This summary is based on the second quarter fiscal 2007 earnings call conducted by Shanda Interactive Entertainment Ltd. (SNDA: chart) on August 27, 2007.

Management:

Manager, IR: Maggie Zhou
President, Director: Jun Tang
Chief Financial Officer, Vice President, Director: Daniel Zhang
Chairman of the Board, Chief Executive Officer: Tianqiao Chen

Key investor issues:

Operating expenses rose 10.4%, due to merit-based salary increases and promotion expenses.

- Net income in the quarter was 54.6 million, vs. a net income of 16.7 million a year ago.
- Other income rose 47.3% to 1.5 million, due to a reduction in foreign exchange loss.
- Diluted earnings per ADS were 74 cents, vs. 24 cents last year.
- Non-GAAP net income increased 16.9% to 31.3 million.

Total revenue grew 6% sequentially and 39.1% from a year ago to a record high of $74.1 million, beating the company’s guidance.

- Operating income rose 8.8% to 32.1 million.
- Operating margin rose to 43.3% compared with 42.2% in the previous quarter.
- Gross margin was 67.2%, up from 65.2% in the previous quarter and up from 56.5% a year ago.
- Adjusted net income rose 16.9% sequentially to $31.3 million.
- Non-GAAP diluted earnings per ADS were 42 cents vs. 36 cents in the first quarter.

Online gaming revenues in the quarter grew 7.6% sequentially and 45.3% from a year ago to $71.4 million.

Revenues from MMORPG games rose 14.2% to $62.1 million, due to the continuous improvement of existing titles, as well as additional expansion packs for existing MMORPG including Heroes for MIR 2, Confinement for Woool and God of Fire for RO, and the newly launched game, LaTale. Active paying accounts for our MMORPGs in the quarter increased 16.3% to $2.72 million. ARPU for MMORPGs decreased 1.8% to RMB57.9.

Second-quarter revenues from the casual games fell 22.3% to $9.3 million.

- Active paying accounts declined 29.3% to 1.68 million in Q2.
- ARPU for casual games increased 9.9% to RMB.

Prepayments and other current assets decreased to 7.7 million from 24.6 million RMB in the previous quarter.

- Investment in equity securities rose from 45.6 million RMB in the previous quarter to 50.2 million in the second quarter.
- Long-term assets increased from 26 million in the previous quarter to 31.4 million in the most recent quarter, due to the prepayment for the acquisition of Aurora Technology.
- Deferred revenue declined 15.7% to 33.1 million.

Third-quarter business outlook

- Total net revenues are expected to rise from 8% to 11% in the range of 80 million and 82.3 million.
- Operating margin is expected to reduce, but be no less than 35%.
- Excluding the impact from Actoz, total net revenue is projected to rise from 7% to 10% in the range of 79.3 million and 81.5 million.

Existing titles are expected to grow, benefiting from the launch of expansion packs like Cat House for Mir II, The Burning Hill ph for Woool, Fairly Tale World for LaTale, Return of the Heroes and new expansion packs for Maple Story and Crazy Kart.

New games, such as LaTale, the fighting series for casual game, Kung-Fu Kid and the casual game, Tales Runner, are also anticipated to increase sales. A series of high-quality MMORPG titles, including Changchun Online, Majesta, and Legend Online, is expected to be released.

Shanda will continue to focus on content, community and commerce as its key areas of development strategies over the next five years.

The company plans to use high quality entertainment content to attract more users; large online communities to retain these users; and creative business model to generate large profits from them. Shanda is confident in the tremendous potential of China''s online game market and believes it will be able to maintain its leadership position in this industry and continue building premium value for the company’s shareholders.

Key questions and answers from the second quarter earnings call conducted by Shanda Interactive Entertainment on August 27, 2007.