Major Shareholder:

• Tsai Yen Yu ¡V 75% interests

Company Subsidiaries:

• Shanghai Natural Beauty Cosmetics Co., Ltd. (100%): Production and sales of skin care and beauty products
• Shanghai Natural Beauty Sanlian Cosmetics Co., Ltd. (90%): Wholesale and retail of skin care and beauty products; beauty treatment service
• Natural Beauty Cosmetics Company Limited (100%): Production and sales of beauty and skin care products; skin treatment services
• Natural Beauty Bio-Technology (HK) Co., Ltd. (100%): Wholesale and retail of skin care and beauty products; skin care and beauty consulting and training

The Group is principally engaged in (i) the research and development, manufacture and sale of aromatherapeutic, beauty and skin care products, marketed under the brandname of "NB " and distributed through a sales network of over 1,900 sales points in Greater China; and (ii) the provision of skin treatments and SPA services through its beauty centres offering tailor-made beauty and skin care solutions, particularly, aromatherapy using essential oil and specialized equipment by the professional beauticians.

The Group has conducted continuous research on aromatherapeutic, beauty and skin care products and developed a variety of product lines with over 700 items. Such products are manufactured at the Group's plants, one of which is in Taipei, Taiwan and the other is in Shanghai, the PRC. The plants in Taiwan and the PRC have both obtained the accreditation of ISO9002 in 1996 and 1997 respectively.

Currently, the Group's products can be broadly categorized into three types namely aromatherapeutic products, beauty products and skin care products. While all these products are marketed under the brandname of "NB ", each of these products types is further divided into various product lines characterized by different pricing, packaging and functions.

In addition to the development, manufacture and sale of the above products, the Group also provides an array of skin treatments and SPA services by applying its own branded products at the Group's beauty centres. Currently, the Group has three types of beauty centres, namely Natural Beauty SPA, NB Salon SPA and NB Beauty Salon, each offering a specific range of products and services and unique decorations, operation area and facilities.

According to Euromonitor, skin care will remain an important sector in the cosmetics and toiletries market, and is forecast to demonstrate the most dynamic performance of the forecast period from 2000 to 2005, with a value in 2005 approaching RMB20 billion representing an increase of well over 100% from the value in 2000. The Directors expect an increasing demand for beauty and skin care products and services in the Greater China region, and will continue to explore and pursue opportunities in the beauty and skin care market.

The Directors attribute the success of the Group of the following principal factors:

• its established and well-recognized tradmark NB developed under the concept of "Nature is the source of Beauty" and its emphasis on using natural ingredients

• its emphasis on the provision of personalized beauty and skin care services by analyzing the particular skin care problems of individual customers with specially designed computer software and through tailor-making skin care programs in accordance with the outcome of the analysis

• its commitment and ability to develop new products to meet the customers' changing requirements

• its dedication to cover a wide spectrum of customers in different location, and its endeavor to increase the market penetration of its products and services in the targeted regions via its extensive sales network which comprises over 1,700 beauty centres and over 130 dedicated counters in department stores and shopping arcades scattered over numerous major cities in Greater China

RISK FACTORS

• Dependence on franchised beauty centres
• Franchiseees' wrongdoings and misuses of the Group's brandname
• Reliance on key management personnel
• Reliance on major suppliers
• Research and development risk
• Increasing competition resulting from the PRC's entry into WTO
• Environmental protection

• Expansion of production facilities and planting of natural ingredients
• Increasing the number of Natural Beauty SPAs
• Enhancing the existing POS syste, and building up an EPRM platform which allows the Group to retrieve information from business partners and individual customers for building up a scale business partner/customer database
• Enhancing marketing and promotion of the Group's products
• Expansion of the Group's research and development strength

The net proceeds from the share offer, after deducting the related expenses, are estimated to amount to approximately HK$270 million (based on the offer price of HK$0.60). The Group at present intends to apply the net proceeds as follows: