The Group continues to expand its production scale in order to produce high quality products at competitive cost. During the year, the Group has operated 15 footwear production lines and 1 shoe sole factory in Jinjiang, 1 apparel production base in Changting (commenced production in May 2007) and 1 apparel production base in Xiamen (commenced production in July 2007), has enhancing the Group's self-production capability. The Group also implemented an industrial engineering system to analyze and stream line its current production processes so as to cater for the increasing demand of goods. As at the end of 2007, the Group has produced 11.4 million pairs of footwear and 1.0 million pieces of apparel. The proportions of self-produced footwear and apparel were 62.5% (2006: 75.4%) and 4.3% (2006: nil) respectively for 2007.

The Group believed that its self-owned production facilities brings economy of scale to the Group and enhances our bargaining power to obtain volume discount. Meanwhile, self production capability has allowed the Group to make prompt response to market changes, and shorten the lead time from product design, trade fairs to sales. To be more responsive to changes of consumers' tastes, the Group has launched 5 sizable trade fairs.

To strengthen the supply chain management, the Group established a stratified management system of suppliers comprised of 3 categories, namely strategic partners, long-term partners and short-term partners. Quarterly review is conducted so as to boost suppliers' performance. The Group is going to establish "suppliers' performance management system" and "suppliers' incentive system", which further encourage suppliers to improve performance spontaneously.

The following graph sets out the geographical location of production facilities and the quantity produced in house until 31 December 2007: