##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES
EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended December 31, 2007.
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission file number: 001-33616
 E-HOUSE (CHINA) HOLDINGS LIMITED
  
  
  
  
 
  Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of exchange on which each class is to be registeredAmerican Depositary Shares, each
representing one ordinary share,
par value $0.001 per share
    
    New York Stock Exchange
 
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
 None
 (Title of Class)
 
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 None
 (Title of Class)
 76,473,759 ordinary shares, par
value US$0.001 per share, as of December 31, 2007.
 o þ
 o þ
 þ o
  o o þ
  US GAAP þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board   o
    
    Other   o
  o o
 o þ
  o o




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##### 



TABLE OF CONTENTS
 INTRODUCTION
    
    
    1PART I
    
    
    
    
    2ITEM
1.
    
    Identity of Directors, Senior Management and Advisers
    
    
    2ITEM 2.
    
    Offer Statistics and Expected Timetable
    
    
    2ITEM 3.
    
    Key Information
    
    
    2ITEM 4.
    
    Information on the Company
    
    
    17ITEM 4A.
    
    Unresolved Staff Comments
    
    
    29ITEM 5.
    
    Operating and Financial Review and Prospects
    
    
    30ITEM 6.
    
    Directors, Senior Management and Employees
    
    
    44ITEM 7.
    
    Major Shareholders and Related Party Transactions
    
    
    53ITEM 8.
    
    Financial Information
    
    
    54ITEM 9.
    
    The Offer and Listing
    
    
    55ITEM 10.
    
    Additional Information
    
    
    56ITEM 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    61ITEM 12.
    
    Description of Securities Other than Equity Securities
    
    
    62PART II
    
    
    
    
    62ITEM 13.
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    62ITEM 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    62ITEM 15.
    
    Controls and Procedures
    
    
    63ITEM 16A.
    
    Audit Committee Financial Expert
    
    
    63ITEM 16B.
    
    Code of Ethics
    
    
    64ITEM 16C.
    
    Principal Accountant Fees and Services
    
    
    64ITEM 16D.
    
    Exemptions from the Listing Standards for Audit Committees
    
    
    64ITEM 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated  Purchasers
    
    
    64PART III
    
    
    
    
    64ITEM 17.
    
    Financial Statements
    
    
    64ITEM 18.
    
    Financial Statements
    
    
    64ITEM 19.
    
    Exhibits
    
    
    65EX-12.1 Certification of CEOEX-12.2 Certification of CFOEX-13.1 Certification of CEOEX-13.2 Certification of CFOEX-23.1 Consent of Deloitte Touche Touche Tohmatsu CPA Ltd.EX-23.2 Consent of Jin Mao PRC Lawyers




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INTRODUCTION
  
    
    China or PRC refers to the Peoples Republic of China, excluding, for the
purpose of this annual report only, Taiwan, Hong Kong and Macau;
    
    CRIC system refers to China Real Estate Information Circle, our proprietary real
estate information database and analysis system;
    
    shares or ordinary shares refers to our ordinary shares, par value $0.001 per
share, and preferred shares refers to our series A convertible and redeemable
preferred shares, all of which were converted into our ordinary shares upon the
completion of our initial public offering on August 8, 2007;
    
    ADSs refers to our American depositary shares, each of which represents one
ordinary share, and ADRs refers to the American depositary receipts that evidence our
ADSs;
    
    primary real estate market refers to the market for newly constructed and
completed residential and commercial real properties, primary real estate agency
services refers to agency services provided for the primary real estate market,
secondary real estate market refers to the market for all residential and commercial
real properties other than those for sale in the primary real estate market, and
secondary real estate brokerage services refers to brokerage services provided for
the secondary real estate market;
    
    The China Real Estate Top 10 Committee refers to a real estate market research
task force jointly organized by the China Real Estate Association, the Enterprise
Research Institute of Development Research Center of the State Council of PRC, the
Institute of Real Estate Studies of Tsinghua University and the China Index Academy;
and
    
    all references to RMB or Renminbi are to the legal currency of China; all
references to $, dollars, US$ and U.S. dollars are to the legal currency of the
United States; and all references to HKD and Hong Kong dollars are to the legal
currency of the Hong Kong Special Administrative Region.
   FORWARD-LOOKING STATEMENTS
  1




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
    
    our anticipated growth strategies;
    
    our future business development, results of operations and financial condition;
    
    expected changes in our revenues and certain cost or expense items;
    
    our ability to attract clients and further enhance our brand recognition; and
    
    trends and competition in the real estate services industry.
   
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A.
    
    Selected Financial Data
 Selected Consolidated Financial Data
    2




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As of and for the Year Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(in thousands of $, except share, per share and per ADS data)Consolidated Statement of Operations
Data:Total revenues
    
    
    13,842
    
    
    
    31,198
    
    
    
    38,661
    
    
    
    55,999
    
    
    
    121,016Cost of revenues
    
    
    (3,311
    )
    
    
    (9,844
    )
    
    
    (10,818
    )
    
    
    (10,244
    )
    
    
    (23,510
    )Selling, general and administrative expenses
    
    
    (6,422
    )
    
    
    (14,299
    )
    
    
    (13,250
    )
    
    
    (21,322
    )
    
    
    (45,546
    )Income from operations
    
    
    4,109
    
    
    
    7,055
    
    
    
    14,593
    
    
    
    24,433
    
    
    
    51,960Net income
    
    
    3,046
    
    
    
    5,589
    
    
    
    11,148
    
    
    
    18,107
    
    
    
    41,726Earnings per ordinary share and ADS(1):Basic
    
    $
    0.06
    
    
    $
    0.11
    
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.62Diluted
    
    $
    0.06
    
    
    $
    0.11
    
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.56Dividends per ordinary share:Basic
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    Weighted average number of ordinary shares
used in per share calculations:Basic
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    60,386,083Diluted
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    67,372,353
    
    
    
    74,555,709Consolidated Balance Sheet Data:Cash and cash equivalents
    
    
    7,689
    
    
    
    10,071
    
    
    
    12,712
    
    
    
    24,306
    
    
    
    101,148Total assets
    
    
    20,135
    
    
    
    54,159
    
    
    
    48,231
    
    
    
    89,430
    
    
    
    329,553Total current liabilities
    
    
    14,583
    
    
    
    40,785
    
    
    
    39,895
    
    
    
    28,751
    
    
    
    54,510Mezzanine equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,828
    
    
    
    Total shareholders equity
    
    
    5,381
    
    
    
    9,807
    
    
    
    5,242
    
    
    
    32,370
    
    
    
    271,173
 
 Note: (1)
    
    Each ADS represents one ordinary share. Exchange Rate Information
   Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    Low
    
    High2003
    
    
    8.2767
    
    
    
    8.2772
    
    
    
    8.2800
    
    
    
    8.27652004
    
    
    8.2765
    
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.27642005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007October
    
    
    7.4682
    
    
    
    7.5016
    
    
    
    7.5158
    
    
    
    7.4682November
    
    
    7.3850
    
    
    
    7.4212
    
    
    
    7.4582
    
    
    
    7.3800December
    
    
    7.2946
    
    
    
    7.3682
    
    
    
    7.4120
    
    
    
    7.2946Full year
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.2946
 3




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Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    Low
    
    High2008January
    
    
    7.1818
    
    
    
    7.2405
    
    
    
    7.2946
    
    
    
    7.1818February
    
    
    7.1115
    
    
    
    7.1644
    
    
    
    7.1973
    
    
    
    7.1100March
    
    
    7.0120
    
    
    
    7.0722
    
    
    
    7.1110
    
    
    
    7.0105April (through April 17)
    
    
    6.9840
    
    
    
    7.0023
    
    
    
    7.0185
    
    
    
    6.9840
 
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period. B.
    
    Capitalization and IndebtednessNot Applicable.C.
    
    Reasons for the Offer and Use of ProceedsNot Applicable.D.
    
    Risk Factors
 Risks Related to Our Business
 Our business is susceptible to fluctuations in the real estate market of China, especially in
certain areas of eastern China where a significant portion of our operations are concentrated,
which may adversely affect our revenues and results of operations.
  Our business may be materially and adversely affected by government measures aimed at Chinas real
estate industry.
  
    
    requiring real estate developers to fund with their internal resources 35% rather
than 20% of the total projected capital outlays of any real estate development;
    
    restricting credit availability based on the criteria that monthly housing expense,
including mortgage payments and property service fees, to 50% of an individual
borrowers monthly income, and limiting all monthly debt service payments of an individual borrower to 55% of
his or her monthly income; and
 4




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
    
    tightening regulations governing mortgage lending and restricting approval of areas
for new development.
  
    
    requiring that at least 70% of the land approved by a local government for
residential real estate development for any given year be used for developing low- to
medium-cost and small- to medium-sized units and low-cost rental properties;
    
    requiring that at least 70% of the total development and construction area of
residential projects approved, or construction which commenced, on or after June 1,
2006 within each city or county, consist of units with a floor area of less than 90
square meters per unit;
    
    increasing the minimum down payment from 20% to 30% of the purchase price for
property with a unit floor area of 90 square meters or more; and
    
    imposing a business tax on the proceeds from re-sale of properties held for less
than five years.
   
    
    for a first-time home owner, increasing the minimum amount of down payment to 30% of
the purchase price of the underlying property if the underlying property has a unit
floor area of 90 square meters or more and the purchaser is buying the property as
his/her own residence;
    
    for a second-time home buyer, increasing (i) the minimum amount of down payment to
40% of the purchase price of the underlying property and (ii) the minimum mortgage loan
interest rate to 110% of the relevant benchmark lending interest rate of the Peoples
Bank of China;
    
    for a commercial real estate buyer, (i) requiring banks not to finance any purchase
of pre-sold properties, (ii) increasing the minimum amount of down payment to 50% of
the purchase price of the underlying property, (iii) increasing the minimum mortgage
loan interest rate to 110% of the relevant benchmark lending interest rate of Peoples
Bank of China, (iv) limiting the terms of such bank loans to no more than ten years,
although the commercial banks are allowed flexibility based on its risk assessment; and
    
    for a buyer of commercial/residential dual-purpose properties, increasing the
minimum amount of down payment to 45% of the purchase price of the underlying property,
with the other terms to be decided by reference to commercial properties.
   5




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The real estate services industry in China is relatively new and rapidly evolving, and if this
industry does not develop or mature as quickly as we expect, the growth and success of our business
may be materially and adversely affected.
  If the value of our brand or image diminishes, it could have a material adverse effect on our
business and results of operations.
  We may not be able to successfully execute our strategy of expanding into new geographical markets
in China, which could have a material adverse effect on our business and results of operations.
  If we cannot manage our growth, our operating results or profitability could be adversely affected.
  If we fail to successfully execute the business plans for our strategic alliances and other new
business initiatives, our anticipated growth and prospects may be materially and adversely
affected.
  6




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We may lose our competitive advantage if we fail to maintain and improve our proprietary CRIC
system or prevent disruptions or failure in the performance of our CRIC system.
   7




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If we are unable to compete successfully, our financial condition and results of operations may be
harmed.
    Our results of operations and cash flows may fluctuate due to seasonal variations in the real
estate market, the non-recurring nature of our primary real estate agency services, billing cycles
and unpredictable development cycles.
    Our reliance on a concentrated number of real estate developers may materially and adversely affect
us.
  8




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Our ability to successfully sell the properties we contract to sell may be materially and adversely
affected if our developer clients fail to make timely delivery of the properties or any of these
properties experience significant quality defects, negative publicity or other problems.
  If we fail to hire, train and retain qualified managerial and other employees, our business and
results of operations could be materially and adversely affected.
   Any failure to protect our brand, trademarks and other intellectual property rights could have a
negative impact on our business.
   9




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Copyright infringement and other intellectual property claims against us may adversely affect our
business and our ability to operate our CRIC system.
  If we fail to obtain or keep licenses and permits applicable to real estate brokerages, we may
incur significant financial penalties and other government sanctions.
   We may be subject to liabilities in connection with real estate brokerage activities.
  If we fail to maintain an effective system of internal controls over financial reporting, we may
not be able to accurately report our financial results or prevent fraud.
  10




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Risks Related to Doing Business in China
 Adverse changes in economic and political policies of the PRC government could have a material
adverse effect on overall economic growth in China, which could adversely affect our business.
   11




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Uncertainties with respect to the Chinese legal system could adversely affect us.
  Governmental control of currency conversion may affect the value of your investment.
  Fluctuation in the value of the RMB may have a material adverse effect on your investment.
  Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC
domestic residents and registration requirements for employee stock ownership plans or share option
plans may subject our PRC resident beneficial owners or the plan participants to personal
liability, limit our ability to inject capital into our PRC subsidiaries, limit our subsidiaries
ability to increase their registered capital or distribute profits to us, or may otherwise
adversely affect us.
  12




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We rely principally on dividends and other distributions on equity paid by our subsidiaries to fund
any cash and financing requirements we may have, and any limitation on the ability of our
subsidiaries to make payments to us could have a material adverse effect on our ability to conduct
our business.
  PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from making loans or additional capital contributions to our PRC operating
subsidiaries.
  13




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Our business benefits from tax-related government incentives and discretionary policies. Expiration
of, or changes to, these incentives or policies could have a material adverse effect on our
operating results.
   Dividends payable to us by our PRC subsidiaries may be subject to PRC withholding taxes, or we may
be subject to PRC taxation on our worldwide income and dividends distributed to our investors may
be subject to PRC withholding taxes under the new EIT Law.
  14




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Foreign ownership of the real estate agency and brokerage business in China is restricted under the
recent PRC regulation. This may limit our ability to establish our new PRC operating entities or to
increase registered capital of existing entities in the future.
   The national and regional economies in China and our prospects may be adversely affected by a
recurrence of SARS or an outbreak of other epidemics, such as avian flu.
  Risks Related to Our ADSs
 The market price for our ADSs may be volatile.
  
    
    actual or anticipated fluctuations in our quarterly operating results;
    
    changes in financial estimates by securities research analysts;
    
    conditions in the real estate industries;
    
    changes in the economic performance or market valuations of other real estate
services companies;
    
    announcements by us or our competitors of new products, acquisitions, strategic
partnerships, joint ventures or capital commitments;
    
    addition or departure of key personnel;
    
    fluctuations of exchange rates between the RMB and U.S. dollar or other foreign
currencies;
    
    potential litigation or administrative investigations;
    
    release of lock-up or other transfer restrictions on our outstanding ADSs or
ordinary shares or sales of additional ADSs; and
    
    general economic or political conditions in China.
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Substantial future sales of our ADSs in the public market, or the perception that these sales could
occur, could cause the price of our ADSs to decline.
   Our corporate actions are substantially controlled by Xin Zhou, our co-founder, chairman and chief
executive officer.
  You may not have the same voting rights as the holders of our ordinary shares and may not receive
voting materials in time to be able to exercise your right to vote.
  You may not be able to participate in rights offerings and may experience dilution of your holdings
as a result.
  You may be subject to limitations on transfer of your ADSs.
  16




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You may face difficulties in protecting your interests, and your ability to protect your rights
through the U.S. federal courts may be limited, because we are incorporated under Cayman Islands
law, conduct substantially all of our operations in China and all of our officers reside outside
the United States.
    We may be classified as a passive foreign investment company, which could result in adverse United
States federal income tax consequences to U.S. holders.
  
 ITEM 4. INFORMATION ON THE COMPANY
 History and Development of the Company
  17




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Business Overview
 Overview
     18




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Our Services
  Primary Real Estate Agency Services
  For the Year Ended December 31,2005
    
    2006
    
    2007Total GFA of new properties sold (thousands of square meters)
    
    
    1,282
    
    
    
    1,955
    
    
    
    3,985Total value of new properties sold (millions of $)
    
    
    1,349
    
    
    
    2,037
    
    
    
    3,929
      19




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Secondary Real Estate Brokerage Services
      20




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Real Estate Consulting and Information Services
  Real Estate Consulting Services
  Land Acquisition Consulting.
 Real Estate Development Consulting.
  Other Consulting.
 Real Estate Information Services
  21




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As of December 31,2005
    
    2006
    
    2007No. of terminals
    
    
    150
    
    
    
    327
    
    
    
    15,000
   Real Estate Investment Fund Management
  CRIC System
    22




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Research and Development
   Marketing and Brand Promotion
  Advertisements.
 Seminars and Workshops.
 E-House Membership Club.
 Competition
   23




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Employees and Training
     Intellectual Property
  www.ehousechina.com www.1fang.com www.cityrehouse.com.cn www.yiju.org
 24




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Facilities
  Legal Proceedings
  Regulation
  Regulation of Real Estate Services Industry
  Regulation on the Establishment of Real Estate Services Companies
  Regulation of Real Estate Agency Companies and Agents
   25




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Regulation of Real Estate Consultation Business
  Regulation of Real Estate Intermediary Service Charges
   26




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Regulations on Trademarks
  Regulations on Foreign Currency Exchange
   27




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Regulations on Loans to and Direct Investment in PRC Entities by Offshore Holding Companies
    Regulations on Employee Share Options
  Regulations on Dividend Distribution
  
    
    the Wholly Foreign Owned Enterprise Law (1986), as amended;
    
    the Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
    
    the Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and
    
    the Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as
amended.
  28




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Organizational Structure
  
 
 *
    
    Wholly owned by Ber Jen Ko, the general manager in charge of our secondary brokerage
services.**
    
    The following list sets forth E-House Shanghais subsidiaries and the percentage of its equity
ownership interest in each subsidiary: (1) Nanjing Jinyue Real Estate Consultant Co., Ltd.
(91%), (2) Shanghai Urban Real Estate Broker Co., Ltd. (51%), (3) Fujian Jinyue Real Estate
Consultant Co., Ltd. (70%), (4) Shenzhen E-House Real Estate Co., Ltd. (95%), (5) Shanghai
E-House Real Estate Academy (90%), (6) Beijing Jinyue Real Estate Broker Co., Ltd. (100%), (7)
Jinan Fangzhouweiye Consultant Co., Ltd. (100%), (8) Shenyang E-House Real Estate Agent Co.,
Ltd. (100%), (9) Wuhan E-House Investment Co., Ltd. (100%), (10) Zhengzhou Jinyue Real Estate
Investment Consultant Co., Ltd. (100%), (11) Changsha Jinyue Real Estate Sales Co., Ltd.
(100%), (12) Jiangxi E-House Real Estate Sales Co., Ltd. (100%), (13) Shaanxi E-House Real
Estate Investment Consultant Co., Ltd. (100%), (14) Chengdu E-House Western Real Estate
Investment Consultant Co., Ltd. (100%) and (15) Chongqing E-House Investment Consultant Co.,
Ltd. (100%).
 Property, Plants and Equipment
  
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  29




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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Operating Results
 Overview
   Factors Affecting Our Results of Operations
  Revenues
 For The Year Ended December 31,2005
    
    2006
    
    2007$
    
    %
    
    $
    
    %
    
    $
    
    %(in thousands except percentages)Revenues:Primary real estate agency services
    
    
    34,502
    
    
    
    89.2
    
    
    
    45,708
    
    
    
    81.6
    
    
    
    100,541
    
    
    
    83.1Secondary real estate brokerage services
    
    
    361
    
    
    
    1.0
    
    
    
    3,846
    
    
    
    6.9
    
    
    
    11,888
    
    
    
    9.8Real estate consulting and information services
    
    
    3,798
    
    
    
    9.8
    
    
    
    6,445
    
    
    
    11.5
    
    
    
    8,587
    
    
    
    7.1Total revenues
    
    
    38,661
    
    
    
    100.0
    
    
    
    55,999
    
    
    
    100.0
    
    
    
    121,016
    
    
    
    100.0
 Primary Real Estate Agency Services.
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
    
    total GFA of the properties we sell;
    
    total transaction value of the properties we sell; and
    
    commission rates.
  Secondary Real Estate Brokerage Services.
  31




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Real Estate Consulting and Information Services.
    Cost of Revenues.
 Selling, General and Administrative Expenses.
   32




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Share-based
Compensation Expenses.
 Number of OrdinaryShares Underlying
    
    
    
    
    
    Fair Value ofGrant Date
    
    Options Granted
    
    Exercise Price
    
    Ordinary SharesNovember 28, 2006
    
    
    436,364
    
    
    $
    3.30
    
    
    $
    3.30March 9, 2007
    
    
    300,000
    
    
    $
    5.50
    
    
    $
    5.50July 23, 2007
    
    
    915,000
    
    
    $
    12.50
    
    
    $
    10.67January 7, 2008
    
    
    480,000
    
    
    $
    23.00
    
    
    $
    23.00January 10, 2008
    
    
    21,500
    
    
    $
    24.23
    
    
    $
    24.23
   
    
    the nature of our business and the contracts and agreements relating to our
business;
    
    the global economic outlook in general and the specific economic and competitive
elements affecting our business;
    
    the nature and prospects of the real estate services industry in China;
    
    the growth of our operations; and
    
    our business risks.
    
    
    Weighted average costs of capital, or WACC, of 13.2% was used. This was the combined
result of the changes in risk-free rate and industry average beta and the decrease in
our company-specific risks; and
    
    Discount for Lack of Marketability, or DLOM, of 6% was used. This took into
consideration our proposed offering in several months.
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##### Table of Contents




    
    We experienced substantial increases in revenues and net income to $34.5 million and
$17.0 million, respectively, for the fourth quarter of 2006 from $7.8 million and $0.6
million, respectively, for the third quarter of 2006;
    
    Despite the fact that we generally experience relatively low volume of real estate
transactions in the first quarter of each year due to the cold weather and the Chinese
New Year holiday, we experienced substantial increases in revenues to $16.0 million for
the first quarter of 2007 from $4.0 million for the same quarter in 2006, and we
achieved a net income of $4.4 million for the first quarter of 2007, compared to a net
loss of $1.3 million for the same quarter in 2006;
    
    We further expanded the secondary brokerage store network from 66 stores as of
December 31, 2006 to 114 stores as of March 31, 2007; and
    
    We completed several major real estate consulting projects.
  
    
    WACC of 14.3% was used. This was the combined result of the changes in risk-free
rate, industry average beta and the decrease in our company-specific risk.
    
    DLOM of 6% was used. This took into consideration our pending offering in the near
future.
    Taxation
  34




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##### Table of Contents



Critical Accounting Policies
   35




---



##### Table of Contents



Revenue Recognition
       Variable Interest Entities
   Share-based Compensation
   Goodwill Valuation
   36




---



##### Table of Contents



Income Taxes
  Results of Operations
  For the Year Ended December 31,2005
    
    2006
    
    2007(in thousands of $)Consolidated Statement of Operations
Data:Revenues
    
    
    38,661
    
    
    
    55,999
    
    
    
    121,016Cost of revenues
    
    
    (10,818
    )
    
    
    (10,244
    )
    
    
    (23,510
    )Selling, general and administrative expenses
    
    
    (13,250
    )
    
    
    (21,322
    )
    
    
    (45,546
    )Income from operations
    
    
    14,593
    
    
    
    24,433
    
    
    
    51,960Other income (expense):Interest expense
    
    
    (639
    )
    
    
    (594
    )
    
    
    (622
    )Interest income
    
    
    63
    
    
    
    206
    
    
    
    2,490Other income
    
    
    132
    
    
    
    168
    
    
    
    198Income before taxes and minority interest
    
    
    14,149
    
    
    
    24,213
    
    
    
    54,026Income tax expenses
    
    
    (2,733
    )
    
    
    (5,751
    )
    
    
    (10,277
    )Minority interests, net of tax
    
    
    (268
    )
    
    
    (355
    )
    
    
    (2,023
    )Net income
    
    
    11,148
    
    
    
    18,107
    
    
    
    41,726
 Segment Information
  37




---



##### Table of Contents



2006
    
    2007Primary
    
    
    
    
    
    
    
    
    
    
    
    
    
    Primaryreal estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    real estateagency
    
    
    
    
    
    
    
    
    
    
    
    
    
    agencyand real
    
    
    
    
    
    
    
    
    
    
    
    
    
    and realestate
    
    
    
    
    
    
    
    
    
    
    
    
    
    estateconsulting
    
    Secondary
    
    
    
    
    
    
    
    
    
    consulting
    
    Secondaryand
    
    real estate
    
    
    
    
    
    
    
    
    
    and
    
    real estateinformation
    
    brokerage
    
    
    
    
    
    
    
    
    
    information
    
    brokerageservice
    
    service
    
    Non-
    
    
    
    service
    
    service
    
    Non-segment
    
    segment
    
    allocated
    
    Total
    
    segment
    
    segment
    
    allocated
    
    Total(in thousands of $)Revenues from external
customers
    
    
    52,153
    
    
    
    3,846
    
    
    
    
    
    
    
    55,999
    
    
    
    109,128
    
    
    
    11,888
    
    
    
    
    
    
    
    121,016Cost of revenues
    
    
    (10,244
    )
    
    
    
    
    
    
    
    
    
    
    (10,244
    )
    
    
    (23,510
    )
    
    
    
    
    
    
    
    
    
    
    (23,510
    )Selling, general and
administrative expenses
    
    
    (14,100
    )
    
    
    (5,286
    )
    
    
    (1,936
    )
    
    
    (21,322
    )
    
    
    (28,181
    )
    
    
    (14,997
    )
    
    
    (2,368
    )
    
    
    (45,546
    )Income (loss) from operations
    
    
    27,809
    
    
    
    (1,440
    )
    
    
    (1,936
    )
    
    
    24,433
    
    
    
    57,437
    
    
    
    (3,109
    )
    
    
    (2,368
    )
    
    
    51,960Interest expense
    
    
    
    
    
    
    
    
    
    
    (594
    )
    
    
    (594
    )
    
    
    
    
    
    
    
    
    
    
    (622
    )
    
    
    (622
    )Interest income
    
    
    200
    
    
    
    6
    
    
    
    
    
    
    
    206
    
    
    
    888
    
    
    
    36
    
    
    
    1,566
    
    
    
    2,490Income (loss) before taxes
and minority interest
    
    
    28,177
    
    
    
    (1,434
    )
    
    
    (2,530
    )
    
    
    24,213
    
    
    
    58,574
    
    
    
    (2,977
    )
    
    
    (1,571
    )
    
    
    54,026Income tax expense
    
    
    (5,751
    )
    
    
    
    
    
    
    
    
    
    
    (5,751
    )
    
    
    (10,272
    )
    
    
    (5
    )
    
    
    
    
    
    
    (10,277
    )Net income (loss) after
taxes before minority
interest
    
    
    22,426
    
    
    
    (1,434
    )
    
    
    (2,530
    )
    
    
    18,462
    
    
    
    48,302
    
    
    
    (2,982
    )
    
    
    (1,571
    )
    
    
    43,749
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Revenues.
 
    
    Primary Real Estate Agency Services. Revenues from our primary real estate agency
services increased by 120.0% from $45.7 million in 2006 to $100.5 million in 2007. This
increase was primarily due to the further expansion of primary real estate agency
operations, which resulted in a significant increase in the GFA and total transaction
value of new properties sold. The GFA of properties we sold increased from
approximately 2.0 million square meters in 2006 to approximately 4.0 million square
meters in 2007 and the total transaction value of the properties we sold increased from
$2.0 billion in 2006 to $3.9 billion in 2007. The average commission rate was 2.4% in
2007, compared to 2.2% in 2006, mainly due to higher commission revenues earned upon
exceeding sales targets for a number of projects. We expect continued strong growth in
revenues from our primary real estate agency services in 2008 as a result of further
expansion in our geographic coverage, market shares and strategic partnerships with
leading developers in China, which have contributed to expansion of our project
pipeline.
    
    Secondary Real Estate Brokerage Services. Revenues from our secondary real estate
brokerage services increased substantially by 209.2% from $3.8 million in 2006 to $11.9
million in 2007. This growth was primarily attributable to the continued expansion of
our secondary real estate brokerage services. As of December 31, 2007, we had a total
of 160 secondary real estate brokerage stores in five cities in China. We will focus on
consolidating recent expansion and improving profitability for its secondary brokerage
services in 2008.
    
    Real Estate Consulting and Information Services. Revenues from our real estate
consulting and information services increased by 33.2% from $6.4 million in 2006 to
$8.6 million in 2007. This growth was primarily due to continued expansion of our real
estate consulting services and our
strengthened efforts in commercializing the CRIC system in 2007. For 2008, we expect
our
revenues from real estate consulting and information services to increase
substantially and
 38




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##### Table of Contents



contribute to a higher portion of total revenues as a result of
our initiative to commercialize its proprietary CRIC database system by offering
subscription service, as well as higher consulting revenues from strategic
arrangements with leading developers in China.
 Cost of Revenues.
 Selling, General and Administrative Expenses.
 
    
    Primary Real Estate Agency and Real Estate Consulting and Information Service
Segment. Selling, general and administrative expenses for our primary real estate
agency and consulting service segment increased from $14.1 million in 2006 to $28.2
million in 2007 primarily due to an increase in staff costs for our management
employees by $7.1 million as a result of hiring additional staff, and an increase in
marketing, consulting, rental, travel, and other administrative expenses by $7.1
million as a result of expanding our operations and hiring new employees.
    
    Secondary Real Estate Brokerage Service Segment. Selling, general and
administrative expenses for our secondary real estate brokerage service segment
increased from $5.3 million in 2006 to $15.0 million in 2007 primarily due to the
expansion of our secondary real estate brokerage service, resulting in increases in
staff costs by $4.4 million due to the hiring of additional staff, and increase in
marketing, rental and administrative expenses for brokerage storefronts by $5.3
million.
 Income Tax Expenses.
 Minority Interest.
 Net Income.
 Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Revenues.
 
    
    Primary Real Estate Agency Services.Revenues from our primary real estate agency
services increased by 32.5% from $34.5 million in 2005 to $45.7 million in 2006. This
increase was primarily due to the substantial increase in revenues generated from the
cities we entered into in 2005 as we established a more competitive position in these
cities in 2006. As a result, the total GFA of properties we sold increased from
approximately 1.3 million square meters in 2005 to approximately 2.0 million square
meters in 2006 and the total transaction value of the properties we sold increased from
$1.3 billion in 2005 to $2.0 billion in 2006. The increase in GFA was partially offset
by lower property prices in the regions into which we expanded in 2006. Our average
commission rate was 2.6% in 2005 and 2.2% in 2006.
    
    Secondary Real Estate Brokerage Services.Revenues from our secondary real estate
brokerage services increased substantially from $361,144 in 2005 to $3.8 million in
2006. This growth was primarily attributable to our acquisition of two brokerage
companies in Shanghai and Hong Kong and subsequent expansion of our secondary real
estate services in 2006.
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##### Table of Contents




    
    Real Estate Consulting and Information Services.Revenues from our real estate
consulting and information services increased by 69.7% from $3.8 million in 2005 to
$6.4 million in 2006. This growth was primarily due to our increased marketing efforts
to promote our consulting services and our completion of several major consulting
projects in 2006. This growth also resulted from the commencement of the
commercialization of our CRIC system in 2006.
 Cost of Revenues.
 Selling, General and Administrative Expenses.
 
    
    Primary Real Estate Agency and Real Estate Consulting and Information Service
Segment.Selling, general and administrative expenses for our primary real estate
agency and consulting service segment increased from $12.7 million in 2005 to $14.1
million in 2006 primarily due to an increase in salaries and bonuses by $1.3 million,
and an increase in rental, travel and administrative expenses by $1.2 million, both
resulting from our hiring of new employees and expansion of our operations. These
increases were partially offset by a decrease in depreciation and amortization by $0.9
million due to the decreased amortization of intangible assets.
    
    Secondary Real Estate Brokerage Service Segment.Selling, general and
administrative expenses for our secondary real estate brokerage service segment
increased substantially from an immaterial amount in 2005 to $5.3 million in 2006
primarily due to the acquisition of secondary real estate brokerage business and the
expansion of our secondary real estate brokerages, resulting in increases in
compensation expenses by $3.0 million, rental and administrative expenses by $1.4
million for brokerage storefronts, marketing expenses and other administrative
expenses.
    
    Non-allocated expenses.Our non-allocated expenses increased from $1.2 million in
2005 to $2.5 million in 2006 primarily due to a $0.8 million share-based compensation
associated with the acquisition of minority interest from one of our employees for a
price in excess of fair value and higher administrative expenses.
 Income Tax Expenses.
 Minority Interest.
 Net Income.
 Liquidity and Capital Resources
  40




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##### Table of Contents



For the Year Ended December 31,2005
    
    2006
    
    2007(in thousands of $)Net cash (used in) provided by operating activities
    
    
    15,282
    
    
    
    (2,590
    )
    
    
    (81,273
    )Net cash (used in) provided by investing activities
    
    
    4,618
    
    
    
    (12,624
    )
    
    
    (5,500
    )Net cash provided by (used in) financing activities
    
    
    (17,516
    )
    
    
    26,413
    
    
    
    162,108Net increase (decrease) in cash and cash equivalents
    
    
    2,641
    
    
    
    11,594
    
    
    
    76,842Cash and cash equivalents at beginning of the period
    
    
    10,071
    
    
    
    12,712
    
    
    
    24,306Cash and cash equivalents at end of the period
    
    
    12,712
    
    
    
    24,306
    
    
    
    101,148
 Operating Activities
     Investing Activities
  41




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##### Table of Contents



Financing Activities
  Research and Development, Patents and Licenses, etc.
 Research and Development
   Intellectual Property
  
 42




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##### Table of Contents



Trend Information
  Off-Balance Sheet Arrangements
  Tabular Disclosure of Contractual Obligations
  Payment Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 year
    
    1-3 year
    
    3-5 year
    
    5 years(in thousands of $)Short-term debt obligations (including
interest payment)
    
    
    6,845
    
    
    
    6,845
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    13,137
    
    
    
    6,033
    
    
    
    6,063
    
    
    
    1,041
    
    
    
    Total
    
    
    19,982
    
    
    
    12,878
    
    
    
    6,063
    
    
    
    1,041
    
    
    
    
  Safe Harbor
  
    
    our ability to sell the properties we contract to sell;
    
    our reliance on a concentrated number of real estate developers;
    
    failure to maintain and improve our proprietary CRIC system or prevent disruptions
or failure in the performance of our CRIC system;
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##### Table of Contents




    
    our ability to expand into new geographical markets in China;
    
    the relatively new and rapidly evolving real estate industry in China may not mature
as quickly as we expect;
    
    our ability to successfully execute the business plans for our strategic alliances
and other new business initiatives; and
    
    fluctuations of the real estate market, especially in certain areas of eastern China
where the majority of our operations are concentrated.
  Recently Issued Accounting Pronouncements
      
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Senior Management
  Directors and Executive Officers
    
    Age
    
    Position/TitleXin Zhou
    
    
    40
    
    
    Chairman, Chief Executive OfficerNeil Nanpeng Shen
    
    
    40
    
    
    DirectorCharles Chao
    
    
    42
    
    
    Director
 44




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##### Table of Contents



Directors and Executive Officers
    
    Age
    
    Position/TitleBing Xiang
    
    
    45
    
    
    Independent DirectorHongchao Zhu
    
    
    48
    
    
    Independent DirectorMay Wu
    
    
    40
    
    
    Independent DirectorYongyue Zhang
    
    
    53
    
    
    Director and Head of ResearchLi-Lan Cheng
    
    
    43
    
    
    Chief Financial OfficerJianjun Zang
    
    
    40
    
    
    Co-head of Primary Agency ServiceXudong Zhu
    
    
    40
    
    
    Co-head of Primary Agency ServiceCanhao Huang
    
    
    50
    
    
    Director and Head of OperationsZuyu Ding
    
    
    34
    
    
    Head of Consulting and Information ServiceBer Jen Ko
    
    
    44
    
    
    Head of Secondary Brokerage Service
 Mr. Xin
Zhou
 Mr. Neil Nanpeng Shen
 Mr. Charles Chao
 Mr. Bing Xiang
 Mr. Hongchao Zhu
 45




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##### Table of Contents



Ms. May Wu
 Mr. Yongyue Zhang
 Mr. Li-Lan Cheng
 Mr. Jianjun Zang
 Mr. Xudong Zhu
 Mr. Canhao Huang
 Mr. Zuyu Ding
 Mr. Ber Jen Ko
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##### Table of Contents



Employment Agreements
   Compensation of Directors and Executive Officers
  Share Incentive Plan
 Share Incentive Plan.
  Ordinary Shares
    
    Exercise PriceName
    
    Underlying Options
    
    (US$/Share)
    
    Date of Grant
    
    Date of ExpirationNeil Nanpeng Shen
    
    
    40,000
    
    
    
    5.50
    
    
    March 9, 2007
    
    March 9, 2017Charles Chao
    
    
    60,000
    
    
    
    5.50
    
    
    March 9, 2007
    
    March 9, 2017Bing Xiang
    
    
    40,000
    
    
    
    5.50
    
    
    March 9, 2007
    
    March 9, 2017Hongchao Zhu
    
    
    40,000
    
    
    
    5.50
    
    
    March 9, 2007
    
    March 9, 2017Li-Lan Cheng
    
    
    436,364
    
    
    
    3.30
    
    
    May 16, 2007
    
    No expiration dateBer Jen Ko
    
    
    80,000
    
    
    
    5.50
    
    
    March 9, 2007
    
    March 9, 2017Other Individuals as a group
    
    
    1,417,500
    
    
    5.50 to 24.23
    
    March 9, 2007 to
January 10, 2008
    
    March 9, 2017 to
January 10, 2018
 47




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##### Table of Contents



Plan Administration.
 Award Agreement.
 Eligibility.
 Acceleration of Awards upon Corporate Transactions.
 Term of the Awards.
 Vesting Schedule.
 Transfer Restrictions.
 Termination of the Plan.
 Board Practices
  Committees of the Board of Directors
  Audit Committee.
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##### Table of Contents




    
    appointing the independent auditors and pre-approving all audit and non-audit
services permitted to be performed by the independent auditors;
    
    reviewing with the independent auditors any audit problems or difficulties and
managements response;
    
    reviewing and approving all proposed related party transactions, as defined in Item
404 of Regulation S-K under the Securities Act;
    
    discussing the annual audited financial statements with management and the
independent auditors;
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies; and
    
    meeting separately and periodically with management and the independent auditors.
 Compensation Committee.
 
    
    reviewing and evaluating at least annually and, if necessary, revising the
compensation policies adopted by our management;
    
    reviewing and evaluating at least annually the performance, and determining the
compensation, of our chief executive officer;
    
    reviewing and approving our chief executive officers employment agreement and
amendments thereto, and severance arrangement, if any;
    
    reviewing all annual bonus, long-term incentive compensation, share option, employee
pension and welfare benefit plans; and
    
    reviewing and approving director and executive officer indemnification and insurance
matters, and any employee loans in an amount equal to or greater than $60,000.
 Nominating and Corporate Governance Committee.
 
    
    recommending to our board of directors for nomination or appointment by the board
such candidates as the committee has found to be well qualified and willing and ready
to be elected or reelected to serve as our members of our board or its committees or to
fill any vacancies on our board or its committees, respectively;
    
    reviewing annually the composition of our board of directors and its committees in
light of the characteristics of independence, qualification, experience and
availability of the board members;
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##### Table of Contents




    
    developing and recommending to our board of directors a set of corporate governance
guidelines and principles applicable to the company; and
    
    monitoring of compliance with the companys code of business conduct and ethics,
including reviewing the adequacy and effectiveness of our internal rules and procedures
to ensure compliance with applicable laws and regulations.
 Duties of Directors
  Terms of Directors and Officers
  Employees
  Number of
    
    Percentage ofEmployees
    
    EmployeesCorporate Offices
    
    
    843
    
    
    
    18.7
    %Research Department
    
    
    471
    
    
    
    10.5Sales Staff
    
    
    3,186
    
    
    
    70.8Total
    
    
    4,500
    
    
    
    100.0
    %
  Share Ownership
  
    
    each of our directors and executive officers; and
    
    each person known to us to own beneficially more than 5.0% of our ordinary shares.
  Shares Beneficially OwnedImmediatelyNumber
    
    %Directors and Executive Officers:Xin
Zhou(1)()
    
    
    27,005,260
    
    
    
    32.74Neil Nanpeng
Shen(2)
    
    
    7,516,666
    
    
    
    9.11
 50




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##### Table of Contents



Shares Beneficially OwnedImmediatelyNumber
    
    %Charles
Chao(3)
    
    
    25,000
    
    
    
    *Bing Xiang(4)
    
    
    16,666
    
    
    
    *Hongchao Zhu(5)
    
    
    16,666
    
    
    
    *Yongyue Zhang(6)
    
    
    1,000,000
    
    
    
    1.21Li-Lan Cheng(7)
    
    
    148,364
    
    
    
    *Jianjun Zang(8)()
    
    
    3,245,646
    
    
    
    3.94Xudong Zhu(9)
    
    
    480,000
    
    
    
    *Canhao Huang(10)()
    
    
    1,085,457
    
    
    
    1.32Zuyu Ding(11)()
    
    
    357,450
    
    
    
    *Ber Jen Ko(12)
    
    
    27,200
    
    
    
    *All Directors and Executive Officers as a Group()
    
    
    36,235,822
    
    
    
    43.88Principal Shareholders:On Chance Inc.(13)()
    
    
    15,090,260
    
    
    
    18.30CHF Investment Limited(14)
    
    
    9,473,684
    
    
    
    11.49Jun Heng Investment Limited(15)()
    
    
    11,915,000
    
    
    
    14.45Smart Create Group Limited(16)
    
    
    7,500,000
    
    
    
    9.09
 
 *
    
    Less than 1% of our total outstanding shares.
    
    Each of these directors and executive officers is a beneficial owner
of our shares through On Chance Inc., Jun Heng Investment Limited or
both, as the case may be. On Chance Inc., or On Chance, is also a
shareholder of Jun Heng Investment Limited, or Jun Heng.(1)
    
    Includes 15,090,260 ordinary shares and 11,915,000 ordinary shares
respectively held by On Chance Inc., or On Chance, and Jun Heng
Investment Limited, or Jun Heng. Each of On Chance and Jun Heng is a
company incorporated in British Virgin Islands and controlled by Mr.
Zhou. As a result, Mr. Zhou is deemed to be the beneficial owner of
27,005,260 ordinary shares of our company. Mr. Zhou disclaims
beneficial ownership of these 27,005,260 shares except to the extent
of his pecuniary interest therein. The business address of Mr. Zhou
is 17/F, Merchandise Harvest Building (East), No. 333 North Chengdu
Road, Shanghai, PRC 200041, Peoples Republic of China.(2)
    
    Includes 7,500,000 ordinary shares held by Smart Create Group
Limited, or Smart Create, a British Virgin Islands company that is
controlled by Mr. Shen. Mr. Shen, a shareholder of Smart Create, has
been granted a voting proxy by each of other shareholders of Smart
Create to vote on their behalf. Mr. Shen disclaims beneficial
ownership of these 7,500,000 shares except to the extent of his
pecuniary interest therein. The business address of Mr. Shen is Suite
2215, 22/F, Two Pacific Place, 88 Queensway Road, Hong Kong.(3)
    
    Represents 25,000 shares issuable upon exercise of options held by
Mr. Chao within 60 days from March 31, 2008. The business address of
Mr. Chao is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(4)
    
    Represents 16,666 shares issuable upon exercise of options held by
Mr. Xiang within 60 days from March 31, 2008. The business address of
Mr. Xiang is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(5)
    
    Represents 16,666 shares issuable upon exercise of options held by
Mr. Zhu within 60 days from March 31, 2008. The business address of
Mr. Zhu is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(6)
    
    Represents 1,000,000 ordinary shares held by Mr. Zhang. The business
address of Mr. Zhang is 17/F, Merchandise Harvest Building (East),
No. 333 North Chengdu Road, Shanghai, PRC 200041, Peoples Republic
of China.(7)
    
    Represents 148,364 restricted shares held by Mr. Cheng. The business
address of Mr. Cheng is 17/F, Merchandise Harvest Building (East),
No. 333 North Chengdu Road, Shanghai, PRC 200041, Peoples Republic
of China. 51




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##### Table of Contents



(8)
    
    Represents 3,245,646 ordinary shares held by Jun Heng that is
approximately 27.24%-owned by Mr. Zang. The business address of Mr.
Zang is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(9)
    
    Represents 480,000 ordinary shares held by Sanson Developments
Limited, a company incorporated in British Virgin Islands and wholly
owned by Mr. Zhu. The business address of Mr. Zhu is 17/F,
Merchandise Harvest Building (East), No. 333 North Chengdu Road,
Shanghai, PRC 200041, Peoples Republic of China.(10)
    
    Represents 1,085,457 ordinary shares held by Jun Heng that is
approximately 9.11%-owned by Mr. Huang. The business address of Mr.
Huang is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(11)
    
    Represents 357,450 ordinary shares held by Jun Heng that is
approximately 3.00%-owned by Mr. Ding. The business address of Mr.
Ding is 17/F, Merchandise Harvest Building (East), No. 333 North
Chengdu Road, Shanghai, PRC 200041, Peoples Republic of China.(12)
    
    The business address of Mr. Ko is 17/F, Merchandise Harvest Building
(East), No. 333 North Chengdu Road, Shanghai, PRC 200041, Peoples
Republic of China.(13)
    
    On Chance Inc. is a company incorporated in British Virgin Islands
and 95%-owned by Xin Zhou. The registered address of On Chance Inc.
is Sea Meadow House, Blackburne Highway, Road Town, Tortola, British
Virgin Islands.(14)
    
    Represents 9,473,684 ordinary shares held by CHF Investment Limited,
a British Virgin Islands company, with the registered address at P.O.
Box 173, Kingston Chambers, Road Town, Tortola, British Virgin
Islands. China Harvest Fund, L.P. and China Harvest Parallel Fund I,
L.P. beneficially own 97.83% and 2.17%, respectively, of the share
capital of CHF Investment Limited. Each of China Harvest Fund, L.P.
and China Harvest Parallel Fund I, L.P. is a Cayman Islands exempted
limited partnership, with its registered address at the offices of
M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands. The general
partner of each of China Harvest Fund, L.P. and China Harvest
Parallel Fund I, L.P. is China Renaissance Capital Investment, L.P.,
a Cayman Islands exempted limited partnership. Voting and investment
power of shares beneficially held by China Harvest Fund, L.P. and
China Harvest Parallel Fund I, L.P. is exercised by the investment
committee of China Renaissance Capital Investment, L.P. which
consists of Mark Qiu, Hung Shih, Li Zhenzhi, Charles Pieper and
Nicole Arnaboldi. The address for these committee members is c/o
China Renaissance Capital Investment, L.P., M&C Corporate Services
Limited, P.O. Box 309GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands. CHF Investment Limited is
affiliated with Credit Suisse Securities (USA) LLC, which is a
registered broker-dealer and a member of the Financial Industry
Regulatory Authority. Credit Suisse Securities (USA) LLC is a limited
liability company with its principal place of business at 11 Madison
Avenue, New York, New York 10010, U.S.A. Credit Suisse Securities
(USA) LLC was an underwriter in our initial and secondary public
offerings.(15)
    
    Jun Heng Investment Limited is a company incorporated in British
Virgin Islands and controlled by Xin Zhou. The registered address of
Jun Heng Investment Limited is Beaufort House, P.O. Box 438, Road
Town, Tortola, British Virgin Islands.(16)
    
    Smart Create Group Limited is a company incorporated in British
Virgin Islands and controlled by Neil Nanpeng Shen. The registered
address of Smart Create Group Limited is P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands. 52




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##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Major Shareholders
  Related Party Transactions
 Private Placement
   Loan Guarantee
  Transactions with Certain Related Customer and Supplier, Shareholders, Directors and Affiliates
 Transactions with Related Customer and Supplier
  Transactions with Management
  Transactions with Affiliates
  53




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##### Table of Contents



Real Estate Investment Fund Management
  Shareholders Agreement
  Share Options
  Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 Consolidated Statements and Other Financial Information
  Legal Proceedings
  54




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##### Table of Contents



Dividend Policy
   Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 Offering and Listing Details
    Sales Price ($)High
    
    LowQuarterly Highs and LowsThird Quarter 2007 (starting from August 9, 2007)
    
    
    23.87
    
    
    
    12.26Fourth Quarter 2007
    
    
    36.45
    
    
    
    18.00First Quarter 2008
    
    
    28.09
    
    
    
    10.05Monthly Highs and LowsOctober 2007
    
    
    36.45
    
    
    
    23.20November 2007
    
    
    35.25
    
    
    
    18.00December 2007
    
    
    29.12
    
    
    
    20.75January 2008
    
    
    28.09
    
    
    
    15.02February 2008
    
    
    19.70
    
    
    
    15.56March 2008
    
    
    16.37
    
    
    
    10.05April 2008 (through April 17)
    
    
    15.93
    
    
    
    12.59
 Plan of Distribution
  Markets
  55




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##### Table of Contents



Selling Shareholders
  Dilution
  Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 Share Capital
  Memorandum and Articles of Association
  Material Contracts
  Exchange Controls
  Taxation
  Cayman Islands Taxation
  Peoples Republic of China Taxation
  56




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United States Federal Income Taxation
   
    
    banks;
    
    financial institutions;
    
    insurance companies;
    
    broker dealers;
    
    traders that elect to mark-to-market;
    
    tax-exempt entities;
    
    persons liable for alternative minimum tax;
    
    persons holding an ADS or ordinary share as part of a straddle, hedging, conversion
or integrated transaction;
    
    persons that actually or constructively own 10% or more of our voting stock;
    
    persons who acquired ADSs or ordinary shares pursuant to the exercise of any
employee share option or otherwise as consideration; or
    
    persons holding ADSs or ordinary shares through partnerships or other pass-through
entities.
 HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX
RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES
TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.
  
    
    an individual who is a citizen or resident of the United States;
    
    a corporation (or other entity taxable as a corporation) organized under the laws of
the United States, any State or the District of Columbia;
 57




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
    
    an estate whose income is subject to U.S. federal income taxation regardless of its
source; or
    
    a trust that (1) is subject to the supervision of a court within the United States
and the control of one or more U.S. persons or (2) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.
    Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares
    58




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Taxation of Disposition of Shares
  Passive Foreign Investment Company
  
    
    at least 75% of its gross income is passive income (the income test), or
    
    at least 50% of the value of its assets (based on an average of the quarterly values
of the assets during a taxable year) is attributable to assets that produce or are held
for the production of passive income (the asset test).
    
    
    the excess distribution or gain will be allocated ratably over your holding period
for the ADSs or ordinary shares,
    
    the amount allocated to the current taxable year, and any taxable year prior to the
first taxable year in which we were a PFIC, will be treated as ordinary income, and
    
    the amount allocated to each other year will be subject to the highest tax rate in
effect for that year and the interest charge generally applicable to underpayments of
tax will be imposed on the resulting tax attributable to each such year.
 
 59




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Information Reporting and Backup Withholding
   F.
    
    Dividends and Paying AgentsNot applicable.G.
    
    Statement by ExpertsNot applicable.
 60




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##### Table of Contents



H.
    
    Documents on Display
     I.
    
    Subsidiary InformationFor a listing of our subsidiaries, see Item 4. Information on the CompanyC.
Organizational Structure.
 
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Exchange Risk
   61




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##### Table of Contents



Inflation
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
   
    
    the registration statement on Form F-1 (File number: 333-144451), or the IPO
Registration Statement for our initial public offering of 13,167,500 ADSs, representing
13,167,500 ordinary shares, which IPO Registration Statement was declared effective by
the SEC on August 7, 2007; and
    
    the registration statement on Form F-1 (File number: 333-148729), or the Follow-on
Registration Statement for our follow-on public offering of 6,000,000 ADSs,
representing 6,000,000 ordinary shares, which Follow-on Registration Statement was
declared effective by the SEC on January 31, 2008.
    62




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##### Table of Contents



ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
   
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  63




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ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 .
 For the Year Ended December 31,2006
    
    2007$
    
    
    
    $Audit fees(1)
    
    
    155,890
    
    
    
    668,515Audit-related fees(2)
    
    
    
    
    
    
    1,113,385Tax fees(3)
    
    
    
    
    
    
    98,137
 
 (1)
    
    Audit fees means the aggregate fees billed for professional services rendered by our
principal auditors for the audit of our annual financial statements and the review of our
comparative interim financial statements.(2)
    
    Audit related fees represents aggregate fees billed for professional services rendered by
our principal auditors for the assurance and related services, which mainly included the
issuance of the audit and review of financial statements and other assurance services rendered
in connection with our initial public offering in 2007 and expenses incurred during 2007 for
our subsequent follow-on in January 2008.(3)
    
    Tax fees represents aggregate fees billed for professional services rendered by our
principal auditors for tax compliance, tax advice and tax planning. de minimis
 
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
  
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  64




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##### Table of Contents



ITEM 19. EXHIBITS
 Exhibit Number
    
    Description of Document1.1
    
    Amended and Restated Memorandum and Articles of Association (incorporated
by reference to Exhibit 3.2 from our F-1 registration statement (File No.
333-148729), as amended, initially filed with the Commission on January
17, 2008)8.1
    
    Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1
from our F-1 registration statement (File No. 333-148729), as amended,
initially filed with the Commission on January 17, 2008)11.1
    
    Code of Business Conduct and Ethics of the Registrant (incorporated by
reference to Exhibit 99.1 from our F-1 registration statement (File No.
333-144451), as amended, initially filed with the Commission on July 10,
2007)12.1*
    
    CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2*
    
    CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1*
    
    CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2*
    
    CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200223.1*
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd.23.2*
    
    Consent of Jin Mao PRC Lawyers
 
 *
    
    Filed with this Annual Report on Form 20-F 65




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SIGNATURES
  E-HOUSE (CHINA) HOLDINGS LIMITEDBy
    /s/ Xin ZhouName:
    Xin ZhouTitle:
    Chairman and Chief Executive Officer  66




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2005, 2006 and 2007
    
    F-4Consolidated Statements of Shareholders Equity and Comprehensive Income for the Years Ended December 31, 2005, 2006, and 2007
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2006 and 2007
    
    F-6Notes to Consolidated Financial Statements for the Years Ended December 31, 2005, 2006 and 2007
    
    F-8
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-2




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 CONSOLIDATED BALANCE SHEETS
(In U.S. dollar except for share data)
 December 31,2006
    
    
    2007$
    
    
    $ASSETSCurrent assets:Cash and cash equivalents
    
    
    24,306,005
    
    
    
    101,147,547Restricted cash
    
    
    
    
    
    
    3,091,293Customer deposits
    
    
    8,492,130
    
    
    
    123,338,996Unbilled accounts receivable
    
    
    30,124,777
    
    
    
    55,845,944Accounts receivable, net of allowance
for doubtful accounts of $52,551 and $2,441,796 at December 31, 2006 and
2007, respectively
    
    
    8,677,242
    
    
    
    11,166,552Properties held for sale
    
    
    2,897,196
    
    
    
    872,408Deferred tax assets
    
    
    151,070
    
    
    
    2,684,060Prepaid expenses and other current assets
    
    
    2,472,140
    
    
    
    7,066,549Amounts due from related parties
    
    
    917,814
    
    
    
    2,773,988Total current assets
    
    
    78,038,374
    
    
    
    307,987,337Property and equipment, net
    
    
    3,646,130
    
    
    
    6,502,380Intangible assets, net
    
    
    3,750,111
    
    
    
    3,098,525Goodwill
    
    
    2,227,293
    
    
    
    2,549,398Customer deposits, non-current portion
    
    
    1,280,620
    
    
    
    7,886,672Deferred tax assets, non-current portion
    
    
    435,810
    
    
    
    447,254Other non-current assets
    
    
    51,225
    
    
    
    1,081,508TOTAL ASSETS
    
    
    89,429,563
    
    
    
    329,553,074LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    
    11,367,808
    
    
    
    6,845,000Accounts payable
    
    
    1,258,624
    
    
    
    1,556,785Accrued payroll and welfare expenses
    
    
    4,097,827
    
    
    
    12,631,639Income tax payable
    
    
    7,016,565
    
    
    
    17,880,163Other tax payable
    
    
    2,562,858
    
    
    
    5,567,513Amounts due to related parties
    
    
    266,510
    
    
    
    2,572,399Other payables to property sellers
    
    
    
    
    
    
    3,091,293Other current liabilities
    
    
    2,180,455
    
    
    
    4,365,162Total current liabilities
    
    
    28,750,647
    
    
    
    54,509,954Deferred tax liabilities
    
    
    1,151,919
    
    
    
    751,500Other non-current liabilities
    
    
    
    
    
    
    200,000Total liabilities
    
    
    29,902,566
    
    
    
    55,461,454Commitments and contingencies (Note 18)Minority interest
    
    
    2,328,394
    
    
    
    2,918,600Mezzanine equitySeries A redeemable convertible preferred
shares ($0.001 par value): 22,727,272
authorized, 22,727,272 and nil issued and
outstanding as of December 31, 2006 and
2007, respectively
    
    
    24,828,412
    
    
    
    Shareholders equity:Ordinary shares ($0.001 par value): 57,272,728 and 1,000,000,000 authorized,
50,000,000 and 76,473,759 issued and
outstanding, as of December 31, 2006 and
2007, respectively
    
    
    50,000
    
    
    
    76,474Additional paid-in capital
    
    
    18,399,306
    
    
    
    209,906,488Retained earnings
    
    
    12,979,130
    
    
    
    54,504,945Accumulated other comprehensive income
    
    
    941,755
    
    
    
    6,685,113Total shareholders equity
    
    
    32,370,191
    
    
    
    271,173,020TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    89,429,563
    
    
    
    329,553,074
  F-3




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In U.S. dollar except for share data)
 Years Ended December 31,2005
    
    
    2006
    
    
    2007$
    
    
    $
    
    
    $Total revenues
    
    
    38,660,514
    
    
    
    55,998,524
    
    
    
    121,016,600Cost of revenues
    
    
    (10,818,272
    )
    
    
    (10,243,968
    )
    
    
    (23,510,065
    )Selling, general and administrative expenses
    
    
    (13,249,785
    )
    
    
    (21,321,726
    )
    
    
    (45,545,800
    )Income from operations
    
    
    14,592,457
    
    
    
    24,432,830
    
    
    
    51,960,735Other income (expense):Interest expense
    
    
    (638,499
    )
    
    
    (594,488
    )
    
    
    (621,903
    )Interest income
    
    
    63,113
    
    
    
    206,378
    
    
    
    2,489,668Other income, net
    
    
    132,369
    
    
    
    168,015
    
    
    
    197,892Income before taxes and minority interest
    
    
    14,149,440
    
    
    
    24,212,735
    
    
    
    54,026,392Income tax expense
    
    
    (2,733,265
    )
    
    
    (5,751,102
    )
    
    
    (10,277,040
    )Minority interest
    
    
    (268,461
    )
    
    
    (354,668
    )
    
    
    (2,023,537
    )Net income
    
    
    11,147,714
    
    
    
    18,106,965
    
    
    
    41,725,815Earnings per share:Basic
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.62Diluted
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.56Shares used in computation:Basic
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    60,386,083Diluted
    
    
    50,000,000
    
    
    
    67,372,353
    
    
    
    74,555,709
  F-4




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(In U.S. dollar)
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    Total
    
    TotalPaid-in
    
    Retained
    
    Comprehensive
    
    Subscription
    
    Shareholders
    
    ComprehensiveOrdinary Shares
    
    Capital
    
    Earnings
    
    Income
    
    Receivable
    
    Equity
    
    IncomeNumber
    
    $
    
    $
    
    $
    
    $
    
    $
    
    $
    
    $Balance at January 1, 2005
    
    
    50,000,000
    
    
    
    50,000
    
    
    
    6,041,200
    
    
    
    3,765,591
    
    
    
    1
    
    
    
    (50,000
    )
    
    
    9,806,792
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,147,714
    
    
    
    
    
    
    
    
    
    
    
    11,147,714
    
    
    
    11,147,714Dividend declared ($0.07 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,624,675
    )
    
    
    
    
    
    
    
    
    
    
    (3,624,675
    )
    
    
    Dividend declared upon reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,391,300
    )
    
    
    
    
    
    
    
    
    
    
    (12,391,300
    )
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    303,117
    
    
    
    
    
    
    
    303,117
    
    
    
    303,117Balance at December 31, 2005
    
    
    50,000,000
    
    
    
    50,000
    
    
    
    6,041,200
    
    
    
    (1,102,670
    )
    
    
    303,118
    
    
    
    (50,000
    )
    
    
    5,241,648
    
    
    
    11,450,831Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,106,965
    
    
    
    
    
    
    
    
    
    
    
    18,106,965
    
    
    
    18,106,965Dividend declared ($0.08 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,025,165
    )
    
    
    
    
    
    
    
    
    
    
    (4,025,165
    )
    
    
    Dividend declared upon reorganization returned as
contributed capital
    
    
    
    
    
    
    
    
    
    
    12,341,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,341,300
    
    
    
    Payment of subscription receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    50,000
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    16,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,806
    
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    638,637
    
    
    
    
    
    
    
    638,637
    
    
    
    638,637Balance at December 31, 2006
    
    
    50,000,000
    
    
    
    50,000
    
    
    
    18,399,306
    
    
    
    12,979,130
    
    
    
    941,755
    
    
    
    
    
    
    
    32,370,191
    
    
    
    18,745,602Series A redeemable convertible preferred shares
converted into ordinary shares
    
    
    13,157,895
    
    
    
    13,158
    
    
    
    24,815,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,828,412
    
    
    
    Issuance of ordinary shares, net of issuance costs
    
    
    13,167,500
    
    
    
    13,168
    
    
    
    165,249,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165,262,754
    
    
    
    Vesting of restricted shares
    
    
    148,364
    
    
    
    148
    
    
    
    489,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,601
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,725,815
    
    
    
    
    
    
    
    
    
    
    
    41,725,815
    
    
    
    41,725,815Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200,000
    )
    
    
    
    
    
    
    
    
    
    
    (200,000
    )
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    952,889
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    952,889
    
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,743,358
    
    
    
    
    
    
    
    5,743,358
    
    
    
    5,743,358Balance at December 31, 2007
    
    
    76,473,759
    
    
    
    76,474
    
    
    
    209,906,488
    
    
    
    54,504,945
    
    
    
    6,685,113
    
    
    
    
    
    
    
    271,173,020
    
    
    
    47,469,173
  F-5




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollar)
 Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Operating activities:Net income
    
    
    11,147,714
    
    
    
    18,106,965
    
    
    
    41,725,815Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    1,804,719
    
    
    
    1,103,446
    
    
    
    2,328,527Minority interest
    
    
    268,461
    
    
    
    354,668
    
    
    
    2,023,537Allowance for doubtful receivables
    
    
    
    
    
    
    29,795
    
    
    
    2,359,752Share-based compensation cost
    
    
    
    
    
    
    16,806
    
    
    
    952,889Others
    
    
    (198,262
    )
    
    
    (311,250
    )
    
    
    196,084Changes in operating assets and liabilities:Restricted cash
    
    
    
    
    
    
    
    
    
    
    (829,127
    )Customer deposits
    
    
    (2,020,379
    )
    
    
    (3,568,674
    )
    
    
    (121,452,918
    )Accounts receivable
    
    
    5,612,157
    
    
    
    (26,247,109
    )
    
    
    (31,388,959
    )Amounts due from related parties
    
    
    
    
    
    
    (170,623
    )
    
    
    (1,900,060
    )Deferred taxes
    
    
    (202,538
    )
    
    
    (299,468
    )
    
    
    (2,529,949
    )Prepaid expenses and other current assets
    
    
    (932,652
    )
    
    
    2,139,226
    
    
    
    2,190,645Deferred taxes, non-current portion
    
    
    
    
    
    
    
    
    
    
    (411,861
    )Other non-current assets
    
    
    
    
    
    
    
    
    
    
    (1,026,750
    )Accounts payable
    
    
    (191,366
    )
    
    
    (275,573
    )
    
    
    277,021Accrued payroll and welfare expenses
    
    
    (63,350
    )
    
    
    1,351,020
    
    
    
    8,532,783Income tax payable
    
    
    977,053
    
    
    
    4,003,333
    
    
    
    10,834,505Other tax payable
    
    
    446,108
    
    
    
    940,950
    
    
    
    2,951,409Amounts due to related parties
    
    
    (131,102
    )
    
    
    (445,375
    )
    
    
    1,621,999Other payables to property sellers
    
    
    
    
    
    
    
    
    
    
    829,127Other current liabilities
    
    
    (1,234,312
    )
    
    
    682,020
    
    
    
    1,442,468Net cash
provided by (used in) operating activities
    
    
    15,282,251
    
    
    
    (2,589,843
    )
    
    
    (81,273,063
    )Investing activities:Purchases of property and equipment
    
    
    (1,655,133
    )
    
    
    (1,464,976
    )
    
    
    (4,287,825
    )Purchase of subsidiaries, net of cash acquired
    
    
    
    
    
    
    (1,478,431
    )
    
    
    (568,640
    )Purchase of minority interests of subsidiaries
    
    
    (99,130
    )
    
    
    (72,995
    )
    
    
    (1,331,400
    )Purchase of subsidiary upon reorganization
    
    
    
    
    
    
    (12,391,300
    )
    
    
    Proceeds from sale of properties held for sale
    
    
    4,235,035
    
    
    
    2,000,443
    
    
    
    627,027Proceeds from disposal of property and equipment
    
    
    97,530
    
    
    
    61,712
    
    
    
    16,597Proceeds from sale of investment
    
    
    1,339,374
    
    
    
    
    
    
    
    Loans to related parties
    
    
    (9,689,382
    )
    
    
    (2,370,948
    )
    
    
    Repayment of loans to related parties
    
    
    10,389,698
    
    
    
    3,092,911
    
    
    
    43,885Net cash provided by (used in) investing activities
    
    
    4,617,992
    
    
    
    (12,623,584
    )
    
    
    (5,500,356
    )
 F-6




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollar)
 Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Financing activities:Repayment of short-term borrowings
    
    
    (3,585,889
    )
    
    
    (381,700
    )
    
    
    (4,233,916
    )Dividend paid
    
    
    (9,325,713
    )
    
    
    (4,213,465
    )
    
    
    Advance from a related party
    
    
    
    
    
    
    
    
    
    
    1,440,001Contribution from minority shareholders
    
    
    32,052
    
    
    
    37,353
    
    
    
    Dividend declared upon reorganization returned as contributed capital
    
    
    
    
    
    
    12,341,300
    
    
    
    Proceeds from issuance of preferred shares (net of issuance costs of $171,588)
    
    
    
    
    
    
    24,828,412
    
    
    
    Proceeds from payment of subscription receivable
    
    
    
    
    
    
    50,000
    
    
    
    Proceeds from issuance of ordinary shares (net of issuance cost of $16,106,695)
    
    
    
    
    
    
    
    
    
    
    165,612,754Dividends to minority interests
    
    
    
    
    
    
    
    
    
    
    (644,194
    )Loans from related parties
    
    
    6,453,949
    
    
    
    2,091,559
    
    
    
    1,264,698Repayment of loans from related parties
    
    
    (11,090,214
    )
    
    
    (8,340,065
    )
    
    
    (1,331,797
    )Net cash provided by (used in)financing activities
    
    
    (17,515,815
    )
    
    
    26,413,394
    
    
    
    162,107,546Effect of exchange rate changes
    
    
    257,466
    
    
    
    393,545
    
    
    
    1,507,415Net increase in cash and cash equivalents
    
    
    2,641,894
    
    
    
    11,593,512
    
    
    
    76,841,542Cash and cash equivalents at the beginning of the year
    
    
    10,070,599
    
    
    
    12,712,493
    
    
    
    24,306,005Cash and cash equivalents at the end of the year
    
    
    12,712,493
    
    
    
    24,306,005
    
    
    
    101,147,547Supplemental disclosure of cash flow information:Interest paid
    
    
    638,499
    
    
    
    594,488
    
    
    
    621,903Income taxes paid
    
    
    2,148,624
    
    
    
    1,857,044
    
    
    
    3,559,865Non-cash investing and financing activities:Acquisition of properties held for sale  Accounts receivable
    
    
    
    
    
    
    
    
    
    
    859,850Acquisition of minority interest  Accounts payable
    
    
    
    
    
    
    114,928
    
    
    
    Dividend payable
    
    
    12,391,300
    
    
    
    
    
    
    
    Capitalization initial public offering cost  other current liabilities
    
    
    
    
    
    
    
    
    
    
    350,000Provision for FIN 48 uncertain tax positions
    
    
    
    
    
    
    
    
    
    
    200,000
  F-7




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##### Table of Contents



E-HOUSE (CHINA) HOLDINGS LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollar)
 1. Organization and Principal Activities
     Date of
    
    Place of
    
    Percentage ofSubsidiary
    
    incorporation
    
    incorporation
    
    ownershipShanghai Real Estate Consultant & Sales (Group) Co., Ltd
    
    August 15, 2000
    
    PRC
    
    
    100
    %Shanghai City Rehouse Agent Consultants Co., Ltd
    
    May 17, 2002
    
    PRC
    
    
    85
    %E-House International Estate Agency Limited
    
    March 25, 2003
    
    Hong Kong
    
    
    100
    %E-House Real Estate Ltd
    
    January 4, 2005
    
    BVI
    
    
    100
    %CRIC (Shanghai) Information Technology Co., Ltd
    
    July 3, 2006
    
    PRC
    
    
    100
    %
   2. Summary of Principal Accounting Policies
 (a) Basis of presentation
  (b) Basis of consolidation
  F-8




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##### Table of Contents



(c) Use of estimates
  (d) Fair value of financial instruments
   (e) Business combinations
  (f) Cash and cash equivalents
  (g) Restricted Cash
  (h) Customer deposits
  (i) Unbilled accounts receivable
  (j) Properties held for sale
  F-9




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##### Table of Contents



(k) Investments
   (l) Property and equipment, net
  Leasehold improvements
    
    Over the shorter of the lease term or their estimated useful livesBuildings
    
    30 yearsFurniture, fixtures and equipment
    
    5 yearsMotor vehicles
    
    5 years
  (m) Intangible assets, net
  (n) Impairment of long-lived assets
  (o) Impairment of goodwill and indefinite lived intangible assets
   F-10




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##### Table of Contents



(p) Income taxes
   (q) Share-based compensation
  (r) Revenue recognition
       F-11




---



##### Table of Contents



(s) Cost of revenue
  (t) Advertising expenses
  (u) Foreign currency translation
    (v) Concentration of credit risk
    2005
    
    2006
    
    2007$
    
    $
    
    $Balance as of January 1,
    
    
    82,693
    
    
    
    35,892
    
    
    
    52,551Provision for doubtful accounts
    
    
    
    
    
    
    29,795
    
    
    
    2,359,752Write offs
    
    
    (48,305
    )
    
    
    (19,680
    )
    
    
    Change due to foreign exchange
    
    
    1,504
    
    
    
    6,544
    
    
    
    29,493Balance as of December 31,
    
    
    35,892
    
    
    
    52,551
    
    
    
    2,441,796
 (w) Earnings per Share
    F-12




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##### Table of Contents



Years Ended December 31,2005
    
    
    2006
    
    
    2007Net income attributable to ordinary shareholders  basic
    
    $
    11,147,714
    
    
    $
    13,437,979
    
    
    $
    37,263,701Amount allocated to Series A Shares for participating rights to dividends
    
    
    
    
    
    $
    4,668,986
    
    
    $
    4,462,114Net income attributable to ordinary shareholders  diluted
    
    $
    11,147,714
    
    
    $
    18,106,965
    
    
    $
    41,725,815Weighted average ordinary shares outstanding
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    60,386,083Stock options
    
    
    
    
    
    
    
    
    
    
    397,393Series A preferred shares
    
    
    
    
    
    
    17,372,353
    
    
    
    13,772,233Weighted average number of ordinary shares outstanding  diluted
    
    
    50,000,000
    
    
    
    67,372,353
    
    
    
    74,555,709Basic earnings per share
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.62Diluted earnings per share
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.56
 (x) Recently issued accounting pronouncements
      3. Properties Held for Sale
  F-13




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##### Table of Contents



4. Acquisitions of Subsidiaries and Minority Interest
   5. Property and Equipment, Net
  As of December 312006
    
    2007$
    
    $Leasehold improvements
    
    
    1,989,083
    
    
    
    3,346,027Buildings
    
    
    1,008,345
    
    
    
    1,052,480Furniture, fixtures and equipment
    
    
    2,074,406
    
    
    
    3,839,130Motor vehicles
    
    
    1,241,887
    
    
    
    2,664,113Total
    
    
    6,313,721
    
    
    
    10,901,750Less: Accumulated depreciation
    
    
    (2,667,591
    )
    
    
    (4,399,370
    )Property and equipment, net
    
    
    3,646,130
    
    
    
    6,502,380
  6. Intangible Assets, Net
 As of December 31,2006
    
    2007$
    
    $Intangible assets not subject to amortization
are comprised of the following:Trademark
    
    
    687,172
    
    
    
    692,480
 F-14




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##### Table of Contents



As of December 31,2006
    
    2007$
    
    $Intangible assets subject to amortization are comprised of the following:Customer contracts
    
    
    4,540,168
    
    
    
    4,853,501Computer software licenses
    
    
    336,876
    
    
    
    401,1954,877,044
    
    
    
    5,254,696Less: Accumulated amortizationCustomer contracts
    
    
    (1,623,702
    )
    
    
    (2,572,930
    )Computer software licenses
    
    
    (190,403
    )
    
    
    (275,721
    )(1,814,105
    )
    
    
    (2,848,651
    )Intangible assets subject to amortization, net
    
    
    3,062,939
    
    
    
    2,406,045Total intangible assets, net
    
    
    3,750,111
    
    
    
    3,098,525
  7. Goodwill
  Primary realestate agency and
    
    Secondaryreal estate
    
    real estateconsulting
    
    brokerageand information
    
    serviceservice segment
    
    segment
    
    Total$
    
    $
    
    $Balance as of January 1, 2006
    
    
    1,948,425
    
    
    
    
    
    
    
    1,948,425Goodwill recognized upon acquisition
    
    
    213,629
    
    
    
    
    
    
    
    213,629Exchange rate translation
    
    
    65,239
    
    
    
    
    
    
    
    65,239Balance as of December 31, 2006
    
    
    2,227,293
    
    
    
    
    
    
    
    2,227,293Goodwill recognized upon acquisition
    
    
    100,067
    
    
    
    67,447
    
    
    
    167,514Exchange rate translation
    
    
    153,713
    
    
    
    878
    
    
    
    154,591Balance as of December 31, 2007
    
    
    2,481,073
    
    
    
    68,325
    
    
    
    2,549,398
 8. Short-Term Borrowing
   F-15




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##### Table of Contents



9. Redeemable Convertible Preferred Shares
   Dividends
  Redemption
  Conversion
  Voting rights
  Liquidation preference
  F-16




---



##### Table of Contents



10. Shares Split
  11. Other Income
 Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Gain from sale of investment
    
    
    132,369
    
    
    
    142,058
    
    
    
    525,220Gain from sale of marketable securities
    
    
    
    
    
    
    25,957
    
    
    
    Fund management fee
    
    
    
    
    
    
    
    
    
    
    339,181Foreign exchange losses
    
    
    
    
    
    
    
    
    
    
    (666,509
    )Total other income
    
    
    132,369
    
    
    
    168,015
    
    
    
    197,892
 12. Income Tax
  Years Ended December 312005
    
    2006
    
    2007$
    
    $
    
    $Current TaxPRC
    
    
    2,935,803
    
    
    
    6,050,570
    
    
    
    13,127,387Other
    
    
    
    
    
    
    
    
    
    
    2,935,803
    
    
    
    6,050,570
    
    
    
    13,127,387Deferred TaxPRC
    
    
    (202,538
    )
    
    
    (299,468
    )
    
    
    (2,850,347
    )Other
    
    
    
    
    
    
    
    
    
    
    (202,538
    )
    
    
    (299,468
    )
    
    
    (2,850,347
    )Income tax expense
    
    
    2,733,265
    
    
    
    5,751,102
    
    
    
    10,277,040
        F-17




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##### Table of Contents



Unrecognized Tax Benefit  January 1, 2007
    
    $
    200,000Gross increases  tax positions in prior period
    
    
    Gross decreases  tax positions in prior period
    
    
    Gross increases  tax positions in current period
    
    
    Settlements
    
    
    Lapse of statute of limitations
    
    
    Unrecognized Tax Benefit  December 31, 2007
    
    $
    200,000
  F-18




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##### Table of Contents



As of December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Deferred tax assets:Accrued salary expenses
    
    
    94,906
    
    
    
    348,505
    
    
    
    2,501,150Bad debt provision
    
    
    54,872
    
    
    
    58,575
    
    
    
    596,560Start-up costs
    
    
    86,415
    
    
    
    100,575
    
    
    
    63,554Decoration
    
    
    19,413
    
    
    
    33,576
    
    
    
    170,112Advertising expenses
    
    
    
    
    
    
    
    
    
    
    14,625Fair value assets step-up
    
    
    49,984
    
    
    
    45,649
    
    
    
    43,110Impairment
for properties held for sales
    
    
    
    
    
    
    
    
    
    
    10,663Net operating loss carryforwards
    
    
    248,775
    
    
    
    994,564
    
    
    
    1,746,906Gross deferred tax assets
    
    
    554,365
    
    
    
    1,581,444
    
    
    
    5,146,680Valuation allowance
    
    
    (248,775
    )
    
    
    (994,564
    )
    
    
    (2,015,366
    )Total deferred tax assets
    
    
    305,590
    
    
    
    586,880
    
    
    
    3,131,314Analysis as:Current
    
    
    82,564
    
    
    
    151,070
    
    
    
    2,684,060Non-current
    
    
    223,026
    
    
    
    435,810
    
    
    
    447,254Deferred tax liabilities:Amortization of intangible and other assets
    
    
    933,683
    
    
    
    1,151,919
    
    
    
    751,500Total deferred tax liabilities
    
    
    933,683
    
    
    
    1,151,919
    
    
    
    751,500Analysis as:Current
    
    
    
    
    
    
    
    
    
    
    Non-current
    
    
    933,683
    
    
    
    1,151,919
    
    
    
    751,500
  2005
    
    2006
    
    2007$
    
    $
    
    $Balance as of January 1,
    
    
    277,429
    
    
    
    248,775
    
    
    
    994,564Addition
    
    
    77,045
    
    
    
    779,554
    
    
    
    1,005,463Release
    
    
    (112,792
    )
    
    
    (42,097
    )
    
    
    (91,077
    )Change due to foreign exchange
    
    
    7,093
    
    
    
    8,332
    
    
    
    106,416Balance as of December 31,
    
    
    248,775
    
    
    
    994,564
    
    
    
    2,015,366
  Year Ended December 31,2005
    
    2006
    
    2007PRC income tax rate
    
    
    33.00
    %
    
    
    33.00
    %
    
    
    33.00
    %Expenses not deductible for tax purposes
    
    
    3.74
    %
    
    
    2.13
    %
    
    
    1.08
    %Investment income under equity method
    
    
    (1.57
    %)
    
    
    (1.09
    %)
    
    
    Tax exemption granted to group
    
    
    (2.76
    %)
    
    
    
    
    
    
    (1.66
    %)Effect of lower rates in certain domestic locations
    
    
    (14.10
    %)
    
    
    (12.11
    %)
    
    
    (14.35
    %)Effect of different tax rate of subsidiary operation in other jurisdiction
    
    
    1.21
    %
    
    
    (1.26
    %)
    
    
    (0.46
    %)Effect of new income tax law
    
    
    
    
    
    
    
    
    
    
    (0.70
    %)Valuation allowance movement
    
    
    (0.20
    %)
    
    
    3.08
    %
    
    
    2.11
    %19.32
    %
    
    
    23.75
    %
    
    
    19.02
    %
  F-19




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##### Table of Contents



Year Ended December 31,2005
    
    
    2006
    
    
    2007$
    
    
    $
    
    
    $The aggregate dollar effect
    
    
    391,140
    
    
    
    
    
    
    
    633,549Per share effect basic
    
    
    0.01
    
    
    
    
    
    
    
    0.01Per share effectdiluted
    
    
    0.01
    
    
    
    
    
    
    
    0.01
   13. Share-Based Compensation
       2006
    
    2007Average risk-free rate of return
    
    
    4.50
    %
    
    
    4.76
    %Weighted average expected option life
    
    10 years
    
    10 yearsAverage estimated volatility rate
    
    
    49.0
    %
    
    
    62.7
    %Average dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
 F-20




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##### Table of Contents



Fair value ofGrant date
    
    No. of options granted
    
    
    Exercise price
    
    
    ordinary shares$
    
    
    $March 9, 2007
    
    
    300,000
    
    
    
    5.50
    
    
    
    5.50July 23, 2007
    
    
    915,000
    
    
    
    12.50
    
    
    
    12.50
   Weighted averageWeighted average
    
    remaining
    
    Aggregate intrinsicNo. of options
    
    exercise price
    
    contractual term
    
    value of options$
    
    
    
    
    
    $Outstanding as of January 1, 2007
    
    
    436,364
    
    
    
    3.30
    
    
    9.9 yearsGranted
    
    
    1,215,000
    
    
    
    10.77Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Cancelled
    
    
    (436,364
    )
    
    
    3.30Outstanding, as of December 31, 2007
    
    
    1,215,000
    
    
    
    10.77
    
    
    9.5 years
    
    15,867,900Unvested and expected to vest as of
December 31, 2007
    
    
    1,077,750
    
    
    
    10.55
    
    
    9.5 years
    
    14,312,520
   Weighted averageNo. of
    
    
    Weighted average
    
    
    remainingRestricted tocks
    
    
    Grant-date fair value
    
    
    contractual term$Nonvested as of January 1, 2007
    
    
    Granted
    
    
    436,364
    
    
    
    1.39
    
    
    9.9 yearsVested
    
    
    (148,364
    )
    
    
    1.39Forfeited
    
    
    
    
    
    
    Nonvested as of December 31, 2007
    
    
    288,000
    
    
    
    1.39
    
    
    8.9 years
    14. Employee Benefit Plans
  F-21




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##### Table of Contents



15. Distribution of Profits
    16. Segment Information
     Primary realestate agency and
    
    
    Secondaryreal estate
    
    
    real estateconsulting
    
    
    brokerageand information
    
    
    service2007
    
    service segment
    
    
    segment
    
    
    Non-allocated
    
    
    Total$
    
    
    $
    
    
    $
    
    
    $Revenues from external customers
    
    
    109,128,157
    
    
    
    11,888,443
    
    
    
    
    
    
    
    121,016,600Cost of revenues
    
    
    (23,510,065
    )
    
    
    
    
    
    
    
    
    
    
    (23,510,065
    )Selling, general and administrative expenses
    
    
    (28,180,514
    )
    
    
    (14,997,248
    )
    
    
    (2,368,038
    )
    
    
    (45,545,800
    )Income/(loss) from operations
    
    
    57,437,578
    
    
    
    (3,108,805
    )
    
    
    (2,368,038
    )
    
    
    51,960,735Interest expense
    
    
    
    
    
    
    
    
    
    
    (621,903
    )
    
    
    (621,903
    )Interest income
    
    
    886,936
    
    
    
    36,274
    
    
    
    1,566,458
    
    
    
    2,489,668Other
income/(loss)
    
    
    249,627
    
    
    
    96,372
    
    
    
    (148,107
    )
    
    
    197,892Income before taxes and minority interest
    
    
    58,574,141
    
    
    
    (2,976,159
    )
    
    
    (1,571,590
    )
    
    
    54,026,392Income tax expense
    
    
    (10,272,534
    )
    
    
    (4,506
    )
    
    
    
    
    
    
    (10,277,040
    )Net income/(loss) after taxes before minority interest
    
    
    48,301,607
    
    
    
    (2,980,665
    )
    
    
    (1,571,590
    )
    
    
    43,749,352
 F-22




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##### Table of Contents



Primary realestate agency and
    
    Secondaryreal estate
    
    real estateconsulting
    
    brokerageand information
    
    service2006
    
    service segment
    
    segment
    
    Non-allocated
    
    Total$
    
    $
    
    $
    
    $Revenues from external customers
    
    
    52,153,228
    
    
    
    3,845,296
    
    
    
    
    
    
    
    55,998,524Cost of revenues
    
    
    (10,243,968
    )
    
    
    
    
    
    
    
    
    
    
    (10,243,968
    )Selling, general and administrative expenses
    
    
    (14,100,136
    )
    
    
    (5,285,358
    )
    
    
    (1,936,232
    )
    
    
    (21,321,726
    )Income/(Loss) from operations
    
    
    27,809,124
    
    
    
    (1,440,062
    )
    
    
    (1,936,232
    )
    
    
    24,432,830Interest expense
    
    
    
    
    
    
    
    
    
    
    (594,488
    )
    
    
    (594,488
    )Interest income
    
    
    200,263
    
    
    
    6,115
    
    
    
    
    
    
    
    206,378Income/(Loss) before taxes and minority interest
    
    
    28,177,402
    
    
    
    (1,433,947
    )
    
    
    (2,530,720
    )
    
    
    24,212,735Income tax expense
    
    
    (5,751,102
    )
    
    
    
    
    
    
    
    
    
    
    (5,751,102
    )Net income/(loss) after taxes before minority interest
    
    
    22,426,300
    
    
    
    (1,433,947
    )
    
    
    (2,530,720
    )
    
    
    18,461,633
 Primary realestate agency and
    
    Secondaryreal estate
    
    real estateconsulting
    
    brokerageand information
    
    service2005
    
    service segment
    
    segment
    
    Non-allocated
    
    Total$
    
    $
    
    $
    
    $Revenues from external customers
    
    
    38,660,514
    
    
    
    
    
    
    
    
    
    
    
    38,660,514Cost of revenues
    
    
    (10,818,272
    )
    
    
    
    
    
    
    
    
    
    
    (10,818,272
    )Selling, general and administrative expenses
    
    
    (12,721,197
    )
    
    
    
    
    
    
    (528,588
    )
    
    
    (13,249,785
    )Income/(Loss) from operations
    
    
    15,121,045
    
    
    
    
    
    
    
    (528,588
    )
    
    
    14,592,457Interest expense
    
    
    
    
    
    
    
    
    
    
    (638,499
    )
    
    
    (638,499
    )Interest income
    
    
    63,113
    
    
    
    
    
    
    
    
    
    
    
    63,113Income/(Loss) before taxes and minority interest
    
    
    15,316,527
    
    
    
    
    
    
    
    (1,167,087
    )
    
    
    14,149,440Income tax expense
    
    
    (2,733,265
    )
    
    
    
    
    
    
    
    
    
    
    (2,733,265
    )Net income/(loss) after taxes before minority interest
    
    
    12,583,262
    
    
    
    
    
    
    
    (1,167,087
    )
    
    
    11,416,175
 Geographic
 Substantially all of the Groups revenues from external customers and long-lived assets are
located in the PRC.
 Service lines
  Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Primary real estate agency service
    
    
    34,501,600
    
    
    
    45,708,032
    
    
    
    100,541,226Secondary real estate brokerage service
    
    
    361,144
    
    
    
    3,845,296
    
    
    
    11,888,443Real estate consulting and information service
    
    
    3,797,770
    
    
    
    6,445,196
    
    
    
    8,586,931Total revenues
    
    
    38,660,514
    
    
    
    55,998,524
    
    
    
    121,016,600
 F-23




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##### Table of Contents



Major customers
  Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Customer A
    
    
    5,860,942
    
    
    
    
    
    
    
    Customer B
    
    
    4,190,025
    
    
    
    
    
    
    
    Customer C
    
    
    
    
    
    
    
    
    
    
    25,478,208Customer D
    
    
    
    
    
    
    
    
    
    
    17,710,007
  Years Ended December 31,2006
    
    2007$
    
    $Customer D
    
    
    
    
    
    
    16,240,944
 17. Related Party Balances and Transactions
  As of December 31,2006
    
    2007$
    
    $Customer and supplier
    
    
    170,623
    
    
    
    1,730,656Other
    
    
    747,191
    
    
    
    1,043,332Total amounts due from related parties
    
    
    917,814
    
    
    
    2,773,988
  As of December 31,2006
    
    2007$
    
    $Management
    
    
    
    
    
    
    (950,401
    )Shareholders
    
    
    (12,316
    )
    
    
    Directors
    
    
    (253,631
    )
    
    
    Other
    
    
    (563
    )
    
    
    (1,621,998
    )Total amounts due to related parties
    
    
    (266,510
    )
    
    
    (2,572,399
    )
 (a) Customer and supplier
  Years Ended December 31,2005
    
    2006
    
    2007$
    
    $
    
    $Revenue  Shanghai Yueshun Real Estate Development Co., Ltd.
    
    
    
    
    
    
    167,858
    
    
    
    2,801,505Cost of revenues  Shanghai Xuyang Media Co., Ltd.
    
    
    (1,192,334
    )
    
    
    (257,971
    )
    
    
    Selling and marketing expenses  Shanghai Xuyang Media Co., Ltd.
    
    
    (39,367
    )
    
    
    (105,322
    )
    
    
    
 As of December 31,2006
    
    2007$
    
    $Accounts receivable  Shanghai Yueshun Real
Estate Development Co., Ltd.
    
    
    170,623
    
    
    
    1,730,656
  F-24




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##### Table of Contents



(b) Shareholders
 As of December 31,2006
    
    2007$
    
    $Shanghai Jinhongyun Investments Consultancy Ltd.(1)
    
    
    (12,316
    )
    
    
    
 
 Note:(1)
    
    The entity was one of the shareholders of E-House Shanghai for the year ended December 31,
2004 and through April 22, 2005. The amount payable to shareholder as of December 31, 2006
represents a cash advance to the Group. (c) Directors
 As of December 31,2006
    
    2007$
    
    $Xin Zhou(1)
    
    
    (110,169
    )
    
    
    Xudong Zhu(1)
    
    
    (95,884
    )
    
    
    Nanpeng Shen(2)
    
    
    (47,578
    )
    
    
    Total amounts payable to directors
    
    
    (253,631
    )
    
    
    
 
 Note:(1)
    
    Mr. Zhou is Chairman and Chief Executive Officer of the Group. Mr. Zhu is a director and
officer of the Group. The amount payable to Mr. Zhou as of December 31, 2006 represents a loan to
the Group. The amount payable to Mr. Zhu as of December 31, 2006 represents a payable of $57,464 by
the Group for the purchase of minority interest in a subsidiary held by Mr. Zhu and a loan of
$38,419 to the Group.(2)
    
    Mr. Shen is a director of the Group. The amount payable as of December 31, 2006 represents a
loan to the Group.  (d) Management
 The amount due to management represents consideration paid by management for unvested
restricted shares. (See Note 12)
 (e) Affiliates
 As of December 312006
    
    2007$
    
    $Turbo Chance Co., Ltd. (1)
    
    
    740,954
    
    
    
    704,421E-House Property Investment 1 (China) Limited (2)
    
    
    6,237
    
    
    
    338,911Total amounts due from other related parties
    
    
    747,191
    
    
    
    1,043,332E-House Property Investment 1 (China) Limited (2)
    
    
    
    
    
    
    (1,621,998
    )Shanghai E-House (HK) Limited (3)
    
    
    (563
    )
    
    
    Total amounts payable to other related parties
    
    
    (563
    )
    
    
    (1,621,998
    )
 
 Note:(1)
    
    Entity is controlled by Xin Zhou. The balance as of December 31, 2007 represents a prepaid
acquisition cost in connection with an acquisition with a third party of a secondary real
estate brokerage company in Hangzhou, for which the entity is acting as an intermediary. The
amount was intended to be applied towards the acquisition of Hangzhou Cityrehouse Real Estate
Broker Co., Ltd. (Hangzhou Chenxin), which occurred in December 2007. The amount is
unsecured, interest free and has no fixed repayment term.(2)
    
    Entity is partially owned by Xin Zhou and Nanpeng Shen, directors of the Company. In connecti
on with a primary real estate project, the entity contributed 50% of the customer deposit paid
to the developer client and is entitled to 50% of the projects profits. For the years ended
December 31, 2007, E-House Property Investment 1 (China) Limited had earned $1,621,998 from
the project, all of which was recorded as cost of sales and was payable as of December 31,
2007.The Company was entitled to $339,181 in fund management fees from the project, all of
which was recorded as other income and was receivable as of December 31, 2007.(3)
    
    Entity is controlled by Xin Zhou. The amount payable represents expenses paid by the entity
on behalf of the Company. F-25




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##### Table of Contents



Other related party transactions:
     18. COMMITMENTS AND CONTINGENCIES
 a) Operating lease commitments
   Year ending December 31
    
    $2008
    
    
    6,032,5902009
    
    
    4,313,8652010
    
    
    1,748,7592011
    
    
    678,0622012
    
    
    363,354Total
    
    
    13,136,630
 b) Contingencies
  19. Subsequent Events
   F-26




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F-27