Mr. Gao Dekang
Chairman of the Board of Directors

Market review

The Chinese economy rebounded in 2009 and continued to grow in 2010. The retail market remained robust. The guiding principles of the "Twelfth Five- Year Plan" have clearly identified the need for establishing a long-term effective mechanism to transform the economic structure from exportoriented in the past to domesticoriented. Supported by favorable international market conditions and domestic policies, the economy saw significant growth and domestic consumption increased with higher per capita income. According to the National Bureau of Statistics of China, the GDP of the year amounted to RMB39,800 billion, representing an increase of 10.3% as compared with last year. Total retail sales amounted to RMB15,500 billion, representing an increase of 18.4% as compared with last year. The growing domestic consumption market attracts investors from all over the world and serves as a new driving engine of the economy of China.

Business review

Our down apparel business maintained its leading market position and the results met expectations

During the year under review, the consumption market boosted. However the raw material cost and labour cost also increased significantly. Production was under severe cost pressure. 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 opportunities arising from the cold weather in October and mid to late December by offering products with high quality and quantity in a timely manner to meet sudden increase in market demand. As a result, the Group achieved satisfactory sales results.

Number one in sales in China for 16 years in a row

As in March 2011, according to CIIIC, "Bosideng" has ranked as the top brand in terms of sales volume of similar products in the domestic market for 16 consecutive years since 1995. The total market share of the Group's brand portfolio in 2010, including "Bosideng", "Snow Flying", "Kangbo" and "Bengen", was 36.7% (2009: 38.0%). These four brands also ranked among top ten in terms of sales volume. "Bosideng" and "Snow Flying" ranked first and second with a market share of 22.0% and 9.5%, respectively. "Kangbo" and "Bengen" ranked seventh and eighth with a market share of 2.9% and 2.3%, respectively.

Brand value reached RMB18.016 billion

On September 15, 2010, the 16th annual "China's Most Valuable Brand Ranking" was announced in Shanghai. "Bosideng" ranked 13th with a brand value of RMB18.016 billion. "Snow Flying", a brand of the Group with a brand value of RMB5.132 billion, was on the list again and was ranked 46th.

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

"Bosideng" organized the "2011/2012 Fall/Winter Cold-resistant Apparel Trends Conference" on March 28, 2011 under the theme of "Harmony" at the "2011 China International Fashion Week". The Bosideng's cold resistant apparels featured by the top models in China were stunning and the show was recognized as one of the most extraordinary, innovative and imaginative apparel show in recent years. The Group has participated in the Fair for 15 consecutive years as the only representative of the cold-resistant apparel industry in China to introduce the market trend of China.

Development of non-down apparel business

To further optimize product portfolio and improve profitability, the Group expanded into the non-down apparel business since 2009. The "Bosideng MAN" business saw significant growth since its establishment two years ago. It attracted RMB0.39 billion orders at the 2011 Fall/Winter product show in March 2011, representing an increase of approximately 36% as compared with the corresponding period last year. According to CNCIC, the "Bosideng Casual Menswear" ranked 4th among similar products of the market in terms of market shares in 2010. In early 2011, in view of the success of the menswear business, the Company introduced the "VETALLO" brand, featuring high-end menswear.

During the year, a number of consignment counters of international brand "ROCAWEAR" were established in major provincial cities such as Beijing, Shanghai, Hangzhou and Chongqing. Its products has launched into the market.

Bosideng has paid a lot of efforts in new brands, the Group launched "BOSIDENG RICCI", a lady's wears brand directly invested by the Group, in November 2010, and developed the casual wears brand "Mogao" and kids wears brand "D.D. Cat" in January 2011 and March 2011, respectively.

Opening of flagship stores in prime shopping districts

The Group opened a number of flagship stores in the prime shopping districts of major cities in China and provided our customers with a more spacious and comfortable shopping environment, which enhanced the brand image of the Group.

During the reporting period, the Group replicated the success of "Bosideng" Shanghai flagship store which opened last year in Nanjing Road, a famous shopping area in China, and opened a "Bosideng" flagship store for its non-seasonal apparel in Xidan of Beijing on December 26, 2010. The store is located in the prime shopping district of Beijing with a total operation area of 1,500 sq.m. The store has 2 floors selling Bosideng products. In addition to down apparels, the store also sells casual menswear. Lady's wears will also be sold in the store. Alternation and tailor services will also be introduced.

The Meicheng flagship store of "Bosideng MAN" in Changshu was opened on September 16, 2010. Leehom Wang, our spokesman, was invited as our guest to the opening ceremony of the store. Meicheng flagship store is located in Meicheng Shopping Centre with an operation area of 300 sq.m. The store serves customers from surrounding areas of Changshu and provide excellent shopping experience to 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 Group endeavors to develop into a respectful and renowned international apparel brand operator.

Leveraging on the strength of the "Bosideng" brands, the group will prudently develop the non-seasonal apparel brand business to satisfy customers of different levels with diversified products. The Group will continue to invest in the current brands such as "Bosideng MAN", "ROCAWEAR", "BOSIDENG RICCI", "Mogao", "D.D. Cat" and "VETALLO", as well as actively 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 to diversify its brands and product portfolio. The Group will increase the proportion of sales of non-down apparel products to its total sales so as to provide 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 2011/2012, the Group will dedicate to improving its competitiveness by focusing on the development of non-down apparel business, promoting brand portfolio and increasing brand value, strengthening its research and development efforts to introduce more non-seasonal and fashion apparels, enhancing the market and distribution channels to increase market shares and actively optimizing the ability of searching stock limits of its information system.

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.