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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, 2005.
 Commission file number: 000-30134
 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 ___________________
 CDC Corporation
  Cayman Islands
 Suite I, 5/F. Building A
East Gate Plaza
9 Dongzhong Street, Dongcheng District
Beijing 100027
Peoples Republic of China
011-8610-5129-8700
e-mail: investor_relations@cdccorporation.net
  Class A common shares
  Class of shares
    
    Number outstanding as of March 31, 2006Class A common shares
    
    111,655,585Preferred Shares
    
    Nil
 o þ
 o þ
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ
 o þ




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TABLE OF CONTENTS
 PagePART I.Item 1. Identity of Directors, Senior Management And Advisors
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    4Item 4. Information on the Company
    
    
    44Item 4A. Unresolved Staff Comments
    
    
    79Item 5. Operating and Financial Review and Prospects
    
    
    80Item 6. Directors, Senior Management and Employees
    
    
    109Item 7. Major Shareholders and Related Party Transactions
    
    
    123Item 8. Financial Information
    
    
    129Item 9. The Offer and Listing
    
    
    129Item 10. Additional Information
    
    
    130Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    141Item 12. Description of Securities Other Than Equity Securities
    
    
    144PART II.Item 13. Defaults, Dividend Arrears and Delinquencies
    
    
    144Item 14. Material Modifications To The Rights Of Security Holders And Use Of Proceeds
    
    
    144Item 15. Controls and Procedures
    
    
    145Item 16. [Reserved]
    
    
    145Item 16A. Audit Committee Financial Expert
    
    
    145Item 16B. Code of Ethics
    
    
    145Item 16C. Principal Accountant Fees and Services
    
    
    145Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    146Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    146PART III.Item 17. Financial Statements
    
    
    147Item 18. Financial Statements
    
    
    147Item 19. Exhibits
    
    
    147SIGNATURES
    
    
    152EX-2.(A)4 2005 STOCK INCENTIVE PLAN, AS AMENDEDEX-4.(A)26 ASSET PURCHASE AGREEMENT-JRG SOFTWAREEX-4.(A)27 ASSET PURCHASE AGREEMENT-HORIZONEX-4.(A)28 SHARE PURCHASE AGREEMENT-17GAMEEX-4.(A)29 STOCK PURCHASE AGREEMENT-C360EX-4.(A)30 AMENDMENT TO STOCK PURCHASE AGREEMENT-C360EX-4.(A)31 SHARE PURCHASE AGREEMENT-SHENZHEN KKEX-4.(A)32 SUPPLEMENTARY AGREEMENT-SHENZHEN KKEX-4.(C)3 TERMINATION AND RELEASE AGREEMENT-APOLEX-4.(C)4 OPTION TRANSFER AGREEMENT-APOLEX-4.(C)5 TERMINATION AND RELEASE AGREEMENTEX-8 LIST OF PRINCIPAL SUBSIDIARIESEX-12.1 SECTION 302, CERTIFICATION OF THE CEOEX-12.1 SECTION 302, CERTIFICATIONI OF THE CFOEX-13.(A)1 SECTION 906, CERTIFICATION OF THE CEOEX-13.(A)2 SECTION 906, CERTIFICATION OF THE CFOEX-15.(A)1 CONSENT OF ERNST & YOUNGEX-15.(A)2 CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-15.(A)3 CONSENT OF DELOITTE TOUCHE TOHMATSU




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PART I.
 General Introduction
     Forward-Looking Statements
    
    
    our goals and strategies in each of our target markets;
 1




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
    
    our competitive strengths in each of our target markets;
    
    expectations and targets for our results of operations;
    
    our business prospects;
    
    the expected growth of the enterprise software, mobile services and applications, internet and media and business services markets;
    
    the pace of change in the enterprise software, mobile services and applications, internet and media and business services markets;
    
    the demand for enterprise software, mobile services and applications, internet and media and business services products and services; and
    
    our acquisition and expansion strategy.
  
    
    our ability to operate in markets in which we lack experience and have a limited operating history;
    
    our ability to integrate the operations of the various businesses we have acquired;
    
    our ability to grow our businesses organically in the future;
    
    our ability to manage distinct business segments several of which are quite disparate;
    
    our ability to manage costs, particularly as a result of our prior acquisition strategy;
    
    risks associated with the development and licensing of software in general, including potential delays in software development and technical difficulties that
may be encountered in the development or use of our software;
    
    the development of new software technologies and applications or services affecting our current and future business;
    
    our ability to efficiently expand or restructure our software sales organization;
    
    our ability to take advantage of opportunities to market and sell our enterprise software products and services to customers directly and through distribution
channels and business partners in Asia;
    
    our ability to successfully develop, market and sell enterprise software products for specific micro-vertical industry segments;
    
    our ability to protect intellectual property rights for our software products;
    
    our ability to accurately estimate the costs of our business services engagements which are billed on a fixed price basis;
    
    the risk that our various contractual relationships with China Mobile or China Unicom will terminate or be altered in a way that adversely affects our mobile
services and applications business;
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
    
    any changes in the regulatory policies of the Ministry of Information Industry (MII) in the PRC, or MII, and other relevant government authorities relating
to, among other matters, the grant and approval of mobile services and applications licenses, acceptance of existing ownership structures, and regulating
content delivered;
    
    the future growth of the mobile telecommunications industry in the PRC;
    
    our ability to maintain up-to-date datasets in our database marketing business;
    
    changes in political, economic, legal and social environment in the PRC, including the Chinese governments specific policies with respect to foreign
investment in the telecommunications industry, economic growth, inflation, foreign exchange and the availability of credit;
    
    the uncertain economic and political climate in Asia, U.S. and throughout the rest of the world, and the potential that such climate may further deteriorate;
and
    
    increased global competition.
  
 ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
  3




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ITEM 3. KEY INFORMATION
 A. Selected Financial Data
     4




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INCOME STATEMENT DATA:
 Year ended December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(in thousands, except share and per share data)Revenues:CDC Software
    
    $
    17,806
    
    
    $
    16,332
    
    
    $
    53,368
    
    
    $
    150,806
    
    
    $
    201,653China.com
    
    
    11,904
    
    
    
    6,468
    
    
    
    24,483
    
    
    
    31,877
    
    
    
    43,38429,710
    
    
    
    22,800
    
    
    
    77,851
    
    
    
    182,683
    
    
    
    245,037Cost of Revenues:CDC Software
    
    
    (12,077
    )
    
    
    (6,828
    )
    
    
    (32,668
    )
    
    
    (71,316
    )
    
    
    (89,290
    )China.com
    
    
    (5,636
    )
    
    
    (4,197
    )
    
    
    (6,209
    )
    
    
    (7,916
    )
    
    
    (18,711
    )(17,713
    )
    
    
    (11,025
    )
    
    
    (38,877
    )
    
    
    (79,232
    )
    
    
    (108,001
    )Gross profit
    
    
    11,997
    
    
    
    11,775
    
    
    
    38,974
    
    
    
    103,451
    
    
    
    137,036Selling, general and administrative expenses
    
    
    (69,949
    )
    
    
    (22,307
    )
    
    
    (31,606
    )
    
    
    (80,342
    )
    
    
    (101,954
    )Research and development expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,825
    )
    
    
    (21,325
    )Depreciation and amortization expenses
    
    
    (19,007
    )
    
    
    (9,015
    )
    
    
    (7,454
    )
    
    
    (12,276
    )
    
    
    (16,162
    )Impairment of goodwill and intangible assets
    
    
    (21,908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,387
    )
    
    
    (1,256
    )Total operating expenses
    
    
    (110,864
    )
    
    
    (31,322
    )
    
    
    (39,060
    )
    
    
    (109,830
    )
    
    
    (140,697
    )Operating loss
    
    
    (98,867
    )
    
    
    (19,547
    )
    
    
    (86
    )
    
    
    (6,379
    )
    
    
    (3,661
    )Interest income
    
    
    26,491
    
    
    
    23,631
    
    
    
    13,412
    
    
    
    9,653
    
    
    
    8,074Interest expense
    
    
    (1,266
    )
    
    
    (2,461
    )
    
    
    (1,070
    )
    
    
    (1,895
    )
    
    
    (1,175
    )Loss arising from share issuance of a subsidiary
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (loss) on disposal of available-for-sale securities
    
    
    4,411
    
    
    
    (163
    )
    
    
    4,599
    
    
    
    167
    
    
    
    525Gain (loss) on disposal of subsidiaries and cost
investments
    
    
    (1,915
    )
    
    
    (66
    )
    
    
    (1,263
    )
    
    
    892
    
    
    
    483Other non-operating gains
    
    
    
    
    
    
    508
    
    
    
    934
    
    
    
    
    
    
    
    Other non-operating losses
    
    
    (927
    )
    
    
    (288
    )
    
    
    (143
    )
    
    
    
    
    
    
    Impairment of cost investments and available-for-sale
securities
    
    
    (12,260
    )
    
    
    (5,351
    )
    
    
    
    
    
    
    (1,362
    )
    
    
    Share of income (losses) in equity investees(1)
    
    
    (2,592
    )
    
    
    682
    
    
    
    (124
    )
    
    
    (308
    )
    
    
    (1,593
    )Total other income
    
    
    11,887
    
    
    
    16,492
    
    
    
    16,345
    
    
    
    7,147
    
    
    
    6,314Income (loss) before income taxes
    
    
    (86,980
    )
    
    
    (3,055
    )
    
    
    16,259
    
    
    
    768
    
    
    
    2,653Income tax benefit (expenses)
    
    
    (65
    )
    
    
    162
    
    
    
    598
    
    
    
    (7,541
    )
    
    
    (4,574
    )Income (loss) before minority interests
    
    
    (87,045
    )
    
    
    (2,893
    )
    
    
    16,857
    
    
    
    (6,773
    )
    
    
    (1,921
    )Minority interests in losses (income) of consolidated
subsidiaries
    
    
    3,162
    
    
    
    248
    
    
    
    (2,257
    )
    
    
    (1,000
    )
    
    
    (1,565
    )Income (loss) from continuing operations
    
    
    (83,883
    )
    
    
    (2,645
    )
    
    
    14,600
    
    
    
    (7,773
    )
    
    
    (3,486
    )Discontinued operations:Loss from operations of discontinued subsidiaries,
net of tax
    
    
    (40,502
    )
    
    
    (16,131
    )
    
    
    (1,203
    )
    
    
    (610
    )
    
    
    (47
    )Gain (loss) on disposal/dissolution of discontinued
subsidiaries, net
    
    
    
    
    
    
    545
    
    
    
    2,127
    
    
    
    (950
    )
    
    
    (3
    )Net income (loss)
    
    $
    (124,385
    )
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )Basic and diluted earnings (loss) per share from
continuing operations(2)
    
    
    (0.82
    )
    
    
    (0.03
    )
    
    
    0.14
    
    
    
    (0.07
    )
    
    
    (0.03
    )Basic and diluted earnings (loss) per share(2)
    
    
    (1.21
    )
    
    
    (0.18
    )
    
    
    0.15
    
    
    
    (0.09
    )
    
    
    (0.03
    )Weighted average number of shares:Basic
    
    
    102,589,760
    
    
    
    102,269,735
    
    
    
    100,532,594
    
    
    
    105,898,392
    
    
    
    111,085,657Diluted
    
    
    102,589,760
    
    
    
    102,269,735
    
    
    
    103,199,421
    
    
    
    105,898,392
    
    
    
    111,085,657
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BALANCE SHEET DATA:
 As of December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005(in thousands)Cash and cash equivalents
    
    $
    20,820
    
    
    $
    33,153
    
    
    $
    55,508
    
    
    $
    110,206
    
    
    $
    93,691Restricted cash
    
    
    1,274
    
    
    
    109
    
    
    
    238
    
    
    
    3,886
    
    
    
    2,086Available-for-sale debt securities(3)
    
    
    346,980
    
    
    
    320,056
    
    
    
    282,145
    
    
    
    104,159
    
    
    
    115,881Restricted available-for-sale debt securities(4)
    
    
    134,960
    
    
    
    151,123
    
    
    
    31,109
    
    
    
    75,780
    
    
    
    32,270Available-for-sale equity securities
    
    
    2,064
    
    
    
    2,050
    
    
    
    590
    
    
    
    527
    
    
    
    659Bank loans(5)
    
    
    118,455
    
    
    
    127,384
    
    
    
    26,826
    
    
    
    63,781
    
    
    
    26,249Working capital(6)
    
    
    359,412
    
    
    
    340,476
    
    
    
    270,451
    
    
    
    170,682
    
    
    
    72,697Total assets
    
    
    596,494
    
    
    
    580,957
    
    
    
    546,054
    
    
    
    664,331
    
    
    
    608,035Common stock
    
    
    26
    
    
    
    25
    
    
    
    25
    
    
    
    28
    
    
    
    28Total shareholders equity
    
    $
    389,861
    
    
    $
    377,700
    
    
    $
    390,446
    
    
    $
    440,950
    
    
    $
    439,314
 
 (1)
    
    The term equity investees refers to CDCs investments in which it has the ability to
exercise significant influence (generally 20% to 50% owned investments).(2)
    
    The computation of diluted earnings (loss) per share did not assume the conversion of the
Companys warrants for 2002 and 2003 and its stock options for 2002, 2004 and 2005 because
their inclusion would have been antidilutive.(3)
    
    Available-for-sale debt securities includes short and long-term available-for-sale debt securities.(4)
    
    Restricted available-for-sale debt securities include short and long-term restricted debt securities.(5)
    
    Bank loans include short and long-term bank loans.(6)
    
    Working capital represents current assets less current liabilities. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Relating to our Overall Business
 Because our business model and strategy have evolved, we lack experience and have a limited
operating history in our new markets and cannot assure you that we will be successful in meeting
the needs of customers in these markets. Our operating results could fall below expectations,
resulting in a decrease in our stock price.
  We have incurred losses in prior periods, may incur losses in the future and cannot provide any
assurance that we can achieve or sustain profitability.
  6




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2001
    
    2002
    
    2003
    
    2004
    
    2005(in thousands)Operating loss
    
    $
    (98,867
    )
    
    $
    (19,547
    )
    
    $
    (86
    )
    
    $
    (6,379
    )
    
    $
    (3,661
    )Net income (loss)
    
    $
    (124,385
    )
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )
  
    
    planned acquisition activities related to the growth and development of both of our
core business units, CDC Software and China.com Inc.;
    
    continuing effects of acquisition-related adjustments including intangible asset
amortization, stock compensation and deferred tax expense;
    
    a high level of planned operating expenditures, including costs we expect to incur
as a result of our ongoing efforts to comply with the regulations promulgated under the
Sarbanes-Oxley Act of 2002;
    
    increased investment activities related to our new businesses as we seek to achieve
organic growth, which may include;
 
    
    increased sales and marketing costs;
    
    greater levels of product development expenses;
  
    
    any decisions to dispose of business units or subsidiaries which we no longer
believe to be central to our new business model and strategy, which would shrink our
revenue base;
    
    a substantial portion of our software license revenue is recognized in the last
month of a quarter, and often in the last weeks or days of a quarter, which may result
in increased volatility in quarterly revenues if customers decide to defer or cancel
orders or implementations, particularly large orders or implementations, from one
quarter to the next;
    
    delay of new software product releases which can result in a customers decision to
delay execution of a contract or, for contracts that include the new software release
as an element of the contract, will result in deferral of revenue recognition until
such release;
    
    the imposition of penalties, such as a temporary suspension of service, for
violation of current or future Chinese laws, rules or regulations regarding Internet
related services and telecom related activities, such as that experienced by our Go2joy
subsidiary during 2004;
    
    the potential or actual loss of key clients and key personnel;
    
    decisions to discontinue products and services which would shrink our revenue base;
    
    our failure to increase market awareness of our company, our brands and our products
and services; and
    
    a slowdown in the U.S., European, Asian and other economic markets.
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As part of our 2005 reorganization into two core business units, we may incur future restructuring
costs and increase our potential liabilities as we continue to transition financial and
administrative functions to our business units.
   As part of our 2005 strategic review, we have discovered certain instances of possible corporate
misconduct by some of our former executive which may result in the company filing suits against
such former executives which could be expensive and divert managements attention away from the
operations.
  Our strategy of expansion through acquisitions or investments has been and will continue to be
costly and may not be effective, and we may realize losses on our investments.
  8




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Our continued international acquisitions and investments may expose us to additional regulatory and
political risks, and could negatively impact our business prospects.
  
    
    adverse changes in regulatory requirements, including export restrictions or controls;
    
    potentially adverse tax and regulatory consequences;
    
    differences in accounting practices;
    
    different cultures which may be relatively less accepting of our business;
    
    difficulties in staffing and managing operations;
    
    greater legal uncertainty;
    
    tariffs and other trade barriers;
    
    changes in the general economic and investment climate affecting valuations and
perception of our business sectors;
    
    political instability and fluctuations in currency exchange rates; and
    
    different seasonal trends in business activities.
 During each of 2003 and 2004, we were dependent on acquisitions for our increase in revenues rather
than organic growth of our businesses.
  
    
    During 2003, our material acquisitions included the acquisition of Praxa, an
Australian information technology outsourcing and professional services organization;
the acquisition of Palmweb Inc. which operates Newpalm, a provider of mobile services
and applications in China; and the acquisition of IMI, an international provider of
software to the supply chain management sector principally in Europe and the United
States.
    
    During 2004, our material acquisitions included the acquisition of Pivotal
Corporation (Pivotal), a customer relationship management (CRM) company focused on
mid-sized enterprises; the acquisition of Group Team Investments Limited, which holds
Beijing He He Technology Co. Ltd. which operates Go2joy, a mobile services and
applications provider based in Beijing, China; and the acquisition of Ross Systems,
Inc. (Ross), an ERP company focused on the food and beverage, life sciences,
chemicals, metals and natural products industries.
    
    During 2005 we did not have any material acquisitions.
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We have been expanding our business through acquisitions and may lose our investment if we do not
successfully integrate the businesses we acquire.
  Integration related to our past and future acquisitions requires us to implement controls,
procedures and policies which divert managements attention and may increase the costs of our
acquisitions, reduce employee morale and impact the operating results of our businesses.
  
    
    the difficulty and cost in combining the operations, technology and personnel of
acquired businesses with our operations and personnel;
    
    retaining and integrating key employees and managing employee morale;
    
    integrating or combining different corporate cultures;
    
    effectively integrating products, research and development, sales, marketing and
support operations;
    
    maintaining focus on our day-to-day operations;
    
    impairing relationships with key customers of the acquired businesses due to changes
in ownership;
    
    facing potential claims filed by terminated employees and contractors; and
    
    geographic complexity and adapting to local market conditions and business practices.
  10




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Several of our products and services are quite disparate, and it is difficult to discern
significant synergies which limits the amount of integration, cost savings and cross-selling we may
be able to achieve among our business segments.
  We may not be able to realize the anticipated cost savings, synergies or revenue enhancements from
integrating acquired businesses into our operations, and we may incur significant integration costs
to achieve these cost savings, synergies or revenue enhancements, which have and could continue to
adversely affect our results of operations.
   
    
    amortization of acquired intangibles;
    
    write-off of acquired deferred revenue;
    
    restructuring charges;
    
    stock compensation expenses;
    
    deferred tax expenses; and
  11




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While we have cash and cash equivalents of $93.7 million and total debt securities of $148.2
million as of December 31, 2005, much of this balance is held at our China.com subsidiary, and we
have limited ability to use these funds at, or for the benefit of, the CDC Corporation parent or
our other subsidiaries outside of the China.com chain of subsidiaries.
  We have significant fixed operating expenses, which may be difficult to adjust in response to
unanticipated fluctuations in revenues, and therefore could have a material adverse effect on our
operations.
  Because we rely on local management for many of our localized CDC Software and China.com Inc.
businesses, our business may be adversely affected if we cannot effectively manage local officers
or prevent them from acting in a manner contrary to our interests or failing to act at our
direction.
  We are exposed to potential risks of noncompliance with rules and regulations under Section 404 of
the Sarbanes-Oxley Act of 2002.
  12




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While we will seek to grow our businesses, including the businesses we have acquired, organically
in the future, we cannot assure you that we will be successful in increasing revenues through
organic growth.
  
    
    We may face difficulties in integrating, assimilating and managing the operations,
technologies, intellectual property, products and personnel of our acquired businesses
individually and cumulatively;
    
    We will be making additional new investments, including increasing sales and
marketing efforts, developing new products and providing additional training in order
to generate organic growth, none of which may ultimately prove successful in generating
such growth;
    
    We may not be successful in introducing products and services we acquire to new
markets. For example, one of our strategies in our enterprise software business is to
target the markets in Japan and China for enterprise application software. Starting in
late 2004 and continuing through 2005 and 2006, we are emphasizing the growth of CDC
Software Asia Pacific which was formed in 2004 to sell our entire range of enterprise
application software products in the Asia Pacific region, including Australia and New
Zealand. However, we cannot assure you that we will be successful in this strategy;
and
    
    While with the completion of our acquisitions of Pivotal and Ross, we have added an
additional approximate 3,200 customers to our customer base which on a combined basis
totals approximately 4,000 customers which have licensed our enterprise software
products worldwide as of December 31, 2005 (which does not include the addition of more
than 1,000 customers added as a result of our acquisition of c360 Solutions in April
2006), we may not be successful in our strategy of leveraging upon cross-selling
opportunities with respect to our expanded customer base. In addition to our
customers not finding our other enterprise software products attractive, it has also
been our experience that the revenues which can be generated in a sale of additional
products made through a cross-sale is often less than the amount of revenues which
would have been generated if the sale had been made by an independent third party
software supplier. This is because often the customer views the purchase of the
cross-sold software product as only a module to their existing enterprise software
solution, rather than a complete standalone software product, and therefore are less
willing to pay the full market price for the product than if the sale had been made by
an independent third party.
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Risks Relating to our CDC Software Business Unit
 The market for enterprise software application products and services is highly competitive. We
have entered this market recently, and if we fail to compete effectively, our failure could have a
material adverse effect on our business, financial condition and results of operations.
   
    
    enterprise resource planning (ERP) providers, including Sage Group, Epicor, Infor
Global Solutions, Microsoft Corporation, Oracle/Peoplesoft, QAD, Inc., SAP AG, SSA
Global Technologies, Inc., and various local providers in the Greater China market such
as FlexSystem Holdings Ltd., Kingdee International Software Group Company Limited and
UFIDA Software Co. Ltd.;
    
    customer relationship management (CRM) providers, including Chordiant Software,
Inc., SSA Global Technologies, Inc., Microsoft Corporation, Onyx Software Corporation,
Oracle/Peoplesoft, Salesforce.com, SalesLogix (part of Best Software/Sage Group plc),
SAP AG and Siebel Systems, Inc.;
    
    supply chain management (SCM) providers, including Aspen Technologies, i2
Technologies, Inc., Manhattan Associates, Manugistics Group, Inc., Logility Inc., and
Infor Global Solutions;
    
    human resource management (HRM) providers, including Oracle/Peoplesoft, SAP AG,
and various local providers in the Greater China market, including Cityray Technology
(China) Ltd., UFIDA Software Co. Ltd., BenQ Group, Vanguard Software Corporation,
Strategy Software Systems Co., Ltd, Shanghai Kayang Information System Co., Ltd. and
Kingdee International Software Group Co., Ltd;
    
    business intelligence (BI) providers, including Business Objects SA, Cognos, Inc.,
Hyperion, Inc. and SAS Institute, Inc.; and
    
    information technology consulting and outsourcing service providers including
Accenture Ltd., Cambridge Technology Partners Inc., Cap Gemini, Electronic Data Systems
Corporation, IBM
Global Services, Infosys Technologies, Wipro Ltd., and various niche local service
providers specializing in IT outsourcing services.
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As we pursue our strategy of developing our enterprise software business, we are exposed to a
variety of risks in this market that may affect our ability to generate revenues from the sale of
enterprise application software and related support services.
  
    
    competition from other products;
    
    flaws in our products;
    
    incompatibility with third party hardware or software products;
    
    negative publicity or valuation of our products and services;
    
    obsolescence of the hardware platforms or software environments on which our products run;
    
    our ability to increasingly move software development capabilities to places like
India and China where costs are generally lower, but subjects us to additional risks
including competition to hire qualified programmers (and a resultant upward pressure on
remuneration costs), turnover risk, language barriers, and challenges to remotely
manage staff due to time zone differences and distance; and
    
    continuing low level expenditures in the enterprise software market.
 Our enterprise software revenues fluctuate significantly from quarter to quarter which may cause
volatility in our share price.
  
    
    the timing of significant orders, delivery and implementation of products;
    
    the gain or loss of any significant customer;
    
    the number, timing and significance of new product announcements and releases by us
or our competitors;
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
    
    our ability to acquire or develop (independently or through strategic relationships
with third parties), introduce and market new and enhanced versions of our products on
a timely basis;
    
    possible delays in the shipment of new or enhanced products and purchasing delays of
current products as our customers anticipate new product releases;
    
    order cancellations and shipment rescheduling or delays;
    
    reductions in the rate at which opportunities in our pipeline
convert into license agreements;
    
    patterns of capital spending and changes in budgeting cycles by our customers;
    
    market acceptance of new and enhanced versions of our products;
    
    changes in the pricing and the mix of products and services we sell;
    
    seasonal variations in our sales cycle;
    
    the level of product and price competition;
    
    exchange rate fluctuations; and
    
    changes in personnel and related costs.
   Our failure to successfully introduce, market and sell new products and technologies, enhance and
improve existing products in a timely manner, and properly position or price our products, as well
as undetected errors or delays in new products or new versions of a product or the failure of
anticipated market growth could individually and/or collectively have a material adverse effect on
our business, results of operations or financial position.
  
    
    product quality, including the possibility of software defects, which could result
in claims against us or the inability to sell our software products;
    
    the fit of the new products and features with the customers needs, which could
result in the customer seeking the product elsewhere;
    
    educating our sales, marketing and consulting personnel to work with the new
products and features, which may strain our resources and lengthen sales cycles;
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
    
    competition from earlier and more established entrants that may have more
significant resources than us;
    
    market acceptance of initial product releases;
    
    marketing effectiveness; and
    
    the accuracy of research or assumptions about the nature of customer demand, whereas
actual demand could be limited or non-existent.
  The decisions we make about which underlying technology platforms to base our products upon,
particularly any eventual migration to a newer technology platform which becomes necessary or
advisable to make as older technologies become obsolete and new technologies mature and become more
widely accepted, subjects us to risks which could affect our business, results of operations and
financial condition.
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We may not be successful in growing our sales organization and sales channels which would harm our
ability to grow our business. In addition, efforts to grow our indirect sales channels expose us to
additional risks.
   If we are unable to take advantage of opportunities to market and sell the products and services of
our newly-acquired companies such as Ross, Pivotal and IMI, to our customers, distribution channels
and business partners in Asia, the value of our investment in Ross, Pivotal and IMI could be
significantly diminished.
  Our strategy of developing industry products for specific industry segments, or micro-verticals,
may not be successful which could affect our business, results of operations and financial
condition.
   
    
    we cannot be certain that the companies in the micro-vertical markets we have
selected will find our products attractive;
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
    
    many of our micro-vertical markets are subject to their own economic cycles,
regulatory considerations and other factors which are beyond our control. For example,
the homebuilder micro-vertical is sensitive to interest rate movements and the
healthcare micro-vertical is subject to significant governmental regulations;
    
    some of our micro-vertical products have only been recently introduced, so do not
have a large installed base of users or developed significant recognition in their
industry;
    
    we may experience difficulty in recruiting sales, business and technical personnel
who have experience in a particular micro-vertical industry;
    
    due to resource constraints, we have a limited number of developers who can focus
upon developing for the micro-verticals; and
    
    in the event we decide to devote limited resources into a micro-vertical market,
such as by dedicating a sales representative, such a resource may not be available to
focus on general sales.
  We may not receive significant revenues from our research and development efforts for several
years.
 .
 We have been increasingly migrating software development capabilities for our enterprise
application software products to India and China, which subjects us to several risks that may
affect our business.
  
    
    Competition to hire qualified programmers and developers in these local markets;
    
    Risks associated with turnover of programmers and developers, particularly where we
have devoted time and resources to train such persons to be familiar with our
enterprise application software products;
    
    Challenges due to the need to remotely manage developers and programmers in India
and China, particularly when the persons most familiar with the needs of the customer
and the desired new functionality and features are not also located in India and China;
    
    Language and other communications barriers, particularly with software development
in China; and
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
    
    Time zone differences which make liaising and communicating with persons in India
and China more difficult.
 While the vast majority of our professional services engagements associated with the sale and
implementation of our enterprise application software products are billed on a time and materials
basis, there are certain instances when management may accept fixed price engagements for certain
of our products which exposes us to various risks.
  A substantial percentage of our business services engagements are billed on a fixed price basis
which may be subject to cost overruns if we do not accurately estimate the costs of these
engagements or if clients change the scope of a project.
  Our clients could unexpectedly terminate their contracts for our services which could result in a
loss of expected revenues and additional expenses for redeployment of staff and resources.
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Our business services contracts may expose us to potential litigation and liabilities.
  Failure by third party suppliers to provide us with software and hardware components could affect
our ability to operate our business services business.
  Each of our business services businesses face intense competition. If we fail to compete
effectively, our failure could have a material adverse effect on our business financial condition
and results of operation.
   The holding company structure through which we have invested in IMI is complex, and subjects us to
risks, including an obligation to purchase the shares of IMI from IMIs other shareholder upon the
occurrence of certain events which may result in the use of a significant amount of our cash or
issuance of a significant number of our shares.
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Our strategy to target higher margin services related to database marketing through our subsidiary,
Mezzo Business Databases Pty Limited, or Mezzo, is subject to numerous risks, may not be
successful, and could therefore limit the amount of advertising/marketing revenues we can generate.
  
    
    we depend upon the ability of Mezzo to maintain up-to-date datasets, and if Mezzo
fails to maintain its databases, its services will be less attractive to customers;
    
    we may not be able to successfully market services in this business segment outside
of Australia where the Mezzo business and our datasets are currently located;
    
    we may not be able to attract larger clients with correspondingly larger marketing
budgets due to the limited size and scope of our current operational base in Australia;
    
    we face competition from companies that have developed large datasets and
established related products and services, such as Acxiom and D&B, affiliated with The
Dun & Bradstreet Corporation;
    
    we rely upon channel partners to distribute our databases to end-users, and should
those channel partners determine to use other databases or stop or reduce their
distribution in our market, this could result in a loss of expected revenues; and
    
    we may suffer continued reductions in revenues and profits as a result of the
application of anti-spamming legislation in Australia (in particular, the Spam Act 2003
(Cth)) that could continue to reduce the distribution potential of our databases.
 Risks Relating to our China.com Inc. Business Unit
 The mobile applications and portal markets in China are highly competitive. If we fail to compete
effectively, our failure could have a material adverse effect on our business, financial condition
and results of operations.
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We depend primarily on the four mobile network operators in China for delivery of our mobile
services and applications, and the termination or alteration of our various contracts with either
of them or their provincial or local affiliates could materially and adversely impact our business.
   
    
    we fail to achieve performance standards established by the applicable mobile
network operator from time to time;
    
    we breach our obligations under the contracts, which include, in many cases, the
obligation not to deliver content that violates the network operators policies and
applicable law;
    
    the mobile network operator receives high levels of customer complaints about our
mobile services or applications; or
    
    the mobile network operator sends us written notice that it wishes to terminate the
contract at the end of the applicable notice period.
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The regulators and the mobile network operators in China have imposed unilateral changes in their
regulations and policies in the past. Depending upon the nature of these regulatory and policy
changes and our ability to implement and adhere to them, our business and financial results could
be materially adversely affected.
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China Mobile has imposed penalties on one of our mobile services and applications businesses for
breaches and irregularities in the provision of services to users. If penalties are imposed by the
mobile network operators in the future with respect to either our past or future activities, our
business and financial results could be materially adversely affected.
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In addition to enhanced enforcement of their policies, the mobile operators have been adopting new
billing systems and policies which we believe have contributed to declines in our SMS revenue.
   Our business could be adversely affected if any of the mobile network operators begin providing
their own mobile applications.
  If any of the mobile network operators fail to bill their customers or to provide billing
confirmations for our mobile applications, our mobile applications revenues could be significantly
reduced.
  Our mobile applications revenues are affected by billing and transmission failures which are often
beyond our control.
  
    
    the delivery of our mobile services and applications to a subscriber is prevented
because his or her mobile phone is turned off for an extended period of time, the
customers prepaid phone card has no value or the subscriber has ceased to be a
customer of the applicable mobile network operator;
    
    the applicable mobile network operator experiences technical problems with its
network which prevent the delivery of our mobile services and applications to the
subscriber;
    
    we experience technical problems with our technology platform that prevents delivery
of our mobile services and applications; or
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
    
    the subscriber refuses to pay for our mobile services and applications due to
quality or other problems.
  Because the mobile network operators do not provide information showing revenues and transmission
information on a service-by-service basis, we can only estimate our actual revenues by service
type.
  The mobile network operators may impose higher service or network fees if we are unable to satisfy
customer usage and other performance criteria, thereby reducing our mobile applications revenues.
   The mobile network operators may not authorize our mobile applications to be offered on their
networks if we fail to achieve minimum customer usage, revenues and other criteria, thereby
adversely affecting our mobile services and applications revenues.
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In the event we fail to achieve or maintain a prominent position on the WAP portals of the two
principal mobile network operators in China, we may not be able to capture opportunities presented
by the expected high growth in the market for WAP services in China which could affect our overall
financial condition.
  Our mobile applications and their pricing are subject to approval by the applicable mobile network
operator, and if requested approvals are not granted in a timely manner, our mobile services and
applications business could be adversely affected.
  We rely heavily on certain regions in China for a significant share of our mobile applications
revenues. An economic downturn or any loss of our contracts with mobile operators in these
provinces could have a material adverse effect on our results of operations.
  The Chinese government has granted licenses to offer basic wireless telecommunications services in
China to third parties with whom we have not yet developed close relationships, and may grant
additional licenses to others in the future. If those parties which receive licenses are successful
in the mobile applications market, but we are unable to establish new arrangements or develop
cooperative relationships with them, our mobile applications business, revenue and overall
financial condition could be adversely affected.
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Our mobile applications and portal business could be materially adversely affected if the current
ownership structure of our Chinese companies that hold ICP licenses is challenged by the Chinese
regulatory authorities.
  
    
    Newpalm has formed Beijing Newpalm Technology Co. Ltd. and Beijing Wisecom
Technology Co., Ltd.
    
    The China.com portal unit has formed Beijing China.com Technology Services Co., Ltd.
    
    Go2joy has formed Beijing He He Technology Co., Ltd.
    
    17game has formed Beijing Hulian Jingwei Technology Development Co., Ltd.
   
    
    levying of fines;
    
    compulsory disgorgement of income for both current and past periods;
    
    revocation of our ICP or business license;
    
    closure or suspension of our China operations; and
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
    
    compulsory restructuring of our China operations or licensing arrangements.
  Our business could be materially adversely affected if we cannot provide effective operational
control of our mobile applications and portal business due to the current ownership structure of
our Chinese companies.
  The dividends, other distributions on equity, service fees, and other payments we may receive from
our domestically registered companies in China are subject to restrictions under Chinese law.
   The Chinese government or the applicable mobile network operators may prevent us from distributing,
and we may be subject to liability for, content that any of them believe is inappropriate.
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If we are held liable for claims based on information originating from our portal network or
communicated through our mobile applications, we may incur significant costs contesting such claims
or paying damages.
  
    
    unsolicited e-mail or messages;
    
    lost or misplaced messages;
    
    illegal or fraudulent use of e-mail or SMS messages; or
    
    interruptions or delays in service.
  If the Chinese government considers our existing licensing structures to be insufficient in meeting
compliance requirements with applicable licensing restrictions, or if we fail to comply with
changes to these requirements or restrictions, our portal and mobile services and applications
businesses could be materially adversely affected.
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
    
    regulations applying to Internet-related services and telecom-related activities.
While many aspects of these regulations remain unclear, they purport to limit and
require licensing of various aspects of the provision of Internet information services.
If these regulations are interpreted to preclude our current ownership structure or
business model, our portal and mobile services and applications businesses could be
severely impaired; and
    
    the activities of ICPs are subject to regulation by various government authorities
in China depending on the specific activities conducted by the ICP as stated by the
Ministry of Information and Industry. Various government authorities have enacted
several laws and regulations that govern these activities. The areas of regulation
include:
 
    
    online advertising;
    
    online news reporting;
    
    online publishing;
    
    online securities trading;
    
    online gaming;
    
    online broadcasting;
    
    bulletin board service; and
    
    the provision of industry-specific information (e.g., pharmaceutical products)
over the Internet, etc.
   Our portal business depends substantially on third party content providers and may be adversely
affected if we are unable to maintain existing arrangements with these content providers.
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Regulation of content distributed on the Internet in the PRC may adversely affect our business
   
    
    contravenes the basic principles enshrined in the PRC Constitution;
    
    endangers the security or unity of the State;
    
    undermines the States religious policies;
    
    undermines public order or social stability; or
    
    contains obscene, pornographic, violent or other illegal content or information
otherwise prohibited by law.
   Risks Relating to our Intellectual Property, Personnel and Network
 We may be unable to protect or enforce our own intellectual property rights adequately and may be
involved in future litigation over our use of technology rights.
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
    
    the recent purchase of Ross, which possesses intellectual property principally
consisting of ERP and SCM software applications for the food and beverage, life
sciences, chemicals, metals and natural products industries;
    
    the recent purchase of Pivotal, which possesses intellectual property principally
consisting of a complete set of highly flexible CRM software applications;
    
    the purchase of IMI, which possesses intellectual property principally consisting of
order management software solutions for complex retail, wholesale, consumer goods, and
distribution operations;
    
    the purchase of OpusOne Technologies, which possesses intellectual property
principally consisting of proprietary enterprise software related applications for use
in human resources, payroll administration and attendance tracking;
    
    the purchase of Executive Suite, which possesses intellectual property principally
consisting of business intelligence and analytics software products;
    
    the purchase of the assets of JRG Software, which possesses intellectual property
principally consisting of on-demand supply chain solutions for planning and scheduling,
delivered as Software as a Service (SaaS); and
    
    the purchase of the URLs, including www.china.com and
www.hongkong.com.
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We are subject to possible infringement claims, which could be time consuming and costly to defend,
divert managements attention and resources or cause product shipment delays.
  We are exposed to product liability claims, which could be time consuming and costly to defend,
divert managements attention and could have a material adverse effect on our business, operating
results and financial condition.
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We rely on key personnel. In the event we lose the services of key employees, it may be costly and
time consuming for us to locate other personnel with the required skills and experience.
   We have entered into indemnification agreements with some of our directors and officers which
generally do not explicitly state our maximum obligation under these agreements. If we were to
incur a loss in connection with these arrangements, it could affect our business, operating results
and financial condition.
  We have relied on stock options to compensate our employees. In the event employees do not consider
their options as valuable compensation, we may need to provide additional compensation at
additional expense.
  Our computer networks are vulnerable to hacking, viruses, spamming and other disruptions which may
cause us to lose key clients, expose us to liability for our clients losses, or prevent us from
securing future business.
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We rely on software and hardware systems that are susceptible to failure, and in the event of
service operations or other related problems, our operating efficiency and results of operations
may be adversely affected.
   Political, Economic and Regulatory Risks
 There are economic risks associated with doing business in the Peoples Republic of China which
could adversely affect our business.
  
    
    amount of government involvement;
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
    
    level of development;
    
    growth rate;
    
    control of foreign exchange; and
    
    allocation of resources.
   A change in currency exchange rates could increase our costs relative to our revenues thereby
potentially adversely affecting our financial condition, results of operations and increasing
market risk.
  Increased Sino-U.S. political tension may make our company less attractive to investors and
clients.
  Hostilities involving the United States and/or terrorist attacks could harm our business.
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Risks Relating to Treasury Management
 Our entry into banking facilities with Fortis Bank and Standard Chartered Bank exposes us to
interest rate, market and credit risks when we borrow funds from these facilities to make other
investments.
   Risks Relating to our Class A Common Shares
 Our share price could be adversely affected if our major strategic shareholders materially change
their holdings in our shares, particularly if the share holdings are not disposed of in an orderly
manner.
  A small group of our existing shareholders controls a significant percentage of our common shares,
and their interests may differ from other shareholders.
  
    
    mergers, consolidations and other business combinations which under the law of the
Cayman Islands requires the approval of at least 75% of the shares voting at the
meeting;
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
    
    election or non-election of directors which under the law of the Cayman Islands
requires the approval of a simple majority of the shares voting at the meeting;
    
    removal of directors which under the law of the Cayman Islands requires the approval
of at least 662/3% of the shares voting at the meeting; and
    
    amendments to CDCs memorandum and articles of association which under the laws of
the Cayman Islands requires the approval of at least 662/3% of
the shares voting at the meeting.
   Our share price has been, and may continue to be, extremely volatile, which may not be attractive
to investors.
   
    
    investor perceptions of our business, the market performance of our peer companies
in the enterprise software businesses, mobile services and applications business,
business services, Greater China portal and advertising and marketing activities
business in general;
    
    our significant acquisitions, partnerships, joint ventures or capital commitments;
    
    trends and developments in all the markets in which we compete;
    
    variations in our operating results;
    
    our new product or service offerings;
    
    changes in our financial estimates by financial or industry analysts;
    
    technological innovations;
    
    litigation;
    
    changes in pricing made by us, our competitors or providers of alternative services;
    
    the depth and liquidity of the market for our shares; and
    
    general economic and other factors.
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We are a foreign private issuer, and have disclosure obligations different from those of other
U.S. domestic reporting companies.
  We may incur significant costs to avoid being considered an investment company under the Investment
Company Act of 1940.
   We are classified as a passive foreign investment company, or PFIC, which will subject our U.S.
investors to adverse tax rules.
  
    
    the composition of our assets, including goodwill, the amount of which will depend,
in part, on our total net assets and the market value of our Treasury portfolio, which
is subject to change; and
    
    the amount and nature of our income from time to time.
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Substantial amounts of our common shares are eligible for future sale, which could adversely affect
the market price of our shares.
    Anti-takeover provisions in our charter documents may adversely affect the rights of holders of our
common shares
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Our shareholders may face difficulties in protecting their interests because we are incorporated
under Cayman Islands law.
  If you are not a registered shareholder and do not hold greater than 10,000 shares, you may not
receive our proxy materials or other corporate communications.
  There is uncertainty as to our shareholders ability to enforce civil liabilities in Australia, the
Cayman Islands, Hong Kong, the PRC and Sweden.
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ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
          Acquisitions and Divestitures
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CDC Software
 Acquisition or Investment
    
    Date
    
    DescriptionPraxa Limited
    
    February 2003
    
    Praxa is an IT
professional
services
organization in
Australia which
provides IT
consulting services,
outsourced
applications
development, systems
integration services
and managed IT
services to
corporate and
government market
clients.PK Information Systems Pty Ltd.
    
    August 2003
    
    PK Information
Systems is an IT
services business in
Australia which
specializes in .NET
application
development and
business
intelligence
solutions, with
clients mainly in
the New South Wales
state government
sector.Industri-Matematik
International Corp.
    
    September 2003
    
    IMI is an
international
provider of software
to the supply chain
management sector
principally across
Europe and the
United States. We
acquired a 51%
interest in IMI
through a joint
venture.Ascent Computing Group, Inc
    
    September 2003
    
    Ascent Computing
Group, based in the
metropolitan New
York region,
provides
applications and
system outsourcing
services, and was
acquired through our
51% owned
subsidiary, Software
Galeria, Inc.Acquired rights to Executive
Suite software
    
    October 2003
    
    Executive Suite is
an integrated
financial management
application based on
Microsoft technology
which offers
budgeting, planning,
forecasting,
consolidation,
reporting and
analysis
functionality. We
acquired the
intellectual
property rights to
such software from
CIP-Global ApS, a
Danish software
company.Pivotal Corporation
    
    February 2004
    
    Pivotal is an
international
customer
relationship
management (CRM)
company that
provides a suite of
highly flexible CRM
applications and
implementation
services for
mid-sized
enterprises and
selected target
industries.Ross Systems, Inc.
    
    August 2004
    
    Ross offers a family
of
Internet-architected
software solutions
that form a
comprehensive,
modular suite
spanning the
enterprise, from
manufacturing,
financials and
supply chain
management to
customer
relationship
management (powered
by Pivotal
software),
performance
management and
regulatory
compliance. It
focuses on the food
and beverage, life
sciences, chemicals,
metals and natural
products industries.Acquired assets of JRG
Software, Inc.
    
    February 2006
    
    JRG is a leading
provider of
on-demand supply
chain solutions for
planning and
scheduling,
delivered as
Software as a
Service (SaaS). Our
CDC Software
business unit
acquired the
business assets of
JRG including the
One Plan
applications which
add complementary
on-demand factory
planning and
scheduling to our
enterprise suite of
industry-leading
enterprise resource
planning.Acquired assets of Horizon
Companies, Inc.
    
    February 2006
    
    Horizon is an IT
consulting business
offering outsourced
information
technology
professional
services in the
United States and
Canada utilizing
India-based
resources whos
specialization in
the financial
services, life
sciences and
manufacturing
industries is
aligned to the
industry-specific
solutions from
Pivotal and Ross
Systems. We acquired
the business assets
of Horizon through
our 51% owned
subsidiary Software
Galeria, Inc.c360 Solutions, Inc.
    
    April 2006
    
    c360 is a leading
provider of add-on
products, industry
solutions and
development tools
for the Microsoft
Dynamics CRM
platform, which will
allow us entry into
CRM products for
smaller scale
businesses with zero
complexity which
complements our
existing CRM product
line for mid-market
enterprises.
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China.com Inc
 Acquisition or investment
    
    Date
    
    DescriptionPalmweb Inc. (holds Newpalm
(China) Information
Technology Co., Ltd.)
    
    April 2003
    
    Newpalm is a mobile
services and
applications
provider in China
which was acquired
through China.com.Group Team Investments
Limited (holds Beijing He He
Technology Co. Ltd.)
    
    May 2004
    
    Beijing He He
Technology Co.
Ltd., which
operates Go2joy, is
a mobile
value-added
services and
applications
provider in China
with partnerships
with media
companies in China.Equity Pacific Limited
(holds Beijing 17Game
Network Technology Co.,
Ltd.)
    
    August 2004,
November 2004,
August 2005 and
March 2006
    
    17game is a leading
massive multiplayer
online role-playing
games (MMORPG)
provider with a
track record in
launching and
distributing online
games in the China
market. Its latest
game, Yulgang, was
one of the
fastest-growing
MMORPGs in China in
2005. In March
2006, China.com
became the indirect
legal and
beneficial owner of
100% of 17game.Unitedcrest Investments
Limited (holds Shenzhen KK
Technology Ltd.)
    
    June 2005
    
    Shenzhen KK
Technology Ltd. is
a mobile
value-added
services and
applications
provider in China
which was acquired
through China.com
and which
specializes in
nation-wide WAP
businesses.
  B. Business Overview
  CDC Software Business Unit
   
    
    Enterprise Software. Our enterprise software segment provides a diverse portfolio
of enterprise application software products to our customers with a complete range of
world-class applications targeting mid-sized enterprises and divisions of larger
enterprises, as well as selected target industries. Our software suite includes
Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Supply
Chain Management (SCM), Order Management Systems (OMS), Human Resources and Payroll
Management (HRM) and Business Intelligence (BI) which are utilized by approximately
4,000 customers worldwide (which does not include the
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addition of more than 1,000
customers added as a result of our acquisition of c360 Solutions in April 2006).
    
    Business Services. Our business services segment offers a variety of information
technology services designed to allow customers to achieve either more value added
services for their IT expenditures for the same cost or the same value added services
for their IT expenditures for less cost. The services we offer cover the business
optimization spectrumfrom industry advisory services to business process improvement
services to traditional implementation services to tuning/optimization services to
outsourced hosting/application management services.The business services segment also includes other specialized business services we offer
in regional markets, including eBusiness consulting and web development offered
principally in the western United States, mobile user interface design consultancy and
development services for the telecommunications industry in Korea, and marketing
database and marketing support services conducted principally in Australia and New
Zealand.
 Products and Services
 Software segment.
   
    
    Enterprise Resource Planning (ERP).Our ERP products consist of multi-module
application software that helps a manufacturer produce finished goods by offering
control over forecasting, planning, customer service, handing of raw materials and
deployment of equipment. The ERP products we offer are targeted at the formula and
specifications-based requirements of process manufacturers.
    
    Supply Chain Management (SCM).Our SCM products help coordinate processes
involved in producing, shipping and distributing products to ensure that the correct
amount of product is in the correct locations at the right time and at the lowest
possible cost.
    
    Customer Relationship Management (CRM).Our CRM products address needs of an
enterprise to establish and maintain profitable long-term business relationships with
customers by integrating information from the entire enterprise and increasing
efficiencies within the sales, marketing and service functions to create one unified
business network connecting employees, partners and customers.
    
    Order Management Systems (OMS).Our OMS products provide a system that
concentrates on optimizing the order and replenishment processes of order fulfillment
and logistics by providing visibility into and control over a distribution center and
store inventory, as well as managing orders from vendors, warehouses, stores, customers
and consumers.
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
    
    Human Resource Management (HRM). Our HRM products focus on automating processes
to enable an organization to improve business results and increase workforce
performance by leveraging technology and applications to manage and mobilize a unified,
global workforce. These HRM products seek to more efficiently connect people,
processes and systems, and align workforce contribution with business objectives.
    
    Business Intelligence (BI).Our BI products help to convert large volumes of data
collected and stored by businesses into meaningful and multi-dimensional reports and
analyses for use in decision-making. Integrated with other components of enterprise
application software, our BI products enhance the development of a business environment
driven by performance management.
 ERP and SCM Software
  
    
    Manufacturing & Distribution Applications. The Manufacturing & Distribution
Applications provide functionality which support the different processes in
manufacturing from purchasing of raw materials to shipping of finished goods. The
modules with the Manufacturing & Distribution Applications address inventory control,
process manufacturing, sales order processing, transportation management, process
planning, purchase order processing and management of maintenance and facilities.
 §
    
    Inventory Control Module. With respect to inventory control, built in
functionality includes lot details, lot traceability, movement history, inventory
valuation and physical inventory counting which enables capabilities such as
managing inventory based upon characteristics such as pH, moisture content, or
potency, tracking shelf life and expiration dates, tracing all the changes in the
product from the time raw material is received through manufacturing and storage,
determining the quantity and location of any material or product, valuing inventory
by options such as standard cost, weighted average cost or actual lot cost, and
performing inventory re-ordering based upon minimum/maximum inventory values by item
by warehouse.§
    
    Data Collection.Ross Data Collection is a plant-level solution that pushes
data from receiving, production, inventory, and shipping operations directly into
the enterprise system of record. This results in real-time and accurate visibility
into production, inventory and distribution, optimized resources, and improved
customer responsiveness. By extending transactions to smart handheld devices, Ross
Data Collection allows customers to simplify the process of capturing and viewing
production and distribution datawhile also improving the accuracy of the data
flowing into the enterprise system. Automated data capture also reduces
transaction time substantially, increasing plant-floor productivity. Typical
benefits include reduced manual overhead and costs, greatly reduced data-entry
errors, increased visibility and confidence in the accuracy of the information.§
    
    Process Manufacturing Module. The process manufacturing module defines the
production process, calculates and tracks product and job costs, and records all of
the activities necessary to manufacture products. This module enables the
production of batches or lots based upon recipes and formulas which produce
products with specified characteristics, such as potency or weight. With this
module, users can define process steps and resources required to produce a product
(such as weighing, mixing for a specified period of time, and packaging), define
quality control requirements and testing for each stage of the product and process,
perform potency calculations
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automatically based upon specified minimum and maximum
values, define batch sizes in terms of quantity (such as pounds) or time (such as
hours or shifts), maintain version controls of changes to existing recipes,
authorize and record a production job, manage materials so that for example
materials needed for a key customer or a critical job are not used for another
purpose, record machine and labor time used in production for costing and
efficiency calculations, record production outputs for products coming out of any
stage in the process or going into inventory, and report yield measurements based
upon the recipes material inputs and production outputs.§
    
    Sales Order Processing Module. The sales order processing module includes
functionality for sales order entry, shipping, invoicing, credit memos and sales
analysis. To support these functions, users can create and maintain customer
information and generate price, discount and promotion plans. Included with order
entry and shipping are credit checking (such as checking against both credit limits
and overdue debits and defining the consequences) and inventory availability,
enabling reservations of and availability to promise inventory. For example,
through this module a customer service representative could enter a customer name
and retrieve information such as the customers address, functional currency and
primary ship-to location. The representative could enter a product order and
amount, and automatically receive the appropriate discount, tax and sales price
which is adjusted based upon factors such as products the customer is buying, the
amount the customer ordered, the location from which the order is placed and the
warehouse the product will be shipped from. The specific lot that matches the
customers specifications will automatically be selected, and packaged according to
the customers requirements. If a modification is made to a sales order, all
related information is updated automatically.§
    
    Pricing and Promotions Management.Pricing & Promotions Management provides a
discount and rebate management system for consumer packaged goods (CPG) companies.
With Pricing & Promotions, companies can integrate complex discounting and rebate
programs for their customers, reduce the time and effort needed for making off-line
calculations, fixing customer invoices, and posting journal entries. Clients can
also addresses both off invoice discounts and post invoice rebates or
commissions.§
    
    Transportation Management Module. The transportation management module works in
conjunction with the sales order processing module for the planning and costing of
freight for outbound shipments to customers and transfer orders to other warehouses
in order to
produce the most efficient shipping costs for the manufacturer and its customers.
The module allows capabilities such as the definition of shipping zones and ship-from
warehouses to customer addresses, the definition of routes to connect the various
shipping zones and association of one or multiple freight providers to these routes,
the establishment of freight rates for each freight provider by route with a choice
of rate methods, the fixing of a load planning process after the entry of sales
orders to assign outstanding sales order lines to loads and releasing of loads for
picking and shipping, and at shipment confirmation, the determination of freight
charges based upon factors such as the route, actual freight provider, and actual
quantity shipped and vouchering of freight provider invoices.§
    
    Process Planning Module. The process planning module allows manufacturers to
develop production plans based upon demand (based upon sales orders and/or sales
forecasts) and current inventory levels and existing replenishments in order to
effectively manage resources to meet sales demands. Capacity requirements of
resources can be checked, and based upon the capacity constraints, the master
production schedule can be adjusted to result in a workable production plan. The
module includes material planning functionality which can be used to determine the
quantity and required date of ingredients and packaging supplies. The module
enables the management of capacity with comparison to demand to arrive at a viable
production plan within the constraints, calculation of the materials needed,
creation of manufacturing jobs for production, making of adjustments or
identification of alternatives in production planning,
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and creation of production
plans with specified horizons (such as an annual operating plan for budgeting or
intermediate forecast plan to meet actual orders and inventory levels).§
    
    Purchase Order Processing Module. The purchase order processing module handles
purchase requisitions, purchase orders, receiving and vouchering of invoices for
raw materials, raw material planning purchases, maintenance purchases and other
one-time purchases. The module supports the purchasing requirements of both
multi-site, multi-national corporations and single site domestic operations in
either a centralized or decentralized mode. The functionality of the module
enables, for example, inspection of a product received from a supplier (such as
moisture level of a lot characteristic which is important to the manufacturer),
automatic management of pricing and discounts with a supplier, and return of
materials to suppliers.
 
    
    Maintenance Management Application. The Maintenance Management Application provides
users access to current and historical data needed to control and effectively manage
facilities and equipment to help ensure high levels of equipment reliability,
regulatory compliance and cost containment, and extend the life of significant capital
assets. The application allows a manufacturer to manage repair work orders
electronically, including verifying availability and status of required spare parts,
tooling, supplies and personnel before releasing repair work orders, provide planning,
approval and tracking of work orders, prioritize repairs, and have up-to-the-minute
status updates of repair work orders to view progress. The application allows
equipment records to be maintained so that vital and technical information (such as
operating instructions and safety precautions) are available to those who need it, and
equipment expense history can be tracked to show repair and preventive work performed
and costs incurred. The application permits preventive and predictive maintenance to
be defined so that parts, crews, shifts, and labor can be planned as needed on a
regular basis.
    
    Financial Applications. The Financial Applications are tightly integrated to the
Ross ERP suite to provide a central source of financial information to help a
manufacturer manage critical financial processes from planning through decision making.
The Financial Applications include general ledger, accounts payable, accounts
receivable, fixed assets, financial reporting and financial budgeting modules. The
financial reporting and financial budgeting modules are third-party products from FRx
which Ross licenses and resells.
  
    
    Demand Management Applications. The Demand Management Applications consist of a set
of modules that enable manufacturers to forecast demand, down to the level of
individual customers at particular locations, and improve customer service while
reducing inventory. The modules include Demand Planning, Enterprise Forecasting and
Inventory Planning.
 §
    
    Demand Planning Module. The demand planning module helps a manufacturer
understand both historical demand patterns and how future events, such as planned
promotions, new product introductions, revisions to existing product, marketing
campaigns and changing economic and market conditions, will affect forecasts. The
module models business processes at user-defined levels such as product, division,
location or customer. The plan created by the module can be automatically fed into
the advanced planning module to help create production schedules.§
    
    Enterprise Forecasting Module. The enterprise forecasting module allows a sales
force, who are closest to the point of demand generation, to help create and manage
forecasts remotely. It
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can also help evaluate sales performance against weekly,
monthly, quarterly and yearly targets through a personalized view of each sales
persons or regional managers performance.§
    
    Inventory Planning Module. The inventory planning module assists a manufacturer
in balancing inventory investments and customer service levels, based upon user
defined inventory policies, so that informed decisions can be made. Using the
inventory policies, the module calculates recommended stocking levels.
 
    
    Supply Chain Management Applications. The Supply Chain Management Applications
bring together optimization of a demand plan with available supply, thus allowing the
manufacturer to connect its business plan to departmental operations. The application
consists of modules including Replenishment Planning, Optimized Orders, and Advanced
Planning and Scheduling.
 §
    
    Replenishment Planning Module. The replenishment planning module seeks to
optimize having the right amount of product at the right location at the right
time, while managing supply chain costs. Using inventory policies from the
inventory planning module and the demand forecast from the demand planning module,
it considers the consumption rates and inventory levels throughout the supply
chain, and automatically calculates time-phased safety stocks and replenishment
quantities for each item at each location. If additional products need to be
ordered, it suggests replenishment orders to come either from existing inventory or
new production. The module dynamically calculates inventory status and monitors
inventory exception conditions (like stock outs, using safety stock or high stock
levels).§
    
    Optimized Orders Module. The optimized orders module automates the process of
generating replenishment orders in order to improve on-time delivery and minimize
the need for extra costs to expedite orders. The module recommends replenishment
order quantities using the demand forecast and the inventory policies from Ross
other SCM modules, and includes shipment optimization logic that accounts for
truckload and pallet configuration while balancing constraints like weight, cost
and dimensions.§
    
    Advanced Planning and Scheduling Module. Once a demand plan is developed, the
task becomes developing a production plan to meet the demand while balancing budget
needs and supply and demand. The advanced planning and scheduling module focuses
on providing answers to questions like what products should be made, how much
should be made, where should it be made, and how to optimize efficiency and
capacity. The module provides graphical warnings to identify capacity, materials,
labor and customer service
issues. It also assists with scheduling production runs and changeovers so that
downtime is kept to a minimum. The module balances competing objectives such as
optimizing sequencing, minimizing changeovers and labor, and maximizing throughput.
 
    
    Measurement Application. The Measurement Applications bring together information
from outside and inside the enterprise regarding sales, service, manufacturing,
inventory, finance and the supply chain so that it may be used in decisions, thereby
enabling better strategic plans, evaluation of plans and improved responsiveness to
changes in plans. The application extracts information from the other modules of Ross
ERP and SCM solutions in order to generate analyses and plans that can be used as
management tools to measure performance and judge the impact of proposed corrective
actions.
 §
    
    Sales & Operations Planning Module. The sales & operations planning module
allows executives to see how the organization is performing against plan, establish
where future demand or supply issues may arise, and evaluate the outcome of
different demand and supply balancing options on the business. The module enables
the tracking of sales and operational activities, and map deviations from the
corporate plan.
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
    
    RFID-to-Go. The RFID-to-Go is an EPC-compliant, bolt-on application to the Ross ERP
and SCM suites. RFID-to-Go supports the practice of applying RFID tags to products
during the receipt process, while in storage, and just prior to shipping.
    
    Ross EPM Analytics. The Ross enterprise performance management (EPM) suite of
analytics applications, integrated with Ross ERP and SCM, enables fast,
multi-dimensional and cross-functional analysis of key business drivers. Through
customizable management dashboards, pre-built reports, and proactive alerts, decision
makers can monitor key performance indicators in real time. These include Ross EPM
Sales Analytics for monitoring key metrics in sales and customer service, Ross EPM
Manufacturing Analytics and Ross EPM Financial Analytics.
 CRM Software
 
    
    Pivotal provides a complete set of highly flexible CRM applications and
implementation services for mid-sized enterprises and divisions of larger enterprises,
as well as selected target industries.
    
    c360 Solutions provides add-on products, industry solutions and development tools
for the Microsoft Dynamics CRM platform, which allows us entry into CRM products for
smaller scale businesses with zero complexity. The acquisition of c360 occurred in
April of 2006 and the operating results of c360 are not included in the Companys
consolidated financial statements for any of the years ended December 31, 2005.
  
    
    Pivotal Sales Suite. The Pivotal Sales Suite provides critical customer
information, opportunity management tools, and best practices sales methodologies for
the enterprise sales force. Core capabilities of the suite include quote and proposal
management, consolidated revenue forecast, territory management, opportunity
management, team selling enablement, product configuration and guided selling. Core
applications in the suite include the following:
 §
    
    Pivotal Sales Application.Pivotal Sales enables global sales organizations to
sell collaboratively across multiple regions, currencies and channels. With Pivotal
Sales, organizations can share information across sales teams, forecast their
business, manage pipelines, automatically generate quotes and proposals, and
configure products and services that meet specific customer needs.§
    
    Pivotal Sales Application  Miller Heiman Edition.Pivotal Sales  Miller
Heiman Edition is an option for the Pivotal Sales application based on the three
most popular disciplines  strategic selling, conceptual selling, and large account
management  as taught by Miller Heiman, a leader in sales methodologies.§
    
    Pivotal Assisted Selling Application. Pivotal Assisted Selling combines sales
automation, guided selling, complex quote creation and price/product configuration.
Users can configure products and services with flexible guided selling
capabilities, and then create, propose and
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automatically expire multiple quotes per
opportunity that contain up-to-date products, services and pricing.
 
    
    Pivotal Marketing Suite.The Pivotal Marketing Suite features Pivotal MarketFirst
as a comprehensive marketing automation product designed for end-to-end management of
multi-channel campaigns and marketing processes. It reduces both the cost and time to
create personalized campaigns and increases the ability to deliver better leads to
sales resources. Core capabilities of the suite include campaign management and
execution lead capturing and tracking, customer profiling and analysis, data mining and
direct mail campaign management. Core applications of the suite include the following:
 §
    
    Pivotal MarketFirst Direct Marketing Manager Application.Pivotal MarketFirst
Direct Marketing Manager synchronizes a customers marketing database, web site,
and multi-channel communications to create a segmented and targeted direct
marketing program that delivers improved response rates, higher quality leads and
better brand building.§
    
    Pivotal MarketFirst Event Manager Application.Pivotal MarketFirst Event
Manager automates labor-intensive tasks associated with marketing events
(including logistics, invitations, registration, scheduling, lead management and
budgeting) and facilitates follow up to turn event attendees into sales leads.§
    
    Pivotal MarketFirst Lead Manager Application.Pivotal MarketFirst Lead
Managerstreamlines lead management, simplifying the process of qualifying,
managing, nurturing and tracking leads, thereby focusing sales and improving both
lead conversion and sales closure rates.§
    
    Pivotal MarketFirst Prospecting Assistant Application.Pivotal MarketFirst
Prospecting Assistantdelivers consistent, accessible marketing support to the
sales team via a Web-based portal that takes the burden off salespeople while
accelerating the conversion of prospects to leads.§
    
    Pivotal MarketFirst Campaign Portal Application.Pivotal MarketFirst Campaign
Portalallows distributed marketing organizations to work together more
effectively and consistently in order to launch targeted campaigns.
 
    
    Pivotal Service Suite. The Pivotal Service Suite is an Internet-based customer
service application designed to build customer loyalty and optimize call center
performance. Core capabilities of the suite include, service request management,
online request tracking and escalation, personalized 24x7 self service and online FAQs.
Core applications of the suite include:
 §
    
    Pivotal Service Application. Pivotal Service automates the capture, management
and resolution of customer service and support requests across multiple channels.
It integrates
with sales and marketing functions to provide service professionals with the tools
and information they need to deliver personalized service for improved customer
satisfaction.§
    
    Pivotal Contact Center Application. Pivotal Contact Center transforms call
centers into a contact center that supports multiple channels of customer
interactions, including voice, email, text chat, Internet collaboration, and fax.
By managing customer interactions across multiple channels, service organizations
have the tools and information they need to deliver high quality, cost-effective
customer service.§
    
    Pivotal eService Application.Pivotal eService helps organizations reduce the
cost of service by giving customers a self-service portal with one-click access to
personalized information. The application provides customers access to
self-service reports to keep track of orders, incidents,
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contracts and service
level agreements, and includes quick product registration capabilities. The
application also allows full text search to help customers solve their problems
quickly.
 
    
    Pivotal Partner Management Suite.The Pivotal Partner Management Suite empowers
customer companies to more effectively manage their partner relationships. Core
capabilities of the suite include, partner lifecycle management, recruitment
management, partner profiling, lead management, opportunity management and forecasting,
alliance management and partner performance reporting and analytics. Core applications
of the suite include:
 §
    
    Pivotal ePartner Application. Pivotal ePartner is a browser-based product that
extends marketing, sales, service and ordering capabilities to a customers
business partners, enabling them to become effective members of the customers
extended enterprise to generate sales and deliver customer value. Tools within the
suite allow the customer to keep a partner up-to-date by providing easy access to
product information, training, sales tools, transaction data, and performance
analysis reports.§
    
    Pivotal Partner Manager Application. Pivotal Partner Manager is an internal
tool used to help manage and enable partner relationships and operations. The
application enables organizations to collaboratively sell, service and market to
end-users, and measure and reward the partner community.
  
    
    Pivotal Mobile CRM Solution.The Pivotal Mobile CRM solution delivers sales and
service functionality to disconnected users. It is designed to support an
organizations mobile users, from mobile executives on the road to remote field sales
to sales representatives who have stepped out of the office. The solution offers users
remote access to data through the following products:
 §
    
    Pivotal Mobile Client.Pivotal Mobile Client delivers access to Pivotal CRM
application functionality, with or without a network.§
    
    Intellisync for Pivotal.Intellisync for Pivotal supports bi-directional
synchronization of data in the Pivotal CRM suite with Microsoft Outlook or Lotus
Notes, allowing offline access to critical data through a personal digital
assistant.§
    
    Pivotal Wireless.Pivotal Wireless allows mobile users to stay connected and
up-to-date on critical opportunity and account developments. Using the
micro-browser on a wireless device, such as a web-enabled cell phone or personal
digital assistant, mobile users have real-time access to data they need from the
field.
 
    
    Pivotal Analytics Solution.The Pivotal Analytics solution is a business
intelligence solution which enables organizations to analyze customer data. Pivotal
Analytics enables businesses to gain greater insight and value from their CRM data,
giving users the ability to analyze data, identify trends, and make better-informed
business decisions, more quickly. It is built on the
Microsoft BI platform, and offers both the flexibility of a BI tool framework and the
usability of a pre-packaged analytics application, making sophisticated analytical
capabilities accessible.
 Industry Specific CRM Solutions.
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
    
    Pivotal Financial Services.Pivotal Financial Services is comprised of targeted
solutions tailored to meet special business requirements of commercial banking, asset
management, private banking and capital markets organizations. Pivotals financial
services solutions have been designed in consultation with financial institutions to
help these companies drive revenue by fostering more meaningful relationships with each
stakeholder, identifying cross-sell and up-sell opportunities, enabling team selling,
providing better visibility into the sales pipeline, and improving regulatory
compliance.
    
    Pivotal Healthcare. Pivotal Healthcare is a comprehensive front office solution
that improves the ability of healthcare payers to serve and manage brokers, members,
and employer groups efficiently and effectively. Comprised of Pivotal Healthcare Front
Office, Pivotal Healthcare eBroker, and Pivotal Healthcare eEnrollment, the Pivotal
Healthcare solution delivers a scalable foundation and processes for member
acquisition, retention, and growth. It encompasses components including lead
management, new business quoting, renewal processing, rating/underwriting, online
enrollment, and back office integration.
    
    Pivotal Homebuilder.Pivotal Homebuilder is designed to handle the complete
marketing automation, lead management, sales automation, and customer care cycles of
homebuilders, from the first point of interest on a website through the complete sales
cycle to the handling of service and warranty requests years after a home is purchased.
It features extensive integration to Microsoft Office, including Microsoft Outlook, a
user friendly interface, and integration to back-office systems including
Oracle/PeopleSoft.
    
    Pivotal Medical Devices. Pivotal Medical Devices is designed to meet the special
needs of medical device manufacturers. Its end-to-end industry-specific integrations
can help companies through the process of how they go to market. The solution offers a
combination of technology-enabled sales, lead management, and industry-specific
capabilities which make it easier for medical device manufacturers to market, sell to
and service customers. Pivotal Medical Devices is the first in a series of CRM
applications designed for specific industries in discrete manufacturing. Much like the
industry-specific CRM applications for financial services and homebuilders, these new
applications are rapidly delivered using a similar application template methodology.
    
    Pivotal Manufacturing. Pivotal Manufacturing provides the critical functionality
needed by manufacturers-integrated sales, marketing, service, and partner processes-to
become customer-driven. With the ability to capture, analyze, and act on customer
intelligence, CDC Software helps manufacturers aggregate and analyze information across
the business, giving them the insight to guide effective decision-making and more
easily adapt to changing markets.
   
    
    Core Productivity Pack.The core productivity pack adds functionality to the
Microsoft Dynamics CRM platform v3.0, including Duplicate Detection to alert uses
when a new entry record already exists in the Microsoft CRM database, Alerts to allow
users to add critical information to CRM records so other user will be advised of this
information upon access of the record, Consoles to
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allow users to consolidate CRM
data in a series of customizable cells which can reduce excess clicks and navigation,
Multi-field Search to provide users with a quick central search screen where they can
search across multiple fields with a single click, Summary to provide a user a
configurable screen to roll-up, summarize, read and review interactions for various
record types in Microsoft CRM without opening other windows or performing additional
clicks, Email Link to allow users to quickly generate Microsoft Outlook email to
share account information with others and Relationship Explorer to allow users to
have a single place to view all relationships that exist for a particular object in a
user friendly graphical tree.
    
    Sales Productivity Pack. The sales productivity pack adds functionality to the
Microsoft Dynamics CRM platform v3.0, including Forecast Manager to allow users to
update multiple fields and records from a single editable dashboard screen and retrieve
find queries allowing users to show opportunities meeting specific criteria and Web
Connect to allow organizations using Microsoft CRM to easily integrate their website
to Microsoft CRM for lead and web visitor activity capture.
    
    Service Productivity Pack.The service productivity pack adds functionality to the
Microsoft Dynamics CRM platform v3.0, including Email to Case to allow users to
configure multiple CRM queues to convert inbound emails to service cases so that each
time a case is created the customer is emailed and designated CRM users are notified
and My Workplace to allow users to personalize the CRM workplace area for more
efficient queue management.
   Order Management Systems (OMS) Software
 
    
    IMI Order Management Systems (OMS). These are distributed order management
applications for multi-channel sales and sourcing, coordination of all kinds of order
flows, and distribution
models with a single face to the customer. It ensures clients can source and distribute
products from anywhere, and to anywhere, based on individual customer
needs.
    
    IMI Warehouse Management Systems (WMS).The WMS suite includes applications for
planning, executing, monitoring, and following up warehouse activities, optimizing the
use of staff, space, and equipment, and maximizing the efficiency of day-to-day
operations. It performs all tasks in real-time
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24 x 7 x 365, adapting to resource
constraints and priorities as well as coordinating interdependent warehouse and
transportation activities.
    
    IMI Collaboration.Our Collaboration software products address business process
integration via web services and portal applications that support trading partner
interaction over the web. They enable customers, vendors, and logistics service
providers to collaborate around orders, confirmations, advance shipping notices, status
inquiries and updates, track & trace and proof of delivery.
    
    IMI Supply Chain Analytics.Our Supply Chain Analytics helps our clients assess
operational effectiveness and how each functional area is contributing towards
corporate goals. Through customizable management dashboards, pre-built reports, and
proactive alerts, decision-makers can easily monitor key performance indicators across
the supply chain, manage by prioritized exceptions, and ensure that all supply-chain
functions are working with the same information.
  
    
    Solutions for retailers. IMIs retail solutions help retailers (including grocery,
specialty goods, and direct merchant retailers) improve ordering, fulfillment, and
customer service across sales channels. The products are designed to provide full
visibility and control of distribution center and store inventory, as well as managing
orders from vendors, warehouses, stores, customers, and consumers. They permit
distribution centers and stores to maintain and control product inventory and
goods-in-transit, and to replenish store shelves based on expected consumer demand.
The control and visibility of inventory helps retailers reduce out-of-stocks, increase
product availability at the shelf, improve response to customer demand and better
utilize store shelf capacity.
    
    Solutions for wholesalers. IMIs wholesaler solutions focus on the grocery,
specialty goods, and pharmaceutical and over-the-counter drugs industries. The
solutions contain advanced order management, replenishment management, warehouse
management, and collaborative management components. It is designed to give the
wholesaler a logistics platform to enable very late customer orders, allow for
multi-channel distribution within the same customer order, lower inventory handling and
storage costs through managing cross-docking and merge-in-transit strategies throughout
the logistics network, differentiating customer service to various individual customers
to give additional focus to the most important customers, and support collaborative
purchasing operations by providing suppliers with time-phased forecasts and
replenishment schedules over the Internet.
    
    Solutions for consumer goods manufacturers. IMIs consumer goods manufacturer
solutions target distribution-intensive supply chain operations and complement existing
enterprise resource planning and supply chain planning systems. The products are
designed to solve the problem of multi-channel integration through a collaborative
order management solution that can fulfill global customer orders and deliver a single
point of contact to customers.
    
    Solutions for logistics service providers. IMIs logistics service provider
solutions focus on traditional services such as warehousing and transportation, but
also complementary services like vendor-managed inventory, replenishment, inventory
control, advanced collaborative order management and customer relationship management.
  HRM
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
    
    PowerHRP. PowerHRP is used in human resources and payroll administration to provide
comprehensive data management functions for the storing, calculating, reading and
tracking of employee information. Data management functions include comprehensive
employee information management, including employee personnel information, payroll
data, attendance, leave status, training, position, benefits and other user definable
information. PowerHRP also provides process management functions, including
recruiting, training, compensation and benefits, and employee performance
functionality. Decision support tools are also available to assist in employee
succession planning and budgeting.
    
    PowerATS.PowerATS is an attendance tracking system which provides functionality
with respect to organizing working shifts, administering temporary changes to shifts,
tracking late arrivals, early departures, absence, overtime and leave, tracking of meal
locations, times and number of meals, and administering salary deductions.
    
    PowerESS.PowerESS is an Internet based employee self-service application which
provides employees and managers with self-service functions for accessing and updating
various human resources related data, such as personal information, leave applications
and approvals, training applications and approvals, time sheets and pay slip inquiries.
 BI Software.
  
    
    Ross EPM Analytics.Ross EMP Analytics is a suite of applications, integrated with
Ross ERP and SCM which enables multi-dimensional and cross-functional analysis of key
business drivers. Through customizable management dashboards, pre-built reports, and
proactive alerts, decision makers can emonitor key performance indicators (KPIs) in
real time. These include Ross EPM Sales Analytics for monitoring key metrics in sales
and customer service, Ross EPM Manufacturing Analytics and Ross EPM Financial
Analytics.
    
    Pivotal Analytics Solution.The Pivotal Analytics solution is a business
intelligence solution which enables organizations to analyze customer data. Pivotal
Analytics enables businesses to gain greater insight and value from their CRM data,
giving users the ability to analyze data, identify trends and make better-informed
business decisions. It is built on the Microsoft BI platform, and offers the
flexibility of a BI tool framework and the usability of a pre-packaged analytics
application, making sophisticated analytical capabilities accessible.
    
    IMI Supply Chain Analytics. The IMI Supply Chain Analytics helps our clients assess
operational effectiveness and how each functional area is contributing towards
corporate goals. Through customizable management dashboards, pre-built reports, and
proactive alerts, decision-makers can easily monitor key performance indicators across
the supply chain, manage by prioritized exceptions, and ensure that all supply-chain
functions are working with the same information.
 Professional Services.
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
    
    Business Application Consulting.Business application consulting involves in-depth
analysis of the clients specific needs and preparation of detailed plans that list
step-by-step actions and procedures necessary to achieve a timely and successful
implementation of our software products. Our consultants, who often have significant
industry-specific experience and product knowledge, work with companies to identify
measurable business objectives and provide a sensible path to reach them.
    
    Technical Consulting.Technical consulting is dedicated to successful implementation
of a product. The services involve evaluating and managing the clients needs by
supplying custom application systems, custom interfaces, data conversions and system
conversions. Consultants participate in a wide range of activities, including
requirements definition, software design, and development. Technology services focused
on networking, database administration and tuning can also be provided. In addition,
Pivotal also offers hosting services.
    
    Integration Services.Integration services focus on a smooth, efficient and
cost-effective integration of our software products across multiple existing systems.
Because businesses have often deployed disparate enterprise systems over time to
support sales, services, accounting, manufacturing, human resources and order
processing, integration services seeks to unify the multiple systems and unlock the
information in these separate databases.
    
    Education Services.Education services seek to ensure that client companies
effectively adopt and use their enterprise application software products by delivering
training which fits the clients business needs. Education services can be offered to
clients either at our education facilities or at the clients location as either
standard or customized classes.
  Product Development.
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
    
    In March 2005, Ross introduced Ross EPM, a suite of applications, integrated with
Ross ERP and SCM, enabling fast, multi-dimensional and cross-functional analysis of key
business drivers. Through customizable management dashboards, pre-built reports, and
proactive alerts, decision
makers can easily monitor key performance indicators in real time. The first
application in the suite was Ross EPM Sales Analytics for monitoring key metrics in
sales and customer service. In the fall of 2005, Ross EPM Manufacturing Analytics and
Ross EPM Financial Analytics were added to the suite. Several other analytics modules
are planned for 2006, including Inventory and Purchasing.
    
    In May 2005, Ross introduced iRenaissance SCM 5.9.1 which offered improved planning
and scheduling, enhancements to demand planning, enhancements to ERP integration and
support for Oracle 10g technology.
    
    In December, 2005, Ross introduced Ross Data Collection, a fully automated system
that eliminates the need for manual entry of operational and inventory information.
From initial receipt of materials to customer shipments, Ross Data Collection automates
all tracking of material movements with immediate data capture and point-of-scan error
alerts.
    
    In April 2005, Pivotal introduced Pivotal Medical Devices 2.0, an upgraded
industry-specific template for Pivotal CRM that addresses unique requirements in the
medical devices industry.
    
    In May 2005, Pivotal introduced Pivotal Sales 5.7, an upgraded module within Pivotal
CRM, providing enhanced integration with Microsoft Outlook email, improved analytics
functionality, Unicode CRM data support and enhanced .NET customization and application
development capabilities.
    
    In August 2005, Pivotal introduced Pivotal Financial Services 3.7, an upgraded
industry-specific template for Pivotal CRM that addresses unique requirements in the
financial services industries and the capital markets in particular.
    
    In December 2005, Pivotal introduced Pivotal Homebuilder 3.6, an upgraded
industry-specific template for Pivotal CRM that addresses unique requirements in the
construction, homebuilding and real estate industries. The template provides improved
sales processes, and neighborhood level interest tracking for leads and contacts.
    
    In December 2005, Pivotal introduced Pivotal Interaction Connector  Universal
Edition 5.7, a standardized, vendor-agnostic API that can be used to integrate the
Pivotal CRM system to almost any brand of contact center hardware or infrastructure
equipment.
    
    In June 2005, IMI released new versions of the core products in the IMI Suite for
supply chain management, IMI Order v9 and IMI Warehouse v5. IMI Order v9 introduced a
new ultra-thin web user interface, configurable workbenches for streamlined workflows
and increased user productivity, adherence to the Sarbanes-Oxley and IFRS mandates,
built-in VAT and Intrastat handling along with other performance and usability
improvements. IMI Warehouse v5 featured a world-class solution for dynamic pick
optimization and real-time pick execution, complete re-architecting of inbound
processes, support for Windows server deployment and Service Oriented Architecture
based on web services.
    
    In September 2005, Platinum China released version 6.4 of the PowerHRP suite which
included employee motivation management and which completed the function of Employee
Risk & Motivation Management, enhanced Attendance Tracking Management and enhanced
Employee Self-Service.
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
    
    In October 2005, IMI released a technology migration of its solution for coordinated
supply chain execution, IMI Collaboration v3, based on open internet-based
architecture, with hardware, operating system and database independent deployment and
web services enablement.
    
    In December 2005, IMI Warehouse v5.0i was released with integration (web services)
to Ross ERP 5.9.
    
    In April 2006, Ion Global redesigned its expresso
interface which makes it easier for
new customers to learn. Expresso is a hosted solution for direct email marketing used
by a wide variety of customers throughout Asia.
   Business Services segment.
    
    
    Strategy. These services cover industry advisory services, and are intended to help
customers with requests such as, What are the industrys best practices? and What
best practices should be adopted?
    
    Design. These services cover business process improvement services, and are
intended to help customers with requests such as, Please assist us in designing our
business processes?
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
    
    Implementation. These services cover traditional implementation services which
are typically offered by enterprise software companies as a part of their professional
services offerings, and are intended to help customers with requests such as, Please
lead the overall effort with participation from our team.
    
    Enhancing.These services cover tuning and optimization services, and are intended
to help customers with requests such as, My system isnt running well. Please help me
figure out what is wrong.
    
    Outsourcing. These services cover hosting and application management services, and
are intended to help customers with requests such as, take care of the entire solution
for me and Can you manage our applications and information technology needs?
Solutions offered in these services include Customer Application Development, System
Integration, Software Product Engineering and Infrastructure related services.
  
    
    Ascent SGI. Ascent SGI is a 51% owned subsidiary with offices in the metropolitan
New York region servicing customers principally in the northeastern United States.
    
    Horizon Companies. Horizon Companies is a 51% owned subsidiary with offices in New
Jersey, Mumbai and Ontario servicing customers principally in the northeastern and
central United States. The acquisition of Horizon occurred in January of 2006 and the
operating results of Horizon are not included in the Companys consolidated financial
statements for any of the years ended December 31, 2005.
    
    Praxa. Praxa is a 100% owned subsidiary with offices in Australia servicing
customers principally in Australia.
    
    PK Information Systems.PK Information Systems is a 100% owned subsidiary with
offices in Australia servicing customers principally in New South Wales in Australia.
  IT Consulting Services.
 Outsourced Applications Development.
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Systems Integration Services.
 Managed IT Services.
 Other Specialized Business Services
  
    
    eBusiness Consulting and Web Development. We offer eBusiness consulting and web
development services primarily through our wholly-owned subsidiary, Ion Global, which
has offices in San Francisco, Hong Kong and Korea. Ion Global (other than Ion Global
Korea which is engaged in providing solutions geared to the mobile business) is engaged
in planning, architecting, and delivering e-business consulting services for both
Fortune 500 multinational corporations and pan-Asian clients. Ion Global typically
assists clients with the adoption of web-based technologies and helps clients deploy
web-based initiatives to lower costs, increase sales, or increase efficiency. The
industries with which Ion Global has the most experience are financial services, travel
and transportation, communications, media and consumer goods.
    
    Mobile User Interface Design Consultancy and Development. We provide mobile user
interface design consultancy and development services for a number of leading Korean
companies in the telecommunications industry primarily through Ion Global Korea. Ion
Global Koreas customers include service providers, mobile handset manufacturers and
manufacturers of MP3 devices, wireless Internet broadband devices and interactive
televisions. Ion Global Korea has expertise in designing user interfaces and graphic
user interfaces which are considered critical to the success or failure of these
devices which need to operate under a variety of pre-defined industry standard
specifications. Industry standard specifications which Ion Global Korea designs under
include, Wireless Internet Platform for Interoperability (WIPI), a standard developed
in Korea to provide an operating environment for applications downloaded via the
wireless Internet for use on a mobile device (like an MP3 player), Wireless Application
Protocol (WAP), an open international set of communications protocols that standardizes
the manner in which wireless devices (such as mobile phones) are used for Internet
access, and Video on Demand (VOD), a technology to enable individuals to select videos
from a central server for viewing on demand (for use in interactive televisions).
    
    Marketing Database and Marketing Support Services. We provide business marketing
data and marketing support services in Australia and New Zealand primarily through our
Mezzo business. Mezzo maintains the IncNet databases as a source of marketing
intelligence on medium and large companies and organizations in Australia and New
Zealand. The IncNet databases, which identify
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decision makers within approximately 50,000 organizations in Australia and New Zealand,
are used as a source of information by many business-to-business direct marketers in
Australia and New Zealand. Direct marketers and other customers can use this data to
develop and execute marketing campaigns, measure market penetration and analyze marketing
opportunities. Marketing support services offered by Mezzo include inbound and outbound
call center services, market analysis and research, and marketing database development
services. Services are provided to lending marketers in several industries, including
the financial services, consumer goods and automotive sectors. Mezzo has also used its
data resources to assist companies in refining their marketing strategies, and has
developed various modeling techniques to segment markets, quantify opportunities and
allocate resources to the appropriate sales channel.
 Competitive Strengths
  We offer a range of enterprise software products which enable businesses to increase revenues,
margins and customer loyalty.
 We have developed industry-specific products for strategic specific industry segments
(micro-verticals)
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Our products can be implemented rapidly, can be easily customized and are relatively easy to
learn, all of which helps to yield a low total cost of ownership but high return on investment
 Our products can be scaled with the growing needs of our customers
 Goals and Strategy
  Complement our product line through selective acquisitions
 Invest in our existing businesses and align their operating plans
 Extend existing applications and product scope
 
    
    Broader application functionality to address an increasingly expanded set of
requirements for our customers.
    
    Deeper functionality to address increasingly specific and complex requirements that
are unique in each of our strategic industries.
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
    
    Geographically-specific functionality to increasingly address the local requirements
of each customer and enable expansion of our markets on a global basis.
    
    Flexible delivery models to address the preferred acquisition and deployment
preferences of each customer. We anticipate that customers will continue to prefer
both traditional on-premise software licensing as well as Software as a Service (SaaS)
options for accessing applications via the Internet based on subscription services. We
intend to offer a full range of options to address the preferences of each customer.
    
    Expanded services offerings to increasingly address a broader range of services
needs for our customers. These may range from outsourced support and maintenance to
fully outsourced operations or monitoring for adherence to best-practices.
 Leverage cross-selling opportunities with our expanded customer base
 Target the markets in Japan and the PRC for enterprise application software, and leverage our
experience and brand name in the Asia Pacific region .
 China.com Inc. Business Unit
   www.china.com www.hongkong.com
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Products and Services
 Mobile Services and Applications segment.
  Services
 
    
    SMS.SMS is a communications protocol which allows users to access, download and
communicate information consisting of fairly simple and short text messages through
mobile phones.
    
    MMS.MMS uses General Packet Radio Service technology, or GPRS technology, and has
a greater capacity than SMS. MMS transmits more data in a single message, enabling
users to access and download color pictures, multi-tonal sounds and Flash files.
    
    WAP.WAP is a set of communications protocols that standardizes the manner in which
wireless devices (such as mobile phones) are used for Internet access. WAP allows
users with WAP enabled handsets to browse content in a more user-friendly format on
their mobile phones so that users can request and receive information in a manner
similar to accessing information on Internet websites. WAP also uses GPRS technology,
enabling users to access and download color pictures, multi-tonal sounds and Flash
files.
    
    IVR.IVR provides users with voice content, such as celebrity voice greetings and
news information.
 Products
 
    
    Mobile Dating. Our mobile dating services are subscription-based community services
that provide dating and chatting platforms through which subscribers may meet and
socialize, or arrange to meet in person, by sending wireless messages. Users can select
a particular geographic location to meet friends and set criteria, including age,
gender, hobbies and qualifications, for the friends they would like to meet. Some
services combine a mobile platform with our Internet portals so that subscribers can
conduct chat sessions with online subscribers or mobile subscribers. In addition,
certain subscribers can record and upload video clips and/or photos onto online
websites, which enhances the communication among our online and mobile subscribers.Mobile subscribers can access mobile dating services through SMS, WAP and IVR.
    
    Fortune Telling. We offer a subscription and on-demand service that provides fortune
telling and tips on ones luck for the day. Users enter their birth dates and select
fortune categories, such as relationships, general fortune or career that they would
like to inquire.Mobile subscribers can access fortune telling through SMS, MMS, WAP and IVR.
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
    
    Jokes. We offer jokes on both a subscription and on-demand basis. Users can
subscribe to a fixed number of jokes to be delivered each day, or they can order on a
per-joke basis, which is delivered on demand. We develop our daily jokes internally or
select jokes submitted by users.Mobile subscribers can access jokes through SMS, MMS, WAP and IVR.
    
    Mobile Games. We offer mobile games to subscribers. For Java based mobile games,
subscribers can download these games to their handsets and play them with their
handsets repeatedly. We offer these games through third party game developers. We
also offer interactive network games of various types that we develop ourselves.Mobile subscribers can access mobile games through SMS, WAP and IVR.
    
    Information-Related Services. We offer current information, such as stock quotes,
news and local weather conditions, and entertainment related products such as music and
celebrity voice greetings to subscribers on a subscription and on-demand basis. Most of
the information distributed from our mobile platform is aggregated from content
partners through revenue sharing arrangements.Mobile subscribers can access information-related services through SMS, MMS, WAP and IVR.
    
    Pictures and Ringtones. We provide ringtone, picture and logo downloads through
China.coms portal and through a subscribers mobile handsets on a subscription and per
download basis.Mobile subscribers can access pictures and ringtones through SMS, MMS, WAP and (for
ringtones) IVR.
 Internet and Media segment.
  Online Games.
  Portal.
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Travel
and Trade Services.
 Competitive Strengths
  Integrated mobile and portal platforms.
 Scalable, high-margin business model
 Extensive China-wide network coverage with direct local connectivity
 Recognized brand names in China
 Experienced management team
 Goals and Strategy
  Pursue selective strategic acquisitions and investments to achieve greater scale
 Expand our product selection and integrate new services and applications
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Broaden our customer base
 Expand
and develop our portal network
 Industry
     www.china.com
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Customers
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Sales
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Intellectual Property
   Treasury Management
  3⁄4
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Markets and Operations
  Legal Proceedings
  Vertical Computer Systems/NOW Solutions LLC.
 Harry Edelson
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Class Action Lawsuit.
 Lam, Po Chiu Mark.
 Herkemij & Partners Knowledge.
 Adding Value to Business Pty Ltd trading as Countrywide Systems Network (Adding Value)
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Mantech International Corporation and ManTech Australia International Inc.
 C. Organizational Structure
  
       Ross Systems, Inc.
    
          NewPalm (China) Information Technology Co. Ltd. (held by Palmweb Inc.)*      Pivotal Corporation
    
          Beijing He He Technology Co. Ltd. (held by Group Team Investments)* (operates Go2joy)      Industri-Matematik International Corp (51%)
    
          Beijing 17Game Network technology Co., Ltd*      Platinum China Holdings Inc.(holds OpusOne)
    
          TTG Asia Media Pte Limited*      Ion Global (BVI) Limited
    
          chinadotcom Portals Limited*      Praxa Limited
    
          hongkong.com Portals Limited*      PK Information Systems Pty Ltd.
    
          Shenzhen KK Technology Ltd (held by United Crest Limited)*      Software Galeria, Inc. (51%) (holds Ascent and the assets of
Horizon)      MEZZO Business Databases Pty Limited      Assets acquired from JRG Software, Inc.      c360 Solutions Incorporated
 
 ( )
     Denotes percentage ownership, if less than 100%
 *
    
    Subsidiaries held under our 77% owned subsidiary, China.com, which is listed on the Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited, or GEM.As at December 31, 2005 we
owned 81% of China.com Inc. As of March 31, 2006, as a result of our acquisition of the remaining
52% of Equity Pacific Limited which ultimately owns Beijing 17game Network Technology Co Limited,
we own 77% of China.com Inc. See Item 10.C  Material Contracts for a summary of the terms of the
17game acquisition. Corporate Structure in China for our China.com Subsidiary
 Overview
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-
    
    Mobile Services and Applications; and-
    
    Internet and Media (including our Online Games business).
  Trust Deed Arrangements
       Licenses and Agreements
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
    
    Beijing Newpalm, Beijing Wisecom, Beijing He He and Shenzhen KK each hold a
license to provide SMS, MMS, IVR, WAP and other mobile services and applications to
public subscribers in China.
    
    Beijing Newpalm, Beijing He He and Shenzhen KK each hold a nationwide license to
provide mobile value added services, or MVAS in the PRC.
    www.china.com
  Use of Wholly Foreign Owned Enterprises
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D. Property, Plants and Equipment
 
    
    Ross has its corporate headquarters, research and development, sales, marketing,
consulting and support facilities in Atlanta, Georgia where it occupies approximately
27,000 square feet. Ross also maintains a leased facility for product development in
San Marcos, California and maintains leased office space in the following additional
locations: England (Northampton); The Netherlands (Zeist); and Spain (Barcelona).
    
    Pivotal maintains its principal, professional services, education and research and
development facilities in Vancouver, British Columbia where it leases approximately
135,000 square feet of office space, approximately 71,400 square feet of which is
sublet. The principal office for Europe, the Middle East and Africa is located in
leased space shared with Ross and IMI in Northampton, England. Pivotal also has a
development center in Bangalore, India in leased space. As of December 31, 2005,
Pivotal has also leased offices in Auckland, New Zealand; Belfast, Northern Ireland;
Paris, France; Tokyo, Japan; Toronto, Ontario; Atlanta, Georgia; Bethesda, Maryland;
Chicago, Illinois; Dallas, Texas; Mountain View, California; and Westborough,
Massachusetts. Pivotal also leases shared workspaces in various locations in
Australia, Europe and the United States.
    
    IMI has its principal product development facilities and its Nordic service,
support, sales and marketing offices in Stockholm, Sweden in approximately 13,500
square feet of leased space. In addition, IMI also leases an aggregate of
approximately 39,000 additional square feet of space elsewhere in Sweden in Globen,
Linköping and Hässleholm. IMI also leases office space in Mt. Laurel, New Jersey.
    
    China.com maintains its administrative, marketing and development facilities in
Beijing, Hong Kong and Singapore where it leases office space. China.com also leases
office space elsewhere in China, including Guangzhou, Shenzhen, Hangzhou, Lanzhou,
Liaoning, Nanjing, Sichuan and Tianjin, as well are in Korea.
  
 ITEM 4A. UNRESOLVED STAFF COMMENTS
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 You should read the following discussion of our financial condition and results of operations
together with our consolidated financial statements and the related notes included elsewhere in
this Annual Report on the Form 20-F . This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ significantly from those anticipated
in these forward-looking statements as a result of factors including, but not limited to, those set
forth under Item 3.D. of this Annual Report on the Form 20-F , Key Information  Risk Factors and
Item 11 of this Annual Report, Quantitative and Qualitative Disclosures About Market Risk.
 A. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Products and Services
  
    
    Software. Our enterprise software business is a global provider of enterprise
software applications and related services. Our products are designed to support and
automate the processes of an organization to achieve company-wide integration of
business and technical information across multiple divisions and organizational
boundaries, such as finance, manufacturing, logistics, human resources, marketing,
sales and customer service, by utilizing common databases and programs that share data
real time across multiple business functions. Our products seek to help companies
worldwide fulfill their business growth objectives through increased operational
efficiencies, improved profitability, strengthened customer relationships and improved
regulatory compliance. The software suite includes Enterprise Resource Planning
(ERP), Customer Relationship Management (CRM), Supply Chain Management (SCM),
Order Management Systems (OMS), Human Resources and Payroll Management (HRM) and
Business Intelligence (BI) products.
    
    Business Services.The Companys business services offering includes information
technology services, eBusiness consulting, web development and outsourcing in Hong
Kong, Australia, Korea, and the U.S., and a marketing database and marketing support
service offered principally in Australia and New Zealand through Mezzo Business. The
Companys business services companies provide program management, outsourcing services,
application development and ongoing support services using a wide range of
technologies. These services are principally offered through our subsidiaries, Ion
Global, Ascent SGI, Praxa and PK Information Systems.
    
    Mobile Services and Applications.Our mobile services and applications business
provides news and mobile applications services targeting the consumer market in China.
It offers wireless services including Short Message Service (SMS), Interactive Voice
Response (IVR), Multimedia Message Service (MMS) and Wireless Application Protocol
(WAP). We have established strong local direct connectivity with provincial mobile
network operators in 29 provinces, which facilitates the marketing and promotional
activities of our wireless services. Our mobile services and applications business is
primarily operated through Newpalm and Go2joy, both of which are held through our
subsidiary, China.com.
    
    Internet and Media.Our Internet and Media business encompasses a range of
businesses, including our Internet media business which is focused on online
entertainment and Internet products and services that target users in China via our
portal network (www.china.com and
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www.hongkong.com) and a Singapore-based travel trade publisher and organizer serving
the travel and tourism industry in the Asia Pacific region operated by TTG.
  Competitive Advantages
  Software
 
    
    We offer a range of enterprise software products which enable businesses to increase
revenues, margins and customer loyalty.
    
    We have developed industry products for specific industry segments
(micro-verticals).
    
    Our products can be implemented rapidly, can be easily customized and are relatively
easy to learn, all of which help to yield a low total cost of ownership but high return
on investment.
    
    Our products can be scaled with the needs of our customers.
 Mobile Services and Applications
 
    
    We have integrated mobile and portal platforms.
    
    We have a scalable, high-margin business model which allows us to deliver our
products to a large mobile subscriber base quickly and at a low cost.
    
    We have extensive China-wide network coverage with direct local connectivity with
China Mobile in 28 provinces and with China Unicom in 26 provinces.
    
    Our management team has extensive experience in the mobile data applications market
in China.
 Key Trends and Uncertainties Affecting our Revenue and Results of Operations
  
    
    Improving Economic Conditions Our operating performance for any period of time is
impacted by global macroeconomic trends. An important factor affecting our ability to
generate revenue is the effect of general economic conditions on our customers
willingness to spend on our products and services. Over the past year as economic
conditions have gradually improved, our customers have been more willing to invest in
software products and services. It is not certain, however, whether economic
conditions will continue to improve or whether enterprises will increase spending on
enterprise software, business services, or our other product offerings in the near
term. Although the global economy impacts all of our businesses, the Chinese economy
in particular has an impact on our mobile services and applications business. There
can be no assurance that growth of the Chinese economy will be steady or that any slow
down will not have a negative effect on our business. The
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Chinese economy affects our results as customer spending on mobile services and
applications depends on customers in less economically developed provinces of China being
able to achieve income levels that allow them to spend on our services.
 
    
    Software Technology Changes Our enterprise software products compete in a market
characterized by rapid technological advances in hardware and software development,
evolving standards in computer hardware and software technology and frequent new
product introductions and enhancements. We continually seek to expand and refresh our
product offerings to include newer features or products, and enter into agreements
allowing integration of third-party technology into our products. Expanding and
refreshing our product offerings impacts our results of operations because of
continuing high levels of investment required in research and development.
    
    Changes in Operating Practices of the Mobile Operators in China Recent changes in
policies or guidelines of the mobile operators such as the change to new billing
systems for 2G services which require users to make two confirmations to order services
via the Internet or mobile phone, enable users to more easily cancel services and
prevent service providers from billing inactive users for subscription-based services,
or the recent change in billing policy on undeliverable MMS messages have resulted in
and may further result in lower mobile services and applications revenues or additional
operating costs for us.
    
    Higher Operating Expenses We will continue to incur significant operating expenses
in the foreseeable future as a result of (i) recurring acquisition-related expenses
including amortization of acquired intangibles and stock compensation expense; (ii)
research and development required to keep our enterprise software business competitive;
and (iii) targeted investments in certain businesses.
    
    Lower Interest Income Interest income, which has historically had a significant
positive impact on our results, is expected to continue to decrease as a result of (i)
continuing acquisitions and investments in our business which have reduced the overall
cash balance over the past three years and will continue to reduce cash balances in
2006 and (ii) a continuation of our strategy of reducing the overall tenure of our
investments in debt securities to shorter-term, highly rated securities.
    
    Higher Non-cash Tax Expense In 2004, we incurred significant deferred tax expenses
resulting from the utilization of deferred tax assets related to net operating loss
carryforwards at Ross and Pivotal for which a valuation allowance had been made on
acquisition. If future events allow us to realize more of our deferred tax assets than
expected, an adjustment to these deferred tax assets would result in a reduction of
goodwill and higher tax expense.
  
    
    Ability to Integrate the Operations of Businesses Acquired Our ability to realize
cost savings, synergies or revenue enhancements may be affected by the extent, timing
and efficiency with which we can consolidate operations, reduce overlapping personnel,
and achieve compatibility or integrate acquired technology, all of which are difficult
to predict. We may not be able to realize cost savings, synergies or revenue
enhancements from such integration, and we may not be able to realize such benefits
within a reasonable time frame.
    
    Ability to Increase Revenues Although our revenue base has increased significantly
as a result of the Ross, Pivotal and Go2joy acquisitions in 2004 and the Newpalm, Praxa
and IMI acquisitions in 2003, if we are unable to continue to grow our revenues or
experience a decline in revenues, our results will be negatively affected. Our ability
to grow revenue depends on a number of factors including the speed with which we adapt
to new technologies and introduce new products, regulatory actions, and the actions
taken by our competitors. In our software business, our failure to
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successfully introduce, market and sell new products and technologies, enhance and
improve existing products in a timely manner, and properly position or price our
products, as well as undetected errors or delays in new products or new versions of a
product or the failure of anticipated market growth could individually and/or
collectively have a material adverse effect on our business, results of operations or
financial position. In our mobile services and applications business, the imposition of
fines or other penalties, such as a temporary suspension of service, for violation of
current or future PRC laws, rules or regulations regarding Internet related services and
telecom related activities, such as that experienced by our Go2joy subsidiary during
2004, can have a significant impact on our ability to generate incremental revenues.
 
    
    Ability to Manage Costs Our cost base has also increased significantly as a result
of the Ross, Pivotal and Go2joy acquisitions in 2004 and the Newpalm, Praxa and IMI
acquisitions in 2003. In addition, we may incur significant integration costs which
have and could continue to adversely affect our results of operations. If we are
unable to manage costs and reduce operating expenses, our results will be adversely
affected.
    
    Future Acquisitions In the future, we may make additional acquisitions and could
incur additional integration costs and acquisition-related charges which affect our
results, including amortization of acquired intangible assets, deferred tax expense,
write-offs of acquired deferred revenue, stock compensation expense, and restructuring
expenses.
 Effect of acquisitions
  Software
 Acquired company
    
    DateIndustri-Matematik International Corp. (IMI)
    
    September 2003Pivotal Corporation (Pivotal)
    
    February 2004Ross Systems, Inc. (Ross)
    
    August 2004
 Business Services
 Acquired company
    
    DatePraxa Limited (Praxa)
    
    February 2003PK Information Systems Pty Ltd. (PK Information Systems)
    
    August 2003
 Mobile Services and Applications
 Acquired company
    
    DatePalmweb Inc. (holds Newpalm (China) Information Technology Co.,
Ltd. (Newpalm))
    
    April 2003Group Team Investments Limited (holds Beijing He He Technology
Co. Ltd. (Go2joy))
    
    May 2004
 83




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Operating Segments and Discontinued Operations
    84




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Results of Operations
  Year ended December 31,2003
    
    
    2004
    
    
    2005(in thousands, except percentage data)RevenuesSoftware
    
    $
    12,891
    
    
    
    17
    %
    
    $
    107,879
    
    
    
    59
    %
    
    $
    159,164
    
    
    
    65
    %Licenses
    
    $
    1,157
    
    
    
    2
    %
    
    $
    28,748
    
    
    
    16
    %
    
    $
    38,856
    
    
    
    16
    %Maintenance and consulting services
    
    
    11,734
    
    
    
    15
    %
    
    
    79,131
    
    
    
    43
    %
    
    
    120,308
    
    
    
    49
    %Business Services
    
    
    40,477
    
    
    
    52
    %
    
    
    42,927
    
    
    
    23
    %
    
    
    42,489
    
    
    
    17
    %IT products
    
    
    6,083
    
    
    
    8
    %
    
    
    2,083
    
    
    
    1
    %
    
    
    2,079
    
    
    
    1
    %Consulting services
    
    
    31,159
    
    
    
    40
    %
    
    
    37,308
    
    
    
    20
    %
    
    
    36,942
    
    
    
    15
    %Advertising
    
    
    3,235
    
    
    
    4
    %
    
    
    3,536
    
    
    
    2
    %
    
    
    3,468
    
    
    
    1
    %Mobile Services and Applications
    
    
    16,876
    
    
    
    22
    %
    
    
    23,694
    
    
    
    13
    %
    
    
    34,389
    
    
    
    14
    %Internet and Media
    
    
    5,606
    
    
    
    7
    %
    
    
    8,173
    
    
    
    5
    %
    
    
    8,995
    
    
    
    4
    %Others
    
    
    2,001
    
    
    
    2
    %
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    77,851
    
    
    
    100
    %
    
    
    182,683
    
    
    
    100
    %
    
    
    245,037
    
    
    
    100
    %Cost of revenuesSoftware
    
    
    (9,357
    )
    
    
    12
    %
    
    
    (43,240
    )
    
    
    24
    %
    
    
    (62,381
    )
    
    
    25
    %Licenses
    
    
    (362
    )
    
    
    1
    %
    
    
    (3,486
    )
    
    
    2
    %
    
    
    (6,589
    )
    
    
    2
    %Maintenance and consulting services
    
    
    (8,995
    )
    
    
    11
    %
    
    
    (39,754
    )
    
    
    22
    %
    
    
    (55,792
    )
    
    
    23
    %Business Services
    
    
    (23,311
    )
    
    
    30
    %
    
    
    (28,076
    )
    
    
    15
    %
    
    
    (26,909
    )
    
    
    11
    %IT products
    
    
    (5,318
    )
    
    
    7
    %
    
    
    (1,879
    )
    
    
    1
    %
    
    
    (1,671
    )
    
    
    1
    %Consulting services
    
    
    (16,754
    )
    
    
    21
    %
    
    
    (24,871
    )
    
    
    13
    %
    
    
    (24,079
    )
    
    
    10
    %Advertising
    
    
    (1,239
    )
    
    
    2
    %
    
    
    (1,326
    )
    
    
    1
    %
    
    
    (1,159
    )
    
    
    Mobile Services and Applications
    
    
    (2,247
    )
    
    
    3
    %
    
    
    (4,597
    )
    
    
    2
    %
    
    
    (15,262
    )
    
    
    6
    %Internet and Media
    
    
    (3,073
    )
    
    
    4
    %
    
    
    (3,319
    )
    
    
    2
    %
    
    
    (3,449
    )
    
    
    2
    %Others
    
    
    (889
    )
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,877
    )
    
    
    (50
    %)
    
    
    (79,232
    )
    
    
    (43
    %)
    
    
    (108,001
    )
    
    
    (44
    %)Gross margin and gross margin %
    
    
    38,974
    
    
    
    50
    %
    
    
    103,451
    
    
    
    57
    %
    
    
    137,036
    
    
    
    56
    %Selling, general and administrative expenses
    
    
    (31,606
    )
    
    
    (41
    %)
    
    
    (80,342
    )
    
    
    (44
    %)
    
    
    (101,954
    )
    
    
    (42
    %)Research and development expenses
    
    
    
    
    
    
    
    
    
    
    (13,825
    )
    
    
    (8
    %)
    
    
    (21,325
    )
    
    
    (9
    %)Depreciation and amortization expenses
    
    
    (7,454
    )
    
    
    (9
    %)
    
    
    (12,276
    )
    
    
    (7
    %)
    
    
    (16,162
    )
    
    
    (6
    %)Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    (3,387
    )
    
    
    (2
    %)
    
    
    (1,256
    )
    
    
    (1
    %)Total operating expenses
    
    
    (39,060
    )
    
    
    (50
    %)
    
    
    (109,830
    )
    
    
    (61
    %)
    
    
    (140,697
    )
    
    
    (58
    %)Operating loss
    
    
    (86
    )
    
    
    
    
    
    
    (6,379
    )
    
    
    (3
    %)
    
    
    (3,661
    )
    
    
    (2
    %)Interest income
    
    
    13,412
    
    
    
    17
    %
    
    
    9,653
    
    
    
    5
    %
    
    
    8,074
    
    
    
    3
    %Interest expense
    
    
    (1,070
    )
    
    
    (1
    %)
    
    
    (1,895
    )
    
    
    (1
    %)
    
    
    (1,175
    )
    
    
    (1
    %)Gain on disposal of available-for-sale securities
    
    
    4,599
    
    
    
    6
    %
    
    
    167
    
    
    
    
    
    
    
    525
    
    
    
    1
    %Gain (loss) on disposal of subsidiaries and cost investments
    
    
    (1,263
    )
    
    
    (2
    %)
    
    
    892
    
    
    
    1
    %
    
    
    483
    
    
    
    1
    %Other non-operating gains
    
    
    934
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-operating losses
    
    
    (143
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of cost investments and available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (1,362
    )
    
    
    (1
    %)
    
    
    
    
    
    
    Share of loss in equity investees
    
    
    (124
    )
    
    
    
    
    
    
    (308
    )
    
    
    
    
    
    
    (1,593
    )
    
    
    (1
    %)Total other income
    
    
    16,345
    
    
    
    21
    %
    
    
    7,147
    
    
    
    4
    %
    
    
    6,314
    
    
    
    3
    %Income before income taxes
    
    
    16,259
    
    
    
    21
    %
    
    
    768
    
    
    
    1
    %
    
    
    2,653
    
    
    
    1
    %Income tax benefit (expense)
    
    
    598
    
    
    
    1
    %
    
    
    (7,541
    )
    
    
    (4
    %)
    
    
    (4,574
    )
    
    
    (2
    %)Income (loss) before minority interests
    
    
    16,857
    
    
    
    22
    %
    
    
    (6,773
    )
    
    
    (3
    %)
    
    
    (1,921
    )
    
    
    (1
    %)Minority interests in income of consolidated subsidiaries
    
    
    (2,257
    )
    
    
    (3
    %)
    
    
    (1,000
    )
    
    
    (1
    %)
    
    
    (1,565
    )
    
    
    (1
    %)Income (loss) from continuing operations
    
    
    14,600
    
    
    
    19
    %
    
    
    (7,773
    )
    
    
    (4
    %)
    
    
    (3,486
    )
    
    
    (2
    %)Discontinued operationsLoss from operations of discontinued subsidiaries, net of related tax benefit
    
    
    (1,203
    )
    
    
    (2
    %)
    
    
    (610
    )
    
    
    
    
    
    
    (47
    )
    
    
    Gain (loss) on disposal/dissolution of discontinued subsidiaries, net
    
    
    2,127
    
    
    
    3
    %
    
    
    (950
    )
    
    
    (1
    %)
    
    
    (3
    )
    
    
    Net income (loss)
    
    $
    15,524
    
    
    
    20
    %
    
    $
    (9,333
    )
    
    
    (5
    %)
    
    $
    (3,536
    )
    
    
    (2
    %)
 85




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Year ended December 31, 2005 Compared to Year ended December 31, 2004
 Net Revenues
 Consolidated
 Year ended December 31,2003
    
    
    2004
    
    
    2005(in thousands, except percentage data)RevenuesSoftware
    
    $
    12,891
    
    
    
    17
    %
    
    $
    107,879
    
    
    
    59
    %
    
    $
    159,164
    
    
    
    65
    %Licenses
    
    
    1,157
    
    
    
    2
    %
    
    
    28,748
    
    
    
    16
    %
    
    
    38,856
    
    
    
    16
    %Maintenance and consulting services
    
    
    11,734
    
    
    
    15
    %
    
    
    79,131
    
    
    
    43
    %
    
    
    120,308
    
    
    
    49
    %Business Services
    
    
    40,477
    
    
    
    52
    %
    
    
    42,927
    
    
    
    23
    %
    
    
    42,489
    
    
    
    17
    %IT products
    
    
    6,083
    
    
    
    8
    %
    
    
    2,083
    
    
    
    1
    %
    
    
    2,079
    
    
    
    1
    %Consulting services
    
    
    31,159
    
    
    
    40
    %
    
    
    37,308
    
    
    
    20
    %
    
    
    36,942
    
    
    
    15
    %Advertising
    
    
    3,235
    
    
    
    4
    %
    
    
    3,536
    
    
    
    2
    %
    
    
    3,468
    
    
    
    1
    %Mobile Services and Applications
    
    
    16,876
    
    
    
    22
    %
    
    
    23,694
    
    
    
    13
    %
    
    
    34,389
    
    
    
    14
    %Internet and Media
    
    
    5,606
    
    
    
    7
    %
    
    
    8,173
    
    
    
    5
    %
    
    
    8,995
    
    
    
    4
    %Others
    
    
    2,001
    
    
    
    2
    %
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    $
    77,851
    
    
    
    100
    %
    
    $
    182,683
    
    
    
    100
    %
    
    $
    245,037
    
    
    
    100
    %
  Year ended December 31,2004
    
    
    2005(in thousands)RevenuesSoftware   Ross, Pivotal
    
    $
    71,885
    
    
    $
    119,801Mobile Services and Applications  Go2joy
    
    
    2,055
    
    
    
    2,538$
    73,940
    
    
    $
    122,339
  Software.
  86




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Business Services.
   Mobile Services and Applications
   Internet and Media.
 87




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Others
 Cost of Revenues
 Consolidated.
 Year ended December 31,2003
    
    
    2004
    
    
    2005(in thousands, except percentage data)Cost of revenuesSoftware
    
    $
    9,357
    
    
    
    12
    %
    
    $
    43,240
    
    
    
    24
    %
    
    $
    62,381
    
    
    
    25
    %Licenses
    
    
    362
    
    
    
    1
    %
    
    
    3,486
    
    
    
    2
    %
    
    
    6,589
    
    
    
    2
    %Maintenance and consulting
services
    
    
    8,995
    
    
    
    11
    %
    
    
    39,754
    
    
    
    22
    %
    
    
    55,792
    
    
    
    23
    %Business Services
    
    
    23,311
    
    
    
    30
    %
    
    
    28,076
    
    
    
    15
    %
    
    
    26,909
    
    
    
    11
    %IT products
    
    
    5,318
    
    
    
    7
    %
    
    
    1,879
    
    
    
    1
    %
    
    
    1,671
    
    
    
    1
    %Consulting services
    
    
    16,754
    
    
    
    21
    %
    
    
    24,871
    
    
    
    13
    %
    
    
    24,079
    
    
    
    10
    %Advertising
    
    
    1,239
    
    
    
    2
    %
    
    
    1,326
    
    
    
    1
    %
    
    
    1,159
    
    
    
    Mobile Services and Applications
    
    
    2,247
    
    
    
    3
    %
    
    
    4,597
    
    
    
    2
    %
    
    
    15,262
    
    
    
    6
    %Internet and Media
    
    
    3,073
    
    
    
    4
    %
    
    
    3,319
    
    
    
    2
    %
    
    
    3,449
    
    
    
    2
    %Others
    
    
    889
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38,877
    
    
    
    50
    %
    
    $
    79,232
    
    
    
    43
    %
    
    $
    108,001
    
    
    
    44
    %
  Year ended December 31,2004
    
    
    2005(in thousands)Cost of revenuesSoftware  Ross, Pivotal
    
    $
    24,793
    
    
    $
    42,139Mobile
Services and Applications  Go2joy
    
    
    591
    
    
    
    1,248$
    25,384
    
    
    $
    43,387
 Software.
  88




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Business Services
   Mobile Services and Applications.
 Internet and Media.
 Others
 Operating Expenses
 Consolidated.
 Selling, General and Administrative Expenses (SG&A expenses)
  89




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##### Table of Contents



Research and Development Expenses.
 Depreciation and Amortization
 Restructuring Expenses
 Interest Income
     Interest Expense
  Other Gains and Losses
  Income Taxes
  90




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##### Table of Contents



Net Income (Loss)
   Year ended December 31, 2004 Compared to Year ended December 31, 2003
 Net Revenues
 Consolidated.
 Year ended December 31,2003
    
    
    2004(in thousands of $)RevenuesSoftware  IMI, Ross, Pivotal
    
    $
    11,223
    
    
    $
    105,432Business services  Praxa, PK Information Systems
    
    
    23,489
    
    
    
    23,000Mobile services and applications  Newpalm, Go2joy
    
    
    16,876
    
    
    
    23,694$
    51,588
    
    
    $
    152,126
 Software.
  Business Services.
  91




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Mobile Services and Applications
   Internet and Media.
 Others
 Cost of Revenues
 Consolidated.
 Year ended December 31,2003
    
    
    2004(in thousands)Cost of revenuesSoftware  IMI, Ross, Pivotal
    
    $
    7,706
    
    
    $
    42,455Business services  Praxa, PK Information Systems
    
    
    16,152
    
    
    
    16,230Mobile
services and applications  Newpalm, Go2joy
    
    
    2,247
    
    
    
    4,597$
    26,105
    
    
    $
    63,282
 Software.
  92




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##### Table of Contents



Business Services.
  Mobile Services and Applications.
 Internet and Media. .
 Others
 Operating Expenses
  Selling, General and Administrative Expenses (SG&A expenses)
   93




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##### Table of Contents



Research and Development Expenses
 Depreciation and Amortization.
 Restructuring Expenses
 Interest income
     Interest expense
  Other Gains and Losses
  94




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##### Table of Contents



Income taxes
  Net Income (Loss)
   Critical Accounting Policies and Estimates
   Revenue Recognition
  Revenue Recognition Software
Revenue Recognition Modification of SOP 97-2, Software Revenue Recognition,
With Respect to Certain Transactions Revenue
Arrangements with Multiple Deliverables Reporting Revenue
Gross as a Principal versus Net as an Agent Accounting for Performance of
Construction-Type and Certain Production-Type Contracts
 95




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##### Table of Contents



Software
        96




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##### Table of Contents



Business Services
         97




---



##### Table of Contents



Mobile Services and Applications
     98




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##### Table of Contents



Internet and Media
  Goodwill and Intangible Assets
    Trademarks
    
    IndefiniteURLs
    
    20 yearsSoftware applications and programs
    
    
    2 to 15 yearsCustomer base and contracts
    
    
    1 to 10 yearsBusiness licenses and partnership agreements
    
    
    1 to 7 years
  99




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##### Table of Contents



Business Combinations
   Capitalization of Software Costs
  100




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##### Table of Contents



Investments
    Accounts Receivable and Allowance for Doubtful Accounts
  101




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Deferred tax valuation allowance
  Stock-based Compensation
  Contingencies
   102




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Impact of Certain Recently Issued Accounting Standards
       103




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##### Table of Contents



B. Liquidity and Capital Resources
  Year ended December 31 (in thousands)2003
    
    
    2004
    
    
    2005Net cash provided by operating activities
    
    $
    13,195
    
    
    $
    10,790
    
    
    $
    12,297Net cash provided by investing activities
    
    
    118,119
    
    
    
    3,629
    
    
    
    8,236Net cash provided by (used in) financing activities
    
    
    (108,959
    )
    
    
    40,246
    
    
    
    (36,353
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    33
    
    
    
    (695
    )Net increase (decrease) in cash and cash equivalents
    
    
    22,355
    
    
    
    54,698
    
    
    
    (16,515
    )Cash and cash equivalents at beginning of period
    
    
    33,153
    
    
    
    55,508
    
    
    
    110,206Cash and cash equivalents as at end of period
    
    $
    55,508
    
    
    $
    110,206
    
    
    $
    93,691
  Sources and Uses of Cash for the Year ended December 31, 2005
 Operating Activities
  
    
    Net Loss We incurred a net loss of $3.5 million in 2005 compared to net loss of
$9.3 million in 2004, representing a $5.8 million year-over-year decrease. This
decrease was due to (i) an increase in gross profit, (ii) a decrease in restructuring
expenses, and (iii) non-cash expenses related to our acquisitions in 2004 which did not
impact cash flows, including amortization of acquired intangibles, deferred tax expense
and stock compensation expense.
    
    Accounts Receivable Our accounts receivable balances increased by $12.6 million
and $5.1 million in 2004 and 2005, respectively. Lower increase in accounts
receivables in 2005 compared to 2004 is due to the acquisitions of Ross and Pivotal in
2004.
  104




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
    
    Deferred Revenues Our deferred revenues increased by $6.4 million and $3.6 million
in 2004 and 2005, respectively, primarily from higher deferred revenues as a result of
the acquisition of Ross and Pivotal in 2004.
    
    Accounts Payable, Tax Payable, and Other Liabilities Certain of our payables
balances increased after the acquisitions of Ross and Pivotal in 2004 resulting in cash
inflows from these categories in 2004 compared to cash outflows in 2005.
 Investing activities
  Financing activities
  Future cash requirements and sources of liquidity
 Future cash requirements
   Payments due by period, in thousandsLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    
    1 3 years
    
    
    3-5 years
    
    
    yearsOperating lease obligations (1)
    
    $
    41,293
    
    
    $
    9,797
    
    
    $
    13,730
    
    
    $
    9,480
    
    
    $
    8,286Short-term debt obligations
    
    
    26,249
    
    
    
    26,249
    
    
    
    
    
    
    
    
    
    
    
    Pension liability
    
    
    1,673
    
    
    
    662
    
    
    
    1,011
    
    
    
    
    
    
    
    Total
    
    $
    69,215
    
    
    $
    36,708
    
    
    $
    14,741
    
    
    $
    9,480
    
    
    $
    8,286
 
 (1)
    
    Operating lease obligations consist of future minimum payments under non-cancelable operating leases.  
    
    Acquisitions We may be required to make earnout payments relating to future acquisitions.
    
    Debt Repayments During 2005, we used cash of $42.5 million to repay loans. The
remaining balance at December 31, 2005 of $26.2 million is due in 2006.
    
    Investments in our Business In 2006, we will be spending on targeted investments
in certain businesses such as CDC Software Asia Pacific and our Portal, as well as
investing in research and development required to keep our software business
competitive.
 105




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Future sources of liquidity
   Expected maturities, in thousandsLess thanTotal
    
    
    1 year
    
    
    13 yearsUnsecured fixed rate debt securities
    
    $
    115,881
    
    
    $
    23,118
    
    
    $
    92,763Secured fixed rate debt securities
    
    
    32,270
    
    
    
    11,838
    
    
    
    20,432Total
    
    $
    148,151
    
    
    $
    34,956
    
    
    $
    113,195
  Lines of credit
      106




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##### Table of Contents



Restrictions on our Liquidity
   Uncertainties regarding our liquidity
  
    
    Ability to Grow Revenues and Manage Costs Both our revenue and cost base have
increased significantly as a result of the Ross, Pivotal and Go2joy acquisitions in 2004
and the Newpalm, Praxa and IMI acquisitions in 2003. If we are unable to continue to grow
our revenues or experience a decline in revenues, or if we are unable to manage costs and
reduce operating expenses, our ability to generate positive cash flows from operating
activities in a sufficient amount to meet our cash needs would be adversely affected.
    
    Integrating the Operations of Acquired Businesses Integration of our acquired
businesses could affect our liquidity as continuing integration of the businesses and
operations into ours may require significant cash resources.
    
    Future Acquisitions Our existing cash and cash equivalents and net cash provided by
operating activities may be insufficient if we face unanticipated cash needs such as the
funding of a future acquisition. In addition, if we acquire a business in the future that
has existing debt, our cash requirements for servicing debt may increase.
 Fair value of Financial Instruments
    107




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C. Research and Development, Patents and Licenses, etc.
  D. Trend Information
      108




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E. Off-balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  G. Safe Harbor
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Board of Directors
    
    Age
    
    Position
    
    Class of DirectorshipRaymond K.F. Chien
    
    
    54
    
    
    Chairman
    
    III, term to expire in 2008Peter Yip
    
    
    54
    
    
    Vice Chairman and Chief Executive Officer**
    
    III, term to expire in 2008Wong Kwong Chi
    
    
    54
    
    
    Director
    
    III, term to expire in 2008Thomas M. Britt, III
    
    
    45
    
    
    Director
    
    II, term to expire in 2007K.O. Chia
    
    
    52
    
    
    Director
    
    II, term to expire in 2007Wang Cheung Yue, Fred
    
    
    62
    
    
    Director
    
    II,II, term to expire in 2007Carrick John Clough
    
    
    58
    
    
    Director *
    
    II,I, term to expire in 2006Fang Xin
    
    
    53
    
    
    Director*
    
    II, term to expire in 2006
 Executive OfficersPeter Yip**
    
    
    54
    
    
    Chief Executive Officer of the Company, Vice Chairman of the Companys Board of
Directors and Executive Chairman, CDC SoftwareAlbert Lam
    
    
    47
    
    
    Chief Executive Officer, China.com IncXiaowei
Chen
    
    
    38
    
    
    Chief Financial Officer, China.com
IncHong Dai
    
    
    39
    
    
    Vice Chairman and Founder, CDC GamesSteve
Xiaoming Zhao
    
    
    36
    
    
    Chief Operating Officer, and
Executive Vice President, CDC GamesVerome Johnston
    
    
    41
    
    
    Chief Financial Officer, CDC SoftwareEric Musser
    
    
    41
    
    
    Executive Vice President, Strategy, M&A, and Chief Technology Officer,
CDC SoftwareOscar Pierre
    
    
    50
    
    
    Senior Vice President, CDC Software, Latin AmericaPer Norling
    
    
    50
    
    
    President, CDC Software, EuropeMark Carlile
    
    
    46
    
    
    Vice President and Managing Director, CDC Software, EMEAIan Whitehouse
    
    
    41
    
    
    Managing Director, CDC Software, Hong KongSerhat Oguz
    
    
    41
    
    
    Managing Director, CDC Software, ANZ
 109




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Executive OfficersArthur Masseur
    
    
    46
    
    
    Vice President of Finance, CDC Software, EMEAJean Marc Kuhlmann
    
    
    43
    
    
    Vice President & Managing Director, CDC Software, FranceLen Zapalowski
    
    
    48
    
    
    Senior Vice President Product Strategy, CDC SoftwareDick De Haan
    
    
    48
    
    
    Vice President, CDC Software, Central & Eastern Europe
 
 *
    
    Subject to re-election by shareholders at our 2006 annual general meeting.**
    
    Mr. Peter Yip was appointed as Chief Executive Officer of the Company in April 2006. Mr.
Steven Chan served as Acting Chief Executive Officer between August 2005 and April 2006, in
addition to continuing to perform the roles of General Counsel and Company Secretary during
that period. Dr. Chien served as Acting Chief Executive Officer between March 2004 and March
2005 and Chief Executive Officer from March 2005 until August 2005.  Raymond K.F. Chien
 Peter Yip
 Carrick John Clough
 110




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##### Table of Contents



Wong Kwong Chi
 Thomas M. Britt, III
 K.O Chia
 Wang Cheung Yue, Fred
 Fang Xin
 111




---



##### Table of Contents



Albert Lam
 Xiaowei
Chen
 Hong Dai
 Steve
Xiaoming Zhao
 Verome Johnston
 Eric Musser
 Oscar Pierre
 Per
Norling
 112




---



##### Table of Contents



Mark Carlile
 Ian Whitehouse
 Serhat Oguz
 Jean-Marc Kuhlmann
 Arthur Masseur
 Len Zapalowski
 113




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##### Table of Contents



Dick de Haan
 B. Compensation
 Directors
  Compensation
    
    
    One Time Option GrantBoard service
    
    $
    25,000
    
    
    
    20,000Chairman of Audit Committee
    
    $
    20,000
    
    
    
    20,000Audit Committee service (other than chairman)
    
    $
    15,000
    
    
    
    15,000Compensation Committee service
    
    $
    7,500
    
    
    
    5,000Nominating Committee service
    
    $
    7,500
    
    
    
    5,000
  Executive Officers
 
 114




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Mandatory Provident Fund
  2005 Stock Incentive Plan
   Purpose.
 Shares Subject to 2005 Plan
  Administration
 Eligibility
 115




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##### Table of Contents



Stock Options
 Stock Appreciation Rights
 Restricted Stock Awards
 Restricted Unit Awards
 Performance Shares and Performance Cash
 116




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##### Table of Contents



Maximum Grants
 Nontransferability of Awards
 Change in Control
 Amendment and Termination
 Non-U.S. Subsidiaries
 1999 Stock Option Plan
   117




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Assumption of Ross 1998 Incentive Stock Plan
    118




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Acceleration of Stock Options in response to FASB 123 (revised 2004)
 Share-Based Payment,
 Options Held by Directors and Officers
     119




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##### Table of Contents



2004 Employee Share Purchase Plan
  -
    
    completion of at least 180 days of continuous service with CDC or an eligible
subsidiary;-
    
    customarily work more than 20 hours per week and five months in a year for CDC or an
eligible subsidiary; and-
    
    less than 5% ownership of the total combined voting power or value of all classes of
capital stock of CDC or of a subsidiary.
   China.com Inc. Share Option Schemes
  120




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##### Table of Contents



-
    
    The closing price of China.coms shares on the Hong Kong Stock Exchange on the
date of grant of the options;-
    
    The average of the closing prices of China.coms shares for the five trading
days immediately preceding the date of grant of the share options; and-
    
    The nominal value of China.coms shares.
  C. Board Practices
 Terms of Directors and Executive Officers
  
  121




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##### Table of Contents



Committees of the Board of Directors
  
    
    the executive committee;
    
    the audit committee;
    
    the compensation committee; and
    
    the nominating committee.
    122




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##### Table of Contents



D. Employees
  E. Share Ownership
   
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  123




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##### Table of Contents



Beneficial OwnershipShareholder
    
    Shares
    
    
    PercentAsia Pacific Online Limited(1)
    
    
    19,318,444
    
    
    
    17.3Xinhua News Agency(2)
    
    
    7,362,734
    
    
    
    6.59
 
 (1)
    
    APOL is owned by the spouse of Mr. Yip, our vice chairman and chief executive officer, and
a trust established for the benefit of Mr. Yips children. APOL was the beneficial owner of,
as at March 31, 2006, of 11,927,653 Class A common shares and the beneficial owner of an
additional 3,106,442 Class A common shares due to exercisable options attributable to APOL.
Mr. Yip was the beneficial owner of 190,000 Class A common shares due to exercisable options
attributable to him. Mr. Yips spouse owned 4,094,349 Class A common shares.(2)
    
    Xinhua holds our shares through a wholly-owned subsidiary, Golden Tripod Technology Limited.  B. Related Party Transactions
 Golden Tripod.
 Dr. Raymond Chien.
 
    
    For so long as Dr. Chien serves as executive chairman, he has the right to be
nominated to serve as a director of our board, subject to the shareholders electing him
as a director at the next general meeting of shareholders;
    
    Dr. Chien receives no basic salary for his services as executive chairman (see
below, however, with respect to provisions relating to Dr. Chiens salary in
connection with services as chief executive officer);
    
    We agreed that Dr. Chien would be granted options to purchase a total of 800,000
Class A common shares in three tranches. The first tranche of 300,000 options was
granted upon Dr. Chiens appointment as executive chairman at an exercise price of
$7.77, with the second and tranches of 250,000 options each to be granted on the first
and second anniversary of Dr. Chiens appointment, respectively. The options vest
quarterly, and as of June 1, 2005, 300,000 options have vested. In the event Dr.
Chien is terminated for a reason other than certain causes specified in the agreement,
death, disability, or by Dr. Chien delivering notice of termination, the options
accelerate and fully vest;
    
    We agreed to reimburse Dr. Chien for the costs of an administrative assistant
employed by an associated company; and
 124




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##### Table of Contents




    
    We agreed to reimburse Dr. Chien of all reasonable expenses related to travel,
entertainment and subscription fees incurred in the performance of his duties as
executive chairman, in accordance with our policies.
    
    
    We amended the provisions relating to the grant of the second and third tranche of
options to Dr. Chien such that when such options were granted, the exercise price
would be equal to the higher of the average closing price of our Class A common shares
during the five trading days prior to the grant date or the closing price on the grant
date. The second tranche of 250,000 options was granted to Dr. Chien in April 2005 at
an exercise price of $2.686.
  
    
    For so long as Dr. Chien serves as chief executive officer, he has the right to be
nominated to serve as a director of our board, subject to the shareholders electing him
as a director at the next general meeting of shareholders;
    
    We granted Dr. Chien a salary of $1.5 million per annum in connection with his
services as chief executive officer;
    
    Dr. Chiens compensation is subject to annual review after April 2007. Dr. Chien
has the right to call for a review of his consideration at most once between annual
reviews which the compensation committee will consider, taking into account factors
including the Hong Kong consumer price index and information provided by a third party
employment benefits firm;
    
    We agreed to reimburse Dr. Chien for the costs of an administrative assistant
employed by an associated company; and
    
    We agreed to reimburse Dr. Chien of all reasonable expenses related to travel,
entertainment and subscription fees incurred in the performance of his duties as chief
executive officer, in accordance with our policies.
 125




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##### Table of Contents




    
    We agreed to give Dr. Chien a period of up to December 31, 2005 in which to
exercise 300,000 options that had been granted to Dr. Chien on May 11, 2004 at a
strike price of $7.77 pursuant to his executive services agreements that had vested as
of August 30, 2005;
    
    We agreed that 879,167 options granted to Dr. Chien that had vested as of August
30, 2005 with exercise prices ranging from $2.6860 to $6.8125 per share shall survive
termination and will not expire as long as Dr. Chien remains on the board of the
Company or until the relevant option termination date; and
    
    We agreed to continue to maintain a health insurance policy for Dr. Chien and his
spouse and immediate family with terms and conditions similar to that available to our
other Hong Kong based executives for as long as Dr. Chien served as a director on our
board of directors.
  Asia Pacific Online Limited (APOL).
  
    
    We agreed to permit APOL and Mr. Yip to transfer approximately 3 million options
granted to APOL and Mr. Yip with exercise prices ranging from $2.82 to $23.00 to
approved non profit organizations;
    
    We agreed to accelerate the vesting of 525,000 out of the money options granted to
APOL with exercise prices ranging from $5.16 to $8.25 per share;
 126




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##### Table of Contents




    
    We agreed that approximately 3 million options granted to APOL and Mr. Yip with
exercise prices ranging from $2.82 to $23.00 per share shall survive termination and
will not expire until the earlier of the relevant option expiration date and 6 months
from the date Mr. Yip ceases to be a member of the board of directors; and
    
    We agreed to continue to maintain a health insurance policy for Mr. Yip and his
spouse and immediate family with terms and conditions similar to that available to our
other Hong Kong based executives for as long as Mr. Yip served as a director on our
board of directors.
  
    
    The initial term of the appointment is likely to be for a
period of three years;
    
    For so long as APOL, a company associated with Mr. Yip,
holds at least 5% of the shares of the Company, APOL is likely to
have the right to nominate one director to our board, subject to the shareholders
electing him as a director at the next general meeting of shareholders;
    
    We are likely to grant APOL, in consideration for the services of Mr. Yip as chief
executive officer, a salary of $1 per annum in addition to certain stock options to
purchase shares of the Company;
    
    Mr. Yips compensation is likely to be subject to annual review after April 2009;
and
    
    We are likely to agree to reimburse Mr. Yip of all reasonable expenses related to
travel, entertainment and subscription fees incurred in the performance of his duties
as chief executive officer, in accordance with our policies.
  Albert Lam.
 Xiaowei
Chen
 Hong Dai.
 Steve Xiaoming Zhao.
 Verome Johnston
 127




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##### Table of Contents



Eric Musser.
 Oscar Pierre.
 Per Norling.
 Mark Carlile.
 Ian Whitehouse.
 Serhat Oguz. .
 Jean-Marc Kuhlmann
 Arthur Masseur.
 Dick De Haan
 128




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##### Table of Contents



Len Zapalowski
 C. Interests of experts and counsel
  
 ITEM 8. FINANCIAL INFORMATION
  
 ITEM 9. THE OFFER AND LISTING
 A. Offer and Listing Details
  Closing pricesHigh
    
    
    Low(in U.S. dollars per share)2000:Annual
    
    
    73.44
    
    
    
    4.412001:Annual
    
    
    7.63
    
    
    
    1.872002:Annual
    
    
    3.28
    
    
    
    1.862003:Annual
    
    
    14.46
    
    
    
    2.732004:First quarter
    
    
    12.65
    
    
    
    8.25Second quarter
    
    
    9.21
    
    
    
    6.20Third quarter
    
    
    7.01
    
    
    
    4.20Fourth quarter
    
    
    5.16
    
    
    
    4.05Annual
    
    
    12.65
    
    
    
    4.052005:First quarter
    
    
    4.48
    
    
    
    2.96Second quarter
    
    
    3.45
    
    
    
    2.40Third quarter
    
    
    3.68
    
    
    
    2.75Fourth quarter
    
    
    3.87
    
    
    
    3.09Annual
    
    
    4.48
    
    
    
    2.40Past six calendar months:December 2005
    
    
    3.54
    
    
    
    3.09January 2006
    
    
    4.16
    
    
    
    3.19February 2006
    
    
    4.89
    
    
    
    4.05March 2006
    
    
    4.79
    
    
    
    4.25April 2006
    
    
    4.69
    
    
    
    3.99
 
 Source: Bloomberg. 129




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##### Table of Contents



B.
    
    Plan of Distribution
  C.
    
    Markets
  D.
    
    Selling Shareholders
  E.
    
    Dilution
  F.
    
    Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A.
    
    Share Capital
  B.
    
    Memorandum and Articles of Association
  C.
    
    Material Contracts
 Expansion through Acquisitions and Partnerships
  Praxa
 130




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##### Table of Contents



Newpalm
 Cayman First Tier
 Cayman First Tier Loan Facilities.
 
    
    to acquire assets of, or equity interests in, companies that are in the business of
providing software for warehousing management, logistics and distribution management,
and supply chain execution; or
    
    to provide working capital for any businesses so acquired.
 Put Option Agreement
 
    
    The composition of IMIs executive committee is altered by the IMI board such that
it does not consist of four members of the IMI board, with two members elected by each
of CDC and Symphony; provided, that a change in the composition of the executive
committee to five members permitted under the terms of the executive committee charter
in limited circumstances, does not trigger Symphonys option;
    
    A decision of the executive committee, made under the exclusive authority delegated
to it under the executive committee charter is overruled by the entire IMI board; or
    
    The rights, powers or responsibilities set forth in the executive committee charter
are adjusted or terminated by the entire IMI board without the approval of the
directors elected by Symphony.
  Symphony Note.
 131




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##### Table of Contents



Demand Note
 Pivotal.
  132




---



##### Table of Contents



Go2joy
 Ross Systems.
 
    
    $17.00 in cash, or
    
    $19.00 in a combination of cash and CDC common shares
    JRG
 133




---



##### Table of Contents



Horizon
 17game
 c360.
 Shenzhen KK Technology
 Indemnification Agreements with Directors and Officers
  D. Exchange Controls
 General
   134




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##### Table of Contents



Differences in Corporate Law
  Mergers and Similar Arrangements.
 
    
    the statutory provisions as to majority vote have been complied with;
    
    the shareholders have been fairly represented at the meeting in question;
    
    the arrangement is such as a businessman would reasonably approve; and
    
    the arrangement is not one that would more properly be sanctioned under some other
provision of the Companies Law.
   Shareholders Suits
 Indemnification
   135




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Inspection of Books and Records
  Proxy materials
  Restrictions on Nonresident or Foreign Shareholders
  E. Taxation
  Cayman Islands Taxation
  United States Federal Income Taxation
  136




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##### Table of Contents




    
    a citizen or resident of the United States;
    
    a corporation or partnership created or organized in or under the laws of the United
States or of any political subdivision of the United States;
    
    an estate the income of which is subject to U.S. Federal income tax regardless of
source;
    
    a trust if a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have authority to
control all substantial decisions of the trust, or the trust elects under U.S. Treasury
Regulations to be treated as a U.S. person; or
    
    any other person who is subject to U.S. Federal income taxation on a net income
basis with respect to a Class A common share.
  Tax Consequences of U.S. Holders
 Dividends
 Passive Foreign Investment Company Status
  
    
    has held Class A common shares for less than a specified minimum period during which
it is not protected from risk of loss;
    
    is obligated to make payments related to the dividends; or
    
    holds Class A common shares in arrangements in which the U.S. holders expected
economic profit, after non-U.S. taxes, is insubstantial,
   137




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##### Table of Contents



Dispositions of Shares
 Passive Foreign Investment Company Status
 Passive Foreign Investment Company Status
  
    
    the composition of our assets, including goodwill, the amount of which will depend,
in part, on our total net assets and the market value of our Class A common shares,
which is subject to change; and
    
    the amount and nature of our income from time to time.
   
    
    at least 75% of our gross income as defined in the applicable Treasury regulations
for such taxable year is passive income; or
    
    at least 50% of our assets, measured by value on a quarterly average basis, produce
or are held for the production of passive income.
   
    
    any excess distribution by us to the investor, which means any distributions,
possibly including any return of capital distributions, received by the investor on the
Class A common shares in a taxable year that are greater than 125% of the average
annual distributions received by the investor in the three preceding taxable years, or
the investors holding period for the Class A common shares, if shorter; and
 138




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##### Table of Contents




    
    any gain realized on the sale or other disposition, including a pledge, of Class A
common shares.
  
    
    the excess distribution or gain would be allocated ratably over the U.S. holders
holding period for the Class A common 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 would be treated as ordinary income;
    
    the amount allocated to each of the other years would be taxed as ordinary income at
the highest tax rate in effect for that year; and
    
    the interest charge applicable to underpayments of tax would be imposed with respect
to the resulting tax attributable to each prior year in which we were a PFIC.
    139




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Transfer Reporting Requirements
  Backup Withholding and Information Reporting
    F. Dividends and Paying Agents
  140




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##### Table of Contents



G. Statement by Experts
  H. Documents on Display
    I. Subsidiary Information
 -
 
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 You should read the following discussion of our Quantitative and Qualitative Disclosures About
Market Risk together with our financial condition and results of operations as set forth in Item 5
of this Annual Report, Operating and Financial Review and Prospects and with our consolidated
financial statements and the related notes included elsewhere in this Annual Report.
  Interest Rate Risk.
 141




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##### Table of Contents



Expected Maturity Dates2006
    
    2007
    
    2008
    
    2009
    
    Total(in thousands of U.S. dollars, except percentages)Debt securities:Unsecured
    
    $
    22,852
    
    
    $
    34,814
    
    
    $
    58,215
    
    
    
    
    
    
    $
    115,881Fixed Rate
    
    
    1.5%-5.35
    %
    
    
    2.58%-3.2
    %
    
    
    3.03%-4.125
    %
    
    
    
    
    
    
    Unsecured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured
    
    $
    11,838
    
    
    $
    5,880
    
    
    $
    14,552
    
    
    
    
    
    
    $
    32,270Fixed rate
    
    
    2.0%-2.625
    %
    
    
    2.58%-3.2
    %
    
    
    3.15%-3.6
    %
    
    
    
    
    
    
    Total
    
    $
    34,690
    
    
    $
    40,694
    
    
    $
    72,767
    
    
    
    
    
    
    $
    148,151
 Foreign Exchange Risk
  Credit Default and Investment Risk.
 
    
    the issuers actual or perceived credit quality;
    
    increased writedowns for goodwill or intangible assets;
    
    declining revenues or earnings that fall short of expectations; and
    
    inability to comply with financial instrument covenants.
  142




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##### Table of Contents




    
    reduced liquidity;
    
    ratings downgrades, or a negative outlook by credit agencies;
    
    a decline in the price of an issuers equity or debt securities; or
    
    an issuer being placed on CreditWatch.
   AAA
    
    AA
    
    A
    
    BBBRating (Standard & Poors)
    
    Aaa
    
    Aa2
    
    A2
    
    Baa2
    
    TotalRating (Moodys Investors Service)
    
    
    (in millions of U.S. dollars)Amounts of debt securities outstanding as of December 31, 2004Moodys Investors Service
    
    
    170.0
    
    
    
    
    
    
    
    
    
    
    
    9.9
    
    
    
    179.9Standard & Poors
    
    
    170.0
    
    
    
    
    
    
    
    
    
    
    
    9.9
    
    
    
    179.9
 AAA
    
    AA
    
    A
    
    BBBRating (Standard & Poors)
    
    Aaa
    
    Aa2
    
    A2
    
    Baa2
    
    TotalRating (Moodys Investors Service)
    
    (in millions of U.S. dollars)Amounts of debt securities outstanding as of December 31, 2005Moodys Investors Service
    
    
    143.2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    148.2Standard & Poors
    
    
    143.2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    148.2
 Reinvestment Risk/Call Risk
 Risks Related to the Repurchase Facilities.
 
    
    The risk associated with increased leverage, which includes our ability to pay back
the borrowed funds in a timely manner and without which we may need to liquidate a
portion of our treasury
 143




---



##### Table of Contents



portfolio at a time where we may need to incur losses on the sale of sufficient debt
instruments to repay the borrowing.
    
    By setting aside debt securities as collateral under our repurchase facilities, we
incur the risk that if the banks themselves were to undergo an insolvency event, we
could lose all or part of our debt securities set aside at such time with the bank.
Currently, Fortis credit rating is AA- by Standard & Poors and Aa3 by Moodys
Investors Service, and Standard Chartered Banks credit rating is A by Standard &
Poors and A2 by Moodys Investors Service.
    
    The interest that we pay under our repurchase facilities is dependent upon LIBOR and
therefore, our future interest expenses with respect to any amounts drawn down under
the repurchase facilities may exceed our expectations due to changes in interest rates.
For example, if LIBOR rises rapidly over the next few years, interest expenses will
rise, as well.
 Negative Interest Rate Differential.
 Equity Price Risk
  December 31, 2004
    
    December 31, 2005Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueAvailable-for-sale equity securities (in million)
    
    $
    0.5
    
    
    $
    0.5
    
    
    $
    0.7
    
    
    $
    0.7
 
 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
  144




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##### Table of Contents



ITEM 15. CONTROLS AND PROCEDURES
   
 ITEM 16. [RESERVED]
 
 ITEM 16A. Audit Committee Financial Expert
  
 ITEM 16B. Code of Ethics
  
 ITEM 16C. Principal Accountant Fees and Services
  Audit Fees.
 Audit-Related Fees.
 Tax Fees
 All Other Fees
 145




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##### Table of Contents



Percentage of Services Approved by the Audit Committee
  
 ITEM 16D. Exemptions from the Listing Standards for Audit Committees
  
 ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 (c) Total number of
    
    (d) Maximum NumberShares Purchased as
    
    of Shares that May(a) Total Number
    
    
    
    
    
    Part of Publicly
    
    Yet Be Purchasedof Shares
    
    (b) Average Price
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    Paid Per Share
    
    Programs
    
    ProgramsJanuary 1,
2005 to January 31,
2005
    
    Nil
    
    
    February 1, 2005 to
February 29, 2005
    
    Nil
    
    
    March 1, 2005 to
March 31, 2005
    
    Nil
    
    
    April 1, 2005 to
April 30, 2005
    
    Nil
    
    
    May 1, 2005 to May
31, 2005
    
    Nil
    
    
    June 1, 2005 to
June 30, 2005
    
    Nil
    
    
    July 1, 2005 to
July 31, 2005
    
    Nil
    
    
    August 1, 2005 to
August 31, 2005
    
    Nil
    
    
    
 146




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##### Table of Contents



(c) Total number of
    
    (d) Maximum NumberShares Purchased as
    
    of Shares that May(a) Total Number
    
    
    
    
    
    Part of Publicly
    
    Yet Be Purchasedof Shares
    
    (b) Average Price
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    Paid Per Share
    
    Programs
    
    ProgramsSeptember 1, 2005
to September 30,
2005
    
    Nil
    
    
    October 1, 2005 to
October 31, 2005
    
    Nil
    
    
    November 1, 2005 to
November 30, 2005
    
    Nil
    
    
    December 1, 2005 to
December 31, 2005
    
    Nil
    
    
    
 
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
 No.
    
    Description1.1
    
    Conformed copy of the Amended and Restated Memorandum of Association.***1.2
    
    Conformed copy of Amendment No. 1 to the Amended and Restated Memorandum of
Association.****1.3
    
    Conformed copy of the Amended and Restated Articles of Association.***1.4
    
    Conformed copy of Amendment No. 1 to the Amended and Restated Articles of
Association.****2(a).1
    
    1999 Employee Stock Option Plan, as amended.*2(a).2
    
    2004 Employee Share Purchase Plan.**2(a).3
    
    Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC Corporation)*****2(a).4
    
    2005 Stock Incentive Plan, as amended4.(a).1
    
    Share Purchase Agreement by and between CDC Mobile Media Corporation, hongkong.com
Corporation and Palmweb Inc., dated March 14, 2003.++++++4.(a).2
    
    Agreement and Plan of Merger among chinadotcom corporation, CDC Software Holdings,
Inc. and Ross Systems, Inc., dated as of September 4, 2003.++4.(a).3
    
    Transition and Stock Vesting Agreement among chinadotcom corporation, CDC Software
Holdings, Inc., Ross Systems, Inc. and J. Patrick Tinley dated as of September 4,
2003.++
 147




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##### Table of Contents



4.(a).4
    
    Transition and Stock Vesting Agreement among chinadotcom corporation, CDC Software
Holdings, Inc., Ross Systems, Inc. and Robert B. Webster dated as of September 4,
2003.++4.(a).5
    
    Series B Preferred Share Purchase Agreement by and between Cayman First Tier and
chinadotcom Capital Limited, dated September 8, 2003.+++4.(a).6
    
    Shareholders Agreement by and among Cayman First Tier, Symphony Technology II-A, L.P.
and chinadotcom Capital Limited, dated September 8,
2003.+++4.(a).7
    
    Voting Agreement by and among Cayman First Tier, Symphony Technology II-A, L.P. and
chinadotcom Capital Limited, dated September 8, 2003.+++4.(a).8
    
    Put Option Agreement by and among Cayman First Tier, Symphony Technology II-A, L.P.
and chinadotcom Capital Limited, dated September 8, 2003.+++4.(a).9
    
    Amended and Restated Memorandum and Articles of Association of Cayman First Tier,
adopted of September 4, 2003.+++4.(a).10
    
    Executive Committee Charter of Cayman First Tier, adopted September 4, 2003.+++4.(a).11
    
    Revolving Credit Agreement by and between Cayman First Tier and chinadotcom Capital
Limited, dated September 8, 2003.+++4.(a).12
    
    Revolving Credit Agreement by and between Symphony Enterprise Solutions, S.ar.l and
chinadotcom Capital Limited, dated September 8, 2003.+++4.(a).13
    
    Amendment to Agreement and Plan of Merger signed between chinadotcom corporation, CDC
Software Holdings, Inc. and Ross Systems, Inc., dated October 3, 2003.+4.(a).14
    
    Guaranty dated as of September 8, 2003 from chinadotcom corporation.+4.(a).15
    
    Amended and Restated Memorandum and Articles of Association of Cayman First Tier
adopted November 14, 2003.y4.(a).16
    
    Amended and Restated Executive Committee Charter of Cayman First Tier adopted November
14, 2003.y4.(a).17
    
    Second Amendment to the Agreement and Plan of Merger among chinadotcom corporation,
CDC Software Holdings, Inc. and Ross Systems, Inc., dated January 7, 2004.yy4.(a).18
    
    Arrangement Agreement by and among Pivotal Corporation, chinadotcom corporation, a
Cayman Islands corporation and CDC Software Corporation, dated December 6, 2003.yy4.(a).19
    
    Notice of Extraordinary General Meeting to be held on February 23, 2004 and Management
Information Circular and Notice of Hearing of Petition for Arrangement under the
British Columbia Company Act relating to a proposed
 148




---



##### Table of Contents



arrangement involving Pivotal
Corporation and Its Common Shareholders and Its Optionholders and CDC Software
Corporation, dated January 20, 2004.yy4.(a).20
    
    Amended and Restated Arrangement Agreement by and among Pivotal Corporation,
chinadotcom corporation, a Cayman Islands corporation and CDC Software Corporation,
dated January 19, 2004.yy4.(a).21
    
    Third Amendment to the Agreement and Plan of Merger among chinadotcom corporation, CDC
Software Holdings, Inc. and Ross Systems, Inc., dated April 29, 2004.+++++++4.(a).22
    
    Amendment to Share Purchase Agreement by and among CDC Australia Limited, Praxa
Limited, Mantech International Corporation and Mantech Australia International Inc.
dated February 10, 2003.yyyy4.(a).23
    
    Amendment to Preferred Stockholder Agreement by and among chinadotcom corporation,
Ross Systems, Inc. and Benjamin W. Griffith, III dated January 31, 2004.+++++++4.(a).24
    
    Share Purchase Agreement among Group Team Investments Limited, the Related Entity,
Easybay Management Inc., Lu Dong and Chen Hang, Jane Lin, chinadotcom Mobile
Interactive Corporation (only with respect to certain sections of the Agreement) and
CDC International Mobile Limited dated February 25, 2004.yyyy4.(a).25
    
    Amendment Agreement Relating to Share Purchase Agreement among Group Team Investments
Limited, the Related Entity, Easybay Management Inc., Lu Dong and Chen Hang, Jane Lin,
chinadotcom Mobile Interactive Corporation (only with respect to certain sections of
the Agreement) and CDC International Mobile Limited dated March, 2004.yyyy4.(a).26
    
    Asset Purchase Agreement between CDC Software Holding Corporation and JRG Software,
Inc. dated January 20, 2006.4.(a).27
    
    Asset Purchase Agreement, is made by and among CDC Global Services Inc., CDC Services,
Inc. dba Horizon Companies, Horizon Companies, Inc., Trans Horizon Consulting (India)
Ltd., and Horizon Software Services Inc., dated February 17, 2006.4.(a).28
    
    Share Purchase Agreement among Prime Leader Holdings Limited, Tridal Pacific Limited,
Skynet Global Limited, Hong Dai, Steve Xiaoming Zhao, Equity Pacific Limited, Beijing
17 Game Network Technology Ltd dated March 17, 2006.4.(a).29
    
    Stock Purchase Agreement among Ross Systems Inc., c360 Solutions Incorporated, John
Gravely, Jeremie Desautels, Jeffrey L. Longoria, Sanin Saracevic, Lisa Patrick and
Arvind Raman dated April 12, 2006.4.(a).30
    
    Amendment to Stock Purchase Agreement among Ross Systems Inc., c360 Solutions
Incorporated, John Gravely, Jeremie Desautels, Jeffrey L. Longoria, Sanin Saracevic,
Lisa Patrick and Arvind Raman dated April 17, 20064.(a).31
    
    Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments
Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan,
Ye Yong Ning, Liang Yan, Ma
 149




---



##### Table of Contents



Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27,
2005.4.(a).32
    
    Supplementary Agreement relating to Share Purchase Agreement among CDC Mobile Media
Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, , CC
Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang
Zhi Gang and Palmweb Inc dated June 29, 2005.4.(b).1
    
    Cooperation Agreement on Short Message Services between China Unicom, Sichuan, and
Beijing Newpalm Technology Co. Ltd.yyy4.(b).2
    
    Monternet SMS Cooperation Agreement.yyy4.(c).1
    
    Amended and Restated Executive Services Agreement (Executive Chairman) effective as of
April 27, 2004, by and between china.com Corporation Limited and Dr. Raymond Kuo-Fung
Chien.yyyy4.(c).2
    
    Executive Services Agreement (Chief Executive Officer) effective as of April 27, 2004,
by and between china.com Corporation Limited and Dr. Raymond Kuo-Fung Chien.yyyy4.(c).3
    
    Termination and Release Agreement between CDC Corporation and Asia Pacific Online
Limited effective July 15, 2005.4.(c).4
    
    Option Transfer Agreement between CDC Corporation, Asia Pacific Online Limited and
Peter Yip effective July 15, 2005.4.(c).5
    
    Termination and Release Agreement between CDC Corporation, CDC Corporation Limited and
Dr. Raymond Kuo-Fung Chien effective August 30, 2005.6.
    
    Details of how EPS information is calculated can be found in Note 18 to our
Consolidated Financial Statements.8.
    
    List of principal subsidiaries of the Company.12.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(a).12.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(a).13.(a).1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.(a).2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.(a).1
    
    Consent of Ernst & Young.15.(a).2
    
    Consent of PricewaterhouseCoopers LLP.15.(a).3
    
    Consent of Deloitte Touche Tohmatsu
 150




---



##### Table of Contents



*
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-11288)
filed with the Commission on December 7, 2000.**
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-123666)
filed with the Commission on March 30, 2005.***
    
    Incorporated by reference to our current report on Form 6-K (File No. 000-30134) filed with
the Commission on September 18, 2002.****
    
    Incorporated by reference to our current report on Form 6-K (File No. 000-30134) filed with
the Commission on May 20, 2005.*****
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-118619)
filed with the Commission on August 27, 2004.+
    
    Incorporated by reference to our registration statement on Form F-4
(File No. 333-109493) filed with the Commission on October 6, 2003.++
    
    Incorporated by reference to our current report on Form 6-K (File
No. 000-30134) filed with the Commission on September 5, 2003.+++
    
    Incorporated by reference to our current report on Form 6-K (File
No. 000-30134) filed with the Commission on September 15, 2003.++++++
    
    Incorporated by reference to Amendment No. 2 to our
registration statement on Form F-4 (File No. 333-109493) filed with
the Commission on January 21, 2004.+++++++
    
    Incorporated by reference to Amendment No. 4 to our
registration statement on Form F-4 (File No. 333-109493) filed with the Commission on May 7, 2004.y
    
    Incorporated by reference to our current report on Form 6-K (File
No. 000-30134) filed with the Commission on December 11, 2003.yy
    
    Incorporated by reference to our current report on Form 6-K (File
No. 000-30134) filed with the Commission on January 8, 2004.yyy
    
    Incorporated by reference to our registration statement on Form
F-4/A (File No. 333-109493) filed with the Commission on January 21,
2004.yyyy
    
    Incorporated by reference to our annual report on Form 20-F (File
No. 000-30134) filed with the Commission on June 30, 2005. 151




---



##### Table of Contents



SIGNATURES
  CDC CORPORATION(Registrant)By:
    
    /s/ Peter YipPeter Yip, Chief Executive Officer
 152




---



##### Table of Contents



INDEX TO EXHIBITS
 No.
    
    Description1.1
    
    Conformed copy of the Amended and Restated Memorandum of
Association.***1.2
    
    Conformed copy of Amendment No. 1 to the Amended and Restated
Memorandum of Association.****1.3
    
    Conformed copy of the Amended and Restated Articles of Association.***1.4
    
    Conformed copy of Amendment No. 1 to the Amended and Restated
Articles of Association.****2.(a).1
    
    1999 Employee Stock Option Plan, as amended.*2.(a).2
    
    2004 Employee Share Purchase Plan.**2(a).3
    
    Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC
Corporation)*****2(a).4
    
    2005 Stock Incentive Plan, as amended4.(a).1
    
    Share Purchase Agreement by and between CDC Mobile Media Corporation,
hongkong.com Corporation and Palmweb Inc., dated March 14, 2003.++++++4.(a).2
    
    Agreement and Plan of Merger among chinadotcom corporation, CDC
Software Holdings, Inc. and Ross Systems, Inc., dated as of September
4, 2003.++4.(a).3
    
    Transition and Stock Vesting Agreement among chinadotcom corporation,
CDC Software Holdings, Inc., Ross Systems, Inc. and J. Patrick Tinley
dated as of September 4, 2003.++4.(a).4
    
    Transition and Stock Vesting Agreement among chinadotcom corporation,
CDC Software Holdings, Inc., Ross Systems, Inc. and Robert B. Webster
dated as of September 4, 2003.++4.(a).5
    
    Series B Preferred Share Purchase Agreement by and between Cayman
First Tier and chinadotcom Capital Limited, dated September 8,
2003.+++4.(a).6
    
    Shareholders Agreement by and among Cayman First Tier, Symphony
Technology II-A, L.P. and chinadotcom Capital Limited, dated
September 8, 2003.+++4.(a).7
    
    Voting Agreement by and among Cayman First Tier, Symphony Technology
II-A, L.P. and chinadotcom Capital Limited, dated September 8,
2003.+++4.(a).8
    
    Put Option Agreement by and among Cayman First Tier, Symphony
Technology II-A, L.P. and chinadotcom Capital Limited, dated
September 8, 2003.+++4.(a).9
    
    Amended and Restated Memorandum and Articles of Association of Cayman
First Tier, adopted of September 4,
2003.+++4.(a).10
    
    Executive Committee Charter of Cayman First Tier, adopted September
4, 2003.+++




---



##### Table of Contents



No.
    
    Description4.(a).11
    
    Revolving Credit Agreement by and between Cayman First Tier and chinadotcom Capital
Limited, dated September 8, 2003.+++4.(a).12
    
    Revolving Credit Agreement by and between Symphony Enterprise Solutions, S.ar.l and
and chinadotcom Capital Limited, dated September 8, 2003.+++4.(a).13
    
    Amendment to Agreement and Plan of Merger signed between chinadotcom corporation, CDC
Software Holdings, Inc. and Ross Systems, Inc., dated October 3, 2003.+4.(a).14
    
    Guaranty dated as of September 8, 2003 from chinadotcom corporation.+4.(a).15
    
    Amended and Restated Memorandum and Articles of Association of Cayman First Tier
adopted November 14, 2003.y4.(a).16
    
    Amended and Restated Executive Committee Charter of Cayman First Tier adopted November
14, 2003.y4.(a).17
    
    Second Amendment to the Agreement and Plan of Merger among chinadotcom corporation,
CDC Software Holdings, Inc. and Ross Systems, Inc., dated January 7, 2004.yy4.(a).18
    
    Arrangement Agreement by and among Pivotal Corporation, chinadotcom corporation, a
Cayman Islands corporation and CDC Software Corporation, dated December 6, 2003.yy4.(a).19
    
    Notice of Extraordinary General Meeting to be held on February 23, 2004 and Management
Information Circular and Notice of Hearing of Petition for Arrangement under the
British Columbia Company Act relating to a proposed arrangement involving Pivotal
Corporation and Its Common Shareholders and Its Optionholders and CDC Software
Corporation, dated January 20, 2004.yy4.(a).20
    
    Amended and Restated Arrangement Agreement by and among Pivotal Corporation,
chinadotcom corporation, a Cayman Islands corporation and CDC Software Corporation,
dated January 19, 2004.yy4.(a).21
    
    Third Amendment to the Agreement and Plan of Merger among chinadotcom corporation, CDC
Software Holdings, Inc. and Ross Systems, Inc., dated April 29, 2004.+++++++4.(a).22
    
    Amendment to Share Purchase Agreement by and among CDC Australia Limited, Praxa
Limited, Mantech International Corporation and Mantech Australia International Inc.
dated February 10, 2003.yyyy4.(a).23
    
    Amendment to Preferred Stockholder Agreement by and among chinadotcom corporation,
Ross Systems, Inc. and Benjamin W. Griffith, III dated January 31, 2004.+++++++




---



##### Table of Contents



No.
    
    Description4.(a).24
    
    Share Purchase Agreement among Group Team Investments Limited, the
Related Entity, Easybay Management Inc., Lu Dong and Chen Hang, Jane
Lin, chinadotcom Mobile Interactive Corporation (only with respect
to certain sections of the Agreement) and CDC International Mobile
Limited dated February 25, 2004.yyyy4.(a).25
    
    Amendment Agreement Relating to Share Purchase Agreement among Group
Team Investments Limited, the Related Entity, Easybay Management
Inc., Lu Dong and Chen Hang, Jane Lin, chinadotcom Mobile
Interactive Corporation (only with respect to certain sections of
the Agreement) and CDC International Mobile Limited dated March,
2004.yyyy4.(a).26
    
    Asset Purchase Agreement between CDC Software Holding Corporation
and JRG Software, Inc. dated January 20, 2006.4.(a).27
    
    Asset Purchase Agreement, is made by and among CDC Global Services
Inc., CDC Services, Inc. dba Horizon Companies, Horizon Companies,
Inc., Trans Horizon Consulting (India) Ltd., and Horizon Software
Services Inc., dated February 17, 2006.4.(a).28
    
    Share Purchase Agreement among Prime Leader Holdings Limited, Tridal
Pacific Limited, Skynet Global Limited, Hong Dai, Steve Xiaoming
Zhao, Equity Pacific Limited, Beijing 17 Game Network Technology Ltd
dated March 17, 20064.(a).29
    
    Stock Purchase Agreement among Ross Systems Inc., c360 Solutions
Incorporated, John Gravely, Jeremie Desautels, Jeffrey L. Longoria,
Sanin Saracevic, Lisa Patrick and Arvind Raman dated April 12, 20064.(a).30
    
    Amendment to Stock Purchase Agreement among Ross Systems Inc., c360
Solutions Incorporated, John Gravely, Jeremie Desautels, Jeffrey L.
Longoria, Sanin Saracevic, Lisa Patrick and Arvind Raman dated April
17, 20064.(a).31
    
    Share Purchase Agreement among CDC Mobile Media Corporation,
Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC
Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma
Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27, 20054.(a).32
    
    Supplementary Agreement relating to Share Purchase Agreement among
CDC Mobile Media Corporation, Unitedcrest Investments Limited,
Shenzhen KK Technology Limited, , CC Mobile Media Corporation, Zheng
Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and
Palmweb Inc dated June 29, 20054.(b).1
    
    Cooperation Agreement on Short Message Services between China
Unicom, Sichuan, and Beijing Newpalm Technology Co. Ltd.yyy4.(b).2
    
    Monternet SMS Cooperation Agreement.yyy4.(c).1
    
    Amended and Restated Executive Services Agreement (Executive
Chairman) effective as of April 27, 2004, by and between china.com
Corporation Limited and Dr. Raymond Kuo-Fung Chien.yyyy




---



##### Table of Contents



No.
    
    Description4.(c).2
    
    Executive Services Agreement (Chief Executive Officer) effective as
of April 27, 2004, by and between china.com Corporation Limited and
Dr. Raymond Kuo-Fung Chien.yyyy4.(c).3
    
    Termination and Release Agreement between CDC Corporation and Asia
Pacific Online Limited effective July 15, 20054.(c).4
    
    Option Transfer Agreement between CDC Corporation, Asia Pacific
Online Limited and Peter Yip effective July 15, 20054.(c).5
    
    Termination and Release Agreement between CDC Corporation, CDC
Corporation Limited and Dr. Raymond Kuo-Fung Chien effective August
30, 2005.6.
    
    Details of how EPS information is calculated can be found in Note 18
to our Consolidated Financial Statements.8.
    
    List of principal subsidiaries of the Company.12.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(a)12.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(a)13.(a).1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.13.(a).2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.15.(a).1
    
    Consent of Ernst & Young15.(a).2
    
    Consent of PricewaterhouseCoopers LLP15.(a).3
    
    Consent of Deloitte Touche Tohmatsu
 
 *
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-11288)
filed with the Commission on December 7, 2000.**
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-123666)
filed with the Commission on March 30, 2005.***
    
    Incorporated by reference to our current report on Form 6-K (File No. 000-30134) filed with
the Commission on September 18, 2002.****
    
    Incorporated by reference to our current report on Form 6-K (File No. 000-30134) filed with
the Commission on May 20, 2005.*****
    
    Incorporated by reference to our registration statement on Form S-8 (File No.: 333-118619)
filed with the Commission on August 27, 2004.+
    
    Incorporated by reference to our registration statement on
Form F-4 (File No. 333-109493) filed with the Commission on
October 6, 2003.++
    
    Incorporated by reference to our current report on Form 6-K
(File No. 000-30134) filed with the Commission on September
5, 2003.




---



##### Table of Contents



+++
    
    Incorporated by reference to our current report on Form 6-K
(File No. 000-30134) filed with the Commission on September
15, 2003.++++++
    
    Incorporated by reference to Amendment No. 2 to our
registration statement on Form F-4 (File No. 333-109493)
filed with the Commission on January 21, 2004.+++++++
    
    Incorporated by reference to Amendment No. 4 to our
registration statement on Form F-4 (File No. 333-109493)
filed with the Commission on May 7, 2004.y
    
    Incorporated by reference to our current report on Form 6-K
(File No. 000-30134) filed with the Commission on December
11, 2003.yy
    
    Incorporated by reference to our current report on Form 6-K
(File No. 000-30134) filed with the Commission on January 8,
2004.yyy
    
    Incorporated by reference to our registration statement on
Form F-4/A (File No. 333-109493) filed with the Commission on
January 21, 2004.yyyy
    
    Incorporated by reference to our annual report on Form 20-F
(File No. 000-30134) filed with the Commission on June 30,
2005




---



##### Table of Contents



PagesReport of Independent Registered Public Accounting Firm
    
    F-2 - F-4Consolidated Balance Sheets as of December 31, 2004 and 2005
    
    F-5Consolidated Statements of Operations for the years ended
December 31, 2003, 2004 and 2005
    
    F-6Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2004 and 2005
    
    F-7Consolidated Statements of Shareholders Equity for the years ended
December 31, 2003, 2004 and 2005
    
    F-8 - F-10Notes to Consolidated Financial Statements
    
    F-11 - F-62
 F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



F-3




---



##### Table of Contents



F-4




---



##### Table of Contents



Notes
    
    December 31,
    
    
    December 31,2004
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    $
    110,206
    
    
    $
    93,691Restricted cash
    
    4
    
    
    3,886
    
    
    
    2,086Accounts receivable (net of allowance of $4,784 and $4,885 in 2004 and
2005, respectively)
    
    5
    
    
    43,521
    
    
    
    46,753Deposits, prepayments and other receivables
    
    
    
    
    10,012
    
    
    
    8,447Available-for-sale debt securities
    
    6
    
    
    94,259
    
    
    
    23,118Available-for-sale equity securities
    
    11
    
    
    527
    
    
    
    659Restricted available-for-sale debt securities
    
    6
    
    
    75,780
    
    
    
    11,838Deferred tax assets
    
    17
    
    
    502
    
    
    
    286Properties held for sale
    
    26
    
    
    2,992
    
    
    
    Total current assets
    
    
    
    
    341,685
    
    
    
    186,878Loan receivable
    
    7
    
    
    25,000
    
    
    
    25,000Interest receivable
    
    
    
    
    878
    
    
    
    1,628Property and equipment, net
    
    8
    
    
    7,617
    
    
    
    5,995Goodwill
    
    9
    
    
    189,552
    
    
    
    190,418Intangible assets
    
    10
    
    
    81,121
    
    
    
    73,885Investments in equity investees
    
    
    
    
    4,016
    
    
    
    5,594Investments under cost method
    
    
    
    
    220
    
    
    
    220Available-for-sale debt securities
    
    6
    
    
    9,900
    
    
    
    92,763Restricted available-for-sale debt securities
    
    6
    
    
    
    
    
    
    20,432Deferred tax assets
    
    17
    
    
    
    
    
    
    157Other assets
    
    
    
    
    4,342
    
    
    
    5,065Total assets
    
    
    
    $
    664,331
    
    
    $
    608,035LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    
    $
    13,697
    
    
    $
    12,286Other payables
    
    
    
    
    4,219
    
    
    
    3,089Purchase consideration payables
    
    
    
    
    14,728
    
    
    
    1,229Accrued liabilities
    
    
    
    
    36,875
    
    
    
    32,296Accrued pension liability, current portion
    
    24
    
    
    910
    
    
    
    662Short-term bank loans
    
    
    
    
    52,215
    
    
    
    26,249Long-term bank loans, current portion
    
    
    
    
    11,566
    
    
    
    Deferred revenue
    
    
    
    
    34,261
    
    
    
    35,845Income tax payable
    
    
    
    
    2,532
    
    
    
    2,525Total current liabilities
    
    
    
    
    171,003
    
    
    
    114,181Deferred tax liabilities
    
    17
    
    
    4,696
    
    
    
    4,046Accrued pension liability, net of current portion
    
    24
    
    
    1,477
    
    
    
    1,011Other liabilities
    
    
    
    
    322
    
    
    
    439Total liabilities
    
    
    
    
    177,498
    
    
    
    119,677Minority interests
    
    
    
    
    45,883
    
    
    
    49,044Contingencies and commitments
    
    27Shareholders equity:Preferred shares, $0.001 par value; 5,000,000 shares authorized, no
shares issued
    
    
    
    
    
    
    
    
    Class A common shares, $0.00025 par value; 800,000,000 shares authorized;
110,893,180 and 111,364,999 shares issued and outstanding
at December 31, 2004 and 2005, respectively
    
    
    
    
    28
    
    
    
    28Additional paid-in capital
    
    
    
    
    673,476
    
    
    
    676,003Common stock held in treasury; 1,766,552 and 1,602,737 shares
at December 31, 2004 and 2005, respectively
    
    
    
    
    (4,067
    )
    
    
    (4,032
    )Accumulated deficit
    
    
    
    
    (228,226
    )
    
    
    (231,762
    )Accumulated other comprehensive loss
    
    13
    
    
    (261
    )
    
    
    (923
    )Total shareholders equity
    
    
    
    
    440,950
    
    
    
    439,314Total liabilities and shareholders equity
    
    
    
    $
    664,331
    
    
    $
    608,035
  F-5




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##### Table of Contents



Notes
    
    Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Revenues:SoftwareLicenses
    
    
    
    $
    1,157
    
    
    $
    28,748
    
    
    $
    38,856Maintenance and consulting services
    
    
    
    
    11,734
    
    
    
    79,131
    
    
    
    120,308Business ServicesIT products
    
    
    
    
    6,083
    
    
    
    2,083
    
    
    
    2,079Consulting services
    
    
    
    
    31,159
    
    
    
    37,308
    
    
    
    36,942Advertising
    
    
    
    
    3,235
    
    
    
    3,536
    
    
    
    3,468Mobile Services and Applications
    
    
    
    
    16,876
    
    
    
    23,694
    
    
    
    34,389Internet and Media
    
    
    
    
    5,606
    
    
    
    8,173
    
    
    
    8,995Others
    
    
    
    
    2,001
    
    
    
    10
    
    
    
    Total revenues
    
    
    
    
    77,851
    
    
    
    182,683
    
    
    
    245,037Cost of revenues:SoftwareLicenses
    
    
    
    
    (362
    )
    
    
    (3,486
    )
    
    
    (6,589
    )Maintenance and consulting services
    
    
    
    
    (8,995
    )
    
    
    (39,754
    )
    
    
    (55,792
    )Business ServicesIT products
    
    
    
    
    (5,318
    )
    
    
    (1,879
    )
    
    
    (1,671
    )Consulting services
    
    
    
    
    (16,754
    )
    
    
    (24,871
    )
    
    
    (24,079
    )Advertising
    
    
    
    
    (1,239
    )
    
    
    (1,326
    )
    
    
    (1,159
    )Mobile Services and Applications
    
    
    
    
    (2,247
    )
    
    
    (4,597
    )
    
    
    (15,262
    )Internet and Media
    
    
    
    
    (3,073
    )
    
    
    (3,319
    )
    
    
    (3,449
    )Others
    
    
    
    
    (889
    )
    
    
    
    
    
    
    Total cost of revenues
    
    
    
    
    (38,877
    )
    
    
    (79,232
    )
    
    
    (108,001
    )Gross profit
    
    
    
    
    38,974
    
    
    
    103,451
    
    
    
    137,036Operating expenses:Selling, general and administrative expenses
    
    
    
    
    (31,606
    )
    
    
    (80,342
    )
    
    
    (101,954
    )Research and development expenses
    
    
    
    
    
    
    
    
    (13,825
    )
    
    
    (21,325
    )Depreciation and amortization expenses
    
    
    
    
    ( 7,454
    )
    
    
    (12,276
    )
    
    
    (16,162
    )Restructuring expenses
    
    
    
    
    
    
    
    
    (3,387
    )
    
    
    (1,256
    )Total operating expenses
    
    
    
    
    (39,060
    )
    
    
    (109,830
    )
    
    
    (140,697
    )Operating loss
    
    
    
    
    (86
    )
    
    
    (6,379
    )
    
    
    (3,661
    )Other income (expenses):Interest income
    
    
    
    
    13,412
    
    
    
    9,653
    
    
    
    8,074Interest expense
    
    
    
    
    (1,070
    )
    
    
    (1,895
    )
    
    
    (1,175
    )Gain on disposal of available-for-sale securities
    
    
    
    
    4,599
    
    
    
    167
    
    
    
    525Gain (loss) on disposal of subsidiaries and cost investments
    
    
    
    
    (1,263
    )
    
    
    892
    
    
    
    483Other non-operating gains
    
    
    
    
    934
    
    
    
    
    
    
    
    Other non-operating losses
    
    
    
    
    (143
    )
    
    
    
    
    
    
    Impairment of cost investments and available-for-sale securities
    
    
    
    
    
    
    
    
    (1,362
    )
    
    
    Share of losses in equity investees
    
    
    
    
    (124
    )
    
    
    (308
    )
    
    
    (1,593
    )Total other income
    
    
    
    
    16,345
    
    
    
    7,147
    
    
    
    6,314Income before income taxes
    
    
    
    
    16,259
    
    
    
    768
    
    
    
    2,653Income tax benefit (expense)
    
    17
    
    
    598
    
    
    
    (7,541
    )
    
    
    (4,574
    )Income (loss) before minority interests
    
    
    
    
    16,857
    
    
    
    (6,773
    )
    
    
    (1,921
    )Minority interests in income of consolidated subsidiaries
    
    
    
    
    (2,257
    )
    
    
    (1,000
    )
    
    
    (1,565
    )Income (loss) from continuing operations
    
    
    
    
    14,600
    
    
    
    (7,773
    )
    
    
    (3,486
    )Discontinued operations:Loss from operations of discontinued subsidiaries, net of related
tax benefit of $90 in 2003, Nil in 2004 and 2005
    
    19
    
    
    (1,203
    )
    
    
    (610
    )
    
    
    (47
    )Gain (loss) on disposal/dissolution of discontinued subsidiaries, net
    
    19
    
    
    2,127
    
    
    
    (950
    )
    
    
    (3
    )Net income (loss)
    
    
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )Basic and diluted earnings (loss) per share from continuing operations
    
    18
    
    $
    0.14
    
    
    $
    (0.07
    )
    
    $
    (0.03
    )Basic and diluted earnings (loss) per share
    
    18
    
    $
    0.15
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )
  F-6




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005OPERATING ACTIVITIES:Net income (loss)
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Minority interests in income of consolidated subsidiaries
    
    
    2,204
    
    
    
    1,000
    
    
    
    1,565Loss (gain) on disposal/write-off of property and equipment
    
    
    127
    
    
    
    1,055
    
    
    
    (1,179
    )Gain on disposal of available-for-sale securities
    
    
    (4,599
    )
    
    
    (167
    )
    
    
    (525
    )Loss (gain) on disposal of subsidiaries and cost investments
    
    
    (2,596
    )
    
    
    401
    
    
    
    (483
    )Amortization of intangible assets
    
    
    3,571
    
    
    
    10,960
    
    
    
    13,935Depreciation
    
    
    5,293
    
    
    
    3,721
    
    
    
    3,861Stock compensation expenses
    
    
    328
    
    
    
    2,051
    
    
    
    1,421Share of losses in equity investees
    
    
    115
    
    
    
    308
    
    
    
    1,593Impairment of cost investments and available-for-sale securities
    
    
    
    
    
    
    1,362
    
    
    
    Deferred provision for income taxes
    
    
    
    
    
    
    5,897
    
    
    
    3,724Expenses settled by issuance of shares
    
    
    
    
    
    
    1,612
    
    
    
    Accreted interest income
    
    
    
    
    
    
    
    
    
    
    (390
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    9,486
    
    
    
    (12,585
    )
    
    
    (5,061
    )Deposits, prepayments and other receivables
    
    
    3,144
    
    
    
    3,545
    
    
    
    1,210Other assets
    
    
    1,794
    
    
    
    (11
    )
    
    
    (1,500
    )Accounts payable
    
    
    (7,413
    )
    
    
    88
    
    
    
    (419
    )Accrued liabilities
    
    
    (4,006
    )
    
    
    (6,372
    )
    
    
    (3,399
    )Other payables
    
    
    (8,505
    )
    
    
    (444
    )
    
    
    (956
    )Deferred revenue
    
    
    (557
    )
    
    
    6,419
    
    
    
    3,631Amounts due to related parties
    
    
    (715
    )
    
    
    
    
    
    
    Income tax payable
    
    
    
    
    
    
    1,644
    
    
    
    (609
    )Accrued pension liability
    
    
    
    
    
    
    (683
    )
    
    
    (707
    )Other liabilities
    
    
    
    
    
    
    322
    
    
    
    121Net cash provided by operating activities
    
    
    13,195
    
    
    
    10,790
    
    
    
    12,297INVESTING ACTIVITIES:Purchases of subsidiaries, net of cash acquired
    
    $
    (13,446
    )
    
    $
    (112,724
    )
    
    
    (15,537
    )Purchases of property and equipment
    
    
    (1,551
    )
    
    
    (3,661
    )
    
    
    (3,730
    )Acquisition of equity investees
    
    
    
    
    
    
    (4,000
    )
    
    
    (3,500
    )Purchases of available-for-sale securities
    
    
    (424,667
    )
    
    
    (80,314
    )
    
    
    Purchases of intangible assets
    
    
    (2,355
    )
    
    
    (4,705
    )
    
    
    (7,980
    )Issuance of loans
    
    
    (27,000
    )
    
    
    
    
    
    
    Collection of promissory notes and warrants
    
    
    6,878
    
    
    
    
    
    
    
    Proceeds from disposal of available-for-sale securities
    
    
    580,607
    
    
    
    212,053
    
    
    
    30,611Proceeds from disposal of property and equipment
    
    
    381
    
    
    
    663
    
    
    
    4,315Proceeds (cash disbursements) from disposal of subsidiaries
    
    
    (2,349
    )
    
    
    (529
    )
    
    
    1,140Proceeds from disposal of cost investments
    
    
    1,750
    
    
    
    494
    
    
    
    1,117Decrease (increase) in restricted cash
    
    
    (129
    )
    
    
    (3,648
    )
    
    
    1,800Net cash provided by investing activities
    
    
    118,119
    
    
    
    3,629
    
    
    
    8,236FINANCING ACTIVITIES:Issuance of share capital
    
    $
    8,585
    
    
    $
    4,061
    
    
    $
    1,052Proceeds from bank loans
    
    
    15,015
    
    
    
    87,537
    
    
    
    5,075Repayment of bank loans
    
    
    (121,388
    )
    
    
    (51,352
    )
    
    
    (42,480
    )Purchases of treasury stock
    
    
    (11,171
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    $
    (108,959
    )
    
    $
    40,246
    
    
    $
    (36,353
    )Effect of exchange differences on cash
    
    
    
    
    
    
    33
    
    
    
    (695
    )Net increase (decrease) in cash and cash equivalents
    
    $
    22,355
    
    
    $
    54,698
    
    
    $
    (16,515
    )Cash and cash equivalents at beginning of year
    
    
    33,153
    
    
    
    55,508
    
    
    
    110,206Cash and cash equivalents at end of year
    
    $
    55,508
    
    
    $
    110,206
    
    
    $
    93,691Interest paid
    
    $
    519
    
    
    $
    1,348
    
    
    $
    955Non-cash activities:Class A common shares issued for settlement of other payables
    
    
    
    
    
    $
    3,036
    
    
    
    Reissuance of treasury stock for the acquisition of subsidiaries
    
    $
    2,810
    
    
    
    
    
    
    
    Class A common shares and stock options issued as consideration
for the acquisition of subsidiaries
    
    $
    39,835
    
    
    $
    49,610
    
    
    $
    54
  F-7




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    shareholdersof shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income (loss)
    
    
    income (loss)
    
    
    deficit
    
    
    equity(000)Balance at January 1, 2003
    
    
    101,296
    
    
    $
    25
    
    
    $
    610,340
    
    
    $
    (238
    )
    
    
    
    
    
    $
    1,990
    
    
    $
    (234,417
    )
    
    $
    377,700Exercise of employee stock options
    
    
    2,592
    
    
    
    1
    
    
    
    8,584
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    8,585Redemption of shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,171
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,171
    )Retirement of shares
    
    
    (2,300
    )
    
    
    (1
    )
    
    
    (5,749
    )
    
    
    5,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reissuance of treasury stock for
non-cash transactions
    
    
    
    
    
    
    
    
    
    
    1,218
    
    
    
    1,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,810Stock compensation expenses
on options granted
    
    
    
    
    
    
    
    
    
    
    328
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328Unrealized gains, net of unrealized
losses on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    644
    
    
    
    644
    
    
    
    
    
    
    
    644Minority interests share of
unrealized losses, net of
unrealized gains on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    184
    
    
    
    
    
    
    
    184Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186
    
    
    
    186
    
    
    
    
    
    
    
    186Less: reclassification adjustment
for gains, net of losses included
in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,344
    )
    
    
    (4,344
    )
    
    
    
    
    
    
    (4,344
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,524
    
    
    
    
    
    
    
    15,524
    
    
    
    15,524Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,194Balance at December 31, 2003
    
    
    101,588
    
    
    $
    25
    
    
    $
    614,721
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (1,340
    )
    
    $
    (218,893
    )
    
    $
    390,446
  F-8




---



##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    shareholdersof shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income (loss)
    
    
    income (loss)
    
    
    deficit
    
    
    equity(000)Balance at January 1, 2004
    
    
    101,588
    
    
    $
    25
    
    
    $
    614,721
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (1,340
    )
    
    $
    (218,893
    )
    
    $
    390,446Exercise of employee stock options
    
    
    1,068
    
    
    
    1
    
    
    
    4,060
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    4,061Issuance of shares for non-
cash transactions
    
    
    8,237
    
    
    
    2
    
    
    
    50,455
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,457Stock compensation expenses
on options granted
    
    
    
    
    
    
    
    
    
    
    4,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,240Unrealized losses, net of unrealized gains
on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (593
    )
    
    
    (593
    )
    
    
    
    
    
    
    (593
    )Minority interests share of unrealized
losses, net of unrealized gains on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53
    
    
    
    
    
    
    
    53Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,345
    
    
    
    1,345
    
    
    
    
    
    
    
    1,345Less: reclassification adjustment
for losses, net of gains included
in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    274
    
    
    
    274
    
    
    
    
    
    
    
    274Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,333
    )
    
    
    
    
    
    
    (9,333
    )
    
    
    (9,333
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (8,254
    )Balance at December 31, 2004
    
    
    110,893
    
    
    $
    28
    
    
    $
    673,476
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (261
    )
    
    $
    (228,226
    )
    
    $
    440,950
  F-9




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    TotalNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    shareholdersof shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income (loss)
    
    
    income (loss)
    
    
    deficit
    
    
    equity(000)Balance at January 1, 2005
    
    
    110,893
    
    
    $
    28
    
    
    $
    673,476
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (261
    )
    
    $
    (228,226
    )
    
    $
    440,950Exercise of employee stock options
    
    
    282
    
    
    
    
    
    
    
    583
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    583Employee stock purchase plan
    
    
    178
    
    
    
    
    
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    469Issuance of shares for non-
cash transactions
    
    
    12
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Reissuance of treasury stock for
non-cash transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Stock compensation expenses on
options granted
    
    
    
    
    
    
    
    
    
    
    1,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,421Unrealized losses, net of unrealized
gains on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,534
    )
    
    
    (2,534
    )
    
    
    
    
    
    
    (2,534
    )Minority interests share of
unrealized losses, net of
unrealized gains on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    217
    
    
    
    
    
    
    
    217Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,509
    
    
    
    1,509
    
    
    
    
    
    
    
    1,509Less: reclassification adjustment
for losses, net of gains included
in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    146
    
    
    
    
    
    
    
    146Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,536
    )
    
    
    
    
    
    
    (3,536
    )
    
    
    (3,536
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,198
    )Balance at December 31, 2005
    
    
    111,365
    
    
    $
    28
    
    
    $
    676,003
    
    
    $
    (4,032
    )
    
    
    
    
    
    $
    (923
    )
    
    $
    (231,762
    )
    
    $
    439,314
  F-10




---



##### Table of Contents



1.
    
    ORGANIZATION AND BUSINESS OPERATIONS
   
    
    Software. The Company offers a broad range of software solutions for mid-sized
enterprises. The software suite includes Enterprise Resource Planning (ERP),
Customer Relationship Management (CRM), Supply Chain Management (SCM), Order
Management Systems (OMS), Human Resources and Payroll Management (HRM) and Business
Intelligence (BI) products.
    
    Business Services. The Companys business services offering includes information
technology services, eBusiness consulting, web development and outsourcing in Hong
Kong, Australia, Korea, and the United States of America (the U.S.), and a marketing
database and marketing support service offered principally in Australia and New
Zealand. The Companys business services companies provide program management,
outsourcing services, application development and ongoing support services using a wide
range of technologies.
    
    Mobile Services and Applications. The Companys mobile services and applications
business provides news and mobile applications services targeting the consumer market
in China. It offers wireless services including Short Message Service (SMS),
Interactive Voice Response (IVR), Multimedia Message Service (MMS) and Wireless
Application Protocol (WAP).
    
    Internet and Media. The Companys internet and media business encompasses a range
of businesses, including a portal network, and a Singapore-based travel trade publisher
and trade exhibition organizer.
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Principles of Consolidation and Basis of Presentation
   F-11




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (a) Principles of Consolidation and Basis of Presentation (continued)
   (b) Use of Estimates
  (c) Cash and Cash Equivalents
  (d) Property and Equipment and Depreciation
  Buildings
    
    25 yearsLeasehold improvements
    
    Over the lesser of the lease term or the estimated useful lifeFurniture and fixtures
    
    1 to 10 yearsOffice equipment
    
    3 to 5 yearsComputer equipment
    
    1 to 3 yearsMotor vehicles
    
    3 to 5 years
 F-12




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (e) Software Development Costs
    (f) Goodwill and Intangible Assets
   Trademarks
    
    IndefiniteURLs
    
    20 yearsSoftware applications and programs
    
    2 to 15 yearsCustomer base and contracts
    
    1 to 10 yearsBusiness licenses and partnership agreements
    
    1 to 7 years
 F-13




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (f) Goodwill and Intangible Assets (continued)
  (g) Investments
    Unrealized
    
    
    Fairloss
    
    
    valueDebt securities
    
    $
    187
    
    
    $
    9,814Equity securities
    
    $
    14
    
    
    $
    70
  Unrealized
    
    
    Fairloss
    
    
    valueDebt securities
    
    $
    3,187
    
    
    $
    133,102
 F-14




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (g) Investments (continued)
    (h) Impairment of Long-lived Assets
  F-15




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (i) Foreign Currency Translation
   (j) Advertising Expenses
  (k) Shipping and Handling
  (l) Revenue Recognition
    F-16




---



##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (l) Revenue Recognition (continued)
 Software
        F-17




---



##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (l) Revenue Recognition (continued)
 Business Services
      Mobile Services and Applications
  F-18




---



##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (l) Revenue Recognition (continued)
 Internet and Media
  (m) Deferred Revenue
  (n) Income Taxes
  (o) Stock Compensation Expenses
  F-19




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (o) Stock Compensation Expenses (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Net income (loss):As reported
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,356
    )Add: Stock compensation expense included
in net income (loss)
    
    
    328
    
    
    
    2,051
    
    
    
    1,421Deduct: Stock compensation expense
determined under fair value method
    
    
    (4,886
    )
    
    
    (14,706
    )
    
    
    (11,594
    )Pro forma
    
    $
    10,966
    
    
    $
    (21,988
    )
    
    $
    (13,529
    )Basic earnings (loss) per share:As reported
    
    $
    0.15
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )Pro forma
    
    $
    0.11
    
    
    $
    (0.21
    )
    
    $
    (0.12
    )Diluted earnings (loss) per share:As reported
    
    $
    0.15
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )Pro forma
    
    $
    0.11
    
    
    $
    (0.21
    )
    
    $
    (0.12
    )
   F-20




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (o) Stock Compensation Expenses (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Range of U.S. risk-free interest rates
    
    2.08% to 6.69%
    
    2.08% to 6.77%
    
    4.12% to 4.17%Weighted expected life of options
    
    5years
    
    5years
    
    5 yearsRange of volatility
    
    38% to 167%
    
    75% to 165%
    
    58% to 69%Dividend yield
    
    Nil
    
    Nil
    
    Nil
 (p) Earnings (Loss) Per Share
  (q) Repurchase Agreements
  (r) Accounts Receivable and Allowance for Doubtful Accounts
  (s) Loans Receivable
  F-21




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (t) Comprehensive Income (Loss)
  (u) Gain on Issuance of Shares by Subsidiaries
  (v) Retirement Costs
  (w) Derivative Instruments
  F-22




---



##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (x) Business Restructuring Charges and Related Expenses
   (y) Recent Accounting Pronouncements
   F-23




---



##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (y) Recent Accounting Pronouncements
     F-24




---



##### Table of Contents



3.
    
    BUSINESS COMBINATIONS
 (a) Praxa Limited (Praxa)
    Current assets
    
    $
    4,552Property and equipment, net
    
    
    1,061Goodwill
    
    
    3,589Intangible assets *
    
    
    1,996Other assets
    
    
    193Total assets acquired
    
    
    11,391Current liabilities
    
    
    (7,292
    )Deferred tax liabilities
    
    
    (532
    )Total liabilities assumed
    
    
    (7,824
    )Net assets acquired
    
    $
    3,567
 
 *
    
    The weighted average useful life of all amortizable identifiable intangible assets
acquired, which represented customer base, is approximately 5 years.  (b) Palmweb Inc. (Palmweb)
  F-25




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##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (b) Palmweb Inc. (Palmweb) (continued)
  
    
    initial cash consideration of $14,000; and
    
    earnout cash consideration which is equal to the aggregate of (i)
an amount equal to the audited net income of the Palmweb Group for the year
ended December 31, 2003 multiplied by 3.56918 and (ii) an amount equal to the
audited net income of the Palmweb Group for the year ended December 31, 2004
multiplied by 1.13982; less the amount already paid (the Contingent
Consideration). The total purchase consideration was subject to a maximum of
$55,000.
   Current assets
    
    $
    7,058Property and equipment, net
    
    
    402Goodwill
    
    
    47,704Intangible assets *Customer base
    
    
    2,064Software applications and programs
    
    
    104Business licenses and partnership agreements
    
    
    654Other assets
    
    
    66Total assets acquired
    
    
    58,052Current liabilities
    
    
    (3,286
    )Deferred tax liabilities
    
    
    (931
    )Total liabilities assumed
    
    
    (4,217
    )Net assets acquired
    
    $
    53,835
 
 *
    
    The weighted average useful life of all amortizable identifiable intangible assets
acquired is approximately 3 years. The weighted average useful life of the customer base
and software applications and programs is approximately 2 years, and the weighted average
useful life of the business licenses and partnership agreements is approximately 6 to 7
years.  F-26




---



##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (c) IMI Global Holdings Ireland Limited (IMI)
   Current assets
    
    $
    36,363Property and equipment, net
    
    
    1,689Goodwill
    
    
    15,802Intangible assets *Customer base
    
    
    2,629Software applications and programs
    
    
    2,434Other assets
    
    
    2,184Total assets acquired
    
    
    61,101Current liabilities
    
    
    (26,178
    )Minority interests
    
    
    (9,923
    )Total liabilities assumed
    
    
    (36,101
    )Net assets acquired
    
    $
    25,000
 
 *
    
    The weighted average useful life of all amortizable identifiable intangible assets
acquired is approximately 7 years. The weighted average useful life of the customer base is
10 years, and the weighted average useful life of the software applications and programs is
approximately 4 years.  F-27




---



##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (d) Pivotal Corporation (Pivotal)
    Current assets
    
    $
    13,791Property and equipment, net
    
    
    1,500Goodwill
    
    
    46,217Intangible assets *Customer base and contracts
    
    
    11,183Software applications and programs
    
    
    8,963Trademarks
    
    
    4,476Other assets
    
    
    987Total assets acquired
    
    
    87,117Current liabilities
    
    
    (29,000
    )Total liabilities assumed
    
    
    (29,000
    )Net assets acquired
    
    $
    58,117
 
 *
    
    The weighted average useful life of all amortizable identifiable intangible assets
acquired is 5 years. The weighted average useful life of the customer base and contracts is
5 years, and the weighted average useful life of the software applications and programs is 5
years. Trademarks have an indefinite useful life.   F-28




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##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (e) Group Team Investments Ltd. (Group Team)
     Current assets
    
    $
    3,026Property and equipment, net
    
    
    453Goodwill
    
    
    15,693Intangible assets *Business licenses and partnership agreements
    
    
    4,003Customer base
    
    
    150Software applications and programs
    
    
    58Other assets
    
    
    21Total assets acquired
    
    
    23,404Current liabilities
    
    
    (1,245
    )Total liabilities assumed
    
    
    (1,245
    )Net assets acquired **
    
    $
    22,159
 
 *
    
    The weighted average useful life of all amortizable identifiable intangible assets
acquired is approximately 4 years. The weighted average useful life of the partnership
agreements and business licenses is approximately 4 years and the weighted average useful
life of the customer base and software applications and programs is approximately 2 years. F-29




---



##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (e) Group Team Investments Ltd. (Group Team) (continued)
 ** Based on the initial cash consideration of $9,600 payable at the date of acquisition and
the First Earnout Payment of $12,978 paid in April 2005, of which $12,559 was accrued for at
December 31, 2004. The initial cash consideration of $9,600 and the First Earnout Payment
of $12,978 were recorded as an increase in goodwill. The Company will not pay the Second
Earnout Payment because Group Team had a net loss in 2005.
   (f) Ross Systems, Inc. (Ross)
    Current assets
    
    $
    14,001Property and equipment, net
    
    
    2,609Goodwill
    
    
    44,804Intangible assets *Customer base and contracts
    
    
    6,600Software applications and programs
    
    
    19,600Trademarks
    
    
    3,400Other assets
    
    
    62Total assets acquired
    
    
    91,076Current liabilities
    
    
    (20,948
    )Total liabilities assumed
    
    
    (20,948
    )Net assets acquired
    
    $
    70,128
 F-30




---



##### Table of Contents



3.
    
    BUSINESS COMBINATIONS (continued)
 (f) Ross Systems, Inc. (Ross) (continued)
 * The weighted average useful life of all amortizable identifiable intangible assets
acquired is 7 years. The weighted average useful life of the customer base and contracts is
7 years, and the weighted average useful life of the software applications and programs is 7
years. Trademarks have an indefinite useful life.
   (g) Unaudited pro forma consolidated financial information
  Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,2003
    
    
    2004(unaudited)
    
    
    (unaudited)Revenue
    
    $
    183,868
    
    
    $
    224,089Net loss
    
    $
    (2,995
    )
    
    $
    (34,373
    )Basic and diluted loss per share
    
    $
    (0.03
    )
    
    $
    (0.32
    )
   4.
    
    RESTRICTED CASH
  F-31




---



##### Table of Contents



5.
    
    ACCOUNTS RECEIVABLE
 December 31,
    
    
    December 31,2004
    
    
    2005Accounts receivable:Amounts billed
    
    $
    41,744
    
    
    $
    45,520Unbilled
    
    
    6,561
    
    
    
    6,11848,305
    
    
    
    51,638Allowance for doubtful accounts
    
    
    (4,784
    )
    
    
    (4,885
    )Net
    
    $
    43,521
    
    
    $
    46,753
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Allowance for doubtful accounts:Balance at beginning of year
    
    $
    4,139
    
    
    $
    2,816
    
    
    $
    4,784Additions
    
    
    2,297
    
    
    
    5,607
    
    
    
    1,450Write-offs, net of recoveries
    
    
    (3,620
    )
    
    
    (3,639
    )
    
    
    (1,349
    )Balance at end of year
    
    $
    2,816
    
    
    $
    4,784
    
    
    $
    4,885
  6.
    
    AVAILABLE-FOR-SALE DEBT SECURITIES
  December 31,
    
    
    December 31,2004
    
    
    2005Debt obligations issued by corporations and U.S.
federally supervised/chartered organizations:Amortized cost
    
    $
    180,783
    
    
    $
    151,504Net unrealized loss *
    
    
    (844
    )
    
    
    (3,353
    )Estimated fair value
    
    
    179,939
    
    
    
    148,151Restricted debt securities pledged for banking facilities
    
    
    (75,780
    )
    
    
    (32,270
    )Non-restricted
    
    $
    104,159
    
    
    $
    115,881
 
 *
    
    The net unrealized loss consisted of gross unrealized gain of $21 (2004: $34) and gross
unrealized loss of $3,374 (2004: $878). F-32




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6.
    
    AVAILABLE-FOR-SALE DEBT SECURITIES (continued)
   December 31,
    
    
    December 31,2004
    
    
    2005Current
    
    $
    94,259
    
    
    $
    23,118Non-current
    
    
    9,900
    
    
    
    92,763$
    104,159
    
    
    $
    115,881
   December 31,
    
    
    December 31,2004
    
    
    2005Maturity date:One year or less
    
    $
    19,980
    
    
    $
    34,956Within one year to five years
    
    
    150,059
    
    
    
    113,195Within five years to ten years
    
    
    9,900
    
    
    
    $
    179,939
    
    
    $
    148,151
  7.
    
    LOAN RECEIVABLE
  F-33




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##### Table of Contents



8.
    
    PROPERTY AND EQUIPMENT
 December 31,
    
    
    December 31,2004
    
    
    2005Leasehold improvements
    
    $
    2,449
    
    
    $
    2,499Furniture and fixtures
    
    
    1,116
    
    
    
    747Office equipment
    
    
    1,950
    
    
    
    1,649Computer equipment
    
    
    29,640
    
    
    
    29,467Motor vehicles
    
    
    480
    
    
    
    32035,635
    
    
    
    34,682Less: Accumulated depreciation
    
    
    (28,018
    )
    
    
    (28,687
    )$
    7,617
    
    
    $
    5,995
  9.
    
    GOODWILL
  MobileBusiness
    
    
    Services and
    
    
    InternetSoftware
    
    
    Services
    
    
    Applications
    
    
    and Media
    
    
    TotalBalance as of January 1, 2004
    
    $
    12,284
    
    
    $
    16,105
    
    
    $
    47,704
    
    
    $
    5,334
    
    
    $
    81,427Goodwill acquired during the year
    
    
    92,471
    
    
    
    
    
    
    
    15,693
    
    
    
    324
    
    
    
    108,488Less: Goodwill written off related to
sale/dissolution of business units
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )Balance as of December 31, 2004 and
January 1, 2005
    
    
    104,392
    
    
    
    16,105
    
    
    
    63,397
    
    
    
    5,658
    
    
    
    189,552Reallocation of goodwill
    
    
    
    
    
    
    362
    
    
    
    
    
    
    
    (362
    )
    
    
    Goodwill acquired during the year
    
    
    
    
    
    
    2,048
    
    
    
    1,521
    
    
    
    
    
    
    
    3,569Purchase accounting adjustments
    
    
    (4,549
    )
    
    
    1,427
    
    
    
    419
    
    
    
    
    
    
    
    (2,703
    )Balance as of December 31, 2005
    
    $
    99,843
    
    
    $
    19,942
    
    
    $
    65,337
    
    
    $
    5,296
    
    
    $
    190,418
  F-34




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##### Table of Contents



10.
    
    INTANGIBLE ASSETSThe following table summarizes the Companys amortized intangible assets as of December 31:
 2004
    
    
    2005Gross
    
    
    
    
    
    
    
    
    
    
    Grosscarrying
    
    
    Accumulated
    
    
    
    
    
    
    carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    Net
    
    
    amount
    
    
    amortization
    
    
    NetURLs
    
    $
    16,956
    
    
    $
    (2,543
    )
    
    $
    14,413
    
    
    $
    16,956
    
    
    $
    (3,390
    )
    
    $
    13,566Software applications and
programs
    
    
    38,426
    
    
    
    (5,624
    )
    
    
    32,802
    
    
    
    47,379
    
    
    
    (13,784
    )
    
    
    33,595Customer base and contracts
    
    
    27,727
    
    
    
    (6,163
    )
    
    
    21,564
    
    
    
    26,318
    
    
    
    (10,272
    )
    
    
    16,046Business licenses and
partnership agreements
    
    
    5,708
    
    
    
    (1,307
    )
    
    
    4,401
    
    
    
    5,199
    
    
    
    (2,462
    )
    
    
    2,737$
    88,817
    
    
    $
    (15,637
    )
    
    $
    73,180
    
    
    $
    95,852
    
    
    $
    (29,908
    )
    
    $
    65,944
   Year ended December 31:2006
    
    $
    14,4732007
    
    $
    14,3352008
    
    $
    12,2522009
    
    $
    5,9072010
    
    $
    5,005
 11.
    
    AVAILABLE-FOR-SALE EQUITY SECURITIES
 December 31,
    
    
    December 31,2004
    
    
    2005Cost
    
    $
    411
    
    
    $
    422Net unrealized gain *
    
    
    116
    
    
    
    237Market value
    
    $
    527
    
    
    $
    659
 
 *
    
    For the year ended December 31, 2005, the net unrealized gain consisted of gross
unrealized gain of $251 (2004: $151) and gross unrealized loss of $14 (2004: $35).  F-35




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11.
    
    AVAILABLE-FOR-SALE EQUITY SECURITIES (continued)
  12.
    
    CREDIT ARRANGEMENTS
      F-36




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##### Table of Contents



13.
    
    ACCUMULATED OTHER COMPREHENSIVE LOSSThe components of accumulated other comprehensive loss are as follows:
 Unrealizedgains (losses)
    
    
    Foreignon available-
    
    
    currencyfor-sale
    
    
    translationsecurities
    
    
    adjustments
    
    
    TotalBalance at December 31, 2003
    
    $
    (151
    )
    
    $
    (1,189
    )
    
    $
    (1,340
    )Unrealized losses, net of unrealized gains on
available-for-sale securities
    
    
    (593
    )
    
    
    
    
    
    
    (593
    )Minority interests share of unrealized losses, net of
unrealized gains on available-for-sale securities
    
    
    53
    
    
    
    
    
    
    
    53Foreign currency translation adjustments
    
    
    
    
    
    
    1,345
    
    
    
    1,345Less: reclassification adjustment for gains, net of losses
included in net income
    
    
    274
    
    
    
    
    
    
    
    274Balance at December 31, 2004
    
    $
    (417
    )
    
    $
    156
    
    
    $
    (261
    )Unrealized losses, net of unrealized gains on
available-for-sale securities
    
    
    (2,534
    )
    
    
    
    
    
    
    (2,534
    )Minority interests share of unrealized losses, net of
unrealized gains on available-for-sale securities
    
    
    217
    
    
    
    
    
    
    
    217Foreign currency translation adjustments
    
    
    
    
    
    
    1,509
    
    
    
    1,509Less: reclassification adjustment for losses, net of gains
included in net loss
    
    
    146
    
    
    
    
    
    
    
    146Balance at December 31, 2005
    
    $
    (2,588
    )
    
    $
    1,665
    
    
    $
    (923
    )
 F-37




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##### Table of Contents



14.
    
    SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Minimum rental expenses under operating leases
    
    $
    3,086
    
    
    $
    9,593
    
    
    $
    9,998Advertising expenses
    
    $
    580
    
    
    $
    2,249
    
    
    $
    5,050Defined contribution retirement plans expenses
    
    $
    2,922
    
    
    $
    3,459
    
    
    $
    2,148
 15.
    
    RELATED PARTY TRANSACTIONS
  (a) Golden Tripod Limited.
  (b) Asia Pacific Online Limited (APOL).
 F-38




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##### Table of Contents



15.
    
    RELATED PARTY TRANSACTIONS (continued)(c)     Harry Edelson lawsuit against the Company.In connection with Harry Edelson, a former
director of the Company, lawsuit against the Company, the Company is paying the costs of
outside counsel retained to represent Raymond Chien and Peter Yip in this matter (Note 27).
For the years ended December 31, 2004 and 2005, the Company paid $201 and $53,
respectively, for such fees.
 16.
    
    VARIABLE INTEREST ENTITIES
     (a)     Beijing Newpalm Information Technology Co., Ltd.
 F-39




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##### Table of Contents



16.
    
    VARIABLE INTEREST ENTITIES (continued)(b) Beijing Wisecom Information Technology Co., Ltd.Beijing Wisecom Information Technology
Co., Ltd. (Beijing Wisecom) is a PRC company which provides MVAS services in Mainland
China via third party network operators under its telecommunications value-added services
license. Beijing Wisecom is 50% owned by a director of China.com Inc., and 50% owned by a
PRC employee of the Company. The registered capital of Beijing Wisecom is $1,217.(c) Beijing China.com Technology Services Co., Ltd.Beijing China.com Technology
Services Co., Ltd. (Beijing China.com) is a PRC company which operates the portal
www.china.com under its Internet content company license and sells the online advertising
space to advertisers or their agents. Beijing China.com is 40% owned by a director of
China.com Inc., who is the general manager of Beijing China.com, and the remaining 60% is
owned by two PRC employees of the Company who own 40% and 20%, respectively. The registered
capital of Beijing China.com is $1,217.(d) Beijing He He Technology Co., Ltd.Beijing He He Technology Co., Ltd. (Beijing He He)
is a PRC company which provides MVAS services in Mainland China via third party network
operators under its telecommunications value-added services license. Beijing He He is owned
by two PRC employees of the Company who own 50% each. The registered capital of Beijing He
He is $1,217.(e) Shenzhen KK Technology Ltd.Shenzhen KK Technology Ltd. (SZ KK) is a PRC
company which provides MVAS services in Mainland China via third party network operators
under its telecommunications value-added services license. SZ KK is owned by two PRC
employees of the Company who own 50% each. The registered capital of SZ KK is $1,327.17.
    
    INCOME TAXES
   Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Current tax expense (benefit) allocated to:Continuing operations
    
    $
    (26
    )
    
    $
    1,644
    
    
    $
    1,259Discontinued operations
    
    
    (90
    )
    
    
    
    
    
    
    (116
    )
    
    
    1,644
    
    
    
    1,259Deferred tax expense (benefit) allocated to:Tax benefits allocated to goodwill of acquired entities
    
    
    
    
    
    
    5,897
    
    
    
    3,724Others
    
    
    (572
    )
    
    
    
    
    
    
    (409
    )Continuing operations
    
    
    (572
    )
    
    
    5,897
    
    
    
    3,315Total income tax expense (benefit)
    
    $
    (688
    )
    
    $
    7,541
    
    
    $
    4,574
 F-40




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##### Table of Contents



17.
    
    INCOME TAXES (continued)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005International:Current
    
    $
    (116
    )
    
    $
    1,568
    
    
    $
    741Deferred
    
    
    (572
    )
    
    
    5,239
    
    
    
    1,610U.S.:Current
    
    
    
    
    
    
    76
    
    
    
    518Deferred
    
    
    
    
    
    
    658
    
    
    
    1,705Total income tax expense (benefit)
    
    $
    (688
    )
    
    $
    7,541
    
    
    $
    4,574
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005International
    
    $
    16,679
    
    
    $
    (44
    )
    
    $
    (2,217
    )U.S.
    
    
    (420
    )
    
    
    812
    
    
    
    4,870Income before income taxes
    
    $
    16,259
    
    
    $
    768
    
    
    $
    2,653
  December 31,
    
    
    December 31,2004
    
    
    2005Deferred tax liabilities:Acquired intangible assets
    
    $
    (14,703
    )
    
    $
    (12,553
    )Capitalized software
    
    
    (1,248
    )
    
    
    (954
    )Indefinite lived assets
    
    
    (2,944
    )
    
    
    (2,944
    )Others
    
    
    (748
    )
    
    
    (1,203
    )Total deferred tax liabilities
    
    
    (19,643
    )
    
    
    (17,654
    )
 F-41




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##### Table of Contents



17.
    
    INCOME TAXES (continued)
 December 31,
    
    
    December 31,2004
    
    
    2005Deferred tax assets:Net operating loss carryforwards
    
    $
    125,827
    
    
    $
    112,977Net capital loss carryforwards
    
    
    
    
    
    
    17,123Book and tax base differences on assets
    
    
    6,177
    
    
    
    6,541Alternative minimum tax credit
    
    
    
    
    
    
    227Research and development
    
    
    5,144
    
    
    
    3,806Deferred revenue
    
    
    2,652
    
    
    
    3,345Accruals and reserves
    
    
    4,268
    
    
    
    4,085Deferred compensation
    
    
    879
    
    
    
    1,140Others
    
    
    506
    
    
    
    2,475Gross deferred tax assets
    
    
    145,453
    
    
    
    151,719Valuation allowance for deferred tax assets
    
    
    (130,004
    )
    
    
    (137,668
    )Total deferred tax assets
    
    
    15,449
    
    
    
    14,051Net deferred tax liabilities
    
    
    (4,194
    )
    
    
    (3,603
    )
   Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Income tax expense (benefit) computed
at the respective statutory rates
    
    $
    (3,482
    )
    
    $
    3,523
    
    
    $
    2,865Changes in tax rates
    
    
    (1,181
    )
    
    
    (79
    )
    
    
    875Tax holiday concession
    
    
    (2,806
    )
    
    
    (4,077
    )
    
    
    (2,551
    )Non-deductible items
    
    
    3,903
    
    
    
    4,038
    
    
    
    2,595Non-taxable items
    
    
    (1,271
    )
    
    
    (752
    )
    
    
    (1,938
    )Change in valuation allowance affecting
provision for income taxes
    
    
    4,239
    
    
    
    4,888
    
    
    
    2,728Total income tax expense (benefit) from
continuing operations
    
    $
    (598
    )
    
    $
    7,541
    
    
    $
    4,574Total income tax expense (benefit) from
discontinued operations
    
    $
    (90
    )
    
    $
    
    
    
    $
    
 F-42




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##### Table of Contents



17.
    
    INCOME TAXES (continued)
      F-43




---



##### Table of Contents



17.
    
    INCOME TAXES (continued)
  F-44




---



##### Table of Contents



18.
    
    BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Numerator for basic and diluted
earnings (loss) per share:Income (loss) from continuing operations
    
    $
    14,600
    
    
    $
    (7,773
    )
    
    $
    (3,486
    )Income (loss) from discontinued operations,
net of gain on disposal/dissolution
    
    
    924
    
    
    
    (1,560
    )
    
    
    (50
    )Income (loss) attributable to common
shareholders
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )Denominator for basic earnings (loss) per share:Weighted average number of shares after
adjusting for share splits
    
    
    100,532,594
    
    
    
    105,898,392
    
    
    
    111,085,657Denominator for basic earnings (loss) per share:Weighted average number of shares after
adjusting for share splits
    
    
    100,532,594
    
    
    
    105,898,392
    
    
    
    111,085,657Effect of dilutive securities:Dilutive common shares equivalent
    
    
    2,666,827
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share:Weighted average number of shares after
adjusting for share splits
    
    
    103,199,421
    
    
    
    105,898,392
    
    
    
    111,085,657Basic earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    0.14
    
    
    $
    (0.07
    )
    
    $
    (0.03
    )Earnings (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.02
    )
    
    
    Earnings (loss) attributable to common
shareholders
    
    $
    0.15
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )Diluted earnings (loss) per share:Earnings (loss) from continuing operations
    
    $
    0.14
    
    
    $
    (0.07
    )
    
    $
    (0.03
    )Earnings (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.02
    )
    
    
    Earnings (loss) attributable to common
shareholders
    
    $
    0.15
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )
  F-45




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##### Table of Contents



19.
    
    DISCONTINUED OPERATIONS
     Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Total assets as of the date of
disposal/dissolution
    
    $
    7,266
    
    
    $
    2,177
    
    
    $
    4Total liabilities as of the date of
disposal/dissolution
    
    $
    7,936
    
    
    $
    418
    
    
    $
    Revenues
    
    $
    11,581
    
    
    $
    864
    
    
    $
    Pre-tax loss
    
    $
    (1,293
    )
    
    $
    (610
    )
    
    $
    (47
    )Net loss
    
    $
    (1,203
    )
    
    $
    (610
    )
    
    $
    (47
    )Net gain (loss) on disposal/dissolution
    
    $
    2,127
    
    
    $
    (950
    )
    
    $
    (3
    )
 F-46




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##### Table of Contents



20.
    
    FINANCIAL INSTRUMENTS
     21.
    
    CONCENTRATION OF RISKS
  Concentration of Credit Risk
    F-47




---



##### Table of Contents



21.
    
    CONCENTRATION OF RISKS (continued)
 Concentration of Business Risk
  Dependence on Mobile Telecommunication Operators
  Current Vulnerability due to Certain Concentrations
    F-48




---



##### Table of Contents



22.
    
    SHARE CAPITAL
   Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Class A common shares issued for
exercise of stock options
    
    
    2,591,646
    
    
    
    1,068,473
    
    
    
    281,523Range of purchase prices per share
    
    $
    1.89 to $9.00
    
    
    $
    0.43 to $7.00
    
    
    $
    0.43 to $3.49Class A common shares issued for
exercise of employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    177,873Range of purchase prices per share
    
    
    
    
    
    
    
    
    
    $
    2.58 to $2.67Class A common shares repurchased
    
    
    4,468,560
    
    
    
    
    
    
    
    Range of repurchase prices per share
    
    $
    2.50
    
    
    
    
    
    
    
    Repurchased Class A common
shares retired
    
    
    2,300,000
    
    
    
    
    
    
    
    Range of retirement prices per share
    
    $
    2.50
    
    
    
    
    
    
    
    
     F-49




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##### Table of Contents



23.
    
    STOCK-BASED COMPENSATION PLANS
 2005 Stock Incentive Plan
   1999 Plan
   F-50




---



##### Table of Contents



23.
    
    STOCK-BASED COMPENSATION PLANS (continued)
  Options outstanding
    
    
    Options exercisableWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    Weightedaverage
    
    
    average
    
    
    
    
    
    
    averageremaining
    
    
    exercise
    
    
    
    
    
    
    exerciseExercise
    
    
    
    
    
    contractual
    
    
    price
    
    
    
    
    
    
    priceprice range ($)
    
    Shares
    
    
    life (in years)
    
    
    per share ($)
    
    
    Shares
    
    
    per share ($)$0.43-$0.95
    
    
    119,643
    
    
    
    8.65
    
    
    $
    0.56
    
    
    
    62,771
    
    
    $
    0.61$1.06-$1.98
    
    
    325,305
    
    
    
    8.15
    
    
    $
    1.72
    
    
    
    169,767
    
    
    $
    1.81$2.04-$2.99
    
    
    2,953,831
    
    
    
    8.25
    
    
    $
    2.89
    
    
    
    1,661,709
    
    
    $
    2.84$3.00-$3.80
    
    
    1,283,662
    
    
    
    7.72
    
    
    $
    3.41
    
    
    
    644,666
    
    
    $
    3.48$4.04-$5.00
    
    
    3,974,745
    
    
    
    6.04
    
    
    $
    4.67
    
    
    
    3,974,745
    
    
    $
    4.67$5.06-$9.94
    
    
    2,715,011
    
    
    
    7.57
    
    
    $
    6.74
    
    
    
    2,715,011
    
    
    $
    6.74$10.66-$19.19
    
    
    133,261
    
    
    
    4.85
    
    
    $
    14.88
    
    
    
    133,261
    
    
    $
    14.88$21.62-$29.92
    
    
    74,500
    
    
    
    4.36
    
    
    $
    26.36
    
    
    
    74,500
    
    
    $
    26.36$30.88-$48.41
    
    
    62,860
    
    
    
    4.23
    
    
    $
    35.80
    
    
    
    62,860
    
    
    $
    35.80$58.56-$68.81
    
    
    24,320
    
    
    
    4.25
    
    
    $
    61.58
    
    
    
    24,320
    
    
    $
    61.5811,667,138
    
    
    
    
    
    
    
    
    
    
    
    9,523,610
 F-51




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##### Table of Contents



23.
    
    STOCK-BASED COMPENSATION PLANS (continued)
  2003Weighted-averageAvailable
    
    
    Options
    
    
    exercisefor grant
    
    
    outstanding
    
    
    priceOutstanding at the beginning of the year
    
    
    9,432,844
    
    
    
    11,334,843
    
    
    $
    5.94Granted
    
    
    (2,217,343
    )
    
    
    2,217,343
    
    
    $
    5.40Forfeited
    
    
    2,832,962
    
    
    
    (2,832,962
    )
    
    $
    7.89Exercised
    
    
    
    
    
    
    (2,591,646
    )
    
    $
    3.32Outstanding at the end of the year
    
    
    10,048,463
    
    
    
    8,127,578
    
    
    $
    5.94Exercisable at the end of the year
    
    
    
    
    
    
    5,648,618Weighted-average grant-date fair value of options granted during the year
    
    
    
    
    
    $
    4.23
 2004Weighted-averageAvailable
    
    
    Options
    
    
    exercisefor grant
    
    
    outstanding
    
    
    priceOutstanding at the beginning of the year
    
    
    10,048,463
    
    
    
    8,127,578
    
    
    $
    5.94Granted
    
    
    (6,742,407
    )
    
    
    6,742,407
    
    
    $
    5.55Forfeited
    
    
    1,270,215
    
    
    
    (1,270,215
    )
    
    $
    9.07Exercised
    
    
    
    
    
    
    (1,068,473
    )
    
    $
    3.80Outstanding at the end of the year
    
    
    4,576,271
    
    
    
    12,531,297
    
    
    $
    5.60Exercisable at the end of the year
    
    
    
    
    
    
    6,641,577Weighted-average grant-date fair value of options granted during the year
    
    
    
    
    
    $
    4.35
 2005Weighted-averageAvailable
    
    
    Options
    
    
    exercisefor grant
    
    
    outstanding
    
    
    priceOutstanding at the beginning of the year
    
    
    4,576,271
    
    
    
    12,531,297
    
    
    $
    5.60Granted
    
    
    (2,629,500
    )
    
    
    2,629,500
    
    
    $
    3.03Forfeited
    
    
    3,212,136
    
    
    
    (3,212,136
    )
    
    $
    6.12Exercised
    
    
    
    
    
    
    (281,523
    )
    
    $
    1.33Outstanding at the end of the year
    
    
    5,158,907
    
    
    
    11,667,138
    
    
    $
    4.98Exercisable at the end of the year
    
    
    
    
    
    
    9,523,610Weighted-average grant-date fair value of options granted during the year
    
    
    
    
    
    $
    1.67
 F-52




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##### Table of Contents



23.
    
    STOCK-BASED COMPENSATION PLANS (continued)
     2004 Employee Share Purchase Plan
  24.
    
    EMPLOYEE BENEFIT PLANS
  F-53




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##### Table of Contents



24.
    
    EMPLOYEE BENEFIT PLANS (continued)
   Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,2004
    
    
    2005Service cost
    
    $
    
    
    
    $
    Interest cost
    
    
    133
    
    
    
    73Net periodic benefit cost
    
    $
    133
    
    
    $
    73
  Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,2004
    
    
    2005Benefit obligations at beginning of year
    
    $
    3,070
    
    
    $
    2,387Interest cost
    
    
    133
    
    
    
    73Actuarial gains
    
    
    (386
    )
    
    
    (283
    )Settlements
    
    
    (641
    )
    
    
    (570
    )Effect of foreign currency exchange rate changes
    
    
    211
    
    
    
    66Benefit obligations at end of year
    
    $
    2,387
    
    
    $
    1,673
 F-54




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##### Table of Contents



24.
    
    EMPLOYEE BENEFIT PLANS (continued)
  December 31,
    
    
    December 31,2004
    
    
    2005Unfunded status
    
    $
    2,387
    
    
    $
    1,673Comprised of:Long-term liability portion
    
    $
    1,477
    
    
    $
    1,011Short-term liability portion
    
    $
    910
    
    
    $
    662
 25.
    
    RESTRUCTURING COSTS
     F-55




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##### Table of Contents



26.
    
    PROPERTIES HELD FOR SALE
  27.
    
    CONTINGENCIES AND COMMITMENTS
 Contingencies
  (a) Vertical Computer Systems, Inc./NOW Solutions LLC.
 (b) Harry Edelson.
 F-56




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##### Table of Contents



27.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 Contingencies (continued)
 (c) Class Action Lawsuit.
  (d) Herkemij & Partners Knowledge
 F-57




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##### Table of Contents



27.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 Contingencies (continued)
 (e) Adding Value to Business Pty Ltd (Adding Value)
 (f) Mantech International Corporation and ManTech Australia International Inc.
 Commitments
  Year ended December 31,2006
    
    $
    9,7972007
    
    
    7,5082008
    
    
    6,2222009
    
    
    5,0682010
    
    
    4,412Thereafter
    
    
    8,286$
    41,293
  F-58




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##### Table of Contents



28.
    
    SEGMENT INFORMATION
 Description of Products and Services by Segment
   Information about Segment Profit or Loss and Segment Assets
  Factors Management Used to Identify the Enterprises Reportable Segments
  F-59




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##### Table of Contents



28.
    
    SEGMENT INFORMATION (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment revenues from external customers:Software
    
    $
    12,891
    
    
    $
    107,879
    
    
    $
    159,164Business Services
    
    
    40,477
    
    
    
    42,927
    
    
    
    42,489Mobile Services and Applications
    
    
    16,876
    
    
    
    23,694
    
    
    
    34,389Internet and Media
    
    
    5,606
    
    
    
    8,173
    
    
    
    8,995Others
    
    
    2,001
    
    
    
    10
    
    
    
    Total consolidated revenues
    
    $
    77,851
    
    
    $
    182,683
    
    
    $
    245,037
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment depreciation and amortization expenses:Software
    
    $
    482
    
    
    $
    1,947
    
    
    $
    7,642Business Services
    
    
    1,306
    
    
    
    998
    
    
    
    808Mobile Services and Applications
    
    
    260
    
    
    
    434
    
    
    
    611Internet and Media
    
    
    2,166
    
    
    
    263
    
    
    
    3664,214
    
    
    
    3,642
    
    
    
    9,427Corporate and other unallocated amounts
    
    
    3,240
    
    
    
    8,634
    
    
    
    6,735Total consolidated depreciation and
amortization expenses
    
    $
    7,454
    
    
    $
    12,276
    
    
    $
    16,162
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment interest income (expense), net:Software
    
    $
    (99
    )
    
    $
    585
    
    
    $
    713Business Services
    
    
    (1,176
    )
    
    
    36
    
    
    
    126Mobile Services and Applications
    
    
    27
    
    
    
    168
    
    
    
    253Internet and Media
    
    
    (448
    )
    
    
    (2
    )
    
    
    16(1,696
    )
    
    
    787
    
    
    
    1,108Corporate and other unallocated amounts
    
    
    14,038
    
    
    
    6,971
    
    
    
    5,791Total consolidated net interest income
    
    $
    12,342
    
    
    $
    7,758
    
    
    $
    6,899
 F-60




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##### Table of Contents



28.
    
    SEGMENT INFORMATION (continued)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment income tax expense (benefit):Software
    
    $
    224
    
    
    $
    316
    
    
    $
    578Business Services
    
    
    143
    
    
    
    1,029
    
    
    
    56Mobile Services and Applications
    
    
    (288
    )
    
    
    (392
    )
    
    
    710Internet and Media
    
    
    91
    
    
    
    39
    
    
    
    113170
    
    
    
    992
    
    
    
    1,457Corporate and other unallocated amounts
    
    
    (768
    )
    
    
    6,549
    
    
    
    3,117Total consolidated income tax expense (benefit)
    
    $
    (598
    )
    
    $
    7,541
    
    
    $
    4,574
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment net income (loss):Software
    
    $
    (114
    )
    
    $
    9,730
    
    
    $
    8,214Business Services
    
    
    3,377
    
    
    
    (47
    )
    
    
    3,888Mobile Services and Applications
    
    
    10,563
    
    
    
    11,568
    
    
    
    4,904Internet and Media
    
    
    (1,347
    )
    
    
    (197
    )
    
    
    (949
    )12,479
    
    
    
    21,054
    
    
    
    16,057Corporate and other unallocated amounts
    
    
    3,045
    
    
    
    (30,387
    )
    
    
    (19,593
    )Total consolidated net income (loss)
    
    $
    15,524
    
    
    $
    (9,333
    )
    
    $
    (3,536
    )
 December 31,
    
    
    December 31,2004
    
    
    2005Segment assets:Software
    
    $
    86,751
    
    
    $
    88,208Business Services
    
    
    19,643
    
    
    
    18,210Mobile Services and Applications
    
    
    24,089
    
    
    
    32,553Internet and Media
    
    
    6,798
    
    
    
    9,862137,281
    
    
    
    148,833Corporate and other unallocated amounts
    
    
    527,050
    
    
    
    459,202Total consolidated assets
    
    $
    664,331
    
    
    $
    608,035
 F-61




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##### Table of Contents



28.
    
    SEGMENT INFORMATION (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2003
    
    
    2004
    
    
    2005Segment revenues from external customers:Australia
    
    $
    26,818
    
    
    $
    29,655
    
    
    $
    27,449Greater China
    
    
    24,479
    
    
    
    32,542
    
    
    
    38,765Korea
    
    
    1,647
    
    
    
    3,643
    
    
    
    2,968Singapore
    
    
    5,858
    
    
    
    6,072
    
    
    
    6,745Europe (excluding United Kingdom)
    
    
    7,654
    
    
    
    39,176
    
    
    
    46,014United Kingdom
    
    
    2,495
    
    
    
    10,857
    
    
    
    17,939North America
    
    
    8,900
    
    
    
    60,061
    
    
    
    101,002Others
    
    
    
    
    
    
    677
    
    
    
    4,155Total consolidated revenues
    
    $
    77,851
    
    
    $
    182,683
    
    
    $
    245,037
 December 31,
    
    
    December 31,2004
    
    
    2005Segment long-lived assets:Australia
    
    $
    4,451
    
    
    $
    2,269Greater China
    
    
    22,259
    
    
    
    19,299Korea
    
    
    57
    
    
    
    55Singapore
    
    
    201
    
    
    
    53Europe (excluding United Kingdom)
    
    
    1,184
    
    
    
    549United Kingdom
    
    
    4
    
    
    
    308North America
    
    
    60,582
    
    
    
    57,232Others
    
    
    
    
    
    
    115Total consolidated long-lived assets
    
    $
    88,738
    
    
    $
    79,880
 29.
    
    SUBSEQUENT EVENT
  F-62