Mr. Gao Dekang
Chairman

Market review

The current global economic adjustment coincided with the adjustment of the economy of China, resulting in the rapid consolidation of the apparel industry. Mired in the prolonged downturn of the international market and the weak performance of the domestic market, a significant number of small and medium garment manufacturers were forced to cease operation. Major players with proprietary technologies, self-owned brand names, independent sales networks, good management and strong marketing capability were able to further secure their market shares and consolidate their competitive edges.

The number of severe cold days in the winter of 2009 was exceptionally high, resulting in the growth of sales in general. The down apparel market was characterized by increase in prices of the down apparel industry, the overall improvement in product quality and concentration of sales in the peak season. Products of various designs were introduced to meet customers' demand. The market was dominated by big names. In addition to its functional features, the fashionable features of the products were increasingly important and the products were further differentiated.

Business review

During the year under review, the Group adjusted its brand strategy, marketing strategy and production plan in response to the market development. Leveraging its strong brand name, extensive retail and distribution networks and innovative designs, the Group captured the market opportunities arising from the cold weather. The Group was able to maintain the quality of its products and to boost its sales by expanding its production to meet sudden increase in market demand.

Number One in sales throughout the country for 15 years in a row

According to CIIIC and the National Bureau of Statistics of China, "Bosideng" has ranked as the top brand in terms of sales for 15 consecutive years since 1995. The total market share of the Group's brand portfolio in 2009, including "Bosideng", "Snow Flying", "Kangbo" and "Bingjie", was 38.0%. These four brands also ranked among top ten in terms of sales. "Bosideng" and "Snow Flying" were ranked first and second with a market share of 24.9% and 7.6%, respectively. "Bingjie" was ranked eleventh last year and bounded to seventh with a market share of 2.9%, while "Kangbo" was ranked eighth with a market share of 2.6%.

High brand value of RMB16.22 billion

In December 2009, the 15th annual R&F Global Ranking was announced in New York, the US. Awarded with "China's World Famous Brand" and "Leading Textile Clothing Brand in China", Bosideng was ranked 13th in "2009 China's Most Valuable Brand" with a brand value of RMB16.22 billion, and ranked top among all apparel brands (by the category of clothing). "Snow Flying", a brand of the Group with a brand value of RMB5.109 billion, was on the list again and was ranked 44th in "2009 China's Most Valuable Brand".

Leading the trend of innovation for winter cold-resistant apparel in the PRC

The Group organized the "2010/2011 Fall/Winter Cold-resistant Apparel Trends Conference" on March 28, 2010 under the theme of "Boundary" at the "2010 China International Clothing and Accessories Fair". The Bosideng's cold resistant apparels featured by the top models of China were stunning and the show was recognized as an extraordinary, innovative and imaginative apparel show in recent years. The Group has participated the Fair for 14 consecutive years as the only representative of the cold-resistant apparel industry in China to introduce the market trend of China. The Group maintained the leading position of its brand in the cold-resistant apparel industry in China due to its leading market position and design capability.

Development of Bosideng's non-seasonal menswear business

To further optimize the product portfolio and improve profitability, the Group expanded into the non-down apparel business. In May 2009, after the Group expanded into menswear business by acquiring Jiangsu Bosideng Garment Development Co., Ltd. (formerly known as Jiangsu Kangbo Clothing Co., Ltd.) (the "Menswear Company"), the overall development of "Bosideng Menswear" was further promoted by capitalizing the brand recognition of "Bosideng" and with the strong support of the Group. During the period, "Bosideng Menswear" established its brand awareness across the PRC with good reputation. In addition, the Group achieved excellent results through rapid business development by building a national sales network, which represented a major step of the Group's business diversification strategy.

Opening of flagship stores in the CBDs

The Group opened a number of flagship stores in the central business districts of major cities in China and provided our customers with a more comfortable shopping environment, which enhanced the brand image of the Group. The "Bosideng" flagship store at Nanjing Road East in Shanghai, the most famous shopping area in China, is the most prominent one. It is located in the central business district of Shanghai with a total floor area of 7,000 sq.m. (7 levels in total, 3 levels are in operation for the time being). The outlook and internal design of the flagship store represent the style of an international brand and create a brand new environment to enhance the shopping experience of its customers.

Future development strategy

Looking ahead, the Group will integrate its brand resources to optimize and improve its business structure and to expand into the non-seasonal and fashion apparel business. The objective of the Group is to develop into a respectful and renowned international apparel brand operator.

The Group will carefully develop the non-seasonal apparel brand business by applying the business model of its down apparel business. The Group will further develop the product lines of "Bosideng Menswear" and intend to acquire more non-down apparel brands including lady's wear, casual wear and kids wear brands with high potential and good reputation through acquisition, merger or joint venture. The Group will increase the proportion of sales of non-down apparel products to its total sales so as to provide our quality products to consumers all year round.

The Group will adhere to its pursuit of perfect quality, dedication to the brand and market exploration. In 2010/2011, the Group will conduct an overall review of the positioning of its brands in order to differentiate their styles to cater for the demand of different customers. The Group will strengthen its research and development efforts to introduce more non-seasonal and fashion apparels. The Group will also strengthen its marketing efforts to effectively expand markets through various sales channels and increase the brand value of the Group. The Group will further invest to establish a unique image of its outlets and increase the number of flagship stores and expand its sales network.

In addition, the Group will change the conventional business model by using information technology and e-commerce business platform so as to adopt a scientific management style and enhance the corporate management level.

Appreciation

The remarkable results of the Group were attributed to the efforts of all the staff and the support of consumers for the Group's products. I would like to express my heartfelt gratitude to all the staff for their dedication and outstanding performance and to our shareholders, distributors, customers and suppliers for their long term support.