• Mr Guo Deying 's family-56.86% Interest

• Yulong Infotech Inc. Limited(100%)¡GInvestment holding

• Digital Tech Inc. (100%)¡GInvestment holding
• Yulong Computer Telecommunications Scientific (Shenzhen) Company Limited (100%): Wireless solutions and equipment provider for the wireless telecommunication market in the PRC

The Group is a wireless solution and equipment provider in the PRC. Capitalising on its technological know-how in wireless telecommunication across multiple wireless telecommunication networks standards including paging, GSM, GPRS, CDMA1X, and PHS (or Xiaolingtong as called in the PRC), the Group has delivered solutions and equipment for wireless telecommunications from back-end system to front-end user level. To date, the Group¡¦s wireless system solutions are mainly used by telecommunication operators for enhancing network coverage and provision of value-added services and corporate user as part of in-house wireless communications platform. The group also supplies wireless terminal products such as fixed wireless terminals and smartphones based on operating system developed by the Group's in-house R&D team. The Group¡¦s terminal products are promoted under its own "Coolpad" brand name.

Combining its technological know-how and its portfolio of products and solutions, the Group is well positioned to provide innovative industry applications (comprising customized wireless system solutions and wireless terminal products) for enhancing internal and external communications of its customers, and thereby creating business opportunities.

For example, the Group provides industry application solution to China Galaxy Securities Limited with an aim of enabling stock trading through wireless telecommunications network. The application comprises a back-end wireless system solution to support stock trading, and supply of smartphones for use of stock account customers. Based in Beijing, China Galaxy Securities Limited is one of the leading securities brokerage in the PRC. The group companies of China Galaxy Securities Limited engaged in a wide range of financial services including securities brokerage, investment banking, asset management, fund management, and foreign exchange. As at the Latest Practicable Date, the Group had also provided industry application solutions to customer in aviation, land transportation and public securities. The Group has been in discussion with potential customers in relation to industry application for banking and insurance. The Group will also explore other industry applications in future.

The Directors consider the group¡¦s competitive strengths to be as follows:

• Understanding of the PRC's wireless communication industry

The group has accumulated expertise and experience in multiple wireless networks, including paging, GSM, GPRS, CDMA and PHS.

• Proximity to local market

As a domestic enterprise with years of business relationships with PRC's major telecommunications operators, the Group has nurtured close relationships with its custoemrs. This enables the Group to have a good understanding of the requirements of the telecommunications operators so as to provide timely response to market changes.

• Nimble and cost-effective R&D

The Directors believe that the Group's R&D activities are both nimble and cost-effective, and the Group has very strong R&D team.

• Portfolio of core technologies

The Group has developed and accumulated core technologies in the areas of telecommunications protocol software development, RF system design, embedded real-time control and proprietary operating systems for wireless terminals.

• Extensive sales, after sales support and technical support services

The group employed a sales team comprising 150 people, who stationed in the group¡¦s headquarters in Shenzhen, representative office in Beijing and sales liaison points in Shanghai, Chongqing, Tianjin and 20 provinces in the PRC.

• Reliance on senior management and key technical personnel
• Reliance on the PRC market
• Relationship with certain major customers
• Reliance on t cooperation wit the smartphone Manufacturing Partner for manufacturing of smartphone
• Reliance on certain major suppliers
• Long settlement cycle
• Recoverability of trade receivable
• Risk related to the Group's smartphone products
• Capital requirement
• Sustainability if gross profit margin
• Term of Yulong Shenzhen's business license
• Renewal of Network Access License
• Risk related to newly launched products or solution
• R&D risks
• Risks related to the sue of the trade name "Coolpad"
• Intellectual property right
• Dividends
• Limited insurance coverage
• Preferential tax treatment

A basic infrastructure of the existing telecommunication networks in the PRC matures and the competition among telecommunication operators intensifies, the Directors expect that the telecommunications operators will continue to focus on enhancing user interface and promoted more value-added services to reinforce customer royalty. Under the current market condition, the Group expects to maintain the provision of wireless systems solutions and to derive growth from wireless terminal products, particular smartphone. In the long term, the Group will continue to generate growth by providing products and solution in response to the emergence of new technology and the increasing requirements of the telecommunication operators and corporate clients by utilising its core wireless technologies. To achieve growth in such direction, the Group has formulated development plans as follows.

• Further development of the smartphones business and development of the potential smartphones operating system licensing business.

The Group has taken steps to market the industry security industry applications for stock trading, aviation, banking, insurance, land transportation and public securities industries.

• Further empowering of R&D

It s the Group's strategy to focus on a few core areas of wireless communication technologies related to its proprietary operating system for wireless terminal products and its industry applications, wireless coverage system for PHS network and applications of 3G technologies.

• Brand awareness and products/solutions promotion

The promotion is expected to be done primarily through direct marketing. The Group will participate in various trade show and technical conference in the PRC to enhance the publicity of its brand name.

• Expansion in sales, distribution and services network coverage

The Directors intends to use the net proceeds from the new issue to implement the Group's future development plans. Assuming that the Over-allotment Option is not exercised, based on Offer Price of HK$0.83 (being the mid-point of the indicative of the Offer Price range of between HK$0.79 and HK$0.87), the net proceeds from the new issue, after deduction of underwriting commission and estimated expense payable by the Company, are estimated to be approximately HK$70.7 million. The Group at present intends to apply the net proceeds as follows: