Our principal business objectives are to continue strengthening our leading market position in the paper cigarette package industry through our existing and potential customers, and to capture business opportunities in the packaging industry for social product paper packages. We aim to attain our objectives through the following strategies:

Major Business Strategies

To increase market penetration by enhancing our design and development capabilities:

Our Group places a strong emphasis on packaging design and product development. Our customized value packaging design not only conveys message, values and culture of their respective brands, but also represents the quality of a particular brand in differentiation with other brands as well as counterfeit products in the market. Leveraging on our capability in providing tailor-made design and printing of cigarette packages, we believe we could build up and maintain long term business relationships with our customers and attract potential customers going forward.

Our Group will continue to devote resources to enhance our product research and development capabilities. Among other existing policies, our Group intends to strengthen and carry out the following measures:

• We plan to apply for accreditation of our existing testing laboratory as a national laboratory. Our Directors believe that, in view of the increasingly stringent testing standards in the PRC, the accreditation of our existing testing laboratory as a national laboratory will strengthen customer confidence in our product quality, which in turn enhances our competitiveness. We have retained a consultation company to conduct on-site inspection of our existing facilities in preparation for the accreditation application;
• We plan to provide further training and education to our staff with development potential; and
• We plan to attend exhibitions, conferences and other activities in relation to printing and packaging, and maintain communication with industry leading enterprises, in order to gain access to and keep abreast of market information and the latest trends in the market.

In addition, we realize the value of collaboration with tertiary institutions and have entered into collaboration agreements with several tertiary institutions in the PRC for providing us with readily available technical expertise and thus bring further improvements to, among others, our operations, in particular product development, production efficiency and quality control. We believe our design and other research and development capabilities can assist us in enhancing our position and increasing our market shares by attracting more business opportunities from both existing and potential customers.

To strengthen our sales and marketing efforts by enhancing relationship with existing customers and developing business with potential customers:

We plan to devote further resources to strengthen our sales and marketing capabilities primarily for the enhancement of relationships with existing customers and the development of business with potential customers. To date, our customers include ten Provincial Tobacco Industrial Company customers and five non-provincial companies from the China Tobacco Industry Development Center which are located in provinces such as Hubei, Sichuan, Yunnan, Shaanxi and Henan. For these existing customers, we endeavor to leverage on our existing approved supplier status to expand our products portfolio to cover other cigarette brands or sub-brands manufactured by these customers not currently designed and/or printed by us. In addition to enhancing our relationships and business scales with existing customers, we also intend to invest in markets in the PRC in which we do not currently have any presence to further enlarge our customer base, for example, Anhui Province and Jiangxi Province. To cope with such business strategy, we propose to set up sales offices in the cities where these potential customers are located when business at these locations realize substantial growth. We also intend to recruit more sales and marketing staff to strengthen our existing sales and marketing team. Our Directors believe that by establishing and maintaining a geographically closer presence with our major customers, our Group can maintain better relationships with our customers and enhance our after-sales services to be provided to our customers which, in turn, will enhance customer satisfaction.

To enhance our product variety by further developing our social product paper packages:

Our Group has focused on the production of paper cigarette packages since the commencement of our business, mainly due to our Group's experience and expertise in the paper cigarette packages industry. It is always our strategy to diversify our products portfolio and to extend our production to social product paper packages, such as medicine, wine and food in order to minimize the negative impact of relying on a single industry segment and attain a healthy financial performance. We have set up a specialized department responsible for development of our social product paper packages. Further, our Group's technical know-how and equipment and machinery relating to our paper cigarette packages products business are, with necessary adjustments to our production lines, transferable and can be applied to produce social product paper packages. By leveraging on our expertise in packages printing and increasing utilization of our production capacity especially during the low season of the paper cigarette package industry, we aim to continue with our effort to expand our product portfolio to paper packages for other products. With the set-up of this specialized department which we already have in place, we plan to expand our market shares in this business line and strengthen the diversity of our business.

To advance our machinery and equipment to improve our production quality:

Our Group plans to continue to invest in our machinery and equipment to upgrade our production base in order to maintain our productivity in line with international standards. Our Directors believe that in today's technology-oriented business model, keeping our production line up-to-date is key to future success. Our management team is dedicated to pursuing new technology enabling us to lower production costs while maintaining or improving our production quality. In addition to our continued investment in advanced machinery in our production line (such as gravure printing machine, platen hot foiling and die-cutting machine, automatic platen stripping and die cutting machine and inspection machine), our Group will also invest to update our quality control equipment. The new machinery adopts more advanced printing technology as compared to the machines currently used and our Directors believe that such technology will result in higher efficiency in our production process. With the acquisition of new equipment, including inspection machines, our Directors believe that we would be able to maintain the high quality standards in our products, thus improving our competitiveness. Our Directors intend to commence the construction of phase II of the Yichang production base in the third quarter of 2014 as the third quarter of the year is usually slack season of our Group so that relocation work will cause minimum disruption to our Group's operation.