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1 Interim Report 0607

2 Global distribution network At 31 March 2007 * The Middle East includes UAE, Qatar, Lebanon, Bahrain, Kuwait, Iran, Jordan, Saudi Arabia and Oman ( ) Figures at 31 March 2006 are shown in brackets Myanmar 3 (1) Thailand 68 (67) 8 (5) Vietnam Malta 8 (8) India Cyprus 7 (7) Middle East* * 149 (132) 578 (628) 29 (0) Nepal 2 (1) Malaysia 11 (3) Mainland China Directly managed Franchised Singapore 33 (29) 359 (344) 219 (284) Hong Kong 38 (33) Indonesia 28 (23) 322 (263) Taiwan 111 (112) Philippinesp 12 (11) 1093 outlets in about 20 countries (1068) 193 (177) Dominican Republic 5 (5) Colombia 3 (3) directly managed and franchised outlets in Mainland China export franchised outlets directly managed outlets in Hong Kong, Taiwan, Singapore and Malaysia

3 Financial and operational highlights Financial performance In HK$mn In HK$mn Twelve months ended 31 March Change Revenue 2,105 2,200-4% Gross profit 990 1,025-3% Profit from operating activities % Profit for the period attributable to equity holders % Basic EPS (in HK cents) % First interim dividend per share (in HK cents) % Second interim dividend per share (in HK cents) Proposed final dividend per share^ (in HK cents) ^ % Payout ratio (%) 0% 54% -54% pts Gross margin (%) 47% 47% 0% pt Operating margin (%) 2% 6% -4% pts Net margin (%) 1% 5% -4% pts EBITDA % EBITDA margin (%) 5% 9% -4% pts ^ Not yet proposed for the twelve months ended 31 March 2007 due to the change of financial year end date from 31 March to 30 June Global distribution network Key financial indicators At At 31 March March 2006 Change Inventory turnover* (days) * day Inventory level (in HK$mn) % Current ratio (times) % Time deposits, cash and bank balances (in HK$mn) % Net cash (in HK$mn) % Total liabilities to equity ratio (%) 45% 46% -1% pt Capital expenditure (in HK$mn) % * Inventory held at 31 March divided by revenue times 365 days 365 Time deposits, cash and bank balances less bank loans At 31 March 2007 At 31 March 2006 Change Hong Kong Directly managed outlets Mainland China Directly managed outlets Franchised outlets Sub-total Taiwan Directly managed outlets Singapore Directly managed outlets Malaysia Directly managed outlets Other countries Export franchised outlets Total Directly managed outlets Franchised outlets ,093 1,

4 Regional performance analyses Sales (in HK$mn) Profit/(loss) from operating activities (in HK$mn) Operating margin (%) Twelve months ended 31 March Change Change Change Retail Hong Kong % % 2% 6% -4% pts Mainland China % (26) (9 ) -189% -7% -3% -4% pts Taiwan % (39) (10 ) -290% -11% -3% -8% pts Singapore % % 3% 10% -7% pts Malaysia ,200% (2) (1 ) -100% -15% -100% +85% pts Total 1,660 1,746-5% (44) % -3% 3% -6% pts Franchise Hong Kong Export % % 30% 30% 0% pt Mainland China % % 7% 14% -7% pts Total % % 25% 25% 0% pt Regional Total Hong Kong 1,072 1,130-5% % 9% 11% -2% pts Mainland China % (19) 7-371% -4% 1% -5% pts Taiwan % (39) (10 ) -290% -11% -3% -8% pts Singapore % % 3% 10% -7% pts Malaysia ,200% (2) (1) -100% -15% -100% +85% pts Consolidated 2,105 2,200-4% % 2% 6% -4% pts Revenue by geographical market Twelve months ended 31 March 2007 As a percentage of total revenue Retail 35% (37%) Export franchise 15% (13%) Others 1% (2%) Hong Kong 51% (52%) Mainland China 22% (22%) Taiwan 17% (17%) As a percentage of total reverue Retail 17% (16%) Franchise 4% (5%) Others 1% (1%) ( ) 2006 figures are shown in brackets Singapore & Malaysia 10% (9%) Regional retail performance indicators Same store sales growth (%)* Floor area (sq. ft.) * Twelve months ended 3 March Change Hong Kong -8% -5% 141, , % Mainland China 0% -9% 311, ,300 +1% Taiwan -16% -11% 159, ,000-10% Singapore -14% +3% 36,400 32, % Malaysia N/A N/A 14,700 4, % Consolidated -9% -5% 663, ,100 +5% * Same store sales growth is the comparison of sales of the same stores having full month operations in comparable periods (no comparison for Malaysia as the operation in financial year 2005/06 was not on a full year term)

5 CONTENTS FINANCIAL AND OPERATIONAL HIGHLIGHTS Inside Front Cover > MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL PERFORMANCE 1 > BUSINESS REVIEW 3 > LIQUIDITY AND FINANCIAL RESOURCES 12 > CONTINGENT LIABILITIES 12 > HUMAN CAPITAL 12 > OUTLOOK 13 > DIVIDEND 16 > SUPPLEMENTARY INFORMATION 17 > FINANCIAL RESULTS CONDENSED CONSOLIDATED INCOME STATEMENT 27 > CONDENSED CONSOLIDATED BALANCE SHEET 28 > CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 30 > CONDENSED CONSOLIDATED CASH FLOW STATEMENT 31 > NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 32 >

6 01 Bossini International Holdings Limited MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL PERFORMANCE The board of directors (the Board ) of Bossini International Holdings Limited (the Company ) announces the unaudited consolidated results of the Company and its subsidiaries (the Group or Bossini ) for the 12 months ended 31 March During the period under review, market competition continued to intensify. Rental and staff costs remained at high level and affected the Group s profitability in both Hong Kong and other core markets. Performance of the Group s retail sales was far from satisfactory in the 12 months ended 31 March Despite this, the Group s sales showed quarter-on-quarter improvements along with the progressive launching of spring/ summer 2007 collection. Therefore, after experiencing sluggish sales in the third quarter, sales picked up gradually in the fourth quarter of 2006/07. The Group s consolidated revenue for the 12 months ended 31 March 2007 declined year-on-year by 4% to HK$2,105 million (2006: HK$2,200 million). Gross profit of the Group decreased by 3% to HK$990 million (2006: HK$1,025 million). The gross margin was maintained at a stable level of 47% (2006: 47%). Operating profit and operating margin were HK$44 million (2006: HK$140 million) and 2% (2006: 6%), respectively. Profit for the period attributable to equity holders decreased to approximately HK$20 million (2006: HK$105 million). 4% % % 47% % 6% interim report 2006/07

7 Bossini International Holdings Limited 02 FINANCIAL PERFORMANCE Operating Efficiencies The increased number of new market entrants in the apparel sector has drawn keener competition in the region. The vast number of product choices reduced the Group s product competitiveness. Overall same store sales therefore posted a negative growth of 9% (2006: 5% negative growth) during the 12 months ended 31 March Net retail sales per sq. ft. reduced by 14% year-on-year to HK$2,500 (2006: HK$2,900). The Group s operating expenses for the 12 months ended 31 March 2007 rose 6% to HK$954 million (2006: HK$902 million), which accounted for 45% of the total revenue of the Group (2006: 41%). The rise in operating expenses was mainly due to the surge in rental and staff cost. Operating Cost Analysis For the twelve months ended 31 March ,500 2,900 6% % 41% HK$ % of HK$ % of million revenue million revenue Change Revenue 2, % 2, % -4% Selling and distribution costs % % +7% Administrative expenses % 202 9% +8% Other operating expenses 31 1% 39 2% -21% Total operating expenses % % +6% interim report 2006/07

8 03 Bossini International Holdings Limited FINANCIAL PERFORMANCE Change of Inventory Provision Policy The Group revised its inventory provision policy during the period under review. If the old inventory provision policy were applied for the current period, profit for the period attributable to equity holders would be HK$16.9 million less. The Group anticipates that this revision of inventory policy will facilitate better inventory and margin management Change of Financial Year End Date The financial year end date of the Company has been changed from 31 March to 30 June commencing from the financial year 2006/2007 (for details, please refer to the Company s announcement dated 7 February 2007). Accordingly, this unaudited interim results covered the period from 1 April 2006 to 31 March The publication of the preliminary announcement of the audited final results and the distribution of the annual report for the 15-month period from 1 April 2006 to 30 June 2007 will be made on or before 31 October ( ) BUSINESS REVIEW Network Expansion During the 12 months ended 31 March 2007, the Group s number of outlets worldwide recorded a net increase of 25 stores to a total of 1,093 (2006: 1,068), covering more than 20 countries and regions as at 31 March Of these, 552 (2006: 521) were directly managed outlets, while 541 (2006: 547) were franchised outlets. 25 1,0931, interim report 2006/07

9 Bossini International Holdings Limited 04 BUSINESS REVIEW Network Expansion (continued) Geographically, the Group had 359 directly managed and 219 franchised outlets in Mainland China, 111 directly managed outlets in Taiwan, 11 directly managed outlets in Malaysia, 33 directly managed outlets in Singapore, 38 directly managed outlets in Hong Kong and 322 franchised outlets in about 20 countries, mainly in the Middle East and Southeast Asia. The Group also established footprints in India and Oman. The total retail floor space of the Group increased by 5% to 663,100 sq. ft. as at 31 March 2007 (2006: 631,100 sq. ft.) % 663,100 (631,100 Brand Revamp Program Having been in the industry for two decades, bossini has been a familiar name as a mass apparel brand offering high quality, value-for-money products for consumers in the region. To increase its competitiveness and rejuvenate the brand, the Group embarked on an integrated brand revamp program to inject new family essence and values to the bossini brand that synchronize with its mission of caring for the needs of every family member in every aspect from product offering, shop décor to shopping experience. bossini bossini The Group appointed an internationally renowned designer to lead the comprehensive brand revamp program. A new brand icon design and revolutionary shop décor were introduced to provide a more enjoyable shopping experience to customers. The new bright green color implies youth, growth, vibrancy and care for the environment to bring out the Group s vision to be a brand for every family member, while the signature lamp icon signifies warmth and home feeling. interim report 2006/07

10 06 05 Bossini International Holdings Limited BUSINESS REVIEW Regional performance analyses For the twelve months ended 31 March Hong Kong Mainland China Change Change Retail Net retail sales (in HK$ million) % % Operating profit/(loss) % (26) (9) 189% (in HK$ million) Operating margin (%) (%) 2% 6% 4%pts 7% 3% 4%pts Retail floor area (sq. ft.) (a) (a) 141, , % 311, ,300 +1% Net sales per sq. ft. (in HK$) (b) (b) 5,800 7,300 21% 1,100 1,200 8% Same store sales growth (c) (c) 8% 5% 3%pts 0% 9% +9%pts No. of outlets Franchise Sales (in HK$ million) % % Operating profit (in HK$ million) % % Operating margin (%) (%) 30% 30% 0%pt 7% 14% 7%pts No. of outlets Regional total Sales (in HK$ million) 1,072 1,130 5% % Operating profit/(loss) % (19) 7 371% (in HK$ million) Operating margin (%) (%) 9% 11% 2%pts 4% 1% 5%pts No. of outlets 38 (d) 33 (d) Notes: (a) As at 31 March (b) On weighted average basis (a) (b) interim report 2006/07

11 Bossini International Holdings Limited Taiwan Singapore Malaysia Total Change Change Change Change % % ,200% 1,660 1,746 5% (39) (10) 290% % (2) (1) 100% (44) % 11% 3% 8%pts 3% 10% 7%pts 15% 100% +85%pts 3% 3% 6%pts 159, ,000 10% 36,400 32, % 14,700 4, % 663, ,100 +5% 2,000 2,500 20% 6,100 6,400 5% 1,400 1, % 2,500 2,900 14% 16% 11% 5%pts 14% +3% 17%pts n/a n/a n/a 9% 5% 4%pts n/a n/a n/a n/a n/a n/a n/a n/a n/a % n/a n/a n/a n/a n/a n/a n/a n/a n/a % n/a n/a n/a n/a n/a n/a n/a n/a n/a 25% 25% 0%pt n/a n/a n/a n/a n/a n/a n/a n/a n/a Consolidated % % ,200% 2,105 2,200 4% (39) (10) 290% % (2) (1) 100% % 11% 3% 8%pts 3% 10% 7%pts 15% 100% +85%pts 2% 6% 4%pts ,093 1, (c) Same store sales growth is the comparison of sales of the same stores having full month operations in comparable periods (no comparison for Malaysia as the operation in financial year 2005/06 was not on a full year term) No. of export franchised outlets is not included (c) 2005/06 (d) (d) interim report 2006/07

12 07 Bossini International Holdings Limited BUSINESS REVIEW Key Operations Breakdown and Analyses The Group operates on a global platform, with core markets located in Hong Kong, Mainland China, Taiwan, Singapore and Malaysia. During the period under review, Hong Kong remained the major source of income for the Group, representing 51% of its consolidated revenue, followed by Mainland China, Taiwan, Singapore and Malaysia, which accounted for 22%, 17%, 9% and 1%, respectively, of the Group s consolidated revenue. 51% 22% 17% 9% 1% Hong Kong For the 12 months ended 31 March 2007, total revenue generated from Hong Kong amounted to HK$1,072 million (2006: HK$1,130 million). The retail and export franchising businesses accounted for 35% and 15% (2006: 37% and 13%), respectively, of the Group s total revenue. The overall operating profit in Hong Kong was HK$99 million (2006: HK$125 million), while operating margin was 9% (2006: 11%) % 15% 37% 13% % 11% In line with the new mission of being a family-fit brand and providing home feeling to customers, the Group launched a total of three new product lines, namely Maternity, Baby and Youth to fulfill its customers demand. The market response to the new products has been encouraging. In addition to the promotion of bossini brand, the Group also implemented marketing campaigns for the new product lines and licensed products in order to penetrate different market segments. bossini interim report 2006/07

13 Bossini International Holdings Limited 08 BUSINESS REVIEW Hong Kong (continued) Bossini added 5 directly managed outlets in Hong Kong in the 12 months under review, bringing the total number of outlets to 38 (2006: 33) as at 31 March 2007 and the total retail floor area to 141,800 sq. ft. (2006: 111,400 sq. ft.), representing a 27% year-on-year increase. A remarkable 4- storey flagship store was opened at the end of March Retail sales reached HK$745 million (2006: HK$815 million). Though same store sales recorded a negative growth of 8% (2006: 5% negative growth) during the period under review, it showed a pickup trend in the fourth quarter of 2006/07. Operating profit of the Hong Kong retail market declined 65% to HK$18 million (2006: HK$51 million) with an operating margin of 2% (2006: 6%) % 141, , %5% 65% 1.8 (5.1 ) 2% ( 6%) The export franchising business posted moderate growth. Revenue for export franchising rose by 6% year-on-year to HK$309 million (2006: HK$291 million). Operating profit increased by 7% to HK$92 million (2006: HK$86 million), operating margin was 30% (2006: 30%). For overseas franchising business, 59 outlets were opened during the past twelve months. The Group commenced export franchising business in India and Oman during the period under review. 6% % % 30% 59 interim report 2006/07

14 09 Bossini International Holdings Limited BUSINESS REVIEW Mainland China Sales in the Mainland China market showed a modest comeback during the fourth quarter of 2006/07, despite the overall unsatisfactory performance on a 12-month period under review. The Group s focus has always been on profitability. In line with this goal, the Group had evaluated individual store performance and realigned its operations in Mainland China. While 15 directly managed outlets were added, bringing the total number of directly managed outlets to 359 (2006: 344), 65 franchised outlets were closed, reducing the number of franchised outlets to 219 (2006: 284). The total number of outlets in Mainland China was therefore reduced to 578 (2006: 628). Total retail floor area increased to 311,100 sq. ft. (2006: 307,300 sq. ft.) , ,300 For the directly managed network, 249 (2006: 225) were bossini outlets and 110 (2006: 119) were sparkle outlets. For the franchising network, 172 (2006: 209) were bossini outlets and 47 (2006: 75) were sparkle outlets bossini sparkle bossini 4775 sparkle interim report 2006/07

15 Bossini International Holdings Limited 10 BUSINESS REVIEW Mainland China (continued) During the 12 months under review, sales decreased 3% yearon-year to HK$474 million (2006: HK$490 million). Sales from directly managed outlets increased 1% to HK$356 million (2006: HK$351 million) while sales from franchised outlets dropped 14% to HK$95 million (2006: HK$110 million). Same store sales for the retail business in Mainland China remained flat (2006: 9% negative growth), but considerable pickup was seen in the fourth quarter with positive double-digit same store sales growth. All of the three brands in the Mainland China, namely bossini, bossinistyle and sparkle performed below expectation and resulted in an operating loss of HK$19 million (2006: HK$7 million operating profit) for the 12 months ended 31 March The operating margin was negative 4% (2006: positive 1%). Taiwan In light of the competitive market condition resulted from economic downturn and political instability during the period under review, the Group closed 1 outlet during the period under review, resulting a total number of 111 (2006: 112). Total retail floor area was 159,100 sq. ft. (2006: 176,000 sq. ft.). Sales in Taiwan decreased by 8% to HK$349 million (2006: HK$379 million) and same store sales experienced a drop of 16% (2006: 11% negative growth). Operating loss amounted to HK$39 million (2006: HK$10 million loss) with operating margin negative 11% (2006: negative 3%). 3% % bossini bossinistyle sparkle %1% , , % % : 3% interim report 2006/07

16 11 Bossini International Holdings Limited BUSINESS REVIEW Singapore The performance in Singapore fell below expectation during the 12 months under review. At 31 March 2007, the total number of directly managed outlets reached 33 (2006: 29) and the total retail floor area increased by 14% to 36,400 sq. ft. (2006: 32,000 sq. ft.) % 36,40032,000 For the 12 months ended 31 March 2007, retail sales in Singapore declined 2% year-on-year to HK$197 million (2006: HK$200 million) while same store sales recorded a negative growth of 14% (2006: 3% positive growth). Despite this, since the bossini top line sales recorded growth throughout the second half of 2006/07 as compared with the same period of the previous year, the Group has an operating profit of HK$5 million (2006: HK$19 million) for the period under review with operating margin of 3% (2006: 10%). 2% % 3% bossini % 10% Malaysia As a new market with the Group with an operating history of about one year and a half, the Malaysian market was still in its infancy and in a mild operating loss of HK$2 million (2006: HK$1 million loss). The Group opened 8 outlets in the period under review, bringing the total number of stores to 11 (2006: 3). Sales revenue increased to HK$13 million (2006: HK$1 million) interim report 2006/07

17 Bossini International Holdings Limited 12 LIQUIDITY AND FINANCIAL RESOURCES At 31 March 2007, the Group s cash and bank balances amounted to HK$199 million (2006: HK$244 million) and net cash balance of HK$195 million (2006: HK$244 million) after the payment of a final dividend of HK$28.2 million in September 2006 for the last fiscal year. The Group s current ratio stood at a healthy level of 2.27 (2006: 2.35) and the total liabilities to equity ratio was 45% (2006: 46%). The Group had bank borrowings of HK$4 million (2006: Nil) payable within one year % 46% 4 The Group managed its inventories at a stable level and had improved its inventory turnover # to 41 days (2006: 42 days) for the period under review. Return on equity ratio was 3% (2006: 18%). # % 18% # Inventory held at 31 March divided by revenue times 365 days # 365 CONTINGENT LIABILITIES During the period under review, the Group had no material changes in contingent liabilities since 31 March HUMAN CAPITAL At 31 March 2007, the Group employed full-time staff or equivalent of 4,500 (2006: 4,300) in Hong Kong, Macau, Mainland China, Taiwan, Singapore and Malaysia. It employs a performance-based remuneration system by reference with market practices and rates with discretionary performance bonuses and offers benefits such as insurance, retirement and share option schemes. 4,5004,300 interim report 2006/07

18 13 Bossini International Holdings Limited OUTLOOK Going forward, the Group will continue its effort to achieve a revival with measures in place to enhance brand image, enrich product offering, strengthen overseas market penetration and realignment of non-performing outlets in both Taiwan and Mainland China. The Group is well poised to score a turning point in the coming year. The board is cautious yet optimistic about the Group s future development in the long-term. During the period, the Group has been receiving good market response to its brand revamp initiatives in Hong Kong. The new brand icon and redecorated outlets attracted public attention effectively. Costs associated with the revamp rollout would be approximately HK$35 million. The Group will roll out this successful formula to overseas markets in phases in this calendar year, applying the new bossini concepts around the world and further enhancing the refreshing brand image and its market awareness. We estimate that additional cost impact for the roll out of the new concept to the overseas markets would be mild. The management believes the long-term benefits derived from the program will far outweigh our costs and expenses. 3.5 "bossini" On the product front, Bossini added three new product lines, Maternity, Baby and Youth, so to complement the new brand direction of Understanding every family member s needs. The new product lines and licensed products launched in March 2007 have been well-received. In the next fiscal year, the Group will continue to extend and revitalize its product lines with new and innovative product designs and functional fabrics so as to stimulate consumption desire. interim report 2006/07

19 Bossini International Holdings Limited 14 OUTLOOK The outlook for the Hong Kong retail sector in the coming year looks mixed with both opportunities and challenges. The Group will continue to maintain a pragmatic expansion strategy with a strong emphasis on profitability and efficiency. With the improvement trend shown in the fourth quarter during the period, the management is confident that the Hong Kong operation has scored a turning point for further growth in the future. In order to further penetrate the mass market, four to five stores will be opened in the coming months. 4 5 Mainland China continues to be the world s fastest growing economy and its economic growth will remain buoyant during the coming financial year. The management remains optimistic that the Mainland China operation will continue the growth momentum gained during the fourth quarter of 2006/07. The brand image will be refreshed in alignment with the brand revamp program in Hong Kong. This initiative will bring a positive influence to the business in Mainland China. Realignment of the sparkle operation will be implemented to reduce operating costs, reallocate financial resources and enhance profitability. It is planned that 40 loss-making sparkle outlets will be closed in the coming year. sparkle 40 sparkle interim report 2006/07

20 15 Bossini International Holdings Limited OUTLOOK Taiwan s retail market is expected to remain sluggish due to political and economic instability. The Group will maintain its existing strategies and minimize outlet expansion in Taiwan in the year 2007/08. It plans to close down 27 outlets in the market, reducing the total number of outlets to 84. With appropriate consolidation of its existing network, the Group anticipates considerable improvements for its Taiwan operation in the near future The management expects further improvement in both Singapore and Malaysia markets. We will continue to expand sales network in both areas throughout the year 2007/08. We are particularly optimistic about the progressive growth of the Malaysia operation which will look set to be profitable in the long term once the operation becomes mature. We plan to increase the number of shops in Malaysia from 11 to 23. Three shops will also be added in Singapore Having delivered moderate performance levels during the 12 months under review, our export franchise business is well prepared for steady growth for future. The Group has launched the well-received new Youth product line to diversify its revenue streams and customer base. We expect to expand into five new countries in the upcoming year to further bolster market presence. 5 interim report 2006/07

21 Bossini International Holdings Limited 16 OUTLOOK Leveraging on the successful brand revamp program, design innovation and pragmatic network expansion approach, the Group is well poised to have revitalization in its performance. In the coming year, the businesses in export franchising and Mainland China will continue to be its driving force of growth. The Group remains confident about the long-term growth potential. DIVIDEND The Board does not recommend payment of any dividend (2006: HK3.60 cents per ordinary share) for the 12 months ended 31 March interim report 2006/07

22 17 Bossini International Holdings Limited SUPPLEMENTARY INFORMATION DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES At 31 March 2007, the interests of the directors in the share capital and underlying shares of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) of the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ), were as follows: XV 352 Long positions in ordinary shares of the Company: Number of shares held, capacity and nature of interest Percentage of Directly Through the Company s beneficially controlled issued Name of director owned corporation Total share capital Mr. LAW Ka Sing 1,063,091,098 30,000,000 1,093,091, interim report 2006/07

23 Bossini International Holdings Limited 18 DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES The interests of the directors in the share options of the Company are separately disclosed hereunder. Save as disclosed above, at 31 March 2007, none of the directors had registered an interest or short position in the shares or underlying shares of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code. 352 DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES Save as disclosed under the heading Directors interests in shares and underlying shares above and the heading Share Option Scheme below, at no time during the period were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; or was the Company, or any of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate. DIRECTORS INTERESTS IN CONTRACTS No director had a material interest, either directly or indirectly, in any contract of significance to the business of the Group to which the Company or any of its subsidiaries was a party during the period. interim report 2006/07

24 19 Bossini International Holdings Limited SHARE OPTION SCHEME Share options were granted to the directors and employees under the Share Option Scheme (the Scheme ) adopted by the Company on 27 November There was no change in any terms of the Scheme during the 12 months ended 31 March The details of the Scheme were disclosed in the 2005/06 annual report. Details of the share options of the Company granted and outstanding under the Scheme during the period are set out below: Number of share options Price of the Company s At Exercised Forfeited At Exercise Exercise shares at Name or category 1 April during during 31 March Date of grant of period of price of exercise date of participants 2006 the period the period 2007 share options share options share options of options (note 1) (note 2) (note 3) HK$ HK$ Directors Ms. CHAN So Kuen 1,332 1,332 2 December December 2004 to December ,333,334 3,333,334 2 December December 2006 to December ,333,334 3,333,334 2 December December 2008 to December ,668,000 6,668,000 interim report 2006/07

25 Bossini International Holdings Limited 20 SHARE OPTION SCHEME Number of share options Price of the Company s At Exercised Forfeited At Exercise Exercise shares at Name or category 1 April during during 31 March Date of grant of period of price of exercise date of participants 2006 the period the period 2007 share options share options share options of options (note 1) (note 2) (note 3) HK$ HK$ Directors Mr. FU Shing Kwan 1,332 (1,332) 2 December December 2004 to Dickie (note 4) 1 December ,333,334 (3,333,334) 2 December December 2006 to December ,333,334 (3,333,334) 2 December December 2008 to December ,668,000 (6,668,000) interim report 2006/07

26 21 Bossini International Holdings Limited SHARE OPTION SCHEME Number of share options Price of the Company s At Exercised Forfeited At Exercise Exercise shares at Name or category 1 April during during 31 March Date of grant of period of price of exercise date of participants 2006 the period the period 2007 share options share options share options of options (note 1) (note 2) (note 3) HK$ HK$ Other employees In aggregate 7,996 (1,000) 6,996 2 December December 2004 to December ,000,002 (3,333,000) 12,667,002 2 December December 2006 to December ,000,002 16,000,002 2 December December 2008 to December ,008,000 (3,334,000) 28,674,000 45,344,000 (3,334,000) (6,668,000) 35,342,000 interim report 2006/07

27 Bossini International Holdings Limited 22 SHARE OPTION SCHEME Notes: 1. The vesting period of the share options is from the date of the grant until the commencement of the exercise period The exercise price of the share options is subject to adjustments in the case of rights or bonus issues, or other similar changes in the Company s share capital, and was adjusted for the issue of bonus shares on 14 September 2004 from HK$0.35 to HK$0.175 each The price of the Company s shares disclosed at the date of the exercise of the share options is the weighted average of the Stock Exchange closing prices over all of the exercises of options within the disclosure line Mr. FU Shing Kwan Dickie resigned as a director of the Company on 26 June All unexercised share options held by him lapsed on 26 September 2006 in accordance with the Scheme. 4., Share options do not confer rights on the holders to dividends or to vote at shareholders meetings. No share options were granted or expired during the period. The 3,334,000 share options exercised during the period resulted in the issue of 3,334,000 ordinary shares of the Company and new share capital of approximately HK$333,400 and share premium of HK$250,000 (before issue expenses). 3,334,000 3,334, , ,000 interim report 2006/07

28 23 Bossini International Holdings Limited SHARE OPTION SCHEME At the balance sheet date, the Company had 35,342,000 share options outstanding under the Scheme, which represented approximately 2.25% of the Company s shares in issue as at that date. The exercise in full of the remaining share options would, under the present capital structure of the Company, result in the issue of 35,342,000 additional ordinary shares of the Company and additional share capital of approximately HK$3,534,200 and share premium of approximately HK$2,651,000 (before issue expenses). 35,342, % 35,342,000 3,534,200 2,651,000 Subsequent to the balance sheet date, a total of 2,334,000 share options granted to an employee were exercised on 3 May 2007, resulted in the issue of 2,334,000 ordinary shares of the Company and new share capital of approximately HK$233,400 and share premium of approximately HK$175,000 (before issue expenses). 2,334,000 2,334, , ,000 Subsequent to the balance sheet date, unexercised share options of 3,334,000 held by an employee lapsed on 18 May 2007 in accordance with the Scheme. 3,334,000 interim report 2006/07

29 Bossini International Holdings Limited 24 SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES AND UNDERLYING SHARES At 31 March 2007, the following interests of 5% or more of the issued shares capital and share options of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO: 336 5% Long positions: Percentage of Name of Capacity Number of the Company s Number substantial and nature ordinary issued of share shareholder of interest shares held share capital options held Mr. LAW Ka Sing Directly beneficially 1,063,091, owned Through controlled 30,000, corporation 1,093,091, Save as disclosed above, at 31 March 2007, no person, other than the directors of the Company, whose interests are also set out in the section Directors interests in shares and underlying shares above, had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO. 336 interim report 2006/07

30 25 Bossini International Holdings Limited PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company s listed securities during the period. AUDIT COMMITTEE The Company has an audit committee which was established in compliance with Rule 3.21 of the Listing Rules for the purpose of reviewing and providing supervision over the Group s financial reporting process and internal controls. It has formulated its written terms of reference in accordance with the provisions set out in Appendix 14 Code on Corporate Governance Practices (the CG Code ) of the Listing Rules. The audit committee has reviewed the unaudited interim financial results for the twelve months ended 31 March The audit committee comprises four Independent Non-executive Directors of the Company, namely Mr. LEE Man Chun Raymond, Ms. LEUNG Mei Han, Prof. SIN Yat Ming and Mr. WONG Wai Kay interim report 2006/07

31 Bossini International Holdings Limited 26 CODE ON CORPORATE GOVERNANCE PRACTICES The Company was in compliance with the code provisions as set out in the CG Code during the twelve months ended 31 March 2007, except for the following deviations: a. The Company does not have a separate Chairman and Chief Executive Officer and Mr. LAW Ka Sing holds both positions for the period from 1 April 2006 to 4 January The Board considered that previous structure provided consistent leadership. In compliance with the CG code, with effect from 5 January 2007, Mr. LAW Ka Sing is redesignated from the Chairman and Chief Executive Officer of the Company to the Chairman and Ms. CHAN So Kuen, Executive Director of the Company is appointed as the Chief Executive Officer. Mr. Law continues to be responsible for the overall direction of the Group. b. The Chairman and the Chief Executive Officer of the Company are not subject to retirement by rotation. The Board considers that the continuity of the Chairman and Chief Executive Officer of the Company and their leadership are crucial in maintaining the stability of the Group s business operations. MODEL CODE FOR SECURITIES TRANSACTIONS The Company has adopted the Model Code as the Company s code of conduct for dealings in securities of the Company by the directors. Based on specific enquiry of the Company s directors, the directors have complied with the required standard set out in the Model Code, throughout the accounting period covered by the interim report. Hong Kong, 21 June 2007 By Order of the Board LAW Ka Sing Chairman a. b. interim report 2006/07

32 27 Bossini International Holdings Limited FINANCIAL RESULTS CONDENSED CONSOLIDATED INCOME STATEMENT Twelve months ended 31 March (Unaudited) (Audited) Notes HK$ 000 HK$ 000 Revenue 2 2,105,353 2,199,515 Cost of sales (1,115,165) (1,174,301) Gross profit 990,188 1,025,214 Other income and gains 3 8,523 16,616 Selling and distribution costs (703,833) (660,924) Administrative expenses (219,155) (202,424) Other operating expenses (31,450) (38,939) Profit from operating activities 44, ,543 Finance costs 4 (1,650) (722) Profit before tax 5 42, ,821 Tax 6 (22,847) (33,786) Profit for the period attributable to equity holders 19, ,035 Dividend per share 7 Interim HK1.80 cents Proposed final^ ^ HK1.80 cents Earnings per share 8 attributable to ordinary equity holders HK3.60 cents Basic HK1.26 cents HK6.69 cents Diluted HK1.24 cents HK6.52 cents ^ Not yet proposed for the twelve months ended 31 March 2007 due to the change of financial year end date from 31 March to 30 June ^ interim report 2006/07

33 Bossini International Holdings Limited 28 CONDENSED CONSOLIDATED BALANCE SHEET At At 31 March March 2006 (Unaudited) (Audited) Notes HK$ 000 HK$ 000 Non-current assets Property, plant and equipment 9 183, ,334 Trademark 1,164 1,164 Deferred tax assets 2,725 2,672 Deposits paid 49,149 48,849 Bank deposits 15,600 15,600 Total non-current assets 252, ,619 Current assets Inventories 237, ,591 Debtors 10 76,393 55,664 Bills receivable 17,730 11,973 Deposits paid 36,527 30,442 Prepayments and other receivables 41,880 57,621 Derivative financial instruments Tax recoverable 2, Pledged bank deposits Cash and cash equivalents 182, ,513 Total current assets 596, ,624 interim report 2006/07

34 29 Bossini International Holdings Limited CONDENSED CONSOLIDATED BALANCE SHEET At At 31 March March 2006 (Unaudited) (Audited) Notes HK$ 000 HK$ 000 Current liabilities Trade creditors and accruals , ,038 Bills payable 24,503 22,243 Tax payable 28,524 28,531 Due to related companies 22,105 23,573 Derivative financial instruments 975 1,153 Interest-bearing bank loans 12 4,150 Total current liabilities 262, ,538 Net current assets 333, ,086 Total assets less current liabilities 585, ,705 Non-current liabilities Provisions 1, Deferred tax liabilities Total non-current liabilities 1,827 1,284 Net assets 583, ,421 Equity Issued capital 157, ,891 Reserves 426, ,290 Proposed dividend 28,240 Total equity 583, ,421 interim report 2006/07

35 Bossini International Holdings Limited 30 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Share Share Asset Exchange share premium option Capital Contributed revaluation fluctuation Reserve Retained Proposed Total capital account reserve reserve surplus reserve reserve funds profits dividend equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Twelve months ended 31 March 2007 (Unaudited) At 1 April ,891 1,855 2,000 (4,987) 90,258 10,151 15,790 1, ,425 28, ,421 Exchange realignment 3, ,797 Total income for the period recognised directly in equity 3, ,797 Profit for the period 19,776 19,776 Total income for the period 3, ,776 23,573 Final 2006 dividend declared (28,240) (28,240) Exercise of share options (237) 584 Equity-settled share option arrangements At 31 March ,225 2,342 2,050 (4,987) 90,258 10,151 19,506 1, , ,625 Twelve months ended 31 March 2006 (Audited) At 1 April ,891 1,855 1,309 (4,987) 90,258 15,904 1, ,870 61, ,038 Reversal of impairment losses of land and buildings 10,151 10,151 Exchange realignment (114) 48 (66) Total income and expense for the period recognised directly in equity 10,151 (114) 48 10,085 Profit for the period 105, ,035 Total income and expense for the period 10,151 (114) , ,120 Final 2005 dividend declared (61,188) (61,188) Equity-settled share option arrangements Interim 2006 dividend (28,240) (28,240) Proposed final 2006 dividend (28,240) 28,240 At 31 March ,891 1,855 2,000 (4,987) 90,258 10,151 15,790 1, ,425 28, ,421 interim report 2006/07

36 31 Bossini International Holdings Limited CONDENSED CONSOLIDATED CASH FLOW STATEMENT Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 Net cash inflow from operating activities 63,814 95,743 Net cash outflow from investing activities (88,686) (91,988) Net cash outflow from financing activities (23,506) (104,428) Net decrease in cash and cash equivalents (48,378) (100,673) Cash and cash equivalents at 1 April 227, ,895 Effect of foreign exchange rate changes, net 3,656 2,291 Cash and cash equivalents at 31 March 182, ,513 Analysis of balances of cash and cash equivalents Cash and bank balances 182, ,156 Non-pledged bank deposits with original maturity of less than three months when acquired 19, , ,513 interim report 2006/07

37 Bossini International Holdings Limited 32 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES These condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim financial reporting issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange The accounting policies and basis of preparation adopted in the preparation of the interim financial statements are the same as those used in the annual financial statements for the year ended 31 March 2006, except in relation to the following revised Hong Kong Financial Reporting Standards ( HKFRSs, which also include HKASs and Interpretations) that affect the Group and are adopted for the first time for the current period s financial statements: HKAS 21 Amendment Net Investment in Foreign Operation 21 HKAS 39 Amendment The Fair Value Option 39 HKAS 39 & HKFRS 4 Financial Guarantee Contracts 39 Amendments 4 HK(IFRIC) Int 4 Determining whether an Arrangement contains a Lease 4 interim report 2006/07

38 33 Bossini International Holdings Limited NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES (continued) The adoption of the above revised HKFRSs has no material impact on the accounting policies of the Group and the methods of computation in the Group s condensed consolidated interim financial statements. Inventories With proven sales track record of the products and the recovery of economic conditions in general for the regions in which the Group has operations over the past few years, the Group has revised its estimates relating to inventory provision policy during the period under review. If the old inventory provision policy were used for the current period, an additional provision of approximately HK$16.9 million would have been made to write-down the carrying amounts of inventories SEGMENT INFORMATION An analysis of the Group s revenue and profit/(loss) by business segment is not presented as the Group s revenue and results are predominantly derived from retailing and distribution of garments. interim report 2006/07

39 Bossini International Holdings Limited 34 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 2. SEGMENT INFORMATION (continued) An analysis of the Group s revenue and profit/(loss) by geographical segment for the twelve months ended 31 March 2007, together with the comparative figures for the corresponding period in 2006, is as follows: Hong Kong Mainland China Taiwan Singapore & Malaysia Consolidated (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue Sales to external customers 1,072,174 1,129, , , , , , ,425 2,105,353 2,199,515 Other income and gains 1,739 6, ,416 1,859 3, ,205 11,843 Total 1,073,913 1,135, , , , , , ,511 2,109,558 2,211,358 Segment results 96, ,368 (19,998) 6,524 (39,752) (11,450) 3,659 17,328 39, ,770 Interest income 4,318 4,773 Profit from operating activities 44, ,543 Finance costs (1,650) (722) Profit before tax 42, ,821 Tax (22,847) (33,786) Profit for the period 19, ,035 interim report 2006/07

40 35 Bossini International Holdings Limited NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 3. OTHER INCOME AND GAINS Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 Bank interest income 2,477 3,452 Other interest income 1,841 1,321 Claims received 990 1,210 Royalty income Gross rental income 1,576 2,447 Impairment losses of land and buildings reversed in the consolidated income statement 5,400 Others 1,295 2,582 8,523 16, FINANCE COSTS Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 Interest on bank loans and overdrafts wholly repayable within five years 1, interim report 2006/07

41 Bossini International Holdings Limited 36 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 5. PROFIT BEFORE TAX The Group s profit before tax is arrived at after charging/(crediting): Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 Inventory provision 3,359 12,487 Depreciation 59,446 54,983 Impairment losses of land and buildings reversed in the consolidated income statement (5,400) Fair value losses/(gains) of derivative instruments transactions not qualifying as hedges, net 100 (4,939) interim report 2006/07

42 37 Bossini International Holdings Limited NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 6. TAX Hong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on the estimated assessable profits arising in Hong Kong during the twelve months ended 31 March Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof. 17.5% 17.5% Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 Current Hong Kong Charge for the period 16,184 21,697 Overprovision in prior periods (233) (324) Current Elsewhere Charge for the period 6,947 11,589 Underprovision in prior periods Deferred (54) 459 Total tax charge for the period 22,847 33,786 interim report 2006/07

43 Bossini International Holdings Limited 38 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 7. DIVIDENDS Twelve months ended 31 March (Unaudited) (Audited) HK$ 000 HK$ 000 First interim dividend Nil (2006: HK1.8 cents per ordinary share) ,240 Second interim dividend Nil (2006: Nil) Proposed final dividend Nil^ ^ (2006: HK1.8 cents per : ordinary share) ,240 56,480 ^ Not yet proposed for the twelve months ended 31 March ^ 2007 due to the change of financial year end date from 31 March to 30 June interim report 2006/07

44 39 Bossini International Holdings Limited NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 8. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS The calculation of basic earnings per share is based on the profit attributable to ordinary equity holders for the twelve months ended 31 March 2007 of HK$19,776,000 (2006: HK$105,035,000) and weighted average of 1,569,770,013 (2006: 1,568,911,394) ordinary shares in issue during the period. 19,776, ,035,000 1,569,770,013 1,568,911,394 The calculation of diluted earnings per share is based on the profit attributable to ordinary equity holders for the twelve months ended 31 March 2007 of HK$19,776,000 (2006: HK$105,035,000). The number of ordinary shares used in the calculation is the weighted average of 1,569,770,013 (2006: 1,568,911,394) ordinary shares in issue during the period, as used in the basic earnings per share calculation, and the weighted average number of 27,678,903 (2006: 41,323,712) ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares. 19,776, ,035,000 1,569,770,013 1,568,911,394 27,678,903 41,323,712 interim report 2006/07