Major Shareholder:

• Mr. But Ka Wai ¡V 31.5% interest
• Mr. But Chai Tong ¡V 31.5% interest

Company Subsidiaries:

• Honfine Co Ltd (100%): Distribution and marketing of snack food products
• Wah Yuen Foods (HK) Ltd (100%): Manufacturing and distribution and marketing of snack food products and convenience frozen food products
• Million riches Development Ltd (100%): Distribution and marketing of snack food products
• Wah Yuen (Guanzhou) Foods Co Ltd (100%): Manufacturing and distribution and marketing of snack food products
• Rocco Foods Enterprise Co (100%): Manufacturing and distribution and marketing of snack food products

The Group is principally engaged in the production and distribution of snack food under the Group's brand names of Wah Yuen, Rocco in HK and the PRC. The Group's snack food comprises mainly preserved meat products, flour products and preserved fruits and nuts products. The Group also produces and sells convenience frozen food under the Group's brand name of WahYuen and other brand names under OEM in Hong Kong. The convenience frozen food comprises mainly chicken wings, chicken legs, Chinese dim sum and noodles.

The Directors believe that the Group is one of the leading producers and distribution of a wide range of snack food and convenience frozen food products in Hong Kong and enjoys a similar leading position in the snack food market in the PRC. According to AC Nielsen's market research reports, the Group was the market leader of packaged meat snack in supermarkets/convenience stores in Hong Kong in July 2002 and the best seller of gift packaged egg rolls in supermarket/convenience stores in Hong Kong in February 2003.

The Group operates three production facilities, one of which is located in Hong Kong and the other two are located in Huadu District, Guangzhou, Guangdong Province, the PRC. The factory in Hong Kong is for the production of convenience frozen food products whereas the factories in the PRC are for the production of snack food products. The three production facilities of the Group occupy an aggregate floor area of approximately 44,415 sq.m.

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

• Its strong capability in product innovation nd development to meet rapid changes in consumer tastes;
• The strong market recognition of its brand names, Wah Yuen, Rocco, in the snack food markets in Hong Kong and the PRC;
• Its extensive sales and distribution network in Hong Kong and the PRC;
• Its long term relationships with its customers, suppliers and employees;
• The extensive experience of its management in the snack food business;
• Its continuous commitment to produce tasty and high quality products; and
• Its high production efficiency and effective cost control resulting from tis vertically integrated production processes.

• Outstanding receivables and long debtors turnover periods;
• High level of borrowings;
• Reliance on key management;
• Reliance on major customer;
• Seasonality;
• Fluctuation in the price of raw materials
• Safety of food products;

The Group will continue to market its product under its brand names of Wah Yuen , Rocco which have been the key elements of the Group's success in the past. The Group will continue to reinforce brand awareness through advertising on television and increasing marketing activities. In addition, the Group intends to expand its distribution network in the PRC by establishing more sales representative offices and enlarging itss sales force there to undertake more comprehensive sales and marketing activities and to maintain closer contacts with the customers.

The Directors believe that the quality of the Group's products and the strict adherence to hygiene regulations and health standards are important factors in the success of the Group. In addition, the Group intends to explore the snack food and convenience frozen food markets in Japan and other overseas markets if opportunities arise. As a result, the Group intend to upgrade its quality control system to meet the requirements of the HACCP quality standards for exporting the Group's products to Japan from the PRC.

To cope with the growing demand for snack food and convenience frozen food in the PRC, the Group has in early 2003 installed two additional production liens at the Second Huadu Plant to increase its production capacity. These two production lines are planned to be used for the production of convenience frozen food products and flour products respectively. The commercial production of these two production lines will commence to late June 2003. The Directors expect that the annual production capacity of the Second Huadu Plant will increase from its present level of 1300 tonnes to approximately 2350 tonnes. The Directors anticipate that the Group will continue to expand its production capacity to meet the market demand.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$36.00 million (based on the offer price HK$0.8 per share). The Group at present intends to apply the net proceeds as follows: