永 恩 國 際 集 團 有 限 公 司
Prime Success International Group Limited
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 210)

INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007

HIGHLIGHTS OF INTERIM RESULTS

2007 2006 Change

Turnover (HK$’000) 1,750.6 1,441.0 +21%
Profit attributable to equity holders of the
Company (HK$’000)

184.4

147.3

+25%
Basic earnings per share (HK cents) 11.26 9.00 +25%
Interim dividend per share (HK cents) 2.5 2.0 +25%

1

INTERIM RESULTS

The board of directors (the “Board”) of Prime Success International Group Limited (the “Company”)
is pleased to announce the unaudited condensed consolidated interim results of the Company and its
subsidiaries (the “Group”) for the six months ended 30 June 2007, together with the comparative
figures for the corresponding period in 2006 as follows:

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months ended 30 June 2007

Unaudited
2007 2006

Note HK$’000 HK$’000

Turnover 2 1,750,640 1,441,031
Cost of sales (903,753) (775,325)
───────── ─────────
Gross profit 846,887 665,706
Other revenues and net gains 27,931 12,602
Selling and distribution expenses (516,056) (397,323)
General and administrative expenses (111,552) (104,005)
───────── ─────────
Operating profit 3 247,210 176,980
Finance costs (5,514) (3,417)
Share of profit of an associated company 77 88
───────── ─────────
Profit before taxation 241,773 173,651
Taxation 4 (54,764) (26,218)
───────── ─────────
Profit for the period 187,009 147,433
═════════ ═════════
Attributable to:
Equity holders of the Company 184,395 147,336
Minority interests 2,614 97
───────── ─────────
187,009 147,433

═════════ ═════════

Interim dividend 5 40,947 32,758
═════════ ═════════

Basic earnings per share 6 HK11.26 cents HK9.00 cents
══════════ ══════════



2

CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2007

Unaudited Audited
30 June 31 December
2007 2006

Note HK$’000 HK$’000
Non-current assets
Goodwill 25,483 25,483
Land use rights 39,579 29,289
Fixed assets 423,263 378,576
Deposits paid for acquisition of fixed assets 27,959 23,348
Interest in an associated company 2,417 2,418
Available-for-sale financial assets 33,624 33,624
Other non-current assets 62,486 51,163
Deferred tax assets 34,146 36,053
─────── ───────
648,957 579,954
------------- -------------

Current assets
Inventories 777,309 684,454
Trade receivables 7 159,498 113,270
Other receivables, deposits and prepayments 248,161 186,108
Derivative financial instruments 2,142 353
Pledged bank deposits - 6,000
Bank balances and cash 171,594 148,699
─────── ───────
1,358,704 1,138,884
------------- -------------

Current liabilities
Trade payables 8 394,775 296,494
Other payables and accrued charges 156,824 159,449
Taxation payable 78,920 65,559
Bank loans 188,933 183,194
─────── ───────
819,452 704,696
------------- -------------

Net current assets 539,252 434,188
------------- -------------

Total assets less current liabilities 1,188,209 1,014,142
═══════ ═══════



3

Unaudited Audited
30 June 31 December
2007 2006

HK$’000 HK$’000
Equity
Share capital 163,789 163,789
Reserves 990,506 817,519
────── ──────
Equity attributable to equity holders of the Company 1,154,295 981,308
Minority interests 32,899 31,904
Total equity ────── ──────
1,187,194 1,013,212

Non-current liabilities
Deferred tax liabilities 1,015 930
────── ──────
1,188,209 1,014,142

═══════ ═══════

1. Basis of preparation and accounting policies

These unaudited condensed consolidated interim accounts have been prepared in accordance
with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by
the Hong Kong Institute of Certified Public Accountants.

These condensed consolidated interim accounts should be read in conjunction with the 2006
annual accounts. The accounting policies and methods of computation used in the preparation
of these condensed consolidated interim accounts are consistent with those used in the annual
accounts for the year ended 31 December 2006 except that certain comparative figures have
been reclassified to conform with changes in presentation in the current period.

In 2007, the Group has adopted the following new/revised Hong Kong Financial Reporting
Standards (“HKFRSs”), which also included HKASs and Interpretations, that are effective for
accounting periods commencing on or after 1 January 2007:

HKAS 1 (Amendment) Capital Disclosures
HKFRS 7 Financial Instruments: Disclosures
HK(IFRIC) – Int 7 Applying the Restatement Approach under HKAS 29
Financial
Reporting in Hyperinflationary Economies
HK(IFRIC) – Int 8 Scope of HKFRS 2
HK(IFRIC) – Int 9 Reassessment of Embedded Derivatives
HK(IFRIC) – Int 10 Interim Financial Reporting and Impairment

The adoption of these new/revised HKFRSs had no material effect on the preparation and
presentation of the results and financial position of the Group for the current or prior
accounting periods.

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2. Turnover and segment information

The Group is principally engaged in the manufacturing and distribution of footwear and
apparel products.

Primary reporting format - business segments

Six months ended 30 June
2007 2006

Brand
business
OEM

business Group
Brand
business
OEM

business Group
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover 1,388,132 362,508 1,750,640 1,089,293 351,738 1,441,031
─────── ────── ─────── ─────── ────── ───────
Segment results 216,234 28,334 244,568 146,917 28,991 175,908
────── ────── ────── ──────
Income derived from
an unlisted
available-for-sale
financial asset 1,500 1,500
Fair value gain on
derivative financial
instruments

1,819

143
Unallocated
revenues

155

72
Unallocated
expenses

(832)

(643)
────── ──────
Operating profit 247,210 176,980
══════ ══════

Secondary reporting format - geographical segments

Six months ended 30 June
2007 2006

HK$’000 HK$’000

China 1,374,718 1,087,846
The US 331,315 331,800
Others 44,607 21,385
──────── ────────
1,750,640 1,441,031

════════ ════════

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3. Operating profit

Operating profit is stated after (crediting)/charging the following:

Six months ended 30 June
2007 2006

HK$’000 HK$’000

Amortisation of land use rights 807 541
Cost of inventories sold 761,741 641,004
Depreciation of fixed assets 45,265 29,687
Employee benefits expense including share-based payment
expense of HK$7,883,000 (2006: Nil) 213,287 194,590
Fair value gain on derivative financial instruments
(1,789) (143)
Loss on disposal of fixed assets
3,064 3,430

Provision for slow moving inventories
7,144 12,706

═══════ ═══════

4. Taxation

No provision for Hong Kong profits tax has been made in the accounts as the Group does not
have any assessable profit arising in Hong Kong. Taxation on profits arising outside Hong
Kong has been calculated on the estimated assessable profit for the six months ended 30 June
2007 at the rates of taxation prevailing in the countries/places in which the Group operates.

Certain subsidiaries of the Company operating in China are eligible for certain tax exemptions
and concessions including tax holidays and reduced corporate income tax rates. Accordingly,
the China corporate income tax for such subsidiaries has been provided after taking account of
these tax exemptions and concessions.

The amount of taxation charged/(credited) to the condensed consolidated profit and loss
account represents:
Six months ended 30 June
2007 2006

HK$’000 HK$’000

Current taxation - outside Hong Kong 52,772 35,141
Deferred taxation 1,992 (8,923)
────── ──────
54,764 26,218

══════ ══════

On 16 March 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”), which will be effective from 1
January 2008. Under the New CIT Law, the corporate income tax rate applicable to the
domestic companies from 1 January 2008 will be decreased from 33% to 25% or
progressively increased from 15% to 25% within 5 years. This unification in the corporate
income tax rate will directly reduce or increase in the Group’s effective tax rate prospectively
from 2008. According to HKAS 12, the deferred tax assets and liabilities shall be measured at
the tax rates that are expected to apply to the period when the asset is realised or the liability
is settled. As a result, an increase in taxation charge of HK$3,954,000 is recognised during
the six months ended 30 June 2007.
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5. Interim dividend

Six months ended 30 June
2007 2006

HK$’000 HK$’000

Interim dividend, proposed, of HK2.5 cents (2006: HK2.0
cents) per ordinary share 40,947 32,758
══════ ══════

6. Earnings per share

The calculation of basic earnings per share is based on the Group’s profit attributable to
equity holders of the Company of HK$184,395,000 (2006: HK$147,336,000). The basic
earnings per share is based on the weighted average number of 1,637,892,384 (2006:
1,637,892,384) ordinary shares in issue during the six months ended 30 June 2007.

No diluted earnings per share has been presented as the exercise price of the Company’s
outstanding share options was higher than the average market price of the Company’s shares
during the six months ended 30 June 2007 while there were no dilutive potential shares in
issue during the six months ended 30 June 2006.

7. Trade receivables

The ageing analysis of trade receivables by invoice date is as follows:

30 June 31 December

2007 2006

HK$’000 HK$’000

0 - 30 days
90,641 79,214

31 - 60 days
51,577 22,996

61 - 90 days
13,309 8,933

91 - 120 days
2,007 1,058

121 - 180 days
1,436 574

181 - 360 days
404 495

Over 360 days
124 -

───── ─────
159,498 113,270

══════ ══════

The Group generally allows an average credit period of 30 to 60 days to its trade customers
other than major and long standing customers with whom specific extended terms will be
agreed between the Group and the relevant counter parties.
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8. Trade payables

The ageing analysis of trade payables including balances due to related parties by invoice date
is as follows:

30 June 31 December
2007 2006

HK$’000 HK$’000

0 - 30 days 295,215 171,658
31 - 60 days 65,380 89,746
61 - 90 days 14,133 14,396
91 - 120 days 2,876 5,794
121 - 180 days 2,346 2,912
181 - 360 days 9,636 5,258
Over 360 days 5,189 6,730
─────── ───────
394,775 296,494

═══════ ═══════

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

During the first half of 2007, the Group’s brand businesses, comprising “Daphne”, “Shoebox” and
“adidas”, continued to excel on all fronts with strong consumer demand from Mainland China
providing impetus for continual growth. With abundant opportunities as a result of the overall
positive market sentiment, “Daphne” had a boosted product portfolio and “Shoebox” added new
points-of-sale and recorded a profit for the six months ended 30 June 2007. The Group has also
been granted the distribution right of “adidas Performance” products in addition to “adidas
Originals” in early 2007, enabling its capture of a larger market share. Serving clearly defined
markets and supported by creative advertising and promotion campaigns, the Group’s brand
businesses reported robust growth.

Brand Business

Compared to the same period last year, the Group’s brand business was continuously gaining weight,
accounting for 79% (2006: 76%) of the Group’s total turnover during the period under review.
Meanwhile, 88% (2006: 84%) of the Group’s total segment results was contributed from brand
business for the first half of 2007.

As at 30 June 2007, the Group had over 2,500 points-of-sale for “Daphne”, “Shoebox” and “adidas”
businesses, all over 31 provinces and municipalities in Mainland China and Taiwan. Having more
points-of-sale to be located in lower tier cities in China will substantially increase the revenue and
profitability of the Group as a whole.

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Distribution of outlets of the Group as at 30 June 2007

Daphne Shoebox adidas Total
Eastern China 798 99 46 943
Northeastern China 311 39 18 368
Southern China 320 34 11 365
Central China 302 38 11 351
Northern China 181 17 18 216
Southwestern China 119 12 6 137
Northwestern China 89 9 - 98
Taiwan 28 - - 28
Total 2,148 248 110 2,506

An analysis of key operational indices for each brand business for the six months ended 30 June
2007 is as follows:

Daphne Shoebox adidas
2007 2006 2007 2006 2007 2006

Average selling price (RMB) 188 180 123 105 586 611
Same store sales growth rate (%) 6.0 8.0 3.3 -0.9 13.0 12.0
Rental expense ratio (as % of sales) 21.1 20.1 23.9 21.8 21.2 21.4
Employee cost ratio (as % of sales) 5.6 5.7 6.7 9.0 4.4 3.9
Advertising and promotion expense ratio
(as % of sales)
2.4 2.4 0.1 0.1 0.7 0.7

Excluding “Daphne” outlets in Taiwan

“Daphne” Business

Riding on the growing popularity of the well-established brand and heeding the increasing spending
of female consumers in China, the Group has increased a net of 182 new points-of-sale in Mainland
China for “Daphne” during the period under review, bringing there the total points-of-sale to 1,404
stores, 470 counters and 246 franchised outlets as at 30 June 2007.

Facing the sluggish Taiwan economy together with the lack of brand recognition in the local market,
“Daphne” Taiwan still incurred an operating loss in the first half of 2007. The Group has kept a
close eye on the business performance and strove to refine its business strategy to ensure the
profitability. As at 30 June 2007, there were 27 stores and 1 franchised outlet in Taiwan.

Buttressed by the well-received brand, a series of “Daphne” eyewear launched in early 2007 has
generated satisfactory results. Not only does the excellent performance broaden the Group’s
revenue stream, but it also indicates its success in the diversification of product portfolio.

To sustain mass appeal of the brand, the Group continued to appoint renowned girl pop group
“S.H.E” and Ms Rene Liu as the spokespersons for “Daphne D18” and “Daphne D28” respectively.
Furthermore, the Group never ceases attempting to use creative means (e.g. sponsoring concerts and
television shows) to attract mass attention to the brand’s new products and promotions launched.
The advertising and promotion expenses spent during the period under review amounted to
approximately HK$30.4 million.

9

“Shoebox” Business

Realising the strong potential in “Shoebox” brand, the Group expanded “Shoebox” business rapidly
during the period under review by adding a net of 84 stores, bringing the total to 248 as at 30 June
2007. The segment recorded a profit for the first half of 2007, testifying to the popularity of the
brand, economies of scale and effectiveness of the Group’s tactic to reach mass consumers with
competitively priced yet high-quality footwear.

“adidas” Business

“adidas” business continued to deliver satisfactory performance though facing keen competition in
the market segment during the period under review. The excitement over the advent of grand sports
events such as the Beijing 2008 Olympic Games, along with the increasing consumer spending
power, has boosted the demand for its products among consumers in China. To meet the rising
demand, the Group extended its product portfolio of the brand to “adidas Performance” products so
as to capture customers of sports casual collection preference. As at 30 June 2007, the Group
operated a total of 105 directly-managed outlets and 5 franchised outlets in Mainland China,
representing a net opening of 6 outlets during the period.

OEM Business

OEM business developed steadily during the six months ended 30 June 2007. In light of the fierce
worldwide competition, Renminbi appreciation and ever-rising cost pressure, the Group managed to
achieve cost effectiveness and economies of scale on its OEM business by executing high-quality-
high-margin orders. Some well-known brands manufactured by the Group included Aerosoles,
Tommy Hilfiger, Umbro, etc.

Development of Infrastructure

During the six months ended 30 June 2007, the Group continued to dedicate itself to establishing
new office buildings, logistics centres, manufacturing plants and management information systems
in order to improve its operational efficiency. The office building in Zhengzhou and the main office
building in Shanghai are expected to complete in the third and the fourth quarter of 2007
respectively.

FINANICAL REVIEW

Results Performance

For the first half of 2007, the Group’s turnover and profit attributable to equity holders was
HK$1,750.6 million (2006: HK$1,441.0 million) and HK$184.4 million (2006: HK$147.3 million)
respectively, an increase of 21% and 25% respectively from the same period last year. The gross
margin and net margin was 48.4% (2006: 46.2%) and 10.5% (2006: 10.2%) respectively. Basic
earnings per share was HK11.26 cents (2006: HK9.00 cents).

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Key Financial Indicators

For the six months ended 30 June
2007 2006

Average inventory turnover (days) (Note 1) 146 158
Average debtors turnover (days) (Note 2) 14 16
Average creditors turnover (days) (Note 3) 75 77
Capital expenditure (HK$ million) 96.2 57.8
Effective tax rate (%) 22.7 15.1

As at
30 June 2007 31 December 2006
Cash and cash equivalents (HK$ million) 171.6 148.7
Shareholders’ equity (HK$ million) 1,154.3 981.3
Bank loans (HK$ million) 188.9 183.2
Current ratio (times) (Note 4) 1.66 1.62
Gearing ratio (%) (Note 5) 16.4 18.7

Notes:
1. The calculation of average inventory turnover (days) is based on the average of opening and
closing inventory balances divided by the cost of sales and multiplied by number of days of the
relevant period.
2. The calculation of average debtors turnover (days) is based on the average of opening and
closing balances of trade receivables divided by turnover and multiplied by number of days of
the relevant period.
3. The calculation of average creditors turnover (days) is based on the average of opening and
closing balances of trade payables divided by purchases and multiplied by number of days of
the relevant period.
4. The calculation of current ratio (times) is based on the total current assets divided by total
current liabilities as at the relevant period end.
5. The calculation of gearing ratio (%) is based on the total bank loans divided by shareholders’
equity as at the relevant period end.

Individual Business Analysis for the six months ended 30 June

Daphne Shoebox adidas OEM
HK$ million 2007 2006 2007 2006 2007 2006 2007 2006
Turnover 1,140.3 916.9 116.5 58.6 131.3 113.8 362.5 351.7
Gross profit 655.0 513.4 62.6 25.9 64.9 57.6 64.3 68.8
Operating profit/(loss) 198.4 139.1 3.9 (4.4) 13.9 7.9 28.3 29.0

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Liquidity and Financial Resources

As at 30 June 2007, the Group maintained a healthy cash position with cash and cash equivalents of
HK$171.6 million (31 December 2006: HK$148.7 million) and unutilised banking facilities of
HK$236.3 million (31 December 2006: HK$136.5 million). Its current ratio improved slightly from
1.62 as at 31 December 2006 to 1.66 as at 30 June 2007. With steady cash flow generated from
operations coupled with existing cash and banking facilities available, the Group has adequate
financial resources to cope with its future expansion.

The gearing ratio, calculated on the basis of bank loans of HK$188.9 million (31 December 2006:
HK$183.2 million) over equity attributable to shareholders of the Company of HK$1,154.3 million
(31 December 2006: HK$981.3 million), decreased slightly from 18.7% as at 31 December 2006 to
16.4% as at 30 June 2007. All bank loans were at floating rates during the period under review.

Foreign Exchange Risk Management

The Group’s monetary assets, liabilities and transactions are mainly denominated in Hong Kong
dollar, Renminbi, US dollar, Euro and New Taiwanese dollar. Foreign exchange risks arising from
fluctuations of foreign currencies are managed by the Group using foreign exchange forward
contracts whenever necessary.

Pledge of Assets

As at 30 June 2007, the Group’s short-term bank loan of HK$21.3 million (31 December 2006:
HK$25.3 million) was secured by an available-for-sale financial asset with nil (31 December 2006:
nil) carrying value. As at 31 December 2006, the Group’s short-term bank loans of HK$27.0
million were secured by certain land use rights and leasehold buildings of a total net book value of
HK$18.3 million and a bank deposit of HK$6.0 million.

Significant Capital Expenditure

During the six months ended 30 June 2007, the Group incurred a total capital expenditure of
HK$96.2 million (2006: HK$57.8 million) mainly for decoration of stores and counters,
construction of office buildings and processing plants and acquisition of information system
equipment.

Contingent Liabilities

As at 30 June 2007, the Group had no significant contingent liabilities.

12

Human Resources

As at 30 June 2007, the Group had over 24,000 (31 December 2006: 24,000) employees in Hong
Kong, Taiwan and Mainland China. Employee expenditure during the six months ended 30 June
2007 was HK$213.3 million (2006: HK$194.6 million) including share-based payment expense of
HK$7.9 million (2006: Nil). The Group values its human resources and recognises the importance
of attracting and retaining qualified employees to sustain its success. Remuneration packages are
generally structured with reference to market terms and individual qualifications. In addition, share
options and discretionary bonuses are granted to eligible employees based on individual’s
performance. The Group also provides employees with provident fund schemes, medical insurance,
staff purchase discounts and training programs.

OUTLOOK

Looking ahead, the Group will continue to explore new business opportunities so as to strengthen
the Group’s business and revenue base through self development of new brands and co-operation
with strategic national and international partners. The Group’s another consistent emphasis will be
to focus resources on expansion of point-of-sale network to maximise economies of scale and to
increase market share. For the whole year of 2007, the Group plans to establish points-of-sale by a
net total of 380-400 for “Daphne”, 120-140 for “Shoebox” and 40-50 for “adidas”. The Group is
optimistic that the prospects of its business and its ability to generate satisfactory returns for
shareholders will sustain in the future.

INTERIM DIVIDEND

The Board has resolved on 12 September 2007 to declare an interim dividend of HK2.5 cents (2006:
HK2.0 cents) per ordinary share for the year ending 31 December 2007. The interim dividend will
be payable on or before 18 October 2007 to shareholders whose names appear on the register of
members of the Company at 4:00 p.m. on 10 October 2007.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 8 October 2007 to 10 October 2007
(both days inclusive) during which period no transfer of shares will be registered. In order to
qualify for the interim dividend, all transfers, accompanied by the relevant share certificates, must
be lodged with the registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor,
Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong no later than 4:00 p.m. on 5 October
2007.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SHARES

The Company has not redeemed any of its shares during the six months ended 30 June 2007.
Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s shares
during the period.


13

CORPORATE GOVERNANCE

The Company has complied with the Code of Corporate Governance Practices (the “Code”) as set
out in Appendix 14 of the Rules Governing the Listing of Securities on

SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors (the “Model
Code”) as set out in Appendix 10 of the Listing Rules. Following specific enquiry by the Company,
all directors of the Company confirmed that they had complied with the required standards as set out
in the Model Code during the six months ended 30 June 2007.

AUDIT COMMITTEE

The Audit Committee, comprises the three independent non-executive directors of the Company,
has reviewed with management the accounting principles and practices adopted by the Group and
discussed auditing, internal control and financial reporting matters. The Group’s unaudited
condensed consolidated interim accounts have been reviewed and approved by the Audit Committee,
who is of the opinion that such accounts comply with the applicable accounting standards, the
Listing Rules and all legal requirements, and that adequate disclosures have been made.

PUBLICATION OF THE INTERIM RESULTS AND REPORT

This results announcement is published on the Stock Exchange’s website (http://www.hkex.com.hk)
and the Company’s website (http://www.prime-success.com.hk). The interim report containing all
the information required by the Listing Rules will be dispatched to the shareholders and available on
the same websites in due course.

By Order of the Board
Prime Success International Group Limited
Chen Ying-Chieh
Chairman

Hong Kong, 12 September 2007

As at the date of this announcement, the Board comprises Mr. Chen Ying-Chieh, Mr. Chen Hsien
Min, Mr. Chang Chih-Kai being the executive directors and Mr. Hsiao Hsi-Ming, Mr. Huang Shun-
Tsai and Mr. Kuo Jung-Cheng being the independent non-executive directors.
14