We are one of the leading online game developers and operators in the PRC as proven by the awards and recognition we and our online games have received. Our portfolio consists of a range of MMORPGs catering to various types of players. Our strong online game development capability enables us to create our own games and to upgrade our existing games in a timely and efficient manner. In addition, our proprietary customer information system tracks players' behaviour and purchasing patterns to allow us to design more appealing game contents. By employing our player-driven development philosophy and our integrated operation model, we have been able to swiftly adapt to trends in the online game industry, such as offering online games to players free of charge and then generating revenue from the sale of virtual items. With these strategies and capabilities, we believe we can effectively satisfy our customers' demand and capture the market opportunities to further strengthen our position in the industry.

We currently offer five proprietary games, namely Eudemons Online, Conquer Online, Zero Online, Monster & Me and Era of Faith. We have achieved significant revenue growth, particularly over the past two years from the strong performance of Eudemons Online and Conquer Online, our flagship games and major revenue generators. We launched Eudemons Online in March 2006 and had over 325,000 PCU and 70,000 ACU in the same year. The PCU and ACU further increased to more than 496,000 and 243,000, respectively for the six months ended 30 June 2007. As to Conquer Online, even in its fourth year of operation, we still enjoyed approximately 34.3% and 34.5% increases in PCU and ACU, respectively for the six months ended 30 June 2007 compared to the same period in 2006. We launched Zero Online in late April 2007 and we had over 53,000 PCU and 21,000 ACU during the period from its launch to 30 June 2007.

We have achieved significant growth in revenue during the Active Business Pursuit Period:

• Eudemons Online had revenue of approximately RMB69.5 million and RMB185.0 million for the year ended 31 December 2006 and the six months ended 30 June 2007, respectively.
  
• Conquer Online had revenue of approximately RMB51.1 million and RMB61.9 million for the year ended 31 December 2006 and the six months ended 30 June 2007, representing approximately 58.1% and 156.5% increases compared to the same periods in 2005 and 2006, respectively.
  
• We reported total revenue of approximately RMB122.1 million and RMB261.7 million for the year ended 31 December 2006 and the six months ended 30 June 2007, representing approximately 247.6% and 902.4% increases compared to the same periods in 2005 and 2006, respectively.
  

We currently have three games in our development pipeline, namely Happiness Q, Piao Miao Online and Heroes of Might and Magic Online. These new games offer different themes and gaming experience to attract various types of players. We expect to launch Happiness Q in 2007, Piao Miao Online and Heroes of Might and Magic Online in 2008.

We operate our online games under the FTP model which encourages more players to experience our games. Under this model, our revenue is generated by selling virtual items, such as virtual weapons, armours and spells. Through continuous improvements and upgrades to our games, we believe that we can enhance the popularity, increase the revenue and extend the life cycle of our games.

We currently have three distribution and payment channels, comprising (i) direct sales; (ii) pre-paid card sales through distributors; and (iii) cooperation channels. Our direct sales includes online payment systems and other direct sales channels. Online payment systems under direct sales accounted for approximately 52.2%, 60.5% and 67.3% of our total revenue for each of the two years ended 31 December 2006 and the six months ended 30 June 2007, respectively.

In the PRC market, our revenue grew over 454.0% and 23.1 times for the year ended 31 December 2006 and the six months ended 30 June 2007, respectively compared to the same periods in 2005 and 2006, respectively.

We also enjoy significant sales by introducing non-Chinese language games, such as English, French and Spanish versions. This multi-language approach has proven to be a success, demonstrated by the 102.1% and 203.5% increases in revenue generated from the non-Chinese language market in the year ended 31 December 2006 and the six months ended 30 June 2007 compared to the same periods in 2005 and 2006, respectively.