Major Shareholder:

• Mr. Wang Cong ¡V 59.02% interest

Company Subsidiaries:

• Jing He Branch (100%): Engaged in the production of FA-90, FA-J, FA-D, FA-F and Ferrocene
• Wei Nan Branch (100%): Engaged in the production of FA-90 core components

The Company was established in April 1999 as a limited liability company and was converted into a joint stock limited company in January 2000. It is a provider of innovative environmental protection energy materials and products in the PRC. During the Track Record Period, the Company produced and sold five types of products, namely, FA-90, FA-J, FA-D, FA-F and Ferrocene. In particular, the Company relies heavily on its principal product, namely, FA-90 which sales accounted for approximately 96.66% and 92.57% of the Company's total turnover for the two years ended 31 December 2002 respectively.

FA-90 is an anti-knock agent for unleaded gasoline which is designed to enhance octane rating of gasoline for automobiles, enable gasoline to achieve full combustion, enhance engine power and reduce the consumption of gasoline. It is also environmental-friendly, as it is capable of reducing harmful substances in automobile exhaust gas.

The raw materials purchased by the Company for its production include chemicals such as dicyclopentadience, amine compound, oxoheterocyclic compound, alcohol compound, aliphatic acid, polyolefine polymerisation inhibitor and complex. The Company also engages independent enterprises to carry out production of certain raw materials of required specifications.

The research and development team of the Company, led by Wang Cong, commenced the research and development of FA-90 in March 1995. FA-90 was successfully developed in March 1998. The Company has applied for the registration of the patent of FA-90 in the PRC in January 2000 and received a notice of grant of the patent right from the State Intellectual Property Office of the PRC in March 2003. The Company produces a series of products in accordance with the composition of petroleum and the requirements of different customers by conducting complex mixing between the Core Components and other chemicals such as antioxidants, initiator and solvent.

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

• Competitive product price: the price of the Company's principal product, FA-90, is lower than those of similar products in the market in achieving a similar performance. FA-90 can achieve improvement in octane rating with superiority in properties and price of similar products.

• Advanced technologies: The Company has placed emphasis on research and development. The Company masters the production technologies of the Core Components of its products.

• Market awareness: The Company's products are in line with the market development. With the further tightening-up of environmental requirements, the Directors expect that market prospect of the Company's products will be better.

• High calibre, experienced and stable management team: The Company has an experienced management team which has expertise in energy materials and petrochemical industry in the PRC.

• Preponderance in market forecast: Since its inception, the Company has paid attention to the State policies and placed emphasis on analysing and researching the market trend. On this basis, the Company has been focusing on the research and development of innovative environmental protection energy materials and products.

• Preponderance in the development of western China: The Company is located in Xi'an, a major city in the western part of China. The implementation by the PRC Government of the strategy for developing the western part of China may likely set the economy of western China in motion, particularly in the fields of energy resources, transportation and petrochemical industry.

• Reliance on short term bank borrowings
• Corporate guarantees provided by Independent Third Parties
• Reliance on one principal product
• High level of capital commitments
• Funding requirements of the Company
• Reliance on major customers

The Company intends to consolidate and leverage on its principal product, FA-90, its research and development capability and its series of oil-processing assistant products with a view to becoming one of the major providers of innovative environmental protection energy materials and products in the PRC. One of the characteristics in the development of the PRC oil-processing industry is the advancement in production technology and product quality, whereas one of the characteristics in the automobile industry is to achieve energy saving and reduction of the exhaust gas. Under these circumstances, the Directors plan to achieve the Company's business objectives via its business strategies to enhance its production capacity, develop production technology, improve its existing products and develop new products.

Given the rapid development of the economy of and the improvement in the living standard in the PRC, the Directors believe that demand for high quality fuel oil, gasoline and petrochemical products will grow rapidly. In particular, after the promulgation by the PRC government of environmental protection measures such as the temporary suspension of adding MMT anti-knock agent to gasoline and the cessation of the production, sale and use of leaded gasoline, and the demand for fuel oil additives has been increasing steadily. Accordingly, the Company will focus on expanding the production capacity of FA-90, its principal product, and oil-processing assistants in order to ensure its future growth. The Directors plan to expand the Company's annual production capacity of FA-90

Core Components from 480 tons to approximately 1,000 tons at the Technology Park. The Company established a production base of oil-processing assistants at the Wei Nan Branch in April 2003.

In an attempt to become one of the major providers of innovative environmental protection energy materials and products in the PRC, the Company will continue to improve its products and develop new products to keep abreast of the development of the PRC oil-processing industry. In order to enhance the Company's capacity in the research and development of advanced innovative environmental protection energy materials and products, the Directors intend to expand its technology centre. The technology centre will leverage on the Company's technological know-how to improve its existing products, including FA-90, and develop new products, including the Company's series of oil processing assistants.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$65.0 million (based on the offer price HK$0.325 per share). The Group at present intends to apply the net proceeds as follows: