Major Shareholder:

• Ms. Li Ngar Kwan, Aldy - 51.87 % interest
• Styland Holdings Limited (0211) - 19.287 % interest

Company Subsidiaries:

• Rainbow Cosmetic (100%): Wholesaling and retailing of beauty products
• Rainbow Cosmetic (Central) (100%): Retailing of beauty products
• Jet Legend (100%): Wholesaling and retailing of beauty products
• Newide International (100%): Wholesaling of beauty products
• Nutriplus Cosmetics (100%): Provision of beauty services

Rainbow Group is principally engaged in the retail and wholesale of branded beauty products in Hong Kong. the beauty products sold by Rainbow Group may be broadly divided into three main categories, namely (1)skin-care products, (2) fragrances and cosmetics and (3) hair-care and personal-care products and accessories. As at the Latest Practicable Date, Rainbow Group operated a chain of eight retail outlets in prime business locations in Hong Kong under its trade name of Rainbow Cosmetic.

Rainbow Group established its first beauty centre in April 1997 in Mongkok, at the same location as one of the Rainbow Cosmetic outlets. Rainbow Group currently operates three-beauty centre in Mongkok, Causeway Bay and Central, Hong Kong, of which the Beauty centre in Mongkok is at same area as the existing Rainbow Cosmetics outlet.

The Directors intend to strengthen the corporation image of Rainbow Group by introducing a new and exclusive series of beauty products under the brand name of Nutrilpus. As at the Latest Practicable Date, Rainbow Group launched 11 skin-care products and eight hair-care products under the brand name of targeting customers of the age of 25 and above. In August 2000, Rainbow Cosmetic engaged a beauty product produced in Switzerland, to develop and produce a series of 11 skin-care products and to supply the products to Rainbow Group on an exclusive basis under the brand name of Nutrilpus.

Like other consumer products, retail market for beauty products in Hong Kong's is affected by the general state of local economy and the purchasing power of local population. Also, the Directors consider that the increasing number of working women and the increasing interest amongst men in personal grooming will stimulate the general the growth in the Beauty product market.

Hong Kong does not currently impose any import tariff or custom duty on imported beauty products. The Directors anticipates that other countries in Asia, such as Indonesia and Korea, will also gradually relax duties on imported beauty products and this is expected to facilitate the continuous expansion of the beauty product retail business in the region.

Hong Kong has only a limited number of producers of beauty products and toiletries, which target the Southeast Asian and the US markets under their own brands. Most of the companies in the beauty product industry are distributors or agencies for products of international brands in the region. A wide range of internationally recognized branded beauty products are easily purchased in Hong Kong through various channels, such as sales counters at department stores, retail shops and beauty centres.

COMPETITIVE ADVANTAGES
The Directors believe that the Group has the following competitive advantages:

• The target customers of Rainbow Group are women from the age of 20 and above focusing on customers between the age of 25 and 35. Generally, skincare products are popular among customers between the age of 20 and 50. Most of them have a higher purchasing power in beauty products.

• Retail sales in Hong Kong are primarily invoiced and settled in HK$. However, Rainbow Group may accept RMB and US$ from its retail customers at the prevailing exchange rate. Whilst wholesales are settled in HK$ as well as other currencies, such as RMB, US$ and JPY.

RISK FACTORS
Risks relating on retail sales in Hong Kong:

• Over reliance on retail sales in Hong Kong, so Rainbow Group is therefore exposed to changes in economic, political and social conditions in Hong Kong.
• No profit track record.
• Net liability. Rainbow Group was recorded net liabilities of approximately HK$4.23 million and approximately HK$2.06 million as at 31 October 1999 and 2000 respectively.
• Non-renewal of leases or license to use of or substantial increase in retail shop rental or license fee.

To expand the retail business of Rainbow Group, the Directors will continue to open new Rainbow Cosmetics outlets in prime business locations in Hong Kong. With the gradual improvement in the economy of Macau, the Directors anticipate that there will be a growing demand for beauty products, whereas the competition is relatively less intensive as compared to Hong Kong. To capitalise these potential business opportunities, the Directors also plan to set up a Rainbow Cosmetic outlet in Macau subject to satisfactory feasibility study.

Recognizing the increasing demand for comprehensive beauty centres in Hong Kong under the trade name of Nutriplus and provide comprehensive beauty services, such as facial and body treatment and hair-care treatment, to women as well as men.

The Directors also believe that with the continuous economic development and improvement in the living standard in the PRC there will be increasing demand for beauty products in the PRC. To capitalize these potential business opportunities, Rainbow Group intends to expand its wholesale business in the PRC subject to satisfactory feasibility study.

The Directors intend to implement a series of strategies, such as advertising, renovating the Rainbow Cosmetic outlets and the beauty centres of Rainbow Group and participating in public functions, to promote the corporate image of Rainbow Group as one of the leading providers of beauty products and services. Rainbow Group will also develop beauty products under the brand name of Nutriplus as part of its brand enhancement program.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$22.50 million (assuming that the Over-allotment Option is not exercised). The Group at present intends to apply the net proceeds as follows: