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Board of Directors

Contents To Our Stockholders 1 Management Discussion 3 Financial Statements 7 Notes to Financial Statements 12 Contact Information 16 Board of Directors 16 Company Information 23

Table of Contents

To Our Stockholders

Last Year: What an incredible and astonishing year for the company. The company had generated $45.7 million in Net profit on the $376.3 million in overall revenue.

This was the year when the company saw a major and dramatic change in the overall operating performance as the company managed to outperform two of its competitors and ranked higher. Despites tremendous challenges form its competitors; the company saw a higher increase in the sales, credit rating, as well as the higher returns for their investors by maximizing and generating higher profits.

This year was tough: The company faced various challenges from their all the competitors as all were working towards the same goal in achieving good quality products, while managing to maximize the profit. The company couldn’t achieve the Gold star award but was working to spend its revenue for social responsibility and

Citizenship initiatives. Although due to the intense pressure the management was able to generate a profit margin of $49.4 million on the $376.3 million in total revenue, which was higher than last year. This shows the companies’ ability to perform better and the potential the company has in performing better under the intense pressure.

I like working with this company because the company has done an incredible job in providing good quality shoes to its customers with the higher credibility. The company’s management team and all the employees share a good understanding within each other and have the right to discuss with all the management before making any decision that could improve the overall performance of the company. The teamwork, the ability to perform under intense pressure, potential to improve makes me confident that the company will be ranked one of the top companies in the world in the coming future.

Our financial perform results have been strong and have meet our all-financial commitments that were proposed by the management and the employees. Throughout the last 5 years are company has survived the intense competition as the company has improved over time by increasing the Earning per share from 0.47% in 2011 to 3.18 % in 2016 and the Stock price rose from $3.5 to $40.89 in 2016. This company has done well since the 2011 and has improved since then and we hope to continue to deliver better in the future.

Alisa Austen Chief Financial Officer May 28, 2016

Management Discussion

Leap Frog Award

In year 12 we won the Leap Frog award. This award is given to the company that improves the most from the previous year. We did this by improving our credit rating from a “C” to a “B-“ and our image rating from a 48 to 72. We were also able to increase our Return on Equity from 3.5 to 5.4; all this was done by increasing our marketing cost, lowering our prices for both Internet and wholesale. We improved our S/Q rating which allowed us to bid more efficiently in the private label market. Because of all this we doubled our sales in both the Global market sales and the Global united sales.

Executive Summary

In this las year our company along with that of company E’s stock price fell slightly while the other companies had increases in their stock prices. We were able to maintain our credit rating of an “A+” as was most of the other companies. We had a small setback in our image rating as it went from 89 to 84. Compared to the other companies this was not uncommon because only a handful were able to improve or maintain their image rating.

Earning per Shares went up for every company, as did the Return on Equity increase for all companies except for company G. Overall when compared to the other companies. Half of them including ourselves did better upon the various year to different degrees, while the other half improved or stayed the same in their efforts to improve.

Our Customers

We added a plant in Latin American in the first few years of our company and more recently we increased the capacity in our North American plant by 500. We used an average of 77% superior material in the making of our shoes, making them some of the highest quality shoes in the market.

Wholesale Price by Region

We were working on improving our internet sales, as we did well in the wholesale market, and steady in the private lable. Of course there is always room for improvement.

In spite of running our plants at 100% capacity and producing 1100 shoes in overtime, we were unable to meet all of our orders and were unable to fill 300 orders this past year. We produce most of our shoes at our Asian-Pacific plant, because it has the capacity of the other two plants combined a total of 3,000. Because of this we were able to ship most of our product to Europe-Africa in order to meet the demand of our shoes in that location.

Key Challenges

This is hard to admit that we were not a Green or Energy efficient company in our last few years. This is due to the fact that we aware working hard on being ethical, having a diversity in all areas of our company, and on making the best shoes we can.

Once we are able to fully meet all of our orders and maintain that level of efficiency, then we would be able to start becoming a green and more charitable company that we know we can be.

CUstomers

In order to achieve this goal our target customers are of both sexes between the age of 12 and 40, selling mostly in North American and Europe. We are focusing on the young teenagers who are just discovering there fashion styles and those of young adult to mid. Age customers who are working and still going out for the night life.

This is because we provide a variety of different shoe styles; from everyday ware, fashionable work, and high class dating styles. Also to help us sell our shoes we have celebrity endorsements form Tiger Green and Yi Lin, combined with a high image rating to prove the quality of our shoes we are able to increase our sales. All of this will help us to make any and all changes that we need to make in order to continue and grow as a responsible company.

Operations

Productions COst

Private LAbel

Distribution

Most of our shoes are produced in Asia-Pacific because it is our largest plant. This allows us to ship to the other sights in need of our products, such as Europe-Africa.

Distribution by Region

We decided that it was cheaper to ship our product then it was to build a plant in Europe-Africa. Our goals are to continue making the best shoe that we can at market price and to ship them where ever they are needed.

Risks

Financial Statements

Consolidated Income Statement

Consolidated Balance Sheet

Statement of Cash Flows

Stock Price
$ 33.15
$ 42.11
$ 40.89
Stock price rose by $7.74 since 2014

EPS

2.13%

2.77%

3.18%

Total Revnue

$ 378,359.00

$ 376,297.00

$ 351,345.00

	ROE	2014	11.9%
		2015	14.7%
		2016	16.5%
Growth rate of 4.6% since 2014

Notes to Financial Statements

Note 1. Liabilities

By Year 14, Fantastic Shoes decided to pay off all debt to help increase credit rating. This explains why the Balance Sheet shows no liabilities other than Accounts Payable. By paying off all debt, this allowed the company to be able to use free revenue towards other parts of the company’s production.

Note 2. Outstanding Shares

At the end of Year 16, Fantastic Shoes had 15,500,000 shares outstanding. In the beginning years from 10-13, Fantastic Shoes issued more stock, to allow the company to have revenue at the end of the operating year. Beginning in Year 14, Fantastic Shoes began to make higher revenues, and had the opportunity to buy back stocks they had originally repurchased.

Note 3. Material Costs

In Year 16, Fantastic Shoes was averaging $11.60 per pair produced in Branded Footwear and Private-Label Footwear. In comparison to the industry average, the Branded Footwear was a little above average, 10.92, and Private-Label was on the high side, with the industry average of $10.08.

Note 4. Labor Costs

With regards to the industry average for labor costs, Fantastic Shoes tended to be higher than the average. The only plant that did not have a benchmark was Europe-Africa, because Fantastic Shoes decided not to build there.

Note 5. Shoes sales By Region

	North America	Europe-Africa	Asia-Pacific	Latin America
Internet		187		181	149	136
Wholesale		1368		1293	1035	882
Private-Label		195		393	200	297

Note 6. Revenue By Region

	North America	Europe-Africa	Asia-Pacific	Latin America
Internet		14,025		13,575	11,175	10,200
Wholesale		75,240		71,115	56,925	48,510
Private-Label		8,471		17,143	8,424	12,623

Note 7. Exchange Rate Effect By Each Region

	North America	Europe-Africa	Asia-Pacific	Latin America
Exchange Rate		3,057		89	261	(5021.00)

Note 8. Costs By Region

	North America	Europe-Africa	Asia-Pacific	Latin America
Cost of Pairs Sold		47,722		44,805	33,178	31,382
Warehouse Expense		5,564		5,267	4,557	4,412
Marketing Expense		19,637		19,340	12,340	10,549
Administrative Expense		2,631		2,494	2,002	1,722

Independent’s Auditor Report

We have audited the accompanying consolidated balance sheet of Fantastic Shoes as of 31 December 2016 and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated cash flow statement Fantastic Shoes’ Annual Report and Accounts We also have audited Fantastic Shoes’ internal control over financial reporting as of 31 December 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Fantastic Shoes’ management is responsible for these Consolidated Financial Statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these Consolidated Financial Statements and an opinion on the Company’s internal control over financial reporting 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 audits to obtain reasonable assurance about whether the Consolidated Financial Statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the Consolidated Financial Statements included examining, on a test basis, evidence supporting the amounts and disclosures in the Consolidated Financial Statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting 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. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (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 receipts and expenditures of the company are being made only in accordance with authorizations of management and Directors of the company; and (iii) 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 Consolidated 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 Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of Fantastic shoes as of 31 December 2016, and the results of its operations and its cash flows for the year ended 31 December 2016, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and in conformity with IFRS as adopted by the European Union. Also in our opinion, Fantastic shoes maintained, in all material respects, effective internal control over financial reporting as of 31 December 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

KPMG LLP

Shanghai, China

May 23, 2016

Contact Information

Talor King PRESIDENT

Amanda Wrong Marketing analyst

Luke Kasper IT Suppervisor

Tel +86-21-55220088

[email protected]

Tel (866)555-9428

[email protected]

Tel (800)555-6429

[email protected]

Board of Directors

Martin Knight

Mr. Knight, 70, a director since 1968, is Chairman of the Board of Directors of Fantastic Shoes. Mr. Knight is a co-founder of the Company and, except for the period from June 1983 through September 1984, served as its President from 1968 to 1990, and from June 2000 to December 2004. Mr. Knight was a certified public accountant with Highland Bookkeeping and Tax services and was an Assistant Professor of Business Administration at Cal Poly State University. Executive Committee (Chair)

Allen Parker

Mr. Parker, 59, has been President and Chief Executive Officer and a director since 2006. He has been employed by Fantastic Shoes since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993, and Vice President of Global Footwear in 1998. He received a Master’s in Design while attending school at Polimoda (Florence, Italy). Executive Committee

Kathy Comstock

Ms. Comstock, 55, a director since 2011, is Vice Chair of Pacific Gas & Electric Company (“PG&E”). Ms. Comstock oversees new growth and innovation and leads PG&E Lighting, & Licensing and the sales and marketing functions. At PG&E, she was appointed Vice President, Communications, ABC News Communications in 1994, Senior Vice President, ABC Corporate Communications in 1996, Vice President of Corporate Communications in 1998, Corporate Vice President and Chief Marketing Officer in 2003, Ms. Comstock is a trustee of the Smithsonian’s Cooper-Hewitt National Design Museum, and Graduated top of her class from California State University of Bakersfield.

Compensation Committee, Finance Committee

Ted Connors

Mr. Connors, 56, a director since 2005, is a partner in KPMG LLP, Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation from December 1999 to May 2005. Mr. Connors is currently a member of the board of directors of Shark Tank and privately held companies Top Chef, Inc., the Washington Post, and the California State University of Bakersfield Financial Club.

Audit Committee, Finance Committee (Chair)

Timothy J. Irons

Mr. Irons, 54, a director since 2005, Worldwide Sales and Operations and Chief Operating Officer. Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. Previous to his work at Compaq, Mr. Irons was a professor of computer sciences at MIT - Massachusetts Institute of Technology. Compensation Committee (Chair)

Dean Winchester

Mr. Winchester, 42, a director since June 2014. Mr. Winchester is a brilliant designer for our company. As he has two Bachelor’s degrees in both Design and Business form International Fashion Academy/IFA (Paris, France). Audit Committee, Finance Committee

Sam Padalecki

Mr. Padalecki, 41, a director since June 2015, is the President and Chief Executive Officer of the animation studio, Fox, which specializes in feature-length films. He has been involved in all principal creative and business decisions at Fox since 2003. President of Animation, and then as President and CEO in 2009. Mr. Padalecki serves on the Board of Directors of LAIKA, LLC. Corporate Responsibility and Sustainability Committee, Executive Committee

Michelle Berry

Ms. Berry, 43, a director since April 2014, is a Venture Partner at Technology Crossover Ventures. She served as Chief Executive Officer of online shopping for us since 2010. Prior to joining Fantastic Shoes she served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2002 to 2009, Ms. Berry. Before that she received her master’s degree in Advanced Media Technologies from MIT - Massachusetts Institute of Technology.

Audit Committee, Corporate Responsibility and Sustainability Committee

Peggy Wise

Dr. Wise, 70, a director since 2009, served as Chancellor of the University of Illinois, at Urbana-Champaign from 2011 to 2015. She joined the John Hopkins School of Medicine as an assistant professor in 1976, was appointed associate professor in 1982, and professor in 1987. Dr. Wise was appointed dean of the division of biological sciences and distinguished professor of neurobiology at the University of California-Davis in 2002. Dr. Wise has a doctorate in zoology from the University of Michigan and an honorary doctorate from Swarthmore College, and she is an elected member of the Institute of Medicine and the American Academy of Arts and Sciences. Dr. Wise is currently a member of the Board of Directors of RANDOM Health.

Corporate Responsibility Committee (Chair), Nominating and Corporate Governance Committee