Yue Yuen Industrial Holdings Limited announced its audited consolidated results for the year ended 30th September, 2005. Turnover rose year-on-year by 16% to US$3,155 million and net profit increased by 2.2% year-onyear
to US$310.1 million for the fiscal year 2005. Earnings per share increased 2.0% to 19.14 cents, from 18.76 cents in 2004. Excluding a one-off US$26.2 million contribution from the disposal of securities investments in 2004, net profit would have increased by 11.9% year-on-year.

The Directors have resolved to recommend the payment of a final dividend of HK$0.48 per share;
this compares with HK$0.46 per share in 2004. (Interim dividend in 2005: HK$0.27 per share; in
2004 HK$0.25 per share). Taking into account the interim dividend declared, the total dividend
payment for the year amounts to HK$0.75 per share.

The Group achieved encouraging results for the period under review despite a challenging and
increasingly demanding operating environment. During the year, the Group made further progress in
improving production efficiency as well as in achieving economies of scale from continued sales
growth. Its commitment to research and development investment remained firm, while stringent costcontrol
measures were implemented, yielding satisfactory results.

During the year, the surge in oil and petrochemical derivative prices, increases in labor costs, higher
utility costs and the appreciation pressure of the Chinese yuan resulted in the contraction of the
Group’s gross profit margin by 0.82 percentage point year-on-year to 23.05% in fiscal 2005.

However, the production costs could not have been contained at such current level without the
dedication and hard work of our staff as well as much closer working relationships with our

The Group focused not only on the manufacturing end of the supply-chain, but also on the retail end.
The move into the mainland China retail market has borne fruit, resulting in a 128% jump in turnover
for that business during the year. By the end of September 2005, the Group operated about 520
shops/counters in the mainland and its wholesale business encompassed the Greater China region
with about 1,600 distribution points. The horizontal expansion into sports apparel and accessory
manufacturing remained on track. The Group’s stake in Eagle Nice, an associate company engaged in
sport apparel manufacturing, increased to 45% from 31% following the early conversion of
convertible notes in March 2005.

Total shoe production volume during the period climbed 11.2% year-on-year to 185.9 million pairs.
As at the end of fiscal 2005, the Group maintained 342 production lines, 33 more than in the previous

Athletic shoes remained the Group’s major product, accounting for 60.2% of total sales. There was
strong growth in the casual/outdoor shoes and sandals categories. The Group achieved a balanced
distribution of products by geographical region with satisfactory growth in all major areas. The
Group also expanded its wholesale operation into Taiwan and Hong Kong, which underpinned the
increase in retail sales turnover.

Looking Forward

The year 2006 is likely to be demanding. The outlook for material prices is uncertain, while labor and
energy costs are still on a rising trend. Currency fluctuations and trade disputes are expected to
continue to overhang the operating environment. However, the Group is well positioned to face the
challenges ahead, and to deliver sustained business growth. The Group’s continuous probing into
innovative production processes and facilities should enhance cost efficiency and competitiveness.

The Group is optimistic about its business growth in fiscal 2006. In the first quarter of the fiscal year,
turnover rose 16.7% year-on-year to US$869 million. Again, there was an increase in contribution
from the mainland retail operations, as well as sustained organic growth in the core manufacturing
business. Continued sales growth demonstrates customer confidence in the Group’s ability to provide
a total solution and deliver high-quality products.

Growth momentum for the retail operations remains robust and the Group will continue with its
program of opening shops/counters in the mainland. In addition to self-run shops it plans to franchise
operations so as to expedite growth in the distribution network. Other than traditional shops, the
Group has opened several mega-stores, and the response to these has been encouraging. The goal to
open 1,000 shops/counters ahead of the Beijing Olympics in 2008 remains intact. At the same time,
the Group will work hard to strike a balance between opening new shops and improving the bottomline

“I believe we have a visionary development strategy to expand our business from the core
manufacturing operations into the retail and wholesale segments in the Greater China region,
leveraging on the Group’s strength in the manufacturing side, which will complement and collaborate
with our branded customers’ efforts in developing the China consumer market,” said Mr. Tsai Chi
Neng, Chairman of the Group.

For the Year ended
30 September,                           2005        2004

                                        US$'000     US$'000
Turnover                                3,154,835    2,720,027
Cost of sales                          (2,427,728) (2,070,732)
Gross profit                              727,107    649,295
Other operating income                    110,943    128,815
Selling and distribution expenses        (130,830)   (110,696)
Administrative expenses                  (243,007)   (234,654)
Other operating expenses                 (162,637)   (140,562)
Profit from operations                    301,576    292,198
Finance costs                             (16,648)    (11,040)

Profit before taxation                    320,921    310,997
Income tax expense                         (5,391)     (3,352)
Profit before minority interests          315,530    307,645
Minority interests                         (5,404)     (4,308)
Net profit for the period                 310,126     303,337
Earnings Per Share (Basic, US cents)      19.1 cents   18.8 cents
Earnings Per Share (Diluted, US cents)    18.1 cents   18.7 cents