Net income in Q4 2007 was $40.1 million compared to net income of $32.9 million in Q4 2006 and $32.7 million in Q3 2007.

Diluted earnings per ADS were 54 cents in Q4 compared to 44 cents in Q3 2007 and 46 cents in Q4 2006. Non-GAAP net income, which excludes share-based compensation and the impact on disposal of SINA shares, increased 67.8% year over year and 22.1% quarter over quarter to $42.4 million in Q4 2007. Non-GAAP diluted earnings per ADS were 58 cents in Q4 2007 compared with 34 cents in Q4 2006 and 48 cents in Q3 2007.

The effective tax rate was 7.5% in Q4 2007 compared to 15.4% in Q3 and an adjusted effective tax rate of 5.2% in Q4 2006, excluding the one-time capital gains on the sale of SINA shares, which is non-taxable.

The cash and cash equivalents totaled $271.9 million and $381.7 million including short-term investments and marketable securities.

The firm’s cash position decreased from $503.8 million at the end of Q3 2007 mainly due to the redemption of its $275 million worth of convertible notes, which was completed on November 15, 2007.

Deferred revenues decreased 2.1% quarter over quarter to $56 million, due to seasonality following the pre national holiday purchasing of prepaid cards for the firm’s distributors in the third quarter.

During the quarter, the firm released expansion packs and held promotions for each of its main casual games titles.

In addition, the firm commercialized three new casual games: Push Push Online, Disney Magicboard Online, and Pop Land. In addition to the current diversified portfolio for content, the firm has announced a strong pipeline of eight MMORPGs and six casual games for 2008 and beyond. For first quarter 2008, in particular, the firm expects to see new expansion packs and value-added service to support continued growth in its existing MMORPG titles. Expansion packs slated for launch in Q1 include packs for Mir II, Woool, The Age, Latale, RO, Archlord and FengYun Online. The firm also closed beta testing of Changchun Online in mid-January, which attracted over 860,000 applicants for 10,000 limited accounts.

For casual games, in addition to planned promotions around the Chinese New Year holiday, the firm plans to commercialize X-Up, an Olympic-themed table tennis game developed at Actoz. The firm will also introduce expansion packs for Maple Story, BNB, Crazy Kart and the Tales Runner.

Shanda currently focuses on online games for its content strategy.

Shanda currently operates the highest number of games simultaneously in China. The company does not pursue the feature and blockbuster games strategy; instead it prefers a balanced portfolio approach of acquiring a diverse offering of games targeting a diverse user market. The firm’s pipeline of both announced and unannounced games consists of over 20 games over the next two or three years. This pipeline includes 3D and 2D MMORPG, casual games, martial arts games and sports games. In addition to in-house development and licensing, the firm has also pioneered a co-development and investment strategy. The firm believes that it has covered all segments of the online games market with an emphasis this year on sports-related games in connection with the upcoming Olympics. The firm believes that its track record in the past eight quarters of operating a diverse portfolio of games targeting a diverse user base validates its strategy.

Fiscal 2007 Financial Highlights

- The consolidated net revenues increased 49.1% year over year to $337.8 million.
- Non-game revenues increased 53.6% year over year to $324.6 million.

- Operating income increased 166.2% year over year to $137.7 million and operating margin was up from 22.8% in 2006 to 40.8% in 2007.
- Net income was $191.1 million, representing an increase of 163.8% from 2006.
- Earnings per diluted ADS was $2.62 compared with $1 per diluted ADS in 2006.

- Non-GAAP net income was $141.3 million, an increase of 105.4% from the previous year.
- Non-GAAP earnings per diluted ADS were $1.94 compared with 96 cents for the full year 2006.

- For the full year 2007, adjusted effective tax rate excluding the capital gain impacts on sales of SINA shares, was 11.8% compared with an adjusted effective tax rate of 7% in 2006.

First Quarter Outlook

The management cautions that it cannot predict the future exchange rate of RMB against the US dollar and therefore cannot accurately with any degree of certainty estimate the fact of any change in exchange rates in its financial results. Accordingly and given the financial targets, the firm assumes no change in exchange rates in Q1 2008 and has adopted a standard exchange rate as of December 31, 2007 which is RMB7.3046 equals to $1. Now, based on current business outlook, the firm expects its consolidated net revenues for the first quarter 2008 to increase 62.9% quarter over quarter, while the operating margin for the fourth quarter to remain at a similar level compared to the fourth quarter 2007.

Key questions and answers from the fourth quarter fiscal 2007 earnings call conducted by Shanda Interactive Entertainment Ltd. on February 25, 2008.

Andrey Glukhov (Brean Murray, Carret): What was the combined contribution from your top two games in the quarter?