Pak Tak International Limited
(Stock Code: 2668)

Major Shareholder:

• Mr. Cheng Chi Tai ¡V 12.0% interest
• The Cheng Family Holding Trust. - 53.0% interest

Company Subsidiaries:

• Pak Tak (Thai) (60%): Engaged in the manufacture of garments in Thailand
• Pak Tak Knitting Factory (Pu Ning) Limited (100%): Manufacture of garments.
• Rich Source (100%): Holds garment export quotas allocated by the HKSAR.
• Kwong Tai (49%): Engaged in the garment manufacturing.

The Group is engaged principally in the manufacture (through the Group's own producing facilities or by way of sub-contracting to garment manufacturers), on an OEM basis, and exports of men's ladies' and children's knitted garments mainly to the United States and Europe. It major customers include Sag Harbor (a division of Kellwood) and Talbots. The Group also manufacturers non-knitted garments such as pajamas for international airlines and non-knitted clothing for Target, a retail chain store in the United States.

The Group's machine-knitted garments are either produced by flat floral knitting machines which are used for knitting complex and multicolor patterns or hand driven flat knitting machines which are used for knitting simple patterns, and crochet knitted garments. Apart from machine knitted garments, the Group also manufacturers hand-knitted garments, knitted garments with hand embroidered or beaded patterns and crochet knitted garments.

Market research is forecasted the clothing retailing market in the United States to reach US$164,342,5 million by 2005, at 9.6% increase over 2000 and an annual average forecast growth rate of 1.9% from 2000. In the period from 1995 to 1999 the compound annual growth rate of the market was 1.6%. The strongest growth was in 1998, when the market grew by 2.0%.

The Directors based on their experience in the knitwear manufacturing business are aware that there are not many competitors, which can manufacture hand, embroidered knitted garments of the scale such as that of the Group. The Directors believe that the Group faces less competition in respect of large scale, as there are not many garment manufacturers in HK and the PRC that have the financial resources and production capability to handle large scale orders.

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

• Mr. Cheng and certain members of the group's management team have extensive experience and expertise in producing, on an OEM basis, machines knitted and hand-knitted garments with crocheted, hand embroidered, or beaded patterns.
• The Group enjoys a good reputation for its reliability in meeting delivery time and quality specifications. The Directors attributable this achievement to, amongst other things, long term relationships with suppliers, good human resources management and stringent quality control through the entire production process.
• A majority of the Group's products are manufactured in China where costs of human resources and land are relatively lower than those in Hong Kong.
• The Directors believe that the diverse range of quality garments plays an important role in maintaining the Group's competitive edge over other garment manufacturers in Hong Kong and China which produce a smaller range of garments.
• The Group has a consistent profitable business that generally generates positive cash flow from its business activities during the track record period.

• The Group's future results will depend significant upon the leadership of its senior management team.
• A significant decline in consumer spending and or, personal disposable income in the United States, whether caused by economic recession or by any other factor, is likely to have an adverse effect on the Group's sales to the US market.
• The Directors believe that the success of the Group is attributable to, amongst other things, its relationship with international fashion brand customers. There is no assurance that orders from these customers will in the future be maintained at the present level.
• In the event that the Group is not able to obtain sufficient textile quotas for any reason, or there is significant increase in the prices of quotas in Hong Kong, China or Thailand, the business and profitability of the Group may be adversely affected.
• If competition escalates in the future, the performance of the Group may be adversely affected. Any increase in the level of competition could dilute the Group's market share and may lead to price reductions of the Group's products which may adversely affect the Group's profitability.

The Group intends to continue to manufacture, through the processing arrangements, or by itself or by way of sub-contracting, knitted and non-knitted garments for export to its customers. Built on the established business relationships with the Group's customers in the United States, and based on the anticipated trend f increasing demand in the United States for branded knitted garments, the Directors are confident that the Group's sales in the US market will continue to grow over the longer term. To accommodate the anticipated increase in sales, the Group plans to expand its production capabilities by constructing additional factory buildings in Thailand and in China.

With a view to further developing business relationships with existing customers and attracting new customers, the Group plans to recruit additional experienced marketing personnel who will station overseas at the Group's sales office to be set up in the United States and make direct contact with the Group's existing and potential customers overseas and international design label hoses in the United States and Europe. It is expected that this marketing team will comprise a total of eight personnel who will travel regularly to customer's office overseas for marketing and promotional and public relation activities.

As part of the Group's long term business development plan, the Group intends to continue the processing arrangements. The Directors believe that such arrangements offer an effective combination of low labor costs, efficient commercial arrangements and overall stability for the Group.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$23.8 million (based on the offer price HK$0.88 per share). The Group at present intends to apply the net proceeds as follows: