Major Shareholder:

• Ms. Li Kei Ling ¡V 34.5% interest
• Mr. Hung Yung Lai ¡V 34.5% interest

Company Subsidiaries:

• Dawnrays Pharmaceuticals (100%): Manufacture and sale of pharmaceuticals
• Dawnrays Technology (PRC) (100%): Research and development of pharmaceuticals
• Shanghai Dawnrays Chemicals (PRC)(100%): Manufacture and sale of intermediate pharmaceuticals
• Suzhou Dawnrays (PRC) (100%): Manufacture and sale of intermediate pharmaceuticals

The Group is engaged principally in the development, manufacture and sale of non-patented chemical medicines including cephalosporins in sterile bulk medicine and powder for injection forms, their intermediate pharmaceuticals and system specific medicine. Cephalosporins are semi-synthetic antibiotics applied in the treatment of a variety of microbial infections. The Group produces a series of cephalosporins with various therapeutic users. The system specific medicines produced by the Group include anti-allergy drugs, digestive system drugs, cardiovascular system drugs, urinary system drugs and endocrine system drugs.

The company has four main operating subsidiaries in the PRC. Dawnrays Pharmaceuticals is primarily engaged in the production of cephalosporins in bulk medicine and powder for injection forms, as well as system specific medicines in tablet, capsule and granule forms and, for certain system specific medicines, in bulk medicine form. Dawnrays Technology is primarily engaged in research and development. Shanghai Dawnrays Chemicals is primarily engaged in the production of intermediate pharmaceuticals for cepharlosporins. Suzhou Dawnrays Chemical was established towards the end of 2001 and is in the process of constructing a new plant in Suzhou, the PRC to undertake the production of intermediate pharmaceuticals for cephalosporins and system specific medicine.

The Group has established a sales and marketing network with 202 staff and wholesalers and distribution covering 30 provinces and municipalities in the PRC to focus on marketing its products in the PRC domestic pharmaceuticals market. The Group's sales and marketing network allows it to maintain contract with customers and to monitor changes in market demand. All of the Group's preparation and bulk medicine products are sold under trademarks owned by the Group to enhance customer recognition.

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

• The experience and expertise of the Group's senior management and technical staff in the pharmaceutical industry in the PRC;
• The Group's research and development capabilities which have enabled it to identify and develop new products, including medicines with national standards obtained by the Group, with growth and commercial potential;
• The Group's production techniques which have enabled it to achieve high product quality, to increase production efficiency and to enhance cost effectiveness and price competitiveness;
• The Group's sales and marketing network covering 30 provinces and municipalities in the PRC; and
• The economies of scale attained by the Group arising from its specialization in the production of cephalosporin antibiotics and their upstream products in large volume and the production of system specific medicine;

• The Group has not registered any patents in relation to its pharmaceutical products or production technology
• There is no assurance that the Group's existing products or new products developed by the Group will continue to be admitted or with be admitted to the insurance catalogue or to the insurance catalogue as adjusted and implemented at provincial level
• Production concentration
• Product liability
• There is no assurance that the Group's research and development projects will be successful

To increase the scale of production of the Group's existing products and to cater for the commencement of the manufacture of new products, the Group plans to acquire additional equipment and is in the course of constructing a number of production workshops and ancillary facilities including one new production workshop with 12 production lines for cephalosporins in powder for injection form and one new production workshop with 1 production line for system specific medicines together with ancillary facilities and warehouse facilities on the premises of Dawnrays pharmaceuticals in Suzhou, the PRC.

The Group intends to continue to place emphasis on research and development. The Directors intend that a substantial portion of the planned funding in this area will be used for further refinement of production techniques for its existing products, conducting preclinical research, clinical trials and applications approval and registration of new products for the commercialization of the products currently under development, as well as feasibility analyses and preliminary studies to explore the development of new products.

By the employment of additional marketing personnel and the subdivision of its ales and marketing network, the Group aims to build up a more extensive sales and marketing network to achieve further market penetration of its products to smaller cities in the PRC and closer liaison with customers. With an improved sales and marketing network, the Group intends to further develop the market recognition of the Group's existing products in both major and smaller cities in the PRC as well as to popularize the Group's new products in major cities in the PRc at their launch.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$165.0 million (based on the offer price HK$0.89 per share). The Group at present intends to apply the net proceeds as follows: