount of our ordinary shares, the prevailing
market price for our ordinary shares could be adversely affected. In addition, we may issue additional ordinary shares for future
acquisitions. If we pay for our future acquisitions in whole or in part with additionally issued ordinary shares, your ownership
interests in our Company would be diluted and this, in turn, could have a material adverse effect on the price of our ordinary
shares.



Your right to participate in any future rights offerings
could be limited, which could cause dilution to your holdings.



We may from time to time distribute rights
to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United
States unless we register the rights and the securities to which the rights relate under the U.S. Securities Act of 1933, as amended,
or the Securities Act, or an exemption from the registration requirements is available. We are under no obligation to file a registration
statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective.
Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, in the event we
conduct any rights offerings in the future, you could be unable to participate in such offerings and could experience dilution
in your holdings.



Certain judgments obtained against us by our shareholders
may not be enforceable.



We are a company incorporated under the
laws of the British Virgin Islands. We conduct our operations in the PRC and substantially all of our assets are located in the
PRC. In addition, our directors and executive officers, and some of the experts named in this annual report, reside within the
PRC, and most of the assets of these persons are located within the PRC. As a result, it may be difficult or impossible for you
to bring an action against us or against any one of these individuals in the United States in the event that you believe that your
rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action
of this kind, the laws of the British Virgin Islands and of the PRC could render you unable to enforce a judgment against our assets
or the assets of our directors and officers.



Since we are a British Virgin Islands company, the rights
of our shareholders could be more limited than those of shareholders of a company organized in the United States.



Under the laws of some jurisdictions in
the United States, majority and controlling shareholders generally have certain fiduciary responsibilities to the minority shareholders.
Shareholder action must be taken in good faith, and actions by controlling shareholders that are obviously unreasonable may be
declared null and void. There are common law rights for the protection of shareholders that may be invoked, largely dependent on
English company law, since the common law of the British Virgin Islands for business companies is limited. Under the general rule
pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management
of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's
affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted
properly according to law and the constituent documents of the corporation. As such, if those who control the company have persistently
disregarded the requirements of company law or the provisions of the company's memorandum and articles of association, then the
courts will grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which
is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute
fraud on the minority where the wrongdoers control the company; (3) acts that infringe on the personal rights of the shareholders,
such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary
majority of shareholders.



The principal protection under statutory
law is that shareholders may bring an action to enforce the constituent documents of the corporation, our Memorandum and Articles
of association. Shareholders are entitled to have the affairs of us conducted in accordance with the general law and the memorandum
and articles.





18









Wemay
become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.



A non-U.S.
corporation is deemed a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive
income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during
such year is attributable to assets that produce passive income or are held for the production of passive income. We operate an
active business of manufacturing and sales of sports and leisure footwear, apparel and accessories in China. Based on our use of
cash for our business operations and on the projected composition of our income and valuation of our assets, including goodwill,
we do not believe that we were considered to be a passive foreign investment company, or a PFIC, for U.S. federal income tax purposes
for our taxable year ending December 31, 2011, and we do not expect to become a PFIC for our taxable year ending December 31,
2012 or thereafter.  The determination of whether a non-U.S. corporation is a PFIC is made on an annual basis after the close
of each taxable year. We cannot assure you that we were not a PFIC for our taxable year ended December 31, 2012 or any future
taxable year. The most consequential factor affecting the outcome of annual PFIC determination in 2012 and future taxable years
will be our use of cash in our active business. Because items of working capital are generally treated as passive assets for PFIC
purposes, accumulating cash, cash equivalents and other assets that are readily convertible into cash increases the risk that we
will be classified as a PFIC for U.S. federal income tax purposes. A determination that we are a PFIC could result in adverse U.S.
tax consequences to you if you are a U.S. investor, in the form of increased tax liabilities and burdensome reporting requirements.
For example, if we were a PFIC, you would generally be taxed at the higher ordinary income rates, rather than the lower capital
gain rates, if you dispose of ordinary shares at a gain in a later year, even if we are not a PFIC in that year. In addition, a
portion of the tax imposed on your gain would be increased by an interest charge. Also, if we were classified as a PFIC in any
taxable year, you would not be able to benefit from any preferential tax rate with respect to any dividend distribution that you
may receive from us in that year or in the following year. Since our business and assets may evolve over time in ways that are
different from what we currently anticipate, we cannot assure you that we will not be a PFIC for any future taxable year. For more
information on the tax consequences to you if we were treated as a PFIC, see Item 10 “Additional Information—Taxation—United
States Federal Income Taxation— Passive Foreign Investment Company Rules.”



Item 4.	INFORMATION ON THE
COMPANY



| | A. | HISTORY AND DEVELOPMENT OF THE COMPANY
| | -- | --------------------------------------



The legal
and commercial name of our Company is Exceed Company Ltd. We began our operation when we established in China as Xdlong Fujian
in September 2001. In January 2002, we began designing, manufacturing and selling footwear under the “”
(“Xidelong”) brand name in a rented production facility in Jinjiang. In 2003, we began designing and selling Xdlong
apparel and accessories. Our products are designed for consumers interested in performance sportswear and lifestyle leisurewear
products.



In March 2007, we established our own production
facility in Jinjiang. The facility currently has nine production lines, each with a designed production capacity of approximately
one million pairs of footwear per year. In 2009, 2010 and 2011, we manufactured 9.7 million, 7.9 million and 7.1 million pairs
of footwear, respectively, at our production facility. As of December 31, 2011, we had 22 distributors who operated 4,844 Xidelong
retail selling locations located in 30 provinces and municipalities in China.



Exceed was incorporated in the British Virgin
Islands on April 21, 2009 as a wholly-owned subsidiary of 2020, a blank check company formed in Delaware for the purpose of acquiring,
through a merger, stock exchange, asset acquisition or other similar business combination, an operating business that either: (1) was
located in China, (2) had its principal operations located in China, or, (3) in 2020’s view, would benefit from
establishing operations in China.



On October
20, 2009, 2020 merged with and into Exceed, with Exceed being the surviving entity. On October 21, 2009, Exceed acquired all of
the outstanding securities of Windrace, the parent company of our PRC subsidiaries, from its shareholders, resulting in Windrace
becoming a wholly-owned subsidiary of Exceed. The merger of 2020 with and into Exceed resulted
in the redomestication of 2020 to the British Virgin Islands on October 21, 2009 and Exceed, the surviving entity following the
merger, became a foreign private issuer. Prior to the business combination with Windrace,
neither 2020 nor Exceed had an operating business.



In late July 2011, the footwear business
of XDLong Fujian was transferred to XDLong China. After the said transfer, XDLong Fujian has not carried on any other business
activities and holds the land use rights used by our Group.



Our principal executive offices are located
at Unit F, 24/F, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong. Our telephone number is (852) 2153 2771. Our agent
for U.S federal securities laws purpose is Puglish & Associates.



19







| | B. | BUSINESS OVERVIEW
| | -- | -----------------



We design,
develop and wholesale footwear, apparel and accessories under the “” (“Xidelong”)
brand name and the “” trademark. We have three principal categories of
products: (i) footwear, which mainly comprises running, leisure, basketball, skateboarding, canvas, tennis and outdoor footwear,
(ii) apparel, which mainly comprises sports tops, pants, jackets, track suits and coats, and (iii) accessories, which mainly comprise
bags, socks, hats and caps. Our footwear, apparel and accessories represented 46.0%, 52.7% and 1.3% respectively, of our total
revenue in 2011. Our primary footwear is running footwear, which represented 8.6% of our total revenue in 2011. We believe the
market for sportswear products similar to ours has been growing rapidly in China due to the increasing demand for lifestyle and
leisure products and heightened interest in health consciousness among Chinese customers.



We focus primarily on second and third-tier
cities in China characterized by increasing urbanization and strong economic development, which we believe present the best opportunity
for retail sales growth. Our target customers are between 15 to 35 years old. We plan to increase our penetration in those areas
using a middle-market pricing strategy. We also aim to expand our geographical presentation and establish regional leadership,
particularly in Southwest China and Northwest China.



We place great emphasis on the comfort and
functionality of our products. We tailor our sports and leisure footwear, especially running footwear, to the needs of Chinese
consumers. The China Institute of Sport Science, which is the research center established by the General Administration of Sport
of China and China’s first government agency engaging in research of sport science, has selected us exclusively to collaborate
on research and development efforts in China. Under our agreement with the China Institute of Sport Science, we are required to
pay an annual fee to the China Institute of Sport Science for its assistance in the research and development of technologies for
our sports footwear and apparel and its promotion of the technology content of our products. In addition, we have the exclusive
right to use the endorsement, “The Strategic Partner of the China Institute of Sport Science”, on our products
and the first right to use the know-how developed through our collaboration with the China Institute of Sport Science. As its exclusive
partner, we allow the China Institute of Sport Science to use our research and development facilities in Jinjiang. We believe that
combined with our current strengths and market position, our footwear, especially running footwear, presents the largest growth
potential in the sports and leisure footwear sector in China. Our commitment to the comfort and quality of our footwear for each
individual is represented by our slogans used in our promotional campaigns such as “The Foot Knows Comfort”,
“Run Freely” “Freedom comes first” and “Respect Yourself”.



We distribute our products mainly through
Xidelong retail selling locations, including Xidelong retail stores, which sell our products exclusively, department store concessionary
counters, and stores-within-stores. We derive all of our revenue from
sales to our distributors that operate, either directly or indirectly through third parties, the Xidelong retail selling locations
that sell our products. These distributors may also engage authorized third-party retailers to operate Xidelong retail selling
locations. We have contractual relationships only with our distributors, not any authorized third-party retailers. We believe
that the sale of our products through distributors has enabled us to grow by leveraging on their regional retail expertise and
economies of scale. We provide our distributors with retail policies and guidelines, training, advertising and marketing support
to assist them to manage and expand the Xidelong retail sales network. The number of the Xidelong retail selling locations grew
from 3,694 as of December 31, 2009 to 4,844 as of December 31, 2011, representing a CAGR of 14.5%.



We manufacture some of our products in
our production facility in Jinjiang, and the remaining through third-party contract manufacturers. Our production facility has
a gross floor area of approximately 66,102 square meters. We have nine production lines with an aggregate annual production capacity
of approximately nine million pairs of footwear. During 2009, 2010 and 2011, we outsourced a portion of our footwear production
and all of our apparel and accessories production to third-party contract manufacturers. All of our products, whether manufactured
in-house or outsourced to third-party contract manufacturers, undergo testing by our stringent quality control system before being
distributed for retail sale. For 2009, 2010 and 2011, approximately 39.2%, 55.2% and 64.5%, respectively, of our footwear in terms
of sales volume were produced through outsourced manufacturing. Such percentages increased in 2011 primarily due to the limited
production capacity in our existing production facility. In December 2011, we entered into a contract with the municipal government
of Ruichang City for the investment and construction of a sportswear manufacturing base on a parcel of land in Ruichang City. Pursuant
to this contact, we would purchase a parcel of land with an aggregate site area of 400,000 square meters in Ruichang City, Jiangxi
Province, PRC, which we plan to use for the construction of a new production facility expected to be completed by the end of 2013.
The land purchase has not been finalized and is subject to municipal and administrative approvals. Upon completion of the construction
of our new production facility in Ruichang City, we expect our annual production capacity for our footwear products to increase
to approximately 30.0 million pairs as well as gaining certain internal apparel production capabilities. We believe increased in-house
production capacities will give us more control over production process and allow us to reduce costs.



Brand and Products



Xidelong brand



We market
our products under the “” (“Xidelong”) brand name and the “”trademark.
We use the Chinese promotional slogan “Respect Yourself” to market our products, which is designed to symbolize
our emphasis on individualism.



20







In June 2006, our “Xidelong”
brand name was recognized as “China’s Well-Known Trademark” by the Hubei Province Jingzhou City Intermediate
People’s Court.



To achieve consistency in our brand image,
we set management and operational guidelines for all distributors to follow at the Xidelong retail selling locations. Those guidelines
include inventory control, pricing and sales procedures, product and window display requirements and customer service standards.



Products



We have three principal products: (i) footwear,
(ii) apparel and (iii) accessories.



The table below sets forth our current main
products under each product category:



|Footwear          |  | Apparel             |  | Accessories
|----------------- |  | ------------------- |  | -----------
|·   Running       |  | ·   Sports
    tops |  | ·   Bags   
|·   Leisure       |  | ·   Pants           |  | ·   Socks  
|·   Basketball    |  | ·   Jackets         |  | ·   Hats   
|·   Skateboarding |  | ·   Track
    suits |  | ·   Caps   
|·   Canvas        |  | ·   Coats           |  |            
|·   Tennis        |  |                     |  |            
|·   Outdoor       |  |                     |  |            



Business Model



The diagram below illustrates our business
model:







21







|Product design, research and development |  | Our design team at the research and development center formulates new designs for footwear, apparel and accessories, and tests prototype designs. We carry out other research and development activities at our research and development center.                          
|---------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                         |  |                                                                                                                                                                                                                                                                           
|Sales Fairs                              |  | We display samples of our new products at sales fairs held three times each year and take orders for our new products.                                                                                                                                                    
|                                         |  |                                                                                                                                                                                                                                                                           
|Purchase orders from distributors        |  | At the sales fairs, distributors place purchase orders for new products.                                                                                                                                                                                                  
|                                         |  |                                                                                                                                                                                                                                                                           
|Raw materials and components procurement |  | Based on the purchase orders received at the sales fairs, our purchasing team procures the requisite quantity of raw materials and components. Raw materials and components undergo our quality control.                                                                  
|                                         |  |                                                                                                                                                                                                                                                                           
|Production                               |  | The footwear production department carries out the production plan.                                                                                                                                                                                                       
|                                         |  |                                                                                                                                                                                                                                                                           
|Outsourcing                              |  | We outsource some of our footwear and all of our apparel and accessories production to contract manufacturers.                                                                                                                                                            
|                                         |  |                                                                                                                                                                                                                                                                           
|Quality Control                          |  | We sample and check finished goods against our quality and performance standards at the science and technology laboratory located in the research and development center.                                                                                                 
|                                         |  |                                                                                                                                                                                                                                                                           
|Distribution Management                  |  | We deliver our products to distributors. We then monitor and oversee their operation of the Xidelong retail selling locations. We work with them to renovate the Xidelong retail selling locations, achieve performance targets and expand the sales distribution network.



Production



Our production facility focuses on the production
of higher-priced running and basketball footwear, which incorporates our proprietary intellectual property and technology. Located
in Jinjiang, the facility has an aggregate gross floor area of approximately 66,000 square meters and was established in March
2007. Prior to that, we carried out our production activities in a rented production facility in the same region. As of December
31, 2011, our production facility had 1,657 full time production staff.



Our production capacity has been increasing
steadily. For the year ended December 31, 2005, we operated five production
lines occupying an aggregate gross floor area of 6,000 square meters, with a production capacity of approximately five million
pairs.After the establishment of our current facility in March 2007, we increased our production lines to seven production
lines with an annual production capacity of approximately seven million pairs. In June 2008, we expanded to nine production lines
with an annual production capacity of approximately nine million pairs. The utilization rates of our production facility for 2009,
2010 and 2011 were approximately 100% 88%, and 79% respectively. In December 2011, we entered into a contract with the municipal
government of Ruichang City for the investment and construction of a sportswear manufacturing base on a parcel of land in Ruichang
City. Pursuant to this contract, we would purchase a parcel of land with an aggregate site area of 400,000 square meters in Ruichang
City, Jiangxi Province, PRC, which we plan to use for the construction of a new production facility expected to be completed by
the end of 2013. The land purchase has not been finalized and is subject to municipal and administrative approvals. Upon completion
of the construction of our new production facility in Ruichang City, we expect our annual production capacity for our footwear
products to increase to approximately 30.0 million pairs as well as gaining certain internal apparel production capabilities.



22







Production process



Footwear



The following diagram illustrates the production
process for our footwear:







|Raw materials procurement                   |  | We procure raw materials such as natural and synthetic leather, nylon, canvas, rubber and plastics for our manufacturing requirements. We also recommend raw materials suppliers to our contract manufacturers for their production of our outsourced footwear and to component subcontractors for their production of our footwear components.
|------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Preparation and processing of raw materials |  | Our quality control department inspects and tests raw materials for processing. Our quality control department also inspects and tests components supplied by component subcontractors.                                                                                                                                                        
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Sewing and stitching                        |  | Our footwear production department sews and stitches individual parts created from raw materials and components sourced from component subcontractors.                                                                                                                                                                                         
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Shaping and assembly of soles               |  | Our footwear production department manufactures the upper soles and midsoles of the footwear and assembles them together.                                                                                                                                                                                                                      
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Assembly                                    |  | Our footwear production department assembles all unfinished parts. The assembly process includes gluing the soles to the body of the shoe and pressing and drying the products.                                                                                                                                                                
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Quality Control                             |  | Finished footwear undergoes our quality control tests.                                                                                                                                                                                                                                                                                         
|                                            |  |                                                                                                                                                                                                                                                                                                                                                
|Packaging                                   |  | We package our finished products according to customer orders.                                                                                                                                                                                                                                                                                 



23







Apparel and accessories



We outsource the production of all our apparel
and accessories to contract manufacturers in the PRC. See “Outsourcing.”



Our apparel business department handles
matters relating to outsourcing such as the selection and appointment of contract manufacturers and the contracts with contract
manufacturers.



Outsourcing



In 2009, 2010 and 2011, we outsourced production
of a portion of our footwear, generally products with lower technology content, and all of our production of apparel and accessories
to third-party contract manufacturers. We will continue our efforts to balance the mix between in-house production and outsourced
manufacturing moving forward, to enhance profitability.



Contract manufacturers only carry out production
activities and do not conduct product design for us. We provide our contract manufacturers with the designs and specifications
of our products. We actively protect our intellectual property rights from unauthorized use by our contract manufacturers. Our
trademarks are registered, and we engage the appropriate legal services and assistance to ensure that our trademarks are effectively
protected and enforced against any unauthorized use.



We select and evaluate our contract manufacturers
carefully. We assess contract manufacturers on an annual basis based on factors such as their product quality and ability to meet
production orders on a timely basis. All of our contract manufacturers are independent third parties and almost all of them are
located in Fujian province. We have not terminated our contractual relationships with any of our contract manufacturers of footwear
during the term of the agreements. However, there have been some incidents of contract termination with our contract manufacturers
of apparel and accessories. When this occurs, we have been able to appoint replacement contract manufacturers readily due to the
large number of replacement contract manufacturers from which we can select. See “Risk Factors — We rely
on third-party contract manufacturers for the production of a portion of our footwear and all of our apparel and accessories.”



We require our contract manufacturers to
comply with our manufacturing standards and specifications. We do not allow contract manufacturers to sub-contract our production
orders without prior consent. We subject outsourced products to our quality control procedures. We return defective components
or unused components to the relevant contract manufacturers.



We do not oversee the manufacturing operations
of our contract manufacturers except to ensure their compliance with our order specifications and quality control. Therefore, we
believe that we will not be liable for any violations of applicable laws, rules or regulations with respect to their manufacturing
operations.



Procurement



We procure raw materials for our footwear
production at our production facility in Jinjiang. The major raw materials used in the production of our footwear products include
natural and synthetic leather, nylon, canvas, rubber and plastics. Our raw material suppliers are primarily located in Quanzhou,
which is adjacent to Jinjiang. We select raw material suppliers based on our selection criteria, which include product quality,
reliability, price, and speed of delivery. We also recommend raw material suppliers to our contract manufacturers for their production
of our outsourced footwear. We place orders for raw material requirements only after we receive sales orders at our sales fairs.



We procure semi-finished rubber soles, a
key part of our footwear, and other components from component subcontractors. Other than these semi-finished rubber soles and other
components, we do not purchase other finished products from component subcontractors. Component subcontractors manufacture semi-finished
rubber soles to our specifications. We also recommend raw material suppliers to component subcontractors for their production of
our footwear components. We select component subcontractors based on location, product quality, reliability, price, and speed of
delivery. Similar to our raw materials suppliers, our component subcontractors are primarily located in Quanzhou. We pay our component
subcontractors a subcontracting fee. The subcontracting fees for 2009, 2010 and 2011 were approximately RMB18.8 million, RMB14.4
million and RMB10.4 million (US$1.7 million), respectively.



For 2009, 2010 and 2011, our top five raw
material suppliers and contract manufacturers accounted for approximately 43.7%, 45.8%, and 44.2% respectively, of total purchases
from raw material suppliers and contract manufacturers. Our single largest supplier accounted for approximately 9.6%, 10.9% and
11.1%, respectively, of our total purchases during the same periods.



24







Inventory Control and Management



Our inventory consists of raw materials
for our footwear production, footwear components and finished products. We keep generally low inventory levels of raw materials
and components because we commence production only after receiving confirmed sales orders from our distributors. We have established
an inventory management system to monitor inventory levels.



Our policy is to review regularly obsolete
inventories based on the age and the expected future salability of a product. In addition, we carry out our physical inventory
inspection on a timely basis to identify any obsolete or damaged inventories. We make specific provisions for a damaged item or
an item of inventory that has a carrying amount lower than its net realizable value. During 2009, 2010 and 2011, we did not make
any provisions for obsolete inventories.



We maintain our finished goods inventory
in two warehouses, one for storage of footwear and the other for storage of apparel and accessories. We generally store finished
goods according to types of footwear in our warehouses. For 2009, 2010 and 2011, our average inventory turnover were 18, 10 and
6 days, respectively, while our inventory balances at December 31, 2009, 2010 and 2011 accounted for approximately 3.8%, 2.6%
and 1.5%, respectively, of our total assets.



Quality Control



We manufacture our products in accordance
with our strict quality control system and quality standards. From selecting raw materials to packaging finished products, each
stage of the production process is subject to our quality control procedures. We conduct regular inspections of the production
facilities of our contract manufacturers and require the facilities and outsourced products to meet both our internal quality control
standards and all applicable national and industry quality standards. We test our new products at the science and technology laboratory
in our research and development center in Jinjiang to help ensure the products conform to quality and performance standards.



Raw materials and components quality control



We implement stringent selection criteria
for raw material suppliers and component subcontractors as the first step towards maintaining the quality of our products. We randomly
test samples of raw materials and components from suppliers and return any goods that do not meet our specifications or standards.



Design prototypes quality control



Before commencing mass production, we test
prototype designs for any design or functional issues and the suitability of materials used. We implement test production runs
in order to identify and isolate any potential production issues or defects.



Production process quality control



We employ on-site quality control staff
to inspect each stage of the production process. Our quality control staff members inspect semi-finished products at two stages,
the first being the sewing and stitching stage, where we sew and stitch individual parts together, and the second being the final
assembly stage of our footwear where we glue soles to the footwear, and press and dry the footwear. We also require our quality
control staff to inspect individual components and semi-finished products to monitor compliance with our internal quality control
over the production process standards and measures. These inspection checks provide us with a degree of control whereby we can
detect defects during the production process, and take steps to rectify these defects, where appropriate.





Finished products quality control



We randomly select products from our finished
product runs to undergo various quality control sampling tests before these products are shipped for delivery or stored at warehouses.
We customize these tests for each product type and include, for example, for footwear, shoe bending tests, abrasion resistance
tests, waterproofing tests, adhesive application tests, temperature tolerance tests, and various other tests.



In December 2005, the General Administration
of Quality Supervision, Inspection and Quarantine of the PRC designated our Xidelong footwear and apparel as “State-designated
Products Exempted from Quality Inspection.” The products which are named as “Exempted from Inspection” is defined
as excellent in quality, and can enhance the consumers’ trusts and confidence. The enterprise who obtains the “Exemption
from Inspection” is perceived to be outperforming in the profession. To obtain the remarkable results, these enterprises
use advanced science and technology to improve the product quality, using an unremitting effort to strengthen the satisfaction
of consumers.



In 2008, we obtained ISO 9001 certification
for the design, development and production of our footwear, and the design, development and production management of our apparel.



25







Sales and Distribution



Our sales operations are managed and coordinated
from our headquarters at Jinjiang. As of December 31, 2011, our sales and marketing center comprised a team of 208 staff. The sales
department devises and implements policies for our distributors to assist them in operating the Xidelong retail selling locations,
which include policies relating to marketing and promotion, sales management, pricing, recording of sales and human resources.



Sales network



We sell all of our products to distributors
for subsequent resale to consumers through Xidelong retail selling locations. We do not sell products directly to consumers. As
of December 31, 2011, our 22 distributors operated 4,844 Xidelong retail selling locations.



We categorize the Xidelong retail selling
locations as either department store concessions or stand-alone shops. Department store concessions are designated sections of
department stores that sell our products. Stand-alone shops are retail shops, usually on the street level. Xidelong retail selling
locations are operated directly by our distributors or indirectly through third parties. Distributors place wholesale orders (which
include purchase orders that the distributors secure from authorized third-party retailers) for our products at our sales fairs
for retail sale at the Xidelong retail selling locations. Our top five distributors accounted for approximately 43.3% of our total
revenue for 2011.



The following chart illustrates the structure
of the sales network for our products:







26







We have sales teams comprising regional
managers, account managers and account representatives who manage our sales in the various regions. Our sales teams are responsible
for monitoring and managing the performance of the distributors and the Xidelong retail selling locations within their respective
regions, as well as managing the distributors’ compliance with our retail policies. These regional sales teams report to
our headquarters.



Selection of distributors



We select distributors based on a range
of criteria that we consider important for the operation of the Xidelong distribution sales network of sportswear retail selling
locations. We do not require our distributors to have any minimum number of years of relevant experience. We assess the suitability
of a candidate to be a distributor based on, but not limited to, the following:



| | · | its relevant experience in the management and operation of sportswear retail selling locations;
| | - | -----------------------------------------------------------------------------------------------



| | · | its creditworthiness;
| | - | ---------------------



| | · | its ability to develop and operate a network of retail selling locations in its designated sales region;
| | - | --------------------------------------------------------------------------------------------------------



| | · | its ability to meet our sales targets; and
| | - | ------------------------------------------



| | · | the suitability of its store location and size.
| | - | -----------------------------------------------



We set guidelines for our distributors in
respect of the location, store layout and product display of their Xidelong retail selling locations. Distributors or third-party
retailers require our prior approval before opening new Xidelong retail selling locations. We typically visit potential locations
for new Xidelong retail selling locations with distributors and consider the suitability of such locations before approving a new
Xidelong retail selling location. As an incentive to our distributors
to expand the number of Xidelong retail selling locations and to create
a uniform high-quality store image across Xidelong retail selling locations nationwide, we provide certain renovation subsidies
in the form of standardized promotional materials and display equipment to qualified Xidelong retail selling locations.



We also allow our distributors to operate
the Xidelong retail selling locations through third parties. Distributors must obtain our approval before appointing such retail
store operators. We do not have direct contractual relationships with the authorized third-party retailers and thus we require
our distributors to implement, monitor compliance with and enforce our retail store guidelines on the authorized third-party retailers.



For 2009, 2010 and 2011, sales to our top
five distributors accounted for approximately 46.0%, 37.6% and 43.3%, respectively, of our total revenue. During the same periods,
sales to our single largest distributor accounted for approximately 13.0%, 8.7% and 12.6%, respectively, of our total revenue.



Ordering of our products



Our distributors place orders for our products
in sales fairs organized by us. Prior to 2008, we organized two major sales fairs each year, usually in March to introduce the
autumn/winter collections and in September to introduce spring/summer collections. Beginning in 2008, we organized three sales
fairs each year, usually in the first quarter to introduce the autumn collection, in the second quarter to introduce the winter
collection and in the third quarter to introduce the spring/summer collections.



We usually introduce our new collections
four to six months before the introduction of a new season’s products to consumers. We use the orders collected at the sales
fairs to determine production schedules for each season and to plan future sales targets. We then manufacture our products in our
production facility or through third-party contract manufacturers. After completion of production, the products are delivered to
distributors, which in turn either sell the products directly to consumers or to their respective third-party retailers for eventual
sales to consumers. We believe that our streamlined order, production and sales process allows us to manage our raw material procurement
and credit exposure, minimize inventory exposure and increase sales.



Return policy



We do not have a formal return policy with
our distributors. We only accept returns of defective products. However, instead of returning defective products to us, distributors
generally choose to sell any defective products at a discount to end customers. Since distributors are required to comply with
our pricing policy, distributors must obtain our prior written consent before they can sell any products at a discount to the suggested
retail price. We determine the amount of discounts on a case-by-case basis. We do not provide any compensation to distributors
for defective products. To date, the number and value of defective products have been nominal.



In addition, we do not have any obsolete
stock arrangements with our distributors. Therefore, we do not have any arrangements with distributors to accept returns of out-of
season stock.



27







Promotion and Marketing



Our marketing department handles media arrangements,
sponsorships, other endorsement activities and store image maintenance. We use a variety of media, such as television, newspapers,
magazines, the Internet and outdoor billboard displays to build both regional and nationwide brand recognition. We collaborate
with athletes, media celebrities and industry experts on marketing and endorsement arrangements and they act as spokespersons for
the Xidelong brand. We also invest resources in maintaining store image and organizing renovation activities to build our brand
recognition to enhance our brand awareness.



For 2009, 2010 and 2011, advertising and
promotional expenses constituted approximately 11.9%, 11.7% and 10.7% of our total revenue, respectively.



Spokespersons



We actively seek reputable spokespersons
to promote our brand. In 2010, we engaged Singaporean twin sisters Miko Bai Wei-Fan and Yumi Bai Wei-Ling of By2, a popular Taiwan-based
musical group, to act as the Company's official product series spokespersons. By2 exemplifies the convergence of fashion and sports
and we believe that their innovative talent, dynamic personalities and high-energy performances embody our core values of energy
and happiness. As part of the agreement, in 2010, By2 completed an advertisement campaign for our upcoming apparel line and filmed
a television commercial to build awareness of the Xidelong brand, and participated in a variety of promotional activities. Our
first television commercial featuring By2 was launched on China Central Television Channel 5 (CCTV-5) in July 2010. Furthermore,
in 2011, we engaged an advertising company, which is a member of the American Association of Advertising Agencies, to plan and
produce television commercials for our spokespersons, By2, and to design and print advertisement for our products. We believe these
commercials and advertisements have successfully promoted Xidelong as a sportswear brand emphasizing a cheerful lifestyle and exemplified
the core value of our products represented by our slogan of “Freedom Comes First”.



Sponsorship and endorsement



We actively seek and are also invited to
sponsor various sporting or festive events related to our products.



In 2010, we sponsored the “Inter-City”
television program, a popular entertainment show featuring athletic challenges aired on channels CCTV-1 and 5. In addition, in
2009, the State Council of the People's Republic of China implemented regulations on physical fitness, and named August 8 as the
annual “Fitness for All” Day in order to enhance the public's enthusiasm for fitness and sporting events. Following
the release of the regulations, the Nationwide “Fitness for All” Sports Campaign, a charitable, social initiative to
promote the development of the sports and fitness industry and the concept of fitness and sporting events organized by the Human
Resources Development Center of the General Administration of Sport of China, or the Center, and China Sports Publishing Group,
began in June 2010 in Beijing and expanded to hundreds of colleges and universities in China. XDLong China sponsored and was named
the first official partner of the Nationwide “Fitness for All” Sports Campaign in 2010.



In 2011, we were named as one of the “Top
Ten Sport-footwear Enterprises of 2010” in China and were selected as one of the “100 Most Valuable Brands of 2010
in the Footwear Industry” by the National Productivity Center of the Leather and Footwear Industry. Furthermore, we received
the Outstanding Contribution Award from the General Administration of Sport of China for our sponsorship of the “Fitness
for All Campaign – Walking to 100 Universities” program. In addition, we have continued to sponsor the “Inter-City”
television program, a popular entertainment show featuring athletic challenges that airs on channels CCTV 1 and 5, starting from
the second quarter of 2011. To support our advertising and promotional initiatives, we have also engaged Genedigi, one of the largest
and longest standing China-based marketing and public relations firms. This engagement, together with our ongoing marketing initiatives
including our sponsorship of the “Fitness for All Campaign – Walking to 100 Universities” program, has enhanced
our brand significantly. Furthermore, we have engaged a new advertising company, a member of the American Association of Advertising
Agencies, for the planning and production of television commercials for our spokespersons, By2, and print advertisements for our
products. The commercials are intended to position Xidelong as a sports brand that emphasizes a “happy lifestyle”.



Pricing



We determine the prices of our products
based on a variety of factors, including the costs of raw materials and production, market conditions (including the spending power
of consumers) and the prices of competitors’ products. We have been able to increase the prices of our products relatively
steadily in 2009, 2010 and 2011 without losing market share due to increasing awareness of our brand name, product quality and
research and development.



We have adopted a suggested retail price
system that is applied nationwide to all retail selling locations operated by our distributors or third-party retailers to maintain
brand image and avoid price competition among distributors and third-party retailers. In addition, our distributors must obtain
our prior written approval before carrying out any promotional events or selling our products (including newly launched products)
at a discount. On a case-by-case basis, we permit sales of our products that deviate from their manufacturing specifications at
a discount to suggested retail prices to end customers.



28







Competition



The sports and leisure industry is highly
competitive in China. We compete with an increasing number of international and domestic sports and leisure footwear companies,
sports and leisure apparel companies, sports accessories companies, and large companies with diversified lines of sports and leisure
shoes, apparel and accessories. We expect competition to further intensify due to the entry of new foreign and domestic sports
and leisurewear retailers in China and, as a result, we may be required to adjust our prices in response to competitors’
pricing policies. Our ability to maintain or further increase our profitability will primarily depend on our ability to compete
effectively by leveraging the following to differentiate us from our competitors: our leading market position in China; our brand
recognition and product portfolio; our distributors’ extensive retail distribution network; our experienced management team
and our product designs.



Performance style and quality of footwear,
apparel and accessories, new product development, price, product identity through marketing and promotion, and support to distributors
and customer service are important aspects of competition in the sports footwear, apparel and accessories business. We believe
that we are competitive in all these areas particularly as a result of, what we believe is, our brand name, product quality and
research and development.



Insurance



We believe that we maintain insurance in
line with industry standards. Our insurance coverage primarily relates to property insurance.



We maintain property insurance policies
covering our equipment and facilities for losses due to fire, earthquake, flood and a wide range of other natural disasters. Insurance
coverage for our property, plant and equipment other than land and inventory amounted to approximately RMB230.4 million (US$36.6
million) as of December 31, 2011. We also maintain insurance for inventory of raw materials, work-in-progress and finished
goods, covering RMB220.0 million (US$35.0 million).



We do not maintain general product liability
insurance for any of our products. Nevertheless, we believe that our practice is in line with the general industry practice in
China, as product liability insurance is not required under PRC law. In 2009, 2010 and 2011, we did not receive any material claims
from customers or consumers relating to our products.



Regulation



Corporate laws relating to foreign investment



The establishment, operation and management
of corporate entities in China are governed by the Company Law of the PRC, or the Company Law, effective in 1994, as amended in
1999, 2004 and 2005, respectively. The Company Law is applicable to our PRC subsidiaries XDLong Fujian and XDLong China, except
where the PRC laws on foreign investment have stipulated otherwise.



The establishment, approval, registered
capital requirement and day-to-day operational matters of wholly foreign-owned enterprises, such as PRC subsidiaries XDLong Fujian
and XDLong China, are regulated by the Wholly Foreign-owned Enterprise Law of the PRC effective in 1986, as amended in 2000, and
the Implementation Rules of the Wholly Foreign-owned Enterprise Law of the PRC effective in 1990, as amended in 2001.



Foreign Currency Exchange



Pursuant to the Foreign Currency Administration
Rules promulgated in 1996 and amended in 1997 and 2008 and various regulations issued by SAFE and other relevant PRC government
authorities, the Renminbi is freely convertible only to the extent of current account items, such as trade-related receipts and
payments, interests and dividends. An enterprise can choose to either keep or sell its foreign exchange income under current account
to financial institutions authorized to engage in foreign exchange settlement or sales business. Capital account items, such as
direct equity investments, loans and repatriation of investment, require the prior approval from SAFE or its local counterpart
for conversion of Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC.
Payments for transactions that take place within the PRC must be made in Renminbi.



Regulations on Dividend Distribution



The principal PRC laws and regulations
governing distribution of dividends of wholly foreign-owned enterprise include the Wholly Foreign-owned Enterprise Law promulgated
by the Standing Committee of the National People’s Congress, as amended on October 31, 2000, and the Implementation Rules
of the Wholly Foreign-owned Enterprise Law issued by the State Council, as amended on April 12, 2001.



Under these laws and regulations, wholly
foreign-owned enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with
PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least
10% of their respective accumulated profits each year, if any, to fund certain statutory reserves unless these reserves have reached
50% of the registered capital of the wholly foreign-owned enterprises. These statutory reserves are not distributable as cash dividends.



29







Employee Stock Options



In December 2006, the People’s Bank of China promulgated
the Administrative Measures of Foreign Exchange Matters for Individuals, or the PBOC Regulation, setting forth the respective requirements
for foreign exchange transactions by PRC individuals under either the current account or the capital account. In January 2007,
SAFE issued implementing rules for the PBOC Regulation, which, among other things, specified approval requirements for certain
capital account transactions such as a PRC citizen’s participation in the equity incentive plan of an overseas publicly listed
company. On March 28, 2007, SAFE issued the Operating Procedures on Administration of Foreign Exchange regarding PRC Individuals’
Participation in Employee Share Ownership Plans and Employee Stock Option Plans of Overseas Listed Companies, or the Stock Option
Rule. On February 15, 2012, SAFE issued the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, or the Stock Incentive Plan Rules, or the Updated Stock
Option Rule, which replaced the Stock Option Rule issued by SAFE in March 2007. The purpose of the Updated Stock Option Rule is
to regulate foreign exchange administration of PRC citizens who participate in equity incentive plans of overseas-listed companies.



According to the Stock Option Rule, if
a PRC citizen participates in any equity incentive plan of an overseas-listed company, a PRC domestic agent or the PRC related
company of such overseas listed company (such as the overseas-listed company itself, its parent company or its subsidiaries or
branches in China) must, among others things, file an application with SAFE on behalf of such individual to obtain approval for
an annual quota with respect to the purchase of foreign exchange in connection with stock holding or stock option exercises. This
is because PRC citizens may not directly use overseas funds to purchase stock or exercise stock options. Concurrent with the filing
of such application with SAFE, the PRC domestic agent or the PRC-related company must obtain approval from SAFE to open a special
foreign exchange account at a PRC domestic bank to hold the funds required in connection with the stock purchase or option exercise,
any returned principal or profits upon sales of stock, any dividends issued upon the stock and any other income or expenditures
approved by SAFE. The PRC domestic agent also is required to obtain approval from SAFE to open an overseas special foreign exchange
account at an overseas bank as trustee to hold overseas funds used in connection with any stock purchase.



All proceeds obtained by PRC citizens from
dividends acquired from the overseas-listed company through an employee stock holding plan or stock option plans or sales of the
overseas-listed company’s stock acquired through other methods must be fully remitted back to China after deducting the relevant
overseas expenses. The foreign exchange proceeds from these sales can be converted into Renminbi or transferred to the PRC citizen’s
foreign exchange savings account after the proceeds have been remitted back to the special foreign exchange account opened at the
PRC domestic bank. If stock options are exercised in a cashless transaction, the PRC option holder is required to remit the proceeds
to the special foreign exchange account.



We and our employees who are PRC citizens
and individual beneficiary owners or have been granted restricted shares or share options are subject to the Stock Option Rule.



In addition, the State Administration for
Taxation has issued circulars concerning employee stock options. Under these circulars, our employees working in the PRC who exercise
stock options will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee
stock options with relevant tax authorities and to withhold individual income taxes of those employees who exercise their stock
options. If our employees fail to pay their income taxes, or we fail to withhold them, we may face sanctions imposed by the tax
authorities or other PRC government authorities. As of the date of this annual report on Form 20-F, the Company granted 404,086
restricted shares to its non-executive directors, senior management and certain employees.



Environmental Protection



Our manufacturing operations are subject
to PRC environmental laws and regulations on air emission, solid waste emission, sewage and waste water, discharge of waste and
pollutants, and noise pollution. These laws and regulations include Law of the PRC on Environmental Protection, Law of the PRC
on the Prevention and Control of Water Pollution, Law of the PRC on the Prevention and Control of Atmospheric Pollution, Law of
the PRC on the Prevention and Control of Pollution from Environmental Noise and Law of the PRC on the Prevention and Control of
Environmental Pollution of Solid Waste. We are also subject to periodic monitoring by relevant local government environmental protection
authorities.



According to these environmental laws and
regulations, all business operations that may cause environmental pollution and other public hazards are required to incorporate
environmental protection measures into their operations and establish a reliable system for environmental protection. Such a system
must adopt effective measures to prevent and control pollution levels and harm caused to the environment in the form of waste gas,
waste water and solid waste, dust, malodorous gas, radioactive substance, noise, vibration and electromagnetic radiation generated
in the course of production, construction or other activities.



Companies in the PRC are also required to
carry out an environment impact assessment before commencing construction of production facilities and the installation of pollution
treatment facilities that meet the relevant environmental standards and treat pollutants before discharge. We carried out the required
environment impact assessment before commencing construction of our production facilities and have obtained all the required permits
and environmental approvals for our production facilities. Under PRC law, a company must apply to the environmental protection
authority in the PRC for an environmental protection examination and acceptance after completion of a construction project. XDLong
China has not applied for an environmental protection examination and acceptance for a construction project that it finished. As
a result, the environmental protection authority has the right to request XDLong China to rectify such non-compliance by applying
for an environmental protection examination and acceptance within a specified period. If XDLong China fails to obtain an environmental
protection examination and acceptance within the specified period of time, XDLong could be subject to a fine up to RMB50,000 or
be ordered to suspend its operations.



30







Our production facility in Jinjiang received
ISO 14001 certification in 2007, which certifies that our environmental management system in respect of the design, development,
production and service of our products conforms to the environmental management standards.



The main environmental impact from our operations
is the generation of wastewater and noise pollution from the operation of production machinery. In order to comply with the relevant
environmental protection laws and regulations, we have implemented an environmental protection system to ensure the emissions from
production operations meet the pollution indicators. In addition, our production plant is located in an open area, away from residential
areas and equipped with an appropriate convection and ventilation system. In order to reduce the impact on the environment, we
have enhanced the convection and ventilation system at our production facilities to improve air quality and adopted various measures
to prevent and minimize the noise pollution from our production operations.



Health and Safety Matters



We are required to maintain working conditions
of various national and industrial safety standards pursuant to the PRC Production Safety Law and other applicable PRC laws and
regulations. We are required to offer education and training programs to our employees regarding production safety. The design,
manufacture, installation, use and maintenance of our safety equipment are required to conform with applicable national and industrial
standards. In addition, we are required to provide employees with safety and protective equipment that meet national and industrial
standards and to supervise and educate them to wear or use such equipment according to the prescribed rules.



We consider the safety of our employees
to be a priority. We have implemented internal health and safety policies in the workplace, which are available through our handbook
on production safety and security procedures and that incorporate safety laws and regulations in the PRC. We have implemented safety
guidelines on production procedures for the safe operation of production equipment and machinery during each stage of the production
process. We require our employees to attend occupational safety education training courses on our safety policies and procedures
to enhance their awareness of safety issues. We provide and require our employees to wear suitable protective devices to ensure
their safety. We also provide employees with free annual medical check-ups.



As required under the Regulation of Insurance
for Labor Injury, Provisional Insurance Measures for Maternity of Employees, Interim Regulation on the Collection and Payment of
Social Insurance Premiums and Interim Provisions on Registration of Social Insurance, we provide our employees in the PRC with
welfare schemes covering pension insurance, unemployment insurance, maternity insurance, injury insurance and medical insurance.



We believe that we are in compliance with
all applicable labor and safety laws and regulations in all material respects and have implemented internal safety guidelines and
operating procedures. We do not expect the new PRC Labor Contract Law, which became effective in 2008, will have any impact on
our business and operations. Since the commencement of our business, none of our employees has been involved in any major accident
in the course of their employment and we have never been subject to disciplinary actions with respect to the labor protection issues.



In September 2011, we received from Jinjiang
Municipal People’s Government an award for our successful maintenance of the safety production and operation.



Regulations on Labor Contracts



On June 29, 2007, the Standing Committee
of the PRC National People’s Congress enacted the PRC Labor Contract Law, or the Labor Contract Law, which became effective
on January 1, 2008. The Implementation Regulation for the PRC Labor Contract Law, or the Implementation Regulation, was promulgated
by the State Council and took effect on September 18, 2008. The Labor Contract Law and the Implementation Regulation formalize,
among others, workers’ rights concerning overtime hours, pensions and layoffs, the execution, performance, modification and
termination of labor contracts, the clauses of labor contracts and the role of trade unions. In particular, they provide for specific
standards and procedures for entering into non-fixed-term labor contracts as some of our sales professionals and staff do. Either
the employer or the applicable sales professional or staff is entitled to terminate the labor contract in circumstances as prescribed
in the Labor Contract Law and the Implementation Regulation or if certain preconditions are fulfilled, and in certain cases, the
employer is required to pay a statutory severance upon the termination of a labor contract pursuant to the standards provided by
the Labor Contract Law.



31







| | C. | ORGANIZATIONAL STRUCTURE
| | -- | ------------------------



Exceed is our investment
holding company incorporated in the British Virgin Islands and we conduct our operations through our PRC subsidiaries, which are
our indirect wholly owned subsidiaries. The following diagram illustrates our significant direct and indirect subsidiaries as
of March 31, 2012:









Subsidiaries



In November, 2011, we dissolved Exceed Brand
Management (BVI) Co. Ltd. as it had remained dormant since its incorporation on December 3, 2009.



The following table sets forth information
relating to our direct and indirect subsidiaries as of March 31, 2012:



|                                       |  | Beneficial Ownership
        Percentage |   |  | Jurisdiction of
        Incorporation | 
|-------------------------------------- |  | --------------------------------------- | - |  | ------------------------------------- | 
|Windrace International Company Limited |  | 100                                     | % |  | Cayman Islands                        | 
|Windrace Investment Holding Limited    |  | 100                                     | % |  | British Virgin Islands                | 
|Hei Dai Lung Group Company Limited     |  | 100                                     | % |  | Hong Kong                             | 
|Fujian Xidelong Sports Goods Co., Ltd. |  | 100                                     | % |  | PRC                                   | 
|Xidelong (China) Co. Ltd.              |  | 100                                     | % |  | PRC                                   | 



| | D. | PROPERTY, PLANTS AND EQUIPMENT
| | -- | ------------------------------



XDLong China owns and occupies a parcel
of land with an aggregate site area of 38,784 square meters and the buildings constructed upon this parcel of land with an aggregate
gross floor area of 99,024 square meters. The buildings consist of a production facility, a research and development center, office
space, staff quarters, a recreation center and various sports facilities. We have obtained the land use rights certificate in relation
to the land and the property ownership certificates for the buildings. The land use rights were granted for industrial use for
a term of 50 years beginning on December 25, 2006.



32







XDLong Fujian owns a parcel of land adjacent
to XDLong China, which is within our production complex in Jinjiang. Such parcel has an aggregate site area of 15,277 square meters.
Pursuant to the State-owned Land Use Right Transfer Contract, construction on this land must commence by February 28, 2006. However,
XDLong Fujian did not commence construction by such date because the Group decided to construct its production facilities on another
larger parcel of land owned by XDLong China. Currently, we have planned to construct production facilities on the XDLong Fujian
parcel of land. On May 14, 2008, XDLong Fujian applied to the relevant local government agency for the approval to postpone construction
on the land. The local government agency has verbally confirmed that the local government does not intend to repossess the parcel
of land held for use by XDLong Fujian, or otherwise cancel the underlying contract. Management of Exceed has concluded that the
possibility of incurring impairment in value or loss of land use is remote.



Management based its conclusion on the fact
that the local government has been advised that we intend to commence construction on the parcel of land and that local government
officials have provided verbal assurances that they do not intend to take punitive action for our failure to commence construction.
Consistent with the objectives of the local government, the construction of the additional production facilities in the Jinjiang
area will inject capital into the local economy and result in an expansion of our local workforce.



Pursuant to four sales and purchase agreements
XDLong China entered into with independent third parties on May 17, 2010, May 20, 2010, November 18, 2010 and January 3, 2011,
respectively,, we acquired a parcel of land adjacent to our XDLong China production complex in Jinjiang, with an aggregate site
area of approximate 22,160 square meters, for which we are in the process of applying for the certificate of land use rights. We
are currently constructing staff quarters on this parcel of land.



In December, 2011, we entered into a contract
with the municipal government of Ruichang City for the investment and construction of a sportswear manufacturing base on a parcel
of land in Ruichang City. Pursuant to this contract, we would purchase a parcel of land with an aggregate site area of 400,000
square meters in Ruichang City, Jiangxi Province, PRC, which we plan to use for the construction of a new production facility expected
to be completed by the end of 2013. The land purchase has not been finalized and is subject to municipal and administrative approvals.



Our principal executive offices are located
at Unit F, 24/F, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong.



Item 4A.	UNRESOLVED STAFF COMMENTS



None.



Item 5.	OPERATING AND FINANCIAL REVIEW
AND PROSPECTS



You should read the following discussion
and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements
and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those set forth
under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F.



Overview



We design,
develop and wholesale footwear, apparel and accessories under the “” (“Xidelong”)
brand name and the “” trademark. We have three principal categories of
products: (i) footwear, which mainly comprises running, leisure, basketball, skateboarding, canvas, tennis and outdoor footwear,
(ii) apparel, which mainly comprises sports tops, pants, jackets, track suits and coats, and (iii) accessories, which mainly comprise
bags, socks, hats and caps. Our footwear, apparel and accessories represented 46.0%, 52.7% and 1.3%, respectively, of our total
revenue in 2011. Our primary footwear is running footwear, which represented 8.6% of our total revenue in 2011. We believe the
market for sportswear products similar to ours has been growing rapidly in China due to the increasing demand for lifestyle and
leisure products and heightened interest in health consciousness among Chinese customers.



We focus primarily on second and third-tier
cities in China characterized by increasing urbanization and strong economic development, which we believe present the best opportunity
for retail sales growth. Our target customers are between 15 to 35 years old. We plan to increase our penetration in those areas
using a middle-market pricing strategy. We also aim to expand our geographical presentation and establish regional leadership,
particularly in Southwest China and Northwest China.



33







We place great emphasis on the comfort and
functionality of our products. We tailor our sports and leisure footwear, especially running footwear, to the needs of Chinese
consumers. The China Institute of Sport Science, which is the research center established by the General Administration of Sport
of China and China’s first government agency engaging in research of sport science, has selected us exclusively to collaborate
on research and development efforts in China. Under our agreement with the China Institute of Sport Science, we are required to
pay an annual fee to the China Institute of Sport Science for its assistance in the research and development of technologies for
our sports footwear and apparel and its promotion of the technology content of our products. In addition, we have the exclusive
right to use the endorsement, “The Strategic Partner of the China Institute of Sport Science,” on our products
and the first right to use the know-how developed through our collaboration with the China Institute of Sport Science. As its exclusive
partner, we allow the China Institute of Sport Science to use our research and development facilities in Jinjiang. We believe that
combined with our current strengths and market position, our footwear, especially running footwear, presents the largest growth
potential in the sports and leisure footwear sector in China. Our commitment to the comfort and quality of our footwear for each
individual is represented by our slogans used in our promotional campaigns such as “The Foot Knows Comfort”,
“Run Freely” “Freedom comes first” and “Respect Yourself”.



We distribute our products mainly through
Xidelong retail selling locations, including Xidelong retail stores, which sell our products exclusively, department store concessionary
counters and stores-within-stores. We derive all of our revenue from
sales to our distributors, which operate Xidelong retail selling locations themselves or engage authorized third-party retailers
to operate Xidelong retail selling locations. We have contractual relationship only with our distributors, not any authorized
third-party retailers. We believe that the sale of our products through distributors has enabled us to grow by leveraging their
regional retail expertise and economies of scale. We provide our distributors retail policies and guidelines, training, advertising
and marketing support to assist them to manage and expand the Xidelong retail sales network. The number of the Xidelong retail
selling locations grew from 3,694 as of December 31, 2009 to 4,844 as of December 31, 2011, representing a CAGR of 14.5%.



We manufacture some of our products in
our production facility in Jinjiang, and the remaining through third-party contract manufacturers. Our production facility has
a gross floor area of 66,102 square meters. We have nine production lines with an aggregate annual production capacity of approximately
nine million pairs of footwear. During 2009, 2010 and 2011, we outsourced a portion of our footwear production and all of our apparel
and accessories production to third-party contract manufacturers. All of our products, whether manufactured in house or outsourced
to third-party contract manufacturers, undergo testing by our stringent quality control system before being distributed for retail
sale. For 2009, 2010 and 2011, approximately 39.2%, 55.2% and 64.5%, respectively, of our footwear in terms of sales volume were
produced through outsourced manufacturing. Such percentages increased in 2011 primarily due to our efforts to balance the mix between
in-house production and outsourced manufacturing. Increased in-house production gives us more control over production process and
allows us to reduce costs, while outsourced manufacturing allows us to avoid shortage or excessive labor if the demand fluctuates.



Our revenue increased from RMB2,078.0 million
in 2009 to RMB2,698.9 million in 2010, and then to RMB3,288.6 million (US$522.5 million) in 2011, representing a CAGR of 25.8%.
Such increase was primarily attributable to our business expansion and the increased demand for our products.



Factors Affecting Our Results of Operations and Financial
Condition



Our financial condition and results of operations
have been and will continue to be affected by a number of factors, including those set forth below.



Macroeconomic conditions in China and our target markets



All of our revenue in 2009, 2010 and 2011
was derived from sales in China. Our financial condition and results of operations have been dependent upon macroeconomic conditions
in China. According to the National Bureau of Statistics of China, the PRC economy grew at a CAGR of 15.4% from 2000 to 2011. We
believe the PRC consumer market has significant growth potential. Total retail sales of consumer products, the primary gauge of
consumer spending in China, increased by 17.1% from 2010 to 2011 and 18.4% from 2009 to 2010. Consumer spending as measured by
total retail sales value grew at a CAGR of 14.9% from 1999 to 2011. With the continued growth in the PRC consumer market, we believe
that we will be able to continue to increase the selling prices of our products in the future due to the increased recognition
of our brand name, product quality and research and development efforts.



We focus primarily on second and third-tier
cities in China, particularly in Southwest China and Northwest China, the regions that we believe present the best opportunity
for retail sales growth due to rapid urbanization and economic development. Urban consumption is expected to continue to be the
primary contributor to consumer consumption in China. According to the National Bureau of Statistics of China, urban retail sales
accounted for nearly 86.6% of total retail sales in 2011. We believe that we will be able to continue to capture the retail sales
growth opportunities in our target markets.



34







Consumer demand for sportswear in China



Consumer demand for sportswear in China
is one of the key drivers of our revenue. Our success depends on the growth in such demand and the overall growth in the consumer
market in China. Statistics published by the General Administration of Sport of China suggest that there is a general correlation
between disposable income and sports participation in China. According to the National Bureau of Statistics of China, the PRC per
capita annual disposable income of urban households grew at a CAGR of 11.8% from 1999 to 2011, and per capita consumption expenditure
of urban residents increased by 6.8% from 2010 to 2011. As the general living standards in China continue to improve, we expect
that the consumer demand in China will shift increasingly towards lifestyle-enhancing products, such as sportswear. We believe
such trend will increase our sales. We also believe that the Olympic Games to be held in London and several other sporting events
to be held in China such as Asian Beach Games and the 12th National Winter Games in 2012 will generate more interest in sports
and corresponding consumer demand for sportswear in China.



Ability to maintain an attractive product portfolio at
competitive prices



We believe that our success depends to a
large extent on our ability to maintain an attractive product portfolio at competitive prices. We have a diversified product portfolio.
Xidelong retail selling locations carry a broad range of merchandise. We monitor market response to our different products and
adjust our product mix from time to time. For instance, we introduced vintage design and cross-training footwear as new categories
starting from June 2011. In order to increase our average selling prices, revenue and gross profit margins, we intend to continue
to monitor the changing consumer demand and adjust our product mix as we deem necessary.



To target different segments within the
mid-range market, we price our products at different price points. Our sales volume and revenue increased in each of 2010 and 2011
as compared to 2009. The average selling prices of our products also increased in each of 2010 and 2011 as compared to 2009 primarily
due to the increased recognition of the Xidelong brand in China as a result of our marketing and brand promotion efforts. In order
to maintain our price competitiveness and sales volume, we review our pricing strategy regularly and make adjustments based on
various factors, including the market response to existing recommended retail prices, the level of sales, the expected product
margin on individual products, the prices of our competitors’ products and the anticipated market trends and expected demand
from customers.



In addition, we believe that brand recognition
is crucial to the consumers’ purchasing decisions, which may have a direct impact on our ability to maintain an attractive
product portfolio at competitive prices. We position our Xidelong brand as a high-quality sports and leisurewear brand in China.
We place great emphasis on brand building and promote Xidelong products through advertisements in the media, sponsorship of PRC
sports events and various other promotional activities. For 2009, 2010 and 2011, our advertising and promotion expenses accounted
for approximately 11.9%, 11.7% and 10.7%, respectively, of our total revenue. We intend to increase our marketing budgets for promotional
activities in the future so as to further enhance our brand recognition and strengthen our market position.



Ability to strengthen and expand our distribution network



We distribute our products mainly through
Xidelong retail selling locations, including Xidelong retail stores, which sell our products exclusively, department concessionary
counters, and stores-within-stores. As of December 31, 2011, a network of 4,844 Xidelong retail selling locations was located in
30 provinces and municipalities in China. The number of Xidelong retail selling locations increased from 3,694 as of December 31,
2009 to 4,844 as of December 31, 2011, representing a CAGR of 14.5%. We believe that our success depends on our ability to strengthen
and expand our distribution network, which in turn depends to a large extent on the performance of our distributors.



Ability to manage production costs and product quality



To meet production requirements and to remain
profitable, we must obtain sufficient quantities of good quality raw materials from our suppliers in a timely manner and at commercially
reasonable prices. The major raw materials used in the production of our footwear products are natural and synthetic leather, nylon,
canvas, rubber and plastics. In addition, we use crude oil and electricity in our production. Therefore, increases in crude oil
prices and electricity costs would increase our production costs. We believe that we will be able to offset a portion of any such
increased costs by raising our production efficiency and leveraging our economies of scale. Historically, we have been successful
in reducing the costs of raw materials as a percentage of our total cost of sales. We seek to capitalize on our purchasing and
bargaining power to continue to obtain favorable prices from our major suppliers. Because we use a cost-plus pricing policy to
determine the selling price of our products, we are able to pass on increased costs to our distributors. We believe that effective
cost management and ability to pass on increased costs to distributors will enable us to maintain and increase our profitability.
Our gross profit margin increased from 30.6% in 2009 to 30.8% in 2011 for our footwear, from 28.2% in 2009 to 29.7% in 2011 for
apparel, and from 28.9% in 2009 to 29.6% in 2011 for accessories.



35







We outsource a portion of our footwear production
to contract manufacturers and all of our apparel and accessories production to third-party contract manufacturers. Since 2009,
we have extended the term of our agreements with contract manufacturers from one year to two years. We have not terminated our
contractual relationship with any of our contract manufacturers of our footwear during the term of the agreements. Due to a larger
pool of contract manufacturers of apparel and accessories available for selection, we have been using such contract manufacturers
that are capable of supplying goods with better quality at more competitive prices. We believe that long-term contracts with contract
manufacturers as well as the relationship we have established with them over the years will enable us to procure quality contract
manufacturers to meet our production and product quality requirements at commercially reasonable terms.



Seasonality



Our results of operations have fluctuated
from season to season and are likely to remain seasonal. Historically, revenues in the third and fourth quarters have slightly
exceeded those in the first and second quarters. The seasonality of our results of operations is primarily attributable to the
seasonal nature of our footwear and apparel products and the fact that our autumn and winter collections generally command higher
selling prices than our spring and summer collections. In addition, other factors such as weather conditions, holiday seasons,
the timing of the launch of our new products and the timing of delivery of our products also affect our sales from season to season.
Due to the seasonal fluctuations of our business, comparisons of sales and results of operations between different periods within
a financial year, or between different periods in different financial years, are not necessarily meaningful and cannot be relied
on as accurate indicators of our future performance.



Income tax rates and preferential tax treatment



Our profit is affected by the income tax
that we pay and any preferential tax treatment that we receive. As a foreign-invested enterprise engaged in the manufacturing business,
XDLong China is entitled to the preferential tax treatments provided under the Foreign Enterprise Income Tax Law. Accordingly,
XDLong China is subject to an enterprise income tax rate of 25%. However, it is fully exempted from the enterprise income tax during
its first two profitable years, which are 2008 and 2009, followed by a 50% tax reduction for the next three years. Such tax treatment
had a significant positive effect on our profit after taxation for 2009, 2010 and 2011.



| | A. | OPERATING RESULTS
| | -- | -----------------



Basis of Presentation



The following discussion and analysis of
our financial condition and results of operations is based on the selected financial information as of and for the years ended
December 31, 2009, 2010 and 2011 and has been prepared based on the financial statements of the companies that comprised Exceed
and its consolidated subsidiaries, after elimination of inter-company transactions. This information should be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere in this Form 20-F.



2020 was incorporated in Delaware on August
21, 2006 as a blank check company for the purpose of acquiring, through a merger, stock exchange, asset acquisition or other similar
business combination an operating business that either (1) was located in China, (2) had its principal operations located in China,
or (3) in 2020’s view, would benefit from establishing operations in China. Exceed was incorporated in the British Virgin
Islands on April 21, 2009 as a wholly-owned subsidiary of 2020.



On October
20, 2009, 2020 merged with and into Exceed, with Exceed being the surviving entity. On October 21, 2009, Exceed acquired all of
the outstanding securities of Windrace from its shareholders, resulting in Windrace becoming a wholly-owned subsidiary of Exceed.
The merger of 2020 with and into Exceed resulted in the redomestication of 2020 to the British Virgin
Islands on October 21, 2009 and Exceed, the surviving entity following the merger, became a foreign private issuer. Exceed
conducts its primary business operations through its wholly-owned subsidiary, Windrace. Prior to the business combination with Windrace,
neither 2020 nor Exceed had an operating business.



The business combination between and among
Windrace, Exceed and 2020, a special purpose acquisition company, was accounted for as a reverse recapitalization since, immediately
following completion of the transaction, the shareholders of Windrace immediately prior to the business combination had effective
control of Exceed through (1) their majority shareholder interest in the combined entity, (2) significant representation on the
Board of Directors, and (3) being named to all of the senior executive positions. For accounting purposes, Windrace was deemed
to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Windrace
(i.e., a capital transaction involving the issuance of stock by the Exceed for the stock of Windrace). Accordingly, the combined
assets, liabilities and results of operations of Windrace became the historical financial statements of the Exceed at the closing
of the transaction, and Exceed’s assets (primarily cash and cash equivalents), liabilities and results of operations were
consolidated with Windrace beginning on the acquisition date. No step-up in basis or intangible assets or goodwill was recorded
in this transaction. All direct costs of the transaction were charged to operations in the period that such costs were incurred.



The consolidated financial statements issued
following a reverse acquisition are those of the accounting acquirer for all periods presented, and are retroactively adjusted
to reflect the capital structure of the legal parent, the accounting acquiree. Comparative information presented in those
consolidated financial statements is also retroactively adjusted to reflect the capital structure of the legal parent, the accounting
acquiree.



36







The financial information has been prepared
in accordance with the accounting policies set out in the financial statements included elsewhere in this Form 20-F and under the
historical cost convention, which conform with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”), except for the derivative components of preferred shares that have
been measured at fair value. It is presented in Renminbi with all amounts rounded to the nearest thousand except when otherwise
indicated.



All income, expenses and unrealized gains
and losses resulting from inter-company transactions and balances are eliminated on consolidation in full.



Investments in non-consolidated subsidiaries,
typically representing an ownership interest in the voting stock of the subsidiaries of between 20% and 50%, are stated at
cost of acquisition plus the Company’s equity in undistributed net income or proportionate share of net losses since
acquisition.



Translations of amounts from RMB into US
dollars are solely for the convenience of the reader and were calculated at the rate of RMB6.2939 = US$1.00, the exchange rate
refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2011. This
convenience translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled
into U.S. dollars at that rate on December 31, 2011, or at any other rate.



Revisions to Previously Issued Consolidated Financial Statements



We have revised our previously issued financial
statements for 2009 and 2010 to reflect the revision to our method of accounting for our conditional obligation to release and
issue shares to the former shareholders of Windrace as part of the reverse recapitalization transaction effective October 21, 2009.
We believe that this revised accounting treatment is more relevant and reliable under the circumstances.



Our original accounting method was to record
the contingent shares issuable, consisting of escrow shares and earn-out shares, as a stock dividend, and upon issuance as an adjustment
to the par value of ordinary shares, with an offsetting adjustment to capital reserve. We included such contingent shares in the
calculation of basic earnings per share from the date of issuance. Under this accounting method, we did not recognize a liability
for our conditional obligation to issue shares, and did not recognize changes in the fair value of that conditional obligation
in our consolidated statements of comprehensive income.



During 2012, prior to the issuance of our
December 31, 2011 financial statements, we concluded it would be more relevant and reliable to revise our method of accounting
with respect to the accounting for the contingent shares issuable, retroactive to the closing of the reverse recapitalization transaction,
to recognize a liability for the fair value of the escrow shares and the earn-out shares, and to recognize changes in the fair
value of the escrow shares and the earn-out shares in our consolidated statements of comprehensive income. We adopted this revised
accounting method based on, among other factors, our review of IAS 8, IAS 32 and IAS 39. We believe that revising comparative amounts
for all prior periods presented will provide more relevant and reliable information to shareholders and investors.



Additional information with respect to this
matter and the adjustments made to the previously reported 2009 and 2010 consolidated financial statements is presented at Note
2 of the December 31, 2011 consolidated financial statements included in this Annual Report on Form 20-F.



37







Critical Accounting Policies and Estimates



We have adopted IFRSs effective for the
accounting periods commencing January 1, 2009, 2010 and 2011, together with the relevant transitional provisions in the preparation
of the financial information throughout the years ended December 31, 2009, 2010 and 2011. The preparation of our financial information
in accordance with IFRS requires management to make estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, contingent liabilities, revenue and expenses. The following sets forth the principal accounting policies applied in
preparing our financial statements that management believes are critical not only because they are important to the portrayal of
our financial condition and results of operations, but also because the application and interpretation of these policies require
both judgments and estimates of matters that are inherently uncertain and unknown. As a result, actual results may differ materially
from our estimates.



Revenue recognition



We recognize revenue when it is probable
that the economic benefits will flow to us and when the revenue can be reliably measured, on the following basis, depending on
the source of such revenue: (i) from the sale of goods, when the significant risks and rewards of ownership have been transferred
to the buyer, provided that we maintain neither managerial involvement to the degree usually associated with the ownership, nor
effective control over the goods sold; which usually occurs when the product is sold and delivered to the distributors with all
transportation and handling costs for delivery of products borne and paid directly by the distributors, and (ii) interest income
on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts
through the expected life of the financial instruments to the net carrying amount of the financial assets.



In addition, we utilize preliminary purchase
orders received from consultations with distributors at sales fairs to prepare sales estimates and formulate production schedules
for upcoming seasons. Once a purchase order is finalized, we re-confirm the delivery schedule of sales orders with each distributor
before shipment. Distributors are invoiced and we recognize sales only at the time, and by the amount of, the products ultimately
delivered to distributors.



Although our policy is to recognize product
returns as a reduction of revenue, we have not deemed it necessary to accrue for returns at the time when sales are recorded because
historically we have not had any significant product returns or similar claims. Our management periodically reviews this matter
and will consider making such accruals when there are indications of significant sales returns or similar claims in future periods.



Although we accept returns of defective
products, distributors generally choose to sell any defective products at a discount to end customers instead of returning defective
products to us. Since distributors are required to comply with our pricing policy, distributors must obtain our prior written consent
before they can sell any products at a discount to the suggested retail price. We determine the amount of discounts on a case-by-case
basis. We do not provide any compensation to distributors for defective products. To date, the number and value of defective products
have been nominal.



We do not have any arrangements with distributors
to accept returns of out-of-season stock. When in-season new products arrive, the current products on shelves become out-of-season
stock. In addition, we do not provide volume-based discount programs or discounts for early payment.



We encourage distributors to clear their
out-of-season inventory levels. An authorized retailer with excess inventory at the end of a season may attempt to sell such excess
inventory through regular and special end-of-season sales. Since distributors must strictly comply with our suggested retail pricing
policy, they must obtain prior written consent from us before conducting any promotional events or selling any products to consumers
at a discount to the suggested retail price. The distributors bear the costs of any sales discounts and we are not required to
provide credits or subsidies to distributors for their seasonal clearance activities.



To facilitate the operation and development
of our business and to promote and enhance our brand recognition nationwide, we provide after-sales assistance and guidance to
distributors. Such after-sale assistance and guidance generally include training of distributors’ employees and provision
of promotional equipment and marketing brochures. Distributors are required to sell the Group’s products on an exclusive
basis to be eligible for such assistance and guidance.



Impairment allowances for trade and other receivables



We estimate the impairment allowances for
trade and other receivables by assessing the collectability of the receivables based on the related customers’ credit history
and prevailing market conditions. Allowances are applied to trade and other receivables where events or changes in circumstances
indicate that the balances may not be collectible. Where the expectation is different from the initial estimate, the difference
is recognized as an impairment loss in the period in which such estimate is changed. We reassess the impairment allowances at each
balance sheet date.



Historically, we have no experience of bad
debts. All the customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable
balances are monitored on an ongoing basis and we have the sole discretion to cease business with customers who fail to pay within
the credit period.



38







Inventory



Inventories are stated at the lower of cost
and net realizable value after making due allowances for obsolete or slow moving items. Cost is calculated using the weighted average
cost formula and comprises all costs incurred in bringing the inventories to their present location and condition. When inventories
are sold, the carrying amount of those inventories is recognized as cost of sales in the period in which the related revenue is
recognized. Net realizable value is based on the estimated selling prices less any estimated costs to be incurred for completion
of the production process and disposal upon delivery of finished goods to distributors. If net realizable value is less than cost
at the balance sheet date, the carrying amount is reduced to the realizable value, and the difference is recognized as a loss on
valuation of inventories. Write-down of inventories to net realizable value is made based on the estimated net realizable value
of the inventories. The assessment of the write-down amounts and the timing of such write-downs require estimates and management’s
judgment. Where the actual outcome or expectation in future periods is different from management’s estimates, such differences
may have a material impact on the carrying amounts of our inventories and any write-down amounts and write-back amounts in the
period in which such estimate has been changed. No inventory amounts were stated at net realizable value in each of the years in
2009, 2010 and 2011 and we did not make any provisions for inventories during the same periods.



Useful lives and impairment of assets



Property, plant and equipment



Property, plant and equipment (other than
construction-in-progress) are recorded at cost less accumulated depreciation and any impairment losses, and are depreciated over
the estimated useful lives of the related assets using the straight-line method. Where parts of an item of property, plant and
equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is
depreciated separately, where practicable. Residual values, useful lives and depreciation method are reviewed and adjusted, if
appropriate, at each balance sheet date. Depreciation is recognized as an expense in the consolidated income statements when an
asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the
manner intended by management.



Buildings are depreciated over the shorter
of the relevant lease term or a 20-year period and manufacturing equipment, such as plant and machinery, is depreciated over a
five to ten-year period. Furniture, fixtures, motor vehicles and office equipment, consisting of computers, office equipment, machinery
and software, are depreciated over a five-year period. Leasehold improvements are also depreciated over the shorter of the relevant
lease term or a five-year period. Construction-in-progress represents costs incurred for the design and construction of the production
facility. Our management determines the estimated useful lives and related depreciation charges for our property, plant and equipment
and such estimates are based on historical experience of the actual useful lives of such property, plant and equipment, and where
no historical experience is available, based on such property, plant and equipment used for similar nature and functions. Management
will increase the depreciation charge where useful lives are less than previously stated amounts based on the estimated life of
such property, plant and equipment or will take write-offs or declare as obsolete or non-strategic assets that have been abandoned
or sold. Impairment reviews are conducted as events or changes in circumstances indicating that the carrying amount may not be
recoverable. The recoverable amounts of property, plant and equipment have been determined based on value-in-use calculations,
which requires the use of judgment and estimates.



Financial assets



Financial assets within the scope of IAS
39 “Financial Instruments: Recognition and Measurements” are classified as loans and receivables. When such financial
assets are recognized initially, they are measured at fair value. We assess whether a financial asset contains an embedded derivative
when we first become a party to it and assess whether the embedded derivatives are required to be recognized separately from their
financial asset contract when the analysis shows that the economic characteristics and risks of the embedded derivatives are not
closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the financial asset
that significantly modifies the cash flows that would otherwise be required under the financial asset. We determine that the classification
of our financial assets upon the initial recognition and, where allowed and appropriate, re-evaluate the classification at the
balance sheet date reported. All regular way purchases and sales of financial assets are recognized on the trade date, that is,
the dates when we commit to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets
that require delivery of assets within the period generally established by regulation or convention in the marketplace.



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried
at amortized cost using the effective interest method less any allowance for impairment. Amortized cost is calculated taking into
account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction
costs. Gains and losses are recognized in the consolidated income statements when the loans and receivables are derecognized or
impaired, as well as through the amortization process.



We assess at each balance sheet date whether
there is any objective evidence that a financial asset or a group of financial assets is impaired. If there is objective evidence
that an impairment loss on loans and receivable carried at amortized cost has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the
effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through
the recognition of an allowance account. The amount of impairment loss is recognized in our consolidated income statements of comprehensive
income. In relation to trade receivables, an impairment allowance is made when there is objective evidence, such as the probability
of insolvency or significant difficulties of the debtor, that we will not be able to collect all of the amounts due under the original
term of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account, and impaired receivables
derecognized when they are assessed as uncollectible. The identification of impairment allowances of financial instruments and
trade and other receivables requires management judgment and estimates.



39











If, in a subsequent period, the amount of
the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the previously recognized impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment
loss is recognized in the consolidated statements of comprehensive income, to the extent that the carrying value of the asset does
not exceed its amortized cost at the reversal date.



Non-financial assets



Where an indication of impairment exists,
or when annual impairment testing for an asset is required (other than inventories, deferred tax assets and financial assets),
we make an estimation of the asset's recoverable amount. An asset's recoverable amount is the higher of the asset's or cash-generating
unit's value in use and its fair value less costs to sell. We determine such recoverable amount for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which
case we determine the recoverable amount for the cash-generating unit to which the asset belongs.



We recognize an impairment loss only if
the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, we discount the estimated future cash
flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. An impairment loss is charged to the consolidated statements of comprehensive income in the
period in which it arises.



We make an assessment at each balance sheet
date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.
If such an indication exists, the recoverable amount is estimated. A previously recognized impairment loss of an asset is reversed
only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher
than the carrying amount that would have been determined (net of any depreciation/amortization) had no impairment loss been recognized
for the asset in prior periods. A reversal of such an impairment loss is credited to the consolidated statements of comprehensive
income in the period in which it arises.



Earn-out obligation



Pursuant to an earn-out provision of the
Purchase Agreement and the escrow agreement, we have been required annually to release shares from the escrow account to the former
shareholders of Windrace for the fiscal years 2009, 2010 and 2011. In addition, upon the achievement of certain earnings targets
in 2011, 2,212,789 additional new shares of Exceed are required to be issued to the former shareholders of Windrace as earn-out
shares. The details with respect to the contingent share obligation are discussed in Note 26 to our consolidated financial statements
included in this Annual Report on Form 20-F.



We release the shares, which are held in
the escrow account, and issue the new ordinary shares, in respect of the earn-out provision, when the audited result of our financial
results each year are released if the financial results fulfill the condition in the Purchase Agreement. The contingent shares
issuable are accounted for as a financial instrument liability that is adjusted to fair value at each reporting date, with changes
in fair value being recognized currently in the consolidated statements of comprehensive income. Once a measurement period for
the issuance of such contingent shares ends, the contingent share liability related to that period is no longer conditional, and
the obligation is reclassified from a liability to equity, if the shares have been earned, based on the fair value of the obligation
at the end of the measurement period.



40







Consolidated Income Statements



The following table sets forth our results
for the periods indicated (the years ended December 31, 2009 and 2010 have been revised as described above):



|                                                             |  | Years ended December 31, |           
|------------------------------------------------------------ |  | ------------------------ | ----------
|                                                             |  | 2009                     |           
|                                                             |  | (RMB in thousands)       |           
|Revenue                                                      |  |                          | 2,077,958 
|Cost of sales                                                |  |                          | (1,464,856
|Gross profit                                                 |  |                          | 613,102   
|Other income and gains                                       |  |                          | 5,855     
|Selling and distribution costs                               |  |                          | (268,123  
|Administrative expenses                                      |  |                          | (44,509   
|Research and development expense                             |  |                          | (24,953   
|Finance costs                                                |  |                          | (29,566   
|Share of loss in jointly-controlled entity                   |  |                          | (16       
|Gain from change in fair value of contingent share liability |  |                          | 170,948   
|Profit before tax                                            |  |                          | 422,738   
|Tax                                                          |  |                          | (3,771    
|Profit for the year                                          |  |                          | 418,967   



Description of Selected Income Statement Items



Revenue



We generate revenue from sales of footwear,
apparel and accessories. The following table sets forth a breakdown of our revenue for the periods indicated:



|            |  | Year ended December 31,          |          
|----------- |  | -------------------------------- | ---------
|            |  | 2009                             |          
|            |  | Revenue                          |          
|            |  | (RMB in thousands, except for %) |          
|Footwear    |  |                                  | 1,102,280
|Apparel     |  |                                  | 948,738  
|Accessories |  |                                  | 26,940   
|Total       |  |                                  | 2,077,958



Our revenue is derived primarily from sales
of the following products:



| | · | Footwear. Footwear accounted for approximately 46.0% of revenue in 2011 and includes mainly nine categories of
footwear: running footwear, leisure footwear, basketball footwear, skateboarding footwear, canvas footwear, tennis footwear, outdoor
footwear, vintage design footwear and cross-training footwear. A portion of our footwear production is outsourced.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Apparel. Sports apparel accounted for approximately 52.7% of revenue in 2011 and includes mainly sports tops,
sports pants, jackets and track suits. All of our apparel production is outsourced.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Accessories. Accessories accounted for approximately 1.3% of revenue in 2011 and include mainly bags, socks,
hats and caps. All of our accessories production is outsourced.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cost of sales



The following table sets forth our cost
of sales and gross profit as percentages of our net sales for each of the periods indicated.



|              |  | Year ended December 31, |          
|------------- |  | ----------------------- | ---------
|              |  | 2009                    |          
|              |  | (RMB in thousands)      |          
|Sales         |  |                         | 2,077,958
|Cost of sales |  |                         | 1,464,856
|Gross profit  |  |                         | 613,102  



41







Our cost of sales consists of:



| | · | Depreciation: Depreciation relates to depreciation expenses arising from our production facilities.
| | - | ---------------------------------------------------------------------------------------------------



| | · | Direct labor cost: Direct labor cost represents salaries of production workers.
| | - | -------------------------------------------------------------------------------



| | · | Indirect labor costs: Indirect labor costs consist primarily of salaries, social insurance and benefit expenses for our production
supervisors.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Purchase of raw materials: Purchases of raw materials consist primarily of purchases of natural
and synthetic leather, nylon, canvas, rubber, plastics and components that we use to manufacture our footwear.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Purchase of finished goods: Purchases of finished goods are the purchases of finished products
including footwear, apparel and accessories that we outsource to contract manufacturers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Manufacturing overhead: Other variable costs primarily consist of packaging materials and other
consumables, utility expenses and subcontracting fees, which are paid to component subcontractors who manufacture footwear components
for our production.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gross profit



We have a diverse product portfolio comprising
a range of products across our three key segments: footwear, apparel and accessories. During the years ended December 31,
2009, 2010 and 2011, our gross profit were RMB613.1 million, RMB841.6 million and RMB992.3 million (US$157.7 million), respectively,
and our overall gross profit margin were 29.5%, 31.2% and 30.2%, respectively. Our overall gross profit margin increased in 2010
primarily due to an increase in the average selling prices across our product categories and improvements in our management of
production costs in 2010. Our overall gross profit margin decreased in 2011, primarily as a result of the decrease in proportion
of footwear produced in-house relative to overall footwear production as a result of the limited production capacity within our
existing production facility.



Other income and gains



Other
income and gains primarily consist of income from bank interest, and award from the PRC governmentfor technological innovation
and business development. Other income and gains represented 0.3%, 0.2%
and 0.4% of our revenue for the years ended December 31, 2009, 2010 and 2011, respectively.



Operating expenses



Our operating expenses consist primarily
of selling and distribution costs, administrative expenses, research and development expenses and finance costs. The following
table sets forth a breakdown of our operating expenses for the periods indicated (the years ended December 31, 2009 and 2010 have
been revised as described above):



|                                                                 |  | Year ended December 31, |        
|---------------------------------------------------------------- |  | ----------------------- | -------
|                                                                 |  | 2009                    |        
|                                                                 |  | (RMB in
    thousands)  |        
|Selling and distribution
    costs                               |  |                         | 268,123
|Administrative expenses                                          |  |                         | 44,509 
|Research and development expenses                                |  |                         | 24,953 
|Finance costs                                                    |  |                         | 29,566 
|Share of loss in jointly-controlled entity                       |  |                         | 16     
|Gain from change in fair value of contingent share
    liability |  |                         | 170,948



Selling and distribution costs



Our selling and distribution costs consist
primarily of advertising and promotional expenses and sales fair expenses. In 2009, 2010 and 2011, selling and distribution costs
represented approximately 12.9%, 12.6% and 11.4%, respectively, of our revenue. Advertising and promotional expenses consist primarily
of fees for advertising on television and other mass media, advertisement production costs, sponsorship fees for sporting events
and television programs, store refurbishment and renovation activities, rental and marketing subsidies, and fees for brand spokespersons.
Sales fair expenses consist primarily of accommodation, travelling and meals provided to our distributors and third-party retailers
for the attendance at our sales fairs.



42







Administrative expenses



Our administrative expenses consist primarily
of salaries of administrative staff, depreciation, professional fee, share-based compensation, and miscellaneous taxes and duties.
In 2009, 2010 and 2011, administrative expenses represented approximately 2.3%, 2.1% and 2.3%, respectively, of our revenue. Salaries
of administrative staff consist primarily of salaries and benefit expenses for our administrative staff. Depreciation consists
primarily of depreciation expenses of our office building and equipment at our production facility in Jinjiang. Miscellaneous taxes
and duties consist primarily of stamp duties, Urban Maintenance and Construction Tax (“UMC Tax”) and Educational Surcharge.
Others under administrative expenses consist primarily of social insurance and other employee expenses for our administrative staff,
amortization of prepaid land lease payments, donation, entertainment expenses, office expenses, rental expenses, utility expenses
and professional fees.



We expect that
our general and administrative expenses will increase as we add personnel and incur additional costs related to the growth of our
business. We also incurred additional legal and consulting fees and other professional fees following our NASDAQ listing. In 2011,
share based compensation expense of RMB7.9 million(US$1.2 million) was included in administrative
expenses.



Research and development expenses



In 2009, 2010 and 2011, research and development
expenses represented approximately 1.2%, 1.5% and 1.6%, respectively, of our revenue. Research and development expenses consist
primarily of salaries paid to our research and development center staff, materials consumed for our product research and development
projects and expenses incurred for our cooperation with the China Institute of Sport Science.



Finance costs



Finance costs are our interest expenses
on short-term bank loans and preferred shares. In 2009, 2010 and 2011, finance costs represented approximately 1.4%, 0.1% and 0.1%,
respectively, of our revenue. No interest expense on preferred shares was incurred in 2010 and 2011.



Gain from change in fair value of contingent share liability



The gain from the change in contingent share
liability was RMB170.9 million, RMB1.6 million and RMB38.6 million in 2009, 2010 and 2011, respectively, reflecting the decrease
in the fair value of the conditional obligation to release and issue shares to the former shareholders of Windrace as part of the
reverse recapitalization transaction effective on October 21, 2009.



Tax



Pursuant to the relevant rules and regulations
of BVI and the Cayman Islands, the Group is not subject to any income tax in such jurisdictions. No tax provision for Hong Kong
profits has been made as the Group did not generate any assessable profits arising in Hong Kong during the reporting periods. Taxes
on profits assessable in the PRC have been calculated at the prevailing rates, based on existing legislation, interpretations and
practices in respect thereof.



The increase in PRC taxes paid was primarily
due to the increase in assessable profits of our subsidiaries in the PRC as a result of business expansion and growth in revenue.



Under the new PRC Corporate Income Tax Law
(the ''New Corporate Income Tax Law'') and its Implementation Rules (effective on January 1, 2008), the PRC corporate income tax
rate for domestic-invested and foreign-invested enterprises is unified to 25%. Accordingly, the applicable tax rate for XDLong
Fujian is 25% in 2009, 2010 and 2011.



According to the Income Tax Law of the PRC
for Foreign Investment Enterprises and Foreign Enterprises and as approved by relevant PRC tax authorities, XDLong China, a foreign-invested
enterprise, is exempt from the PRC corporate income tax for its first two profitable years, commencing from January 1, 2008. Thereafter,
it is entitled to a 50% reduction in the PRC corporate income tax for the subsequent three years from January 1, 2010 to December 31,
2012 (the “Tax Holidays”). Pursuant to the new PRC Corporate Income Tax Law and its Implementation Rules effective
from January 1, 2008, the PRC corporate income tax rate for foreign-invested enterprises such as XDLong China is 25%. Existing
foreign-invested enterprise, such as XDLong China, however, are entitled to continue to enjoy the Tax Holidays until 2012. No provision
for the PRC corporate income tax has been made for XDLong China in 2009 as its assessable profits are fully exempt for PRC corporate
income tax purposes.



43







The following table sets forth the reconciliation
of the tax expense applicable to profit before tax using the applicable statutory rates in the PRC to the tax expense at our effective
tax rates for the periods indicated (the years ended December 31, 2009 and 2010 have been revised as described above):



|                                                            |  | Year ended December 31, |        
|----------------------------------------------------------- |  | ----------------------- | -------
|                                                            |  | 2009                    |        
|                                                            |  | (RMB in thousands)      |        
|Profit before tax                                           |  |                         | 422,738
|Tax at the applicable rates                                 |  |                         | 94,051 
|Lower tax due to tax holidays                               |  |                         | (67,697
|Tax effect of expenses not deductible for taxation purposes |  |                         | 5,620  
|Income not subject to tax                                   |  |                         | (28,203
|Tax charge at our effective rate                            |  |                         | 3,771  



The applicable tax rates for entities operating
in China and Hong Kong were 25% and 16.5%, respectively.



According to the Corporate Income Tax Law
and its implementation rules, dividends receivable by non-PRC corporate residents from PRC enterprises are subject to withholding
tax at a rate of 10%, unless reduced by tax treaties or arrangements, for profits earned since January 1, 2008. In addition, under
the Sino Hong Kong Double Tax Arrangement and its relevant regulations, a qualified Hong Kong tax resident will be liable for withholding
tax at the rate of 5% for dividend income derived from the PRC if the Hong Kong tax resident is the “beneficial owner”
and holds 25% or more of the equity interests of the PRC company.



As of December 31, 2011, 2010 and
2009, we had not recorded any withholding tax on the retained earnings of our foreign invested enterprises in the PRC, since
we intends to reinvest our earnings to further expand our businesses in mainland China, and our foreign invested enterprises
do not intend to declare dividends to their immediate foreign holding companies.



Results of Operations



Year ended December 31, 2011 compared to the year
ended December 31, 2010



Revenue.Revenue increased by 21.8%
from RMB2,698.9 million for the year ended December 31, 2010 to RMB3,288.6 million (US$522.5 million) for the year ended December
31, 2011.



In 2011, we engaged one of the largest and
longest standing China-based marketing and public relations firms to further enhance our advertising and promotional initiatives.
This engagement, together with our ongoing marketing initiatives including production of television commercials for our spokespersons,
By2, our sponsorship of the “Fitness for All Campaign – Walking to 100 Universities” program, and “Inter-City”
television program, have enhanced our brand significantly. Furthermore, we have engaged a new advertising company, a member of
the American Association of Advertising Agencies, for the planning and production of television commercials for our spokespersons,
By2, and print advertisements for our products. The commercials are intended to position Xidelong as a sports brand that emphasizes
a “happy lifestyle”. Meanwhile, strong demand from end customers encouraged the expansion of the Xidelong retail network
by our distributors and third-party retailers. The number of the Xidelong retail selling locations increased by 511, from 4,333
as of December 31, 2010 to 4,844 as of December 31, 2011.



| | · | Revenue from footwear increased by 19.6%, from RMB1,266.4 million for the year ended December 31, 2010 to RMB1,514.1 million
(US$240.6 million) for the year ended December 31, 2011, primarily due to a 4.7% increase in the average selling price (“ASP”)
and a 14.2% increase in sales volume. Such increases were mainly attributable to the introduction of our new vintage design footwear
and cross-training footwear product lines in June 2011. As a result of our continuous marketing and brand promotion efforts, the
footwear ASP increased, leading to an increase in our overall footwear revenue.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue from apparel increased by 23.4%, from RMB1,403.7 million for the year ended December 31, 2010 to RMB1,731.5 million
(US$275.1 million) for the year ended December 31, 2011. This increase was primarily due to a 4.5% increase in sales volume and
an 18.0% increase in ASP. Such increases were mainly attributable to the improvement of the design and quality of our apparel products
and the introduction of certain new products, particularly the new lifestyle apparel products, which have created strong demand
from end customers. In addition, the increase in the average size of the Xidelong retail selling locations, which typically now
have larger display areas for apparel, has attracted more customer traffic. The increased consumer recognition of our Xidelong
brand as a result of our continuous marketing and brand promotion efforts also contributed to the increase in ASP of the apparel
products.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue from accessories increased by 49.2%, from RMB28.8 million for the year ended December 31, 2010 to RMB43.0 million (US$6.8
million) for the year ended December 31, 2011. This increase was primarily driven by an increase in
product varieties.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44







Cost of sales. Cost of sales increased
by 23.6% from RMB1,857.3 million in 2010 to RMB2,296.3 million (US$364.8 million) in 2011. The increase in cost of sales was primarily
due to an increase of purchases of finished products by RMB428.1 million (US$68.0 million) from contract manufacturers to meet
the increase in orders resulting from increased demand for our products. The increase in cost of sales was also attributable to
increased purchase of raw materials by RMB9.4 million (US$1.5 million) for our own production of footwear products.



Gross profit. Our gross profit increased
by 17.9% from RMB841.6 million in 2010 to RMB992.3 million (US$157.7 million) in 2011 primarily as a result of an increase in sales.
Our overall gross profit margin decreased from 31.2% in 2010 to 30.2% in 2011, primarily as a result of the decrease in proportion
of footwear produced in-house relative to overall footwear production as a result of the limited production capacity within our
existing production facility. We have formulated a new operational plan in response to these production capacity restraints. Please
refer to Item 4 Information of the Company – Production in this annual report. Furthermore, rising inflation in China resulted
in an increase in raw material and wage costs, leading to an increase in the manufacturing cost. We will continue our efforts to
balance the mix between in-house production and outsourced manufacturing in the future.



Other income and gains. Other income
and gains increased by 131.3% from RMB6.4 million in 2010 to RMB14.8 million (US$2.4 million) in 2011. Other income and gains
in 2011 included a governmental award of RMB2.4 million (US$0.4 million) for technological innovation and business development,
and interest income of RMB11.9 million (US$1.9 million). The increase in other income and gains in 2011 was mainly attributable
to an increase in interest income, derived from a short term time deposits of RMB400.0 million (US$63.6 million), which carried
an interest rate ranging from 1.7% to 3.1% per annum.



Selling and distribution costs. Selling
and distribution costs increased by 11.3% from RMB339.6 million in 2010 to RMB377.9 million (US$60.0 million) in 2011. This increase
in selling and distribution costs was primarily due to increases in advertising and promotional expenses. Advertising and promotional
expenses increased by 11.2% from RMB316.8 million in 2010 to RMB352.4 million (US$56.0 million) in 2011, primarily attributable
to the additional resources we invested in marketing, advertising, and store image and renovation activities to build our brand
recognition and achieve further market penetration. In 2011, over 500 new Xidelong retail selling locations were opened by our
distributors and third-party retailers. During the same period, over 450 of the existing Xidelong retail locations were renovated
by our distributors or authorized third-party retailers, certain of which received our renovation
subsidies in the form of standardized promotional materials and display equipment.In 2011, our advertising and promotional
activities continued to focus on the events relating to the Nationwide “Fitness for All” Sports Campaign and the continued
engagement of By2 as our official product series spokesperson. We have also engaged Genedigi, one of the largest and longest standing
China-based marketing and public relations firms to support our advertising and promotional initiatives in conjunction with the
our sponsorship of the “Fitness for All” Sports Campaign in 2011 and its general public relations and marketing initiatives
in mainland China. In addition, we have continued to sponsor the “Inter-City” television program, a popular entertainment
show featuring athletic challenges that airs on channels CCTV 1 and 5, starting from the second quarter of 2011.



Administrative expenses. Administrative
expenses increased by 33.4% from RMB57.8 million in 2010 to RMB77.1 million (US$12.4 million) in 2011 primarily due to the
increase in UMC Tax, Educational Surcharge, salaries of administrative staff and rental expenses. Commencing from December 1, 2010,
foreign enterprises, foreign funded enterprises and foreign individuals have been required to pay UMC Tax and Educational Surcharge.
UMC Tax and Educational Surcharge increased by 780.0% from RMB1.5 million in 2010 to RMB13.2 million (US$2.1 million) in 2011.
Salaries of administrative staff increased by 15.9% from RMB11.3 million in 2010 to RMB13.1 million (US$2.1 million) in 2011
primarily due to an increase in the number of administrative staff and a general increase in average wages. Office rental expenses
increased by 236.4% from RMB1.1 million in 2010 to RMB3.7 million (US$0.6 million) in 2011 due to the business expansion of the
Company. Administrative expenses as a percentage of revenue increased from 2.1% in 2010 to 2.3% in 2011.



Research and development expenses.
Research and development expenses increased by 32.1% from RMB40.8 million in 2010 to RMB53.9 million (US$8.6 million) in 2011 primarily
due to the continued investment in the design of new products and components to improve our product offering, as well as our research
and development efforts with a PRC sports institute.



Finance costs. Finance costs decreased
by 52.6% from RMB1.9 million in 2010 to RMB0.9 million (US$0.1 million) in 2011 primarily due to a decrease in the average balance
of our short-term bank borrowings.



Gain from change in fair value of contingent
share liability. The gain from the change in contingent share liability was RMB1.6 million and RMB38.6 million in 2010 and
2011, respectively, reflecting the decrease in the fair value of the conditional obligation to release and issue shares to the
former shareholders of Windrace as part of the reverse recapitalization transaction effective on October 21, 2009.



Profit before tax. As a result of
the foregoing, our profit before tax increased by 30.9% from RMB409.5 million in 2010 to RMB536.0 million (US$85.2 million)
in 2011.



Tax. Tax increased by 17.1% from
RMB56.3 million in 2010 to RMB65.9 million (US$10.5 million) in 2011 primarily due to the increase in operating profit. The full
exemption period of Xidelong (China) Co. Ltd., our principal PRC subsidiary, from PRC corporate income tax expired on December
31, 2009. Xidelong (China) Co. Ltd. is entitled to a 50% reduction in the PRC corporate income tax until December 31, 2012, after
which it will be subject to the standard tax rate of 25%. The effective tax rate for 2010 and 2011 were 13.7 % and 12.3%, respectively.



45







Profit for the year. As a result
of the foregoing, our profit for 2011 was RMB470.1 million (US$74.7 million), an increase of 33.1% from RMB353.2 million for 2010.



Year ended December 31, 2010 compared to year ended December
31, 2009



Revenue. Revenue increased by 29.9%
from RMB2,078.0 million for the year ended December 31, 2009 to RMB2,698.9 million for the year ended December 31, 2010. Beginning
in 2010, we have used the phrase “happy lifestyle” as the main theme in our Xidelong brand promotional activities and
product offerings. The increase in revenue was primarily driven by results
from the new advertising and promotional campaign, as well as our successful launch of a new series of apparel and footwear products.
Meanwhile, strong demand from end customers encouraged the expansion of the Xidelong retail network by our distributors.The
number of the Xidelong retail selling locations increased by 639, from 3,694 as of December 31, 2009 to 4,333 as of December 31,
2010.



| | · | Revenue from footwear increased by 14.9%, from RMB1,102.3 million for the year ended December 31, 2009 to RMB1,266.4 million
for the year ended December 31, 2010, primarily due to a 4.6% increase in the average selling price (“ASP”) and a 9.8%
increase in sales volume. Such increases were mainly attributable to strong growth in the sales of a new series of running footwear
and leisure footwear, which were marketed using the “happy lifestyle” theme.As a result of our continuous marketing
and brand promotion efforts, the footwear ASP increased, leading to an increase in overall footwear revenue.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue from apparel increased by 48.0%, from RMB948.7 million for the year ended December 31, 2009 to RMB1,403.7 million for
the year ended December 31, 2010. This increase was primarily due to a 36.2% increase in sales volume and an 8.6% increase in ASP,
as the introduction of certain new products, particularly the new lifestyle apparel products, has created a strong demand from
end customers. In addition, the increase in the average size of the Xidelong retail selling locations, which typically now have
larger display areas for apparel, has attracted more customer traffic. The increased consumer recognition of our Xidelong brand
as a result of our continuous marketing and brand promotion efforts also contributed to the increase in ASP of the apparel products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue from accessories increased by 7.1%, from RMB26.9 million for the year ended December 31, 2009 to RMB28.8 million for
the year ended December 31, 2010. This increase was primarily driven by an increase in product
varieties.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cost of sales. Cost of sales increased
by 26.8% from RMB1,464.9 million in 2009 to RMB1,857.3 million in 2010. The increase in cost of sales was primarily due to an increase
of purchases of finished products by RMB490.8 million from contract manufacturers, which was partially offset by a decrease in
purchases of raw materials by RMB53.2 million for our own production of footwear products. The purchase of raw materials decreased
as the percentages of footwear that we outsourced to our contract manufacturers in terms of sales volume increased from 39.2% in
2009 to 55.2% in 2010. The percentages of footwear that we outsourced to our contract manufacturers in terms of sales volume increased
in 2010 because we balanced the mix between in-house production and outsourced manufacturing. Increased in-house production gives
us more control over footwear production and allows us to save costs, while outsourced manufacturing allows us to avoid shortages
or excess labor if demand fluctuates.



Gross profit. Our gross profit increased
by 37.3% from RMB613.1 million in 2009 to RMB841.6 million in 2010 primarily as a result of an increase in sales. Our overall gross
profit margin increased from 29.5% in 2009 to 31.2% in 2010, primarily as a result of the increase in average selling prices of
our products due to enhanced brand recognition. The rate of increase in revenues in 2010 as compared to 2009 exceeded the rate
of increase in cost of sales during the same periods.



Other income and gains. Other income
and gains increased by 8.5% from RMB5.9 million in 2009 to RMB6.4 million in 2010. Other income and gains in 2010 included an award
of RMB4.1 million from the Jinjiang local government for our successful listing in NASDAQ and interest income of RMB2.4 million. The
increase in other income and gains in 2010 was mainly attributable to an increase in interest income, reflecting the higher
average bank balance resulting from strong business growth.



Selling and distribution costs. Selling
and distribution costs increased by 26.7% from RMB268.1 million in 2009 to RMB339.6 million in 2010. This increase in selling and
distribution costs was primarily due to increases in advertising and promotional expenses. Advertising and promotional expenses
increased by 27.8% from RMB247.9 million in 2009 to RMB316.8 million in 2010 primarily because we invested more resources on marketing
and advertising activities to increase our brand recognition and market penetration. In 2010, we enhanced our advertising
and promotional activities including the engagement of By2 as our official product series spokesperson, the sponsorship of the
“Inter-City” television program, a popular entertainment show featuring athletic challenges that has aired on channels
CCTV 1 and 5 since early 2010, and being the first official partner of the Nationwide “Fitness for All” Sports Campaign.



46







Administrative expenses. Administrative
expenses increased by 29.9% from RMB44.5 million in 2009 to RMB57.8 million in 2010 primarily due to an
increase in share-based compensation, professional fees and salaries of administrative staff, which was partially
offset by a decrease inacquisition related expenses. Share-based compensation of RMB7.3 million
was incurred in 2010 as we granted a certain portion of restricted shares to our directors and employees in 2010. Professional
fees increased by 191.7% from RMB2.4 million in 2009 to RMB 7.0 million in 2010 primarily due to the increased legal and consulting
fees and other professional fees after the NASDAQ listing. Salaries of administrative staff increased by 18.9% from RMB9.5
million in 2009 to RMB11.3 million in 2010 primarily due to an increase
in the number of administrative staff and a general increase in average wages. No acquisition related expenses were noted in 2010
as the acquisition related expenses were incurred for the business combination in 2009.Administrative
expenses as a percentage of revenue remained unchanged at 2.1% in both 2009 and 2010.



Research and development expenses.
Research and development expenses increased by 63.2% from RMB25.0 million in 2009 to RMB40.8 million
in 2010 primarily due to the continued investment in the design of new products and components to improve our product offering,
as well as our research and development efforts with a PRC sports institute.



Finance costs. Finance costs decreased
by 93.6% from RMB29.6 million in 2009 to RMB1.9 million in 2010 primarily due to preferred shares issued to Elevatech on March
28, 2008, which carried an interest rate of 12%, that were redeemed at the time of our business combination in late 2009.



Gain from change in fair value of contingent
share liability. The gain from the change in contingent share liability was RMB170.9 million and RMB1.6 million in 2009 and
2010, respectively, reflecting the decrease in the fair value of the conditional obligation to release and issue shares to the
former shareholders of Windrace as part of the reverse recapitalization transaction effective October 21, 2009.



Profit before tax. As a result of
the foregoing, our profit before tax decreased by 3.1% from RMB422.7 million in 2009 to RMB409.5 million in 2010.



Tax. Tax increased by 1,381.6% from
RMB3.8 million in 2009 to RMB56.3 million in 2010 primarily due to the full exemption period of Xidelong (China) Co. Ltd., our
principal PRC subsidiary, from PRC corporate income tax expired on December 31, 2009. The subsidiary, however, will be entitled
to a 50% reduction in the PRC corporate income tax until December 31, 2012, after which it will be subject to the standard tax
rate of 25%. The effective tax rate for 2009 and 2010 were 0.9% and 13.7%, respectively.



Profit for the year. As a result
of the foregoing, our profit for 2010 was RMB353.2 million, a decrease of 15.7% from RMB419.0 million for 2009.



| | B. | LIQUIDITY AND CAPITAL RESOURCES
| | -- | -------------------------------



The following table sets forth a summary
of our consolidated cash flows for the periods indicated:



|                                                    |  | Year ended December 31, |         
|--------------------------------------------------- |  | ----------------------- | --------
|                                                    |  | 2009                    |         
|                                                    |  | (RMB in thousands)      |         
|Net cash inflow/(outflow) from operating activities |  |                         | (143,047
|Net cash outflow from investing activities          |  |                         | (14,263 
|Net cash inflow/(outflow) from financing activities |  |                         | 299,878 



We have historically financed our liquidity
requirements primarily through operating cash flow, short-term bank loans and issuance of preferred shares. All of the preferred
shares were redeemed on October 21, 2009. Going forward, we believe our liquidity requirements will be satisfied using a combination
of bank loans and our cash flows from operations.



The financial crisis and economic downturns
that began in 2008 could adversely affect our liquidity position. While the global and the Chinese economy have been improving,
the full scope of any recovery is not yet known. If such economies do not continue to improve, our cash from operations could be
adversely affected by decreased consumer spending or longer collection periods of trade receivables from our distributors whose
liquidity positions may be negatively impacted by worsening financial and economic conditions. Additional financing from investors,
banks or the capital market may be limited as a result of the tight credit market and volatile capital market that might result
if economic conditions deteriorate.



47







Cash inflows from operating activities



For 2011, our net cash inflow from operating
activities was RMB320.4 million (US$50.9 million) and was primarily attributable to profit before tax of RMB536.0 million (US$85.2
million), and an add back of the non-cash expenses in the amount of RMB26.9 million (US$4.3 million), including depreciation of
property, plant and equipment, amortization of intangible assets and expense recognized in respect of equity-settled share-based
payments, which was partially offset by the non-cash item of gain from change in fair value of contingent share liability of RMB38.6
million (US$6.1 million), an increase in trade receivables of RMB88.2 million (US$14.0 million) for the increase in sales, a decrease
in trade and bills payables of RMB51.1 million (US$8.1 million) as a result of our proactive strategy to maximize the bulk purchase
discounts offered by the suppliers in exchange for quicker payment for raw materials and products and PRC tax paid of RMB67.7 million
(US$10.8 million) for the year ended December 31, 2011.



For 2010, our net cash inflow from operating
activities was RMB523.5 million and was primarily attributable to profit before tax of RMB409.5 million, an decrease in trade receivables
of RMB201.1 million as we have reviewed and tightened our credit control policy in 2010, given that the business and financial
status of our distributors has returned to normal, an increase in deposits received, other payables and accruals of RMB9.8 million
due to the increase in prepaid renovation expense, and an add back of the non-cash expenses in the amount of RMB25.1 million, including
depreciation of property, plant and equipment, amortization of intangible assets and expense recognized in respect of equity-settled
share-based payments, which was partially offset by the non-cash item of gain from change in fair value of contingent share liability
of RMB1.6 million, a decrease in trade and bills payables of RMB84.5 million as a result of our proactive strategy to maximize
the bulk purchase discounts offered by the suppliers in exchange for quicker payment for raw materials and products and PRC tax
paid of RMB44.7 million for the year ended December 31, 2010.



For 2009, our net cash outflow from operating
activities was RMB143.0 million and was primarily attributable to profit before tax of RMB422.7 million, an increase in trade receivables
of RMB528.0 million due to extension of credit periods for certain distributors and an increase in prepayments, deposits and other
receivables of RMB9.3 million due to the increase in prepaid advertising expense, which was partially offset by an adjustment for
finance costs of RMB29.6 million primarily due to interest arising from the preferred shares issued to Elevatech carrying an internal
rate of return of 12%, the non-cash item of gain from change in fair value of contingent share liability of RMB170.9 million, an
increase in trade and bills payables of RMB68.0 million due to the extension of credit periods granted by certain suppliers as
well as increased use of bills payables with longer terms to settle purchases from suppliers and a decrease in inventory of RMB30.1
million due to increased delivery of our products.



Cash outflows from investing activities



For 2011, our net cash outflow from investing
activities was RMB87.1 million (US$13.8 million) due to the purchase of property, plant and equipment of RMB38.7 million (US$6.2
million) and the deposit paid for acquisition of land use rights of RMB60.4 million (US$9.6 million), which was partially offset
by the interest received of RMB11.9 million (US$1.9 million).



For 2010, our net cash outflow from investing
activities was RMB3.7 million due to the purchase of property, plant and equipment of RMB8.44 million, the deposit paid for acquisition
of land use rights of RMB12.6 million and the decrease in pledged bank deposits of RMB15.0 million due to the decrease in use of
bills payables, which was partially offset by the interest received of RMB2.4 million.



For 2009, our net cash outflow from investing
activities was RMB14.3 million due to a purchase of property, plant and equipment of RMB2.3 million, which was partially offset
by the interest received of RMB0.7 million and the increase in pledged bank deposits of RMB12.7 million primarily due to the increase
in use of bills payables.



Cash outflows from financing activities



For 2011, our net cash outflow from financing
activities was RMB29.1 million (US$4.6 million) due to repayment of bank loans of RMB18.0 million (US$2.9 million) and repurchase
of the Company’s ordinary shares of RMB11.5 million (US$1.8 million).



For 2010, our net cash outflow from financing
activities was RMB16.6 million due to repayment of bank loans of RMB58.0 million and repayment of the additional premium for the
redemption of the preferred shares of RMB6.6 million, which was partially offset by new bank loans of RMB18.0 million for
working capital requirements and exercise of warrants in exchange of ordinary shares of Exceed of RMB31.5 million.



For 2009, our net cash inflow from financing
activities was RMB299.9 million due to new bank loans of RMB90.5 million for working capital requirements, capital in the amount
of RMB343.2 million received from 2020 upon recapitalization and business combination and proceeds of RMB205.0 million from the
issue of ordinary shares to new investors, which was partially offset by the repayment of bank loans of RMB52.5 million, the purchase
of a unit option of RMB17.1 million and the redemption of preferred shares of RMB272.4 million.



48







Capital Expenditures



Our capital expenditures principally include
expenditures on property, plant and equipment and construction in progress for our new factory buildings. We financed our capital
expenditure requirements primarily through cash flow from operations.



The following table sets forth our historical
capital expenditures for the periods indicated:



|                              |  | Year ended December 31, |      
|----------------------------- |  | ----------------------- | -----
|                              |  | 2009                    |      
|                              |  | (RMB in thousands)      |      
|Property, plant and equipment |  |                         | 2,290
|Construction in progress      |  |                         | —    
|Total                         |  |                         | 2,290



| | C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
| | -- | ----------------------------------------------------



Design, Research and Development



We established our research and development
center in 2002. In 2005, we established a dedicated research and development facility adjacent to our production facility in Jinjiang.
The facility occupies a total gross floor area of approximately 3,000 square meters.



Product design



We carry out our product design at the research
and development center. We maintain a dedicated design team and engage external design firms in order to keep up with market trends
and changing consumer preferences. Our design team initiates various design themes for our products to appeal to different tastes
and preferences of consumers located in varying regions in the PRC. The design team refines and improves on its design themes by
taking into account other considerations such as the comfort and functionality of the products, as well as the technology used.



As of December 31, 2011, our research and
development department consisted of 120 employees. Our design team formulates new designs for products, tests prototype designs
by obtaining feedback from other internal departments and distributors, and assesses demand at sales fairs. When a prototype is
approved for production, the design team sends the design specifications to the production team. During the year ended December
31, 2011, we launched over 1,000 designs at the sales fair in 2011.



Our product design process consists of several
integrated design steps ranging from initial product concept design to production and testing of prototypes.



49







The diagram below illustrates the typical
design process for our Xidelong footwear and apparel:







|Initial market survey and product strategy formulation    |  | Our design team, with the assistance of third-party professionals, formulates new design concepts by analyzing information on global sportswear trends and market research.                                                             
|--------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                          |  |                                                                                                                                                                                                                                         
|Product design                                            |  | We design or engage external designers to design products.                                                                                                                                                                              
|                                                          |  |                                                                                                                                                                                                                                         
|Product development                                       |  | New designs from the product design stage are developed into product prototypes, which are tested against our quality and performance standards.                                                                                        
|                                                          |  |                                                                                                                                                                                                                                         
|Initial product review by distributors and marketing team |  | Our marketing team reviews the initial batch of prototypes together with distributors to assess whether they meet the target standards. Prototypes are refined based on evaluations carried out by athletes and our marketing personnel.



50







|Sales fairs |  | We then display samples of all our new products in a seasonal sales fair, at which we launch our new product collections and our distributors place sales orders.
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



Samples of the final products are then provided
to our production facilities and our contract manufacturers. Before mass production commences, we also perform pilot production
runs to identify, and subsequently rectify, potential problems in the production process.



Research and development



As a leading sports and leisurewear company
in China, we place great emphasis on the comfort and functionality of our products. In particular, our sports and leisure footwear
are designed to tailor to the needs of Chinese consumers. Our research and development is principally focused on (i) developing
new technologies to improve existing or to create new products, by using the latest technology and materials to enhance the comfort
and quality of our products, and (ii) testing and other quality control activities. We maintain a science and technology laboratory
in Jinjiang that tests potential new materials and products. We believe our research capabilities and the development of new products
that incorporate the latest technology is an important element of our growth strategy.



China Institute of Sport Science



The General Administration of Sport of China,
a PRC government agency, established the China Institute of Sport Science in 1958 as China’s first governmental agency engaging
in research in the field of sport science. The functions of the China Institute of Sport Science include strengthening public fitness
and enhancing the performance of Chinese athletes through research and development. The China Institute of Sport Science has six
research centers focusing on four main areas of research: (i) developing Chinese athletes; (ii) monitoring and developing public
fitness levels; (iii) studying sports sociology; and (iv) improving sports equipment.



On October 20, 2006, we entered into an
exclusive five-year technology cooperation agreement with the China Institute of Sport Science, where it stated the following as
reasons for selecting us as its exclusive collaboration partner:



| | · | our commitment to enhancing the technological level of our products;
| | - | --------------------------------------------------------------------



| | · | our strength and resources in technology, research and development;
| | - | -------------------------------------------------------------------



| | · | our commitment to developing our products into one of the world’s famous brands;
| | - | --------------------------------------------------------------------------------



| | · | the high quality of our products and, in particular, our running footwear, which is comparable to running footwear from leading
international brands based on market research conducted by the China Institute of Sport Science;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our large scale and modernized production facility in Jinjiang and research and development center, which can accommodate international
science and research activities; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the extensive experience and professional knowledge of Mr. Lin Shuipan, our founder, chairman of the board and chief executive
officer.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



We have successfully renewed the technology
cooperation agreement for another five years upon its expiration in October 2011. Under the cooperation agreement, the China Institute
of Sport Science will assist us with the research and development of technology for our sports footwear and apparel. While the
China Institute of Sport Science owns the know-how developed under the cooperation agreement, we have the first right of refusal
to use such know-how. In addition, we pay an annual fee of RMB0.5 million to the China Institute of Sport Science pursuant to the
cooperation agreement for their assistance in the research and development of our products. Other than such annual fees, we do
not pay any other fees, including usage fees, to the China Institute of Sport Science.



Our current collaborative projects with
the China Institute of Sport Science include research initiatives to establish a national database of different foot shapes and
characteristics of the PRC population. In April 2007, we launched a nationwide foot measurement campaign where we collected foot
measurement data from consumers across China, using the foot shape measurement equipment developed in conjunction with the China
Institute of Sport Science, which helped analyze the data in the foot shape database, and which we subsequently incorporated into
the design and development of footwear insoles and soles.



Key recent achievements



The following are our recent key research
and development achievements in footwear technologies:





51







Arch support pad



Arch support pads are commonly used in footwear
to provide underside support to the feet in order to reduce foot or heel pain. Our research and development activities with the
China Institute of Sport Science resulted in the development of a foot shape database and testing system for foot pressure distribution,
providing shock absorption functions, which are specifically tailored to consumers in the PRC.



Silicone rubber materials



Our research and development activities
with the China Institute of Sport Science resulted in the development of silicone rubber materials that have higher levels of color-fading
resistance and have a higher overall durability compared to conventional rubber materials. We have used these materials in the
production of specially designed midsoles for shock absorption and balancing functions.



Nano-silver photocatalyst



We have developed footwear materials that
contain nano-silver photocatalysts. Nano-silver photocatalysts in footwear materials absorb odors and have an antibacterial effect.
We are currently using nano-silver photocatalyst technology in our footwear.



For 2009, 2010 and 2011, our total expenditure
on research and development amounted to RMB25.0 million, RMB40.8 million and RMB53.9 million (US$8.6 million), respectively, representing
1.2% , 1.5% and 1.6% of our total revenue during the same periods, respectively.



Intellectual Property Rights



As of December 31, 2011, we registered 23
trademarks, including  and , with the Trademark Office of the State Administration for Industry and Commerce
in the PRC. As of December 31, 2011, we had ten pending applications for the registration of trademarks in the PRC. In addition,
we have registered four domain names.



We recognize the importance of protecting
and enforcing our intellectual property rights. We safeguard our intellectual property rights through the registration of trademarks,
and may include the relevant protective provisions in contracts with third parties. Our employees and contract manufacturers are
subject to confidentiality agreements but there has been no action taken against any employee or contract manufacturers for a breach
of such confidentiality. In addition, we plan to apply for intellectual property rights to any new technologies developed together
with scientific and educational institutions. We mitigate the risks of infringement by others through obtaining the appropriate
legal services and advice to ensure that our trademarks are adequately protected. For example, in December 2005, Liu Dingyi registered
the Chinese domain name “.com” on the China Internet Network Information Center (CNNIC) and used the website
to promote and sell travel products and services. On June 8, 2006, we obtained an injunction from the Hubei Province Jingzhou City
Intermediate People’s Court restraining Liu Dingyi from infringing on our trademark and ordered the termination of the domain
name registration. In addition, the court awarded us RMB5,000 in damages.



| | D. | TREND INFORMATION
| | -- | -----------------



Other than as disclosed elsewhere in this
annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2011
to December 31, 2011 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity
or capital resources, or that caused the disclosed financial information to not be indicative of future operating results or financial
conditions.



| | E. | OFF-BALANCE SHEET ARRANGEMENTS
| | -- | ------------------------------



We do not have any outstanding off-balance
sheet guarantees, interest rate swap transactions or foreign currency forward contracts. We do not engage in trading activities
involving non-exchange traded contracts. In our ongoing business, we do not enter into transactions involving, or otherwise form
relationships with, unconsolidated entities or financials partnerships that are established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes.



52







| | F. | CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
| | -- | --------------------------------------------------



Our contractual obligations primarily consist
of short-term debt obligations, operating lease obligations and purchase obligations. The following table sets forth a breakdown
of our contractual obligations as of December 31, 2011 and their maturity profile:



|                                                       |  | Payment Due by Period |        
|------------------------------------------------------ |  | --------------------- | -------
|                                                       |  | Total                 |        
|                                                       |  | (RMB in thousands)    |        
|Capital commitments                                    |  |                       | 172,051
|Operating lease obligations (1)                        |  |                       | 5,184  
|Purchase obligations (2)                               |  |                       | 9,183  
|Annual fee for research and development assistance (3) |  |                       | 2,500  
|Total                                                  |  |                       | 188,918








| | (1) | Lease obligations for our office premises.
| | --- | ------------------------------------------



| | (2) | Includes advertising and promotional expenses.
| | --- | ----------------------------------------------



| | (3) | Under the agreement with the China Institute of Sport Science, we have committed to pay predetermined annual fees of RMB0.5
million to the China Institute of Sport Science annually from October 2011 to October 2016 for their assistance with the research
and development of technology for sports footwear and apparel, and the promotion of the technology content of our products.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | G. | SAFE HARBOR
| | -- | -----------



This annual report contains forward-looking
statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements
other than statements of historical fact in this form are forward-looking statements. These forward-looking statements can be identified
by words or phrases such as “may,” “will,” “expect,” “anticipate,” “estimate,”
“plan,” “believe,” “is/are likely to” or other similar expressions. The forward-looking statements
included in this form relate to, among others:



| | · | our goals and strategies;
| | - | -------------------------



| | · | our future business development, financial condition and results of operations;
| | - | -------------------------------------------------------------------------------



| | · | our projected revenues, earnings, profits and other estimated financial information;
| | - | ------------------------------------------------------------------------------------



| | · | expected changes in our margins and certain costs or expenditures;
| | - | ------------------------------------------------------------------



| | · | our plans to expand and diversify the sources of our revenues;
| | - | --------------------------------------------------------------



| | · | our plans for staffing, research and development and regional focus;
| | - | --------------------------------------------------------------------



| | · | our plans to launch new products;
| | - | ---------------------------------



| | · | competition in the sportswear industry in China;
| | - | ------------------------------------------------



| | · | the outcome of ongoing, or any future, litigation or arbitration;
| | - | -----------------------------------------------------------------



| | · | changes in PRC governmental preferential tax treatment and financial incentives we currently qualify for and expect to qualify
for; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | · | PRC governmental policies relating to the sportswear manufacturing industry.
| | - | ----------------------------------------------------------------------------



These forward-looking statements involve
various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable,
we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from and
worse than our expectations. Important risks and factors that could cause our actual results to be materially different from our
expectations are generally set forth in the “Risk Factors” section of Item 3 and elsewhere in this annual report. The
forward-looking statements made in this annual report relate only to events or information as of the date on which the statements
are made in this annual report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances
after the date on which the statements are made or to reflect the occurrence of unanticipated events.



53







Item 6.	DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES



| | A. | DIRECTORS AND SENIOR MANAGEMENT
| | -- | -------------------------------



The following table sets forth certain information
relating to our directors as of March 31, 2012. The business address of each of our directors and executive officers Unit F, 24/F,
China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong.



|Name          |  | Age |  | Position                                                   
|------------- |  | --- |  | -----------------------------------------------------------
|Lin Shuipan   |  | 43  |  | Director, Chairman of the Board and Chief Executive Officer
|Jin Jichun    |  | 70  |  | Director                                                   
|Yea-Mow Chen  |  | 59  |  | Director                                                   
|Tai Yau Ting  |  | 32  |  | Chief Financial Officer and Company Secretary              
|Yu Shulong    |  | 49  |  | Deputy Financial Officer                                   
|Ding Dongdong |  | 30  |  | Vice President                                             



Directors



Mr. Lin Shuipan is our founder, executive
Director, the chairman of the board and chief executive officer. He is responsible for our overall corporate strategies, planning
and business development. Mr. Lin has over 16 years of experience in the sportswear industry. From 1993 to 1997, he was the technical
engineer and factory manager of Huatingkou Footwear Manufacturing Factory in Chendai Town, Jinjiang. From 1997 to 2000, he was
the general manager of Jiuzhou Footwear Business Company Limited in Chendai Town, Jinjiang. In 2001, Mr. Lin founded XDLong Fujian
and was its vice-chairman from 2001 to September 2007 and has been its chairman since September 2007. He has been the general manager
of XDLong Fujian since its establishment. Mr. Lin has also been the chairman and general manager of XDLong China since its establishment
in April 2004. In 2003, he was named as one of the 100 Outstanding Persons in China’s Economy. In 2003, he was appointed
as a representative of the 14thJinjiang People’s Congress and the executive director of Jinjiang Chendai Chamber
of Commerce. In 2004, Mr. Lin was appointed as vice president of Jinjiang Footwear Manufacturing Association. In 2005, he was appointed
as a member of the standing committee of Quanzhou Foreign Invested Enterprises Association and, in 2007, as vice president of Jinjiang
Youth Chamber of Commerce. In 2006, he was appointed as a representative of the 14th Quanzhou People’s Congress.
He was also appointed as a representative of the 14th,15thand 16th Jinjiang People’s Congress
in 2003, 2006 and 2011, respectively. In 2010, Mr. Lin was appointed as the first Executive Vice President of Jinjiang Federation
of Enterprise & Entrepreneur.



Mr. Jin Jichun is an independent
non-executive director. Mr. Jin is a professor of sports biomechanics at the Beijing Sports University. Mr. Jin received a bachelor’s
degree in gymnastics and obtained a degree in kinesiology at the Shanghai Sports College in 1958 and 1966, respectively. From 1982
to 1984, he was a visiting scholar at the University of Delaware, specializing in biomechanics. He served as a member of the editorial
staff of the International Journal of Sport Biomechanics for a total period of four years between 1985 and 1989. Since 1987, he
has been a council member of the International Council of Sport Science and Physical Education, and was appointed its regional
coordinator of Asia in 2001.



Mr.Yea-Mow Chenhas been a member of our board of directors
since February, 2012. Mr. Chen is a professor of finance at the San Francisco University. Mr. Chen is also the chairman and chief
executive officer of Intelliwise Financial Engineering Advisory Corp. Ltd., a financial advisory firm at Taipei, and an advisor
of Taiwan Securities Association. Mr. Chen received a B.A from the National Taiwan University in 1976, a M.A in Economics from
the Ohio State University in 1980, and a Ph.D in Economics from the Ohio State University in 1984.



Senior Management



Ms. Tai Yau Ting is our Chief Financial
Officer and Company Secretary and is a qualified accountant. Ms. Tai was appointed as our Chief Financial Officer in August 2011.
Prior to her appointment as our Chief Financial Officer, Ms. Tai served as our Vice President of Finance. Ms. Tai joined us in
February 2008 and is primarily responsible for our financial management, internal control, risk management and corporate secretarial
matters. Ms. Tai graduated from the University of Toronto with a bachelor’s degree in applied science in 2002 and a master’s
degree in applied science in 2004. Ms. Tai is also a member of the American Institute of Certified Public Accountants and a member
of CPA Australia. Prior to joining us, she worked for Ernst & Young and has over four years’ auditing, accounting and
financing experience, mainly focused on auditing Hong Kong listed companies and Hong Kong initial public offering projects..



Mr. Yu Shulong is our deputy financial
officer. Mr. Yu joined us in August 2009. From 1983 to 1993, he worked for Anhui Sugong County Salt Co. Ltd. and was responsible
for accounting, finance and distribution related matters. From 1993 to 2005, he worked as the financial manager for Fujian Fengzhu
Group Co. Ltd. From 2006 to 2009, he worked as the chief financial officer for Fujian Jinjiang San Li Motor Co. Ltd. Mr. Yu obtained
a diploma in finance and accounting from Anhui Anqing Commercial College.



54







Mr. Ding Dongdongis our Vice President.
He is primarily responsible for the design, research and development of footwear and apparel. Mr. Ding joined us in September 2001.
He was the development manager of the apparel department of XDLong Fujian from 2002 to 2003, and was promoted to the position of
manager in 2003. He is responsible for data collection, apparel design, processing and production, quality control and after-sales
of the apparel department. Mr. Ding obtained a diploma in apparel design from the Guangdong Apparel Institute in July 2002. Mr.
Ding is the brother-in-law of Mr. Lin Shuipan, an executive Director.



| | B. | COMPENSATION
| | -- | ------------



We offer our directors and executive officers
competitive remuneration packages to attract and retain management talent. The principal component of our compensation for directors
and executives are their basic salaries. In addition, we make statutory contributions to the social insurance scheme for our executive
officers.



In 2011, the aggregate cash compensation
we paid to our directors and executive officers was approximately RMB3.8 million (US$0.6 million) and the total social
insurance contributions made for our executive officers was approximately RMB24,000 (US$3,813).



In 2011, we granted 338,000 restricted shares
to our senior management and certain employees under the Plan. Of the 338,000 restricted shares granted in 2011, 163,000 restricted
shares will be vested at a schedule of 25% at the first anniversary of the grant date, 30% at the second anniversary of the grant
date and 45% at the third anniversary of the grant date, respectively. The remaining granted restricted shares will be generally
vested in equal installments over three years following the grant date.



Except as disclosed above, no other compensation
or benefits in kind were paid or granted to our executive officers in 2011.



The compensation of our directors and executive
officers is determined by reference to our operating results as a whole, market environment, salary trends, tasks and responsibilities
of the director and executive officer, and compensation packages offered by companies in the same industry in the PRC. The compensation
of directors and executive officers was subject to performance reviews on an annual basis.



The primary goal of our remuneration policy
is to enable us to retain and motivate management by offering them compensation commensurate with their performance.



Determination of Compensation



We have a compensation committee that makes
all compensation decisions regarding our named executive officers. Compensation decisions with respect to our named executive officers
have focused on attracting and retaining individuals who could help us meet and exceed our financial and operational goals. Our
compensation committee considers our growth, individual performance and market trends when setting individual compensation levels.



| | C. | BOARD PRACTICES
| | -- | ---------------



Independence of Directors



We apply the standards of NASDAQ in determining
whether a director is independent. Under the relevant standards, an independent director means a person other than an executive
officer or employee of the company, and no director qualifies as independent unless the issuer’s board of directors affirmatively
determines that the director does not have a relationship that would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. NASDAQ requires that a majority of the board of directors of a company be independent.
We have determined that Messrs. Chen and Jin are independent.



With respect to our Audit Committee, Compensation
Committee and Nominations Committee, pursuant to exemptions available to foreign private issuers, we have relied on home country
corporate governance requirements and have only two independent directors. As a result, each of these committees is comprised of
two independent directors.



Audit Committee



We have established an audit committee.
Messrs. Chen (chair) and Jin are members of the audit committee. Messrs. Chen and Jin have an understanding of generally accepted
accounting principles and financial statements, the ability to assess the general application of such principles in connection
with our financial statements, including estimates, accruals and reserves, experience in analyzing or evaluating financial statements
of similar breadth and complexity as the Company’s financial statements, an understanding of internal controls and procedures
for financial reporting and an understanding of audit committee functions.



Audit Committee Financial Expert



The board of directors has identified Mr.
Chen as an “audit committee financial expert” within the meaning of all applicable rules.



55







Audit Committee Pre-Approval Policies and Procedures



In accordance with Section 10A(i) of the
Securities Exchange Act of 1934, before the Company engages its independent accountant to render audit or permitted non-audit services,
the engagement will be approved by the audit committee.



Code of Conduct



We have adopted a code of conduct that applies
to all directors, officers and employees. The code of conduct codifies the business and ethical principles that govern all aspects
of our business.



Compensation Committee



We have established a compensation committee.
The purpose of the compensation committee is to administer any stock option plans, including authority to make and modify awards
under such plans. Messrs. Jin (chair) and Chen are members of the compensation committee.



Nominations Committee



We have formed a nominating and corporate
governance committee. The nominations committee is responsible for overseeing the selection of persons to be nominated to serve
on our board of directors. The nominations committee will consider persons identified by our members, management, stockholders,
investment bankers and others. Messrs. Jin (chair) and Chen are members of the nominating and corporate governance committee.



Employment Agreement with Executive Director



Neither our Company nor any of its subsidiaries
has entered into any service contracts with any of our directors that contain any provisions for benefits upon termination of employment
(“golden parachute” or “handshake” or similar arrangements).



Terms of Directors and Officers



Our officers are elected by and serve at
the discretion of our shareholders and the board of directors in accordance with our memorandum and articles of association. Our
directors are not subject to a term of office and hold office until such time as they are removed from office by resolution of
the majority of the directors or a resolution by the shareholders holding a majority of the voting rights. A director will be removed
from office automatically if, among others, the director (i) becomes bankrupt or makes any arrangement or composition with his
creditors or (ii) dies or is found by our company to be or becomes of unsound mind.



| | D. | EMPLOYEES
| | -- | ---------



Employees



As of December 31, 2011, we had a total
of 2,204 full-time employees. The following sets forth the number of employees as of December 31, 2011:



|                                |  | Number of employees |      
|------------------------------- |  | ------------------- | -----
|Footwear production department  |  |                     | 1,657
|Research and development center |  |                     | 120  
|Quality control department      |  |                     | 71   
|Sales and marketing center      |  |                     | 204  
|Administration department       |  |                     | 83   
|Apparel business department     |  |                     | 14   
|Finance department              |  |                     | 35   
|Brand and promotion department  |  |                     | 4    
|Senior management               |  |                     | 10   
|Human resources department      |  |                     | 6    
|Total                           |  |                     | 2,204



We have made contributions in relation to
the retirement of our employees in accordance with applicable laws and regulations in the PRC, which require contribution by both
employees and the company at a fixed percentage of the salaries of such employees. For 2009, 2010 and 2011, the employee social
insurance (including our retirement contribution) paid by us amounted to approximately RMB17.9 million, RMB16.6 million and RMB20.1
million (US$3.2 million), respectively, which represented 19.4%, 17.4% and 19.6% of the total salaries of our employees during
the same periods, respectively.



56







For the year ended December 31, 2009, we
paid year-end bonuses of RMB8.5 million to 966 employees meeting performance targets in that year. For the year ended December
31, 2010, we paid year-end bonuses of RMB7.7 million to 957 employees meeting performance targets in that year. For the year ended
December 31, 2011, we paid year-end bonuses of RMB7.1 million (US$1.1 million) to 645 employees meeting performance targets in
that year.



We believe we are in material compliance
with all applicable labor and safety laws and regulations in the PRC, including the PRC Labor Contract Law, the PRC Production
Safety Law, the PRC Regulation for Insurance for Labor Injury, the PRC Unemployment Insurance Law, the PRC Provisional Insurance
Measures for Maternity of Employees, PRC Interim Provisions on Registration of Social Insurance, PRC Interim Regulation on the
Collection and Payment of Social Insurance Premiums and other related regulations, rules and provisions issued by the relevant
governmental authorities from time to time, for our operations in the PRC.



According to the PRC Labor Contract Law,
we are required to enter into labor contracts with our employees. We are required to pay no less than local minimum wages to our
employees. We are also required to provide employees with labor safety and sanitation conditions meeting PRC government laws and
regulations and carry out regular health examinations of our employees engaged in hazardous occupations.



| | E. | SHARE OWNERSHIP
| | -- | ---------------



Please see Item 7.A for share ownership
held by our directors and senior management.



Equity Incentive Plan



The Company’s Equity Incentive Plan
(the “Plan”) was adopted by the board of directors on June 3, 2010 and approved by a majority of our shareholders voting
at the Annual General Meeting held on June 30, 2010. The Plan was adopted to attract and retain directors, officers, other employees
and consultants of the Company and its Subsidiaries and to provide to such persons incentives and rewards for superior performance.



Under the Plan, the Company may issue or
transfer 1,000,000 Shares of Common Stock plus, during each calendar year of the Company during which this Plan is in effect, an
additional number of shares equal to the lesser of (1) 1,000,000 shares of Common Stock, (2) ten percent (10%) of the number of
shares of all classes of common stock of the Company outstanding on the first business day of the Company’s fiscal year,
and (3) such lesser number as may be determined by the Committee, in the aggregate not to exceed 10,000,000 Shares of Common Stock
plus, in each case, any shares of Common Stock relating to awards that expire or are forfeited or cancelled under this Plan. Such
Common Stock may be shares of original issuance or treasury shares or a combination of the foregoing. Each grant will specify an
option price per share, which may not be less than the market value per share on the date of grant. No option right will be exercisable
more than ten (10) years from the date of grant; provided that no incentive stock option right granted to a ten percent
participant will be exercisable more than five (5) years from the date of grant.



57







Item 7.	MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS



| | A. | MAJOR SHAREHOLDERS
| | -- | ------------------



The following table sets forth information
with respect to the beneficial ownership, within the meaning of Rule 13d-3 of the U.S. Securities Exchange Act of 1934, as amended,
or the Exchange Act, of our ordinary shares, as of March 31, 2012:



| | · | each person known to us to own beneficially more than 5% of our ordinary shares; and
| | - | ------------------------------------------------------------------------------------



| | · | each of our directors and executive officers who beneficially own ordinary shares within the meaning of Rule 13d-3 of the Exchange
Act.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



Beneficial ownership
includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community
property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as
beneficially owned by them. Percentage of beneficial ownership is based on 29,314,946 ordinary shares outstanding as of March 31,
2012.



|Beneficial Owner                                            |  | Ordinary
                                                                                                  Shares Beneficially Owned(8) |            |  | Percentage of Ordinary Shares Beneficially Owned | 
|----------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- | ---------- |  | ------------------------------------------------ | 
|Directors and executive officers                            |  |                                                                                                                                         |            |  |                                                  | 
|Lin Shuipan(1)                                              |  |                                                                                                                                         | 10,395,571 |  |                                                  | 
|Tai Yau Ting                                                |  |                                                                                                                                         | 36,666     |  |                                                  | 
|Jin Jichun                                                  |  |                                                                                                                                         | 6,000      |  |                                                  | 
|Yea-Mow Chen                                                |  |                                                                                                                                         | -          |  |                                                  | 
|All directors and executive officers as a group (4 persons) |  |                                                                                                                                         | 10,438,237 |  |                                                  | 
|Principal shareholders                                      |  |                                                                                                                                         |            |  |                                                  | 
|2020 International Capital Group Limited(2)                 |  |                                                                                                                                         | 1,312,504  |  |                                                  | 
|Beijing Century Limited(3)                                  |  |                                                                                                                                         | 1,312,504  |  |                                                  | 
|Tse Shiu Wah(4)                                             |  |                                                                                                                                         | 1,312,504  |  |                                                  | 
|George Lu(5)                                                |  |                                                                                                                                         | 1,312,504  |  |                                                  | 
|Louis Koo(6)                                                |  |                                                                                                                                         | 1,312,504  |  |                                                  | 
|Windtech Holdings Limited(7)                                |  |                                                                                                                                         | 3,957,784  |  |                                                  | 
|Tiancheng Int’l Investment Group Limited(8)                 |  |                                                                                                                                         | 1,651,434  |  |                                                  | 



The percentages shown in the table are based
on 29,314,946 ordinary shares outstanding on March 31, 2012, which number excludes an additional 1,425,863 shares currently held
in escrow and 2,212,789 new earn-out shares, issuable to the former holders of ordinary shares of Exceed if certain earnings targets
are met in fiscal years 2011. None of our existing shareholders has different voting rights from other shareholders. We are not
aware of any arrangement that may, at a subsequent date, result in a change of control of our company.



We have met the earnings target of US$64.3
million in fiscal year 2011, an aggregate of 1,425,863 escrow shares will be released and 2,212,789 earn-out shares will be issued
to the former holders of ordinary shares of Exceed in May 2012.



| | * | Percentage of ownership is less than 1% of the outstanding ordinary shares of the combined company.
| | - | ---------------------------------------------------------------------------------------------------



| | (1) | Represents 6,266,984 shares held by Mr. Lin Shuipan and the remaining 4,128,587 ordinary shares held on trust for the benefit
of Ms. Chen Xiayu, the spouse of Mr. Lin
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Shuipan. The business address of Mr. Lin Shuipan
and Ms. Chen Xiayu is No. 103, Qiancanggong Road, Huatingkou Village, Chendai Town, Jinjiang City, Fujian Province, the PRC.



| | (2) | Represents beneficial ownership of 1,312,504 ordinary shares of Exceed held by Beijing Century Limited, a British Virgin Islands
company wholly owned by 2020 International Capital Group Limited (“Capital”). Beijing Century Limited acquired such
ordinary shares on September 9, 2010 through a transfer from 2020 Strategic Investments, LLC (“2020”), of which Capital
is the sole manager. Prior to the transfer, Capital, as 2020’s sole manager, had voting and dispositive power of the 1,312,504
shares directly owned by 2020. Pursuant to an advisory agreement with 2020, Capital had the rights to receive 100% of the profits
generated by the 1,312,504 ordinary shares owned by 2020 in excess of a preferred return to Louis Koo, the sole member of 2020,
of $3,750 per year, effectively giving Capital an economic interest in the 1,312,504 ordinary shares owned by 2020. Beijing Century
Limited did not pay 2020 any consideration for the 1,312,504 shares. Capital, by virtue of its ownership of 100% of the outstanding
securities of Beijing Century Limited, is deemed to beneficially own the 1,312,504 ordinary shares held by Beijing Century Limited.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Beijing Century Limited acquired 1,312,504 ordinary shares of Exceed on September 9, 2010 through a transfer from 2020. Such
shares were initially acquired by 2020 pursuant to a merger on October 20, 2009 in exchange for 1,312,504 shares of common stock,
$.0001 par value of 2020 ChinaCap Acquirco, Inc., a Delaware corporation acquired by 2020 in January 2007 at a purchase price of
approximately $0.013 per share. Beijing Century Limited did not pay 2020 any consideration for the 1,312,504 ordinary shares of
Exceed.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Tse Shiu Wah, solely in his capacity as the sole director and a controlling person of Beijing Century Limited, is deemed to
beneficially own the 1,312,504 ordinary shares of Exceed held by Beijing Century Limited.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | George Lu, solely in his capacity as a director and a controlling person of Capital, the parent of Beijing Century Limited,
is deemed to beneficially own the 1,312,504 ordinary shares of Exceed held by Beijing Century Limited.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Louis Koo, solely in his capacity as a director and a controlling person of Capital, the parent of Beijing Century Limited,
is deemed to beneficially own the 1,312,504 ordinary shares of Exceed held by Beijing Century Limited.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



58







| | (7) | Represents 1,583,114 ordinary shares owned by Wisetech and 2,374,670 ordinary shares owned by Windtech. Each of Wisetech and
Windtech is controlled by its sole director Yuk Mei Tsui, an employee of New Horizon Capital Advisors Ltd. Yuk Mei Tsui disclaims
beneficial ownership of shares of Exceed held or to be held by Wisetech and Windtech except to the extent of her pecuniary interest
therein. Wisetech and Windtech operate as a group with respect to their interests in us within the meaning of the United States
federal securities laws.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | As of March 31, 2012, Tiancheng Int’l Investment Group Limited (“Tiancheng”) holds 1,651,434 ordinary shares
of Exceed, representing 5.6% shareholding of Exceed. Ms. Chen Shuli, the mother of Mr. Lin Shuipan, is the beneficial owner of
Tiancheng.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | RELATED PARTY TRANSACTIONS
| | -- | --------------------------



As of December 31, 2011, there are no amounts
owed to related parties.



Mr. Lin Shuipan and Ms. Chen Xiayu provided
personal guarantees to a credit facility agreement with a credit up to RMB60 million from November 10, 2008 to November 9, 2010,
of which RMB18 million was drawn down as of December 31, 2009. The personal guarantee provided by Mr. Lin Shuipan and Ms. Chen
Xiayu expired upon the repayment of the respective bank loans made by the Company in June 2010.



Appearance design patents license



Mr. Lin Shuipan applied to the State Intellectual
Property Office of the PRC for registration of 11 appearance design patents for sports footwear, two appearance design patents
for leisure footwear, three appearance design patents for shoe soles and two appearance design patents for package boxes, respectively,
during the period from April 2001 to February 2003. The registrations were granted during the period from November 2001 to
October 2003. Before such registrations were granted, Mr. Lin granted XDLong Fujian an exclusive license to use the appearance
design patents for no consideration from October 1, 2001 to September 30, 2007. XDLong Fujian used these appearance design
patents in the design, manufacture and sale of its footwear during the license period but do not currently use such patents in
its business operations. XDLong Fujian does not anticipate using these patents in its future business operations because the
relevant appearance designs are out of date.



Financial assistance



Mr. Lin Shuipan has provided financial assistance
to support our operations from time to time. The financial assistance comprised interim financing and personal guarantees,
including those guarantees described below. As of December 31 2009, the amount due to Mr. Lin Shuipan was approximately
RMB1.7 million. As of December 31, 2010 and 2011, no amounts were owed to Mr. Lin Shuipan. The balance was unsecured,
interest-free and repayable on demand.



A credit facility agreement with a credit
up to RMB60 million from November 10, 2008 to November 9, 2010 was secured by the personal guarantees from Mr. Lin Shuipan and
Ms. Chen Xiayu. The personal guarantees were released in June 2010 after the repayment of short-term bank loan.



Investment by Elevatech



On April 30, 2008, Windrace issued and allotted
2,500 preferred shares representing 2.5% of the issued share capital of Windrace to Elevatech, an indirect wholly-owned subsidiary
of The Goldman Sachs Group, Inc., pursuant to a subscription agreement dated March 28, 2008 and last amended on June 2, 2008. In
addition, Mr. Lin Shuipan and RichWise transferred an aggregate of 5,500 preferred shares representing 5.5% of the issued share
capital of Windrace to Elevatech pursuant to a share transfer agreement dated March 28, 2008 and last amended on June 2, 2008.



Pursuant to a letter agreement dated May
8, 2009 among Windrace, Elevatech, Mr. Lin Shuipan and RichWise, all of the preferred shares were redeemed by Windrace in exchange
for the issue of a promissory note by Windrace to Elevatech, providing for payment by Windrace of (i) HK$306.2 million (RMB272.5
million) as redemption price on the earlier of the fifth business day following the date of issue of the promissory note and October
31, 2009 and (ii) US$1.0 million (RMB 6.9 million) as additional premium on June 30, 2010. The shares were redeemed by Windrace
on October 21, 2009 in accordance with the letter agreement, and we paid the initial payment of HK$306.2 million to Elevatech.



59







Investment by RichWise



On April 18, 2007, XDLong HK, XDLong Fujian
and XDLong China entered into a subscription and shareholders’ agreement with RichWise, Mr. Lin Shuipan and Ms. Chen Xiayu
under which RichWise subscribed for 20% of the issued share capital of XDLong Investment for HK$88.0 million and agreed to pay
XDLong Investment a premium of HK$32.0 million if XDLong HK’s audited profit after tax in 2007 increased by at least 100.0%
as compared with that in 2006 (the “Minimum Profit Growth Rate”). On March 25, 2008, the same parties entered into
a supplementary subscription and shareholders’ agreement and agreed to lower the Minimum Profit Growth Rate to 70.0%. XDLong
HK achieved the Minimum Profit Growth Rate on December 31, 2007 and RichWise is required under the supplementary subscription and
shareholders’ agreement to pay XDLong Investment HK$32.0 million. Such amount was fully settled by four installments on February
27, 2008, March 26, 2008, March 28, 2008 and May 8, 2008.



| | C. | INTERESTS OF EXPERTS AND COUNSEL
| | -- | --------------------------------



Not applicable.



Item 8.	FINANCIAL INFORMATION



| | A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
| | -- | -------------------------------------------------------



Consolidated Financial Statements



Please see Item 18 “Financial Statements”
for our audited consolidated financial statements filed as a part of this annual report.



Legal Proceedings



We are not involved in any legal matters
that management believes will have a material adverse effect on our business.



Dividend Policy



The payment of dividends by us in the future
will be contingent upon revenues and earnings, if any, capital requirements and our general financial condition. The payment of
any dividends is within the discretion of the board of directors and subject to the limitations imposed by British Virgin Islands
law. It is the present intention of the board of directors to retain all earnings, if any, for use in business operations and,
accordingly. Loans or credit facilities may limit our ability to pay dividends.



| | B. | SIGNIFICANT CHANGES
| | -- | -------------------



Except as disclosed elsewhere in this annual
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included
in this annual report.



60







Item 9.	THE OFFER AND LISTING



| | A. | OFFER AND LISTING DETAILS
| | -- | -------------------------



Price Range of Our Ordinary Shares, Warrants and Units



The following table sets forth the high
and low closing sale prices for our ordinary shares, warrants and units as reported on the market on which the securities were
trading during the period.



|                                                                                                  |  | Ordinary Shares |       |  | Warrants |   |      | Units | 
|------------------------------------------------------------------------------------------------- |  | --------------- | ----- |  | -------- | - | ---- | ----- | 
|                                                                                                  |  | High            |       |  | Low      |   |      | High  | 
|Yearly Highs and Lows                                                                             |  |                 |       |  |          |   |      |       | 
|Year 2011 (Warrants and Units expired on November 8, 2011)                                        |  | $               | 8.58  |  |          | $ | 2.83 |       | 
|Year 2010                                                                                         |  | $               | 10.30 |  |          | $ | 6.21 |       | 
|Year 2009                                                                                         |  | $               | 13.69 |  |          | $ | 7.25 |       | 
|Year 2008                                                                                         |  | $               | 7.60  |  |          | $ | 6.60 |       | 
|Year 2007 (from December 3, 2007 for ordinary shares and warrants and November 9, 2007 for units) |  | $               | 7.30  |  |          | $ | 7.11 |       | 
|                                                                                                  |  |                 |       |  |          |   |      |       | 
|Quarterly Highs and Lows                                                                          |  |                 |       |  |          |   |      |       | 
|First Quarter of 2012                                                                             |  | $               | 4.98  |  |          | $ | 2.98 |       | 
|Fourth Quarter of 2011 (Warrants and Units expired on November 8, 2011)                           |  | $               | 5.45  |  |          | $ | 3.20 |       | 
|Third Quarter of 2011                                                                             |  | $               | 5.70  |  |          | $ | 2.83 |       | 
|Second Quarter of 2011                                                                            |  | $               | 7.63  |  |          | $ | 4.46 |       | 
|First Quarter of 2011                                                                             |  | $               | 8.58  |  |          | $ | 5.88 |       | 
|Fourth Quarter of 2010                                                                            |  | $               | 9.13  |  |          | $ | 7.58 |       | 
|Third Quarter of 2010                                                                             |  | $               | 7.67  |  |          | $ | 6.43 |       | 
|Second Quarter of 2010                                                                            |  | $               | 9.78  |  |          | $ | 6.21 |       | 
|First Quarter of 2010                                                                             |  | $               | 10.30 |  |          | $ | 8.20 |       | 
|                                                                                                  |  |                 |       |  |          |   |      |       | 
|Monthly Highs and Lows                                                                            |  |                 |       |  |          |   |      |       | 
|March 2012                                                                                        |  | $               | 4.07  |  |          | $ | 2.98 |       | 
|February 2012                                                                                     |  | $               | 4.46  |  |          | $ | 3.41 |       | 
|January 2012                                                                                      |  | $               | 4.98  |  |          | $ | 4.14 |       | 
|December 2011                                                                                     |  | $               | 5.39  |  |          | $ | 4.02 |       | 
|November 2011                                                                                     |  | $               | 5.45  |  |          | $ | 4.10 |       | 
|October 2011                                                                                      |  | $               | 4.33  |  |          | $ | 3.20 |       | 



The closing price of our ordinary shares
on April 27, 2012 was $2.09.



As of March 31, 2012, we had approximately
7 holders of record of our ordinary shares. Such number does not include beneficial owners holding shares through nominee names.



| | B. | PLAN OF DISTRIBUTION
| | -- | --------------------



Not applicable.



| | C. | MARKETS
| | -- | -------



On January 3, 2011, our ordinary shares,
warrants and units were transferred and being traded on the NASDAQ Global Select Market.



Our ordinary shares, warrants and units
began being traded on the NASDAQ Capital Market on October 13, 2009 and were transferred and being traded on the NASDAQ Global
Market on June 28, 2010. Prior to such date, the securities had been traded on the NYSE Amex.



Our ordinary shares, warrant and units trade
under the symbols “EDS,” “EDSWW” and “EDSUU,” respectively. These securities were traded on
the NYSE Amex under the symbols “TTY,” “TTYWW” and “TTYUU,” respectively. In addition, from
October 13, 2009 through October 19, 2009, when the symbols were switched to their current symbols, these securities were traded
under the symbols “TTY,” “TTYWW” and “TTYUU”.



61







Each of our units consisted of one ordinary
share and one warrant. Each of our warrants was exercisable into one ordinary share. Our units commenced trading on November 9,
2007. Our ordinary shares and warrants commenced trading separately from our units on December 3, 2007. Our warrants and units
have been withdrawn from listing on the NASDAQ Capital Market when our warrants expired in accordance with their terms on November
8, 2011.



| | D. | SELLING SHAREHOLDERS
| | -- | --------------------



Not applicable.



| | E. | DILUTION
| | -- | --------



Not applicable.





| | F. | EXPENSES OF THE ISSUE
| | -- | ---------------------



Not applicable.



Item 10.	ADDITIONAL INFORMATION



| | A. | SHARE CAPITAL
| | -- | -------------



Not applicable.



| | B. | MEMORANDUM AND ARTICLES OF ASSOCIATION
| | -- | --------------------------------------



There are common law rights for the protection
of shareholders that may be invoked, largely dependent on English company law, since the common law of the British Virgin Islands
for business companies is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle,
a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders
who express dissatisfaction with the conduct of the company's affairs by the majority or the board of directors. However, every
shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent documents of
the corporation. As such, if those who control the company have persistently disregarded the requirements of company law or the
provisions of the company's memorandum and articles of association, then the courts will grant relief. Generally, the areas in
which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business
or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers
control the company; (3) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (4) where
the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders.



The principal protection under statutory
law is that shareholders may bring an action to enforce the constituent documents of the corporation, our Memorandum and Articles
of association. Shareholders are entitled to have the affairs of us conducted in accordance with the general law and the memorandum
and articles.



Under British Virgin Islands law as currently
in effect, a holder of ordinary shares who is not a resident of the British Virgin Islands is exempt from British Virgin Islands
income tax on dividends paid with respect to the ordinary shares and all holders of ordinary shares are not liable to the British
Virgin Islands for income tax on gains realized during that year on sale or disposal of such shares. The British Virgin Islands
does not impose a withholding tax on dividends paid by a company incorporated in the British Virgin Islands. There is no tax treaty
currently in effect between the United States and the British Virgin Islands or between China and the British Virgin Islands. However,
the British Virgin Islands had entered into tax information exchange treaties with China and the United States respectively.



We incorporate by reference into this annual
report the description of our amended and restated memorandum and articles of association contained in our annual report on Form
20-F (File No. 001-33799-10735637) filed with the Securities and Exchange Commission on April 7, 2010.



| | C. | MATERIAL CONTRACTS
| | -- | ------------------



We have not
entered into any material contracts other than in the ordinary course of business or other than those described below and in Item
4 “Information on the Company”, Item 5 “Operating and Financial Review and
Prospects” and elsewhere in this annual report.



On October
20, 2011, we renewed the technology cooperation agreement with the China Institute of Sport Science for a term of five years, pursuant
to which China Institution of Sport Science agrees to select us as its exclusive strategic collaboration partner. For more information
of this agreement, see Item 5 “Operating and Financial Review and Prospects—Research and Development, Patents and Licenses,
etc.— China Institute of Sport Science”.



62







On December 20, 2011, we entered into a
contract with the municipal government of Ruichang City for the investment and construction of a sportswear manufacturing base
on a parcel of land in Ruichang City. Pursuant to this contract, we would purchase a parcel of land of 400,000 square meters in
Ruichang City, Jiangxi Province, PRC, for a total consideration of RMB198,000,000. We have made a deposit of RMB46,800,000 (approximately
US$7.4 million) as a performance bond. This parcel of land will be used for the construction of our new production facility, which
is expected to be completed by the end of 2013. The land purchase has not been finalized and is subject to municipal and administrative
approvals.



| | D. | EXCHANGE CONTROLS
| | -- | -----------------



All of our revenues are denominated in Renminbi,
while a portion of our expenditures are denominated in foreign currencies, primarily the U.S. dollar. Fluctuations in exchange
rates, particularly those involving the U.S. dollar may affect our costs and operating margins. In addition, these fluctuations
could result in exchange losses and increased costs in Renminbi terms. Where our operations conducted in Renminbi are reported
in dollars, such fluctuations could result in changes in reported results which do not reflect changes in the underlying operations.
Since January 1, 1994, the PRC government has used a unitary managed floating rate system. Under that system, the People’s
Bank of China, or PBOC, publishes a daily base exchange rate with reference primarily to the supply and demand of the Renminbi
against the U.S. dollar and other foreign currencies in the market during the previous day. Authorized banks and financial institutions
are allowed to quote buy and sell rates for Renminbi within a specified bank around the central bank’s daily exchange rate.
On July 21, 2005, PBOC announced an adjustment of the exchange rate of the U.S. dollar to Renminbi from 1:8.27 to 1:8.11 and modified
the system by which the exchange rates are determined. While the international reaction to the Renminbi revaluation has generally
been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy,
which could result in a further revaluation and a significant fluctuation of the exchange rate of the Renminbi against the U.S.
dollar, including possible devaluations. As substantially all of our revenues are denominated in Renminbi, such a potential future
devaluation of the Renminbi against the U.S. dollar could negatively impact our results of operations.



In October 2005, SAFE promulgated regulations
that require registration with local SAFE in connection with direct or indirect offshore investment by PRC residents, including
PRC individual residents and PRC corporate entities. These regulations apply to our shareholders who are PRC residents and also
apply to our prior and future offshore acquisitions.



The SAFE regulations retroactively require
registration by March 31, 2006 of direct or indirect investments previously made by PRC residents in offshore companies. If a PRC
resident with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries
of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the
offshore parent proceeds from any reduction in capital, share transfer or liquidation with respect to the PRC subsidiaries. Further,
failure to comply with various SAFE registration requirements described above could result in liability under PRC law for foreign
exchange evasion.



For more information about foreign exchange
control and other foreign exchange regulations in China, see “Risk Factors” in Item 3 “Key Information.”



| | E. | TAXATION
| | -- | --------



The following is a general summary of
certain British Virgin Islands and U.S. federal income tax considerations. The discussion is not intended to be, nor should
it be construed as, legal or tax advice to any particular prospective holder of our ordinary shares, warrants and units.
The discussion is based on laws and relevant interpretations thereof in effect as of the date hereof, all of which are
subject to change or different interpretations, possibly with retroactive effect. The discussion does not address United
States state or local tax laws, or tax laws of jurisdictions other than British Virgin Islands and the United States.



British Virgin Islands Taxation



Under British Virgin Islands law as currently
in effect, a holder of ordinary shares who is not a resident of the British Virgin Islands is exempt from British Virgin Islands
income tax on dividends paid with respect to the ordinary shares and all holders of ordinary shares are not liable to the British
Virgin Islands for income tax on gains realized during that year on sale or disposal of such shares. The British Virgin Islands
does not impose a withholding tax on dividends paid by a company incorporated in the British Virgin Islands. There is no tax treaty
currently in effect between the United States and the British Virgin Islands or between China and the British Virgin Islands. However,
the British Virgin Islands had entered into tax information exchange treaties with China and the United States respectively.



63







United States Federal Income Taxation



General



The following is a summary of the material
U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares and warrants, which are
sometimes referred to collectively as our securities. The discussion below of the U.S. federal income tax consequences to
“U.S. Holders” will apply to a beneficial owner of our securities that is for U.S. federal income tax purposes:



| | · | an individual citizen or resident of the United States;
| | - | -------------------------------------------------------



| | · | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized
(or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons
are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If a beneficial owner of our securities
is not described as a U.S. Holder and is not an entity treated as a partnership or other pass- through entity for U.S. federal
income tax purposes, such owner will be considered a “Non-U.S. Holder.” The U.S. federal income tax consequences applicable
specifically to Non-U.S. Holders are described below under the heading “Non-U.S. Holders.”



This summary is based on the Internal Revenue
Code of 1986, as amended, or the Code its legislative history, existing and proposed Treasury regulations promulgated thereunder,
published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations,
possibly on a retroactive basis.



This discussion does not address all aspects
of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In
particular, this discussion considers only holders that own our securities as capital assets within the meaning of Section
1221 of the Code, and does not address the potential application of the alternative minimum tax or the U.S. federal income tax
consequences to holders that are subject to special rules, including:



| | · | financial institutions or financial services entities;
| | - | ------------------------------------------------------



| | · | broker-dealers;
| | - | ---------------



| | · | taxpayers who have elected mark-to-market accounting;
| | - | -----------------------------------------------------



| | · | tax-exempt entities;
| | - | --------------------



| | · | governments or agencies or instrumentalities thereof;
| | - | -----------------------------------------------------



| | · | insurance companies;
| | - | --------------------



| | · | regulated investment companies;
| | - | -------------------------------



| | · | real estate investment trusts;
| | - | ------------------------------



| | · | certain expatriates or former long-term residents of the United States;
| | - | -----------------------------------------------------------------------



| | · | persons that actually or constructively own 10% or more of our voting shares;
| | - | -----------------------------------------------------------------------------



| | · | persons that acquired our securities pursuant to an exercise of employee stock options, in connection with employee stock incentive
plans or otherwise as compensation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | persons that hold our securities as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;
or
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | · | persons whose functional currency is not the U.S. dollar.
| | - | ---------------------------------------------------------

64







This discussion does not address any aspect
of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws. Additionally,
the discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our securities through
such entities. If a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes)
is the beneficial owner of our securities, the U.S. federal income tax treatment of a partner in the partnership will generally
depend on the status of the partner and the activities of the partnership.



We have not sought, and will not seek, a
ruling from the Internal Revenue Service, or IRS or an opinion of counsel as to any U.S. federal income tax consequence described
herein. The IRS may disagree with the consequences described herein, and its determination may be upheld by a court. Moreover,
we cannot assure you that future legislation, regulations, administrative rulings or court decisions will not adversely affect
the accuracy of the statements in this discussion.



BECAUSE OF THE COMPLEXITY OF THE TAX
LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN,
EACH HOLDER OF OUR SECURITIES IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL
AS U.S. FEDERAL TAX LAWS.



Tax Consequences to U.S. Holders of Ordinary Shares and Warrants



Taxation of Distributions Paid on Ordinary Shares



Subject to the passive foreign investment
company, or PFIC, rules discussed below, the U.S. dollar amount of distributions on our ordinary shares (including the amount of
PRC tax withheld, if any), other than certain pro rata distributions of our ordinary shares, generally will be includable in a
U.S. Holder’s gross income as ordinary dividend income when actually or constructively received to the extent the distribution
is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Such dividend
will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received
from other U.S. corporations. Distributions in excess of such earnings and profits will be applied against and reduce the U.S.
Holder’s basis in its ordinary shares and, to the extent in excess of such basis, will be treated as gain from the sale or
exchange of such ordinary shares. We may not, however, calculate earnings and profits in accordance with U.S. tax principles. In
this case, all distributions by us to U.S. Holders generally will be treated as dividends.



With respect to non-corporate U.S. Holders
for taxable years beginning before January 1, 2013, dividends may be taxed at the lower applicable long term capital gains rate
(see “— Taxation on the Disposition of Ordinary Shares and Warrants” below) provided that (1) our ordinary shares
are readily tradable on an established securities market in the United States, (2) we are not a PFIC, as discussed below, for either
the taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are
met. Under published IRS authority, shares are considered for purposes of clause (1) above to be readily tradable on an established
securities market in the United States only if they are listed on certain exchanges, which include the NASDAQ Stock Market. Although
our ordinary shares are currently traded on the NASDAQ Stock Market, U.S. Holders nevertheless should consult their own tax advisors
regarding the availability of this lower rate for any dividends paid with respect to our ordinary shares.



If PRC taxes apply to dividends paid to
a U.S. Holder on our ordinary shares, such taxes may be treated as foreign taxes eligible for credit against such holder’s
U.S. federal income tax liability (subject to certain limitations), and, if we are deemed to be a PRC “resident enterprise”
under PRC tax law (see “Risk Factors – Risks Relating to the PRC – Any changes in PRC policies on enterprise
income tax may adversely affect our ability to pay dividends and our financial condition”), a U.S. Holder may be entitled
to certain benefits under the income tax treaty between the United States and the PRC. U.S. Holders should consult their own tax
advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the income tax treaty between
the United States and the PRC.



Possible Constructive Dividends



If an adjustment is made to the number of
ordinary shares for which a warrant may be exercised or to the exercise price of a warrant, other than an adjustment made pursuant
to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interest of the U.S. Holder
of the warrant, the adjustment may, under certain circumstances, result in a constructive distribution that could be taxable as
a dividend to the U.S. Holder of the warrant. Conversely, the absence of an appropriate anti-dilution adjustment may result
in a constructive distribution that could be taxable as a dividend to the U.S. Holders of our ordinary shares.



Taxation on the Disposition of Ordinary Shares and Warrants



Upon a sale or other taxable disposition
of our ordinary shares or warrants, and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital
gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in
the ordinary shares or warrants, both determined in U.S. dollars.



65







Capital gains recognized by U.S. Holders
generally are subject to U.S. federal income tax at the same rate as ordinary income, except that long-term capital gains recognized
by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum rate of 15% for taxable years beginning
before January 1, 2013 (and 20% thereafter). Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s
holding period for the ordinary shares or warrants exceeds one year. The deductibility of capital losses is subject to various
limitations.



If PRC taxes apply to any gain from the
disposition of our ordinary shares or warrants by a U.S. Holder, such taxes may be treated as foreign taxes eligible for credit
against such holder’s U.S. federal income tax liability (subject to certain limitations), and, if we are deemed to be a PRC
“resident enterprise” under PRC tax law (see“Risk Factors – Risks Relating to the PRC – Any
changes in PRC policies on enterprise income tax may adversely affect our ability to pay dividends and our financial condition”),
a U.S. Holder may be entitled to certain benefits under the income tax treaty between the United States and the PRC. U.S. Holders
should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of
the income tax treaty between the United States and the PRC.



Exercise of Warrants



A U.S. Holder generally will not be required
to recognize gain or loss by reason of its exercise of warrants for cash. The U.S. Holder’s tax basis in the ordinary shares
it receives upon exercise of the warrants for cash generally will be an amount equal to the sum of the U.S. Holder’s initial
investment in the warrants and the exercise price of the warrants. The U.S. Holder’s holding period for ordinary shares received
upon exercise of the warrants for cash generally will begin on the date following the date of exercise of the warrants and will
not include the period(s) during which the U.S. Holder held the warrants. Any U.S. Holder that exercises the warrants other than
by paying the exercise price in cash should consult its tax advisor regarding the tax treatment of such an exercise, which may
vary from that described above.



Expiration of a Warrant



Upon expiration of a warrant, a U.S. Holder
will recognize a loss in an amount equal to the U.S. holder’s tax basis in the warrant, determined in U.S. dollars. Any
such loss would generally be treated as capital loss and will be long-term capital gain or loss if the warrant was held by the
U.S. holder for more than one year at the time of such expiration. The deductibility of capital losses is subject to various
limitations.



Additional Taxes After 2012



For taxable years beginning after December
31, 2012, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject
to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the
sale or other taxable disposition of, our securities, subject to certain limitations and exceptions. U.S. Holders should consult
their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our securities.



Passive Foreign Investment Company Rules



A foreign corporation will be a passive
foreign investment company, or PFIC, if at least 75% of its gross income in a taxable year of the foreign corporation, including
its pro rata share of the gross income of any company in which it is considered to own at least 25% of the shares by value, is
passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the
foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata
share of the assets of any company in which it is considered to own at least 25% of the shares by value, are held for the production
of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain
rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.



We do not believe that we were a PFIC for the 2011 taxable year.
Our actual PFIC status for the 2012 taxable year or any subsequent taxable year will not be determinable until after the end of
each such taxable year. The PFIC determination is dependent on a number of factors, some of which are beyond our control, including
the amount of our operating income and the market valuation of our assets, including goodwill, and certain aspects of the PFIC
rules are not entirely certain. Accordingly, we cannot assure you with respect to our status as a PFIC for the 2012 taxable year
or any future taxable year. See “—Risk Factors— We may become a passive foreign investment company, or PFIC,
which could result in adverse U.S. tax consequences to U.S. investors”.



If we qualified as a PFIC and a U.S.
Holder did not make either a timely qualified electing fund, or QEF election for our first taxable year as a PFIC in which the
U.S. Holder held (or was deemed to hold) ordinary shares, or a mark-to-market election, as described below, such holder generally will
be subject to special rules with respect to:



| | · | any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants; and
| | - | ---------------------------------------------------------------------------------------------------------------



66







| | · | any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable
year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect
of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding
period for the ordinary shares).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under these rules,



| | · | the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for
the ordinary shares or warrants;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the amount allocated to the taxable year of the U.S. Holder in which the U.S. Holder recognized the gain or received the excess
distribution, or allocated to the period in the U.S. Holder’s holding period before the first day of our first taxable year
in which we qualified as a PFIC, will be taxed as ordinary income;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will
be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each
such other taxable year of the U.S. Holder.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



In general, a U.S. Holder may avoid the
PFIC tax consequences described above in respect of our ordinary shares if the U.S. Holder is able to make a timely QEF
election to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits
(as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which
or with which our taxable year ends. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed
income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.



In order to comply with the requirements
to make a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor
to provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC
annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no
assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.



A U.S. Holder may not make a QEF election
with respect to its warrants. As a result, if a U.S. Holder sells or otherwise disposes of a warrant to purchase our ordinary
shares (other than upon exercise of a warrant), any gain recognized generally will be subject to the special tax and interest charge
rules treating the gain as an excess distribution, as described above, if we were a PFIC at any time during the period the U.S.
Holder held the warrants. If a U.S. Holder that exercises such warrants properly makes a QEF election with respect to the
newly acquired ordinary shares (or has previously made a QEF election with respect to its ordinary shares), the QEF election will
apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares, adjusted to take into account
the current income inclusions resulting from the QEF election, will continue to apply with respect to such newly acquired ordinary
shares (which generally will be deemed to have a holding period for the purposes of the PFIC rules that includes the period the
U.S. Holder held the warrants), unless the U.S. Holder makes a purging election. The purging election creates a deemed sale
of such shares at their fair market value. The gain recognized by the purging election will be subject to the special tax
and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election,
the U.S. Holder will have a new basis and holding period in the ordinary shares acquired upon the exercise of the warrants for
purposes of the PFIC rules.



The QEF election is made on a shareholder-by-shareholder
basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching
a completed IRS Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including
the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the tax year
to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with
such return and if certain other conditions are met or with the consent of the IRS.



If a U.S. Holder has elected the application
of the QEF rules to our ordinary shares, and the special tax and interest charge rules do not apply to such shares (because of
a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares
or a purge of the PFIC taint pursuant to a purging election), any gain recognized on the appreciation of our ordinary shares generally
will be taxable as capital gain and no interest charge will be imposed. As discussed above, U.S. Holders of a QEF are currently
taxed on their pro rata shares of its earnings and profits, whether or not distributed. In such case, a subsequent distribution
of such earnings and profits that were previously included in income generally will not be taxable as a dividend. The tax
basis of a U.S. Holder’s shares in a QEF will be increased by amounts that are included in income, and decreased by amounts
distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply to property if by reason of
holding such property the U.S. Holder is treated under the applicable attribution rules as owning shares in a QEF.



67







Although a determination as to our PFIC
status will be made annually, an initial determination that our Company is a PFIC will generally apply for subsequent years to
a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status in those
subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the
U.S. Holder holds (or is deemed to hold) ordinary shares, however, will not be subject to the PFIC tax and interest charge rules
discussed above in respect of such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with
respect to such shares for any of our taxable years that ends within or with a taxable year of the U.S. holder and in which we
are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC
and during which the U.S. Holder holds (or is deemed to hold) ordinary shares, the PFIC rules discussed above will continue to
apply to such shares unless the holder makes a purging election and pays the tax and interest charge with respect to the gain inherent
in such shares attributable to the pre-QEF election period.



Alternatively, if a U.S. Holder, at the
close of its taxable year, owns ordinary shares in a PFIC that is treated as marketable stock, the U.S. Holder may make a mark-to-market
election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the
first tax year in which the U.S. Holder holds (or is deemed to hold) our ordinary shares and for which we are determined
to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect of its ordinary shares. Instead,
in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its ordinary
shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed
to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value
of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as
a result of the mark-to-market election). The U.S. Holder’s basis in its ordinary shares will be adjusted to reflect
any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares
will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to warrants.



The mark-to-market election is available
only for shares that are regularly traded on a national securities exchange that is registered with the Securities and Exchange
Commission, including the NASDAQ Stock Market, or on a foreign exchange or market that the IRS determines has rules sufficient
to ensure that the market price represents a legitimate and sound fair market value. Although our ordinary shares currently
trade on the NASDAQ Stock Market, U.S. Holders nevertheless should consult their own tax advisors regarding the availability and
tax consequences of a mark-to-market election in respect of our ordinary shares under their particular circumstances.



If we are a PFIC and, at any time, have
a non-U.S. subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of the shares of such
lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution
from, or dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier
PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to make or maintain
a QEF election with respect to the lower-tier PFIC. However, there is no assurance that we will be able to cause a lower-tier
PFIC to provide such information to a U.S. Holder. U.S. Holders are urged to consult their own tax advisors regarding the
tax issues raised by lower-tier PFICs.



Under recently enacted legislation effective
March 18, 2010, if a U.S. Holder owns (or is deemed to own) shares or warrants in a PFIC during any taxable year of the U.S. Holder,
such holder generally will have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market election is made) and
provide such other information as may be required by the U.S. Treasury Department.



The rules dealing with PFICs and with the
QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly,
U.S. Holders of our ordinary shares and warrants should consult their own tax advisors concerning the application of the PFIC rules
to our ordinary shares and warrants under their particular circumstances.



Tax Consequences to Non-U.S. Holders of Ordinary Shares and
Warrants



Dividends paid to a Non-U.S. Holder in respect
of its ordinary shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected
with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income
tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).



In addition, a Non-U.S. Holder generally
will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our ordinary shares or
warrants unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the
United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable
year of sale or other disposition and certain other conditions are met (in which case, such gain from United States sources generally
is subject to tax at a 30% rate or a lower applicable tax treaty rate).



Dividends and gains that are effectively
connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable
income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject
to tax (but not the Medicare contribution tax described above) in the same manner as for a U.S. Holder and, in the case of a Non-U.S.
Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a
30% rate or a lower applicable tax treaty rate.



68







The U.S. federal income tax treatment of
a Non-U.S. Holders’ exercise of a warrant generally will correspond to the U.S. federal income tax treatment of the exercise
of a warrant by a U.S. Holder, as described under “Tax Consequences to U.S. Holders of Ordinary Shares and Warrants—Exercise
of Warrants” above.



Backup Withholding and Information Reporting



In general, information reporting for U.S.
federal income tax purposes will apply to distributions made on our ordinary shares within the United States to a non-corporate
U.S. Holder and to the proceeds from sales and other dispositions of our ordinary shares or warrants by a non-corporate U.S. Holder
to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the
United States will be subject to information reporting in limited circumstances.



In addition, backup withholding of United
States federal income tax, currently at a rate of 28% for taxable years beginning before January 1, 2013, generally will apply
to dividends paid on our ordinary shares to a non-corporate U.S. Holder and the proceeds from sales and other dispositions of shares
or warrants by a non-corporate U.S. Holder, in each case who:



| | · | fails to provide an accurate taxpayer identification number;
| | - | ------------------------------------------------------------



| | · | is notified by the IRS that backup withholding is required; or
| | - | --------------------------------------------------------------



| | · | in certain circumstances, fails to comply with applicable certification requirements.
| | - | -------------------------------------------------------------------------------------



A Non-U.S. Holder generally may eliminate
the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties
of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.



Backup withholding is not an additional
tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S.
Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information
is timely furnished to the IRS.



| | F. | DIVIDENDS AND PAYING AGENTS
| | -- | ---------------------------



Not applicable.



| | G. | STATEMENTS BY EXPERTS
| | -- | ---------------------



Not applicable.



| | H. | DOCUMENTS ON DISPLAY
| | -- | --------------------



We are subject to the periodic reporting
and other informational requirements of the Securities Exchange Act of 1934, as amended, and are required to file reports and other
information with the Securities and Exchange Commission. Specifically, we are required to file annually a Form 20-F no later than
six months after the close of each fiscal year, which is December 31. Copies of reports and other information, when so filed,
may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities
and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding
the Washington, D.C. Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities
and Exchange Commission also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other
information regarding registrants that make electronic filings with the Securities and Exchange Commission using its EDGAR system.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly
reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act.



| | I. | SUBSIDIARY INFORMATION
| | -- | ----------------------



Not applicable.



Item 11.	QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Foreign currency risk



We operate in China and most of our transactions
are settled in Renminbi. Our assets and liabilities, and transactions arising from operations are denominated in Renminbi. We have
not used any forward contract or currency borrowing to hedge our exposure as we consider foreign currency risks to be minimal.

69







Credit risk



We trade only with recognized and creditworthy
customers. It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In
addition, receivable balances are monitored on an ongoing basis and our exposure to bad debts is not significant.



Since we trade only with recognized and
creditworthy third parties, there is no requirement for collateral.



The credit risk of our other financial assets,
which comprise deposits, other receivables, pledged bank deposits and cash and bank balances, arises from default of the counterparty,
with a maximum exposure equal to the carrying amounts of these instruments.



Our exposure to credit risk is influenced
mainly by the individual characteristics of each customer. The default risk of the industry in which our customers operate
also has an influence on credit risk but only to a lesser extent. At the balance sheet date, we have a certain concentration
of credit risk as 48.1%, 39.9% and 54.5%, respectively, of our total trade and other receivables that were due from our five largest
customers during 2009, 2010 and 2011.



The maximum exposure to credit risk, without
taking collateral into account, is represented by the carrying amount of each financial asset. We do not provide any guarantees
which would expose us to credit risk.



Interest rate risk



We do not have any significant exposure
to risk of changes in market interest rates as our debt obligations are all with fixed interest rates. If we borrow money
in the future, we may be exposed to interest rate risk. We do not have any derivative financial instruments and believe our
exposure to interest rate risk and other relevant market risks is not material.



Commodity price risk



The major raw materials used in the production
of our products include cotton, natural and synthetic leather, nylon, canvas, rubber and plastics. We are exposed to fluctuation
in the prices of these raw materials, which are influenced by global as well as regional supply and demand conditions. Fluctuations
in the prices of raw materials could adversely affect our financial performance. We historically have not entered into any
commodity derivative instruments to hedge the potential commodity price changes.



Liquidity risk



We monitor our risk to a shortage of funds
by considering the maturity of both our financial assets and projected cash flows from operations. Our objective is to maintain
a balance between continuity of funding and flexibility through use of bank borrowings and other borrowings to meet our working
capital requirements. See “ — Liquidity and Capital Resources.”



Item 12.	DESCRIPTION OF SECURITIES
OTHER THAN EQUITY SECURITIES



Not applicable.



70







PART
II



Item 13.	DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES



Not applicable.



Item 14.	MATERIAL MODIFICATIONS
TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



None.



Item 15.	CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



As of the end of the period covered by
this annual report, our chief executive officer and chief financial officer have performed an evaluation of the effectiveness
of our disclosure controls and procedures as defined and required under Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended. Based upon that evaluation, they have concluded that our disclosure controls and procedures
were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under
the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods
specified in by the Securities and Exchange Commission’s rules and regulations.



Management’s Report on Internal Control over Financial
Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of management; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect
on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Attestation report of the registered public accounting firm



Crowe Horwath (HK) CPA Limited, an
independent registered public accounting firm, has issued an opinion on the effectiveness of management's internal control
over financial reporting which is included under "Item 18. Financial Statements". See the report of Crowe
Horwath (HK) CPA Limited, an independent registered public accounting firm, included under "Item 18. Financial
Statements".



Changes in Internal Control over Financial Reporting



During the year ended December 31, 2011,
there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.



Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT



Our board of directors has determined that
Mr. Yea-Mow Chen qualifies as an Audit Committee Financial Expert as defined by the applicable rules of the Securities and Exchange
Commission.



Our board of directors has determined that
Mr. Jin Jichun is independent as such term is defined by Rule 5605(a)(2) of the NASDAQ Listing Rules.



71







Item 16B. CODE OF ETHICS



Our board of directors has adopted a code
of ethics, which is applicable to our senior executive and financial officers. In addition, our board of directors has adopted
a code of conduct, which is applicable to all of our directors, officers and employees. Our code of ethics sets forth and summarizes
certain policies of the Company related to legal compliance and ethical business practices. Essentially, each officer, employee
and member of the Board of Directors of the Company is expected, and required, to comply with the law and to conduct the business
of the Company in an ethical manner. This code is intended to comply with the standards set forth in Section 406 of the Sarbanes-Oxley
Act of 2002. The full text of our code of ethics has been posted on our internet website, www.exceedsports.cn.



Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table sets forth the
aggregate fees by categories specified below in connection with certain professional services rendered by Crowe Horwath (HK)
CPA Limited and Crowe Horwath LLP for the periods indicated. We did not pay any other fees to our principal external auditors
during the periods indicated below.



|                                                |  | For the year ended December 31, |      
|----------------------------------------------- |  | ------------------------------- | -----
|                                                |  | 2010                            |      
|                                                |  | RMB                             |      
|                                                |  | (in thousands)                  |      
|Audit fees – Crowe Horwath (HK) CPA
    Limited |  |                                 | -    
|Audit fees – Crowe Horwath LLP                  |  |                                 | 1,505
|Audit-related fees – Crowe Horwath LLP          |  |                                 | 1,228
|Total                                           |  |                                 | 2,733










Audit Fees



Crowe Horwath (HK) CPA Limited audit fees for 2011
consisted of fees in relation to the audit of our financial statements for the three years ended December 31, 2009, 2010 and
2011, and the fees in relation to the 2010 report on internal controls over financial reporting.



Crowe Horwath LLP audit fees for 2010 and 2011 consisted of
fees in relation to the audit of our financial statements for the two years ended December 31, 2010 and 2011, respectively.



Audit-related Fees



Crowe Horwath LLP audit related fees for 2010 included the fees
for the reviews of our interim financial statements included in our Form 6-K filings for 2010, the service rendered in relation
to our registration statement on Form F-1 initially filed in 2009, and the service rendered in relation to 2010 report on internal
controls over financial reporting.



Crowe Horwath LLP audit related fees for 2011 included the fees
for the reviews of our interim financial statements included in our Form 6-K filings for 2011, and the service rendered in relation
to our registration statement on Form S-8 filed in 2010.



Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES



We have not been granted an exemption from
the applicable listing standards for the audit committee of our board of directors.



Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS



|Period                              |  | (a) Total Number of 
Shares Purchased |  | (b) Average Price
Paidper Shares(1) |      |  | (c) Total Number of Shares Purchased as
Part of Publicly
Announced Plans or
Program |                | (d) Maximum Number
(or Approximate Dollar
Value) of Shares the 
May Yet Be Purchased 
Under the Plans
    or  Programs | 
|----------------------------------- |  | ------------------------------------- |  | ----------------------------------- | ---- |  | ----------------------------------------------------------------------------------- | -------------- | ---------------------------------------------------------------------------------------------------------------------- | 
|                                    |  |                                       |  | US$                                 |      |  |                                                                                     |                | US$                                                                                                                    | 
|August 15, 2011 – February 14, 2012 |  | 486,685 shares                        |  |                                     | 4.36 |  |                                                                                     | 486,685 shares |                                                                                                                        | 
|                                    |  |                                       |  |                                     |      |  |                                                                                     |                |                                                                                                                        | 
|February 15, 2012 – April 27, 2012  |  | 77,679 shares                         |  |                                     | 3.43 |  |                                                                                     | 77,679 shares  |                                                                                                                        | 



In accordance with our share repurchase
program announced on August 15, 2011, we are authorized to repurchase up to US$10 million of our ordinary shares within six months
starting from August 15, 2011 using existing cash reserves. As of December 31, 2011, we have purchased up to 415,751 of our ordinary
shares, at an average price of US$4.34 per share, for a total purchase price of approximately US$1.8 million (approximately
RMB11.3 million). On February 13, 2012, our board of directors has extended the date of expiration of the existing US$10 million
share repurchase program from February 14, 2012 to August 14, 2012. For the purpose of this annual report only, all of the repurchased
ordinary shares are not included in the number of our ordinary shares that were issued and outstanding as of a specified date.



72







Our share repurchase program will be reviewed
from time to time and may be adjusted or terminated at any time without prior notice. Stock repurchases under this program may
be made through open market purchases, in privately negotiated transactions, in block trades, pursuant to a 10b5-1 plan, or otherwise.
The timing and actual number of shares repurchased will depend on market conditions, trading price of the ordinary shares and other
factors and be subject to the restrictions relating to volume, price and timing under applicable laws.



|Period                        |  | Total
     number of shares purchased |         |  | Average price paid per share(1) |     |      | Total number of
     shares purchased as 
    part of publicly
    announced program |        |  | Approximate dollar value of shares
    that may yet be purchased under the program | 
|----------------------------- |  | ------------------------------------- | ------- |  | ------------------------------- | --- | ---- | ------------------------------------------------------------------------------------ | ------ |  | ---------------------------------------------------------------------------------- | 
|                              |  |                                       |         |  |                                 | US$ |      |                                                                                      | RMB(2) |  |                                                                                    | 
|August 2011                   |  |                                       | 14,955  |  |                                 |     | 3.63 |                                                                                      |        |  | 22.85                                                                              | 
|September 2011                |  |                                       | 108,752 |  |                                 |     | 4.00 |                                                                                      |        |  | 25.18                                                                              | 
|October 2011                  |  |                                       | 89,658  |  |                                 |     | 3.81 |                                                                                      |        |  | 24.98                                                                              | 
|November 2011                 |  |                                       | 103,848 |  |                                 |     | 4.97 |                                                                                      |        |  | 31.28                                                                              | 
|December 2011                 |  |                                       | 98,538  |  |                                 |     | 4.65 |                                                                                      |        |  | 29.27                                                                              | 
|January 2012                  |  |                                       | 69,491  |  |                                 |     | 4.48 |                                                                                      |        |  | 28.20                                                                              | 
|February 2012                 |  |                                       | 17,182  |  |                                 |     | 3.69 |                                                                                      |        |  | 23.22                                                                              | 
|March 2012                    |  |                                       | 61,940  |  |                                 |     | 3.38 |                                                                                      |        |  | 21.27                                                                              | 
|April 2012 (through April 27) |  |                                       | -       |  |                                 |     | -    |                                                                                      |        |  | -                                                                                  | 








| | (1) | The average price paid per share is calculated using the execution price for each repurchase excluding commissions paid to
brokers.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (2) | The translations of U.S. dollar amounts into Renminbi amounts have been made at the exchange rate in effect on December 31,
2011, which was US$1.00 to RMB6.2939. See “Part I.—Item 3. Key Information—Selected Financial Data—Exchange
Rate Information.”
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 16F.  CHANGE IN REGISTRANT’S CERTIFYING
ACCOUNTANT





On April 4, 2012, Crowe
Horwath (HK) CPA Limited (“Horwath HK”) was appointed to serve as our independent registered public accounting firm
and our former independent registered public accounting firm, Crowe Horwath LLP (“Horwath US”), was dismissed as of
April 4, 2012.



The principal accountant’s
report of Horwath US on our financial statements for each of the fiscal years ended December 31, 2010 and 2009 did not contain
an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.



The change in independent
registered public accounting firm was recommended and approved by our Audit Committee on April 4, 2012.



During the fiscal years
ended December 31, 2009 and 2010 and subsequent interim periods preceding this change in independent registered public accounting
firm, there were (1) no disagreements between us and Horwath US on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Horwath US, would
have caused Horwath US to make reference to the subject matter of the disagreements in its reports on the financial statements
for such years, and (2) no reportable events (as described in Item 16F(a)(1)(v) of Form 20-F).



However, on April 26, 2012, we were advised
by Horwath US that their audit reports covering our 2009 and 2010 financial statements should no longer be relied upon due to the
accounting change with respect to the Company’s method of accounting for its conditional obligation to release and issue
shares to the former shareholders of Windrace as part of the reverse recapitalization transaction effective October 21, 2009, as
described in Note 2 of the December 31, 2011 consolidated financial statements included in our Annual Report on Form 20-F for the
year ended December 31, 2011. The Company’s December 31, 2011 Form 20-F includes the audit report of Horwath HK covering
the Company’s consolidated financial statements for the fiscal years ended December 31, 2009, 2010 and 2011.



During the fiscal years
ended December 31, 2009 and 2010 and subsequent interim period preceding this change in independent registered public accounting
firm, we have not consulted with Horwath HK regarding either (1) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written
report was provided to us nor any oral advice was provided that Horwath HK concluded was an important factor considered by us in
reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either the subject
of a “disagreement” (as defined in Item 16F(a)(1)(iv) and the related instructions of Form 20-F) or “reportable
event” (as described in Item 16F(a)(1)(v) of Form 20-F).



We have provided a copy of this disclosure
to Horwath US and requested Horwath US to furnish us with a letter addressed to the Securities and Exchange Commission stating
whether Horwath US agrees with the statements made by us in this Annual Report on Form 20-F, and, if not, stating the respects
in which it does not agree. A copy of Horwath US's letter dated April 27, 2012 is attached hereto as Exhibit 15.2.



The Company’s December 31, 2011 Form
20-F includes the audit report of Horwath HK covering the Company’s consolidated financial statements for the fiscal years
ended December 31, 2009, 2010 and 2011. As a result of, and effective with, the filing of the Company’s December 31, 2011
Form 20-F, the previously issued audit reports of Horwath US covering the Company’s 2009 and 2010 consolidated financial
statements were superseded.



73







Item 16G.  CORPORATE GOVERNANCE



We are incorporated under the laws of British
Virgin Islands. Our common stock is currently listed on the NASDAQ Global Select Market and, for so long as our securities continue
to be listed, we will remain subject to the rules and regulations established by NASDAQ as being applicable to listed companies.
NASDAQ has adopted its Rule 5600 Series to impose various corporate governance requirements on listed securities. Rule 5615 provides
that foreign private issuers such as our Company are required to comply with certain specific requirements of the Rule 5600 Series,
but, as to the balance of the Rule 5600 Series, foreign private issuers are not required to comply if the laws of their home country
do not otherwise require compliance.



We currently comply with the specifically
mandated provisions of the Rule 5600 Series. In addition, we have elected to voluntarily comply with certain other requirements
of the Rule 5600 Series, notwithstanding that our home country does not mandate compliance; although we may in the future determine
to cease voluntary compliance with those provisions of the Rule 5600 Series. However, we have determined not to comply with the
following provisions of the Rule 5600 Series since the laws of the British Virgin Islands do not require compliance:



| | · | NASDAQ Rule 5605(c)(2)(A) requires that each company must have an audit committee of at least three members and such audit
committee must be comprised only of Independent Directors as defined in the NASDAQ Rule 5605 (a)(2). Under the laws of the British
Virgin Islands, we are not required to have an audit committee of at least three members. Our audit committee is comprised of two
members, both of whom are Independent Directors as defined in the NASDAQ Rule 5605 (a)(2).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | NASDAQ Rule 5605(d) requires Independent Director involvement in the determination of executive compensation. In particular,
NASDAQ 5605(d)(B) requires that the chief executive officer may not be present during voting or deliberations of the compensation
committee. Our chief executive officer, however, can be invited to attend our compensation committee meetings.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | NASDAQ Rule 5610 requires that each company shall adopt a code of conduct applicable to all directors, officers and employees,
which shall be publicly available. A code of conduct satisfying this rule must comply with the definition of a "code of ethics"
set out in Section 406(c) of the Sarbanes-Oxley Act of 2002 and any regulations promulgated thereunder by the Commission. In addition,
the code must provide for an enforcement mechanism. Any waivers of the code for directors or executive officers must be approved
by the board. Our ethics administrator, who is the chairman of our audit committee, has the authority to grant a specific limited
waiver of any provision of our ethics code.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



74







PART
III



Item 17.	 FINANCIAL STATEMENTS



We have elected to provide financial statements
pursuant to Item 18 (see below).



Item 18.	 FINANCIAL STATEMENTS



Our consolidated financial statements are
included at the end of this Annual Report on Form 20-F.



Item 19.	 EXHIBITS



|Exhibit No.         |  | Description                                                                                                                                                                                                          
|------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |  |                                                                                                                                                                                                                      
|1.1†                |  | Amended and Restated Memorandum and Articles of Association of the Registrant                                                                                                                                        
|                    |  |                                                                                                                                                                                                                      
|2.1††               |  | Specimen Stock Certificate                                                                                                                                                                                           
|                    |  |                                                                                                                                                                                                                      
|4.1††               |  | Exceed Company Ltd. 2010 Equity Incentive Plan                                                                                                                                                                       
|                    |  |                                                                                                                                                                                                                      
|4.2                 |  | Translation of the Technology Cooperation Agreement with China Institute of Sports Science of the General Administration of Sport of China dated October 20, 2011                                                    
|                    |  |                                                                                                                                                                                                                      
|4.3                 |  | Translation of the Contract for the Investment Project Regarding Setting up a Sportswear Manufacturing Base in Ruichang City with the municipal government of Ruichang City, Jiangxi Province dated December 20, 2011
|                    |  |                                                                                                                                                                                                                      
|8.1                 |  | List of subsidiaries                                                                                                                                                                                                 
|                    |  |                                                                                                                                                                                                                      
|12.1                |  | Certification of the Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                               
|                    |  |                                                                                                                                                                                                                      
|12.2                |  | Certification of the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                               
|                    |  |                                                                                                                                                                                                                      
|13.1                |  | Certification of the Chief Executive Officer and Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                            
|                    |  |                                                                                                                                                                                                                      
|15.1


        15.2 |  | Consent of Crowe Horwath (HK) CPA Limited, dated April
        30,         2012


        Letter from Crowe Horwath LLP dated April 27, 2012                                                                         
|                    |  |                                                                                                                                                                                                                      
|15.3                |  | Termination letter to Crowe Horwath LLP dated April 4, 2012                                                                                                                                                          










| | † | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed with the Commission on April 7, 2010 (File
No. 001-33799).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| | †† | Incorporated by reference to the Registrant’s Registration Statement on Form S-8 filed with the Commission on December
20, 2010 (File No. 333-171280)
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------



75







SIGNATURE



The registrant hereby certifies that it
meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.



| | EXCEED COMPANY LTD.
        (Registrant) |                                                    
| | ---------------------------------------- | ---------------------------------------------------
| |                                          |                                                    
| | By:                                      | /s/ Lin Shuipan                                    
| |                                          | Name: Lin Shuipan                                  
| |                                          | Title: Chairman and Chief
        Executive Officer



Date: April 30, 2012



76







Audited Financial Statements



EXCEED COMPANY LTD. AND ITS SUBSIDIARIES

(Incorporated in the British Virgin Islands with limited liability)



December 31, 2011, 2010 and 2009











EXCEED COMPANY LTD. AND SUBSIDIARIES



CONTENTS



|                                           |  | Pages      
|------------------------------------------ |  | -----------
|                                           |  |            
|INDEPENDENT AUDITORS' REPORT               |  | F-1 – F-2  
|                                           |  |            
|AUDITED FINANCIAL STATEMENTS               |  |            
|                                           |  |            
|Consolidated:                              |  |            
|                                           |  |            
|Statements of comprehensive income         |  | F-3        
|                                           |  |            
|Statements of financial position           |  | F-4        
|                                           |  |            
|Statements of changes in equity            |  | F-5 – F-8  
|                                           |  |            
|Statements of cash flows                   |  | F-9 – F-10 
|                                           |  |            
|Notes to consolidated financial statements |  | F-11 – F-77











Report of Independent Registered Public
Accounting Firm



Board of Directors and Stockholders of

Exceed Company Ltd.



We have audited the accompanying consolidated statements of
financial position of Exceed Company Ltd. and its Subsidiaries (the “Company”) as of December 31, 2011, 2010 and 2009,
and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the
three-year period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of
December 31, 2011, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2011, in conformity with International Financial Reporting Standards as issued by the
International Accounting Standards Board.



As discussed in Note 2 to the consolidated financial statements,
the Company has elected to revise its method of accounting for contingent shares issuable and revised its financial statements
as of and for the two-year period ended December 31, 2010.



We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated April 30, 2012 expressed an unqualified opinion thereon.



/s/ Crowe Horwath (HK) CPA Limited

Hong Kong, China

April 30, 2012



F-1







Report of Independent Registered Public
Accounting Firm



Board of Directors
and Stockholders of

Exceed Company Ltd.





We have audited Exceed Company Ltd. and its Subsidiaries’
(the “Company’s”) internal control over financial reporting as of December 31, 2011, based on criteria established
in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit.



We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.



A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company's assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.



In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Exceed Company
Limited and its Subsidiaries (the “Company”) as of December 31, 2011,2010 and 2009, and the related consolidated statements
of comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2011 and
our report dated April 30, 2012 expressed an unqualified opinion on those consolidated financial statements.



/s/ Crowe Horwath (HK) CPA Limited

Hong Kong, China

April 30, 2012



F-2







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



Years ended December 31, 2011, 2010 and 2009



|                                                                                      |  | Notes |     |  | 2011                                               |     |            | 2011    |  |     | 2010          |   |  | 2009          |           
|------------------------------------------------------------------------------------- |  | ----- | --- |  | -------------------------------------------------- | --- | ---------- | ------- |  | --- | ------------- | - |  | ------------- | ----------
|                                                                                      |  |       |     |  | (in thousands except for share and per share data) |    
|                                                                                      |  |       |     |  | USD'000                                            |     |            | RMB'000 |  |     | RMB'000       |   |  | RMB'000       |           
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     | As Restated - |   |  | As Restated - |           
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     | Note 2        |   |  | Note 2        |           
|REVENUE                                                                               |  |       | 6   |  |                                                    |     | 522,500    |         |  |     | 3,288,561     |   |  |               | 2,698,891 
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Cost of sales                                                                         |  |       |     |  |                                                    |     | (364,845   | )       |  |     | (2,296,298    | ) |  |               | (1,857,251
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Gross profit                                                                          |  |       |     |  |                                                    |     | 157,655    |         |  |     | 992,263       |   |  |               | 841,640   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Other income and gains                                                                |  |       | 6   |  |                                                    |     | 2,350      |         |  |     | 14,791        |   |  |               | 6,416     
|Selling and distribution costs                                                        |  |       |     |  |                                                    |     | (60,043    | )       |  |     | (377,903      | ) |  |               | (339,637  
|Administrative expenses                                                               |  |       |     |  |                                                    |     | (12,246    | )       |  |     | (77,073       | ) |  |               | (57,814   
|Research and development expenses                                                     |  |       |     |  |                                                    |     | (8,558     | )       |  |     | (53,863       | ) |  |               | (40,783   
|OPERATING PROFIT                                                                      |  |       |     |  |                                                    |     | 79,158     |         |  |     | 498,215       |   |  |               | 409,822   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Finance costs                                                                         |  |       | 7   |  |                                                    |     | (136       | )       |  |     | (856          | ) |  |               | (1,893    
|Share of loss in jointly-controlled entity                                            |  |       |     |  |                                                    |     | -          |         |  |     | -             |   |  |               | (17       
|Gain from change in fair value of contingent share liability                          |  |       | 2,6 |  |                                                    |     | 6,140      |         |  |     | 38,645        |   |  |               | 1,604     
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|PROFIT BEFORE TAX                                                                     |  |       | 8   |  |                                                    |     | 85,162     |         |  |     | 536,004       |   |  |               | 409,516   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Tax                                                                                   |  |       | 10  |  |                                                    |     | (10,474    | )       |  |     | (65,922       | ) |  |               | (56,274   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|PROFIT FOR THE YEAR                                                                   |  |       |     |  |                                                    |     | 74,688     |         |  |     | 470,082       |   |  |               | 353,242   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Other comprehensive income for the year, net of tax:                                  |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Exchange differences on translation of financial statements of overseas subsidiaries  |  |       |     |  |                                                    |     | 642        |         |  |     | 4,042         |   |  |               | 9,383     
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Total comprehensive income for the year attributable to equity holders of the Company |  |       |     |  |                                                    |     | 75,330     |         |  |     | 474,124       |   |  |               | 362,625   
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|EARNINGS PER SHARE                                                                    |  |       | 11  |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Net profit per share                                                                  |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Basic                                                                                 |  |       |     |  |                                                    | USD | 2.51       |         |  | RMB | 15.83         |   |  | RMB           | 14.00     
|Diluted                                                                               |  |       |     |  |                                                    | USD | 2.18       |         |  | RMB | 13.72         |   |  | RMB           | 10.67     
|                                                                                      |  |       |     |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Weighted average number of shares outstanding                                         |  |       | 11  |  |                                                    |     |            |         |  |     |               |   |  |               |           
|Basic                                                                                 |  |       |     |  |                                                    |     | 29,700,010 |         |  |     | 29,700,010    |   |  |               | 25,232,827
|Diluted                                                                               |  |       |     |  |                                                    |     | 34,273,028 |         |  |     | 34,273,028    |   |  |               | 33,117,326



The shares which are held in escrow are regarded as issued
and not outstanding.

The accompanying notes are an integral part of these consolidated
financial statements.



F-3







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



December 31, 2011, 2010 and 2009



|                                                                                                                                                                                                 |  | Notes |      |  | 2011    |  |         | 2011    |  |  | 2010          |   |  | 2009          |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | ---- |  | ------- |  | ------- | ------- |  |  | ------------- | - |  | ------------- | ---------
|                                                                                                                                                                                                 |  |       |      |  | USD'000 |  |         | RMB'000 |  |  | RMB'000       |   |  | RMB'000       |          
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  | As Restated - |   |  | As Restated - |          
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  | Note 2        |   |  | Note 2        |          
|NON-CURRENT ASSETS                                                                                                                                                                               |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|Property, plant and equipment                                                                                                                                                                    |  |       | 13   |  |         |  | 45,173  |         |  |  | 284,314       |   |  |               | 263,958  
|Prepaid land lease payments                                                                                                                                                                      |  |       | 14   |  |         |  | 4,425   |         |  |  | 27,851        |   |  |               | 28,599   
|Deposit paid for acquisition of land use rights                                                                                                                                                  |  |       | 15   |  |         |  | 11,603  |         |  |  | 73,030        |   |  |               | 12,600   
|Total non-current assets                                                                                                                                                                         |  |       |      |  |         |  | 61,201  |         |  |  | 385,195       |   |  |               | 305,157  
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|CURRENT ASSETS                                                                                                                                                                                   |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|Inventories                                                                                                                                                                                      |  |       | 16   |  |         |  | 5,019   |         |  |  | 31,589        |   |  |               | 44,747   
|Trade receivables                                                                                                                                                                                |  |       | 17   |  |         |  | 111,201 |         |  |  | 699,891       |   |  |               | 611,660  
|Prepayments, deposits and other receivables                                                                                                                                                      |  |       | 18   |  |         |  | 757     |         |  |  | 4,765         |   |  |               | 19,788   
|Due from a shareholder                                                                                                                                                                           |  |       |      |  |         |  | -       |         |  |  | -             |   |  |               | -        
|Pledged deposits                                                                                                                                                                                 |  |       | 19   |  |         |  | -       |         |  |  | -             |   |  |               | -        
|Cash and cash equivalents                                                                                                                                                                        |  |       | 20   |  |         |  | 153,215 |         |  |  | 964,317       |   |  |               | 762,798  
|Total current assets                                                                                                                                                                             |  |       |      |  |         |  | 270,192 |         |  |  | 1,700,562     |   |  |               | 1,438,993
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|CURRENT LIABILITIES                                                                                                                                                                              |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|Trade and bills payables                                                                                                                                                                         |  |       | 21   |  |         |  | 9,524   |         |  |  | 59,941        |   |  |               | 111,001  
|Deposits received, other payables and accruals                                                                                                                                                   |  |       | 22   |  |         |  | 8,310   |         |  |  | 52,304        |   |  |               | 65,585   
|Interest-bearing bank borrowings                                                                                                                                                                 |  |       | 23   |  |         |  | -       |         |  |  | -             |   |  |               | 18,000   
|Due to a director                                                                                                                                                                                |  |       | 24   |  |         |  | -       |         |  |  | -             |   |  |               | -        
|Tax payable                                                                                                                                                                                      |  |       |      |  |         |  | 1,763   |         |  |  | 11,098        |   |  |               | 12,858   
|Contingent share liability                                                                                                                                                                       |  |       | 2,26 |  |         |  | -       |         |  |  | -             |   |  |               | 139,168  
|Total current liabilities                                                                                                                                                                        |  |       |      |  |         |  | 19,597  |         |  |  | 123,343       |   |  |               | 346,612  
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|NET CURRENT ASSETS                                                                                                                                                                               |  |       |      |  |         |  | 250,595 |         |  |  | 1,577,219     |   |  |               | 1,092,381
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|Net assets                                                                                                                                                                                       |  |       |      |  |         |  | 311,796 |         |  |  | 1,962,414     |   |  |               | 1,397,538
|                                                                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|STOCKHOLDERS’ EQUITY                                                                                                                                                                             |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|Preferred stock – par value of USD0.0001 per share; 5,000,000 shares authorized; nil issued and outstanding                                                                                      |  |       |      |  |         |  | -       |         |  |  | -             |   |  |               | -        
|Common stock – par value of USD0.0001 per share;                                                                                                                                                 |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|55,000,000 shares authorized;                                                                                                                                                                    |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|31,288,507 shares issued and 29,436,060 shares outstanding                                                                                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |          
|(2010: 55,000,000 shares authorized; 31,010,930 shares issued and 25,357,563 shares outstanding; 2009: 55,000,000 shares authorized; 31,123,335 shares issued and 18,856,168 shares outstanding) |  |       | 26   |  |         |  | 3       |         |  |  | 20            |   |  |               | 17       
|Treasury shares                                                                                                                                                                                  |  |       | 26   |  |         |  | (1,835  | )       |  |  | (11,549       | ) |  |               | -        
|Retained profits                                                                                                                                                                                 |  |       |      |  |         |  | 238,707 |         |  |  | 1,502,398     |   |  |               | 1,077,313
|Reserves                                                                                                                                                                                         |  |       | 26   |  |         |  | 74,921  |         |  |  | 471,545       |   |  |               | 320,208  
|Total equity                                                                                                                                                                                     |  |       |      |  |         |  | 311,796 |         |  |  | 1,962,414     |   |  |               | 1,397,538



The accompanying notes are an integral part of these consolidated
financial statements.



F-4







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Years ended December 31, 2011, 2010 and 2009



|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   | Employee    |  |        |              |  |  |            |  |  |          |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | - | -------- |  | -- | ------------ |  |  | ------------- | - |  | --------- | -------- | - | ----------- |  | ------ | ------------ |  |  | ---------- |  |  | -------- | -
|                                                                                                                                        |  | Outstanding  |            |   |          |  |    |              |  |  | Statutory     |   |  |           |          |   | share-based |  |        |              |  |  | Contingent |  |  |          |  
|                                                                                                                                        |  | common stock |            |   | Capital  |  |    | Other        |  |  | surplus       |   |  | Exchange  |          |   | payment     |  |        | Retained     |  |  | shares     |  |  | Total    |  
|                                                                                                                                        |  | Shares       |            |   | Amount   |  |    | reserve (ii) |  |  | reserve (iii) |   |  | fund (iv) |          |   | reserve (v) |  |        | reserve (vi) |  |  | profits    |  |  | issuable |  
|                                                                                                                                        |  |              |            |   | RMB '000 |  |    | RMB '000     |  |  | RMB '000      |   |  | RMB '000  |          |   | RMB '000    |  |        | RMB '000     |  |  | RMB '000   |  |  | RMB '000 |  
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|At January 1, 2009                                                                                                                      |  |              | 5,741,466  |   |          |  | 4  |              |  |  | 112,004       |   |  |           | (189,504 | ) |             |  | 28,273 |              |  |  | 4,644      |  |  |          | -
|Profit for the year                                                                                                                     |  |              | -          |   |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Contingent share deemed dividend (as restated – Note 2)                                                                                 |  |              | -          |   |          |  | -  |              |  |  | (761,854      | ) |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|Other comprehensive income: Exchange difference                                                                                         |  |              | -          |   |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | 2,536      |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Transfer to statutory surplus                                                                                                           |  |              | -          |   |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | 28,210 |              |  |  | -          |  |  |          | -
|Reverse merger adjustments :                                                                                                            |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Shares issued to 2020 shareholders (as defined in Note 1) (retroactively adjusted for reverse merger with Windrace on October 21, 2009) |  |              | 10,500,000 |   |          |  | 7  |              |  |  | 415,702       |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Shares of 2020 redeemed on October 21, 2009                                                                                             |  |              | (1,343,082 | ) |          |  | (1 | )            |  |  | (72,502       | ) |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Issue of shares (Note 26)                                                                                                               |  |              | 3,957,784  |   |          |  | 3  |              |  |  | 204,997       |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Purchase of an unit option (Note 26)                                                                                                    |  |              | -          |   |          |  | -  |              |  |  | (17,083       | ) |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Contingent shares issuable (as restated – Note 2)                                                                                       |  |              | -          |   |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|Preferred shares redemption adjustment : Written-off of accrued interest on preferred shares (Note 25)                                  |  |              | -          |   |          |  | -  |              |  |  | -             |   |  |           | 41,061   |   |             |  | -      |              |  |  | -          |  |  |          | -
|                                                                                                                                        |  |              |            |   |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |  
|At December 31, 2009 and January 1, 2010 (as restated – Note 2)                                                                         |  |              | 18,856,168 |   |          |  | 13 |              |  |  | (118,736      | ) |  |           | (148,443 | ) |             |  | 56,483 |              |  |  | 7,180      |  |  |          | -



continued/...





F-5







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)



Years ended December 31, 2011, 2010 and 2009



|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   | Employee    |  |        |              |  |  |            |  |  |          |      
|--------------------------------------------------------------- |  | ------------ | ---------- |  | -------- |  | -- | ------------ |  |  | ------------- | - |  | --------- | -------- | - | ----------- |  | ------ | ------------ |  |  | ---------- |  |  | -------- | -----
|                                                                |  | Outstanding  |            |  |          |  |    |              |  |  | Statutory     |   |  |           |          |   | share-based |  |        |              |  |  | Contingent |  |  |          |      
|                                                                |  | common stock |            |  | Capital  |  |    | Other        |  |  | surplus       |   |  | Exchange  |          |   | payment     |  |        | Retained     |  |  | shares     |  |  | Total    |      
|                                                                |  | Shares       |            |  | Amount   |  |    | reserve (ii) |  |  | reserve (iii) |   |  | fund (iv) |          |   | reserve (v) |  |        | reserve (vi) |  |  | profits    |  |  | issuable |      
|                                                                |  |              |            |  | RMB '000 |  |    | RMB '000     |  |  | RMB '000      |   |  | RMB '000  |          |   | RMB '000    |  |        | RMB '000     |  |  | RMB '000   |  |  | RMB '000 |      
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|At December 31, 2009 and January 1, 2010                        |  |              | 18,856,168 |  |          |  | 13 |              |  |  | (118,736      | ) |  |           | (148,443 | ) |             |  | 56,483 |              |  |  | 7,180      |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Profit for the year                                             |  |              | -          |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Other comprehensive income: Exchange difference                 |  |              | -          |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | 9,383      |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Recognition of equity-settled share-based payments              |  |              | 50,086     |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | 7,319
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Transfer to statutory surplus                                   |  |              | -          |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | 37,103 |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Exercise of warrants (Note 26)                                  |  |              | 879,372    |  |          |  | 1  |              |  |  | 31,508        |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Warrant exchange in relation to tender offer (Note 26)          |  |              | 8,223      |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Contingent shares issuable (as restated – Note 2)               |  |              | -          |  |          |  | -  |              |  |  | -             |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|Escrow shares released in relation to 2009 profit (Note 26)     |  |              | 5,563,714  |  |          |  | 3  |              |  |  | 240,992       |   |  |           | -        |   |             |  | -      |              |  |  | -          |  |  |          | -    
|                                                                |  |              |            |  |          |  |    |              |  |  |               |   |  |           |          |   |             |  |        |              |  |  |            |  |  |          |      
|At December 31, 2010 and January 1, 2011 (as restated – Note 2) |  |              | 25,357,563 |  |          |  | 17 |              |  |  | 153,764       |   |  |           | (148,443 | ) |             |  | 93,586 |              |  |  | 16,563     |  |  |          | 7,319



continued/...



F-6







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)



Years ended December 31, 2011, 2010 and 2009



|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         | Employee    |  |  |              |  |  |            |        |  |          | 
|----------------------------------------------------------- |  | ------------ | ---------- | - | -------- |  | -- | ------------ |  |  | ------------- |  |  | --------- | -------- | - | --------- |  | ------- | ----------- |  |  | ------------ |  |  | ---------- | ------ |  | -------- | 
|                                                            |  | Outstanding  |            |   |          |  |    |              |  |  |               |  |  | Statutory |          |   |           |  |         | share-based |  |  |              |  |  | Contingent |        |  |          | 
|                                                            |  | common stock |            |   | Capital  |  |    | Other        |  |  | Treasury      |  |  | surplus   |          |   | Exchange  |  |         | payment     |  |  | Retained     |  |  | shares     |        |  | Total    | 
|                                                            |  | Shares       |            |   | Amount   |  |    | reserve (ii) |  |  | reserve (iii) |  |  | shares    |          |   | fund (iv) |  |         | reserve (v) |  |  | reserve (vi) |  |  | profits    |        |  | Issuable | 
|                                                            |  |              |            |   | RMB '000 |  |    | RMB '000     |  |  | RMB '000      |  |  | RMB '000  |          |   | RMB '000  |  |         | RMB '000    |  |  | RMB '000     |  |  | RMB '000   |        |  | RMB '000 | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|At December 31, 2010 and January 1, 2011                    |  |              | 25,357,563 |   |          |  | 17 |              |  |  | 153,764       |  |  |           | (148,443 | ) |           |  | -       |             |  |  | 93,586       |  |  |            | 16,563 |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Profit for the year                                         |  |              | -          |   |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Other comprehensive income: Exchange difference             |  |              | -          |   |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | 4,042  |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Recognition of equity-settled share-based payments          |  |              | 205,665    |   |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Transfer to statutory surplus                               |  |              | -          |   |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | -       |             |  |  | 44,997       |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Repurchase of treasury shares (Note 26)                     |  |              | (415,751   | ) |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | (11,549 | )           |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Exercise of warrants (Note 26)                              |  |              | 10,993     |   |          |  | -  |              |  |  | 371           |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Contingent shares issuable                                  |  |              | -          |   |          |  | -  |              |  |  | -             |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|Escrow shares released in relation to 2010 profit (Note 26) |  |              | 4,277,590  |   |          |  | 3  |              |  |  | 197,416       |  |  |           | -        |   |           |  | -       |             |  |  | -            |  |  |            | -      |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|At December 31, 2011                                        |  |              | 29,436,060 |   |          |  | 20 |              |  |  | 351,551       |  |  |           | (148,443 | ) |           |  | (11,549 | )           |  |  | 138,583      |  |  |            | 20,605 |  |          | 
|                                                            |  |              |            |   |          |  |    |              |  |  |               |  |  |           |          |   |           |  |         |             |  |  |              |  |  |            |        |  |          | 
|At December 31, 2011 (USD '000)                             |  |              | 29,436,060 |   |          |  | 3  |              |  |  | 55,855        |  |  |           | (23,585  | ) |           |  | (1,835  | )           |  |  | 22,019       |  |  |            | 3,274  |  |          | 



The accompanying notes are an integral part of these consolidated
financial statements.



F-7







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)



Years ended December 31, 2011, 2010 and 2009



Notes:



| | (i) | Pursuant to a group reorganization effective on April 28, 2008 (the
“Group Reorganization”), Windrace International Company Limited (formerly known as Xdlong International Company Limited)
became the holding company of certain subsidiaries. The founders, Mr. Lin Shuipan and Ms. Chen Xiayu continue to govern the financial
and operating policies and activities of such entities following partial ownership interest held by third parties since March 2008.
Accordingly, such entities were under the common control of Mr. Lin Shuipan and Ms. Chen Xiayu for all periods presented herein.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The capital reserve at January 1, 2009 primarily included (a) RMB83,597,000 being the excess of the consideration received
from the equity holder of a subsidiary over the nominal value of the issued capital of a subsidiary pursuant to Group Reorganization;
and (b) RMB28,400,000 being a contribution from an equity holder of the Company in 2008 pursuant to an agreement dated March 28,
2008 whereby the equity holder agreed to pay the contribution if the Group achieved certain profit target for 2007.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | The other reserve represented distribution to certain holders of the Company pursuant to a share purchase agreement on March
28, 2008 (Note 25).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | In accordance with the relevant regulations applicable in the PRC, subsidiaries established in the PRC are required to transfer
a certain percentage of their statutory annual profits after tax (after offsetting any prior years’ losses), if any, to the
statutory surplus fund until the balance of the fund reaches 50% of their respective registered capital. Subject to certain restrictions
as set out in the relevant PRC regulations, the statutory surplus fund may be used to offset against accumulated losses of the
respective PRC subsidiaries. The amount of the transfer is subject to the approval of the board of directors of the respective
PRC subsidiaries.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Exchange fluctuation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations. This reserve is presented in accordance with the accounting policy in Note 3.2.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Share-based payment reserve represents the value of employee services in respect of restricted shares granted to
                                                              directors and employees of the Group.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-8







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



Years ended December 31, 2011, 2010 and 2009



|                                                                       |  | Notes |      |  | 2011    |  |         | 2011    |  |  | 2010          |   |  | 2009          |        
|---------------------------------------------------------------------- |  | ----- | ---- |  | ------- |  | ------- | ------- |  |  | ------------- | - |  | ------------- | -------
|                                                                       |  |       |      |  | USD'000 |  |         | RMB'000 |  |  | RMB'000       |   |  | RMB'000       |        
|                                                                       |  |       |      |  |         |  |         |         |  |  | As restated - |   |  | As restated - |        
|                                                                       |  |       |      |  |         |  |         |         |  |  | Note 2        |   |  | Note 2        |        
|                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                   |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Profit before tax                                                      |  |       |      |  |         |  | 85,162  |         |  |  | 536,004       |   |  |               | 409,516
|Non-cash adjustments for:                                              |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Interest income                                                        |  |       | 6    |  |         |  | (1,884  | )       |  |  | (11,858       | ) |  |               | (2,364 
|Finance costs                                                          |  |       | 7    |  |         |  | 136     |         |  |  | 856           |   |  |               | 1,893  
|Over-provision for aborted IPO expenses                                |  |       | 6    |  |         |  | -       |         |  |  | -             |   |  |               | -      
|Share of loss of a jointly-controlled entity                           |  |       |      |  |         |  | -       |         |  |  | -             |   |  |               | 17     
|(Gain)/Loss on disposal of items of property, plant and equipment, net |  |       | 6,8  |  |         |  | (9      | )       |  |  | (56           | ) |  |               | 108    
|Depreciation                                                           |  |       | 13   |  |         |  | 2,899   |         |  |  | 18,248        |   |  |               | 16,950 
|Amortization of prepaid land lease payments                            |  |       | 8,14 |  |         |  | 119     |         |  |  | 748           |   |  |               | 746    
|Expense recognized in respect of equity-settled share-based payment    |  |       |      |  |         |  | 1,249   |         |  |  | 7,860         |   |  |               | 7,319  
|Impairment of an advance of loan to a jointly-controlled entity        |  |       |      |  |         |  | -       |         |  |  | -             |   |  |               | (17    
|Gain from change in fair value of contingent shares liability          |  |       | 2    |  |         |  | (6,140  | )       |  |  | (38,645       | ) |  |               | (1,604 
|Operating cash flow before working capital changes                     |  |       |      |  |         |  | 81,532  |         |  |  | 513,157       |   |  |               | 432,564
|                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Decrease in inventories                                                |  |       |      |  |         |  | 2,091   |         |  |  | 13,158        |   |  |               | 11,218 
|(Increase)/decrease in trade receivables                               |  |       |      |  |         |  | (14,018 | )       |  |  | (88,230       | ) |  |               | 201,087
|(Increase)/decrease in prepayments, deposits and other receivables     |  |       |      |  |         |  | 2,378   |         |  |  | 14,967        |   |  |               | 7      
|Increase/(decrease) in trade and bills payables                        |  |       |      |  |         |  | (8,113  | )       |  |  | (51,060       | ) |  |               | (84,537
|Increase/(decrease) in deposits received, other payables and accruals  |  |       |      |  |         |  | (2,068  | )       |  |  | (13,018       | ) |  |               | 9,772  
|                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Cash generated from/(used in) operations                               |  |       |      |  |         |  | 61,802  |         |  |  | 388,974       |   |  |               | 570,111
|                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Interest paid                                                          |  |       |      |  |         |  | (136    | )       |  |  | (856          | ) |  |               | (1,893 
|PRC taxes paid                                                         |  |       |      |  |         |  | (10,754 | )       |  |  | (67,683       | ) |  |               | (44,702
|                                                                       |  |       |      |  |         |  |         |         |  |  |               |   |  |               |        
|Net cash inflow/(outflow) from operating activities                    |  |       |      |  |         |  | 50,912  |         |  |  | 320,435       |   |  |               | 523,516



continued/...



F-9







EXCEED COMPANY LTD. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)



Years ended December 31, 2011, 2010 and 2009



|                                                                  |  | Notes |     |  | 2011    |  |         | 2011    |  |  | 2010    |   |  | 2009    |        
|----------------------------------------------------------------- |  | ----- | --- |  | ------- |  | ------- | ------- |  |  | ------- | - |  | ------- | -------
|                                                                  |  |       |     |  | USD'000 |  |         | RMB'000 |  |  | RMB'000 |   |  | RMB’000 |        
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES                              |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|Purchases of items of property, plant and equipment               |  |       | 13  |  |         |  | (6,152  | )       |  |  | (38,721 | ) |  |         | (8,440 
|Deposit paid for acquisition of land use rights                   |  |       | 15  |  |         |  | (9,601  | )       |  |  | (60,430 | ) |  |         | (12,600
|Proceeds from disposal of items of property, plant and equipment  |  |       |     |  |         |  | 27      |         |  |  | 173     |   |  |         | -      
|(Increase)/decrease in pledged deposits                           |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | 15,000 
|Interest received                                                 |  |       | 6,8 |  |         |  | 1,884   |         |  |  | 11,858  |   |  |         | 2,364  
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|Net cash outflow from investing activities                        |  |       |     |  |         |  | (13,842 | )       |  |  | (87,120 | ) |  |         | (3,676 
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES                              |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|Cash received from 2020 upon recapitalization                     |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | -      
|Purchase of a unit option                                         |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | -      
|Exercise of warrants                                              |  |       |     |  |         |  | 59      |         |  |  | 372     |   |  |         | 31,508 
|Proceeds from issue of ordinary shares                            |  |       | 26  |  |         |  | -       |         |  |  | -       |   |  |         | -      
|Redemption of preferred shares                                    |  |       | 25  |  |         |  | -       |         |  |  | -       |   |  |         | -      
|Repayment of additional premium of redemption of preferred shares |  |       | 25  |  |         |  | -       |         |  |  | -       |   |  |         | (6,616 
|Repurchase of ordinary shares                                     |  |       | 26  |  |         |  | (1,835  | )       |  |  | (11,549 | ) |  |         | -      
|New bank loans                                                    |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | 18,000 
|Repayment of bank loans                                           |  |       |     |  |         |  | (2,860  | )       |  |  | (18,000 | ) |  |         | (58,000
|Increase/(decrease) in amount due to a director                   |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | (1,624 
|(Increase)/decrease in amount due from a shareholder              |  |       |     |  |         |  | -       |         |  |  | -       |   |  |         | 99     
|Exchange realignment                                              |  |       |     |  |         |  | 15      |         |  |  | 98      |   |  |         | -      
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|Net cash inflow/(outflow) from financing activities               |  |       |     |  |         |  | (4,621  | )       |  |  | (29,079 | ) |  |         | (16,633
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                         |  |       |     |  |         |  | 32,449  |         |  |  | 204,236 |   |  |         | 503,207
|Cash and cash
    equivalents at beginning of year                |  |       |     |  |         |  | 121,196 |         |  |  | 762,798 |   |  |         | 262,204
|Effect of foreign exchange rate changes                           |  |       |     |  |         |  | (430    | )       |  |  | (2,717  | ) |  |         | (2,613 
|                                                                  |  |       |     |  |         |  |         |         |  |  |         |   |  |         |        
|CASH AND CASH EQUIVALENTS AT END OF YEAR                          |  |       |     |  |         |  | 153,215 |         |  |  | 964,317 |   |  |         | 762,798



The accompanying notes are an integral part of these consolidated
financial statements.



F-10







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 1. | CORPORATE INFORMATION
| | -- | ---------------------



Exceed Company Ltd. (“the Company”) is
a limited liability company incorporated in the British Virgin Islands (“BVI”) on April 21, 2009, as a wholly-owned
subsidiary of 2020 ChinaCap Acquirco, Inc. (“2020”), a blank check company formed in Delaware for the purpose of acquiring,
through a merger, stock exchange, asset acquisition or other similar business combination, an operating business that either: (1) was
located in China, (2) had its principal operations located in China, or, (3) in 2020’s view, would benefit from
establishing operations in China.



On May 8, 2009, the Company entered into a sales and
purchase agreement (the “Purchase Agreement”) among 2020, Windrace International Company Limited (“Windrace”)
and the selling shareholders party thereto (the “Sellers”), which owned 100% of the issued and outstanding equity securities
of Windrace (the “Acquisition”).



On October 5, 2009, the board of directors of 2020
unanimously approved the simultaneous reincorporation of 2020 from the State of Delaware to the BVI through a redomestication merger
(the “Redomestication”) with and into the Company. In the Redomestication, the Company issued its securities in exchange
for the issued and outstanding securities of 2020 (being 10,500,000 shares of common stock) on a one-to-one basis, and redeemed
1,343,082 shares of 2020 common stock at USD7.92 per share.



On October 21, 2009, the Company completed its Acquisition
of Windrace through its acquisition of the issued and outstanding shares of Windrace under the Purchase Agreement, as supplemented
by a supplemental purchase agreement dated July 27, 2009 and a letter agreement dated September 9, 2009, among Windrace and the
Sellers on the one hand, and 2020 and the Company on the other hand. The Acquisition and Redomestication (“Business
Combination”) was accounted for as a reverse recapitalization, whereby the Company was the surviving and continuing entity
for financial reporting purposes and was deemed to be the acquirer of 2020.



The Business Combination was
accounted for as a reverse recapitalization because (i) after the Business Combination the Sellers together with the Investors
(as defined in Note 26 – Shareholders’ Equity – Common Stock) held approximately 51% of the issued and outstanding
ordinary shares of Exceed (not including the escrowed shares, the additional 2,212,789 shares issuable to the Sellers if certain
earnings targets in 2011 are met, and the additional shares issuable to the Investors as described in this Note 26 – Shareholders’
Equity – Common Stock) and 2020’s directors resigned and were replaced by Mr. Lin Shuipan, the CEO of the Company immediately
prior to the Acquisition, and Professor Jin Jichun, a designee of the Sellers who is considered an independent director under applicable
regulatory rules and thus independent of both 2020 and the Investors, and (ii) 2020 has no prior operations and was formed for
the purpose of effecting this business combination.



F-11







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 1. | CORPORATE INFORMATION (continued)
| | -- | ---------------------------------



In accordance with the applicable
accounting guidance for accounting for the Business Combination as a reverse recapitalization, initially the Company was deemed
to have undergone a recapitalization, whereby its issued and outstanding ordinary shares were converted into 17,008,633 ordinary
shares of the Company. Immediately thereafter, the Company, as the parent company of the Group, which is the continuing accounting
entity, was deemed to have acquired the assets and assumed the liabilities of 2020 in exchange for the issuance of the Company
securities identical in number and terms to the outstanding securities of 2020. The Company, as the parent company of the Group,
was deemed to have acquired 2020 in accordance with the applicable accounting guidance for accounting for the Acquisition and the
Redomestication as a reverse recapitalization, and 2020’s assets and liabilities were recorded at their historical carrying
amounts, with no step-up in basis or other intangible assets or goodwill recorded. All direct costs of the Acquisition
and the Redomestication were charged to operations in the period that such costs were incurred.



Windrace, the owner and operator of “Xidelong”
brand — one of the leading domestic sportswear brands in China, is engaged in the design, develop and wholesale of sporting
goods, including footwear, apparel and accessories, under its own brand, Xidelong, in China.



During the year ended December 31, 2011, the Company
had direct or indirect equity interests in the following subsidiaries, the particulars of which are set out below, as a result
of which the Company had the ability to direct the financial and operating policies of each of the entities, and thus had effective
control over such entities:



F-12







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 1. | CORPORATE INFORMATION (continued)
| | -- | ---------------------------------



|                                                                                                                  |  | Place and                              |  | Nominal value   |             |                 |     |            |    
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- |  | --------------- | ----------- | --------------- | --- | ---------- | ---
|                                                                                                                  |  | date of                                |  | of issued       |             | Percentage      |     |            |    
|                                                                                                                  |  | incorporation or                       |  | ordinary share/ |             | of equity       |     |            |    
|                                                                                                                  |  | establishment/                         |  | registered      |             | attributable to |     | Principal  |    
|Name                                                                                                              |  | operation                              |  | capital         |             | the Company     |     | activities |    
|                                                                                                                  |  |                                        |  |                 |             | Direct          |     | Indirect   |    
|                                                                                                                  |  |                                        |  |                 |             |                 |     |            |    
|Windrace International Company Limited
(Formerly known as Xdlong International Company Limited)                   |  | Cayman Islands
March 25, 2008          |  | HKD             | 9,200       |                 | 100 |            | -  
|                                                                                                                  |  |                                        |  |                 |             |                 |     |            |    
|Windrace Investment Holding Limited
("Windrace Investment")
(Formerly known as Xdlong Investment Holding Limited) |  | British Virgin Islands
August 17, 2007 |  | USD             | 100         |                 | -   |            | 100
|                                                                                                                  |  |                                        |  |                 |             |                 |     |            |    
|Hei Dai Lung Group Company Limited
("XDLong HK")                                                                  |  | Hong Kong
November 5, 2003             |  | HKD             | 10,000      |                 | -   |            | 100
|                                                                                                                  |  |                                        |  |                 |             |                 |     |            |    
|Xidelong (China) Co., Ltd.
("XDLong China")
(Note (i) and (ii))                                                   |  | PRC
April 13, 2004                     |  | HKD             | 390,000,000 |                 | -   |            | 100
|                                                                                                                  |  |                                        |  |                 |             |                 |     |            |    
|Fujian Xidelong Sports Goods Co., Ltd.
("XDLong Fujian")
(Note (i) and (iii))                                     |  | PRC
September 26, 2001                 |  | HKD             | 25,000,000  |                 | -   |            | 100



Notes:



| | (i) | These entities are wholly foreign-owned enterprises and limited liability companies established in the PRC.
| | --- | -----------------------------------------------------------------------------------------------------------



| | (ii) | The registered capital of XDLong China is HKD390,000,000 and was fully paid as of October 26, 2009.
| | ---- | ---------------------------------------------------------------------------------------------------



| | (iii) | The registered capital of XDLong Fujian is HKD25,000,000 and was fully paid as of June 13, 2008.
| | ----- | ------------------------------------------------------------------------------------------------



| | (iv) | The functional and reporting currency of XDLong China and XDLong Fujian, the operating subsidiaries of the Group, is RMB.
| | ---- | -------------------------------------------------------------------------------------------------------------------------



F-13







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
| | -- | ----------------------------------------------------------------



The Company has revised its previously issued financial
statements for 2009 and 2010 to reflect the revision to its method of accounting for the conditional obligation to release and
issue shares to the former shareholders of Windrace as part of the reverse recapitalization transaction effective on October 21,
2009 (see Note 26). The Company believes that this revised accounting treatment is more relevant and reliable under the circumstances.



The Company’s original accounting method was
to record the contingent shares issuable, consisting of escrow shares and earn-out shares, as a stock dividend, and upon issuance
as an adjustment to the par value of common shares, with an offsetting adjustment to capital reserve. The Company included such
contingent shares in the calculation of basic earnings per share from the date of issuance. Under this accounting method, the Company
did not recognize a liability for its conditional obligation to issue shares, and did not recognize changes in the fair value of
that conditional obligation in its consolidated statements of comprehensive income.



During 2012, prior to the issuance of the Company’s
December 31, 2011 financial statements, the Company concluded it would be more relevant and reliable to revise its method of accounting
with respect to the accounting for the contingent shares issuable, retroactive to the closing of the reverse recapitalization transaction,
to recognize a liability for the fair value of the escrow shares and the earn-out shares, and to recognize changes in the fair
value of the escrow shares and the earn-out shares in the Company’s consolidated statements of comprehensive income. The
Company adopted this revised accounting method based on, among other factors, its review of IAS 8, IAS 32 and IAS 39.



In particular, the Company considered IAS 8, “Accounting
Policies, Changes in Accounting Estimates and Errors”, which states that, in the absence of a standard or an interpretation
that specifically applies to a transaction, other event or condition, management shall use its judgment in developing and applying
an accounting policy that results in information that is relevant and reliable. One of the permitted changes in an accounting policy
under IAS 8 is if such change results in the financial statements providing reliable and more relevant information about the effects
of transactions, other events or conditions on the company’s financial position, financial performance or cash flows. The
Company believes that revising comparative amounts for all prior periods presented will provide more relevant and reliable information
to shareholders and investors.



The Company also considered the example of another
SEC registrant that, after consultation with the Securities and Exchange Commission, revised its accounting for contingent shares
issuable in a reverse recapitalization transaction to reflect contingent shares issuable as a liability in its balance sheet at
fair value, with the changes in fair value of the contingent shares issuable recognized in its consolidated statements of operations.



The Company now believes accounting for the contingent
shares issuable as a liability at fair value, with the changes in fair value recognized in the consolidated statements of comprehensive
income, is a more relevant and reliable accounting method under the circumstances. The Company’s reconsideration was significantly
influenced by evolving professional views as to the accounting for this type of transaction, as well as the continuing movement
to fair value/derivative accounting for an expanding array of financial instruments.



F-14







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



The following table summarizes the adjustments made
to the previously reported 2009 and 2010 consolidated balance sheets, consolidated statements of comprehensive income, consolidated
statements of cash flows, and consolidated statements of changes in equity.



2009 SELECTED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                      |  | As previously |         |   |            |     |         |             | 
|------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------- | --- | ------- | ----------- | 
|                                                                                      |  | Reported      |         |   |            |     |         | As adjusted | 
|                                                                                      |  | 2009          |         |   | Adjustment |     |         | 2009        | 
|                                                                                      |  | RMB'000       |         |   | RMB'000    |     |         | RMB'000     | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|OPERATING PROFIT                                                                      |  |               | 281,372 |   |            |     | -       |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|Finance costs                                                                         |  |               | (29,566 | ) |            |     | -       |             | 
|Share of loss in jointly-controlled entity                                            |  |               | (16     | ) |            |     | -       |             | 
|Gain from change in fair value of contingent share liability                          |  |               | -       |   |            |     | 170,948 | (A)         | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|PROFIT BEFORE TAX                                                                     |  |               | 251,790 |   |            |     | 170,948 |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|Tax                                                                                   |  |               | (3,771  | ) |            |     | -       |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|PROFIT FOR THE YEAR                                                                   |  |               | 248,019 |   |            |     | 170,948 |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|Other comprehensive income for the year, net of tax:                                  |  |               |         |   |            |     |         |             | 
|Exchange differences on translation of financial statements of overseas subsidiaries  |  |               | 2,391   |   |            |     | 145     |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|Total comprehensive income for the year attributable to equity holders of the Company |  |               | 250,410 |   |            |     | 171,093 |             | 
|                                                                                      |  |               |         |   |            |     |         |             | 
|EARNINGS PER SHARE                                                                    |  |               |         |   |            |     |         |             | 
|Net profit per share                                                                  |  |               |         |   |            |     |         |             | 
|Basic                                                                                 |  | RMB           | 29.91   |   |            | RMB | 20.61   | (B)         | 
|Diluted                                                                               |  | RMB           | 23.77   |   |            | RMB | 14.81   | (B)         | 



| | (A) | To reflect the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------

| | (B) | To adjust earnings per share for the effect of the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------------------------------------------



F-15







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



2009 SELECTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                          |  | As previously |           |  |            |  |          |             | 
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- |  | ---------- |  | -------- | ----------- | 
|                                                                                                                                          |  | Reported      |           |  |            |  |          | As adjusted | 
|                                                                                                                                          |  | 2009          |           |  | Adjustment |  |          | 2009        | 
|                                                                                                                                          |  | RMB'000       |           |  | RMB'000    |  |          | RMB'000     | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|CURRENT LIABILITIES                                                                                                                       |  |               |           |  |            |  |          |             | 
|Trade and bills payables                                                                                                                  |  |               | 195,538   |  |            |  | -        |             | 
|Deposits received, other payables and accruals                                                                                            |  |               | 62,842    |  |            |  | -        |             | 
|Interest-bearing bank borrowings                                                                                                          |  |               | 58,000    |  |            |  | -        |             | 
|Due to a director                                                                                                                         |  |               | 1,687     |  |            |  | -        |             | 
|Tax payable                                                                                                                               |  |               | 1,286     |  |            |  | -        |             | 
|Contingent share liability                                                                                                                |  |               | -         |  |            |  | 349,766  | (A)         | 
|Total current liabilities                                                                                                                 |  |               | 319,353   |  |            |  | 349,766  |             | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|NET CURRENT ASSETS                                                                                                                        |  |               | 846,507   |  |            |  | (349,766 | )           | 
|Net assets                                                                                                                                |  |               | 1,148,432 |  |            |  | (349,766 | )           | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|STOCKHOLDERS’ EQUITY                                                                                                                      |  |               |           |  |            |  |          |             | 
|Common stock – par value of USD0.0001 per share; 55,000,000 shares authorized; 30,123,335 shares issued and 18,856,168 shares outstanding |  |               | 13        |  |            |  | -        |             | 
|Retained profits                                                                                                                          |  |               | 590,226   |  |            |  | 170,948  | (B)         | 
|Reserves - Contingent shares issuable                                                                                                     |  |               | -         |  |            |  | 240,995  | (C)         | 
|Reserves                                                                                                                                  |  |               | 558,193   |  |            |  | (761,854 | )(D)        | 
|                                                                                                                                          |  |               | -         |  |            |  | 145      | (E)         | 
|Total equity                                                                                                                              |  |               | 1,148,432 |  |            |  | (349,766 | )           | 



| | (A) | To reflect fair value of contingent share liability
| | --- | ---------------------------------------------------

| | (B) | To adjust retained profits for the effect of the change in fair value of contingent share liability
| | --- | ---------------------------------------------------------------------------------------------------

| | (C) | To reflect contingent shares issuable in equity based on the fair value of the shares earned during the current year, with
the shares being issued in the following year
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (D) | To recognize liability for conditional obligation to release and issue shares based on the fair value of the obligations upon
the reverse capitalization effective on October 21, 2009, recorded as deemed dividend
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (E) | To reflect exchange difference on contingent share liability
| | --- | ------------------------------------------------------------



F-16







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



2009 SELECTED CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                       |  | As previously |         |   |            |  |          |             | 
|---------------------------------------------------------------------- |  | ------------- | ------- | - | ---------- |  | -------- | ----------- | 
|                                                                       |  | Reported      |         |   |            |  |          | As adjusted | 
|                                                                       |  | 2009          |         |   | Adjustment |  |          | 2009        | 
|                                                                       |  | RMB'000       |         |   | RMB'000    |  |          | RMB'000     | 
|                                                                       |  |               |         |   |            |  |          |             | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                   |  |               |         |   |            |  |          |             | 
|Profit before tax                                                      |  |               | 251,790 |   |            |  | 170,948  |             | 
|Non-cash adjustments for:                                              |  |               |         |   |            |  |          |             | 
|Interest income                                                        |  |               | (727    | ) |            |  | -        |             | 
|Finance costs                                                          |  |               | 29,566  |   |            |  | -        |             | 
|Over-provision for aborted IPO expenses                                |  |               | (5,128  | ) |            |  | -        |             | 
|Share of loss of a jointly-controlled entity                           |  |               | 16      |   |            |  | -        |             | 
|(Gain)/Loss on disposal of items of property, plant and equipment, net |  |               | 189     |   |            |  | -        |             | 
|Depreciation                                                           |  |               | 16,166  |   |            |  | -        |             | 
|Amortization of prepaid land lease payments                            |  |               | 752     |   |            |  | -        |             | 
|Impairment of an advance of loan to a jointly-controlled entity        |  |               | (16     | ) |            |  | -        |             | 
|Gain from change in fair value of contingent share liability           |  |               | -       |   |            |  | (170,948 | )(A)        | 
|Operating cash flow before working capital changes                     |  |               | 292,608 |   |            |  | -        |             | 



| | (A) | To reflect the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------



F-17







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



2010 SELECTED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                      |  | As previously |         |   |            |     |        |             | 
|------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------- | --- | ------ | ----------- | 
|                                                                                      |  | Reported      |         |   |            |     |        | As adjusted | 
|                                                                                      |  | 2010          |         |   | Adjustment |     |        | 2010        | 
|                                                                                      |  | RMB'000       |         |   | RMB'000    |     |        | RMB'000     | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|OPERATING PROFIT                                                                      |  |               | 409,822 |   |            |     | -      |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|Finance costs                                                                         |  |               | (1,893  | ) |            |     | -      |             | 
|Share of loss in jointly-controlled entity                                            |  |               | (17     | ) |            |     | -      |             | 
|Gain from change in fair value of contingent share liability                          |  |               | -       |   |            |     | 1,604  | (A)         | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|PROFIT BEFORE TAX                                                                     |  |               | 407,912 |   |            |     | 1,604  |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|Tax                                                                                   |  |               | (56,274 | ) |            |     | -      |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|PROFIT FOR THE YEAR                                                                   |  |               | 351,638 |   |            |     | 1,604  |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|Other comprehensive income for the year, net of tax:                                  |  |               |         |   |            |     |        |             | 
|Exchange differences on translation of financial statements of overseas subsidiaries  |  |               | (2,192  | ) |            |     | 11,575 |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|Total comprehensive income for the year attributable to equity holders of the Company |  |               | 349,446 |   |            |     | 13,179 |             | 
|                                                                                      |  |               |         |   |            |     |        |             | 
|EARNINGS PER SHARE                                                                    |  |               |         |   |            |     |        |             | 
|Net profit per share                                                                  |  |               |         |   |            |     |        |             | 
|Basic                                                                                 |  | RMB           | 13.94   |   |            | RMB | 0.06   | (B)         | 
|Diluted                                                                               |  | RMB           | 10.62   |   |            | RMB | 0.05   | (B)         | 



| | (A) | To reflect the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------

| | (B) | To adjust earnings per share for the effect of the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------------------------------------------



F-18







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



2010 SELECTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                          |  | As previously |           |  |            |  |          |             | 
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- |  | ---------- |  | -------- | ----------- | 
|                                                                                                                                          |  | Reported      |           |  |            |  |          | As adjusted | 
|                                                                                                                                          |  | 2010          |           |  | Adjustment |  |          | 2010        | 
|                                                                                                                                          |  | RMB'000       |           |  | RMB'000    |  |          | RMB'000     | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|CURRENT LIABILITIES                                                                                                                       |  |               |           |  |            |  |          |             | 
|Trade and bills payables                                                                                                                  |  |               | 111,001   |  |            |  | -        |             | 
|Deposits received, other payables and accruals                                                                                            |  |               | 65,585    |  |            |  | -        |             | 
|Interest-bearing bank borrowings                                                                                                          |  |               | 18,000    |  |            |  | -        |             | 
|Tax payable                                                                                                                               |  |               | 12,858    |  |            |  | -        |             | 
|Contingent share liability                                                                                                                |  |               | -         |  |            |  | 139,168  | (A)         | 
|Total current liabilities                                                                                                                 |  |               | 207,444   |  |            |  | 139,168  |             | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|NET CURRENT ASSETS                                                                                                                        |  |               | 1,231,549 |  |            |  | (139,168 | )           | 
|Net assets                                                                                                                                |  |               | 1,536,706 |  |            |  | (139,168 | )           | 
|                                                                                                                                          |  |               |           |  |            |  |          |             | 
|STOCKHOLDERS’ EQUITY                                                                                                                      |  |               |           |  |            |  |          |             | 
|Common stock – par value of USD0.0001 per share; 55,000,000 shares authorized; 31,010,930 shares issued and 25,357,563 shares outstanding |  |               | 17        |  |            |  | -        |             | 
|Retained profits                                                                                                                          |  |               | 904,761   |  |            |  | 172,552  | (B)         | 
|Reserves - Contingent shares issuable                                                                                                     |  |               | -         |  |            |  | 197,419  | (C)         | 
|Reserves                                                                                                                                  |  |               | 631,928   |  |            |  | (761,854 | )(D)        | 
|                                                                                                                                          |  |               | -         |  |            |  | 240,995  | (E)         | 
|                                                                                                                                          |  |               | -         |  |            |  | 11,720   | (F)         | 
|Total equity                                                                                                                              |  |               | 1,536,706 |  |            |  | (139,168 | )           | 



| | (A) | To reflect the fair value of contingent share liability
| | --- | -------------------------------------------------------

| | (B) | To adjust retained profits for the effect of the change
in fair value of contingent share liability
| | --- | ---------------------------------------------------------------------------------------------------

| | (C) | To reflect contingent shares issuable in equity based on the fair value of the shares earned during the current year, with
the shares being issued in the following year
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (D) | To recognize liability for conditional obligation to release and issue shares based on the fair value of the obligations upon
the reverse capitalization effective on October 21, 2009, recorded as deemed dividend
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (E) | To reflect escrow shares released in relation to 2009 profit
| | --- | ------------------------------------------------------------

| | (F) | To reflect exchange difference on contingent share liability
| | --- | ------------------------------------------------------------



F-19







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



2010 SELECTED CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                       |  | As previously |         |   |            |  |         |             | 
|---------------------------------------------------------------------- |  | ------------- | ------- | - | ---------- |  | ------- | ----------- | 
|                                                                       |  | Reported      |         |   |            |  |         | As adjusted | 
|                                                                       |  | 2010          |         |   | Adjustment |  |         | 2010        | 
|                                                                       |  | RMB'000       |         |   | RMB'000    |  |         | RMB'000     | 
|                                                                       |  |               |         |   |            |  |         |             | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                   |  |               |         |   |            |  |         |             | 
|Profit before tax                                                      |  |               | 407,912 |   |            |  | 1,604   |             | 
|Non-cash adjustments for:                                              |  |               |         |   |            |  |         |             | 
|Interest income                                                        |  |               | (2,364  | ) |            |  | -       |             | 
|Finance costs                                                          |  |               | 1,893   |   |            |  | -       |             | 
|Share of loss of a jointly-controlled entity                           |  |               | 17      |   |            |  | -       |             | 
|(Gain)/Loss on disposal of items of property, plant and equipment, net |  |               | 108     |   |            |  | -       |             | 
|Depreciation                                                           |  |               | 16,950  |   |            |  | -       |             | 
|Amortization of prepaid land lease payments                            |  |               | 746     |   |            |  | -       |             | 
|Expense recognized in respect of equity-settled share-based payment    |  |               | 7,319   |   |            |  | -       |             | 
|Impairment of an advance of loan to a jointly-controlled entity        |  |               | (17     | ) |            |  | -       |             | 
|Gain from change in fair value of contingent share liability           |  |               | -       |   |            |  | (1,604) | (A)         | 
|                                                                       |  |               |         |   |            |  |         |             | 
|Operating cash flow before working capital changes                     |  |               | 432,564 |   |            |  | -       |             | 



| | (A) | To reflect the change in fair value of contingent share liability
| | --- | -----------------------------------------------------------------



F-20







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 2. | REVISIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| | -- | ----------------------------------------------------------------------------



The adjustments to record the fair value of the contingently
issuable shares as described above had the effect of creating the following additional adjustments in the consolidated statements
of changes in equity: (i) a deemed dividend, reflecting the recording of the original fair value of the contingently issuable shares
of RMB762 million, and (ii) a reclassification from liability to equity for the contingently issuable shares for 2009 and 2010
amounting to RMB241 million and RMB197 million, respectively. The deemed dividend is the estimated fair value of the escrow shares
and earn-out shares at the closing of the reverse recapitalization transaction referred to above. The reclassification from liability
to equity reflects the fair value of the shares earned in 2009 and 2010 pursuant to the escrow and earn-out provisions, and were
characterized as contingent shares issuable until the shares were issued.



| | 3.1 | BASIS OF PRESENTATION AND PREPARATION
| | --- | -------------------------------------



Basis of presentation

The consolidated financial statements of the Group
have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International
Accounting Standards Board (“IASB”). They have been prepared under the historical cost convention. These financial
statements are presented in Renminbi (“RMB”) and all amounts are rounded to the nearest thousand except where otherwise
indicated.



All income, expenses and unrealized gains and losses
resulting from intercompany transactions and balances within the Group are eliminated on consolidation in full.



Investments in non-consolidated subsidiaries, typically
representing an ownership interest in the voting stock of the subsidiaries of between 20% and 50%, are stated at cost of acquisition
plus the Company’s equity in undistributed net income or proportionate share of net losses since acquisition.



Translations of amounts from RMB into USD are solely
for the convenience of the reader and were calculated at the rate of USD1.00 = RMB6.294. The exchange rate refers to the exchange
rate as set forth in the H.10 statistical release of the Federal Reserve Board, on December 31, 2011. This convenience translation
is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at
that rate on December 31, 2011, or at any other rate.



F-21







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.1 | BASIS OF PRESENTATION AND PREPARATION (continued)
| | --- | -------------------------------------------------



Basis of presentation (continued)

The preparation of these financial statements in
conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.



The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.



Judgments made by management in the application of
IFRS that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note
4.



F-22







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | ---- | ------------------------------------------



Subsidiaries

A subsidiary is an entity whose financial and operating
policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.



Related parties

A party is considered to be related to the Group if:



| | (a) | the party is a person or a close member of that person’s family and that person
| | --- | -------------------------------------------------------------------------------



| | (i) | has control or joint control over the Group;
| | --- | --------------------------------------------



| | (ii) | has significant influence over the Group; or
| | ---- | --------------------------------------------



| | (iii) | is a member of the key management personnel of the Group or of a parent of the Group;
| | ----- | -------------------------------------------------------------------------------------



or



| | (b) | the party is an entity where any of the following conditions applies:
| | --- | ---------------------------------------------------------------------



| | (i) | the entity and the Group are members of the same group;
| | --- | -------------------------------------------------------



| | (ii) | one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other
entity);
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | the entity and the Group are joint ventures of the same third party;
| | ----- | --------------------------------------------------------------------



| | (iv) | one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
| | ---- | ---------------------------------------------------------------------------------------------------------



| | (v) | the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | (vi) | the entity is controlled or jointly controlled by a person identified in (a); and
| | ---- | ---------------------------------------------------------------------------------



| | (vii) | a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the
entity (or of a parent of the entity).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-23







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Impairment of non-financial assets

Where an indication of impairment exists, or when
annual impairment testing for an asset is required (other than inventories, deferred tax assets and financial assets), the asset's
recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash-generating unit's value in
use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined
for the cash-generating unit to which the asset belongs.



An impairment loss is recognized only if the carrying
amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. An impairment loss is charged to the consolidated statements of comprehensive income in the period in which
it arises.



An assessment is made at each reporting date as to
whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such
an indication exists, the recoverable amount is estimated. A previously recognized impairment loss of an asset is reversed only
if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher
than the carrying amount that would have been determined (net of any depreciation/amortization) had no impairment loss been recognized
for the asset in prior periods. A reversal of such an impairment loss is credited to the consolidated statements of comprehensive
income in the period in which it arises.



F-24







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Property, plant and equipment and depreciation

Property, plant and equipment, other than construction
in progress, are stated at cost less accumulated depreciation and any impairment losses.



The cost of an item of property, plant and equipment
comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for
its intended use. Expenditures incurred after the items of property, plant and equipment have been put into operation, such as
repairs and maintenance, is normally charged to the consolidated statements of comprehensive income in the period in which it is
incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be
measured reliably, the expenditure is capitalized as an additional cost of that asset or as a replacement.



Depreciation is calculated on the straight-line basis
to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The estimated
useful lives used for this purpose are as follows:



|Buildings                                |  | Over the shorter of lease terms or 20 years
|---------------------------------------- |  | -------------------------------------------
|Leasehold improvements                   |  | Over the shorter of lease terms or 5 years 
|Plant and machinery                      |  | 5 to 10 years                              
|Motor vehicles                           |  | 5 years                                    
|Furniture, fixtures and office equipment |  | 5 years                                    



Where parts of an item of property, plant and equipment
have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated
separately.



Residual values, useful lives and the depreciation
method are reviewed, and adjusted if appropriate, at the end of each reporting period.



An item of property, plant and equipment is derecognized
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement
recognized in the consolidated statements of comprehensive income in the year the asset is derecognized is the difference between
the net sales proceeds and the carrying amount of the relevant asset.



F-25







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Property, plant and equipment and depreciation
(continued)

Construction in progress represents a building under
construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction
during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and
equipment or investment properties when completed and ready for use.



Research and development costs

All research costs are charged to the consolidated
statements of comprehensive income as incurred.



Expenditures incurred on projects to develop new products
are capitalized and deferred only when the Group can demonstrate the technical feasibility of completing the product so that it
will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditures
during the development. Product development expenditures which do not meet these criteria are expensed when incurred.



Financial assets

Financial assets in the scope of IAS 39 "Financial
Instruments: Recognition and Measurements" are classified as loans and receivables. When financial assets are recognized initially,
they are measured at fair value. The Group assesses whether a contract contains an embedded derivative when the Group first becomes
a party to it and assesses whether an embedded derivatives is required to be separated from the host contract when the analysis
shows that the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract.
Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would
otherwise be required under the contract.



The Group determines the classification of its financial
assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the end of each reporting
period.



All regular way purchases and sales of financial assets
are recognized on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases
or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by
regulation or convention in the marketplace.



Loans and receivables

Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortized
cost using the effective interest method less any allowance for impairment. Amortized cost is calculated taking into account any
discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs.
Gains and losses are recognized in the consolidated statements of comprehensive income when the loans and receivables are derecognized
or impaired, as well as through the amortization process.



F-26







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Impairment of financial assets

The Group assesses at the end of each reporting period
whether there is any objective evidence that a financial asset or a group of financial assets is impaired.



Assets carried at amortized cost

If there is objective evidence that an impairment
loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference
between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have
not been incurred) discounted at the financial asset's original effective interest rate (i.e., the effective interest rate computed
at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account.
The amount of the impairment loss is recognized in the consolidated statements of comprehensive income. Loan and receivables together
with any associated allowances are written off when there is no realistic prospect of future recovery.



If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognized
in the consolidated statements of comprehensive income, to the extent that the carrying value of the asset does not exceed its
amortized cost at the reversal date.



In relation to trade receivables, an impairment allowance
is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor)
that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of
the receivables is reduced through the use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.



Derecognition of financial assets

A financial asset (or, where applicable, a part of
a financial asset or part of a group of similar financial assets) is derecognized where:

| | · | the rights to receive cash flows from the asset have expired;
| | - | -------------------------------------------------------------

| | · | the Group retains the rights to receive cash flows from the asset, but
has assumed an obligation to pay them in full without material delay to a third party under a "pass-through" arrangement;
or
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the Group has transferred its rights to receive cash flows from the
asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Where the Group has transferred its rights to receive
cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred
control of the asset, the asset is recognized to the extent of the Group's continuing involvement in the asset. Continuing involvement
that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset
and the maximum amount of consideration that the Group could be required to repay.



F-27







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39
are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated
as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities
at initial recognition.



All financial liabilities are recognized initially
at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.



The Group’s financial liabilities include
trade and other payables and interest-bearing bank and other borrowings.



Derecognition of financial liabilities

A financial liability is derecognized when the obligation
under the liability is discharged or cancelled, or expires.



When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability,
and the difference between the respective carrying amounts is recognized in the consolidated statements of comprehensive income.



Earn-out obligation

Pursuant to an earn-out provision of the Purchase
Agreement and the escrow agreement, the Company may be required annually to release shares from the escrow account to the former
shareholders of Windrace from the fiscal year 2009 to 2011. In addition, if the Company achieves certain earnings targets in 2011,
2,212,789 additional new ordinary shares of Exceed shall be issued to the Sellers as earn-out shares. The details are defined in
Note 26 – Shareholders’ Equity – Common Stock.



The Company releases the shares, which are held in
the escrow account, and issues the new ordinary shares, in respect of the earn-out provision when the audited result of the Company’s
financial results each year are released if the financial results fulfill the condition in the Purchase Agreement. The Earn-out
obligation is a derivative financial instrument liability that is adjusted to its fair value each reporting date with changes in
fair value being recognized currently in the consolidated statements of comprehensive income. Once a measurement period for the
issuance of shares ends, the Earn-out obligation related to that period is no longer conditional and the obligation is reclassified
from a liability to equity based on the fair value of the obligation at the end of the measurement period.



Treasury shares

Equity instruments which are reacquired (treasury
shares) are recognized at cost and deducted from equity until the shares are cancelled or reissued. No gain or loss is recognized
in the consolidated statements of comprehensive income on the purchase, sale, issue or cancellation of the Group's own equity instruments.
Any difference between the carrying amount and the consideration is recognized in equity.



F-28







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Inventories

Inventories are stated at the lower of cost and net
realizable value after making due allowances for obsolete or slow moving items. Cost is calculated using the weighted average cost
method and comprises all costs incurred in bringing the inventories to their present location and condition.



Net realizable value is based on the estimated selling
prices less any estimated costs to be incurred for completion of the production process and disposal upon delivery of finished
goods to distributors.



When inventories are sold, the carrying amount of
those inventories is recognized as cost of sales in the period in which the related sales are recognized.



Leases

Leases where substantially all the rewards and risks
of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessee, rentals payable
under the operating leases are charged to the consolidated statements of comprehensive income on the straight-line basis over the
lease terms.



Prepaid land lease payments

Prepaid land lease payments under PRC land use right
arrangements are initially stated at cost and subsequently amortized on the straight-line basis over the lease terms.



Cash and cash equivalents

For the purpose of the consolidated cash flow statements,
cash and cash equivalents comprise cash on hand and demand deposits, and short-term, highly liquid investments that are readily
convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of
generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the
Group's cash management.



For the purpose of the consolidated statements of
financial position, cash and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted
as to use.



Provisions

A provision is recognized when a present obligation
(legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required
to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.



When the effect of discounting is material, the amount
recognized for a provision is the present value at the end of each reporting period of the future expenditures expected to be required
to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance
costs in the consolidated statements of comprehensive income.



F-29







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Income tax

Income tax comprises current and deferred tax. Income
tax is recognized in the consolidated statements of comprehensive income, or in equity if it relates to items that are recognized
in the same or a different period directly in equity.



Current tax assets and liabilities for the current
and prior periods are measured at the amount expected to be recovered from or paid to the taxation authority.



Deferred tax is provided, using the liability method,
on all temporary differences at the end of each reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.



Deferred tax liabilities are recognized for all taxable
temporary differences, except:



| | · | where the deferred tax liability arises from goodwill or from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in respect of taxable temporary differences associated with investments
in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Deferred tax assets are recognized for all deductible
temporary differences, carryforward of unused tax credits and tax losses, to the extent that it is probable that future taxable
profit will be available against which the deductible temporary differences, and the unused tax credits and unused tax losses can
be utilized, except:



| | · | where the deferred tax asset relating to the deductible temporary differences
arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in respect of deductible temporary differences associated with investments
in subsidiaries, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary differences can be utilized.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and, where appropriate, reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Conversely, previously unrecognized
deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.



F-30







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Income tax (continued)

Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. The expected rates
are projected based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.



Deferred tax assets and liabilities are offset when
the Group has a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax
assets and liabilities relate to income taxes levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.



Revenue recognition

Revenue is recognized when there is probable economic
benefits to the Group and when the revenue can be measured reliably, on the following bases:



| | (a) | from sale of goods, when the significant risks and rewards of ownership have been transferred
to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership,
nor effective control over the goods sold; which usually occurs when the product is sold and delivered to the distributors with
all transportation and handling costs for delivery of products borne and paid directly by the distributors, and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | interest income, on an accrual basis using the effective interest method by applying the rate
that discounts the estimated future cash receipts through the expected life of the financial instruments to their net carrying
amount.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Group utilizes preliminary purchase
orders received from consultations with customers at sales fairs to prepare sales estimates and formulate production schedules
for upcoming seasons. Once a purchase order is finalized, the Group re-confirms the delivery schedule of sales orders with each
distributor before shipment. Distributors are invoiced and sales are recognized by the Group only at the time that products are
ultimately delivered to distributors.



Although the Group’s policy is to recognize
product returns as a reduction of revenue, the Group has not deemed it necessary to accrue for returns at the time when sales are
recorded, as the Group has not had any significant product returns or similar claims. Management periodically reviews this matter
and will consider making such accruals, when there are indications of significant sales returns or similar claims in future periods.



Although the Group accepts returns of defective
products from distributors, distributors generally choose to sell any defective products at a discount rather than to return such
defective products to the Group. Since distributors are required to comply with the Group’s pricing policy, prior written
consent must be obtained from the Group before any products are sold at a discount to the suggested retail price, which is determined
on a case-by-case basis. The Group does not provide any compensation to distributors for defective products. To date, the number
and value of defective products has been nominal.



F-31







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Revenue recognition (continued)

The Group does not have any arrangements with distributors
to accept returns of out-of-season stock. When in-season new products arrive, the current products on shelves become out-of-season
stock. The Group does not provide volume-based discount programs or discounts for early payment.



The Group encourages distributors to clear their
out-of-season inventory levels. An authorized retailer with excess inventory at the end of a season may attempt to sell such excess
inventory through regular and special end-of-season sales. Since distributors must strictly comply with the Group’s suggested
retail pricing policy, prior written consent must be obtained from the Group before a distributor may conduct any promotional events
or sell any of the Group’s products to consumers at a discount to the suggested retail price. The distributors bear the costs
of any sales discounts and the Group is not required to provide credits or subsidies to distributors for their seasonal clearance
activities.



In order to facilitate the operation and development
of its business, including promoting brand recognition and building a nationwide brand image, the Group provides selective industry-standard
post-sales assistance and guidance to distributors, including training of distributors’ employees and promotional equipment
and marketing brochures. Distributors are required to sell the Group’s products on an exclusive basis to be eligible for
such assistance and guidance.



Borrowing costs

Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or
sale are capitalized as part of the cost of the respective assets. During the three years ended December 31, 2011, no interest
has been capitalized. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.



Government grants

Government grants are recognized at their fair value
where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the
grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis
to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is deducted from the carrying
amount of the asset and released to the consolidated statements of comprehensive income by way of a reduced depreciation charge.



Contracts for services

Contract revenue on the rendering of services comprises
the agreed contract amount. Costs of rendering services are comprised of labour and other costs of personnel directly engaged in
providing the services and attributable overhead costs.



F-32







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Employee benefits

Share-based payment transactions

The Company operates an equity
incentive plan for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the
Group's operations. Employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees
render services as consideration for equity instruments (“equity-settled transactions”).



The cost of equity-settled
transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of
the restricted shares is determined by an external valuer using a prepaid forward contract and based on the income approach by
discounting the expected value of the shares according to its expected vesting schedule to the date of valuation, taking into account
the terms and conditions upon which the restricted shares were granted. The fair value is essentially equal to the share price
of the Company as at the date of grant.



The cost of equity-settled transactions is recognized,
together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled.
The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects
the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will
ultimately vest. The charge or credit to the consolidated statements of comprehensive income for a period represents the movement
in the cumulative expense recognized as at the beginning and end of that period.



The expense is recognized and charged to the consolidated
statements of comprehensive income on the straight-line basis over the performance period.



No expense is recognized for
awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting
condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided
that all other performance and/or service conditions are satisfied.



Where the terms of an equity-settled
award are modified, as a minimum the expense recognized is the expense as if the terms had not been modified, if the original terms
of the award are met . In addition, an expense is recognized for any modification that increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.



F-33







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Employee benefits (continued)

Share-based payment transactions(continued)

Where an equity-settled award
is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is
recognized immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee
are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date
that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described
in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally.



The dilutive effect of outstanding
restricted shares is reflected as additional share dilution in the computation of earnings per share.



Pension schemes

The Group operates a defined contribution Mandatory
Provident Fund retirement benefit scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for
those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’
basic salaries and are charged to the consolidated statements of comprehensive income as they become payable in accordance with
the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered
fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme. The Group has
no further payment obligations once the contributions have been paid.



The employees of the Group’s subsidiaries which
operate in Mainland China are required to participate in central pension schemes operated by the local municipal government. The
subsidiaries are required to contribute certain percentages of their payroll costs to the central pension schemes. The contributions
are charged to the consolidated statements of comprehensive income as they become payable in accordance with the rules of the central
pension schemes. The Group has no further payment obligations once the contributions have been paid.



Other benefits

The Group contributes on a monthly basis to defined
contribution housing, medical and other benefit plans organized by the PRC government. The PRC government assumes the obligations
to all existing and retired employees under these plans. Contributions to these plans by the Group are expensed as incurred. The
Group has no further obligations beyond the required contributions under these plans.



F-34







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| | ---- | ------------------------------------------------------



Foreign currencies

These financial statements are presented in RMB. Each
entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured
using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional
currency rates of exchange ruling at the end of each reporting period. All differences are taken to the consolidated statements
of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was determined.



The functional currencies of certain overseas subsidiaries
are currencies other than RMB. As of the end of each reporting period, the assets and liabilities of these entities are translated
into the presentation currency of the Group at exchange rates ruling at the end of each reporting period and, their consolidated
statements of comprehensive income are translated into RMB at the weighted average exchange rates for the year. The resulting exchange
differences are included in a separate component of equity, the exchange fluctuation reserve. On disposal of a foreign entity,
the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the consolidated
statements of comprehensive income.



For the purpose of the consolidated cash flow statements,
the cash flows of foreign subsidiaries are translated into RMB at the exchange rates prevailing at the dates of the cash flows.
Frequently recurring cash flows of overseas subsidiaries which arise throughout the period are translated into RMB at the weighted
average exchange rates for the period.





F-35







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.3. | IMPACT OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
| | ---- | ---------------------------------------------------------------------



The Group has adopted the following relevant new
interpretations and amendments to IFRSs for the first time for the current year’s financial statements.



|IFRS 1 Amendment           |  | Amendment to IFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards – Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|IAS 24 (Revised)           |  | Related Party Disclosures                                                                                                                                         
|IAS 32 Amendment           |  | Amendment to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues                                                                         
|IFRIC-Int 14 Amendments    |  | Amendments to IFRIC-Int 14 Prepayments of a Minimum Funding Requirement                                                                                           
|IFRIC-Int 19               |  | Extinguishing Financial Liabilities with Equity Instruments                                                                                                       
|Improvements to IFRSs 2010 |  | Amendments to a number of IFRSs issued in May 2010                                                                                                                



Other than as further explained below regarding the
impact of IAS 24 (Revised), and amendments to IFRS 3, IAS 1 and IAS 27 included in Improvements to IFRSs 2010, the adoption
of the new and revised IFRSs has had no significant financial effect on these financial statements.



The principal effects of adopting these IFRSs are
as follows:



| | (a) | IAS 24 (Revised) Related Party Disclosures
| | --- | ------------------------------------------



IAS 24 (Revised) clarifies and
simplifies the definitions of related parties. The new definitions emphasize a symmetrical view of related party relationships
and clarify the circumstances in which persons and key management personnel affect related party relationships of an entity. The
revised standard also introduces an exemption from the general related party disclosure requirements for transactions with a government
and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity.
The accounting policy for related parties has been revised to reflect the changes in the definitions of related parties under the
revised standard. The adoption of the revised standard did not have any impact on the financial position or performance of the
Group. Details of the related party transactions, including the related comparative information, are included in Note 12 to the
consolidated financial statements.



F-36







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.3. | IMPACT OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (continued)
| | ---- | ---------------------------------------------------------------------------------



| | (b) | Improvements to IFRSs 2010 issued in May 2010 sets out amendments to a number of IFRSs. There are separate transitional
provisions for each standard. While the adoption of some of the amendments may result in changes in accounting policies, none of
these amendments has had a significant financial impact on the financial position or performance of the Group. Details of the key
amendments most applicable to the Group are as follows:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | IFRS 3 Business Combinations: The amendment clarifies that
the amendments to IFRS 7, IAS 32 and IAS 39 that eliminate the exemption for contingent consideration that does not apply to contingent
consideration that arose from business combinations whose acquisition dates precede the application of IFRS 3 (as revised in 2008).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the amendment limits the scope of measurement
choices for non-controlling interests. Only the components of non-controlling interests that are present ownership interests and
entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation are measured at either
fair value or at the present ownership instruments’ proportionate share of the acquiree’s identifiable net assets.
All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement
basis is required by another IFRS.



The amendment also added explicit guidance to clarify
the accounting treatment for non-replaced and voluntarily replaced share-based payment awards.



| | · | IAS 1 Presentation of Financial Statements: The amendment clarifies
that an analysis of each component of other comprehensive income can be presented either in the consolidated statements of changes
in equity or in the notes to the financial statements. The Group elects to present the analysis of each component of other comprehensive
income in both the statements of comprehensive income and changes in equity.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | IAS 27 Consolidated and Separate Financial Statements: The
amendment clarifies that the consequential amendments from IAS 27 (as revised in 2008) made to IAS 21, IAS 28 and IAS 31 shall
be applied prospectively for annual periods beginning on or after July 1, 2009 or earlier if IAS 27 is applied earlier.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-37







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.4. | ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
STANDARDS
| | ---- | ------------------------------------------------------------------------



The Group has not applied the following new and revised
IFRSs, that have been issued but are not yet effective, in the financial statements.



|IFRS 9            |  | Financial Instruments4                                                                     
|----------------- |  | -------------------------------------------------------------------------------------------
|IFRS 10           |  | Consolidated Financial Statements3                                                         
|IFRS 11           |  | Joint Arrangements3                                                                        
|IFRS 12           |  | Disclosure of Interests in Other Entities3                                                 
|IFRS 13           |  | Fair Value Measurement3                                                                    
|IAS 1 Amendments  |  | Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income2
|IAS 12 Amendments |  | Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of Underlying Assets1           
|IAS 19 (2011)     |  | Employee Benefits3                                                                         
|IAS 27 (2011)     |  | Separate Financial Statements3                                                             
|IAS 28 (2011)     |  | Investments in Associates and Joint Ventures3                                              
|IFRIC-Int 20      |  | Stripping Costs in the Production Phase of a Surface Mine3                                 



| | 1 | Effective for annual periods beginning on or after January 1, 2012
| | - | ------------------------------------------------------------------

| | 2 | Effective for annual periods beginning on or after July 1, 2012
| | - | ---------------------------------------------------------------

| | 3 | Effective for annual periods beginning on or after January 1, 2013
| | - | ------------------------------------------------------------------

| | 4 | Effective for annual periods beginning on or after January 1, 2015
| | - | ------------------------------------------------------------------



The Group is in the process of making an assessment
of the impact of these new and revised IFRSs upon initial application. Other than as further explained below regarding the impact
of IFRS 12, IFRS 13, amendments to IAS 1, and IAS 19 (2011), these new and revised IFRSs are unlikely to have a significant impact
on the Group’s results of operations and financial position.



IFRS 12 includes the disclosure
requirements for subsidiaries, joint arrangements, associates and structured entities that are previously included in IAS 27 Consolidated
and Separate Financial Statements, IAS 31 Interests in Joint Ventures and IAS 28 Investments in Associates. It also introduces
a number of new disclosure requirements for these entities.



IFRS 13 provides a precise definition of fair value
and a single source of fair value measurement and disclosure requirements for use across IFRSs. The standard does not change the
circumstances in which the Group is required to use fair value, but provides guidance on how fair value should be applied where
its use is already required or permitted under other IFRSs. The Group expects to adopt IFRS 13 prospectively from January 1, 2013.



F-38







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 3.4. | ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
STANDARDS (continued)
| | ---- | ------------------------------------------------------------------------------------



Amendments to IAS 1 change the grouping of items presented
in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time (for
example, upon derecognition or settlement) would be presented separately from items which will never be reclassified. The Group
expects to adopt the amendments from January 1, 2013.



IAS 19 (2011) includes a number of amendments that
range from fundamental changes to simple clarifications and re-wording. The revised standard introduces significant changes in
the accounting for defined benefit pension plans including removing the choice to defer the recognition of actuarial gains and
losses. Other changes include modifications to the timing of recognition for termination benefits, the classification of short-term
employee benefits and disclosures of defined benefit plans. The Group expects to adopt IAS 19 (2011) from January 1, 2013.



F-39







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 4. | SIGNIFICANT ACCOUNTING ESTIMATES
| | -- | --------------------------------



In the process of applying the Group’s accounting
policies, management has made estimates and assumptions in determining certain amounts recognized in the financial statements,
some of the estimates and assumptions are based on expected outcomes of future events. These estimates may not necessarily be indicative
of the actual outcome. The significant estimates and assumptions are discussed below.



Useful lives of property, plant and equipment

The Group determines the estimated useful lives and
related depreciation charges for its property, plant and equipment based on the historical experience of the actual useful lives
of property, plant and equipment of similar nature and functions. Management will revise the depreciation period where actual useful
lives are different from those previously estimated, and it will write off or write down the value of obsolete or non-strategic
assets that have been abandoned.



Net realizable value of inventories

Net realizable value of inventories is the estimated
selling price in the ordinary course of business less estimated selling expenses. The net realizable value is estimated based on
the current market conditions and historical experience of selling merchandise of similar nature. The estimates can change significantly
as a result of changes in customer taste or competitor actions. The Group reassesses these estimates at the end of each reporting
period.



Impairment allowances for trade and other receivables

The Group estimates the impairment allowances for
trade and other receivables by assessing the collectability of the receivables based on the related customers’ credit history
and prevailing market conditions. Allowances are applied to trade and other receivables where events or changes in circumstances
indicate that the balances may not be collectible. Where the expectation is different from the initial estimate, the difference
is recognized as an impairment loss in the period in which such estimate is changed. The Group reassesses the impairment allowances
at the end of each reporting period.



Historically, the Group has no experience of bad debts.
All the customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances
are monitored on an ongoing basis and the Group has the sole discretion to cease business with customers who fail to pay within
the credit period.



The Group will not make any provision of the overdue
balance if (1) the Group has continuous trading with the distributor; (2) the Group receives continuous repayment from the distributor;
and (3) the Group has no dispute on the overdue balance with the distributor.



The Group will make full provision on such balances
if they are considered not recoverable by the Group.



Share-based payment transactions

The Group measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair
value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the
terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including
the expected life of the share option, volatility and dividend yield and making assumptions about them.



F-40







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 4. | SIGNIFICANT ACCOUNTING ESTIMATES (continued)
| | -- | --------------------------------------------



Contingent share liability

As stated in Notes 2 and 26 to the consolidated financial
statements, the number of shares of the Company to be released and issued to the former shareholders of Windrace as part of the
reverse capitalization transaction effective on October 21, 2009 is subject to the results of the Company. Estimating fair value
for contingent share liability requires determining the most appropriate valuation model. This estimate also requires determining
the most appropriate inputs to the valuation model including volatility, market discount and dividend yield and making assumptions
about them. Any changes to the assumptions can materially affect the determination of the fair value of contingent share liability.



| | 5. | SEGMENT INFORMATION
| | -- | -------------------



The Group determines its operating segments based
on the reports reviewed by the chief operating decision-makers that are used to make strategic decisions.



The Group operates one business segment, which is
the manufacture and sale of sportswear, including footwear, apparel and accessories. The Group’s most senior executive management
consider the major product lines (being footwear, apparel and accessories) as one business segment for assessment of segment performance
as they exhibit similar long term financial performance and they are similar in terms of product nature, production process, customer
type and class, and distribution method. As such, no further business segment analysis is presented.



In addition, the Group’s revenue, expenses,
assets and liabilities and capital expenditures are predominantly attributable to a single geographical region, which is the PRC.
Therefore, no analysis of business or geographical segment is presented.



| | 6. | REVENUE, OTHER INCOME AND GAINS
| | -- | -------------------------------



Revenue, which is also the Group's turnover, represents
the net invoiced value of goods sold during the year.



An analysis of revenue, other income and gains is
as follows:



|                                    |  | 2011    |         |  | 2011    |  |           | 2010    |  |  | 2009      | 
|----------------------------------- |  | ------- | ------- |  | ------- |  | --------- | ------- |  |  | --------- | 
|                                    |  | USD'000 |         |  | RMB'000 |  |           | RMB'000 |  |  | RMB'000   | 
|                                    |  |         |         |  |         |  |           |         |  |  |           | 
|Revenue                             |  |         |         |  |         |  |           |         |  |  |           | 
|Manufacture and sale of sportswear: |  |         |         |  |         |  |           |         |  |  |           | 
|Footwear                            |  |         | 240,566 |  |         |  | 1,514,096 |         |  |  | 1,266,378 | 
|Apparel                             |  |         | 275,105 |  |         |  | 1,731,482 |         |  |  | 1,403,708 | 
|Accessories                         |  |         | 6,829   |  |         |  | 42,983    |         |  |  | 28,805    | 
|                                    |  |         |         |  |         |  |           |         |  |  |           | 
|                                    |  |         | 522,500 |  |         |  | 3,288,561 |         |  |  | 2,698,891 | 



F-41







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 6. | REVENUE, OTHER INCOME AND GAINS (continued)
| | -- | -------------------------------------------



|                                                             |  | 2011    |       |  | 2011    |  |        | 2010    |  |  | 2009    | 
|------------------------------------------------------------ |  | ------- | ----- |  | ------- |  | ------ | ------- |  |  | ------- | 
|                                                             |  | USD'000 |       |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                                                             |  |         |       |  |         |  |        |         |  |  |         | 
|Other income and gains                                       |  |         |       |  |         |  |        |         |  |  |         | 
|Bank interest income                                         |  |         | 1,884 |  |         |  | 11,858 |         |  |  | 2,364   | 
|Gain on disposal of property, plant and equipment            |  |         | 10    |  |         |  | 63     |         |  |  | -       | 
|Award from the PRC government*                               |  |         | 380   |  |         |  | 2,390  |         |  |  | 4,051   | 
|Other income**                                               |  |         | 76    |  |         |  | 480    |         |  |  | 1       | 
|                                                             |  |         |       |  |         |  |        |         |  |  |         | 
|                                                             |  |         | 2,350 |  |         |  | 14,791 |         |  |  | 6,416   | 
|                                                             |  |         |       |  |         |  |        |         |  |  |         | 
|Gain from change in fair value of contingent share liability |  |         | 6,140 |  |         |  | 38,645 |         |  |  | 1,604   | 



| | * | There are no unfulfilled conditions or contingencies relating
to these subsidies.
| | - | ---------------------------------------------------------------------------------

| | ** | Other income in 2009 represented the reversal of over-provision for aborted IPO expenses in 2008.
| | -- | -------------------------------------------------------------------------------------------------



| | 7. | FINANCE COSTS
| | -- | -------------



|                                                        |  | 2011    |     |  | 2011    |  |     | 2010    |  |  | 2009    | 
|------------------------------------------------------- |  | ------- | --- |  | ------- |  | --- | ------- |  |  | ------- | 
|                                                        |  | USD'000 |     |  | RMB'000 |  |     | RMB'000 |  |  | RMB'000 | 
|                                                        |  |         |     |  |         |  |     |         |  |  |         | 
|Interest on bank loans wholly repayable within one year |  |         | 136 |  |         |  | 856 |         |  |  | 1,893   | 
|Interest on preferred shares                            |  |         | -   |  |         |  | -   |         |  |  | -       | 
|                                                        |  |         |     |  |         |  |     |         |  |  |         | 
|                                                        |  |         | 136 |  |         |  | 856 |         |  |  | 1,893   | 



F-42







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 8. | PROFIT BEFORE TAX
| | -- | -----------------



The Group's profit before tax is arrived at after
charging/(crediting):



|                                                                                          |  | Note |  |  | 2011    |     |         | 2011    |  |     | 2010      |  |  | 2009    |          
|----------------------------------------------------------------------------------------- |  | ---- |  |  | ------- | --- | ------- | ------- |  | --- | --------- |  |  | ------- | ---------
|                                                                                          |  |      |  |  | USD'000 |     |         | RMB'000 |  |     | RMB'000   |  |  | RMB'000 |          
|                                                                                          |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Included in cost of sales                                                                 |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Cost of inventories sold*                                                                 |  |      |  |  |         |     | 364,845 |         |  |     | 2,296,298 |  |  |         | 1,857,251
|                                                                                          |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Included in selling and distribution expenses                                             |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Depreciation of property, plant and equipment                                             |  |      |  |  |         |     | 54      |         |  |     | 338       |  |  |         | 302      
|Employee benefits expenses :                                                              |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Wages and salaries                                                                        |  |      |  |  |         |     | 2,185   |         |  |     | 13,752    |  |  |         | 12,343   
|Pension scheme contributions**                                                            |  |      |  |  |         |     | 317     |         |  |     | 1,995     |  |  |         | 1,498    
|                                                                                          |  |      |  |  |         |     | 2,502   |         |  |     | 15,747    |  |  |         | 13,841   
|                                                                                          |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Included in administrative expenses                                                       |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Depreciation of property, plant and equipment                                             |  |      |  |  |         |     | 1,085   |         |  |     | 6,831     |  |  |         | 6,018    
|Employee benefits expenses (including directors' remuneration - Note 9):                  |  |      |  |  |         |     |         |         |  |     |           |  |  |         |          
|Wages and salaries                                                                        |  |      |  |  |         |     | 2,075   |         |  |     | 13,057    |  |  |         | 11,236   
|Pension scheme contributions**                                                            |  |      |  |  |         |     | 211     |         |  |     | 1,329     |  |  |         | 854      
|                                                                                          |  |      |  |  |         |     | 2,286   |         |  |     | 14,386    |  |  |         | 12,090   
|Minimum lease payments under operating leases in respect of office premises and warehouse |  |      |  |  |         |     | 590     |         |  |     | 3,714     |  |  |         | 1,088    
|Auditors' remuneration                                                                    |  |      |  |  |         |     | 596     |         |  |     | 3,753     |  |  |         | 2,855    
|Amortization of prepaid land lease payments                                               |  | 14   |  |  |         | 119 |         |         |  | 748 |           |  |  | 746     |          
|Loss on disposal of items of property, plant and equipment                                |  |      |  |  |         |     | 1       |         |  |     | 7         |  |  |         | 108      





F-43









EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 8. | PROFIT BEFORE TAX (continued)
| | -- | -----------------------------



|                                              |  | 2011    |        |   | 2011    |  |         | 2010    |  |  | 2009    |  
|--------------------------------------------- |  | ------- | ------ | - | ------- |  | ------- | ------- |  |  | ------- | -
|                                              |  | USD'000 |        |   | RMB'000 |  |         | RMB'000 |  |  | RMB'000 |  
|                                              |  |         |        |   |         |  |         |         |  |  |         |  
|Included in research and development expenses |  |         |        |   |         |  |         |         |  |  |         |  
|Depreciation of property, plant and equipment |  |         | 109    |   |         |  | 683     |         |  |  | 423     |  
|Employee benefits expenses:                   |  |         |        |   |         |  |         |         |  |  |         |  
|Wages and salaries                            |  |         | 1,549  |   |         |  | 9,750   |         |  |  | 9,013   |  
|Pension scheme contributions**                |  |         | 270    |   |         |  | 1,698   |         |  |  | 1,215   |  
|                                              |  |         | 1,819  |   |         |  | 11,448  |         |  |  | 10,228  |  
|                                              |  |         |        |   |         |  |         |         |  |  |         |  
|Included in other income and gains            |  |         |        |   |         |  |         |         |  |  |         |  
|Interest income                               |  |         | (1,884 | ) |         |  | (11,858 | )       |  |  | (2,364  | )



| | * | The cost of inventories sold includes approximately RMB54,803,000 (2010: RMB53,630,000; 2009: RMB60,777,000) relating to direct
staff cost and RMB10,396,000 (2010: RMB10,207,000; 2009: RMB10,102,000) depreciation of the manufacturing facilities.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ** | As of December 31, 2011, the Group had no forfeited contributions available to reduce its contributions to the pension schemes
in future years(2010: Nil; 2009: Nil).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | DIRECTORS' REMUNERATION
| | -- | -----------------------



Details of directors' remuneration are as follows:



|                                                   |  | 2011    |     |  | 2011    |  |     | 2010    |  |  | 2009    | 
|-------------------------------------------------- |  | ------- | --- |  | ------- |  | --- | ------- |  |  | ------- | 
|                                                   |  | USD'000 |     |  | RMB'000 |  |     | RMB'000 |  |  | RMB'000 | 
|                                                   |  |         |     |  |         |  |     |         |  |  |         | 
|Other emoluments:                                  |  |         |     |  |         |  |     |         |  |  |         | 
|Salaries, bonuses, allowances and benefits in kind |  |         | 150 |  |         |  | 941 |         |  |  | 1,160   | 
|Share-based compensation expense                   |  |         | -   |  |         |  | -   |         |  |  | 626     | 
|Pension scheme contributions                       |  |         | 1   |  |         |  | 8   |         |  |  | 8       | 
|                                                   |  |         |     |  |         |  |     |         |  |  |         | 
|                                                   |  |         | 151 |  |         |  | 949 |         |  |  | 1,794   | 



F-44







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 9. | DIRECTORS' REMUNERATION (continued)
| | -- | -----------------------------------



There was no arrangement under which a director waived
or agreed to waive any remuneration during the year ended December 31, 2011(2010: Nil; 2009: Nil).



No remuneration was paid by the Group to any of the
directors of the Group as an inducement to join or upon joining the Group or as compensation for loss of office for the year ended
December 31, 2011 (2010: Nil; 2009: Nil).



During the year ended December 31, 2010, certain directors
were granted restricted shares in respect of their services to the Group, under the equity incentive plan of the Company, further
details of which are set out in Note 27 to the financial statements. The fair value of such restricted shares which have been recognized
in the consolidated statements of comprehensive income over the vesting period, was determined as at the date of grant and the
amount included in the financial statements for the current year is included in the above directors' remuneration disclosures.



| | 10. | TAX
| | --- | ---



Pursuant to the rules and regulations of the BVI and
the Cayman Islands, the Group is not subject to any income tax in BVI and the Cayman Islands. No tax provision for Hong Kong profits
has been made as the Group did not generate any assessable profits arising in Hong Kong during the reporting periods. Taxes on
profits assessable in the PRC have been calculated at the prevailing rates, based on existing legislation, interpretations and
practices in respect thereof.



|                                                 |  | 2011    |        |  | 2011    |  |        | 2010    |  |  | 2009    | 
|------------------------------------------------ |  | ------- | ------ |  | ------- |  | ------ | ------- |  |  | ------- | 
|                                                 |  | USD'000 |        |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                                                 |  |         |        |  |         |  |        |         |  |  |         | 
|Current tax - Mainland China Charge for the year |  |         | 10,474 |  |         |  | 65,922 |         |  |  | 56,274  | 



Under the new PRC Corporate Income Tax Law (the ''New
Corporate Income Tax Law'') and its Implementation Rules (effective on January 1, 2008), the PRC corporate income tax rate for
domestic-invested and foreign-invested enterprises is unified to 25%. Accordingly, the applicable tax rate for XDLong Fujian is
25% in 2011, 2010 and 2009.



XDLong China, a foreign-invested enterprise established
before the New Corporate Income Tax Law, can continue to enjoy the existing tax holiday whereby it is exempted from the PRC corporate
income tax for its first two profitable years, commencing from January 1, 2008, and thereafter is entitled to a 50% reduction in
the PRC corporate income tax for the subsequent three years from January 1, 2010 to December 31, 2012. No provision for the PRC
corporate income tax has been made for XDLong China in 2009 as its assessable profits are fully exempt for PRC corporate income
tax purposes. The tax rate applied to XDLong China pre-tax profits in 2010 and 2011 was 12.5%.



F-45







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 10. | TAX (continued)
| | --- | ---------------



A reconciliation of the tax expense applicable to
profit before tax using the applicable statutory rates for the jurisdictions in which the Company and the majority of its subsidiaries
operated to the tax expense at the effective tax rates are as follows:



|                                                            |  | 2011    |         |   | 2011    |  |         | 2010          |  |  | 2009          |  
|----------------------------------------------------------- |  | ------- | ------- | - | ------- |  | ------- | ------------- |  |  | ------------- | -
|                                                            |  |         |         |   |         |  |         | As Restated - |  |  | As Restated - |  
|                                                            |  |         |         |   |         |  |         | Note 2        |  |  | Note 2        |  
|                                                            |  | USD'000 |         |   | RMB'000 |  |         | RMB'000       |  |  | RMB'000       |  
|                                                            |  |         |         |   |         |  |         |               |  |  |               |  
|Profit before tax                                           |  |         | 85,162  |   |         |  | 536,004 |               |  |  | 409,516       |  
|                                                            |  |         |         |   |         |  |         |               |  |  |               |  
|Tax at the applicable rates (Note)                          |  |         | 21,071  |   |         |  | 132,618 |               |  |  | 104,019       |  
|Tax exemption due to tax holidays                           |  |         | (10,175 | ) |         |  | (64,041 | )             |  |  | (50,930       | )
|Tax effect of expenses not deductible for taxation purposes |  |         | 591     |   |         |  | 3,721   |               |  |  | 3,427         |  
|Income not subject to tax                                   |  |         | (1,013  | ) |         |  | (6,376  | )             |  |  | (242          | )
|                                                            |  |         |         |   |         |  |         |               |  |  |               |  
|Tax charge at the Group's effective rate                    |  |         | 10,474  |   |         |  | 65,922  |               |  |  | 56,274        |  



| | Note: | The applicable tax rates from January 1, 2008 were a mix of 25% and 16.5% for entities operating in China and Hong Kong, respectively.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------



According to the Corporate Income Tax Law and its
implementation rules, dividends receivable by non-PRC corporate residents from PRC enterprises are subject to withholding tax at
a rate of 10%, unless reduced by tax treaties or arrangements, for profits earned since January 1, 2008. In addition, under the
Sino Hong Kong Double Tax Arrangement and its relevant regulations, a qualified Hong Kong tax resident will be liable for withholding
tax at the rate of 5% for dividend income derived from the PRC if the Hong Kong tax resident is the “beneficial owner”
and holds 25% or more of the equity interests of the PRC company.



As of December 31, 2011, 2010 and 2009, the
Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since
the Company intends to reinvest its earnings to further expand its businesses in mainland China, and its foreign invested
enterprises do not intend to declare dividends to their immediate foreign holding companies.



F-46







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 11. | EARNINGS PER SHARE
| | --- | ------------------



The calculation of the basic and diluted earnings
per share attributable to the ordinary equity holders of the Company is based on the following data:



|                                                                                          |  | December 31 |           
|----------------------------------------------------------------------------------------- |  | ----------- | ----------
|                                                                                          |  | 2011        |           
|                                                                                          |  |             |           
|                                                                                          |  |             |           
|                                                                                          |  |             | USD'000   
|                                                                                          |  |             |           
|Earnings                                                                                  |  |             |           
|Earnings for the purposes of basic earnings per share                                     |  |             | 74,688    
|Effect of dilutive potential ordinary shares                                              |  |             |           
|Interest on preferred shares                                                              |  |             | -         
|                                                                                          |  |             |           
|Earnings for the purposes of diluted earnings per share                                   |  |             | 74,688    
|                                                                                          |  |             |           
|Number of shares                                                                          |  |             |           
|Weighted average number of ordinary shares for the purposes of basic earnings per share   |  |             | 29,700,010
|Effect of dilutive potential ordinary shares                                              |  |             |           
|Escrow shares                                                                             |  |             | 1,425,863 
|Earn-out shares                                                                           |  |             | 2,212,789 
|Preferred shares                                                                          |  |             | -         
|Warrants                                                                                  |  |             | 927,246   
|Restricted shares                                                                         |  |             | 7,120     
|                                                                                          |  |             |           
|Weighted average number of ordinary shares for the purposes of diluted earnings per share |  |             | 34,273,028
|Earnings per share                                                                        |  |             |           
|Basic                                                                                     |  | USD         | 2.51      
|Diluted                                                                                   |  | USD         | 2.18      



F-47







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 12. | RELATED PARTY TRANSACTIONS
| | --- | --------------------------



The Group had the following material transactions
with related parties:



| | (a) | Mr. Lin Shuipan, a director of the Company, and Ms. Chen Xiayu, the spouse of Mr. Lin Shuipan, have guaranteed certain bank
loans and bills payables made available to the Group up to RMB60,000,000 during the year ended December 31, 2009. The personal
guarantee provided by Mr. Lin Shuipan and Ms. Chen Xiayu expired upon repayment of the respective bank loans and bills payables
by the Group in June 2010.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The Group entered into an agreement with Professor Sun Yining, a non-executive director of Windrace, on September 6, 2007.
Pursuant to the agreement, Professor Sun Yining was appointed as a brand spokesperson of the Group for a term of two years from
September 6, 2007. The annual remuneration to Professor Sun Yining comprises RMB200,000 cash payment and RMB20,000 in-kind payment
of the Group's products. The agreement expired in September 2009 and Professor Sun Yining resigned as a non-executive director
of Windrace on November 10, 2009.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Details of remuneration to the directors of the Group are disclosed in Note 9 to the financial statements.
| | --- | ----------------------------------------------------------------------------------------------------------



| | (d) | There is no outstanding balance due to a director as of December 31, 2011 and 2010. Details of the outstanding balance due
to a director as of December 31, 2009 are disclosed in Note 24 to the financial statements.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-48







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 13. | PROPERTY, PLANT AND EQUIPMENT
| | --- | -----------------------------



|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  | Furniture, |         |   |              |  |         |         | 
|------------------------------------------- |  | --------- | ------- |  | ------------ |  | ------- | --------- |  |  | -------- | - |  | ---------- | ------- | - | ------------ |  | ------- | ------- | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  | fixtures   |         |   |              |  |         |         | 
|                                            |  |           |         |  | Leasehold    |  |         | Plant and |  |  | Motor    |   |  | and office |         |   | Construction |  |         |         | 
|                                            |  | Buildings |         |  | improvements |  |         | machinery |  |  | vehicles |   |  | equipment  |         |   | in progress  |  |         | Total   | 
|                                            |  | RMB'000   |         |  | RMB'000      |  |         | RMB'000   |  |  | RMB'000  |   |  | RMB'000    |         |   | RMB'000      |  |         | RMB'000 | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|Cost:                                       |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of January 1, 2009                       |  |           | 285,987 |  |              |  | 183     |           |  |  | 24,938   |   |  |            | 3,592   |   |              |  | 1,401   |         | 
|Additions                                   |  |           | -       |  |              |  | -       |           |  |  | 1,037    |   |  |            | 122     |   |              |  | 1,131   |         | 
|Disposals                                   |  |           | -       |  |              |  | (182    | )         |  |  | -        |   |  |            | -       |   |              |  | (29     | )       | 
|Exchange realignment                        |  |           | -       |  |              |  | (1      | )         |  |  | -        |   |  |            | -       |   |              |  | -       |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2009 and January 1, 2010 |  |           | 285,987 |  |              |  | -       |           |  |  | 25,975   |   |  |            | 3,714   |   |              |  | 2,503   |         | 
|Additions                                   |  |           | -       |  |              |  | 1,886   |           |  |  | 3,087    |   |  |            | 2,172   |   |              |  | 1,124   |         | 
|Disposals                                   |  |           | -       |  |              |  | -       |           |  |  | (223     | ) |  |            | -       |   |              |  | (41     | )       | 
|Exchange realignment                        |  |           | -       |  |              |  | -       |           |  |  | -        |   |  |            | -       |   |              |  | (1      | )       | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2010 and January 1, 2011 |  |           | 285,987 |  |              |  | 1,886   |           |  |  | 28,839   |   |  |            | 5,886   |   |              |  | 3,585   |         | 
|Additions                                   |  |           | -       |  |              |  | 1,353   |           |  |  | 5,894    |   |  |            | 535     |   |              |  | 751     |         | 
|Disposals                                   |  |           | -       |  |              |  | (12     | )         |  |  | (4       | ) |  |            | (608    | ) |              |  | (15     | )       | 
|Exchange realignment                        |  |           | -       |  |              |  | -       |           |  |  | -        |   |  |            | -       |   |              |  | (1      | )       | 
|As of December 31, 2011                     |  |           | 285,987 |  |              |  | 3,227   |           |  |  | 34,729   |   |  |            | 5,813   |   |              |  | 4,320   |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|Accumulated depreciation:                   |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of January 1, 2009                       |  |           | 21,912  |  |              |  | 16      |           |  |  | 4,994    |   |  |            | 2,236   |   |              |  | 299     |         | 
|Provided during the year                    |  |           | 12,869  |  |              |  | 3       |           |  |  | 2,612    |   |  |            | 301     |   |              |  | 381     |         | 
|Written off                                 |  |           | -       |  |              |  | (19     | )         |  |  | -        |   |  |            | -       |   |              |  | (3      | )       | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2009 and January 1, 2010 |  |           | 34,781  |  |              |  | -       |           |  |  | 7,606    |   |  |            | 2,537   |   |              |  | 677     |         | 
|Provided during the year                    |  |           | 12,869  |  |              |  | 216     |           |  |  | 2,923    |   |  |            | 434     |   |              |  | 508     |         | 
|Written off                                 |  |           | -       |  |              |  | -       |           |  |  | (138     | ) |  |            | -       |   |              |  | (17     | )       | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2010 and January 1, 2011 |  |           | 47,650  |  |              |  | 216     |           |  |  | 10,391   |   |  |            | 2,971   |   |              |  | 1,168   |         | 
|Provided during the year                    |  |           | 12,870  |  |              |  | 865     |           |  |  | 3,126    |   |  |            | 734     |   |              |  | 653     |         | 
|Written off                                 |  |           | -       |  |              |  | -       |           |  |  | -        |   |  |            | (513    | ) |              |  | (10     | )       | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2011                     |  |           | 60,520  |  |              |  | 1,081   |           |  |  | 13,517   |   |  |            | 3,192   |   |              |  | 1,811   |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|Carrying amount:                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2009                     |  |           | 251,206 |  |              |  | -       |           |  |  | 18,369   |   |  |            | 1,177   |   |              |  | 1,826   |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2010                     |  |           | 238,337 |  |              |  | 1,670   |           |  |  | 18,448   |   |  |            | 2,915   |   |              |  | 2,417   |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|As of December 31, 2011                     |  |           | 225,467 |  |              |  | 2,146   |           |  |  | 21,212   |   |  |            | 2,621   |   |              |  | 2,509   |         | 
|                                            |  |           |         |  |              |  |         |           |  |  |          |   |  |            |         |   |              |  |         |         | 
|                                            |  |           | USD'000 |  |              |  | USD'000 |           |  |  | USD'000  |   |  |            | USD'000 |   |              |  | USD'000 |         | 
|As of December 31, 2011                     |  |           | 35,823  |  |              |  | 341     |           |  |  | 3,370    |   |  |            | 416     |   |              |  | 399     |         | 



The Group's buildings are situated in Mainland China
and are held on land under medium term leases (lease with a term less than 50 years). The leases of the said land expire in 2056.



F-49







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 13. | PROPERTY, PLANT AND EQUIPMENT (continued)
| | --- | -----------------------------------------



As of December 31, 2011, no Group's buildings (2010
and 2009: carrying amounts of approximately RMB136,744,000 and RMB243,481,000, respectively) were pledged to secure general banking
facilities granted to the Group (Note 23).



| | 14. | PREPAID LAND LEASE PAYMENTS
| | --- | ---------------------------



|                                                                                  |  | 2011    |       |   | 2011    |  |        | 2010    |  |  | 2009    |  
|--------------------------------------------------------------------------------- |  | ------- | ----- | - | ------- |  | ------ | ------- |  |  | ------- | -
|                                                                                  |  | USD'000 |       |   | RMB'000 |  |        | RMB'000 |  |  | RMB'000 |  
|                                                                                  |  |         |       |   |         |  |        |         |  |  |         |  
|Carrying amount at January 1                                                      |  |         | 4,647 |   |         |  | 29,247 |         |  |  | 29,993  |  
|Additions                                                                         |  |         | -     |   |         |  | -      |         |  |  | -       |  
|Recognized during the year                                                        |  |         | (119  | ) |         |  | (748   | )       |  |  | (746    | )
|                                                                                  |  |         |       |   |         |  |        |         |  |  |         |  
|Carrying amount at December 31                                                    |  |         | 4,528 |   |         |  | 28,499 |         |  |  | 29,247  |  
|Current portion included in prepayments, deposits and other receivables (Note 18) |  |         | (103  | ) |         |  | (648   | )       |  |  | (648    | )
|                                                                                  |  |         |       |   |         |  |        |         |  |  |         |  
|Non-current portion                                                               |  |         | 4,425 |   |         |  | 27,851 |         |  |  | 28,599  |  



The Group's prepayment of land
use rights is for medium term land located in Mainland China. The leases expire between 2055 and 2056.



As of December 31, 2011, no land use right (2010 and
2009: carrying amounts of approximately RMB12,310,000 and RMB29,837,000, respectively) was pledged to secure general banking facilities
granted to the Group (Note 23).



XDLong China owned and occupied a parcel of land with
an aggregate site area of approximately 38,784 square meters together with buildings on such land. The buildings consist of the
Group’s production facility, a research and development center, an office facility, staff quarters, and a recreation center
and sports facility, with an aggregate gross floor area of approximately 99,024 square meters. The Group has obtained the land
use rights certificate in relation to the land and the property ownership certificates for the buildings. The land use rights were
granted for industrial use for a term of 50 years from December 25, 2006.



XDLong Fujian owns a parcel of land located within
the Group’s production complex in Jinjiang, which has an aggregate site area of approximately 15,277 square meters. Pursuant
to the State-owned Land Use Right Transfer Contract, construction on this land was required to commence by February 28, 2006. However,
XDLong Fujian did not commence construction by such date because the Group decided to construct its production facilities on another
larger parcel of land owned by XDLong China. Currently, the Group has plans to construct additional facilities on the XDLong Fujian
parcel of land. On May 14, 2008, XDLong Fujian applied to the relevant local government agency for the approval to postpone construction
on the land. The local government agency has verbally confirmed that the local government does not intend to repossess the parcel
of land held for use by XDLong Fujian, or otherwise cancel the underlying contract. Management of the Group has concluded that
the possibility of incurring an impairment in value or loss of land use is remote.



F-50







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 14. | PREPAID LAND LEASE PAYMENTS (continued)
| | --- | ---------------------------------------



Management based its conclusion on the fact that the
local government has been advised that the Group intends to commence construction on the parcel of land and that local government
officials have provided verbal assurances that they do not intend to take punitive action for the Group’s failure to commence
construction. Consistent with the objectives of the local government, the construction in the Jinjiang area will inject capital
into the local economy and result in an expansion of the Group’s local workforce. As of December 31, 2011, the carrying amount
of this piece of land was RMB5,339,000 (2010: RMB5,461,000; 2009: RMB5,584,000).



| | 15. | Deposit paid for acquisition of land use rights
| | --- | -----------------------------------------------



|                               |  | 2011    |        |  | 2011    |  |        | 2010    |  |  | 2009    | 
|------------------------------ |  | ------- | ------ |  | ------- |  | ------ | ------- |  |  | ------- | 
|                               |  | USD'000 |        |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                               |  |         |        |  |         |  |        |         |  |  |         | 
|Carrying amount at January 1   |  |         | 2,002  |  |         |  | 12,600 |         |  |  | -       | 
|Additions                      |  |         | 9,601  |  |         |  | 60,430 |         |  |  | 12,600  | 
|                               |  |         |        |  |         |  |        |         |  |  |         | 
|Carrying amount at December 31 |  |         | 11,603 |  |         |  | 73,030 |         |  |  | 12,600  | 



As of December 31, 2011, a total deposit of RMB73,030,000
was paid for land use rights over two parcels of land.



As at December 31, 2011, the deposit of RMB26,230,000
(2010: RMB12,600,000) was paid for land use rights over a parcel of land in Jinjiang, Fujian Province, the PRC. On May 17, 2010,
May 20, 2010, November 18, 2010 and January 3, 2011, four sales and purchase agreements were entered into between the Group and
the independent third parties for the transfer of the right arising from the aforesaid deposit paid at a consideration of RMB5,400,000,
RMB7,640,000, RMB600,000 and RMB7,590,000, respectively. RMB5,000,000 was paid to the Jinjiang Municipal Bureau of Land and Resources
for the application of the land use right. The Group plans to use this parcel of land for the construction of new staff quarters,
which is expected to be completed by the end of 2012.



The consideration of RMB26,230,000 was fully paid
by the Group to the independent third party as of December 31, 2011. The Group is in the process of obtaining the relevant State-owned
Land Use Rights Certificate.



On December 20, 2011, a contract was entered into
between the Group and the municipal government of Ruichang City for the investment and construction of a sportswear manufacturing
base on a parcel of land in Ruichang City. Under this contract, the Group would purchase a parcel of land of 400,000 square meters
in Ruichang City, Jiangxi Province, PRC, for a total consideration of RMB198,000,000. The Group plans to use this parcel of land
for the construction of a new production facility, which is expected to be completed by the end of 2013. The land purchase proposal
has not been finalized and is subject to municipal and administrative approvals. As at December 31, 2011, the deposit of RMB46,800,000
was paid as a performance bond. The outstanding amount of RMB151,200,000 is disclosed as a capital commitment in Note 30(a).



F-51







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 16. | INVENTORIES
| | --- | -----------



|                 |  | 2011    |       |  | 2011    |  |        | 2010    |  |  | 2009    | 
|---------------- |  | ------- | ----- |  | ------- |  | ------ | ------- |  |  | ------- | 
|                 |  | USD'000 |       |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                 |  |         |       |  |         |  |        |         |  |  |         | 
|Raw materials    |  |         | 1,043 |  |         |  | 6,566  |         |  |  | 12,424  | 
|Work in progress |  |         | 264   |  |         |  | 1,659  |         |  |  | 2,561   | 
|Finished goods   |  |         | 3,712 |  |         |  | 23,364 |         |  |  | 29,762  | 
|                 |  |         |       |  |         |  |        |         |  |  |         | 
|                 |  |         | 5,019 |  |         |  | 31,589 |         |  |  | 44,747  | 



| | 17. | TRADE RECEIVABLES
| | --- | -----------------



|                  |  | 2011    |         |  | 2011    |  |         | 2010    |  |  | 2009    | 
|----------------- |  | ------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                  |  | USD'000 |         |  | RMB'000 |  |         | RMB'000 |  |  | RMB'000 | 
|                  |  |         |         |  |         |  |         |         |  |  |         | 
|Trade receivables |  |         | 111,201 |  |         |  | 699,891 |         |  |  | 611,660 | 
|Impairment        |  |         | -       |  |         |  | -       |         |  |  | -       | 
|                  |  |         |         |  |         |  |         |         |  |  |         | 
|                  |  |         | 111,201 |  |         |  | 699,891 |         |  |  | 611,660 | 



The Group's trading terms with its customers (independent
distributors) are mainly on credit. The credit period is generally for a period of two to four months. As the Group monitors and
controls the outstanding amounts due from the distributors and requires the distributors to make continuous payment before getting
new products, the distributors usually do not fully utilize the granted credit period.



All of the trade receivables are expected to be recovered
within one year. An aging analysis of the Group's trade receivables as of December 31, 2011, 2010 and 2009, based on the invoice
date, is as follows:



|                |  | 2011    |         |  | 2011    |  |         | 2010    |  |  | 2009    | 
|--------------- |  | ------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                |  | USD'000 |         |  | RMB'000 |  |         | RMB'000 |  |  | RMB'000 | 
|                |  |         |         |  |         |  |         |         |  |  |         | 
|Within 60 days  |  |         | 76,574  |  |         |  | 481,947 |         |  |  | 398,484 | 
|61 to 90 days   |  |         | 17,633  |  |         |  | 110,981 |         |  |  | 179,554 | 
|91 to 180 days  |  |         | 16,994  |  |         |  | 106,963 |         |  |  | 33,622  | 
|181 to 360 days |  |         | -       |  |         |  | -       |         |  |  | -       | 
|                |  |         |         |  |         |  |         |         |  |  |         | 
|                |  |         | 111,201 |  |         |  | 699,891 |         |  |  | 611,660 | 



F-52







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 17. | TRADE RECEIVABLES (continued)
| | --- | -----------------------------



An aging of trade receivables as December 31, 2011,
that were neither past due nor impaired or past due but not impaired, is as follows:



|                  |  |              |         |  | Past due but not impaired |  |       |          | 
|----------------- |  | ------------ | ------- |  | ------------------------- |  | ----- | -------- | 
|                  |  | Neither past |         |  |                           |  |       |          | 
|                  |  | due nor      |         |  | Less than                 |  |       | 31 to    | 
|                  |  | impaired     |         |  | 30 days                   |  |       | 120 days | 
|                  |  | RMB'000      |         |  | RMB'000                   |  |       | RMB'000  | 
|                  |  |              |         |  |                           |  |       |          | 
|December 31, 2009 |  |              | 808,631 |  |                           |  | 4,116 |          | 
|December 31, 2010 |  |              | 611,660 |  |                           |  | -     |          | 
|December 31, 2011 |  |              | 699,891 |  |                           |  | -     |          | 



|                  |  |  | USD'000 |  |  |  | USD'000 |  |  |  | USD'000 |  |  |  | USD'000 |  |  |  | USD'000 |  |  |  | USD'000 | 
|----------------- |  |  | ------- |  |  |  | ------- |  |  |  | ------- |  |  |  | ------- |  |  |  | ------- |  |  |  | ------- | 
|                  |  |  |         |  |  |  |         |  |  |  |         |  |  |  |         |  |  |  |         |  |  |  |         | 
|December 31, 2011 |  |  | 111,201 |  |  |  | -       |  |  |  | -       |  |  |  | -       |  |  |  | -       |  |  |  | 111,201 | 



Receivables that were neither past due nor impaired
relate to customers with no recent history of default.



The carrying amounts of trade receivables approximate
to their fair values.



F-53







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 18. | PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
| | --- | -------------------------------------------



|                            |  | 2011    |     |  | 2011    |  |       | 2010    |  |  | 2009    | 
|--------------------------- |  | ------- | --- |  | ------- |  | ----- | ------- |  |  | ------- | 
|                            |  | USD'000 |     |  | RMB'000 |  |       | RMB'000 |  |  | RMB'000 | 
|                            |  |         |     |  |         |  |       |         |  |  |         | 
|Prepaid advertising         |  |         | 218 |  |         |  | 1,375 |         |  |  | 2,714   | 
|Prepaid expenses            |  |         | 233 |  |         |  | 1,470 |         |  |  | 13,693  | 
|Prepaid land-lease payments |  |         | 103 |  |         |  | 648   |         |  |  | 648     | 
|Rental deposits             |  |         | 101 |  |         |  | 635   |         |  |  | 612     | 
|Other receivables           |  |         | 102 |  |         |  | 637   |         |  |  | 2,121   | 
|                            |  |         |     |  |         |  |       |         |  |  |         | 
|                            |  |         | 757 |  |         |  | 4,765 |         |  |  | 19,788  | 



All of the other receivables are expected to be
recovered or recognized as expense within one year.



The carrying amount of prepayments, deposits and
other receivables approximate to their fair value.



Staff advances include in other receivables are
considered as financial assets in the scope of IAS 39.



| | 19. | PLEDGED DEPOSITS
| | --- | ----------------



The pledged deposits were used to secure the bills
payables of the Group (Note 21).



F-54







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 20. | CASH AND CASH EQUIVALENTS
| | --- | -------------------------



|                                         |  | 2011    |         |  | 2011    |  |         | 2010    |  |  | 2009    | 
|---------------------------------------- |  | ------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                         |  | USD'000 |         |  | RMB'000 |  |         | RMB'000 |  |  | RMB'000 | 
|                                         |  |         |         |  |         |  |         |         |  |  |         | 
|Time deposits                            |  |         | 63,554  |  |         |  | 400,000 |         |  |  | 200,000 | 
|Cash and bank balances                   |  |         | 89,661  |  |         |  | 564,317 |         |  |  | 562,798 | 
|                                         |  |         |         |  |         |  |         |         |  |  |         | 
|                                         |  |         | 153,215 |  |         |  | 964,317 |         |  |  | 762,798 | 
|Less: Pledged deposits for bills payable |  |         | -       |  |         |  | -       |         |  |  |         | 
|                                         |  |         |         |  |         |  |         |         |  |  |         | 
|Cash and cash equivalents                |  |         | 153,215 |  |         |  | 964,317 |         |  |  | 762,798 | 



At the end of the reporting period, the cash and cash
equivalents of the Group denominated in RMB amounted to RMB927,470,000 (2010: RMB696,554,000; 2009: RMB205,209,000). RMB is not
freely convertible into other currencies, however, under Mainland China's Foreign Exchange Control Regulations and Administration
of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through
banks authorized to conduct foreign exchange business.



Cash at banks earns interest at floating rates based
on daily bank deposit rates. Short term time deposits are made for varying periods of between one month to three months depending
on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates. The bank balances,
time deposits and pledged bank deposits (Note 19) are deposited with creditworthy banks with no recent history of default. The
carrying amounts of cash and bank balances approximate to their fair values.



F-55







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 21. | TRADE AND BILLS PAYABLES
| | --- | ------------------------



An aging analysis of the Group's trade and bills payables
as of December 31, 2011, based on the invoice date, is as follows:



|                         |  | 2011    |       |  | 2011    |  |        | 2010    |  |  | 2009    | 
|------------------------ |  | ------- | ----- |  | ------- |  | ------ | ------- |  |  | ------- | 
|                         |  | USD'000 |       |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                         |  |         |       |  |         |  |        |         |  |  |         | 
|Within 90 days           |  |         | 9,524 |  |         |  | 59,941 |         |  |  | 110,992 | 
|91 to 180 days           |  |         | -     |  |         |  | -      |         |  |  | 9       | 
|181 to 360 days          |  |         | -     |  |         |  | -      |         |  |  | -       | 
|Over 360 days            |  |         | -     |  |         |  | -      |         |  |  | -       | 
|                         |  |         |       |  |         |  |        |         |  |  |         | 
|Trade payables           |  |         | 9,524 |  |         |  | 59,941 |         |  |  | 111,001 | 
|Bills payables           |  |         | -     |  |         |  | -      |         |  |  | -       | 
|                         |  |         |       |  |         |  |        |         |  |  |         | 
|Trade and bills payables |  |         | 9,524 |  |         |  | 59,941 |         |  |  | 111,001 | 



The trade payables are non-interest-bearing and are
normally settled on 30- to 90-day terms. All of the trade and bills payables are expected to be settled within one year.



The carrying amounts of trade and bills payables approximate
to their fair values.



No bills payables were noted as of December 31, 2011
and 2010. Bills payables as of December 31, 2009 were secured by pledged bank deposits (Note 19), certain personal guarantees and
asset pledge (Note 23).



F-56







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 22. | DEPOSITS RECEIVED, OTHER PAYABLES AND ACCRUALS
| | --- | ----------------------------------------------



|                                     |  | 2011    |       |  | 2011    |  |        | 2010    |  |  | 2009    | 
|------------------------------------ |  | ------- | ----- |  | ------- |  | ------ | ------- |  |  | ------- | 
|                                     |  | USD'000 |       |  | RMB'000 |  |        | RMB'000 |  |  | RMB'000 | 
|                                     |  |         |       |  |         |  |        |         |  |  |         | 
|Deposits received                    |  |         | 1,748 |  |         |  | 11,000 |         |  |  | 11,000  | 
|Accrued liabilities                  |  |         | 4,691 |  |         |  | 29,529 |         |  |  | 33,261  | 
|Accrued IPO expenses                 |  |         | 484   |  |         |  | 3,046  |         |  |  | 3,188   | 
|Accrued interest on preferred shares |  |         | -     |  |         |  | -      |         |  |  | -       | 
|Value added tax payables             |  |         | 1,387 |  |         |  | 8,729  |         |  |  | 18,136  | 
|                                     |  |         |       |  |         |  |        |         |  |  |         | 
|                                     |  |         | 8,310 |  |         |  | 52,304 |         |  |  | 65,585  | 



Other payables and value added tax payables are
non-interest-bearing and have an average term of three months. All of the other payables are expected to be settled or recognized
as income within one year or are repayable on demand.



The carrying amount of deposits received, other
payables and accruals approximate to their fair value.



Deposits received primarily
relate to deposits made by distributors in accordance with the distributorship agreements. Each distributor must pay the Group
a fixed sum of RMB500,000 as security for the performance of their obligations under the distributorship agreement. The Group has
the right not to refund the deposit to the distributors if they do not comply with the terms stipulated in the distributorship
agreements. The Group will refund the deposit to a distributor upon the expiration of the distributorship agreement should either
party decide not to renew the agreement.During the term of the distribution agreement, the Group has the right to terminate
the distribution agreement, at its sole discretion and at anytime, if the distributions cannot meet certain sales target and payment
requirements. Accordingly, management considers it appropriate to classify the deposits from the Group’s distributors as
a current liability.





| | 23. | INTEREST-BEARING BANK BORROWINGS
| | --- | --------------------------------



|                                                   |  |  | 2011    |  |  |  | 2011    |  |  |  | 2010    |  |  |  | 2009    | 
|-------------------------------------------------- |  |  | ------- |  |  |  | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                                   |  |  | USD'000 |  |  |  | RMB'000 |  |  |  | RMB'000 |  |  |  | RMB'000 | 
|                                                   |  |  |         |  |  |  |         |  |  |  |         |  |  |  |         | 
|Current                                            |  |  |         |  |  |  |         |  |  |  |         |  |  |  |         | 
|Bank loans - secured and repayable within one year |  |  | -       |  |  |  | -       |  |  |  | 18,000  |  |  |  | 58,000  | 



F-57







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 23. | INTEREST-BEARING BANK BORROWINGS (continued)
| | --- | --------------------------------------------





|                                   |  |               |   |  | 2011    |  |   |               |  | 2010        |  |  |               |  |  | 2009   
|---------------------------------- |  | ------------- | - |  | ------- |  | - | ------------- |  | ----------- |  |  | ------------- |  |  | -------
|                                   |  | Maturity
date |   |  | RMB'000 |  |   | Maturity
date |  | RMB'000     |  |  | Maturity
date |  |  | RMB'000
|Current                            |  |               |   |  |         |  |   |               |  |             |  |  |               |  |  |        
|Bank loans - secured and repayable |  |               | - |  |         |  | - |               |  | Nov 4, 2011 |  |  | 18,000        |  |  |        
|                                   |  |               |   |  |         |  |   |               |  |             |  |  |               |  |  |        
|                                   |  |               |   |  |         |  |   |               |  |             |  |  |               |  |  |        
|                                   |  |               |   |  |         |  |   |               |  |             |  |  |               |  |  |        
|                                   |  |               |   |  |         |  |   |               |  |             |  |  | 18,000        |  |  |        





The above bank loans were denominated in RMB. The
bank loans bore interest at the PRC RMB prime rate per annum. As of December 31, 2010 and 2009, the PRC RMB prime rate was 5.810%
per annum and ranged from 5.310% to 6.372% per annum, respectively. Because of the short maturity, the carrying amounts of current
bank loans approximate to their fair values.



The bank loans of RMB18,000,000 as of December 31,
2010 were secured by mortgages over certain buildings and land use rights of the Group situated in Mainland China (Note 13 and
14).



The bank loans of RMB58,000,000 as of December 31,
2009 were secured by:



| | (i) | personal guarantee of RMB60,000,000 from Mr. Lin Shuipan (Note 12(a)) and Ms. Chen Xiayu, the spouse of Mr. Lin Shuipan; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------

| | (ii) | mortgages over certain buildings and land use rights of the Group situated in Mainland China (Notes 13 and 14).
| | ---- | ---------------------------------------------------------------------------------------------------------------



| | 24. | AMOUNT DUE TO A DIRECTOR
| | --- | ------------------------



The balance as of December 31, 2009 was unsecured,
interest-free and due on demand. The carrying amount of this balance approximated to its fair value because of its short term.
The amount was fully settled during 2010.



F-58







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 25. | PREFERRED SHARES
| | --- | ----------------



On March 28, 2008, Windrace, Mr. Lin Shuipan and
Elevatech Limited (the "GS Investor") entered into a subscription agreement (the "Subscription Agreement")
under which GS Investor agreed to subscribe for 2,500 preferred shares representing 2.5% of the total issued share capital of Windrace
after the issue and allotment of preferred shares under the Subscription Agreement (the "Subscription"). The consideration
for the Subscription was HKD95.71 million (equivalent to RMB85,135,000).



On March 28, 2008, Mr. Lin Shuipan, RichWise International
Investment Group Limited ("RichWise"), Mr. Shi Jinlei (the sole beneficial owner of RichWise), Windrace and GS Investor

entered into a share purchase agreement (the "SPA")
under which Mr. Lin Shuipan and

RichWise agreed to transfer 2,000 and 3,500 preferred
shares (the “sale shares”) representing 2.0% and 3.5%, respectively, of the issued share capital of Windrace as enlarged
by the Subscription by GS Investor. The consideration for the acquisition of the sale shares under the SPA amounting to HKD210.56
million (equivalent to RMB189,504,000), was made to Mr. Lin Shuipan and Richwise.



GS Investor shall have the right to require Windrace
to redeem any part or all of the preferred shares in cash for an amount equal to the consideration as stated in the Subscription
Agreement. In addition, pursuant to the SPA, upon the redemption of the preferred shares, the Selling Parties will make a payment
to GS Investor in respect of the sum of the issue price for each preferred share, plus 12% of internal rate of return (“IRR”)
from the initial issuance date until redemption date of the preferred shares. During the year ended December 31, 2009, interest
of RMB47,931, was credited to other payable.



A letter agreement and a redemption agreement were
signed on May 8, 2009 and July 27, 2009, respectively, in which all of the outstanding preferred shares of Windrace were to be
redeemed simultaneously with the Acquisition (as defined in Note 1).



As consideration for the redemption
of the preferred shares, the sole preferred shareholder, Elevatech, were received a promissory note from Windrace providing for
(i) the payment of HKD306.2 million (RMB272.5 million) on the earlier of the fifth business day following the date of issue of
the promissory note and October 31, 2009 and (ii) an additional payment of USD1.0 million (equivalent to RMB 6.9 million) on June
30, 2010.



On
October 23, 2009, the initial valuation of the preferred shares of HKD306.27 million (equivalent to RMB269,960,000) was
fully repaid to the GS investors. As the accrued interest of RMB41,061,000 has been waived, the amount was treated as a gain to
Windrace and was charged to the stockholders’ equity by crediting “other reserve” account.



On June 30, 2010, the additional payment of USD1.0
million (equivalent to RMB 6.9 million) was paid to the GS investors according to the letter agreement and the redemption agreement.



F-59







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 25. | PREFERRED SHARES (continued)
| | --- | ----------------------------



Details of the net proceeds received from the issue
of the preferred shares are analyzed as follows:



|Preferred Shares                                                                                |  | USD’000 |         |   | RMB'000 | 
|----------------------------------------------------------------------------------------------- |  | ------- | ------- | - | ------- | 
|                                                                                                |  |         |         |   |         | 
|Nominal value of the 8,000 Preferred Shares issued and liability component at the issuance date |  |         | 40,235  |   |         | 
|Exchange rate effect                                                                            |  |         | (323    | ) |         | 
|                                                                                                |  |         |         |   |         | 
|Liability component as January 1, 2009                                                          |  |         | 39,912  |   |         | 
|                                                                                                |  |         |         |   |         | 
|Redemption of preferred shares                                                                  |  |         | (39,912 | ) |         | 
|                                                                                                |  |         |         |   |         | 
|Liability component as December 31, 2009                                                        |  |         | -       |   |         | 



F-60







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 26. | SHAREHOLDERS’ EQUITY
| | --- | --------------------



Common Stock

On October 21, 2009, the Company acquired 100% equity
interest of Windrace by issuing an aggregate of 17,008,633 new ordinary shares (the “Additional Shares”) to the Sellers.



Common Stock – Escrow Agreement

Subject to an escrow agreement to be entered into
among 2020, Windrace, the Company, the Sellers and the escrow agent and the Purchase Agreement, a portion of the Additional Shares
were to be held in escrow and released by installment subject to Adjusted Net Earnings of Exceed. The Company defines adjusted
profit after tax (the “Adjusted Net Earnings”) according to the interpretation of 2010 Adjusted Earnings in the Purchase
Agreement. The Adjusted Net Earnings is defined as the profit for the year in the financial statements excluding: (i) the impact,
positive or negative, of any fair value assessment or accounting impact attributable to the escrow agreement for the release of
escrowed shares; (ii) the expenses relating to the completion of the transactions contemplated by the Purchase Agreement; (iii)
the expenses, including interest expenses and other related expenses, related to the repurchase of the preferred shares held by
the GS Investor; and (iv) the expenses relating to the grant of options under share option plans that may be implemented in the
future.



If the 2009 Adjusted Net Earnings are not less than
USD38,067,350, an aggregate of 5,563,714 Additional Shares would be released to the Sellers . If the 2010 Adjusted Net Earnings
are not less than USD49,487,555, an aggregate of 4,277,590 Additional Shares would be released to the Sellers. If the 2011 Adjusted
Net Earnings are not less than USD64,333,821, an aggregate of 1,425,863 Additional Shares would be released to the Sellers. If
the Company achieves Adjusted Net Earnings of USD64,333,821 in 2011, 2,212,789 additional new ordinary shares of Exceed shall be
issued to the Sellers as earn-out shares.



The contingent shares issuable under the escrow and
the additional earn-out shares are accounted for as a financial instrument liability that is adjusted to fair value at each reporting
date, with changes in fair value being recognized currently in the consolidated statements of comprehensive income. Once a measurement
period for the issuance of such contingent shares ends, the contingent share liability related to that period is no longer conditional,
and the obligation is reclassified from liability to equity, if the shares have been earned, based on the fair value of the obligation
at the end of the measurement period. The activities in the contingent share liability during 2009, 2010 and 2011 were as follows:



F-61







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 26. | SHAREHOLDERS’ EQUITY (continued)
| | --- | --------------------------------



Common Stock (continued)

Common Stock – Escrow Agreement (continued)



|                                                                                                                              |  | RMB'000 |         
|----------------------------------------------------------------------------------------------------------------------------- |  | ------- | --------
|Deemed dividend for the fair value of the contingently issuable shares at October 21, 2009 with a charge to retained earnings |  |         | 761,854 
|Change in fair value during 2009 with a charge to the consolidated statement of comprehensive income                          |  |         | (170,948
|Reclassification of 2009 contingent share liability at December 31, 2009 from liability to equity                             |  |         | (240,995
|Exchange rate effect                                                                                                          |  |         | (145    
|Contingent share liability as of December 31, 2009                                                                            |  |         | 349,766 
|Change in fair value during 2010 with a charge to the consolidated statement of comprehensive income                          |  |         | (1,604  
|Reclassification of 2010 contingent share liability at December 31, 2010 from a liability to equity                           |  |         | (197,419
|Exchange rate effect                                                                                                          |  |         | (11,575 
|Contingent share liability as of December 31, 2010                                                                            |  |         | 139,168 
|Change in fair value during 2011 with a charge to the consolidated statement of comprehensive income                          |  |         | (38,645 
|Reclassification of 2011 contingent share liability at December 31, 2011 from a liability to equity                           |  |         | (94,069 
|Exchange rate effect                                                                                                          |  |         | (6,454  
|Contingent share liability as of December 31, 2001                                                                            |  |         | -       



|                                                                                |  | Number of  Shares |           
|------------------------------------------------------------------------------- |  | ----------------- | ----------
|                                                                                |  |                   |           
|Contingent shares issuable at October 21, 2009                                  |  |                   | 13,479,956
|Contingent shares earned in 2009, released from escrow in 2010                  |  |                   | (5,563,714
|Contingent shares issuable as of December 31, 2009                              |  |                   | 7,916,242 
|Contingent shares earned in 2010, released from escrow in 2011                  |  |                   | (4,277,590
|Contingent shares issuable as of December 31, 2010                              |  |                   | 3,638,652 
|Contingent shares earned in 2011, to be released from escrow and issued in 2012 |  |                   | (3,638,652
|Contingent share issuable as of December 31, 2011                               |  |                   | -         



F-62







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



| | 26. | SHAREHOLDERS’ EQUITY (continued)
| | --- | --------------------------------



Common Stock (continued)

Common Stock – Escrow Agreement (continued)



METHODOLOGY — VALUATION OF CONTINGENT
CONSIDERATION



When estimating the fair value of the financial liabilities
that arise from release or issuance of Escrow Shares and Earn-out Shares which constitute the contingent consideration, management
relied on the probabilistic scenario model which is commonly adopted to value a contingency driven by future non-market-related
events. The Company consulted with an international independent valuation firm to assist it in developing the model and determining
the fair value of the Escrow Shares and Earn-out Shares at each reporting period end. The following major factors were considered
when estimating the valuation-date fair value of contingent consideration under this model:



| | 1. | Expected or scenario-based projection of earning estimates
| | -- | ----------------------------------------------------------

The earnings estimates adopted under different scenarios
were referenced to the following sources:



| | (i) | Historical performance of the Company as of different valuation dates
| | --- | ---------------------------------------------------------------------

| | (ii) | Internal profit forecasts prepared by the management as of different valuation dates
| | ---- | ------------------------------------------------------------------------------------

| | (iii) | Research reports on the Company issued by third-party analysts
| | ----- | --------------------------------------------------------------

| | (iv) | Industry earning growth rates implied by the consensus earnings estimates from Bloomberg
| | ---- | ----------------------------------------------------------------------------------------



| | 2. | Likelihood of various possible outcomes
| | -- | ---------------------------------------

The probabilities of achieving specified earnings
estimates were management representation and based on their best estimate of the likelihood of different earning scenarios as of
different valuation dates.



| | 3. | Expected quantities of issuable Escrow Shares and Earn-out Shares
| | -- | -----------------------------------------------------------------

The number of shares issuable for a particular year
under each scenario was calculated according to the release schedules stated in the Agreement for Sale and Purchase dated May 8,
2009 and the expected numbers of issuable Escrow Shares and Earn-out Shares as of different valuation dates are probability-weighted
figures calculated using the probabilities estimated by the management and number of issuable shares.



| | 4. | Fair value per share
| | -- | --------------------

The fair value per share is based on the prevailing
market price as of each valuation date.



| | 5. | Marketability discount on issuable shares
| | -- | -----------------------------------------

As the sale or transfer of Escrow Shares and Earn-out
Shares is prohibited during a certain lock-up period after they are released or issued, marketability discounts were applied on
the fair value of the contingent consideration to reflect this restriction from the release date or issue date to the expiry date
of the lock-up restriction. An option-pricing method was used to estimate the discount for lack of marketability ("DLOM").
Under an option-pricing method, the cost of a put option, which can hedge the price change before the privately held share can
be sold, was considered as a basis to determine the lack of marketability discount. This option-pricing method is one of the methods
commonly used in estimating DLOM, as it can take into consideration factors like timing of liquidity event (expiry of lock-up period
in this case) and estimated volatility of the Company or shares of peer companies.



F-63







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



26.	        SHAREHOLDERS’
EQUITY (continued)



Common Stock (continued)

Common Stock – Escrow Agreement
(continued)



METHODOLOGY — VALUATION OF FINALIZED
CONSIDERATION



The fair value of the finalized considerations as
of December 31, 2009, 2010 and 2011 were calculated through multiplication of the actual quantities of the issuable Escrow Shares
and Earn-out Shares by both the prevailing market price as of valuation date and the appropriate marketability discount.



After determining all the key parameters, the fair
value of the contingent liabilities and finalized considerations as of each valuation date was then calculated through multiplication
of the expected quantities of the issuable Escrow Shares and Earn-out Shares by both the prevailing market price as of the valuation
date and the appropriate marketability discount. Below are some of the key assumptions:



|                       |  | October 21, 
2009 |         |  | December 
31, 2009 |  |         | December
 31, 2010 |  |  | December 
31, 2011 | 
|---------------------- |  | ----------------- | ------- |  | ------------------ |  | ------- | ------------------ |  |  | ------------------ | 
|                       |  |                   |         |  |                    |  |         |                    |  |  |                    | 
|Volatility             |  |                   | 51%-61% |  |                    |  | 44%-56% |                    |  |  | 39%-45%            | 
|Marketability discount |  |                   | 11%-37% |  |                    |  | 10%-33% |                    |  |  | 11%-23%            | 
|Current stock price    |  |                   | US$12.1 |  |                    |  | US$8.5  |                    |  |  | US$8.26            | 
|Dividend yield         |  |                   | 0.0%    |  |                    |  | 0.0%    |                    |  |  | 0.0%               | 



F-64







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



26.	        SHAREHOLDERS’
EQUITY (continued)



Common Stock (continued)

Common Stock – Escrow Agreement
(continued)



The Company originally accounted for the contingent
share liability as an adjustment to equity wholly contained in equity at the time the shares were actually issued to the prior
shareholder, as a stock dividend. See Note 2 for a summary of the impact of the change in the method of accounting for the contingent
share liability.



The Company exceeded the Adjusted Net Earnings for
the years ended December 31, 2011, 2010 and 2009. The shares described above became issuable in each of the years based on the
Adjusted Earnings Targets, and were released or issued in the subsequent year.



Common Stock – Investment Agreement

On July 27, 2009, Windrace entered into an Investment
Agreement (the “Investment Agreement”) and an escrow agreement (the “Escrow Agreement”) with Wisetech Holdings
Limited (“Wisetech”), Windtech Holdings Limited (“Windtech” and, collectively with Wisetech, the “Investors”)
and Mr. Lin Shuipan, and as amended by a supplemental agreement dated on November 30, 2009, the Investors invested an aggregate
of USD30,000,000 in Windrace in two installments. Upon the completion of the Business Combination, the Company issued 3,627,968
new ordinary shares to the Investors (equal to USD27,500,000 divided by USD7.58 per share. On November 30, 2009, the Company issued
329,816 new ordinary shares to the Investors (equal to USD2,500,000 divided by USD7.58 per share).



F-65







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



26.	        SHAREHOLDERS’
EQUITY (continued)



Treasury shares

In accordance with its share repurchase program announced
on August 15, 2011, the Company has purchased 415,751 of its ordinary shares as of December 31, 2011, at an average price of USD4.34
per share, for a total purchase price of approximately USD1.8 million (approximately RMB11.5 million). As previously announced,
the Company is authorized to repurchase up to USD10 million of its ordinary shares within 6 months of August 15, 2011 using existing
cash reserves. Stock repurchases under this program may be made through open market purchases, in privately negotiated transactions,
in block trades, pursuant to a 10b5-1 plan, or otherwise. The timing and actual number of shares repurchased will depend on market
conditions, trading price of the ordinary shares and other factors and be subject to the restrictions relating to volume, price
and timing under applicable laws.



At December 31, 2011, the
Company held 415,751 (2010: Nil; 2009: Nil ) of its own shares. The market value of these shares as at December 31, 2011 was approximately
USD2.0 million (RMB12.8 million).



Common stock warrants

2020 issued common stock warrants in November 2007
as part of its initial public offering. Each warrant entitled the holder to purchase from 2020 one share of common stock at an
exercise price of USD5.25 commencing on the later of (i) November 8, 2008 or (ii) the completion of the Business Combination with
a target business, and expires on November 8, 2011. The warrants would be redeemable, at a price of USD0.01 per warrant upon 30
days prior notice after the warrants become exercisable, only in the event that the last sale price of the common stock was at
least USD11.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which
notice of redemption is given.



In 2010, the Company implemented a program for early
cashless exercise of warrants through ordinary share exchange, which offered the holders of all 10,890,000 outstanding warrants
(the “Warrants”), including Warrants held as part of the Company’s units, the opportunity, for a limited time,
to acquire ordinary shares of the Company (the “Ordinary Shares”) by exchanging the Warrants for Ordinary Shares. A
total of 32,550 Warrants (approximately 0.3% of the outstanding Warrants) were exchanged for a total of 8,223 Ordinary Shares in
this tender offer. Besides the tender offer, a total of 10,993 (2010: 879,372; 2009: Nil) warrants were exercised into shares in
2011.



The Company's publicly traded warrants expired in
accordance with their terms on November 8, 2011. 922,915 warrants were exercised during the period from October 21, 2009 to November
8, 2011, generating USD4,674,000 in cash for the Company. As of December 31, 2011, the Company had no warrants outstanding (2010:
9,978,078; 2009: 10,890,000). The common stock warrants were treated as equity instruments according to IAS 32 paragraph 22.



F-66







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



26.	        SHAREHOLDERS’
EQUITY (continued)



Unit Purchase Option

In November 2007, a unit purchase option (“UPO”)
was issued to Morgan Joseph & Co. Inc. (“Morgan Joseph”) for USD100 by 2020, as partial consideration for Morgan
Joseph’s services as underwriter of the initial public offering of 2020. The UPO comprises an option to purchase up to an
aggregate of 550,000 units of the Company, with each unit consisting of one share of the Company’s common stock and one warrant
to purchase a share of common stock of Company.



On December 8, 2009, the Company has completed the
purchase of the UPO from Morgan Joseph for cash consideration of USD2,500,000 (equivalent to RMB17.1 million). The UPO has been
retired and cancelled.



The Company paid the cash consideration to Morgan
Joseph out of the proceeds of a subscription in the aggregate amount of USD2,500,000 by the Investors for shares of the Company’s
common stock. The subscription was completed on November 30, 2009 as the final investment (as stated in Note 26 – Common
Stock).



Reserves

The amounts of the Group's reserves and the movements
therein for the current and prior years are presented in the consolidated statements of changes in equity.



F-67







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



27.	        EQUITY INCENTIVE PLAN



The Company operates a 2010 Equity
Incentive Plan (the “Plan”) for the purpose of providing incentives and rewards to eligible participants who contribute
to the success of the Group's operations. Eligible participants of the Scheme include the Company's directors, including independent
non-executive directors, other employees of the Group, consultants of the Company, and its Subsidiaries. The Plan was approved
by the shareholders and became effective on June 30, 2010 and, unless otherwise cancelled or amended, will remain in force for
10 years from that date.



The number of ordinary shares of USD0.0001 each in
the share capital of the Company, that may be issued or transferred (A) upon the exercise of option rights or appreciation rights,
(B) in payment of restricted stock and released from substantial risks of forfeiture thereof, (C) in payment of restricted stock
units, (D) in payment of performance shares or performance units that have been earned, (E) as awards to non-employee directors,
(F) as other awards, or (G) in payment of dividend equivalents paid with respect to awards made under the Plan, shall be 1,000,000
shares of common stock plus, during each calendar year of the Company during which this Plan is in effect, an additional number
of shares equal to the lesser of (1) 1,000,000 shares of common stock, (2) ten percent (10%) of the number of shares of all classes
of common stock of the Company outstanding on the first business day of the Company’s fiscal year, and (3) such lesser number
as may be determined by the Compensation Committee, in the aggregate not to exceed 10,000,000 shares of common stock plus, in each
case, any shares of common stock relating to awards that expire or are forfeited or cancelled under this Plan. Such common stock
may be shares of original issuance or treasury shares or a combination of the foregoing.



In 2011, the Company granted an additional 338,000
restricted shares (2010: 404,086 restricted shares; 2009: Nil) to its senior management and certain employees under the Plan. Restricted
shares of 50,086 were granted outright in 2010. 163,000 restricted shares granted in 2011 will be vested 25%, 30% and 45% after
the first year, second year and third year, respectively. The remaining granted restricted shares will be generally vested in equal
installments over three years.



Share-based compensation expense related to the restricted
shares under the Plan amounted to RMB7.9 million and was recognized in the consolidated statements of comprehensive income for
the year ended December 31, 2011 (2010: RMB7.3 million; 2009: Nil).



F-68







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



27.	        EQUITY INCENTIVE PLAN
(continued)



The following restricted shares were outstanding
under the Plan during the years:



|Unvested Restricted Shares  |  | Number  of Shares |          |   | Weighted  Average  Grant-date  Fair Value  USD | 
|--------------------------- |  | ----------------- | -------- | - | ---------------------------------------------- | 
|At January 1, 2009 and 2010 |  |                   | -        |   |                                                | 
|Granted during the year     |  |                   | 404,086  |   |                                                | 
|Vested during the year      |  |                   | (50,086  | ) |                                                | 
|At January 1, 2011          |  |                   | 354,000  |   |                                                | 
|Granted during the year     |  |                   | 338,000  |   |                                                | 
|Vested during the year      |  |                   | (205,665 | ) |                                                | 
|Forfeited during the year   |  |                   | (145,918 | ) |                                                | 
|                            |  |                   |          |   |                                                | 
|At December 31, 2011        |  |                   | 340,417  |   |                                                | 



F-69







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



28.	        CONTINGENT LIABILITIES



At December 31, 2011, the Group is not aware of any
significant contingent liabilities (2010: Nil; 2009: Nil).



29.	        OPERATING LEASE ARRANGEMENTS



The Group leases certain of its office premises under
operating lease arrangements. Leases for these properties are negotiated for terms ranging from 1 to 3 years.



As of the end of each reporting period, the Group
had total future minimum lease payments under non-cancellable operating leases falling due as follows:



|                                        |  | December 31 |    
|--------------------------------------- |  | ----------- | ---
|                                        |  | 2011        |    
|                                        |  | USD'000     |    
|                                        |  |             |    
|Within one year                         |  |             | 512
|In the second to fifth years, inclusive |  |             | 311
|                                        |  |             |    
|                                        |  |             | 823



F-70







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



30.	        COMMITMENTS



| | (a) | Capital commitments
| | --- | -------------------



Total commitments under these arrangements at the
end of each reporting period were as follows:



|                                               |  | December 31 |       
|---------------------------------------------- |  | ----------- | ------
|                                               |  | 2011        |       
|                                               |  | USD'000     |       
|                                               |  |             |       
|Contract for commitment in respect of          |  |             |       
|-    acquisition of land                       |  |             | 24,023
|-    design of new staff quarter               |  |             | 181   
|-    purchase of property, plant and equipment |  |             | 3,132 
|                                               |  |             |       
|                                               |  |             | 27,336



| | (b) | Other commitments
| | --- | -----------------



Total commitments under these arrangements at the
end of each reporting period were as follows:



|                                     |  | December 31 |      
|------------------------------------ |  | ----------- | -----
|                                     |  | 2011        |      
|                                     |  | USD'000     |      
|                                     |  |             |      
|Advertising and promotional expenses |  |             |      
|2010                                 |  |             | -    
|2011                                 |  |             | -    
|2012                                 |  |             | 1,227
|2013                                 |  |             | 232  
|                                     |  |             | 1,459
|                                     |  |             |      
|Research and development (Note (i))  |  |             |      
|2010                                 |  |             | -    
|2011                                 |  |             | -    
|2012                                 |  |             | 119  
|2013                                 |  |             | 79   
|2014                                 |  |             | 79   
|2015                                 |  |             | 79   
|2016                                 |  |             | 40   
|                                     |  |             | 396  
|                                     |  |             |      
|                                     |  |             | 1,855



F-71







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



30.	        COMMITMENTS (Continued)



Note (i): 	              The agreement
with the China Institute of Sport Science was renewed in October 2011. The Group has committed to pay predetermined annual fees
of RMB500,000 to the China Institute of Sport Science for each of the years in the period from October 2011 to October 2016 for
their assistance with the research and development of technology for its sports footwear and apparel, and the promotion of the
technology content of its products.



31.	        FINANCIAL INSTRUMENTS
BY CATEGORY



The carrying amounts of each of the categories of
financial instruments as of the end of each reporting period are as follows:



Financial assets – Loans and receivables
(including cash and cash equivalents)



|                          |  | 2011    |         |  | 2011    |  |           | 2010    |  |  | 2009      | 
|------------------------- |  | ------- | ------- |  | ------- |  | --------- | ------- |  |  | --------- | 
|                          |  | USD'000 |         |  | RMB'000 |  |           | RMB'000 |  |  | RMB'000   | 
|                          |  |         |         |  |         |  |           |         |  |  |           | 
|Trade receivables         |  |         | 111,201 |  |         |  | 699,891   |         |  |  | 611,660   | 
|Other receivables         |  |         | 4       |  |         |  | 24        |         |  |  | 268       | 
|Pledged deposits          |  |         | -       |  |         |  | -         |         |  |  | -         | 
|Cash and cash equivalents |  |         | 153,215 |  |         |  | 964,317   |         |  |  | 762,798   | 
|                          |  |         |         |  |         |  |           |         |  |  |           | 
|                          |  |         | 264,420 |  |         |  | 1,664,232 |         |  |  | 1,374,726 | 



Financial liabilities



|                                                      |  | 2011    |        |  | 2011    |  |        | 2010          |  |  | 2009          | 
|----------------------------------------------------- |  | ------- | ------ |  | ------- |  | ------ | ------------- |  |  | ------------- | 
|                                                      |  |         |        |  |         |  |        | As Restated - |  |  | As Restated - | 
|                                                      |  |         |        |  |         |  |        | Note 2        |  |  | Note 2        | 
|                                                      |  | USD'000 |        |  | RMB'000 |  |        | RMB'000       |  |  | RMB'000       | 
|                                                      |  |         |        |  |         |  |        |               |  |  |               | 
|Liabilities at fair value through the profit and loss |  |         |        |  |         |  |        |               |  |  |               | 
|Contingent share liability                            |  |         | -      |  |         |  | -      |               |  |  | 139,168       | 
|Other financial liabilities at amortized costs        |  |         |        |  |         |  |        |               |  |  |               | 
|Trade and bills payables                              |  |         | 9,524  |  |         |  | 59,941 |               |  |  | 111,001       | 
|Other payables                                        |  |         | 5,596  |  |         |  | 35,223 |               |  |  | 39,414        | 
|Due to a director                                     |  |         | -      |  |         |  | -      |               |  |  | -             | 
|Interest-bearing bank borrowings                      |  |         | -      |  |         |  | -      |               |  |  | 18,000        | 
|                                                      |  |         |        |  |         |  |        |               |  |  |               | 
|                                                      |  |         | 15,120 |  |         |  | 95,164 |               |  |  | 307,583       | 



F-72







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



32.	        FINANCIAL RISK MANAGEMENT
OBJECTIVES AND POLICIES



The Group's principal financial instruments comprise
bank borrowings and cash and cash equivalents. The main purpose of these financial instruments is to fund the Group's operations.
The Group has various financial assets and liabilities such as trade receivables and trade and bills payables, which arise directly
from its operations.



It is, and has been, throughout the reporting periods,
the Group's policy that no trading in financial instruments shall be undertaken.



The main risks arising from the Group's financial
instruments are foreign currency risk, credit risk, interest rate risk, commodity price risk and liquidity risk. The board of directors
reviews and agrees policies for managing each of these risks and they are summarized below:



Foreign currency risk



The Group mainly operates in Mainland China with
most of the transactions settled in RMB. The Group's assets and liabilities, and transactions arising from its operations are mainly
denominated in RMB. The Group has not used any forward contract or currency borrowing to hedge its exposure as foreign currency
risk is considered minimal.



Credit risk



The Group trades only with recognized and creditworthy
customers. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis and the Group's exposure to bad debts is not significant.



Since the Group trades only with recognized and creditworthy
third parties, there is no requirement for collateral.



The credit risk of the Group's other financial assets,
which comprise deposits, other receivables, pledged bank deposits and cash and cash equivalents, arises from potential default
of the counterparties, with a maximum exposure equal to the carrying amounts of these instruments.



The Group’s exposure to credit risk is influenced
mainly by the individual characteristics of each customer. The default risk of the overall industry in which customers operate
also has an influence on credit risk but to a lesser extent. As of December 31, 2011, the Group had 22 distributors as customers.
(2010: 22 distributors; 2009: 22 distributors). At the end of reporting period, the Group is exposed to certain credit risks as
54.5% (2010: 39.9%; 2009: 48.1%) of the total trade and other receivables were due from the Group’s five largest customers.



The maximum exposure to credit risk is represented
by the carrying amount of each financial asset. The Group does not provide any guarantees which would expose the Group or the Company
to credit risk.



Further quantitative disclosures in respect of the
Group’s exposure to credit risk arising from trade receivables are set out in Note 17.



F-73







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



32.	        FINANCIAL RISK MANAGEMENT
OBJECTIVES AND POLICIES (Continued)



Interest rate risk



The Group does not have any significant exposure to
risk of changes in market interest rates as the Group's debt obligations were all with fixed interest rates.



Commodity price risk



The major raw materials used in the production of
the Group's products included cotton, rubber and plastics. The Group is exposed to fluctuation in the prices of these raw materials
which are influenced by global as well as regional supply and demand conditions. Fluctuations in the prices of raw materials could
adversely affect the Group's financial performance. The Group historically has not entered into any commodity derivative instruments
to hedge the potential commodity price changes.



Liquidity risk



The Group monitors risk of a shortage of funds by
considering the maturity of both its financial assets and projected cash flows from operations. The Group's objective is to maintain
a balance between continuity of funding and flexibility through use of bank borrowings and other borrowings to meet its working
capital requirements.



The table below summarizes the maturity profile of
the Group's financial liabilities as of the end of reporting period based on contractual undiscounted cash flow.



|December 31, 2011               |  | On demand |        |  | Less than 
3 months |  |        | 3 to 12 months |  |  | Total   |  |  | Carrying amount |       
|------------------------------- |  | --------- | ------ |  | ------------------- |  | ------ | -------------- |  |  | ------- |  |  | --------------- | ------
|                                |  | RMB'000   |        |  | RMB'000             |  |        | RMB'000        |  |  | RMB'000 |  |  | USD'000         |       
|                                |  |           |        |  |                     |  |        |                |  |  |         |  |  |                 |       
|Other financial
    liabilities |  |           | 11,000 |  |                     |  | 24,223 |                |  |  | -       |  |  |                 | 35,223
|Trade
    and bills payables    |  |           | -      |  |                     |  | 59,941 |                |  |  | -       |  |  |                 | 59,941
|                                |  |           |        |  |                     |  |        |                |  |  |         |  |  |                 |       
|                                |  |           | 11,000 |  |                     |  | 84,164 |                |  |  | -       |  |  |                 | 95,164



|December 31, 2010                |  |           |        |  | Less than |  |         | 3 to 12 |  |  |         |  |  | Carrying |        
|-------------------------------- |  | --------- | ------ |  | --------- |  | ------- | ------- |  |  | ------- |  |  | -------- | -------
|                                 |  | On demand |        |  | 3 months  |  |         | months  |  |  | Total   |  |  | amount   |        
|                                 |  | RMB'000   |        |  | RMB'000   |  |         | RMB'000 |  |  | RMB'000 |  |  | RMB'000  |        
|                                 |  |           |        |  |           |  |         |         |  |  |         |  |  |          |        
|Interest-bearing bank borrowings |  |           | -      |  |           |  | -       |         |  |  | 18,872  |  |  |          | 18,872 
|Other financial liabilities      |  |           | 11,000 |  |           |  | -       |         |  |  | 28,414  |  |  |          | 39,414 
|Trade and bills payables         |  |           | -      |  |           |  | 111,001 |         |  |  | -       |  |  |          | 111,001
|                                 |  |           |        |  |           |  |         |         |  |  |         |  |  |          |        
|                                 |  |           | 11,000 |  |           |  | 111,001 |         |  |  | 47,286  |  |  |          | 169,287



F-74







EXCEED COMPANY LTD. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



32.	        FINANCIAL RISK MANAGEMENT
OBJECTIVES AND POLICIES (Continued)



|December 31, 2009                |  |           |        |  | Less than |  |         | 3 to 12 |  |  |         |  |  | Carrying |        
|-------------------------------- |  | --------- | ------ |  | --------- |  | ------- | ------- |  |  | ------- |  |  | -------- | -------
|                                 |  | On demand |        |  | 3 months  |  |         | months  |  |  | Total   |  |  | amount   |        
|                                 |  | RMB'000   |        |  | RMB'000   |  |         | RMB'000 |  |  | RMB'000 |  |  | RMB'000  |        
|                                 |  |           |        |  |           |  |         |         |  |  |         |  |  |          |        
|Interest-bearing bank borrowings |  |           | -      |  |           |  | -       |         |  |  | 59,544  |  |  |          | 59,544 
|Other financial liabilities      |  |           | 15,687 |  |           |  | 20,870  |         |  |  | 6,875   |  |  |          | 43,432 
|Trade and bills payables         |  |           | -      |  |           |  | 195,538 |         |  |  | -       |  |  |          | 195,538
|                                 |  |           |        |  |           |  |         |         |  |  |         |  |  |          |        
|                                 |  |           | 15,687 |  |           |  | 216,408 |         |  |  | 66,419  |  |  |          | 298,514



F-75







EXCEED COMPANY LTD.AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



32.	        FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)



Capital Management



The primary objective of the Group's capital management
is to ensure that it maintains a capital ratio in order to support its business. The Group manages its capital structure and makes
adjustment to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, or issue new shares. No changes were made in the objectives or policies during the reporting periods.



The Group monitors capital on the basis of debt-to-adjusted
capital ratio, which is calculated as the net debt divided by adjusted capital. The debt-to-adjusted capital ratios as of the end
of reporting period were as follows:



|                                      |  | 2011    |          |   | 2011    |  |           | 2010    |  |  | 2009      |  
|------------------------------------- |  | ------- | -------- | - | ------- |  | --------- | ------- |  |  | --------- | -
|                                      |  | USD'000 |          |   | RMB'000 |  |           | RMB'000 |  |  | RMB'000   |  
|                                      |  |         |          |   |         |  |           |         |  |  |           |  
|Interest-bearing bank borrowings      |  |         | -        |   |         |  | -         |         |  |  | 18,000    |  
|Trade and bills payables              |  |         | 9,524    |   |         |  | 59,941    |         |  |  | 111,001   |  
|Less: Cash and cash equivalents       |  |         | (153,215 | ) |         |  | (964,317  | )       |  |  | (762,798  | )
|Pledged deposits                      |  |         | -        |   |         |  | -         |         |  |  | -         |  
|                                      |  |         |          |   |         |  |           |         |  |  |           |  
|Net debt/(cash)                       |  |         | (143,691 | ) |         |  | (904,376  | )       |  |  | (633,797  | )
|                                      |  |         |          |   |         |  |           |         |  |  |           |  
|Total equity                          |  |         | 311,796  |   |         |  | 1,962,414 |         |  |  | 1,536,706 |  
|Add: Amount due to a director         |  |         | -        |   |         |  | -         |         |  |  | -         |  
|                                      |  |         |          |   |         |  |           |         |  |  |           |  
|Adjusted capital                      |  |         | 311,796  |   |         |  | 1,962,414 |         |  |  | 1,536,706 |  
|                                      |  |         |          |   |         |  |           |         |  |  |           |  
|Debt/(cash)-to-adjusted capital ratio |  |         | N/A      |   |         |  | N/A       |         |  |  | N/A       |  



F-76







EXCEED COMPANY LTD.AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



December 31, 2011



33.	        POST BALANCE SHEET EVENTS



| | (a). | The Company has extended the date of expiration of the existing USD10 million share repurchase
program from February 14, 2012 to August 14, 2012. As of April 27, 2012, the Company has purchased up to 563,364 of its ordinary
shares, at an aggregate cost of approximately USD2.4 million, with a balance of approximately USD7.6 million available for further
repurchases under the share repurchase program. The share repurchase program will be reviewed from time to time and may be adjusted
or terminated at any time without prior notice.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b). | The board of directors of the Company has approved the
establishment of a new operating subsidiary in Jiangxi Province and construct a new production facility on the purchased land
in Ruichang City, Jiangxi Province, in order to increase its internal manufacturing capacity.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Save as disclosed elsewhere in this report, no other
significant events took place subsequent to December 31, 2011.



34.	        APPROVAL OF FINANCIAL
STATEMENTS



The financial statements were approved and authorised
for issue by the board of directors on April 30, 2012.



F-77