Major Shareholder:

• FE Holdings -26.99% interest
• Mr. Xu Zhe -25.5% interest
• Mr. Dao Tian -20.93% interest

Company Subsidiary:

• Pharmaceutical Branch (100%): Production of Chinese medicine
• NT Branch (100%): Research and development of pharmaceutical products

The Group is principally engaged in the production and sale of Chinese medicine under the brand name of "Northeast Tiger" in the PRC as well as conducting pharmaceutical research and development. The forms of products produced and sold by the Company include small-volume injections, granules, tablets, capsules and guttate pills.

Currently, the Company possesses the production rights of 101 types of medicine, which were mostly acquired through the business combination with NT Drugs. The Company had obtained the production rights of such 101 types Chinese medicine from the JDA.

During the track record period, the company had established an extensive sales and distribution network in the PRC. Through its sales and marketing network and the efforts of its full-time sales and marketing staff, the markets for the Company's products cover many cities in 28 provinces, independent municipalities and autonomous regions in the PRC. The customers of the Company are mainly pharmaceutical companies.

Capitalization on its extensive sales and distribution network, the Company's is also engaged in the distribution of general medicine of other brands produced by other pharmaceutical companies in the PRC. As at the Latest Practicable date, there were approximately 180 types of medicine distributed by the Company.

The Directors consider that in view of the enormous demand from the international markets coupled with the quickening pace of industrialization and development of the sectors, Chinese medicine enterprises are likely to experience growth despite competition from foreign enterprises.

According to the China Markets, Yearbook 2000, the PRC's annual sale of Chinese medicine amounted to approximately RMB36, 831 million in 1998, representing a CAGR of approximately 20.8% as compared to that of 1995.

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

• Established brand recognition in the PRC pharmaceutical industry;
• Extensive sales and distribution network in the PRC;
• A professional management teams with extensive experience and expertise in the pharmaceutical industry;
• A strong emphasis on quality control;
• A strong research and development capability in the pharmaceutical industry;
• Own a new Chinese medicine under State category.

• There is no assurance that these Chinese herbs are not toxic or will not cause irritation to the users and the effect of consumption of these Chinese medicine products is not proven.
• Any significant fluctuation in market demand of the Group's major product "Lu Lu Tong Injection" may adversely affect the sales of the products and hence the Company's profitability.
• The Price of the two major products is subject to the control of the State or provincial price administrations and the relevant drug administration authorities.
• During the Track Record Period, the Company's average turnover period for gross account receivable was 143 days, 153 days and 185 days.

In order to expand and enhance the Company's production capacity and to further strengthen is competitive advantages, the Company intends to invest approximately HK$28 million for the establishment of a new GMP compliant plant which will initially house one production line mainly for producing Shi Long Blood Clean Granules, which is registered as a new Chinese medicine under State category 3.

In order to further expand its market in the PRC and extend its business to the Hong Kong market, the Company plans to invest approximately HK$2.0 million to expand its sales team and set up a sales offices in Hong Kong for promoting the Company's products.

In order to enhance its competitive advantage, the Company will continuously place great effort on research and development of a comprehensive range of pharmaceutical products. The Company plans to invest approximately HK$6.0 million in the development and production of the several medicines.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$31 million (based on the offer price HK$0.23 per share). The Group at present intends to apply the net proceeds as follows: