"Last year, management demonstrated remarkable acumen in accommodating unforeseen changes and minimizing negative impact, preparing and steering the Group back on course for future growth," said Mr Mickey Chen Ming-hsiung, Chairman and Managing Director of Kingmaker Footwear Holdings.

The decline in revenues and profitability was attributable to, externally, the leather price hikes brought on by the mad-cow disease and the significant retail discounts and cut back on forward purchasing resulting from the September 11 incident, and internally, the lower productivity of the Vietnam facilities newly established in 2001 and the low interest income from cash deposits.

Mr Chen continued: "Amid such difficulties, our solid competitive advantages, including strong financial position, supportive customer relationships, responsive and committed management, were pivotal in diluting the negative impact."

Baby and children shoes programs remained the Group's major growth driver in the year, accounting for 40% of turnover. Last year also proved that market demands for baby and children shoes were much more stable in tough market conditions, making this product category a reliable income source. There was also a shift in the Group's product mix last year. Casual shoes, contributing 31.60% of total revenues, grew steadily in sales in line with traditional rugged shoes. It became one of the leading product categories in response to prevalent market demands.

"Although the Group's wholesale and retail operations in China has not yet met our expectations in the past financial year, we still believe that the market is worth pursuing and should improve significantly as the economy is improving. China will soon assume full membership of WTO, and has been expanding its view of the outside world. More foreign retailers will be drawn to established companies which already have access to local distribution networks. Currently the management is closely monitoring this operation in an effort to improve its performance," added Mr Chen.

By today, six production lines in the Vietnam factory has gone into operation. In China, five production lines of the phase one development of the Zhongshan facility has been in trial run since May 2002. The Group will continue to improve efficiency and to optimize economy of scale through customer-driven capacity expansion.

"We continue to remain positive on growth opportunities in Vietnam as expressed by our customers, who are increasingly looking to diversify their production bases in light of the positive labor conditions in Vietnam, the confirmed shrinking of the European footwear manufacturing base, and the recent beneficial commercial agreements signed between the USA and Vietnam," concluded Mr Chen.

Ground has already been broken for a new factory facility on the same site of the existing factory in Vietnam. Operation in the new Vietnam facilities are scheduled to begin by the end of 2002. In China, the 2-phase plant development in Zhongshan will continue. It is geared to specially service a particular brand which requires an exclusive environment.

About Kingmaker Footwear
Kingmaker Footwear Holdings Limited (SEHK: 1170) is a world leading manufacturer of casual fashion and baby footwear. It currently has a workforce of 13,000 on 29 production lines in China, Vietnam and Macau. The Group was named one of "The Best 200 Small Companies in the World" by Forbes Magazine in its October 2001 issue.

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