Major Shareholder:

• Mr. Chen Jin Dong ¡V 66.5% interest

Company Subsidiaries:

• Art Technology Ltd (100%): Research and development of finished woven fabrics
• Fuzhou Huaguan (100%): Manufacture and sale of fabrics

The Group is principally engaged in the manufacture and sale of finished woven fabrics targeting at the mid to high-end market in PRC. The Group has vertically integrated its production processes, which include research and development, raw fabric weaving, dyeing and setting, cloth finishing such as pattern pressing and calendering. Accordingly, a variety of finished woven fabrics can be offered by the Group according to the customers' specifications and requirements. To the knowledge of the Directors, the Group's products are used for manufacturing men's and women's fashions such as outer garments, eider down wear, trousers, windbreakers and jackets.

Through its well-established distribution network, the Group's products have been distributed to major cities in PRC including Guangzhou, Shaoxing, Sichuan, Fuzhou, Xian, Zhengzhou, Wuhan, Beijing, Shanghai and Chongqing under its trademark .

As the textile and garment markets are subject to fashion trend, which is seasonal and dynamic, the Directors are of the view that it is important for the Group to launch new products to the market in a timely manner in order to remain competitive. Accordingly, the Group has put significant emphasis on research and development of new products. Around 30 new products, which have different features in terms of strength, elasticity, twist, texture and colour, are developed and launched by the Group into the market every year.

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

• its vertically integrated production process: the Group has production facilities for fabric weaving, dyeing, setting and cloth finishing. This allows the Group to enjoy low production cost and assurance of product quality;

• its continuous effort on research and development: the research and development team of the Group, which is headed by Mr. Chen Jinyan, the chairman of the Group and an executive Director, keeps abreast of the latest market trend and develops products of different texture and styles to suit the ever-changing market needs;

• its well-established distribution network: the Group has established a distribution network around the major cities in PRC. Distribution agents have been appointed in major textile markets of PRC including Guangzhou, Shaoxing, Sichuan, Xian, Zhengzhou, Wuhan, Beijing and Chongqing;

• its trademark : the Group's trademark has received market recognition as a result of its trendy design, product quality and well-established distribution channel; and

• its commitment to quality control: the Group has adopted an advanced quality control system, the effectiveness of which can be evidenced by the accreditation of the ISO 9001 certification in April 2001.

• Reliance on distribution agents
• Reliance on processing arrangements
• Reliance on major suppliers
• Possible disruptions in the supply of, or the price fluctuations for, the Group's raw materials
• Reliance on key management
• Reliance on PRC market
• Reliance on skilled labour

In order to diversify the customer base of the Group and tap the market potential, the Group plans to expand its distribution network to the other textile markets in PRC, such as Dalian, Shenyang, Harbin, Urumqi, Nanjing, Shishi, Kunming, and overseas textile markets such as Hong Kong, France, Italy and Russia. The Group intends to expand its distribution network by, on one hand, establishing sales points or appoint distribution agents in these new distribution locations and, on the other hand, strengthening its existing sales and marketing team in order to further promote the Group's products.

To cope with the expected growth in demand of the Group's products, the Directors plans to expand the Group's production capacity. The utilisation rate of the Group's fabric dyeing production line of the Group is approximately 84%. In some peak production months, this production line has been operated at over 90% of its full capacity. In order to cater for demand from customers resulted from the Group's plan to expand its customers base as set out below, the Group plans to establish a new production line for fabric dyeing.

The extension of the production premises to accommodate the establishment of a new production line has already been commenced in January 2003, which is located adjacent to the Group's factory premises for the existing production line for fabric dyeing. The Directors expect that the establishment of the new production line will be completed by December 2003. The capital expenditure is approximately HK$61 million, which is expected to be funded by the net proceeds from the Share Offer and the internal resources of the Group.

As a result of the continuous change in the trend of the textile and garment markets, the Group will continue to put effort in research and development of new products to suit the market needs. The Group is currently in the progress of development of Nylon-cotton Series, High-end Strongly-combined knitted Fabrics and Pure Cotton Series, which are expected to be launched in the third quarter of 2003, the fourth quarter of 2003 and the fourth quarter of 2004, respectively.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$77.1 million (based on the offer price HK$0.5 per share). The Group at present intends to apply the net proceeds as follows: