ERATAT LIFESTYLE LIMITED

(Company Registration No: 200705552D)

RESPONSE TO SGX QUERY ON ANNOUNCEMENT OF RESULTS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2013


With reference to the announcement of the "Results for the financial period ended 30 June 2013" released on
5 August 2013 (the "Results Announcement"), we wish to provide additional information in response to the following queries raised by the Singapore Exchange Limited ("SGX") on 14 August 2013.
SGX's query:
1. We note that under the non-current liabilities, the item 'bond payable' amounted to RMB100.8 million. Separately, an amount of RMB101.5 million was recorded as 'other receivables' due mainly to proceeds receivable from the issue of bond of RMB100.5 million. To explain (i) why the bond was issued when payments had not yet been made by the bondholder as at 30 June 2013; (ii) notwithstanding the announcement of the results on 5 Aug 2013, the Company disclosed that the payment (for the bond issued) "would be received in July 2013". To confirm whether the payments have been received to-date and to provide update on use of proceeds; and
According to the "Subscription Agreement" dated 20 June 2013, it has been agreed that the Bond was to be issued on 24 June 2013 (the "Issue Date"), and that the payment of the Bond should be made on or around Issue Date but not later than 7 business days after the Issue Date (i.e. 3 July 2013). However , the payment was received on 9 July 2013, due to a public holiday in Hong Kong on 1 July 2013 and the processing took longer than expected time to complete. To date, about RMB1.7 million has been used to set up the sales and marketing office in Shanghai.
(iii) to explain why a finance cost of RMB642,000 was accrued on the bond when the payment for the bond had still not been made as at 30 Jun 2013.
The finance cost was accrued for the period from Issue Date to 30 June 2013, which comprised (i) the accrual of coupon interest of RMB321,000, as it was provided in the Subscription Agreement that the coupon interest shall commence from the Issue Date, hence accrual was made in the current financial period; and (ii) the amortization of RMB321,000 for the difference between the Bond principal amount and the Subscription Price as required by the FRS (please also refer to item 2 on page 5 of the Results Announcement).
2. We note that the revenue for 2Q2013 amounted to RMB202.9 million. However, it was disclosed that as at 30 Jun 2013, the trade receivables amounting to RMB237.4 million was outstanding with aging of between 1 - 90 days. To reconcile how the RMB237.4 million could be less than 90 days old when the revenue in 2Q2013 amounted to only RMB202.9 million.
Please refer to "item 3(a) Trade receivables" on page 4 of the Results Announcement. It has been explained that "The trade receivables substantially comprised revenue from sales of goods, including VAT of 17% that were charged to distributors. Excluding the VAT, the trade receivables attributable to revenue as at 30 June 2013 amounted to RMB271.4 million, which was the revenue recorded from March to June
2013". In other words, the 1 - 90 days trade receivables of RMB237.4 million comprised the revenue for
2Q2013 of RMB202.9 million and 17% VAT of RMB34.5 million.
By order of the Board
Lin Jiancheng