Forward Fashion (International) Holdings Company Limited

(incorporated in the Cayman Islands with limited liability)

Stock Code : 2528

ANNUAL REPORT 2022

CONTENTS
Page
Corporate Information 2
Message from the Chairman 3
Management Discussion and Analysis 4
Directors and Senior Management 12
Corporate Governance Report 18
Report of the Directors 32
Independent Auditor’s Report 54
Consolidated Statements of Profit or Loss 60
Consolidated Statements of Comprehensive Income 61
Consolidated Statements of Financial Position 62
Consolidated Statements of Changes in Equity 64
Consolidated Statements of Cash Flows 66
Notes to the Consolidated Financial Statements 67
Five Years Financials 146
Annual Report 2022
Forward Fashion (International) Holdings Company Limited

CORPORATE INFORMATION

BOARD OF DIRECTORS COMPANY SECRETARY

Executive Directors Mr. Kevin Trantallis
Mr. Fan Wing Ting (Chairman)
Ms. Chen Xingyi (Chief Executive Officer) AUDITORS
Mr. Kevin Trantallis PricewaterhouseCoopers
Mr. Fong Yat Ming Certified Public Accountants
Ms. Fan Tammy Registered Public Interest Entity Auditor
22/F, Prince’s Building
Independent Non-executive Directors Central, Hong Kong
Mr. Yu Chun Kau
Mr. Cheung Chun Yue, Anthony REGISTERED OFFICE
(resigned on 1 July 2022) IN THE CAYMAN ISLANDS
Mr. Ng Kam Tsun
Cricket Square, Hutchins Drive
Mr. Sze Irons, B.B.S., J.P.
P.O. Box 2681
(appointed on 1 July 2022)
Grand Cayman, KY1-1111
Cayman Islands
BOARD COMMITTEES
Audit Committee PRINCIPAL PLACE OF BUSINESS AND
Mr. Yu Chun Kau (Chairman) HEAD OFFICE IN HONG KONG
Mr. Cheung Chun Yue, Anthony
Suite 1204, 12/F., Tower 6
(resigned on 1 July 2022)
The Gateway, Harbour City
Mr. Ng Kam Tsun
Tsim Sha Tsui, Kowloon
Mr. Sze Irons, B.B.S., J.P.
Hong Kong
(appointed on 1 July 2022)

Remuneration Committee HONG KONG BRANCH SHARE

Mr. Yu Chun Kau (Chairman)
REGISTRAR AND TRANSFER OFFICE
Ms. Chen Xingyi Tricor Investor Services Limited
Mr. Cheung Chun Yue, Anthony 17/F, Far East Finance Centre
(resigned on 1 July 2022) 16 Harcourt Road
Mr. Sze Irons, B.B.S., J.P. Hong Kong
(appointed on 1 July 2022)
PRINCIPAL BANKERS
Nomination Committee The Hongkong and Shanghai Banking Corporation Limited
Mr. Fan Wing Ting (Chairman) Bank of China (Hong Kong) Limited
Mr. Yu Chun Kau China Merchants Bank Co., Ltd.
Mr. Cheung Chun Yue, Anthony
(resigned on 1 July 2022) COMPANY WEBSITE
Mr. Sze Irons, B.B.S., J.P.
www.forward-fashion.com
(appointed on 1 July 2022)

AUTHORISED REPRESENTATIVES STOCK CODE

Mr. Kevin Trantallis 02528
Ms. Fan Tammy

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MESSAGE FROM THE CHAIRMAN

Dear Shareholders,

On behalf of the board (the “Board”) of Directors of the Group, I hereby present the audited consolidated results of
the Group for the year ended 31 December 2022 to our shareholders and investors.

For the Reporting Period, the Group recorded a revenue of HK$959.9 million (2021: HKD1,228.3 million),
representing a year-on-year decrease of 21.9%. Gross Margin percentage was at 47.3% (2021: 53.0%) and the
Group incurred a net loss of HKD36.5 million (2021: HKD31.6 million profit). While the Group’s performance has
been adversely affected by the COVID-19 pandemic and the uncertain macro-environment, the Group has managed
to maintain its retail presence with 184 stores and over 34,000 square meters in total retail area.

With the reopening of the borders for travelling, we are confident that sales will pick up. At the same time, we have
exciting new projects in the pipeline, including Artelli. We are confident that Artelli has a promising outlook as a
pioneering immersive multi-dimensional premium art space that blends modern art gallery, pop art culture and
our strength in fashion and retail know-how. Leveraging our decades of experience in the fashion industry, we
have created a unique concept that integrates art and retail, offering a one-of-a-kind immersive art experience.
We believe that Artelli’s innovative approach will resonate with art lovers and enthusiasts alike. We are proud to
spearhead luxurious art projects including exclusive debut collections with world-renowned artists and designers.
The first retail store was opened in October 2022 in Macau with over 500 sqm of retail space.

Furthermore, we are proud to announce our partnership with some of the best known brands in the world to open
stores in the next luxury retail destination, Macau Treasure Island Hotel. This project includes Galeries Lafayette, the
internationally renowned French premium department store that will enter Macau for the first time.

I am confident that 2023 will be an exciting and promising year for the Group and on behalf of the Board of the
Company, I wish to express my sincere gratitude for the contributions of our colleagues and the support of our
customers, business partners and shareholders of the Company. I am very confident about the Group’s future
and building on our experience and retail network built over the years, we will be able to achieve sustainable
development and create value for our shareholders.

Mr. Fan Wing Ting

Chairman

Hong Kong, 30 March 2023

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW
The Group principally engages in the retail of fashion apparel of international brands ranging from established
designer label brands, popular global brands to up-and-coming brands in Mainland China, Macau, Hong Kong and
Taiwan (collectively, “Greater China”). The Group adopts a multi-brand and multi-store business model. As at 31
December 2022, the Group operated 184 self-operated retail stores in Greater China, of which 163 retail stores are
mono-brand stores operated under the brand name of the merchandise to cater for the brand’s target customers
and 21 retail stores are multi-brand stores that offer a broad assortment of the Group’s selected fashion apparel and
lifestyle merchandise from different international brands and the Group’s own brands. As at 31 December 2022, the
Group’s brand portfolio had 126 brands, of which 123 brands were international brands owned by third-party brand
owners or their master/authorised licensors.

The novel coronavirus (COVID-19) pandemic (the “Pandemic”) in Mainland China, Macau, Hong Kong and Taiwan
(“Greater China”) has continued to affect the sales of the Group in Greater China in 2022. The GDP growth in
Mainland China decreased from 8.1% in 2021 to 3.0% in 2022 and the consumer goods consumption in 2022
dropped 0.2%. The number of visitors to Macau in 2022 decreased by 26.0% comparing with that in 2021 and the
total visitor expenditure decreased by 25.7% year-over-year (“yoy”) comparing with that in 2021. Retail sales of the
Group therefore were greatly affected and the Group experienced a drop of 21.9% yoy in revenue in 2022. Of the
decrease in revenue of HKD268.4 million, Macau and Mainland China recorded a decrease of HKD147.4 million and
HKD99.7 million, or 54.9% and 37.1% of total decrease in revenue, respectively.

Even though the pandemic impact is easing, and borders are now reopened for travelling, the Group will continue to
strengthen management and cost control measures and will continue to monitor the situation closely and act swiftly
to ensure that a healthy cashflow and financial position can be maintained.

FINANCIAL REVIEW
Revenue
The Group’s revenue decreased to HKD959.9 million for 2022 (2021: HKD1,228.3 million), representing a yoy 21.9%
decrease mainly due to the “relatively static” Pandemic control measures implemented in Macau and China. Both
mono-brand stores and multi-brand stores recorded a decrease of 29.5% and 39.4% yoy, while the Group’s online
sales achieved a growth rate of 339.2%. Store management and consignment services also recorded a growth of
46.4% yoy but wholesale recorded a drop of 15.8% yoy. Under the adverse consumption contraction during the
Pandemic, the Group’s average sales floor area was reduced from 36,547 m2 in 2021 to 34,582 m2 in 2022, mainly in
Macau, Hong Kong and Taiwan by closing down the under-performance stores.

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Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Breakdown of revenue by sales channels:

2022 2021
HKD million % of revenue HKD million % of revenue Change (%)

Retail
Mono-brand stores 668.4 69.7 948.4 77.2 (29.5)
Multi-brand stores 131.9 13.7 217.7 17.7 (39.4)
Online sales 116.4 12.1 26.5 2.2 339.2

916.7 95.5 1,192.6 97.1 (23.1)

Store management &
consignment services 30.9 3.2 21.1 1.7 46.4
Wholesale 12.3 1.3 14.6 1.2 (15.8)

Total 959.9 100.0 1,228.3 100.0 (21.9)

Movement of number, floor area and same store growth rate of retail stores:

No. of retail stores Sales floor area (m2)

As at As at As at As at No of same Same store
31/12/2021 Open Close 31/12/2022 31/12/2021 Open Close 31/12/2022 Average stores growth (%)

Macau 53 8 (25) 36 9,234 1,294 (3,924) 6,604 7,919 18 (29.3)

Mainland China 145 27 (37) 135 23,098 5,267 (5,079) 23,286 23,192 92 (20.7)
HK & Taiwan 18 1 (6) 13 4,602 153 (2,416) 2,339 3,471 10 3.4

Total/Overall 216 36 (68) 184 36,934 6,714 (11,419) 32,229 34,582 120 (21.8)

Revenue by geographical areas:

2022 2021
HKD million % of revenue HKD million % of revenue Change (%)

Macau 438.4 45.7 585.8 47.7 (25.2)

Mainland China 449.8 46.8 549.5 44.7 (18.1)
HK & Taiwan 71.7 7.5 93.0 7.6 (22.9)

Total 959.9 100.0 1,228.3 100.0 (21.9)

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Macau
The revenue generated from Macau for 2022 decreased to HKD438.4 million, representing a yoy decrease of 25.2%.
The drop was mainly attributable to the decrease in the number of visitors to Macau in 2022 by 26.0% yoy while the
total visitor expenditure decreased by 25.7% yoy. The Group opened 8 stores and closed 25 stores in 2022 with a
negative same store sales growth of 29.3%.

Mainland China
The revenue generated from Mainland China recorded HKD449.8 million in 2022, representing a yoy decrease
of 18.1%. The Group has streamlined the store portfolio by retaining good performance stores to prevent loss of
customers, the number of stores decreased to 135 in 2022 comparing with 145 in 2021 and achieved a negative
same store growth rate of 20.7%. The Group opened 27 stores and closed 37 stores in 2022 with an increase in the
average floor area of 4.1% yoy.

Hong Kong and Taiwan

The revenue generated from the sales in Hong Kong and Taiwan recorded a yoy decrease of 22.8% and 25.2%,
respectively. The recurring Pandemic in both markets has resulted in unstable business performance and the Group
has streamlined the store portfolio in both markets in 2022. The Group opened 1 store while closing 4 other stores
in Hong Kong during 2022 with a decrease of average floor area of 601 m2, representing 31.0% yoy decrease. In
Taiwan, the Group closed 2 stores in 2022.

Gross profit
The Group’s cost of sales consisted of cost of inventory sold for the fashion apparel and lifestyle products and the
cost of store management and consignment services rendered to the brand owners. The cost of sales decreased to
HKD505.7 million in 2022, or a yoy decrease of 12.4%, primarily attributable to the decrease in sales.

As such, the gross profit in 2022 decreased by HKD196.9 million, or a yoy decrease of 30.2%, to HKD454.2 million
and the gross profit margin decreased from 53.0% in 2021 to 47.3% in 2022. Among the Greater China areas, the
gross profit margin of sales in the PRC and Macau in 2022 recorded a decrease of 320 basis points and 760 basis
points to 47.7% and 46.9% respectively due to the “relatively static” Pandemic control measures implemented in
Macau and PRC. The gross profit margins of sales in Hong Kong and Taiwan recorded a decrease of 860 basis
points in 2022 resulting from the clearance sale for store closure with higher average discount rate offered.

Other income and other gains and losses, net

The Group had other income of HKD3.3 million in 2022 comprising government grants, representing a yoy decrease
of 69.8%. The Group recorded net other losses of HKD7.4 million, compared with net other gains of HKD17.8 million
in 2021, mainly attributable to (1) exchange losses of HKD9.5 million; (2) net losses on disposal of property, plant
and equipment of HKD2.0 million and (3) gains on the derecognition of right-of-use assets and lease liabilities of
HKD0.9 million in 2022.

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Operating expenses
Selling and marketing expenses decreased to HKD371.7 million in 2022, or a 25.0% yoy decrease, primarily due to
a decrease in employee benefit expenses of HKD46.5 million, depreciation of property, plant and equipment and
right-of-use assets of HKD43.7 million and variable lease expenses of HKD19.0 million.

General and administrative expenses decreased to HKD94.3 million in 2022, or a yoy decrease of 19.3%, primarily
due to the decrease in employee benefit expenses and impairment loss on intangible assets of HKD8.8 million and
HKD7.6 million, respectively.

Finance costs
Net finance costs decreased to HKD18.5 million in 2022, or a yoy decrease of 9.3%. The decrease was mainly due
to the lower interest expenses on lease liabilities of HKD9.3 million resulting from lower balance of lease liability and
lower interest on bank borrowing of HKD9.6 million resulting from lower average balance of bank borrowings.

Income tax expenses

There were income tax expenses of HKD2.1 million (2021: HKD15.5 million).

(Loss)/profit for the year

The Group recorded a net loss of HKD36.5 million for 2022 comparing with a profit of HKD31.6 million in 2021 mainly
attributable to the decrease in revenue of HKD268.4 million.

SEASONALITY
The Group’s sales performance is subject to seasonal fluctuations. We normally generates higher revenue during
winter season than summer season as winter apparel generally has a higher unit price than summer apparel. The
Group records higher revenue in festive seasons such as Christmas and the month before Chinese New Year and
the traditional peak season in Mainland China long holidays. Normally revenue recorded in the first half and the
second half of the year are of equal weighting as they have similar festivals and holidays.

FINANCIAL
Working capital structure
The Group’s net current assets amounted to HKD0.3 million as at 31 December 2022, representing a decrease of
HKD5.7 million from 31 December 2021. Such decrease was primarily the result of the decrease in current assets of
HKD129.5 million mainly resulting from the decrease in restricted cash, term deposits, cash and cash equivalents
and prepayment of HKD111.5 million and offset by the decrease in current liabilities of HKD123.8 million which
comprised of decrease in bank borrowing of HKD53.9 million and lease liabilities of HKD56.5 million respectively.

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Liquidity and financial management

The Group strives to maintain a healthy financial position and liquidity for its normal operation, development needs
and ad hoc events. As at 31 December 2022, the cash and cash equivalents were HKD69.9 million, representing a
decrease of HKD46.0 million comparing with those of 31 December 2021, details are as follows:

HKD million
184.5
200
150
115.9
100
69.9
50 45.7
2.5
0
-50
-40.9
-100
-150

-200
-250 -237.8
1/1/2022 Operating Working Net CAPEX Financing Exchange 31/12/2022
cash flow capital difference

The Group’s current ratio was 1.0 times as at 31 December 2022, compared to that of 1.0 times as at 31 December
2021. The current ratio is maintained mainly attributable to the decrease in both current assets and current liabilities
by the same weight.

The gearing ratio of the Group, which is calculated as net debt divided by total capital, was 58% as at 31 December
2022 compared to that of 59% as at 31 December 2021.

Pledge of assets
As at 31 December 2022, a building with net book value of HKD58.5 million, restricted cash of HKD18.0 million
and the investment in life insurance contract of HKD34.8 million were pledged for a first mortgage, credit loans and
credit facilities of bank borrowings, respectively.

CAPITAL COMMITMENT
The Group had no material capital commitment contracted, but not provided for as at year end (2021: Nil).

CONTINGENT LIABILITIES
As of 31 December 2021 and 2022, the Group did not have any material contingent liabilities.

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

FOREIGN EXCHANGE RISK MANAGEMENT

Merchandise purchased by the Group is mainly denominated in Euros, United States Dollars (USD) and Renminbi
(RMB) whereas the retail operation is mainly exposed to RMB, Macanese pataca (MOP), New Taiwan Dollars (TWD)
and Hong Kong Dollars (HKD). However, the Group did not expect foreign currency fluctuations to materially impact
its operation. The Group did not hedge foreign exchange fluctuation by forward contracts. The Group managed the
foreign exchange risk by reviewing its net foreign exchange exposures regularly and endeavored to shrink these
exposures through reviewing the exchange rates with the suppliers, the brand owners periodically.

OUTLOOK
Due to the COVID-19 pandemic (the “Pandemic”) in 2022, the Group’s business has suffered enormously with many
stores closed for extended period of time, such as the lockdown in Shanghai during the 2nd quarter of 2022.

As disclosed in our 2021 annual report, the Group’s business could be adversely affected by the Pandemic and/
or other adverse public health developments in Greater China. Such events could severely disrupt the Group’s
business operations and have a negative impact on the consumer sentiment, the macro-economic condition as well
as the financial conditions of the stock markets.

However, the Group has forged its resilience and it is evident that the economy is recovering after the re-opening
of the borders for travellers. In 2023, the Group will continue to adhere to strict compliance and internal control. The
Group will stay vigilant, monitor closely the business environment and will plan ahead and be prepared to grasp
hold of good business opportunities to create greater values to our shareholders.

USE OF PROCEEDS FROM THE LISTING

The shares of the Company (the “Shares”) were listed on the The Stock Exchange of Hong Kong Limited (the “Stock
Exchange”) on 13 January 2020 (the “Listing Date”) and the net proceeds from the global offering of its Shares (the
“Global Offering”) amounted to HKD140.0 million (the “Net Proceeds”).

As of 31 December 2022, the Company has used approximately 80.9% of the proceeds from the Global Offering
and the net proceeds have been utilised in line with those set out in the section headed “Future Plans and Use of
Proceeds” in the prospectus of the Company dated 30 December 2019 (the “Prospectus”).

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

The following sets forth a summary of the utilisation of the net proceeds from the Global Offering as of 31 December
2022:

Utilised Unutilised
Planned amount up to balance as at Expected timeline
Percentage to use of the 31 December 31 December for unutilised
total amount Net Proceeds 2022 2022 Net Proceeds
% HK$ million HK$ million HK$ million

Expand the Group’s retail 50.3 70.4 70.4 –

stores

Upgrade the Group’s existing 9.2 12.9 12.9 –

retail stores

Explore new brands 24.0 33.6 10.3 23.3 On or before

31 December 2023

Set up and implement 10.8 15.1 11.6 3.5 On or before

Centralised Retail 31 December 2023
Management System

Strengthen the Group’s online 5.7 8.0 8.0 –

sales

100.0 140.0 113.2 26.8

It was disclosed in the Prospectus that the net proceeds will be applied by the Group in an expected timetable
ending 31 December 2021. However, as a result of the outbreak of the Pandemic and its adverse impact on the
global economy which includes the apparel retail market in Greater China, the Company has proposed to adjust
the estimated time of using the unutilised net proceeds by extending to on or before 31 December 2023 in order to
enhance flexibility for the future development of the Group. The expected timeline for using the unutilised amount of
the Net Proceeds is based on the best estimation of the business market situations made by the Board. It might be
subject to changes based on the market conditions. Further announcement(s) in respect of material change in the
expected timeline, if any, will be made by the Company in accordance with the requirements of the Listing Rules as
and when appropriate to update its Shareholders and potential investors.

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES

AND JOINT VENTURES
There is no major acquisition or disposal in 2022.

EMPLOYEES AND REMUNERATION POLICIES

The Group adopts a competitive emolument policy to attract, retain and motivate high quality individuals.
Remuneration packages are reviewed regularly to reflect the market practice and employees’ performance. As at 31
December 2022, the Group employed around 1,080 employees (31 December 2021: 1,300). The total staff costs for
2022 was HKD180.9 million (2021: HKD232.8 million), a yoy decrease of 22.3%.

EVENTS AFTER THE REPORTING PERIOD

Up to the date of this report, the Directors are not aware of any significant events related to the business or financial
performance of the Group after the reporting period.

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS
Executive Directors
Mr. Fan Wing Ting (范榮庭), aged 67, is the founder, Chairman, Executive Director and Controlling Shareholder of
the Group. He was first appointed as a Director on 16 May 2019 and was re-designated as an Executive Director
on 26 July 2019. He is also the Chairman of the Group’s Nomination Committee. He is primarily responsible for the
overall strategic planning and management, administration and overall direction of the Group’s business operations.

Mr. Fan has served the Group for over 10 years. Mr. Fan is instrumental in the Group’s business expansion and
oversaw the integration of the Group’s multi-brand store strategy such as UM, UM Junior and WF Fashion that
showcases an assortment of high-end fashion apparel and luxury lifestyle products selected from the Group’s
collection of international brands, designer labels and its in-house brand UM, UM•IXOX and IXOX apparel products.
Under his leadership, the Group continues to expand its brand portfolio and retail network to increase the Group’s
market presence in Mainland China, Macau, Hong Kong and Taiwan.

Mr. Fan obtained an Individual Dental Practitioner Certificate of the Guangdong Province in the PRC in April 1986.
He was admitted as a member of The American Chamber of Commerce in Macau in November 2017.

Mr. Fan is the father of Ms. Fan Tammy and the uncle of Mr. Fong Yat Ming.

Ms. Chen Xingyi (陳幸儀), aged 46, was appointed as an Executive Director on 26 July 2019. Ms. Chen is also the
Chief Executive Officer of the Group and a member of the Group’s Remuneration Committee. She is responsible for
the overall strategic planning, management and administration of the Group’s business operations.

Ms. Chen has served the Group for over 10 years. She joined the Group in March 2005 as an operation manager
and also as Mr. Fan Wing Ting’s secretary at the Shenzhen office of Wide Spread (China) Limited. She was
subsequently promoted as the general manager of Shouwei Trading (Shenzhen) Co., Ltd in January 2011 and was
further promoted as the chief operating officer of the Group in January 2013. Since January 2016, she has been the
Chief Executive Officer of the Group.

Ms. Chen obtained an associate college academic credential in Business English from the Shenzhen Polytechnic
(深圳職業技術學院) in the PRC in June 1998. She obtained her Business English Certificate 1 and Business English
Certificate 2 from the University of Cambridge Local Examinations Syndicate in October 1996 and in September
1997, respectively.

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

DIRECTORS AND SENIOR MANAGEMENT

Mr. Kevin Trantallis (陳漢榮), aged 48, was first appointed as a Director on 16 May 2019 and was re-designated
as an Executive Director, the Chief Financial Officer and the Company Secretary of the Group on 26 July 2019.
Mr. Trantallis joined the Group in April 2015 as a finance director of World First Holdings Limited (the “World First
Holdings”). He is responsible for financial management of the Group’s business operations.

Mr. Trantallis has over 20 years of experience in the fashion industry. From May 1996 to April 1999, he was
employed by Barro Group Pty. Limited as an assistant accountant in Australia. From April 1999 to April 2001, he
worked as a financial analyst at 7-Eleven Stores Pty. Ltd. in Australia. He also worked at Prada Asia Pacific Limited
from November 2001 to September 2004, with his last position as a treasury analyst. From September 2004 to
February 2011, he worked at Christian Dior Far East Limited initially as a business analyst and was subsequently
promoted as a general manager (Guam & Saipan in the United States) in December 2007. From March 2011 to
July 2013, he served as an executive officer to the chairman at i.t apparels Limited, a subsidiary of I.T Limited, a
company previously listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)
(stock code: 0999). Before joining the Group, he was the head of controlling at Hugo Boss Hong Kong Ltd. from
October 2013 to October 2014.

Mr. Trantallis graduated from The University of Melbourne in Australia with a Bachelor of Commerce Degree in
March 1996. He subsequently obtained a Master’s Degree of Business Administration from The University of
Melbourne in Australia in June 2002. In 2007, he further completed his Master’s Degree of Arts in Fashion and
Textiles (Global Fashion Management) (with credit) from The Hong Kong Polytechnic University. He was admitted
as a certified practising accountant of CPA Australia in August 2001 and was admitted as an associate of the Hong
Kong Institute of Certified Public Accountants (formerly known as Hong Kong Society of Accountants) in July 2004.

Mr. Fong Yat Ming (方日明), aged 37, was appointed as an Executive Director on 26 July 2019. He is responsible
for marketing strategy of the Group’s business operations.

Mr. Fong has served the Group for over 10 years. He joined the Group in August 2007 as an operation assistant of
Macau Ieng Nam Limited (“Macau Ieng Nam”) and was promoted as a senior buyer and a regional manager trainee
in September 2009 and in March 2010, respectively. He was further promoted as a regional manager of Macau Ieng
Nam in March 2011. Since March 2017, he serves as a regional director and acting general manager of Macau Ieng
Nam.

Mr. Fong graduated from The University of Nottingham in the United Kingdom with a Bachelor of Arts Degree with
honours in Finance, Accounting and Management in July 2007.

Mr. Fong is the nephew of Mr. Fan Wing Ting and the cousin of Ms. Fan Tammy.

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Annual Report 2022
Forward Fashion (International) Holdings Company Limited

DIRECTORS AND SENIOR MANAGEMENT

Ms. Fan Tammy (范麗君), aged 35, was appointed as an Executive Director on 26 July 2019. She is responsible for
business development of the Group’s business operations.

Ms. Fan has served the Group for over 10 years. She joined the Group in July 2011 as the head of strategy of World
First Holdings.

Ms. Fan completed the AEM Business Management Certificate Program from the Cornell University in the United
States of America in July 2009. She subsequently obtained a Bachelor of Arts in Economics Degree from the
University of Southern California in the United States of America in May 2010. Ms. Fan also studied in Fashion
Marketing from the Parsons School of Design in the United States of America.

Ms. Fan is the daughter of Mr. Fan Wing Ting and the cousin of Mr. Fong Yat Ming.

Independent non-executive Directors

Mr. Yu Chun Kau (余振球), aged 50, was appointed as an Independent Non-executive Director on 17 December
2019. He is the Chairman of the Group’s Audit Committee and Remuneration Committee and a member of the
Nomination Committee. He is responsible for providing independent advice to the Board.

Mr. Yu has over 25 years of experience in the accounting, corporate finance, compliance and auditing. He started
his career at a major international accounting firm in 1994 and then worked for various Hong Kong listed companies
and multinational corporations as executive director, chief financial officer and company secretary. Mr. Yu has been
an independent non-executive director of Ruifeng Power Group Company Limited, a company listed on the Main
Board of the Stock Exchange (stock code: 2025) since December 2017 and an independent non-executive director
of JiaChen Holding Group Limited, a company listed on the Main Board of the Stock Exchange (stock code: 1937)
from December 2019 to September 2021. He is the chief financial officer of Jacobson Pharma Corporation Limited,
a company listed on the Main Board of the Stock Exchange (stock code: 2633) since January 2019 and has been
appointed as the Company Secretary since April 2021.

Mr. Yu graduated from The Chinese University of Hong Kong with a Bachelor of Business Administration Degree
with first class honour in December 1994. In June 2005, he also obtained a Master of Corporate Governance Degree
from the Hong Kong Metropolitan University (formerly known as The Open University of Hong Kong). Mr. Yu was
admitted as a fellow member of The Association of Chartered Certified Accountants in November 2002. He was
admitted as a fellow member and registered as a Certified Public Accountant (Practising) of the Hong Kong Institute
of Certified Public Accountants (formerly known as Hong Kong Society of Accountants) in July 2005 and in October
2002, respectively. In March 2007, he was admitted as a senior international finance manager of the International
Financial Management Association. In April 2015, he was also admitted as a fellow member of The Institute of
Chartered Accountants in England and Wales. In September 2016, he was admitted as both a fellow member of The
Hong Kong Chartered Governance Institute (formerly known as The Hong Kong Institute of Chartered Secretaries)
and as a fellow member of The Chartered Governance Institute.

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 Annual Report 2022
Forward Fashion (International) Holdings Company Limited

DIRECTORS AND SENIOR MANAGEMENT

Mr. Ng Kam Tsun (伍鑑津), aged 49, was appointed as an Independent Non-executive Director and a member
of the Group’s Audit Committee on 19 November 2021. Mr. Ng has over 25 years of experience in finance
and accounting. He has served in various listed companies in Hong Kong and was responsible for financial
management, corporate financing, mergers and acquisitions, investor relations management and corporate
governance, through which he accumulated extensive experience. Mr. Ng served as (i) the chief financial officer,
the company secretary and the authorised representative of Fulum Group Holdings Limited, a company listed on the
Main Board of the Stock Exchange (stock code: 1443) from September 2015 to December 2021; (ii) an independent
non-executive director, the chairman of the audit committee, a member of the remuneration committee and a
member of the nomination committee of Wan Leader International Limited, a company listed on the GEM of the
Stock Exchange (stock code: 8482) during the period from August 2018 to June 2021; and (iii) an independent non-
executive director, the chairman of the audit committee, the chairman of the remuneration committee and a member
of the nomination committee of Hao Bai International (Cayman) Limited, a company listed on the GEM of the Stock
Exchange (stock code: 8431) from September 2021 to December 2022.

Mr. Ng became a member of CPA Australia and The Hong Kong Institute of Certified Public Accountants (HKICPA)
since July 2002 and December 2002, respectively. Furthermore, he was admitted as a fellow member of CPA
Australia and the HKICPA in December 2010 and September 2009, respectively. Mr. Ng graduated from the
Monash University in Australia with a Bachelor of Business in January 2003. He subsequently obtained a Master of
Management Degree from the Shanghai University of Finance and Economics in March 2006. In November 2014,
Mr. Ng further completed his Master of Laws Degree from The Chinese University of Hong Kong.

Mr. Sze Irons (施榮懷), B.B.S., J.P., aged 61, was appointed as an Independent Non-executive Director and a
member of each of the Audit Committee, the Remuneration Committee and the Nomination Committee of the Group
on 1 July 2022.

Mr. Sze has extensive experience in investment and corporate management. He serves as an independent non-
executive director in various listed companies in Hong Kong . He serves as (i) an independent non-executive
director, a member of the audit committee and a member of the remuneration committee of Continental Holdings
Limited, a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)
(stock code: 513) since October 2008; (ii) an independent non-executive director of Chevalier International
Holdings Limited, a company listed on the Main Board of the Stock Exchange (stock code: 25) since November
2016 and has been appointed as a member of the audit committee since February 2019; (iii) an independent
non-executive director, the chairman of the nomination committee and a member of the audit committee of ST
International Holdings Company Limited, a company listed on the GEM of the Stock Exchange (stock code: 8521)
since April 2018; (iv) an independent non-executive director, the chairman of the remuneration committee and a
member of the audit committee of Best Mart 360 Holdings Limited, a company listed on the Main Board of the Stock
Exchange (stock code: 2360) since December 2018; (v) an independent non-executive director, the chairman of the
nomination committee, a member of the audit committee and a member of the remuneration committee of Jianzhong
Construction Development Limited, a company listed on the Main Board of the Stock Exchange (stock code: 589)
since February 2020; and (vi) an independent non-executive director, a member of the audit committee, a member
of the remuneration committee and a member of the nomination committee of Redco Healthy Living Company
Limited, a company listed on the Main Board of the Stock Exchange (stock code: 2370) since March 2022.

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Forward Fashion (International) Holdings Company Limited

DIRECTORS AND SENIOR MANAGEMENT

Mr. Sze was appointed as a Justice of the Peace and awarded the Bronze Bauhinia Star by the Government of the
Hong Kong Special Administrative Region (“HKSAR”) in 2011 and 2015 respectively. He is currently a member of
The 13th National Committee of the Chinese People’s Political Consultative Conference* (“CPPCC”) (中國人民政治
協商會議全國委員會) and the deputy director of Committee on Population, Resources and Environment* (人口資源環
境委員會) of the CPPCC; a standing committee member of the Beijing Municipal Committee of the CPPCC* (中國人
民政治協商會議北京市委員會常務委員); the chairman of the HKCPPCC (Provincial) Members Association Limited*
(港區省級政協委員聯誼會會長); a member of the Labour Advisory Board of the Government of the HKSAR; the
Permanent Honorary President of the Chinese Manufacturers’ Association of Hong Kong; the deputy secretary
general of The Hong Kong Coalition; the chairman of the Mainland Business Advisory Committee of the Hong Kong
Trade Development Council; a council member of the Hong Kong Repertory Theatre; and a member of the
University Court of The Hong Kong Polytechnic University. Mr. Sze was also elected as a member of the Election
Committee of the Chief Executive of the HKSAR in 2016.

Mr. Sze graduated from the University of Wisconsin – La Crosse in the United States of America with a Bachelor of
Science Degree in May 1985.

SENIOR MANAGEMENT
Ms. Fung Sze Nga, Dorothy (馮詩雅), aged 44, joined the Group in August 2017 as a Junior Human Resources
Director. She is primarily responsible for the human resources and administrative operations of the Group.

Ms. Fung has over 15 years of experience in the human resources field in the apparel industry. From June 2000 to
July 2006, she was employed by Giordano Limited, where she initially worked as a trainee and was subsequently
promoted as a human resources officer. From July 2006 to February 2008, she worked at Swire Resources
Limited, where she initially worked as a human resources officer and was subsequently promoted as a senior
human resources officer. Before joining the Group, she worked at i.t apparels Limited, a subsidiary of I.T Limited, a
company previously listed on the Main Board of the Stock Exchange (stock code: 0999) with her last position as a
senior human resources manager from February 2008 to July 2017.

Ms. Fung graduated from The Hong Kong University of Science and Technology with a Bachelor of Business
Administration Degree in Marketing in November 2000. She subsequently obtained a Diploma in Legal Studies from
The University of Hong Kong, School of Professional and Continuing Education in September 2005. In November
2011, she further obtained a Master of Strategic Human Resources Management Degree from Hong Kong Baptist
University.

* For identification purposes only

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Choi Chin Chung (蔡展忠), aged 48, joined the Group in March 2016 as a senior IT manager. He is primarily
responsible for the IT operations of the Group.

Mr. Choi has over 20 years of experience in various IT roles with regional exposure within Asia Pacific. From June
1997 to October 1998, he was employed by Christian Dior Far East Limited, with his last position as an EDP assistant.
From October 1998 to January 1999, he worked as an IT support specialist at Bluebell (Asia) Limited. From February
1999 to June 2000, he worked at Louis Vuitton Pacific Limited, with his last position as an IT support specialist. From
June 2000 to January 2001, he worked as a consultant at Delirium (HK) Limited.

From February 2001 to November 2001, Mr. Choi worked as a project consultant at Raymark Asia Limited. From
September 2002 to May 2005, he worked as an ITM officer at Mercedes-Benz China Limited. From May 2005 to
December 2011, he re-joined Christian Dior Far East Limited as an assistant ITM manager. From March 2012 to
December 2013, he worked at J. Choo Limited in the United Kingdom as a project manager. Before joining the
Group, he served as a business operations manager (Asia) at J.Choo (Asia) Limited from January 2014 to November
2015.

Mr. Choi graduated from The City University of Hong Kong with a Bachelor of Engineering (honours) Degree in
Computer Engineering in December 1996. He has been certified as a Project Management Professional (PMP) by
Project Management Institute since September 2005 and passed the Information Technology Infrastructure Library
(ITIL) Version 3 Foundation Examination in March 2010.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

The Company is committed to maintain good corporate governance standard and procedures to ensure the
integrity, transparency and quality of disclosure.

CORPORATE GOVERNANCE CODE

The Directors recognise the importance of incorporating elements of good corporate governance in the management
structures and internal control procedures of the Company so as to achieve effective accountability.

The Company has adopted the code provisions of the Corporate Governance Code and Corporate Governance
Report (the “CG Code”) as set out in Appendix 14 to the Listing Rules issued by Stock Exchange.

The Company had complied with the code provisions in the CG Code for the year ended 31 December 2022. The
Company is committed to the objective that the Board should include a balanced composition of Executive Directors
and Independent Non-executive Directors so that there is a strong independent element on the Board which can
effectively exercise independent judgement.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted a code of conduct regarding securities transactions by the Directors on terms no
less exacting than the required standard of dealings as set out in the Model Code for Securities Transactions by
Directors of Listed Issuers in Appendix 10 of the Listing Rules. The Company, having made specific enquiry of all
the Directors, is not aware of any non-compliance with the required standard of dealings and its code of conduct
regarding securities transactions by the Directors during the year ended 31 December 2022.

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

Save as disclosed in Note 37 of the Notes to the Consolidated Financial Statements, no contract of significance, to
which the Company or any of its subsidiaries was a party and in which a Director of the Company had a material
interest, whether directly or indirectly, subsisted as at 31 December 2022 or at any time during the year ended 31
December 2022.

COMPETING INTEREST
For the year ended 31 December 2022, Mr. Fan Wing Ting and Ms. Chen Xingyi held share interests and/or
directorships in companies engage in fashion retail in China, further details of which are set out in the section
headed “Directors’ Interests in Competing Business” of the 2022 annual report which will be published at the
websites of the Company and the Stock Exchange in due course. Save as disclosed herein, the Directors are not
aware of any business or interest of the Directors, the Controlling Shareholders, the management, the shareholders
and their respective associates (as defined under the Listing Rules) that compete or may compete with the business
of the Group and any other conflict of interest.

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CORPORATE GOVERNANCE REPORT

BOARD OF DIRECTORS
The Board is responsible for the leadership and control of the Company and is responsible for setting up the
overall strategy as well as reviewing the operation and financial performance of the Group. The Board reserved for
its decision or consideration matters covering overall Group strategy, annual budgets, annual and interim results,
recommendations on Directors’ appointment or re-appointment, approval of major capital transactions and other
significant operational and financial matters.

The management was delegated the authority and responsibility by the Board for the daily management of the
Group. In addition, the Board has also delegated various responsibilities to the Board committees. Further details of
these committees are set out in this annual report.

The Board currently consists of eight Directors who include five Executive Directors and three Independent Non-
executive Directors. The biographical information of the Directors is set out under the section headed “Directors and
Senior Management” in this annual report.

Confirmation of Independence of Independent Non-Executive Directors

The Company has received a confirmation of independence from each of the Independent Non-executive Directors
pursuant to Rule 3.13 of the Listing Rules. The Board has assessed their independence and concluded that all the
Independent Non-executive Directors are considered to be independent pursuant to the Listing Rules.

Chairman and Chief Executive Officer

The roles of the Chairman and the Chief Executive Officer of the Company are held separately by two individuals
to ensure their respective independence, accountability and responsibility. Mr. Fan Wing Ting is the Chairman of
the Board and Ms. Chen Xingyi is the Chief Executive Officer of the Company. Mr. Fan Wing Ting is in charge of
the management of the Board and strategic planning of the Group. Ms. Chen Xingyi is responsible for the overall
business operation and formulating business plans. The Company considered that the division of responsibilities
between the Chairman and Chief Executive Officer is clearly established.

Non-executive Director and Independent Non-executive Directors

The Independent Non-executive Directors are appointed for a specific term and they are also subject to the
retirement by rotation at least once every three years in accordance with the articles of association of the Company
(the “Articles of Association”).

The three Independent Non-executive Directors are persons of high caliber, with academic and professional
qualifications in the fields of legal, accounting and finance. With their experience gained from various sectors, they
provide strong support towards the effective discharge of the duties and responsibilities of the Board.

Directors’ Continuous Professional Development

All Directors participate in continuous professional development to develop and refresh their knowledge and skills.
This is to ensure that their contribution to the Board remains sound and advances. Directors provide their records of
training to the Company from time to time. During the year, all Directors had read materials updating new practices,
rules and regulations to keep themselves updated on the roles, functions and duties of a listed company director.

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CORPORATE GOVERNANCE REPORT

Board Diversity Policy

The Board adopted a Board Diversity Policy on 17 December 2019 which sets out the approach to achieve diversity
on the Board.

Purpose
The Policy aims to set out the modus operandi to ensure that the Board possesses the appropriate skills, experience
and diversity of perspectives necessary to enhance the effectiveness and performance of the Board and to maintain
high standards of corporate governance.

General Policy
With a view to enhancing the effectiveness and performance of the Board and strengthening the business
development of the Company, the Company believes that it is important to promote diversity at the Board level.

In determining the Board’s composition, Board diversity shall consider various factors which include, gender, skills,
age, professional experience, knowledge, independence, cultural and educational background, ethnicity and length
of service. All appointments to the Board shall be based on merits and the positive contributions that the proposed
candidates will bring to the Board, the Company, its subsidiaries and/or its affiliated companies.

Measurable Objectives
To achieve gender diversity, selection of candidates will be based on a range of diversity perspectives with
reference to the Company’s business model and specific needs which includes gender, skills, age, professional
experience, knowledge, independence, cultural and educational background, ethnicity and length of service. The
ultimate decision will be based on merits and the contribution that the selected candidates will bring to the Board.

Succession planning to achieve gender diversity

In particular, in achieving gender diversity on the Board, the Company shall:

(a) have an appropriate balance of gender diversity with reference to stakeholders’ expectation and international
and local recommended best practices;

(b) identify and select female individuals with a diverse range of skills, experience and knowledge in different
fields from time to time and maintain a list of these female individuals who possess qualities to become Board
members in order to develop a pipeline of potential successors to the Board;

(c) continue to take steps to promote gender diversity at all levels, including at the senior management levels; and

(d) provide career development opportunities and resources in training female staff with the aim of promoting
them to the senior management levels or the Board level so that the Company will have a pipeline of female
senior management and potential successors to the Board.

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CORPORATE GOVERNANCE REPORT

Continuous Monitoring
The Nomination Committee will monitor the implementation of this Policy by conducting review of the Board’s
composition at least once annually taking into account the benefits of all relevant diversity aspects, and adhering to
this Policy when making recommendation on any Board appointments. The Nomination Committee will also ensure
that Board diversity is considered as part of the evaluation of the Board’s effectiveness.

For the year ended 31 December 2022, the Directors were satisfied, in general, with diversity of the Board and each
Board Committee in accordance with the Board Diversity Policy. The Board has reviewed this Policy and concluded
that it is effective.

Workforce Diversity
The Group aims to provide a diversified work environment to the workforce and provide equal opportunity to all
employees and will not discriminate on grounds of gender, race, age, nationality, religion and sexual orientation and
any other aspects of diversity. As of 31 December 2022, a total number of 326 employees were hired by the Group,
comprising 58.9% female and 41.0% male. The Board will continue to monitor and review the workforce diversity in
accordance with the Listing Rules.

Mechanisms for ensuring independent views and input to the Board

To ensure that independent views are available to the Board, the Board is committed to assess the independence of
the Board on an ongoing basis with regard to relevant factors such as the ability to provide constructive challenge
for management and the Board and to express one’s views which are independent of the management or other
fellow Directors.

The Company has established several channels to encourage the Independent Non-executive Directors (“INEDs”)
to express their views in an open manner and in a confidential manner. INEDs are entitled to seek further information
and documentation from the management on the matters to be discussed at board meetings and general meetings.
They may also have meetings with the Chairman privately. They may seek assistance from the Company’s Company
Secretary and, where necessary, independent advice from external professional advisers at the Company’s
expense.

The Nomination Committee will assess the independence of all the INEDs by reference to the independence criteria
set out in the Listing Rules to ensure that they can continue to exercise independent judgement.

For the year ended 31 December 2022, the Board considers that the INEDs are independent in character and
judgement, and they also meet the independence criteria set out in Rule 3.13 of the Listing Rules. The Board has
reviewed this Policy and concluded that it is effective.

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CORPORATE GOVERNANCE REPORT

Board Meetings
The Board holds board meetings regularly and at least four times a year at approximately quarterly intervals. Notices
of not less than fourteen days will be given for all regular board meetings to provide all Directors with an opportunity
to attend and propose matters to be discussed in the meeting. The Board held a meeting on 30 March 2023 and,
amongst other matters, considered and approved the 2022 Consolidated Financial Statements and Independent
Auditor’s Report.

The attendance record of each Director at the Board meeting and Board Committee meetings of the Company held
during the year ended 31 December 2022 and up to the date of this annual report is set out in the table below:

Name of Directors Number of attendance

Executive Directors
Mr. Fan Wing Ting (Chairman) 5/5
Ms. Chen Xingyi (Chief Executive Officer) 4/4
Mr. Kevin Trantallis 4/4
Mr. Fong Yat Ming 4/4
Ms. Fan Tammy 4/4

Independent Non-executive Directors

Mr. Cheung Chun Yue, Anthony (resigned on 1 July 2022) 2/2
Mr. Yu Chun Kau 5/5
Mr. Ng Kam Tsun 5/5
Mr. Sze Irons (appointed on 1 July 2022) 3/3

General Meetings
One general meeting has been held in 2022.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

BOARD COMMITTEES
The Board has established three committees, namely, the Audit Committee, the Remuneration Committee and the
Nomination Committee to oversee particular aspects of the Company’s affairs. All Board committees are established
with defined written terms of reference. The terms of reference of the Board committees are posted on the website
of the Company (www.forward-fashion.com) and the website of the Stock Exchange (www.hkexnews.hk) and are
available to the Shareholders upon request.

Audit Committee
The Audit Committee operates under the terms of reference approved by the Board. It is the Board’s responsibility
to ensure that an effective internal control and risk management framework exists within the entity. This includes
internal controls, risk management to deal with both the effectiveness and efficiency of significant business
processes, safeguarding of assets, maintenance of proper accounting records, and reliability of financial information
as well as non-financial considerations such as the benchmarking of operational key performance indicators.

The Board has delegated to the Audit Committee the responsibility for the establishment and the maintenance of
a framework of internal controls, risk management and ethical standards for the Group’s management. The Audit
Committee currently comprises three Independent Non-executive Directors, namely Mr. Yu Chun Kau (Chairman),
Mr. Ng Kam Tsun and Mr. Sze Irons (appointed on 1 July 2022). The Audit Committee has reviewed the annual
results of the Group for the year ended 31 December 2022.

During the year ended 31 December 2022, two Audit Committee meetings were held. The attendance record of
each member of the Audit Committee is set out in the table below:

Members of the Audit Committee Number of attendance

Mr. Cheung Chun Yue, Anthony (resigned on 1 July 2022) 1/1

Mr. Yu Chun Kau (Chairman) 2/2
Mr. Ng Kam Tsun 2/2
Mr. Sze Irons (appointed on 1 July 2022) 1/1

Remuneration Committee
The primary duties of the Remuneration Committee are to (i) develop and review the policies and the structure of the
remuneration for the Directors and senior management; (ii) evaluate the performance of, and make recommendations
on the remuneration packages and long-term incentive compensation or equity plans for, the Directors and senior
management; and (iii) evaluate and make recommendations on employee benefit arrangements.

During the year ended 31 December 2022, one Remuneration Committee meeting was held. The attendance record
of each member of the Remuneration Committee is set out in the table below:

Members of the Remuneration Committee Number of attendance

Mr. Cheung Chun Yue, Anthony (resigned on 1 July 2022) 1/1

Mr. Yu Chun Kau (Chairman) 1/1
Ms. Chen Xingyi 1/1
Mr. Sze Irons (appointed on 1 July 2022) N/A

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CORPORATE GOVERNANCE REPORT

Nomination Committee
The primary functions of the Nomination Committee are to make recommendations to the Board in relation to the
appointment and removal of Directors and senior management and on matters of succession planning. In assessing
the Board composition, the Nomination Committee would take into account various aspects set out in the Board
Diversity Policy, including but not limited to professional qualifications, regional and industry experience, educational
and cultural background, skills, industry knowledge, reputation and gender. The Nomination Committee will discuss
and agree on measurable objectives for achieving diversity on the Board, where necessary, and recommend them
to the Board for adoption.

In identifying and selecting suitable candidates for directorships, the Nomination Committee would consider
the candidate’s character, qualifications, experience, independence and other relevant criteria necessary to
complement the corporate strategy and achieve Board diversity, where appropriate, before making recommendation
to the Board.

During the year ended 31 December 2022, one Nomination Committee meeting was held. The attendance record of
each member of the Nomination Committee is set out in the table below:

Members of the Nomination Committee Number of attendance

Mr. Cheung Chun Yue, Anthony (resigned on 1 July 2022) 1/1

Mr. Fan Wing Ting (Chairman) 1/1
Mr. Yu Chun Kau 1/1
Mr. Sze Irons (appointed on 1 July 2022) N/A

Nomination Policy
The Board has on 31 March 2021 adopted a Nomination Policy in accordance with the CG Code, which sets out the
procedure for the election, appointment and re-appointment of Directors (the “Nomination Policy”). The Nomination
Policy specifies certain selection criteria and the Board succession planning consideration.

The Nomination Policy is reproduced as follows.

1. In carrying out its duties, the Nomination Committee shall give adequate consideration to the following
principles:

(a) in relation to Board composition – the Board should have a balance of skills, experience and diversity of
perspectives appropriate to the requirements of the Company’s business. It should include a balanced
composition of Executive and Independent Non-executive Directors so that there is a strong independent
element on the Board and independent judgment can be effectively exercised. Independent Non-
executive Directors should be of sufficient calibre and number for their views to carry weight; and

(b) in relation to appointment, re-election and removal of Directors – there should be a formal, considered
and transparent procedure for selection, appointment and reappointment of Directors, as well as plans in
place for orderly succession for appointments (if considered necessary). It should ensure that changes
to the Board composition can be managed without undue disruption. All Directors should be subject to
reelection at regular intervals in accordance with the Articles of Association.

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CORPORATE GOVERNANCE REPORT

2. The criteria to be applied in considering whether a candidate is qualified shall be his/her ability to devote
sufficient time and attention to the affairs of the Company and contribute to the diversity of the Board (which
includes but not limited to diversity in gender, age, experience, cultural and educational background,
expertise, skills and know-how) as well as the effective carrying out by the Board of the responsibilities which,
in particular, are set out as follows:

(a) participating in Board meetings to bring an independent judgment to bear on issues of strategy, policy,
performance, accountability, resources, key appointments and standards of conducts;

(b) taking the lead where potential conflicts of interests arise as Independent Non-executive Directors;

(c) serving on the Audit, Remuneration, Nomination and other governance committees, if invited;

(d) giving the Board and any committees on which he/she serves the benefit of his/her skills, expertise,
varied backgrounds and qualifications through attendance and participation;

(e) monitoring or scrutinising the Company’s performance in achieving agreed corporate goals and
objectives;

(f) conforming to any requirement, direction and regulation that may from time to time be prescribed by
the Board or contained in the constitutional documents of the Company or imposed by legislation or the
Listing Rules, where appropriate; and

(g) if the candidate is proposed to be appointed as an Independent Non-executive Director, his/her

independence shall be assessed in accordance with, among other things, the factors as set out in Rule
3.13 of the Listing Rules, subject to any amendments as may be made by the Stock Exchange from time
to time.

Director Nomination Procedure

Subject to the provisions of the Articles of Association and the Listing Rules, if the Board determines that an
additional or replacement Director is required, the Nomination Committee will deploy multiple channels for identifying
suitable candidates, including referral from Directors, the Shareholders, management, advisors of the Company and
external executive search firms.

Where a retiring Director, being eligible, offers himself/herself for re-election, the Nomination Committee will consider
and, if appropriate, recommend such retiring Director to stand for re-election at a general meeting. A circular
containing the requisite information on such retiring Director will be sent to the Shareholders prior to a general
meeting in accordance with the Listing Rules.

Shareholders of the Company may nominate a person to stand for election as a Director at a general meeting in
accordance with the Articles of Association and applicable laws and regulations. The procedures for such proposal
are stated on page 30 of this annual report.

The Board will from time to time review the Nomination Policy and monitor its implementation to ensure its continued
effectiveness and compliance with regulatory requirements and good corporate governance practices.

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CORPORATE GOVERNANCE REPORT

DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the financial statements of the Company for the year
ended 31 December 2022. The Directors are not aware of any material uncertainties relating to events or conditions
that may cast significant doubt upon the Company’s ability to continue as a going concern. The statement of the
Independent Auditor of the Company about their reporting responsibilities on the financial statements is set out in
the Independent Auditor’s Report on pages 54 to 59 of this annual report.

CORPORATE CULTURE
The Board has laid down the Group’s purposes, values and strategy and has ensured that they aligned with the
Group’s culture. The Group is committed to adopt a proactive and prudent operating strategy to introduce to its
customers high-quality fashion brands and to enrich the number and diversity of fashion brands offered by the
Group. The Group will continue to adopt a cautious approach in exploring potential investments and business
opportunities to achieve sustainable growth and to deliver attractive and sustainable returns to the Shareholders.

Among the Company’s core values, the Group places strong emphasis on employee relations and the culture
of ethical conduct and integrity by instilling the element of integrity into every aspect of our businesses. Our
Directors, management and staff are required to act lawfully, ethically and responsibly, which are part and parcel
of the Company’s culture. In promoting and maintaining this culture, relevant trainings are conducted from time
to time to strengthen the requisite standards and the norms in respect of ethics and integrity of our business. This
culture of integrity has also been stated in the Employee Handbook and embedded in various policies such as the
Anti-Corruption Policy and the Whistleblowing Policy. A healthy corporate culture is important to good corporate
governance which is crucial for achieving sustainable long-term success of the Group.

ANTI-CORRUPTION POLICY
The Company is committed to observing and upholding high standards of business integrity, honesty, fairness,
impartiality, and transparency in its business dealings.

With such commitment in mind, the Company has established and adopted an Anti-Corruption Policy to strengthen
the standards of conduct of its Directors and employees and to ensure that our Directors and employees adhere
to high standard of business ethics and comply with the applicable laws and regulations of the jurisdictions in
which the Group operates. This Policy outlines the Group’s expectation on maintaining high standards of ethics and
integrity, and the framework on prevention, detection, treatment and reporting of any suspected fraud, corruption
and irregularities.

The Group conducts periodic internal monitoring and assessments on bribery and corruption risks to ensure bribery
and corrupt activities are prevented.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

WHISTLEBLOWING POLICY
The Company has adopted a Whistleblowing Policy to facilitate the achieving of high standards of openness,
probity, and accountability. This Policy creates a system for a Director, an employee or a third party (who includes
customers, suppliers, subcontractors) to report to the Group any suspected fraud, malpractice, misconduct, or
irregularity. A Director, an employee or a third party who has legitimate concern can report to the Group by mail or
email or by attending the Group’s office. The Group will endeavor to protect the whistleblower from detriments and
all reports will be kept confidential.

During the year under review, no incident of fraud or misconduct that has material effect on the Group’s financial
statements and overall operations has been reported. The Audit Committee of the Company will continue to review
this Policy periodically to ensure its effectiveness.

DIVIDEND POLICY
The Company has adopted a dividend policy which stated that in recommending or declaring dividends, the
Company shall maintain adequate cash reserves for meeting its working capital requirements and future growth as
well as its shareholder’s value. The Board may determine and pay to the Shareholders such interim dividends and
special dividends as it considers appropriate and recommend the payment of final dividends which are required to
be approved by the Shareholders of the Company in general meetings.

In determining/recommending the frequency, amount and form of any dividend in any financial year/period, the
Board shall consider the following factors:

– the actual and expected financial performance of the Group;

– economic conditions and other internal or external factors that may have an impact on the business or financial
performance and position of the Group;

– the Group’s business strategies and operations, including future cash commitments and investment needs to
sustain the long-term growth aspect of the business;

– the current and future liquidity position and capital requirements of the Group; and

– any other factors that the Board deems appropriate.

The Company does not have any pre-determined dividend payout ratio.

AUDITOR’S REMUNERATION
An analysis of the remuneration paid or payable to the external auditor of the Company, PricewaterhouseCoopers,
in respect of audit and non-audit services provided to the Group for the year ended 31 December 2022 is set out
below:

Service Category
Services rendered Fees Paid/Payable
HKD’000

Audit service 2,216

The non-audit services mainly include professional services on consultation services on employee stock ownership
plans.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

RISK MANAGEMENT AND INTERNAL CONTROL

A sound and effective system of risk management and internal control is designed to achieve the Group’s strategic
objectives and safeguard shareholder investments and the Group’s assets. Such systems are designed to manage
rather than eliminate the risk of failure to achieve strategic objectives, and can only provide reasonable and not
absolute assurance against material misstatement or loss.

The Board acknowledges its responsibility to establish, maintain, and review the effectiveness of the Group’s risk
management and internal control systems, where management is responsible for the design and implementation
of the risk management and internal control systems to manage risk. With the support from the Audit Committee,
the Board monitors the Group’s risk exposures, oversees the actions of management and monitors the overall
effectiveness of the risk management and internal control systems on an ongoing basis. Management is responsible
for setting the appropriate tone from the top, performing risk assessments, and owning the design, implementation
and maintenance of internal control. Policies and procedures form the basis and set forth the control standards
required for functioning of the Group’s business entities. These policies and procedures covered various aspects,
including operations, finance & accounting, human resources, regulatory & compliance, delegation of authority, etc.

2. Risk 4. Risk
• Identify the Group’s Assessment • Propose and Report
key risks in each recommend mitigating
of the following • Design risk controls for each • Report to the
categories: business assessment identified key risk and Board and senior
& strategic, questionnaire to assist process owners management on the
operational, and understand and assets or business units to implementation of the
regulatory compliance, the risk level of each implement relevant remedial measures.
environmental, social, key risk and whether remedial measures. • Follow-up on the
and governance. the Group’s existing implementation status
procedures and of these remedial
1. Risk controls are adequate. 3. Risk measures.
Identification Response

An annual enterprise-wide risk assessment has been performed to evaluate the nature and extent of the risks to
which the Group is willing to take in achieving its strategic objectives. During the risk assessment process, the
Group has identified a number of key risks that may impact the Group’s strategic objectives in responding to the
changes in the business and external environment. These risks are prioritised according to the likelihood of their
occurrence and the significance of their impact on the business of the Group.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

INTERNAL AUDIT
The Group has engaged Internal Audit Function which reports to the Audit Committee. The Internal Audit Function
is independent from operation management in performing internal audit reviews. Audits are conducted according
to the internal audit plan approved by the Audit Committee to review the Group’s major operational, financial,
compliance and risk management controls. During the process of the internal audits, the Internal Audit Function
will identify internal control deficiencies and weaknesses and proposed recommendations for improvements.
Internal audit findings and control deficiencies are communicated to Internal Audit Function and the management,
who is responsible for ensuring the deficiencies are rectified within a reasonable period. A follow-up review is also
performed to ensure the remedial actions are implemented.

REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

The Board is responsible for maintaining an adequate risk management and internal control systems to safeguard
shareholder investments and the Group assets. For the year ended 31 December 2022, the Board along with the
Audit Committee has conducted a comprehensive review of the Company’s risk management and internal control
systems. The review has covered the fiscal year of 2022 and all material controls, including operational, financial
and compliance controls, and considered the changes in the nature and extent of significant risks as well as the
Company’s ability to respond to changes in its business and the external environment. The Board considers that the
Company has complied with the risk management and internal control provisions of the CG Code, and considers
such systems are effective and sufficient. The Board has also reviewed the resources of accounting, internal audit
and financial reporting functions, staff qualifications and experience, training programs and related budgets, as well
as procedures related to financial reporting and compliance with the Listing Rules, and considered them effective
and sufficient.

INSIDE INFORMATION
The Group is aware of its obligation under relevant sections of the Securities and Futures Ordinance and Listing
Rules regarding disclosure of inside information/price sensitive information. The Company has implemented
procedures and internal controls for the handling and dissemination of inside information, including:

• having procedures to preserve the confidentiality of price-sensitive and/or inside information relating to the
Group;

• communicating such procedures to all Directors, senior management and relevant employees who are likely to
have access to inside information, and reminding them from time to time that they are required to comply with
such procedures; and

• conducting its affairs with close regard to the disclosure requirement under the Listing Rules and the related
guidance.

COMPANY SECRETARY
Mr. Kevin Trantallis, who is the Company Secretary of the Company, reports directly to the Board and is responsible
for, inter alia, providing updated and timely information to all Directors from time to time. During the year ended 31
December 2022, he has undertaken not less than 15 hours of relevant professional training in accordance with Rule
3.29 of the Listing Rules.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

COMMUNICATION WITH SHAREHOLDERS AND INVESTORS/INVESTOR

RELATIONS
The Company considers that effective communication with the Shareholders is essential in enhancing investor
relations and investor understanding of the Group’s business performance and strategies, hence a Shareholders
Communication Policy has been adopted.

As stated in this Policy, the Company has established the following channels of communication with its Shareholders:

• Corporate communications such as annual and interim reports, announcements and circulars are issued in
printed form and are available on the Stock Exchange’s website at www.hkexnews.hk and the Company’s
website at www.forward-fashion.com;

• The Company’s website information will be updated from time to time to inform the Shareholders and investors
of the latest development of the Company;

• The annual general meetings and extraordinary general meetings provide an opportunity for communication
between the Shareholders and the Board; and

• The Shareholders may put forward their enquires to the Company’s principal place of business in Hong
Kong and to Tricor Investor Services Limited, the Hong Kong branch share registrar and transfer office of the
Company by post or by email.

The Board has reviewed the implementation and effectiveness of this Policy and concluded that it is effective.

SHAREHOLDERS’ RIGHTS
To safeguard Shareholders’ interests and rights, separate resolutions should be proposed for each substantially
separate issue at general meetings, including the election of individual Directors. All resolutions put forward at
general meetings will be voted on by poll pursuant to the Listing Rules and the poll results will be posted on the
website of the Company and the website of the Stock Exchange after each general meeting.

Convening an Extraordinary General Meeting

Pursuant to article 58 of the Articles of Association, any one or more Shareholders holding at the date of deposit of
the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general
meetings of the Company shall at all times have the right, by written requisition to the Board or the Company
Secretary of the Company, to require an extraordinary general meeting to be called by the Board for the transaction
of any business specified in such requisition; and such meeting shall be held within two months after the deposit
of such requisition. If within 21 days of such deposit the Board shall fail to proceed to convene such meeting the
requisitionist(s) himself/herself/themselves may do so in the same manner, and all reasonable expenses incurred by
the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.

Putting Forward Proposals at General Meetings

There are no provisions in the Articles of Association or Companies Law of the Cayman Islands for the Shareholders
to move new resolutions at general meetings. Shareholders who wish to move a resolution may request the
Company to convene a general meeting in accordance with the procedures set out in the preceding paragraph.

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Forward Fashion (International) Holdings Company Limited

CORPORATE GOVERNANCE REPORT

Putting Forward Enquiries to the Board

For putting forward any enquiries to the Board, the Shareholders may send written enquiries to the Company.

Contact Details
Shareholders may send their enquiries or requests as mentioned above to the following:

Address: Suite 1204, 12/F., Tower 6, The Gateway, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong. (For the
attention of the Board of Directors)

Email: ir@forward-fashion.com

For the avoidance of doubt, the Shareholder(s) must deposit and send the original duly signed written requisition,
notice or statement, or enquiry (as the case may be) to the above address and provide their full name, contact
details and identification in order to give effect thereto. Shareholders’ information may be disclosed as required by
law.

CONSTITUTIONAL DOCUMENTS
During the year ended 31 December 2022, there is no change to the constitutional documents of the Company.

The Stock Exchange of Hong Kong Limited has recently announced various amendments to the Listing Rules
to implement the proposals under the “Consultation Conclusion Paper on Listing Regime for Overseas Issuers”
published on 19 November 2021. The amendments to the Listing Rules include the introduction of one common set
of core shareholder protection standards (set out in Appendix 3 to the Listing Rules) that will apply to all listed issuers
to provide the same level of protection to all investors.

To conform with the Core Shareholder Protection Standards and to keep up with technological developments and
to provide flexibility to the Company in relation to the conduct of general meetings, the Directors recommended that
the articles of association of the Company be amended. A proposal on amending the articles of association and the
adoption of a new articles of association will be put forward at the forthcoming annual general meeting and details
of the proposed amendments will be set out in the notice of the forthcoming annual general meeting.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

The directors of the Company (the “Directors”) are pleased to present their report together with the audited
consolidated financial statements of the Group for the year ended 31 December 2022.

PRINCIPAL ACTIVITIES
The Company is an investment holding company and its subsidiaries (together the “Group”) are principally engaged
in the retail of fashion apparel of international brands ranging from established designer label brands, popular
global brands to up-and-coming brands through our multi-brand and multi-store business model in Mainland China,
Macau, Hong Kong and Taiwan. Particulars of the principal subsidiaries of the Company are set out in Note 42 to
the consolidated financial statements respectively.

An analysis of the Group’s performance for the year by geographical segment is set out in Note 5 to the consolidated
financial statements.

FINANCIAL RESULTS
The results of the Group for the year ended 31 December 2022 are set out in the consolidated statements of profit or
loss and the consolidated statements of comprehensive income on pages 60 to 61.

DIVIDEND
The board of the Company (the “Board”) does not recommend the declaration of a final dividend for the year ended
31 December 2022 (2022 interim dividend (in lieu of a final dividend): Nil).

ANNUAL GENERAL MEETING

The annual general meeting of the Company is scheduled to be held on Thursday, 1 June 2023.

CLOSURE OF REGISTER OF MEMBERS

For determining the entitlement to attend and vote at the forthcoming annual general meeting, the register of
members of the Company will be closed from Thursday, 25 May 2023 to Thursday, 1 June 2023 (both days
inclusive), during which period no transfer of shares of the Company will be registered. In order to be eligible to
attend and vote at the annual general meeting, all transfer forms accompanied by relevant share certificates must
be lodged with Tricor Investor Services Limited at 17/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong for
registration not later than 4:30 p.m. on Wednesday, 24 May 2023.

BUSINESS REVIEW
A review of the business of the Group during the year and a discussion on the Group’s future business development
are set out in the section headed “Message from the Chairman” as well as the section headed “Management
Discussion and Analysis” of this annual report respectively. Discussions on the Group’s relationships with its key
stakeholders are also set out in the section headed “Message from the Chairman” of this annual report.

COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS

As far as the Board and management are aware, the Group has complied in material respects with the applicable
laws and regulations that have a significant impact on the business and operation of the Group. During the year,
there is no material breach of or non-compliance with the applicable laws and regulations by the Group.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

ENVIRONMENTAL POLICIES AND PERFORMANCE

The Group is committed to building an environmentally-friendly corporation that pays close attention to conserving
natural resources. The Group strives to minimise its adverse environmental impact by saving electricity and
encouraging recycle of office supplies and other materials.

The environment, social and governance report of the Company for the year ended 31 December 2022 containing
the information required under Appendix 27 to the Rules Governing the Listing of Securities (the “Listing Rules”)
will be published on the website of the Company and the website of The Stock Exchange of Hong Kong Limited (the
“Stock Exchange”) in accordance with the provisions of the Listing Rules.

FINANCIAL SUMMARY
A summary of the published results and of the assets and liabilities of the Group for the past five years ended 31
December 2022 are set out on page 146 of this annual report.

SHARE CAPITAL
Details of the movements in the share capital of the Company are set out in Note 27 to the consolidated financial
statements.

RESERVES
Details of the movements in the reserves of the Group and the Company during the year are set out in the
consolidated statement of changes in equity, Note 28 and Note 41 to the consolidated financial statements.

DISTRIBUTABLE RESERVES
As of 31 December 2022, the reserves of the Company available for distribution to the shareholders of the Company
amounted to approximately HKD236 million (2021: HKD300 million).

RETIREMENT BENEFIT SCHEMES

The Group participated in various retirement benefit schemes in accordance with the relevant rules and regulations
in the Mainland China, Macau, Hong Kong and Taiwan.

TAX RELIEF AND EXEMPTION

The Company is not aware of any relief from taxation available to the shareholders of the Company by reason of
their holding of the shares.

EQUITY-LINKED AGREEMENTS
No equity-linked agreements has been entered into by the Company during the year ended 31 December 2022 or
subsisted at the end of the year.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

DIRECTORS
The Directors during the year and up to the date of this report are:

Executive Directors
Mr. Fan Wing Ting (Chairman)
Ms. Chen Xingyi (Chief Executive Officer)
Mr. Kevin Trantallis
Mr. Fong Yat Ming
Ms. Fan Tammy

Independent Non-executive Directors

Mr. Yu Chun Kau
Mr. Cheung Chun Yue, Anthony (resigned on 1 July 2022)
Mr. Ng Kam Tsun
Mr. Sze Irons (appointed on 1 July 2022)

EMOLUMENTS POLICY
The Group remunerates its employees, including the Directors, on the basis of their merit, qualifications and
competence. The Group’s employees are subject to regular job performance reviews which determine their
promotion prospects and compensation. Subject to the Group’s profitability, the Group may also provide
discretionary bonuses to its employees as an incentive for their contribution to the Group.

Details of the remuneration of the Directors for year ended 31 December 2022 are set out in Note 39 to the
consolidated financial statements.

DIRECTORS’ SERVICE CONTRACTS

Each of the Executive Directors and Independent Non-executive Directors, has entered into a service contract or an
appointment letter with the Company for a term of three years, commencing from the Listing Date until terminated
by either party giving not less than three months’ notice in writing to the other. All of them are subject to retirement
by rotation and re-election at the annual general meeting in accordance with the Articles of Association. Their
emoluments are determined by the Board by reference to their experience, responsibilities and duties with the
Company and shall be reviewed annually by the Remuneration Committee.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

NON-COMPETITION UNDERTAKING
In order to avoid any potential competition arising between the Group and the Controlling Shareholders, Mr. Fan
Wing Ting and Gold Star Fashion Limited (each a “Covenantor” and collectively the “Covenantors”) have entered
into the deed of non-competition with the Company on 17 December 2019 (the “Deed of Non-competition”).
Pursuant to the Deed of Non-competition, each of the Covenantors jointly, severally, unconditionally and irrevocably
warrants and undertakes to the Company (for itself and as trustee for each of its subsidiaries) that from the Listing
Date and ending on the occurrence of the earliest of (i) the date on which the Shares cease to be listed on the
Stock Exchange; (ii) the date on which the Covenantors cease to be a Controlling Shareholder; or (iii) the date on
which the Covenantors beneficially own or become interested jointly or severally in the entire issued share capital
of the Company, he/she/it will not, and will use his/her/its best endeavours to procure any Covenantor and his/her/
its close associates (as defined in the Listing Rule and excluding the Company and its subsidiaries) (“Controlled
Person(s)”) and any Covenantor and/or any company directly or indirectly controlled by any Covenantor, excluding
any member of the Group (“Controlled Company(ies)”) not to, either on his/her/its own or in conjunction with any
person, body corporate, partnership, joint venture or other contractual agreement, whether directly or indirectly, for
profit or not, among other things, carry on, participate in, hold, engage in, be interested in, acquire or operate (in
each case whether as a shareholder, director, partner, agent, employee, or otherwise, and whether for profit, reward
or otherwise), or provide any form of assistance to any person, firm or company (except members of the Group) to
conduct the business or activity which, directly or indirectly, compete or likely to compete with the business carried
on or contemplated to be carried on by the Company or any of its subsidiaries in Mainland, Hong Kong, Macau and
Taiwan and such other places as the Company or any of its subsidiaries may conduct or carry on business from
time to time.

Each of the Covenantors further undertakes that if any Controlled Company(ies) is offered or becomes aware of
any business opportunity (the “New Business Opportunity”) which directly or indirectly engages in or owns any
business or activity which, directly or indirectly, competes or is likely to compete with the business carried on or
contemplated to be carried on by the Group, he/she/it shall notify the Group in writing, and he/she/it shall not, and
shall procure that his/her/its Controlled Person(s) or Controlled Company(ies) not to, invest or participate in any
project or New Business Opportunity, unless such project or New Business Opportunity shall have been rejected
by the Company. The Board of Directors (including the independent non-executive Directors) will be responsible
for reviewing and considering whether or not to take a New Business Opportunity referred by a Covenantor or
Controlled Company(ies).

During the year ended 31 December 2022, the Company had received notice in writing from Mr. Fan Wing Ting in
respect of a New Business Opportunity relating to investment in the Chinese Brands Platform (the “CB Platform”)
which intends to invest in clothing brand projects, including start-up clothing brand projects, for the purpose of
cultivating the development of designer brands in China, which might compete with the existing and future business
of the Group and which were offered to or came to be the knowledge of Mr. Fan Wing Ting. The Board of Directors
(including the independent non-executive Directors) reviewed and considered whether or not to accept the New
Business Opportunity relating to the CB Platform referred by Mr. Fan Wing Ting, and it was resolved that due to the
high risk and funding requirement of the potential investment in the CB Platform, the Company would not invest in it
and the New Business Opportunity relating to the CB Platform was unanimously rejected by the Board of Directors.
After receiving the non-acceptance notice from the Company, Mr. Fan Wing Ting decided to engage in the New
Business Opportunity along with Ms. Chen Xingyi and became interested in the CB Platform through the entities as
set out below in the section headed “Directors’ Interests in Competing Business”.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

The independent non-executive Directors have reviewed the status of compliance and declared that they are not
aware of any non-compliance of the Deed of Non-competition by the Covenantors during the financial year ended
31 December 2022.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

For the year ended 31 December 2022, interests of directors of the Company in competing businesses required to
be disclosed pursuant to Rule 8.10 of the Listing Rules were as follows:

Nature of
Name of director Name of company competing businesses Nature of interest

Mr. Fan Wing Ting 深圳致尚品牌管理有限責任公司 Fashion retail in China Director &
through the CB Platform Shareholder
榮信貿易（深圳）有限責任公司 Fashion retail in China Shareholder
through the CB Platform

Ms. Chen Xingyi 深圳致尚品牌管理有限責任公司 Fashion retail in China Shareholder

through the CB Platform
榮信貿易（深圳）有限責任公司 Fashion retail in China Shareholder
through the CB Platform

Having considered the size and scope of the above businesses, the Board believes that there is unlikely to be any
significant competition with the business of the Group. Although Mr. Fan Wing Ting serves as the director of 深圳
致尚品牌管理有限責任公司, he is not involved with the day-to-day operations of the projects that it invests in. The
Board is of the view that the Group is capable of carrying on the business of the Group independent of, and at arm’s
length from the businesses of the above companies. When making decisions on the Group’s business and in the
performance of their duties as Directors of the Company, the above Directors have acted and will act in the best
interest of the Group and its shareholders.

Save as disclosed above, as at 31 December 2022, none of our Directors had any interest in any business which
competes or is likely to compete, either directly or indirectly with our Company’s business which would require
disclosure under Rule 8.10 of the Listing Rules.

PERMITTED INDEMNITY PROVISION

Pursuant to the Company’s Articles of Association, the Directors shall be indemnified and secured harmless out of
the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they
shall or may incur or sustain by reason of any act done, concurred in or omitted in or about the execution of their
duty.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

SHARE OPTION SCHEME

The Company has conditionally adopted a share option scheme (the “Share Option Scheme”) pursuant to the
written resolutions of the Company’s shareholders and Directors passed on 17 December 2019 which took effect
upon on 13 January 2020 (the “Listing Date”). The following is a summary of the principal terms of the Share Option
Scheme:

1. Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to provide an incentive or reward for the Grantees (as defined
below) for their contribution or potential contribution to the Group.

2. Participants of the Share Option Scheme and the basis of determining the eligibility of the
participants
The Board may, subject to and in accordance with the provisions of the Share Option Scheme and the
Listing Rules, at its discretion grant options to any full-time or part-time employees, consultants or potential
employees, consultants, executives or officers (including Directors) of the Company or any of its subsidiaries,
and any suppliers, customers, consultants, agents and advisors who, in the sole opinion of the Board has
contributed or will contribute to the Group (collectively, the “Eligible Participants”) and whom the Board may
in its absolute discretion select and subject to such conditions as it may think fit.

3. Life of the Share Option Scheme

The Share Option Scheme shall be valid and effective for a period ending on the tenth anniversary of the
Listing Date (the “Scheme Period”), after which time no further option will be granted, but the provisions of
the Share Option Scheme shall remain in full force and effect in all other respects to the extent necessary to
give effect to the exercise of any options granted prior thereto or otherwise as may be required in accordance
with the provisions of the Share Option Scheme and options granted prior thereto but not yet exercised shall
continue to be valid and exercisable in accordance with the Share Option Scheme.

4. Grant of options
(a) Making of offer
An offer shall be made to an Eligible Participant by an offer document in such form as the Board may
from time to time determine (the “Offer Document”), requiring the participant to undertake to hold the
option on the terms on which it is to be granted and to be bound by the provisions of the Share Option
Scheme.

(b) Acceptance of offer

An option shall be deemed to have been granted to (subject to certain restrictions in the Share Option
Scheme), and accepted by, the Eligible Participant (the “Grantee(s)”) and to have taken effect upon the
issue of an option certificate after the duplicate Offer Document comprising acceptance of the option
duly signed by the Grantee, together with a remittance in favour of the Company of HKD1.00 by way
of consideration for the grant of the option is received by the Company on or before the last day for
acceptance set out in the Offer Document. The remittance is not in any circumstances refundable and
shall be deemed as part payment of the Exercise Price (as defined below). Once accepted, the option is
granted as from the date on which it was offered to the Grantee (the “Offer Date”).

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REPORT OF THE DIRECTORS

(c) Restrictions on time of grant

(i) No grant of options shall be made after any inside information has come to the knowledge of the
Company until such inside information has been announced pursuant to the requirements of the
Listing Rules. In particular, no option shall be granted during the period of one month immediately
preceding the earlier of:

(1) the date of the Board meeting as shall have been notified to the Stock Exchange for the
approval of the Company’s results for any year, half-year, quarterly or any other interim period
(whether or not required under the Listing Rules);

(2) the deadline for the Company to publish an announcement of its results for any year or half-
year under the Listing Rules or quarterly or any other interim period (whether or not required
under the Listing Rules), and ending on the actual date of the results announcement for
such year, half year, quarterly or interim period (as the case may be). The period during
which no option may be granted will cover any period of delay in the publication of a results
announcement;

(3) for so long as the shares of the Company (the “Share(s)”) are listed on the Stock Exchange,
no options may be granted to a Director on any day which financial results of the Company
are published;

(4) during the period of 60 days immediately preceding the publication date of the annual results
or, if shorter, the period from the end of the relevant financial year up to the publication date
of the results; and

(5) during the period of 30 days immediately preceding the publication date of the quarterly
results (if any) and half-year results or, if shorter, the period from the end of the relevant
quarterly or half-year.

(d) Grant to connected persons

Any grant of options to a connected person must be approved by all independent non-executive
Directors (excluding any independent non-executive Director who is also a proposed Grantee (as
defined below) of the options, the vote of such independent non-executive Director shall not be counted
for the purposes of approving the grant).

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

(e) Grant to substantial shareholders and independent non-executive directors

Without prejudice to sub-paragraph 4(c) above, any grant of options to a substantial shareholder or
an independent non-executive Director of the Company or any of their respective associates shall be
subject to, in addition to the approval of the Company’s independent non-executive Directors in sub-
paragraph (d) above, the issue of a circular by the Company to its shareholders and the approval of
the Company’s shareholders in general meeting if the Shares issued and to be issued upon exercise
of all options already granted and proposed to be granted to him (whether exercised, cancelled or
outstanding) under the Share Option Scheme or any other scheme in the twelve (12) months period up to
and including the Offer Date:

(i) would represent in aggregate more than 0.1%, or such other percentage as may from time to time
be provided under the Listing Rules, of the Shares in issue on the Offer Date; and

(ii) would have an aggregate value, based on the official closing price of the Shares as stated in the
daily quotation sheets of the Stock Exchange on the Offer Date, in excess of HKD5,000,000 (or
such other amount as shall be permissible under the Listing Rules from time to time).

(f) Proceedings in general meeting to approve the grant of option

At the general meeting to approve the proposed grant of options under sub-paragraph 4(e) above,
the Grantee, his associates and all core connected persons of the Company must abstain from voting.
At such general meeting, the vote to approve the grant of such options must be taken on a poll in
accordance with the Articles and the relevant provisions of the Listing Rules.

(g) Performance target

The Board has the discretion to require a particular Grantee to achieve certain performance targets
specified at the time of grant before any option granted under the Share Option Scheme can be
exercised. There is no specific performance targets stipulated under the terms of the Share Option
Scheme and the Board currently has no intention to set any specific performance targets on the exercise
of any options granted or to be granted under the Share Option Scheme.

5. Exercise price
The price per Share at which a Grantee may subscribe for Shares upon exercise of an option (the “Exercise
Price”) shall, subject to any adjustment pursuant to paragraph 7 below, be determined by the Board in its sole
discretion but in any event shall be at least the highest of:

(i) the official closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on the
Offer Date;

(ii) the average of the official closing prices of the Shares as stated in the Stock Exchange’s daily quotation
sheets for the five business days immediately preceding the Offer Date; and

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

(iii) the nominal value of a Share;

provided that for the purpose of determining the Exercise Price under sub-paragraph 5(ii) above where the
Shares have been listed on the Stock Exchange for less than five business days preceding the Offer Date, the
issue price of the Shares in connection with such listing shall be deemed to be the closing price of the Shares
for each business day falling within the period before the listing of the Shares on the Stock Exchange.

6. Maximum number of Shares available for subscription

(a) Scheme limit
Subject to sub-paragraphs 6(b) and 6(c) below, the maximum number of Shares in respect of which
options may be granted under the Share Option Scheme and any other share option schemes of the
Company shall not in aggregate exceed the number of Shares that shall represent 10% of the total
number of Shares in issue upon Listing upon Listing (the “Scheme Limit”). For the purpose of calculating
the Scheme Limit, options which have lapsed in accordance with the terms of the relevant scheme shall
not be counted.

(b) Renewal of scheme limit

The Company may seek approval by the Company’s shareholders in general meeting for renewing the
Scheme Limit provided that the total number of Shares in respect of which options may be granted under
the Share Option Scheme and any other schemes of the Company under the Scheme Limit as renewed
from time to time must not exceed 10% of the total number of Shares in issue as at the date of the
Company’s shareholders’ approval. Options previously granted under the Share Option Scheme, whether
outstanding, cancelled, lapsed in accordance with its applicable rules or already exercised, will not be
counted for the purpose of calculating the limit as renewed. For the purpose of seeking the approval
of the Company’s shareholders under this sub-paragraph 6(b), a circular containing the information
required under Rule 17.02(2) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the
Listing Rules must be sent to the Company’s shareholders.

(c) Grant of options beyond scheme limit

The Company may seek separate approval by the Company’s shareholders in general meeting for
granting options beyond the Scheme Limit provided that the options in excess of the Scheme Limit are
granted only to Eligible Participants who are specifically identified by the Board before such approval is
sought.

For the purpose of seeking the approval of the Company’s shareholders under this sub-paragraph (6)
(c), the Company must send a circular to the Company’s shareholders containing a generic description
of the specified Eligible Participants who may be granted such options, the number and terms of the
options to be granted, the purpose of granting such options to the Grantees with an explanation as to
how the terms of options serve such purpose and the information required under Rule 17.02(2)(d) of the
Listing Rules and the disclaimer as required under Rule 17.02(4) of the Listing Rules.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

(d) Maximum number of Shares issued pursuant to the Share Option Scheme
Notwithstanding anything to the contrary in the Share Option Scheme, the maximum limit on the number
of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised
under the Share Option Scheme and any other schemes of the Company must not in aggregate exceed
such number of Shares as shall represent 30% of the Shares in issue from time to time. No options may
be granted under any schemes of the Company or subsidiaries if such grant will result in this 30% limit
being exceeded.

(e) Grantee’s maximum holding

Unless approved by the Company’s shareholders in general meeting in the manner prescribed in the
Listing Rules, the Board shall not grant options to any Grantee if the acceptance of those options would
result in the total number of Shares issued and to be issued to that Grantee on exercise of his options
during any twelve (12) months period up to the Offer Date exceed 1% of the total Shares then in issue.

Where any further grant of options to a Grantee, if exercised in full, would result in the total number of
Shares already issued or to be issued upon exercise of all options granted and to be granted to such
Grantee (including exercised, cancelled and outstanding options) in any twelve (12) months period up
to and including the date of such further grant exceed 1% of the total number of Shares in issue, such
further grant must be separately approved by the Company’s shareholders in general meeting with
such Grantee and his close associates (or associates if the Grantee is a connected person) abstaining
from voting. The Company must send a circular to the Company’s shareholders and the circular must
disclose the identity of the Grantee, the number and terms of the options to be granted and options
previously granted to such Grantee and the information required under Rule 17.02(2) of the Listing Rules
and the disclaimer required under Rule 17.02(4) of the Listing Rules. The number and terms (including
the Exercise Price) of the options to be granted to such Grantee must be fixed before the Company’s
shareholders’ approval. The date of the meeting of the Board for proposing such further grant of option
should be taken as the date of grant for the purpose of calculating the Exercise Price.

(f) Adjustment
The number of Shares subject to the Share Option Scheme shall be adjusted in such manner as the
Company’s independent financial advisor shall certify to the Board to be appropriate, fair and reasonable
in accordance with paragraph 7 below but in any event shall not result in the number of Shares which
may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share
Option Scheme and the other schemes exceed the limit set out in sub-paragraph 6(d).

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

7. Capital restructuring
(a) Adjustment of options
In the event of any capitalisation issue, rights issue, open offer (if there is a price dilutive element), sub-
division or consolidation of Shares, or reduction of capital of the Company in accordance with applicable
laws and regulatory requirements, such corresponding alterations (if any) shall be made (except on an
issue of securities of the Company as consideration in a transaction which shall not be regarded as a
circumstance requiring alteration or adjustment) in:

(i) the number of Shares subject to any outstanding option;

(ii) the Exercise Price; and/or

(iii) the number of Shares subject to the Share Option Scheme;

as the approved independent financial advisor shall at the request of the Company or any Grantee,
certify in writing either generally or as regards any particular Grantee, to be in their opinion fair and
reasonable provided that any such alterations shall be made on the basis that a Grantee shall have as
near as possible the same proportion of the equity capital of the Company (as interpreted in accordance
with the supplementary guidance attached to the letter from the Stock Exchange dated 5 September
2005 to all the issuers relating to share option scheme) as that to which the Grantee was previously
entitled to subscribe had he exercised all the options held by him immediately before such adjustments
and the aggregate Exercise Price payable by a Grantee on the full exercise of any option shall remain as
nearly as possible the same as (but shall not be greater than) it was before such event, but not so that
the effect would be to enable any Share to be issued to a Grantee at less than its nominal value, provided
that no adjustment to the Exercise Price and number of Shares should be made to the advantage of the
Eligible Participants without specific prior approval of the Company’s shareholders.

(b) Independent financial advisor confirmation

On any capital reorganisation, independent financial advisor shall certify in writing to the Board that the
adjustments satisfy the requirements set out in Rule 17.03(13) of the Listing Rules and the note thereto
and the supplementary guidance attached to the letter from the Stock Exchange dated 5 September
2005 to all issuers relating to share option schemes and/or such other requirement prescribed under the
Listing Rules from time to time.

8. Cancellation of options
Any cancellation of options granted but not exercised must be approved in writing by the Grantees of the
relevant options. For the avoidance of doubt, such approval is not required in the event any option is cancelled
pursuant to paragraph 9. Where the Company cancels options, the grant of new options to the same Grantee
may only be made under the Share Option Scheme within the limits set out in sub-paragraphs 6(a), 6(b), and
6(e).

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

9. Assignment of options
An option is personal to the Grantee and shall not be transferable or assignable. No Grantee shall sell, transfer,
charge, mortgage, encumber or create any interest (legal or beneficial) in favour of any third party over or in
relation to any option held by him or attempt to do so (except that the Grantee may nominate a nominee, in
whose name the Shares issued pursuant to the Share Option Scheme may be registered).

10. Rights attached to the Shares

Shares to be allotted upon exercise of an option will be subject to all the provisions of the Articles and will rank
pari passu with the fully paid Shares in issue on the date of issue. Accordingly, such Shares will entitle the
holders to have the same voting, dividend, transfer and other rights, and to participate in all dividends or other
distributions paid or made on or after the date on which the allottee is registered as a member (the “Registration
Date”) other than any dividends or other distributions previously declared or recommended or resolved to be
paid or made with respect to a record date which is before the Registration Date.

A Share issued upon the exercise of an option shall not carry any voting rights until completion of registration
of the Grantee or his nominee as the holder of such Share on the register of members of the Company.

Shares issued on the exercise of an option shall not rank for any rights attaching to Shares by reference to a
record date preceding the date of allotment.

11. Exercise of options

Unless otherwise provided in the respective Grantee’s Offer Document, an option may be exercised by a
Grantee at any time or times during the period notified by the Board during which the Grantee may exercise
his option(s) (the “Option Period”) provided that:

(a) in the event of the Grantee ceasing to be an Eligible Participant for any reason other than his death,
ill-health, injury, disability or the termination of his relationship with the Company and/or any of its
subsidiaries on one or more of the grounds specified in sub-paragraph 12(v) below, the Grantee may
exercise the option up to his entitlement at the date of cessation of being an Eligible Participant (to the
extent not already exercised) within the period of thirty (30) days (or such longer period as the Board
may determine) following the date of such cessation (which date shall be, in relation to a Grantee who is
an Eligible Participant by reason of his employment with the Company or any of its subsidiaries, the last
actual working day with the Company or the relevant subsidiary whether salary is paid in lieu of notice or
not);

(b) in the case of a Grantee ceasing to be an Eligible Participant by reason of death, ill-health, injury or
disability (all evidenced to the satisfaction of the Board) and none of the events which would be a ground
for termination of his relationship with the Company and/or any of its subsidiaries under sub-paragraph
12(e) has occurred, the Grantee or the personal representative(s) of the Grantee shall be entitled within
a period of 12 months (or such longer period as the Board may determine) from the date of cessation of
being an Eligible Participant or death to exercise his option in full (to the extent not already exercised);

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

(c) if a general offer (whether by way of take-over offer, share repurchase offer or scheme of arrangement
or otherwise in like manner) is made to all the holders of Shares (or all such holders other than the offeror
and/or any person controlled by the offeror and/or any person acting in association or in concert with
the offeror), the Company shall use its best endeavours to procure that such offer is extended to all the
Grantees (on the same terms mutatis mutandis, and assuming that they shall become, by the exercise in
full of the options granted to them as Shareholders). If such offer, having been approved in accordance
with applicable laws and regulatory requirements, becomes, or is declared unconditional, the Grantee
(or his legal personal representative(s)) shall be entitled to exercise his option in full (to the extent not
already exercised) at any time within fourteen (14) days after the date on which such general offer
becomes or is declared unconditional;

(d) if a compromise or arrangement between the Company and the Company’s shareholders and/or
creditors is proposed for the purposes of or in connection with a scheme for the reconstruction of the
Company or its amalgamation with any other company or companies pursuant to the Companies Law,
the Company shall give notice thereof to all the Grantees (together with a notice of the existence of
the provisions of this paragraph) on the same day as it dispatches to Shareholders and/or creditors of
the Company a notice summoning the meeting to consider such a compromise or arrangement, and
thereupon each Grantee shall be entitled to exercise all or any of his options in whole or in part at any
time prior to noon (Hong Kong time) on the Business Day immediately preceding the date of the general
meeting directed to be convened by the relevant court for the purposes of considering such compromise
or arrangement and if there is more than one meeting for such purpose, the date of the first meeting.
With effect from the date of such meeting, the rights of all Grantees to exercise their respective options
shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all options
shall, to the extent that they have not been exercised, lapse and determine. The Board shall endeavour
to procure that the Shares issued as a result of the exercise of options in such circumstances shall for
the purposes of such compromise or arrangement form part of the issued share capital of the Company
on the effective date thereof and that such Shares shall in all respects be subject to such compromise or
arrangement. If for any reason such compromise or arrangement is not approved by the relevant court
(whether upon the terms presented to the relevant court or upon any other terms as may be approved by
such court), the rights of the Grantees to exercise their respective options shall with effect from the date
of the making of the order by the relevant court be restored in full as if such compromise or arrangement
had not been proposed by the Company and no claim shall lie against the Company or any of its officers
for any loss or damage sustained by any Grantee as a result of the aforesaid suspension; and

(e) in the event a notice is given by the Company to its shareholders to convene a general meeting for the
purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up the Company,
the Company shall on the same date as or soon after it dispatches such notice to each member of the
Company give notice thereof to all Grantees and thereupon, each Grantee (or in the case of the death
of the Grantee, his personal representative(s)) shall be entitled to exercise all or any of his options (to
the extent not already lapsed or exercised) at any time not later than two Business Days prior to the
proposed general meeting of the Company by giving notice in writing to the Company, accompanied by
a remittance for the full amount of the aggregate Exercise Price for the Shares in respect of which the
notice is given whereupon the Company shall as soon as possible and, in any event, no later than the
Business Day immediately prior to the date of the proposed general meeting referred to above, allot and
issue the relevant Shares to the Grantee credited as fully paid.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

12. Lapse of options

An option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest
of:

(i) the expiry of the Option Period;

(ii) the expiry of the periods referred to in sub-paragraphs 11(b) to (e) above;

(iii) the date of the commencement of the winding-up of the Company in respect of the situation
contemplated in sub-paragraph 11(e);

(iv) the date the scheme or compromise referred to in sub-paragraph 11(d) above becomes effective;

(v) the date on which the Grantee ceases to be an Eligible Participant by reason of his resignation or
dismissal, or by reason of the termination of his relationship with the Company and/or any of its
subsidiaries on any one or more of the grounds that he has been guilty of serious misconduct or has
been convicted of any criminal offence involving his integrity or honesty or in relation to an employee or
consultant of the Company and/or any of its subsidiaries (if so determined by the Board) on any other
ground on which an employer would be entitled to unilaterally terminate his employment or service
at common law or pursuant to any applicable laws or under the Grantee’s service contract with the
Company or the relevant subsidiary. A resolution of the Board or the board of directors of the relevant
subsidiary to the effect that the relationship of the Grantee has or has not been terminated on one or
more of the grounds specified in this paragraph shall be conclusive;

(vi) the date that is thirty (30) days after the date on which a Grantee is terminated by the Company and/or
any of its subsidiaries by reasons other than termination of employment on grounds under sub-paragraph
12(v);

(vii) the date on which a Grantee commits a breach of paragraph 9 above or the options are cancelled in
accordance with paragraph 8 above; or

(viii) the occurrence of such event or expiry of such period as may have been specifically provided for in the
Offer Document, if any.

13. Alteration of the Share Option Scheme

The terms and conditions of the Share Option Scheme and the regulations for the administration and operation
of the Share Option Scheme may be altered in any respect by resolution of the Board except that:

(a) any alteration to the advantage of the Grantees or the Eligible Participants (as the case may be), in
respect of matters contained in Rule 17.03 of the Listing Rules, including without limitation, the definitions
of “Eligible Participant”, “Expiry Date”, “Grantee” and “Option Period” contained in the Share Option
Scheme; or

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

(b) any material alteration to the terms and conditions of the Share Option Scheme or any change to the
terms of options granted (except any alterations which take effect automatically under the terms of
the Share Option Scheme), or any change to the authority of the Board in respect of alternation of the
Share Option Scheme, must be made with the prior approval of the Company’s shareholders in general
meeting at which any persons to whom or for whose benefit the Shares may be issued under the Share
Option Scheme and their respective associates shall abstain from voting provided that no alteration shall
operate to affect adversely the terms of issue of any option granted or agreed to be granted prior to such
alteration or to reduce the proportion of the equity capital to which any person was entitled pursuant to
such option prior to such alteration except with:

(i) the consent in writing of the Grantees holding in aggregate options which if exercised in full on the
date immediately preceding that on which such consent is obtained would entitle them to the issue
of three-fourths in nominal value of all Shares which would fall to be issued upon the exercise of all
options outstanding on that date; or

(ii) the sanction of a special resolution.

Written notice of any alterations made in accordance with this paragraph shall be given to all Grantees.

14. Termination
The Company may by ordinary resolution in general meeting or the Board at any time terminate the operation
of the Share Option Scheme and in such event no further option shall be offered or granted. Options granted
prior to such termination but not yet exercised at the time of termination shall continue to be valid and
exercisable in accordance with the Share Option Scheme.

For the year ended 31 December 2022, no share option has been granted, exercised, expired, cancelled or lapsed
and there is no outstanding share option under the Share Option Scheme.

RELATED PARTY TRANSACTIONS

The significant related party transactions entered into by the Group during the year set out in Note 38 to the financial
statements included transactions that constitute connected/continuing connected transactions for which the
disclosure requirements under the Listing Rules have been complied with.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

CONTINUING CONNECTED TRANSACTIONS

During the year ended 31 December 2022, the Group had entered into the following continuing connected
transactions:

Cooperation Services Agreement executed on 1 December 2020

Name of connected person Nature of transaction 2022 2021

HKD’000 HKD’000

Retail
Sao Hang Investment Company Limited Provision of retail stores and
(首恆投資有限公司) management services to the
(“Sao Hang Investment (Macau)”) Group in Macau – 15,744

Total transaction amount – 15,744

Note: According to the Cooperation Services Agreement, the service fees (including the rental, management, promotion and
administration fees) payable under the Cooperation Services Agreement was determined with reference to the historical
service fees paid by the Group to Sao Hang Investment (Macau) and the prevailing market conditions and prevailing market
rent of similar properties of comparable size and quality in the vicinity.

Sao Hang Investment (Macau) is a company incorporated in Macau which is principally engaged in the operation
of shopping malls in Macau and is owned as to 96% by Mr. Fan and 4% by Ms. Fan Po Yuk, the sister of Mr. Fan.
Mr. Fan is an Executive Director and the Controlling Shareholder. By virtue of Mr. Fan holding over 30% interest in
Sao Hang Investment (Macau), Sao Hang Investment (Macau) is therefore an associate of Mr. Fan and a connected
person of the Company under Chapter 14A of the Listing Rules.

Renovation Services Agreement executed on 23 December 2019

Name of connected person Nature of transaction 2022 2021

HKD’000 HKD’000

SJ Synergy Engineering Company Provision of fitting-out services

Limited (晟杰工程有限公司) to the Group in Macau
(“SJ Synergy Engineering”) 1,256 737
SJ Synergy Holdings Limited
(晟杰集團有限公司) Provision of fitting-out services to
(“SJ Synergy Holdings”) the Group in Hong Kong – –

Total transaction amount 1,256 737

Note: According to the Renovation Services Agreement, subcontracting fees for the services to be provided by SJ Synergy
Engineering were determined with reference to the price at which comparable types of the services were provided by
independent subcontractors to the Group under normal commercial terms in the ordinary course of its business and such
price shall be no less favourable to the Group than is available from independent subcontractors.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

SJ Synergy Engineering is a limited company incorporated in Macau which is principally engaged in the provision
of fitting-out works and is owned as to 96% by Mr. Fan Rongxiong, the brother of Mr. Fan, and 4% by Ms. Zhang
Xiaoming, the spouse of Mr. Fan Rongxiong. Mr. Fan is an Executive Director and the Controlling Shareholder.
By virtue of Mr. Fan Rongxiong holding over 50% interest in SJ Synergy Engineering, SJ Synergy Engineering is
therefore an associate of Mr. Fan and a connected person of the Company under Chapter 14A of the Listing Rules.

SJ Synergy Holdings is a limited company incorporated in Hong Kong which is principally engaged in the provision
of fitting-out works and is owned as to 100% by Mr. Fan Rongxiong, the brother of Mr. Fan. Mr. Fan is an Executive
Director and the Controlling Shareholder. By virtue of Mr. Fan Rongxiong holding over 50% interest in SJ Synergy
Holdings, SJ Synergy Holdings is therefore an associate of Mr. Fan and a connected person of the Company under
Chapter 14A of the Listing Rules.

Name of connected person Nature of transaction 2022 2021

HKD’000 HKD’000

Wise Fortune Company Limited Loan 1,967 230

卓智富達一人有限公司 (“Wise Fortune”)
Shun Ao Investment Company Limited Loan 335 –
順澳投資有限公司 (“Shun Ao Investment”)
深圳致尚品牌管理有限責任公司 (“深圳致尚”) Management Fee 2,961 363

Total transaction amount 5,263 737

Wise Fortune is a company incorporated in Macau which is principally engaged in commercial industry in Macau
and is wholly owned by Mr. Fan. Mr. Fan is an Executive Director and the Controlling Shareholder. By virtue of Mr.
Fan holding over 30% interest in Wise Fortune, Wise Fortune is therefore an associate of Mr. Fan and a connected
person of the Company under Chapter 14A of the Listing Rules.

Shun Ao Investment is a company incorporated in Macau which is principally engaged in real estate industry in
Macau and is owned as to 50% by Mr. Fan, 25% by Ms. Fan Po Yuk, the sister of Mr Fan and 25% by Mr. Fong Yat
Ming, the nephew of Mr. Fan. Mr. Fan is an Executive Director and the Controlling Shareholder. By virtue of Mr. Fan
holding over 30% interest in Shun Ao Investment, Shun Ao Investment is therefore an associate of Mr. Fan and a
connected person of the Company under Chapter 14A of the Listing Rules.

深圳致尚 is a company incorporated in Shenzhen which is principally engaged in investment activities in China and is
owned as to 80% by 榮信貿易(深圳)有限責任公司. 榮信貿易(深圳)有限責任公司 is owned as to 75% by Mr. Fan and
25% by Ms. Chen Xingyi. Mr. Fan is the sole Director and the Substantial Shareholder of 深圳致尚. By virtue of Mr.
Fan holding over 30% interest in 深圳致尚, 深圳致尚 is therefore an associate of Mr. Fan and a connected person of
the Company under Chapter 14A of the Listing Rules.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

Cooperation Agreement executed on 15 April 2015 among Twelve S.A., White S.R.L. and
World First International Holdings Limited, as further supplemented on 3 October 2016 and 10
September 2018

Name of
connected person Nature of transaction 2022 2021
HKD’000 HKD’000

White S.R.L. Promotion, marketing and distribution of the 22.919 17,106

Neil Barrett brand ready-to-wear products and
accessories (with the exception of underwear,
perfumes, glasses, sunglasses, children
clothing, skiwear, watches, beachwear,
jewels and homewear) (the “Products”) in
Macau and the PRC; and the purchase of the
Products by NB China Limited (盈冠商貿有限
公司) (“NB China”) from White S.R.L.

Total transaction amount 22,919 17,106

Note: According to the Cooperation Agreement, the selling price, payment schedule and method, and other specific terms or
conditions (if any) shall be fixed by the relevant parties in the purchase order on a case-by-case basis. The annual cap for
the financial year ended 31 December 2022 is HK$56,000,000.

White S.R.L. is a company incorporated in Italy which is principally engaged in fashion business. As White S.R.L.
is indirectly wholly-owned by Twelve S.A. which is holding 40% equity interest in NB China, a non wholly-owned
subsidiary of the Company, it is an associate of Twelve S.A. Accordingly, White S.R.L. is a connected person of the
Company under Chapter 14A of the Listing Rules.

Review of Continuing Connected Transactions

Pursuant to Rule 14A.55 of the Listing Rules, the continuing connected transactions mentioned above have been
reviewed by the Independent Non-executive Directors of the Company who have confirmed that the transactions
have been entered into (a) in the ordinary and usual course of business of the Company; (b) on normal commercial
terms or better; and (c) according to the relevant agreements governing them on terms that are fair and reasonable
and in the interests of the Company’s shareholders as a whole.

The Company’s Auditor has been engaged to report on the continuing connected transactions in accordance with
Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or
Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing
Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public
Accountants. Pursuant to Rule 14A.56 of the Listing Rules, the Auditor has issued its unqualified letter confirming
that nothing has come to its attention that causes it to believe that the continuing connected transactions: (i) have
not been approved by the Board; (ii) for the transactions involve the provision of goods or services by the Group,
were not, in all material respects, in accordance with the pricing policies of the Group; (iii) were not entered into,
in all material respects, in accordance with the relevant agreements governing the transactions; and (iv) have
exceeded the respective annual cap of each of the Company’s continuing connected transactions. A copy of the
auditor’s letter has been provided by the Company to the Stock Exchange.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

One-off Transactions
The following transactions have been entered into by the Group which constitute one-off transactions prior to the
Listing.

Tenancy Agreement

Name of related party Term of lease agreements Monthly rent Annual rent

Office Tenancy Agreement with 1/2/2019 – 31/1/2024 RMB159,130 RMB1,909,560

Mr. Fan and Ms. Cheng King
Ling executed on 30 January
2019

Warehouse Tenancy Agreement 29/2/2020 – 28/2/2023 RMB10,117 RMB121,404

with Ms. Cheng King Ling
executed on 17 April 2020

The Directors confirmed that the rents in respect of the above tenancy agreements (the “Tenancy Agreements”)
have been determined after arm’s length negotiations between the parties with reference to the then prevailing
market conditions and rental rate of similar properties in the vicinity. In this connection, the Company has engaged
an independent property valuer, to assess the fairness of the rent and the terms of the Tenancy Agreements. The
independent property valuer is of the opinion that the terms of the Tenancy Agreements (including rental and
duration) are fair and reasonable and the rents payable thereunder reflected the prevailing market rate as at the
date of commencement of the respective tenancy agreement.

Mr. Fan is the Company’s Executive Director and Controlling Shareholder, and Ms. Cheng is the spouse of Mr. Fan.
As such, each of Mr. Fan and Ms. Cheng is a connected person of the Company under Chapter 14A of the Listing
Rules.

In accordance with IFRS 16 “Leases”, the Group has recognized the value of the right-of-use assets on its balance
sheet in connection with the transactions contemplated under the Tenancy Agreements, as such, the transactions
contemplated thereunder would be regarded as acquisitions for the purposes of the Listing Rules.

The transactions contemplated under the Tenancy Agreements are one-off transactions entered into by Shenzhen
Shouwei prior to Listing. Such transaction will not, following the Listing, constitute continuing connected transactions
of the Group under Chapter 14A of the Listing Rules, and will not be subject to further requirements under the Listing
Rules. The Group will comply with the relevant requirements under Chapter 14A of the Listing Rules should there be
any material change to the terms thereof if the Group enters into any other connected transaction in relation thereto
after the Listing.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

OTHER INFORMATION
Disclosure of interests
Interests and short positions of directors and chief executive in the shares, underlying shares and
debentures of the Company and its associated corporations
As at 31 December 2022, the interests and short positions of the Directors and chief executive of the Company in
the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the
meaning of Part XV of the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”))
which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which the Directors and chief executive of the Company were deemed or
taken to have under such provisions of the SFO), or which were recorded in the register required to be kept by the
Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) in
Appendix 10 of the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange were as
follows:

Approximately
Number of percentage of
Shares held/ shareholding
Name of Director Nature of interest interested in the Company

Mr. Fan Wing Ting Interest in controlled 300,000,000 75%

(“Mr. Fan”) (Note 1) corporation

Note:

1. Mr. Fan owns the entire issued share capital of Gold Star Fashion Limited and he is deemed to be interested in the
300,000,000 Shares held by Gold Star Fashion Limited by virtue of the SFO.

Interests and short positions of substantial shareholders in the shares and underlying shares of the
Company
So far as the Directors and chief executive of the Company are aware, as at 31 December 2022, the following
shareholders of the Company (other than the interests of the Directors and the chief executives of the Company) had
interests in the Shares or underlying Shares of the Company as recorded in the register required to be kept under
Section 336 of the SFO:

Approximately
Number of percentage of
Capacity/ Shares held/ shareholding
Shareholders Nature of interest interested in the Company

Gold Star Fashion Beneficial owner 300,000,000 75%

Limited (Note 1)

Ms. Cheng King Ling Interest of spouse 300,000,000 75%

(Note 2)

Notes:

1. Mr. Fan owns the entire issued share capital of Gold Star Fashion Limited.

2. Ms. Cheng King Ling is the spouse of Mr. Fan. Therefore, she is deemed to be interested in all the Shares in which Mr. Fan
has interest in under the SFO.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

During the year ended 31 December 2022, neither the Company or any of its subsidiaries, a party to any
arrangements to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in,
or debentures of, the Company or any other body corporate.

MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the business of
the Company has been entered into or existed during the year ended 31 December 2022.

RELATIONSHIP WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS

The Group acknowledges the importance to maintain good relationship with its employees and customers for the
achievement of its short-term and long-term business objectives.

For the year ended 31 December 2022, there was no serious and material dispute between the Group and its
employees, customers and suppliers.

MAJOR SUPPLIERS AND CUSTOMERS

The Group’s customers are primarily retail customers in Greater China. None of the Group’s customers accounted
for 5% or more of the Group’s total revenue for the year ended 31 December 2022 and the Group did not rely on any
single customer.

During the year ended 31 December 2022, the Group’s largest supplier and five largest suppliers accounted for
26.1% (2021: 26.3%) and 69.0% (2021: 63.6%) of the Group’s total purchases respectively. None of the Directors or
any of their respective associates or any shareholder which to the best knowledge of the Directors, who own more
than 5% of the Company’s issued share capital, had any interest in any of the Group’s five largest customers or
suppliers during the year ended 31 December 2022.

CONTROLLING SHAREHOLDERS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

There was no contract of significance to which the Company or any of its subsidiaries was a party and in which any
controlling shareholders had a material interest subsisted at the end of the year or at any time during the year.

PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the articles of association of the Company or the laws of the
Cayman Islands which would oblige the Company to offer new shares on a pro rata basis to existing shareholders.

PURCHASE, SALE AND REDEMPTION OF LISTED SECURITIES

During the year ended 31 December 2022, neither the Company, nor any of its subsidiaries purchased, sold or
redeemed any of the listed securities of the Company.

USE OF PROCEEDS FROM THE LISTING

Details of the use of proceeds from the Listing is set out in the section headed “Management Discussion and
Analysis – Use of Proceeds” of this annual report.

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Forward Fashion (International) Holdings Company Limited

REPORT OF THE DIRECTORS

CHARITABLE DONATION
During the year ended 31 December 2022, the Group did not make any charitable donation (2021: Nil).

CORPORATE GOVERNANCE
Save as disclosed in the Corporate Governance Report, the Company had complied with the code provisions of the
Corporate Governance Code and Corporate Governance Report (the “CG Code”) contained in Appendix 14 of the
Listing Rules during the year ended 31 December 2022.

Details of the corporate governance practices adopted by the Company are set out in the “Corporate Governance
Report” section of this annual report.

SUFFICIENCY OF PUBLIC FLOAT

As at the date of this annual report, based on the information publicly available to the Company and to the best of
the Directors’ knowledge, information and belief, the Company has maintained sufficient public float as required
under the Listing Rules.

REVIEW OF ANNUAL RESULTS BY AUDIT COMMITTEE

The Company has established an Audit Committee with written terms of reference in compliance with Rule 3.21 of
the Listing Rules and the CG Code. The Audit Committee consists of three members, namely Mr. Yu Chun Kau, Mr.
Ng Kam Tsun and Mr. Sze Irons. Mr. Yu Chun Kau is the chairman of the Audit Committee. The Audit Committee has
reviewed the consolidated financial statements of the Company for the year ended 31 December 2022.

AUDITOR
The consolidated financial statements for the year ended 31 December 2022 have been audited by
PricewaterhouseCoopers, Certified Public Accountants, who will retire and, being eligible, offer themselves for
re-appointment at the forthcoming annual general meeting of the Company. A resolution for re-appointment of
PricewaterhouseCoopers as the independent auditor of the Company will be proposed at the forthcoming annual
general meeting.

On behalf of the Board

Mr. Fan Wing Ting

Chairman

Hong Kong, 30 March 2023

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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Forward Fashion (International) Holdings Company Limited

(incorporated in the Cayman Islands with limited liability)

OPINION
What we have audited
The consolidated financial statements of Forward Fashion (International) Holdings Company Limited (the “Company”)
and its subsidiaries (the “Group”) set out on pages 60 to 145, which comprise:

• the consolidated statement of financial position as at 31 December 2022;

• the consolidated statement of profit or loss for the year then ended;

• the consolidated statement of comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, which include significant accounting policies and other
explanatory information.

Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of
the Group as at 31 December 2022, and of its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) and have been
properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the International Ethics Standards Board for
Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA
Code.

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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

Key audit matters identified in our audit are summarised as follows:

• Valuation of inventories

• Impairment of property, plant and equipment and right-of-use assets

Key Audit Matter How our audit addressed the Key Audit Matter

Valuation of inventories

Refer to Accounting Policies Note 2.12, Critical Our procedures in relation to management’s valuation
Accounting Estimates and Judgments in Note 4.1(a) assessment of inventories included:
and Note 19 “Inventories” to the consolidated financial
statements. • Understood and evaluated the management’s
internal control and assessment process of
As at 31 December 2022, the net inventory balance valuation of inventories and assessed the inherent
was approximately HKD274.1 million which represented risk of material misstatement by considering the
approximately 30.1% of the Group’s total assets. degree of estimation uncertainty and level of other
inherent risk factors;
As described in the Accounting Policies in Note 2.12 to
the consolidated financial statements, inventories are • Tested on a sample basis, the inventory items
carried at the lower of cost and net realisable value. categorised into different seasons of the year to
gain comfort over the categorisation and ageing
Management determined the net realisable value of of inventory, and recalculated the mathematical
the inventories based upon the ageing analysis of accuracy of the provision percentage applied;
the inventories focusing on seasonality and market
conditions, which involved significant management • Assessed the reasonableness of the provisions by
judgement and was difficult to estimate in the apparel challenging management’s projections on current
industry. trends and demand for the remaining inventories,
with reference to historical sales experience. We
We focused on the evaluation of management’s also assessed the reasonableness of the inventory
valuation assessment of inventories because of the provisions by comparing inventory items to actual
significant balance of the Group’s inventories, and post year end sales, on sample basis.
the fact that the estimation of net realisable value is
subject to high degree of estimation uncertainty. The Based on the procedures performed, we considered the
inherent risk in relation to the valuation of inventories is management’s judgement in estimating the valuation of
considered significant due to subjectivity of significant inventories at 31 December 2022 to be supportable by
assumptions used. available evidence.

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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

KEY AUDIT MATTERS (Cont’d)

Key Audit Matter How our audit addressed the Key Audit Matter

Impairment of property, plant and equipment and right-of-use assets

Refer to Accounting policies Note 2.7 and Note 2.25, Our procedures in relation to management’s impairment
Critical Accounting Estimates and Judgements in assessment of property, plant and equipment and right-
Note 4.1(b), Note 13 “Property, plant and equipment” of-use assets included:
and Note 14 “Right-of-use assets” to the consolidated
financial statements. • Understood and evaluated management’s
relevant controls over the Group's impairment
As at 31 December 2022, the Group had property, plant assessment and assessed the inherent risk of
and equipment and right-of-use assets of approximately material misstatement by considering the degree
HKD128.4 million and HKD150.7 million which of estimation uncertainty and level of other
represented approximately 14.1% and 16.6% of the inherent risk factors;
Group’s total assets, respectively.
• Challenged the appropriateness of the
The Group has material operational leasehold impairment indicators set by management based
improvements and right-of-use assets used in the retail on our knowledge of the business and market
stores which are subject to impairment test when there information;
are impairment indicators, including when trading
performance of the retail stores is below expectation. • Discussed with management the possibility
that the retail stores within expectation may be
The Group considered each retail store to be a cash subject to impairment loss and corroborated
generating unit (“CGU”) and determined the recoverable management’s position by comparing to the
amount of a CGU using the value in use model. Value in historical performance of these retail stores and
use was calculated by preparing discounted cash flows understanding of their business plan;
for the CGU, which involved significant management
judgement with respect to the assumptions used • Checked, on a sample basis, whether retail
including revenue growth rates, gross margins and stores with impairment indicators were identified
store costs such as rent, employment costs and general for impairment testing;
operating costs and the discount rate.
• Checked for consistency between the cash flow
We focused on the evaluation of management’s forecasts and the Board approved budgets;
impairment assessment of property, plant and
equipment and right-of-use assets due to the size of • Reconsidered the appropriateness of the
the Group’s property, plant and equipment and right- impairment assessment methodology used by
of-use assets and the estimation of recoverable amount management; and
is subject to high degree of estimation uncertainty. The
inherent risk in relation to the impairment of property, • Challenged the key assumptions used in
plant and equipment and right-of-use assets is the value-in-use calculations by applying
considered significant due to subjectivity of significant our knowledge of the business and industry,
assumptions used. comparing the cash flow forecasts with the
historical actual performance results of the
stores, discussing business plans with senior
management, performing market research on
revenue growth rates, gross margins and store
costs, and involving our valuation experts to
evaluate the discount rate.

Based on the procedures performed, we considered that

the management’s judgement and assumptions made
in relation to impairment assessment of property, plant
and equipment and right-of-use assets at 31 December
2022 to be supportable by available evidence.
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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all of the
information included in Forward Fashion (International) Holdings Company Limited Annual Report 2022 (the “annual
report”) other than the consolidated financial statements and our auditor’s report thereon. We have obtained some
of the other information including corporate information, directors and senior management, corporate governance
report, report of the directors prior to the date of this auditor’s report. The remaining other information, including
management discussion and analysis, the message from the chairman and the five years financials, are expected to
be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.

When we read management discussion and analysis, the message from the chairman and five years financials, if
we conclude that there is a material misstatement therein, we are required to communicate the matter to the audit
committee and take appropriate action considering our legal rights and obligations.

RESPONSIBILITIES OF DIRECTORS AND AUDIT COMMITTEE FOR THE

CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies
Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.

The Audit Committee is responsible for overseeing the Group’s financial reporting process.

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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED

FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility
towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.

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Forward Fashion (International) Holdings Company Limited

INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED

FINANCIAL STATEMENTS (Cont’d)
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Mr. Wilson Chan.

PricewaterhouseCoopers
Certified Public Accountants

Hong Kong, 30 March 2023

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Year ended 31 December

2022 2021
Notes HKD’000 HKD’000

Revenue 5 959,900 1,228,307

Cost of sales 5 (505,658) (577,187)

Gross profit 454,242 651,120

Selling and marketing expenses 8 (371,721) (495,324)
General and administrative expenses 8 (94,251) (116,797)
Other income 6 3,259 10,780
Other (losses)/gains – net 7 (7,437) 17,775

Operating (loss)/profit (15,908) 67,554

Finance income 10 391 855
Finance costs 10 (18,931) (21,292)

Finance costs – net (18,540) (20,437)

(Loss)/profit before income tax (34,448) 47,117

Income tax expenses 11 (2,057) (15,486)

(Loss)/profit for the year (36,505) 31,631

(Loss)/profit is attributable to:

Equity holders of the Company (33,137) 32,157
Non-controlling interests (3,368) (526)

(36,505) 31,631

(Losses)/earnings per share for (loss)/profit attributable

to equity holders of the Company
Basic and diluted (losses)/earnings per share (HKD) 12 (0.08) 0.08

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December

2022 2021
Note HKD’000 HKD’000

(Loss)/profit for the year (36,505) 31,631

Other comprehensive (loss)/income for the year

Change in the fair value of equity investment at fair value
through other comprehensive income (9,985) –
Currency translation differences 28 (11,563) 4,096

Other comprehensive (loss)/income for the year, net of tax (21,548) 4,096

Total comprehensive (loss)/income for the year (58,053) 35,727

Total comprehensive (loss)/income for the year

is attributable to:
Equity holders of the Company (55,499) 36,485
Non-controlling interests (2,554) (758)

(58,053) 35,727

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of 31 December
2022 2021
Notes HKD’000 HKD’000

Assets
Non-current assets
Property, plant and equipment 13 128,352 127,223
Right-of-use assets 14 150,713 251,248
Intangible assets 15 8,109 7,566
Financial asset at fair value through
other comprehensive income 16 1,715 11,700
Investment in insurance contract 17 34,843 33,723
Deferred tax assets 18 20,979 19,800
Prepayments 22 18,780 1,099
Other receivables and deposit 23 28,404 28,892

Total non-current assets 391,895 481,251

Current assets
Inventories 19 274,114 260,408
Trade receivables 21 40,285 49,791
Prepayments 22 28,615 65,894
Amount due from related parties 37 3,939 9,740
Other receivables and deposits 23 33,688 50,181
Restricted cash 25 17,987 26,216
Term deposits with initial term of over three months 26 50,058 70,000
Cash and cash equivalents 24 69,881 115,891

Total current assets 518,567 648,121

Total assets 910,462 1,129,372

Equity
Share capital 27 4,000 4,000
Share premium 27 859,232 859,232
Reserves 28 (599,088) (576,952)
(Accumulated losses)/retained earnings (15,166) 18,197

Capital and reserve attributable to equity holders

of the Company 248,978 304,477

Non-controlling interests (7,395) (4,841)

Total equity 241,583 299,636

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of 31 December
2022 2021
Notes HKD’000 HKD’000

Liabilities
Non-current liabilities
Borrowings 29 45,291 30,979
Lease liabilities 30 70,688 119,376
Provisions 31 9,955 4,472
Financial liabilities at fair value through profit or loss 32 – 1,444
Other non-current liabilities 33 6,269 14,393
Deferred tax liabilities 18 6,271 2,442
Other payables 34 12,091 14,504

Total non-current liabilities 150,565 187,610

Current liabilities
Trade and other payables 34 161,350 158,507
Amount due to related parties 37 182,915 190,666
Other current liabilities 33 18,061 24,882
Contract liabilities 35 4,533 3,905
Lease liabilities 30 91,564 148,065
Provisions 31 6,369 4,906
Income tax liabilities 8,819 12,578
Borrowings 29 44,703 98,617

Total current liabilities 518,314 642,126

Total liabilities 668,879 829,736

Net assets 241,583 299,636

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 60 to 145 were approved by the Board of Directors on 30 March
2023 and were signed on its behalf.

Mr. Fan Wing Ting Ms. Chen Xingyi

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Company

Retained
earning/ Non-
Share Share (accumulated controlling
capital premium Reserve losses) Sub-total interests Total equity
Notes HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

Balance at 1 January 2021 4,000 859,232 (584,052) (11,188) 267,992 (4,082) 263,910

Total comprehensive loss

for the year
Loss for the year – – – 32,157 32,157 (526) 31,631
Other comprehensive income
for the year 28 – – 4,328 – 4,328 (233) 4,095

– – 4,328 32,157 36,485 (759) 35,726

Transactions with equity holders of

the Company:
Dividends and distribution – – – – – – –
Appropriation to reserve 28 – – 2,772 (2,772) – – –

– – 2,772 (2,772) – – –

Balance at 31 December 2021 4,000 859,232 (576,952) 18,197 304,477 (4,841) 299,636

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Company

(Accumulated
losses)/ Non-
Share Share retained controlling
capital premium Reserve earnings Sub-total interests Total equity
Notes HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

Balance at 1 January 2022 4,000 859,232 (576,952) 18,197 304,477 (4,841) 299,636

Total comprehensive loss

for the year
Profit for the year – – – (33,137) (33,137) (3,368) (36,505)
Changes in the fair vale of equity
investments at fair value through other
comprehensive income – – (9,985) – (9,985) – (9,985)
Other comprehensive income
for the year 28 – – (12,377) – (12,377) 814 (11,563)

– – (22,362) (33,137) (55,499) (2,554) (58,053)

Transactions with equity holders

of the Company:
Dividends and distributions – – – – – – –
Appropriation to reserve 28 – – 226 (226) – – –

– – 226 (226) – – –

Balance at 31 December 2022 4,000 859,232 (599,088) (15,166) 248,978 (7,395) 24,583

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

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Forward Fashion (International) Holdings Company Limited

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December

2022 2021
Notes HKD’000 HKD’000

Cash flows from operating activities

Cash generated from operations 36 231,298 228,837
Income tax paid (1,082) (14,847)

Net cash generated from operating activities 230,216 213,990

Cash flows from investing activities

Investment in deposit with maturity over 3 months 19,942 20,027
Interest income received 391 855
Proceeds from disposal of property, plant and equipment 6,678 2,647
Purchase of intangible assets (5,357) (1,046)
Purchase of property, plant and equipment (62,574) (41,231)
Investment in an unlisted company – (11,700)

Net cash used in investing activities (40,919) (30,448)

Cash flows from financing activities

Proceeds from borrowings 124,996 154,899
Interest paid (9,594) (7,214)
Repayment of loans from related parties (7,750) (12,667)
Repayment of borrowings (164,598) (340,939)
Loans from related parties – 143,378
Payment of lease liabilities (180,902) (213,076)

Net cash used in financing activities (237,848) (275,619)

Net (decrease)/increase in cash and cash equivalents (48,551) (92,077)

Cash and cash equivalents at beginning of the year 115,891 209,639

Effect on exchange rate difference 2,541 (1,671)

Cash and cash equivalents at end of the year 24 69,881 115,891

The notes on pages 67 to 145 are an integral part of these consolidated financial statements.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION
Forward Fashion (International) Holdings Company Limited (the “Company”) was incorporated in the Cayman
Islands on 16 May 2019. The address of the Company’s registered office is Cricket Square, Hutchins Drive, PO
Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company is an investment holding company and its subsidiaries (together the “Group”) are principally
engaged in the retail of fashion apparel of international brands ranging from established designer label
brands, popular global brands to up-and-coming brands through our multi-brand and multi- store business
model (the “Business”) in Mainland China, Macau, Hong Kong and Taiwan.

The ultimate holding company of the Company is Gold Star Fashion Limited, a company incorporated in the
British Virgin Islands (the “BVI”) and is wholly-owned by Mr. Fan Wing Ting (“Mr. Fan”), the ultimate controlling
shareholder (the “Controlling shareholder”) of the Group.

The shares of the Company have been listed on the Main Board of the Stock Exchange of Hong Kong Limited
(the “Stock Exchange”) since 13 January 2020.

The financial statements for the year ended 31 December 2022 are presented in Hong Kong dollars (“HKD”)
and all values are rounded to the nearest thousand (HKD’000), unless otherwise stated. The financial
statements for the year ended 31 December 2022 have been approved for issue by the board of directors of
the Company (the “Board”) on 30 March 2023.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This note provides a list of the significant accounting policies adopted in the preparation of these consolidated
financial statements. These policies have been consistently applied to all the periods presented, unless
otherwise stated.

2.1 Basis of preparation

(i) Compliance with IFRS and Hong Kong Companies Ordinance
The consolidated financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) issued by International Accounting Standards
Board (“IASB”) and requirements of the Hong Kong Companies Ordinance Cap. 622.

(ii) Historical cost convention

The financial statements have been prepared on a historical cost basis, except for the following:

• certain financial liabilities – measured at fair value

• investment in insurance contracts – measured at cash surrender value

• investment in an unlisted company – measured at fair value

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.1 Basis of preparation (Cont’d)
(iii) Amended standards adopted by the Group
The Group has applied the following amendment for the first time for their annual reporting period
commencing 1 January 2022:

IFRS 16 (Amendments) Covid-19 Related Rent Concessions beyond 2021

Annual improvements project (Amendments) Annual Improvements to IFRSs 2018–2020
IFRS 3, IAS 16 and IAS 37 (Amendments) Narrow-scope Amendments
AG 5 (Revised) Revised Accounting Guideline 5 Merger
Accounting for Common Control Combinations

Most of the amendments listed above did not have any impact on the amounts recognised in prior
periods and are not expected to significantly affect the current or future periods.

(iv) New and amended standards, improvement, interpretation and accounting guideline
which are not yet effective and have not been early adopted by the Group
The following new and amended standards, improvement, interpretation and accounting guideline
have been issued but are not effective for the year and have not been early adopted by the Group.

Effective for
annual periods
beginning
on or after

IAS 1 and IFRS Disclosure of Accounting Policies 1 January 2023

Practice Statement 2
(Amendments)
Amendments to IFRS 4 Extension of the Temporary Exemption from 1 January 2023
Applying IFRS 9
IAS 12 (Amendments) Deferred Tax related to Assets and Liabilities 1 January 2023
arising from a Single Transaction
IAS 8 (Amendments) Definition of Accounting Estimates 1 January 2023
IFRS 17 Insurance Contracts 1 January 2023
IFRS 17 (Amendments) Amendments to IFRS 17 1 January 2023
IFRS 17 (Amendments) Initial Application of IFRS 17 and 1 January 2023
IFRS 9 – Comparative Information
Hong Kong Interpretation 5 Presentation of Financial Statements 1 January 2024
(2020) – Classification by the Borrower of a Term Loan
that Contains a Repayment on Demand Clause
IFRS 16 (Amendments) Lease Liability in a Sale and Leaseback 1 January 2024
IAS 1 (Amendments) Classification of Liabilities as Current or 1 January 2024
Non-current
IAS 1 (Amendments) Non-current Liabilities with Covenants 1 January 2024
IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor To be
(Amendments) and its Associate or Joint Venture determined

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.1 Basis of preparation (Cont’d)
(iv) New and amended standards, improvement, interpretation and accounting guideline
which are not yet effective and have not been early adopted by the Group (Cont’d)
Revised Accounting Guideline 5 – Merger Accounting for Common Control Combinations
The Group has already commenced an assessment of the impact of these new and amended
standards, improvement, interpretation and practice statement. According to the preliminary
assessment made by management, no significant impact on the financial performance and
positions of the Group is expected when they become effective.

2.2 Principles of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are
consolidated from the date on which control is transferred to the Group. They are deconsolidated from
the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer
to Note 2.4).

Inter-company transactions, balances and unrealised gains/losses on transactions between Group

companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of profit or loss, statement of comprehensive income, statement of changes in
equity and balance sheet respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.3 Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of
whether equity instruments or other assets are acquired. The consideration transferred for the acquisition
of a subsidiary comprises the:

• fair values of the assets transferred

• liabilities incurred to the former owners of the acquired business

• equity interests issued by the Group

• fair value of any asset or liability resulting from a contingent consideration arrangement, and

• fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group
recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either
at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable
assets.

Acquisition-related costs are expensed as incurred.

The excess of the:

• consideration transferred,

• amount of any non-controlling interest in the acquired entity, and

• acquisition-date fair value of any previous equity interest in the acquired entity

over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts
are less than the fair value of the net identifiable assets of the business acquired, the difference is
recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions. Contingent consideration is classified
either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit or loss.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.4 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable
costs of investment. The results of subsidiaries are accounted for by the Company on the basis of
dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these
investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the
dividend is declared or if the carrying amount of the investment in the separate financial statements
exceeds the carrying amount of the investee’s net assets including goodwill in the consolidated financial
statements.

2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker (“CODM”). The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the
executive directors of the Group.

2.6 Foreign currency translation

(i) Functional and presentation currency
The consolidated financial statements are presented in HKD, which is the Company’s functional
currency and presentation currency. Each entity in the Group determines its own functional
currency and items included in the consolidated financial statements of each entity are measured
using the currency of the primary economic environment in which the entity operates. The
Company’s primary subsidiaries were incorporated in the PRC, Macau and Hong Kong, and these
subsidiaries considered Renminbi (“RMB”), Macau Patacas (“MOP”) and HKD as their functional
currency, respectively.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the consolidated statements of profit or loss.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of
profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the
statement of profit or loss on a net basis within other gains/(losses).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.6 Foreign currency translation (Cont’d)
(ii) Transactions and balances (Cont’d)
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss and
translation differences on non-monetary assets such as equities classified as fair value through
other comprehensive income are recognised in other comprehensive income.

(iii) Group companies

The results and financial position of foreign operations (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:

– assets and liabilities for each statement of position presented are translated at the closing
rate at the date of that statement of financial position; and

– income and expenses for each consolidated statement of profit or loss are translated at
average exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions); and

– all resulting currency translation differences are recognised in other comprehensive income/
(loss).

On consolidation, exchange differences arising from the translation of any net investment in
foreign entities, and of borrowings and other financial instruments designated as hedges of such
investments, are recognised in other comprehensive income. When a foreign operation is sold or
any borrowings forming part of the net investment are repaid, the associated exchange differences
are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as
assets and liabilities of the foreign operation and translated at the closing rate.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and accumulated
impairment.

Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the asset will flow to
the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the consolidated statements of profit or
loss during the periods in which they are incurred.

Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net
of their residual values, over their estimated useful lives.

Leasehold improvements Estimated useful lives or remaining

lease terms, whichever is shorter
Building 50 years
Vehicle 5 years
Office furniture and equipment 3–5 years
Computer and electric equipment 3–4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (Note 2.10).

Gains and losses on disposal are determined by comparing the proceeds with the carrying amounts.
These are included in the consolidated statements of profit or loss.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.8 Intangible assets
(i) Software
Costs associated with maintaining the software programs are recognised as an expense as
incurred. Separately acquired software are shown at historical cost. They have a finite useful life
and are subsequently carried at cost less accumulated amortisation and impairment losses.

(ii) License rights

License rights have a definite useful life and are carried at cost less accumulated amortisation and
accumulated impairment losses, if any. They are initially measured at fair value of the consideration
given to acquire at the time of the acquisition. The consideration given represents the capitalised
present values of the fixed minimum periodic payments to be made in subsequent years in respect
of the acquisition of the license rights.

(iii) Goodwill
Goodwill is measured as described in Note 2.4. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more
frequently if events or changes in circumstances indicate that it might be impaired, and is carried
at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation
is made to those cash-generating units or groups of cash–generating units that are expected to
benefit from the business combination in which the goodwill arose. The units or groups of units
are identified at the lowest level at which goodwill is monitored for internal management purposes,
being the operating segments.

(iv) Trademarks
Trademark acquired in a business combination is recognised at fair value at the acquisition date.
It has an indefinite useful life because it is expected to contribute to net cash inflows indefinitely.
Therefore, the trademark would not be amortised until its useful life is determined to be finite. It
would be tested for impairment annually or whenever there is an indication that it may be impaired.

The Group amortises intangible assets with a limited useful life using the straight-line method over
the following periods:

Software 4–5 years

License rights 3–7 years

The useful life of license rights are determined based on the contract term of the license granted to
the Group.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.9 Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of
assets (cash–generating units). Non–financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting period.

2.10 Investments and other financial assets

(i) Classification
The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through OCI or through profit or loss),
and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and
the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for trading, this will depend on whether the
Group has made an irrevocable election at the time of initial recognition to account for the equity
investment at fair value through other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing
those assets changes.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on
which the Group commits to purchase or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the financial assets have expired or have been transferred and
the Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.10 Investments and other financial assets (Cont’d)
(iii) Measurement (Cont’d)
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in profit or loss using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit
or loss and presented in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as separate line item in the statement of profit or
loss.

• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial
assets, where the assets’ cash flows represent solely payments of principal and interest, are
measured at FVOCI. Movements in the carrying amount are taken through OCI, except for
the recognition of impairment gains or losses, interest income and foreign exchange gains
and losses which are recognised in profit or loss. When the financial asset is derecognised,
the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit
or loss and recognised in other gains/(losses). Interest income from these financial assets is
included in other income using the effective interest rate method. Foreign exchange gains
and losses are presented in other gains/(losses) and impairment expenses are presented as
separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL.
A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in
profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in OCI,
there is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the
statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses)
on equity investments measured at FVOCI are not reported separately from other changes in fair
value.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.10 Investments and other financial assets (Cont’d)
(iv) Impairment
The Group has the following types of financial assets subject to expected credit loss model:

– trade receivables for sales of goods or provision of services;

– other receivables and deposits;

– restricted cash;

– Term deposits with initial term of over three months; and

– cash and cash equivalents.

While cash and cash equivalents, term deposits and restricted cash are also subject to the
impairment requirements of IFRS 9, the identified impairment loss was immaterial.

The Group assesses on a forward looking basis the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which
requires lifetime expected credit losses to be recognised from initial recognition of the receivables.

Impairment of other receivables and amount due from related parties is measured as either
12-month expected credit losses or lifetime expected credit loss, depending on whether there has
been a significant increase in credit risk since initial recognition. If a significant increase in credit
risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime
expected credit losses.

2.11 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the consolidated statements
of financial position where the Group currently has a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. The Group does not have any offsetting financial instruments for the years.

2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted
average method. Inventories consist mainly of retail goods and the net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.13 Trade and other receivables
Trade receivables are amounts due from customers for services performed or merchandise sold in the
ordinary course of business. Majority of other receivables are rental deposits, staff advance and value-
added tax recoverable. If collection of trade and other receivables is expected in one year or less (or in
the normal operating cycle of the business if longer), they are classified as current assets. If not, they are
presented as non-current assets.

Trade and other receivables are recognised initially at the amount of consideration that is unconditional
unless they contain significant financing components, when they are recognised at fair value. The Group
holds the trade receivables with the objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest method, less provision
for impairment. See Note 3.1 for a description of the Group’s impairment policy for trade and other
receivables.

2.14 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents
includes cash at bank and in hand, and term deposits with financial institutions that with original maturity
less than 3 months are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.

2.15 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net
of tax, from the proceeds.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.16 Trade and other payables
Trade and other payables are obligations to pay for goods or services that have been acquired in the
ordinary course of business from suppliers. Accounts payable are classified as current liabilities if
payment is due within one year or less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.

2.17 Borrowings and borrowing cost

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the consolidated statement of profit or loss over the period of
the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the
facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised
over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.

General and specific borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are substantially
ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.18 Current and deferred income tax
The tax expense or credit for the period is the tax payable or recoverable on the current period’s taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences and to unused tax losses.

Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the company and its subsidiaries and
associates operate and generate taxable income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable tax regulation is subject to interpretation
and considers whether it is probable that a taxation authority will accept an uncertain tax treatment.
The Group measures its tax balances either based on the most likely amount or the expected value,
depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition
of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to
utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in foreign operations where the Company is able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not reverse
in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on either the taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis, or to relies the asset and
settle the liability simultaneously.

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.19 Employee benefits
(i) Short-term benefit obligations
Liabilities for wages and salaries, including non–monetary benefits and accumulated sick leave
that are expected to be settled wholly within 12 months after the end of the period in which the
employees rendered the related service are recognised in respect of employees’ services up to
the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current employee benefit obligations in the
consolidated statements of financial position.

(ii) Pension obligations

In accordance with the rules and regulations in the PRC, the employees of the Group based
in the PRC participate in various defined contribution retirement benefit plans organised by
the relevant municipal and provincial governments in the PRC under which the Group and the
employees are required to make monthly contributions to these plans calculated as a percentage
of the employees’ salaries, subject to certain ceiling. The municipal and provincial governments
undertake to assume the retirement benefit obligations of all existing and future retired employees
based in the PRC payable under the plans described above. Other than the monthly contributions,
the Group has no further obligation for the payment of retirement and other post retirement benefits
of its employees. The assets of these plans are held separately from those of the Group in an
independent fund managed by the PRC government. The Group’s contributions to these plans are
expensed as incurred.

For other defined contribution plans, the Group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group
has no further payment obligations once the contributions have been paid. The contributions are
recognised as employee benefit expense when they are due. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iii) Housing funds, medical insurances and other social insurances

The employees of the Group based in the PRC are entitled to participate in various government-
supervised housing funds, medical insurance and other employee social insurance plan. The
Group contributes on a monthly basis to these funds based on certain percentages of the salaries
of the employees, subject to certain ceiling. The Group’s liability in respect of these funds is limited
to the contributions payable in each period.

(iv) Employee leave entitlement

Employee entitlement to annual leave are recognised when they have accrued to employees.
A provision is made for the estimated liability for annual leave as a result of services rendered
by employees up to the end of each reporting period. Employee entitlements to sick leave and
maternity leave are not recognised until the time of leave.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.19 Employee benefits (Cont’d)
(v) Bonus plan
The expected cost of bonuses is recognised as a liability when the Group has a present legal or
constructive obligation for payment of bonus as a result of services rendered by employees and
a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected to be
settled within 1 year and are measured at the amounts expected to be paid when they are settled.

2.20 Provisions
Provisions for legal claims are recognised when the Group has a present legal obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and the
amount can be reliably estimated. Provisions are not recognised for future operating losses.

Make good provisions has been recognised for the present value of the estimated expenditure required
to remove any leasehold improvements, when the Group is required to restore the leased premises of its
retail stores to their original condition at the end of the respective lease terms.

Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect to any one item included in the same class of obligations
may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required
to settle the present obligation at the end of the reporting period. The discount rate used to determine the
present value is a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The increase in the provision due to the passage of time is recognised as
interest expense.

2.21 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods
and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added
tax, rebates, returns and discounts and after eliminating sales within the Group. The Group recognises
revenue when it transfers control of the goods or services to a customer.

(i) Sales of goods – retail

The Group operates a chain of retail outlets for selling a lot of different brands of luxury apparel
and accessories. Sales are recognised when the Group sells the apparel and accessories to the
customer.

Payment of the transaction price is due immediately when the customer purchases the apparel
and accessories and takes delivery in store. Although the end customer has a right of return within
7 days, based on accumulated experience, the returns were insignificant for years and it is highly
unlikely that a significant reversal in the cumulative revenue recognised will occur. The validity of
this assumption and the estimated amount of returns are reassessed at each reporting date.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.21 Revenue recognition (Cont’d)
(ii) Sales of goods – wholesale
The Group sells limited brands of luxury apparel and accessories in the wholesale market. Sales
are recognised when control of the apparel and accessories has been transferred, being when the
goods are delivered to the wholesaler, the wholesaler has full discretion over the channel and price
to sell the goods, and there is no unfulfilled obligation that could affect the wholesalers’ acceptance
of the goods.

Delivery occurs when the wholesaler has accepted the products in accordance with the sales
contract or the Group has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognised when the goods are delivered as this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is
due.

Costs to obtain a contract as incurred are expensed as the expected amortisation period is one
year or less.

(iii) Store management and consignment service

The Group provides store management service to other retail customers over a specific period of
time and earns a variable fee calculated based on an agreed percentage of the store turnover.
There is no minimum management fee entitled by the Group, e.g. fixed per day. The management
fee is recognised and billed to customers based on the actual store turnover in that month. The
Group also earns consignment fee as calculated based on a percentage of each sales transaction
for sale of consignment goods placed in its retail stores to end customers. The Group has no legal
ownership of consignment goods and is an agent to sell the goods for the owners.

As a practical expedient, the Group elects not to disclose the information for remaining
performance obligation of store management and consignment service as the contract have an
original expected duration of less than one year or the portion with variable consideration.

2.22 Contract liabilities

Certain wholesale customers are required to pay down deposit upon entering into a contract, and such
advance payment from customers are classified as contract liabilities and are recognised as revenue at
the point in time when the good are transferred to the wholesale customer.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.23 Subsidies and rebates from suppliers, franchisers and shopping malls
Cash discount and on time payment discounts for purchase from suppliers is recognised as a reduction
in cost of inventories or cost of sales when the inventory is sold.

Subsidies from the franchisers for reimbursement of rental and stores decoration without any commitment
of future purchases from franchisers are included in other current/non-current liabilities and are credited
to profit or loss under “cost of sales” on a straight-line basis over the expected leasing term of related
stores or franchise period.

Subsidies from the shopping malls for reimbursement of stores decoration are included in other current/
non-current liabilities and are credited to profit or loss under “selling and marketing expenses” on a
straight-line basis over the expected leasing term of related stores.

2.24 Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently remeasured to their fair value at the end of each reporting period. The subsequent
changes in fair value are recognised in profit or loss as no derivative is designated as a hedging
instrument.

2.25 Leases
The Group leases various properties. Rental contracts are typically made for fixed periods of 3 to 5
years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased assets may not be used as
security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the
leased asset is available for use by the Group.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit
or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.

The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a
straight-line basis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.25 Leases (Cont’d)
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable

• variable lease payment that are based on an index or a rate, initially measured using the index or
rate as at the commencement date

• amounts expected to be payable by the lessee under residual value guarantees

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option
and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that
option

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs

Payments associated with leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Low-value assets comprise information technology equipment and small items
of office furniture with value below HKD10,000.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.26 Dividend distribution
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer
at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of
the reporting period.

2.27 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that
the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the consolidated statements of profit
or loss over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to the purchase of property and equipment, and other non-current assets
are included in the current liabilities and are credited to consolidated statements of profit or loss on a
straight–line basis over the expected lives of the related assets.

2.28 Interest income

Interest income from financial assets at FVPL is included in the net fair value gains/(losses) on these
assets.

Interest income is presented as finance income where it is earned from financial assets that are held for
cash management purposes. Any other interest income is included in other income.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a
financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired
financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after
deduction of the loss allowance).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.29 Investment in insurance contract
The management life insurance contracts of the Group include both investment and insurance elements.
The investment insurance contract is initially recognised at the amount of the premium paid and
subsequently carried at the amount that could be realised under the corresponding insurance contract
(cash surrender value) at the end of each reporting period, with changes in value being recognised in
profit or loss.

2.30 (Loss)/earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the company, excluding any costs of servicing equity other
than ordinary shares

(b) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:

• the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and
cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group’s financial performance. Risk management is carried out by the senior management of
the Group.

3.1 Financial risk factors

(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets and
liabilities are denominated in a currency that is not the Group entities' functional currency. The
functional currency of the Company is HKD whereas functional currency of the subsidiaries
operate in the PRC is RMB and the subsidiaries operate in Macau is MOP. The Group
manages its foreign exchange risk by performing regular reviews of the Group’s net foreign
exchange exposures and tries to minimise these exposures through natural hedges, wherever
possible and may enter into forward foreign exchange contracts, when necessary.

The Group’s subsidiaries in PRC operate mainly in PRC with most of the transactions settled
in RMB. Management considers that the business is not exposed to any significant foreign
exchange risk as there are no significant financial assets or liabilities that are denominated in
the currencies other than RMB.

The Group’s Hong Kong and Macau subsidiaries are exposed to foreign exchange risk
arising from recognised financial assets and liabilities denominated in USD and EUR. For
the years ended 31 December 2022, if HKD had strengthened/weakened by 5% against
USD and EUR with all other variables held constant, post-tax profit for the years would have
been approximately HKD1,842,000 higher/lower (2021: HKD712,000 higher/lower), and
HKD835,000 higher/lower (2021: HKD1,443,000 higher/lower), respectively, mainly as a
result of foreign exchange gains on translation of USD-denominated and EUR-denominated
borrowings, accounts payable, other payables, financial asset at FVOCI and cash and cash
equivalents.

The Group did not hedge against any fluctuation in foreign currencies during the years ended
31 December 2021 and 2022.

(ii) Cash flow and fair value interest rate risk

The Group’s interest-rate risk arises from borrowings. Borrowings issued at variable rates
expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest-rate risk. The Group currently has not used any interest rate swap
arrangements but will consider hedging interest rate risk should the need arise.

Other than interest-bearing short-term deposits, the Group has no other significant interest-
bearing assets. The directors of the Company do not anticipate there is any significant impact
to interest-bearing assets resulted from the changes in interest rates, because the interest
rates of short-term deposits are not expected to change significantly.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.1 Financial risk factors (Cont’d)
(a) Market risk (Cont’d)
(ii) Cash flow and fair value interest rate risk (Cont’d)
For the years ended 31 December 2021 and 2022, if the floating interest rate on borrowings
had been higher/lower by 0.5% with all other variables held constant, the post–tax profit
would have changed mainly as a result of higher/lower interest expenses on floating rate
borrowings. Details of changes are as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

(Decrease)/increase in post-tax profit

– 0.5% higher (270) (224)
– 0.5% lower 270 224

The interest rates and terms of repayment of borrowings of the Group are disclosed in Note
28.

(b) Credit risk

Credit risk arises from cash and cash equivalents, term deposits with initial term of over three
months, restricted cash, trade receivables and other receivables and deposits.

(i) Risk management

To manage this risk, deposits are mainly placed with state-owned financial institutions in the
PRC and reputable international financial institutions outside the PRC. There has been no
recent history of default in relation to these financial institutions.

For cash and cash equivalents (excluding cash on hand) and deposits with banks, they are
all deposited or traded with reputable banks. The Group has not incurred significant loss from
non-performance by these parties in the past and management does not expect so in the
future.

For trade receivables, the Group has policies in place to ensure that sale of goods are made
to customers with an appropriate credit history. It also has other monitoring procedures to
ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews
regularly the recoverable amount of each individual receivable to ensure that adequate
impairment losses are made for irrecoverable amounts.

For other receivables and amount due from related parties, management makes periodic
collective assessments as well as individual assessment on the recoverability of other
receivables and amount due from related parties. Based on historical settlement records
and past experience, the directors of the Company believe that there is no material credit
risk inherent in the Group’s outstanding balances of other receivables and amount due from
related parties.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.1 Financial risk factors (Cont’d)
(b) Credit risk (Cont’d)
(ii) Impairment of financial assets
Cash and cash equivalents (excluding cash on hand), term deposits with initial term of over
three months, restricted cash, trade receivables, and other receivables and deposits are
subject to the expected credit loss (“ECL”) model.

Impairment of cash and cash equivalents and deposits in banks

While cash and cash equivalents and deposits in banks, are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was immaterial.

Impairment of trade receivables

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivables.

To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and ageing. The expected loss rates are based on the
ageing profiles of trade receivable. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of the customers
to settle the receivables.

On that basis, the loss allowance as at 31 December 2022 was determined as follows for
trade receivables:

Over Over
3 months 6 months
Within and within and within Over
31 December 2022 3 months 6 months 1 year 1 year Total

Expected loss rate 0.38% 5.38% 21.27% 100%

Gross carrying amount

(HKD’000)
– Trade receivables 40,203 130 141 267 40,741

Loss allowance (HKD’000)

– Trade receivables (152) (7) (30) (267) (456)

31 December 2021

Expected loss rate 0.34% 0.57% 14.02% 100%

Gross carrying amount

(HKD’000)
– Trade receivables 48,401 1,052 592 425 50,470

Loss allowance (HKD’000)

– Trade receivables (165) (6) (83) (425) (679)

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Forward Fashion (International) Holdings Company Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.1 Financial risk factors (Cont’d)
(b) Credit risk (Cont’d)
(ii) Impairment of financial assets (Cont’d)

Trade
receivables
2022
HKD’000

Opening loss allowance at 1 January (679)

Decrease in loan loss allowance recognised in profit or loss during the year 223

Closing loss allowance at 31 December (456)

Trade receivables is written off when there is no reasonable expectation of recovery, such as
a debtor failing to engage in a repayment plan with the Group. Where receivables have been
written off, the Group continues to engage in enforcement activity to attempt to recover the
receivable due. Impairment losses on trade receivables and contract assets are presented as
net impairment losses charged against operating profit. Subsequent recoveries of amounts
previously written off are credited against the same line item.

Impairment of other receivables and deposits

Management considers that the credit risk has not increased significantly since initial
recognition with reference to the counterparty historical default rate and current financial
position. The impairment provision is determined based on the 12-month expected credit loss
which is immaterial and no loss allowance was made as at 31 December 2022 and 2021.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.1 Financial risk factors (Cont’d)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents. Due
to the dynamic nature of the business of the Group, the policy of the Group is to regularly monitor
the Group’s liquidity risk and to maintain adequate cash and cash equivalents to meet the Group’s
liquidity requirements.

The table below set out the Group’s financial liabilities grouped into relevant maturity groupings
based on their contractual maturity dates. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the
impact of discounting is not significant.

Between Between
Less than 1 year and 2 years and Over Carrying
1 year 2 years 5 years 5 years Total amount
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

As of 31 December 2022
Trade and other payables
(excluding other taxes payable,
salaries payable) 130,834 – 12,091 – 142,925 142,925
Amount due to related parties 182,915 – – – 182,915 182,915
Borrowings and interest payables 48,016 7,700 22,083 19,442 97,241 89,994
Lease liabilities and interest
expenses 99,567 46,769 32,709 – 179,045 162,252

Total 461,332 54,469 66,883 19,442 602,126 578,086

As of 31 December 2021
Trade and other payables
(excluding other taxes
payable, salaries payable) 107,548 1,295 13,209 122,052 122,052
Amount due to related parties 190,666 – – 190,666 190,666
Borrowings and interest payables 72,657 85 1,697 63,478 137,917 129,596
Lease liabilities and interest
expenses 155,738 75,411 48,645 – 279,794 267,441

Total 526,609 76,791 63,551 63,478 730,419 709,755

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.2 Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholder, issue new shares or sell assets to reduce debt.

The Group monitors capital on basis of the gearing ratio. This ratio is calculated as net debt divided by
total capital. Net debt is calculated as total borrowing, lease liabilities, loan from third parties and loan
from related parties less cash and cash equivalents. Total capital is calculated as “equity” as shown in
the consolidated statements of financial position plus net debts. For the years ended 31 December 2022
and 2021, the gearing ratio of the Group were as follows:

As of 31 December
2022 2021
HKD’000 HKD’000

Net debt (Note 36) 333,154 439,685

Total capital 584,722 739,321

Gearing ratio 57% 59%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.3 Fair value estimation
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the
financial instruments that are recognised and measured at fair value in the financial statements. To
provide an indication about the reliability of the inputs used in determining fair value, the Group has
classified its financial instruments into the three levels prescribed under the accounting standards.
An explanation of each level follows underneath the table.

Recurring fair value measurements Level 3

At 31 December 2022 HKD’000

Financial assets

Equity security – an unlisted company 1,715

Financial assets at fair value through other comprehensive income (FVOCI) 1,715

Financial liabilities

Call option –

Financial liabilities at fair value through profit or loss –

Recurring fair value measurements Level 3

At 31 December 2021 HKD’000

Financial assets

Equity security – an unlisted company 11,700

Financial assets at fair value through other comprehensive income (FVOCI) 11,700

Financial liabilities

Call option 1,444

Financial liabilities at fair value through profit or loss 1,444

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.3 Fair value estimation (Cont’d)
(i) Fair value hierarchy (Cont’d)
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at
the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and equity securities) is based on quoted market prices at the end of the
reporting period. The quoted market price used for financial assets held by the Group is
the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for
example, over-the-counter derivatives) is determined using valuation techniques which
maximise the use of observable market data and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the
instrument is included in level 3. This is the case for unlisted equity securities.

(ii) Valuation techniques used to determine fair values

Specific valuation techniques used to value financial instruments include:

• the use of quoted market prices

• the Monte Carlo simulation

• discounted cash flow analysis

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.3 Fair value estimation (Cont’d)
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the years ended 31 December 2021
and 2022:

As of 31 December
2022 2021
HKD’000 HKD’000

FVPL
At 1 January 1,444 5,026
Fair value gains (Note 7) (1,444) (3,582)

At 31 December – 1,444

Total losses included in the statement of comprehensive income (1,444) (3,582)

FVOCI
At 1 January 11,700 –
Additions – 11,700
Fair value losses (10,024) –
Currency translation difference 39 –

At 31 December 1,715 11,700

Total losses included in the other comprehensive income (9,985) –

(iv) Valuation processes

The finance department of the Group includes a team that performs the valuations of non–property
items required for financial reporting purposes, including level 3 fair values. This team reports
directly to the chief financial officer (CFO). Discussions of valuation processes and results are held
between the CFO and the valuation team at least once every year. External valuation experts will be
involved when necessary.

The main level 3 inputs used by the Group are derived and evaluated as follows:

• Discount rates for financial assets and financial liabilities are determined using a capital asset
pricing model to calculate a post-tax rate that reflects current market assessments of the time
value of money and the risk specific to the asset or liability.

• Enterprise value (EV)/ Earnings before interest, taxes, depreciation and amortisation (EBITDA)
multiples are based on the information of comparable companies.

• Drift rates of EBITDA multiples are estimated based on the entity’s knowledge of the business
and how the current economic environment is likely to impact it.

• EBITDA multiples and EBITDA volatilities are based on the respective historical measures of
comparable companies.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.3 Fair value estimation (Cont’d)
(v) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable
inputs used in level 3 fair value measurements (see (ii) above for the valuation techniques
adopted):

Relationship of
Unobservable unobservable
Description Fair value at 31 December inputs As at 31 December inputs to fair value Sensitivity analysis
2022 2021 2022 2021
HKD’000 HKD’000 HKD’000 HKD’000

Financial liabilities at fair 1,474 1,444 Discount rate - 16.5% The higher the As at 31 December 2022, an
value through profit/loss discount rate, the increase in the discount rate
lower the fair value. by 100 bps would decrease
the FV by HKD Nil. (2021:
HKD 29,000)

Annualized - 7% The higher the As at 31 December 2022, an

EBITDA Drift annualized EBITDA increase in the annualized
Drift, the higher the EBITDA drift by 5% would
fair value. increase the FV by HKD Nil
(2021: HKD51,000)

As at 31 December 2022, a
decrease in the annualized
EBITDA drift by 5% would
decrease the FV by
approximately HKD Nil.
(2021: HKD200,000)

EBITDA multiple – 5 The higher the EV/ As at 31 December 2022, an

EBITDA multiple, increase in the EV/EBITDA
the higher the fair multiple by 1.0 would
value. increase the FV by HKD Nil.
(2021: HKD243,000)

As at 31 December 2022,
a decrease in the EV/
EBITDA multiple by 1.0
would decrease the FV by
approximately HKD Nil.
(2021: HKD454,000)

EV/EBITDA – 70% The higher the EV/ As at 31 December 2022, an

volatility EBITDA volatility, increase in the EV/EBITDA
the higher the fair volatility by 10% would
value. increase the FV by HKD Nil.
(2021: HKD254,000)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (Cont’d)

3.3 Fair value estimation (Cont’d)
(v) Valuation inputs and relationships to fair value (Cont’d)
Relationship of
Unobservable unobservable
Description Fair value at 31 December inputs As at 31 December inputs to fair value Sensitivity analysis
2022 2021 2022 2021
HKD’000 HKD’000 HKD’000 HKD’000

As at 31 December 2022,
a decrease in the EV/
EBITDA volatility by 10%
would decrease the FV by
approximately HKD Nil.
(2021:HKD88,000)

Financial asset at fair 1,715 11,700 Discount rate 25% 25% The higher the As at 31 December 2022, an
value through other discount rate, the increase in the discount rate
comprehensive income lower the fair value. by 100 bps would decrease
(“FVOCI”) the FV by HKD 156,000.
(2021: HKD 1,066,000)

The lower the discount As at 31 December 2022, a

rate, the higher the decrease in the discount
fair value. rate by 100 bps would
increase the FV by HKD
187,000. (2021: HKD
1,158,000)

Terminal growth 3% 3% The higher the As at 31 December 2022,

rate terminal growth an increase in the terminal
rate, the higher the growth rate by 100bps
fair value. would increase the FV
by HKD47,000 (2021:
HKD271,000).

The lower the terminal As at 31 December 2022, an

growth rate, the decrease in the terminal
lower the fair value. growth rate by 100 bps
would decrease the FV
by HKD39,000 (2021:
HKD286,000).

Note: the EBITDA volatility is not a sensitive input.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 CRITICAL ESTIMATES AND JUDGEMENTS

The preparation of financial statements requires the use of accounting estimates which, by definition, will
seldom equal the actual results. Management also needs to exercise judgement in applying the group’s
accounting policies.

Estimates and judgements are continually evaluated. They are based on historical experience and other
factors, including expectations of future events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and judgements

(a) Net realisable value of inventories
The Group makes provision for inventories based on an assessment of the net realisable value,
which was determined based upon ageing analysis of the inventories focusing on seasonality and
market conditions. Provision for inventories is recorded where events or changes in circumstances
indicate that the carrying amount of inventories will not be fully realised. The identification and
quantification of inventory provisions requires the use of judgement and estimates. These estimates
are based on the current market condition and the historical experience of selling products of
similar nature. It could change significantly as a result of changes in economic conditions in places
where the Group operates and changes in customer taste and competitor actions in response to
changes in market conditions. Where the outcomes are different from the original estimates, such
differences will impact the carrying value of inventories and write-downs of inventories in the year in
which such estimates have been changed. Management reassesses these estimates at the end of
each period.

(b) Impairment on property, plant and equipment and right-of-use assets

At the end of each period, the Group reviews the internal and external sources of information to
identify indications that property, plant and equipment and right-of-use assets may be impaired.
The Group considered each retail store to be a cash generating unit (“CGU”) and determined the
recoverable amount of a CGU using the value in use model. Management judgment is required
in the area of impairment on property, plant and equipment and right-of-use assets, particularly in
assessing whether: (1) an event has occurred that may affect asset values; (2) the carrying value
of an asset can be supported by the net present value of future cash flows from the asset using
estimated cash flow projections; and (3) the cash flow is discounted using an appropriate rate. An
impairment loss of property, plant and equipment and right-of-use assets is established when there
is objective evidence that the carrying amount of property, plant and equipment and right-of-use
assets exceeds its recoverable amount.

The Group has material operational leasehold improvements and right-of-use assets used in the
retail stores which are subject to impairment test when there is impairment indicator. In assessing
whether there is any indication that an asset might be impaired, management considers both the
external and internal sources of information including that trading performance of the retail stores is
below expectation. Management has performed discounted cash flow analysis on the retail stores
with impairment indicators and the recoverable amounts were determined based on value-in-use
calculations of these retails stores. Key assumptions used in the calculations including the revenue
growth rate, gross margin, store costs such as rent, payroll costs and general operating costs and
discount rate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 CRITICAL ESTIMATES AND JUDGEMENTS (Cont’d)

4.1 Critical accounting estimates and judgements (Cont’d)
(c) Current and deferred income taxes
The Group is subject to income taxes in certain jurisdictions. Significant judgement is required in
determining the provision for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax issues
based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the
current and deferred income tax assets and liabilities in the period in which such determination is
made.

For temporary differences which give rise to deferred tax assets, the Group assesses the likelihood
that the deferred income tax assets could be recovered. Deferred tax assets are recognised based
on the Group’s estimates and assumptions that they will be recovered from taxable income arising
from continuing operations in the foreseeable future.

(d) Fair value measurement of financial instruments

The fair value assessment of financial instruments that are measured at level 3 fair value hierarchy
requires significant estimates, which include annualised EBITDA drift, annualised EBITDA volatility,
EV/EBITDA multiple, EV/EBITDA volatility, discount rate and other assumptions. Changes in these
assumptions and estimates could materially affect the respective fair value of these financial
instruments.

5 SEGMENT INFORMATION
The Group is principally engaged in the retailing and wholesale of luxury and fashion clothes and products
in the PRC, Macau, Hongkong and other places. The performance of the Group’s retail stores is subject to
seasonal fluctuations and certain holiday seasons.

The Group’s business activities, for which discrete financial statements are available, are regularly reviewed
and evaluated by the CODM. The CODM considers the business from geographic perspective and assesses
the performance of the geographical segments mainly based on segment revenues and segment result. Assets
and liabilities are regularly reviewed on a consolidated basis.

The revenues from external customers reported to CODM are measured as segment revenues, which are the
revenues derived from customers of each segment.

Segment result is equal to revenue from external customers deducted by cost of sales and selling and
marketing expenses from each segment.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 SEGMENT INFORMATION (Cont’d)

The segment information for the years ended 31 December 2022 and 2021 are as follows:

Year ended 31 December 2022

Mainland HK and
China Macau others Total
HKD’000 HKD’000 HKD’000 HKD’000

Segment revenue 450,469 440,346 103,805 994,620

Inter-segment revenue (634) (1,959) (32,127) (34,720)

Revenue from external customers 449,835 438,387 71,678 959,900

Cost of sales (235,354) (232,820) (37,484) (505,658)

Selling and marketing expenses (170,559) (166,255) (34,907) (371,721)

Segment result 43,922 39,312 (713) 82,521

General and administrative expenses (94,251)

Other income 3,259
Other loss – net (7,437)
Finance income 391
Finance costs (18,931)
Finance costs – net (18,540)

Loss before income tax expenses (34,448)

Income tax expense (2,057)

Loss for the year (36,505)

Depreciation and amortisation (53,695) (105,368) (26,850) (185,913)

Provision for impairment of property,
plant and equipment, right-of-use
assets and intangible assets (1,475) (6,360) (1,330) (9,165)
Reversal of provision for/(provision for)
impairment of inventories 698 (8,713) 114 (7,901)

Segment non-current assets 92,581 274,835 24,479 391,895

Segment current assets 216,014 250,430 52,123 518,567

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 SEGMENT INFORMATION (Cont’d)

Year ended 31 December 2021

Mainland HK and
China Macau others Total
HKD’000 HKD’000 HKD’000 HKD’000

Segment revenue 557,952 588,665 125,711 1,272,328

Inter-segment revenue (8,412) (2,854) (32,755) (44,021)

Revenue from external customers 549,540 585,811 92,956 1,228,307

Cost of sales (269,819) (266,780) (40,588) (577,187)

Selling and marketing expenses (194,905) (243,736) (56,683) (495,324)

Segment result 84,816 75,295 (4,315) 155,796

General and administrative expenses (116,797)

Other income 10,780
Other losses 17,775
Finance income 855
Finance costs (21,292)
Finance costs – net (20,437)

Loss before income tax expenses 47,117

Income tax expense (15,486)

Loss for the year 31,631

Depreciation and amortisation (59,910) (135,881) (39,521) (235,312)

Provision for impairment of
property, plant and equipment and
right-of-use assets (538) (5,434) (7,963) (13,935)
Provision for impairment of inventories 1,388 10,573 (76) 11,885

Segment non-current assets 120,002 305,446 55,803 481,251

Segment current assets 202,361 393,579 52,181 648,121

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 SEGMENT INFORMATION (Cont’d)

(a) Revenue by business line and nature

Year ended 31 December

2022 2021
HKD’000 HKD’000

Retail 916,691 1,192,551

Store management and consignment service 30,874 21,110
Wholesale 12,335 14,646

Total 959,900 1,228,307

(b) Timing of Revenue Recognition

Year ended 31 December

2022 2021
HKD’000 HKD’000

Revenue at a point in time 929,026 1,207,197

Revenue over time 30,874 21,110

Total 959,900 1,228,307

(c) Information about unsatisfied performance obligation

The Group elects not to disclose the information for remaining performance obligation of contracts
as the contracts have an original expected duration of less than one year or the portion with variable
consideration as a practical expedient.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 OTHER INCOME

Year ended 31 December

2022 2021
HKD’000 HKD’000

Government grants (Note) 3,259 2,002

Subsidy from franchisor on operating loss – 8,765
Others – 13

3,259 10,780

Note: Government grants represent subsidies received from government for anti-epidemic assistance.

7 OTHER (LOSSES)/GAINS – NET

Year ended 31 December

2022 2021
HKD’000 HKD’000

Change in cash surrender value of investment in insurance contract

(Note 16) 1,107 1,070
Gains on the derecognition of right-of-use assets and lease liabilities 910 5,953
Exchange (losses)/gains (9,468) 2,165
Fair value gains on financial liabilities at fair value through
profit or losses – net 1,444 6,552
Net loss on disposal of property, plant and equipment (1,961) (474)
Reversal of provision for litigation expenses – 2,130
Others 531 379

(7,437) 17,775

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8 EXPENSES BY NATURE

Year ended 31 December

2022 2021
HKD’000 HKD’000

Change in inventories 472,139 573,866

Depreciation of right-of-use assets (Note 14) 152,886 187,018
Employee benefit expenses (Note 9) 180,938 232,836
Depreciation of property, plant and equipment (Note 13) 28,471 44,050
Variable lease expenses (Note 14) 31,005 44,847
Utilities and electricity expenses 23,031 25,089
Property management fee 17,778 24,790
Advertising and promotion expenses 21,653 22,431
Payment processing fee 9,505 10,822
Labour cost 3,772 5,096
Provision/(reversal of provision) of inventories impairment 7,901 (11,885)
(Reversal of provision)/provision for impairment loss on trade receivables (223) 121
Travelling, entertainment and communication expenses 3,900 4,658
Impairment loss on property, plant and equipment (Note 13) 2,889 1,006
Repair and maintenance 5,935 4,892
Amortisation of intangible assets (Note 15) 4,556 4,244
Delivery expenses 2,983 2,578
Office expenses 5,286 5,107
Impairment loss on right-of-use assets (Note 14) 6,276 5,338
Professional service fees 4,835 5,479
Auditor’s remuneration 2,216 2,318
Rent concession related to Covid-19 (23,307) (24,056)
Impairment loss on intangible assets (Note 15) – 7,591
Other expenses 7,205 11,072

971,630 1,189,308

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 EMPLOYEE BENEFIT EXPENSES

(a) Employee benefit expenses are analysed as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Salaries, wages and bonuses 160,367 209,615

Pension costs – defined contribution plan 14,903 16,285
Other social security costs, housing benefits and
other employee benefits 5,668 6,936

180,938 232,836

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year ended 31 December
2022 include four (2021: four) directors whose emoluments are reflected in the analysis shown in Note
22. The emoluments payable to the remaining one (2021: one) individuals during the year are as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Basic salaries, housing allowances, share options,

other allowances and benefits in kind 1,132 1,292
Contribution to pension scheme 11 30

Total 1,143 1,322

The emoluments fell within the following bands:

Number of individuals
Year ended 31 December
2022 2021

HKD1,000,001–1,500,000 1 1

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 FINANCE INCOME AND COSTS

Year ended 31 December

2022 2021
HKD’000 HKD’000

Finance income
– Interest income 391 855

Finance costs
– Interest and finance charges paid/payable for lease liabilities (9,337) (14,078)
– Other interest cost (9,594) (7,214)

(18,931) (21,292)

Finance costs – net (18,540) (20,437)

11 INCOME TAX EXPENSE

(a) Income tax expense

Year ended 31 December

2022 2021
HKD’000 HKD’000

Current income tax 514 8,415

Deferred income tax related to the temporary differences (Note 18) 1,543 7,071

2,057 15,486

The Group’s principal applicable taxes and tax rates are as follows:

Cayman Islands
Under the prevailing laws of the Cayman Islands, the Company is not subject to tax on income or capital
gains. In addition, no Cayman Islands withholding tax is payable on dividend payments by the Company
to its shareholders.

British Virgin Islands

The Group’s entities incorporated in the British Virgin Islands are not subject to tax on income or capital
gains.

Hong Kong
In accordance with the two-tiered profits tax regime, for a subsidiary entitled to this benefit, Hong Kong
profits tax was calculated at 8.25% on the first HKD2 million and 16.5% on the remaining balance of the
estimated assessable profits for the years ended 31 December 2022 and 2021. For other Hong Kong
incorporated subsidiaries, Hong Kong profits tax was calculated at 16.5%.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11 INCOME TAX EXPENSE (Cont’d)

(a) Income tax expense (Cont’d)
Mainland China corporate income tax (“CIT”)
CIT was made on the estimated assessable profits of the entities within the Group incorporated and
operated in Mainland China and was calculated in accordance with the relevant tax rules and regulations
of Mainland China. The general CIT rate is 25% for the years ended 31 December 2021 and 2022.

Macau
The entities within the Group incorporated and operating in Macau are subject to Macau profits tax at
progressive rates ranging from 3% to 9% on the taxable income above MOP 32,000 but below MOP
300,000, and thereafter at a fixed rate of 12%. In addition, a special tax incentive has provided to effect
that tax free income threshold amounting to MOP 600,000 for the years ended 31 December 2021 and
2022.

Taiwan
The entities within the Group operating in Taiwan are subject to Taiwan profits tax at the rate of 20% for
the year ended 31 December 2022.

Withholding tax on undistributed profits

According to the relevant tax rules and regulations of the PRC, distribution to foreign investors of profits
earned by PRC companies since 1 January 2008 is subject to withholding tax of 5% or 10%, depending
on the country of incorporation of the foreign investors’ foreign incorporated immediate holding
companies.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11 INCOME TAX EXPENSE (Cont’d)

(b) Numerical reconciliation of income tax expense

Year ended 31 December

2022 2021
HKD’000 HKD’000

(Loss)/profit before income tax (34,448) 47,117

Tax calculated at applicable statutory tax rate of respective entities (4,554) 10,995
Tax preference (98) 8
Withholding income tax on the profits to be distributed by the group
companies in the mainland China (13) –
Tax effect of unrecognised tax losses 6,321 5,636
Utilisation of previously unrecognised tax losses (811) 645
Items not deductible/(taxable) for tax purposes 1,212 (1,798)

Income tax expense 2,057 15,486

The weighted average applicable tax rate is influenced by the change in the profitability of the Group’s
subsidiaries in the respective regions. There is no change of the tax rate of the respective regions during
for the years ended 31 December 2021 and 2022.

12 (LOSSES)/ EARNINGS PER SHARE

(a) Basic (losses)/earnings per share
Basic (losses)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders
of the Company by the weighted average number of ordinary shares in outstanding during the financial
year.

Year ended 31 December

2022 2021

(Loss)/profit attributable to equity holders of the Company (HKD’000) (33,137) 32,157

Weighted average number of ordinary shares in issue 400,000,000 400,000,000
Basic (losses)/earnings per share (HKD) (0.08) 0.08

(b) No diluted (losses)/earnings per share is presented as the Group has no dilutive potential ordinary
shares during the reporting period.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13 PROPERTY, PLANT AND EQUIPMENT

Office Computer
furniture and
Leasehold and electronic
Buildings improvements Vehicle equipment equipment Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

At 31 December 2020
Cost 83,577 292,646 3,172 20,889 13,849 414,133
Accumulated depreciation and
impairment provision (5,285) (235,966) (2,896) (19,068) (9,549) (272,764)

Net book amount 78,292 56,680 276 1,821 4,300 141,369

Year ended 31 December 2021

Opening net book amount 78,292 56,680 276 1,821 4,300 141,369
Additions – 27,855 – 1,411 2,891 32,157
Depreciation (1,794) (37,890) (72) (1,644) (2,650) (44,050)
Impairment provision – (1,006) – – – (1,006)
Exchange differences – 1,757 – 36 81 1,874
Disposals – (2,935) – (43) (143) (3,121)

Net book amount 76,498 44,461 204 1,581 4,479 127,223

At 31 December 2021
Cost 83,577 281,496 2,796 19,870 14,678 402,417
Accumulated depreciation and
impairment provision (7,079) (237,035) (2,592) (18,289) (10,199) (275,194)

Net book amount 76,498 44,461 204 1,581 4,479 127,223

Year ended 31 December 2022

Opening net book amount 76,498 44,461 204 1,581 4,479 127,223
Additions – 41,191 367 – 2,275 43,833
Depreciation (1,643) (23,283) (439) (511) (2,595) (28,471)
Impairment provision – (2,889) – – – (2,889)
Exchange differences – (2,391) – (95) (219) (2,705)
Disposals – (8,242) – – (397) (8,639)

Net book amount 74,855 48,847 132 975 3,543 128,352

At 31 December 2022
Cost 83,577 303,831 3,148 19,870 15,886 426,312
Accumulated depreciation and
impairment provision (8,722) (254,984) (3,016) (18,895) (12,343) (297,960)

Net book amount 74,855 48,847 132 975 3,543 128,352

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13 PROPERTY, PLANT AND EQUIPMENT (Cont’d)

As at 31 December 2022, the Group performed impairment test on the property, plant and equipment used
in the retail stores with discounted cash flow analysis and recognised impairment loss of approximately
HKD2,889,000 (2021: HKD1,006,000).

As at 31 December 2022, a building with carrying amount of approximately HKD58,533,000 is pledged for first
mortgage of bank borrowings (2021: HKD59,801,000).

Depreciation of the Group’s property, plant and equipment has been recognised in the consolidated
statements of profit or loss as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Selling and marketing expenses 24,417 39,835

Administrative expenses 4,054 4,215

28,471 44,050

14 RIGHT-OF-USE ASSETS

As of 31 December
2022 2021
HKD’000 HKD’000

Retail stores 142,022 232,119

Vehicle – 368
Office 8,691 18,761

150,713 251,248

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14 RIGHT-OF-USE ASSETS (Cont’d)

Retail
stores Vehicle Office Total
HKD’000 HKD’000 HKD’000 HKD’000

At 31 December 2020
Cost 545,165 4,415 35,129 584,709
Accumulated depreciation and impairment (282,366) (2,934) (13,988) (299,288)

Net book amount 262,799 1,481 21,141 285,421

Year ended 31 December 2021

Opening net book amount 262,799 1,481 21,141 285,421
Additions 164,641 – 7,658 172,299
Depreciation (176,089) (1,113) (9,816) (187,018)
Provision for impairment loss (5,338) – – (5,338)
Early termination (14,533) – – (14,533)
Exchange differences 639 – (222) 417

Closing net book amount 232,119 368 18,761 251,248

At 31 December 2021
Cost 499,370 4,415 39,691 543,476
Accumulated depreciation and impairment (267,251) (4,047) (20,930) (292,228)

Net book amount 232,119 368 18,761 251,248

Year ended 31 December 2022

Opening net book amount 232,119 368 18,761 251,248
Additions 73,182 – – 73,182
Depreciation (143,024) (368) (9,494) (152,886)
Provision for impairment loss (6,276) – – (6,276)
Early termination (11,020) – – (11,020)
Exchange differences (2,959) – (576) (3,535)

Closing net book amount 142,022 – 8,691 150,713

At 31 December 2022
Cost 316,032 4,414 14,620 335,066
Accumulated depreciation and impairment (174,010) (4,414) (5,929) (184,353)

Net book amount 142,022 – 8,691 150,713

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14 RIGHT-OF-USE ASSETS (Cont’d)

The statement of profit or loss shows the following amounts relating to leases:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Expense relating to variable lease payments not included in

lease liabilities (Note 8) 31,005 44,847
Depreciation charge of right-of-use assets 152,886 187,018
Interest expenses (included in finance cost) (Note 10) 9,337 14,078

The Group leases various properties to operate its businesses and these lease liabilities were measured at net
present value of the lease payments during the lease terms that are not yet paid. No extension option and no
residual value guarantee are included in such property and equipment leases across the Group.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets that
are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Some property leases contain variable payment terms that are linked to sales generated from a store. For
individual stores, some of lease payments are on the basis of variable payment terms and there is a wide
range of sales percentages applied. Variable payment terms are used for a variety of reasons, including
minimising the fixed costs base for newly established stores. Variable lease payments that depend on sales
are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

A 5% increase in sales across all stores in the Group with such variable lease contracts, for the years ended
31 December 2022 would increase total lease payments by approximately HKD1,550,000, respectively (2021:
HKD2,242,000).

The total cash outflows for leases payment including lease liabilities, interest expenses on leases and variable
lease payments, for the year ended 31 December 2022 were approximately HKD210,018,000, respectively
(2021: HKD288,470,000).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 INTANGIBLE ASSETS

License
Goodwill Trademark Software rights Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

At 31 December 2020
Cost 688 7,966 6,071 16,966 31,691
Accumulated amortisation – (266) (2,347) (10,348) (12,961)

Net book amount 688 7,700 3,724 6,618 18,730

Year ended 31 December 2021

Opening net book amount 688 7,700 3,724 6,618 18,730
Additions – – (250) – (250)
Amortisation – (797) (1,224) (2,223) (4,244)
Disposals – 893 – 893
Provision for impairment loss
(Note) (688) (6,903) – – (7,591)
Exchange differences – – 28 – 28

Net book amount – – 3,171 4,395 7,566

At 31 December 2021
Cost 688 7,966 5,903 16,966 31,523
Accumulated amortisation (688) (7,966) (2,732) (12,571) (23,957)

Net book amount – – 3,171 4,395 7,566

Year ended 31 December 2022

Opening net book amount – – 3,171 4,395 7,566
Additions – – 5,357 – 5,357
Amortisation – – (1,710) (2,846) (4,556)
Exchange differences – – (258) – (258)

Net book amount – – 6,560 1,549 8,109

At 31 December 2022
Cost 688 7,966 10,926 17,471 37,051
Accumulated amortisation (688) (7,966) (4,366) (15,922) (28,942)

Net book amount – – 6,560 1,549 8,109

Note: Goodwill and trademark arose from the acquisition of a business engaging in the production, development, import and
sale of skincare and cosmetic products business (“SwissPro business”) during the year ended 31 December 2020.
In preparing the consolidated financial statements for the year ended 31 December 2021, the Group determined the
impairment assessment on the intangible asset on annual basis by reference from the recoverable amount which
is referenced to the external valuer. In the impairment assessment, the Group prepared a cash flow projection for
SwissPro Business, in which the revenue generated in 2021 is significantly lower than the projection previously
budgeted. The SwissPro business operated for more than one year and made losses during the years. The Group
foresee it is uncertain whether the sales target of SwissPro business could be met.

As the recoverable amount of SwissPro business was below its carrying amount, an impairment loss in property,
plant and equipment and intangible assets of approximately HKD488,000 and HKD7,591,000 in FY2021 has been
recognised in the consolidated statement of profit or loss. Management did not consider any reversal of impairment in
trademark in 2022 based on the actual and forecastable performance of SwissPro Business.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 INTANGIBLE ASSETS (Cont’d)

Amortisation of the Group’s intangible assets has been recognised in the consolidated statements of profit or
loss as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Cost of sales 2,845 2,221

Administrative expenses 1,711 2,023

4,556 4,244

16 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE

INCOME
(a) Classification of financial assets at fair value through other comprehensive income
On 9 July 2021, the Group made an investment of USD1.5 million (approximately equivalent to HKD11.7
million) in an unlisted company which is registered in the Cayman Islands. The investment was made by
way of a subscription for 1,503,759 shares which represents 1% shareholding of the company. The fair
value is within level 3 of the fair value hierarchy (Note 3.3 (iii)). During year ended 31 December 2022,
there was not material change in the fair value of the investment.

The fair value through other comprehensive income designation was made because the investment
is an equity securities which are not held for trading and which the Group has irrevocably elected at
initial recognition to recognise in this category. During the year ended 31 December 2022, there was no
transfer of any cumulative gain or loss within equity relating to this investment.

(b) Equity investments at fair value through other comprehensive income

Year ended 31 December

2022 2021
HKD’000 HKD’000

At beginning of the year 11,700 –

Additions 11,700
Fair value losses recognised in other comprehensive income (10,024) –
Currency translation difference 39 –

At end of the year, all non-current and unlisted 1,715 11,700

On disposal of the equity investment, any related balance within the FVOCI reserve is reclassified to
retained earnings.

(c) Fair value and risk exposure

Information about the methods and assumptions used in determining fair value is provided in Note 3.3.

The financial assets at FVOCI is denominated in USD. For an analysis of the sensitivity of the foreign
exchange risk, see Note 3(a)(i).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17 INVESTMENT IN INSURANCE CONTRACT

Investment
in insurance
contract
HKD’000

Balance as at 1 January 2020 32,486

Foreign exchange loss 167
Increase in cash surrender value credited to profit or loss 1,070

Balance as at 31 December 2021 33,723

Foreign exchange gain 13
Increase in cash surrender value credited to profit or loss 1,107

Balance as at 31 December 2022 34,843

The investment in insurance contract represents the investments in life insurance product issued by HSBC
Life (International) Limited to one director, Ms. Fan Tammy, of the Company, at the amount of USD4 million
(equivalent to approximately HKD31 million). It is pledged for the bank loans of Macau Ieng Nam (a subsidiary
of the Group) from the Hongkong and Shanghai Banking Corporation Limited. The effective date of the
insurance was 22 September 2015 with a sum insured of USD11,200,000. A guaranteed minimum crediting
rate of 2% applies to the insurance.

18 DEFERRED INCOME TAX

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
income tax assets against current income tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority.

As of 31 December
2022 2021
HKD’000 HKD’000

Deferred income tax assets

– to be recovered after more than 12 months 6,188 836
– to be recovered within 12 months 14,791 18,964

20,979 19,800

Deferred income tax liabilities

– to be recovered after more than 12 months (6,271) (2,442)

14,708 17,358

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 DEFERRED INCOME TAX (Cont’d)

The net movement on the deferred income tax account is as follows:

Year ended 31 December

2022 2021
HKD’000 HKD’000

At beginning of the year 17,358 23,995

Charged/(credited) to consolidated statement of profit or loss (Note 11) (1,543) (7,071)
Exchange differences (1,107) 434

At end of the year 14,708 17,358

The movement in deferred income tax assets and liabilities during the period without taking into consideration
the offsetting of balances within the same tax jurisdiction is as follows:

Deferred income tax assets

Depreciation Other current/

and Inventory- non-current Lease
amortisation provision liabilities liabilities Tax losses Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

At 1 January 2021 26 2,504 14,819 49,600 6,674 73,623

(Credited)/charged to consolidated
statement of profit or loss 26 (447) (6,916) (6,473) (37) (13,847)
Exchange differences – 63 275 489 126 953

At 31 December 2021 52 2,120 8,178 43,616 6,763 60,729

(Credited)/charged to consolidated
statement of profit or loss (26) (119) (2,075) (14,677) 726 (16,171)
Exchange differences – (157) (562) (1,282) (365) (2,366)

At 31 December 2022 26 1,844 5,541 27,657 7,124 42,192

117
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 DEFERRED INCOME TAX (Cont’d)

Deferred income tax liabilities

Withholding
tax on Depreciation
undistributed Right-of-use and
profits assets amortisation Total
HKD’000 HKD’000 HKD’000 HKD’000

At 1 January 2021 42 46,072 3,514 49,628

(Credited)/charged to consolidated
statement of profit or loss – (5,579) (1,197) (6,776)
Exchange differences 2 436 81 519

At 31 December 2021 44 40,929 2,398 43,371

Charged to consolidated
statement of profit or loss (13) (18,562) 3,948 (14,627)
Exchange differences 80 (1,153) (186) (1,259)

At 31 December 2022 111 21,214 6,160 27,485

The Group has the following unrecognised tax losses:

As of 31 December
2022 2021
HKD’000 HKD’000

Unused tax losses for which no deferred tax asset has been recognised –
without expiration date 30,472 42,585
Unused tax losses for which no deferred tax asset has been recognised –
with expiration date 141,835 118,388
Potential tax benefit 29,899 24,389

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 DEFERRED INCOME TAX (Cont’d)

Deferred income tax liabilities (Cont’d)
Tax losses carried forward with expiration date expire in the following years:

As of 31 December
2022 2021
HKD’000 HKD’000

2021 282 282

2022 1,335 1,335
2023 89,494 89,494
2024 463 463
2025 26,814 26,814
2026 23,447 –

141,835 118,388

19 INVENTORIES

As of 31 December
2022 2021
HKD’000 HKD’000

Fashion wears and accessories 281,560 267,086

Electronic devices 8,349 4,702
Skincare and cosmetic products 10,933 7,447
Less: provision for impairment (26,728) (18,827)

274,114 260,408

Inventory measured at cost 242,727 234,355

Inventory measured at net realisable value 31,387 26,053

274,114 260,408

Provision for impairment was recognised for the amount by which the carrying amount of the inventories
exceeds its net realisable value, and was recorded in “cost of sales” in the consolidated statements of profit or
loss.

For the year ended 31 December 2022, the cost of inventories recognised as expense and included in “cost of
sales” amounted to approximately HKD480,040,000 (2021: HKD561,981,000).

119
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20 FINANCIAL INSTRUMENTS BY CATEGORY

The Group holds the following financial instruments:

As of 31 December
2022 2021
Notes HKD’000 HKD’000
Financial assets
Financial assets at amortised cost
Trade receivable 21 40,285 49,791
Other receivables and deposit (excluding value-added tax
recoverable) 23 56,162 72,741
Term deposits with initial term of over three months 26 50,058 70,000
Cash and cash equivalents 24 69,881 115,891
Restricted cash 25 17,987 26,216

234,373 334,639

Financial asset at fair value

Financial asset at fair value through other comprehensive
income 16 1,715 11,700

236,088 346,339

Financial liabilities
Financial liabilities at amortised cost
Trade and other payables (excluding other taxes payable,
salaries payable) 34 142,925 122,052
Amount due to related parties 38 182,915 190,666
Borrowings 29 89,994 129,596
Lease liabilities 30 162,252 267,441

578,086 709,755

Financial liabilities at fair value

Financial liabilities at fair value through profit or loss 32 – 1,444

578,086 711,199

The Group’s exposure to various risks associated with the financial instruments is discussed in Note 3. The
maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21 TRADE RECEIVABLES

As of 31 December
2022 2021
HKD’000 HKD’000

Trade receivables
Due from third parties 40,741 50,470
Less: provision for impairment of trade receivables (456) (679)

Net trade receivables 40,285 49,791

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables. The loss allowance decreased by approximately
HKD223,000 for trade receivables during the current reporting period.

The net trade receivables are denominated in the following currencies:

As of 31 December
2022 2021
HKD’000 HKD’000

RMB 27,432 37,112

MOP 5,685 4,643
HKD 5,556 7,634
EUR 1,354 –
TWD 258 402

40,285 49,791

The credit terms of trade receivables granted by the Group are generally 1–3 months. For the years ended 31
December 2021 and 2022, the ageing analysis of the trade receivables based on invoice date is as follows:

As of 31 December
2022 2021
HKD’000 HKD’000

Within 3 months 39,349 45,401

Over 3 months and within 6 months 909 2,052
Over 6 months and within 1 year 216 2,221
Over 1 year 267 796

40,741 50,470

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as
their fair value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22 PREPAYMENTS

As of 31 December
2022 2021
HKD’000 HKD’000

Included in current assets

– Prepayments to supplier 18,625 47,379
– Other prepayments 9,990 18,515

28,615 65,894

Included in non-current assets

– Prepayments for leasehold improvement and furniture 10,173 1,099
– Prepayments for franchising fee 8,607 –

18,780 1,099

47,395 66,993

23 OTHER RECEIVABLES AND DEPOSIT

As of 31 December
2022 2021
HKD’000 HKD’000

Included in current assets

– Rental deposits 14,908 23,811
– Value-added tax recoverable 5,930 6,332
– Staff advance 956 852
– Others 11,894 19,186

33,688 50,181

Included in non-current assets

– Rental deposits 28,404 28,892

62,092 79,073

122
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24 CASH AND CASH EQUIVALENTS

As of 31 December
2022 2021
HKD’000 HKD’000

Cash at bank and in hand 69,881 115,891

Cash and cash equivalents are denominated in the following currencies:

As of 31 December
2022 2021
HKD’000 HKD’000
Cash at bank and in hand
– HKD 26,469 66,815
– RMB 29,352 22,227
– MOP 12,479 24,051
– EUR 581 582
– USD 984 600
– TWD 16 1,616

69,881 115,891

25 RESTRICTED CASH

As of 31 December
2022 2021
HKD’000 HKD’000

Restricted cash 17,987 26,216

Restricted cash mainly includes the security deposits for issuance of letters of credit by banks denominated in
HKD and the security deposits for bank loans denominated in HKD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26 TERM DEPOSITS WITH INITIAL TERM OF OVER THREE MONTHS

As of 31 December
2022 2021
HKD’000 HKD’000

Term deposits with initial term of over three months 50,058 70,000

27 SHARE CAPITAL

Number of Nominal value Share

shares of shares premium
HKD’000 HKD’000

As at 31 December 2021 and 2022 400,000,000 4,000 859,232

28 RESERVES

Currency
Capital Statutory FVOCI translation
reserve reserve reserve differences Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

At 1 January 2021 (582,796) 2,870 – (4,126) (584,052)

Transfer to statutory reserves (Note) – 2,772 – – 2,772
Currency translation differences – – – 4,328 4,328

At 31 December 2021 (582,796) 5,642 – 202 (576,952)

At 1 January 2022 (582,796) 5,642 – 202 (576,952)

Transfer to statutory reserves (Note) – 226 – – 226
Changes in the fair value of equity
investments at fair value through
other comprehensive income – – (9,985) – (9,985)
Currency translation differences – – – (12,377) (12,377)

At 31 December 2022 (582,796) 5,868 – (12,175) (599,088)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28 RESERVES (Cont’d)
Note:

Statutory reserve
In accordance with the Companies Laws of the PRC and the stipulated provisions of the articles of association of
subsidiaries with limited liabilities in the PRC, appropriation of net profits (after offsetting accumulated losses from prior
years) should be made by these companies to their respective Statutory Surplus Reserve Funds and the Discretionary
Reserve Funds before distributions are made to the owners. The percentage of appropriation to Statutory Surplus Reserve
Fund is 10%. The amount to be transferred to the Discretionary Reserve Fund is determined by the equity owners of these
companies. When the balance of the Statutory Surplus Reserve Fund reaches 50% of the registered capital, such transfer
needs not to be made. Both the Statutory Surplus Reserve Fund and Discretionary Reserves Fund can be capitalised as
capital of an enterprise, provided that the remaining Statutory Surplus Reserve Fund shall not be less than 25% of the
registered paid in capital.

Also, in accordance with the Law of the PRC on Enterprises with Foreign Investments and the stipulated provisions of
the articles of association of wholly owned foreign subsidiaries in the PRC, appropriation from net profits (after offsetting
accumulated losses brought forward from prior years) should be made by these companies to their Respective Reserve
Fund. The percentage of net profit to be appropriated to the Reserve Fund is not less than 10% of the net profit. When
the balance of the Reserve Fund reaches 50% of the registered capital, such transfer needs not be made. With approvals
obtained from respective boards of directors of these companies, the Reserve Fund can be used to offset accumulated
deficit or to increase capital.

In addition, in accordance with Macau Commercial Code, the entity incorporated in Macau should set aside a minimum of
25% of the entity’s profit after tax to the legal reserve until the balance of the reserve reaches a level equivalent to 50% of the
entity’s capital.

29 BORROWINGS

As of 31 December
2022 2021
HKD’000 HKD’000

Non-current
Bank loans (a) 45,291 30,979

Current
Bank loans (a) 12,895 85
Letter of credit loans (b) 31,808 98,532

44,703 98,617

89,994 129,596

125
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

29 BORROWINGS (Cont’d)
(a) All borrowings are guaranteed and pledged as shown below:

As of 31 December
2022 2021
HKD’000 HKD’000

Guaranteed by Mr. Fan and pledged by his properties 20,575 21,057

Guaranteed by Mr. Fan and pledged by his properties and
time deposit 4,736 50,000
Guaranteed by Mr. Fan and pledged by his properties,
time deposit and insurance contract (Note 16) 18,919 20,378
Pledged by buildings (Note 13) 45,764 38,161

89,994 129,596

(b) Letter of credit loans represent loans granted by banks in connection with inward cargoes.

(c) The Group’s bank borrowings for the years ended 31 December 2021 and 2022 are denominated in the
following currencies:

As of 31 December
2022 2021
HKD’000 HKD’000

RMB 12,829 –
HKD 43,001 89,806
USD 20,474 20,378
EUR 13,690 19,412

89,994 129,596

126
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

29 BORROWINGS (Cont’d)
(d) The weighted average effective interest rates at the balance sheet dates are set out as follows:

As of 31 December
2022 2021

Bank borrowings 3.01% 4.46%

(e) The following tables sets forth the ranges of the effective interest rate on our bank borrowings as of the
dates indicated:

As of 31 December
2022 2021
% %

Fixed-rate bank borrowings 1.80–3.90 4.00–5.88

LIBOR+1.25– HIBOR+1.75–
LIBOR+3.00; HIBOR+3.00;
LIBOR+1.25–
LIBOR+3.00;
Floating-rate bank borrowings 4.53–8.40 3.00–3.88

(f) The borrowings were repayable by repayment day as follows:

As of 31 December
2022 2021
HKD’000 HKD’000

Within 1 year 44,703 98,617

Between 1 and 2 years 6,466 1,077
Between 2 and 5 years 19,466 1,697
Over 5 years 19,359 28,205

89,994 129,596

(g) The fair values of the Group’s borrowings are not materially different to their carrying amounts, since the
interest payable on those borrowings is either close to current market rates or the borrowings are of a
short-term nature.

(h) Compliance with loan covenants

The Group complied with the financial covenants of its borrowing facilities throughout the reporting
period.

127
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30 LEASE LIABILITIES

As of 31 December
2022 2021
HKD’000 HKD’000

Current 91,564 148,065

Non-current 70,688 119,376

162,252 267,441

Liabilities arising from a lease are initially measured on a present value basis. Leases of entities operating in
Mainland China are discounted at the rate of 6.0% and leases of entities operating in Macau and Hongkong
are discounted at the rate of 3.5%. The finance cost of leases is charged to profit or loss over the lease period
at the same rate.

31 PROVISIONS

As of 31 December
2022 2021
HKD’000 HKD’000

Non-current
Make good provision 9,955 4,472

Current
Make good provision 6,369 4,906

6,369 4,906

16,324 9,378

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Call option

Year ended 31 December

2022 2021
HKD’000 HKD’000

At the beginning of the year 1,444 5,026

Fair value gains on the financial liabilities at fair value through profit or
losses (Note 3.3) (1,444) (3,582)

At the end of the year – 1,444

Pursuant to the cooperation arrangement of NB China Limited (“NB China”) came into in 2015, a subsidiary
of the Group, the Group agrees to grant to the minority shareholder of NB China the right to exercise a first
call option of nine percentage of the shares held by the Group in NB China on the seventh year counted from
2015. The price of buy back will be calculated on full year earnings before interest, taxes, depreciation and
amortisation (“EBITDA”) and basing on a twice multiple of EBITDA (in Hong Kong Dollars). The Group agrees
to grant to the minority shareholder of NB China the right to exercise a second call option of the balance or a
percentage of the shares held by the Group in NB China on the ninth year counted from 2015. The percentage
of the second call option should be discussed by both parties in order to be mutually agreed on the amount of
percentage of the number of shares. The price of buy back will be calculated on full year EBITDA and basing
on a three and a half times multiple of EBITDA (in Hong Kong Dollars).

The Group designated the call option as financial liabilities at fair value through profit or loss and initially
recognised the call option at fair value. In subsequent period, such call option are measured at fair value with
changes in fair values recognised in profit or loss. Transactions costs relating to the issuance of the call option
is charged to profit or loss immediately. As the EBITDA of the NB China is negative, the management believed
that the value of the call option is not material.

The fair value of the call option were determined by an independent valuer based on the Monte Carlo Model,
with the following key assumption:

As of As of
31 December 31 December
2022 2021

Annualised EBITDA drift – 7.00%

Annualised EBITDA volatility – 80.00%
EV/EBITDA multiple – 5
EV/EBITDA volatility – 70.00%
Discount rate – 16.50%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

33 OTHER CURRENT AND NON-CURRENT LIABILITIES

Year ended 31 December

2022 2021
HKD’000 HKD’000

At 1 January 39,275 71,064

Receipt (Note) 13,006 8,122
Recognised in consolidated statements of profit or loss (25,870) (41,009)
Exchange difference (2,081) 1,098

At 31 December 24,330 39,275

Current 18,061 24,882

Non-current 6,269 14,393

Note: The other current and non-current liabilities include decoration subsidy received from the franchisors and shopping
malls, plus rental support for Bose stores. All the subsidy is amortized on a straight-line basis over the rental periods.

34 TRADE AND OTHER PAYABLES

As of 31 December
2022 2021
HKD’000 HKD’000

Current
Trade payables (a) 96,246 77,920
Salaries payable 29,782 49,289
Variable lease payable 5,129 7,018
Other taxes payable 734 1,670
License fee payable 8,125 5,251
Renovation service fee payables 10,574 9,515
Other payables 10,760 7,844

161,350 158,507

Non-current
Operating support fund (b) 12,091 13,209
License fee payables (c) – 1,295

12,091 14,504

173,441 173,011

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

34 TRADE AND OTHER PAYABLES (Cont’d)

(a) Trade payables primarily represent payables for inventories. The ageing analysis of the trade payables
based on invoice date is as follows:

As of 31 December
2022 2021
HKD’000 HKD’000

Within 3 months 69,756 77,683

Over 3 months and within 1 year 26,367 213
Over 1 year 123 24

96,246 77,920

(b) Operating support fund is provided by the shopping malls for the Group to operate its retail stores.
The fund shall be repaid upon the earlier of the date when the store meets specific operating condition
agreed and the date when the leases expire.

(c) License fee payables in respect of the acquisition of license rights are initially recognised at fair value of
the consideration given to acquire the license at the time of the acquisition, which represent the present
values of the fixed minimum periodic payments to be made in subsequent years. They are subsequently
stated at amortised cost using the effective interest method less amounts paid.

Interest is accreted and represents changes in the license fee payables due to passage of time
calculated by applying an effective interest rate to the amount of license fee payables at the beginning of
the period.

The corresponding intangible assets are amortised on a straight-line basis over the term of the franchise
agreement.

35 CONTRACT LIABILITIES
Contract liabilities primarily comprise advance payments received from wholesalers for goods that have not
yet been delivered to the wholesaler.

The following table shows how much of the revenue recognised in the current reporting period relates to
carried-forward contract liabilities.

Year ended 31 December

2022 2021
HKD’000 HKD’000

Revenue recognised that was included in the contract liability balance

at the beginning of the period

Wholesale contract 4,533 3,905

131
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

36 CASH FLOW INFORMATION

(a) Reconciliation from (loss)/profit before income tax to cash generated from operating activities:

Year ended 31 December

2022 2021
HKD’000 HKD’000

(Loss)/profit before income tax expense (34,448) 47,117

Adjustment for:
Depreciation and amortisation (Note 8) 185,913 235,312
Finance expense (Note 10) 18,931 21,292
Impairment of property, plant and equipment and
right-of-use assets (Note 8) 9,165 13,936
(Reversal of)/impairment provision for inventories (Note 8) 7,901 (11,885)
Loss on disposals of property, plant and equipment (Note 7) 1,961 474
Interest income (Note 10) (391) (855)
Gains on the derecognition of right-of-use assets and lease
liabilities (Note 7) (910) (5,953)
Fair value gains on financial liabilities at fair value through
profit or losses (Note 7) (1,444) (6,552)
Net changes in cash surrender (Note 7) (1,107) (1,070)

185,571 291,816

Decrease in Other receivables and deposit 16,020 1,937

Increase/(decrease)in trade and other payables 2,146 (27,822)
Increase/(decrease) in Contract liabilities 637 (783)
Reversal in provision 6,946 (4,466)
Increase/(decrease) in amounts due to related parties – (863)
(Increase) in other current/non-current liabilities (17,025) (32,888)
Decrease in trade receivables 9,075 7,371
Decrease/(increase) in restricted cash 8,229 (1,297)
(Increase)/decrease in inventories (23,533) 53,469
Decrease/(increase) in prepayment 37,429 (47,895)
Decrease/(increase) in amount due from related parties 5,803 (9,742)

Cash generated from operations 231,298 228,837

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

36 CASH FLOW INFORMATION (Cont’d)

(a) Reconciliation from profit/(loss) before income tax to cash generated from operating activities: (Cont’d)

In the consolidated statement of cash flows, proceeds from disposal of property, plant and equipment
comprise:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Net book amount 8,640 3,121

Net loss on disposal of property, plant and
equipment (Note 7) (1,961) (474)

Proceeds from disposal of property, plant and equipment 6,679 2,647

For the years ended 31 December 2021 and 2022, the Group did not have any material non-cash
investing and financing activities.

(b) This section sets out an analysis of net debt and the movements in net debt for each of the periods
presented:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Cash and cash equivalents 69,881 115,891

Loan from related parties (Note 37(e)(ii)) (150,789) (158,539)
Borrowing – repayable within one year (44,703) (98,617)
Borrowing – repayable after one year (45,291) (30,979)
Lease liabilities- repayable within one year (91,564) (148,065)
Lease liabilities – repayable after one year (70,688) (119,376)

Net debt (333,154) (439,685)

Cash and cash equivalents 69,881 115,891

Gross debt – fixed interest rates (341,297) (495,960)
Gross debt – variable interest rates (61,738) (59,616)

Net debt (333,154) (439,685)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

36 CASH FLOW INFORMATION (Cont’d)

(c) Reconciliation of liabilities arising from financing activities is as follows:

Other assets Liabilities from financing activities

Loan from Lease Lease
related Borrowing – Borrowing – liabilities – liabilities –
parties – due due within due after due within due after
Cash within 1 year 1 year 1 year 1 year 1 year Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

As at 1 January 2021 209,639 (27,828) (203,389) (111,741) (166,344) (149,474) (449,137)

Cash flows (92,077) (128,857) 116,266 74,932 213,076 – 183,540
Foreign exchange
adjustments (1,671) – (504) – (1,019) (928) (4,122)
Interest expense – (2,054) (2,767) (2,393) – (14,078) (21,292)
Non-cash movement:
Addition in lease – – – – – (169,790) (169,790)
Early termination – – – – – 21,116 21,116
Other non-cash movement – – (8,223) 8,223 (193,778) 193,778 –

As at 31 December 2021 115,891 (158,539) (98,617) (30,979) (148,065) (119,376) (439,685)

As at 1 January 2022 115,891 (158,539) (98,617) (30,979) (148,065) (119,376) (439,685)

Cash flows (48,551) 13,992 32,775 10,179 180,902 – 189,297
Foreign exchange
adjustments 2,541 – – – 1,918 1,371 5,830
Interest expense – (6,242) (1,418) (1,934) – (9,337) (18,931)
Non-cash movement:
Addition in lease – – – – – (79,097) (79,097)
Early termination – – – – – 9,432 9,432
Other non-cash movement – – 22,557 (22,557) (126,319) 126,319 –

As at 31 December 2022 69,881 (150,789) (44,703) (45,291) (91,564) (70,688) (333,154)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 RELATED PARTY TRANSACTIONS

(a) Parent entity
The Group is controlled by the following entity:

Place of
Name Type incorporation Ownership interest
2022 2021

Gold Star Fashion Immediate/ultimate parent BVI 75% 75%

Limited company

(b) Subsidiaries
Interests in subsidiaries are set out in Note 42.

(c) Key management compensation

Key management includes directors (executive and non-executive) and the senior management of the
Group.

The compensation paid or payable to key management for employee services is shown below:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Salaries, wages and bonus 7,259 7,841

Pension cost – defined contribution plan 75 101
Other social security costs, housing benefits and other
employee benefits 816 194

8,150 8,136

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 RELATED PARTY TRANSACTIONS (Cont’d)

(d) Transactions with other related parties
The following transactions occurred with related parties:

Year ended 31 December

2022 2021
HKD’000 HKD’000

Purchase of goods
Company with significant influence over a subsidiary 22,919 17,106

Purchase of decoration services

Controlled by a close family member of Mr. Fan 1,265 737

Purchase of rental services (with variable lease payment)

Fellow subsidiaries 2,409 10,445

Purchase of management, promotion and administration services

Fellow subsidiary – 7,636

Interest expense
Controlling shareholder of the Company 6,242 2,054

Sales of corporate management services

Controlled by Mr. Fan 2,961 –

In the opinion of the directors of the Company, the related party transactions were carried out in the
normal course of business and at terms negotiated between the Group and the respective related
parties.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 RELATED PARTY TRANSACTIONS (Cont’d)

(e) Year end balances with related parties
(i) Due from related parties
Particulars of amounts due from related parties are as follows:

2022 2021
HKD’000 HKD’000

Sao Hang Investment Company Ltd 722 2,754

SJ Synergy Engineering Company Limited – 2,226
White S.R.L. 124 4,760
Shenzhen Zhishang Brand Management Co., Ltd. 3,093 –

3,939 9,740

The amounts due from related parties for the year ended 31 December 2022 are denominated in
the following currencies:

2022 2021
HKD’000 HKD’000

RMB 3,093 –
HKD 722 4,980
EUR 124 4,760

3,939 9,740

The amount was in trade nature, unsecured, repayment on demand and non-interest bearing.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 RELATED PARTY TRANSACTIONS (Cont’d)

(e) Year end balances with related parties (Cont’d)
(ii) Due to related parties

As of 31 December
2022 2021
HKD’000 HKD’000

Loans from related parties – non-trade

Mr. Fan 95,576 97,744

Shun Ao Co. Ltd. 8,086 9,259
Zhuo Zhi Fu Da 47,127 51,536

Amounts due to related parties – trade

SJ Synergy Engineering Company Limited 31,229 31,230

SJ Synergy Holdings Limited 897 897

Loans from Mr. Fan were unsecured with term of one year and an interest rate of 4%.

Loans from related parties were unsecured with term of one year and an interest rate of 4%.

Amounts due to related parties represents unsecured, interest-free and repayable on demand
amount paid on behalf of the Group by related parties.

(f) Guarantees
Guarantees provided by the controlling shareholder to the Group are set out in Note 29.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 RELATED PARTY TRANSACTIONS (Cont’d)

(g) Leases as lessee with other related parties
The following amounts of leases are related to related parties:

As of 31 December
2022 2021
HKD’000 HKD’000

Lease liabilities
Controlling shareholder of the Company 4,050 6,935

Year ended 31 December

2022 2021
HKD’000 HKD’000

Interest of lease liabilities

Controlling shareholder of the Company 360 488

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

38 BENEFITS AND INTERESTS OF DIRECTORS

(a) Directors’ and chief executive’s emoluments
Remuneration of every director and chief executive is set out below:

Year ended 31 December 2022

Other social
security costs,
Pension housing
Salaries, cost-defined benefits and
wages and contribution other employee
Fees bonus plan benefits Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

Chairman:
Mr. Fan Wing Ting – 2,400 – – 2,400

Executive directors:
Ms. Chen Xingyi – 1,639 19 87 1,745
Mr. Kevin Trantallis – 1,200 18 – 1,218
Mr. Fong Yat Ming – 1,140 12 – 1,152
Ms. Fan Tammy – 600 18 – 618

Independent non-
executive directors:
Mr. Yu Chun Kau – 240 – – 240
Mr. Cheung Chun Yue
(Note a) – 120 – – 120
Mr. Ng Kam Tsun – 240 – – 240
Mr. Sze Irons (Note b) – 120 – – 120

Chief executive:
Ms. Fung Sze Nga – 840 18 – 858
Mr. Choi Chin Chung – 708 18 – 726

– 9,247 103 87 9,437

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

38 BENEFITS AND INTERESTS OF DIRECTORS (Cont’d)

(a) Directors’ and chief executive’s emoluments (Cont’d)

Year ended 31 December 2021

Other social
security costs,
Pension housing
Salaries, cost-defined benefits and
wages and contribution other employee
Fees bonus plan benefits Total
HKD’000 HKD’000 HKD’000 HKD’000 HKD’000

Chairman:
Mr. Fan Wing Ting – 2,400 – – 2,400

Executive directors:
Ms. Chen Xingyi – 1,327 23 76 1,426
Mr. Kevin Trantallis – 1,200 18 – 1,218
Mr. Fong Yat Ming – 1,140 12 – 1,152
Ms. Fan Tammy – 600 18 – 618

Independent non-
executive directors:
Mr. Chau Kwok Keung – 157 – – 157
Mr. Yu Chun Kau – 240 – – 240
Mr. Cheung Chun Yue – 240 – – 240
Mr. Ng Kam Tsun – 28 – – 28

Chief executive:
Ms. Fung Sze Nga – 840 18 – 858
Mr. Choi Chin Chung – 708 18 – 726

– 8,880 107 76 9,063

(a) Resigned on 1 July 2022.

(b) Appointed on 1 July 2022.

(c) No loans, quasi-loans or other dealings were entered into by the Company in favor of directors, controlled body
corporates by and connected entities with such directors for the years ended 31 December 2021 and 2022,
respectively.

(d) Save as disclosed in Note 21, no significant transactions, arrangements and contracts in relation to the
Company’s business to which the Company was a party and in which a director of the Company had a material
interest, whether directly or indirectly, subsisted during the years ended 31 December 2021 and 2022.

(e) No consideration was provided to third parties for making available directors’ services during the years ended
31 December 2021 and 2022.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

39 CONTINGENT LIABILITIES
As of 31 December 2021 and 2022, the Group did not have any material contingent liabilities except pending
litigation have made provision in Note 31.

40 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY

(a) Balance sheet of the Company

As of As of
31 December 31 December
2022 2021
HKD’000 HKD’000

Assets
Non-current assets
Investment in subsidiaries 691,000 691,000

Current assets
Cash and cash equivalents 223 241
Term deposits with initial term of over three months – –
Prepayment 320 1,064
Amount due from group companies 166,371 169,492

Total current assets 166,914 170,797

Total assets 857,914 861,797

Equity
Equity attributable to equity holders of the Company
Share capital 4,000 4,000
Share premium 859,232 859,232
Accumulated losses (44,286) (40,335)

Total equity 818,946 822,897

Liabilities
Current liabilities
Trade and other payables 2,436 2,368
Amount due to group companies 36,532 36,532

Total current liabilities 38,968 38,900

Total liabilities 38,968 38,900

Total equity and liabilities 857,914 861,797

The balance sheet of the Company was approved by the Board of Directors on 30 March 2022 and were
signed on its behalf.

Mr. Fan Wing Ting Ms. Chen Xingyi

Director Director

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

40 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (Cont’d)

(b) Reserve movement of the Company

Share Accumulated
premium losses
HKD’000 HKD’000

At 31 December 2020 859,232 (35,958)

Loss for the year – (4,377)

At 31 December 2021 859,232 (40,335)

Loss for the year – (3,951)

At 31 December 2022 859,232 (44,286)

41 SUBSIDIARIES
The Group’s principal subsidiaries at 31 December 2022 are set out below. Unless otherwise stated, they have
share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of
ownership interests held equals the voting rights held by the Group. The country of incorporation or registration
is also their principal place of business.

Place of incorporation/ Particulars of Ownership interest

establishment and issued held by the Group
Name of entity kind of legal entity Principal activities share capital 2022 2021
% %

World First International Holdings Limited BVI, limited liability company Investment holding USD1,000 100% 100%
company
Fortune Fashion Limited BVI, limited liability company Investment holding USD10 100% 100%
company
Frontline Fashion Limited BVI, limited liability company Investment holding USD10 100% 100%
company
NB China Limited HK, limited liability company Procurement of fashion HKD105,000 60% 60%
(盈冠商貿有限公司) apparel
Yingnan Asia Limited HK, limited liability company Investment holding HKD1 100% 100%
(盈南中華有限公司) company
World First Holdings Limited HK, limited liability company Investment holding HKD103,000,000 100% 100%
(科盈集團有限公司) company

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41 SUBSIDIARIES (Cont’d)

Place of incorporation/ Particulars of Ownership interest

establishment and issued held by the Group
Name of entity kind of legal entity Principal activities share capital 2022 2021
% %

Wide Spread (China) Limited HK, limited liability company Retail of fashion apparel HKD5,000,000 100% 100%
(康弘(中國)有限公司)
Ying Yi Hong Kong Limited HK, limited liability company Retail of skincare and HKD1 100% 100%
(盈奕商貿有限公司) cosmetic products
Yuan Zhi Holdings Limited HK, limited liability company Wholesale of skincare HKD1 100% 100%
(媛芝商貿有限公司) and cosmetic
products
Macau Ieng Nam Limited Macau, limited Retail of fashion apparel MOP100,000 100% 100%
(澳門盈南有限公司) liability company
Sao Wai Investment Company Limited Macau, limited Retail of fashion apparel MOP25,000 100% 100%
(首威投資有限公司) liability company
Ieng Weng Company Limited Macau, limited Retail of fashion apparel MOP25,000 100% 100%
(盈榮有限公司) liability company
Ieng Leong Company Limited Macau, limited Retail of fashion apparel MOP25,000 100% 100%
(盈亮有限公司) liability company
Lan Yuan Company Limited Macau, limited Retail of fashion apparel MOP25,000 100% 100%
(蘭媛有限公司) liability company
Macau Ieng Kun Company Limited Macau, limited Retail of fashion apparel MOP25,000 62% 62%
(澳門盈冠有限公司) liability company
Sao Wai Limited HK, limited liability company Investment holding HKD10,000 100% 100%
(首威商貿有限公司) company
首威貿易（深圳）有限公司 (a) PRC, limited liability company Retail of fashion apparel HKD100,000,000 100% 100%
蘭媛商貿（上海）有限公司 (a) PRC, limited liability company Retail of fashion apparel HKD15,000,000 100% 100%
盈昭商貿（上海）有限公司 (a) PRC, limited liability company Retail of fashion apparel HKD16,500,000 60% 60%
盈亮貿易（深圳）有限公司 (a) PRC, limited liability company Retail of fashion apparel HKD50,000,000 100% 100%
媛芝商貿（深圳）有限公司 (a) PRC, limited liability company Wholesale and retail HKD25,000,000 100% 100%
of skincare and
cosmetic products
珠海橫琴盈華商貿有限公司 (a) PRC, limited liability company Retail of fashion apparel HKD4,000,000 100% 100%
Sao Hang Limited HK, limited liability company Investment holding HKD10,000 100% 100%
(首恒商貿有限公司) company
Artelli Metaverse Holdings Limited HK, limited liability company Investment holding HKD1 100% 100%
(璦特利元創有限公司) company
Artelli Metaverse Group Company Limited BVI, limited liability company Investment holding USD1 100% 100%
(璦特利元創集團有限公司) company
Artelli Metaverse International Company BVI, limited liability company Investment holding USD1 100% 100%
Limited (璦特利元創國際有限公司) company
Artelli Metaverse (Hong Kong) Limited HK, limited liability company Retail of fashion apparel/ HKD300,000 100% N/A
toys/cosmetic
products

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41 SUBSIDIARIES (Cont’d)

Place of incorporation/ Particulars of Ownership interest

establishment and issued held by the Group
Name of entity kind of legal entity Principal activities share capital 2022 2021
% %

Artelli Metaverse Macau Limited Macau, limited liability Retail of fashion apparel/ MOP25,000 100% N/A
(璦特利元創澳門有限公司) company toys/cosmetic
products
Artelli Metaverse Inc. US, limited liability company Retail of fashion apparel/ USD0.1 100% N/A
toys/cosmetic
products
璦特利文化創意（深圳）有限公司 PRC, limited liability company Retail of fashion apparel/ HKD70,000 100% N/A
toys/cosmetic
products

Note:

(a) Registered as wholly foreign owned enterprises under PRC law.

(i) Significant restrictions

Cash and short-term deposits held in PRC are subject to local exchange control regulations. These
regulations provide for restrictions on exporting capital from those countries, other than through normal
dividends.

For the year ended 31 December 2022, the carrying amount of the assets included within
the consolidated financial statements to which these restrictions apply was approximately
HKD23,030,000 (2021: HKD26,023,000).

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FIVE YEARS FINANCIALS

CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

Year ended 31 December

2018 2019 2020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue 1,344,865 1,513,817 884,463 1,228,307 959,900

Gross Profit 730,355 787,867 396,286 651,120 454,242
Profit/(loss) for the year 108,577 37,771 (136,360) 31,631 (36,505)
Adjusted net profit/(loss) for the year 110,689 65,164 (134,335) 31,631 (36,505)

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December
2018 2019 2020 2021 2022
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 1,222,844 1,308,366 1,280,263 1,129,372 910,462

Total liabilities 1,019,173 1,070,306 1,016,353 829,736 668,879
Total equity 203,671 238,060 263,910 299,636 241,583

Note: Adjusted net profit is derived by adding listing expenses from the net profit for the year.

146