Labixiaoxin Snacks Group Limited — Interim / Quarterly Report 2013

Sep 23, 2013

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奶味茶飲料
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CONTENTS

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奶味茶飲料
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Corporate Information	2
Financial Highlights	3
Management Discussion and Analysis	4
Auditor’s Independent Review Report	9
Condensed Consolidated Statement of Comprehensive Income	10
Condensed Consolidated Balance Sheet	11
Condensed Consolidated Statement of Changes in Equity	12
Condensed Consolidated Statement of Cash Flows	13
Notes to the Condensed Consolidated Interim Financial Information	14
Other Information	24

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This report is printed on environmentally friendly paper.

CORPORATE INFORMATION

Registerd Office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Headquarters and Principal Place of Business in the PRC

Wuli Industrial Area Jinjiang, Fujian PRC

Place of Business in Hong Kong

7th Floor, AT Tower 180 Electric Road North Point Hong Kong

Place of Listing and Trading Code

The Stock Exchange of Hong Kong Limited Stock code: 1262

Company Website

http://www.lbxxgroup.com (information contained in this website does not form part of this interim report)

Board of Directors Executive Directors

Zheng Yu Long (Chairman) Zheng Yu Shuang (Chief Executive Officer) Zheng Yu Huan

Non-Executive Directors

Independent Non-Executive Directors

Li Zhi Hai Sun Kam Ching Chung Yau Tong

Company Secretary

Yap Yung (HKICPA)

Authorized Representatives Zheng Yu Shuang Yap Yung

Audit Committee

Chung Yau Tong (Chairman) Li Zhi Hai Sun Kam Ching

Remuneration Committee

Sun Kam Ching (Chairman) Zheng Yu Long Chung Yau Tong

Nomination Committee

Li Zhi Hai (Chairman) Zheng Yu Shuang Chung Yau Tong

Auditor

PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince’s Building Central, Hong Kong

Legal Advisor

Sidley Austin Level 39, Two International Finance Centre 8 Finance Street, Central Hong Kong

Principal Share Registrar

Codan Services Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Hong Kong Share Registrar

Tricor Investor Services Limited Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong

Principal Bankers

Construction Bank of China, Jinjiang Branch Construction Bank Building Zeng Jin Area, Qing Yang Jinjiang, Fujian PRC

Bank of Communications, Quanzhou Branch 550 Fengze Street Quanzhou, Fujian PRC

China CITIC Bank, Quanzhou Branch 1-2/F, Renmin Yinhang Building Quanzhou, Fujian PRC

Agricultural Bank of China, Tianjin Wuqing Branch Jinrong Building Northern Xinhua Road Yangcun Town Wuqing Area, Tianjin PRC

Li Hung Kong (Vice-Chairman)

2

Labixiaoxin Snacks Group Limited

Financial Highlights

Sales

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RMB’M 1,546.5
1,279.7
975.5
931.7
831.7
771.4
2009 2010 2011 2012 1H 1H
2012 2013
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EBITDA

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436.4
RMB’M
332.4
292.8
232.0
203.9
130.0
2009 2010 2011 2012 1H 1H
2012 2013
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Sales by Products 1H2013

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Beverage Products
Jelly Products 1.0%
77.7%
Other Snacks
Products
12.7%
Confectionary Products
8.6%
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Sales by Distribution Channels 1H2013

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Wholesale
Distributors Key Account Agents
82.5% 14.6%
Overseas
2.9%
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Gross Profit

RMB’M

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633.3
512.5
406.7
342.0 341.4
288.5
2009 2010 2011 2012 1H 1H
2012 2013
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Net Profit

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277.9
RMB’M
221.7
186.7
160.8
147.8
53.5
2009 2010 2011 2012 1H 1H
2012 2013
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1H2012

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Jelly Products Other Snacks Products
83.9%
9.6%
Confectionary Products
6.5%
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1H2012

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Wholesale Key Account Agents
Distributors 15.1%
79.8%
Overseas
5.1%
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3

Interim Report 2013

MANAGEMENT DISCUSSION AND ANALYSIS

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Business Review

During the first half of 2013, the Group has maintained a robust growth for its core business. On the other hand, it has also kicked off a good start for its new business stream of beverage products. Total sales of the Group for the first half of 2013 increased by 17.3%, as compared with the same period of last year. During the six months ended 30 June 2013, the cost of most of the raw materials remained low, gross profit margin and EBITDA margin showed good improvement. Net profit and earnings per share surged by 16.1% and 21.4% respectively year on year. Operating cash flow remained strong and increased 20.5% from a year back.

Sales

Sales surged 17.3% to RMB975.5 million in the first half of 2013. The Group continued to penetrate “Labixiaoxin” products into new areas via expansion of existing distribution networks and new distributorships. As at 30 June 2013, the Group had a total number of 316 wholesale distributors and key account agents. The sales contributed from new distributors, net of terminated distributors, represents 3.9% of total domestic sales in the first half of 2013. Meanwhile, the current distributors demonstrated a strong growth of 13.5% in domestic sales, as compared with the same period in last year. The performance in Northern China outstood from the rest and delivered 27.5% growth year on year. Sales in Western and Central China remained robust which soared by 24.2% and 23.6% respectively from a year back. The sales momentum in Eastern China was maintained which increased by 10.2% from the same period in last year. Sales in modern retail channels remained robust, sales via key account agents grew 13.6% to RMB142.4 million in the first half of 2013 or 15.0% of total domestic sales. Sales in traditional retail channels demonstrated a even stronger growth. Sales via wholesale distributors increased 21.2% from a year back to RMB804.7 million.

Starting from 2013, the delivery cost previously borne by the Group, being the cost of delivering products from the Group’s warehouses to distributors’ warehouses, were taken up by the distributors. The Group granted extra discount to subsidize the distributors. The said discount of RMB33.4 million, or 3.1% of gross sales, were directly net off against sales in 2013. Consequently, the reported sales and gross profit in 2013 were cut down while the selling and distribution expenses also dropped by the same amount without affecting profit for the period. For comparison purpose, assuming the extra sales discount were not deducted from sales, the adjusted sales surged 21.3% from a year back and adjusted gross profit margin improved by 2.5 percentage points from the same period in last year.

Jelly products

Sales of jelly products increased by 8.6% from RMB697.8 million in the first half of 2012 to RMB758.1 million in the first half of 2013, of which sales attributable to jelly snacks and jelly beverages increased by 7.0% to RMB455.8 million and 11.3% to RMB302.4 million, respectively. The Group’s brand image played a key role particularly after the gelatin scandal. The Group was glad to note that consumers were eventually restoring confidence in consuming jelly products. The year-on-year growth rate of jelly products’ sales was improving throughout the first half of 2013. The new Angry Bird series of jelly bar and jelly beverages also boosted the consumption sentiment.

4

Labixiaoxin Snacks Group Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Confectionary products

Sales of confectionary products increased by 54.5% to RMB83.9 million in the first half of 2013. The new Angry Bird series of lollipop and gummy candy not only boosted up the consumption sentiment but also generated higher margin for the portfolio.

Beverage products

The Group soft launched “Xiaoxin Ru Guo” flavored milk in April 2013 which contributed RMB9.5 million sales in the first half of 2013. By the end of June 2013, the Group has engaged 43 wholesale distributors selling the flavored milk products mainly in the second or third tier cities at Fujian, Zhejiang and Anhui Provinces, etc. The Group has received encouraging feedback from the market, in particular the banana flavored milk. There was ample number of distributors in the pipeline who has indicated their interest to join the distributorship. Besides, certain key account customers have also agreed to allow “Xiaoxin Ru Guo” selling via their network. However, the Group must breakthrough the immediate hurdle of production capacity constraint before expanding the market further. The Group has expedited the installation process of the production machinery in Anhui Production Facilities which is now under test running.

Other snacks products

Sales of other snacks products soared 55.5% to RMB123.9 million in the first half of 2013. This was mainly due to sales attributable from new products including, “Megg” egg rolls, “Megg” red bean bun and “Xiaoxin cup” – chocolate cracker ball, which generated a robust demand.

Cost of Sales

Cost of sales increased 16.0% to RMB568.8 million in the first half of 2013. The increase in cost of sales was less than that of sales because the cost of most of the raw materials and packaging materials were falling since last year.

Gross Profit

Gross profit increased by 19.1% to RMB406.7 million in the first half of 2013 and gross profit margin increased by 0.6 percentage point from 41.1% in the first half of 2012 to 41.7% in the first half of 2013. The margin improvement was primarily due to falling in prices of raw materials since last year.

Selling and Distribution Expenses

Selling and distribution expenses increased marginally by 6.7% to RMB118.8 million in the first half of 2013 primarily due to increase in advertising and promotion expenses, operating costs of sales department, off-set by decrease in freight and transportation expenses.

As mentioned in previous paragraph, the delivery cost previously borne by the Group, being the delivering cost of products from the Group’s warehouses to distributors’ warehouses were taken up by the distributors in 2013. The Group granted an extra sales discount as subsidy. The said discount represents 3.1% of gross sales while the freight and transportation expenses represents 3.3% of sales in the first half of 2012 which was more or less the same level.

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5

Interim Report 2013

MANAGEMENT DISCUSSION AND ANALYSIS

During the six months ended 30 June 2013, the Group had invested heavily in various media and retail channels to promote “Labixiaoxin – Xiaoxin Ru Guo” flavored milk series. The advertising and promotion expenses were jetting up by 39.2% to RMB90.7 million or 9.3% of sales. The Group will disciplinarily monitor the advertising and promotion expenses at the range of 8–10% of sales.

Administrative Expenses

Administrative expenses increased slightly by 4.4% to RMB33.5 million in the first half of 2013. The overall administrative expenses to sales ratio was 3.4% which was comparable to that of same period in last year.

Other Net Gains

Balance primarily comprised net exchange gains, loss on disposal of machinery and equipment and net gain on sales of scrap materials. During the period, the Group incurred net gains of RMB1.9 million, primarily due to exchange gain as a result of appreciate of Renminbi during the period.

Income Tax Expense

The Group’s income tax expense increased significantly by 81.8% to RMB70.6 million in the first half of 2013, representing an effective income tax rate of 27.4% versus that of 19.5% in the same period of last year. This was mainly because the tax benefit of one of the Group’s subsidiaries expired in the second half of 2012. That subsidiary was subjected to preferential income tax rate of 15% in the first half of 2012 and was restored to the standard rate of 25% after expiry of the tax benefit in the second half of 2012. In fact, the subsidiary was charged retrospectively to the first half of 2012 at standard income tax rate of 25% after expiry of the tax benefit, leading the Group’s effective income tax rate for the second half of 2012 and full year of 2012 were 31.0% and 24.7% respectively.

If the income tax expense for the first half of 2012 was adjusted retrospectively, taking into account the captioned arrangement, the effective income tax rate for that period would have been 24.3% which was relatively comparable to that of the current period.

Net Profit for the Period

Net Profit for the period increased by 16.1% from RMB160.8 million in the first half of 2012 to RMB186.7 million in the first half of 2013. This was primarily due to increase in sales and margin improvement, partially offset by increase in effective income tax rate from 19.5% in first half of 2012 to 27.4% in the first half of 2013.

As aforesaid mentioned, the effective income tax rate in the first half of 2012 would have been 24.3% if taking into account the retrospective income tax charge to the first half of 2012. Consequently, the adjusted net profit for the first half of 2012 would have been RMB151.1 million. Accordingly, the net profit for current period would surge by 23.6% from a year back and net profit margin improved by 0.9 percentage points for comparison purpose.

Financial Review

Financial resources and liquidity

The Group mainly finances its operations and capital expenditure by cash and bank balances, internal generated cash flows and bank borrowings.

As at 30 June 2013, the bank balances and deposits amounted to RMB832.1 million, representing an increase of RMB426.0 million as compared with the year ended 31 December 2012. This was mainly due to good cash flow generated from operating activities and fund raised from 3-year syndicated bank loan during the period. Total borrowings of the Group as at 30 June 2013 increased sharply by 551.3% to RMB489.1 million which was primarily due to the 3-year syndicated bank loans that the Group secured during the period under review. Over 90% of the Group’s cash and bank balances were denominated in RMB while over 90% of the Group’s borrowings were denominated in USD. While the Group’s gearing ratio (total borrowings divided by total equity) as at 30 June 2013 increased to 27.5% (31 December 2012: 4.5%), the Group maintained at net cash position as at 30 June 2013.

6

Labixiaoxin Snacks Group Limited

MANAGEMENT DISCUSSION AND ANALYSIS

The Group maintains sufficient cash and available banking facilities for its working capital requirements and for capitalizing on any potential investment opportunities in the future. The Group will from time to time make prudent financial arrangements and decisions to address changes in the domestic and international financial environment.

Cash flow

Cash flow generated from operating activities surged 20.5% from RMB201.6 million in the first half of 2012 to RMB243.0 million in the first half of 2013. As at 30 June 2013, the Group has spent RMB147.2 million in investing activities mainly for expansion of production facilities. The Group has inflow cash of RMB330.2 million from financing activities which primarily represents fund raise from the 3-year syndicated bank loan.

Capital expenditure

In first half of 2013, the Group has spent RMB152.0 million in capital expenditure mainly for construction of production facilities in Anhui Province and expansion of production facilities in Tianjin and Sichuan Provinces. The flavored milk production lines at Anhui Production Facilities have recently commenced operation in August 2013 as planned. The production lines of jelly products at Anhui Production Facilities will commence operation by end of this year. The Group will build 4 production houses at Sichuan Production Facilities for future expansion.

The above capital expenditure was primarily financed by proceeds from the 3-year syndicated bank loan and operating cash flows.

Inventory analysis

The Group’s inventories primarily consist of finished goods of jelly products, confectionary products, beverage products and other snacks products, as well as raw materials and packaging materials. As at 30 June 2013, balance increased RMB5.9 million from the beginning of the year mainly due to procurement of raw materials toward the end of the reporting period. The inventories turnover days for the first half of 2013 and 2012 were 21 days and 20 days, respectively.

Trade receivables

Trade receivables mainly represent the balance due from wholesales distributors and key account agents. The Group typically sells its products on credit and grant 30 days credit to most of the wholesale distributors and 90 days credit to key account agents. Balance decreased by RMB66.7 million from the beginning of the year mainly due to seasonal factor. The trade receivable turnover days for the first half of 2013 and 2012 were 44 days and 52 days, respectively.

Trade payables

Trade payables mainly represent the balances due to the Group’s suppliers who generally grant credit terms ranging from 30 days and 60 days to the Group. The Group also settled some of the procurement by bank bills which typically have 180 settlement days, at cost of bank charges and pledged deposits to the banks. Trade payables turnover days for the first half of 2013 and 2012 were 53 days and 74 days respectively.

Charges on assets

As at 30 June 2013, the Group had the following charge of assets:

• (i) bank deposits of RMB14.1 million (31 December 2012: RMB9.6 million);

• (ii) land and building with net asset value of RMB9.8 million (31 December 2012: RMB10.0 million); and

• (iii) shares of certain wholly-owned subsidiaries of the Group.

Contingent liabilities

As at 30 June 2013, the Group had no contingent liabilities (31 December 2012: Nil).

7

Interim Report 2013

MANAGEMENT DISCUSSION AND ANALYSIS

Disclosure pursuant to Rule 13.18 of the Listing Rules

On 25 February 2013, the Company as borrower entered into a Facility Agreement (the “Facility Agreement”) with certain banking institutes as original lenders in relation to a US$75,000,000 term loan facility. The Facility has a term of 36 months commencing from the date of the Facility Agreement.

The Facility Agreement includes a condition imposing specific performance obligations on Mr. Zheng Yu Long, Mr. Zheng Yu Shuang, Mr. Zheng Yu Huan and Mr. Li Hung Kong, the controlling shareholders of the Company (the “Controlling Shareholders”) who are collectively interested in approximately 64.10% of the issued share capital of the Company as of the date of the Facility Agreement. It will be a change of control in the event that (i) the Controlling Shareholders collectively do not or cease to, at any time directly or indirectly own at least 35% of the issued share capital of the Company on a fully diluted basis; or (ii) the Controlling Shareholders collectively do not or cease to, at any time directly or indirectly, have the ability to direct the affairs of the Company.

If a change of control occurs, the facility agent to the Facility Agreement may cancel all the available Facility and declare all or part of the outstanding loan, together with all accrued interests, breaks costs (if any) and all other amounts accrued pursuant to the Facility Agreement then due and payable, whereupon the Facility Agreement will be cancelled and all such outstanding amounts will be immediately due and payable.

Employment and Remuneration Policy

As at 30 June 2013, the Group had approximately 2,700 employees and total remuneration expenses for the first half of 2013 amounted to RMB55.3 million including amortisation cost of share option of RMB1.8 million. The employees’ salaries are reviewed and adjusted annually based on employee’s performance and experience. The Group’s employee benefits include performance bonus, mandatory provident fund for Hong Kong employees, social insurance packages for the PRC employees and education subsidy to encourage continuous professional development of staff.

On 30 March 2012, the Group has granted 15,000,000 share options to certain employees of the Group with an exercisable period from 31 March 2012 to 30 March 2017 at an exercise price of HK$2.68 per share. There are three vesting periods for these share options. As at 30 June 2013, 7,000,000 share options were vested and were fully exercised subsequently in July 2013.

Material Acquisition and Disposal of Subisidiaries and Associated Companies

There was no material acquisition and disposal of subsidiaries and associated companies during the six months ended 30 June 2013.

Prospect

The economic data indicates that China economy is under downward pressure. The new administration has demonstrated their commitment to transform the economy from intense investment and export driven to domestic consumption driven, at the expense of short term economic slowdown. The Group’s previous investment in branding and distribution networks has provided a solid foundation to meet the future challenges. Particularly, the Group is seeing a good recovery of consumers’ confidence in jelly products after the gelatin scandal. The market feedback to “Xiaoxin Ru Guo” flavored milk is also encouraging. Besides, there is no indication of immediate rising pressure to most of the raw material cost. The Group is cautiously optimistic to its performance in the second half of 2013, albeit the short term volatility of China economy.

8

Labixiaoxin Snacks Group Limited

Auditor’s Independent Review Report

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REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF LABIXIAOXIN SNACKS GROUP LIMITED

(incorporated in Bermuda with limited liability)

Introduction

We have reviewed the interim financial information set out on pages 10 to 23, which comprises the condensed consolidated balance sheet of Labixiaoxin Snacks Group Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2013 and the related condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 “Interim Financial Reporting”. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 28 August 2013

9

Interim Report 2013

CONDENSED CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME

For the six months ended 30 June 2013

	Note	Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000 975,474 831,729 (568,812) (490,281) 406,662 341,448 274 486 (118,798) (111,288) (33,518) (32,098) 1,855 2,734 256,475 201,282 4,405 2,756 (3,529) (4,415) 876 (1,659) 257,351 199,623 (70,634) (38,861) 186,717 160,762 0.17 0.14 0.17 0.14
		2013
		RMB’000
Sales Cost of sales	4
		975,474
		(568,812)
Gross profit Other income Selling and distribution expenses Administrative expenses Other net gains	5 6
		406,662
		274
		(118,798)
		(33,518)
		1,855
Operating profit	7
		256,475
Finance income Finance costs
		4,405
		(3,529)
Finance income/(costs),net	8
		876
Profit before income tax Income tax expense	9
		257,351
		(70,634)
Profit and total comprehensive income for the period
		186,717
Earnings per share attributable to equity holders of the Company (RMB per share) – Basic	10
		0.17
– Diluted
		0.17

10

Labixiaoxin Snacks Group Limited

CONDENSED CONSOLIDATED

BALANCE SHEET

As at 30 June 2013

	Note	Unaudited	Audited 31 December 2012 RMB’000
		30 June
		2013
		RMB’000
ASSETS Non-current assets Land use rights Property, plant and equipment Deposits for property, plant and equipment Interests in an associated company Deferred income tax assets	12 12		150,922 991,138 118,917 – 6,112
		149,264
		989,355
		240,189
		–
		11,407
			1,267,089
		1,390,215
Current assets Inventories Trade receivables Prepayments and other receivables Pledged bank deposits Cash and cash equivalents	13		72,769 269,517 10,904 9,604 406,106
		78,702
		202,769
		22,870
		14,083
		832,140
			768,900
		1,150,564
Total assets			2,035,989
		2,540,779
EQUITY Capital and reserves attributable to equity holders of the Company Share capital Share premium Other reserves Retained earnings			403,984 550,787 33,311 670,856
		403,984
		550,787
		35,131
		785,535
Total equity			1,658,938
		1,775,437
LIABILITIES Non-current liabilities Deferred income tax liabilities Borrowings	15		17,410 –
		23,144
		444,296
			17,410
		467,440
Current liabilities Trade and other payables Borrowings Current income tax liabilities	14 15		257,408 75,080 27,153
		215,898
		44,780
		37,224
			359,641
		297,902
Total liabilities			377,051
		765,342
Total equity and liabilities			2,035,989
		2,540,779
Net current assets			409,259
		852,662
Total assets less current liabilities			1,676,348
		2,242,877

11

Interim Report 2013

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2013

					Unaudited	Unaudited
						Share	Currency
		Share	Share	Merger	Statutory	option	translation	Retained
		capital	premium	reserve	reserves	reserve	reserve	earnings	Total
	Note	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Balance at 1 January 2013		403,984	550,787	(87,600)	116,889	4,063	(41)	670,856	1,658,938
Profit and total
comprehensive income
for the period		–	–	–	–	–	–	186,717	186,717
Employee share-based
payments		–	–	–	–	1,820	–	–	1,820
Dividends	11	–	–	–	–	–	–	(72,038)	(72,038)
Balance at 30 June 2013		403,984	550,787	(87,600)	116,889	5,883	(41)	785,535	1,775,437
Balance at 1 January 2012		403,984	550,787	(87,600)	85,902	–	(41)	480,263	1,433,295
Profit and total
comprehensive income
for the period		–	–	–	–	–	–	160,762	160,762
Employee share-based
payments		–	–	–	–	1,320	–	–	1,320
Dividends	11	–	–	–	–	–	–	(56,280)	(56,280)
Balance at 30 June 2012		403,984	550,787	(87,600)	85,902	1,320	(41)	584,745	1,539,097

12

Labixiaoxin Snacks Group Limited

CONDENSED CONSOLIDATED STATEMENT

OF CASH FLOWS

For the six months ended 30 June 2013

	Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000 303,158 235,261 (60,124) (33,622) 243,034 201,639 (17,380) (145,409) (134,643) (25,174) 430 – 4,405 2,756 (147,188) (167,827) 444,296 30,000 (30,300) (100,000) (4,479) 9,766 (72,038) (56,280) (7,291) (4,415) 330,188 (120,929) 426,034 (87,117) 406,106 521,949 832,140 434,832
	2013
	RMB’000
Cash flows from operating activities Cash generated from operations Income tax paid
	303,158
	(60,124)
Net cash generated from operating activities
	243,034
Cash flows from investing activities Purchases of property, plant and equipment Deposits paid for property, plant and equipment Proceeds from disposal of property, plant and equipment Interest received
	(17,380)
	(134,643)
	430
	4,405
Net cash used in investing activities
	(147,188)
Cash flows from financing activities Proceeds from borrowings Repayments of borrowings (Increase)/decrease in pledged bank deposits Dividends paid Interest paid
	444,296
	(30,300)
	(4,479)
	(72,038)
	(7,291)
Net cash generated from/(used in) financing activities
	330,188
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period
	426,034
	406,106
Cash and cash equivalents at the end of the period
	832,140

13

Interim Report 2013

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 General Information

Labixiaoxin Snacks Group Limited (the “Company”) was incorporated in Bermuda on 4 May 2004 and domiciled in Bermuda. The Company’s immediate and ultimate holding company is Alliance Food and Beverages (Holding) Company Limited, a company incorporated in the British Virgin Islands (“BVI”). The address of the Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The address of its principal place of business is Wuli Industrial Area, Jinjiang Fujian, the People’s Republic of China (“PRC”).

The Company is an investment holding company. The principal activities of the Company and its subsidiaries (collectively referred to as the “Group”) are the manufacture and sale of food and beverages products.

The Company’s shares are listed on the main board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The condensed consolidated interim financial information is presented in Renminbi (“RMB”), unless otherwise stated.

This condensed consolidated interim financial information has not been audited.

2

Basis of Preparation

The condensed consolidated interim financial information for the six months ended 30 June 2013 has been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing the condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual financial statements for the year ended 31 December 2012.

The accounting policies used in the preparation of the condensed consolidated interim financial information are consistent with those used in the annual financial statements for the year ended 31 December 2012, except as mentioned below.

• (a) New standards, amendments and interpretations to standards adopted by the Group

The following new standards, amendments and interpretations to standards are mandatory for accounting periods beginning on or after 1 January 2013. The adoption of these new standards, amendments and interpretations to standards does not have any significant impact to the results and financial position of the Group.

IAS 1 (Amendment)	Presentation of financial statements
IAS 19 (Amendment)	Employee benefits
IAS 27 (2011)	Separate financial statements
IAS 28 (2011)	Investments in associates and joint ventures
IFRS 1 (Amendment)	Government grants
IFRS 7 (Amendment)	Financial instruments: disclosures – offsetting financial assets and
	financial liabilities
IFRS 10	Consolidated financial statements
IFRS 11	Joint arrangements
IFRS 12	Disclosure of interests in other entities
IFRS 13	Fair value measurements
IFRIC – Int 20	Stripping costs in the production phase of a surface mine
Annual improvements project	Fourth 2011 annual improvements project

14

Labixiaoxin Snacks Group Limited

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

2 Basis of Preparation (continued)

(b) New standards, amendments to standards and interpretations that have been issued but are not effective

The following new standards, amendments to standards and interpretations have been issued and are mandatory for the Group’s accounting periods beginning on or after 1 January 2014 and which the Group has not early adopted.

IAS 32 (Amendment) Financial instruments: Presentation – offsetting financial assets and financial liabilities[1] IAS 36 (Amendment) Recoverable amount disclosures for non-financial assets[1] IFRS 7 and IFRS 9 (Amendments) Mandatory effective date and transition disclosures[2] IFRS 9 Financial instruments[2] IFRS 10, IFRS 12 and IAS 27 Investment entities[1] (Amendments) IFRIC – Int 21 Levies[1]

1 Effective for the Group for annual periods beginning on or after 1 January 2014

2 Effective for the Group for annual periods beginning on or after 1 January 2015

The Group is currently assessing the impact of the adoption of the above new standards, amendments to standards and interpretations and does not expect there will be any significant impact to the results and financial position of the Group.

3 Financial Risk Management

The Group’s activities expose it to market risks (including currency risk and interest rate risk), credit risk and liquidity risk.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2012.

There have been no changes in the risk management department since year end or in any risk management policies since the year end.

4 Segment Information

The Group is principally engaged in the manufacturing and sale of jelly products, confectionary products, beverage products and other snacks products.

The chief operating decision-maker (“CODM”) has been identified as the executive directors of the Company. CODM reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

CODM considers the business by products and assesses the performance of the following operating segments:

• i. Jelly products

• ii. Confectionary products

• iii. Beverage products

• iv. Other snacks products

15

Interim Report 2013

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

4 Segment Information (continued)

Although the beverage products segment does not meet the quantitative thresholds required by IFRS 8 “Operating segments”, management has concluded that this segment should be reported, as it is closely monitored by the CODM as a potential growth segment and is expected to materially contribute to group revenue in the future.

CODM assesses the performance of the operating segments based on measure of segment results. Finance income and costs, corporate income and expenses are not included in the results for each operating segment that is reviewed by the CODM. Other information provided to the CODM is measured in a manner consistent with that in the financial information.

The revenue from external parties reported to the CODM is measured in a manner consistent with that in the condensed consolidated statement of comprehensive income.

During the six months ended 30 June 2013, none of the individual customer account for 10% or more of the Group’s external revenue (2012: none). As at 30 June 2013 and 31 December 2012, substantially all of the Group’s assets, liabilities and capital expenditure are located or utilised in the PRC.

Jelly products RMB’000	Unaudited Six months ended 30 June 2013 Confectionary products Beverage products Other snacks products RMB’000 RMB’000 RMB’000	Unaudited Six months ended 30 June 2013 Confectionary products Beverage products Other snacks products RMB’000 RMB’000 RMB’000	Unaudited Six months ended 30 June 2013 Confectionary products Beverage products Other snacks products RMB’000 RMB’000 RMB’000	Reportable segments Total RMB’000
Revenue Sales to external customers 758,143 Cost of sales (436,612)
	83,932	9,455	123,944	975,474
	(51,559)	(6,684)	(73,957)	(568,812)
Gross profit 321,531
	32,373	2,771	49,987	406,662
Results of reportable segments 229,201
	22,151	1,620	34,892	287,864

A reconciliation of results of reportable segments to profit for the period is as follows:

Results of reportable segments Corporate income Corporate expenses Operating profit Finance income Finance costs Profit before income tax Income tax expense Profit for the period Amortisation of land use rights 1,658				287,864
				5,106
				(36,495)
				256,475
				4,405
				(3,529)
				257,351
				(70,634)
				186,717
	–	–	–	1,658
Depreciation of property, plant and equipment 30,424
	–	–	2,465	32,889

16

Labixiaoxin Snacks Group Limited

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

4 Segment Information (continued)

Unaudited Six months ended 30 June 2012 Jelly products Confectionary products Other snacks products RMB’000 RMB’000 RMB’000	Reportable segments Total RMB’000 831,729 (490,281) 341,448 230,160 230,160 3,234 (32,112) 201,282 2,756 (4,415) 199,623 (38,861) 160,762 1,658 27,725
Revenue Sales to external customers 697,795 54,271 79,663 Cost of sales (401,799) (34,037) (54,445)
Gross profit 295,996 20,234 25,218
Results of reportable segments 199,775 14,040 16,345
A reconciliation of results of reportable segments to profit for the period is as follows: Results of reportable segments Corporate income Corporate expenses Operating profit Finance income Finance costs Profit before income tax Income tax expense Profit for the period Amortisation of land use rights 1,658 – –
Depreciation of property, plant and equipment 26,824 – 901

17

Interim Report 2013

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

5 Other Income

Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000	Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000
Rental income 274	486

6 Other Net Gains

Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000	Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000
Gain on sale of scrap materials 1,767 Loss on disposal of property, plant and equipment (2,976) Net exchange gains 3,064	157 (14) 2,591
1,855	2,734

7 Operating Profit

Operating profit was determined after charging the following:

Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000

Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000

Purchases of raw materials, finished goods and consumables 531,663 Changes in inventories of raw materials and finished goods (5,933) Advertising and promotion expenses 90,726 Freight and transportation expenses 1,754 Employee benefit expenses (including directors’ emoluments and share-based payments) 55,277 Depreciation of property, plant and equipment 32,889 Amortisation of land use rights 1,658 Operating leases rentals –

408,686 30,457 65,170 29,591 44,777 27,725 1,658 287

18

Labixiaoxin Snacks Group Limited

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

8 Finance Income/(Costs), Net

Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000	Unaudited Six months ended 30 June 2013 2012 RMB’000 RMB’000
Finance income: Interest income on bank deposits 4,405	2,756
Finance costs: Interest expenses on bank borrowings wholly repayable within five years (7,291) Less: amounts capitalised on qualifying assets 3,762	(4,415) –
Total finance costs (3,529)	(4,415)
Finance income/(costs), net 876	(1,659)

9 Income Tax Expense

	Unaudited
	Six months ended	30 June
	2013	2012
	RMB’000	RMB’000
Current income tax – PRC	70,195	34,121
Deferred income tax	439	4,740
	70,634	38,861

During the six months ended 30 June 2013, the Group did not have any assessable income in Bermuda, BVI and Hong Kong (2012: Nil).

The subsidiaries in the PRC are subject to income tax rate of 25% (2012: 25%) on their taxable profit during the period.

One of the subsidiaries enjoyed a 50% reduction in PRC income tax rate for the period ended 30 June 2012, which was expired by the end of 2012.

A subsidiary in Fujian province, PRC, was designated an New and Hi-Tech Enterprises (“高新技術企業”) in October 2009 and enjoyed a preferential income tax rate of 15% for the period ended 30 June 2012 which was expired in the second half of the year ended December 2012. That subsidiary is subject to standard income tax rate of 25% in 2013.

19

Interim Report 2013

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

10 Earnings Per Share

(a) Basic earnings per share

Unaudited Six months ended 30 June 2013 2012	Unaudited Six months ended 30 June 2013 2012
Net profit attributable to the equity holders of Company (RMB’000) 186,717	160,762
Weighted average number of ordinary shares outstanding for basic earnings per share (’000) 1,125,600	1,125,600
Basic earnings per share (RMB per share) 0.17	0.14

Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

(b) Diluted earnings per share

The calculation of diluted earnings per share is based on the net profit attributable to equity holders of the Company and the weighted average number of ordinary shares in issue during the period after adjusting for the dilutive potential ordinary shares in respect of the Company’s outstanding share options. The potential ordinary shares in respect of the Company’s outstanding share options are dilutive for the six months ended 30 June 2013 while they were anti-dilutive for the six months ended 30 June 2012.

	Unaudited Six months ended 30 June 2013
Net profit attributable to the equity holders of Company (RMB’000)	186,717
Weighted average number of ordinary shares outstanding for basic earnings
per share (’000)	1,125,600
Adjustment for share options (’000)	4,257
Weighted average number of ordinary shares outstanding for diluted earnings
per share (’000)	1,129,857
Diluted earnings per share (RMB per share)	0.17

11 Dividends

At the annual general meeting held on 23 May 2013, the shareholders approved a final dividend of HK$0.08 per share, amounting to HK$90,048,000 (equivalent to RMB72,038,000) for the year ended 31 December 2012, which was paid in June 2013 and have been reflected as an appropriation of retained earnings for the six months ended 30 June 2013. The directors do not recommend the payment of an interim dividend for the six months ended 30 June 2013.

20

Labixiaoxin Snacks Group Limited

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

12 Capital Expenditure

	Land use rights RMB’000	Land and buildings RMB’000	Plant and equipment RMB’000	Motor vehicles RMB’000	Leasehold improvements RMB’000	Construction in-progress RMB’000	Total RMB’000
Six months ended 30 June 2013 Cost At 1 January 2013 Additions Disposals Transfer from/(to)
	165,820	522,430	429,905	13,836	820	247,711	1,380,522
	–	12,000	15,411	385	–	6,716	34,512
	–	–	(11,422)	–	–	–	(11,422)
	–	10,981	–	–	–	(10,981)	–
At 30 June 2013
	165,820	545,411	433,894	14,221	820	243,446	1,403,612
Accumulated depreciation At 1 January 2013 Depreciation charge Disposals
	14,898	82,155	131,972	9,437	–	–	238,462
	1,658	13,462	18,934	411	82	–	34,547
	–	–	(8,016)	–	–	–	(8,016)
At 30 June 2013
	16,556	95,617	142,890	9,848	82	–	264,993
Net book value At 30 June 2013
	149,264	449,794	291,004	4,373	738	243,446	1,138,619
	Land use rights RMB’000	Land and buildings RMB’000	Plant and equipment RMB’000	Motor vehicles RMB’000	Leasehold improvements RMB’000	Construction in-progress RMB’000	Total RMB’000 1,111,951 212,846 (64) – 1,324,733 179,334 29,383 (50) 208,667 1,116,066
Six months ended 30 June 2012 Cost At 1 January 2012 Additions Disposals Transfer from/(to)	165,820 – – –	416,264 2,722 – 42,087	329,161 89,591 (64) –	10,454 3,382 – –	– – – –	190,252 117,151 – (42,087)
At 30 June 2012	165,820	461,073	418,688	13,836	–	265,316
Accumulated depreciation At 1 January 2012 Depreciation charge Disposals	11,581 1,658 –	59,091 10,742 –	100,267 16,386 (50)	8,395 597 –	– – –	– – –
At 30 June 2012	13,239	69,833	116,603	8,992	–	–
Net book value At 30 June 2012	152,581	391,240	302,085	4,844	–	265,316

21

Interim Report 2013

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

13 Trade Receivables

The Group’s sales are generally on credit term ranging from 30 to 90 days. The aging analysis of the Group’s trade receivables, based on invoice date, is as follows:

Unaudited 30 June 2013 RMB’000	Audited 31 December 2012 RMB’000
Less than 30 days 149,352 31 days–90 days 53,417 Over 90 days –	199,875 69,342 300
202,769	269,517

For the trade receivables that are not past due nor impaired, the directors were of the opinion that no impairment provision was required as those customers did not have recent default history.

During the period, no trade receivables were impaired. As at 30 June 2013 and 31 December 2012, no trade receivables are considered to be impaired.

The carrying amounts of trade receivables approximate their fair values.

14 Trade and Other Payables

Trade and Other Payables
Unaudited 30 June 2013 RMB’000	Audited 31 December 2012 RMB’000
Trade payables 127,008 Bills payable 17,081	148,717 32,798
Trade and bills payables 144,089 Accrued sales rebates 19,864 Other accrued expenses 24,097 Directors’ fees and emoluments payable 8,515 Sundry creditors 19,333	181,515 28,447 24,825 7,862 14,759
215,898	257,408

The credit periods granted by suppliers generally range from 30 to 60 days. As at 30 June 2013 and 31 December 2012, the aging analysis of trade payables is as follows:

Unaudited 30 June 2013 RMB’000	Audited 31 December 2012 RMB’000
Less than 30 days 85,419 31 days–90 days 41,160 Over 90 days 429	126,035 22,682 –
127,008	148,717

Bills payable of the Group amounting to RMB17,081,000 (31 December 2012: RMB32,798,000) were secured by pledged bank deposits of RMB5,043,000 (31 December 2012: RMB9,604,000). The bills payable were with average maturity period of within six months.

The carrying amounts of trade and other payables approximate their fair values.

22

Labixiaoxin Snacks Group Limited

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

15 Borrowings

Unaudited 30 June 2013 RMB’000	Audited 31 December 2012 RMB’000
Non-current 444,296 Current 44,780	– 75,080
Total borrowings 489,076	75,080

• (i) On 25 February 2013, the Company as borrower entered into a Facility Agreement (the “Facility Agreement”) with certain banking institutes as original lenders in relation to a US$75,000,000 term loan facility with the interest rate of 3-month LIBOR plus 3.5% per annum. The facility has a term of 36 months commencing from the date of the Facility Agreement. The facility was fully drawn down as at 30 June 2013. This syndicated loan is repayable in four instalments in August 2014, February 2015, August 2015 and February 2016 respectively, and secured by bank deposit of RMB9,040,000 and shares of certain whollyowned subsidiaries of the Group.

• (ii) At 30 June 2013, bank borrowings of RMB40,000,000 (31 December 2012: RMB70,000,000) were guaranteed by a subsidiary of the Group.

• (iii) At 30 June 2013, a bank borrowing of RMB4,780,000 (31 December 2012: RMB5,080,000) was secured by land and buildings of RMB9,771,000 (31 December 2012: RMB10,027,000).

16 Commitments

Capital commitments

As at 30 June 2013, the Group had the following capital commitments not provided for in respect of land use rights and property, plant and equipment:

30 June 2013 RMB’000	31 December 2012 RMB’000
Authorised but not contracted for in respect of – property, plant and equipment – Contracted but not provided for in respect of – property, plant and equipment 57,622	– 135,208
57,622	135,208

23

Interim Report 2013

OTHER INFORMATION

Share Option Scheme

On 23 September 2011, the Company conditionally adopted a share option scheme (the “Share Option Scheme”) whereby the board of Directors (the “Board”) can grant options for the subscription of shares of the Company (the “Shares”) to any directors of the Company (“Directors”), employees and officers of any member of the Group and any advisers, consultants, distributors, contractors, contract manufacturers, agents, customers, business partners, joint venture business partners and service providers of any member of the Group who the Board considers that they will contribute or have contributed to the Group (the “Eligible Participants”) as described in the Share Option Scheme in order to serve as compliment and to reciprocate their contribution to the Group. The maximum number of Shares that can be issued according to the Share Option Scheme or any other share option schemes adopted by the Company (and to which the provisions of Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) are applicable) shall not exceed 10% of the aggregate number of the shares in issue as at the date of the Listing which was 112,560,000 Shares, representing 10% of the issued share capital of the Company as at the date of this Interim Report. The total number of Shares which may be issued upon exercise of all the options granted and yet to be exercised under the Share Option Scheme or any other share option schemes adopted by the Company (and to which the provisions of Chapter 17 of the Listing Rules are applicable) must not exceed 30% of the aggregate number of the Shares in issue from time to time. Unless otherwise approved by the shareholders of the Company, the number of Shares that may be granted to a Eligible Participant (including both exercised, cancelled and outstanding options) under the Share Option Scheme or any other share option scheme adopted by the Company (and to which the provisions of Chapter 17 of the Listing Rules are applicable) in any 12 month period must not exceed 1% of the Shares in issue. There is no minimum period that the options must be held before they become exercisable, and the options granted shall be exercised within the period decided by the Board, however no options shall be exercised 10 years after they have been granted. The exercise price of the option shall be the higher of (a) the closing price of the Shares on the daily quotation sheet of the Stock Exchange on the date of grant; (b) the average closing price of the Shares on the daily quotation sheet of the Stock Exchange for the five business days immediately preceding the date of grant; and (c) nominal value of the Share on the date of grant. Each grantee shall pay a consideration of HK$1.00 at the time the option is granted. The Share Option Scheme shall take effect from the date it is granted and shall remain effective within a period of 10 years from that relevant date of grant.

Movements of the share options granted under the Share Option Scheme

On 30 March 2012, 15,000,000 share options were granted to certain employees of the Group with an exercisable period from 31 March 2012 to 30 March 2017 at an exercise price of HK$2.68 per Share. There are three vesting periods for these share options. The estimated fair value of these share options was approximately RMB8,003,000, based on the Black-Scholes valuation model. The variables and assumptions used in computing the fair value of the share options are based on the Company’s best estimate. The value of an option varies with different variables of certain subjective assumptions. Any change in variables so adopted may materially affect the estimation of the fair value of an option. The significant inputs into the model are as follows:

Date of grant: 30 March 2012 Exercise price: HK$2.68 per Share Expected life: 2.57 years–3.79 years Risk-free rate: 0.28%–0.39% Expected volatility: 41.03%–45.43% Expected dividend yield: 2.24%

None of the options granted as stated above were granted to a director, chief executive or substantial shareholder of the Company nor an associate (as defined in the Listing Rules) of any of them. Save as disclosed above, no other options have been granted during the six months ended 30 June 2013.

24

Labixiaoxin Snacks Group Limited

OTHER INFORMATION

Movement of the share options granted during the six months ended 30 June 2013 are as follows:

	Number of	ordinary shares subject to share options granted	ordinary shares subject to share options granted	ordinary shares subject to share options granted	ordinary shares subject to share options granted	ordinary shares subject to share options granted
		under the	Share Option Scheme
		Granted	Exercised		Lapsed
		during		during	during
	Outstanding	the period	the period		the period	Outstanding
	as at	ended		ended	ended	as at
	1 January	30 June		30 June	30 June	30 June
Exercise period	2013	2013		2013	2013	2013
31 March 2013 to 30 March 2017	7,000,000	–		–	–	7,000,000
31 March 2014 to 30 March 2017	5,000,000	–		–	–	5,000,000
31 March 2015 to 30 March 2017	3,000,000	–		–	–	3,000,000
Total	15,000,000	–		–	–	15,000,000

Interest and Short Positions of Directors in the Shares, Underlying Shares or Debentures

As at 30 June 2013, the interest and short positions of the Directors and the chief executives and their associates in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to Model Code for Securities Transactions by Directors of Listed Companies as set out in Appendix 10 of the Listing Rules (the “Model Code”), are as follows:

(i) Long position in shares and underlying shares of the Company

			Approximate
		Number	percentage
Name of Director/		of Shares	of interest in
Chief Executive	Nature of Interest	interested	the Company	Note
Zheng Yu Long	Interest of a controlled	610,915,527	54.3%	1
	corporation
	Beneficial owner	110,208,060	9.8%
Zheng Yu Shuang	Interest of a controlled	610,915,527	54.3%	1
	corporation
Zheng Yu Huan	Interest of a controlled	610,915,527	54.3%	1
	corporation
Li Hung Kong	Interest of a controlled	610,915,527	54.3%	1
	corporation

Note:

(1) The 610,915,527 Shares are beneficially owned by Alliance Food And Beverages (Holding) Company Limited (“Alliance Holding”), a company which is owned as to 28% by each of Zheng Yu Long, Zheng Yu Shuang, Zheng Yu Huan and as to 16% by Li Hung Kong. Accordingly, each of Zheng Yu Long, Zheng Yu Shuang, Zheng Yu Huan and Li Hung Kong is deemed to be interested in the shares held by Alliance Holding for the purpose of the SFO.

25

Interim Report 2013

OTHER INFORMATION

(ii) Long position in shares and underlying shares of the associated corporation

			Approximate
		Total number of	percentage of issued
		shares held in	share capital of
	Name of associated	associated	associated
Name of Director	corporation	corporation	corporation
Zheng Yu Long	Alliance Holding	28	28%
Zheng Yu Shuang	Alliance Holding	28	28%
Zheng Yu Huan	Alliance Holding	28	28%
Li Hung Kong	Alliance Holding	16	16%

Save as disclosed above, as at 30 June 2013, none of the Directors and the chief executive of the Company had any interest or short position in the Shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO), (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or (b) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

Substantial Shareholders’ Interests and Short Positions

As at 30 June 2013, to the best of the Directors’ knowledge, the following persons (other than the Directors and chief executives of the Company) had or deemed or taken to have an interests of 5% or more of the issued share capital of the Company, which would fall to be disclosed under the provisions of Division 2 and 3 of Part XV of the SFO or were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO.

		Interest of				Approximate
	Beneficial	a controlled	Investment	Founder of a	Total interest	percentage of
Name of shareholder	owner	corporation	manager	discretionary trust	in shares	shareholding	Note
Alliance Holding	610,915,527	–	–	–	610,915,527(L)	54.3%	2
Zheng Yu Long	110,208,060	610,915,527	–	–	721,123,587(L)	64.10%	2
Zheng Yu Shuang	–	610,915,527	–	–	610,915,527(L)	54.3%	2
Zheng Yu Huan	–	610,915,527	–	–	610,915,527(L)	54.3%	2
Li Hung Kong	–	610,915,527	–	–	610,915,527(L)	54.3%	2
Cheah Cheng Hye	–	–	–	77,761,000	77,761,000 (L)	6.90%	3
To Hau Yin	–	–	–	77,761,000	77,761,000 (L)	6.90%	3
				(spouse of
				Cheah Cheng Hye,
				founder of the
				discretionary trust)
Hang Seng Bank Trustee	–	77,761,000	–	–	77,761,000 (L)	6.90%	3
International Limited		(as trustee)
(“HSBTIL”)
Cheah Company Limited (“CCL”)	–	77,761,000	–	–	77,761,000 (L)	6.90%	3
Cheah Capital Management	–	77,761,000	–	–	77,761,000 (L)	6.90%	3
Limited (“CCML”)
Value Partners Group Limited	–	77,761,000	–	–	77,761,000 (L)	6.90%	3
(“VPGL”)
Value Partners Hong Kong	–	77,761,000	–	–	77,761,000 (L)	6.90%	3
Limited (“VPHK”)
Value Partners Limited (“VPL”)	–	–	77,761,000	–	77,761,000 (L)	6.90%	3

26

Labixiaoxin Snacks Group Limited

OTHER INFORMATION

Notes:

• (1) The letter “L” denotes the person’s long position in such securities and the letter “S” denotes the person’s short position in such securities.

• (2) The 610,915,527 Shares are beneficially owned by Alliance Holding, a company which is owned as to 28% by each of Zheng Yu Long, Zheng Yu Shuang, Zheng Yu Huan and as to 16% by Li Hung Kong. Accordingly, each of Zheng Yu Long, Zheng Yu Shuang, Zheng Yu Huan and Li Hung Kong is deemed to be interested in the Shares held by Alliance Holding for the purpose of the SFO.

• (3) Cheah Cheng Hye and To Hau Yin, spouse of Cheah Cheng Hye, are deemed interested in the shares held by the funds managed by VPL, by virtue of them being the founder and beneficiary respectively of a discretionary trust, The C H Cheah Family Trust, with HSBTIL as the trustee, for the purpose of the SFO. HSBTIL owns 100% in CCL which in turn owns 100% in CCML which in turn owns 28.47% in VPGL which in turn owns 100% in VPHK which in turn owns 100% in VPL. Further, VPL as the fund manager, is deemed interested by virtue of shares held directly by the funds under its management for the purpose of the SFO.

Save as disclosed above, the Company has not been notified of any other relevant interests or short positions in the issued share capital of the Company as at 30 June 2013.

Interim Dividend

The Board has resolved not to declare any interim dividend for the six months ended 30 June 2013.

Corporate Governance Practices

The Company is committed to the establishment of stringent corporate governance practices and procedures with a view to enhancing investor confidence and the Company’s accountability and transparency. The Company strives to maintain a high standard of corporate governance. For the six months ended 30 June 2013, the Board is of the view that the Company has complied with the code provisions on the Code on Corporate Governance Practices (the “CG Code”) set out in Appendix 14 to the Listing Rules and there has been no deviation from the code provisions set forth therein the CG Code except for code provision A.6.7 of the CG Code which requires that the independent non-executive directors and the non-executive directors should attend the general meetings. However, due to other business commitment, Mr. Li Hung Kong, an non-executive director of the Company, did not attend the annual general meeting of the Company held on 23 May 2013.

Model Code for Directors’ Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules as its own code of conduct for securities transactions. The Company has made specific enquiries with all directors of the Company and all the directors of the Company have confirmed that they have complied with the required standard set out in the Model Code and its code of conduct regarding directors’ securities transactions during the six months ended 30 June 2013.

Purchase, Sale or Redemption of the Company’s Shares

During the six months ended 30 June 2013, neither the Company nor any of its subsidiaries has purchased or, sold any of the Company’s securities.

Sufficiency of Public Float

Based on the information available to the Company and within the knowledge of the Directors, the Company maintained adequate public float throughout the period for the six months ended 30 June 2013.

27

Interim Report 2013

OTHER INFORMATION

Audit Committee

The audit committee of the Company (the “Audit Committee”) was established in compliance with Rules 3.21 and 3.22 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with written terms of reference in compliance with the Code Provision on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules. The Audit Committee comprises three independent non-executive directors of the Company, namely Mr. Chung Yau Tong (chairman), Mr. Li Zhi Hai and Ms. Sun Kam Ching.

The Audit Committee has reviewed with the Company’s management and the Group’s auditor the accounting principles and practices adopted by the Group. The Audit Committee has also reviewed the interim results of the Group for the six months ended 30 June 2013.

Publication of Interim Report

This interim report is published on the websites of the Stock Exchange (www.hkexnews.com.hk) and the Company (http://www.lbxxgroup.com). This report will be despatched to the shareholders of the Company and made available for review on the aforesaid websites.

For and on behalf of the Board Labixiaoxin Snacks Group Limited

Zheng Yu Long Chairman

Hong Kong, 28 August 2013

28

Labixiaoxin Snacks Group Limited