Shanghai Asia Holdings

Competitive Strengths

We believe that our competitive strengths are as follows:-

We are well-positioned as an independent producer of cigarette packaging

We believe that our major competitors are mainly joint ventures set up by cigarette manufacturers. These joint venture producers of cigarette packaging primarily produce packaging to meet the internal requirements of the joint venture partners. As such, these producers are limited to producing cigarette packaging only for their respective parent cigarette manufacturer. We have established ourselves as a specialised printer of cigarette packaging and have not associated ourselves with any cigarette manufacturers. This gives us the flexibility to service different cigarette manufacturers at the same time and tap into the growth of a broader base of customers. To date, five of our six major customers as mentioned in the section entitled "Major Customers" above are among the 36 key cigarette enterprises identified and fostered by the STMA. In early 2004, we have further expanded our customer base to include the cigarette manufacturers based in the provinces of Yunnan and Guizhou. These included Chuxiong Cigarette Factory and Qujing Cigarette Factory in the Yunnan province, and Guiyang Cigarette Factory in the Guizhou province.

We are able to deliver consistent and high quality products to our customers

We believe in providing consistent and high quality products to our customers, ensuring that our products meet the stringent requirements of each of our customers. We implement strong quality control checks throughout the entire production process and have been accredited with the ISO 9001:2000 certification in December 2001. Our major customers have exempted our products from quality inspections because the State Administration for Industry and Commerce have awarded us with an inspection exempt status. The long established relationship we enjoyed with our existing customers, in particular, the six major customers who have remained our customers since we commenced gravure printing business in 1996, is a testament to our product quality.

We possess advanced machinery and are continuously investing to upgrade our production machinery

We believe that we are among the first in the PRC to apply gravure printing for cigarette packaging as an alternative to other types of printing such as off-set printing. Gravure printing is more cost and production efficient for high production volumes as compared to certain types of printing processes such as off-set printing. We introduced gravure printing to some of our major customers as a more efficient printing process as their production volumeA has risen with the increase in sales of their cigarette brands. We are also continuously upgrading our production machinery and have recently contracted to acquire a new 8-colour rotogravure printing machine to replace our existing one.

We are well positioned to take advantage of the rapidly expanding markets in the PRC for gravure printing of cigarette packing

With the rapid development and gradual liberalisation of the PRC economy, our Directors believe that a number of foreign cigarette manufacturers will enter into the PRC market. We believe that this would lead to a steady increase in the manufacture of cigarettes in the PRC by both domestic and foreign players, which would in turn lead to an increase in the demand for gravure printing of cigarette packaging products.

Over the years, we have established a proven track record with local cigarette manufacturers such as the Shanghai Tobacco Group and Nanjing Cigarette Factory. We also have strong links with our Controlling Shareholder, NTIH, who has also developed extensive networks with foreign cigarette manufacturers such as British American Tobacco ("BAT"), Philip Morris and Japan Tobacco. In this regard, our Directors believe that we are well positioned in the PRC market to take advantage of this increasing demand for gravure printing of cigarette packaging.

We have extensive experience in gravure printing of paper packing for cigarettes in the PRC

Our founders, Yen Wen Hwa and Liu Yi Fang have collectively over 40 years of experience in the printing and packaging industry. Their experience and understanding of the industry are important to our Group in identifying new business opportunities for expansion. In addition, we have an experienced management team led by our CEO, Liu Jian Zhong, who possesses extensive managerial and operational expertise in the gravure printing of cigarette packaging in the PRC.

We are within close proximity to our major customers and suppliers

We are located in Jiangsu province, PRC which is within close proximity to our major customers, such as Shanghai Tobacco Group, Nanjing Cigarette Factory and Huaiyin Cigarette Factory. With such close proximity to our customers, we are able to respond to our customers' needs expeditiously and provide timely delivery services.