Giordano International : ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED DECEMBER 31, 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

GIORDANO INTERNATIONAL LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 709)

ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED DECEMBER 31, 2019

Highlights

• Group sales in 2019 were HK$4,852 million (2018: HK$5,509 million), a decrease of 11.9%. Group comparable store sales and comparable store gross profit were down by 10.1% and 11.1%, respectively. The Sino-US trade dispute, the unseasonably warm winter and the social events in Hong Kong have adversely affected Group sales throughout the reporting period.
• Group gross margin was slightly down by 0.3 percentage points to 58.7%.
• If applying the previous accounting standard for direct comparison, the Company would have reported 2019 profit after income taxes attributable to shareholders of the Company ("PATS") of HK$289 million, which would have been 39.8% lower than in 2018. After the adoption of Hong Kong Financial Reporting Standard ("HKFRS") 16 applicable to the treatment of leases, the reported PATS was HK$230 million, a decrease of 52.1% from 2018, and due primarily to the decline in Group sales and an additional charge of HK$59 million on leases and non-cash accounting expenses of impairment of right-of-use assets. The Group has adopted HKFRS 16 for fiscal year commencing on January 1, 2019. As permitted under the transitional provisions in the standard, the Company has not restated PATS for the 2018 corresponding period using HKFRS 16.
• At year-end, the cash and bank balances, net of bank loans, was HK$994 million (2018: HK$1,017 million), a slight decrease of 2.3%.
• Inventory turnover on costs increased by 11 days to 100 days due to the decline in sales. System inventory remains healthy, having reduced the finished goods held by our vendors and China franchisees.
• Basic and diluted earnings per share were 14.6 HK cents (2018: 30.5 HK cents) and 14.6 HK
  cents (2018: 30.4 HK cents), respectively.
• The board of directors of the Company has recommended a final dividend of 4.4 HK cents per share (2018: 16.5 HK cents per share), making 14.6 HK cents per share for the year (2018: 33.5 HK cents per share).

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TABLE OF CONTENTS
Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		3
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . .	.	. 3. . . . .
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
Notes to the consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
Management Discussion and Analysis of Group Results of Operations and Financial Position . . . .		15
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		26
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		28
List of tables:
1.	Store portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		15
2.	Group results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		16
3.	Impact of the adoption of HKFRS 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	. 17. . . . . . . .
4.	Sales by channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	. 18. . . . . . .

5. Sales and operating profit contribution by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. . . .

6.	Analysis of change in PATS . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			20
7.	Greater China region . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			20
8.	Greater China region - by market . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			21
9.	The rest of Asia Pacific region . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. .	.21. . . . . .
10.	The rest of Asia Pacific region - by market	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			22
11.	The Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	.	.22.
12.	South Korea . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	.	23. . . . . . . .
13.	Store numbers of overseas franchisees . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	.	23. . . . . . . .
14.	System inventories . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	.	.25. . . . . .

2

The board of directors (the "Board") of Giordano International Limited (the "Company") presents the following audited annual results of the Company and its subsidiaries (the "Group") for the year ended December 31, 2019 along with comparative figures and explanatory notes..

Consolidated Income Statement
(In HK$ million, except earnings per share)	Note	2019	2018
Sales	2	4,852	5,509
Cost of sales	4	(2,006)	(2,259)
Gross profit		2,846	3,250
Other income and other gains, net	3	83	86
Distribution expense	4	(2,300)	(2,440)
Administrative expense	4	(232)	(271)
Operating profit	4	397	625
Finance expense	5	(55)	(5)
Share of profit of joint ventures		63	64
Profit before income taxes		405	684
Income taxes	6	(116)	(142)
Profit after income taxes for the year		289	542
Attributable to:
Shareholders of the Company		230	480
Non-controlling interests		59	62
		289	542
Earnings per share attributable to
shareholders of the Company	7
Basic (HK cents)		14.6	30..5
Diluted (HK cents)		14.6	30..4
Consolidated Statement of Comprehensive Income
(In HK$ million)		2019	2018
Profit after income taxes for the year		289	542
Other comprehensive income:
Items that may be reclassified to profit or loss
Fair value change on financial asset at
fair value through other comprehensive income		(1)	(10)
Exchange adjustments on translation of
overseas subsidiaries, joint ventures and branches		(6)	(65)
Total comprehensive income for the year		282	467
Attributable to:
Shareholders of the Company		217	414
Non-controlling interests		65	53
		282	467

3

Consolidated Balance Sheet
		As at 31 December
(In HK$ million)	Note	2019	2018
ASSETS
Non-current assets		171
Property, plant and equipment		207
Right-of-use assets		1,279	-
Investment properties		23	25
Goodwill		546	546
Interest in joint ventures		538	552
Financial asset at fair value through		5
other comprehensive income		6
Financial asset at fair value through profit or loss		28	28
Leasehold land and rental prepayments		5	134
Rental deposits		181	122
Deferred tax assets		54	47
		2,830	1,667
Current assets
	548
Inventories		552
Leasehold land and rental prepayments		6	62
Financial asset at fair value through profit or loss		200	-
Trade and other receivables	9	353	528
Cash and bank balances		1,259	1,315
		2,366	2,457
Total assets		5,196	4,124
EQUITY AND LIABILITIES
Capital and reserves		79
Share capital		79
Reserves		2,492	2,450
Proposed dividends	8	69	260
Equity attributable to shareholders of the Company		2,640	2,789
Non-controlling interests		207	220
Total equity		2,847	3,009
Non-current liabilities
	572
Lease liabilities		-
Deferred tax liabilities		125	123
		697	123
Current liabilities
	692
Trade and other payables	10	476
Lease liabilities		536	-
Put option liabilities		59	121
Bank loans		265	298
Income tax payables		100	97
		1,652	992
Total liabilities		2,349	1,115
Total equity and liabilities		5,196	4,124
Net current assets		714	1,465
Total assets less current liabilities		3,544	3,132

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Notes to the consolidated financial statements

1. Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRS") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities (the "Listing Rules") of the Stock Exchange and by the Hong Kong Companies Ordinance.. The consolidated financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities (including derivative instruments) measured at fair value..

1. Impact of new and amended standards
   The Group has applied the following new and amendments to HKFRS issued by the HKICPA which were effective for the Group's financial year beginning on or after January 1, 2019:
2. • HKFRS 16 Leases;
   • Amendments to HKFRS 9 Prepayment Features with Negative Compensation;
   • Amendments to Hong Kong Accounting Standards ("HKAS") 28 Long-term Interests in Associates and Joint Ventures;
   • Amendments to Annual Improvements to HKFRS Standards 2015-2017 Cycle;
   • Amendments to HKAS 19 Plan Amendment, Curtailment or Settlement; and
   • Hong Kong (IFRIC)-Interpretation 23 Uncertainty over Income Tax Treatments..

The Group had to change its accounting policies as a result of adoption HKFRS 16.. Changes in principal accounting policies are set out in Note 1(c) below.. The adoption of other above new effective interpretation and the amendments to existing standards did not result in substantial changes to the Group's accounting policies or financial results..

1. New and amended HKFRSs issued but not yet effective
   The Group has not early applied the new and amended standards and interpretations that have been issued but not yet effective.. The adoption of these are not expected to have a material impact on the financial results of the Group..
2. Change in principal accounting policies
   This Note explains the impact of the adoption of HKFRS 16 Leases on the Group's financial statements..

5

1. Basis of preparation (continued)

1. Change in principal accounting policy (continued)
   As indicated in Note 1(a) above, the Group has adopted HKFRS 16 Leases retrospectively from January 1, 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard.. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on January 1, 2019..
   On adoption of HKFRS 16, the Group recognized lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of HKAS 17 Leases.. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rates as of January 1, 2019.. The Group's incremental borrowing rates applied to the lease liabilities on January 1, 2019 ranged from 1..3% to 10..0%..
2. 1. Practical expedients applied
      In applying HKFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
   2. • applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
      • relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review - there were no onerous contracts as at January 1, 2019;
      • accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases;
      • excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
      • using hindsight in determining the lease term where the contract contains options to extend or terminate the lease..

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying HKAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease..

6

1. Basis of preparation (continued)

(c) Change in principal accounting policy (continued)

(ii) Measurement of lease liabilities

(In HK$ million)

Operating lease commitments disclosed
as at December 31, 2018	1,247
Discounted using the Group's incremental
borrowing rate of 1..3 - 10..0%	(104)
Less: Short-term leases recognized on
a straight-line basis as expenses	(180)
Add: Adjustments relating to changes in the lease payments	147
Lease liabilities recognized as at January 1, 2019	1,110
Of which are:
Current lease liabilities	391
Non-current lease liabilities	719
	1,110

1. Measurement of right-of-use assets
   The right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as at December 31, 2018..

7

1. Basis of preparation (continued)

1. Change in principal accounting policy (continued)
2. 1. Adjustments recognized in the balance sheet on January 1, 2019

	As at
	December 31,	Impact	As at
	2018	on initial	January 1,
	As originally	adoption of	2019
(In HK$ million)	presented	HKFRS 16	Restated
Consolidated Balance Sheet (extract)
Non-current assets
Property, plant and equipment	207	(7)	200
Right-of-use assets	-	1,374	1,374
Leasehold land and rental prepayments	134	(128)	6
Current assets
Leasehold land and rental prepayments	62	(53)	9
Trade and other receivables	528	(59)	469
Total assets*
4,124	1,127	5,251
Capital and reserves
Reserves	2,450	7	2,457
Total equity*
3,009	7	3,016
Non-current liabilities
Lease liabilities	-	719	719
Current liabilities
Trade and other payables	476	10	486
Lease liabilities	-	391	391
Total liabilities*
1,115	1,120	2,235
Total equity and liabilities*
4,124	1,127	5,251
Net current assets*
1,465	(513)	952
Total assets less current liabilities*
3,132	726	3,858

1. • The above table shows the impact on each individual line item.. Line items were not affected by the changes that have not been included..
2. Lessor accounting
   The Group did not need to make any adjustments to the accounting for assets held as lessor under operating leases as a result of the adoption of HKFRS 16..

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2. Operating segments

The Group determines its operating segments based on its development strategies and operational control.. There are two major operating segments: Retail and Distribution and Wholesales to Overseas Franchisees. . Management manages the Retail and Distribution operating segment geographically and by brand..

Geographically, the Retail and Distribution operating segment in Mainland China and the Middle East comprise directly operated stores ("DOS") and franchised stores.. Hong Kong and Macau, Taiwan and the rest of Asia Pacific do not have material local franchised stores.. Group stores span most of Asia Pacific and the Middle East..

As for brands, the Group presently operates Giordano and Giordano Junior, Giordano Ladies, BSX as well as other owned and licensed brands..

Adjusted EBITDA is profit before finance expense, income taxes, impairment of right-of-use assets and property, plant and equipment, depreciation and amortization, share of profit of joint ventures and unallocated corporate items.. Segment results are before finance expense, share of profit of joint ventures, income taxes and unallocated corporate items.. This is the measurement basis reported to management and the senior decision-makers for the purpose of resources allocation and assessment of segment performance..

Analysis of sales and operating profit of the Group's operating segment by geographic regions is as follows..

				2019
		Hong Kong		The rest	The	Wholesales
	Mainland	and		of Asia	Middle	to Overseas
(In HK$ million)	China	Macau	Taiwan	Pacific	East	Franchisees	Total
Sales	995	772	587	1,584	662	252	4,852
Adjusted EBITDA	72	201	119	465	231	35	1,123
Depreciation and amortization
- Right-of-use assets	(71)	(173)	(59)	(208)	(94)	-	(605)
- Property, plant and equipment
and investment properties	(18)	(12)	(15)	(38)	(14)	-	(97)
- Leasehold land prepayments	(1)	-	-	-	-	-	(1)
Impairment
- Right-of-use assets	(11)	(9)	-	(6)	-	-	(26)
- Property, plant and equipment	(4)	(2)	(1)	(4)	-	-	(11)
Segment results	(33)	5	44	209	123	35	383
Corporate functions							14
Finance expense							(55)
Share of profit of joint ventures							63
Profit before income taxes							405

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2. Operating segments (continued)

				2018
		Hong Kong		The rest	The	Wholesales
	Mainland	and		of Asia	Middle	to Overseas
(In HK$ million)	China	Macau	Taiwan	Pacific	East	Franchisees	Total
Sales	1,293	959	671	1,623	636	327	5,509
Adjusted EBITDA	111	126	83	273	102	49	744
Depreciation and amortization
- Property, plant and equipment
and investment properties	(21)	(13)	(17)	(40)	(16)	-	(107)
- Leasehold land prepayments	(1)	(5)	-	-	-	-	(6)
Segment results	89	108	66	233	86	49	631
Corporate functions							(6)
Finance expense							(5)
Share of profit of joint ventures							64
Profit before income taxes							684

Further analysis of the Retail and Distribution operating segment by brand is as follows..

	2019	2018
		Operating		Operating
(In HK$ million)	Sales	profit	Sales	profit
Retail and Distribution
Giordano and Giordano Junior	3,831	307	4,362	483
Giordano Ladies	395	34	452	72
BSX	101	(3)	137	6
Others	273	10	231	21
	4,600	348	5,182	582

The Company has its domicile in Hong Kong.. Sales to external customers recorded in Hong Kong and Macau (including retail and wholesale sales) are HK$1,024 million (2018: HK$1,286 million), Mainland China HK$995 million (2018: HK$1,293 million) and external customers from other markets HK$2,833 million (2018: HK$2,930 million)..

Inter-segment sales of HK$1,160 million (2018: HK$1,208 million) have been eliminated upon consolidation..

Income taxes charged relating to Mainland China was HK$5 million (2018: HK$18 million),

Hong Kong and Macau HK$3 million (2018: HK$11 million), Taiwan HK$10 million (2018:

HK$12 million), the rest of Asia Pacific HK$60 million (2018: HK$67 million) and the Middle

East HK$9 million (2018: HK$6 million)..

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2. Operating segments (continued)

Analysis of the Group's assets by geographic regions is as follows..

	Segment assets
(In HK$ million)	2019	2018
Segment assets
Hong Kong and Macau	1,174	973
The Middle East	1,044	832
The rest of Asia Pacific	1,159	750
Mainland China	704	740
Taiwan	290	196
	4,371	3,491
Interest in joint ventures	538	552
Financial asset at fair value through
other comprehensive income	5	6
Financial asset at fair value through profit or loss	228	28
Deferred tax assets	54	47
Total assets	5,196	4,124

The total of non-current assets other than financial instruments and deferred tax assets located in Hong Kong and Macau was HK$477 million (2018: HK$167 million); Mainland China, HK$176 million (2018: HK$66 million); and other markets, HK$2,090 million (2018: HK$1,353 million)..

3. Other income and other gains, net
	(In HK$ million)	2019	2018
	Royalty income	31	31
	Interest income	21	20
	Rental and sub-lease rental income	12	13
	Net exchange gain	5	1
	Dividend income	3	3
	Net loss on disposal of property, plant and equipment	(1)	(2)
	Fair value loss on financial asset at fair value
	through profit or loss	(1)	-
	Others	13	20
		83	86

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4.		Operating profit
		Operating profit is after charging:
			(In HK$ million)	2019	2018
			Cost of sales
			Cost of inventories sold	2,000	2,250
			Provision for obsolete stock and stock written off	6	9
						2,006	2,259
			Distribution expense
			Staff cost	763	811
			Depreciation expenses
			- Right-of-use assets	589	-
			- Property, plant and equipment	90	100
			Operating lease rentals in respect of land and building
			- Minimum lease payments	183	808
			- Contingent rent	189	237
			Building management fee, government rent and rates
			and utilities	122	132
			Advertising, promotion and incentives	107	129
			Packaging and deliveries	58	56
			Bank and credit card charges	33	35
			Impairment
			- Right-of-use assets	26	-
			- Property, plant and equipment	11	-
			Amortization of leasehold land prepayments	1	6
			Others	128	126
						2,300	2,440
			Administrative expense
			Staff cost	145	157
			Depreciation expenses
			- Right-of-use assets	16	-
			- Property, plant and equipment and investment properties	7	7
			Legal and professional fee	15	40
			Auditor's remuneration	6	7
			Computer and telecommunication	6	7
			Travelling	4	5
			Operating lease rentals in respect of land and building
			- Minimum lease payments	3	17
			Business and other taxes	1	1
			Others	29	30
						232	271
5.	Finance expense
			(In HK$ million)	2019	2018
			Interest on lease liabilities	49	-
			Interest on bank loans	6	5
						55	5

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6. Income taxes

Hong Kong profits tax is calculated at the rate of 16..5% (2018: 16..5%) on the estimated assessable profits for the year.. Income taxes on profits assessable outside Hong Kong are calculated at the rates applicable in the respective jurisdictions..

(In HK$ million)	2019	2018
Current income taxes	15
Hong Kong	20
Outside Hong Kong	70	87
Over provision in prior years	(1)	(3)
Withholding taxes	34	33
Deferred income taxes	118	137
(2)
Origination and reversal of temporary differences	5
	116	142

This charge excludes the share of joint ventures' income taxes of HK$20 million (2018: HK$19 million) for the year.. The share of profit of joint ventures in the consolidated income statement is after income taxes accrued in the appropriate income tax jurisdictions..

1. Earnings per share
   The calculations of basic and diluted earnings per share are based on the profit after income taxes attributable to shareholders of the Company for the year of HK$230 million (2018: HK$480 million)..
   The basic earnings per share is based on the weighted average of 1,578,500,518 shares (2018: 1,575,281,071 shares) in issue during the year..
   Diluted earnings per share for the year ended December 31, 2019 was the same as the basic earnings per share since the share options had anti-dilutive effect..
   The diluted earnings per share is calculated by adjusting the weighted average of 1,575,281,071 shares in issue during the year ended December 31, 2018 by the weighted average of 2,922,810 shares deemed to be issued if all outstanding share options granted under the share option schemes of the Company had been exercised..
2. Dividends

(In HK$ million)	2019	2018
Interim dividend declared and paid of 10..2 HK cents	161
per share (2018: 17..0 HK cents per share)	268
Final dividend proposed after the balance sheet date of	69
4..4 HK cents per share (2018: 16..5 HK cents per share)	260
	230	528

On March 10, 2020, the Board has recommended a final dividend of 4..4 HK cents per share and is subject to the approval of the Company's shareholders at the forthcoming annual general meeting.. The proposed dividend has not been recognized as a liability at the balance sheet date.. The amount of proposed dividend was based on the shares of the Company in issue as at the reporting date..

13

9. Trade and other receivables
	(In HK$ million)	2019	2018
	Trade receivables	239	330
	Less: Loss allowance	(27)	(14)
	Trade receivables, net	212	316
	Ageing analysis from the invoice date net of
	loss allowance is as follows:
	0 - 30 days	165	203
	31 - 60 days	31	66
	61 - 90 days	13	28
	Over 90 days	3	19
		212	316
	Other receivables, including deposits and prepayments	141	212
		353	528

Trade receivables mainly comprise amounts due from franchisees, licensees and retail proceeds due from department stores.. The Group normally allows a credit period of 30 - 90 days.. The carrying amounts of trade and other receivables are stated approximately at their fair values..

10. Trade and other payables
	(In HK$ million)	2019	2018
	Trade payables	139	124
	The ageing analysis of trade payables is as follows:
	0 - 30 days	111	93
	31 - 60 days	15	17
	61 - 90 days	1	4
	Over 90 days	12	10
		139	124
	Other payables and accrued expense	553	352
		692	476

The carrying amounts of trade payables and other payables are stated approximately at their fair values..

14

MANAGEMENT DISCUSSION AND ANALYSIS

OF GROUP RESULTS OF OPERATIONS AND FINANCIAL POSITION

The following commentaries refer to the year-on-year ("YOY") comparison of the Group for the years ended December 31, 2019, and 2018 unless otherwise indicated..

OVERVIEW

■

■

The Group is an international apparel retailer with a portfolio of brands, including Giordano and Giordano Junior, Giordano Ladies, BSX, as well as other owned and licensed brands..

We offer high-quality,value-for-money and easy-to-wear apparel through a network of 2,375 stores (or 2,280,000 sq.. ft.. of retail floor space) as of December 31, 2019, of which 1,274 were standalone stores.. The majority of the stores were in Greater China, South Korea, Southeast Asia and the Middle East.. We manage our stores by geographic regions and by distribution channels, as shown in Table 1..

• Group sales1 for the year were HK$4,852 million at a gross margin of 58..7%.. The Group's comparable store sales ("Group CSS")2 and comparable store gross profit ("Group CSGP")2 were down by 10..1% and 11..1%, respectively.. Table 2 provides details of significant markets..
• PATS was HK$230 million, a decrease of 52. .1% from 2018. . If applying the previous accounting standard for leases, the Group would have reported 2019 PATS of HK$289 million, or 39..8% lower than 2018.. Table 3 below shows the impact of adoption of HKFRS 16 for the year ended December 31, 2019, as compared to HKAS 17..
• Cash and bank balances, net of bank loan, were HK$994 million on December 31, 2019..

Table 1: Store portfolio
			Retail floor space
	Store numbers		(sq. ft. in thousands)
	at December 31		at December 31
	2019	2018	2019	2018
Retail and Distribution
Mainland China
Franchised stores	641	639	475	493
DOS	261	298	218	250
The rest of Asia Pacific	597	606	633	634
Taiwan	197	200	195	198
The Middle East
Franchised stores	35	39	33	38
DOS	146	143	179	176
Hong Kong and Macau	73	76	88	87
Overseas franchisees	425	425	459	454
Total	2,375	2,426	2,280	2,330

15

RESULTS OF OPERATIONS

Table 2: Group results of operations

			As published			For reference only
		2019		2018			2019
		Reported		Reported			Reported
		under		under			under
(In HK$ million)	HKFRS 16*	% to sales	HKAS 17*	% to sales	Change	HKAS 17*	Change
The rest of Asia Pacific	1,584	32.7%	1,623	29..5%	(2.4%)	1,584	(2.4%)
Mainland China	995	20.5%	1,293	23..5%	(23.0%)	995	(23.0%)
Hong Kong and Macau	772	15.9%	959	17..4%	(19.5%)	772	(19.5%)
The Middle East	662	13.6%	636	11..5%	4.1%	662	4.1%
Taiwan	587	12.1%	671	12..2%	(12.5%)	587	(12.5%)
Wholesale sales to overseas
franchisees	252	5.2%	327	5..9%	(22.9%)	252	(22.9%)
Group sales	4,852	100.0%	5,509	100..0%	(11.9%)	4,852	(11.9%)
Gross profit	2,846	58.7%	3,250	59..0%	(12.4%)	2,846	(12.4%)
Operating expense	(2,532)	(52.2%)	(2,711)	(49..2%)	(6.6%)	(2,521)	(7.0%)
Operating profit	397	8.2%	625	11..3%	(36.5%)	408	(34.7%)
Finance expense	(55)	(1.1%)	(5)	(0..1%)	1,000.0%	(6)	20.0%
EBITDA	1,183	24.4%	821	14..9%	44.1%	594	(27.6%)
PATS	230	4.7%	480	8..7%	(52.1%)	289	(39.8%)
Global brand sales3	6,166		6,778		(9.0%)
Global brand gross profit3	3,745		4,168		(10.1%)
Group CSS growth	(10.1%)		(0..1%)
Group CSGP growth	(11.1%)		(1..4%)
Net cash and bank balances
at year end	994		1,017		(2.3%)
Inventories at year end	548		552		(0.7%)
Inventory turnover on costs
("ITOC") (days)4	100		89		11

• Following the adoption of HKFRS 16 on January 1, 2019, the Group's statutory results for the year ended December 31, 2019 are on a HKFRS 16 basis ("Reported under HKFRS 16"), whereas the statutory results for the corresponding year ended December 31, 2018 are on a HKAS 17 basis ("Reported under HKAS 17") as previously reported.. Hence, any comparison between the two bases of reporting would not be meaningful.. The Group believes that the HKAS 17 based report, which is not intended to be a substitute for, or superior to, Reported under HKFRS 16, allows a like-with-like comparison with the prior year results.. As a result, the Group has provided, for reference only, an alternative presentation of the Group's financial performance prepared as if Reported under HKAS 17 relating to the accounting for leases for the year 2019..

16

Table 3: Impact of the adoption of HKFRS 16

(In HK$ million)

Operating lease rentals in respect of land and building	598
Depreciation expenses - right-of-use assets	(589)
Impairment of right-of-use assets	(26)
Amortization of leasehold land prepayments	5
Others	3
IMPACT ON DISTRIBUTION EXPENSE	(9)
Operating lease rentals in respect of land and building	14
Depreciation expenses - right-of-use assets	(16)
IMPACT ON ADMINISTRATIVE EXPENSE	(2)
FINANCE EXPENSE	(49)
INCOME TAXES	(6)
NON-CONTROLLING INTERESTS	7
PATS	(59)

Sales and gross profit

Group sales decreased by 11..9%, or by 11..1% if translated at constant exchange rates..Multiple macro factors, such as the Sino-US trade dispute, regional social events, and unseasonably warm winter, affected the retail environment and consumer sentiment.. The impact was particularly significant to our sales in Mainland China and Hong Kong..

The Group's e-commerce generated HK$267 million in sales revenue, representing a decrease of 15..0%.. The decline was primarily due to the unsatisfactory performance of our Mainland China e-business, which endured ferocious competition on established third-party platforms in China.. E-commerce in other regions recorded strong growth.. For instance, Hong Kong enjoyed substantial growth as we kick-started our cooperation with some local third-party platforms such as HKTV Mall.. Management is determined to further develop our e-commerce business in all regions by improving the product mix and collaboration with emerging online platforms..

Sales from physical stores fell by 9..6%.. Wholesales to franchisees declined by 24..2%, partly due to the tightening of our credit policy in light of weakening economic conditions.. That said, the Group will continue to deploy more resources to expand our wholesale businesses in developing markets.. In the second half of the year, we opened four stores in Mauritius on a franchise basis.. Management expects store openings in India and Kenya in 2020..

Core Giordano lines contributed to 87..3% of global brand sales.. All lines experienced different levels of sales decrease amidst turbulent macroeconomic conditions, although our Middle East and Indonesia businesses recorded YOY sales growth, making them our critical markets for business expansion in the immediate future..

17

Table 4: Sales by channels
(In HK$ million)	2019	Contribution	2018	Contribution	Change
Physical stores	4,013	82.7%	4,440	80..6%	(9..6%)
E-business	267	5.5%	314	5..7%	(15..0%)
Retail sales	4,280	88.2%	4,754	86..3%	(10..0%)
Wholesale sales to franchisees	572	11.8%	755	13..7%	(24..2%)
Group sales	4,852	100.0%	5,509	100..0%	(11..9%)

With carefully calibrated pricing tactics and disciplined merchandising, the Group managed to defend the adverse effect on profit margin, suffering only a marginal drop YOY in the face of intense price competition and discounting in various markets.. On the back of healthy inventory levels, the Group was able to minimize the number of promotional offers, resulting in a minor decrease in gross margin.. Group gross profit slid by 12..4%, driven mainly by a decline in volume and a small reduction in the average selling price.. The average product cost increased because of the change in product mix..

Other income and other gains, net

Other income and other gains, which comprise royalty income, licensing revenue, interest income, rental and sub-lease rental income, and exchange difference, decreased by HK$3 million to HK$83 million in 2019.. Our licensing business in the timepiece and eyewear categories recorded a small YOY growth.. Management continues expanding our licensing business, both in terms of product categories, geographical reach and overall performance..

Operating expense and operating profit

The operating expense to sales ratio was up to 52..2% (2018: 49..2%), primarily due to a decrease in sales and despite a significant reduction of operating expenses.. Before the adoption of HKFRS 16, both shop occupancy charges and staff cost decreased by 6..5% and 6..1% YOY, respectively, attributable to our stringent cost control measures..

The Group also recognized the non-cash operating expense of impairment of right-of-use assets and property, plant and equipment of HK$37 million.. Although operating expenses shrunk by HK$179 million, or 6..6%, it was not enough to maintain the same operating expense ratio as last year.. The reduction was also insufficient to outweigh the negative impact of the decline in gross profit, resulting in a decrease in operating profit of 36..5% to HK$397 million..

18

Table 5: Sales and operating profit contribution by region
	Contribution by region
		Operating
For the year ended December 31, 2019	Sales	profit
The rest of Asia Pacific	32.7%	52.6%
Mainland China	20.5%	(8.2%)
Hong Kong and Macau	15.9%	1.2%
The Middle East	13.6%	31.0%
Taiwan	12.1%	11.1%
Wholesale sales to overseas franchisees	5.2%	8.8%
Wholesale sales to overseas subsidiaries	-	13.5%
Headquarter expense, net of other income and gains	-	(10.0%)
	100.0%	100.0%

Finance expense

Finance expense was HK$55 million (2018: HK$5 million), which comprised of bank interest expense and interest on lease liabilities.. Please note that the interest on lease liabilities of HK$49 million was due to the adoption of HKFRS 16, under which the Group (as lessee in numerous tenancy agreements) recognizes the imputed interest expense accrued on the outstanding balance of the lease liabilities.. If excluding the impact of HKFRS 16, the expense would have been HK$6 million..

EBITDA

EBITDA was HK$1,183 million (2018: HK$821 million), an improvement of 44..1%, due to the adoption of HKFRS 16.. Under HKFRS 16, depreciation on the right-of-use assets and imputed interest expense on lease liabilities replace the operating lease expense previously recorded in the consolidated income statement.. If not for the impact of HKFRS 16, the EBITDA would have decreased by 27..6 %..

Income taxes

Income taxes amounted to HK$116 million (2018: HK$142 million), representing an effective tax

rate of 28..6% (2018: 20..8%).. If excluding the impact on the adoption of HKFRS 16, the effective tax rate would be 23..7%.. The increase is mainly due to a change in the distribution of profits and losses suffered by the Group's entities operating in various locations..

Profit after income taxes attributable to shareholders of the Company

PATS decreased by 52..1%, as shown in Table 6.. Net margin was 4..7%, a decrease of 4..0 percentage points, but would have been down by 2..7 percentage points if excluding the impact of HKFRS 16.. The preceding commentaries cite the reasons..

19

Table 6: Analysis of change in PATS

(In HK$ million)

Reported 2018 PATS	480
The Middle East	37
South Korea	3
The rest of Asia Pacific	(27)
Wholesale sales to overseas franchisees/subsidiaries	(30)
Greater China	(247)
Income taxes, non-controlling interests,
finance expense and headquarter expense	15
2019 PATS without currency translation difference	231
Currency translation difference	(1)
Reported 2019 PATS	230

ANALYSIS BY MARKET

The following comments are in local currencies or if in HK$, are at constant exchange rates to remove distortions from the translation of financial statements.. These figures have not removed the impact on imported product costs contracted at non-local currencies..

Greater China

Table 7: Greater China region

			As published			For reference only
		2019		2018			2019
		Reported		Reported			Reported
(In HK$ million, translated	under		under			under
at constant exchange rates)	HKFRS 16	% to sales	HKAS 17	% to sales	Change	HKAS 17	Change
Total sales	2,410	100.0%	2,923	100..0%	(17.6%)	2,410	(17.6%)
Gross profit	1,403	58.2%	1,753	60..0%	(20.0%)	1,403	(20.0%)
Operating expense	(1,406)	(58.3%)	(1,514)	(51..8%)	(7.1%)	(1,381)	(8.8%)
Operating profit	16	0.7%	263	9..0%	(93.9%)	40	(84.8%)
Finance expense	(17)	(0.7%)	-	-	N/A	-	N/A
Profit before income tax	-	0.0%	263	9..0%	(100.0%)	40	(84.8%)
CSS growth	(14.6%)		0..8%
CSGP growth	(16.4%)		0..1%
Stores at year end	1,172		1,213		(41)

20

A combination of factors has significantly affected our Greater China business, especially in Mainland China and Hong Kong.. While the Sino-US trade dispute curtailed economic growth, unseasonably warm weather also drastically hampered the sales of our heavy jackets.. Retail sales in Hong Kong plummeted due to protracted social events in the second half of 2019.. China's ban on solo travel to Taiwan negatively affected the local tourism business.. In the long term, however, e-commerce and franchising will continue to be our two main business drivers for Greater China.. The Group will continue to allocate more resources towards our online channels, which have partially cushioned the negative impact on physical stores due to the macro-environment..

Table 8: Greater China region - by market

		Sales		CSS growth	CSGP growth	Stores at year end
(In HK$ million, translated
at constant exchange rates)	2019	2018	Change	2019	2018	2019	2018	2019	2018
Mainland China	1,038	1,293	(19.7%)	(15.1%)	(0..9%)	(19.5%)	(2..5%)	902	937
Hong Kong and Macau	772	959	(19.5%)	(16.1%)	3..1%	(16.5%)	1..9%	73	76
Taiwan	600	671	(10.6%)	(11.3%)	1..2%	(11.1%)	1..7%	197	200
Total	2,410	2,923	(17.6%)	(14.6%)	0..8%	(16.4%)	0..1%	1,172	1,213

The rest of Asia Pacific

Table 9: The rest of Asia Pacific region

			As published			For reference only
		2019		2018			2019
		Reported		Reported			Reported
(In HK$ million, translated	under		under			under
at constant exchange rates)	HKFRS 16	% to sales	HKAS 17	% to sales	Change	HKAS 17	Change
Total sales	1,575	100.0%	1,623	100..0%	(3.0%)	1,575	(3.0%)
Gross profit	932	59.2%	968	59..6%	(3.7%)	932	(3.7%)
Operating expense	(737)	(46.8%)	(744)	(45..8%)	(0.9%)	(744)	Flat
Operating profit	206	13.1%	233	14..4%	(11.6%)	199	(14.6%)
Finance expense	(23)	(1.5%)	-	-	N/A	-	N/A
Profit before income tax	184	11.7%	233	14..4%	(21.0%)	199	(14.6%)
CSS growth	(7.2%)		0..3%
CSGP growth	(6.9%)		(0..2%)
Stores at year end	597		606		(9)

21

The repercussion of the Sino-US trade dispute also affected our businesses in the Southeast Asia region, especially in Singapore and Malaysia.. Indonesia continued to record a growth in overall CSS and CSGP, mainly attributable to the satisfactory performance of our non-Giordano brands..

Table 10: The rest of Asia Pacific region - by market

		Sales		CSS growth	CSGP growth	Stores at year end
(In HK$ million, translated at
constant exchange rates)	2019	2018	Change	2019	2018	2019	2018	2019	2018
Indonesia	625	585	6.8%	(3.0%)	3..6%	(1.9%)	0..8%	238	249
Thailand	345	360	(4.2%)	(6.9%)	1..1%	(5.4%)	2..7%	172	169
Singapore	274	312	(12.2%)	(10.2%)	(2..2%)	(10.9%)	(4..3%)	42	43
Malaysia	182	201	(9.5%)	(13.7%)	(5..2%)	(14.3%)	(1..7%)	95	93
Vietnam	90	89	1.1%	(3.7%)	N/A	(3.5%)	N/A	41	39
Australia	48	65	(26.2%)	3.3%	11..4%	(1.0%)	9..4%	7	11
Cambodia	11	11	Flat	N/A	(8..2%)	N/A	(8..4%)	2	2
Total	1,575	1,623	(3.0%)	(7.2%)	0..3%	(6.9%)	(0..2%)	597	606

The Middle East

Table 11: The Middle East

		As published			For reference only
	2019		2018			2019
	Reported		Reported			Reported
(In HK$ million, translated at	under		under			under
constant exchange rates)	HKFRS 16	% to sales	HKAS 17	% to sales	Change	HKAS 17	Change
Total sales	662	100.0%	636	100..0%	4.1%	662	4.1%
Gross profit	428	64.7%	393	61..8%	8.9%	428	8.9%
Operating expense	(307)	(46.4%)	(307)	(48..3%)	Flat	(313)	2.0%
Operating profit	123	18.6%	86	13..5%	43.0%	118	37.2%
Finance expense	(10)	(1.5%)	-	-	N/A	-	N/A
Profit before income tax	114	17.2%	86	13..5%	32.6%	118	37.2%
CSS growth	4.5%		(5..0%)
CSGP growth	3.6%		(11..0%)
Stores at year end	181		182		(1)

22

The Group successfully turned around the Middle East business, with operating profit up by 43%.. The turnaround was due to the improved merchandising mix and disciplined inventory management, leading to fewer promotional activities.. Alternative supply sources also helped reduce the average product cost.. The positive momentum in the Middle East will continue by further strengthening through heightened marketing efforts..

South Korea (a 48.5% joint venture under an independent management team)

Table 12: South Korea
(In Korean Won million)	2019	% to sales	2018	% to sales	Change
Total sales	205,138	100.0%	205,582	100..0%	(0.2%)
Gross profit	118,482	57.8%	122,073	59..4%	(2.9%)
Net profit	19,394	9.5%	18,532	9..0%	4.7%
Share of profit	9,406		8,988		4.7%
CSS growth	2.3%		(1..6%)
CSGP growth	0.9%		0..5%
Stores at year end	175		186		(11)

South Korea reported a small growth in CSS and CSGP, with net profit increase due to improved cost control and closure of non-performing stores..

Wholesale sales to overseas franchisees

Table 13: Store numbers of overseas franchisees

		At December 31
By market	2019		2018
South Korea	175		186
Southeast Asia	229		224
Other markets	21		15
Total stores	425		425

Wholesales to overseas franchisees decreased by 22..9% to HK$252 million (2018: HK$327 million).. Uncertainties in the global economy have affected the sales of our franchisees in various regions, which in turn have affected our wholesales performance.. The tightening of our credit policy towards franchisees has also led to lower wholesale sales for the sake of our long term financial position.. Management continued persevered in expanding the franchise and wholesale footprint outside of our core markets.. For instance, our franchise in Mauritius opened four stores in the second half of the year.. Though initially small, these newly developed markets will pay off in the medium to long run..

23

FINANCIAL POSITION

Liquidity and financial resources

Despite the sales decline during the year, the Group's financial position remains strong.. On December 31, 2019, the cash and bank balance net of bank loans was HK$994 million (2018: HK$1,017 million), representing a slight decrease of 2..3%.. The four primary sources and uses of the cash and bank balances, net of bank loans, are (i) HK$1,068 million cash inflow from operating activities; (ii) HK$76 million investment in capital expenditure; (iii) HK$473 million dividend payment to shareholders and non-controlling interests; and (iv) HK$507 million payment for principal elements of lease payments..

The short-term bank borrowings amounted to HK$265 million (2018: HK$298 million) and was a financial instrument designed to leverage interest rate differentials among banks in the region for yield enhancement.. The Group's gearing ratio, defined as the ratio of total borrowings less cash and bank balances to equity attributable to owners of the Company, was -0..4 (2018: -0..4).. As of December 31, 2019, the Group's current ratio was 1..4 (2018: 2..5)..

Property, plant and equipment

During the year, our capital expenditure was HK$76 million (2018: HK$84 million), mainly incurred to upgrade our stores.. Management will continue to invest in our shop ambience to strengthen our brand image, especially in Hong Kong and Macau..

Goodwill and put option liability

The goodwill and put option liability stems from the acquisition of the Middle East operations in the years of 2012 and 2015.. We have carried out annual impairment tests and concluded that there was no impairment to goodwill in the 2019 financial year..

During the year, the Group has entered into agreements with the non-controlling shareholders of Giordano Fashions L..L..C.. ("Giordano UAE"), Giordano Fashions Co.. W..L..L ("Giordano KW") and GIO Fashions W..L..L.. ("Giordano QA") to acquire the remaining interests in these companies.. The associated put option liabilities of HK$62 million recognized previously lapsed accordingly..

Interests in joint ventures

Interest in joint ventures comprises a 48..5% interest in the South Korea joint venture.. The change in HK$14 million during the year derives from our share of profit in the sum of HK$63 million, offset by dividends received and currency translation difference..

24

Inventories

Group inventories on December 31, 2019, were HK$548 million (2018: HK$552 million).. ITOC increased by 11 days to 100 days.. The increase in ITOC is primarily due to a decline in sales and the early receipt of Chinese New Year orders..

Inventories at suppliers and franchisees are not our legal liabilities.. Despite this, the Group responsibly tracks their levels to ensure that we do not build up excessive "off-balance sheet" inventories.. An increase in inventories in South Korea was to meet the recent sales.. Stocks held by franchisees in Mainland China decreased significantly due to effective inventory management.. Finished goods at suppliers significantly dropped by 55..6%.. Our system inventories had reduced by 5..0% YOY..

Table 14: System inventories
		At December 31
(In HK$ million)	2019		2018
Inventories held by the Group	548		552
Inventories held by 48..5% South Korea joint venture	196		200
Inventories held by franchisees in Mainland China	73		94
Finished goods at suppliers (not yet shipped)	12		27
Total system inventories	829		873

Trade receivables and payables

The Group monitors the recoverability of trade receivables to mitigate bad debt risks.. Trade receivable turnover days for the year ended December 31, 2019, were 45 days, a decrease of 14 days as compared to last year.. The reduction stems from the tightening of our credit policy to third parties.. Trade payable turnover days increased by 5 days to 25 days during the year.. The result is in line with the credit period granted by our suppliers, but also demonstrates the Group's good faith in assisting our suppliers' cash flow situation..

Pledge of assets

The Group didn't pledge any assets as of December 31, 2019, and 2018..

25

Contingent liabilities

There were no contingent liabilities as of December 31, 2019, and 2018..

Foreign exchange risk

The Group faces foreign exchange risk mainly arising from purchases from a Renminbi-based supply chain and sales proceeds in local currencies of the relevant Group entities.. Foreign exchange risk arising from recognized assets and liabilities is insignificant.. The Group promptly settles balances denominated in currencies other than the functional currency of the relevant Group entity, leaving minimal outstanding foreign currency position at the balance sheet date.. Management monitors foreign exchange risks of the Group regularly.. The Group does not employ financial instruments for hedging purposes.. The Group may use forward foreign exchange contracts if it anticipates fluctuations in the relevant foreign currencies..

Dividends

The Company has adopted a dividend policy on November 8, 2018 (the "Dividend Policy").. The Dividend Policy aims to return surplus cash to its shareholders through the payment of dividends and share repurchase.. In line with the Dividend Policy, the Company has been paying a substantial portion of its earnings as an ordinary dividend, the amount of which may vary depending on cash on hand, future investment requirements and working capital considerations..

Having considered the economic outlook, the Group's financial position, its future expansion plans and other factors, the Board has thus recommended a final dividend of 4..4 HK cents per share (2018: 16..5 HK cents per share) for the year ended December 31, 2019.. Together with the interim dividend of 10..2 HK cents per share (2018: 17..0 HK cents per share) paid on September 20, 2019, total 2019 dividend would amount to 14..6 HK cents per share (2018: 33..5 HK cents per share), representing a payout of 100% of 2019 earnings per share (2018: 110%).. Subject to the approval of our shareholders at the forthcoming annual general meeting of the Company, the final dividend will be payable on Friday, June 19, 2020, to shareholders whose names appear on the register of members of the Company on Thursday, June 4, 2020..

OUTLOOK

The spreading of the COVID-19 epidemic at the beginning of the year will undermine regional retail businesses in the first half, especially in China and Hong Kong.. The outbreak's proximity to the traditional Lunar New Year buying spree exacerbated its negative impact on the Group's annual performance.. We expect the new coronavirus infection to continue to affect our business significantly in the first quarter of the year.. The remnant issues of 2019, such as Sino-US trade disputes and regional social events, are still material in affecting the outlook for 2020..

26

Nevertheless, with a secure brand positioning and quality merchandise, Management is confident of overcoming the challenges ahead.. Management will further strengthen the Group's financial position through a combination of strategies and actions.. In terms of cash flow management, Management targets to reduce accounts receivable by retrieving overdue debts and tightening our credit policy.. On inventory management, the Group has been diverting ready garments between regions, while Management has either cut or postponed purchases to avoid inventory glut.. Stringent cost control is also critical for long term sustainability.. Thus Management and regional heads will aggressively hunt for rental reductions and concessions as well as reduce other overhead costs..

The Group will take a more cautious approach in Mainland China and Hong Kong.. In contrast, Management is prepared to adopt a more aggressive approach towards overseas markets, especially in the Middle East and the developing regions in the Southeast Asia regions, such as Indonesia and Vietnam..

Geographically, the Group will seize opportunities for store expansion in developing countries.. The Group made significant progress in search of compatible franchise partners in recent years.. On top of Mongolia, South Africa and France, we have now secured new franchises in Mauritius and in Continental Africa and India..

On e-commerce, Management will expedite the development in our existing markets by partnering with established online channels.. The cooperation with local third party e-platforms has proven to be a success in the past..

Talent management will remain an essential aspect of our business strategy.. The restructured Fast- Track Management Scheme paid off as graduates now shine in respective executive positions.. Management will devise various job rotations to expose graduates to all disciplines of business operations, paving the way for their promotion to management roles with greater exposure and responsibility..

Crisis creates opportunities.. In the face of numerous obstacles in 2020, Management will take a decisive and positive approach to rejuvenate our operations to create more value for our shareholders.. With a robust financial position and cost control measures in place, Management believes that the Group will persevere and weather the storm..

27

OTHER INFORMATION

Human Resources

At December 31, 2019, the Group had approximately 7,900 employees (December 31, 2018: 8,200).. The Group offers competitive remuneration packages and generous, goal-oriented bonuses targeted to different levels of staff.. We offer senior managers performance-based bonus schemes and share options to reward and retain a high calibre leadership team.. We also invest heavily in training in sales and customer service, management, planning and leadership development to retain a skilled and motivated workforce..

Annual General Meeting

The annual general meeting of the Company is scheduled to be held on Friday, May 22, 2020 (the "2020 AGM").. A notice convening the 2020 AGM, which constitutes part of the circular to shareholders, will be sent to the shareholders together with the 2019 annual report of the Company.. The notice of the 2020 AGM and the proxy form will also be available on the websites of the Company and Hong Kong Exchange and Clearing Limited..

Closure of Register of Members

Annual General Meeting

For determining the entitlement to attend and vote at the 2020 AGM, the register of members of the Company will be closed from Monday, May 18, 2020 to Friday, May 22, 2020 (both days inclusive), during which period no share transfers will be registered.. In order to be eligible to attend and vote at the 2020 AGM, all completed transfer documents accompanied by the relevant share certificates must be lodged with the Company's Hong Kong branch share registrar, Tricor Abacus Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p..m.. on Friday, May 15, 2020..

Final Dividend

For determining the entitlement to the proposed final dividend, the register of members of the Company will be closed from Tuesday, June 2, 2020 to Thursday, June 4, 2020 (both days inclusive), during which period no transfer of shares will be registered.. In order to qualify for the proposed final dividend, all completed transfer documents accompanied by the relevant share certificates must be lodged with the Company's Hong Kong branch share registrar, Tricor Abacus Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p..m.. on Monday, June 1, 2020..

28

Corporate Governance Code

During the year ended December 31, 2019, the Company has complied with all applicable code provisions under the Corporate Governance Code as set out in Appendix 14 to the Listing Rules, except for the following deviations:

Code provision A.2.1

Code provision A..2..1 provides that the roles of the chairman and the chief executive should be separate and should not be performed by the same individual..

Currently, Dr.. LAU Kwok Kuen, Peter holds the positions of Chairman and Chief Executive.. In view of Dr.. LAU's extensive experience in the industry and deep understanding of the Group's businesses, the Board believes that vesting the roles of both Chairman and Chief Executive in Dr.. LAU provides the Group with strong leadership, allowing for more effective planning and execution of long-term business strategies and enhances efficiency in decision-making.. The Board also believes that the Company already has a strong corporate governance structure appropriate for its circumstances in place to ensure effective oversight of Management..

Code provision A.4.2

Code provision A..4..2 provides that every director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years..

According to the bye-laws of the Company, one-third of the Directors, with the exception of Chairman or Managing Director, shall retire from office by rotation at each annual general meeting.. In the opinion of the Board, stability and continuation are key factors to the successful implementation of business plans.. The Board believes that it is beneficial to the Group that there is continuity in the role of the Chairman and, therefore, the Board is of the view that the Chairman should be exempt from this arrangement at the present time..

Securities Transactions by Directors

The Company has adopted its own Code of Conduct for Securities Transactions by Directors (the "Code of Conduct for Securities Transactions").. This is on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Listing Rules, and has been updated from time-to-time.. Having made specific enquiries to all Directors, all Directors confirmed that they had complied with the required standards set out in the Model Code and the Code of Conduct for Securities Transactions throughout the year ended December 31, 2019..

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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 year ended December 31, 2019..

Review of Financial Information

The Group's audited consolidated financial statements for the year ended December 31, 2019 including the accounting principles and practices adopted have been reviewed by the Audit Committee in conjunction with the Company's external auditor..

The figures in respect of the Group's consolidated statement of comprehensive income, the consolidated balance sheet and the related notes thereto for the year ended December 31, 2019 as set out in the preliminary announcement have been agreed by the Company's external auditor, PricewaterhouseCoopers, to the amounts set out in the Group's audited consolidated financial statements for the year.. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the HKICPA and consequently no assurance has been expressed by PricewaterhouseCoopers on the preliminary announcement..

By Order of the Board

LAU Kwok Kuen, Peter

Chairman and Chief Executive

Hong Kong, March 10, 2020

As at the date of this announcement, the Board comprises three executive Directors; namely, Dr. LAU Kwok Kuen, Peter (Chairman and Chief Executive), Dr. CHAN Ka Wai and Mr. Mark Alan LOYND; two non-executive Directors; namely, Dr. CHENG Chi Kong and Mr. CHAN Sai Cheong; and four independent non-executive Directors; namely, Dr. Barry John BUTTIFANT, Mr. KWONG Ki Chi, Professor WONG Yuk (alias, HUANG Xu) and Dr. Alison Elizabeth LLOYD.

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Group sales refer to consolidated sales and include retail sales from DOS and wholesale sales to all overseas/non- consolidated franchisees.

Group CSS/CSGP are total Giordano brand sales/gross profit of consolidated subsidiaries, at constant exchange rates, from existing DOS and franchised stores that have been fully operating in the same prior period.

Global brand sales/gross profit are at 2019 exchange rates, and are greater than Group sales/gross profit to include the total of Giordano retail sales/gross profit, in DOS, franchised stores and stores operated by a joint venture. ITOC refers to inventories held at year end divided by cost of sales and multiplied by number of days in the year.

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