UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

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

For the Fiscal Year Ended December 31, 2004

Commission File Number 000-30698

SINA CORPORATION

(Exact Name of Registrant as specified in its charter)

Room 1802, United Plaza
1468 Nan Jing Road West
Shanghai 200040, China
(86-21) 6289 5678

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Ordinary Share, $0.133 par value
Ordinary Share Purchase Rights

     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 þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is an accelerated filer. Yes þ No o

     The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1,328,900,937 as of June 30, 2004, based upon the closing sale price for our ordinary shares as quoted by the Nasdaq National Stock Market reported for such date. Ordinary shares held by each officer and director and by each person known to the registrant (based on information provided by such persons and/or the most recent schedule 13G’s as filed by such persons) to beneficially own 5% or more of the outstanding ordinary shares have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

     As of March 10, 2005, there were 51,501,116 shares of the registrant’s ordinary shares outstanding, $0.133 par value.

DOCUMENTS INCORPORATED BY REFERENCE

     Part III (Items 10-14) incorporate information by reference from the definitive proxy statement for the 2005 Annual Meeting of Shareholders to be filed hereafter.

 

SINA CORPORATION

INDEX

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

     Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

     Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the caption “Business — Risk Factors” included herein.

PART I

Item 1. Business

Overview

     SINA Corporation (“SINA”, “we” or the “Company”), is a leading online media company and value-added information services (“VAS”) provider in the People’s Republic of China (the “PRC” or “China”) and for Chinese communities worldwide. The Company offers a network of localized web sites targeting Greater China and overseas Chinese, and provides an array of services to its users including region-focused online portals, mobile value-added services (“MVAS”), search and directory, interest-based and community-building channels, free and premium email, online games, virtual ISP, classified listings, fee-based services, e-commerce, and enterprise e-solutions. The Company generates revenue through advertising, MVAS, e-commerce and enterprise services. As of December 31, 2004, SINA had approximately 127.0 million registered users worldwide. See Note 14 “Segment Information” in our Notes to Consolidated Financial Statements for information about geographic areas.

     Founded by the merger between Beijing SINA Information Technology Co. Ltd. and California-based SINANET.com in March 1999, SINA, a Cayman Islands corporation has offices in seven cities and a network of four web sites around the world. SINA completed its initial public offering on the Nasdaq National Market in April 2000 and is now headquartered in Shanghai, China. Over the years, SINA has transformed itself from a pure Internet portal relying almost exclusively on online advertising to a company with multiple revenue streams.

     In 2004, the Company made additional acquisitions and established partnerships to expand upon its network of properties and services. In January 2004, the Company formed a joint venture with Yahoo! to provide online auctions in the PRC. In February 2004, the Company acquired Bravado Investments Limited (“Bravado”) to enter the PRC online travel market. In March 2004, SINA acquired Crillion Corporation (“Crillion”) to enhance its MVAS as well as increase its market share in the PRC MVAS market. In October 2004, SINA completed the acquisition of Davidhill Capital Inc. (“Davidhill”) and its instant messaging technology platform. The instant messaging technology platform allows users to communicate in real-time over the Internet and mobile phone networks. These new partners and alliances further strengthen SINA’s position as a leading portal in China and bring synergies to its overall business offerings.

Market Opportunity

     Our primary focus is the market in China. The success of our business is tied to the strength and vitality of the Chinese economic environment. With Gross Domestic Product, or GDP, growth of 9.5% in 2004, China represents the fastest growing country in the world. Similarly, there has been tremendous growth in the Chinese Internet market. At the end of December 31, 2004, China had 94 million of Internet users according to China Internet Network Information Center, making it

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the country with the second-largest Internet user base in the world. The mobile service sector, the area of focus for SINA’s mobile value-added business, continues to exhibit healthy growth. With 335 million mobile phone users at December 31, 2004, China has the largest mobile service market despite its low penetration rate of only 21%, according to International Telecommunication Union. The high growth and low penetration rates make China an attractive market for SINA. The adoption of 3G mobile technology and broadband access will allow for new and greater product applications and additional revenue streams for the Company in the near future.

Product Offerings

     SINA provides services through five major business lines including SINA.com (online news and content), SINA Mobile (“MVAS”), SINA Online (community-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping, online auction and travel).

     We currently operate in two principal business segments globally: advertising and non-advertising. Please see the Consolidated Financial Statements for information on revenues, profit or loss and total assets for the last three fiscal years. The following table presents an overview of the Company’s financial reporting structure as well as its vertical properties and services:

Properties and Services

SINA.com

   SINA Portal Network

     SINA’s portal network consists of four destination web sites dedicated to users in Greater China including mainland China (www.sina.com.cn), Taiwan (www.sina.com.tw), Hong Kong (www.sina.com.hk), and overseas Chinese in North America (www.sina.com). Each of the destination sites consists of Chinese-language news and content organized into interest based channels, and offer extensive community and communication services and sophisticated web navigation capability through SINA search and directory services.

   Interest-Based Channels

     On all of its web sites, SINA offers for free a variety of interest-based channels that provide region-focused format and content. The most popular channels are:

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  Advertising Services

     SINA employs a multi-pronged sales strategy that targets both short-term revenue opportunities such as banner advertising campaigns, as well as longer-term, higher-value contracts such as integrated marketing and communications packages. The Company’s advertising product offerings consist of banner, button, textlink advertisements that appear on pages within the SINA network, promotional sponsorships that are typically focused on a particular event, such as the Olympics, and advertising campaign design and management services.

     The Company’s primary target client base for advertising and sponsorships consists of global corporations doing business in Greater China and domestic companies in each of the regions SINA operate in, to which it sells from both its corporate and regional headquarters. Global corporations are typically Fortune 500 and Fortune 1000 companies with significant operations worldwide that employ a global approach to their branding, marketing and communications programs. Regional companies consist of medium to large companies that are focused on specific geographic as well as demographic markets, such as Chinese Americans or Taiwanese, and smaller companies whose markets are within a local territory, such as Beijing or Hong Kong. A partial list of advertising clients includes: China Mobile, China Telecom, Shanghai Volkswagen, Hewlett Packard, BenQ, Microsoft, Dell, IBM, Johnson and Johnson, Lenovo, L’Oreal, Motorola, Nokia, Nike, China Merchants Bank, Samsung, and TCL.

     SINA derives its competitive advantage in online advertising from its brand prestige, high user traffic and diversified user demographics. SINA is consistently ranked the most influential web site by third party media publications, such as China Internet Weekly. The Company has a large number of unique users and the most desirable user demographics of well-educated, high-income individuals and the 25-35 age groups. These distinctions set SINA apart from its competitors and enable the Company to be the leader in the space of online advertising.

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SINA Mobile

     SINA Mobile provides MVAS through the Monternet platform of China Mobile Communication Corporation (“China Mobile”) and the UNI-Info platforms of China Unicom Co., Ltd (“China Unicom”). SINA also works closely with provincial mobile operators to jointly promote its mobile value-added service offerings. In 2004, SINA generated $124.0 million in revenues from MVAS, accounting for 62% of total net revenues.

     SINA’s MVAS allow users to receive news and information, download ring tones and pictures, and participate in dating and friendship communities. Users can order these services through the web site or through their mobile phones on a monthly subscription basis or per-message basis.

     SINA offers MVAS through a wide range of products from content downloading, subscription to dating and mobile games, covering such platforms as short messaging service (“SMS”), multimedia messaging service (“MMS”), wireless application protocol (“WAP”), and interactive voice response system (“IVR”). SMS revenues made up the majority of 2004 mobile value-added services revenues. For the year ended December 31, 2004, SMS revenue was $103.3 million, and accounted for 83% of total MVAS revenues. The year 2004 saw the increasing adoption and growth of non-SMS or 2.5G MVAS, which include MMS, WAP, and Color Ringback Tone (“CRBT”). For the year ended December 31, 2004, non-SMS revenue was $20.7 million, representing an average of 1781% year over year growth.

     For the months of March (including the users from the acquisition of Crillion on a pro forma basis, assuming acquisition had occurred on March 1, 2004), June, September and December 2004, SINA had 12.5 million, 11.7 million, 15.3 million and 15.9 million unique mobile users for its MVAS, respectively. SINA receives payments from its users via China Mobile and China Unicom, who bill the users on the Company’s behalf and deduct a percentage of the revenue for providing the billing service. In addition, SINA is charged a per-message transmission fee by China Mobile and China Unicom, which varies depending on the type of message and volume of messages sent. In 2004, SINA generally received 77% and 72% of the amounts collected by China Mobile and China Unicom, respectively, from users of its MVAS.

     SINA’s competitive advantage in MVAS comes from its online and offline marketing channels. As a leading online media company in China, SINA has a large number of unique users and online content portfolio. Offline, SINA has a large local sales team that covers 29 out of the 32 provinces and municipalities in China as well as a significant presence in local radio, TV and print advertising.

     In January 2003, SINA acquired Memestar Limited, a MVAS provider in China to expand its customer base and product offerings. In March 2004, SINA acquired Crillion, a leading SMS valued-added service provider to further expand its customer base and product offerings in China. The acquisition of Memestar enhanced SINA’s existing ground sales force for mobile value-added business while Crillion brought expertise and a well-developed offline media distribution platform such as TV, radio and print publications for the mobile value-added business.

     SINA’s MVAS can be categorized into three main categories – news and information, community, and multimedia downloads:

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     SINA provides its mobile data products through its SMS, MMS, WAP, IVR and CRBT services.

   Short Messaging Service

     As many mobile phones are able to display and send text in Chinese, SINA developed a suite of short messaging services that includes user-customized information subscription, personal greetings, customized mobile phone screen decoration, personalized ring tones, mobile dating service and mobile games.

   Multimedia Messaging Service

     Using general packet radio service (“GPRS”) technology, MMS enables users to download color pictures and sophisticated ring tones, as well as to transmit more data per message. SINA currently provides MMS services in five major categories: MMS downloads, MMS news, MMS love, MMS jokes, and MMS dating/games.

   Wireless Application Protocol

     SINA’s WAP services allow users to browse content on their mobile phones similar to accessing information on Internet web sites. SINA’s WAP services use GPRS technology to provide users with color pictures and graphics, sophisticated ring tones, news, chatting and dating, games and entertainment.

   Interactive Voice Response System

     SINA’s IVR service provides mobile phone users with voice content, including chatting and dating, news information and interactive games.

   Color Ringback Tone (“CRBT”)

     SINA’s CRBT service gives mobile phone users the option to customize their ring back tone based on popular songs and special sound effects.

SINA Online

     SINA Online offers a variety of community-building services designed to encourage registered users to become active and loyal members, or SINA Netizens. The integrated SINA Mail, SINA UC, SINA Games, SINA Passport/Pay Point and SINA Dating service enable SINA Netizens to communicate with one another or with groups of people in the SINA community.

   SINA Mail

     Launched in 1999, the free SINA Mail boasts millions of registered users and supports both POP3 and SMTP servers. The storage capacity of the free email system has been expanded to a maximum of 2 gigabytes. SINA Mail also provides users with year-round anti-Spam and anti-virus protections.

   SINA UC

     In October 2004, SINA acquired Davidhill and its UC instant messaging technology platform. Launched in 2002, the UC instant messaging service allows users to communicate in real-time over the Internet and mobile phone networks. UC also provides community services such as chat rooms, online games, alumni clubs, online karaoke and other entertainment services. SINA UC is currently being offered free of charge.

  SINA Dating

     SINA Dating provides an online forum for those seeking friends and personal relationships. Users can meet new friends, chat and play games and enjoy many other personalized dating services.

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   Premium Mail

     SOL Mail is a personal paid email service introduced in 2002, providing diversified and personalized services for users with different needs. SINA’s paid email service provides features such as anti-virus software, junk mail filter, and unlimited attachment size.

   Internet Access

     SINA offers dial-up Internet access to users through partners in China, Taiwan and the U.S.

   SINA Passport/Pay Point

     SINA Passport is a one-for-all login system that integrates formerly independent membership signups for different SINA products into one single step, enabling users to access any of SINA’s membership-only content with just one ID. SINA Pay Point is a payment system for purchasing a wide variety of SINA’s value-added products and services.

SINA Games

   Online Multiplayer Game

     In January 2003, SINA formed a joint venture with NCsoft, a leading online game provider in Korea to launch the popular online games Lineage and Lineage II in China. In November 2004, Lineage II was launched commercially, targeting the high end MMORPG (Massive Multiplayer Online Role Playing Game) market in China. Users can play the game by purchasing the physical or virtual point cards available either online or offline at Internet cafes, newsstands, and software outlets. From its commercialization launch to December 31, 2004, Lineage II had an average-concurrent-users of roughly 65,000.

   Casual Game

     In January 2004, SINA entered into a license agreement with Plenus Inc. to offer game portal service in China. SINA introduced for free iGame (http://igameport.sina.com.cn) that provides online casual games, card and board games as well as avatars and community-based services such as chat rooms and hompeys. At December 31, 2004, iGame had 6.1 million registered accounts, offering a total of 27 games.

SINA.net

     SINA.net provides enterprise solutions on an integrated platform to government agencies and small to medium-sized businesses in China. These solutions include search and listings services, web hosting, corporate email, and proprietary software products.

   Search and Listings

     SINA’s listing properties include a search engine, a directory and classified information. SINA’s search engine and directory provide an intuitive and user-friendly online guide to web navigation and a gateway to the vertical offerings on the SINA network. Users can either browse the directory listings by subject matter, or use SINA Search, a rapid keyword search function that scans the contents of the entire directory. In addition to any relevant listings from SINA’s directory, the Company provides users with web-wide search results from search engines provided by its partners. For browser-driven inquiries, SINA’s directory results include Sponsored Sites, a SINA created fee-based program that allows commercial sites to receive enhanced placement in the directory. For keyword-search-driven inquiries, its search results also include SINA Sponsor matches, site listings with enhanced placement in search results that are bought by businesses or organizations.

   Corporate Email

     Leveraging its large-scale personal email system, SINA offers a premium email service to small and medium sized businesses. This email service includes the bundling of a pre-set number of email boxes with larger storage than SINA Mail as well as customized email addresses for business use.

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SINA E-Commerce

     SINA’s e-commerce services are divided into three areas: SINAMall, the online shopping web site; 1Pai, the online auction joint venture with Yahoo!; and Fortune Trip, the online travel and hotel booking service.

  SINAMall

     SINA currently offers SINAMall, an online shopping web site, on its China and North America web sites. Its technology platform enables both multinational and local merchants to transact business online. SINA generates revenue from monthly hosting fees and through receiving a percentage of online sales from its merchant partners. SINA works with merchants to design customized marketing campaigns that involve both advertising and sales of their products over SINA’s network.

  Online Auction

     In January 2004, SINA established an online auction joint venture with Yahoo! to provide a new auctions-based ecommerce service for small- and medium-sized businesses and buyers and sellers in China. The auction site 1Pai provides both a fixed-price and bid-price model for the sale of consumer goods, and also offers a range of services to facilitate transactions. 1Pai connects buyers and sellers and is currently available free of charge.

  Travel and Hotel Booking

     In February 2004, SINA acquired Bravado which provides online and offline hotel booking services under the brand name Fortune Trip in China. With over 1,000 hotels in its nationwide hotel network, Fortune Trip provides leisure travel information and allows consumers to find and book flights and hotels online. Fortune Trip generates commission-based revenue on hotel booking.

Strategic Relationships

     SINA has developed strategic relationships with a range of content, service, application and distribution partners in order to serve users more effectively and to extend its brand and services to a broader audience.

Content Partnerships

     The goal of SINA’s content partnerships is to provide its users with the broadest offering of Chinese-language content available. SINA contracts with content partners to display their content on one or more of its web sites free of charge or in exchange for a share of revenue, a licensing fee, and access to SINA content or a combination of these arrangements. Some of SINA’s leading content providers include Xinhua News Agency, China National Radio, AFP, Associated Press, Nanfang Daily, and Beijing Zhongxin Net.

Application and Service Partnerships

     The goal of SINA’s application and service partnerships is to ensure that its users have access to user-friendly, reliable and scalable communication and search tools. Because many of the Company’s prospective partners have traditionally focused on non-Chinese speaking markets, SINA’s internal engineering and development teams often work closely with them to adapt their solutions to the Chinese-language market.

Technology Infrastructure

     SINA’s operating infrastructure is designed to serve and deliver hundreds of millions of page views per day to its users. This scalable infrastructure allows SINA’s users to access its products and services quickly and efficiently, regardless of their geographical location. SINA’s infrastructure is also designed to provide high-speed access by forwarding queries to its web hosting sites with greater resources or lower loads. The Company’s web pages are generated, served and cached by servers hosted at various co-location web hosting sites in China, U.S., Taiwan and Hong Kong.

     SINA’s servers run on Linux, FreeBSD, Solaris and Windows platforms using Apache and IIS servers. These servers are mainly maintained at China Telecom Corporation and China Netcom Corporation in Beijing, China, APOL in Taipei,

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Taiwan, Qwest in Sunnyvale, California, as well as iAdvantage and Wharf T&T in Hong Kong. The Company believes that these hosting partners provide operating advantages, including an enhanced ability to protect its systems from power loss, break-ins and other potential external causes of service interruption. They provide continuous customer service, multiple connections to the Internet and a continuous power supply to its systems. In addition, SINA conducts online monitoring of all its systems for accessibility, load, system resources, network-server intrusion and timeliness of content. SINA’s mobile applications in China leverage the aforementioned web operation resources by utilizing the wireless infrastructure of China Mobile Communication Corporation and China Unicom Co., Ltd. to provide MVAS to SINA’s users.

Seasonality

     The Company experiences seasonality in its online advertising business. Traditionally, in the China market, the September quarter represents the best season for general advertising markets. This is followed by the June quarter and the December quarter. The March quarter is usually the worst season in China due to the Chinese New Year. There is little seasonality in the Company’s mobile value added services, online game, ecommerce and its enterprise business offerings.

Competition

     SINA operates in the market of online content and services for the global Chinese community. The industry can be classified as highly competitive and rapidly changing due to the fast growing market.

     Portals

     Other online content/services companies such as Sohu.com, Netease and Tom.com compete with SINA for user traffic, advertising revenue, e-commerce transactions, MVAS and other fee-based services. Industry consolidation, however, may occur as the market for the Internet in China matures, which could result in increased competition.

     Vertical Players

     As SINA expands its vertical product offerings into new areas such as online travel, online games and e-commerce, it faces increasing competition from companies that focus on these same verticals. In instant messaging, SINA faces competition from Tencent (“QQ”) and MSN. In online travel, Ctrip and eLong have significantly larger user bases than SINA. In online games, SINA’s key competitors include Shanda, Netease and other game operators. In online auction, the leading competitors are eBay/eachnet and Taobao. Similarly, Yahoo!/3721, Baidu and Huicong focus on the growing online search market in China. On the mobile side, the Company is seeing competition from non-portal service providers such as Kongzhong, Hurray and TOM Online that specialize in MVAS, including MMS, WAP and IVR services. As SINA continues to broaden its range of product offerings, it expects increasing competition from these vertical players in the coming years.

     International Players

     The Company also faces competition from international Internet companies such as Yahoo!, Microsoft, Ebay and Google. With the gradual opening of the telecommunication sector resulting from China’s entry into WTO, the Company expects increasing number of international portals and Internet companies to enter the Chinese online media industry. These companies may have greater brand recognition, financial resources and longer operating history than us.

     Traditional Media

     SINA also competes for advertisers with traditional media companies, such as newspapers, television networks and radio stations that have a longer history of use and greater acceptance among advertisers. In addition, providers of Chinese language Internet tools and services may be acquired by, receive investments from, or enter into other commercial relationships with large, well-established and well-financed Internet, media or other companies.

     SINA’s ability to compete successfully depends on many factors, including the quality of its content, the breadth, depth and ease of use of its services, its sales and marketing efforts, and the performance of its technology. See also “Risk Factors — The markets for mobile value-added services and Internet services are highly competitive, and we may be unable to compete successfully against new entrants and established industry competitors, some of which have greater financial resources than we do or currently enjoy a superior market position than we do.”

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Intellectual Property and Proprietary Rights

     We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our products is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriations of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

     In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations. See “Risk Factors — We may not be able to adequately protect our intellectual property, which could cause us to be less competitive” and “— We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damage awards.”

Government Regulation and Legal Uncertainties

The following description of PRC laws and regulations is based upon the opinions of Lawyers from Jun He Law Offices, our PRC counsel. For a description of legal risks relating to our ownership structure and business, see “Risk Factors.”

Overview

     The Chinese government has enacted an extensive regulatory scheme governing the operation of business with respect to the Internet, such as telecommunications, Internet information services, international connections to computer information networks, information security and censorship. Besides the Ministry of Information Industry, or MII, the various services of the PRC Internet industry are also regulated by various other governmental authorities, such as the State Administration for Industry and Commerce, or SAIC, the State Council Information Office, or SCIO, the General Administration for Press and Publication, or GAPP (formerly the State Press and Publications Administration, or SPPA), the Ministry of Education, or MOE, the Ministry of Culture, or MCPRC, the Ministry of Health, or MOH, and, the Ministry of Public Security.

     Among all the regulations, the Telecommunications Regulations of the People’s Republic of China, or Telecom Regulations, promulgated on September 25, 2000, is the primary governing law. Telecom Regulations set out the general framework under which domestic Chinese companies such as SINA’s subsidiaries may engage in various types of telecommunications services in the PRC. They reiterate the long-standing principle that telecommunications service providers need to obtain operating licenses as a mandatory precondition to begin operation. The Telecom Regulations differentiate the telecommunications services into basic telecommunications services and value-added telecommunications services. Value-added telecommunications services are defined as telecommunications and information services provided through public networks. The “Catalogue of Telecommunications Business”, an attachment to the Telecom Regulations and updated by MII’s Notice on Adjusting the Catalogue of Telecommunications Business of April 1, 2003, categorizes various types of telecommunications and telecommunications-related activities into basic or value-added services.

     On December 20, 2001, after China’s formal entry into the WTO, the PRC State Council promulgated the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which became effective on January 1, 2002. The FITE Regulations stipulate that foreign-invested telecommunications enterprises, or FITEs, may undertake operations in basic telecom services and value-added telecom services. Currently, the foreign party to a value-added FITE may hold up to 50% of the equity, with no geographic restrictions on its operations. Before that, foreign investors were prohibited from investing in Internet content services. The PRC government has not made any further commitment to loosen the regulation on FITEs.

     According to the Measures for the Administration of Internet Information Services described below, an enterprise must obtain an ICP license in the first place to conduct Internet content service businesses. When the Internet content involves areas of news, education, medical care, health or medicine, which are regulated by the MCPRC, the MOE, the MOH and other governmental authorities, respectively, the enterprise must also obtain permission from responsible national authorities.

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     PRC Corporate Structure

     SINA is a holding company, which owns the following material wholly owned subsidiaries in China:

	•	Beijing SINA Information Technology Co. Ltd. (“BSIT”)
	•	Star-Village.com (Beijing) Internet Technology Limited
	•	Beijing New Media Information Technology Co. Ltd.
	•	Beijing SINA Internet Technology Service Co. Ltd.
	•	Sina.com Technology (China) Co. Ltd.
	•	Fayco Network Technology Development (Shenzhen) Co. Ltd.

     In compliance with PRC’s foreign investment restrictions on Internet information services and other laws and regulations, we conduct all our Internet information services, advertising and MVAS in China via the following significant domestic Variable Interest Entities, or VIEs:

•

Beijing SINA Internet Information Service Co., Ltd. (the “ICP Company”), a China company controlled through business agreement. The ICP Company is responsible for operating www.sina.com.cn in connection with its Internet content company license and selling advertisements to advertisers directly under its online advertising license. It is also responsible for providing MVAS in China via third party mobile operators to the users. It is 1.5% owned by Yan Wang, our Chief Executive Officer and director, and 98.5% owned by six other non-executive PRC employees.

•

Beijing SINA Interactive Advertising Co., Ltd. (the “Ad Company”), a China company controlled through business agreement. The Ad Company is responsible for placing advertisements on www.sina.com.cn for its third party customers under its advertising license. It is 75% owned by Yan Wang and 25% owned by Beijing SINA Information Technology Co. Ltd., one of our subsidiaries in China.

•

Guangdong SINA Internet Information Service Co., Ltd. (the “GDICP Company”), a China company controlled through business agreement. The GDICP Company is responsible for providing MVAS in China via third party mobile operators to the users under its Internet content company license. It has been inactive since late 2004. It is 10% owned by Yan Wang and 90% owned by five other of our non-executive PRC employees.

•

Guangzhou Media Message Technologies, Inc. (“Xunlong”), a China company controlled through business agreement. Xunlong is responsible for providing MVAS in China via third party mobile operators to the users under its Internet content company license. It is owned by three of our non-executive PRC employees.

•

Beijing Star-Village.com Cultural Development Co., Ltd. (“StarVI”), a China company controlled through business agreement. StarVI is responsible for providing MVAS in China via third party mobile operators to the users under its Internet content company license. It is owned by three of our non-executive PRC employees.

•	Shenzhen Wangxing Technology Co., Ltd. (“Wangxing”), a China company controlled through business agreement. Wangxing is responsible for providing MVAS in China via third party mobile operators to the users. It is owned by three of our non-executive PRC employees.

•

Beijing SINA Infinity Advertising Co., Ltd. (the “IAD Company”), a China company controlled through business agreement. The IAD Company is responsible for placing advertisements on www.sina.com.cn for its third party customers. It is owned by five of our non-executive PRC employees. This entity has an approved business scope including design, production, agency and issuance of advertisements.

     The capital investment in these VIEs is funded by SINA and registered as interest-free loans to these PRC employees. As of December 31, 2004, the total amount of interest-free loans to the employee shareholders of the VIEs listed above and the other two inactive VIEs was $9.0 million. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by PRC laws and regulations

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or to our designees at any time for the amount of outstanding loans, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services and other services to the VIEs in exchange for substantially all net income of the VIEs. In addition, our employee shareholders of the VIEs have pledged their shares in the VIEs as collateral for non-payment of loans or for fees on technical and other services due to us.

     Classified Regulations

     Internet Information Services

     The Measures for the Administration of Internet Information Services, or the ICP Measures, went into effect on September 25, 2000. Under the ICP Measures, any entity that provides information to online Internet users must obtain an operating license from the MII or its local branch at the provincial level in accordance with the Telecom Regulations described above. The ICP Measures further stipulate that entities providing online information services in areas of news, publishing, education, medicine, health, pharmaceuticals and medical equipment must obtain permission from responsible national authorities prior to applying for an operating license from the MII or its local branch at the provincial or municipal level. Moreover, ICPs must display their operating license numbers in a conspicuous location on their web sites. ICPs must police their web sites to remove categories of harmful content that are broadly defined. This obligation reiterates Internet content restrictions set by other ministries over the past few years.

     On December 29, 2000, the ICP Company obtained an ICP license from the Beijing Telecommunications Administration, or the BTA (the municipal branch of the MII) for the first time. It also obtained a permit to operate its bulletin board systems on July 16, 2001 pursuant to additional ICP Measure regulations issued on October 8, 2000, which requires all companies that operate bulletin board systems, or BBS, to obtain official permits. Currently, the ICP Company holds a Value-Added Telecommunication Services Operating License which was issued on June 2, 2004 by the MII with a 5-year validity term subject to annual inspection.

     StarVI obtained an ICP license issued on April 8, 2003 by the BTA with a validity term up to December 28, 2005 subject to annual inspection. Star VI currently holds a Value-Added Telecommunications Services Operating License issued on January 17, 2005 by the MII with a 5-year validity term subject to annual inspection, authorizing the provision of nationwide business of information services (excluding fixed line phone call information services).

     Xunlong obtained an ICP license issued on March 21, 2003 by Guangdong Telecommunications Administration, or GTA, with a validity term up to June 3, 2007 subject to annual inspection. Xunlong currently holds a Value-Added Telecommunication Services Operating License issued on January 17, 2005 by the MII with a validity term of five years subject to annual inspection, authorizing the provision of nationwide business of information services (excluding fixed line phone call information services).

     GDICP Company obtained an ICP license issued on December 8, 2003 by GTA with a 5-year validity term. GDICP Company currently holds a Value-Added Telecommunication Services Operating License issued on July 22, 2004 by the GTA with a validity term of four years, authorizing the provision of business of information services in Guangdong province (excluding fixed line phone call information services).

     Wangxing obtained a Value-Added Telecommunication Services Operating License issued by the GTA on April 15, 2004, authorizing the provision of business of information services (excluding fixed line phone call information services). Wangxing currently holds a Value-Added Telecommunication Services Operating License issued on January 17, 2005 by the MII with a validity term of five years subject to annual inspection, authorizing the provision of business of information services (excluding fixed line phone call information services).

     Online News Publishing

     On November 7, 2000, the Provisional Regulations for the Administration of Web Site Operation of News Publication Services were jointly promulgated by SCIO and MII. The regulations stipulate that general web sites set up by non-news organizations may list news released by certain governmental news agencies, if they satisfy the requirements set forth in Article 9, but may not publish news items produced by themselves or news sources from elsewhere.

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     Before commencing news-publishing services, the above regulations also require the general web sites of non-news organizations to be approved by SCIO after securing permission from SCIO at the provincial level. In addition, the general web sites intending to publish the news released by the aforementioned news agencies must enter into agreements with the respective organizations, and submit copies of such agreements to the relevant administration department.

     On December 27, 2000, SCIO approved the ICP Company to develop online news publishing services.

     Online Transmission of Audio-Visual Programs

     On July 6, 2004, the State Administration of Radio, Film and Television (“SARFT”) promulgated the Measures for the Administration of Publication of Audio-Visual Programs through Internet or Other Information Network, which apply to the opening, broadcasting, integration, transmission or download of audio-visual programs via Internet. An applicant who is engaged in the business of transmitting audio-visual programs shall apply for a license, which is to be issued by SARFT in accordance with the categories of business, receiving terminals, transmission networks, and other items. Validity term of the license is two years. Foreign invested enterprises are not allowed to engage in the above business. Moreover, the audio-visual programs of the news category published to the public through information network shall be limited to the programs produced and broadcasted by radio stations, television stations, radio television stations and approved news web sites within the territory of China.

     According to the Reply on Approvals for Beijing SINA Internet Information Service Co., Ltd. Engaging in the Business of Information Services Relating to Online Transmission of Audio-Visual Programs issued by the SARFT on October 17, 2004, the ICP company has been approved to carry out the online transmission of audio-visual programs. And, the ICP Company obtained a license with a validity term of two years from the SARFT on February 3, 2005.

     MVAS

     On December 26, 2001, the MII published the Administrative Measures for Telecommunication Business Operating Licenses, or Telecom License Measures to supplement the FITE Regulations. The Telecom License Measures confirm that the MII is the competent approval authority for foreign-invested telecom enterprises. There are two types of telecom operating licenses in China (including FITEs): license for basic telecom services and license for value-added telecom services. Furthermore, a distinction is made as to whether a license is granted for “intra-provincial” or “trans-regional” (inter-provincial) activities. An appendix to the license will detail the permitted activities to be conducted by the enterprise. An approved telecom service operator must conduct its business (basic or value-added) in accordance with the specifications recorded on its Telecom Service Operating License. However, there are still ambiguities regarding the interpretation and application of the FITE Regulations.

     The ICP Company has obtained a Value-Added Telecommunication Services Operating License issued by the BTA on August 11, 2003, which authorizes the provision of specialized mobile value-added telecom services. The ICP Company currently holds a Value-Added Telecommunication Services Operating License which was issued on June 2, 2004 by the MII with a 5-year validity term subject to annual inspection, authorizing nationwide provision of nationwide information service in value-added telecommunications services.

     Xunlong has obtained a Value-Added Telecommunication Services Operating License issued by the GTA on September 5, 2003, which authorizes the provision of call center service, mobile value-added telecom services and internet information services. Xunlong currently holds a Value-Added Telecommunication Services Operating Licenses issued on January 17, 2005 by the MII with a validity term of five years subject to annual inspection, authorizing the provision of nationwide mobile value-added telecom services.

     Star VI has obtained a Value-Added Telecommunication Services Operating License issued on January 17, 2004 by the BTA, authorizing the provision of mobile value-added telecom services. Star VI currently holds a Value-Added Telecommunications Services Operating License issued on January 17, 2005 by the MII with a 5-year validity term subject to annual inspection, authorizing the provision of trans-regional business of information services.

     Wangxing has obtained a Value-Added Telecommunication Services Operating License issued by the GTA with a validity term from April 15, 2004 to June 3, 2007 subject to annual inspection, authorizing the provision of mobile value-added telecom services. Wangxing currently holds a Value-Added Telecommunication Services Operating License issued on January 17, 2005 by the MII with a validity term of five years subject to annual inspection, authorizing the provision of mobile value-added telecom services.

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     Short Message Services

     On April 29, 2004, the MII issued the Notice on Certain Issues Regarding the Regulation of Short Massage Services (the “SMS Notice”). The Notice confirms that all mobile communication companies shall provide SMS in cooperation with information service providers who have obtained relevant operating license for SMS. In addition, all mobile communication companies and information service providers shall highlight the fee standards, payment methods and ways of withdrawal in their advertisements for SMS services. For services based on monthly payment and subscription services, providers shall confirm with the users in advance. Without such confirmation, it should be convinced that the user has withdrawn such requirement for services. The mobile communication companies and information service providers shall strictly comply with the service items as agreed upon with the users. And, the information service providers shall examine the contents of short messages. No short message may contain contents forbidden by law.

     Internet Publishing

     On June 27, 2002, the SPPA and MII jointly released the Provisional Rules for the Administration of Internet Publishing, or Internet Publishing Rules, which define “Internet publications” as works that are either selected or edited to be published on the Internet or transmitted to end-users through the Internet for the purposes of browsing, reading, using or downloading by the general public. Such works mainly include content or articles formally published by press media such as: (a) books, newspapers, periodicals, audio-visual products and electronic publications; and (b) literature, art and articles on natural science, social science, engineering and other topics that have been edited.

     According to the Internet Publishing Rules, web portals like SINA are required to apply to and register with the GAPP before distributing Internet publications. In accordance with these rules, the ICP Company obtained a license from the GAPP to distribute Internet publications on October 30, 2003 with a 10-year validity term subject to annual inspection.

     Online Games

     On December 30, 1997, the Rules for the Administration of Electronic Publications, or Electronic Publication Rules, were published by the SPPA, and went into effect as of January 1, 1998. The Electronic Publication Rules outline a licensing system for business operations involving electronic publications, which has been interpreted by the GAPP to include online games. Under the Electronic Publication Rules, if a PRC company is contractually authorized to publish foreign electronic publications, it must obtain the approval of and register the copyright licensing contract with the GAPP.

     On March 4, 2003, the Provisional Regulations for the Administration of Online Culture were issued by the MCPRC and went to effect on July 1, 2003 (these regulations were revised by MCPRC on July 1, 2004). According to these regulations, commercial entities are required to apply to the relevant local branch of the MCPRC for an Online Culture Operating Permit to engage in online games services. On September 5, 2003, the MCPRC issued an Online Culture Operating Permit subject to annual inspection to the ICP Company, which authorizes the ICP Company to provide online games service.

     As to imported online games, the GAPP and the State Copyright Bureau jointly promulgated the Notice on Carrying out the Decision from the State Council Regarding the Approval of Electronic and Online Games Publications (the “Games Notice”). Imported online games publication is defined as “the online games publication published and issued within the territory of China by a Chinese publishing institute via copyright trade with foreign copyright owner of the said online games publication”. Publishing institutes shall apply to local publication authority for the import of such online games. After pre-approval by the provincial publication authority, the GAPP will examine contents of the online games and issue a final approval. Pursuant to the Games Notice and Copyright Law, the applicant, after duly establishment, shall file for record and register the copyright licensing contract with the GAPP.

     According to the Circular of the Ministry of Culture on Strengthening the Examination of Content of Online Games Products, entities engaged in developing and operating domestic online games products should register with the Ministry of Culture.

     SINA has duly conducted all relevant examination and record procedures for online games under its operation, including Lineage, Lineage II (both are imported online games) and iGame.

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     Internet Medical, Health and Drug Information Services

     Pursuant to the Measures for the Administration of Internet Medical and Health Information Services issued on January 8, 2001, MOH, is responsible for reviewing the qualifications of web sites and approving their publication of health-related information. According to the Measures for the Administration of Internet Drug Information Services, issued by the State Drug Administration, or SDA, on July 8, 2004, web sites publishing drug-related information must obtain license from the SDA or its provincial departments.

     The ICP Company obtained the aforementioned approvals from Beijing Health Bureau and Beijing Drug Administration (the “BDA”) on May 27, 2002 and January 17, 2002, respectively, and has obtained the Qualification Certificate for Internet Drug Information Services issued by the BDA with a validity term from November 18, 2004 to November 17, 2009.

     Online Cultural Products

     The Provisional Regulations for the Administration of Online Culture as described above apply to entities engaged in activities related to “online cultural products”. Online cultural products are classified as: (1) online cultural products particularly developed for publishing via internet, which include online music and video files (including VOD and DV etc.), network games, online performing arts, online artworks, and online animation features and cartoons (including FLASH); and (2) online cultural products converted from audio and visual products, games, performing arts, artworks and animation features and cartoons, and published via internet. Pursuant to this legislation, commercial entities are required to apply to the relevant local branch of the MCPRC for an Online Culture Operating Permit if they intend to engage in any of the following types of activities:

	•	production, duplication, import, wholesale, retail, leasing or broadcasting of online cultural products;
	•	publishing of online cultural products on the Internet or transmission thereof to computers, fixed-line or mobile phones, radios, television sets or gaming consoles for the purpose of browsing, reading, using or downloading such products; or
	•	exhibitions or contests related to online cultural products.

     On September 5, 2003, the MCPRC issued an Online Culture Operating Permit with a 3-year validity term subject to annual inspection to the ICP Company.

     Online Advertising

     The SAIC promulgated the Notice on Registration Issues for Enterprises Specialized in Advertising Business (the “Ad Notice”) on July 19, 2004. Upon the i