In terms of domestic tourism spending in 2002, the approximately RMB388 billion (US$46.9 billion) travel industry in China is large and growing rapidly. It is expected that the industry will continue to experience rapid growth as China’s economy continues to develop. Travel and tourism in China is characterized by a highly fragmented and inefficient travel service sector due to many factors, including the lack of consolidated hotel ownership, the lack of a centralized hotel reservation system, the localized nature of travel agencies and a dual regulatory regime. It is believed that the fragmented nature of the travel market in China will create increasing demand for central reservation platforms capable of consolidating a wide range of travel information and negotiating favorable terms with travel suppliers.

According to the China National Tourism Administration, as of the end of 2002, China had more than 11,500 travel agencies, with the top 100 domestic travel agencies having an aggregate market share of less than 2%. As the requirements of travelers become more complex, it is believed that these local agencies, which had been accustomed to providing services using state-owned travel suppliers, have been increasingly unable to respond to the changing needs of business and leisure travelers in China. In addition, the development of China’s tourism infrastructure has resulted in an increasing number of travelers who choose to engage in leisure travel without the constraints inherent in packaged group tours.

The Company acts primarily as an agent in its hotel-related transactions. When a customer makes an initial inquiry through either the Company’s call center or the Company’s websites, the Company matches the customer’s request with its allotment of rooms and makes a reservation for the customer with the appropriate hotel supplier. The hotel supplier returns a confirmation that is passed along to the customer by phone, fax or email.

The Company provides a 24-hour air-ticketing service through its toll-free call center and websites. The Company acts as agents for all major airlines in China and international airlines that operate flights, that originate from selected cities in China. The Company makes flight reservations through TravelSky, which is the operator of the only nationwide system for air-ticket reservations in China, and currently issue and deliver air tickets using a network of local agents throughout major cities in China.

The Company’s air-ticketing process begins when a customer initiates an inquiry through the Company’s toll-free call center or the Company’s websites. The customer is informed of the available flights based on their schedule and desired air carrier and the Company then confirms a booking for a seat on the selected flight through its call center. Booking information is sent to one of the Company’s local agents in the city where the customer wants the ticket to be issued and delivered. The Company has relationships with a network of local ticketing agents throughout major cities in China.

Cost of services increased 61.4% from RMB4.4 million for the six months ended June 30, 2003, to RMB7.1 million (US$0.9 million) for the six months ended June 30, 2004.

The Company had a gross profit of RMB53.0 million (US$6.4 million) for the six months ended June 30, 2004, an increase of 163.7% over RMB20.1 million for the six months ended June 30, 2003.

Operating expenses were RMB 58.1 million (US$7.0 million) for the six months ended June 30, 2004, representing an increase of 138.5% over RMB24.4 million for the six months ended June 30, 2003.

The Company incurred a tax expense of RMB0.3 million (US$0.1 million) for the six months ended June 30, 2004, compared to RMB1.0 million for the six months ended June 30, 2003.