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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM
20-F/A
 Amendment No. 1
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  : 000-30134
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 CDC Corporation
  Cayman Islands
 34/F Citicorp Centre
18 Whitfield Road
Causeway Bay
Hong Kong
telephone: (852) 2893-8200
facsimile: (852) 2893-5245
e-mail: investor_relations@cdccorporation.net
  Class A common shares
  Class of shares
    
    Number outstanding as of March 31, 2005Class A common shares
    
    110,965,246Preferred Shares
    
    Nil
  þ o
  o þ




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TABLE OF CONTENTS
 Page
 Explanatory Note
    
    
    2Item 3.Key Information
    
    
    4Item 5.Operating And Financial Review And Prospects
    
    
    45Item 15. Controls and Procedures
    
    
    76Item 18. Financial Statements
    
    
    76Item 19. Exhibits
    
    
    77EX-12.1 CERTIFICATION OF CEO REQUIRED BY RULE 13a-14(a)EX-12.2 CERTIFICATION OF CFO REQUIRED BY RULE 13a-14(a)EX-13.(A).1 CERTIFICATION OF CEO PURSUANT TO SECTION 906EX-13.(A).2 CERTIFICATION OF CFO PURSUANT TO SECTION 906EX-15.(A).1 CONSENT OF ERNST & YOUNGEX-15.(A).2 CONSENT OF PRICEWATERHOUSECOOPERS LLP
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EXPLANATORY NOTE
  
    
    A restatement of the following line items in our Consolidated Balance Sheet as
at December 31, 2004 and our Consolidated Statement of Operations, Consolidated
Statement of Cash Flows and Consolidated Statement of Shareholders Equity for the year
ended December 31, 2004 to correct a minority interest calculation error which resulted
in an overstatement of our minority interests in income of consolidated subsidiaries by
US$1.2 million:
 
    
    minority interests;
    
    accumulated deficit;
    
    total shareholders equity;
    
    minority interests in losses/(income) of consolidated subsidiaries;
    
    income/(loss) from continuing operations;
    
    net income/(loss);
    
    basic and diluted earnings/(loss) per share from continuing operations;
    
    basic and diluted earnings/(loss) per share; and
    
    comprehensive income/(loss).
 
    
    The restatement of notes 2(o), 4(g), 20 and 30(ii) and the addition of note
2(y) to the Consolidated Financial Statements to reflect the impact of the restatement.
    
    The inclusion of an updated audit report from Ernst & Young, our independent
registered public accounting firm, that contains an explanatory paragraph describing
the correction of an accounting error for the year ended December 31, 2004 and refers
to the amendments to the Consolidated Financial Statements for the year ended December
31, 2004.
   2




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3




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ITEM 3. KEY INFORMATION
 A. Selected Financial Data
  Year ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(in thousands of U.S. dollars except share and per share data)Income Statement Data: (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    [Restated(8)]Revenues:Software
    
    $
    
    
    
    $
    
    
    
    $
    3,526
    
    
    $
    12,891
    
    
    $
    107,879Business services
    
    
    45,791
    
    
    
    16,643
    
    
    
    10,148
    
    
    
    37,242
    
    
    
    39,391Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,876
    
    
    
    23,694Advertising/marketing
    
    
    21,051
    
    
    
    9,337
    
    
    
    7,527
    
    
    
    8,841
    
    
    
    11,709Others
    
    
    953
    
    
    
    3,730
    
    
    
    1,599
    
    
    
    2,001
    
    
    
    1067,795
    
    
    
    29,710
    
    
    
    22,800
    
    
    
    77,851
    
    
    
    182,683Cost of revenues:Software
    
    
    
    
    
    
    
    
    
    
    (1,328
    )
    
    
    (9,357
    )
    
    
    (43,240
    )Business services
    
    
    (28,972
    )
    
    
    (11,923
    )
    
    
    (4,544
    )
    
    
    (22,072
    )
    
    
    (26,750
    )Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,247
    )
    
    
    (4,597
    )Advertising/marketing
    
    
    (10,432
    )
    
    
    (4,400
    )
    
    
    (4,477
    )
    
    
    (4,312
    )
    
    
    (4,645
    )Others
    
    
    (1,081
    )
    
    
    (1,390
    )
    
    
    (676
    )
    
    
    (889
    )
    
    
    (40,485
    )
    
    
    (17,713
    )
    
    
    (11,025
    )
    
    
    (38,877
    )
    
    
    (79,232
    )Gross profit
    
    
    27,310
    
    
    
    11,997
    
    
    
    11,775
    
    
    
    38,974
    
    
    
    103,451Selling, general and administrative expenses
    
    
    (89,524
    )
    
    
    (69,949
    )
    
    
    (22,476
    )
    
    
    (31,785
    )
    
    
    (80,419
    )Research and development expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,825
    )Depreciation and amortization expenses
    
    
    (29,807
    )
    
    
    (19,007
    )
    
    
    (9,515
    )
    
    
    (6,954
    )
    
    
    (12,276
    )Impairment of goodwill and intangible assets
    
    
    (31,712
    )
    
    
    (21,908
    )
    
    
    
    
    
    
    
    
    
    
    Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,387
    )Total operating expenses
    
    
    (151,043
    )
    
    
    (110,864
    )
    
    
    (31,991
    )
    
    
    (38,739
    )
    
    
    (109,907
    )Operating income/(loss)
    
    
    (123,733
    )
    
    
    (98,867
    )
    
    
    (20,216
    )
    
    
    235
    
    
    
    (6,456
    )Interest income
    
    
    29,717
    
    
    
    26,501
    
    
    
    23,631
    
    
    
    13,412
    
    
    
    9,653Interest expense
    
    
    (851
    )
    
    
    (1,266
    )
    
    
    (2,461
    )
    
    
    (1,070
    )
    
    
    (1,895
    )Gain/(loss) arising from share issuance of a subsidiary
    
    
    140,031
    
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
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Year ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(in thousands of U.S. dollars except share and per share data)Gain/(loss) on disposal of available-for-sale securities
    
    
    1,685
    
    
    
    4,411
    
    
    
    (163
    )
    
    
    4,599
    
    
    
    167Gain/(loss) on disposal of subsidiaries and cost investments
    
    
    13,981
    
    
    
    (1,915
    )
    
    
    (66
    )
    
    
    (1,263
    )
    
    
    549Other non-operating gains
    
    
    
    
    
    
    
    
    
    
    508
    
    
    
    934
    
    
    
    Other non-operating losses
    
    
    (2,226
    )
    
    
    (927
    )
    
    
    (288
    )
    
    
    (148
    )
    
    
    Impairment of cost investments and available-for-sale securities
    
    
    (84,696
    )
    
    
    (12,260
    )
    
    
    (5,351
    )
    
    
    
    
    
    
    (1,362
    )Share of income/(losses) in equity investees(2)
    
    
    (9,423
    )
    
    
    (2,592
    )
    
    
    682
    
    
    
    (124
    )
    
    
    (308
    )Total other income
    
    
    88,218
    
    
    
    11,897
    
    
    
    16,492
    
    
    
    16,340
    
    
    
    6,804Income/(loss) before income taxes
    
    
    (35,515
    )
    
    
    (86,970
    )
    
    
    (3,724
    )
    
    
    16,575
    
    
    
    348Income tax benefits/(income taxes)
    
    
    (327
    )
    
    
    (65
    )
    
    
    162
    
    
    
    598
    
    
    
    (7,541
    )Income/(loss) before minority interests
    
    
    (35,842
    )
    
    
    (87,035
    )
    
    
    (3,562
    )
    
    
    17,173
    
    
    
    (7,193
    )Minority interests in losses/(income) of consolidated subsidiaries
    
    
    546
    
    
    
    3,162
    
    
    
    248
    
    
    
    (2,257
    )
    
    
    (1,000
    )Income/(loss) from continuing operations
    
    
    (35,296
    )
    
    
    (83,873
    )
    
    
    (3,314
    )
    
    
    14,916
    
    
    
    (8,193
    )Discontinued operations:Loss from operations of discontinued subsidiaries, net of tax
    
    
    (24,506
    )
    
    
    (40,512
    )
    
    
    (15,462
    )
    
    
    (1,519
    )
    
    
    (190
    )Gain/(loss)
on disposal/dissolution of discontinued subsidiaries, net
    
    
    
    
    
    
    
    
    
    
    545
    
    
    
    2,127
    
    
    
    (950
    )Net income/(loss)
    
    $
    (59,802
    )
    
    $
    (124,385
    )
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )Basic and diluted earnings/(loss) per share(3)
    
    
    (0.61
    )
    
    
    (1.21
    )
    
    
    (0.18
    )
    
    
    0.15
    
    
    
    (0.09
    )Basic and
diluted earnings/(loss) per share from continuing operations(3)
    
    
    (0.36
    )
    
    
    (0.82
    )
    
    
    (0.03
    )
    
    
    0.14
    
    
    
    (0.08
    )Weighted average number of shares:Basic
    
    
    98,091,541
    
    
    
    102,589,760
    
    
    
    102,269,735
    
    
    
    100,532,594
    
    
    
    105,898,392Diluted
    
    
    98,091,541
    
    
    
    102,589,760
    
    
    
    102,269,735
    
    
    
    103,199,421
    
    
    
    105,898,392
 As of December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004(in thousands of U.S. dollars except share and per share data)Balance Sheet Data:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    [Restated(8)]Cash and cash equivalents
    
    $
    47,483
    
    
    $
    20,820
    
    
    $
    33,153
    
    
    $
    55,508
    
    
    $
    110,206Restricted cash
    
    
    4,134
    
    
    
    1,274
    
    
    
    109
    
    
    
    238
    
    
    
    3,886Available for sale debt securities(4)
    
    
    242,324
    
    
    
    346,980
    
    
    
    320,056
    
    
    
    282,145
    
    
    
    104,159Restricted available for sale debt securities(5)
    
    
    148,622
    
    
    
    134,960
    
    
    
    151,123
    
    
    
    31,109
    
    
    
    75,780Available for sale equity securities
    
    
    10,368
    
    
    
    2,064
    
    
    
    2,050
    
    
    
    590
    
    
    
    527Bank loans(6)
    
    
    3,934
    
    
    
    118,455
    
    
    
    127,384
    
    
    
    26,826
    
    
    
    63,781Working capital(7)
    
    
    450,391
    
    
    
    359,412
    
    
    
    340,476
    
    
    
    270,451
    
    
    
    170,682Total assets
    
    
    622,920
    
    
    
    596,494
    
    
    
    580,957
    
    
    
    546,054
    
    
    
    664,331Common stock
    
    
    25
    
    
    
    26
    
    
    
    25
    
    
    
    25
    
    
    
    28Total shareholders equity
    
    $
    512,024
    
    
    $
    389,861
    
    
    $
    377,700
    
    
    $
    390,446
    
    
    $
    440,950
 
 (1)
    
    In 2004, CDC adopted new reporting segmentation, changing from the previous
segmentation of software and consulting services, mobile services and applications and
advertising and marketing activities to the current segmentation of software, business
services, mobile services and applications, advertising/marketing and others. In addition,
CDC discontinued the operations of certain subsidiaries in the software, 5




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business services, advertising/marketing and others segments. In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the operating results of the
discontinued operating units were retroactively reclassified as a loss from operations of
discontinued subsidiaries, net of tax, in the consolidated statements of operations. The
results of the continuing operations of 2000, 2001, 2002 and 2003 were reclassified to
conform to the 2004 presentation. Prior to January 1, 2002, goodwill was amortized to
expense on a straight-line basis over a period of two to five years. From January 1, 2002,
CDC ceased amortizing goodwill and instead performs annual impairment tests on goodwill.(2)
    
    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).(3)
    
    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 and 2004 because
their inclusion would have been antidilutive.(4)
    
    Available-for-sale debt securities includes short-term and long-term debt securities
available-for-sale.(5)
    
    Restricted available-for-sale debt securities include short-term and long-term
restricted debt securities.(6)
    
    Bank loans include short-term and long-term bank loans.(7)
    
    Working capital represents current assets less current liabilities.(8)
    
    Refer to Note 2(y) to the Consolidated Financial Statements. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Relating to CDC Corporation
 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.
  2000
    
    2001
    
    2002
    
    2003
    
    2004(in thousands of U.S. dollars)
    
    [Restated(1)]Operating income/(loss)
    
    
    (123,733
    )
    
    
    (98,867
    )
    
    
    (20,216
    )
    
    
    235
    
    
    
    (6,456
    )Net income/(loss)
    
    
    (59,802
    )
    
    
    (124,385
    )
    
    
    (18,231
    )
    
    
    15,524
    
    
    
    (9,333
    )
 
 (1)
    
    Refer to Note 2(y) to the Consolidated Financial Statements. 6




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
    
    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;
 
    
    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;
    
    continuing effects of acquisition-related adjustments including intangible asset
amortization, stock compensation and deferred tax expense; and
    
    any additional acquisition activities related to the growth and development of our
enterprise software, mobile services and applications, advertising/marketing and
business services businesses.
  
    
    increases in revenues in 2004 have been due in significant part to our acquisition
related activity which increased our revenue base substantially in 2004. As we expect
to significantly decrease our acquisition related activity in 2005, growth of our
revenue base through acquisition will no longer drive our revenue increases;
    
    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, including those from
our enterprise software, mobile services and applications, advertising/marketing and
business services businesses;
    
    decisions to discontinue products and services which would shrink our revenue base;
 7




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
    
    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.
  During each of 2003 and 2004, we were dependent upon acquisitions for our increase in revenues
rather than organic growth of our businesses.
  
    
    During 2003, our material acquisitions included the acquisition in February 2003 of
Praxa, an Australian information technology outsourcing and professional services
organization; the acquisition in April 2003 of Palmweb Inc. which operates Newpalm, a
provider of mobile services and applications in China; and the acquisition in September
2003 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 in February 2004 of
Pivotal Corporation, or Pivotal, a customer relationship management (CRM) company
focused on mid-sized enterprises; the acquisition in May 2004 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 in
August 2004 of Ross Systems, Inc., or Ross, an ERP company focused on the food and
beverage, life sciences, chemicals, metals and natural products industries.
  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;
 8




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
    
    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, 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. Among other things, we hired a new president and chief executive officer of
CDC Software Asia Pacific during 2004. However, we cannot assure you that we will be
successful in our Japan and China strategy; and
    
    While with the completion of our acquisitions of Pivotal and Ross, we have added an
additional approximate 3,000 customers to our customer base which on a combined basis
totals approximately 3,500 customers which have licensed our enterprise software
products worldwide as of December 31, 2004, 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.
  Several of our lines of business 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 between our lines of business.
  Our acquisitions require 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.
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
    
    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;
    
    facing potential claims filed by terminated employees and contractors; and
    
    geographic complexity and adapting to local market conditions and business practices.
  We may not be able to realize the anticipated cost savings, synergies or revenue enhancements from
combining acquired businesses with 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
 10




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
    
    legal and professional expenses related to the acquisition of subsidiaries.
  While we have cash and cash equivalents of US$110.2 million and total debt securities of US$179.9
million as of December 31, 2004, 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.
  A decrease in the value of our acquired businesses may lead to impairment of our goodwill and other
intangible assets and have a material adverse impact on our financial condition.
 .
 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.
  11




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Because we rely on local management for many of our localized enterprise software, mobile services
and applications, advertising/marketing and business services 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 in connection with our evaluation of our internal controls
systems in order to determine whether we have adequate internal controls procedures in place in
accordance with recent legislation requiring companies to evaluate controls under Section 404 of
the Sarbanes-Oxley Act of 2002.
   Changes to existing accounting pronouncements, including SFAS 123R, or tax laws or practices may
cause adverse revenue and earnings fluctuations, affect our reported results of operations,
negatively impact our ability to attract and retain employees or affect how we conduct our
business.
  12




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Risks relating to our enterprise software business
 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 Adonix, Epicor, Infor Global
Solutions, Microsoft Corporation, Oracle/Peoplesoft, QAD, Inc., SAP, 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., Epiphany, Inc., Microsoft Corporation, Onyx Software Corporation,
Oracle/Peoplesoft, Salesforce.com, SalesLogix (part of Best Software/Sage Group plc),
SAP AG and Siebel Systems, Inc.;
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
    
    supply chain management (SCM) providers, including Aspen Technologies, i2
Technologies, Inc., Manhattan Associates, Manugistics Group, Inc. and MAPICS, Inc.
(recently acquired by 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. and UFIDA Software Co. Ltd.;
    
    business intelligence (BI) providers, including Business Objects SA, Cognos, Inc.,
Hyperion, Inc. and SAS Institute, Inc.; and
    
    large 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 and Wipro Ltd.
  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,
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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;
    
    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.
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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;
    
    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.
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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;
    
    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.
 .
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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
    
    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.
  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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Risks relating to our mobile services and applications and portal businesses
 Each of the mobile services and applications and portal businesses in China is 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.
   We depend primarily on the two 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.
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
    
    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.
  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
China Mobile and/or China Unicom 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 China Mobile or China Unicom or both begin providing
their own mobile services and applications.
  If China Mobile or China Unicom fails to bill their customers or to provide billing confirmations
for our mobile services and applications, our mobile services and applications revenues could be
significantly reduced.
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Our mobile services and 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;
    
    China Mobile or China Unicom 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
    
    the subscriber refuses to pay for our mobile services and applications due to
quality or other problems.
  Because China Mobile and China Unicom 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.
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China Mobile and China Unicom may impose higher service or network fees if we are unable to satisfy
customer usage and other performance criteria, thereby reducing our mobile services and
applications revenues.
   China Mobile and China Unicom may not authorize our mobile services and 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.
   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.
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Our mobile services and applications and their pricing are subject to approval by China Mobile and
China Unicom, 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 services and
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 services and applications market, but we are unable to establish new arrangements or
develop cooperative relationships with them, our mobile services and applications business, revenue
and overall financial condition could be adversely affected.
  If we fail to keep pace with changes in mobile technology, our competitive position and
ability to generate revenues could be adversely affected.
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Our mobile services and 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.
   
    
    levying of fines;
    
    compulsory disgorgement of income for both current and past periods;
    
    revocation of our ICP or business license;
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
    
    closure or suspension of our China operations; and
    
    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 services and 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.
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The Chinese government, China Unicom or China Mobile may prevent us from distributing, and we may
be subject to liability for, content that any of them believe is inappropriate.
    If we are held liable for claims based on information originating from our portal network or
communicated through our mobile services and 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.
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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.
   §
    
    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.
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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.
  Regulation of content distributed on the Internet in of 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.
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Risks relating to our advertising and marketing business
 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 business services business
 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.
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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.
  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.
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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.
  
    
    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; 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.
  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.
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We have entered into indemnification agreements with 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;
    
    level of development;
    
    growth rate;
    
    control of foreign exchange; and
    
    allocation of resources.
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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.
  Risks relating to treasury management
 Our entry into banking facilities with Fortis Bank, DBS 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.
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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;
    
    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.
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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.
  We are a foreign private issuer, and have disclosure obligations different from those of other
U.S. domestic reporting companies.
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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
   Our shareholders may face difficulties in protecting their interests because we are incorporated
under Cayman Islands law.
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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 Peoples Republic of China and Sweden.
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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. 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, 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
  Primary Lines of Business
 
    
    Enterprise 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.
    
    Mobile Services and Applications.Our mobile services and applications
business provides popular news and mobile applications services targeting the consumer
market in China. We offer wireless services including SMS (Short Message Service), MMS
(Multimedia Message Service), WAP (Wireless Application Protocol) and IVR (Interactive
Voice Response). 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.
 Additional Operations
 
    
    Advertising/marketing.Our advertising/marketing 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 www.hongkong.com). This segment also includes a
marketing database and diverse marketing support business conducted principally in
Australia and New Zealand through Mezzo Business, and a Singapore-based travel trade
publisher and organizer serving the travel and tourism industry in the Asia Pacific
region operated by TTG.
    
    Business Services.Our business services companies provide program
management, outsourcing services, application development and on-going support services
using a range of technologies.
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These services are principally offered through our subsidiaries, Ion Global, Ascent SGI,
Praxa and PK Information Systems.
  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
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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 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 such as our Portal and CDC
Software Asia Pacific.
    
    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
2005 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
 47




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##### Table of Contents



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 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
  Enterprise Software
 Acquired company
    
    Acquisition dateIndustri-Matematik International Corp. (IMI)
    
    September 2003Pivotal Corporation (Pivotal)
    
    February 2004Ross Systems, Inc. (Ross)
    
    August 2004
 Business Services
 Acquired company
    
    Acquisition datePraxa Limited (Praxa)
    
    February 2003PK Information Systems Pty Ltd. (PK Information Systems)
    
    August 2003
 48




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##### Table of Contents



Mobile Services and Applications
 Acquired company
    
    Acquisition 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
 Operating segments
  Discontinued operations
  Results of Operations
   Year ended December 31,2002
    
    
    2003
    
    2004(in thousands of U.S. dollars, except percentages)[Restated (2)]RevenuesSoftware
    
    $
    3,526
    
    
    
    15
    %
    
    $
    12,891
    
    
    
    17
    %
    
    $
    107,879
    
    
    
    59
    %Business services
    
    
    10,148
    
    
    
    45
    %
    
    
    37,242
    
    
    
    48
    %
    
    
    39,391
    
    
    
    22
    %Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    16,876
    
    
    
    22
    %
    
    
    23,694
    
    
    
    13
    %Advertising/marketing
    
    
    7,527
    
    
    
    33
    %
    
    
    8,841
    
    
    
    11
    %
    
    
    11,709
    
    
    
    6
    %Others
    
    
    1,599
    
    
    
    7
    %
    
    
    2,001
    
    
    
    2
    %
    
    
    10
    
    
    
    22,800
    
    
    
    100
    %
    
    
    77,851
    
    
    
    100
    %
    
    
    182,683
    
    
    
    100
    %Cost of revenuesSoftware
    
    
    (1,328
    )
    
    
    (6
    %)
    
    
    (9,357
    )
    
    
    (12
    %)
    
    
    (43,240
    )
    
    
    (24
    %)Business services
    
    
    (4,544
    )
    
    
    (20
    %)
    
    
    (22,072
    )
    
    
    (28
    %)
    
    
    (26,750
    )
    
    
    (15
    %)Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    (2,247
    )
    
    
    (3
    %)
    
    
    (4,597
    )
    
    
    (2
    %)Advertising/marketing
    
    
    (4,477
    )
    
    
    (19
    %)
    
    
    (4,312
    )
    
    
    (6
    %)
    
    
    (4,645
    )
    
    
    (2
    %)Others
    
    
    (676
    )
    
    
    (3
    %)
    
    
    (889
    )
    
    
    (1
    %)
    
    
    
    
    
    
    (11,025
    )
    
    
    (48
    %)
    
    
    (38,877
    )
    
    
    (50
    %)
    
    
    (79,232
    )
    
    
    (43
    %)Gross margin and gross margin %
    
    
    11,775
    
    
    
    52
    %
    
    
    38,974
    
    
    
    50
    %
    
    
    103,451
    
    
    
    57
    %Selling, general and administrative expenses
    
    
    (22,476
    )
    
    
    (99
    %)
    
    
    (31,785
    )
    
    
    (41
    %)
    
    
    (80,419
    )
    
    
    (44
    %)Research and development expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,825
    )
    
    
    (7
    %)Depreciation and amortization expenses
    
    
    (9,515
    )
    
    
    (42
    %)
    
    
    (6,954
    )
    
    
    (9
    %)
    
    
    (12,276
    )
    
    
    (7
    %)Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,387
    )
    
    
    (2
    %)Total operating expenses
    
    
    (31,991
    )
    
    
    (141
    %)
    
    
    (38,739
    )
    
    
    (50
    %)
    
    
    (109,907
    )
    
    
    (60
    %)
 49




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##### Table of Contents



Year ended December 31,2002
    
    
    2003
    
    2004(in thousands of U.S. dollars, except percentages)Operating income/(loss)
    
    
    (20,216
    )
    
    
    (89
    %)
    
    
    235
    
    
    
    
    
    
    
    (6,456
    )
    
    
    (3
    %)Interest income
    
    
    23,631
    
    
    
    104
    %
    
    
    13,412
    
    
    
    17
    %
    
    
    9,653
    
    
    
    5
    %Interest expense
    
    
    (2,461
    )
    
    
    (11
    %)
    
    
    (1,070
    )
    
    
    (1
    %)
    
    
    (1,895
    )
    
    
    (1
    %)Gain/(loss) on disposal of available-for-sale securities
    
    
    (163
    )
    
    
    (1
    %)
    
    
    4,599
    
    
    
    6
    %
    
    
    167
    
    
    
    Gain/(loss) on disposal of subsidiaries and cost investments
    
    
    (66
    )
    
    
    
    
    
    
    (1,263
    )
    
    
    (2
    %)
    
    
    549
    
    
    
    Other non-operating gains
    
    
    508
    
    
    
    2
    %
    
    
    934
    
    
    
    1
    %
    
    
    
    
    
    
    Other non-operating losses
    
    
    (288
    )
    
    
    (1
    %)
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of cost investments and available-for-sale securities
    
    
    (5,351
    )
    
    
    (23
    %)
    
    
    
    
    
    
    
    
    
    
    (1,362
    )
    
    
    (1
    %)Share of income/(loss) in equity investees
    
    
    682
    
    
    
    3
    %
    
    
    (124
    )
    
    
    
    
    
    
    (308
    )
    
    
    Total other income
    
    
    16,492
    
    
    
    73
    %
    
    
    16,340
    
    
    
    21
    %
    
    
    6,804
    
    
    
    3
    %Income/(loss) before income taxes
    
    
    (3,724
    )
    
    
    (16
    %)
    
    
    16,575
    
    
    
    21
    %
    
    
    348
    
    
    
    Income tax benefits/(income taxes)
    
    
    162
    
    
    
    1
    %
    
    
    598
    
    
    
    1
    %
    
    
    (7,541
    )
    
    
    (4
    %)Income/(loss) before minority interests
    
    
    (3,562
    )
    
    
    (15
    %)
    
    
    17,173
    
    
    
    22
    %
    
    
    (7,193
    )
    
    
    (4
    %)Minority interests in losses/(income) of consolidated subsidiaries
    
    
    248
    
    
    
    1
    %
    
    
    (2,257
    )
    
    
    (3
    %)
    
    
    (1,000
    )
    
    
    (1
    %)Income/(loss) from continuing operations
    
    
    (3,314
    )
    
    
    (14
    %)
    
    
    14,916
    
    
    
    19
    %
    
    
    (8,193
    )
    
    
    (4
    %)Discontinued operationsLoss from operations of discontinued subsidiaries, net of related tax
expense/(benefit)
    
    
    (15,462
    )
    
    
    (68
    %)
    
    
    (1,519
    )
    
    
    (2
    %)
    
    
    (190
    )
    
    
    Gain/(loss) on disposal/dissolution of discontinued subsidiaries, net
    
    
    545
    
    
    
    2
    %
    
    
    2,127
    
    
    
    3
    %
    
    
    (950
    )
    
    
    (1
    %)Net income/(loss)
    
    $
    (18,231
    )
    
    
    (80
    %)
    
    $
    15,524
    
    
    
    20
    %
    
    $
    (9,333
    )
    
    
    (5
    %)
 
 (1)
    
    In 2004, we changed our reporting segments from the previous segmentation of software and
consulting services, mobile services and applications, advertising and marketing activities
and other income, to the current segmentation of software, business services, mobile services
and applications, advertising/marketing and others. In addition, we discontinued the
operations of certain subsidiaries in the software, business services, advertising/marketing,
and others segments. In accordance with SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the operating results of the discontinued operating units, net of related
tax, were retroactively reclassified as a loss from operations of discontinued subsidiaries,
net of tax, in the consolidated statements of operations. As a result, the results of the
continuing operations of 2002 and 2003 were reclassified to conform to the 2004 presentation.(2)
    
    Refer to Note 2(y) to the Consolidated Financial Statements. Year ended December 31, 2004 compared to year ended December 31, 2003
  Revenues by business segment
  50




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Year ended December 31,2002
    
    
    2003
    
    2004(in thousands of U.S. dollars, except percentages)RevenuesSoftware
    
    $
    3,526
    
    
    
    15
    %
    
    $
    12,891
    
    
    
    17
    %
    
    $
    107,879
    
    
    
    59
    %Licenses
    
    
    893
    
    
    
    4
    %
    
    
    1,157
    
    
    
    2
    %
    
    
    28,748
    
    
    
    16
    %Maintenance and consulting services
    
    
    2,633
    
    
    
    11
    %
    
    
    11,734
    
    
    
    15
    %
    
    
    79,131
    
    
    
    43
    %Business services
    
    
    10,148
    
    
    
    45
    %
    
    
    37,242
    
    
    
    48
    %
    
    
    39,391
    
    
    
    22
    %IT products
    
    
    
    
    
    
    
    
    
    
    6,083
    
    
    
    8
    %
    
    
    2,083
    
    
    
    1
    %Consulting services
    
    
    10,148
    
    
    
    45
    %
    
    
    31,159
    
    
    
    40
    %
    
    
    37,308
    
    
    
    21
    %Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    16,876
    
    
    
    22
    %
    
    
    23,694
    
    
    
    13
    %Advertising/marketing
    
    
    7,527
    
    
    
    33
    %
    
    
    8,841
    
    
    
    11
    %
    
    
    11,709
    
    
    
    6
    %Others
    
    
    1,599
    
    
    
    7
    %
    
    
    2,001
    
    
    
    2
    %
    
    
    10
    
    
    
    $
    22,800
    
    
    
    100
    %
    
    $
    77,851
    
    
    
    100
    %
    
    $
    182,683
    
    
    
    100
    %
   Year ended December 31,2003
    
    
    2004(in thousands of US$)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
   51




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Business services
   Mobile services and applications
    52




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Advertising/marketing
  Others
  Cost of revenues by business segment
  Year ended December 31,2002
    
    
    2003
    
    
    2004(in thousands of US$, except percentages)Cost of revenuesSoftware
    
    $
    1,328
    
    
    
    6
    %
    
    $
    9,357
    
    
    
    12
    %
    
    $
    43,240
    
    
    
    24
    %Licenses
    
    
    445
    
    
    
    2
    %
    
    
    362
    
    
    
    1
    %
    
    
    3,486
    
    
    
    2
    %Maintenance and consulting
services
    
    
    883
    
    
    
    4
    %
    
    
    8,995
    
    
    
    11
    %
    
    
    39,754
    
    
    
    22
    %Business services
    
    
    4,544
    
    
    
    20
    %
    
    
    22,072
    
    
    
    28
    %
    
    
    26,750
    
    
    
    15
    %IT products
    
    
    
    
    
    
    
    
    
    
    5,318
    
    
    
    7
    %
    
    
    1,879
    
    
    
    1
    %Consulting services
    
    
    4,544
    
    
    
    20
    %
    
    
    16,754
    
    
    
    21
    %
    
    
    24,871
    
    
    
    14
    %Mobile services and applications
    
    
    
    
    
    
    
    
    
    
    2,247
    
    
    
    3
    %
    
    
    4,597
    
    
    
    2
    %Advertising and marketing activities
    
    
    4,477
    
    
    
    19
    %
    
    
    4,312
    
    
    
    6
    %
    
    
    4,645
    
    
    
    2
    %Others
    
    
    676
    
    
    
    3
    %
    
    
    889
    
    
    
    1
    %
    
    
    
    
    
    
    $
    11,025
    
    
    
    48
    %
    
    $
    38,877
    
    
    
    50
    %
    
    $
    79,232
    
    
    
    43
    %
   53




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Year ended December 31,2003
    
    
    2004(in thousands of US$)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
   Business services
   Mobile services and applications
  54




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Advertising/marketing
 .
 Others
  Operating expenses
   Selling, general and administrative expenses (SG&A expenses)
   Research and development expenses
  Depreciation and amortization
  55




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##### Table of Contents



Restructuring expenses
  Interest income
     Interest expense
  Other gains and losses
  56




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##### Table of Contents



Income taxes
  Net income/(loss)
 .
  Year ended December 31, 2003 compared to year ended December 31, 2002
 Revenues
  Software
  Business services
  57




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Mobile services and applications
  Advertising/marketing
  Others
  Cost of revenues
  Software
  Business services
  Mobile services and applications
  Advertising/marketing
  58




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##### Table of Contents



Others
  Operating expenses
  Selling, general and administrative expenses (SG&A expenses)
  
    
    the ongoing implementation of cost control measures in our ongoing businesses, in
particular, reductions in our workforce; and
    
    a more rapid increase in revenues as a result of the acquisitions of Newpalm, Praxa
and IMI which, in general, have higher net margins than our existing operations.
During 2003, Newpalm, Praxa and IMI had SG&A expenses of US$3.7 million, US$5.3 million
and US$2.8 million, respectively, although these companies contributed US$16.9 million,
US$22.3 million and US$11.2 million of our revenues, respectively, during 2003.
 Depreciation and amortization
  Impairment of goodwill and intangible assets
  Interest income
  59




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##### Table of Contents




    
    lower overall prevailing interest rates in 2003 as compared to 2002;
    
    implementation of a more conservative investment strategy of buying shorter term
securities with higher credit ratings and lower yields;
    
    lower overall cash levels in 2003 due to our acquisition activities; and
    
    a decrease in our holding of long-term range accrual notes.
    Interest expense
  Other gains and losses
  Net income/(loss)
   60




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##### Table of Contents



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
   Software
  61




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Business services
  62




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##### Table of Contents



Mobile services and applications
   63




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##### Table of Contents



Advertising/marketing
   64




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##### Table of Contents



Goodwill and intangible assets
    Trademarks and service marks
    
    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
  65




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##### Table of Contents



Goodwill and Other Intangible Assets
   Business combinations
  Accounting in a Business
Combination for Deferred Revenue of an Acquiree.
 66




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##### Table of Contents



Capitalization of software costs
 Accounting for the Costs of Software to be
Sold, Leased, or Otherwise Marketed
  Investments
    67




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##### Table of Contents



Accounts receivable and allowance for doubtful accounts
  Deferred tax valuation allowance
  Stock-based compensation
 Accounting for Stock Issued to
Employees Accounting for Stock-Based
Compensation Accounting for Stock Appreciation Rights and Other Variable Stock Option
Award Plans Share-Based Payment
 68




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Contingencies
 Accounting for
Contingencies
  Impact of Certain Recently Issued Accounting Standards
 The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for
Stock Issued to Employees Amendment to
Rule 4- 01(a) of Regulation S-X Regarding the Compliance Date for Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 69




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B.
    
    Liquidity and Capital Resources
  Year ended December 31, in thousands of US dollars2002
    
    
    2003
    
    
    2004Net cash provided by (used in) operating activities
    
    $
    15,926
    
    
    $
    13,195
    
    
    $
    10,790Net cash provided by (used in) investing activities
    
    
    (8,830
    )
    
    
    118,119
    
    
    
    3,629Net cash provided by (used in) financing activities
    
    
    5,237
    
    
    
    (108,959
    )
    
    
    40,246Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    33Net increase (decrease) in cash and cash equivalents
    
    
    12,333
    
    
    
    22,355
    
    
    
    54,698Cash and cash equivalents at beginning of period
    
    
    20,820
    
    
    
    33,153
    
    
    
    55,508Cash and cash equivalents as at end of period
    
    $
    33,153
    
    
    $
    55,508
    
    
    $
    110,206
  Sources and uses of cash for the year ended December 31, 2004
 Operating activities
  
    
    Net loss We incurred a net loss of US$9.3 million for 2004 compared to net income
of US$15.5 million in 2003, representing a US$24.9 million year-over-year decrease.
This decrease was due to (i) an increase in operating expenses, such as research and
development expenses and restructuring expenses as a result of acquisitions; (ii) a
decrease in other income as a result of impairments and lower interest income; and
(iii) non-cash expenses related to our acquisitions in 2003 and 2004 which did not
impact cash flows, including amortization of acquired intangibles, write-off of
acquired deferred revenues, deferred tax expense and stock compensation expense.
    
    Accounts receivable Our accounts receivable balances increased due to the
acquisitions of Ross and Pivotal.
  
    
    Deferred revenues Our deferred revenues increased from higher software license and
service billings after the acquisitions of Ross and Pivotal.
    
    Accounts payable, tax payable, and other liabilities Certain of our payables
balances increased after the acquisitions of Ross and Pivotal.
 70




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Investing activities
  Financing activities
  Future cash requirements and sources of liquidity
 Future cash requirements
   Payments due by period, in thousands of US dollarsTotal
    
    
    Less than 1
    
    
    1 -3 years
    
    
    3-5 years
    
    
    More than 5year
    
    
    
    
    
    
    
    
    
    
    yearOperating lease obligations (1)
    
    $
    55,420
    
    
    $
    14,124
    
    
    $
    17,245
    
    
    $
    10,319
    
    
    $
    13,732Short-term debt obligations
    
    
    52,215
    
    
    
    52,215
    
    
    
    
    
    
    
    
    
    
    
    Current portion of long-term debt
obligations
    
    
    11,566
    
    
    
    11,566
    
    
    
    
    
    
    
    
    
    
    
    Pension liability
    
    
    2,387
    
    
    
    910
    
    
    
    1,477
    
    
    
    
    
    
    
    Total
    
    $
    121,588
    
    
    $
    78,815
    
    
    $
    18,722
    
    
    $
    10,319
    
    
    $
    13,732
    
    
    Acquisitions We made a cash payment of US$12.4 million during the second quarter
of 2005 in connection with the first of two earnout payments required under our
arrangements to acquire Go2joy. We will have to make additional earnout payments in the
future relating to the acquisitions of Go2joy, OpusOne and other entities. Such
earnout payments will be based on the performance of the acquired entities for
specified periods of time.
    
    Debt repayments During the first quarter of 2005, we used cash of US$35.1 million
to repay loans. The terms for the remaining US$28.7 million were renegotiated.
Repayment will be due in 2006.
    
    Investments in our business In 2005, 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.
 
 71




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##### Table of Contents



Future sources of liquidity
   Expected maturities, in thousands of US dollarsLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsUnsecured fixed rate debt securities
    
    $
    94,239
    
    
    $
    16,955
    
    
    $
    39,973
    
    
    $
    37,311
    
    
    $
    Unsecured variable rate debt securities
    
    
    9,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,900Secured fixed rate debt securities
    
    
    75,800
    
    
    
    3,025
    
    
    
    35,995
    
    
    
    36,780
    
    
    
    Total
    
    $
    179,939
    
    
    $
    19,980
    
    
    $
    75,968
    
    
    $
    74,091
    
    
    $
    9,900
  Lines of credit
   72




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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 recently 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.
 73




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##### Table of Contents



Fair value of financial instruments
      C.
    
    Research and Development, Patents and Licenses, etc.
  D.
    
    Trend Information
    74




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##### Table of Contents



E.
    
    Off-balance Sheet Arrangements
  F.
    
    Tabular Disclosure of Contractual Obligations
  G.
    
    Safe Harbor
  75




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##### Table of Contents



ITEM 15. CONTROLS AND PROCEDURES
      
 ITEM 18. FINANCIAL STATEMENTS
  76




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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)*****4.(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.+++
 77




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##### Table of Contents



No.
    
    Description4.(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 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.+++++++
 78




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##### 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.(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. yyyy6.
    
    Details of how EPS information is calculated can be found in Note 20 to our Consolidated
Financial Statements.8.
    
    List of principal subsidiaries of the Company. yyyy12.1
    
    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^
 
 *
    
    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. 79




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##### Table of Contents



****
    
    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.^
    
    Filed herewith. 80




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SIGNATURES
  CDC CORPORATION/s/ Steven ChanSteven ChanActing Chief Executive Officer




---



##### Table of Contents



PagesReport of Independent Registered Public Accounting Firm
    
    F-2  F-3Consolidated Balance Sheets as of December 31, 2003 and 2004
    
    F-4Consolidated Statements of Operations for the years ended
December 31, 2002, 2003 and 2004
    
    F-5Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2003 and 2004
    
    F-6Consolidated Statements of Shareholders Equity for the years ended
December 31, 2002, 2003 and 2004
    
    F-7  F-9Notes to Consolidated Financial Statements
    
    F-10  F-61
 F-1




---



##### Table of Contents



/s/ Ernst & YoungHong KongMarch 9, 2005, except for notes 2(o), 2(y), 4(g), 20 and 30(ii), as to which the date is October 4,
2005
 F-2




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##### Table of Contents



PricewaterhouseCoopers LLPPhiladelphia, PAFebruary 9, 2004
 F-3




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##### Table of Contents



December 31,
    
    
    December 31,2003
    
    
    2004(Restated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    55,508
    
    
    $
    110,206Restricted cash
    
    
    238
    
    
    
    3,886Accounts receivable (net of allowance of $2,816 for 2003 and $4,784 for 2004)
    
    
    16,562
    
    
    
    43,521Deposits, prepayments and other receivables
    
    
    10,461
    
    
    
    10,012Available-for-sale debt securities
    
    
    262,745
    
    
    
    94,259Available-for-sale equity securities
    
    
    
    
    
    
    527Restricted available-for-sale debt securities
    
    
    19,213
    
    
    
    75,780Deferred tax assets
    
    
    240
    
    
    
    502Properties held for sale
    
    
    
    
    
    
    2,992Total current assets
    
    
    364,967
    
    
    
    341,685Loans receivable
    
    
    27,000
    
    
    
    25,000Interest receivable
    
    
    
    
    
    
    878Property and equipment, net
    
    
    7,210
    
    
    
    7,617Goodwill
    
    
    81,427
    
    
    
    189,552Intangible assets
    
    
    28,880
    
    
    
    81,121Investments in equity investees
    
    
    434
    
    
    
    4,016Investments under cost method
    
    
    609
    
    
    
    220Available-for-sale debt securities
    
    
    19,400
    
    
    
    9,900Restricted available-for-sale debt securities
    
    
    11,896
    
    
    
    Available-for-sale equity securities
    
    
    590
    
    
    
    Deferred tax assets
    
    
    305
    
    
    
    Other assets
    
    
    3,336
    
    
    
    4,342Total assets
    
    $
    546,054
    
    
    $
    664,331LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,800
    
    
    $
    13,697Other payables
    
    
    4,602
    
    
    
    4,219Purchase consideration payable
    
    
    39,835
    
    
    
    14,728Accrued liabilities
    
    
    16,098
    
    
    
    36,875Accrued pension liability, current portion
    
    
    798
    
    
    
    910Short-term bank loans
    
    
    15,199
    
    
    
    52,215Long-term bank loans, current portion
    
    
    171
    
    
    
    11,566Deferred revenue
    
    
    9,357
    
    
    
    34,261Income tax payable
    
    
    656
    
    
    
    2,532Total current liabilities
    
    
    94,516
    
    
    
    171,003Deferred tax liabilities
    
    
    1,618
    
    
    
    4,696Long-term bank loans, net of current portion
    
    
    11,456
    
    
    
    Accrued pension liability, net of current portion
    
    
    2,272
    
    
    
    1,477Other liabilities
    
    
    
    
    
    
    322Minority interests
    
    
    45,746
    
    
    
    45,883Contingencies and commitments (note 29)Shareholders equity:Class A common shares, $0.00025 par value  Authorized: 800,000,000 shares;
Issued and outstanding: 101,588,009 shares as of December 31, 2003 and
110,893,180 shares as of December 31, 2004
    
    
    25
    
    
    
    28Additional paid-in capital
    
    
    614,721
    
    
    
    673,476Treasury stock - 1,766,552 shares as of December 31, 2003 and 1,766,552 shares
as of December 31, 2004
    
    
    ( 4,067
    )
    
    
    (4,067
    )Accumulated deficit
    
    
    (218,893
    )
    
    
    (228,226
    )Accumulated other comprehensive loss
    
    
    (1,340
    )
    
    
    (261
    )Total shareholders equity
    
    
    390,446
    
    
    
    440,950Total liabilities and shareholders equity
    
    $
    546,054
    
    
    $
    664,331
  F-4




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004(Restated)Revenues:SoftwareLicenses
    
    $
    893
    
    
    $
    1,157
    
    
    $
    28,748Maintenance and consulting services
    
    
    2,633
    
    
    
    11,734
    
    
    
    79,131Business servicesIT products






6,083



2,083Consulting services
    
    
    10,148
    
    
    
    31,159
    
    
    
    37,308Mobile services and applications
    
    
    
    
    
    
    16,876
    
    
    
    23,694Advertising/marketing
    
    
    7,527
    
    
    
    8,841
    
    
    
    11,709Others
    
    
    1,599
    
    
    
    2,001
    
    
    
    10Total revenues
    
    
    22,800
    
    
    
    77,851
    
    
    
    182,683Cost of revenues:SoftwareLicenses


(445)


 

(362)


 

(3,486)Maintenance and consulting services
    
    
    (883
    )
    
    
    (8,995
    )
    
    
    (39,754
    )Business servicesIT products







(5,318)


 

(1,879)Consulting services
    
    
    (4,544
    )
    
    
    (16,754
    )
    
    
    (24,871
    )Mobile services and applications
    
    
    
    
    
    
    (2,247
    )
    
    
    (4,597
    )Advertising/marketing
    
    
    (4,477
    )
    
    
    (4,312
    )
    
    
    (4,645
    )Others
    
    
    (676
    )
    
    
    (889
    )
    
    
    Total cost of revenues
    
    
    (11,025
    )
    
    
    (38,877
    )
    
    
    (79,232
    )Gross profit
    
    
    11,775
    
    
    
    38,974
    
    
    
    103,451Operating expenses:Selling, general and administrative expenses
    
    
    (22,476
    )
    
    
    (31,785
    )
    
    
    (80,419
    )Research and development expenses
    
    
    
    
    
    
    
    
    
    
    (13,825
    )Depreciation and amortization expenses
    
    
    (9,515
    )
    
    
    ( 6,954
    )
    
    
    (12,276
    )Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    (3,387
    )Total operating expenses
    
    
    (31,991
    )
    
    
    (38,739
    )
    
    
    (109,907
    )Operating income/(loss)
    
    
    (20,216
    )
    
    
    235
    
    
    
    (6,456
    )Other income/(expenses):Interest income
    
    
    23,631
    
    
    
    13,412
    
    
    
    9,653Interest expense
    
    
    (2,461
    )
    
    
    (1,070
    )
    
    
    (1,895
    )Gain/(loss) on disposal of available-for-sale securities
    
    
    (163
    )
    
    
    4,599
    
    
    
    167Gain/(loss) on disposal of subsidiaries and cost investments
    
    
    (66
    )
    
    
    (1,263
    )
    
    
    549Other non-operating gains
    
    
    508
    
    
    
    934
    
    
    
    Other non-operating losses
    
    
    (288
    )
    
    
    (148
    )
    
    
    Impairment of cost investments and available-for-sale securities
    
    
    (5,351
    )
    
    
    
    
    
    
    (1,362
    )Share of income/(losses) in equity investees
    
    
    682
    
    
    
    (124
    )
    
    
    (308
    )Total other income
    
    
    16,492
    
    
    
    16,340
    
    
    
    6,804Income/(loss) before income taxes
    
    
    (3,724
    )
    
    
    16,575
    
    
    
    348Income tax benefits/(income taxes)
    
    
    162
    
    
    
    598
    
    
    
    (7,541
    )Income/(loss) before minority interests
    
    
    (3,562
    )
    
    
    17,173
    
    
    
    (7,193
    )Minority interests in losses/(income) of consolidated subsidiaries
    
    
    248
    
    
    
    (2,257
    )
    
    
    (1,000
    )Income/(loss) from continuing operations
    
    
    (3,314
    )
    
    
    14,916
    
    
    
    (8,193
    )Discontinued operations:Loss from operations of discontinued subsidiaries, net of related
tax expense/(benefit) of $322 for 2002, $(90) for 2003 and nil for 2004
    
    
    (15,462
    )
    
    
    (1,519
    )
    
    
    (190
    )Gain/(loss) on disposal/dissolution of discontinued subsidiaries, net
    
    
    545
    
    
    
    2,127
    
    
    
    (950
    )Net income/(loss)
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )Basic and diluted earnings/(loss) per share from continuing operations
    
    $
    ( 0.03
    )
    
    $
    0.14
    
    
    $
    (0.08
    )Basic and diluted earnings/(loss) per share
    
    $
    ( 0.18
    )
    
    $
    0.15
    
    
    $
    (0.09
    )
  F-5




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004(Restated)OPERATING ACTIVITIES:Net income/(loss)
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:Minority interests in income/(losses) of subsidiaries
    
    
    (1,036
    )
    
    
    2,204
    
    
    
    1,000Loss on disposal/write-off of property and equipment
    
    
    1,732
    
    
    
    127
    
    
    
    1,055Loss/(gain) on disposal of available-for-sale securities
    
    
    158
    
    
    
    (4,599
    )
    
    
    (167
    )Loss/(gain) on disposal of subsidiaries and cost investments
    
    
    (428
    )
    
    
    (2,596
    )
    
    
    401Amortization of intangible assets
    
    
    1,183
    
    
    
    3,571
    
    
    
    10,960Expenses settled by issuance of shares
    
    
    
    
    
    
    
    
    
    
    1,612Depreciation
    
    
    11,340
    
    
    
    5,293
    
    
    
    3,721Stock compensation expenses
    
    
    309
    
    
    
    328
    
    
    
    2,051Share of losses/(income) in equity investees
    
    
    (682
    )
    
    
    115
    
    
    
    308Impairment of cost investments and available-for-sale securities
    
    
    5,351
    
    
    
    
    
    
    
    1,362Gain in value of derivative instruments
    
    
    (571
    )
    
    
    
    
    
    
    Deferred tax expense
    
    
    
    
    
    
    
    
    
    
    5,897Changes in operating assets and liabilities:Accounts receivable
    
    
    7,191
    
    
    
    9,486
    
    
    
    (12,585
    )Deposits, prepayments and other receivables
    
    
    10,909
    
    
    
    3,144
    
    
    
    3,545Other assets
    
    
    (252
    )
    
    
    1,794
    
    
    
    (11
    )Accounts payable
    
    
    (1,107
    )
    
    
    (7,413
    )
    
    
    88Other payables
    
    
    4,824
    
    
    
    (8,505
    )
    
    
    (444
    )Accrued liabilities
    
    
    (3,968
    )
    
    
    (4,006
    )
    
    
    (6,372
    )Deferred revenue
    
    
    (66
    )
    
    
    (557
    )
    
    
    6,419Amounts due to related parties
    
    
    (730
    )
    
    
    (715
    )
    
    
    Income tax payable
    
    
    
    
    
    
    
    
    
    
    1,644Accrued pension liability
    
    
    
    
    
    
    
    
    
    
    (683
    )Other liabilities
    
    
    
    
    
    
    
    
    
    
    322Net cash provided by operating activities
    
    $
    15,926
    
    
    $
    13,195
    
    
    $
    10,790INVESTING ACTIVITIES:Purchases of subsidiaries, net of cash acquired
    
    $
    (4,587
    )
    
    $
    (13,446
    )
    
    $
    (112,724
    )Purchases of property and equipment
    
    
    (5,471
    )
    
    
    (1,551
    )
    
    
    (3,661
    )Acquisition of equity investees
    
    
    
    
    
    
    
    
    
    
    (4,000
    )Purchases of available-for-sale securities
    
    
    (660,599
    )
    
    
    (424,667
    )
    
    
    (80,314
    )Purchases of intangible assets
    
    
    (8,800
    )
    
    
    (2,355
    )
    
    
    (4,705
    )Issuance of loans
    
    
    
    
    
    
    (27,000
    )
    
    
    Purchases of promissory notes and warrants
    
    
    (7,000
    )
    
    
    
    
    
    
    Collection of promissory notes and warrants
    
    
    
    
    
    
    6,878
    
    
    
    Proceeds from disposal of available-for-sale securities
    
    
    675,728
    
    
    
    580,607
    
    
    
    212,053Proceeds from disposal of property and equipment
    
    
    1,386
    
    
    
    381
    
    
    
    663Proceeds/(cash disbursements) from disposal of subsidiaries
    
    
    (652
    )
    
    
    (2,349
    )
    
    
    (529
    )Proceeds from disposal of cost investments
    
    
    
    
    
    
    1,750
    
    
    
    494Decrease/(increase) in restricted cash
    
    
    1,165
    
    
    
    (129
    )
    
    
    (3,648
    )Net cash provided by/(used in) investing activities
    
    $
    (8,830
    )
    
    $
    118,119
    
    
    $
    3,629FINANCING ACTIVITIES:Issuance of share capital
    
    $
    724
    
    
    $
    8,585
    
    
    $
    4,061Proceeds from bank loans
    
    
    125,278
    
    
    
    15,015
    
    
    
    87,537Repayment of bank loans
    
    
    (116,349
    )
    
    
    (121,388
    )
    
    
    (51,352
    )Purchases of treasury stock
    
    
    (4,416
    )
    
    
    (11,171
    )
    
    
    Net cash provided by/(used in) financing activities
    
    $
    5,237
    
    
    $
    (108,959
    )
    
    $
    40,246Effect of exchange differences on cash
    
    
    
    
    
    
    
    
    
    
    33Net increase in cash and cash equivalents
    
    $
    12,333
    
    
    $
    22,355
    
    
    $
    54,698Cash and cash equivalents at beginning of year
    
    
    20,820
    
    
    
    33,153
    
    
    
    55,508Cash and cash equivalents at end of year
    
    $
    33,153
    
    
    $
    55,508
    
    
    $
    110,206Interest paid
    
    $
    2,632
    
    
    $
    519
    
    
    $
    1,348Non-cash activities:Class A common shares issued for settlement of other payables
    
    
    
    
    
    
    
    
    
    $
    3,036Reissuance of treasury stock for the acquisition of subsidiaries
    
    
    
    
    
    $
    2,810
    
    
    
    Reissuance of treasury stock for settlement of employee
stock ownership plan obligations
    
    $
    24
    
    
    
    
    
    
    
    Class A common shares and stock options issued as consideration
for the acquisition of subsidiaries
    
    $
    
    
    
    $
    39,835
    
    
    $
    49,610
  F-6




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##### Table of Contents



Accumulated
    
    
    
    
    
    
    TotalAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    shareholdersNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    equity/of shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income/(loss)
    
    
    income/(loss)
    
    
    deficit
    
    
    (deficit)(000)Balance at January 1, 2002
    
    
    102,692
    

    
    $
    26
    

    
    $
    613,460
    

 
    $
    
    

    
    
    
    
    
    $
    (7,439
    )
    
    $
    (216,186
    )
    
    $
    389,861Exercise of employee stock options
    
    
    296
    
    
    
    
    
    
    
    724
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    724Redemption of shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,416
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,416
    )Retirement of shares
    
    
    (1,692
    )
    
    
    (1
    )
    
    
    (4,153
    )
    
    
    4,154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reissuance of treasury stock for
non-cash transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Stock compensation expenses
on options granted
    
    
    
    
    
    
    
    
    
    
    309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309Unrealized gains, net of unrealized
losses on available-for-
sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,849
    
    
    
    3,849
    
    
    
    
    
    
    
    3,849Minority interests share of
unrealized gains, net of
unrealized losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    (484
    )
    
    
    
    
    
    
    (484
    )Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    661
    
    
    
    
    
    
    
    661Less: reclassification adjustment
for losses, net of gains included
in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,403
    
    
    
    5,403
    
    
    
    
    
    
    
    5,403Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,231
    )
    
    
    
    
    
    
    (18,231
    )
    
    
    (18,231
    )Comprehensive income/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    ( 8,802
    )Balance at December 31, 2002
    
    
    101,296
    
    
    $
    25
    
    
    $
    610,340
    
    
    $
    ( 238
    )
    
    
    
    
    
    $
    1,990
    
    
    $
    (234,417
    )
    
    $
    377,700
  F-7




---



##### Table of Contents



Accumulated
    
    
    
    
    
    
    TotalAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    shareholdersNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    equity/of shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income/(loss)
    
    
    income/(loss)
    
    
    deficit
    
    
    (deficit)(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/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,194Balance at December 31, 2003
    
    
    101,588
    
    
    $
    25
    
    
    $
    614,721
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (1,340
    )
    
    $
    (218,893
    )
    
    $
    390,446
  F-8




---



##### Table of Contents



Accumulated
    
    
    
    
    
    
    TotalAdditional
    
    
    
    
    
    
    
    
    
    
    other
    
    
    
    
    
    
    shareholdersNumber
    
    
    Common
    
    
    paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Accumulated
    
    
    equity/of shares
    
    
    shares
    
    
    capital
    
    
    stock
    
    
    income/(loss)
    
    
    income/(loss)
    
    
    deficit
    
    
    (deficit)(000)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)
    
    
    (Restated)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 (Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,333
    )
    
    
    
    
    
    
    (9,333
    )
    
    
    (9,333
    )Comprehensive income/(loss)
(Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (8,254
    )
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2004
(Restated)
    
    
    110,893
    
    
    $
    28
    
    
    $
    673,476
    
    
    $
    (4,067
    )
    
    
    
    
    
    $
    (261
    )
    
    $
    (228,226
    )
    
    $
    440,950
  F-9




---



##### Table of Contents



Primary lines of business
 
    
    Software. The Company offers a broad range of software solutions for mid-sized
enterprises internationally. The software suite includes ERP (Enterprise Resource
Planning), CRM (Customer Relationship Management), SCM (Supply Chain Management), OMS
(Order Management Systems), HRM (Human Resources and Payroll Management) and BI
(Business Intelligence) products.
    
    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 SMS (Short Message Service), IVR
(Interactive Voice Response), MMS (Multimedia Message Service) and WAP (Wireless
Application Protocol).
 Additional operations
 
    
    Advertising/Marketing. The Companys advertising/marketing business encompasses a
range of businesses, including a portal network, a marketing database and marketing
support service conducted principally in Australia and New Zealand, and a Singapore
based travel trade publisher and trade exhibition organizer.
    
    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 (the U.S.). The Companys business
services companies provide program management, outsourcing services, application
development and ongoing support services using a wide range of technologies.
    (a)
    
    Principles of consolidation
  F-10




---



##### Table of Contents



(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 and the estimated useful lifeFurniture and fixtures
    
    1 to 10 yearsOffice equipment
    
    3 to 5 yearsComputer equipment
    
    1 to 3 yearsMotor vehicles
    
    3 years
 (e)
    
    Software development costs
   F-11




---



##### Table of Contents



(e)
    
    Software development costs (continued)
  (f)
    
    Goodwill and intangible assets
    Trademarks and service marks
    
    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
 Goodwill and Other Intangible Assets
  F-12




---



##### Table of Contents



(g)
    
    Investments
    Unrealized
    

Fairloss
    
    valueDebt securities
    
    $
    1,158
    
    
    $
    123,606Equity securities
    
    $
    35
    
    
    $
    131
    F-13




---



##### Table of Contents



(h)
    
    Impairment of long-lived assets
  (i)
    
    Foreign currency translation
   (j)
    
    Advertising expenses
  (k)
    
    Shipping and handling
  F-14




---



##### Table of Contents



(l)
    
    Revenue recognition
 Revenue Recognition Software Revenue Recognition 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
   Software
    F-15




---



##### Table of Contents



(l)
    
    Revenue recognition (continued)
 Software (continued)
     Business services
    Mobile services and applications
   F-16




---



##### Table of Contents



(l)
    
    Revenue recognition (continued)
 Advertising/marketing
     (m)
    
    Deferred revenue
  (n)
    
    Income taxes
 Accounting for Income Taxes
 F-17




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##### Table of Contents



(o)
    
    Stock compensation expenses
 Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock Appreciation Rights and Other Variable Stock
Option Award Plans,
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004(Restated)Net income/(loss):As reported
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )Add: Stock compensation expense included
in net income/(loss)
    
    
    309
    
    
    
    328
    
    
    
    2,051Deduct: Stock compensation expense
determined under fair value method
    
    
    (15,924
    )
    
    
    (4,886
    )
    
    
    (14,706
    )Pro forma
    
    $
    (33,846
    )
    
    $
    10,966
    
    
    $
    (21,988
    )Basic earnings/(loss) per share:As reported
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    (0.09
    )Pro forma
    
    $
    (0.33
    )
    
    $
    0.11
    
    
    $
    (0.21
    )Diluted earnings/(loss) per share:As reported
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    (0.09
    )Pro forma
    
    $
    (0.33
    )
    
    $
    0.11
    
    
    $
    (0.21
    )
 F-18




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##### Table of Contents



(o)
    
    Stock compensation expenses (continued)
   Year ended
    
    Year ended
    
    Year endedDecember 31,

    
    December 31,

    
    December 31,2002
        
    2003
     
    2004Range of U.S. risk-free interest rates
    
    2.65% to 6.69%
    
    2.08% to 6.69%
    
    2.08% to 6.77%Weighted expected life of options
    
    5 years
    
    5 years
    
    5 yearsRange of volatility
    
    38% to 167%
    
    38% to 167%
    
    75% to 165%Dividend yield
    
    nil
    
    nil
    
    nil
 (p)
    
    Earnings/(loss) per share
 Earnings
Per Share
 (q)
    
    Repurchase agreements
  (r)
    
    Accounts receivable and allowance for doubtful accounts
  (s)
    
    Loans receivable
  F-19




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##### Table of Contents



(t)
    
    Comprehensive income/(loss)
  (u)
    
    Gain on issuance of shares by subsidiaries
  (v)
    
    Retirement costs
  (w)
    
    Derivative instruments
 Accounting for Derivative Instruments and Hedging Activities Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities
 F-20




---



##### Table of Contents



(x)
    
    Impact of recently issued accounting standards
 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments
 Share-Based
Payment, Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions,
 F-21




---



##### Table of Contents



(y)
    
    Restatement
   Year ended December 31, 2004As
    
    
    
    
    
    Asreported
    
    Restatement
    
    restatedMinority interests in income of consolidated subsidiaries
    
    $
    (2,227
    )
    
    $
    1,227
    
    
    $
    (1,000
    )Loss from continuing operations
    
    $
    (9,420
    )
    
    $
    1,227
    
    
    $
    (8,193
    )Net loss
    
    $
    (10,560
    )
    
    $
    1,227
    
    
    $
    (9,333
    )Basic and diluted loss per share from continuing operations
    
    $
    (0.09
    )
    
    $
    0.01
    
    
    $
    (0.08
    )Basic and diluted loss per share
    
    $
    (0.10
    )
    
    $
    0.01
    
    
    $
    (0.09
    )
 December 31, 2004As
    
    
    
    
    
    
    Asreported
    
    
    Restatement
    
    
    restatedMinority interests
    
    $
    47,110
    
    
    $
    (1,227
    )
    
    $
    45,883Accumulated deficit
    
    $
    (229,453
    )
    
    $
    1,227
    
    
    $
    (228,226
    )Total shareholders equity
    
    $
    439,723
    
    
    $
    1,227
    
    
    $
    440,950
    F-22




---



##### Table of Contents



(a)
    
    Praxa Limited (Praxa)
 Business Combinations
   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-23




---



##### Table of Contents



-
    
    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 is 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-24




---



##### Table of Contents



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-25




---



##### Table of Contents



Business Combinations
   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-26




---



##### Table of Contents



-
    
    initial cash consideration of $9,600; and-
    
    earnout cash consideration which is equal to the aggregate of (i)
an amount equal to the audited net income of Group Teams consolidated
operations for the year ended December 31, 2004 multiplied by 9.9 at 50% and
(ii) an amount equal to audited net income of Group Teams consolidated
operations for the year ending December 31, 2005 multiplied by 9.9 at 15%. The
total purchase consideration is not to exceed $60,000.
   Current assets
    
    $
    3,026Property and equipment, net
    
    
    453Goodwill
    
    
    15,693Intangible assets *Partnership agreements and business licenses
    
    
    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.**
    
    Based on the initial cash consideration of $9,600 payable at the date of acquisition and
the first earnout cash consideration of $12,559 accrued at December 31, 2004, which was
recorded as goodwill. F-27




---



##### Table of Contents



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
 
 *
    
    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.  F-28




---



##### Table of Contents



Year endedYear ended
    
    
    December 31,December 31,
    
    
    20042003
    
    
    (Restated)(unaudited)
    
    
    (unaudited)Revenue
    
    $
    183,868
    
    
    $
    224,089Net loss
    
    $
    (2,995
    )
    
    $
    (34,373
    )Basic and diluted loss per share
    
    $
    (0.03
    )
    
    $
    (0.32
    )
     December 31,
    
    
    December 31,2003
    
    
    2004Accounts receivable:Amounts billed
    
    $
    18,058
    
    
    $
    41,744Unbilled
    
    
    1,320
    
    
    
    6,56119,378
    
    
    
    48,305Allowance for doubtful accounts
    
    
    (  2,816
    )
    
    
    (  4,784
    )Net
    
    $
    16,562
    
    
    $
    43,521
 F-29




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Allowance for doubtful accounts:Balance at beginning of year
    
    $
    6,538
    
    
    $
    4,139
    
    
    $
    2,816Additions
    
    
    4,296
    
    
    
    2,297
    
    
    
    5,607Write-offs, net of recoveries
    
    
    ( 6,695
    )
    
    
    (  3,620
    )
    
    
    ( 3,639
    )Balance at end of year
    
    $
    4,139
    
    
    $
    2,816
    
    
    $
    4,784
    December 31,
    
    
    December 31,2003
    
    
    2004Debt obligations issued by corporations and U.S.
federally supervised/chartered organizations:Amortized cost
    
    $
    313,219
    
    
    $
    180,783Net unrealized gain/(loss) *
    
    
    35
    
    
    
    (844
    )Estimated fair value
    
    
    313,254
    
    
    
    179,939Restricted debt securities pledged for banking facilities
    
    
    (31,109
    )
    
    
    (75,780
    )Non-restricted
    
    $
    282,145
    
    
    $
    104,159
 
 *
    
    The net unrealized gain/(loss) consisted of the gross unrealized gain of $34 (2003:
$1,471) and the gross unrealized loss of $878 (2003: $1,436).  F-30




---



##### Table of Contents



December 31,
    
    
    December 31,2003
    
    
    2004Current
    
    $
    262,745
    
    
    $
    94,259Non-current
    
    
    19,400
    
    
    
    9,900$
    282,145
    
    
    $
    104,159
   December 31,
    
    
    December 31,2003
    
    
    2004Maturity dateOne year or less
    
    $
    30,322
    
    
    $
    19,980Over one year to five years
    
    
    233,342
    
    
    
    150,059Over five years to ten years
    
    
    49,590
    
    
    
    9,900$
    313,254
    
    
    $
    179,939
     F-31




---



##### Table of Contents



December 31,
    
    
    December 31,2003
    
    
    2004Freehold land
    
    $
    1,348
    
    
    $
    Buildings
    
    
    1,348
    
    
    
    Leasehold improvements
    
    
    2,156
    
    
    
    2,449Furniture and fixtures
    
    
    301
    
    
    
    1,116Office equipment
    
    
    1,740
    
    
    
    1,950Computer equipment
    
    
    26,754
    
    
    
    29,640Motor vehicles
    
    
    511
    
    
    
    48034,158
    
    
    
    35,635Less: Accumulated depreciation
    
    
    (26,948
    )
    
    
    (28,018
    )$
    7,210
    
    
    $
    7,617
    MobileBusiness
    
    
    services and
    
    
    Advertising/Software
    
    
    services
    
    
    applications
    
    
    marketing
    
    
    TotalBalance as of January 1, 2003
    
    $
    7,561
    
    
    $
    
    
    
    $
    
    
    
    $
    4,455
    
    
    $
    12,016Goodwill acquired during the year
    
    
    21,063
    
    
    
    
    
    
    
    47,704
    
    
    
    879
    
    
    
    69,646Less: Goodwill written off related to
sale/dissolution of business units
    
    
    (235
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (235
    )Balance as of December 31, 2003
    
    
    28,389
    
    
    
    
    
    
    
    47,704
    
    
    
    5,334
    
    
    
    81,427Reallocation of goodwill
    
    
    (16,105
    )
    
    
    16,105
    
    
    
    
    
    
    
    
    
    
    
    Balance 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
    
    $
    104,392
    
    
    $
    16,105
    
    
    $
    63,397
    
    
    $
    5,658
    
    
    $
    189,552
  F-32




---



##### Table of Contents



2003
    
    
    2004Gross
    
    
    
    
    
    
    
    
    
    
    Grosscarrying
    
    
    Accumulated
    
    
    
    
    
    
    carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    Net
    
    
    amount
    
    
    amortization
    
    
    NetURLs
    
    $
    16,956
    
    
    $
    (1,688
    )
    
    $
    15,268
    
    
    $
    16,956
    
    
    $
    (2,543
    )
    
    $
    14,413Software applications
and programs
    
    
    6,585
    
    
    
    (813
    )
    
    
    5,772
    
    
    
    38,426
    
    
    
    (5,624
    )
    
    
    32,802Customer base and
contracts
    
    
    9,303
    
    
    
    (2,098
    )
    
    
    7,205
    
    
    
    27,727
    
    
    
    (6,163
    )
    
    
    21,564Business licenses and
partnership
agreements
    
    
    654
    
    
    
    (78
    )
    
    
    576
    
    
    
    5,708
    
    
    
    (1,307
    )
    
    
    4,401$
    33,498
    
    
    $
    (4,677
    )
    
    $
    28,821
    
    
    $
    88,817
    
    
    $
    (15,637
    )
    
    $
    73,180
   Year ended December 31:2005
    
    $
    12,7122006
    
    $
    11,1512007
    
    $
    10,8772008
    
    $
    9,5582009
    
    $
    7,099
   December 31,
    
    
    December 31,2003
    
    
    2004Cost
    
    $
    813
    
    
    $
    411Net unrealized gain/(loss) *
    
    
    (223
    )
    
    
    116Market value
    
    $
    590
    
    
    $
    527
 
 *
    
    For the year ended December 31, 2004, the net unrealized gain/(loss) consisted of gross
unrealized gain of $151 (2003: $103) and gross unrealized loss of $35 (2003: $326).  F-33




---



##### Table of Contents



F-34




---



##### Table of Contents



December 31,
    
    
    December 31,2003
    
    
    2004LIBOR + 1.75% mortgage loan
    
    $
    777
    
    
    $
    7187.72% mortgage loan
    
    
    777
    
    
    
    775LIBOR + 0.35% total return swap transaction loan
    
    
    10,073
    
    
    
    10,07311,627
    
    
    
    11,566Less: Current portion
    
    
    (171
    )
    
    
    (11,566
    )$
    11,456
    
    
    $
    
     Unrealizedgains/(losses)
    
    
    Foreignon available-
    
    
    currencyfor-sale
    
    
    translationsecurities
    
    
    adjustments
    
    
    TotalBalance at December 31, 2002
    
    $
    3,365
    
    
    $
    (1,375
    )
    
    $
    1,990Unrealized gains, net of unrealized losses of
available-for-sale securities
    
    
    644
    
    
    
    
    
    
    
    644Minority interests share of unrealized losses, net of
unrealized gains on available-for-sale securities
    
    
    184
    
    
    
    
    
    
    
    184Foreign currency translation adjustments
    
    
    
    
    
    
    186
    
    
    
    186Less: reclassification adjustment for gains, net of losses
included in net income
    
    
    (4,344
    )
    
    
    
    
    
    
    (4,344
    )Balance 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 losses, net of gains
included in net loss
    
    
    274
    
    
    
    
    
    
    
    274Balance at December 31, 2004
    
    $
    (417
    )
    
    $
    156
    
    
    $
    (261
    )
 F-35




---



##### Table of Contents



16.
    
    SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Minimum rental expenses under operating leases
    
    $
    4,198
    
    
    $
    3,086
    
    
    $
    9,593Advertising expenses
    
    $
    930
    
    
    $
    580
    
    
    $
    2,249Defined contribution retirement plans expenses
    
    $
    1,423
    
    
    $
    2,922
    
    
    $
    3,459
 17.
    
    RELATED PARTY TRANSACTIONS
  (a)
    
    24/7 Real Media, Inc.
     F-36




---



##### Table of Contents



17.
    
    RELATED PARTY TRANSACTIONS (continued)
 (b)
    
    Golden Tripod Limited
   (c)
    
    Asia Pacific Online Limited (APOL)
   (d)
    
    New World TMT Limited (formerly known as New World Infrastructure Limited)
  F-37




---



##### Table of Contents



17.
    
    RELATED PARTY TRANSACTIONS (continued)
 (d)
    
    New World TMT Limited (formerly known as New World Infrastructure Limited)
(continued)
   (e)
    
    AOL Time Warner Inc. (AOL)
   F-38




---



##### Table of Contents



17.
    
    RELATED PARTY TRANSACTIONS (continued)
 (f)
    
    Harry Edelson lawsuit against the Company
  18.
    
    VARIABLE INTEREST ENTITIES
     F-39




---



##### Table of Contents



18.
    
    VARIABLE INTEREST ENTITIES (continued)
 (a)
    
    Beijing Newpalm Information Technology Co., Ltd.
  (b)
    
    Beijing Wisecom Information Technology Co., Ltd.
  (c)
    
    Beijing China Net Communication Technology Service Ltd.
  (d)
    
    Beijing He He
  19.
    
    INCOME TAXES
  F-40




---



##### Table of Contents



19.
    
    INCOME TAXES (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Current tax expense/(benefit) allocated to:Continuing operations
    
    $
    (162
    )
    
    $
    (26
    )
    
    $
    1,644Discontinued operations
    
    
    322
    
    
    
    (90
    )
    
    
    160
    
    
    
    (116
    )
    
    
    1,644Deferred tax expense/(benefit) allocated to:Tax benefits allocated to goodwill of acquired entities
    
    
    
    
    
    
    
    
    
    
    5,897Others
    
    
    
    
    
    
    (572
    )
    
    
    Continuing operations
    
    
    
    
    
    
    (572
    )
    
    
    5,897Total income tax provision/(benefit)
    
    $
    160
    
    
    $
    (688
    )
    
    $
    7,541International:Current
    
    $
    160
    
    
    $
    (116
    )
    
    $
    1,568Deferred
    
    
    
    
    
    
    (572
    )
    
    
    5,239United States:Current
    
    
    
    
    
    
    
    
    
    
    76Deferred
    
    
    
    
    
    
    
    
    
    
    658Total income tax provision/(benefit)
    
    $
    160
    
    
    $
    (688
    )
    
    $
    7,541
 F-41




---



##### Table of Contents



19.
    
    INCOME TAXES (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004International
    
    $
    (2,781
    )
    
    $
    16,995
    
    
    $
    (464
    )United States
    
    
    (943
    )
    
    
    (420
    )
    
    
    812Income/(loss) before income taxes
    
    $
    (3,724
    )
    
    $
    16,575
    
    
    $
    348
  December 31,
    
    
    December 31,2003
    
    
    2004Deferred tax liabilities:Acquired intangible assets
    
    $
    (770
    )
    
    $
    (17,647
    )Capitalized software
    
    
    
    
    
    
    (1,248
    )Accelerated depreciation allowances
    
    
    (848
    )
    
    
    Others
    
    
    
    
    
    
    (748
    )Total deferred tax liabilities
    
    
    (1,618
    )
    
    
    (19,643
    )Deferred tax assets:Net operating loss carryforwards
    
    
    58,353
    
    
    
    126,340Book and tax base differences on assets
    
    
    
    
    
    
    6,177Research and development
    
    
    
    
    
    
    5,144Deferred revenue
    
    
    
    
    
    
    2,652Accruals and reserves
    
    
    248
    
    
    
    4,634Others
    
    
    752
    
    
    
    506Gross deferred tax assets
    
    
    59,353
    
    
    
    145,453Valuation allowance for deferred tax assets
    
    
    (58,808
    )
    
    
    (130,004
    )Total net deferred tax assets
    
    
    545
    
    
    
    15,449Net deferred tax liabilities
    
    $
    (1,073
    )
    
    $
    (4,194
    )
  F-42




---



##### Table of Contents



19.
    
    INCOME TAXES (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Income tax expense/(benefit) computed
at the respective statutory rates
    
    $
    453
    
    
    $
    (3,482
    )
    
    $
    3,523Changes in tax rates
    
    
    384
    
    
    
    (1,181
    )
    
    
    (79
    )Tax holiday/concession
    
    
    
    
    
    
    (2,806
    )
    
    
    (4,077
    )Non-deductible items
    
    
    108
    
    
    
    3,903
    
    
    
    4,038Non-taxable items
    
    
    (308
    )
    
    
    (1,271
    )
    
    
    (752
    )Change in valuation allowance affecting
provision for income taxes
    
    
    (799
    )
    
    
    4,239
    
    
    
    4,888Total income tax expense/(benefit) from
continuing operations
    
    $
    (162
    )
    
    $
    (598
    )
    
    $
    7,541Total income tax expense/(benefit) from
discontinued operations
    
    $
    322
    
    
    $
    (90
    )
    
    $
    
    F-43




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##### Table of Contents



19.
    
    INCOME TAXES (continued)
    F-44




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##### Table of Contents



20.
    
    BASIC AND DILUTED EARNINGS/(LOSS) PER SHARE
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004(Restated)Numerator for basic and diluted
earnings/(loss) per share:Income/(loss) from continuing operations
    
    $
    (3,314
    )
    
    $
    14,916
    
    
    $
    (8,193
    )Income/(loss) from discontinued operations,
net of gain on disposal/dissolution
    
    
    (14,917
    )
    
    
    608
    
    
    
    (1,140
    )Income/(loss) attributable to common
shareholders
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )Denominator for basic earnings/(loss) per share:Weighted average number of shares after
adjusting for share splits
    
    
    102,269,735
    
    
    
    100,532,594
    
    
    
    105,898,392Denominator for basic earnings/(loss) per share:Weighted average number of shares after
adjusting for share splits
    
    
    102,269,735
    
    
    
    100,532,594
    
    
    
    105,898,392Effect 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
    
    
    102,269,735
    
    
    
    103,199,421
    
    
    
    105,898,392Basic earnings/(loss) per share:Earnings/(loss) from continuing operations
    
    $
    (0.03
    )
    
    $
    0.14
    
    
    $
    (0.08
    )Earnings/(loss) from discontinued operations
    
    
    (0.15
    )
    
    
    0.01
    
    
    
    (0.01
    )Earnings/(loss) attributable to common
shareholders
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    (0.09
    )Diluted earnings/(loss) per share:Earnings/(loss) from continuing operations
    
    $
    (0.03
    )
    
    $
    0.14
    
    
    $
    (0.08
    )Earnings/(loss) from discontinued operations
    
    
    (0.15
    )
    
    
    0.01
    
    
    
    (0.01
    )Earnings/(loss) attributable to common
shareholders
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    (0.09
    )
  F-45




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##### Table of Contents



21.
    
    DISCONTINUED OPERATIONS
     December 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Total assets as of the date of
disposal/dissolution
    
    $
    2,019
    
    
    $
    7,266
    
    
    $
    2,177Total liabilities as of the date of
disposal/dissolution
    
    $
    2,564
    
    
    $
    7,936
    
    
    $
    418
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Revenues
    
    $
    21,211
    
    
    $
    11,581
    
    
    $
    864Pretax loss
    
    $
    (15,140
    )
    
    $
    (1,609
    )
    
    $
    (190
    )Net loss
    
    $
    (15,462
    )
    
    $
    (1,519
    )
    
    $
    (190
    )Net gain/(loss) on disposal/dissolution
    
    $
    545
    
    
    $
    2,127
    
    
    $
    (950
    )
 F-46




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##### Table of Contents



22.
    
    FINANCIAL INSTRUMENTS
       23.
    
    CONCENTRATION OF RISKS
    F-47




---



##### Table of Contents



23.
    
    CONCENTRATION OF RISKS (continued)
           F-48




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##### Table of Contents



23.
    
    CONCENTRATION OF RISKS (continued)
   24.
    
    SHARE CAPITAL
   Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Class A common shares issued for
exercise of stock options
    
    
    296,492
    
    
    
    2,591,646
    
    
    
    1,068,473Range of purchase prices per share
    
    $
    2.03 to $2.5266
    
    
    $
    1.89 to $9.00
    
    
    $
    0.4314 to $7.0Class A common shares repurchased
    
    
    1,764,555
    
    
    
    4,468,560
    
    
    
    Range of repurchase prices per share
    
    $
    1.92 to $3.24
    
    
    $
    2.50
    
    
    
    Repurchased Class A common shares retired
    
    
    1,692,001
    
    
    
    2,300,000
    
    
    
    Range of retirement prices per share
    
    $
    2.334 to $2.826
    
    
    $
    2.50
    
    
    
    
    F-49




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##### Table of Contents



25.
    
    STOCK-BASED COMPENSATION
 (a)
    
    Stock options
    Options outstanding
    
    
    Options exercisableWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    Weightedaverage
    
    
    average
    
    
    
    
    
    
    averageremaining
    
    
    exercise
    
    
    
    
    
    
    exerciseExercise
    
    Numbers
    
    
    contractual
    
    
    price
    
    
    Numbers
    
    
    priceprice range ($)
    
    outstanding
    
    
    life (in years)
    
    
    per share ($)
    
    
    exercisable
    
    
    per share ($)0.43-0.95
    
    
    134,464
    
    
    
    9.65
    
    
    
    0.56
    
    
    
    102,867
    
    
    
    0.491.06-1.99
    
    
    495,835
    
    
    
    8.72
    
    
    
    1.79
    
    
    
    346,934
    
    
    
    1.852.07-2.98
    
    
    1,358,820
    
    
    
    6.95
    
    
    
    2.73
    
    
    
    1,282,592
    
    
    
    2.753.02-3.80
    
    
    822,134
    
    
    
    7.52
    
    
    
    3.41
    
    
    
    435,096
    
    
    
    3.384.04-5.00
    
    
    4,686,486
    
    
    
    7.47
    
    
    
    4.60
    
    
    
    2,362,275
    
    
    
    4.905.01-9.87
    
    
    4,501,703
    
    
    
    8.70
    
    
    
    6.72
    
    
    
    1,638,105
    
    
    
    6.5810.19-19.13
    
    
    313,075
    
    
    
    4.90
    
    
    
    13.77
    
    
    
    254,928
    
    
    
    14.3021.62-29.92
    
    
    174,060
    
    
    
    5.39
    
    
    
    24.48
    
    
    
    174,060
    
    
    
    24.4832.13-48.41
    
    
    22,480
    
    
    
    5.19
    
    
    
    39.03
    
    
    
    22,480
    
    
    
    39.0356.00-67.13
    
    
    22,240
    
    
    
    5.26
    
    
    
    61.09
    
    
    
    22,240
    
    
    
    61.0912,531,297
    
    
    
    
    
    
    
    
    
    
    
    6,641,577
 F-50




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##### Table of Contents



25.
    
    STOCK-BASED COMPENSATION (continued)
 (a)
    
    Stock options (continued)
  2002Weighted-averageAvailable
    
    
    Options
    
    
    exercisefor grant
    
    
    outstanding
    
    
    priceOutstanding at the beginning of the year
    
    
    6,998,268
    
    
    
    14,065,911
    
    
    $
    6.66Granted
    
    
    (1,648,960
    )
    
    
    1,648,960
    
    
    
    2.44Forfeited
    
    
    4,083,536
    
    
    
    (4,083,536
    )
    
    
    7.27Exercised
    
    
    
    
    
    
    (296,492
    )
    
    
    2.42Outstanding at the end of the year
    
    
    9,432,844
    
    
    
    11,334,843
    
    
    $
    5.94Exercisable at the end of the year
    
    
    
    
    
    
    7,686,104Weighted-average grant-date fair value of
options granted during the year
    
    
    
    
    
    $
    2.00
 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
 F-51




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##### Table of Contents



25.
    
    STOCK-BASED COMPENSATION (continued)
 (a)
    
    Stock options (continued)
 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
     (b)
    
    2004 Employee Share Purchase Plan
  F-52




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##### Table of Contents



26.
    
    EMPLOYEE BENEFIT PLANS
  Employers Accounting for Pensions Employers Disclosures
about Pensions and Other Postretirement Benefits (Revised)
  Post-acquisition
    
    
    Year endedperiod ended December 31,
    
    
    December 31,2003
    
    
    2004Service cost
    
    $
    
    
    
    $
    Interest cost
    
    
    61
    
    
    
    133Net periodic benefit cost
    
    $
    61
    
    
    $
    133
  Post-acquisition
    
    
    Year endedperiod ended December 31,
    
    
    December 31,2003
    
    
    2004Change in benefit obligations:Benefit obligations
- at beginning of year/at date of acquisition
    
    $
    3,608
    
    
    $
    3,070Service cost
    
    
    
    
    
    
    Interest cost
    
    
    61
    
    
    
    133Actuarial gains
    
    
    (286
    )
    
    
    (386
    )Settlements
    
    
    (895
    )
    
    
    (641
    )Effect of foreign currency exchange rate changes
    
    
    582
    
    
    
    211Benefit obligations at end of year
    
    $
    3,070
    
    
    $
    2,387
 F-53




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##### Table of Contents



26.
    
    EMPLOYEE BENEFIT PLANS (continued)
  December 31,
    
    
    December 31,2003
    
    
    2004Unfunded status
    
    $
    3,070
    
    
    $
    2,387Comprised of:Long-term liability portion
    
    $
    2,272
    
    
    $
    1,477Short-term liability portion
    
    $
    798
    
    
    $
    910
  December 31,
    
    
    December 31,2003
    
    
    2004Discount rate
    
    
    5.3
    %
    
    
    5.1
    %Rate of increase in salaries
    
    
    3.0
    %
    
    
    2.0
    %Inflation rate
    
    
    2.0
    %
    
    
    0.4
    %
 27.
    
    RESTRUCTURING COSTS
  28.
    
    PROPERTIES HELD FOR SALE
  F-54




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##### Table of Contents



29.
    
    CONTINGENCIES AND COMMITMENTS
 Contingencies
 (a)
    
    Class action lawsuit against the Company
    F-55




---



##### Table of Contents



29.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 Contingencies
 (a)
    
    Class action lawsuit against the Company (continued)
  (b)
    
    Harry Edelson lawsuit against the Company
  (c)
    
    Herkemij & Partners Knowledge B.V.
  F-56




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##### Table of Contents



29.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 Contingencies
 (d)
    
    Others
  Commitments
 (a)
    
    Operating lease commitments
  Year ended December 31,2005
    
    $
    14,1242006
    
    
    10,2912007
    
    
    6,9542008
    
    
    5,3032009
    
    
    5,016Thereafter
    
    
    13,732$
    55,420
  (b)
    
    Capital commitments
  F-57




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##### Table of Contents



30.
    
    SEGMENT INFORMATION
 Description of Products and Services by Segment
   Information about Segment Profit or Loss and Segment Assets
    F-58




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##### Table of Contents



30.
    
    SEGMENT INFORMATION (continued)
 (i)
    
    Segment information by business segment:
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Segment revenues from external customers:Software
    
    $
    3,526
    
    
    $
    12,891
    
    
    $
    107,879Business services
    
    
    10,148
    
    
    
    37,242
    
    
    
    39,391Mobile services and applications
    
    
    
    
    
    
    16,876
    
    
    
    23,694Advertising/marketing
    
    
    7,527
    
    
    
    8,841
    
    
    
    11,709Others
    
    
    1,599
    
    
    
    2,001
    
    
    
    1022,800
    
    
    
    77,851
    
    
    
    182,683Corporate and other unallocated amounts
    
    
    
    
    
    
    
    
    
    
    Total consolidated revenues
    
    $
    22,800
    
    
    $
    77,851
    
    
    $
    182,683
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Segment depreciation and amortization:Software
    
    $
    219
    
    
    $
    482
    
    
    $
    1,947Business services
    
    
    1,015
    
    
    
    993
    
    
    
    966Mobile services and applications
    
    
    
    
    
    
    260
    
    
    
    434Advertising/marketing
    
    
    4,336
    
    
    
    1,979
    
    
    
    295Others
    
    
    3,086
    
    
    
    1,998
    
    
    
    1758,656
    
    
    
    5,712
    
    
    
    3,817Corporate and other unallocated amounts
    
    
    859
    
    
    
    1,242
    
    
    
    8,459Total consolidated depreciation and amortization
    
    $
    9,515
    
    
    $
    6,954
    
    
    $
    12,276
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Segment interest income/(expense):Software
    
    $
    
    
    
    $
    (99
    )
    
    $
    585Business services
    
    
    (1,198
    )
    
    
    (1,194
    )
    
    
    (33
    )Mobile services and applications
    
    
    
    
    
    
    27
    
    
    
    168Advertising/marketing
    
    
    (379
    )
    
    
    (430
    )
    
    
    67Others
    
    
    (105
    )
    
    
    6,295
    
    
    
    3,909(1,682
    )
    
    
    4,599
    
    
    
    4,696Corporate and other unallocated amounts
    
    
    22,852
    
    
    
    7,743
    
    
    
    3,062Total consolidated net interest income
    
    $
    21,170
    
    
    $
    12,342
    
    
    $
    7,758
 F-59




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30.
    
    SEGMENT INFORMATION (continued)
 (i)
    
    Segment information by business segment (continued):
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Segment income tax expense/(benefit):Software
    
    $
    
    
    
    $
    224
    
    
    $
    316Business services
    
    
    (42
    )
    
    
    191
    
    
    
    893Mobile services and applications
    
    
    
    
    
    
    (288
    )
    
    
    (392
    )Advertising/marketing
    
    
    (121
    )
    
    
    43
    
    
    
    175Others
    
    
    1
    
    
    
    (374
    )
    
    
    2(162
    )
    
    
    (204
    )
    
    
    994Corporate and other unallocated amounts
    
    
    
    
    
    
    (394
    )
    
    
    6,547Total consolidated income tax expense/(benefit)
    
    $
    (162
    )
    
    $
    (598
    )
    
    $
    7,541
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004(Restated)Segment net income/(loss):Software
    
    $
    (670
    )
    
    $
    (114
    )
    
    $
    9,730Business services
    
    
    1,443
    
    
    
    3,134
    
    
    
    (260
    )Mobile services and applications
    
    
    
    
    
    
    10,563
    
    
    
    11,568Advertising/marketing
    
    
    (4,914
    )
    
    
    (782
    )
    
    
    16Others
    
    
    (2,150
    )
    
    
    (831
    )
    
    
    (5,620
    )(6,291
    )
    
    
    11,970
    
    
    
    15,434Corporate and other unallocated amounts
    
    
    (11,940
    )
    
    
    3,554
    
    
    
    (24,767
    )Total consolidated net income/(loss)
    
    $
    (18,231
    )
    
    $
    15,524
    
    
    $
    (9,333
    )
 F-60




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##### Table of Contents



30.
    
    SEGMENT INFORMATION (continued)
 (i)
    
    Segment information by business segment (continued):
 December 31,
    
    
    December 31,2003
    
    
    2004Segment assets:Software
    
    $
    15,136
    
    
    $
    86,751Business services
    
    
    21,109
    
    
    
    18,235Mobile services and applications
    
    
    17,510
    
    
    
    24,089Advertising/marketing
    
    
    933
    
    
    
    8,206Others
    
    
    10,750
    
    
    
    7,25265,438
    
    
    
    144,533Corporate and other unallocated amounts
    
    
    480,616
    
    
    
    519,798Total consolidated assets
    
    $
    546,054
    
    
    $
    664,331
 (ii)
    
    Segment information by geographical segment:
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2002
    
    
    2003
    
    
    2004Segment revenues from external customers:Australia
    
    $
    2,783
    
    
    $
    26,818
    
    
    $
    29,655Greater China
    
    
    7,053
    
    
    
    24,479
    
    
    
    32,542Korea
    
    
    662
    
    
    
    1,647
    
    
    
    3,643Singapore
    
    
    5,489
    
    
    
    5,858
    
    
    
    6,072Europe (excluding United Kingdom)
    
    
    
    
    
    
    7,654
    
    
    
    39,176United Kingdom
    
    
    1,750
    
    
    
    2,495
    
    
    
    10,857North America
    
    
    5,063
    
    
    
    8,900
    
    
    
    60,061South America
    
    
    
    
    
    
    
    
    
    
    677Total consolidated revenues
    
    $
    22,800
    
    
    $
    77,851
    
    
    $
    182,683
  December 31,
    
    
    December 31,2003
    
    
    2004Segment long-lived assets:Australia
    
    $
    1,223
    
    
    $
    651Greater China
    
    
    1,486
    
    
    
    1,912Korea
    
    
    49
    
    
    
    57Singapore
    
    
    152
    
    
    
    201Europe (excluding United Kingdom)
    
    
    
    
    
    
    1,184United Kingdom
    
    
    2,823
    
    
    
    4North America
    
    
    1,477
    
    
    
    3,608Total consolidated long-lived assets
    
    $
    7,210
    
    
    $
    7,617
 F-61




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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)*****4.(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.+++




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##### 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.+++++++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
yyyy
 F-63




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##### Table of Contents



No.
    
    Description4.(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.(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.
yyyy6.
    
    Details of how EPS information is calculated can be found in Note 20 to our Consolidated
Financial Statements.8.
    
    List of principal subsidiaries of
the Company.
yyyy12.1
    
    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^
 
 *
    
    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.




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##### 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.^
    
    Filed herewith. F-65