Major Shareholder:

• Hop Fung Industries ¡V 70.0% interest

Company Subsidiaries:

• Gong Ming Hop Fung Paper Ware Factory Ltd (100%): Trading of paper-ware products
• Fung Kong Hop Fung Paper Ware Factory Ltd (100%): Manufacture through processing arrangement and sale of paper ware products
• Hop Fung Paper Ware Ltd (100%): Provision of management services
• Hop Fung (Overseas) Trading Ltd (100%): Trading of paper ware products

The Group is principally engaged in the manufacture (through Processing Arrangements) and sale of corrugated paper-ware products including corrugated paper boards and corrugated carton boxes.

The Group manufactures (through Processing Arrangements) corrugated paper boards in customers' required sizes and specifications. The Group also manufactures and prints corrugated carton boxes from its corrugated paper boards in customised sizes, specifications, patterns and colours. The Group sells its products mainly to companies in Hong Kong and overseas and to companies or factories in the PRC, which the Directors believe, would use the Group's products for the packaging of their products to export to Hong Kong and overseas. During the Track Record Period, the corrugated paper boards were sold mainly to paper-ware agents, suppliers and trading companies, and the corrugated carton boxes were sold mainly to customers who use them for packaging purposes in their manufacturing base in the PRC.

The Group currently conducts its manufacturing operations by way of processing arrangements in the PRC. As at the Latest Practicable Date, the Processing Factories under the Group's processing arrangements are based in Fenggang Town, Dongguan and Gongming Town, Baoan District, Shenzhen in the PRC. As at the Latest Practicable Date, the Processing Factories had a total monthly manufacturing capacity of approximately 23 million sq.m. of corrugated paper boards. The FG Processing Factory has been accredited with the internationally recognized ISO9001 and ISO9002 certifications in respect of the quality management system it operates. The GM Processing Factory has also been accredited with the internationally recognized ISO9001 certification in respect of its quality management system and ISO14001 certification in respect of the environmental management system it operates.

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

• Long operating history and reputation for servicing the world's manufacturing hub
• Experienced and focused management team
• Solid and diversified customer base
• Vertically integrated production and short lead time
• Stringent quality control

• Reliance on key management personnel
• Reliance on major products
• Reliance on the Hong Kong and PRC markets
• Product substitution
• Credit risk
• Price fluctuation of raw materials and finished products
• Reliance on major suppliers
• Non-renewal of the Processing Arrangements

In anticipation of growing demand arising from the increase in manufacturing operations set up by foreign enterprises in the PRC, the Group plans to add new production machines and equipment to enhance the production and processing capacity for corrugated carton boxes. Such investments will further increase the Group's sales proportion in corrugated carton boxes, which generally have higher added value and profit margin.

In order to capture the increasing demand from domestic enterprises in the PRC who mainly use corrugated paper-ware products for their domestic sales in the PRC, the Group plans to establish a subsidiary in the PRC dedicated mainly to domestic sales in the PRC. Through this subsidiary in the PRC, the Group plans to set up manufacturing facilities mainly to cater for domestic sales to domestic PRC enterprises. The Group has already submitted an application to the relevant PRC authorities for the establishment of such PRC subsidiary. However, the application has not been approved and the business certificate has not been issued as at the Latest Practicable Date. It is expected that this PRC entity will be a wholly-owned subsidiary of the Group and will have its own production facilities to manufacture corrugated paper-ware products mainly for domestic PRC sales by the Group.

The Directors anticipate that such manufacturing facilities of corrugated paper-ware products for domestic PRC market will be able to commence production in the first quarter of 2004 and after full scale operation and with a planned normal monthly production capacity of approximately 8.5 million sq.m. of corrugated paper boards.

The Group intends to set up manufacturing facilities in the PRC to produce medium paper to cater for its own consumption. The Group plans to set up such medium paper production operations by establishing another subsidiary in the PRC and/or entering into a PRC processing arrangement. The establishment of a PRC subsidiary and/or the entering into a PRC processing arrangement is at its preliminary evaluation stage and the Group has not yet submitted any application to the relevant PRC authorities for approval. It is the Group's current plan to have such manufacturing facilities for medium paper ready for commencement of production in the first quarter of 2005. The Directors currently project that, after full scale operation of such production facilities as currently planned, such production facilities will be able to meet approximately 30% to 40% of the Group's demand for medium paper for its production.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$83.0 million (based on the offer price HK$1.10 per share). The Group at present intends to apply the net proceeds as follows: