Major Shareholder:

• Mr. Zhong Houtai ¡V 52.93% interest
• Mr. Chan Chau Wan ¡V 20.07% interest

Company Subsidiaries:

• Fuqing Pharmaceutical (100%): Manufacture, sale and research and development of pharmaceutical products

The Group is engaged principally in the manufacture, sale, research and development of (injection solution pharmaceutical products) under the ¡§Nan Shaolin¡¨ brandname in the PRC. As at the Latest Practicable Date, all the Group's products are small volume parenteral solution and large volume parenteral solution for which the original chemical formulae are set out in the ¡§Pharmacopoeia of the PRC¡¨, ¡§Standard of the Pharmaceutical Products of the Ministry of Health of State Drug Administration of the PRC¡¨, which are publicly avaliable.

Six major products of the Group accounted for most of the Group's turnover for each of the three years ended 31 December 2001 and the six months ended 30th June 2003. (citicoline sodium injection solution), (etoposide injection solution) (tobramycin sulfate injection solution), (lincomycin hydrochloride injection solution), (Kanamycin sulfate injection solution) and dexamethasone sodium phosphate injection solution) in aggregate accounted for approximately 82%, 93%, 98% of the Group's total turnover for the 3 years ended 31st December 2002.

Products of the Group are ultimately sold to hospital and clinics with (Medical Institution Practicing Permit) and pharmacies with (Pharmaceutical Trading Permit) in the PRC. In order to facilitate product distribution the Group sells most of the products to pharmaceutical distributors, who are independent to the Group, in the PRC. The Group also, to a lesser extent, sells its products to hospitals and clinics directly. Sales to 40 distributors accounted for approximately 92% of the group's turnover for the year ended 31st December 2002. The remaining 8% was attributed to sales directly to hospitals and clinics. The Group currently has entered into distribution agreements with six major distributors, who are independent third parties to the Group, covering regions of Guangxi autonomous region, Guizhou, Fuzhou, Beijing, Chongqing and Sanming.

The Group sources all its raw materials. Such as bulk pharmaceutical materials and packaging materials from suppliers in the PRC. In order to secure a stable supply, the Group has entered into written supply agreements with nine major independent suppliers in respect of principal bulk pharmaceutical materials and packaging materials. The Group owns all the production facilities, which are located in Fujian Province. The factories and ancillary structure were erected and completed in various stages between 1995 and 2002./ after revamping in accordance with GMP standard in 1999, the Group was accredited with the GMP certificate for its small volume parenteral solution in February 2001, and for its large volume parenteral solution in May 2002.

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

• Its well known ¡§Nan Shaolin¡¨ brandname;
• Its GMP certified production of facilities;
• Its established network of independent distributors and sales force in the PRC;
• Its extensive product lines (more than 40 pharmaceutical products have been granted approval for production); and
• Its experienced and professional advisory board, management team and production team

• Products over concentration;
• Research and development risks;
• No assurance that new products of the Group to be successfully developed and launched to the market;
• Reliance on key personnel;
• Reliance on distributors;
• Reliance on the PRC market;

In order to maintain its competitiveness in the pharmaceutical industry in the PRC, the Directors believe that introduction of new pharmaceutical products in a core factor to the future success of the Group's business. The Directors expect the production lines for pharmaceutical products in pill and capsule forms will commence mass production in 2005 after obtaining the relevant GMP certificate, which is expected to be in around mid 2005. The Group plans to apply for the GMP certificate for the production lines for pharmaceutical products in pill and capsule forms in late 2004.

The production facilities of the Group are currently operating at nearly full capacity. The Directors expect that, with the increasing demand for its pharmaceutical products, the current production facilities will not be able to cope with the future demand. As a result, the Group plans to expand the current production facilities by investing in additional machinery and equipment, which would lead to higher productivity and volume.

To explore the PRC market, the Group intends to its distribution network and marketing team for the PRC market. It plans to recruit additional marketing staff and co-operate with other distributors in the PRC. The Group also expects to establish sales offices in major cities in the PRC such Hanzhou, Zhenzhou and Shenyang to strengthen the Group's existing sales and distribution network in the PRC. The Group also aims to expand into certain Asian markets like Hong Kong, Myammar and Vietnam, It intends to establish sales network in these markets by appointing independent distributors. It plans to recruit additional marketing staff to liaise with these distributors.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$69.0 million (based on the offer price HK$0.93 per share). The Group at present intends to apply the net proceeds as follows: