Major Shareholder:

• Mr. Li Ning 7 Mr. Li Chun ¡V 41.116% interest
• Ms Li Ying 7his husband Mr. Zhao Jian Guo ¡V 5.178% interest

The Group is one of the leading sports brand enterprises in the PRC. The Group own branding, research, design, manufacturing, distribution and retail capabilities. The products include sports footwear, apparel and accessories for sport and leisure use primarily sold under the LI-NING brand, which is owned by us, and the KAPPA brand, which is exclusively licenced to us for use in the PRC and Macau.

The Group was established an extensive distributorship and retail network in the PRC market. The Group sells to the distributors who operate franchised LI-NING and KAPPA retail outlets under the supervision. The Group also operates its own LI-NING and KAPPA retail stores and concessions. As at 31 May, 2004, The Group had over 200 distributors operating over 2,200 franchised retail outlets for the LI-NING and KAPPA brands in the PRC. As at the same date, The Group also operated 110 retail stores and 199 concessions for the LI-NING and KAPPA brands in the PRC.

Internationally, The Group focuses The sales of LI-NING branded products in Italy, Spain and Russia through the independent distributors. The processing and manufacturing of the majority of the sports apparel and of all of the sports footwear and accessories are subcontracted to independent contract manufacturers in the PRC. The Group manufactures a small portion of the sports apparel in the manufacturing facilities located in Sanshui, Guangdong, the PRC.

For the LI-NING brand, The Group pursues opportunities to reinforce and capitalise on The brand recognition by expanding the product offerings and developing new product lines. For licenced international brands, The Group intend to pursue opportunities to enter into exclusive management rights or licences of other foreign sports brands with good market potential to manufacture, market and sell in the PRC market.

The Directors believe that the Group has the following competitive advantages:

• The leading market position
• The extensive sales network
• The well-defined market positioning and comprehensive product offerings
• The abundant sports marketing and sponsorship resources
• The professional management teams and motivated corporate culture.

• The Group is dependent on the PRC distributors and their operation of franchised Li-Ning and KAPPA retail outlets;
• The Group face seasonal and timing fluctuations;
• The Group is dependent on the contract manufacturers
• The KAPPA License Agreement with the BasicNet Group may not be renewed
• The Group be adversely affected by trademarks and intellectual property rights disputes or proceedings with others;
• The Group dependent on the renewal of leases or concessions for the retail outlets;

The Group intends to increase the number of retail points (both franchised and directly-managed retail outlets) to a total of approximately 2,800, 3,200 and 3,500 by the end of 2004, 2005 and 2006, respectively, in order to correspond to the income growth in different regions. The anticipated growth of retail points in 2004 is 30.5% which is based on the actual implementation plan and is in line with the expected market growth of the PRC' s branded sporting goods.

To counter the challenge of international competitors and maintain the leading market position, the Group plan to upgrade the product design, development and research platform. The Group also intends to make substantial investments to develop the own basic research capabilities. For distinct sports categories such as soccer, basketball and tennis, the Group aims to produce professional sporting goods for professional athletes using advanced technologies. In particular, the Group plan to establish a product design and development centre in Hong Kong to combine overseas talents in product design with local market knowledge in the PRC to launch new product series under a unified brand image and style.

The Group believes that one of the most valuable assets is the unique image of the LI-NING brand as one of the leading sports brands in the PRC. The Group is committed to continue to invest and strengthen the brand to retain customer loyalty and promote customer preferences. To achieve this, the Group plan to intensify the sports marketing and promotional campaigns (such as campaigns for the 2004 Athens Olympic Games).

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$440 million (based on the offer price HK$1.995 per share). The Group at present intends to apply the net proceeds as follows: