Q: You incurred finance cost of Rmb 8.7 million in 3Q2013 on bonds payable of Rmb 102.6 million. Why do you need to raise the Rmb 100.5 million via such an expensive bond issue when you have a large cash reserve (Rmb 584.2 million as at 30 Sep)?

In actual fact, we have been exploring various options and searching for the right party to raise money from for the past two years before deciding on SHK.

In reality, it will be more pressurising when the expansion is ongoing and the funding is not enough or not raised in time to keep pace with the plan.  It will be even tougher to raise money when the financial resources then run low.

We are at the stage of network expansion that requires huge cash outlay.  Apparel manufacturing that is 100% outsourced requires upfront trade deposit payment to our suppliers. 

We have over 30 suppliers for each season and production order to each supplier may not be sizable.  These suppliers produce for top international brands.  We pay them deposits upfront in order to secure their services and to get priority treatment.

It is also important to retain sufficient cash reserves in case of unforeseen contingencies caused by external factors that can turn into a drastically challenging  economic environment.  In recent years, we have seen what severe financial crisis can do.