AMOREPACIFIC Corp. held the dedication ceremony for a cosmetic factory in Shanghai, China, on July 22, 2002. The completion of a production base in Shanghai, the trendsetting center of China, will help accelerate the company endeavors to access the Chinese market. The plant will produce the LANEIGE line, a best-selling brand in Korea. Located in Ziatingchui, Shanghai, the plant which is made up of a production block, an administration block and an annex building equipped with a boiler room and waste water treatment facilities -- occupies 3960 square meters on a 16,500-square-meter land lot. The facility is capable of manufacturing 9.9 million units and packaging 11.7 million units annually. AMOREPACIFIC had already established Amore Cosmetics Shanghai Co., Ltd., in Shanghai in November 2000, as the first step to aggressively gain access to the huge markets of mainland China. The plant took one year and two months to complete since the groundbreaking in May 2001 and cost the company a total of five million dollars. The Shanghai plant is a wholly owned company of AMOREPACIFIC. The three residential officials and local workers of the plant are now busy preparing for the launch of sales in September. LANEIGE will be the core brand for the Shanghai company. The establishment of a local plant means more aggressive sales for LANEIGE, which up to now, had been imported and sold mainly in Beijing, through sales agents. The newly produced LANEIGE line will be sold exclusively in premium-grade department stores in metropolitan cities such as Shanghai and Beijing. The company plans to introduce the basically same brand image as the one used in Korea to capture the imagination of Chinese women. With the addition of the Shanghai plant, AMOREPACIFIC now has two production bases in China, with the other one in Shenyang. Amore Cosmetics Shenyang Co., Ltd., which covers the areas of Shenyang, Changchun and Harbin, was established on December 31, 1993; it began production in December 1994 and launched sales in 1995. Establishing this company cost the company a total of 2.5 million dollars. The Shenyang company started out as a joint venture firm, but was later turned into an independent company in 2000. It now employs three residential officials and 230 local workers, and produces two brands, AMORE and MAMONDE, primarily supplying department stores and specialty stores. AMOREPACIFIC seeks to continually strengthen the Shenyang company marketing capabilities to stabilize its growth, and to eventually rank among the top five market share holders in the department store area for the three major cities in Northeastern China. In its effort to access the Chinese market, AMOREPACIFIC has focused on local production and local sales, rather than agency sales. As a result, exports from the Headquarters to the Chinese market have been limited to the LANEIGE line, which has been sold in China through a general sales agent in Beijing. A sales agent contract was signed between the company and the Beijing agent in 1997, requiring the agency to sell only to department stores in principle. (Exports amounted to 830,000 dollars in 2000 and 900,000 dollars in 2001.) AMOREPACIFIC has set 2002 as the first year for its globalization plan to reinvent the company from being Korea No. 1 local brand into being a truly globalized company. To accomplish this, the company plans to promote its best-known brand, LANEIGE, throughout the entire Asian region. Its aggressive investment into and cultivation of sales in the Chinese market is a cornerstone for the effort to attain the long-term vision of becoming a company with a collection of powerful brands.