Major Shareholder:

• Mr. Wang Zhiqiang & Mr. Wang Xubing ¡V 56.32% interest
• Legend New-Tech Investments Ltd ¡V 8.63% interest

Company Subsidiaries:

• Zhongxin software Inc. (90.25%)
• Zhongxun Computer System (Beijing) Co., Ltd (100%)

The Group is principally engaged in the provision of outsourcing software development services to customers in the information technology sector in Japan. Customers of the Group includes established information technology companies such as NEC and its subsidiary, NEC Soft, NRI and DIR which provide software development services to their own customers in Japan. As one of the measures to increase cost-efficiency, the Group's customers would first formulate the basic design of the computer software to be developed and then outsource other parts of the software development process, such as functional design, detailed design, programming and unit testing to other software developers, such as the Group. As at the Latest Practicable Date, all software development projects carried on by the Group were outsourced by customers in Japan.

The Group's project implementation operation is carried out through nine outsourcing software development business units of SinoCom Beijing and its Chengdu branch office. However, since the customers of the Group are located in Japan, throughout the software development process, staff of SinoCom Beijing and SinoCom Japan, a subsidiary of the Group established in Japan whose staff include 40 system engineers and programmers, will work closely together to ensure that the needs and requirements of the customers are addressed in a timely manner. In general, SinoCom Japan's engineers will handle the development work for user interface which, when completed, will be documented by way of electronic files which can then be integrated with the core software functions developed by SinoCom Beijing in the PRC.

Since it is not the Group's business strategy to independently develop its own proprietary software for sale to the mass consumer market, the software development projects undertaken by the Group are initiated by its customers rather than through research and development of new software products by the Group.

The Group's headquarters are located in Beijing, the PRC. It has established a customer support centre in Japan, SinoCom Japan, whose staff include 40 system engineers and programmers. The Group also has one branch office in Chengdu and ten representative offices in various major cities in the PRC, namely, Shanghai, Tianjin, Shenyang, Jinan, Xian, Harbin, Fuzhou, Guangzhou, Nanchang and Zhengzhou.

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

• the quality of services provided by the Group and its experience in participating in outsourcing software development projects requiring six months or more to complete;

• the experienced management staff of the Group, many of whom have related overseas work experience;

• the ability to capture industry trend and growth potential, and to adapt to market changes as evidenced by the Group's ability to develop from initially a provider of software development services to local PRC customers during its early years of establishment to a recognised software developer in Beijing with a Japanese customer base comprising established Japanese information technology companies; the ability to recruit, retain and train skilled personnel;

• the trend for customers to engage the Group on an agreed man-month basis, which, the Directors believe, enables the Group to better allocate and plan its resources in advance and to generate a stable income stream as in the Group's experience, projects in respect of which the Group is engaged on an agreed manmonth basis are usually of a long term nature;

• the capability to deliver software design of different levels of sophistication, and software development covering upgrading and maintenance of already developed software outsourced by the Group's customers; and

• management and project experience gained by SinoCom Japan through on-site services provided by its bridge system engineers to customers located in Japan.

• sustainability of growth in turnover and profit
• reliance on the Japanese market
• reliance on five major customers
• uncertainty on expansion
• service liability
• reliance on key executives and ability to attract and retain skilled employees
• software, hardware or systems failure
• preferential tax treatments

The Directors intend to continue to work with providers of software development services in Japan, such as NEC, NEC Soft, NRI and DIR, to seek to participate in large-scale software development projects and to expand the volume of outsourcing software development business from among existing customers of the Group as well as to establish new strategic alliances with other Japanese or international information technology companies interested in outsourcing software development to the Group in the PRC. The Directors also intend to acquire a property in Beijing to relocate and consolidate the operations of the Group in Beijing currently carried out at properties leased by the Group which is expected to be financed from internal resources of the Group;

To enhance of the software development capabilities of the Group and the quality of its service by recruiting additional experienced information technology personnel and providing continuous training to its existing staff. The Group is also developing new in-house outsourcing management software and tools and platform software in order to enhance operational efficiency.

While the Group intends to maintain its primary business focus on the Japanese market, the Directors may seek to expand into other markets as and when the Japanese market becomes saturated and suitable opportunities arise. At this stage, the Group has identified US software companies with operations in the PRC (such as IBM Solutions and Services Company) as a potential market for the next phase of its business expansion in view of their strong demand for software development services.

The Directors plan to pursue such strategy through different channels, such as participation in overseas and PRC software exhibitions, invitation of new and potential Japanese customers to visit the Group's operations, hosting regular press conferences as well as advertising in magazines and trade journals in Japan in order to raise the Group's profile.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$98 million (based on the offer price HK$1.72 per share). The Group at present intends to apply the net proceeds as follows: