RISK FACTORS

You should carefully consider all of the information set out in this prospectus beforemaking an investment in the Offer Shares, including the risks and uncertainties describedbelow which may be typically associated with investing in equity securities of companiesfrom other jurisdictions. You should pay particular attention to the fact that the Company isincorporated in the Cayman Islands and that most of the Group’s operations are conductedin China and are governed by a legal and regulatory environment that in some respectsdiffers from those that prevail in other countries. The Group’s business, financial condition orresults of operations could be affected materially and adversely by any of these risks.Additional risks not currently known to the Company or that the Company now deemsimmaterial may also harm the Group and affect your investment.

RISKS RELATED TO THE BUSINESS OF THE GROUP

If the PRC Government determines that the agreements that establish the structure foroperating the Group’s business in China do not comply with PRC Governmentrestrictions on foreign investment in companies that provide Internet content services,the Group could be subject to a number of actions by the PRC Government, any ofwhich could cause its business, financial condition and results of operations to suffer.

PRC law currently limits foreign ownership of companies that provide Internet contentservices in China to 50%. In addition, foreign and wholly foreign-owned enterprises arecurrently restricted from providing other Internet information services, such as onlineadvertising. The Company is a Cayman Islands company, and the Group conducts itsoperations through its major operating subsidiary, namely GZP Computer. Due to the foreignownership restriction, the Company and its wholly-owned subsidiary in China are alsoineligible to sell online advertising. In order to comply with foreign ownership restrictions, theGroup engages in Internet content business in China through contractual arrangements withGDP Internet, a wholly-owned subsidiary of GZ Yingxin which is owned by the GZ YingxinShareholders. GDP Internet holds the licenses and approvals that are required to sell onlineadvertising on its webpages and has entered into a series of contractual arrangements withGZP Computer. The Group has been operating under these contractual arrangements assummarised in the Structure Contracts throughout the Track Record Period and the purpose ofthe recent execution of the Structure Contracts was to set out the pre-existing arrangementsinto more detailed written contracts in preparation for the proposed listing. There are three keycontractual arrangements that were in place throughout the Track Record Period whichenabled the Group to recognise and receive the economic benefit of the business andoperations of GZ Yingxin and GDP Internet during the Track Record Period, being (i) the loanprovided by the Company to the GZ Yingxin Shareholders which was used as their initialworking capital into GZ Yingxin; (ii) the share pledge pursuant to the GZ Yingxin Shareholderspledged their interest in GZ Yingxin to the Company; and (iii) the power of attorney signed bythe GZ Yingxin Shareholders authorising Lam Wai Yan, one of the Controlling Shareholders,chief executive officer, and Chairman of the Board, to operate and control the operations ofGZ Yingxin. As a result of these contractual arrangements, the Company is the beneficiary ofthe economic benefits of the business operations of GDP Internet. For a description of thesecontractual arrangements, see the section headed “Structure contracts” in this prospectus.

In July 2006, the MII issued a notice, or the MII Notice, which prohibits ICP holders fromleasing, transferring or selling telecommunications business operating licenses to any foreigninvestors in any form, or providing any resources, sites or facilities to any foreign investors fortheir illegal operation of a telecommunications business in China. The MII Notice also requiresthat ICP holders and/or their shareholders directly own the domain names, trademarks and

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servers used by such ICP holders in their daily operations. The MII Notice further requireseach ICP holder to have the necessary facilities for its approved business operations and tomaintain such facilities in the regions covered by its license. In addition, all value-addedtelecommunication service providers are required to maintain network and Internet security inaccordance with the standards set forth under relevant PRC regulations. The local authoritiesin charge of telecommunications services were required to ensure that existing ICP holdersconduct a self-assessment of their compliance with the MII Notice and to submit self-assessment reports to the MII before 1 November 2006. After the MII Notice was issued,pursuant to the domain name transfer agreement dated 1 June 2007 between GZP Computerand GDP Internet, GZP Computer transferred to GDP Internet all relevant domain names usedin GDP Internet’s daily operations, as required under the MII Notice. The registration oftransfer of these domain names has been completed in accordance with relevant PRC lawsand regulations. In order to comply with the MII Notice, Takehigh has also agreed to transfercertain trademarks to GDP Internet that are relevant to the latter’s operations and theregistration of these trademarks has also been completed in accordance with the relevant PRClaws and regulations.

In addition, GDP Internet owns all web-hosting servers and other necessary facilitiesused for its daily operations as required under the MII Notice. In accordance with therequirement of the MII Notice, the Group submitted a self-assessment report on 9 October2006 to Guangdong Telecommunications Administration. Guangdong TelecommunicationsAdministration accepted the report and did not raise any issue with respect to the submittedself-assessment report. The Company has been advised by Tian Yuan Law Firm, theCompany’s PRC legal adviser, that the Group’s business operation is in compliance with theMII Notice in all material aspects in that GDP Internet owns the domain names, owns theregistered trademarks and has the necessary facilities required for its daily operations. TheGroup passed its annual review of its ICP license by the Guangdong TelecommunicationsAdministration in April 2007.

The MII Notice has introduced a more stringent regulatory environment on foreigninvestment in the telecommunications business, which increases the risk that the PRCregulatory authorities may challenge the nature of the contractual arrangements. Tian YuanLaw Firm, the Company’s PRC legal adviser, also cannot rule out the possibility that therelevant PRC regulatory authorities may unwind the structure for operating the Group’sbusiness in China as a result of the increased attention on companies operating in thisindustry following the introduction of the MII Notice. If the Company or any of the Group’ssubsidiaries or shareholders are found to be in violation of any existing or future PRC laws orregulations, either due to the Group operating structure or other non-compliance operationalactivities, the relevant regulatory authorities will have broad discretion in dealing with suchviolations, including:

Š levying fines of three to five times the total revenue generated from operatingactivities violating telecommunications regulations in cases where related revenuehas been generated, or fines of between RMB100,000 and RMB1,000,000 in caseswhere no revenue related to a violation has been generated or where such revenueis lower than RMB50,000;

Š confiscating the income of GDP Internet;

Š requiring the Company and GDP Internet to unwind its contractual arrangements orrestructure its ownership structure or operations, and requiring the Company andGDP Internet to discontinue any portion or all of its operations related to onlineadvertising;

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RISK FACTORS

Š revoking the business and operating license of GDP Internet;

Š discontinuing or restricting its operations and/or those of GDP Internet;

Š imposing conditions or requirements with which the Company or any of itssubsidiaries or shareholders may not be able to comply;

Š restricting or prohibiting the Company’s use of the proceeds from this offering tofinance its business and operations in China; and

Š taking other regulatory or enforcement actions that could be harmful to the businessof the Company and GDP Internet.

Any of these actions could cause significant disruption to the Group’s businessoperations and may materially and adversely affect its business and financial condition andresults of operations.

The Company could also face material and adverse tax consequences if the PRC taxauthorities determine that the contractual arrangements among the GZ Yingxin Shareholders,GZ Yingxin, GDP Internet and GZP Computer were not made on reasonable commercial termsor otherwise. If that happens, they may adjust the income and expenses for PRC tax purposesin the form of a transfer pricing adjustment. A transfer pricing adjustment could adverselyaffect the Group by (i) increasing GDP Internet’s and GZP Computer’s tax liability, whichcould, in turn, result in late payment fees and other penalties for GDP Internet and GZPComputer, or (ii) limiting GDP Internet’s and GZP Computer’s ability to maintain preferentialtax treatments.

The Group may be requested to obtain certain licenses and failure to do so may have anadverse effect on its business and result of operations.

The Group is required to obtain applicable licenses, permits and approvals from differentPRC regulatory authorities in order to conduct its business. Over the past several years, variousgovernmental authorities in the PRC have issued regulations on specific aspects of Internetcontent and services. Certain regulations require operators to obtain licenses, permits orapprovals that were not required previously. There can be no assurance that the governmentauthorities will not continue to issue new regulations governing the Internet industry that willrequire the Group to obtain additional licenses, permits or approvals in order to operate itsexisting business or will prohibit the Group from engaging in those types of business to whichthe new requirements will apply. Among other things, new regulations or new interpretations ofexisting regulations could increase the Group’s costs of doing business and prevent the Groupfrom efficiently delivering services and products over the Internet.

ICP License

GDP Internet obtained the ICP License and such license will expire on 29 June 2011.The Group has taken all necessary measures to maintain the validity of the ICP License,including participating in the required annual review, and the Group will renew the ICP Licensewithin 90 days before the expiration of ICP License in accordance with the Telecom LicenseMeasures ( ). The Group’s qualification to engage in Internet contentservices will be adversely affected should it fail to renew the ICP License. However, theDirectors are of the view that there should be no impediment to the Group’s renewal of the ICPLicense.

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RISK FACTORS

Internet publishing approval

The Internet publishing approval pursuant to the PRC Interim Provisions on InternetPublishing (the “Internet Publishing Regulations”) is an approval relating to Internet publishingby ICPs on their websites (the “Internet Publishing Approval”). The definition of “InternetPublishing” applies to certain parts of the business operations of GDP Internet, including, theposting and dissemination of games, flash applications, pictures, cartoons and electronicpublications on GDP Internet’s websites which are discrete and separate from its other businessoperations as they are kept separate from overall editorial content of the Group’s websites. Mostof the Group’s websites that contain these items are aggregated under particular portals andchannels of PCgames and the download centre of PConline, respectively.

GDP Internet has applied for the Internet Publishing Approval but has not yet obtainedsuch approval as of the Latest Practicable Date. In accordance with the Internet PublishingRegulations, the application for the Internet Publishing Approval must be submitted to the localoffice of Guangdong Provincial Bureau of Press and Publications for preliminary examination,and then the local office will forward the application to the PRC General Administration ofPress and Publications (“GAPP”) for final approval. The application was preliminarily approvedby Guangzhou News, Press, Broadcasting and Television Bureau on 17 March 2005.Thereafter, the application was submitted by GDP Internet to the Guangdong ProvincialBureau of Press and Publication on 18 March 2005 and is now under examination. Accordingto the Internet Publishing Regulations, GAPP should either approve the application or rejectthe application with reasons in writing within 60 days of receipt of the application. GAPP hasthe sole discretion to approve or reject the application. As of the Latest Practicable Date,GAPP has not granted approval to GDP Internet.

Pending the grant of such approval, GDP Internet will cease, before the Listing, toconduct the activities which fall within the definition of “Internet Publishing” as set out in theInternet Publishing Regulations, being items in certain portals and channels within PCgamesand in the download centre of PConline.

There is no assurance that the PRC regulatory authorities will grant the InternetPublishing Approval to the Group to enable the resumption of such activities. There is also noassurance that the PRC regulatory authorities will not deem the Group to be in breach of theInternet Publishing Regulations for carrying out such regulated activities prior to the Group’scessation of such regulated activities.

If the Group is deemed by the PRC regulatory authorities to be in breach of the InternetPublishing Regulations, the PRC regulatory authorities may seize the related equipment andservers used primarily for such activities and any revenue generated from such activitieswould also be confiscated by the PRC regulatory authorities. In addition, the PRC authoritiesmay also impose a fine of five to 10 times of any revenue exceeding RMB10,000 or a fine ofnot more than RMB50,000 if such related revenue is below RMB10,000. No revenue wasgenerated by the Group from “Internet Publishing” activities during the Track Record Periodand therefore the maximum fine that may be imposed on the Group will not exceedRMB50,000. In addition, the suspended activities that are related to “Internet Publishing” arenot material to the operations of the Group and the negative impact from continuingsuspension of such activities will be limited and immaterial.

As of the Latest Practicable Date, the GAAP has not taken any legal or administrativeproceeding against GDP Internet. Tian Yuan Law Firm, the Company’s PRC legal adviser hasadvised that GDP Internet has met all substantive requirements under the Internet PublishingRegulations and there should no material legal impediment for GDP Internet to obtain theInternet Publishing Approval.

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RISK FACTORS

The Group’s contractual arrangements with GDP Internet, GZ Yingxin Shareholders andGZ Yingxin through GZP Computer may be less effective in providing operationalcontrol over GDP Internet as compared to direct ownership.

The Group conducts substantially all of its online advertising operations throughcontractual arrangements with GDP Internet, GZ Yingxin Shareholders and GZ Yingxin thatprovide the Group with the ability to control the operations of GDP Internet. These contractualarrangements may be less effective in providing the Group with operational control over GDPInternet as compared to direct ownership.

These contractual arrangements are governed by PRC law and provide resolution ofdisputes through arbitration in the PRC. Accordingly, these contracts would be interpreted inaccordance with PRC law and any disputes would be resolved in accordance with PRC legalprocedures. If either GDP Internet or GZ Yingxin fails to perform its respective obligations underthese contractual arrangements, the Group may have to rely on legal remedies under PRC law,including exercising its right to purchase the equity interests in GDP Internet and GZ Yingxin,seeking specific performance, and claiming damages, which the Group cannot be sure would beeffective. The legal environment in the PRC is not as developed as it is in certain otherjurisdictions, such as Hong Kong and the United States. As a result, uncertainties in the PRClegal system could limit the Group’s ability to enforce these contractual arrangements.

Moreover, these contractual arrangements could be subject to increased governmentalscrutiny, which could result in additional challenges to these arrangements. Under thesecontracts, the parties have agreed to resolve any disputes through arbitration by the ChinaInternational Economic and Trade Arbitration Commission in Shenzhen according to itsarbitration rules. The Group has been advised by its PRC legal adviser that such arbitrationprovisions are valid under PRC law and the parties thereto shall be entitled to bring legalaction in the China International Economic and Trade Arbitration Commission to seekremedies. According to the PRC Arbitration Law ( ), an arbitration award maybe set aside by a court with competent jurisdiction if there are certain defects during thecourse of arbitration, and the parties are entitled to seek subsequent remedies throughlitigation in courts. However, there is no assurance that the relevant court or arbitrationtribunal would agree with the Group’s PRC legal adviser. Even if the Group is able to bring acourt action or arbitration proceeding against either GDP Internet, GZ Yingxin or GZ YingxinShareholders for failure to perform its obligations and is able to obtain judgement or an awardin the Group’s favour, it might be not practicable for the Group to enforce the judgement oraward in light of the financial means of GZ Yingxin, which could materially and adversely affectthe Group’s business.

In the event of the imposition of statutory liens, bankruptcy and criminal proceedingsagainst GZ Yingxin or its shareholders, or against GDP Internet, the Group may lose theability to use substantially all the assets of GDP Internet.

To comply with PRC laws and regulations relating to foreign ownership restrictions in thevalue-added telecommunication services business, the Group currently conducts its operationsin China through contractual arrangements with GDP Internet, GZ Yingxin Shareholders andGZ Yingxin. GZ Yingxin and GDP Internet hold substantially all of the assets of GDP Internetthat are important to the operation of the Group’s business. In the event of the imposition ofstatutory liens, bankruptcy and criminal proceedings against GZ Yingxin or its shareholders, oragainst GDP Internet, unrelated third-party creditors may claim rights to some or all of theseassets, or the relevant governmental agencies may close down GZ Yingxin or GDP Internet,thereby hindering the Group’s ability to operate its business, which could materially andadversely affect its business, its ability to generate revenue and the market price of its Shares.

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RISK FACTORS

The Group’s gross profit margin may continue to decrease affecting future profitability.

In 2004, 2005 and 2006, the Group’s gross profit margin, relative to total revenue,decreased from 80.9% to 75.5% to 73.0% over the three years due to increases in sales taxesarising from intra-group sales, staff costs and sales commission payable to the largeadvertising agencies during this period. As the Group expands its revenue, there is noassurance that these reasons will not continue to impact the Group’s gross profit margin, noris there any assurance that the effect of these factors will not outpace the increase in therevenue of the Group. As a result, the Group’s financial conditions and results of operationsmay continue to be adversely affected by decreasing gross profit margin.

The Group relies on advertising sales as a significant part of its future revenue, but theonline advertising market is subject to many uncertainties which could cause itsadvertising revenues to decline.

The Group’s advertising revenue growth is dependent on increased revenue from thesale of advertising space on its portals. The growth of online advertising in China is subject tomany uncertainties and many of its current and potential advertisers have limited experiencewith the Internet as an advertising media platform, have not traditionally devoted a significantportion of their advertising expenditures or other available funds to web-based advertising, andmay not find the Internet to be effective for promoting their products and services relative totraditional print and broadcast media. The Group’s ability to generate and maintain significantadvertising revenue will depend on a number of factors, many of which are beyond its control,including but not limited to:

Š the development and retention of a large base of users possessing demographiccharacteristics attractive to advertisers;

Š the maintenance and enhancement of its brands in a cost effective manner;

Š increased competition and potential downward pressure on online advertising pricesand limitations on webpage space;

Š a change in government policy that would curtail or restrict its online advertisingservices;

Š the acceptance of online advertising as an effective way for advertisers to markettheir businesses;

Š the development of independent and reliable means of verifying levels of onlineadvertising and traffic; and

Š the effectiveness of its advertising delivery, tracking and reporting systems.

If the Internet does not become more widely accepted as a media platform foradvertising, the Group’s ability to generate increased revenue could be negatively affected.

The Group’s growth in advertising revenues, to a certain extent, will also depend on itsability to increase the advertising space on its portals. If the Group fails to increase itsadvertising space at a sufficient rate, its growth in advertising revenues could be hampered.Further, the development of web software that blocks Internet advertisements before theyappear on a user’s screen may hinder the growth of online advertising. The expansion ofadvertisement blocking on the Internet may decrease the Group’s revenues because when an

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advertisement is blocked, it cannot be downloaded from its advertisement server. As a result,such advertisements will not be tracked as a delivered advertisement and advertisers maychoose not to advertise on the Internet or on the Group’s websites because of the use by thirdparties of Internet advertisement blocking software.

The Group relies on the IT-related products and automobile industries for substantiallyall of its advertising revenue but the growth of such industries is subject to manyuncertainties which could have a material adverse impact on the Group’s business andresult of operations.

Substantially all of the Group’s advertising revenue comes from the sale of advertisingspace on PConline and PCauto. The growth of advertising on PConline and PCauto dependson the growth of the IT-related products and automobile industries. Any slow-down in thegrowth of these industries could have a material adverse effect on the advertising revenue onPConline. The automobile industry is an emerging industry in China. Its growth depends ongovernment policy, the growth of the middle class, the highway system, pricing wars and newvehicle financing programmes. Other factors that could limit its growth in China are the cost oflicensing, the availability of parking, the price of raw materials and petroleum supplies. Thedeterioration of such factors and uncertainties would have a material adverse effect on theadvertising revenue on PCauto.

The Group faces intense competition which could reduce its market share and adverselyaffect its financial performance.

There are many companies that distribute online content and services targeting Chineseusers. The Group competes primarily with vertically-integrated portals as well as generalportals. These sites compete with the Group for visitor traffic, advertising revenue andpotential partners. The Internet market in China is relatively new and rapidly evolving.Competition is intense and expected to increase significantly in the future.

The Group competes with other portals in China primarily on the following bases:

Š attractiveness of features and services on the portals;

Š brand recognition;

Š volume of traffic and users;

Š quality of its websites and content;

Š strategic relationships;

Š quality of its services;

Š effectiveness of sales and marketing efforts;

Š hiring and retention of talented staff; and

Š price.

The Group’s existing competitors may in the future achieve greater market acceptanceand gain a greater market share. It is also possible that new competitors may emerge and

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acquire significant market share. In addition, operators of leading websites or Internet serviceproviders currently offer, and could expand, their online products and services targeting China.Such entities may cooperate with other organisations, such as telecommunication operators, inChina to accelerate their entry into, and enhance their competitiveness in, the Chinese market.The Directors believe the rapid increase in China’s online population will draw more attentionfrom these multinational players to the PRC Internet market. The Group also competes withtraditional forms of media, such as newspapers, magazines, radio and television, foradvertisers and advertising revenues.

The Company’s subsidiaries and affiliated operating entities in China are subject torestrictions on paying dividends or making other payments to its overseas entities.

The Company is a holding company and does not have any assets or conduct anybusiness operations in China other than its investments in its Chinese subsidiaries andaffiliated operating entities. As a result, the Company depends on dividend payments from itssubsidiaries in the PRC, in particular from GZP Computer. The Structure Contracts do notentitle the Company to receive dividends directly from its affiliated operating entities(GZ Yingxin or GDP Internet). According to the Structure Contracts, GZP Computer is entitledto receive fixed annual and monthly fees from GDP Internet under the Structure Contracts,and GZP Computer may then transfer the revenue it receives from GDP Internet in the form ofdividends, to the Company. It is possible that its Chinese subsidiaries will not continue toreceive the payments in accordance with its contracts with its affiliated operating entities. Inaddition, under PRC law, the Company’s subsidiaries are only allowed to pay dividends to theCompany out of their accumulated profits, if any, as determined in accordance with PRCaccounting standards and regulations. Moreover, its Chinese subsidiaries are required to setaside at least 10% of their respective net after tax profits into a mandatory reserve fund untilthe balance of the reserve reaches 50% of their registered capital. Such reserve funds are notpayable or distributable as cash dividends.

The PRC Government also imposes controls on the convertibility of Renminbi into foreigncurrencies and, in certain cases, the remittance of currencies out of China. The Company mayexperience difficulties in completing the administrative procedures necessary to obtain andremit foreign currencies. If the Company or any of its subsidiaries are unable to receive all ofthe revenues from its operations through these contractual or dividend arrangements, it maybe unable to effectively finance its operations or pay dividends on its Shares.

If the Group fails to successfully develop and introduce new portal features andservices, its competitive position and ability to generate revenues could be harmed.

The Group is continuously developing new features and services for its users. The plannedtiming or introduction of new features and services is subject to risks and uncertainties. Actualtiming may differ materially from original plans. Unexpected technical, operational, distribution orother problems could delay or prevent the introduction of one or more of its new features orservices. Moreover, there can be no assurance that any of its new features and services willachieve widespread market acceptance or generate incremental revenue.

The Group’s business depends on its strong brands, as a result, the Group will not beable to attract users, customers and clients of its products and offerings if the Groupdoes not maintain and develop its brands.

It is critical for the Group to maintain and develop its brands so as to effectively expandits user base and revenues. The Directors believe that the importance of brand recognition will

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increase as the number of Internet users in China grows. In order to attract and retain Internetusers and advertisers, the Group may need to substantially increase its expenditures forcreating and maintaining brand loyalty. Accordingly, its revenues will need to increase at leastproportionately in order for it to maintain its current levels of profitability.

Its success in promoting and enhancing its brands, as well as its ability to remaincompetitive, will also depend on its success in offering high quality content, features andfunctionality. If the Group fails to promote its brands successfully or if visitors to its websitesor advertisers do not perceive its content and services to be of high quality, the Group may notbe able to continue growing its business and attracting visitors and advertisers.

The discontinuation of any preferential tax treatments or tax refunds currently availableto the Group in the PRC could materially and adversely affect its business, financialcondition and results of operations.

The Group located and structured its PRC subsidiaries in designated economic zonesand/or as high technology enterprises ( ) in order to benefit from preferential taxtreatments. Some of these tax treatments are subject to conditions specified in relevantregulations. For example, some of the Group’s PRC entities are entitled to preferential taxtreatment because they are recognised as high technology enterprises. According to therelevant PRC law, the following conditions should be satisfied by enterprises seeking to berecognised as high technology enterprises: (i) the business carried out by the enterpriseshould fall into certain high technology industries; (ii) the enterprise should be an independententity; (iii) the responsible manager should have certain technology experience; (iv) the ratioof employees with technology experience should meet certain levels; (v) the expenses onresearch and development of high technology each year should meet certain criteria; and(vi) the income generated by high technology products should meet certain criteria. In addition,local government authorities may also have supplementary or implementation rules on thecriteria of high technology enterprises. GZP Computer has applied to be treated as andqualified for treatment as high technology enterprises. Thus GZP Computer is eligible for astatutory tax rate of 15%.

Since the current criteria may be amended or changed in the future, and there is noassurance that the Group’s qualified PRC entities will continue to satisfy the amended orchanged standards, there is no assurance that the Group’s PRC subsidiaries will continue toenjoy these preferential tax treatments or tax refunds in the future. In addition, there can be noassurance that preferential tax treatments granted to its PRC subsidiaries by localgovernmental authorities may not be reviewed, challenged or even revoked by the centralgovernment in the future. The discontinuation of this preferential tax treatment or tax refundscould materially and adversely affect its business, financial condition and results of operations.Please see the section headed “Financial Information” in this prospectus for a more detaileddiscussion of these preferential tax treatments.

Further, on 16 March 2007, the National People’s Congress of the PRC adopted a newenterprise income tax law, the PRC Enterprise Income Tax Law ( ),which imposes a single uniform income tax rate of 25% for most domestic enterprises andforeign-invested enterprises. This new law will be effective as of 1 January 2008. Itcontemplates various transition periods and measures for existing preferential tax policies,including a grace period for as long as five years for enterprises which are currently entitled toa lower income tax rate and continued implementation of preferential tax treatment with a fixedterm until the expiration of such fixed term. The Enterprise Income Tax Law provides that the

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Foreign Investment Enterprises and Foreign Enterprises Income Tax Law of the PRC and itsImplementing Rules should become void upon the effectiveness of the Enterprise Income TaxLaw, and thus, there is a risk that the tax exemption enjoyed by the foreign investors on thedividends they receive from their investment will be abolished. Thus, the Group cannotexclude the possibility that the Group’s PRC Subsidiaries’ tax preferential treatment may bediscontinued.

The PRC Government may eliminate or significantly shorten the period in which theCompany enjoys its preferential tax treatment, which would adversely affect its financialcondition and results of operations. Moreover, the Group’s historical operating results may notbe indicative of its operating results for future periods as a result of changes in applicable taxlaws. The new enterprise income tax law which will become effective on 1 January 2008applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises anddomestic enterprises. According to the new enterprise income tax law, key high technologyenterprises supported by the State shall be subject to enterprise income tax at a reduced taxrate of 15%. The term “key high technology enterprises supported by the State” is not definedor interpreted by the State Council to date, and thus the Company cannot exclude thepossibility the preferential income tax rate of 15% may be discontinued although GZPComputer has received approval from the relevant Technology Bureau to be classified as hightechnology enterprises. Any significant increase of the Company’s income tax liability in thefuture could have a material adverse effect on its financial condition and results of operations.

Unauthorised use of the Group’s intellectual property by third parties, and the expensesincurred in protecting its intellectual property rights, may adversely affect its business.

The Group regards its copyrights, service marks, trademarks, trade secrets and otherintellectual property as critical to its success. Unauthorised use of its intellectual property bythird parties may adversely affect its business and reputation. The Group relies on trademarkand copyright law, trade secret protection and confidentiality agreements with its employees,customers, business partners and others to protect its intellectual property rights. Despite itsprecautions, it may be possible for third parties to obtain and use its intellectual propertywithout authorisation. Furthermore, the validity, enforceability and scope of protection ofintellectual property in Internet-related industries are uncertain and still evolving. In particular,the laws of the PRC and certain other countries are uncertain or do not protect intellectualproperty rights to the same extent as do the laws of Hong Kong and other jurisdictions.Moreover, litigation may be necessary in the future to enforce the Group’s intellectual propertyrights, to protect its trade secrets or to determine the validity and scope of the proprietaryrights of others. Future litigation could result in substantial costs and diversion of resources.

The Group may be subject to intellectual property infringement claims, which may forcethe Group to incur substantial legal expenses and, if determined adversely against theGroup, materially disrupt its business.

There can be no assurance that the Group’s products, services and intellectual propertyused in its normal course of business do not or will not infringe valid patents, copyrights orother intellectual property rights held by third parties. The Group has in the past been, iscurrently, and may in the future be, subject to claims and legal proceedings relating to theintellectual property of others in the ordinary course of its business. In particular, if the Groupis found to have violated the intellectual property rights of others, it may be enjoined fromusing such intellectual property, may be ordered to pay a fine and may incur licensing fees orbe forced to develop alternatives. The Group may incur substantial expenses in defending

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against these third party infringement claims, regardless of their merit. Successfulinfringement claims against the Group may result in substantial monetary liability or maymaterially disrupt the conduct of its business by restricting or prohibiting its use of theintellectual property in question.

The Group may be subject to claims based on the content it provides on its portals andthe products and services sold on its portals, which, if successful, could cause theGroup to pay significant damage awards.

As a provider of content and services over the Internet, the Group faces potential liabilityfor defamation, negligence, copyright, patent or trademark infringement and other claimsbased on the nature and content of the materials that the Group provides; the selection oflistings that are accessible through its portals, or through content and materials that may beposted by users on its bulletin board, chat room services, blog and other areas on its portals;losses incurred in reliance on any erroneous information published by the Group, such as IT-related and automobile products quotes; unsolicited email, lost or misdirected messages,illegal or fraudulent use of email and product liability, warranty and similar claims to beasserted against the Group by end users who purchase goods and services through itsshopping portal and any future e-commerce services the Group plans to offer.

The Group may incur significant costs in investigating and defending any potentialclaims, even if they do not result in liability. Moreover, the Group carries no insurance to coverpotential claims of this type or to indemnify the Group against all potential liabilities. To date,the Company has not been subject to any material claims on the content it provides during theTrack Record Period.

The Group’s strategy of acquiring complementary assets, technologies and businessesmay fail and result in equity or earnings dilution.

As a component of its growth strategy, the Group intends to identify and acquire assets,technologies and businesses that are complementary to its existing portal business. Itsacquisitions could result in the use of substantial amounts of cash, potentially dilutiveissuances of equity securities, significant impairment losses related to goodwill or amortisationexpenses related to intangible assets and exposure to undisclosed or potential liabilities ofacquired companies. Moreover, the resources expended in identifying and consummatingacquisitions may be significant. Furthermore, any acquisition the Group decides to pursue maybe subject to the approval of the relevant PRC governmental authorities, as well as anyapplicable PRC rules and regulations. Considering the rapidly evolving legal environment,such acquisitions may be subject to government scrutiny and the acquisition structures theGroup chooses to adopt may be found to be inappropriate or inadequate.

The Group depends on key personnel and its business may be severely disrupted if itloses the services of its key executives and employees.

The Group’s future success is heavily dependent upon the continued service of its keyexecutives, particularly Lam Wai Yan, who is one of the Controlling Shareholders, chiefexecutive officer, Chairman of the Board, and a substantial shareholder of the Company. TheGroup relies on his expertise in its business operations. If one or more of the Group’s keyexecutives and employees are unable or unwilling to continue in their present positions, theGroup may not be able to replace them easily and its business may be severely disrupted. Inaddition, if any of its key executives or employees joins a competitor or forms a competingcompany, the Group may lose customers and suppliers and incur additional expenses to

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RISK FACTORS

recruit and train personnel. Each of the Group’s executive officers has entered into anemployment agreement and a confidentiality, non-competition and non-solicitation agreementwith the Group. However, the degree of protection afforded to an employer pursuant toconfidentiality and non-competition undertakings governed by PRC law may be more limitedwhen compared to the degree of protection afforded under the laws of Hong Kong and otherjurisdictions. The Group does not maintain key-man life insurance for any of its keyexecutives.

The Group also relies on a number of key technology staff for the operation of its portals.Given the competitive nature of the industry, the risk of key technology staff leaving the Groupis high and could have a disruptive impact on its operations.

Rapid growth and a rapidly changing operating environment strain the Group’s limitedresources.

The Group has limited operational, administrative and financial resources, which may beinadequate to sustain the growth the Group wants to achieve. As the demands of its audienceand the needs of its customers change, and as the number of its users and volume of onlineadvertising increase, the Group will need to increase its investment in its networkinfrastructure, facilities and other areas of operations. If the Group is unable to manage itsgrowth and expansion effectively, the quality of its services could deteriorate and its businessmay suffer. Its future success will depend on, among other things, its ability to:

Š adapt its services and maintain and improve the quality of its services;

Š protect its portals from hackers and unauthorised access;

Š continue training, motivating and retaining its existing employees and attract andintegrate new employees; and

Š develop and improve its operational, financial, accounting and other internalsystems and controls.

The Group’s operations are vulnerable to system failures of its telecommunicationservice providers and natural disasters, as the Group only has limited backup systemsand does not maintain any backup servers outside of China.

The Group’s operations are vulnerable to system failures of its telecommunicationservice providers. During the Track Record Period and up to the Latest Practicable Date, therewere four incidents of system failures of its telecommunication providers although only twoincidents resulted in damages to the Group. The Group received full compensation from thetelecommunication service providers in both incidents (RMB50,000 from China NetworkCommunications Group Corporation (Guangzhou branch) in relation to a system failure on27 September 2007 and RMB77,196 from China Telecom in relation to a system failure on21 June 2007). Therefore, the Group effectively suffered no loss in connection with theseevents and the Group did not experience any actual disruption to its services in any of thesethree incidents because backup support server mechanisms were in place.

However, the Group has limited network backup systems. Most of its servers and routersare currently hosted in a single location within the premises of the Guangzhou branch of ChinaTelecom and China Netcom. The Group’s disaster recovery plan cannot fully ensure safety inthe event of damage from fire, floods, typhoons, earthquakes, power loss, telecommunicationsfailures, break-ins and similar events. If any of the foregoing occurs, the Group mayexperience a complete system shutdown. The Group does not carry any business interruption

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insurance. To improve the performance and prevent disruption of its services, the Group mayhave to make substantial investments to deploy additional servers or one or more copies of itsportals to mirror its online resources.

The Group does not maintain any property or business insurance coverage.

The Group does not maintain any insurance for its properties or business. In particular,the Group does not maintain insurance policies covering losses related to the Group’sinformation systems or potential product liability, and the Group does not have businessinterruption insurance. Insurance companies in China offer limited business insuranceproducts and do not, to the Directors’ knowledge, offer business interruption insurance. Anyproperty damage, business disruption, litigation or natural disaster might result in substantialcosts and diversion of the Group’s resources.

The Group’s business is subject to seasonal fluctuations.

The Group’s business and results of operations are subject to seasonality. For example,advertising revenue tends to decrease during the holiday periods such as Chinese New Yearand other extended holiday period in May and October due to limited access and less frequentuse of the Internet during such period. The Group typically records higher revenue in the lastquarter of each year due to the high amount of advertising activities as new products areusually launched during this period.

Certain of the Group’s offices and quarters may need to relocate as these leases havenot been registered with the relevant PRC governmental authorities.

10 out of 16 of the Group’s leases have not been registered with the relevant PRCgovernmental authorities. These leased properties are mainly used as offices and staffquarters and represent a gross floor area of approximately 1,283 sq.m., which amount toapproximately 56% of the aggregate gross floor area of the properties leased by the Group.Certain details of these properties are highlighted as follows:

Properties number inAppendix IV of this

prospectus Remarks

1-5, 14 and 15 The respective lessors of these properties have already obtained the BuildingOwnership Certificates and are the owners of the respective leasedproperties.

6 and 7 The respective lessors of these properties are entitled to lease them.8 The lessor of the property was not able to provide the Building Ownership

Certificate.

Under PRC law, the registration of lease agreements with the relevant governmentauthority shall be conducted by or through the lessor. Although the Group has taken allpossible steps to negotiate with the lessors, the lessor of each of the above leased propertieshas refused to apply for registration of the relevant lease agreement. However, as of theLatest Practicable Date, the Group has not received any assertions from third partiesregarding the validity of the occupation or the use of these properties.

As (i) the Group does not derive any revenue from these properties, (ii) there are readilyavailable alternative properties in these locations, and (iii) there is no particular operationalreason why the Company has to remain in such properties, the Directors believe that therewould be no material adverse impact to the Group’s business if the Group is asked to vacate

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RISK FACTORS

the above leased properties. In such an event, the Directors estimate that the relevantrelocation costs will amount to approximately RMB300,000. In addition, having considered theabove facts, the PRC legal adviser confirmed that the non-registration of the leases would nothave a material adverse impact on the Group’s operations.

RISKS RELATING TO THE INTERNET INDUSTRY

The telecommunications infrastructure in China is not well developed which may limitthe Group’s growth.

The telecommunications infrastructure in China is not well developed. Although privatesector ISPs exist in China, almost all access to the Internet is conducted through ChinaNet,China’s primary commercial network, which is owned and operated by China Telecom andChina Netcom under the administrative control and regulatory supervision of MII. Theunderdeveloped Internet infrastructure in China has limited the growth of Internet usage inChina. If the necessary Internet infrastructure is not developed, or is not developed on a timelybasis, future growth of the Internet in China could be limited and the Group’s business couldbe harmed. In addition, there can be no assurance that the Group will have access toalternative networks and services in the event of any disruption or failure. If the necessaryinfrastructure standards or protocols or complementary products, services or facilities are notdeveloped by the Chinese government, the growth of the Group’s business could be hindered.

The high cost of Internet access may limit the growth of the Internet in China andimpede the Group’s growth.

Access to the Internet in China remains relatively expensive, and may make it less likelyfor users to access and transact business over the Internet. Unfavourable rate developmentscould further decrease visitor traffic and the Group’s ability to derive revenues fromtransactions over the Internet.

Unexpected network interruptions caused by system failures may result in reducedvisitor traffic, reduced revenue and harm to the Group’s reputation.

The Group’s website operations are dependent upon web browsers, Internet serviceproviders, content providers and other website operators in China, which have experiencedsystem failures and system outages in the past. Any system failure or inadequacy that causesinterruptions in the availability of its services, or increases the response time of its services,as a result of increased traffic or otherwise, could reduce its user satisfaction, future trafficand its attractiveness to users and advertisers.

The Group’s network operations may be vulnerable to hacking, viruses and otherdisruptions, which may make its services less attractive and reliable.

Internet usage could decline if any well-publicised compromise of security occurs.“Hacking” involves efforts to gain unauthorised access to information or systems or to causeintentional malfunctions or loss or corruption of data, software, hardware or other computerequipment. Hackers, if successful, could misappropriate proprietary information or causedisruptions in the Group’s service. The Group may be required to incur additional expensesand other resources to protect its portals against hackers. There can be no assurance that anymeasures the Group may take will be effective. In addition, the inadvertent transmission ofcomputer viruses could expose the Group to a material risk of loss or litigation and possibleliability, as well as materially damage its reputation and decrease its user traffic.

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RISK FACTORS

Even if the Group is in compliance with PRC governmental regulations relating tolicensing and foreign investment restrictions, the PRC Government may prevent theGroup from distributing, and the Group may be subject to liability for content that itbelieves is inappropriate.

The PRC has enacted regulations governing Internet access and the distribution of newsand other information. In the past, the PRC Government has stopped the distribution ofinformation over the Internet that it believes to violate PRC law, including content that isobscene, incites violence, endangers national security, is contrary to the national interest or isdefamatory. In addition, the Group may not publish news items, such as news relating tonational security, without permission from the PRC Government. Furthermore, the Ministry ofPublic Security has the authority to make any local Internet service provider block any websitemaintained outside the PRC at its sole discretion. Even if the Group complies with PRCgovernmental regulations relating to licensing and foreign investment prohibitions, if the PRCGovernment were to take any action to limit or prohibit the distribution of information throughthe Group’s network or to limit or regulate any current or future content or services available tousers on its network, its business would be harmed.

The Group is also subject to potential liabilities for content on its websites that is deemedinappropriate and for any unlawful actions of its subscribers and other users of its systemsunder regulations promulgated by the MII, such potential liabilities including, but not limited to,the imposition of fines or even the shutting down of the website.

Furthermore, the Group is required to delete content that clearly violates the laws of thePRC and report content that the Group suspects may violate PRC law. The Group may havedifficulty determining the type of content that may result in liability for the Group and the Groupmay be prevented from operating its websites if its judgement is wrong.

Activities of Internet content providers are or will be subject to additional PRCregulations, which have not yet been put into effect. The Group’s operations may not beconsistent with these new regulations when put into effect, and, as a result, it could besubject to severe penalties.

The MII has stated that the activities of Internet content providers are subject toregulation by various PRC governmental authorities, depending on the specific activitiesconducted by the Internet content provider. Various government authorities have statedpublicly that they are in the process of preparing new laws and regulations that will governthese activities. The areas of regulation currently include online advertising, online newsreporting, online publishing, the provision of industry-specific information over the Internet andforeign investment in value-added telecommunication services. The Group’s operations maynot be consistent with these new regulations when put into effect and, as a result, the Groupmay be subject to severe penalties as discussed above.

The Group’s failure to keep up with rapid technology changes may severely affect itsfuture success.

The Internet industry is undergoing rapid technological changes. The Group’s futuresuccess will depend on its ability to respond to rapidly evolving technologies, adapt itsservices to changing industry standards and improve the performance and reliability of itsservices. If the Group fails to adapt to such changes, its business may be adversely affected.Its competitors may develop their own or update their existing technology to surpass theGroup. Accordingly, the Group will need to adapt its business to cope with the changes andsupport these new services. In addition, the MII, is cooperating with other administrations,

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including the Ministry of Public Security, the Ministry of Culture and the Ministry of Justice, todraft industry standards or regulations. If the Group cannot adapt to new industry standards,more technical expenses could be required in the future.

Concerns about the security of electronic commerce transactions and confidentiality ofinformation on the Internet may reduce use of the Group’s portals and impede itsgrowth.

A significant barrier to electronic commerce and communications over the Internet ingeneral has been a public concern over security and privacy, especially the transmission ofconfidential information. If these concerns are not adequately addressed, they may inhibit thegrowth of the Internet and other online services generally, especially as a means of conductingcommercial transactions. If a well-publicised Internet breach of security were to occur, generalInternet usage could decline, which could reduce traffic to the portals sites and impede itsgrowth.

Under-developed product distribution networks and payment systems may hinder thegrowth of e-commerce.

The most important factor affecting the development of e-commerce in China is theavailability of efficient product distribution channels that provide timely and satisfactoryfulfillment of purchase orders. As China currently does not have a reliable nationwide productdistribution network, the fulfillment of orders for goods purchased over the Internet willcontinue to be a challenge that constrains the growth of e-commerce. An additional barrier tothe development of e-commerce is the lack of reliable payment systems. In particular, the useof credit cards or another viable means of electronic payment in sales transactions in China isnot as well developed as it is in some other jurisdictions, such as Hong Kong and the UnitedStates.

RISKS RELATED TO THE PRC

The Group’s business could be affected by changes in China’s economic, political orsocial conditions or government policies.

A significant portion of the Group’s business and operations are conducted in China.Accordingly, its business, financial condition, results of operations and prospects are, to asignificant degree, subject to the economic, political and social developments in China. TheChinese economy differs from the economies of most developed countries in many respects,including the amount of government involvement, level of development, growth rate, control offoreign exchange and allocation of resources. Although the PRC Government hasimplemented measures since the late 1970s emphasising the utilisation of market forces foreconomic reform, the reduction of state ownership of productive assets and the establishmentof improved corporate governance in business enterprises, a substantial portion of productiveassets in China is still owned by the PRC Government. In addition, the PRC Governmentcontinues to play a significant role in regulating industry development by imposing industrialpolicies. The PRC Government also exercises significant control over the PRC’s economicgrowth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment toparticular industries or companies.

While the Chinese economy has experienced significant growth over the past decade,growth has been uneven, both geographically and among various sectors of the economy. ThePRC Government has implemented various measures to guide the allocation of resources.

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Some of these measures may benefit the overall PRC economy, but may also have a negativeeffect on the Group. For example, the Group’s financial results may be adversely affected bygovernment control over foreign investment in the PRC telecommunications industry that areapplicable to the Group. The PRC Government has also recently implemented certainmeasures, including the MII Notice, in an attempt to strengthen the restriction on foreigninvestment in the PRC telecommunications industry. The PRC regulatory authorities maychallenge the nature of the Group’s contractual arrangements. If the contractual arrangementsare found to be in violation of the MII Notice, it would materially and adversely affect theGroup’s business, financial condition, results of operations and prospects.

The PRC legal system has inherent uncertainties that could materially and adverselyaffect the Group.

The PRC legal system is based upon written statutes. Prior court decisions may be citedfor reference but are not binding on subsequent cases and have limited value as precedents.Since 1979, the PRC legislative bodies have promulgated laws and regulations dealing witheconomic matters such as foreign investment, corporate organisation and governance,commerce, taxation and trade. However, the PRC has not developed a fully integrated legalsystem and the array of new laws and regulations may not be sufficient to cover all aspects ofeconomic activities in the PRC. In particular, because these laws and regulations are relativelynew, and because of the limited volume of published decisions and their non-binding nature,the interpretation and enforcement of these laws and regulations involve uncertainties. Inaddition, published government policies and internal rules may have retroactive effects and, insome cases, the policies and rules are not published at all. As a result, the Group may beunaware of the violation of these policies and rules until some time later. The Group’scontractual arrangements with its affiliated entities are governed by the laws of the PRC. Theenforcement of these contracts and the interpretation of the laws governing these relationshipsare subject to uncertainty.

You may experience difficulties in effecting service of legal process, enforcing foreignjudgements or bringing original actions in China based on Hong Kong or other foreign lawsagainst the Group, its management or the experts named in the prospectus.

All participants in the Group’s existing share option plans who are PRC citizens may berequired to register with SAFE. The Group may also face regulatory uncertainties thatcould restrict its ability to adopt additional option plans for its directors, employees andother parties under PRC law.

On 6 April 2007, the department of general administration affairs of SAFE issued theOperating Procedures for Administration of Domestic Individuals Participating in the EmployeeStock Option Plan or Stock Option Plan of An Overseas Listed Company (Hui Zong Fa [2007]No. 78), or Circular 78. It is not clear at this time whether Circular 78 covers only equitycompensation plans which provide for the grant of stock options or any type of equitycompensation plan, such as a plan which authorises the grant of restricted share awards. Forany plans which are so covered and are adopted by a non-PRC listed company such as theCompany after 6 April 2007, Circular 78 requires all participants who are PRC citizens toregister with and obtain approvals from SAFE prior to their participation in the plan. Inaddition, Circular 78 also requires PRC citizens to register with SAFE and make the necessaryapplications and filings by 5 July 2007 if they participated in an overseas listed company’scovered equity compensation plan prior to 6 April 2007. The Company passed on23 November 2007 a written resolution of the shareholders to approve the Share Option

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RISK FACTORS

Scheme and will require its employees who are PRC residents and participate in such ShareOption Scheme to register with and obtain approval from the local branch of SAFE incompliance with Circular 78. The Directors believe that the registration and approvalrequirements contemplated in Circular 78 will be burdensome and time consuming.

Circular 78 has not yet been made publicly available nor formally promulgated by SAFE,but the Directors believe that SAFE has begun enforcing its provisions. Nonetheless, it is notpredictable whether SAFE will continue to enforce this circular or adopt additional or differentrequirements with respect to equity compensation plans. If it is determined that the Company’sequity compensation plans are subject to Circular 78, failure to comply with such provisionsmay subject the Group and the participants of the Company’s equity compensation plans whoare PRC citizens to fines and legal sanctions and prevent the Company from being able togrant equity compensation to its personnel, which is currently a significant component of thecompensation of many of its PRC employees. In that case, the Company’s businessoperations may be materially adversely affected.

Governmental control of currency conversion may affect the value of the Shares.

The PRC Government imposes controls on the convertibility of Renminbi into foreigncurrencies and, in certain cases, the remittance of currency out of China. The Companyreceives substantially all of its revenue in Renminbi, which is currently not a freely convertiblecurrency. Under the current structure, the Company’s income will be primarily derived fromdividend payments from its PRC subsidiaries and other payments. Shortages in the availabilityof foreign currency may restrict the ability of its PRC subsidiaries and its affiliated entities toremit sufficient foreign currency to pay dividends or other fees to the Company, or otherwisesatisfy their foreign currency-dominated obligations. Under existing PRC foreign exchangeregulations, payments of current account items, including profit distributions, interestpayments and expenditures from the transaction, can be made in foreign currencies withoutprior approval from SAFE by complying with certain procedural requirements. However,approval from appropriate governmental authorities is required where Renminbi is to beconverted into foreign currency and remitted out of China to pay capital expenses such as therepayment of bank loans denominated in foreign currencies. The PRC Government may alsoat its discretion restrict access in the future to foreign currencies for current accounttransactions. If the foreign exchange control system prevents the Company from obtainingsufficient foreign currency to satisfy its currency demands, the Company may not be able topay dividends in foreign currencies to its shareholders.

The fluctuation of Renminbi may materially and adversely affect the value of the Shares.

The value of Renminbi against the U.S. dollar and other currencies may fluctuate and isaffected by, among other things, changes in the PRC’s political and economic conditions. ThePeople’s Bank of China, or PBOC, issued a public notice on 21 July 2005 increasing theexchange rate of Renminbi against the U.S. dollar by approximately 2% to RMB8.11 perUS$1.00. Further to this notice, the PRC Government has reformed its exchange rate regimeby adopting a managed floating exchange rate regime based on market supply and demandwith reference to a portfolio of currencies, which includes the U.S. dollar, the Euro, theJapanese Yen and the Korean Won. Under this new regime, Renminbi will no longer bepegged to the U.S. dollar. As it is unclear how the PBOC notice will be implemented, it is notpredictable how and to what extent the exchange rate of Renminbi will fluctuate in the future.As the Company relies entirely on dividends and other fees paid to the Company by itssubsidiaries and affiliated entities in the PRC, any further significant revaluation of Renminbimay materially and adversely affect its cash flows, revenue and financial condition, and thevalue of, and any dividends payable on, its Shares in foreign currency terms. For example, to

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RISK FACTORS

the extent that the Company needs to convert U.S. dollars it receives from this offering intoRenminbi for its operations, appreciation of Renminbi against the U.S. dollar could have amaterial adverse effect on its business, financial condition and results of operations.Conversely, if it decides to convert its Renminbi into U.S. dollars for the purpose of makingpayments for dividends on its ordinary shares or for other business purposes and the U.S.dollar appreciates against Renminbi, the U.S. dollar equivalent of Renminbi it converts wouldbe reduced. In addition, the depreciation of its U.S. dollar-denominated monetary assets couldresult in a charge to the Company’s income statement and a reduction in the value of theseassets. For further information on its foreign exchange risks and certain exchange rates, seeexchange rate information in the section headed “Definitions” and “Financial Information —Quantitative and Qualitative Disclosures about Market Risk — Foreign Exchange RateFluctuation Risk” in this prospectus.

Inflation in China could negatively affect the Group’s profitability and growth.

While the PRC economy has experienced rapid growth, such growth has been unevenamong various sectors of the economy and in different geographical areas of the country.Rapid economic growth can lead to growth in the money supply and rising inflation. If pricesfor the Group’s services rise at a rate that is insufficient to compensate for the rise in its costs,its business may be materially and adversely affected. In order to control inflation in the past,the PRC Government has imposed controls on bank credits, limits on loans for fixed assetsand restrictions on state bank lending. Such an austere policy can lead to a slow-down ofeconomic growth which could also materially and adversely affect its business operations.

The Group faces risks related to health epidemics and other outbreaks.

The Group’s business could be adversely affected by the effects of Severe AcuteRespiratory Syndrome, or SARS, avian influenza, swine influenza or another epidemic oroutbreak impacting the economic and business climate. China reported a number of cases ofSARS in April 2004, avian influenza has been reported in western China and several countriesin Southeast Asia in 2005, and swine influenza has resulted in numerous human deaths inseveral Chinese provinces in 2005. Restrictions on travel resulting from a reoccurrence ofSARS or another epidemic or outbreak could adversely affect its ability to market and servicenew and existing customers throughout China.

The Group’s business operations could be disrupted if one of its employees is suspectedof having SARS, avian influenza or swine influenza, since it could require the Group toquarantine some or all of its employees and/or disinfect its offices. In addition, its results ofoperations could be adversely affected to the extent that SARS, avian influenza, swineinfluenza or another outbreak harms the Chinese economy in general.

RISKS RELATED TO THE GLOBAL OFFERING

There has been no prior public market for the Shares, and the liquidity, market price andtrading volume of the Shares may be volatile.

Prior to the Listing, there has been no public market for the Shares. The Offer Price for theShares will be the result of negotiations between the Global Coordinator (on behalf of theUnderwriters) and the Company, and may differ from the market prices for the Shares after theListing. The Group has applied to the Stock Exchange for the listing of, and permission to dealin, the Shares. However, there can be no assurance that the Listing will result in thedevelopment of an active and liquid public trading market for the Shares. The market price,liquidity and trading volume of the Shares may be volatile. There can be no assurance as to theability of holders to sell their Shares or the price at which the Shares can be sold. As a result,

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shareholders may not be able to sell their Shares at prices equal to or greater than the pricepaid for their Shares under the Global Offering. Factors that may affect the volume and price atwhich the Shares will be traded include, among other things, variations in the Group’s sales,earnings, cash flows and costs, announcements of new investments, and changes in laws andregulations in China. There is no assurance that these developments will not occur in the future.In addition, shares of other companies listed on the Stock Exchange with significant operationsand assets in China have experienced price volatility in the past, and it is possible that theShares may be subject to changes in price not directly related to the Group’s performance.

There can be no assurance that dividends will be paid in the future at a rate similar topast rates

The dividends declared by Takehigh in respect of each of the years ended 31 December2004, 2005 and 2006 amounted to approximately HK$19.1 million, HK$54.6 million andHK$97.0 million, respectively, representing 63.0%, 122.9% and 137.5% of the combined profitattributable to equity holders of the Company in such years, respectively. There is, however,no assurance that future dividends will be paid at a similar level to past dividends andpotential investors should be aware that the amount of dividends paid in the past should notbe used as a reference or basis upon which future dividends are determined.

The declaration, payment and amount of any future dividends of the Group are subject tothe discretion of the Directors, and will depend upon, among others, the Group’s results ofoperations, cash flows and financial condition, operating and capital requirements and otherrelevant factors prevailing at the time. The Group’s past dividend distributions are notindicative of the dividends that the Group may declare or pay in the future.

Purchasers of the Shares will experience immediate dilution and may experience furtherdilution if the Company issues additional Shares in the future.

The Offer Price of the Shares is higher than its net tangible assets value per Shareimmediately prior to the Global Offering. Therefore, purchasers of the Shares in the GlobalOffering will experience an immediate dilution in pro forma net tangible assets value ofHK$2.75 per Share, based on the maximum Offer Price of HK$3.58.

In order to expand its business, the Group may consider offering and issuing additionalShares in the future. Purchasers of the Shares may experience dilution in the value of nettangible assets per Share if the Group issues additional Shares in the future at a price which islower than its net tangible assets value per Share.

There may be dilution because of the issuance of Shares pursuant to the optionsgranted under Pre-IPO Share Option Plan and the Share Option Scheme.

The Company has granted Shares to eligible participants under the Pre-IPO Share OptionPlan, and may grant share options under the Share Option Scheme, who may be employees,senior management and Directors. Further details of the Pre-IPO Share Option Plan and ShareOption Scheme are summarised in “Appendix VI — Statutory and General Information — OptionSchemes”. The exercise of share options under the Pre-IPO Share Option Plan and the ShareOption Scheme will result in an increase in the number of Shares, and may result in a dilutionto the percentage of ownership of the shareholders of the Company, the earnings per Shareand net asset value per Share depending on the exercise price.

Any issuance of new Shares upon exercise of the options granted under the Pre-IPOShare Option Plan and the Share Option Scheme will also lead to a dilution of our earningsper Share and net asset value per Share because the number of Shares outstanding will be

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RISK FACTORS

increased as a result of such issuance. As of the Latest Practicable Date, the outstandingoptions conditionally granted under the Pre-IPO Share Option Plan entitle the grantees tosubscribe for an aggregate of 49,929,000 Shares, representing approximately 5.26% of ourissued share capital upon completion of the Global Offering (and assuming that the Over-allotment Option and all options granted under the Pre-IPO Option Plan are not exercised).Assuming that all the options granted under the Pre-IPO Share Option Plan had beenexercised in full on 1 January 2007 and that 999,929,000 Shares, comprising 950,000,000Shares to be in issue immediately after the Global Offering and the Capitalisation Issue and49,929,000 Shares to be issued upon the exercise of all the options granted under the Pre-IPOShare Option Plan, but not taking into account any Shares which may be allotted and issuedupon the exercise of the Over-allotment Option, this would have a dilutive effect on the proforma forecast basic earnings per Share for the year ending 31 December 2007 fromapproximately RMB0.095 to approximately RMB0.090.

Future sales by its current shareholders of a substantial number of the Shares in thepublic market could materially and adversely affect the prevailing market price of theShares.

Future sales of a substantial number of the Shares by the Group’s current shareholders,or the possibility of such sales, could negatively impact the market price of the Shares and itsability to raise equity capital in the future at a time and price that it deems appropriate. Theshares held by the Controlling Shareholders are subject to certain lock-up undertakings forperiods ending six to twelve months after the date on which trading in the Shares commenceson the Stock Exchange, details of which are set out in the section headed “Underwriting” in thisprospectus. While the Directors are not aware of any intentions of the Controlling Shareholdersto dispose of significant amounts of their Shares after the end of the lock-up periods, there isno assurance that they will not dispose of any Shares they may now own or in the future.

Controlled by a small group of existing shareholders.

The Group’s three largest shareholders currently beneficially own approximately 74.7% ofits outstanding shares and following the Global Offering will beneficially own approximately59.8% of the outstanding Shares, or 57.2% if the Underwriters exercise the Over-allotmentOption in full. Accordingly, they will have significant influence in determining the outcome ofany corporate transaction or other matter submitted to the shareholders for approval, includingmergers, consolidations and the sale of all or substantially all of its assets, election of directorsand other significant corporate actions. They will also have the power to prevent or cause achange in control. In addition, without the consent of these shareholders, the Company couldbe prevented from entering into transactions that could be beneficial to the Company. Theinterests of these shareholders may differ from the interests of the other shareholders.

Forward-looking information may prove inaccurate.

This prospectus contains forward-looking statements and information relating to theGroup’s operations and prospects that are based on its current beliefs and assumptions aswell as information currently available to the Group. When used in this prospectus, the words“anticipate,” “believe,” “estimate,” “expect,” “plans,” “prospects” and similar expressions, asthey relate to its business, are intended to identify forward-looking statements. Suchstatements reflect the Directors’ current beliefs with respect to future events and are subject torisks, uncertainties and various assumptions, including the risk factors described in thisprospectus. Should one or more of these risks or uncertainties materialise, or should any ofthe underlying assumptions or information prove incorrect, actual results may divergesignificantly from the forward-looking statements in this prospectus. The Group does not

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intend to update these forward-looking statements beyond adherring to on-going disclosureobligations pursuant to the Listing Rules or other requirements of the Stock Exchange.

Investors may face difficulties in protecting their interests because the Company isincorporated under Cayman Islands laws, which may provide remedies to minorityshareholders that are different from the laws of certain other jurisdictions.

The Company’s corporate affairs are governed by its Memorandum and Articles ofAssociation, and by the Companies Law and the common law of the Cayman Islands. CaymanIslands law relating to the protection of the interests of minority shareholders differs in somerespects from that established under statutes and under judicial precedents in otherjurisdictions. This may mean that the remedies available to the Company’s minorityshareholders may be different to those they would have under the laws of other jurisdictions.Please see Appendix V to this prospectus for a Summary of the Constitution of the Companyand Cayman Islands Companies Law.

Certain facts and other statistics with respect to China, the PRC economy and itsindustries in this prospectus are derived from various official sources and may not bereliable.

Certain facts and other statistics in this prospectus relating to China, the PRC economyand the PRC and international Internet industry and markets have been derived from variousgovernment publications. However, there can be no assurance of the quality or reliability ofsuch source materials. They have not been prepared or independently verified by the Group,the Global Coordinator, the Sponsors, the Underwriters or any of their respective affiliates oradvisers and, therefore, the Group makes no representation as to the accuracy of such factsand statistics, which may not be consistent with other information compiled within or outsideChina. Due to possibly flawed or ineffective collection methods or discrepancies betweenpublished information and market practice and other problems, the statistics herein may beinaccurate or may not be comparable to statistics produced for other economies and shouldnot be relied upon. Furthermore, there is no assurance that they are stated or compiled on thesame basis or with the same degree of accuracy as may be the case elsewhere. Nonetheless,the Directors have taken reasonable care in reproducing these facts and statistics in thisprospectus from their respective official sources.

In all cases, investors should give consideration as to how much weight or importancethey should attach to or place on such facts or statistics.

The Group strongly cautions investors not to place any reliance on any informationcontained in press articles or other media regarding the Group and the Global Offering.

There has been press and media coverage regarding the Group and the Global Offering(such as Apple Daily on 27 November 2007) which included certain financial information,financial projections, valuations and other information about the Group that do not appear inthis prospectus. The Group has not authorised the disclosure of any such information in thepress or media. The Group does not accept any responsibility for any such press or mediacoverage or the accuracy or completeness of any such information. The Group makes norepresentation as to the appropriateness, accuracy, completeness or reliability of any suchinformation or publication. To the extent that any such information appearing in publicationsother than this prospectus is inconsistent or conflicts with the information contained in thisprospectus, the Group disclaims it. Accordingly, prospective investors should not rely on anysuch information. In making the decision as to whether to purchase the Offer Shares, investorsshould rely only on the financial, operational and other information included in this prospectus.

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