CDC (CHINA) 20-F/A 2007 FY Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-30134

CDC Corporation

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

c/o CDC Corporation Limited

33/F Citicorp Centre

18 Whitfield Road

Causeway Bay, Hong Kong

852-2893-8200

e-mail: investor_relations@cdccorporation.net

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Class A common shares

Indicate the number of outstanding shares of each of the Issuer’s class of capital or common stock as of the close of the period covered by this Annual Report:

Class of shares	Number outstanding as of March 31, 2008
Class A common shares	106,992,519

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP  x    International Financial Reporting Standards  ¨    Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨  Item 17    ¨  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

			Page
Explanatory Note			1
PART III.
Item 18.	Financial Statements		2
Item 19.	Exhibits		2
SIGNATURES			6
Index to Consolidated Financial Statements			F - 1
Index to Exhibits
Exhibit 12.1		Certification of CEO required by Rule 13a-14(a)
Exhibit 12.2		Certification of CFO required by Rule 13a-14(a)
Exhibit 13(a).1		Certification of CEO pursuant to Section 906
Exhibit 13(a).2		Certification of CFO pursuant to Section 906
Exhibit 15(a).1		Consent of Deloitte Touche Tohmatsu relating to China.com Inc. dated September 9, 2008
Exhibit 15(a).2		Consent of Ernst & Young dated September 9, 2008
Exhibit 15(a).3		Consent of Deloitte Touche Tohmatsu relating to Equity Pacific Limited
Exhibit 15(a).4		Consent of Deloitte and Touche LLP
Exhibit 15(a).5		Audited financial statements of Equity Pacific Limited for the year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006.

EXPLANATORY NOTE

The purpose of this Amendment No. 1 on Form 20-F/A (“Amendment No. 1”) to the annual report on Form 20-F (the “Annual Report”) of CDC Corporation (the “Company”) for the year ended December 31, 2007, filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 30, 2008 (the “Annual Report Filing Date”) is to: (i) correct a typographical error relating to the date contained in the audit report of Deloitte Touche Tohmatsu on page F-6 of the Consolidated Financial Statements and to include an explanatory paragraph relating to the restatement of the China.com financial statements for the year ended December 31, 2005; (ii) provide an amended consent of Deloitte Touche Tohmatsu, dated September 9, 2008 relating to such amendments contained on page F-6 of the Consolidated Financial Statements; (iii) provide an amended consent of Ernst & Young dated September 9, 2008 to include a reference to clarify that the audit report of Ernst & Young is dated July 2, 2007 as to the effects of the Company’s restatement; (iv) correct the references contained in Item 19—Exhibits, and in the Index to Exhibits relating to the financial statements of Equity Pacific Limited; and (v) provide updated certifications under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the “Act”), and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as required pursuant to Rule 12b-15 under the Act.

“Part III, Item 18 – Financial Statements, Item 19 – Exhibits and Index to Exhibits” contained in the Annual Report are amended and restated in their entirety in this Amendment No. 1.

Other than as set forth herein, the Company has not modified or updated any other disclosures in the Annual Report. The Company has made no changes to the Items in the Annual Report other than those set forth above, and accordingly, it has omitted all such unchanged information.

Other than expressly set forth herein, this Amendment No. 1 does not reflect events occurring after the Annual Report Filing Date or modify or update those disclosures affected by subsequent events. Rather, except as described above, information is unchanged and reflects the disclosures made at the time of the Annual Report Filing Date. Accordingly, this Amendment No. 1 should be read in conjunction with the Annual Report as at the Annual Report Filing Date and the Company’s filings made subsequent thereto, including any amendments to those filings. The filing of this Amendment No. 1 shall not be deemed an admission that the Annual Report when made included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

1

PART III

ITEM 18. FINANCIAL STATEMENTS

We have appended our Consolidated Financial Statements as of and for the year ended December 31, 2007 on pages F-1 to F-86 of this Amendment No. 1.

Additionally, the audited financial statements of Equity Pacific Limited for the year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006 are attached as an exhibit hereto.

ITEM 19. EXHIBITS

No.	Description
1.1	Amended and Restated Articles of Association and Memorandum of Association of the Company, together with amendments thereto.yyy
2(a).1	1999 Employee Stock Option Plan, as amended. *
2(a).2	2004 Employee Share Purchase Plan. ***
2(a).3	Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC Corporation). **
2(a).4	CDC Corporation 2005 Stock Incentive Plan, as amended. ****
2(a).5	CDC Software Corporation 2007 Stock Incentive Plan.yy
2(a).6	CDC Games Corporation 2007 Stock Incentive Plan.yy
2(b).1	Note Purchase Agreement, dated as of November 10, 2006, between CDC Corporation and each of the investors listed therein relating to the issuance and sale of $168 million aggregate principal amount of 3.75% Senior Exchangeable Convertible Notes due 2011.yy
2(b).2	Form of 3.75% Senior Exchangeable Convertible Note due 2011 issued by CDC Corporation.yy
2(b).3	Registration Rights Agreement, dated as of November 10, 2006, among CDC Corporation, CDC Games Corporation and CDC Software Corporation.yy
2(b).4	Promissory Note by and between CDC Games Corporation and China.com Limited, dated as of December 29, 2006.yy
4(a).1	Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27, 2005. ****
4(a).2	Supplementary Agreement relating to Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 29, 2005. ****
4(a).3	Stock Purchase Agreement, dated as of June 1, 2006, among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana.yy
4(a).4	Addendum No. 1 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of March 13, 2007.yy

2

4(a).5	Addendum No. 2 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of August 30, 2007.yyy
4(a).6	Share Purchase Agreement dated as of July 25, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy
4(a).7	Amendment to Share Purchase Agreement dated as of October 5, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy
4(a).8	Amendment to Share Purchase Agreement dated as of November 9, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy
4(a).9	Stock Purchase Agreement, dated as of October 6, 2006, among Ross Systems Inc., Advantage Growth Fund, John Caines, Siobhan Sutcliffe, Mark Sutcliffe, Rob Archer, Robin Wight, Steve Massey, Alistair Norman, Richard Tester, Roy Thomas, John Clement, Richard Craig, Phil Hignett, Colin Downes, Dan Saunders, Robin West, James Wood, James Cutter, Andy Neilson, Sarah Weston and Di Judd related to the acquisition of MVI Holdings Limited.yy
4(a).10	Guaranty Agreement dated as of October 6, 2006 by CDC Corporation.yy
4(a).11	Stock Purchase Agreement by and between CDC Games Corporation and China.com Corp., Limited, dated as of November 11, 2006.yy
4(a).12	Merger Agreement, dated as of December 1, 2006, among China.com Corporation, CDC Mergerco Corporation and Vis.align, Inc. and the Stockholders’ Representative appointed thereby related to the acquisition of Vis.align, Inc.yy
4(a).13	Senior Secured Loan Agreement by CDC Mobile Media Corporation to BBMF Group, Inc. dated as of January 12, 2007.yy
4(a).14	Share Sale and Purchase Agreement dated as of December 17, 2007 by and between CDC Games Corporation and Nikko Antfactory K.K.yyy
4(a).15	Share Purchase Agreement dated as of February 16, 2007 among Ross Systems, Inc., 3i plc, The Parkmeade Group plc, James Heavey, Cathal Naughton and Michael Breare related to the acquisition of Respond Group Limited.yy
4(a).16	Merger Agreement dated as of April 16, 2007 by and among CDC Software Inc., CDC Merger Sub, Inc., Saratoga Systems Inc., Mark R. Elconin and Alvin W. Smith.yy
4(a).17	Master Framework Agreement dated as of June 29, 2007 by and among Bonarich Enterprises, Ltd., CDC Corporation and CDC Games Holdings Limited.yyy
4(a).18	Asset Purchase Agreement dated as of August 1, 2007 by and among Chinadotcom Strategic, Inc., CDC Software Corporation and Carat Korea Co., Ltd.yyy
4(a).19	Share Purchase Agreement dated as of August 1, 2007 by and among Ion Global (BVI) Ltd., CDC Software Corporation and Group Carat (Nederland) BV.yyy
4(a).20	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc.yyy

3

4(a).21	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc.yyy
4(a).22	Merger Agreement dated as of September 4, 2007 by and among CDC Software Corporation, CI Acquisition Corporation, Catalyst International, Inc., Comvest Investment Partners II LLC, CLYS Holdings, LLC, Terrance L. Mealey, Peter Knight, William G. Nelson, John Gorman, Nigel Davies and S. Michael Godshall.yyy
4(a).23	Letter Agreement dates as of November 13, 2007 by and among Symphony Technology II-A, L.P. Cayman First Tier and Chinadotcom Capital Limited.yyy
4(c).1	Termination and Release Agreement between CDC Corporation and Asia Pacific Online Limited effective July 15, 2005. ****
4(c).2	Option Transfer Agreement between CDC Corporation, Asia Pacific Online Limited and Peter Yip effective July 15, 2005. ****
4(c).3	Amendment No. 1 to Option Transfer Agreement dated as of October 2, 2007 by and between CDC Corporation, Asia Pacific Online Limited and Peter Yip.yyy
4(c).4	Termination and Release Agreement by and between CD Corporation and Dr. Raymond Kuo-Fung Ch’ien effective August 30, 2005. ****
4(c).5	Executive Services (CEO) Agreement between CDC Corporation Limited and Asia Pacific Online Limited effective as of April 12, 2006.y
6.	Details of how EPS information is calculated can be found in Note 18 to our Consolidated Financial Statements.
8.	List of principal subsidiaries of the Company.yyy
12.1	Certification of Chief Executive Officer required by Rule 13a-14(a).^
12.2	Certification of Chief Financial Officer required by Rule 13a-14(a).^
13(a).1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.^
13(a).2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.^
15(a).1	Consent of Deloitte Touche Tohmatsu relating to China.com Inc. dated September 9, 2008.^
15(a).2	Consent of Ernst & Young dated September 9, 2008.^
15(a).3	Consent of Deloitte Touche Tohmatsu CPA Ltd. relating to Equity Pacific Limited.^
15(a).4	Consent of Deloitte & Touche LLP.^
15(a).5	Audited financial statements of Equity Pacific Limited for the year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006.^

* Incorporated by reference to Post-Effective Amendment to our registration statement on Form S-8 (Reg. No. 333-11288) filed with the Commission on December 7, 2000.

4

** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-118619) filed with the Commission on August 27, 2004.

*** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-123666) filed with the Commission on March 30, 2005.

**** Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 21, 2006.

y Incorporated by reference to our current report on Form 6-K filed with the Commission on August 10, 2006.

yy Incorporated by reference to our annual report on Form 20-F filed with the Commission on July 2, 2007.

yyy Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 30, 2008.

^ Filed herewith.

5

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf on this 15^th day of September, 2008.

CDC CORPORATION
(Registrant)
By:	/s/ Peter Yip
	Peter Yip
	Chief Executive Officer

6

INDEX TO EXHIBITS

No.	Description
1.1	Amended and Restated Articles of Association and Memorandum of Association of the Company, together with amendments thereto.yyy
2(a).1	1999 Employee Stock Option Plan, as amended. *
2(a).2	2004 Employee Share Purchase Plan. ***
2(a).3	Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC Corporation). **
2(a).4	CDC Corporation 2005 Stock Incentive Plan, as amended. ****
2(a).5	CDC Software Corporation 2007 Stock Incentive Plan.yy
2(a).6	CDC Games Corporation 2007 Stock Incentive Plan.yy
2(b).1	Note Purchase Agreement, dated as of November 10, 2006, between CDC Corporation and each of the investors listed therein relating to the issuance and sale of $168 million aggregate principal amount of 3.75% Senior Exchangeable Convertible Notes due 2011.yy
2(b).2	Form of 3.75% Senior Exchangeable Convertible Note due 2011 issued by CDC Corporation.yy
2(b).3	Registration Rights Agreement, dated as of November 10, 2006, among CDC Corporation, CDC Games Corporation and CDC Software Corporation.yy
2(b).4	Promissory Note by and between CDC Games Corporation and China.com Limited, dated as of December 29, 2006.yy
4(a).1	Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27, 2005. ****
4(a).2	Supplementary Agreement relating to Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 29, 2005. ****
4(a).3	Stock Purchase Agreement, dated as of June 1, 2006, among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana.yy
4(a).4	Addendum No. 1 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of March 13, 2007.yy
4(a).5	Addendum No. 2 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of August 30, 2007.yyy
4(a).6	Share Purchase Agreement dated as of July 25, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy

7

4(a).7	Amendment to Share Purchase Agreement dated as of October 5, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy
4(a).8	Amendment to Share Purchase Agreement dated as of November 9, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc.yy
4(a).9	Stock Purchase Agreement, dated as of October 6, 2006, among Ross Systems Inc., Advantage Growth Fund, John Caines, Siobhan Sutcliffe, Mark Sutcliffe, Rob Archer, Robin Wight, Steve Massey, Alistair Norman, Richard Tester, Roy Thomas, John Clement, Richard Craig, Phil Hignett, Colin Downes, Dan Saunders, Robin West, James Wood, James Cutter, Andy Neilson, Sarah Weston and Di Judd related to the acquisition of MVI Holdings Limited.yy
4(a).10	Guaranty Agreement dated as of October 6, 2006 by CDC Corporation.yy
4(a).11	Stock Purchase Agreement by and between CDC Games Corporation and China.com Corp., Limited, dated as of November 11, 2006.yy
4(a).12	Merger Agreement, dated as of December 1, 2006, among China.com Corporation, CDC Mergerco Corporation and Vis.align, Inc. and the Stockholders’ Representative appointed thereby related to the acquisition of Vis.align, Inc.yy
4(a).13	Senior Secured Loan Agreement by CDC Mobile Media Corporation to BBMF Group, Inc. dated as of January 12, 2007.yy
4(a).14	Share Sale and Purchase Agreement dated as of December 17, 2007 by and between CDC Games Corporation and Nikko Antfactory K.K.yyy
4(a).15	Share Purchase Agreement dated as of February 16, 2007 among Ross Systems, Inc., 3i plc, The Parkmeade Group plc, James Heavey, Cathal Naughton and Michael Breare related to the acquisition of Respond Group Limited.yy
4(a).16	Merger Agreement dated as of April 16, 2007 by and among CDC Software Inc., CDC Merger Sub, Inc., Saratoga Systems Inc., Mark R. Elconin and Alvin W. Smith.yy
4(a).17	Master Framework Agreement dated as of June 29, 2007 by and among Bonarich Enterprises, Ltd., CDC Corporation and CDC Games Holdings Limited.yyy
4(a).18	Asset Purchase Agreement dated as of August 1, 2007 by and among Chinadotcom Strategic, Inc., CDC Software Corporation and Carat Korea Co., Ltd.yyy
4(a).19	Share Purchase Agreement dated as of August 1, 2007 by and among Ion Global (BVI) Ltd., CDC Software Corporation and Group Carat (Nederland) BV.yyy
4(a).20	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc.yyy
4(a).21	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc.yyy

8

4(a).22	Merger Agreement dated as of September 4, 2007 by and among CDC Software Corporation, CI Acquisition Corporation, Catalyst International, Inc., Comvest Investment Partners II LLC, CLYS Holdings, LLC, Terrance L. Mealey, Peter Knight, William G. Nelson, John Gorman, Nigel Davies and S. Michael Godshall.yyy
4(a).23	Letter Agreement dates as of November 13, 2007 by and among Symphony Technology II-A, L.P. Cayman First Tier and Chinadotcom Capital Limited.yyy
4(c).1	Termination and Release Agreement between CDC Corporation and Asia Pacific Online Limited effective July 15, 2005. ****
4(c).2	Option Transfer Agreement between CDC Corporation, Asia Pacific Online Limited and Peter Yip effective July 15, 2005. ****
4(c).3	Amendment No. 1 to Option Transfer Agreement dated as of October 2, 2007 by and between CDC Corporation, Asia Pacific Online Limited and Peter Yip.yyy
4(c).4	Termination and Release Agreement by and between CD Corporation and Dr. Raymond Kuo-Fung Ch’ien effective August 30, 2005. ****
4(c).5	Executive Services (CEO) Agreement between CDC Corporation Limited and Asia Pacific Online Limited effective as of April 12, 2006.y
6.	Details of how EPS information is calculated can be found in Note 18 to our Consolidated Financial Statements.
8.	List of principal subsidiaries of the Company.yyy
12.1	Certification of Chief Executive Officer required by Rule 13a-14(a).^
12.2	Certification of Chief Financial Officer required by Rule 13a-14(a).^
13(a).1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.^
13(a).2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.^
15(a).1	Consent of Deloitte Touche Tohmatsu relating to China.com Inc. dated September 9, 2008.^
15(a).2	Consent of Ernst & Young dated September 9, 2008.^
15(a).3	Consent of Deloitte Touche Tohmatsu CPA Ltd. relating to Equity Pacific Limited.^
15(a).4	Consent of Deloitte & Touche LLP.^
15(a).5	Audited financial statements of Equity Pacific Limited for the year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006.^

9

* Incorporated by reference to Post-Effective Amendment to our registration statement on Form S-8 (Reg. No. 333-11288) filed with the Commission on December 7, 2000.

** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-118619) filed with the Commission on August 27, 2004.

*** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-123666) filed with the Commission on March 30, 2005.

**** Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 21, 2006.

y Incorporated by reference to our current report on Form 6-K filed with the Commission on August 10, 2006.

yy Incorporated by reference to our annual report on Form 20-F filed with the Commission on July 2, 2007.

yyy Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 30, 2008.

^ Filed herewith.

10

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Pages
Report of Independent Registered Public Accounting Firm	F-2 – F-6
Consolidated Balance Sheets as of December 31, 2006 and 2007	F-7
Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007	F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007	F-9
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2006 and 2007	F-10 – F-12
Notes to Consolidated Financial Statements	F-13 – F-86

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited CDC Corporation and subsidiaries' (the "Company's") internal control over financial reporting as of December 31, 2007, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely

F-2

basis. The following material weaknesses have been identified and included in management’s assessment: (1) lack of adequate policies, procedures, documentation and personnel in certain aspects of the financial statement close and reporting Process, (2) inadequate personnel and procedures in the preparation and review of the income tax provision and related deferred tax balances and (3) insufficient personnel with appropriate skills and experience to adequately assess and monitor the accounting, economics, performance and risks related to complex treasury transactions. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2007, of the Company and this report does not affect our report on such consolidated financial statements.

In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2007, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2007, of the Company and our report dated June 30, 2008 expressed an unqualified opinion on those financial statements and included explanatory paragraphs regarding the adoption of Statement of Financial Accounting Standards No. 123R, “Share Based Payment” and the adoption of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

June 30, 2008

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited the accompanying consolidated balance sheets of CDC Corporation and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CDC Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 2 and 19, the Company adopted Statement of Financial Accounting Standards No. 123 (R), “Share Based Payment,” effective January 1, 2006.

As discussed in Notes 2 and 15, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2007, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 30, 2008 expressed an adverse opinion on the Company's internal control over financial reporting because of three material weaknesses.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

June 30, 2008

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited the accompanying consolidated statements of operations, cash flows and shareholders’ equity of CDC Corporation and subsidiaries for the year ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the consolidated financial statements of China.com Inc., an 81% owned subsidiary, and its subsidiaries for the period ended December 31, 2005 which statements reflect total revenue constituting 17.7% of the related 2005 consolidated total. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for China.com Inc. and its subsidiaries, is based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations of CDC Corporation and subsidiaries and their cash flows for the year ended December 31, 2005, in conformity with United States generally accepted accounting principles.

As more fully described in Note 2, the Company restated its consolidated financial statements for the year ended December 31, 2005.

/s/ Ernst & Young

Hong Kong

June 20, 2006, except for the restatement described in Note 2, as to which the date is July 2, 2007.

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of China.com Inc.:

We have audited the consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income of China.com and subsidiaries (the “Company”) for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows for the year ended December 31, 2005 of the Company in conformity with accounting principles generally accepted in the United States of America.

As explained in note 19, these consolidated financial statements have been restated from those previously issued because of the correction of misstatements, due to the inappropriate application of the equity method of accounting for a change in the level of ownership of investment in affiliated companies, the failure to record the fair value of a put option relating to affiliated companies in 2004 and the subsequent changes in fair value of the put option in 2005, and the inappropriate application of foreign currency translation of goodwill and intangible asset amounts of its subsidiaries in the People’s Republic of China. As a result of this restatement, the equity in loss of affiliated companies decreased by US$405,000, investment in affiliated companies increased by US$405,000, derivative liability and net income increased by US$144,000 and US$16,000 respectively, opening accumulated profits decreased by US$160,000, goodwill and intangible assets increased by US$1,673,000 and US$13,000 respectively, and accumulated other comprehensive loss decreased by US$1,686,000. The net effect of these restatements was to increase shareholders’ equity from US$198,250,000 to US$200,197,000 as at December 31, 2005 and to increase net income from US$1,842,000 to US$2,263,000 for the year ended December 31, 2005.

/s/ DELOITTE TOUCHE TOHMATSU

Certified Public Accountants

Hong Kong

June 20, 2006 (June 29, 2007 as to the effects of the restatement discussed in note 19)

F-6

CDC Corporation

CONSOLIDATED BALANCE SHEETS

(in thousands U.S. dollars, except share and per share data)

	December 31,
	2006			2007
ASSETS
Current assets:
Cash and cash equivalents	$	223,548		$	142,218
Restricted cash		1,996			9,066
Accounts receivable (net of allowance of $5,373 and $8,688 in 2006 and 2007, respectively)		64,437			87,612
Note receivable		25,000			—
Available-for-sale securities		14,401			47,631
Restricted available-for-sale securities		—			30,867
Restricted held-to-maturity securities		30,504			—
Deferred tax assets		5,061			3,423
Prepayments and other current assets		18,525			22,930
Total current assets		383,472			343,747
Property and equipment, net		9,540			19,659
Goodwill		205,050			215,783
Intangible assets, net		104,069			132,605
Available-for-sale securities		112,045			28,526
Investments under cost method		217			12,315
Deferred tax assets		34,689			44,576
Other assets		8,351			6,390
Total assets	$	857,433		$	803,601
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,903		$	28,571
Purchase consideration payables		5,626			4,192
Income tax payable		4,202			2,145
Accrued liabilities		36,787			50,549
Restructuring accruals, current portion		2,411			2,807
Short-term debt		18,991			33,892
Deferred revenue		46,033			67,989
Deferred tax liabilities		1,641			942
Total current liabilities		142,594			191,087
Deferred tax liabilities		16,041			28,496
Convertible notes		167,645			174,905
Restructuring accruals, net of current portion		3,599			482
Other liabilities		419			12,396
Total liabilities		330,298			407,366
Minority interests		72,512			37,411
Contingencies and commitments
Shareholders’ equity:
Preferred shares, $0.001 par value; 5,000,000 shares authorized, no shares issued		—			—
Class A common shares, $0.00025 par value; 800,000,000 shares authorized; 114,092,737 and 117,416,475 shares issued as of December 31, 2006 and 2007, respectively; 106,401,376 and 106,930,800 shares outstanding as of December 31, 2006 and 2007, respectively		28			28
Additional paid-in capital		692,143			713,096
Common stock held in treasury; 7,691,361 and 10,485,675 shares at December 31, 2006 and 2007, respectively		(32,102	)		(54,646	)
Accumulated deficit		(217,290	)		(324,828	)
Accumulated other comprehensive income		11,844			25,174
Total shareholders’ equity		454,623			358,824
Total liabilities and shareholders’ equity	$	857,433		$	803,601

The accompanying notes form an integral part of these consolidated financial statements.

F-7

CDC Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands U.S. dollars, except share and per share data)

	Years ended December 31,
	2005			2006			2007
Revenue:
CDC Software
Licenses	$	38,541		$	46,260		$	62,044
Maintenance		59,144			63,252			86,585
Consulting Services		61,119			64,825			86,862
Hardware		—			—			2,769
Global Services
Licenses		—			—			3,235
Consulting services		42,686			66,484			103,723
Hardware		—			—			3,819
CDC Games		—			26,780			33,596
China.com		8,995			10,064			11,409
Mobile Services and Applications		34,389			31,863			8,342
Total revenue		244,874			309,528			402,384
Cost of revenue:
CDC Software
Licenses		(12,278	)		(13,417	)		(18,531	)
Maintenance		(9,335	)		(9,161	)		(11,623	)
Consulting Services		(46,457	)		(51,211	)		(66,994	)
Hardware		—			—			(1,678	)
Global Services
Licenses		—			—			(3,143	)
Consulting Services		(27,168	)		(45,943	)		(77,389	)
Hardware		—			—			(3,603	)
CDC Games		—			(10,631	)		(20,108	)
China.com		(3,449	)		(4,095	)		(4,283	)
Mobile Services and Applications		(15,262	)		(13,004	)		(4,757	)
Total cost of revenue		(113,949	)		(147,462	)		(212,109	)
Gross profit		130,925			162,066			190,275
Operating expenses:
Sales and marketing expenses		(47,611	)		(59,313	)		(76,513	)
Research and development expenses		(22,788	)		(19,981	)		(23,836	)
General and administrative expenses		(56,608	)		(65,948	)		(95,733	)
Amortization expenses		(6,084	)		(8,315	)		(12,657	)
Restructuring and other charges		(1,667	)		(4,874	)		(9,056	)
Goodwill impairment		—			—			(71,096	)
Total operating expenses		(134,758	)		(158,431	)		(288,891	)
Operating income (loss)		(3,833	)		3,635			(98,616	)
Other income (expenses):
Interest income		8,156			10,680			13,386
Interest expense		(1,257	)		(3,038	)		(9,086	)
Gain on disposal of available-for-sale securities		525			344			514
Gain on disposal of subsidiaries and cost investments		483			3,087			561
Impairment of available-for-sale securities		—			—			(13,497	)
Gain (loss) on change in fair value of derivatives		—			531			(5,996	)
Share of earnings (losses) in equity investees		(1,172	)		975			—
Total other income (expense)		6,735			12,579			(14,118	)
Income (loss) before income taxes		2,902			16,214			(112,734	)
Income tax expense		(4,957	)		(3,062	)		(10,850	)
Income (loss) before minority interests		(2,055	)		13,152			(123,584	)
Minority interests in (income) loss of consolidated subsidiaries		(1,409	)		(2,312	)		18,551
Income (loss) from continuing operations		(3,464	)		10,840			(105,033	)
Discontinued operations:
Loss from operations of discontinued subsidiaries		(47	)		—			—
Loss on disposal/dissolution of discontinued subsidiaries, net		(3	)		—			—
Net income (loss)	$	(3,514	)	$	10,840		$	(105,033	)
Basic earnings (loss) per share from continuing operations	$	(0.03	)	$	0.10		$	(0.98	)
Diluted earnings (loss) per share from continuing operations	$	(0.03	)	$	0.10		$	(0.98	)
Basic and diluted earnings (loss) per share	$	(0.03	)	$	0.10		$	(0.98	)
Diluted earnings (loss) per share	$	(0.03	)	$	0.10		$	(0.98	)

The accompanying notes form an integral part of these consolidated financial statements.

F-8

CDC Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands U.S. dollars, except share and per share data)

	Years Ended, December 31,
	2005			2006			2007
OPERATING ACTIVITIES:
Net (loss) income	$	(3,514	)	$	10,840		$	(105,033	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Minority interests in income of consolidated subsidiaries		1,409			2,312			(18,551	)
Loss (gain) on disposal of property and equipment		(1,179	)		137			233
Gain on disposal of available-for-sale securities		(525	)		(344	)		(514	)
Gain on disposal of subsidiaries and cost investments		(483	)		(3,087	)		(561	)
Bad debt expense		1,450			2,890			5,695
Amortization of intangible assets in cost of revenue		7,154			9,687			17,041
Amortization of intangible assets in operating expenses		6,084			8,315			12,657
Depreciation		3,866			4,385			6,233
Stock compensation expenses		1,421			7,700			8,451
Share of (income) losses in equity investees		1,172			(975	)		—
Impairment of available-for-sale securities		—			—			13,497
Unrealized (gain) loss on investment securities		—			—			—
Deferred provision for income taxes		3,698			(1,082	)		5,500
Goodwill impairment		—			—			71,096
Restructuring and other charges		1,667			4,874			9,954
Interest (income) expense		(390	)		273			1,264
Fair market value adjustment of derivative instruments		—			(531	)		5,996
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(6,474	)		(9,292	)		(14,188	)
Deposits, prepayments and other receivables		1,210			(6,353	)		(1,825	)
Other assets		(1,500	)		306			(6,408	)
Accounts payable		(1,375	)		2,732			(5,313	)
Accrued liabilities		(5,345	)		1,571			(703	)
Deferred revenue		3,822			4,347			4,661
Income tax payable		(561	)		1,567			(1,801	)
Other liabilities		341			(943	)		1,903
Net cash provided by operating activities		11,948			39,329			9,284
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(15,537	)		(33,428	)		(89,466	)
Purchases of property and equipment		(3,730	)		(4,403	)		(12,515	)
Purchases of cost investments		(3,500	)		—			(16,023	)
Purchases of available-for-sale securities		—			(43,067	)		(7,037	)
Capitalized software		(7,802	)		(13,067	)		(9,948	)
Purchases of games licenses		—			(420	)		(10,079	)
Proceeds from disposal of available-for-sale securities and cost investments		31,728			43,473			44,859
Proceeds from disposal of property and equipment		4,315			—			1,273
Proceeds from disposal of subsidiaries		1,140			—			7,017
Decrease (increase) in restricted cash		2,000			(110	)		(7,070	)
Net cash provided by (used in) investing activities		8,614			(51,022	)		(98,989	)
FINANCING ACTIVITIES:
Issuance of share capital, net of offering costs		1,052			8,512			12,178
Proceeds from bank loans		5,075			—			33,792
Repayment of bank loans		(42,480	)		(45,987	)		(18,700	)
Proceeds from sale of convertible notes		—			168,000			—
Debt issuance costs		—			(3,460	)		—
Proceeds of purchase note agreements		—			38,700			—
Purchases of treasury stock		—			(28,070	)		(22,544	)
Net cash provided by (used in) financing activities		(36,353	)		137,695			4,726
Effect of exchange differences on cash		(696	)		3,827			3,649
Net increase (decrease) in cash and cash equivalents		(16,487	)		129,829			(81,330	)
Cash and cash equivalents at beginning of year		110,206			93,719			223,548
Cash and cash equivalents at end of year	$	93,719		$	223,548		$	142,218
Interest paid	$	955		$	592		$	6,504
Income taxes paid	$	695		$	1,988		$	5,268
Non-cash activities:
Class A common shares and stock options issued as consideration for the acquisition of subsidiaries	$	54		$	741		$	921

The accompanying notes form an integral part of these consolidated financial statements.

F-9

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2004	110,893	$	28	$	673,476	$	(4,067	)	$	(224,616	)	$	5,155		$	449,976		$	—
Exercise of employee stock options	282		—		583		—			—			—			583			—
Employee stock purchase plan	178		—		469		—			—			—			469			—
Issuance of shares for acquisitions	12		—		54		—			—			—			54			—
Reissuance of treasury stock for non-cash transactions	—		—		—		35			—			—			35			—
Stock compensation expenses on options granted	—		—		1,421		—			—			—			1,421			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			(2,534	)		(2,534	)		(2,534	)
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			217			217			217
Foreign currency translation adjustments	—		—		—		—			—			(355	)		(355	)		(355	)
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			146			146			146
Net loss for the year	—		—		—		—			(3,514	)		—			(3,514	)		(3,514	)
Comprehensive loss	—		—		—		—			—			—					$	(6,040	)
Balance at December 31, 2005	111,365	$	28	$	676,003	$	(4,032	)	$	(228,130	)	$	2,629		$	446,498

The accompanying notes form an integral part of these consolidated financial statements.

F-10

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2005	111,365	$	28	$	676,003	$	(4,032	)	$	(228,130	)	$	2,629		$	446,498		$	—
Exercise of employee stock options	2,401		—		7,963		—			—			—			7,963			—
Employee stock purchase plan	161		—		549		—			—			—			549			—
Issuance of shares for acquisitions	166		—		741		—			—			—			741			—
Purchase of treasury stock	—		—		—		(28,070	)		—			—			(28,070	)		—
Stock compensation expenses on options granted	—		—		6,887		—			—			—			6,887			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			681			681			681
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			11			11			11
Foreign currency translation adjustments	—		—		—		—			—			8,528			8,528			8,528
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			(5	)		(5	)		(5	)
Net income for the year	—		—		—		—			10,840			—			10,840			10,840
Comprehensive income	—		—		—		—			—			—					$	20,055
Balance at December 31, 2006	114,093	$	28	$	692,143	$	(32,102	)	$	(217,290	)	$	11,844		$	454,623

The accompanying notes form an integral part of these consolidated financial statements.

F-11

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2006	114,093	$	28	$	692,143	$	(32,102	)	$	(217,290	)	$	11,844		$	454,623		$	—
Exercise of employee stock options	2,926		—		11,121		—			—			—			11,121			—
Employee stock purchase plan	192		—		1,057		—			—			—			1,057			—
Issuance of shares for acquisitions	205		—		921		—			—			—			921			—
Purchase of treasury stock	—		—		—		(22,544	)		—			—			(22,544	)		—
Stock compensation expenses on options granted	—		—		7,854		—			—			—			7,854			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			2,215			2,215			2,215
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			(270	)		(270	)		(270	)
Foreign currency translation adjustments	—		—		—		—			—			11,835			11,835			11,835
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			(450	)		(450	)		(450	)
Cumulative effect adjustment due to adoption of FIN 48	—		—		—		—			(2,505	)		—			(2,505	)		—
Net loss for the year	—		—		—		—			(105,033	)					(105,033	)		(105,033	)
Comprehensive income	—		—		—		—			—			—			—		$	(91,703	)
Balance at December 31, 2007	117,416	$	28	$	713,096	$	(54,646	)	$	(324,828	)	$	25,174		$	358,824

The accompanying notes form an integral part of these consolidated financial statements.

F-12

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

1. ORGANIZATION AND BUSINESS OPERATIONS

CDC Corporation (together with its subsidiaries, the “Company” or “CDC”), with facilities in the People’s Republic of China (“PRC”), North America, Europe and Australia, is a global enterprise software and new media company. The Company was incorporated in the Cayman Islands in June 1997 as a limited liability company.

The Company offers products and services to customers in Hong Kong, Taiwan and the PRC (the “Greater China”) and other parts of Asia, Australia, New Zealand, North America, South America, the United Kingdom and the rest of Europe. The Company has the following operating segments:

• Software. The Company offers a broad range of software solutions for mid-sized enterprises. The software suite includes Enterprise Resource Planning (“ERP”), Customer Relationship Management (“CRM”), Supply Chain Management (“SCM”), Order Management Systems (“OMS”), Human Resources and Payroll Management (“HRM”) and Business Intelligence (“BI”) products.

• Global Services. The Company’s global services offering includes information technology services, eBusiness consulting, web development and outsourcing in Hong Kong, Australia, and the United States of America (the “U.S.”), and a marketing database and marketing support service offered principally in Australia and New Zealand. The Company’s global services companies provide program management, outsourcing services, application development and ongoing support services using a wide range of technologies.

• CDC Games. The Company’s online games business is principally engaged in the development and operation of online games in the PRC.

• China.com. The Company’s internet and media business encompasses a range of businesses, including a portal network, and a Singapore-based travel trade publisher and trade exhibition organizer.

• Mobile Services and Applications (“MVAS”). The Company’s mobile services and applications business provides news and mobile applications services targeting the consumer market in China. It offers wireless services including Short Message Service (“SMS”), Interactive Voice Response (“IVR”), Multimedia Message Service (“MMS”) and Wireless Application Protocol (“WAP”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries that are not considered variable interest entities and all variable interest entities for which the Company is the primary beneficiary (Note 14), after eliminations of all intercompany accounts, transactions and profits.

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets

F-13

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

(c) Cash and Cash Equivalents

The Company considers all cash held in banks and investments with an original maturity of three months or less when purchased to be cash equivalents. Except for the restricted cash disclosed in Note 5, none of the Company’s cash and cash equivalents are restricted as to withdrawal or use.

(d) Property and Equipment and Depreciation

Leasehold improvements, furniture and fixtures, office equipment, computer equipment and motor vehicles are stated at cost less accumulated depreciation. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. The estimated useful lives of the property and equipment are as follows:

Leasehold improvements	Over the lesser of the lease term or the estimated useful life
Furniture and fixtures	1 to 10 years
Office equipment	3 to 5 years
Computer equipment	1 to 3 years
Motor vehicles	3 to 5 years

(e) Software Development Costs

The Company capitalizes computer software product development costs incurred in developing a product once technological feasibility has been established, and capitalization of product software development costs stops once the product is available for general release to customers. The Company evaluates realizability of the capitalized amounts based on expected revenue from the product over the remaining product life. Where future revenue streams are not expected to cover remaining unamortized amounts, the Company expenses the remaining capitalized amounts. The amortization of such costs is computed as the greater of the amount calculated based on (i) the ratio of current product revenue to projected current and future product revenue or (ii) the straight-line basis over the expected economic life of the product (not to exceed five years). Software costs related to the development of new products incurred prior to establishing technological feasibility or after general release are expensed as incurred. When technological feasibility of the underlying software is not established until substantially all product development is completed, including the development of a working model, the Company expenses the costs of such development because the impact of capitalizing such costs would not be material.

(f) Goodwill and Intangible Assets

Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired. Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), requires companies to test goodwill for impairment on an annual basis or an interim basis if an event occurs that might reduce the fair value of a reporting unit below its carrying value. SFAS 142 also requires that an identifiable intangible asset that is determined to have an indefinite useful economic life should not be amortized, but instead tested separately for impairment using a fair value based approach. All other intangible assets are amortized over their estimated useful lives.

F-14

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company’s intangible assets represent trademarks and trade names, uniform resource locators (“URLs”), software applications and programs, customer base and contracts, and business licenses and partnership agreements. Definite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the greater of the straight-line method over the estimated useful life of the respective asset or the undiscounted cash flows method. The estimated useful lives of these intangible assets are as follows:

Trademarks	Indefinite
Trade names	3 to 5 years
URLs	20 years
Software applications and programs	3 to 7 years
Customer base and contracts	1 to 10 years
Business licenses and partnership agreements	1 to 7 years

The Company evaluates the long-lived assets of identifiable business activities for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Other than the impairment of the intangible assets related to the MVAS and Games segments (Note 4), the Company did not record any impairment for the year ended December 31, 2007.

The Company tests goodwill and intangible assets with indefinite useful lives for impairment utilizing a combination of valuation techniques including the expected present value of future cash flows approach. The Company performed its annual goodwill and indefinite lived intangible assets test on December 31 as required by SFAS 142 and determined that there was no impairment for the years ended December 31, 2005 and 2006. Other than the impairment of the goodwill related to the MVAS segment of $71,096 (Note 9), the Company did not record any impairment for the year ended December 31, 2007.

(g) Investments

Debt and equity investments designated as available-for-sale securities are stated at fair value. Unrealized holding gains or losses, net of tax, on available-for-sale securities are reported in accumulated other comprehensive income (loss) and as a separate component of shareholders’ equity. Realized gains and losses and any declines in fair value judged to be other-than-temporary (“OTT”) on available-for-sale securities are included in gain (loss) on disposal of investments and impairment of investments, respectively, in the Company’s consolidated statements of operations. Gains or losses on the sale of investments and amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statements of operations are computed based upon specific identification. Interest on securities classified as available-for-sale securities is included in interest income. See Note 7 for a further discussion of the Company’s OTT impairment on its collateralized debt obligations (“CDOs”).

Debt investments where the Company has the positive intent and ability to hold the securities to maturity are designated as held-to-maturity securities and are stated at amortized cost.

When determining whether an impairment of investments exists or a decline in the value of an available-for-sale or held-to-maturity security is OTT, the Company evaluates evidence to support a realizable value in excess of the current market price for the securities. Such information may include the investment’s financial performance (including such factors as earnings trends, dividend payments, asset quality and specific events), the near term prospects of the investment, the current and expected financial condition of the investment’s issuer, and the Company’s investment intent.

The Company’s investments in equity investees for which its ownership exceeds 20% or for which the Company owns less than 20% but has the ability to exercise significant influence, but which are not majority-owned, are accounted for using the equity method. Under the equity method,

F-15

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

the Company’s proportionate share of each equity investee’s net income or loss and the amortization of any identifiable intangible assets arising from the investment is included in share of income and losses in equity investees in the accompanying consolidated statements of operations.

All other investments for which the Company does not have the ability to exercise significant influence (generally, when the Company has an investment of less than 20% ownership and no representation on the company’s Board of Directors) and for which there is not a readily determinable fair value, are accounted for using the cost method. Dividends and other distributions of earnings from investees, if any, are included in income when declared. The Company periodically evaluates the carrying value of its investments accounted for under the cost method of accounting and any impairment is included in the Company’s consolidated statement of operations.

(h) Impairment of Long-lived Assets

Long-lived assets (other than goodwill and indefinite lived intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset (other than goodwill and indefinite lived intangible assets) exceeds the sum of the undiscounted cash flows expected to result from the asset’s use and eventual disposition. An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset. As discussed in Note 4, the Company recognized impairment of $4,213 related to CDC Games license fee assets during the year ended December 31, 2007.

(i) Foreign Currency Translation

The financial statements of the Company’s foreign operations have been translated into the United States dollar (“U.S. dollar”) from their local functional currencies in accordance with SFAS No. 52, “Foreign Currency Translation” (“SFAS 52”). Under SFAS 52, all assets and liabilities are translated at year end exchange rates. Income statement items are translated at an average exchange rate for the year. Translation adjustments are not included in determining net income, but are accumulated and reported as a component of shareholders’ equity as accumulated other comprehensive income (loss). Realized and unrealized gains and losses, which result from foreign currency transactions, are included in determining net income (loss), except for intercompany foreign currency transactions that are of a long term investment nature which are reported as translation adjustments. The Company considers itself to be permanently reinvested with respect to its investment in its foreign subsidiaries. Accordingly, no realized and unrealized gains and losses from foreign currency translation of investments in foreign subsidiaries are included in the Company’s consolidated income statements for any year presented.

During the years ended December 31, 2005, 2006 and 2007, $380, Nil and Nil, respectively, were reclassified from cumulative foreign currency translation adjustment and included in the consolidated statement of operations as a result of the sale or liquidation of an investment in a foreign operation.

(j) Advertising Expenses

Advertising expenses are charged to expenses when incurred and are included in general and administrative expenses in the accompanying consolidated statement of operations. For the years ended December 31, 2005, 2006 and 2007, advertising expenses totaled $5,050 , $10,573 and $6,573 , respectively.

F-16

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(k) Shipping and Handling

Shipping and handling costs are included in cost of revenue in the accompanying consolidated statements of operations for all periods presented. Shipping and handling costs are not separately billed to customers.

(l) Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. If an acceptance period is required, revenue is recognized upon the earlier of customer acceptance or the expiration of the acceptance period. In some circumstances, the Company recognizes revenue on arrangements that contain certain acceptance provisions when it has historical experience that the acceptance provision is perfunctory. The Company’s agreements with its customers, resellers and distributors do not contain product return rights. If the fee is not fixed or determinable due to the existence of extended payment terms, revenue is recognized periodically as payments become due, provided all other conditions for revenue recognition are met. Discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period in which the related revenue is recorded. Such provisions are calculated after considering relevant historical data.

The specific literature that the Company follows in connection with its revenue recognition policy includes the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 104, “Revenue Recognition” (“SAB 104”), the American Institute of Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) 00-21, “Revenue Arrangements with Multiple Deliverables,” EITF 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” and in certain instances EITF 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”) and SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”).

In addition to these basic criteria, there are specific revenue recognition policies for each major stream of revenue by reportable segment.

Software

Revenue from the sale of software products often includes a combination of software licenses, consulting and integration services, and the provision of training and maintenance services.

Consulting and integration services consist of programming, installation and implementation services. Vendor Specific Objective Evidence (“VSOE”) of fair value for each of the above noted elements are determined as follows:

Software.The Company does not sell software or software licenses to its customers on a stand-alone basis; therefore, allocation of fees to the software component of multiple element arrangements is determined using the residual method. According to this method, the Company measures the amount of the arrangement fee allocated to the delivered elements based on the difference between the arrangement fee and the VSOE of fair value of the undelivered elements. The amount allocated to the software license is calculated by subtracting the VSOE of fair value for maintenance, consulting and integration services, and training services from the total arrangement fee in accordance with paragraph 12 of SOP 97-2. For those agreements that provide for significant services or custom development that are essential to the software’s functionality, the software

F-17

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

license and contracted services are recognized under the percentage of completion method as prescribed by the provisions of Accounting Research Bulletin (“ARB”) No. 45, “Long-Term Construction-Type Contracts,” and SOP 81-1.

When software licenses incorporating third-party software products are sold or sold with third-party products that complement the software, the Company recognizes the gross amount of sales of third-party products as revenue in accordance with EITF 99-19.

In addition, the Company offers its customers hosting services for some of its products. Under these subscription-based contracts, revenue is recognized ratably over the contract period commencing, when the product has been installed. Revenue from hosting services is included in licenses line items in the accompanying consolidated financial statements.

Consulting, Integration Services and Training.Consulting and integration services include programming, installation and implementation of the software products. VSOE of fair value for programming, consulting and integration services and for training services, respectively, is determined based on transactions where such services are rendered on a stand-alone basis to customers.

Historically, a substantial majority of the Company’s stand-alone programming, consulting and integration services and stand-alone training services are priced within a narrow range of the median value of the stand-alone sales. Variation in pricing for such services is due to differences in transaction volume and type of arrangement (beta site versus established sites). VSOE of fair value for consulting, integration and training services is established by region by an analysis of stand-alone sales of services over the preceding one year period. In a multiple-element arrangement, if the stated rates for such services fall outside of the established VSOE of fair value, then revenue from the delivered elements is deferred accordingly and recognized as the services are delivered, assuming all other criteria for revenue recognition have been met.

Many of the Company’s software arrangements include consulting implementation services sold separately under consulting engagement contracts. Consulting revenue from these arrangements are accounted for separately from new software license revenue because the arrangements qualify as service transactions as defined in SOP 97-2. The more significant factors considered in determining whether the revenue should be accounted for separately include the nature of services (i.e., consideration of whether the services are essential to the functionality of the licensed product), degree of risk, availability of services from other vendors, timing of payments and impact of milestones or acceptance criteria on the realizability of the software license fee. Revenue for consulting services is recognized as the services are performed. If there is a significant uncertainty about the project completion or receipt of payment for the consulting services, revenue is deferred until the uncertainty is sufficiently resolved. Contracts with fixed or “not to exceed” fees are recognized on a proportional performance basis.

If an arrangement does not qualify for separate accounting of the software license and consulting transactions, then new software license revenue is recognized together with the consulting services based on contract accounting using either the percentage-of-completion or completed-contract method. Contract accounting is applied to any arrangements: (1) that include milestones or customer-specific acceptance criteria that may affect collection of the software license fees; (2) where services include significant modification or customization of the software; (3) where significant consulting services are provided for in the software license contract without additional charge or are substantially discounted; or (4) where the software license payment is tied to the performance of consulting services. This revenue is classified together with license revenue and was not significant in any year presented.

F-18

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Maintenance.VSOE of fair value for maintenance services is determined based on the contractual renewal rate. The maintenance renewal rates are always priced based on a percentage of the software license fee. Maintenance renewal rates as percentage of license fee is set at a fixed rate for each geographical area in which the Company operates. Maintenance renewal rates may be different for the same basic product sold in different geographical areas due to different market variables such as competitors’ pricing and distribution channels. Substantially all maintenance renewals are priced at a standard percentage of software license fees and therefore the Company determined that it has established a VSOE of fair value for maintenance. The Company’s policy and business practice is for customers to renew their maintenance services at the stated rate indicated in the contract. Revenue related to maintenance is deferred and recognized ratably over the terms of the maintenance agreements, which are normally one year.

Arrangements with Value-added Resellers (“VARs”) and Distributors.The Company enters into software license arrangements with certain established VARs in which the VARs agree to sell the Company’s software to end-users. In the vast majority of these arrangements, the VARs are obligated to pay the Company only as and if sales are made to the end-users. The fee received is calculated on a stipulated percentage of the individual sales earned by the VARs which is stated in the sales contract. Pursuant to SOP 97-2, the fee relating to VARs transactions is not fixed or determinable until the software is sold by the VARs to the end users. Consequently, the Company does not recognize any revenue for VARs transactions until all of the criteria specified under paragraph 8 of SOP 97-2 are met; this point coincides with the sell-through to the end-users because at that point, the Company has persuasive evidence of an arrangement (a signed contract with VARs), the fee is fixed or determinable, delivery has occurred, and collection is reasonably assured. VARs and distributors do not have rights of return, price protections, rotation rights, or other features that would preclude revenue recognition. The Company does not typically earn any portion of fees for services provided by the distributor to the end-user. The Company earns maintenance fees based upon an agreed-upon percentage of the maintenance fees that the distributor earns from the end-user.

VARs have a sole discretion and responsibility to determine and negotiate the sales price of the Company’s software with the end-users. VARs are also responsible for billing and collecting from the end-users and assume all credit risks.

Global Services

The Company provides design and development services which encompass eBusiness consulting, development of mobile phone interfaces and web development services, and the modification, re-configuration, and testing of customers’ information systems to enhance customers’ internal financial reporting systems to customer specifications. These projects are priced on a fixed fee basis. Customers’ needs and specifications are documented in the statement of work which is attached to the agreement. For such arrangements, the Company is able to make reasonable estimates based on the Company’s historical experience with similar transactions, and with the total costs, fees and progress to completion. The vast majority of these agreements do not include customer acceptance provisions. The Company recognizes revenue for these projects using the percentage of completion method in accordance with SOP 81-1. For arrangements containing customer-specific acceptance clauses, the Company accounts for revenue based on the completed contract method by deferring the recognition of revenue until it obtains formal acceptance due to the unique nature of customer acceptance terms which require that the functionality of the product passes a predetermined acceptance test as designed by the customer.

Revenue from time and materials outsourcing contracts is recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

F-19

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company provides database and marketing support services, including list rental, database development and supply, data analysis and call center services in Australia and New Zealand. In these single element arrangements, the Company maintains the databases as a source of marketing intelligence on medium and large companies and organizations in Australia and New Zealand. Direct marketers and other customers can use this data to develop and execute marketing campaigns, measure market penetration, and analyze marketing opportunities. Revenue from the Company’s advertising and marketing services is recognized upon the delivery of a specified customer list and other data from the Company’s databases to its customers. The delivery is in the form of a flat file of data which is delivered to the customer by email. These services are priced based on a pricelist. The price is determined based on the number of contacts and the amount of data supplied for each contact. The delivery of the customer list to the customer constitutes the contract delivery. The Company does not recognize revenue from these types of arrangements until all criteria in SAB 104 have been met, which coincides with the delivery of the customer list to the customer because at that point, the Company has persuasive evidence of the arrangement, the fee is fixed and determinable, delivery has occurred and collection is reasonably assured. The completed performance method is appropriate because the delivery of the data is of such significance to the customer that substantial performance has not taken place until the data is delivered.

Advertising and marketing consulting services revenue for fixed price contracts are recognized using the proportional performance method based on hours incurred. Revenue from time and materials outsourcing contracts are recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

Revenue from Internet web site maintenance agreements is deferred and recognized ratably over the terms of the related agreements, which are usually for periods of six months or one year.

Hardware revenue is recognized upon shipment by the hardware vendor and title has transferred to the customer.

CDC Games

CDC Games revenue is principally derived from the provision of online game services in the PRC. The Company operates its Massively Multiplayer Online Role-Playing Games (“MMORPGs”) under two models. The first revenue model is the traditional subscription based pay-to-play, where users purchase pre-paid cards (the “PP-Cards”) to play for a fixed number of hours. The second revenue model is free-to-play, under which players are able to access the games free of charge but may choose to purchase in-game merchandise or premium features to enhance their game playing experience. Such purchases can only be made through the use of PP-Cards.

All PP-Cards are sold to distributors and retailers across the country, from whom CDC Games collects payment on a prepaid basis. The distributors then resell the cards to end users and other retail points. CDC Games offered sales discounts primarily ranging from 13% - 15% to distributors or retailers. The sales discount represents the difference between the price at which the PP-Cards are sold and the face value of the PP-Cards.

End users are required to activate their PP-Cards by using access codes and passwords to exchange the value of these cards into game points, which are then deposited into their personal accounts. Points are consumed for online game services by trading them either for a pre-specified length of game playing time or in-game merchandise or premium features sold at online game stores.

All prepaid fees received by CDC Games from distributors are initially recognized as deferred revenue and revenue is recognized when the registered points are consumed for the Company’s online game services, i.e., when game playing time occurs or in-game merchandise or premium features are delivered, or when the end customers are no longer entitled to access the online game services after the expiration of the PP-Cards. Distributors are permitted to return unsold prepaid cards under certain conditions, including termination of game and disqualification of distributor status. Returns of PP-Cards during 2006 and 2007 were not material.

F-20

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

China.com

Revenue from internet and media mainly represents revenue from advertising, which is recognized on a straight-line basis over the period in which the advertisement is displayed, and when collection of the resulting receivable is probable, provided that no significant obligations of the Company remain. Advertising service fees from direct mailings are recognized when each advertisement is sent to a target audience.

MVAS

MVAS revenue is recognized when services are provided. The Company records revenue on a monthly basis based upon confirmations from the network operators. At the end of each reporting period, where an operator fails to provide the Company with a monthly statement confirming the amount of charges billed to its mobile phone users for that month, the Company uses information generated from its own internal system and historical financial data to make estimates of the billing reconciliation rate and collectible mobile services and applications fees, and revenue is accrued accordingly.

(m) Deferred Revenue

Deferred revenue represents cash received for software, business services, advertising and marketing services and online games in advance of services being rendered. The Company reports deferred revenue as a liability on the balance sheet when there is a contractual obligation at the balance sheet date to provide services or software product to the customer but the services or software have not yet been completed or the product has not yet been delivered, and thus no recognition of revenue has taken place.

(n) Income Taxes

Income taxes are determined under the liability method as required by SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). Income tax expense is based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, are not more likely than not to be realized.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under the interpretation, the Company shall recognize the financial statement effects of a tax position when it is more likely than not, based upon the technical merits, that the position will be sustained upon examination. Conversely, the Company shall derecognize a previously recognized tax position in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. A tax position that meets the more likely than not recognition threshold shall initially and subsequently be measured as the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with a taxing authority. The Company also recognizes interest expense by applying a rate of interest to the difference between the tax position recognized in accordance with FIN 48 and the amount previously taken or expected to be taken in a tax return. The Company classifies interest expense and related penalties, if any, with respect to its uncertain tax positions in the provision for income taxes.

F-21

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(o) Stock Compensation Expenses

On January 1, 2006, the Company and its subsidiary China.com adopted SFAS No. 123(R), “Share Based Payment” (“SFAS 123(R)”). Prior to January 1, 2006, the Company accounted for share-based employee compensation arrangements under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations, and complied with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under APB 25, share compensation expense was recognized by utilizing the accelerated expense attribution method over the vesting period of the share options based on the difference, if any, between the fair value of the underlying the Company’s shares at the date of grant and the exercise price of the share options. During 2007, the Company approved its subsidiaries CDC Software and CDC Games, 2007 Stock Incentive Plan. Upon creation of these plans, both CDC Software and CDC Games adopted SFAS 123(R).

Prior to the adoption of SFAS 123(R), cash flows resulting from the tax benefit related to equity-based compensation were required to be presented in the operating cash flows, along with other tax cash flows, in accordance with the provisions of EITF 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option” (“EITF 00-15”). SFAS 123(R) superseded EITF 00-15, amended SFAS No. 95, “Statement of Cash Flows” (“SFAS 95”), and requires tax benefits relating to excess equity-based compensation deductions to be prospectively presented in the statement of cash flows as financing cash inflows.

The Company adopted SFAS 123(R) using the modified prospective method. SFAS 123(R) requires measurement of compensation cost for all share-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The recognized expense is net of expected forfeitures, and the restatement of prior periods is not required.

The fair value of restricted shares is determined based on the number of shares granted and the quoted market price of the Company’s common shares. SFAS 123(R) did not change the accounting guidance for share-based payment transactions with parties other than employees as originally issued by EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). The fair value of options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures under SFAS 123, as amended by SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure” (“SFAS 148”). On March 29, 2005, the SEC published Staff Accounting Bulletin No. 107 (“SAB 107”), which provides the Staff’s views on a variety of matters related to share-based payments. SAB 107 requires that share-based compensation be classified in the same expense line items as cash compensation.

Equity-based compensation expense recognized under SFAS 123(R) in the consolidated statements of operations for the years ended December 31, 2006 and 2007 was $6,887 and $8,451 , respectively. The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a straight-line basis.

Prior to its adoption of SFAS 123(R), the Company accounted for equity-based compensation under the provisions and related interpretations of SFAS 148 and APB 25. Accordingly, the Company was not required to record compensation expense when stock options were granted to its employees as long as the exercise price was not less than the fair market value of the stock at the grant date. Also, the Company was not required to record compensation expense when the Company issued common stock under its Employee Stock Purchase Plan as long as the purchase price was not less than 85% of the fair market value of the Company’s common stock on the grant date.

F-22

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Had compensation cost for the Company’s and China.com Inc.’s share-based compensation plans been determined based on the fair value at the grant dates for awards under those plans in accordance with the provisions of SFAS 123(R), the Company’s net loss and net loss per share for the year ended December 31, 2005, would have been as follows:

	Year ended December 31, 2005
Net loss:
As reported	$	(3,514	)
Add: Stock compensation expense included in net loss		1,421
Deduct: Stock compensation expense determined under fair value method		(11,594	)
Pro forma net loss	$	(13,687	)
Basic loss per share:
As reported	$	(0.03	)
Pro forma	$	(0.12	)
Diluted loss per share:
As reported	$	(0.03	)
Pro forma	$	(0.12	)

For the purpose of the pro forma disclosures above, the estimated fair value of the options is amortized to expense over the options’ vesting period.

As further discussed in Note 19, on December 29, 2005, the Company accelerated the vesting of approximately 1.7 million unvested share options with exercise prices equal to or greater than $3.50 per share. The closing price of the Company’s common shares on December 28, 2005, the last trading day before the acceleration, was $3.14 per share. The acceleration was effective as of December 29, 2005. The options had a range of exercise prices of $3.79 to $7.38 and a weighted average exercise price of $4.32. The purpose of the acceleration was to enable the Company to avoid recognizing compensation expense associated with these options upon the adoption of SFAS 123(R) in January 2006. The Company also believed that because the options that were accelerated had exercise prices in excess of the current market value of it’s common stock, the options had limited economic value and were not fully achieving their original objective of employee retention and incentive compensation. Included in the computation of pro forma net loss and net loss per share for the period ended December 31, 2005, is $4,433 in share compensation expense related to the accelerated options.

F-23

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(p) Earnings (Loss) Per Share

The Company computes earnings (loss) per share in accordance with SFAS No. 128, “Earnings Per Share” (“SFAS 128”). The Company’s convertible notes (Note 11) meet the definition of a participating security in accordance with EITF 03-6 “Participating Securities and the Two-Class Method under SFAS No. 128”. Therefore, the convertible notes are included in basic earnings per share using the two-class stock method and in diluted earnings per share using the more dilutive of the if-converted method or two-class method. Under the provisions of SFAS 128, basic earnings or loss per share is computed by dividing the net income or loss available to common shareholders for the year by the weighted average number of common shares outstanding during the year. Diluted earnings or loss per share is computed by dividing the net income or loss available to common shareholders for the year, adjusted for any impact to net income or loss by dilutive common equivalent shares, by the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares, composed of incremental common shares issuable upon the exercise of stock options, are included in diluted earnings or loss per share to the extent that such shares are dilutive.

(q) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are carried at their original amount less an estimate made for uncollectible amounts. The Company does not charge interest on receivables.

(r) Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings or loss as well as additional other comprehensive income (loss) items. The Company’s other comprehensive income (loss) consists of unrealized gains and losses on available-for-sale securities, unrealized gains and losses on held-to-maturity securities and foreign currency translations, all recorded net of tax.

(s) Gain on Issuance of Shares by Subsidiaries

When a subsidiary sells its shares to unrelated parties at a price in excess of its book value, the Company’s net investment in that subsidiary increases. If at that time the subsidiary is not a newly-formed, non-operating entity, nor a research and development, start-up or development stage company, nor is there question as to the subsidiary’s ability to continue in existence, the Company records the increase as a non-operating gain in the Company’s consolidated statement of operations. Otherwise, the increase is reflected in the Company’s consolidated statement of shareholders’ equity.

(t) Retirement Costs

Retirement costs relating to defined benefit plans are determined based on assumptions concerning the future events that will determine the amount and timing of the benefit payments. Contributions relating to defined contribution plans are made based on a percentage of the employees’ salaries and are included in the Company’s consolidated statement of operations as they become payable.

(u) Business Restructuring Charges and Related Expenses

The Company accounts for exit or disposal activities in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”) and SFAS No. 112, “Employers’ Accounting for Postemployment Benefits” (“SFAS 112”). In accordance with SFAS 146, a business restructuring is defined as an exit activity that includes but is not limited to a program that is planned and controlled by management, and materially changes either the scope of a business or the manner in which that business is conducted. Business restructuring charges include

F-24

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other costs associated with consolidating or closing of facilities. SFAS 112 prescribes the accounting for the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement.

A liability is recognized and measured at its fair value for one-time termination benefits once the plan of termination is communicated to employees and it meets all of the following criteria: (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated, their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement, and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract. A liability is recognized and measured at its fair value for other associated costs in the period in which the liability is incurred.

(v) Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an Amendment of FASB Statements No. 133 and 140” (“SFAS 155”). It allows financial instruments that have embedded derivatives that otherwise would require bifurcation from the host to be accounted for as a whole, if the holder irrevocably elects to account for the whole instrument on a fair value basis. Subsequent changes in the fair value of the instrument would be recognized in earnings. The standard also clarifies which interest-only strips and principal-only strips are not subject to the requirement of SFAS 133; establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a Replacement of FASB Statement No. 125” (“SFAS 140”) to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued by the Company after January 1, 2007. SFAS 155 did not have an effect on the company’s financial position or results of operations for the year ended December 31, 2007.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 defines fair value, expands disclosures about fair value measurements, establishes a framework for measuring fair value in generally accepted accounting principles, and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. The Company is required to adopt SFAS 157 effective January 1, 2008 on a prospective basis. In February, 2008, the FASB issued Financial Statement of Position No. 157-2, “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. Management believes this standard will not have a material impact on its consolidated financial statements.

In September 2006, the SEC issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 requires the recognition of a plan’s overfunded or underfunded status as an asset or liability in the consolidated balance sheet and the recognition of changes in that funded status in the year in which the changes occur through comprehensive income. The Company settled its defined benefit plan obligations during 2006, therefore, SFAS 158 did not have an effect on the Company’s financial position, cash flows or results of operations for the year ended December 31, 2006 or 2007.

F-25

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Management believes this standard will not have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies and research and development. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. Consolidated net income should include the net income for both the parent and the noncontrolling interest with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. The effective date for both Statements is the beginning of fiscal year 2009. The Company has currently not determined the potential effects on its consolidated financial statements.

In April 2007, the FASB issued FSP FIN No. 39-1, which amended FIN No. 39,Offsetting of Amounts Related to Certain Contracts — an interpretation of APB Opinion No. 10 and FASB Statement No. 105(“FIN No. 39”), to indicate that the following fair value amounts could be offset against each other if certain conditions of FIN No. 39 are otherwise met: (a) those recognized for derivative instruments executed with the same counterparty under a master netting arrangement and (b) those recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. In addition, a reporting entity is not precluded from offsetting the derivative instruments if it determines that the amount recognized upon payment or receipt of cash collateral is not a fair value amount. FSP FIN No. 39-1 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the effects of this statement on its consolidated financial position and results of operations for 2008.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). This statement applies to the accounting for noncontrolling interests (previously referred to as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires noncontrolling interests to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. The effective date for SFAS 160 is the beginning of fiscal year 2009. The Company has currently not determined the potential effects on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact of adopting SFAS 161 on its consolidated financial statements.

F-26

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In April 2008, the FASB issued FASB Staff Position No. 142-3, "Determining the Useful Life of Intangible Assets" (“FSP 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the effect the implementation will have on its consolidated financial statements.

3. BUSINESS COMBINATIONS

(a) During 2007, the Company made the following acquisitions:

(i) Respond Group Ltd. (“Respond”)

In February 2007, the Company acquired a 100% equity interest in Respond through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, “Business Combinations” (“SFAS 141”), this acquisition has been accounted for under the purchase method of accounting, and the results of Respond’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Respond is a provider of enterprise class complaints, feedback and customer service solutions.

Under the terms of the share purchase agreement, the Company paid $14,743 at closing, subject to various adjustments. In addition, the Company agreed to pay up to a maximum of $14,000 of additional consideration based upon 2007, 2008 and 2009 revenue. Revenue must exceed $12,000 during each annual period for any additional consideration to be payable for that period. Any additional consideration will be paid in the form of cash. The additional compensation payments are subject to holdback in the event of breaches of representations and warranties, and various other adjustments. Management has determined that these contingent payments are not probable; therefore, no accrual has been recorded as of December 31, 2007.

F-27

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Respond has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $14,743, including direct expenses related to the acquisition, was as follows:

				Useful Life
Current assets	$	3,819
Property and equipment, net		304
Goodwill		11,634
Trade name		430		5 years
Developed technologies		2,080		7 years
Customer base		2,180		8 years
Noncompete agreements		30		3 years
Total assets acquired		20,477
Current liabilities		(5,734	)
Total liabilities assumed		(5,734	)
Net assets acquired	$	14,743

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

(ii) SaratogaSystems Inc. (“Saratoga”)

In April 2007, the Company acquired a 100% equity interest in Saratoga through merger. In accordance with SFAS 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Saratoga’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Saratoga is a provider of enterprise CRM and wireless CRM applications.

Under the terms of the agreement, the Company agreed to pay not more than $35,000 in cash in connection with the merger, with $30,000 paid at closing and $5,000 placed into escrow for an 18-month period and subject to holdback in the event of breaches of representations and warranties and various other adjustments.

The Company is continuing its plan of integration of certain activities at Saratoga. These activities are accounted for in accordance with EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination” (“EITF 95-3”). These costs primarily include the closure of facilities and employee terminations in the United States, United Kingdom and Sweden. Such costs have been recognized as liabilities assumed in the acquisition because the Company had begun to assess and formulate a plan to integrate these activities at the time of the acquisition of Saratoga. During 2007, the Company recorded a liability of $1,730 as a result of severance costs and relocation costs related to the acquisition with a corresponding adjustment to goodwill. At December 31, 2007, the Company had $398 remaining in accrued restructuring charges in the accompanying consolidated balance sheet related to this integration.

F-28

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Saratoga has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $34,846, including direct expenses related to the acquisition, was as follows:

				Useful Life
Current assets	$	7,908
Property and equipment, net		200
Other assets		318
Goodwill		26,634
Trade name		640		5 years
Developed technologies		2,560		6 years
Customer base		11,740		8 years
Total assets acquired		50,000
Current liabilities		(15,080	)
Long term liabilities		(74	)
Total liabilities assumed		(15,154	)
Net assets acquired	$	34,846

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

(iii) Guangzhou Optic Communications Co., Ltd (“Optic”)

In July 2007, the Company acquired a 100% equity interest in Optic through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Optic’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Optic is an online games publisher in China.

F-29

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Optic has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $13,214 , including direct expenses related to the acquisition was as follows:

				Useful Life
Current assets		3,903
Property and equipment, net		3,597
Goodwill		13,051
Distribution network		660		1 year
Developed technologies		117		0.5 year
Customer base		412		1 year
License agreements		3,608		2 -5 years
Total assets acquired		25,348
Current liabilities		(8,110	)
FIN 48 liability		(3,701	)
Deferred tax liability related to intangible assets		(323	)
Total liabilities assumed		(12,134	)
Net assets acquired	$	13,214

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the CDC Games segment, and such goodwill is not deductible for tax purposes.

(iv) Catalyst International, Inc. (“Catalyst”)

In September 2007, the Company acquired a 100% equity interest in Catalyst through merger. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Catalyst’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Catalyst is a provider of enterprise supply chain software and hardware solutions.

Under the terms of the agreement, the Company agreed to pay not more than $29,500 in cash in connection with the merger, with $25,000 paid at closing and $4,500 placed in escrow for a 24-month period and subject to holdback in the event of breaches of representations and warranties and various other adjustments.

The Company is continuing its plan of integration of certain activities at Catalyst. These activities are accounted for in accordance with EITF 95-3. These costs primarily include the closure of facilities and employee terminations in the United States and United Kingdom. Such costs have been recognized as liabilities assumed in the acquisition because the Company had begun to assess and formulate a plan to integrate these activities at the time of the acquisition of Catalyst. During 2007, the Company recorded a liability of $704 as a result of severance costs and relocation costs related to the acquisition with a corresponding adjustment to goodwill. At December 31, 2007, the Company had $149 in accrued restructuring charges in the accompanying consolidated balance sheet related to this integration.

F-30

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Catalyst has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $29,600, including direct expenses related to the acquisition was as follows:

				Useful Life
Current assets	$	8,523
Property and equipment, net		351
Goodwill		16,118
Trade name		1,230		5 -10 years
Developed technologies		2,110		6 years
Customer base		11,520		10 years
Total assets acquired		39,852
Current liabilities		(10,163	)
Long term liabilities		(89	)
Total liabilities assumed		(10,252	)
Net assets acquired	$	29,600

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. $9,797 of the goodwill was assigned to the Software segment and $6,321 of the goodwill was assigned to the Global Services segment. None of the goodwill is deductible for tax purposes.

(v) Industri-Matematik International Corp. (“IMI”)

In September 2003, the Company acquired a 51% equity interest in Cayman First Tier (“CFT”), an investment holding company organized in the Cayman Islands which owns a 100% equity interest in IMI for $25,000 in cash. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting and the results of IMI’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. IMI is a provider of supply chain management solutions in North America and Europe. The remaining 49% equity interest of CFT was held by Symphony Technology Group (“Symphony”), a private equity firm focused on enterprise software and services, which previously owned 100% of IMI.

In November 2003, CFT loaned $25,000 to Symphony (“Symphony Note”) to provide Symphony with additional capital to fund future Symphony investments. The loan was secured by Symphony’s 49% holding in IMI (through CFT). Principal and interest on the Symphony Note was due and payable in full in November 2007.

In November 2007, the Company, CFT and Symphony entered into a letter agreement whereby all amounts due and payable to CFT pursuant to the Symphony Note were deemed discharged and paid in full in exchange for the transfer by Symphony to CFT of all of Symphony’s rights, title, and interest in Symphony’s 49% interest in CFT. As of the date of the transfer, there was approximately $28,000 outstanding under the Symphony Note ($25,000 in principal and $3,000 in accrued interest).

F-31

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company has determined that the value of the 49% equity interest in CFT exceeded the carrying value of the Symphony Note. No impairment charge was recorded, and the Company’s interest in the Symphony Note of $14,282 was considered purchase price consideration for the 49% minority interest in CFT and was accounted for in accordance with SFAS No. 141.

The purchase price for IMI has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $14,282, including direct expenses related to the acquisition was as follows:

				Useful Life
Goodwill		11,177
Capitalized software		1,475		4 years
Customer base		4,621		4 years
Trade name		446		5 years
Total assets acquired		17,719
Deferred revenue		(1,785	)
Long term liabilities		(1,652	)
Total liabilities assumed		(3,437	)
Net assets acquired	$	14,282

Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

The purchase price allocations for each of the preceding acquisitions have not been finalized because the Company has not yet completed the analysis of acquired deferred tax assets and liabilities.

(vi) Pro Forma Effect of Respond, Saratoga, Optic and Catalyst Acquisitions

The following unaudited pro forma consolidated information reflects the Company’s consolidated results of operations for the years ended December 31, 2006 and 2007, as if the acquisitions of Respond, Saratoga, Optic and Catalyst had occurred on January 1, 2006 and 2007. These pro forma results have been prepared for informational purposes only and do not purport to be indicative of what the Company’s consolidated results of operations would have been had the acquisitions of these subsidiaries actually taken place on January 1, 2006 and 2007, and may not be indicative of future results of operations.

F-32

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	Year ended December 31,
	2006			2007
Revenue	$	385,721		$	443,476
Net loss from continuing operations	$	(1,397	)	$	(108,971	)
Net loss per common share - basic and diluted	$	(0.01	)	$	(1.03	)

(b) During 2007, the Company acquired the following individually insignificant entities for a total cost of $934, which was paid in cash. In accordance with SFAS 141, these acquisitions have been accounted for under the purchase method of accounting, and the results of each respective acquisition’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

(i) Vectra Corporation (“Vectra”)

In May 2007, a subsidiary of the Company completed the acquisition of a majority interest in Vectra, a provider of information security consulting services, managed services and enterprise security solutions in Australia. Under the terms of a share purchase agreement, the Company paid approximately $106 in cash at closing for such majority interest in Vectra.

(ii) PlanTec Limited (“PlanTec”)

In July 2007, a subsidiary of the Company completed the acquisition of 100% of the equity in PlanTec, a provider of information technology services to a broad range of industries including health, retail, telecommunications, waste management, transportation, state and federal governments in Australia. Under the terms of the purchase agreement, the Company paid approximately $557 in cash at closing, with additional consideration payable of up to $1,200 based upon 2008 and 2009 financial performance.

(iii) Snapdragon Consulting Pty. Ltd. (“Snapdragon”)

In October 2007, a subsidiary of the Company completed the acquisition of 100% of the equity in Snapdragon, an information service provider focused on Microsoft CRM based in Australia. Under the terms of the share purchase agreement, the Company paid approximately $271 at closing. In addition, the Company agreed to pay additional consideration payable in 2008 and 2009 based upon consolidated earnings of Snapdragon before interest income and interest expenses and income tax, but after amortization and depreciation. If Snapdragon achieves its forecast results, the total additional consideration payable would be approximately $1,400.

(iv) Acquisition of Franchise Partners

In May 2007, the Company acquired 19% of the equity in Business T G. Spain, a reseller of ERP, CRM & SCM products. Under the terms of the share purchase agreement, the Company paid $431 at closing. The Company accounts for this investment under the cost method of accounting.

In August 2007, the Company acquired 10% of the equity in CMT Argentina, a reseller of CRM and c360 products. Under the terms of the share purchase agreement, the Company paid $84 at closing. The Company accounts for this investment under the cost method of accounting.

F-33

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In November 2007, the Company acquired 19% of the equity in CDC CRM Solutions India, a reseller of CRM products. Under the terms of the agreement, the Company paid $2 at closing. CDC CRM Solutions India is a start-up entity, and the Company is the sole source of funding. Accordingly, the results of CDC CRM Solutions India’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

Goodwill recognized in conjunction with these individually insignificant acquisitions amounted to $171 and was assigned to the Global Services segment and such goodwill is not deductible for tax purposes.

In conjunction with these individually insignificant acquisitions, the Company acquired $1,057 of intangible assets, which has been classified as customer base and has a weighted-average useful life of 3 years.

(c) In 2006, the Company made the following significant acquisitions:

(i) Equity Pacific (the “17game Group”)

In August 2004, China.com Inc. entered into an acquisition agreement to acquire an 11.11% equity interest in the 17game Group. In November 2004, China.com Inc., through the conversion of certain convertible loans to the 17game Group, further increased its interest in 17game Group to 36.5%. In August 2005, China.com Inc. acquired an additional 11.5% interest in 17game Group through the purchase of shares from other shareholders and subscription of new shares, increasing its interest in 17game Group to 48%. These acquisitions resulted in a total consideration of $6,618 and were accounted for using the equity method.

The remaining 52% of 17game Group was acquired on March 17, 2006 for an aggregate total consideration of $18,000 with approximately $4,800 being paid in cash and $13,000 being paid in restricted China.com Inc. shares with the restrictions lapsing over a period of two years with 25% lapsing on the first six (6) months anniversary of closing and 12.5% lapsing on each subsequent three (3) month anniversaries of closing.

The purchase price of $24,618 for 17game Group has been allocated to the assets acquired and liabilities assumed based on management’s estimate of their respective fair values as of the date of the acquisition. Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the CDC Games segment, and such goodwill is not deductible for tax purposes.

(ii) DB Professionals, Inc. (“DBPI”)

On July 7, 2006, the Company acquired a 100% equity interest in DBPI through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of DBPI’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. DBPI’s core business is outsourced information technology support and consulting services. The acquisition of DBPI extended the Company’s business services operations on the west coast of the United States.

The Company acquired the business of DBPI for a cash payment of $8,850 and the Company agreed to an additional cash payment of $1,400, payable on December 31, 2007,

F-34

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

and subject to an adjustment onwards for any liability arising prior to the closing date. In addition, the Company also agreed to pay additional cash consideration of $1,400, payable April 30, 2008, based on a specified financial target, subject to an upward or downward adjustment. The contingent cash payment is also subject to adjustment in the event of breaches of representations and warranties. In March 2007, the Company entered into an addendum to its share purchase agreement pursuant to which, among other things, it accelerated the payment of the second cash installment payable to the sellers and paid $815 as an additional cash consideration to the sellers. Furthermore, in August 2007, the Company entered into a second addendum to the share purchase agreement pursuant to which it accelerated the payment of the third cash installment, amended such amount to $1,250 and released the sellers from any liability after November 30, 2007. Under this addendum, the Company paid $625 on execution and paid the remaining amounts in three equal installments of $208. In accordance with EITF 95-08 “Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination” (“EITF 95-08”), the Company has accounted for these additional contingent payments as adjustments to the purchase price and has recorded these payments as additional goodwill in the Company’s consolidated balance sheet as of December 31, 2007.

The goodwill was assigned to the Global Services segment, and such goodwill is deductible for tax purposes.

(iii) TimeHeart Science Technology Limited (the “TimeHeart Group”)

On November 28, 2006, China.com Inc. acquired a 100% equity interest in the TimeHeart Group through the acquisition of its entire issued share capital. In accordance with SFAS 141, this acquisition has been accounted for under the purchase method of accounting and the results of the TimeHeart Group’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. TimeHeart Group’s core business is value-added telecom services. The acquisition of the TimeHeart Group complements the Company’s current mobile services and applications platform and provides the Company with the opportunity to further expand its market share.

The components of the purchase price were: (i) cash consideration of $2,113; (ii) 27,320,490 restricted shares of China.com Inc. valued at $1,605 at the commitment date; (iii) 10% of the issued share capital of CDC Mobile Media Corporation, a subsidiary of the Company, valued at $1,794 at the date of acquisition; and (iv) contingent consideration based on a formula set out in the agreement, which would vary based on the performance of the TimeHeart Group in the fourth quarter of 2006 and in the year 2007. The contingent consideration was to be in the form of restricted shares of China.com Inc., equivalent to a maximum amount of $2,080. As of December 31, 2007, the criteria for this contingent consideration were not met and, accordingly, no adjustment for the contingent payment has been recorded in the consolidated financial statements.

The purchase price of $5,512 for the TimeHeart Group has been allocated to the assets acquired and liabilities assumed based on management’s estimate of their respective fair values as of the date of the acquisition. Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the MVAS segment, and such goodwill is not deductible for tax purposes.

(iv) Vis.align, Inc. (“Vis.align”)

On December 1, 2006, the Company acquired a 100% equity interest in Vis.align through merger. In accordance with SFAS 141, this acquisition has been accounted for

F-35

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

under the purchase method of accounting and the results of Vis.align’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Vis.align’s core business is providing worldwide IT support and managed services. The acquisition of Vis.align expands the Company’s services portfolio, generates cross-selling opportunities and offers customers additional end-to-end enterprise solutions and services.

The Company acquired the business of Vis.align for a cash payment of approximately $4,650. In addition to the fixed cash payment, a contingent payment of up to $7,520 is payable, partly in cash and partly in Class A common shares of the Parent, based upon 2007 and 2008 revenue. Revenue of Vis.align must exceed $20,000 during each annual period for any additional consideration to be payable for that period. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as adjustments to the purchase price and has accrued Nil at December 31, 2006 and 2007.

The goodwill was initially assigned to the Software segment and such goodwill is not deductible for tax purposes.

(d) During 2006, the Company acquired the following individually insignificant entities for a total cost of $11,550 which was paid primarily in cash. In accordance with SFAS 141, these acquisitions have been accounted for under the purchase method of accounting, and the results of each respective acquisition’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

(i) Horizon IT Outsourcing Business (“Horizon”)

In February 2006, Software Galeria Inc., the Company’s 51% owned subsidiary (“SGI”), acquired the IT consulting services business of Horizon, which offers outsourced information technology professional services in the U.S. and Canada, utilizing India-based resources. The acquisition enabled the Company to enhance the Global Services segment through growth of the outsourced information technology professional services line of business. Under the terms of the agreement, the Company paid $608 in cash at closing and paid an additional $608 of cash consideration in installments during 2006. The Company also agreed to pay additional cash consideration of $1,000 in 2007 and 2008, if earnings before interest, taxes, depreciation and amortization (“EBITDA”) generated from the purchased business were at least $1,350 in each year 2006 and 2007. The additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2006 EBITDA and 2007 EBITDA is less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as compensation because in accordance with the purchase agreement the payment is automatically forfeited if employment terminates and it was probable that certain performance criteria were going to be met. The Company has accrued $1,400 and $717 at December 31, 2006 and 2007, respectively, related to these additional consideration payments.

In addition, the Company agreed to issue to the sellers up to a 20% equity interest in the entity formed to acquire the assets purchased from Horizon in the event the EBITDA generated from the purchased business exceeds specified targets during each of 2006, 2007 and 2008. No equity has been issued to the sellers. The sellers also have the right to put their equity interest back to the Company between April 2009 and April 2011 at a predetermined and fixed cash consideration. The fair value of this put was determined to be a nominal amount.

F-36

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(ii) c360 Solutions Incorporated (“c360”)

In April 2006, the Company acquired 100% of the shares in c360, a global provider of CRM add-on products, industry-specific CRM solutions, and CRM development tools for Microsoft Dynamics CRM. The acquisition enabled the Company to expand globally through channel sales partners, and complements its market strategy to target mid-to-large sized organizations. Under the terms of the agreement, the Company paid $1,250 of cash and issued 50,000 of its unregistered Class A common shares at closing. The 50,000 shares were valued as of the commitment date at $225. In addition, the Company paid $1,641 of additional cash consideration during the year ended December 31, 2007, and agreed to issue to the sellers an additional 350,000 of its unregistered Class A common shares, to be issued in 50,000 share increments every three months through the twenty-one month anniversary of closing. The 350,000 shares were valued as of the commitment date at $1,572. An additional 200,000 unregistered Class A common shares of the Company may be earned by the seller based upon certain performance targets through 2009. In accordance with EITF 95-08, the Company has accounted for these additional contingent shares as compensation and has accrued $153 and $830 at December 31, 2006 and 2007, respectively.

Through February 29, 2008, the full 350,000 unregistered Class A common shares of the Company had been issued. In addition, the Company has agreed to issue up to an aggregate of 200,000 additional unregistered Class A common shares between the twenty-four and thirty-three month anniversary of closing in the event c360 achieves certain revenue targets. Approximately $475 of the purchase price is subject to adjustment for breaches of representations and warranties.

(iii) OST International, Inc. (“OSTI”)

In June 2006, the Company acquired OSTI. OSTI is a preferred third party vendor of consulting and outsourced IT services to many Fortune 500 companies, which expanded the Company’s business offerings to the Midwest region of the United States. Under the terms of the agreement, the Company paid $3,000 in cash at closing. A cash payment in the amount of $280 was made on March 31, 2007, for the net tangible assets of OSTI. In addition, the Company agreed to issue to the selling shareholder $330 worth of its unregistered Class A common shares prior to June 15, 2008, and an additional $220 worth of its unregistered Class A common shares prior to June 15, 2009. The Company also agreed to pay additional cash consideration in the amounts of $300 and $400 in the event 2007 and 2008 EBITDA for OSTI is $1,350 and $1,450, respectively. The additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2007 and 2008 EBITDA are less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as adjustments to the purchase price and has accrued Nil and $550 at December 31, 2006 and 2007, respectively.

(iv) MVI Technology (“MVI”)

In October 2006, the Company acquired MVI. MVI is a developer of real-time performance management solutions specifically designed for the food and beverage and consumer products industries that enable manufacturers to merge automated shop floor data, quality process control and manufacturing performance dashboards. Under the terms of the agreement, the Company paid approximately $5,273 of cash at closing. In addition, the Company agreed to pay up to a maximum of $12,000 of additional consideration based upon the revenue of MVI between months 1 through 12, 13 through 24 and 25 through 36 following the closing. Revenue must exceed $6,000 during each 12-month period for any

F-37

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

additional consideration to be payable for that period. Any additional consideration will be paid in the form of cash. The additional consideration payments are subject to adjustment in the event of breaches of representations and warranties, and various other adjustments. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as compensation and has accrued $164 and $672 at December 31, 2006 and 2007, respectively.

Goodwill recognized in conjunction with these individually insignificant acquisitions amounted to $4,098 and was assigned $2,520 to the Software segment and $1,578 to the Global Services segment, respectively; $1,578 of such goodwill is deductible for tax purposes.

(e) There were no acquisitions made during 2005.

(f) In 2005, 2006 and 2007, the Company paid $2,059, $752 and Nil, respectively, in additional earn-out considerations related to the acquisitions that were made before January 1, 2005. The Company will not be required to pay any additional earn-out consideration related to pre-January 1, 2005 acquisitions.

4. RESTRUCTURING AND OTHER CHARGES

The following table sets forth the components of restructuring and other charges recorded in the consolidated statements of operations:

	Year ended December 31,
	2005		2006		2007
Restructuring charges	$	1,667	$	1,974	$	931
MVAS impairment		—		—		2,398
CDC Games license impairment		—		—		4,213
Legal settlements		—		2,900		1,370
Gain on sale of ION Global		—		—		(6,745	)
Impairment of cost investments and other assets		—		—		6,889
Total restructuring and other charges, net	$	1,667	$	4,874	$	9,056

Restructuring Charges

For the year ended December 31, 2005, the Company incurred and charged to expense $3,055 in restructuring costs, principally at the Company’s subsidiaries, Ross Systems, Inc. (“Ross”), Pivotal Corporation (“Pivotal”) and IMI. In 2005, the restructuring liability at Pivotal was reduced by $1,354 due to a change in estimate relating to lease facility closure costs.

For the year ended December 31, 2006, the Company incurred and charged to expense $2,943 in restructuring costs, principally at the Company’s subsidiaries, Praxa Limited (“Praxa”) and IMI. At IMI, restructuring costs were $2,288, comprised of $732 related to employee termination costs and $1,556 for closure of offices. At Praxa, restructuring costs were $323, comprised of $132 related to employee termination costs and $191 in other costs. In 2006, the restructuring liability at IMI was reduced by $711 due to a change in estimate relating to workforce reduction, and the restructuring liability at Pivotal was reduced by $353 due to a change in estimate relating to a lease termination.

F-38

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

For the year ended December 31, 2007, the Company incurred and charged to expense $3,995 in restructuring costs, principally at the Company’s subsidiaries, IMI, Ross, Pivotal and Praxa. At IMI, restructuring costs were $2,130 , comprised of $2,096 related to employee termination costs and $34 for closure of offices. At Ross, restructuring costs were $666, comprised entirely of employee termination costs. At Pivotal, restructuring costs were $856, comprised of $306 related to employee termination costs and $550 related to legal fees. At Praxa, restructuring costs were $157, related to employee termination costs. The Company recorded adjustments to the restructuring liability of $3,064, which is primarily comprised of a $2,933 adjustment at Pivotal due to a change in estimate relating to a lease termination. During 2007, in connection with the Company’s acquisition of Saratoga and Catalyst, the restructuring liability was increased by $1,730 and $704, respectively, due to lease facility closure costs and workforce reduction costs.

At December 31, 2006 and 2007, the Company had a total of $6,010 and $3,289 , respectively, in accruals relating to the business restructuring activities. Pivotal, Ross and IMI are included in the Software segment. Praxa is included in the Global Services segment.

The changes in the accrued liability balance associated with the exiting costs for the year ended December 31, 2006, are as follows:

	Workforce Reduction			Lease Termination			Other Exit Costs			Total
Balance at December 31, 2005	$	1,878		$	5,190		$	286		$	7,354
Expensed in 2006		1,183			1,556			204			2,943
Adjustments to income		(711	)		(173	)		(85	)		(969	)
Amounts paid		(2,115	)		(965	)		(238	)		(3,318	)
Balance at December 31, 2006	$	235		$	5,608		$	167		$	6,010
Current	$	235		$	2,009		$	167		$	2,411
Non-current		—			3,599			—			3,599
	$	235		$	5,608		$	167		$	6,010

F-39

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The changes in the accrued liability balance associated with the exiting costs for the year ended December 31, 2007, are as follows:

	Workforce Reduction			Lease Termination			Other Exit Costs		Total
Balance at December 31, 2006	$	235		$	5,608		$	167	$	6,010
Expensed in 2007		3,371			74			550		3,995
Adjustments related to acquired subsidiaries		1,141			1,293			—		2,434
Adjustments to income		(164	)		(2,933	)		33		(3,064	)
Amounts paid		(3,773	)		(2,313	)		—		(6,086	)
Balance at December 31, 2007	$	810		$	1,729		$	750	$	3,289
Current	$	810		$	1,247		$	750	$	2,807
Non-current		—			482			—		482
	$	810		$	1,729		$	750	$	3,289

MVAS Impairment

See Note 9 for further discussion of the status of the MVAS segment and the Company’s goodwill impairment charge of $71,096.

In accordance with the Company’s policy on testing long-lived assets for impairment (Note 2(h)), the Company had a triggering event that required testing the intangible assets of the MVAS business for impairment. The Company performed its impairment test and determined that the intangible assets were impaired because the Company did not have sufficient discounted cash flows to support the remaining intangible assets due to the fact that it had made the decision to exit this business in 2008. Therefore, the Company wrote off all the remaining intangible assets that related to this segment, which equaled $2,398.

CDC Games Impairment

The Company’s business model in the CDC Games segment is to make investments in a diverse set of online computer game licenses. During 2006 and 2007 the Company entered into many license arrangements with numerous game developers for the right to produce the online computer games in specific countries and/or geographical regions. Not all of these games are successfully launched due to various factors: 1) development problems; 2) poor beta test results; 3) other games have better potential to become successful; and 4) limited capital resources. During 2007, the Company performed an assessment of the recoverability of the license fee assets and determined that they would not generate future cash flows from several licenses and, therefore, it impaired $4,213 of these license fees.

Legal Settlements

The Company and its subsidiaries are parties to other litigation and claims incident to the ordinary course of business. Periodically, the Company settles these disputes with the various counterparties. During the years ended December 31, 2005, 2006 and 2007, the Company recorded Nil, $2,900 and $1,370 in legal settlement costs.

F-40

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Gain on Sale of ION Global

In August 2007, the Company entered into four separate agreements to sell the principal assets and subsidiaries that comprised its Ion Global business for $9,000. Subsequent to the date of sale, the Company received an additional $665 due to a net asset adjustment. In total, these transactions resulted in a pretax gain of approximately $6,745 . Under the terms of these agreements, the Company agreed to sell (i) the assets related to the internet consulting services and website design and development of Ion Global (California), Inc.; (ii) substantially all of the assets of Ion Global Limited; (iii) all of the issued and outstanding shares of Ion Global Korea Ltd. held by Ion Global (BVI) Ltd.; and (iv) the “Ion Global” trademark. Ion Global was included within the Global Services segment and the goodwill associated with this transaction was allocated on a historical basis as Ion Global was not integrated into the Company.

The Company has concluded that the financial position, results of operations and cash flows from these businesses are immaterial to the overall results of the Company and therefore have not been reported as discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2007.

Impairment of Cost Investments and Other Assets

	Year ended December 31,
	2005		2006		2007
CDC Games cost investments	$	—	$	—	$	4,337
Corporate other assets		—		—		2,552
	$	—	$	—	$	6,889

As discussed above, CDC Games’ strategy is to make several investments in game licenses. In addition, the Company made some cost investments in online computer game development companies. During 2007 and early 2008, these game developers lost their access to the credit markets, thus raising questions as to their ability to continue as a going concern. Therefore, the Company recorded a charge of $4,337 to write-off its investment in these companies.

The Company has made cost investments in several companies during its history. In 2007, one of these companies filed bankruptcy and the Company was not able to recover its $2,403 investment. The Company also wrote off other assets of $149.

5. RESTRICTED CASH

The Company had $1,996 and $9,066 of restricted cash at December 31, 2006 and 2007, respectively.

At December 31, 2006 and 2007, $1,996 and $454, respectively, of restricted cash served as collateral for an irrevocable standby letter of credit that provides financial assurance that the Company will fulfill its obligations with respect to the operating lease agreement at Pivotal Corporation, an affiliate of the Company. The letter of credit is renewed annually. The cash is held in custody by the issuing bank and is restricted as to withdrawal or use.

At December 31, 2007 an additional $3,612 of restricted cash was held in various escrow accounts as collateral for pending litigation settlements and an additional $5,000 served as collateral for the Company’s line of credit agreement with a financial institution (Note 11).

F-41

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

6. ACCOUNTS RECEIVABLE

	As of December 31,
	2006			2007
Accounts receivable:
Amounts billed	$	62,781		$	91,219
Unbilled		7,029			5,081
		69,810			96,300
Allowance for doubtful accounts		(5,373	)		(8,688	)
Net	$	64,437		$	87,612

	Year ended December 31,
	2005			2006			2007
Allowance for doubtful accounts:
Balance at beginning of year	$	4,011		$	4,112		$	5,373
Additions		1,450			2,890			5,695
Write-offs, net of recoveries		(1,349	)		(1,629	)		(2,380	)
Balance at end of year	$	4,112		$	5,373		$	8,688

Unbilled receivables represent the recognized sales value of performance relating to the Software and Global Services segments, and these amounts had not been billed and were not billable to the customers at the balance sheet dates. The balances will be billed upon the fulfillment of certain conditions agreed between the parties.

7. INVESTMENTS

Available-for-sale securities consist of the following:

	December 31, 2006
	Estimated Fair Value		Gains in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income
Current:
U.S. government securities	$	10,869	$	—	$	(187	)
Total debt securities		10,869		—		(187	)
Common stock		3,532		1		(936	)
Total equity securities		3,532		1		(936	)
Total current available-for-sale securities		14,401		1		(1,123	)
Noncurrent:
U.S. government securities		73,036		—		(1,946	)
CDOs		39,009		—		(692	)
Total debt securities		112,045		—		(2,638	)
Total noncurrent available-for-sale securities		112,045		—		(2,638	)
Total available-for-sale securities	$	126,446	$	1	$	(3,761	)

F-42

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	December 31, 2007
	Estimated Fair Value		Gains in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income
Current:
U.S. government securities	$	74,595	$	—	$	(324	)
Less: restricted securities pledged for banking facilities		30,867		—		(116	)
Total debt securities		43,728		—		(208	)
Common stock		3,903		192		(385	)
Total equity securities		3,903		192		(385	)
Total current available-for-sale securities		47,631		192		(593	)
Noncurrent:
CDOs		23,736		111		—
Private equity securities		4,790		—		—
Total noncurrent available-for-sale securities		28,526		111		—
Total available-for-sale securities	$	76,157	$	303	$	(593	)

Included in the total available-for-sale debt securities as of December 31, 2006 and 2007, were debt securities with a market value of Nil and $30,867, respectively, which were pledged as compensating balances in connection with the credit lines granted to the Company as further discussed in Note 11.

The gross realized gains on sales of available-for-sale securities totaled $584, $392 and $516 in 2005, 2006 and 2007, respectively. The gross realized losses on sales of available-for-sale securities totaled $59, $224 and $2 in 2005, 2006 and 2007, respectively.

In 2006, the Company acquired an equity interest in preference shares in two CDOs coupled with a U.S. treasury strip for an aggregate nominal amount of $38,700. These investments are subject to variability as there is no stated coupon rate and the equity interest in these investments is subject to changes in returns on the collateralized debt backing the interest. The principal amount in these investments is backed by U.S. treasury strips and domestic corporate debt with S&P ratings ranging from “BBB” to “CC”.

The Company currently intends to hold the CDO investments as long-term investments, not to be traded in the near term. As the aforementioned investments are not publicly traded and have no active market, fair value as of December 31, 2006 and 2007, was determined by the respective brokers and validated by management based on expected cash flow returns discounted by rates consistent with rates of return offered on comparable investments with comparable risks. In addition at December 31, 2007, management based the fair value on binding quotes received from third parties for these investments. These valuations represent management’s best estimate of fair value of these investments at December 31, 2006 and 2007, and may or may not represent the ultimate value of these investments.

At December 31, 2006 and 2007, the Company evaluated the length of time and extent to which the fair market value of certain of its securities had been less than their cost, as well as the financial condition and performance of the issuer and the Company’s intention and ability to hold such securities to recovery or maturity. The Company records an impairment loss on securities for which the decrease in fair value of the securities was determined to be OTT. At December 31, 2006 and 2007, Nil and $13,497 respectively, of the Company’s CDOs were determined to have an OTT impairment.

F-43

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In conjunction with the purchase of the CDOs, the Company pledged certain held-to-maturity U.S. agency bonds as collateral under multiple note purchase agreements (Note 11). The pledged U.S. agency bonds are being used to repay the debt when such U.S. agency bonds mature. The total amounts of securities pledged at December 31, 2006 and 2007, were $30,504 and Nil, respectively, and the securities were classified as restricted investments.

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2006 and 2007.

	December 31, 2006
	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
U.S. Treasury obligations	$	—	$	—	$	114,423	$	2,372	$	114,423	$	2,372
CDOs		39,009		692		—		—		39,009		692
Marketable equity securities		3,047		61		—		—		3,047		61
Total	$	42,056	$	753	$	114,423	$	2,372	$	156,479	$	3,125

	December 31, 2007
	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
U.S. Treasury obligations	$	—	$	—	$	64,595	$	388	$	64,595	$	388
Marketable equity securities		179		53		948		333		1,127		386
Total	$	179	$	53	$	65,543	$	721	$	65,722	$	774

The unrealized losses on the Company’s investments in U.S. Treasury obligations were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be OTT impaired at December 31, 2006 and 2007.

The Company’s investments in marketable equity securities consist primarily of investments in common stock. The Company has evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Company’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider these investments to be OTT impaired at December 31, 2006 and 2007.

The Company did not have any securities classified as held-to-maturity at December 31, 2007. The following table summarizes the Company’s held-to-maturity securities pledged as collateral under multiple note purchase agreements (Note 11) as of December 31, 2006:

	December 31, 2006
	Net Carrying Amount		Unrecognized Holding Gains		Unrecognized Holding Losses			Estimated Fair Value
Current:
Restricted U.S. government securities	$	30,504	$	—	$	(341	)	$	30,163

F-44

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

For the years ended December 31, 2005, 2006 and 2007, the Company did not record any gross realized gains or gross realized losses on sales of held-to-maturity securities.

At December 31, 2006 and 2007, all available-for-sale securities were carried at market value and all held-to-maturity securities were carried at amortized cost. Temporary unrealized gains and losses at December 31, 2006 and 2007, related to the available-for-sale securities were reported in accumulated other comprehensive income (loss).

All available-for-sale and held-to-maturity debt securities held by the Company have maturity terms ranging from one to five years. At December 31, 2006 and 2007, the Company’s debt securities had maturity dates falling due as follows:

	December 31, 2006		December 31, 2007
Maturity date:
Available-for-sale
One year or less	$	10,869	$	74,595
Within one year to five years		73,036		—
Total available-for-sale	$	83,905	$	74,595
Held-to-maturity
One year or less	$	30,504	$	—
Total held-to-maturity	$	30,504	$	—

8. PROPERTY AND EQUIPMENT

	December 31, 2006			December 31, 2007
Leasehold improvements	$	2,160		$	2,962
Furniture and fixtures		761			557
Office equipment		1,303			960
Computer equipment		28,869			31,398
Motor vehicles		151			266
		33,244			36,143
Less: Accumulated depreciation		(23,704	)		(16,484	)
Property and Equipment, net	$	9,540		$	19,659

Depreciation expense was $3,866, $4,385 and $6,233 for the years ended December 31, 2005, 2006 and 2007, respectively.

At December 31, 2004, the Company classified a building and the related land with a carrying amount of $2,992 as held for sale. Such assets were stated at carrying value, which was less than fair value less cost to sell. The land and building were sold in 2005, resulting in a gain of $1,181.

F-45

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

9. GOODWILL

The changes in the carrying amounts of goodwill for the years ended December 31, 2006 and 2007 are as follows:

	Software			Global Services			CDC Games		China.com			MVAS			Total
Balance as of December 31, 2005	$	107,182		$	21,153		$	—	$	5,435		$	66,893		$	200,663
Goodwill acquired during the year		4,358			5,863			14,765		—			2,246			27,232
Subsequent realization of tax benefit from acquired companies		(27,362	)		(1,006	)		—		—			(451	)		(28,819	)
Foreign currency adjustment		2,886			493			—		183			2,412			5,974
Balance as of December 31, 2006		87,064			26,503			14,765		5,618			71,100			205,050
Goodwill acquired during the year		56,700			6,492			13,051								76,243
Purchase price adjustments		—			3,429			—		—			—			3,429
Disposal of ION Global		—			(1,295	)		—		—			—			(1,295	)
Reallocation of goodwill		(1,838	)		1,838			—		—			—			—
Subsequent realization of tax benefit from acquired companies		1,591			(233	)		—		—			—			1,358
FIN 48 adjustments		(1,844	)		—			—		—			—			(1,844	)
Goodwill impairment recorded during the year		—			—			—		—			(71,096	)		(71,096	)
Foreign currency adjustment		1,577			1,024			1,504		(163	)		(4	)		3,938
Balance as of December 31, 2007	$	143,250		$	37,758		$	29,320	$	5,455		$	—		$	215,783

The regulatory environment for the MVAS industry in China changed in mid-2006 and the Company believes that market conditions will continue to be challenging for the entire MVAS sector in the future. Since the onset of the regulatory changes, the Company has significantly reduced headcount and the marketing promotion expenses incurred for the MVAS business. In 2007, the Company worked hard to explore various strategies to achieve long term growth. These strategies included: 1) continue to move further upstream into the content provider segment of the business, 2) continue to launch popular mobile games and 3) develop mobile applications for enterprises and government offices in China.

However, as the regulatory environment for the MVAS industry continues to be difficult and the Company sees no reasonable instance where its MVAS business may turn profitable in the foreseeable future, in February 2008, the Company announced that it was in the process of reducing the MVAS workforce and intended to scale down its emphasis on this business. Later in 2008, the Company made the determination that it was winding down the operations of the MVAS business and would discontinue this segment.

At December 31, 2007, the Company performed its annual impairment test and determined that all of the goodwill associated with the Company’s MVAS segment was impaired because the discounted cash flows from this segment were negative. The Company wrote off all of the goodwill that was assigned to this segment.

In 2007 the Company recorded net purchase price adjustments of $3,429 related to 2006 acquisitions. Most notably, goodwill from the DBPI acquisition was adjusted $1,989 based on a renegotiated purchase price, which resulted from an amendment to the original purchase agreement. Also, a $987 adjustment was made to the fair market values of assets and liabilities of Vis.align subsequent to recording the initial purchase accounting entries.

In 2007 the Company reallocated the goodwill from the acquisition of Vis.align from the Software segment to the Global Services segment. Vis.align was originally acquired in December of 2006 and the goodwill was assigned to the Software segment. However, during the integration process, management determined that Vis.align’s product and service offerings were more closely aligned with the Global Services segment, therefore 100% of the goodwill recognized in conjunction with this acquisition was reallocated from the Software segment to the Global Services segment. All prior periods have been adjusted to reflect this reorganization.

F-46

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

10. INTANGIBLE ASSETS

The following table summarizes the Company’s amortized intangible assets as of December 31:

	2006							2007
	Gross carrying amount		Accumulated amortization			Net		Gross carrying amount		Accumulated amortization			Net
Capitalized software:
Capitalized software	$	20,897	$	(4,512	)	$	16,385	$	28,910	$	(8,865	)	$	20,045
Acquired technologies		40,160		(16,214	)		23,946		47,422		(24,046	)		23,376
Total capitalized software		61,057		(20,726	)		40,331		76,332		(32,911	)		43,421
Other intangible assets:
Customer base and contracts		47,593		(17,413	)		30,180		78,323		(26,725	)		51,598
Business licenses and partnership agreements		18,137		(6,092	)		12,045		32,420		(17,485	)		14,935
URLs		16,950		(4,238	)		12,712		16,950		(5,182	)		11,768
Trade names		1,020		(160	)		860		3,698		(764	)		2,934
Total other intangible assets		83,700		(27,903	)		55,797		131,391		(50,156	)		81,235
Total intangible assets	$	144,757	$	(48,629	)	$	96,128	$	207,723	$	(83,067	)	$	124,656

These intangible assets are amortized using the greater of the straight-line method over the estimated useful life of the respective asset or the undiscounted cash flows method. The Company had trademarks not subject to amortization with carrying values of $7,941 and $7,949 as of December 31, 2006 and 2007, respectively. Refer to Note 4 for information on the impairment of CDC Games license fee assets.

The following table summarizes the actual amortization expense and the estimated amortization expense for each of the past three years and each of the following five years based on the current amount of capitalized software and other intangible assets subject to amortization:

	Cost of Revenue				Operating Expenses		Total
Year ended December 31:	Capitalized Software		Acquired Technologies		Other Intangible Assets
Actual:
2005	$	1,049	$	6,105	$	6,084	$	13,238
2006	$	3,347	$	6,340	$	8,315	$	18,002
2007	$	5,802	$	11,239	$	12,657	$	29,698
Estimated:
2008	$	9,077	$	7,096	$	16,017	$	32,190
2009	$	8,563	$	5,589	$	12,823	$	26,975
2010	$	2,375	$	4,857	$	9,747	$	16,979
2011	$	19	$	3,545	$	5,918	$	9,482
2012 and thereafter	$	11	$	2,289	$	36,730	$	39,030

F-47

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

11. FINANCING ARRANGEMENTS

Financing arrangements at December 31, 2006 and 2007, were as follows:

	December 31,
	2006			2007
Proceeds from issuance of convertible notes	$	168,000		$	168,000
Discount on debt		(6,141	)		(4,877	)
Fair value of compound derivative at the end of the year		5,786			11,782
Convertible notes	$	167,645		$	174,905
Credit line agreements	$	—		$	33,355
Financing agreements		18,700			—
Other financing arrangements		291			537
Total short term debt	$	18,991		$	33,892

(a) Convertible Notes

In November 2006, the Company issued $168,000 aggregate principal amount of 3.75% senior exchangeable, unsecured convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act.

Conversion Option. Under the terms of the notes, the holders have the right to exchange such notes into common shares of the Company or upon a qualifying initial public offering (“IPO”), common shares of two wholly-owned subsidiaries of the Company based on a predetermined exchange price and when the IPO is consummated.

The aggregate number of common shares of the Company’s common stock that the Company may deliver to the holders in connection with exchanges of the notes is capped at a maximum of 19.99% of the number of shares of the Company’s common stock outstanding as of the issue date of the note.

The aggregate number of common shares of each subsidiary that the Company is required to deliver to holders in connection with exchanges of the notes is capped at a maximum of 33.33% of the number of shares of each subsidiary’s common stock outstanding as of the time of the exchange.

Upon the occurrence of an IPO of either subsidiary and if the holders of the notes decide to convert the notes into the respective subsidiary’s shares, the Company has agreed to satisfy the conversion option by delivering the existing shares of its investment into the subsidiary.

The investors have agreed to a lock-up period of up to 180 days following the date of an IPO prospectus during which the investors will refrain from selling any of each subsidiary’s respective common shares.

Contingent Written Put Option 1. If a qualified IPO (defined as gross proceeds before underwriting discounts, commissions and fees, to the Company and any of its selling shareholders are at least $100,000, provided that the total gross proceeds to all selling shareholders is not in excess of 30% of the total proceeds from the IPO) by either of the two wholly-owned subsidiaries of the Company has not occurred within the first three years of issuance of the notes, the holder has the right to force the Company to repurchase all or any portion of an outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest and (iii) any additional amounts. The accrued and unpaid interest amount will be based on an interest

F-48

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

premium of 12.5% applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement. The Company is required to bifurcate this put option pursuant to SFAS 133.

Contingent Written Put Option 2. If the Company or either of the two wholly-owned subsidiaries undergoes a change of control (defined as (i) a person or group obtaining 50% or more of the total voting power of all classes of capital stock, (ii) current members of the Board of Directors cease to constitute a majority of that board or (iii) consolidation into or merger with another entity or disposition of substantially all of the Company’s or the two wholly-owned subsidiaries assets, the holder has the right to force the Company to repurchase all or any portion of the outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest, (iii) any additional amounts and (iv) a premium of 5% of the principal. The accrued and unpaid interest amount will be based on an interest premium of 12.5% applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement. The Company is required to bifurcate this put option pursuant to SFAS 133.

Contingent Written Put Option 3. If the Company sustains an event of default (defined as (i) failure to pay when due any principal and/or interest due on the note, (ii) default or breach in the performance of any material covenants in the note agreement or failure to timely file with the SEC all reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended, (iii) default or breach in the performance of any of the material covenants in the registration rights agreement or payment of any liquidated damages under such agreement as and when due, (iv) bankruptcy, insolvency or the appointment of receivership of the Company or any of its material subsidiaries, (v) court decree that it is illegal for the Company or either of the two wholly-owned subsidiaries to comply with any of its material obligations under the note agreement and related agreements, (vi) any default of indebtedness of the Company or any of its subsidiaries that individually or in the aggregate exceeds $5,000 and such default results in the redemption or acceleration of such indebtedness, or (vii) judgment against the Company or any of its material subsidiaries for payment of money in excess of $5,000, which is not discharged within 60 days), the holder has the right to force the Company to repurchase all or any portion of the outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest, and (iii) any additional amounts. The accrued and unpaid interest amount will be based on the lower of 18% or the highest rate permitted by applicable law, applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement.

Contingent Payment 1. If a qualified IPO has not occurred by the maturity of the notes and assuming the notes are still outstanding at that time, the interest rate on a note will increase from 3.75% to 12.5%, applied retroactively to the principal of the note as of the issue date. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Contingent Payment 2. If a qualified IPO has occurred prior to the maturity of the notes and assuming the notes are still outstanding at maturity, the interest rate on a note will increase from 3.75% to 7.5%, applied retroactively to the principal of the note as of the issue date. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

F-49

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Contingent Payment 3. If an event of default has occurred and continues for 45 days, the interest rate on a note will increase from 3.75% to the lower of 18% or the highest rate permitted by applicable law and will be in effect from the date of the event of default to the earlier of (i) the date the event of default is cured or (ii) the date on which the put price with respect to Contingent Written Put Option 3 is fully paid. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Contingent Payment 4. The Company has entered into a registration rights agreement with respect to each of the common shares deliverable upon an exchange of the notes. Under the terms of the registration rights agreement, the Company and the two wholly-owned subsidiaries of the Company have agreed to file a registration statement covering the resale of the respective common shares within 45 days after the consummation of the IPO, and to use its reasonable best efforts to have such registration statement become effective no later than the later of 60 days following the filing date or the date on which the lock-up period expires. The Company has agreed to maintain the effectiveness of the registration statement until the later of such time as all of the respective common shares which may be delivered upon exchange may be re-sold pursuant to Rule 144(k) or May 13, 2012. In the event of any of the following: (i) the registration statement is not declared effective by the applicable deadlines; (ii) after the registration statement has been declared effective, sales cannot be made by a holder under the registration statement (except for limited exceptions related to allowed delays or suspensions described below); or (iii) an amendment to the registration statement required to be filed is not filed by the required date, the Company has agreed to pay the holders an amount of cash equal to 0.5% of the aggregate principal amount of notes then held by such holder, and for each month thereafter in which the default exists, an amount of cash equal to 1%, subject to a cap for each individual default of 6%, of the aggregate principal amount of the notes outstanding.

The Company is permitted to suspend without penalty the availability of the registration statement as a result of delaying the disclosure of material, nonpublic information concerning the Company for a maximum of 20 consecutive days and no more than 60 days in any period of 365 days.

The registration rights agreement represents a contingent obligation of the Company to make future payments under a registration payment arrangement. The Company accounts for the registration rights agreement in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”) and FASB Interpretation No.14, “Reasonable Estimation of the Amount of a Loss”. At December 31, 2006 and 2007, the Company did not accrue for contingent obligation related to the registration rights agreement because of the remote likelihood that it will incur a loss under the registration rights agreement.

Contingent Payment 5. If any of the taxing jurisdictions of the U.S., Cayman Islands or the PRC were to compel the Company to withhold or deduct a tax with respect to any amounts to be paid by the Company under the note, the Company is obligated to pay such additional amounts on behalf of the note holders. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Dividends Participation Right.The holder of a note participates in any distributions of cash or other assets that the Company or either of the two wholly-owned subsidiaries makes to the holders of the Company or the two wholly-owned subsidiaries’ common stock, respectively. Specifically, upon declaration/payment of any such dividends, the holder can elect to either (i) receive the same amount and type of consideration as the underlying common shareholders on an as-converted basis into which the note is convertible based on the applicable conversion price then in effect or (ii) reduce the conversion price then in effect by multiplying it by a ratio that is designed to maintain the value of the conversion option.

F-50

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In November 2006, the net proceeds of the $168,000 were allocated as follows: $161,683 to the convertible notes and $6,317 to the compound embedded derivatives liability. The initial discount on the convertible notes is being amortized as interest expense in the accompanying consolidated statements of operations over the five-year term using the effective interest method.

In accordance with SFAS 133, the Company aggregated and accounted for the embedded derivatives as one compound derivative. The compound embedded derivative is comprised of the following: Contingent Written Put Options 1 & 2, Contingent Payments 1-3 and 5. The Company used a binomial option pricing model to calculate the fair value of the Contingent Written Put Options 1 & 2 and the Contingent Payments 1 & 2. The Company valued the Contingent Payment 3 & 5 using a discounted present value approach. The Company values the embedded derivatives at each subsequent reporting period and records the change in value of the derivatives in its own line item in the accompanying consolidated statements of operations.

Details of the compound derivative for the years ended December 31, 2006 and 2007 are as follows:

	Year ended December 31,
	2006			2007
Fair value of compound derivative at the beginning of the year	$	6,317		$	5,786
(Gain) loss on change in fair value of derivatives		(531	)		5,996
Fair value of compound derivative at the end of the year	$	5,786		$	11,782

The Company recorded debt issuance costs of $3,460 in conjunction with the issuance of the convertible notes, which are included in prepayments and other current assets and other assets on the accompanying balance sheets. The debt issuance costs are being amortized over 5 years on a straight-lined basis. The amortization expense is recorded in interest expense on the accompanying statements of operations.

The estimated fair value of the Convertible Notes at December 31, 2006 and 2007 was $167,645 and $158,406, respectively.

(b) Financing Agreements

In 2006 in connection with the purchase of certain CDO investments (Note 7), the Company and China.com Inc. entered into separate and independent financing agreements with two financial institutions, collectively referred to as the “Bank”, in the aggregate nominal amount of $38,700. The Company entered into a credit facility agreement with the Bank pursuant to which the Bank agreed to pay the Company the aggregate amount of $38,700 for payment of the purchase price of the collateralized debt obligations. The Company pledged certain held-to-maturity U.S. agency bonds as collateral for payments due under the financing agreements. These pledged securities all had maturity dates within 12 months and interest rates ranging from 2.58% to 3.2%. As these securities matured, a portion of the loan was settled with the cash proceeds. At December 31, 2006, the aggregate balance of the financing agreements was $18,700, and the total amount of securities pledged at December 31, 2006, was $30,504, all of which was classified as a restricted investment. The weighted average interest rate on these agreements during 2006 and at December 31, 2006, was 5.6%. During 2007, the balance of $18,700 was paid and no pledged securities remained at December 31, 2007. The weighted average interest rate on these agreements during 2007 was 5.6%.

F-51

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(c) Credit Line Agreements

Under the line of credit arrangement with a financial institution, the Company may borrow up to $100,000 on such terms as the Company and the financial institution mutually agree upon. Interest is payable at the end of each interest period and is calculated using the London Inter-Bank Offered Rate (“LIBOR”) for the applicable interest rate period plus 0.2% per annum (4.42% at December 31, 2007). Except for loans of $10,000 that were repaid in 2006, this arrangement does not have a termination date but is reviewed annually for renewal. At December 31, 2006 and 2007, the Company had Nil and $30,000 outstanding, respectively, and the unused portion of the credit line was $100,000 and $70,000, respectively.

The Company utilized a margin facility to draw a revolving line of credit, with balances outstanding of Nil and $1,872 at December 31, 2006 and 2007, respectively. Interest is payable based upon LIBOR for the applicable interest rate period plus 0.75% per annum (4.97% at December 31, 2007). To secure the line of credit, the Company pledged some of the Company’s available-for-sale securities, which are recorded as restricted available-for-sale securities on the Company’s balance sheet.

A subsidiary of the Company had a line of credit with a financial institution in which the subsidiary may borrow up to $6,500. The loan had an outstanding balance of Nil and $905 as of December 31, 2006 and 2007, respectively and the unused portion of the credit line was $6,500 and $5,595 at December 31, 2006 and 2007, respectively. Accrued unpaid interest is payable monthly based upon LIBOR for the applicable interest rate period plus 2.20% per annum (6.42% at December 31, 2007). The loan is secured by the assets of the subsidiary.

Under the line of credit arrangement between a financial institution and subsidiary of the Company, the financial institution allows the subsidiary to borrow up to 80% of the subsidiary’s accounts receivable balance. There was an outstanding balance of Nil and $579 as of December 31, 2006 and 2007, respectively. Interest is variable and was 11.2% at December 31, 2007.

During 2006, the Company discontinued a $250,000 line of credit agreement with a financial institution. This line of credit consisted of a repurchase agreement pursuant to which the Company sold certain debt securities to the financial institution at a discounted price, and the financial institution agreed to sell the same debt securities back to the Company at the same price at the termination of the agreement. Throughout the term of the agreement the financial institution paid to the Company any income associated with the debt securities, and the Company paid to the financial institution interest calculated using LIBOR plus 0.2% per annum. Loans of $16,249 were repaid in 2006 prior to the line of credit being discontinued.

In connection with the credit lines granted to the Company, the Company maintained compensating balances of $1,996 and $5,454, in restricted cash at December 31, 2006 and 2007, respectively, available-for-sale debt securities of Nil and $30,867 at December 31, 2006 and 2007, respectively, and held-to-maturity debt securities with a net book value of $30,504 and Nil at December 31, 2006 and 2007, respectively.

The maturities of long-term debt for the five years subsequent to December 31, 2007, are as follows: 2008 - Nil; 2009 - Nil; 2010 - Nil; 2011 - $168,000; and 2012 - Nil.

The weighted average interest rates on short-term borrowings during the year were 3.6% in 2005, 4.6% in 2006 and 5.5% in 2007. The weighted average interest rates on short-term borrowings at December 31, 2006 and 2007, were 4.5% and 5.1% per annum, respectively.

As of December 31. 2007, the Company was in compliance with all of its debt covenants. During 2008, the Company determined that it violated certain terms of its Convertible Notes. See Note 23 for further details.

F-52

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) are as follows:

	Unrealized gains (losses) on available- for-sale securities			Foreign currency translation adjustments		Total
Balance at December 31, 2005	$	(2,588	)	$	5,217	$	2,629
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		681			—		681
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		11			—		11
Foreign currency translation adjustments		—			8,528		8,528
Realized losses, net of gains and income taxes included in net loss		(5	)		—		(5	)
Balance at December 31, 2006	$	(1,901	)	$	13,745	$	11,844
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		2,215			—		2,215
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		(270	)		—		(270	)
Foreign currency translation adjustments		—			11,835		11,835
Realized losses, net of gains and income taxes included in net loss		(450	)		—		(450	)
Balance at December 31, 2007	$	(406	)	$	25,580	$	25,174

13. RELATED PARTY TRANSACTIONS

The Company had the following material transactions with related parties during the years ended December 31, 2005, 2006 and 2007.

(a) BBMF Group Inc. In January 2007, the Company entered into a senior secured loan agreement with BBMF Group Inc. pursuant to which it provided a $3,000 loan to BBMF, for working capital purposes and to accelerate the business expansion of the BBMF group of companies. In January 2008 all principal amounts outstanding together with interest accrued thereon was converted into common shares of BBMF Group Inc. In addition, in December 2007, CDC Games entered into a purchase agreement with an existing shareholder of BBMF Inc. to purchase 346,800 shares of BBMF, Inc. for aggregate consideration of $6,800. Under the purchase agreement, CDC Games transferred $6,800 to an escrow account in December 2007. The share purchase was completed by CDC Games in January 2008 and is included as a component of “Investments under cost method” in the Company’s consolidated balance sheets. Effective January 2008, the Company will account for this investment under the equity method. Subsequent to CDC’s investment, BBMF, Inc. distributed all of the shares of BBMF Group, Inc. held by it to its shareholders on a pro rata basis and BBMF, Inc. Currently, CDC Games directly owns approximately 20.8% of BBMF Group, Inc.

BBMF Group Inc. is owned 16.03% by Outerspace Investments Limited, an entity in which Ms. Nicola Chu is the ultimate beneficial owner. Ms. Chu is the spouse of Mr. Peter Yip, the chief executive officer of CDC Corporation. In addition, Mr. Antony Ip serves as the chairman and a director of BBMF. Antony Ip is the son of Peter Yip. In addition, Mr. Ip serves as a director of CDC Games.

F-53

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(b) Golden Tripod Limited (“Golden Tripod”). For the years ended December 31, 2005, 2006 and 2007, the Company paid management fees of $77, $77 and $45, respectively, to Golden Tripod, an entity affiliated with Xinhua, one of the Company’s shareholders, for the provision of general management services to the Company, including consultancy fees provided by Golden Tripod.

(c) Dr. Raymond Ch’ien (“Dr. Ch’ien”).Effective August 30, 2005, Dr. Ch’ien resigned from his position as the Company’s Chief Executive Officer and Executive Chairman but continues to serve on the Board of Directors as its Chairman. In connection with his resignation, the Company entered into an agreement with Dr. Ch’ien which governs the terms and conditions of his resignation. Among other things, the agreement provides for the following:

• The Company agreed to give Dr. Ch’ien until December 31, 2005, in which to exercise 300,000 options that were granted to Dr. Ch’ien on May 11, 2004, at an exercise price of $7.77 pursuant to his executive services agreements and that had vested as of August 30, 2005. All of such options were cancelled on December 31, 2005;

• The Company agreed that 879,167 options granted to Dr. Ch’ien that had vested as of August 30, 2005, with exercise prices ranging from $2.6860 to $6.8125 per share shall not expire as long as Dr. Ch’ien remains on the Board of Directors, or until the relevant option termination date. As of May 31, 2008, Dr. Ch’ien had exercised 377,500 of such options and an additional 546,667 options remain outstanding;

• The Company agreed to grant, and did grant to Dr. Ch’ien, on January 1, 2006, 45,000 options under the 1999 Stock Option Plan. The exercise price of these options is $3.22, and such options vest in 3 equal semi-annual installments over an 18-month period from the date of grant; and

The Company agreed to continue to maintain a health insurance policy for Dr. Ch’ien, his spouse and immediate family with terms and conditions similar to that available to the Company’s other Hong Kong-based executives for as long as Dr. Ch’ien remains on the Board of Directors.

(d) Asia Pacific Online Limited (“APOL”).APOL is a Cayman Islands company that is 50% owned by the spouse of Peter Yip and 50% owned by a trust set up for the benefit of Mr. Yip’s children.

Effective April 12, 2006, the Company entered into an agreement with APOL, pursuant to which APOL would provide the services of Mr. Peter Yip as the Company’s Chief Executive Officer and Vice Chairman. The agreement has an initial term of three years, and is automatically renewable for successive terms of one year each.

In consideration of providing the services of Mr. Yip, the Company agreed to pay APOL cash remuneration of $.001 per annum; grant APOL options to purchase 2.4 million shares of the Company’s Class A common stock at an exercise price of $3.99 per share, which shall vest quarterly over a three-year period, the “Quarterly Vest Options”; and grant of options to purchase up to 2,399,999 of the Company’s Class A common stock at an exercise price of $3.99 per share, which shall vest in installments upon the achievement of specified milestones, which include the following, the “Contingent Options”:

• a public listing of the Company’s software related business;

F-54

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

• a listing of China.com Inc. outside of Hong Kong or moving China.com Inc.’s listing to the main board of the Hong Kong Stock Exchange;

• a public listing of the Company’s online games business;

• a public listing of any other business acquired by the Company after the date of this agreement or the acquisition of at least 20% of a company listed on a recognized stock exchange; and

• a public listing of any other business of the Company.

The consideration paid to APOL will be reviewed at the end of the initial term.

If the agreement with APOL is terminated for any reason other than cause, Mr. Yip’s death or by APOL by giving six (6) months advance notice, the Quarterly Vest Options accelerate and fully vest. In addition, in the event that Mr. Yip’s death or disability is tangibly related to the performance of the duties by Mr. Yip for the Company, then the Quarterly Vest Options shall accelerate and fully vest.

In the event a change of control of the Company occurs and the agreement is terminated for a reason other than cause, Mr. Yip’s death or by APOL giving six (6) months advance notice of termination, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. In addition, in the event a change of control of the Company occurs, and Mr. Yip remains in good standing with us or the Company’s successor through the first anniversary of such change in control, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. A change of control shall be deemed to occur in the event any person, other than the Company or APOL, becomes the owner of 20% or more of the combined voting power of the Company’s outstanding securities.

Under the terms of the agreement, the Company also agreed to reimburse APOL for Mr. Yip’s reasonable expenses incurred in the performance of his duties related to travel and entertaining, including duties performed on behalf of us, in accordance with the the Company’s internal policies.

In addition, as long as APOL holds at least 5% of the Company’s shares, APOL will be entitled to nominate one director to the Board of Directors, subject to the shareholders electing such nominee as a director at the next general meeting of shareholders. APOL and Mr. Yip have also agreed to a non-competition period of twelve (12) months after the termination of the agreement. In addition, the Company has agreed to reimburse all medical expenses incurred by Mr. Yip and his immediate family during the 36 months prior to the agreement.

As of December 31, 2007, APOL is the owner of 11,987,253 Class A common shares of the Company and had outstanding options to purchase additional 5,744,999 Class A common shares of the Company, of which 1,879,996 options were exercisable at December 31, 2007. Included in APOL’s outstanding option total were 600,000 Class A common shares of the Company, which were originally issued on March 25, 2004, with an exercise price of $8.25 per share, but were cancelled on January 3, 2006, and were replaced by a new grant with an exercise price of $3.22 per share. In addition, as of December 31, 2007, Mr. Yip held exercisable options to purchase 90,000 Class A common shares of the Company. Mr. Yip’s spouse also owns 4,496,396 Class A common shares of the Company.

(e) Harry Edelson lawsuit against the Company.In connection with Harry Edelson, a former director of the Company, lawsuit against the Company, the Company is paying the costs of outside counsel retained to represent Dr. Raymond Ch’ien and Peter Yip in this matter (Note 21). For the years ended December 31, 2005, 2006 and 2007, the Company paid $53, Nil and Nil, respectively, for such fees.

F-55

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

14. VARIABLE INTEREST ENTITIES

The MVAS and Internet content services are subject to foreign ownership restrictions in the PRC. To comply with the PRC laws and regulations that prohibit or restrict foreign ownership of telecommunications and other information services within the PRC, the Company provides substantially all of its MVAS and Internet portal services through its variable interest entities (“VIEs”). These VIEs are owned by certain employees of the Company who are PRC citizens (the “Nominees”). The Company funds the capital invested in these companies via interest-free loans to these PRC employees. These loans are eliminated in consolidation along with the capital of the VIEs. As of December 31, 2006 and 2007, the total amounts of interest-free loans to the Nominees were approximately $8,236 and $13,911, respectively. The Company has not pledged any assets as collateral for the obligations of any of the VIEs, and the creditors of the VIEs do not have recourse to the general credit of the Company.

The Company has entered into various contractual arrangements with the Nominees. Such contractual arrangements establish and facilitate the Company’s control over the operations of each of these VIEs. Under these contractual arrangements, each of the Nominees declares and undertakes that he or she holds equity interests in the relevant VIEs in trust for the Company. Each of these Nominees also undertakes to transfer his or her ownership in these entities to designees of the Company at any time for the amount of loans outstanding. These Nominees are also required to execute proxies to the designated representatives of the Company at the request of the Company to enable such representatives to attend and vote at shareholders’ meetings of these VIEs. Through these contractual arrangements, the Company is able to cause the individuals designated by it to be appointed as the directors and senior management of each of the VIEs.

The Company has also entered into exclusive technical service agreements with the VIEs under which the Company provides technical and other services to the VIEs in exchange for substantially all the net income of the VIEs. The technical services provided by the Company to the VIEs, as the case may be, relate to, among others, technologies in respect of MVAS and Internet content services, application software for network servers, system solutions, technical training and content development and design.

The following is a summary of the VIEs of the Company at December 31, 2007. All have been consolidated by the Company in accordance with FIN 46(R), because the Company is the primary beneficiary. The entities mentioned below have been organized under the laws of the PRC with Chinese names and do not have official English names.

(a) Beijing Newpalm Technology Co., Ltd.Beijing Newpalm Co., Ltd. (“Beijing Newpalm”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing Newpalm is owned by two PRC employees of the Company who own 50% each. The registered capital of Beijing Newpalm is $1,282.

(b) Beijing Wisecom Technology Co., Ltd.Beijing Wisecom Co., Ltd. (“Beijing Wisecom”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing Wisecom is 50% owned by the chief operation officer of China.com Inc., and the remaining 50% is owned by a PRC employee of the Company. The registered capital of Beijing Wisecom is $1,282.

(c) Beijing China.com Technology Services Co., Ltd.Beijing China.com Technology Services Co., Ltd. (“Beijing China.com”) is a PRC company which operates the portal “www.China.com”

F-56

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

under its Internet content company license and sells the online advertising space to advertisers or their agents. Beijing China.com is 40% owned by the chief operating officer of China.com Inc., and the remaining 60% is owned by two PRC employees of the Company who own 40% and 20%, respectively. The registered capital of Beijing China.com Inc. is $1,282.

(d) Beijing He He Technology Co., Ltd.Beijing He He Technology Co., Ltd. (“Beijing He He”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing He He is owned by two PRC employees of the Company who own 50% each. The registered capital of Beijing He He is $1,282.

(e) Shenzhen KK Technology Ltd.Shenzhen KK Technology Ltd. (“SZ KK”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. SZ KK is owned by two PRC employees of the Company who own 50% each. The registered capital of SZ KK is $1,282.

(f) Beijing TimeHeart Information Technology Ltd.Beijing TimeHeart Information Technology Ltd. ("TimeHeart") is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. TimeHeart is owned by two PRC employees of the Company who own 50% each. The registered capital of TimeHeart is $2,116.

(g) Beijing Straight Show Technology Co., Ltd.Beijing Straight Show Technology Co., Ltd. ("Straight Show") is a PRC company which provides online media publishing services in Mainland China. Straight Show is owned by two PRC employees of the Company who own 50% each. The registered capital of Straight Show is $128.

(h) Beijing Hulian Jingwei Technology Development Co., Ltd.Beijing Hulian Jingwei Technology Development Co., Ltd. ("Hulian Jingwei") is a PRC company which provides online game publishing services in Mainland China. Hulian Jingwei is owned by two PRC employees of the Company who own 70% and 30%, respectively. The registered capital of Hulian Jingwei is $128.

(i) Beijing Dianzong Advertising Media Co., Ltd. (formerly know as Beijing Xianda Hulian Technology Development Co., Ltd.)Beijing Dianzong Advertising Media Co., Ltd. ("Dianzong") is a PRC company which provides online game publishing services in Mainland China. Dianzong is owned by two PRC employees of the Company who own 50% each. The registered capital of Dianzong is $1,282.

(j) Guangzhou Optic Communications Ltd.Guangzhou Optic Communications Ltd. ("Guangzhou Optic") is a PRC company which provides online game publishing services in Mainland China. Guangzhou Optic is owned by three PRC employees of the Company who own 34%, 33% and 33% each, respectively. The registered capital of Guangzhou Optic is $3,972.

F-57

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

15. INCOME TAXES

Under the current tax laws of the Cayman Islands, the Company and its subsidiaries are not subject to tax on income or capital gains, and no Cayman Islands withholding tax is imposed upon payments of dividends by the Company to its shareholders. The subsidiaries in all geographical regions are governed by the respective local income tax laws with statutory tax rates ranging from 0% to 40%.

Significant components of the provision for income taxes are as follows:

	Year ended December 31,
	2005			2006			2007
Current tax expense allocated to:
Continuing operations	$	1,259		$	4,144		$	5,350
Discontinued operations		—			—			—
		1,259			4,144			5,350
Deferred tax expense (benefit) allocated to:
Realization of tax benefits of acquired entities reflected as a reduction of goodwill		3,828			5,857			396
Operations		(130	)		(6,939	)		5,104
Continuing operations		3,698			(1,082	)		5,500
Total income tax expense	$	4,957		$	3,062		$	10,850
	Year ended December 31,
	2005			2006			2007
International:
Current	$	741		$	2,774		$	4,385
Deferred		1,871			3,744			5,086
U.S.:
Current		518			1,370			965
Deferred		1,827			(4,826	)		414
Total income tax expense	$	4,957		$	3,062		$	10,850

Income before provision for income taxes consists of the following:

	Year ended December 31,
	2005			2006			2007
International	$	(1,900	)	$	20,292		$	(111,541	)
U.S.		4,802			(4,078	)		(1,193	)
Income (loss) before income taxes	$	2,902		$	16,214		$	(112,734	)

F-58

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Deferred tax liabilities and assets consist of the following:

	As of December 31,
	2006			2007
Deferred tax assets:
Short-term
Deferred revenue		3,652			3,660
Accruals and reserves		4,968			4,011
Other		3,949			668
Valuation allowance		(7,508	)		(4,916	)
Net short-term deferred tax assets		5,061			3,423
Long-term
Net operating loss carryforwards		77,727			81,573
Net capital loss carryforwards		3,902			5,347
Book and tax base differences on assets		2,172			2,533
Alternative minimum tax credit		385			66
Investment Tax Credit		—			2,761
Research and development		1,963			2,723
Deferred compensation		1			—
Other		—			7,342
Valuation allowance		(51,461	)		(57,769	)
Net long-term deferred tax assets		34,689			44,576
Total net deferred tax assets		39,750			47,999
Deferred tax liabilities:
Short-term
Other	$	(1,641	)	$	(942	)
Total short-term deferred tax liabilities		(1,641	)		(942	)
Long-term
Acquired intangible assets		(10,700	)		(19,798	)
Capitalized software		(1,477	)		(3,280	)
Indefinite lived assets		(2,764	)		(2,427	)
Other		(1,100	)		(2,991	)
Total long-term deferred tax liabilities		(16,041	)		(28,496	)
Total deferred tax liabilities		(17,682	)		(29,438	)
Net deferred tax asset	$	22,068		$	18,561

F-59

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The reconciliation of income taxes computed at the respective statutory tax rates, which ranged from 0% to 40% for each of the years ended December 31, 2005, 2006 and 2007, to the effective income tax provision recorded is as follows:

	Year ended December 31,
	2005			2006			2007
Income tax expense computed at the respective statutory rates	$	2,679		$	5,038		$	(13,712	)
Changes in tax rates		875			94			2,287
Tax holiday concession		(2,551	)		(5,052	)		(1,745	)
Impact of foreign earnings		—			—			3,704
Non-deductible items		2,594			3,288			16,715
Prior year true-up		—			(34	)		286
Other		—			129			(1,177	)
Non-taxable items		(1,938	)		—			—
Capital loss		—			—			(1,288	)
Credits		—			—			(1,569	)
Change in acquisition goodwill affecting provision for income taxes		—			—			243
Change in valuation allowance affecting provision for income taxes		3,298			(401	)		7,106
Total income tax expense from continuing operations	$	4,957		$	3,062		$	10,850
Total income tax expense (benefit) from discontinued operations	$	—		$	—		$	—

The Company considers itself to be permanently reinvested with respect to its investment in its foreign subsidiaries. Accordingly, no deferred income tax liability related to its foreign subsidiaries’ unremitted earnings have been included in the Company's provision for income taxes. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to income taxes and withholding taxes payable in various non-Cayman jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of unrecognized deferred income tax liability is not practicable because of the complexities associated with the hypothetical calculation.

Due to its history of losses, the Company does not believe that sufficient objective and positive evidence currently exists to conclude that the recoverability of certain of its deferred tax assets is more likely than not. Consequently, the Company has provided valuation allowances of $58,969 and $62,685 as of December 31, 2006 and 2007, respectively, to cover its net deferred tax assets. The valuation allowance for deferred tax assets has increased by $3,716 in 2007.

At December 31, 2007, the Company had world wide net operating loss carryforwards of approximately $299,496 for income tax purposes, $126,181 of which will expire from 2008 to 2028 and $173,315 of which can be carried forward indefinitely. In the U.S., the Company had federal and state net operating loss carryovers of $69,956 of which $60,060 are subject to significant limitation provisions. The Company also had a U.S. net capital loss carryover of $10,279 which will expire in 2008 and are subject to significant limitation provisions. The limitation provisions which are imposed by the U.S. Internal Revenue Service significantly restrict the Company’s ability to realize the benefits of these U.S. carryovers.

Effective January 1, 2007, the Company adopted FIN 48 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under the

F-60

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

interpretation, the Company shall recognize the financial statement effects of a tax position when it is more likely than not, based upon the technical merits, that the position will be sustained upon examination. Conversely, the Company shall derecognize a previously recognized tax position in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. A tax position that meets the more likely than not recognition threshold shall initially and subsequently be measured as the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with a taxing authority. The Company also recognizes interest expense by applying a rate of interest to the difference between the tax position recognized in accordance with FIN 48 and the amount previously taken or expected to be taken in a tax return. The Company classifies interest expense and related penalties, if any, with respect to its uncertain tax positions in the provision for income taxes.

Upon adoption of FIN 48, $2,505 was recorded as an adjustment to opening retained earnings.

For the year ended December 31, 2007 the Company recognized $1,530 of additional interest and penalties related to its unrecognized income tax benefits in its income tax provision. As of December 31, 2007 the Company’s cumulative FIN 48 accrual includes $1,950 in interest and penalties.

The following table describes the tax years that remain subject to examination by major tax jurisdictions:

Tax Jurisdictions	Open Years
United States	1995 - 2007
Non – United States	1999 -2007

The following table summarizes the changes to the gross amounts of unrecognized tax benefits during the year ended December 31, 2007.

	2007
Balance as of January 1,	$	7,406
Increases related to prior year tax positions		890
Decreases related to prior year tax positions		(3,450	)
Increases related to current year tax positions		4,103
Settlements		—
Lapse of statute of limitations		—
Foreign currency impact		151
Balance as of December 31,	$	9,100

These liabilities are primarily included as a component of long-term “Other liabilities” in the Company’s consolidated balance sheets because the Company generally does not anticipate that settlement of the liabilities will require payment of cash within the next twelve months. As of December 31, 2007, $4,300 of unrecognized tax benefits, if recognized in future periods, would impact our effective tax rate.

The Company operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited or subject to review by both domestic and foreign tax authorities.

It is expected that the amount of unrecognized tax benefits will change for various reasons in the next 12 months; however, the Company does not expect that change to have a significant impact on its financial position or results of operations.

F-61

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Newpalm (China) Information Technology Company Limited (“Newpalm”), a subsidiary of Palmweb Inc. established in the PRC, is governed by the Income Tax Laws of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (the “PRC Income Tax Laws”). Pursuant to the PRC Income Tax Laws, Newpalm is subject to corporate income tax at a rate of 33% (30% state income tax plus 3% local income tax). Under the PRC Income Tax Laws, foreign investment enterprises satisfying certain criteria receive preferential tax treatment. Because Newpalm has obtained the status of “manufacturing enterprise”, it is entitled to a reduced corporate income tax rate of 15%. During the year ended December 31, 2005, Newpalm received a confirmation from the relevant tax authorities that it would be fully exempt from PRC corporate income tax for the 2004 fiscal year and is entitled to a 50% tax reduction from 2005 to 2007 fiscal years. The tax concessions were $1,479 and $199 for the years ended December 31, 2006 and 2007, respectively, and the per share effects were approximately Nil and Nil for the years ended December 31, 2006 and 2007, respectively.

Beijing He He established in the PRC, is governed by the PRC Income Tax Laws. Under the PRC Income Tax Laws, enterprises satisfying certain criteria receive preferential tax treatment. Because Beijing He He has obtained the status of “new high technology enterprise” and is registered and operating in the Beijing Zhongguancun Science Park, it is entitled to a reduced corporate income tax rate of 15% upon expiry of its tax holiday period. Beijing He He was granted a “tax holiday” for exemption of PRC corporate income tax for three years starting from 2003 and is entitled to a 50% tax reduction, subject to official approval from the relevant PRC tax authority, for three consecutive years starting from 2006. The tax concession was $90 and $54 for the years ended December 31, 2006 and 2007, respectively, and the per share effect was approximately Nil and Nil for the years ended December 31, 2006 and 2007.

Pivotal Bangalore Software Development Private Limited (“Pivotal India”), a subsidiary of Pivotal Corporation established in India, is subject to Indian corporate income tax at a rate of 35%. Upon fulfilling certain criteria, Pivotal India is entitled to certain Indian corporate income tax exemptions due to its status as a “100% Software Export Oriented Unit” located in the Bangalore Software Technology Park. Management believes that the necessary criteria for tax exemption have been met for the full year of 2006 and 2007 and accordingly, no provision for Indian corporate income tax has been made for the years. The tax concessions were $289 and $356 for the years ended December 31, 2006 and 2007, respectively, and the per share effect was Nil and Nil for the years ended December 31, 2006 and 2007. The corporate income tax exemption is available until March 31, 2010. Management believes that Pivotal India will fulfill the necessary criteria for tax exemption in future periods. The effect of the future tax exemptions will be recognized when the fulfillment of such criteria is ascertained.

16. BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share for the years ended December 31, 2005, 2006, and 2007, are calculated using the two-class stock method, which is an earnings allocation formula that determines earnings (loss) per share for each class of common stock and participating security according to participation rights in undistributed earnings. Basic earnings (loss) per share are calculated by dividing net earnings available to common stockholders by weighted-average common shares outstanding during the period. Diluted earnings (loss) per common share are calculated by dividing net earnings available to common stockholders by weighted-average common shares outstanding during the period plus dilutive potential common shares. Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value. The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities.

F-62

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table sets forth the computation of basic and diluted earnings (loss) per share:

	2005						2006						2007
	Basic			Diluted			Basic			Diluted			Basic			Diluted
Numerator for basic and diluted earnings (loss) per share:
CDC Corporation net income (loss)	$	(3,514	)	$	(3,514	)	$	10,840		$	10,840		$	(105,033	)	$	(105,033	)
Net adjustments(a)		50			46			—			(9	)		—			—
Adjusted earnings (loss) available from continuing operations		(3,464	)		(3,468	)		10,840			10,831			(105,033	)		(105,033	)
Amount allocated to convertible noteholders		—			—			(223	)		(225	)		—			—
Net earnings (loss) available to common stockholders from continuing operations		(3,464	)		(3,468	)		10,617			10,606			(105,033	)		(105,033	)
Earnings (loss) available from discontinued operations		(50	)		(50	)		—			—			—			—
Net earnings (loss) available to common stockholders for per-share calculation	$	(3,514	)	$	(3,518	)	$	10,617		$	10,606		$	(105,033	)	$	(105,033	)
Denominator for basic and diluted earnings (loss) per share:
Weighted average number of shares after adjusting for share splits		111,085,657			111,085,657			107,950,544			107,950,544			107,160,474			107,160,474
Employee compensation related shares, including stock options(b)		—			—			—			1,128,848			—			—
Total weighted average number of shares		111,085,657			111,085,657			107,950,544			109,079,392			107,160,474			107,160,474
Per share amounts:
Earnings (loss) from continuing operations	$	(0.03	)	$	(0.03	)	$	0.10		$	0.10		$	(0.98	)	$	(0.98	)
Earnings (loss) from discontinued operations		(0.00	)		(0.00	)		—			—			—			—
Net earnings (loss) per share	$	(0.03	)	$	(0.03	)	$	0.10		$	0.10		$	(0.98	)	$	(0.98	)

(a) Includes the basic and dilutive effects of subsidiary-issued stock-based awards.

(b) The computation of diluted earnings (loss) per share did not assume the conversion of the Company’s stock options for 2005 and 2007 because their inclusion would have been antidilutive.

Income has been allocated to the common stock and convertible notes based on their respective rights to share in dividends. 2,263,642 and 16,200,579 weighted average shares related to the convertible notes were not included in the 2006 and 2007 diluted earnings per share calculations, respectively, because to do so would have been antidilutive.

Earnings-per-share amounts are computed independently for earnings (loss) from continuing operations, earnings (loss) from discontinued operations and net earnings (loss). As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the per-share amounts for net earnings.

During the years ended December 31, 2006 and 2007, the Company agreed to issue 343,617 and 162,936, respectively, Class A common shares in future years as additional purchase consideration for acquired subsidiaries. All of these shares have been included in the Company’s weighted average basic and diluted earnings per share calculation for the years ended December 31, 2006 and 2007.

17. CONCENTRATION OF RISKS

The Company is exposed to market risk from changes in foreign currency exchange rates and to a lesser extent, interest rates which could affect its future results of operations and financial condition. The Company manages the exposure to these risks through its operating and financing activities.

F-63

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Risks Related to CDO Investments (Note 6)

The equity portion of the Company’s investment in CDOs represents preference shares in the residual value of the underlying securities in the CDO. The underlying securities in the CDO are debt obligations of varying quality and risk. The preference shares are subject to the following types of risk:

Illiquidity and Market Value Volatility Risk

There can be no assurance of a liquid secondary market for our CDO investments. Our investment in preference shares could be particularly exposed to both liquidity and market value volatility risk if a CDO is required to liquidate assets and is forced to accept sales prices less than those paid for the assets or less than what the collateral manager may consider to be their fair value. The collateral consists primarily of securities not registered under the Securities Act of 1933 and should be considered illiquid. As a result, should a default or event of default occur under the CDO Indenture which would permit or require liquidation of the collateral, there is no assurance that a ready market will exist for the collateral, and the proceeds of such sale may not be sufficient to repay the preference shares in full.

Prepayment Risk

The amount and frequency of payments of amounts due to the holders of preference shares in a CDO investment will depend on, among other things, the level of LIBOR, treasury yields and spreads, returns with respect to eligible investments, the extent to which portfolio collateral becomes defaulted portfolio collateral and scheduled payments of principal or retirement prior to the stated maturity of the underlying collateral through mandatory or optional redemption, sale, maturity or other liquidation or disposition. In addition, the redemption (upon a mandatory redemption) or other payment of principal of the underlying collateral, which will depend in part on the foregoing factors, will result in reduced leverage and may affect the yield to holders of the preference shares.

Default and Yield Risk

Preference shares in a CDO investment typically bear the risk of loss or other shortfalls prior to any classes of securities which are senior to them, and as a consequence are extremely sensitive to the delinquency and loss performance of the underlying assets. Any such losses and other shortfalls with respect to the collateral will be borne first by the holders of the preference shares and then by the holders of the most junior class of notes then outstanding. Further, the rate at which principal payments will be received on the securities will be dependent on the rate of principal payments (including prepayments) on the underlying assets and may fluctuate significantly over time. Such fluctuations will affect the yield to the issuer, as holder of such securities. The entities housing these CDO investments are VIEs. However, as the Company’s ownership in each does not constitute a primary beneficiary interest, the Company has not consolidated either entity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, investments, accounts receivable, notes receivable and other receivables. The maximum amount of loss would be $124,773 if the counterparties for non-government sponsored entity security investments, accounts receivable, notes receivable and other receivables failed to perform.

The Company maintains cash and cash equivalents and investments with various financial institutions in the countries in which it operates. The Company has its policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy. The Company does not require collateral on these financial instruments.

Concentration of credit risk with respect to accounts receivable is limited due to the large number of entities comprising the Company’s customer base. The Company generally does not require collateral for accounts receivable.

F-64

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Concentration of Business Risk

Revenue has been derived from a number of clients that use the Company’s services. The top 10 customers accounted for 18%, 15% and 11% of the Company’s revenue for the years ended December 31, 2005, 2006 and 2007, respectively.

Dependence on Mobile Telecommunication Operators

The Company offers mobile services and applications to customers primarily through the two mobile network operators in the PRC, China Mobile Communications Corporation and China United Telecommunications Corporation, which serve most of the PRC’s mobile subscribers. Such dominant market position limits the Company’s negotiating leverage with these network operators. If the Company’s various contracts with either network operator are terminated or adversely altered, it may be impossible to find appropriate replacement operators with the requisite licenses and permits, infrastructure and customer base to offer the services, and the business would be significantly impaired. For the year ended December 31, 2007, the Company derived 2.1% of its total revenue from mobile services and applications business, a substantial portion of which was derived using the networks of the mobile network operators.

Current Vulnerability due to Certain Concentrations

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. The PRC government has been pursuing economic reform policies for the past 20 years. However, the PRC government may discontinue or alter such policies especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. Additionally, the PRC government’s pursuit of economic reforms may not be consistent or effective.

The PRC has recently enacted new laws and regulations governing Internet access and the provision of online business, economic and financial information. Current or proposed laws aimed at limiting the use of online services to transmit certain materials could, depending upon their interpretation and application, result in significant potential liability to the Company, as well as additional costs and technological challenges in order to comply with any statutory or regulatory requirements imposed by such legislation. Additional legislation and regulations that may be enacted by the PRC government could have an adverse effect on the Company’s business, financial condition and results of operations.

The Renminbi (“RMB”) is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of the exchange rates does not imply the convertibility of RMB into U.S. dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. At December 31, 2006 and 2007, the Company had RMB-denominated currency holdings amounting to $25,981 and $14,339, respectively.

F-65

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

18. SHARE CAPITAL

Pursuant to its articles of association, the Company is authorized to issue up to 800,000,000 shares of Class A common shares and up to 5,000,000 shares of preferred shares. The holder of each Class A Common Share is entitled to one vote on all matters upon which the Class A Common Share is entitled to vote. The Board of Directors is authorized, without further action by the shareholders, to issue preferred shares in one or more series and to fix the designations, powers, preference, privileges and relative participatory, optional or special rights and the qualifications, limitation or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of common shares. At December 31, 2006 and 2007, there are no preferred shares outstanding.

The following table sets forth the number and price range of shares issued during the years ended December 31, 2005, 2006 and 2007, from the exercise of stock options granted to employees, and the number and price range of shares repurchased and retired during the years ended December 31, 2005, 2006 and 2007:

	Year ended December 31, 2005		Year ended December 31, 2006		Year ended December 31, 2007
Class A common shares issued for exercise of stock options		281,523		2,400,796		2,926,391
Range of purchase prices per share	$	0.43 to $3.49	$	0.43 to $8.34	$	0.43 to $8.93
Class A common shares issued for exercise of employee stock purchase plan		177,873		161,232		191,649
Range of purchase prices per share	$	2.58 to $2.67	$	4.49 to $9.07	$	7.33 to $9.04
Class A common shares repurchased		—		6,088,624		2,794,314
Range of repurchase prices per share		—	$	3.91 to $5.67	$	3.96 to $9.58

During the year ended December 31, 2005, 12,423 Class A common shares of the Company were issued at $4.35 per share for the acquisition of Ross.

During the year ended December 31, 2006, 15,710 Class A common shares of the Company were issued at prices ranging from $4.14 to $5.73 per share in connection with the acquisition of Ross.

During the year ended December 31, 2006, 150,000 Class A common shares of the Company were issued at prices ranging from $3.95 to $6.15 per share for the acquisition of c360.

During the year ended December 31, 2006, the Company agreed to issue 343,617 Class A common shares during future years as additional purchase consideration for acquired subsidiaries.

F-66

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

19. STOCK-BASED COMPENSATION PLANS

CDC Corporation

2005 Stock Incentive Plan

On November 4, 2005, the Company’s shareholders approved the 2005 Stock Incentive Plan (the “2005 Plan”). The purpose of the 2005 Plan is to make available incentives, including alternatives to stock options, that will assist the Company to attract and retain key employees and to encourage them to increase their efforts to promote the business of the Company and its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. During 2007, options for the purchase of an additional 10 million shares were approved by the shareholders of the Company, which increased the options available for grants for the purchase of shares to 30 million.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares (“Shares”) which may be issued pursuant to all awards under the 2005 Plan is the aggregate number of Shares available for future grants and Shares subject to awards which expire or are cancelled or forfeited under the 1999 Stock Option Plan (the “1999 Plan”). As of December 31, 2007, of the 30 million Shares reserved for grant under the 1999 Plan, 10,674,176 Shares remain available for future grant, and there are 12,822,678 Shares to be issued upon the exercise of outstanding options under the 1999 Plan. The 2005 Plan is administered by a committee of the Board of Directors, which will determine, at its discretion, the number of shares subject to each option granted and the related exercise price and option period.

1999 Plan

The Company’s 1999 Plan was replaced by the 2005 Plan described above. Upon adoption of the 1999 Plan, 12 million Shares were reserved for issuance to employees of, consultants and advisors to the Company and its subsidiaries. During 2000, options for the purchase of an additional 8 million Shares were made available, which increased the options available for grants for the purchase of Shares to 20 million. Options granted under the 1999 Plan vest ratably over a period of 1 to 4 years, and have terms of 10 years.

On December 29, 2005, the Company’s Compensation Committee approved the acceleration of vesting of certain unvested and “out of the money” stock options with exercise prices equal to or greater than $3.50 per share which were previously awarded to employees, including executive officers and directors, under the 1999 Plan. The acceleration was effective as of December 29, 2005. Options to purchase approximately 1.7 million shares of common stock, or 37 % of the Company’s outstanding unvested options, were subject to the acceleration. The options had a range of exercise prices of $3.79 to $7.38 and a weighted average exercise price of $4.32. The purpose of the acceleration was to enable the Company to avoid recognizing compensation expense associated with these options upon the adoption of SFAS 123(R) in January 2006. The Company also believed that because the options that were accelerated had exercise prices in excess of the current market value of the Company’s common stock, the options had limited economic value and were not fully achieving their original objective of employee retention and incentive compensation.

F-67

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning outstanding options and stock appreciation rights at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	29,103	6.64	$	0.44	$	129
$1.06-$1.98	26,173	6.26	$	1.70		83
$2.05-$2.99	746,475	6.10	$	2.84		1,513
$3.02-$3.80	2,546,346	7.57	$	3.27		4,085
$3.95-$5.00	6,829,843	8.10	$	4.18		4,747
$5.06-$9.94	2,379,276	7.96	$	6.73		—
$10.66-$19.19	69,122	6.21	$	12.41		—
$21.62-$29.92	165,940	2.39	$	24.34		—
$32.13-$48.41	15,200	2.19	$	39.02		—
$58.56-$68.81	15,200	2.32	$	59.12		—
December 31, 2007 outstanding	12,822,678				$	10,557

The following table summarizes information concerning exercisable options and stock appreciation rights at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	28,982	6.64	$	0.44	$	128
$1.06-$1.98	25,629	6.26	$	1.69		81
$2.05-$2.99	625,111	5.80	$	2.83		1,278
$3.02-$3.80	1,500,774	7.29	$	3.29		2,365
$3.95-$5.00	2,896,511	7.76	$	4.41		1,328
$5.06-$9.94	1,044,762	6.26	$	6.30		—
$10.66-$19.19	29,122	2.32	$	15.24		—
$21.62-$29.92	165,940	2.39	$	24.34		—
$32.13-$48.41	15,200	2.19	$	39.02		—
$58.56-$68.81	15,200	2.32	$	59.12		—
December 31, 2007 exercisable	6,347,231				$	5,180

F-68

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning options and stock appreciation rights expected to vest at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	87	6.65	$	0.43	$	—
$1.06-$1.98	392	6.65	$	1.84		1
$2.05-$2.99	87,382	7.66	$	2.93		169
$3.02-$3.80	827,712	7.96	$	3.22		1,362
$3.95-$5.00	3,839,999	8.33	$	4.00		3,348
$5.06-$9.94	960,850	9.28	$	7.06		—
$10.66-$19.19	28,800	9.04	$	10.36		—
$21.62-$29.92	—	—		—		—
$32.13-$48.41	—	—		—		—
$58.56-$68.81	—	—		—		—
December 31, 2007 expected to vest	5,745,222				$	4,880

A summary of the Company’s stock option and stock appreciation rights activities and related information for the years ended December 31, 2005, 2006 and 2007, is as follows:

	2005
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		12,531,297		$	5.60
Granted		2,629,500		$	3.03
Forfeited		(3,212,136	)	$	6.12
Exercised		(281,523	)	$	1.33
Outstanding at the end of the year		11,667,138		$	4.98
Exercisable at the end of the year		9,523,610
Weighted-average grant-date fair value of options granted during the year	$	1.67
Intrinsic value of options exercised during the year	$	363

F-69

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	2006
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		11,667,138		$	4.98
Granted		9,252,999		$	4.15
Forfeited		(2,597,132	)	$	7.15
Exercised		(2,492,673	)	$	3.18
Outstanding at the end of the year		15,830,332		$	5.19
Exercisable at the end of the year		7,247,170		$	5.11
Weighted-average grant-date fair value of options granted during the year	$	2.51
Intrinsic value of options exercised during the year	$	7,934

	2007
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		15,830,332		$	5.19
Granted		1,466,892		$	6.17
Forfeited		(1,471,598	)	$	5.82
Exercised		(3,002,948	)	$	4.01
Outstanding at the end of the year		12,822,678		$	5.06
Exercisable at the end of the year		6,347,231		$	4.79
Weighted-average grant-date fair value of options granted during the year	$	3.14
Intrinsic value of options exercised during the year	$	14,361

The Company accounts for stock appreciation rights in accordance with SFAS 123(R). Stock appreciation rights are settled in shares and have similar characteristics as stock options. The Company issued no stock appreciation rights in 2005, and it issued 2,878,000 and 1,466,892 in 2006 and 2007, respectively. Included in the number of options are 2,789,002 stock appreciation rights outstanding at December 31, 2007.

Compensation expense charged to operations during the years ended December 31, 2006 and 2007, relating to stock options and stock appreciation rights was $3,902 and $5,426, respectively. As of December 31, 2007, the Company had unrecognized compensation expense of $8,383 before taxes, related to stock option awards and stock appreciation rights. The unrecognized compensation expense is expected to be recognized over a total weighted average period of 1.0 years.

The fair value of options that vested during the years ended December 31, 2005, 2006 and 2007, was not significantly different than the amount of stock compensation expense that was charged to operations during the years ended December 31, 2006 and 2007, or that would have been charged to operations during the year ended December 31, 2005 under SFAS 123(R) as disclosed within Note 2. Net cash proceeds from the exercise of stock options during the years ended December 31, 2005, 2006 and 2007, were $1,052, $8,512 and $11,121, respectively.

F-70

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Management estimated the fair value of stock option awards on the date of grant or modification using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected share price volatility and average expected term. The main inputs into the model are estimated by management based on historical performance and management’s expectations of future results on the date of grant or modification. The fair value of each option grant was estimated at the date of grant or modification using the following weighted average assumptions:

	Year ended December 31,
	2005		2006		2007
Range of U.S. risk-free interest rates	4.12% to 4.76	%	4.50% to 4.76	%	3.58% to 5.04	%
Weighted expected life of options	5 years		6 years		5 years
Range of volatility	58% to 69	%	55% to 58	%	61% to 62	%
Dividend yield	Nil		Nil		Nil

2004 Employee Share Purchase Plan

During 2004, the Company established and implemented an employee share purchase plan, which qualified as a non-compensatory plan under Section 423 of the U.S. Internal Revenue Code. The plan allows qualified employees to purchase Class A common shares during the relevant six-month plan period. Qualifying employees are allowed to purchase up to 1,000 Class A common shares for each plan period. The maximum number of Class A common shares, issuable under the plan is 2,000,000, and a maximum of 300,000 shares will be available for issuance during each plan period. Compensation expense charged to operations during the years ended December 31, 2006 and 2007, relating to the employee share purchase plan was $324 and $454.

China.com Inc.

The Company’s China.com Inc. subsidiary is registered on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (“GEM”) and maintains certain stock-based compensation plans in addition to those maintained by the Company. China.com Inc. adopted a pre-IPO share option plan (the “Pre-IPO Plan”) and post-IPO share option plan (the “Post-IPO Plan”) on February 25, 2000, which will remain in force for 10 years. On April 30, 2002, China.com Inc. adopted a 2002 share option plan (the “2002 Plan”) which has an option life of 10 years. The Pre-IPO Plan and the Post-IPO Plan were operated for the purpose of recognizing the contributions of certain directors, employees, consultants and advisors of China.com Inc. and employees of the Company to the growth of China.com Inc. and/or the listing of shares of China.com Inc. on the GEM, while the 2002 Plan was operated for providing incentives and rewards to eligible participants who contribute to the success of China.com Inc.’s operations. Eligible participants of the Pre- IPO Plan and the Post-IPO Plan include China.com Inc.’s directors, consultants and advisors of China.com Inc., and employees of China.com Inc. The eligible participants of the 2002 Plan include China.com Inc.’s directors, full-time and part-time employees, advisors, consultants, vendors and suppliers of China.com Inc. and employees of the Company (as defined in the 2002 Plan).

The maximum number of shares which can be granted under the Pre-IPO Plan and the Post-IPO Plan must not exceed 10% of the issued share capital of China.com Inc. as at the date of listing of the shares on the GEM. For the 2002 Plan, the maximum number of shares which can be granted must not exceed 10% of the issued shares of China.com Inc. at the date of approval of such plan. At December 31, 2007, the number of shares issuable under the Pre-IPO Plan, the Post-IPO Plan and the 2002 Plan was 11,980,000, 1,279,012 and 340,899,322, respectively, which represented

F-71

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

approximately 8.08% in aggregate of China.com Inc.’s shares in issue at that date. Pursuant to the Pre-IPO Plan and the Post-IPO Plan (the “Plans”), no participant shall be granted an option which, if accepted and exercised in full, would result in such participant’s maximum entitlement exceeding 25% of the aggregate number of shares of China.com Inc. subject to the Plans. The maximum number of shares issuable as share options to each eligible participant in the 2002 Plan in any 12-month period up to and including the date of the grant to such participant shall not exceed 1% of the issued share capital of China.com Inc. from time to time. Any further grant of options in excess of this 1% limit must be subject to shareholders’ approval with that participant and associates abstaining from voting.

Share options granted to a director, chief executive, management shareholder or substantial shareholder of China.com Inc., or to any of their associates, are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of China.com Inc., or to any of their associates, in excess of 0.1% of the shares of China.com Inc. in issue at any time or with an aggregate value (based on the closing price of China.com Inc.’s shares at the date of the grant) in excess of $641, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of share options under the Plans must be accepted within 14 days from the date of the offer, upon payment of a nominal consideration of $.0001 in total by the grantee. For the 2002 Plan, the offer of a grant of share options must be accepted within 7 days from the date of the offer upon payment of a nominal consideration of $.0001 in total by the grantee. The exercise period of the share options granted is determinable by the directors. However, for the Plans, each of the grantees of the options is not allowed to exercise in aggregate in excess of 25%, 50% and 75% of shares comprised in the options granted within the first, second and third years from one year after the date of grant of options, respectively. All option shares must be exercised within 10 years from the date of grant of options.

The exercise price for the Pre-IPO Plan is determined by the final Hong Kong dollar price per share at which the shares are subscribed pursuant to the placing of 640,000,000 shares by China.com Inc. to professional and institutional investors and other persons made on the terms of the prospectus issued by China.com Inc. on 28th February, 2000 ($0.24 per share).

The exercise prices of the Post-IPO Plan and the 2002 Plan share options are determinable by the directors, but may not be less than the higher of (i) the closing price of China.com Inc.’s shares on the Stock Exchange on the date of grant of the share options; (ii) the average Stock Exchange closing price of China.com Inc.’s shares for the five trading days immediately preceding the date of the grant of the share options; and (iii) the nominal value of the share.

The share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

At December 31, 2007, the remaining life of the Plans is two years and two months, and the remaining life of the 2002 Plan is four years and four months.

F-72

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning outstanding options at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	32,290	5.15	$	0.02	$	1
$0.037-$0.044	228,392	3.51	$	0.04		2
$0.065-$0.092	341,917,652	8.33	$	0.06		—
$0.24	11,980,000	2.18	$	0.24		—
December 31, 2007 outstanding	354,158,334				$	3

The following table summarizes information concerning exercisable options at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	32,290	5.15	$	0.02	$	1
$0.037-$0.044	228,392	3.51	$	0.04		2
$0.065-$0.092	114,252,343	8.00	$	0.06		—
$0.24	11,980,000	2.18	$	0.24		—
December 31, 2007 exercisable	126,493,025				$	3

The following table summarizes information concerning options expected to vest at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	—	—		—	$	—
$0.037-$0.044	—	—		—		—
$0.065-$0.092	207,175,431	8.49	$	0.06		—
$0.24	—	—		—		—
December 31, 2007 expected to vest	207,175,431				$	—

F-73

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

A summary of China.com Inc.’s stock option activities and related information for the years ended December 31, 2005, 2006 and 2007, is as follows:

	2005
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		183,321,129		$	0.16
Granted		86,666,667		$	0.07
Forfeited		(16,068,534	)	$	0.18
Exercised		(26,579,592	)	$	0.04
Outstanding at the end of the year		227,339,670		$	0.14
Exercisable at the end of the year		114,609,023
Weighted-average grant-date fair value of options granted during the year	$	0.05
Intrinsic value of options exercised during the year	$	709

	2006
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		227,339,670		$	0.14
Granted		316,056,507		$	0.06
Forfeited		(181,091,442	)	$	0.14
Exercised		(38,748	)	$	0.03
Outstanding at the end of the year		362,265,987		$	0.07
Exercisable at the end of the year		50,336,575
Weighted-average grant-date fair value of options granted during the year	$	0.04
Intrinsic value of options exercised during the year	$	2

F-74

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	2007
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		362,265,987		$	0.07
Granted		3,950,000		$	0.06
Forfeited		(9,075,355	)	$	0.07
Exercised		(2,982,298	)	$	0.06
Outstanding at the end of the year		354,158,334		$	0.07
Exercisable at the end of the year		126,493,025		$	0.08
Weighted-average grant-date fair value of options granted during the year	$	0.05
Intrinsic value of options exercised during the year	$	55

Compensation expense charged to operations during the year ended December 31, 2006 and 2007, relating to stock options was $3,474 and $2,568. As of December 31, 2007, China.com Inc. had unrecognized compensation expense of $1,131 before taxes, related to stock option awards. The unrecognized compensation expense is expected to be recognized over a total weighted average period of 0.8 years.

The fair value of options that vested during the years ended December 31, 2005, 2006 and 2007, was not significantly different than the amount of stock compensation expense that was charged to operations during the years ended December 31, 2006 and 2007, or that would have been charged to operations during the year ended December 31, 2005, under SFAS 123(R) as disclosed within Note 2. Net cash proceeds from the exercise of stock options during the years ended December 31, 2005, 2006 and 2007, were $1,143, $1 and $180, respectively.

Management estimated the fair value of stock option awards on the date of grant or modification using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected share price volatility and average expected term. The main inputs into the model are estimated by management based on historical performance and management’s expectations of future results on the date of grant or modification. The fair value of each option grant was estimated at the date of grant or modification using the following weighted average assumptions:

	Year ended December 31,
	2005		2006		2007
Risk-free rate	3.53% to 4.24	%	4.00% to 4.69	%	2.93% to 4.08	%
Weighted expected life of options	5 years		5 years		5 years
Range of volatility	68% to 73	%	70% to 73	%	67	%
Dividend yield	Nil		Nil		Nil

CDC Software Corporation (“CDC Software”)

During 2007, the Company approved the 2007 CDC Software Stock Incentive Plan (“2007 Software Plan”). The purpose of the 2007 Software Plan is to make available incentives that will assist CDC Software in attracting and retaining key employees and to encourage them to increase

F-75

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

their efforts to promote the business of CDC Software and the business of its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. The 2007 Software Plan is administered by the compensation committee appointed by the CDC Software board of directors, which determines, at its discretion, the persons to whom and the times at which awards are granted, the types and sizes of such awards, all award terms and conditions, and the related exercise price and option period.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares of CDC Software (“CDC Software Shares”) that may be issued pursuant to all awards under the 2007 Plan is 3,750,000. During the year ended December 31, 2007, the compensation committee granted an aggregate of 2,100,000 options to purchase CDC Software Shares. The options will vest in equal installments on a quarterly basis over the three-year period immediately following the consummation of an initial public offering of CDC Software Shares, and have an expiration date on the seventh anniversary of the date of grant.

Since all of the option grants made during 2007 are contingent upon the consummation of an initial public offering, none of the options are exercisable at December 31, 2007 nor has any related stock-based compensation expense been recorded as of December 31, 2007. As of December 31, 2007, CDC Software had unrecognized compensation expense relating to the 2007 Plan of Nil before taxes, related to stock option awards. Upon consummation of an initial public offering, CDC Software expects to recognize any compensation expense over a weighted average period of 3 years.

CDC Games Corporation (“CDC Games”)

During 2007, the Company approved the CDC Games Corporation 2007 Stock Incentive Plan (“2007 Games Plan”). The purpose of the 2007 Plan is to make available incentives that will assist CDC Games in attracting and retaining key employees and to encourage them to increase their efforts to promote the business of CDC Games and the business of its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. The 2007 Games Plan is administered by the compensation committee appointed by the CDC Games board of directors, which determines, at its discretion, the persons to whom and the times at which awards are granted, the types and sizes of such awards, all award terms and conditions, and the related exercise price and option period.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares of CDC Games (“CDC Games Shares”) that may be issued pursuant to all awards under the 2007 Plan is 3,750,000. During the year ended December 31, 2007, the compensation committee granted an aggregate of 1,718,000 options to purchase CDC Games Shares. The options will vest in equal installments on a quarterly basis over the three-year period immediately following the consummation of an initial public offering of CDC Games Shares, and have an expiration date on the seventh anniversary of the date of grant.

Since all of the option grants made during 2007 are contingent upon the consummation of an initial public offering, none of the options are exercisable at December 31, 2007 nor has any related stock-based compensation expense been recorded as of December 31, 2007. As of December 31, 2007, CDC Games had unrecognized compensation expense relating to the 2007 Plan of Nil before taxes, related to stock option awards. Upon consummation of an initial public offering, CDC Games expects to recognize any compensation expense over a weighted average period of 3 years.

F-76

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

20. EMPLOYEE BENEFIT PLANS

IMI, a subsidiary of the Company acquired in 2003, provides retirement benefits for substantially all employees in the U.S. and in foreign locations. In the U.S., the United Kingdom and the Netherlands, IMI sponsors defined contribution plans. In addition, IMI’s Swedish subsidiary (“IMAB”) has a supplemental defined contribution plan for certain key management employees. Contributions by IMI relating to its defined contribution plans for the years ended December 31, 2005, 2006 and 2007, amounted to $978, $2,611 and $2,280, respectively. For the years ended December 31, 2005, 2006 and 2007, defined contribution retirement plans expenses totaled $2,148, $2,122 and $1,497, respectively.

IMAB also participates in several employee benefit plans (non-contributory for employees) which cover substantially all employees of its Swedish operations. The plans are in accordance with a nationally-agreed standard plan administered by a national organization, Pensionsregisteringsinstitute (“PRI”). These plans have been frozen and moved to the Swedish government for administration and distribution. Benefits are not paid by IMAB, but by the Swedish government. The level of benefits and actuarial assumptions used to account for these pension plans are calculated and established by the PRI and are solely based on the fully funded value of the predetermined pension payoff amount that was prescribed when the plans were transferred to the Swedish government during 2001. Accordingly, IMAB will not change benefit levels or actuarial assumptions. In addition, since the actuarial assumptions are not disclosed to IMAB, no such disclosure is provided herein. The Company accounts for pensions in accordance with SFAS No. 87, “Employers’ Accounting for Pensions”, SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits (Revised)” (“SFAS 132(R)”) and SFAS 158. During 2006, the Company paid $1,336 to satisfy the remaining liability under the IMI Benefit Plan and has subsequently been released from making future contributions to PRI related to this benefit plan.

The net periodic benefit cost for IMAB’s defined benefit pension plans in Sweden includes the following components:

	Year ended December 31, 2005		Year ended December 31, 2006
Service cost	$	—	$	—
Interest cost		73		28
Net periodic benefit cost	$	73	$	28

The following table sets forth the change in the benefit obligations for IMAB’s defined benefit plans in Sweden:

	Year ended December 31, 2006
Benefit obligations at beginning of year/at date of acquisition	$	1,673
Interest cost		28
Actuarial gains		(469	)
Settlements		(1,336	)
Effect of foreign currency exchange rate changes		104
Benefit obligations at end of year	$	—

F-77

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

21. CONTINGENCIES AND COMMITMENTS

Contingencies

Class Action Lawsuit. A class action lawsuit was filed in the United States District Court, Southern District of New York on behalf of purchasers of the Company’s securities between July 12, 1999 (the date of the Company’s IPO) and December 6, 2000, inclusive. The complaint charges the Company and the underwriters in the Company’s IPO with violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that the prospectus used in the Company’s IPO was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors, in exchange for which the underwriters allocated to those investors material portions of the restricted numbers of the Company’s shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate the Company’s shares to those customers, in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices.

In June 2003, the plaintiffs in the consolidated IPO class action lawsuits currently pending against the Company and over 300 other issuers who went public between 1998 and 2000, announced a proposed settlement with the Company and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers would guarantee that the plaintiffs recover $1,000 from non-settling defendants, including the investment banks that acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1,000, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to the Company’s insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3,900. The Company believes that it has sufficient insurance coverage to cover the maximum amount that the Company may be responsible for under the proposed settlement. The independent members of the Board of Directors approved the proposed settlement at a meeting held in June 2003. As of March 2005, outside counsel advised that the court has granted preliminary approval of the settlement, subject to certain conditions. In August 2005, the court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings (the action involving the Company is not one of those test cases). On June 25, 2007, the court entered an order terminating the proposed settlement based on a stipulation among the parties to the settlement. Plaintiffs have filed amended master allegations and amended complaints and moved for class certification in the six test cases, which the defendants in those cases have opposed. On March 26, 2008, the court largely denied the defendants’ motion to dismiss the amended complaints in the six test cases. It is uncertain whether there will be any revised or future settlement. If the litigation proceeds, the Company believes that it has meritorious defenses to plaintiffs’ claims and intends to defend the action vigorously.

ManTech International Corporation and ManTech Australia International Inc.In October 2005, ManTech International Corporation and ManTech Australia International Inc, filed a civil action against our subsidiaries CDC Australia Limited and CDC Australia (Praxa) Pty Ltd (collectively, “CDC Australia”), alleging that CDC Australia failed to pay $4,384 that was retained as part of the consideration for the acquisition of Praxa Limited. In late 2005, CDC Australia filed and served a request for further and better particulars of the statement of claim and a request for the filing of security of costs. The plaintiffs have answered the requests for further and better particulars, and further directions as to the conduct of the action were given by the Court soon after plaintiff made payment of security for costs in January 2007. The parties are engaging in discovery and interrogatories under a new timetable, and other preliminary procedural steps through early 2008 have been set. At a hearing held in February 2008, plaintiffs filed and served answers to defendants’ interrogatories and a directions hearing was scheduled for March 2008. Plaintiffs have now

F-78

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

requested additional discovery. The Company believes that the $4,384 was rightfully retained by CDC Australia in accordance with the terms of the acquisition agreement, and the action is without merit. The Company intends to vigorously defend such action. Management of the Company considers the outcome of any judgment on the lawsuit with respect to the Company to be uncertain and the amount of any expenditure from the lawsuit is not estimable.

Lam, Po Chiu Mark.In December 2003, Mr. Mark Lam filed a civil action in the High Court of Hong Kong against our subsidiary Ion Global (BVI) Limited alleging breach of contract in relation to a put option agreement under a share purchase agreement in an amount of $742. Pleadings closed in April 2004 when Mr. Lam filed his reply to the defense filed by Ion Global. The case was largely dormant until late 2005 when the plaintiff sought and was granted leave to amend his statement of claim and to join CDC Corporation, our parent company, as a party. CDC Corporation was joined in July 2006. In January 2007, Mr. Lam also joined a member of our board of directors, Mr. Peter Yip, to the proceedings. An amended statement of claim and an amended defense have been filed by the plaintiff and defendants, respectively. Management considers the outcome of any judgment in this matter to be uncertain and the amount of any expenditure from this matter is not estimable. The Company believes that this action is without merit and intend to vigorously defend such action.

Marjorie Fudali.In June 2003, Majorie Fudali (“Fudali”) filed a civil action in the United States District Court for the District of Columbia against Pivotal Corporation, alleging that she was owed commission in the amount of $423 plus override commissions under a compensation plan allegedly agreed between her and a former senior executive of Pivotal, and wages under District of Columbia wage laws. In early 2004, Pivotal’s motion to dismiss the wage law claim was granted. In July 2004, Fudali amended her claim to add a promissory estoppel ground. In August 2004, Pivotal filed a motion for summary judgment, which was denied by the Court, ruling that factual disputes existed, which should be resolved at trial. Shortly before the jury trial which was scheduled to occur in January 2007, Fudali alleged that new facts came into light and amended her damages claim to $2,276. As a result, the jury trial was adjourned. The jury trial took place in October 2007, and a verdict against Pivotal was returned. The Court ordered Fudali to provide a calculation of the amount that Fudali believes she may be entitled to based on the verdict. Fudali has provided two alternative calculations, in the amounts of $1,940 and $1,783. Pivotal has challenged those calculations and is awaiting a hearing and the Court's decision on the amount. The Company accrued Nil and $750 at December 31, 2006 and 2007, respectively.

Leedy. In August 2002, Mr. Jason Leedy filed a civil action against Vis.align. LLC, which became our subsidiary in December 2006. Mr. Leedy has alleged that his employment with Vis.align LLC had been wrongfully terminated, and severance pay and other amounts were owing to him, and sought damages in the amount of $257. After a jury trial in which a verdict favorable to Mr. Leedy was returned, the Court entered judgment in the amount of $357, which included $100 in attorney’s fees and costs. Vis.align. LLC has appealed to the Pennsylvania Superior Court. In September 2006, the Superior Court ordered that the judgment below based on the jury verdict be vacated, and that judgment be entered in favor of Vis.align LLC notwithstanding the verdict. In November 2006, the Superior Court granted Mr. Leedy's petition for rehearing en banc and withdrew its September 2006 decision. In March 2008, an evenly divided Superior Court issued two opinions, one in support of reversal of the trial court and one in affirmance of the trial court. As the Superior Court was evenly split, the trial court’s decision was affirmed by default, leaving the defendants liable for approximately $433. A petition requesting review by the Pennsylvania Supreme Court was filed in April 2008 and remains pending.

Asian Media Company Limited.Optic Communications Co., Ltd received an arbitration claim of approximately $586 from Asian Media Company Limited claiming damages related to an alleged breach of contract under an undated 3-party agreement among Guangzhou Optic Communications Co., Ltd, Asian Media Company Limited and Changchun YaAo Resources Development Company Limited. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

F-79

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Chan. In March 2007, the Company filed suit against Steven Chan (“Chan”) and Bing Corporation (“Bing”), alleging that Chan and Bing illegally obtained option shares in CDC Corporation. In April 2008, Chan and Bing filed a cross-complaint against CDC Corporation and CDC Corporation Ltd. alleging breach of an oral contract and various tortious claims including interference with the exercise of purported options, and defamation. Chan and Bing currently allege damages: (i) in excess of $1,000 arising from alleged inability to exercise stock options at more favorable dates, (ii) in excess of $200 for various payments alleged to be due to Chan and/or Bing, and (iii) unspecified damages for libel.

Pure Biosciences.In June 2007, Pure Biosciences (“Pure”) filed a complaint in the Southern District of California asserting claims for breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and rejection of goods and/or revocation of acceptance related to a Software License and Professional Services Agreement and related Statement of Work and Master Work Order Pure entered into with Ross in March. In August 2007, Ross filed a motion to dismiss the complaint. Pure did not respond to Ross's motion, but instead filed an amended complaint in October 2007. In November 2007, Ross filed a second motion to dismiss, and in an order dated April 4, 2008, the Court granted Ross’s motion without prejudice. Pure filed its Second Amended Complaint In May 2008 asserting claims for breach of contract, breach of express warranty, and rejection of goods/revocation of acceptance and seeking attorney’s fees and damages of at least $159. Ross filed its third motion to dismiss in May 2008, arguing that Pure still failed to adequately allege that the software failed to conform to the terms of the parties’ License Agreement or the express warranty it contains and that Pure cannot state a claim based on alleged pre-contractual marketing statements because the License Agreement contains a merger clause. Pure filed its response in June 2008, and Ross’s reply is due June 23, 2008. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

William McKenna (“McKenna”). In November 2007, McKenna filed a civil action in the District Court of Denver County, Colorado, against the Company’s subsidiary, CDC Software, Inc. alleging he was terminated from his position as a sales account executive in violation of public policy, based on his refusal to engage in allegedly improper sales practices. McKenna is seeking compensatory damages in an unspecified amount, damages for emotional distress and exemplary damages. In January 2008, the Company removed the case from the Colorado State Court to the U.S. District Court for the District of Colorado and thereafter filed an answer, defenses and asserted a counterclaim alleging a breach of McKenna's Proprietary Information Agreement with the Company. In addition, the Company filed a motion to transfer venue of this case to the United States District Court for the Northern District of Georgia. In February 2008, McKenna filed an answer to the Company's counterclaim, and the Company was notified that McKenna's attorney requested permission to withdraw from the case. McKenna hired new counsel, who filed a response in opposition to the Company's motion to transfer and moved to amend the Complaint to add a cause of action for alleged violations of the Colorado Wage Claim Act. The Company filed a reply in support of its motion to transfer in April 2008, and the parties are now waiting for the Court to rule on that motion. Later in April 2008, the Company filed a response in opposition to McKenna's motion to amend, and McKenna filed a reply in early May 2008, and the United States Magistrate Judge issued a written opinion recommending that the District Court Judge grant McKenna's motion to amend, and the Company filed Objections later in May 2008. The parties have recently propounded written discovery. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

F-80

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Triton IP LLC. In April 2008, Triton IP, LLC filed a claim in the United States District Court for the Eastern District of Texas against defendants NetSuite, Inc., CDC Corporation and CDC Software Inc. alleging that our MarketFirst software infringed a patent owned by Triton through assignment. The plaintiff is seeking a permanent injunction against defendants, damages, costs, expenses, interest, attorneys' fees and other restitutional remedies. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

Vertical Computer Systems, Inc./NOW Solutions LLC (“Vertical” or “NOW”).In February 2003, Vertical Computer Systems (on behalf of itself and on behalf of NOW Solutions) filed a civil action in the state court in New York, New York, against the Company’s subsidiary Ross Systems, Inc. and others alleging, among other things, breach of contract, claims under contractual indemnifications and fraud arising from the February 2001 sale of assets from Ross’s HR/Payroll division to NOW Solutions. The action sought $5,000 in damages. In April 2003, Ross filed a motion to dismiss the complaint, which was granted in November 2003. The plaintiff appealed and its appeal was granted in October 2004. The matter was remanded to the trial court for adjudication. In May 2006, both Vertical and Ross filed a summary judgment motions against each other. In November 2006, the Court denied these summary motions, finding that factual issues existed to be resolved at trial. In March 2004, the Company’s subsidiary Ross filed a separate civil action against NOW in state court in New York, New York seeking payment of the final $750 installment due under a promissory note executed by NOW in connection with the February 2001 HR/Payroll division asset sale. In November 2004, NOW asserted counterclaims against Ross raising the same contractual issues asserted in the Vertical v. Ross action, as well as additional contractual claims related to the 2001 asset sale, seeking a total of approximately $15,000 in damages. In December 2004, Ross filed a motion to dismiss certain of the counterclaims, which the Court granted in February 2005, thereby reducing the total damages being sought in NOW’s counterclaims to approximately $5,000. In May 2006, Ross filed a motion for partial summary judgment that was granted in part. A jury trial of both the Vertical v. Ross and Ross v. NOW actions took place in March and April 2007 following which the Court directed certain verdicts in favor of NOW, and certain verdicts in favor of Ross. In September 2007, the Court entered a final judgment against Ross in the amount of $1,300 in damages, $900 in attorney’s fees and costs, and $900 in pre-judgment interest, for a total judgment against Ross of $3,150. In November 2007, Ross filed a Notice of Appeal, thereby commencing its appeal from the Court’s trial rulings. In February 2007, NOW Solutions, Inc, the alleged successor-by-merger to NOW Solutions, LLC, filed an action in the state court in New York, New York, against Ross, although Ross has yet been served with the Complaint. In this action, NOW Solutions, Inc. asserts claims for breach of contract and attorney’s fees based upon facts similar to those in the above action, seeking $4,100 in damages. The Company believes that this action filed in February 2007 is duplicative of the claims that have already been litigated through trial as referred to above, and is without merit, and the Company intends to vigorously defend the same. The Company accrued $300, $2,900 and $3,211 at December 31, 2005, 2006 and 2007, respectively.

Sunshine Mills. In May 2008, Sunshine Mills, Inc., a customer of CDC Software, filed a claim in the Circuit Court of Franklin County, Alabama alleging [breach of contract] and other causes of action. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

Mgame Corporation (“Mgame”).In December 2003, the Company entered into its original game license agreement with Mgame for Yulgang. This agreement was subsequently supplemented in June 2004 to extend the term of the Company’s license for Yulgang to December 2007 and provide a 21% royalty on the Company’s revenue derived from Yulgang to Mgame.

F-81

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Furthermore, in March 2007, the Company entered into an additional supplementary agreement with Mgame pursuant to which the Company extended its exclusive license to Yulgang in China (excluding Hong Kong) through 2010.

On October 17, 2007, Mgame unilaterally announced that they terminated their agreements with CDC Games, alleging breach of contract for non-payment. In October 2007, the Company filed two lawsuits against Mgame alleging breach of contract and that Mgame was not providing adequate technical support for Yulgang, and that Mgame was not supporting CDC Games in its efforts to combat pirate servers. The Company subsequently filed a second lawsuit alleging that Mgame breached contractual obligations owed to it by failing to provide certain financial and operating data and other information which Mgame is required to provide to the Company as a shareholder of Mgame.

Following the announcement of the Company’s disputes with Mgame in October 2007 and until such time as it resolved these disputes in March 2008, revenues generated by Yulgang declined significantly.

In March 2008, the Company settled its disputes with Mgame by entering into an Amended and Restated Exclusive Game License Agreement and Settlement Agreement. Under these settlement agreements, CDC Games received exclusive distribution rights to Yulgang in China until March 2010 with an option to extend for an additional year. CDC Games also agreed to work together with Mgame to launch a Version 2.0 upgrade to Yulgang as soon as possible following the settlement. In addition, the settlement agreements provided that the Company’s license fee payable to Mgame would be increased to $4,500 of which $4,000 of would be paid by the Company in the form of shares of Mgame held by the Company. Additionally, the Company agreed to pay royalty payments equal to 25% of revenues in months where revenues are less than $2,000 and 28% in months where revenues are greater than $2,000, and agreed to terminate the game license agreement with Mgame pursuant to which it received the exclusive right to distribute Wind Forest Fire Mountain, or WFFM, a combat MMORPG developed by Mgame.

Commitments

As of December 31, 2007, the Company had future minimum lease payments under non-cancelable operating leases falling due as follows:

Year ended December 31,
2008	$	14,253
2009	$	11,098
2010	$	8,341
2011	$	6,387
2012	$	5,035
Thereafter	$	851
	$	45,965

The Company recorded rental expense of $10,042, $12,825 and $15,745 and sublease income of $1,728, $1,484 and $3,025 for the years ended December 31, 2005, 2006 and 2007, respectively. As of December 31, 2007, the Company had future minimum rentals to be received under subleases of $8,799.

F-82

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

22. SEGMENT INFORMATION

Description of Products and Services by Segment

In 2005, the Company reported its operating results in four operating segments, “Software”, “Global Services”, “Mobile Services and Applications” and “Internet and Media”. In April 2006, in conjunction with the acquisition of the remaining 52% interest in the 17game Group (Note 3(c)(i)), the Company added “CDC Games” operating segment. Historically, the Company accounted for the results of CDC Games under the equity basis and included its proportionate share of losses in CDC Games in share of gains (losses) in equity investees in the accompanying consolidated statements of operations. Refer to Note 1 for a description of products and services offered by each segment.

Information about Segment Profit or Loss and Segment Assets

Prior to 2007, the Company evaluated performance and allocated resources based on segment revenue and net income (loss). During 2007, the Company changed one of its performance metrics from net income (loss) to operating income (loss). All prior periods have been reclassified to reflect this change. The accounting policies of the reportable segments are the same as those described in Note 2.

Factors Management Used to Identify the Enterprise’s Reportable Segments

The Company’s reportable segments are business units that offer different services. The reportable segments are each managed separately and are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s segment information is as follows:

	Year ended December 31,
	2005		2006		2007
Segment revenue from external customers:
Software:
Licenses	$	38,541	$	46,260	$	62,044
Maintenance		59,144		63,252		86,585
Consulting services		61,119		64,825		86,862
Hardware		—		—		2,769
Total Software		158,804		174,337		238,260
Global Services:
Licenses		—		—		3,235
Consulting services		42,686		66,484		103,723
Hardware		—		—		3,819
Total Global Services		42,686		66,484		110,777
CDC Games		—		26,780		33,596
China.com		8,995		10,064		11,409
Mobile Services and Applications		34,389		31,863		8,342
Total consolidated revenue	$	244,874	$	309,528	$	402,384

F-83

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	Year ended December 31,
	2005		2006		2007
Segment depreciation and amortization expenses:
Software	$	12,845	$	14,654	$	20,969
Global Services		803		1,905		4,097
CDC Games		—		2,822		6,742
China.com		366		1,517		459
Mobile Services and Applications		1,818		815		2,640
		15,832		21,713		34,907
Corporate		1,272		675		1,024
Total consolidated depreciation and amortization expenses	$	17,104	$	22,388	$	35,931

	Year ended December 31,
	2005			2006			2007
Segment operating income (loss):
Software	$	(1,565	)	$	6,396		$	15,677
Global Services		3,962			3,430			5,847
CDC Games		—			9,540			(14,555	)
China.com		(3,361	)		(8,110	)		(5,737	)
Mobile Services and Applications		4,597			1,357			(79,064	)
		3,633			12,613			(77,832	)
Corporate		(7,466	)		(8,978	)		(20,784	)
Total consolidated operating (loss) income		(3,833	)		3,635			(98,616	)
Other income (loss), net		6,735			12,579			(14,118	)
Income tax expense		(4,957	)		(3,062	)		(10,850	)
Minority interests in income of consolidated subsidiaries		(1,409	)		(2,312	)		18,551
Consolidated income (loss) from continuing operations	$	(3,464	)	$	10,840		$	(105,033	)

The Company’s segment information by geographical segment is as follows. Revenue is attributed to countries based on the location of customers.

	Year ended December 31,
	2005		2006		2007
Segment revenue from external customers:
North America	$	100,987	$	129,537	$	205,172
Europe, Middle East and Africa (“EMEA”)		63,805		81,612		100,385
Asia-Pacific		75,927		98,379		96,827
Others		4,155		—		—
Total consolidated revenue	$	244,874	$	309,528	$	402,384

F-84

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	As of December 31,
	2006		2007
Segment long-lived assets:
North America	$	67,683		89,652
EMEA		12,907		21,592
Asia-Pacific		33,019		41,020
Total consolidated long-lived assets	$	113,609	$	152,264

23. SUBSEQUENT EVENTS

Discontinuation of MVAS Operations. In February 2008, the Company announced that China.com Inc., a 77% owned subsidiary of the Company, would be discontinuing its MVAS operations. China.com has since discontinued these operations, due to the challenging regulatory environment related to the MVAS business in China.

Integrated Solutions Limited (“ISL”). In March 2008, the Company announced that it had completed its acquisition of a 51 percent stake in Integrated Solutions Limited (ISL), a Hong Kong-based vendor of ERP systems designed for small and medium-sized discrete manufacturers in China. Under the terms of the agreement, the Company paid approximately $764 at closing for such majority interest in ISL.

Investment in Tenly Software.In April 2008, CDC Software, a wholly owned subsidiary of the Company announced that it signed a binding term sheet to acquire a 22 percent stake in Tenly Software, a leading provider of business intelligence solutions in China. The term sheet also provides CDC Software with the option to increase its stake in Tenly to approximately 37 percent, and upon completion of the initial investment, provide CDC Software with the right to appoint one representative to Tenly's board of directors. The two companies also intend to form a joint venture in which CDC Software is expected to provide implementation services and support for Tenly customers and Tenly is expected to sell CDC Software solutions to its customer base. The parties intend that CDC Software will hold a 60 percent interest, and Tenly, a 40 percent stake in this joint venture.

Agreement and Proposal for Amendment of Promissory Note Terms; Prior Event of Default and Subsequent Cure Related to $168,000 Convertible Notes.In April 2008, CDC Games Corporation (“CDC Games”), a wholly-owned subsidiary of the Company and China.com Capital Ltd. (“CCL”), a wholly owned subsidiary of China.com Inc., a 77% owned subsidiary of the Company (“China.com”) entered into an agreement (the “Modification Agreement”) for the purpose of: (i) extending the maturity date of a promissory note in the principal amount of $60,000 by and between CDC Games and CCL (the “Promissory Note”) from the initial maturity date of June 28, 2008 (the “Maturity Date”) to June 28, 2010, and (ii) including the Company as a guarantor of the Promissory Note.

The effectiveness of the Modification Agreement was conditioned upon China.com obtaining the approval of its minority shareholders (the “Minority Shareholders”). At an

F-85

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

extraordinary general meeting (“EGM”) of China.com held on May 27, 2008, the Minority Shareholders, by way of poll, rejected the proposal to ratify the Modification Agreement. As a result, the Modification Agreement lapsed automatically and did not become effective.

In June 2008, the Company determined that the execution of the Modification Agreement had constituted an “Event of Default” (as defined in the Convertible Notes) under the terms of those certain 3.75% Senior Exchangeable Convertible Notes due 2011 issued by the Company in November 2006 for the aggregate principal amount of $168,000 (the “Convertible Notes”). The Convertible Notes provide that, following an Event of Default, payment of all or a portion of any amounts due thereunder may be accelerated and become due and payable immediately upon delivery of a written notice of acceleration to the Company (an “Acceleration Notice”), unless such Event of Default shall have been cured by the Company prior to the delivery of such Acceleration Notice. Accordingly, for the period from April 2, 2008 through May 27, 2008 (the date upon which the Minority Shareholders disapproved of the Modification Agreement and it lapsed automatically), any or all of the Convertible Notes could have been called by the Noteholders and become due and payable immediately. However, the Company did not receive any written Acceleration Notice from any of the Noteholders during this period as required under the Convertible Notes. Therefore, the lapsing of the Modification Agreement automatically cured the Event of Default that existed from April 2, 2008 through May 27, 2008 under the Convertible Notes, and under the express terms of the Convertible Notes none of the Noteholders has any current or continuing right to deliver an Acceleration Notice to the Company as a result of those past events. No adjustments have been made to the financial statements as a result of the occurrence of the Event of Default or the subsequent curing of such Event of Default.

Dividend from China.com Inc. On June 27, 2008, China.com declared and paid a cash dividend to its shareholders in the aggregated amount of $74,100. Of such amount, approximately $57,500 was paid to the Company and the remaining $16,600 was paid to the independent minority shareholders of China.com. On June 27, 2008, the Company transferred an aggregate of $64,500 to CDC Games. CDC Games subsequently paid CCL the entire balance of $64,500 of principal and interest due and payable under the Promissory Note.

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