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1、Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 20-F (Mark One)ooRegistration statement pursuant to Section 12(b)or 12(g)of the Securities Exchange Act of 1934 or xxAnnual report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934For the f

2、iscal year ended December 31,2015 or ooTransition report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 For the transition period from to or ooShell company report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 Date of event requiring this shell company

3、report.Commission file number:001-33853 CTRIP.COM INTERNATIONAL,LTD.(Exact name of Registrant as specified in its charter)N/A(Translation of Registrants name into English)Cayman Islands(Jurisdiction of incorporation or organization)99 Fu Quan RoadShanghai 200335Peoples Republic of China(Address of p

4、rincipal executive offices)James Jianzhang Liang,Chief Executive OfficerTelephone:+(8621)3406-4880Facsimile:+(8621)5251-000099 Fu Quan RoadShanghai 200335Peoples Republic of China(Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be regist

5、ered pursuant to Section 12(b)of the Act:Title of Each ClassName of Each Exchange on Which RegisteredOrdinary shares,par value US$0.01per ordinary shareThe NASDAQ Stock Market LLC*(The NASDAQ Global Select Market)*Not for trading but only in connection with the listing on the NASDAQ Global Select Ma

6、rket of American depositary shares,each representing 0.125 ofan ordinary share.Securities registered or to be registered pursuant to Section 12(g)of the Act:None(Title of Class)Table of Contents Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act:None(Title of Cl

7、ass)Indicate the number of outstanding shares of each of the Issuers classes of capital or common stock as of the close of the period covered by the annual report:51,167,228 ordinary shares,par value$0.01 per ordinary share.Indicate by check mark if the registrant is a well-known seasoned issuer,as

8、defined in Rule 405 of the Securities Act.x Yes o 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 theSecurities Exchange Act of 1934.o Yes x No Indicate by check mark whether the registrant

9、:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934during 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 filingrequirements for the past 90 days.x Yes o N

10、o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant

11、 was required tosubmit and post such files).x Yes o 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 andlarge accelerated filer”in Rule 12b-2 of the Exchange Act.(Check one):Large acceler

12、ated filer x Accelerated filer o Non-accelerated filer o 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 as issuedby the International Accounting Standards Boar

13、d o Other o 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.o Item 17 o Item 18 If this is an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12

14、b-2 of the Exchange Act).o Yes x No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d)of the Securities ExchangeAct of 1934 subsequ

15、ent to the distribution of securities under a plan confirmed by a court.o Yes o No Table of Contents TABLE OF CONTENTS PageINTRODUCTION2PART I2ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS2ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE2ITEM 3.KEY INFORMATION2ITEM 4.INFORMATION ON THE C

16、OMPANY27ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS41ITEM 6.DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES55ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS63ITEM 8.FINANCIAL INFORMATION67ITEM 9.THE OFFER AND LISTING68ITEM 10.ADDITIONAL INFORMATION69ITEM 11.QUANTITATIVE AND QUALITATIVE DI

17、SCLOSURES ABOUT MARKET RISK76ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES76PART II77ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES77ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS77ITEM 15.CONTROLS AND PROCEDURES77ITEM 16A.AUDIT COMMITTE

18、E FINANCIAL EXPERT78ITEM 16B.CODE OF ETHICS78ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES78ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES79ITEM 16E.PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS79ITEM 16F.CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT80ITE

19、M 16G.CORPORATE GOVERNANCE80ITEM 16H.MINE SAFETY DISCLOSURE80PART III80ITEM 17.FINANCIAL STATEMENTS80ITEM 18.FINANCIAL STATEMENTS80ITEM 19.EXHIBITS80 1Table of Contents INTRODUCTION In this annual report,unless otherwise indicated,(1)the terms“we,”“us,”“our company,”“our”and“Ctrip”refer to C Interna

20、tional,Ltd.,its predecessor entities and subsidiaries,and,in thecontext of describing our operations and consolidated financial information,also include its consolidated affiliated Chinese entities;(2)“shares”and“ordinary shares”refer to our ordinary shares,par value of US$0.01 per ordinary share;(3

21、)“ADSs”refers to our American depositary shares,eight of which represent one ordinary share,unless the context suggests otherwise;(4)“China”and“PRC”refer to the Peoples Republic of China and,solely for the purpose of this annual report,exclude Taiwan,Hong Kong and Macau,and“Greater China”refers to t

22、he PRC,Taiwan,Hong Kong and Macau;and(5)all references to“RMB”and“Renminbi”are to the legal currency of China and all references to“U.S.dollars,”“US$,”“dollars”and“$”are to thelegal currency of the United States.Any discrepancies in any table between the amounts identified as total amounts and the s

23、um of the amounts listed therein are due to rounding.This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31,2013,2014 and 2015.On January 21,2010,we effected a change of the ratio of our ADSs to ordinary shares from two(2)ADSs represent

24、ing one ordinary share to four(4)ADSsrepresenting one ordinary share.Effective December 1,2015,we further changed our ADS to ordinary share ratio from four(4)ADSs representing oneordinary share to eight(8)ADSs representing one ordinary share.Unless otherwise indicated,ADSs and per ADS amount in this

25、 annual report have beenretroactively adjusted to reflect the changes in ratio for all periods presented.PART I ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS Not applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable.ITEM 3.KEY INFORMATION A.Selected Financial Data Th

26、e following table presents the selected consolidated financial information for our business.You should read the following information in conjunctionwith“Item 5.Operating and Financial Review and Prospects”below.The selected consolidated statement of operations data for the years endedDecember 31,201

27、3,2014 and 2015 and the selected consolidated balance sheet data as of December 31,2014 and 2015 have been derived from our auditedconsolidated financial statements and should be read in conjunction with those statements,which are included in this annual report beginning on page F-1.The selected con

28、solidated statement of operations data for the years ended December 31,2011 and 2012 and the selected consolidated balance sheet data asof December 31,2011,2012 and 2013 have been derived from our audited consolidated financial statements for these periods,which are not included in thisannual report

29、.All ADS data have been retroactively adjusted to reflect the current ADS to ordinary share ratio for all periods presented.2Table of Contents For the Year Ended December 31,2011RMB 2012RMB 2013RMB 2014RMB 2015RMB 2015US$(in thousands,except for per ordinary share data)Consolidated Statement of Oper

30、ationDataNet revenues3,498,0854,158,7915,386,7467,346,91810,897,5681,682,295Cost of revenues(805,130)(1,037,791)(1,386,767)(2,100,606)(3,043,440)(469,827)Gross profit2,692,9553,121,0003,999,9795,246,3127,854,1281,212,468Operating expensesProduct development(601,485)(911,905)(1,245,719)(2,321,349)(3,

31、296,693)(508,922)Sales and marketing(624,600)(984,002)(1,269,413)(2,214,210)(3,087,990)(476,704)General and administrative(400,876)(570,487)(646,405)(861,551)(1,088,402)(168,019)Total operating expenses(1,626,961)(2,466,394)(3,161,537)(5,397,110)(7,473,085)(1,153,645)Income/(loss)from operations1,06

32、5,994654,606838,442(150,798)381,04358,823Net interest income and other income 223,627296,088305,554186,0502,624,321405,125Income before income tax expense,equityin income of affiliates and non-controlling interest1,289,621950,6941,143,99635,2523,005,364463,948Income tax expense(262,186)(294,526)(293

33、,740)(130,821)(470,188)(72,585)Equity in income/(loss)of affiliates57,52534,34356,147187,191(135,781)(20,960)Net income1,084,960690,511906,40391,6222,399,395370,403Less:Net(income)/loss attributable tonon-controlling interests(8,545)23,89591,917151,117108,26116,712Net income attributable to Ctripssh

34、areholders1,076,415714,406998,320242,7392,507,656387,115Earnings Per Ordinary Share Data:Net income attributable to Ctripsshareholders1,076,415714,406998,320242,7392,507,656387,115Earnings per ordinary share,basic29.9220.8730.347.0866.3410.24Earnings per ordinary share,diluted28.3019.9226.636.3556.8

35、58.78 As of December 31,2011RMB 2012RMB 2013RMB 2014RMB 2015RMB 2015US$(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents3,503,4283,421,5337,138,3455,300,88819,215,6752,966,389Restricted cash211,636768,229739,544836,3952,286,883353,034Short-term investment1,288,4721,408,6643,635

36、,0916,438,8558,235,7861,271,386Accounts receivable,net789,036983,8041,518,2301,826,7663,150,768486,395Prepayments and other current assets566,188999,1491,237,5312,480,2767,711,7561,190,490Deferred tax assets,current39,78261,84196,980193,503Non-current assets3,362,8933,994,1356,324,93814,132,84278,24

37、1,72412,078,441Total assets9,761,43511,637,35520,690,65931,209,525118,842,59218,346,135Current liabilities2,568,0603,910,1446,368,00812,714,70333,666,0955,197,150Deferred tax liabilities,non-current48,30953,30963,197132,5073,045,259470,107Long-term Debt1,089,0225,529,3687,984,58818,354,6082,833,463O

38、ther long-term Liabilities91,70214,156Total Ctrips shareholders equity7,042,2956,489,6328,530,3969,529,17944,550,7306,877,448Noncontrolling interests102,77195,248199,690848,54819,134,1982,953,811Total shareholders equity7,145,0666,584,8808,730,08610,377,72763,684,9289,831,259(1)Share-based compensat

39、ion was included in the related operating expense categories as follows:For the Year Ended December 31,2011RMB 2012RMB 2013RMB 2014RMB 2015RMB 2015US$(in thousands)Product development98,955132,583138,668184,665291,64345,022Sales and marketing48,19155,89249,10554,39265,57410,123General and administra

40、tive195,645243,246250,157257,587285,37944,055(2)Translation from RMB amounts into U.S.dollars was made at a rate of RMB6.4778 to US$1.00.See“Item 3.Key Information A.Selected Financial Information Exchange Rate Information.”(3)Each ADS represents 0.125 of an ordinary share.(4)In April 2015,the FASB

41、issued new guidance which changes the presentation of debt issuance cost.Under the new guidance,debt issuance cost is presented as a reduction ofthe carrying amount of the related liability,rather than as an asset.This guidance has been adopted and applied retrospectively by us to the prior periods

42、presented herein.(5)In 2015,a gain of RMB2.3 billion(US$350 million)was recognized in the other income for the deconsolidation of Tujia which was once a subsidiary of the Company.Pleaserefer to footnote 8 of our consolidated financial statements incorporated herein.(2)(1)(1)(1)(5)(3)(3)(7)(7)(2)(6)(

43、6)(4)(2)(6)In 2015,we have determined and elected to early adopt ASU 2015-17 to our consolidated financial statements starting December 31,2015,prospectively to present thedeferred tax assets and liabilities as non-current items.(7)Our consolidated balance sheet data has reflected the effect of cons

44、olidation of the financial statements of Qunar Cayman Islands Limited starting from December 31,2015.3Table of Contents Exchange Rate Information We have published our consolidated financial statements in RMB.Our business is primarily conducted in China using RMB.The conversion of RMBinto U.S.dollar

45、s in this annual report is based on the certified exchange rate published by the Federal Reserve Board.For your convenience,this annualreport contains translations of some RMB or U.S.dollar amounts for 2015 at a rate of RMB6.4778 to US$1.00,which was the certified exchange rate in effectas of Decemb

46、er 31,2015.The certified exchange rate on April 15,2016 was RMB6.4730 to US$1.00.We make no representation that any RMB or U.S.dollaramounts could have been,or could be,converted into U.S.dollars or RMB,as the case may be,at any particular rate,the rates stated below,or at all.The PRCgovernment impo

47、ses control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange.The following table sets forth information concerning exchange rates between the RMB and the U.S.dollars for the periods indicated.The exchangerates refer to the exchange r

48、ates as set forth in the H.10 statistical release of the Federal Reserve Board.These rates are provided solely for your convenienceand are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information tobe provid

49、ed to you.The source of these rates is the Federal Reserve Statistical Release.Certified Exchange RatePeriodPeriod-End Average Low High(RMB per U.S.Dollar)20116.29396.44756.63646.293920126.23016.29906.38796.222120136.05376.14126.24386.053720146.20466.17046.25916.040220156.47786.28276.48966.1870Octob

50、er6.31806.35056.35916.3180November6.38836.36406.39456.3180December6.47786.44916.48966.38832016January6.57526.57266.59326.5219February6.55256.55016.57956.5154March6.44806.50276.55006.4480April(through April 15,2016)6.47306.47136.48106.4580(1)Annual averages are calculated using the average of month-e

51、nd rates of the relevant year.Monthly averages are calculated using the average of the daily rates during therelevant period.B.Capitalization and Indebtedness Not applicable.C.Reasons for the Offer and Use of Proceeds Not applicable.D.Risk Factors Risks Related to Our Company Our strategy to acquire

52、 or invest in complementary businesses and assets and establish strategic alliances involves significant risk and uncertaintythat may prevent us from achieving our objectives and harm our financial condition and results of operations.As part of our plan to expand our product and service offerings,we

53、 have made and intend to make strategic acquisitions or investments in the travelservice industries in Greater China and overseas.For example,we had invested through open market purchases and in a private placement transaction a totalof US$92 million in an approximately 15%stake in Homeinns Hotel Gr

54、oup,or Homeinns,a leading economy hotel chain in China.In June 2015,we,together with our co-founder and chief executive officer Mr.James Jianzhang Liang,our co-founder and independent director Mr.Neil Nanpeng Shen andcertain other buyers,delivered a non-binding letter to Homeinns which proposes to a

55、cquire all of its outstanding ordinary shares not already owned by thesebuyers for a cash consideration of US$35.8 per ADS;in December 2015,an agreement and plan of merger was entered into between Homeinns and the specialpurpose vehicles formed by our consortium to consummate the transaction.In Marc

56、h 2010,we invested a total of US$67.5 million in approximately 9%stakein China Lodging Group,Limited,or Hanting,a leading economy hotel chain in China,through private placement transactions and purchases in Hantingsinitial public offering.As a result of a series of investments on eHi since 2013,we h

57、eld an aggregate equity interest of approximately 14%in eHi as ofDecember 31,2015 with the aggregated investment cost of US$107 million.In 2014 and 2015,we invested a total of US$50 million in approximately 4%stake in Tuniu Corporation,or Tuniu,a well-known service provider in the leisure package to

58、ur market,through a private placement transaction conductedconcurrently with Tunius initial public offering and private acquisitions afterwards.In May 2015,we made an investment in eLong,Inc.,or eLong,throughacquiring the shares of eLong from certain selling shareholders,including Expedia,Inc.,or Ex

59、pedia,together with several other investors.We acquired a 38%equity stake in eLong for a total purchase price of US$422 million.In October 2015,we completed a share exchange transaction with Baidu,Inc.,or Baidu,and obtained approximately 45%of the aggregate voting interest of Qunar Cayman Islands Li

60、mited,or Qunar,in exchange for our newly issued ordinaryshares.In December 2015,we issued ordinary shares represented by ADSs to certain special purpose vehicles holding shares solely for the benefit of certainQunar employees and,as consideration,we received class B ordinary shares of Qunar and dire

61、ctly injected these shares to third-party investment entitiesdedicated to investing in business in China.From accounting perspective,we started to consolidate Qunars financial statements from December 31,2015.Ifthe ADS prices of Hanting,eHi,and Tuniu,or other future public company targets declines a

62、nd becomes lower than our share purchase price,we could incurimpairment loss under U.S.GAAP,which in turn would adversely affect our financial results for the relevant periods.In addition,if any of Homeinns andeLong incur a net loss in the future,we would share their net loss proportionate to our eq

63、uity interest in them.4(1)Table of Contents In connection with our recent strategic acquisitions,there had been a significant increase of goodwill and indefinite lived intangible assets booked inour financial statements.As of December 31,2015,our goodwill was RMB45.7 billion(US$7.1 billion)and our i

64、ndefinite lived intangible assets wereRMB9.7 billion(US$1.5 billion).ASC 350“Intangibles Goodwill and Other,”provides that intangible assets that have indefinite useful lives andgoodwill will not be amortized but rather will be tested at least annually for impairment.ASC 350 also requires that long-

65、lived assets be reviewed forimpairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from its undiscounted futurecash flow.See also“Item 5 Operating and Financial Review and Prospects A.Operating Results Critical Accounting Policies

66、and Estimates Goodwill,Intangible Assets and Long-lived Assets.”For 2013,2014 and 2015,we did not recognize any impairment charges for goodwill or intangibleassets.If different judgments or estimates had been utilized,however,material differences could have resulted in the amount and timing of the i

67、mpairmentcharge.We may potentially incur significant impairment charges if the recoverability of these assets become substantially reduced in the future.In addition,our strategic acquisitions and investments could subject us to other uncertainties and risks,and our failure to address any of theseunc

68、ertainties and risks,among others,may have a material adverse effect on our financial condition and results of operations:high acquisition and financing costs;potential ongoing financial obligations and unforeseen or hidden liabilities;failure to achieve our intended objectives,benefits or revenue-e

69、nhancing opportunities;cost of,and difficulties in,integrating acquired businesses and managing a larger business;failure to be in full compliance with applicable laws,rules and regulations;potential claims or litigation regarding our boards exercise of its duty of care and other duties required und

70、er applicable law in connection withany of our significant acquisitions or investments approved by the board;and diversion of our resources and management attention.In addition,we establish strategic alliances with various third parties to further our business purpose from time to time.Strategic all

71、iances with thirdparties could subject us to a number of risks,including risks associated with sharing proprietary information,non-performance by the counter-party,anincrease in expenses incurred in establishing new strategic alliances,inefficiencies caused by failure to integrate strategic partners

72、 businesses with our own,and unforeseen levels of diversion of our resources and management attention,any of which may materially and adversely affect our business.From time to time,we selectively acquired or invested in businesses that complement our existing business,and will continue to do so in

73、the future.See“Item 4.Information on the Company A.History and Development of the Company”for more details of our acquisitions and investments.We cannotassure you that we will be able to achieve the benefits we expected from such acquisitions or investments.Moreover,our strategy of acquiring or inve

74、sting ina competing business could be adversely affected by uncertainties in the implementation and enforcement of the PRC Anti-Monopoly Law.Under the PRCAnti-Monopoly Law,companies undertaking acquisitions or investments in a business in China must notify MOFCOM in advance of any transaction wheret

75、he parties revenues in the China market and global market exceed certain thresholds and the buyer would obtain control of,or decisive influence over,thetarget.There are numerous factors MOFCOM considers in determining“control”or“decisive influence,”and,depending on certain criteria,MOFCOM willconduc

76、t anti-monopoly review of transactional transactions in respect of which it was notified.In light of the uncertainties relating to the interpretation,implementation and enforcement of the PRC Anti-Monopoly Law,there is no assurance that MOFCOM will not deem our past and future acquisitions orinvestm

77、ents,including the ones referenced herein or elsewhere in this annual report,to have met the filing criteria under the PRC Anti-Monopoly Law andtherefore demand a filing for merger review.However,there have been limited cases of MOFCOM anti-monopoly review of filings involving companies witha variab

78、le interest entity structure similar to ours.If we are found to have violated the PRC Anti-Monopoly Law for failing to file the notification ofconcentration and request for review,we could be subject to a fine of up to RMB500,000,and the parts of the transaction causing the prohibitedconcentration c

79、ould be ordered to be unwound.Such unwinding could affect our business and financial results,and harm our reputation.5Table of Contents As a result of any of the above factors,any actual or perceived failure to realize the benefits we expected from these acquisitions or investments maycause the trad

80、ing price of our ADSs to decline.Our business could suffer if we do not successfully manage current growth and potential future growth.Our business has grown significantly as a result of both organic growth of existing operations and acquisitions,and we expect to continue to experiencesuch growth in

81、 the future.We have significantly expanded our operations and anticipate further expansion of our operations and workforce,as a result of thecontinued growth of our service offerings,customer base and geographic coverage.For example,we have invested in,and plan to continue to invest in,organic growt

82、h by rolling out new business initiatives focusing in a diverse range of areas including cruise lines,car services,bus tickets and train tickets,and if such new business initiatives fail to perform as expected,our financial condition and results of operations could be adversely impacted.Our growth t

83、odate has placed,and our anticipated future operations will continue to place,a significant strain on our management,systems and resources.In addition totraining and managing our workforce,we will need to continue to improve and develop our financial and managerial controls and our reporting systems

84、 andprocedures.We cannot assure you that we will be able to efficiently or effectively manage the growth of our operations,and any failure to do so may limit ourfuture growth and hamper our business strategy.Consolidation of the results of operations of Qunar with ours may negatively impact our fina

85、ncial performance and results of operations.Following the consummation of the share exchange transaction with Baidu in October 2015,we beneficially owned approximately 45%of Qunarsaggregate voting interest.See“Item 4.Information on the Company B.Business Overview Strategic Investments and Acquisitio

86、ns.”In connection withour transaction with Baidu,we agreed to issue approximately 5 million ordinary shares to certain special purpose vehicles holding shares solely for thebenefit of Qunar employees.The issuance of such Ctrip shares to Qunar employees is conditional upon the surrender by such emplo

87、yees of any Qunarsecurities held by or granted to them.Thus far,we offered a total of approximately 4.0 million ordinary shares to three special purpose vehicles holding theseshares solely for the benefit of Qunar employees.Future receipt by Qunar employees of Ctrip shares will be upon satisfaction

88、of legal and contractualconditions.As a result of these transactions,we accounted for the transactions as a business combination under U.S.GAAP and,starting from December 31,2015,we started to consolidate Qunars financial statements from the accounting perspective.Qunar has historically incurred net

89、 loss.Therefore,consolidating Qunars financial statements may negatively impact our financial performance in the upcoming financial reporting cycles for an extendedperiod of time.Moreover,starting in January 2016,some PRC airlines,including two of the largest airlines in China,announced suspension o

90、f theirrespective business cooperation with Qunar without indicating the length of such suspension and cited serious customer complaints in their respectiveannouncements.If such suspension further exacerbates,Qunar may suffer from loss of revenue and its results of operations may be materially and a

91、dverselyaffected,which in turn may materially and adversely affect our consolidated results of operations.The pro forma financial statements giving effect to thisinvestment are incorporated by reference in this annual report.Our recent transactions including share exchange with Baidu,issuance of sha

92、res for the benefit of Qunar employees and investment or financingarrangements with selected third-party investment entities will result in substantial dilution to our shareholders and will also reduce our existingcash balance.In the long-term interest of our company,we will make investments,in the

93、form of limited partnership contributions,assets injection or other financingarrangements,into or with certain entities that are dedicated to investing businesses in China.In late 2015 and early 2016,we agreed to make investment orenter into financing arrangements with several non-U.S.investment ent

94、ities,which are managed and/or owned by parties unaffiliated with each other andunaffiliated with us and are dedicated to investing in businesses in China.In January 2016,we issued a total number of 5,431,983 ordinary shares,including2,661,967 ordinary shares represented by ADSs,and provided capital

95、 contribution or financial support in a total amount of approximately US$1.3 billion incash to some of these non-U.S.investment entities.In March 2016,we further issued an aggregate of 474,534 ordinary shares represented by ADSs to certainof these non-U.S.investment entities,and these ordinary share

96、s represent approximately 1%of our immediate post-issuance outstanding shares.Theseinvestments,capital contributions and financing arrangements in the form of our ordinary shares may result in our issuance of a substantial number of ourordinary shares in the aggregate,which together with the recent

97、share exchange with Baidu and issuance of shares for the benefit of Qunar employees,willcause substantial dilution to our existing shareholders.In addition,future sale of our shares by Baidu and/or our other significant shareholders,individuallyor in the aggregate,may cause our share price to declin

98、e.Furthermore,our cash investments or financial support in selected investment entities maymaterially reduce our existing cash balance and adversely affect our working capital.If we decide to raise additional capital through the sale of equity orequity linked securities,our existing shareholders wil

99、l be further diluted.If we obtain debt financings,we may be subject to restrictive covenants limiting orrestricting our ability to take specific actions,such as incurring additional debt,making capital expenditures or declaring dividends.See“Item 4.Informationon the Company B.Business Overview Strat

100、egic Investments and Acquisitions.”6Table of Contents Our business is sensitive to global economic conditions.A severe or prolonged downturn in the global or Chinese economy may have a materialand adverse effect on our business,and may materially and adversely affect our growth and profitability.The

101、 global macroeconomic environment is facing challenges,including the escalation of the European sovereign debt crisis since 2011,the end ofquantitative easing by the U.S.Federal Reserve and the economic slowdown in the Eurozone in 2014.There have been concerns over unrest in the MiddleEast and Afric

102、a,which have resulted in volatility in oil and other markets.Economic conditions in China are sensitive to global economic conditions.Our business and operations are primarily based in China and the majority ofour revenues are derived from our operations in China.Accordingly,our financial results ha

103、ve been,and are expected to continue to be,affected by theeconomy and travel industry in China.While the economy in China has grown significantly over the past decades,growth has been uneven,bothgeographically and among various sectors of the economy,and the rate of growth has been slowing.Any sever

104、e or prolonged slowdown in the global and/orChinese economy could reduce expenditures for travel,which in turn may adversely affect our operating results and financial condition.According to theNational Bureau of Statistics of China,in 2015,the growth rate of Chinas gross domestic product,or GDP,was

105、 6.9%and it is unclear how the economy willfare in 2016 and beyond.Since we derive the majority of our revenues from accommodation reservation,transportation ticketing and packaged-tour servicesin China,any severe or prolonged slowdown in the global and/or Chinese economy or the recurrence of any fi

106、nancial disruptions may materially andadversely affect our business,operating results and financial condition in a number of ways.For example,the weakness in the economy could erodeconsumer confidence which,in turn,could result in changes to consumer spending patterns relating to travel products and

107、 services.If consumer demand fortravel products and services we offer decreases,our revenues may decline.Furthermore,continued turbulence in the international markets may adverselyaffect our ability to access the capital markets to meet liquidity needs.General declines or disruptions in the travel i

108、ndustry may materially and adversely affect our business and results of operations.Our business is significantly affected by the trends that occur in the travel industry in China,including the hotel,transportation ticketing and packaged-tour sectors.As the travel industry is highly sensitive to busi

109、ness and personal discretionary spending levels,it tends to decline during general economicdownturns.The recent worldwide recession has led to a weakening in the demand for travel services.Other trends or events that tend to reduce travel and arelikely to reduce our revenues include:terrorist attack

110、s or threats of terrorist attacks or wars,particularly given the recent attacks in Paris,Belgium and the worsening situation in Syria;an outbreak of H1N1 influenza,Ebola virus,avian flu,Middle East respiratory syndrome,or MERS,severe acute respiratory syndrome,orSARS,or any other serious contagious

111、diseases;increased prices in the hotel,transportation ticketing,or other travel-related sectors;increased occurrence of travel-related accidents;political unrest;natural disasters or poor weather conditions;and any travel restrictions or other security procedures implemented in connection with any m

112、ajor events in China.We could be severely and adversely affected by declines or disruptions in the travel industry and,in many cases,have little or no control over theoccurrence of such events.Such events could result in a decrease in demand for our travel services.This decrease in demand,depending

113、on the scope andduration,could significantly and adversely affect our business and financial performance over the short and long term.7Table of Contents The trading price of our ADSs has been volatile historically and may continue to be volatile regardless of our operating performance.The trading pr

114、ices of our ADSs have been and may continue to be subject to wide fluctuations.In 2015,the trading prices of our ADSs on the NASDAQGlobal Select Market,as adjusted retrospectively for all periods presented to reflect the current ADS to ordinary share ratio of eight(8)ADSs representing oneordinary sh

115、are effective on December 1,2015,have ranged from US$21.54 to US$57.36 per ADS,and the last reported trading price on April 21,2016 wasUS$47.21 per ADS.The price of our ADSs may fluctuate in response to a number of events and factors,including the following:actual or anticipated fluctuations in our

116、quarterly operating results;changes in financial estimates by securities analysts;conditions in the Internet or travel industries;changes in the economic performance or market valuations of other Internet or travel companies or other companies that primarily operate inChina;changes in major business

117、 terms between our travel suppliers and us;announcements by us or our competitors of new products or services,significant acquisitions,strategic partnerships,joint ventures or capitalcommitments;additions or departures of key personnel;and market and volume fluctuations in the stock market in genera

118、l.In addition,the stock market in general,and the market prices for Internet-related companies and companies with operations in China in particular,haveexperienced volatility that often has been unrelated to the operating performance of such companies.The securities of some China-based companies tha

119、thave listed their securities in the United States have experienced significant volatility since their initial public offerings,including,in some cases,substantialprice declines in the trading prices of their securities.The trading performances of the securities of these China-based companies after

120、their offerings and therecent surge in the number of China-based,U.S.-listed companies that commenced going private proceedings may affect the attitudes of investors towardChinese companies listed in the United States,which consequently may impact the trading performance of the ADSs,regardless of ou

121、r actual operatingperformance.Furthermore,some negative news and perceptions about inadequate corporate governance practices or fraudulent accounting,corporatestructure including the use of variable interest entities or other matters of other China-based companies have negatively affected the attitu

122、des of investorstowards China-based companies,including us,in general in the past,regardless of whether we have engaged in any inappropriate activities,and any news orperceptions with a similar nature may continue to negatively affect us in the future.In addition,the global financial crisis and the

123、ensuing economicrecessions in many countries have contributed and may continue to contribute to extreme volatility in the global stock markets,such as the large decline inshare prices in the United States,China and other jurisdictions in recent years.These broad market and industry fluctuations may

124、continue to adversely affectthe price of the ADSs,regardless of our operating performance.Additionally,volatility or a lack of positive performance in our stock price may adverselyaffect our ability to retain key employees,all of whom have been granted share-based awards.If we are unable to maintain

125、 existing relationships with travel suppliers and strategic alliances,or establish new arrangements with travelsuppliers and strategic alliances at or on favorable terms or at terms similar to those we currently have,or at all,our business,market share and results ofoperations may be materially and

126、adversely affected.We rely on travel suppliers(including without limitation hotels and domestic and international airlines)to make their services available to consumersthrough us,and our business prospects depend on our ability to maintain and expand relationships with travel suppliers.If we are una

127、ble to maintainsatisfactory relationships with our existing travel suppliers,or if our travel suppliers establish similar or more favorable relationships with our competitors,orif our travel suppliers increase their competition with us through their direct sales,or if any one or more of our travel s

128、uppliers significantly reduceparticipation in our services for a sustained period of time or completely withdraw participation in our services,our business,market share and results ofoperations may be materially and adversely affected.To the extent any of those major or popular travel suppliers ceas

129、ed to participate in our services in favorof one of our competitors systems or decided to require consumers to purchase services directly from them,our business,market share and results ofoperations may suffer.Our business depends significantly upon our ability to contract with hotels in advance for

130、 the guaranteed availability of certain hotel rooms.We rely onhotel suppliers to provide us with rooms at discounted prices.However,our contracts with our hotel suppliers are not exclusive and most of the contractsmust be renewed semi-annually or annually.We cannot assure you that our hotel supplier

131、s will renew our contracts in the future on favorable terms or termssimilar to those we currently have agreed.The hotel suppliers may reduce the commission rates on bookings made through us.Furthermore,in order tomaintain and grow our business and to effectively compete with many of our competitors

132、in all potential markets,we will need to establish new arrangementswith hotels and accommodations of all ratings and categories in our existing markets and in new markets.We cannot assure you that we will be able toidentify appropriate hotels or enter into arrangements with those hotels on favorable

133、 terms,if at all.This failure could harm the growth of our business andadversely affect our operating results and financial condition,which consequently will impact the price of our ADSs.8Table of Contents We derive revenues and other significant benefits from our arrangements with major domestic ai

134、rlines in China and international airlines.Our airlineticket suppliers allow us to book and sell tickets on their behalf and collect commissions on tickets booked and sold through us.Although we currently havesupply relationships with these airlines,they also compete with us for ticket bookings and

135、have entered into similar arrangements with many of ourcompetitors and may continue to do so in the future.Such arrangements may be on better terms than we have.In the past,airlines have from time to timereduced the commission rates on tickets booked and sold through us,which negatively affected our

136、 revenues from transportation ticketing in the relevantperiods.Starting in January 2016,some PRC airlines,including two of the largest airlines in China,announced suspension of their respective businesscooperation with Qunar without indicating the length of such suspension and cited serious customer

137、 complaints in their respective announcements.Althoughwe are not aware of any airlines publicly announcing suspension of business cooperation with us as of the date of this annual report,if any airlines choose totake similar actions against us and additional airlines follow suit,our business,market

138、share and results of operations may be materially and adverselyaffected.We cannot assure you that any of these airlines will continue to have supplier relationships with us or pay us commissions at the same or similarrates as what they paid us in the past.The loss of these supplier relationships or

139、adverse changes in major business terms with our travel suppliers wouldmaterially impair our operating results and financial condition as we would lose an increasingly significant source of our revenues.Part of the revenues that we derive from our hotel suppliers,airline ticket suppliers and other t

140、ravel service providers are obtained through our strategicalliances with various third parties.We cannot assure you,however,that we will be able to successfully establish and maintain strategic alliances with thirdparties which are effective and beneficial for our business.Our inability to do so cou

141、ld have a material adverse effect on our market penetration,revenuegrowth and profitability.If we fail to further increase our brand recognition,we may face difficulty in maintaining existing and acquiring new customers and businesspartners and our business may be harmed.We believe that maintaining

142、and enhancing the Ctrip brand depends in part on our ability to grow our customer base and obtain new business partners.Some of our potential competitors already have well-established brands in the travel industry.The successful promotion of our brand will depend largely onour ability to maintain a

143、sizeable and active customer base,maintain relationships with our business partners,provide high-quality customer service,properlyaddress customer needs and handle customer complaints and organize effective marketing and advertising programs.If our customer base significantlydeclines or grows more s

144、lowly than our key competitors,the quality of our customer services substantially deteriorates,or our business partners cease to dobusiness with us,we may not be able to cost-effectively maintain and promote our brand,and our business may be harmed.If we do not compete successfully against new and e

145、xisting competitors,we may lose our market share,and our business may be materially andadversely affected.We compete primarily with other consolidators of hotel accommodations and transportation reservation services based in China,such as Qunar andeLong.We also compete with traditional travel agenci

146、es and new Internet travel search websites.In the future,we may also face competition from new playersin the hotel consolidation market in China and abroad that may enter China.We may face more competition from hotels and airlines as they enter the discount rate market directly or through alliances

147、with other travelconsolidators.In addition,international travelers have become an increasingly important customer base.Competitors that have formed stronger strategicalliances with overseas travel consolidators may have more effective channels to address the needs of customers in China to travel ove

148、rseas.Furthermore,wedo not have exclusive arrangements with our travel suppliers.The combination of these factors means that potential entrants to our industry face relativelylow entry barriers.In the past,certain competitors launched aggressive advertising campaigns,special promotions and engaged i

149、n other marketing activities to promotetheir brands,acquire new customers or to increase their market shares.In response to such competitive pressure,we started to take and may continue to takesimilar measures and as a result will incur significant expenses,which in turn could negatively affect our

150、operating margins in the quarters or years when suchpromotional activities are carried out.For example,we launched a promotion program in recent years to offer certain selected transportation tickets,hotelrooms and package tours as well as grant of e-coupons to our customers in response to promotion

151、 campaigns that our competitors have launched.Primarily asa result of the enhanced marketing efforts and additional investment in product developments in response to the intensified market competition,ouroperational margin was negatively affected.In addition,some of our existing and potential compet

152、itors may have competitive advantages,such assignificantly larger active user base on mobile or other online platforms,greater financial,marketing and strategic relationships and alliances or otherresources or name recognition,and may be able to imitate and adopt our business model.We cannot assure

153、you that we will be able to successfully competeagainst new or existing competitors.In the event we are not able to compete successfully,our business,results of operations and profit margins may bematerially and adversely affected.9Table of Contents Our quarterly results are likely to fluctuate beca

154、use of seasonality in the travel industry in Greater China.Our business experiences fluctuations,reflecting seasonal variations in demand for travel services.For example,the first quarter of each year generallycontributes the lowest portion of our annual net revenues primarily due to a slowdown in b

155、usiness activity around and during the Chinese New Year holiday,which occurs during the period.Consequently,our results of operations may fluctuate from quarter to quarter.Any failure to maintain the satisfactory performance of our mobile platform,websites and systems,particularly those leading to d

156、isruptions in ourservices,could materially and adversely affect our business and reputation,and our business may be harmed if our infrastructure or technology isdamaged or otherwise fails or becomes obsolete.The satisfactory performance,reliability and availability of our infrastructure,including ou

157、r mobile platform,websites and systems,are critical to thesuccess of our business.Any system interruptions that result in the unavailability or slowdown of our mobile platform,websites or other systems and thedisruption in our services could reduce the volume of our business and make us less attract

158、ive to customers.Substantially all of our computer andcommunications systems are located at two customer service centers,one in Shanghai and the other one in Nantong,China.Our technology platform andcomputer and communication systems are vulnerable to damage or interruption from human error,computer

159、 viruses,fire,flood,power loss,telecommunications failure,physical or electronic break-ins,hacking or other attempts at system sabotage,vandalism,natural disasters and other similarevents.For example,in May 2015,we experienced a network shut-down for a few hours,leading to temporary disruptions in t

160、he operations of our mobileplatform and websites and interrupted customer services;later internal investigations revealed the cause to be employee human error.No data leakageoccurred as part of the May 2015 incident,and we have since implemented extensive measures to ensure prompt responses to simil

161、ar future incidents ofnetwork shutdown/service disruption and to continue to update our security mechanisms to protect our systems from any human error,third-party intrusions,viruses or hacker attacks,information or data theft or other similar activities;however,we cannot assure you that unexpected

162、interruptions to our systems willnot occur again in the future.We do not carry business interruption insurance to compensate us for losses that may occur as a result of such disruptions.Inaddition,any such future occurrences could reduce customer satisfaction levels,damage our reputation and materia

163、lly and adversely affect our business.We use an internally developed booking software system that supports nearly all aspects of our booking transactions.Our business may be harmed if weare unable to upgrade our systems and infrastructure quickly enough to accommodate future traffic levels,avoid obs

164、olescence or successfully integrate anynewly developed or purchased technology with our existing system.Capacity constraints could cause unanticipated system disruptions,slower responsetimes,poor customer service,impaired quality and speed of reservations and confirmations and delays in reporting ac

165、curate financial and operatinginformation.These factors could cause us to lose customers and suppliers,which would have a material adverse effect on our results of operations andfinancial condition.In addition,our future success will depend on our ability to adapt our products and services to the ch

166、anges in technologies and Internet user behavior.For example,the number of people accessing the internet through mobile devices,including smart devices,mobile phones,tablets and other hand-helddevices,has increased in recent years,and we expect this trend to continue while 3G,4G and more advanced mo

167、bile communications technologies arebroadly implemented.As we make our services available across a variety of mobile operating systems and devices,we are dependent on the interoperabilityof our services with popular mobile devices and mobile operating systems that we do not control,such as Android,i

168、OS and Windows.Any changes in suchmobile operating systems or devices that degrade the functionality of our services or give preferential treatment to competitive services could adverselyaffect usage of our services.Further,if the number of platforms for which we develop our services increases,which

169、 is typically seen in a dynamic andfragmented mobile services market such as China,it will result in an increase in our costs and expenses.In order to deliver high quality services,it isimportant that our services work well across a range of mobile operating systems,networks,mobile devices and stand

170、ards that we do not control.If we fail todevelop products and technologies that are compatible with all mobile devices and operating systems,or if the products and services we develop are notwidely accepted and used by users of various mobile devices and operating systems,we may not be able to penet

171、rate the mobile Internet market.In addition,the widespread adoption of new internet technologies or other technological changes could require significant expenditures to modify or integrate ourproducts or services.If we fail to keep up with these changes to remain competitive,our future success may

172、be adversely affected.10Table of Contents Our business depends substantially on the continuing efforts of our key executives,and our business may be severely disrupted if we lose theirservices.Our future success depends heavily upon the continued services of our key executives.We rely on their exper

173、tise in business operations,finance andtravel services and on their relationships with our suppliers,shareholders,and business partners.We do not maintain key-man life insurance for any of ourkey executives.If one or more of our key executives are unable or unwilling to continue in their present pos

174、itions,we may not be able to easily replace them.In that case,our business may be severely disrupted,we may incur additional expenses to recruit and train personnel and our financial condition and resultsof operations may be materially and adversely affected.In addition,if any of these key executive

175、s joins a competitor or forms a competing company,we may lose customers and suppliers.Each of our executiveofficers has entered into an employment agreement with us that contains confidentiality and non-competition provisions.If any disputes arise between ourexecutive officers and us,we cannot assur

176、e you of the extent to which any of these agreements would be enforced in China,where most of these executiveofficers reside and hold most of their assets,in light of the uncertainties with Chinas legal system.See“Risks Related to Doing Business in China Uncertainties with respect to the PRC legal s

177、ystem could adversely affect us.”If we are unable to attract,train and retain key individuals and highly skilled employees,our business may be adversely affected.If our business continues to expand,we will need to hire additional employees,including travel supplier management personnel to maintain a

178、nd expandour travel supplier network,information technology and engineering personnel to maintain and expand our mobile platform,websites,customer servicecenters and systems,and customer service representatives to serve an increasing number of customers.If we are unable to identify,attract,hire,trai

179、n and retainsufficient employees in these areas,users of our mobile platform,websites and customer service centers may not have satisfactory experiences and may turn toour competitors,which may adversely affect our business and results of operations.The PRC government regulates the air-ticketing,tra

180、vel agency and Internet industries.If we fail to obtain or maintain all pertinent permits andapprovals or if the PRC government imposes more restrictions on these industries,our business may be adversely affected.The PRC government regulates the air-ticketing,travel agency and Internet industries.We

181、 are required to obtain applicable permits or approvals fromdifferent regulatory authorities to conduct our business,including separate licenses for value-added telecommunications,air-ticketing and travel agencyactivities.If we fail to obtain or maintain any of the required permits or approvals in t

182、he future,we may be subject to various penalties,such as fines orsuspension of operations in these regulated businesses,which could severely disrupt our business operations.As a result,our financial condition and resultsof operations may be adversely affected.In particular,the Civil Aviation Adminis

183、tration of China,or CAAC,together with National Development and Reform Commission,or NDRC,regulatespricing of air tickets.CAAC also supervises commissions payable to air-ticketing agencies together with China National Aviation TransportationAssociation,or CNATA.If restrictive policies are adopted by

184、 CAAC,NDRC,or CNATA,or any of their regional branches,our air-ticketing revenues may beadversely affected.We may not be able to prevent others from using our intellectual property,which may harm our business and expose us to litigation.We regard our domain names,trade names,trademarks and similar in

185、tellectual property as critical to our success.We try to protect our intellectualproperty rights by relying on trademark protection and confidentiality laws and contracts.Trademark and confidentiality protection in China may not be aseffective as that in the United States.Policing unauthorized use o

186、f proprietary technology is difficult and expensive.The steps we have taken may be inadequate to prevent the misappropriation of our proprietary technology.Any misappropriation could have a negativeeffect on our business and operating results.Furthermore,we may need to go to court to enforce our int

187、ellectual property rights.Litigation relating to ourintellectual property might result in substantial costs and diversion of resources and management attention.See“Risks Related to Doing Business inChina Uncertainties with respect to the PRC legal system could adversely affect us.”11Table of Content

188、s We rely on services from third parties to carry out our business and to deliver our products to customers,and if there is any interruption ordeterioration in the quality of these services,our customers may not continue using our services.We rely on third-party computer systems to host our websites

189、,as well as third-party licenses for some of the software underlying our technology platform.In addition,we rely on third-party transportation ticketing agencies to issue transportation tickets and travel insurance products,confirmations and deliveriesin some cities in Greater China.We also rely on

190、third-party local operators to deliver on-site services to our packaged-tour customers.Any interruption in ourability to obtain the products or services of these or other third parties or deterioration in their performance,such as server errors or interruptions,or dishonestbusiness conduct,could imp

191、air the timing and quality of our own service.If our service providers fail to provide high quality services in a timely manner toour customers or violate any applicable rules and regulations,our services will not meet the expectations of our customers and our reputation and brand willbe damaged.Fur

192、thermore,if our arrangement with any of these third parties is terminated,we may not find an alternative source of support on a timely basisor on favorable terms to us.If our hotel suppliers or customers provide us with untrue information regarding our customers stay,we may not be able to recognize

193、and collectrevenues to which we are entitled.A substantial portion of our revenues are represented by commissions paid by hotels for room nights booked through us.Generally,we do not receivepayment from our customers on behalf of our hotel suppliers,as our customers pay hotels directly.To confirm wh

194、ether a customer adheres to the bookeditinerary,we routinely make inquiries with the hotel and,occasionally,with the customer.We rely on the hotel and the customer to provide us truthfulinformation regarding the customers check-in and check-out dates,which forms the basis for calculating the commiss

195、ion we are entitled to receive from thehotel.If our hotel suppliers or customers provide us with untrue information with respect to our customers length of stay at the hotels,we would not be ableto collect revenues to which we are entitled.In addition,using such untrue information may lead to inaccu

196、rate business projections and plans,which mayadversely affect our business planning and strategy.We may suffer losses if we are unable to predict the amount of inventory we will need to purchase during the peak holiday seasons.During the peak holiday seasons in China,we establish limited merchant bu

197、siness relationships with selected travel service suppliers,particularly for ourpackaged-tour products,in order to secure adequate supplies for our customers.In the merchant business relationship,we buy hotel rooms and/ortransportation tickets before selling them to our customers and thereby incur i

198、nventory risk.If we are unable to correctly predict demand for hotel rooms andtransportation tickets that we are committed to purchase,we would be responsible for covering the cost of the hotel rooms and transportation tickets we areunable to sell,and our financial condition and results of operation

199、s would be adversely affected.The recurrence of SARS or other similar outbreaks of contagious diseases as well as natural disasters may materially and adversely affect ourbusiness and operating results.In early 2003,several regions in Asia,including Hong Kong and China,were affected by the outbreak

200、of SARS.The travel industry in China,Hong Kongand some other parts of Asia suffered tremendously as a result of the outbreak of SARS.Furthermore,in early 2008,severe snowstorms hit many areas ofChina and particularly affected southern China.The travel industry was severely and adversely affected dur

201、ing and after the snowstorms.Additionally,inMay 2008,a major earthquake struck Chinas populous Sichuan Province,causing great loss of life,numerous injuries,property loss and disruption to thelocal economy.The earthquake had an immediate impact on our business as a result of the sharp decrease in tr

202、avel in the relevant earthquake-affected areas inSichuan Province.In 2009,an outbreak of H1N1 influenza(swine flu)occurred in Mexico and the United States and human cases of the swine flu werediscovered in China and Hong Kong.In March 2011,a powerful earthquake hit Japan,and the subsequent tsunami a

203、nd nuclear accidents had far-reachingimpact on the surrounding economies.Starting from March 2013,H7N9 bird flu,a new strain of animal influenza,has been spreading in China and hasinfected more than a hundred people.In October 2013,large scale political protests began in Thailand that lasted several

204、 months and caused disruption totourism and travel.In November 2013,one of the largest typhoons ever recorded hit the Philippines,causing widespread devastation.In March 2014,theWorld Health Organization,or the WHO,reported a major Ebola outbreak in Guinea,a western African nation.The disease then r

205、apidly spread to theneighboring countries of Liberia and Sierra Leone.As of February 3,2015,22,560 suspected cases and 9,019 deaths had been reported;however,the WHOhas said that these numbers may be underestimated.In June 2015,an outbreak of Middle East respiratory syndrome,or MERS,affected South K

206、orea,one ofour popular overseas travel destinations.Any future outbreak of contagious diseases,extreme unexpected bad weather or natural disasters would adversely affect our business and operatingresults.Ongoing concerns regarding contagious disease or natural disasters,particularly its effect on tr

207、avel,could negatively impact our customers desire totravel.If there is a recurrence of an outbreak of certain contagious diseases or natural disasters,travel to and from affected regions could be curtailed.Government advice regarding,or restrictions on,travel to and from these and other regions on a

208、ccount of an outbreak of any contagious disease or occurrenceof natural disasters may have a material adverse effect on our business and operating results.12Table of Contents If tax benefits available to our subsidiaries in China are reduced or repealed,our results of operations could suffer.Under t

209、he PRC Enterprise Income Tax Law and the relevant implementation rules,or the EIT Law,effective on January 1,2008,foreign investedenterprises,or FIEs,and domestic enterprises are subject to EIT at a uniform rate of 25%.Certain enterprises will benefit from a preferential tax rate of 15%under the EIT

210、 Law if they qualify as“high and new technology enterprises,”subject to certain general restrictions described in the EIT Law and the relatedregulations.In December 2008,our PRC subsidiaries,Ctrip Computer Technology,Ctrip Travel Information,Ctrip Travel Network and JointWisdom were eachdesignated b

211、y relevant local authorities as a“high and new technology enterprise”under the EIT Law with an effective period of three years.Therefore,theseentities were entitled to enjoy a preferential tax rate of 15%,as long as they maintained their qualifications for“high and new technology enterprises”thatare

212、 subject to renewals every three years with the current effective period expiring by the end of 2017.We cannot assure you that our subsidiaries willcontinue to qualify as high and new technology enterprises when they are subject to reevaluation in the future.In 2002,the PRC State Administration ofTa

213、xation,or the SAT,started to implement preferential tax policy in Chinas western region,and companies located in applicable jurisdictions covered bythe Catalogue of Encouraged Industries in the Western Region(initially effective through the end of 2010 and further extended to 2020)are eligible to ap

214、plyfor a preferential income tax rate of 15%if their businesses fall within the“encouraged”category of the policy.Benefiting from this policy,Chengdu Ctripand Chengdu Ctrip International obtained approval from local tax authorities to apply the 15%tax rate for their annual tax filing subject to peri

215、odic renewalsover the years since 2012.The two entities re-applied for this qualification after the effective period expired in 2014 and their applications were approved bythe relevant government authority.In 2013,Chengdu Information Technology Co.,Ltd.,or Chengdu Information,obtained approval from

216、local taxauthorities to apply the 15%tax rate for its 2012 tax filing and for the years from 2013 to 2016.In the event that the preferential tax treatment for theseentities is discontinued,these entities will become subject to the standard tax rate at 25%,which would materially increase our tax obli

217、gations.We have sustained loss in the past and may experience earnings decline or net loss in the future.We sustained net loss in certain past periods and we cannot assure you that we can sustain profitability or avoid net loss in the future.We expect that ouroperating expenses will increase and the

218、 degree of increase in these expenses is largely based on anticipated growth,revenue trends and competitive pressure.As a result,any decrease or delay in generating additional sales volume and revenues and increase in our operating expenses may result in substantialoperating losses.We have incurred

219、substantial indebtedness and may incur additional indebtedness in the future.We may not be able to generate sufficient cash tosatisfy our outstanding and future debt obligations.As of December 31,2015,our total short-term borrowings and long-term borrowings(current portions)were RMB12.7 billion(US$2

220、 billion),and ourtotal long-term borrowings(excluding current portions)were RMB18.5 billion(US$2.85 billion).Our substantial indebtedness could have important consequences to you.For example,it could:increase our vulnerability to adverse general economic and industry conditions;require us to dedicat

221、e a substantial portion of our cash flow from operations to servicing and repaying our indebtedness,thereby reducing theavailability of our cash flow to fund working capital,capital expenditures and other general corporate purposes;and limit,along with the financial and other restrictive covenants o

222、f our indebtedness,among other things,our ability to conduct additionalfinancing activities,or increase the cost of additional financing.In the future,we may from time to time incur additional indebtedness and contingent liabilities.If we incur additional debt,the risks that we face as aresult of ou

223、r substantial indebtedness and leverage could intensify.Our ability to generate sufficient cash to satisfy our outstanding and future debt obligations will depend upon our future operating performance,whichwill be affected by prevailing economic conditions and financial,business and other factors,ma

224、ny of which are beyond our control.As a result,we may notgenerate or obtain sufficient cash flow to meet our anticipated operating expenses and to service our debt obligation as they become due.13Table of Contents We may be subject to legal or administrative proceedings regarding information provide

225、d on our online portals or other aspects of our businessoperations,which may be time-consuming to defend.Our online portals contain information about hotels,transportation,popular vacation destinations and other travel-related topics.It is possible that if anyinformation accessible on our online por

226、tals contains errors or false or misleading information,third parties could take action against us for losses incurred inconnection with the use of such information.From time to time,we have become and may in the future become a party to various legal or administrativeproceedings arising in the ordi

227、nary course of our business,including actions with respect to labor and employment claims,breach of contract claims,anti-competition claims and other matters.Although such proceedings are inherently uncertain and their results cannot be predicted with certainty,we believethat the resolution of our c

228、urrent pending matters will not have a material adverse effect on our business,consolidated financial position,results of operationsor cash flow.Regardless of the outcome and merit of such proceedings,however,any legal action can have an adverse impact on us because of defense costs,negative publici

229、ty,diversion of managements attention and other factors.In addition,it is possible that an unfavorable resolution of one or more legal oradministrative proceedings,whether in the PRC or in another jurisdiction,could materially and adversely affect our financial position,results of operationsor cash

230、flows in a particular period or damage our reputation.We could be liable for breaches of Internet security or fraudulent transactions by users of our mobile platform and our websites.The Internet industry is facing significant challenges regarding information security and privacy,including the stora

231、ge,transmission and sharing ofconfidential information.In recent years,PRC government authorities have enacted legislation on Internet use to protect personal information from anyunauthorized disclosure.See“Item 4.Information on the Company B.Business Overview PRC Government Regulations Internet Pri

232、vacy.”Weconduct a significant portion of our transactions through the Internet,including our mobile platform and websites.In such transactions,secured transmissionof confidential information(such as customers itineraries,hotel and other reservation information,credit card information,personal inform

233、ation and billingaddresses)over public networks and ensuring the confidentiality,integrity,availability and authenticity of the information of our users,customers,hotelsuppliers and airline partners are essential to maintaining their confidence in our online products and services.Our current securit

234、y measures may not beadequate and may contain deficiencies that we fail to identify,and advances in technology,increased levels of expertise of hackers,new discoveries in thefield of cryptography or others could increase our vulnerability.For example,a third-party website with focus on Internet secu

235、rity information exchangereleased a news in March 2014 that as a result of a temporary testing function performed by us,certain data files containing customers credit cardinformation had been stored on local servers maintained by us,which may lead to potential exposure of these customers information

236、 to hackers.We removedthe cause of the potential security concern within two hours of the release of the news report and then examined all other possible leaks and found that 93customers credit card information might have been downloaded by the above-mentioned website for the purpose of confirming p

237、otential risks.Although toour knowledge,no customer has suffered financial loss or other damage due to the incident as of the date of this report,our business,results of operations,user experience and reputation may be materially and adversely affected if similar incidents related to Internet securi

238、ty recur in the future.In August 2011,Chinas Supreme Peoples Court and Supreme Peoples Procuratorate issued judicial interpretations regarding hacking and other Internet crimes.However,itseffect on curbing hacking and other illegal online activities still remains to be seen.Significant capital,manag

239、erial and human resources are required to enhance information security and to address any issues caused by security failures.Ifwe are unable to protect our systems and the information stored in our systems from unauthorized access,use,disclosure,disruption,modification ordestruction,such problems or

240、 security breaches may cause loss,expose us to litigation and possible liability to the owners of confidential information,disrupt our operations and may harm our reputation and ability to attract customers.We may be the subject of detrimental conduct by third parties including complaints to regulat

241、ory agencies,negative blog postings,and the publicdissemination of malicious assessments of our business,which could have a negative impact on our reputation and cause us to lose market share,travelsuppliers and customers and revenues,and adversely affect the price of our ADSs.We may be the target o

242、f anti-competitive,harassing,or other detrimental conduct by third parties.Such conduct may include complaints,anonymous orotherwise,to regulatory agencies regarding our operations,accounting,revenues,business relationships,business prospects and business ethics.Additionally,allegations,directly or

243、indirectly against us,may be posted in Internet chat-rooms or on blogs or any websites by anyone,whether or notrelated to us,on an anonymous basis.We may be subject to government or regulatory investigation as a result of such third-party conduct and may berequired to expend significant time and inc

244、ur substantial costs to address such third-party conduct,and there is no assurance that we will be able toconclusively refute each of the allegations within a reasonable period of time,or at all.Our reputation may also be negatively affected as a result of the publicdissemination of anonymous allega

245、tions or malicious statements about our business,which in turn may cause us to lose market share,travel suppliers andcustomers and revenues and adversely affect the price of our ADSs.14Table of Contents We have limited business insurance coverage in Greater China.Insurance companies in Greater China

246、 offer limited business insurance products and generally do not,to our knowledge,offer business liabilityinsurance.Business disruption insurance is available to a limited extent in Greater China,but we have determined that the risks of disruption,the cost of suchinsurance and the difficulties associ

247、ated with acquiring such insurance make it impractical for us to have such insurance.We do not maintain insurancecoverage for any kinds of business liabilities or disruptions and would have to bear the costs and expenses associated with any such events out of our ownresources.We hire celebrities to

248、be our brand ambassadors to market our brands and products and this marketing initiative may not be effective.From time to time,we hire celebrities to be our brand ambassadors to market our“Ctrip”brand or our products and services that are important to ourbusiness.However,we cannot give assurance th

249、at the endorsement from our brand ambassadors or related advertisements will remain effective,that the brandambassador will remain popular or his or her images will remain positive and compatible with the messages that our brand and products aim to convey.Furthermore,we cannot ensure that we can suc

250、cessfully find suitable celebrities to replace any of our existing brand ambassador if any of his popularitiesdeclines or if the existing brand ambassador is no longer able or suitable to continue the engagement,and termination of such engagements may have asignificant impact on our brand images and

251、 the promotion or sales of our products.If any of these situations occurs,our business,financial condition andresults of operations could be materially and adversely affected.We may face greater risks of doubtful accounts as our business increases in scale.Since we began providing travel booking ser

252、vices to corporate customers and some hotel customers who generally request credit terms,our accountsreceivable have increased.We cannot assure you that we will be able to collect payment fully and in a timely manner on our outstanding accounts receivablefrom our customers.As a result,we may face a

253、greater risk of non-payment of our accounts receivable.For the years ended December 31,2013,2014 and2015,we recognized the provisions of doubtful accounts of RMB2.8 million,RMB11.7 million and RMB32.1 million(US$5.0 million)respectively.As ourcorporate travel business grows in scale,we may need to m

254、ake increased provisions for doubtful accounts.Our operating results and financial condition maybe materially and adversely affected if we are unable to successfully manage our accounts receivable.As we have commenced accounting for employee share options using the fair value method beginning in 200

255、6,such accounting treatment couldcontinue to significantly reduce our net income.Since 2006,we have accounted for share-based compensation in accordance with ASC 718“Compensation Stock Compensation,”or ASC 718,whichrequires a public company to recognize,as an expense,the fair value of share options

256、and other share-based compensation to employees based on therequisite service period of the share-based awards.We have granted share-based compensation awards,including share options and restricted share units,toemployees,officers and directors to incentivize performance and align their interests wi

257、th ours.We have adopted four share incentive plans,namely,the 2007Share Incentive Plan,or the 2007 Plan,the 2005 Employees Stock Option Plan,or the 2005 Plan,the 2003 Employees Option Plan,or the 2003 Plan,andthe 2000 Employees Stock Option Plan,or the 2000 Plan.As a result of these grants and poten

258、tial future grants under these plans,we had incurred in the pastand expect to continue to incur in future periods significant share-based compensation expenses.The amount of these expenses is based on the fair value ofthe share-based awards.Our board of directors has the discretion to change terms o

259、f any previously issued share options and any such change may significantly increase theamount of our share-based compensation expenses for the period that the change takes effect as well as those for any future periods.In February 2009,ourboard of directors approved to reduce the exercise price of

260、all outstanding unvested options that were granted by us in 2007 and 2008 under our 2007 Plan tothe then fair market value of our ordinary shares underlying such options and,in December 2009,our board of directors approved to extend the expirationdates of all stock options granted in 2005 and 2006 t

261、o eight years after the respective original grant dates of these options.As a result of such changes,ourshare-based compensation expense of 2009 reduced our diluted earnings per ADS by US$0.14.In February 2010,our compensation committee approved toextend the expiration dates of all stock options gra

262、nted in and after 2007 to eight years after the respective original grant dates of these options.As a result ofsuch changes and extensions,our share-based compensation expense of 2010 reduced our diluted earnings per ADS by US$0.06.In addition,with suchchanges and extensions,the application of ASC 7

263、18 will continue to have a significant impact on our net income.In addition,future changes to variousassumptions used to determine the fair value of awards issued or the amount and type of equity awards granted may also create uncertainty as to the amountof future share-based compensation expense.15

264、Table of Contents Failure to maintain effective internal control over financial reporting could result in errors in our published financial statements,which in turncould have a material adverse effect on the trading price of our ADSs.We are subject to the reporting obligations under the U.S.securiti

265、es laws.The U.S.Securities and Exchange Commission,or the SEC,as required underSection 404 of the Sarbanes-Oxley Act of 2002,has adopted rules requiring public companies to include a report of management on the effectiveness of suchcompanies internal control over financial reporting in its annual re

266、port.In addition,an independent registered public accounting firm for a public companymust issue an attestation report on the effectiveness of the companys internal control over financial reporting.Our management conducted an evaluation ofthe effectiveness of our internal control over financial repo

267、rting and concluded that our internal control over financial reporting was effective as ofDecember 31,2015.In addition,our independent registered public accounting firm attested the effectiveness of our internal control and reported that ourinternal control over financial reporting was effective as

268、of December 31,2015.If we fail to maintain the effectiveness of our internal control over financialreporting,we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with theSarbanes-Oxley Act.Moreover,effective internal contro

269、l over financial reporting is necessary for us to produce reliable financial reports.As a result,anyfailure to maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financialstatements,which in turn could negatively imp

270、act the trading price of our ADSs.Furthermore,we may need to incur additional costs and use additionalmanagement and other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward.We may need additional capital and we may not be able to obtain

271、it.We believe that our current cash and cash equivalents,short-term investments,cash flow from operations and proceeds from our financing activities willbe sufficient to meet our anticipated cash needs for the foreseeable future.We may,however,require additional cash resources due to changed busines

272、sconditions or other future developments,including any investments or acquisitions we may decide to pursue.If these resources are insufficient to satisfy ourcash requirements,we may seek to sell additional equity or debt securities or obtain a credit facility.The sale of additional equity securities

273、 could result inadditional dilution to our shareholders.The incurrence of indebtedness would result in increased debt service obligations and could result in operating andfinancing covenants that would restrict our operations.We cannot assure you that financing will be available in amounts or on ter

274、ms acceptable to us,if atall.In particular,the recent financial turmoil affecting the financial markets and banking system may significantly restrict our ability to obtain financing inthe capital markets or from financial institutions on commercially reasonable terms,or at all.Risks Related to Our C

275、orporate Structure PRC laws and regulations restrict foreign investment in the air-ticketing,travel agency and value-added telecommunications businesses,andsubstantial uncertainties exist with respect to the application and implementation of PRC laws and regulations.We are a Cayman Islands incorpora

276、ted company and a foreign person under PRC law.Due to foreign ownership restrictions in the air-ticketing,travelagency and value-added telecommunications industries,we conduct part of our business through contractual arrangements with our consolidated affiliatedChinese entities.These entities hold t

277、he licenses and approvals that are essential for our business operations.In the opinion of our PRC counsel,Commerce&Finance Law Offices,our current ownership structure,the ownership structure of our subsidiaries andour consolidated affiliated Chinese entities,the contractual arrangements among us,ou

278、r subsidiaries,our consolidated affiliated Chinese entities and theirshareholders,as described in this annual report,are in compliance with existing PRC laws,rules and regulations.There are,however,substantial uncertaintiesregarding the interpretation and application of current or future PRC laws an

279、d regulations.Accordingly,we cannot assure you that PRC governmentauthorities will not ultimately take a view contrary to the opinion of our PRC legal counsel due to the lack of official interpretation and clear guidance.If we and our consolidated affiliated Chinese entities are found to be in viola

280、tion of any existing or future PRC laws or regulations,the relevantgovernmental authorities would have broad discretion in dealing with such violation,including,without limitation,levying fines,confiscating our incomeor the income of our consolidated affiliated Chinese entities,revoking our business

281、 licenses or the business licenses of our consolidated affiliated Chineseentities,requiring us and our consolidated affiliated Chinese entities to restructure our ownership structure or operations and requiring us or our consolidatedaffiliated Chinese entities to discontinue any portion or all of ou

282、r value-added telecommunications,air-ticketing or travel agency businesses.In particular,ifthe PRC government authorities impose penalties which cause us to lose our rights to direct the activities of and receive economic benefits from ourconsolidated affiliated Chinese entities,we may lose the abil

283、ity to consolidate and reflect in our financial statements the operation results of our consolidatedaffiliated Chinese entities.Any of these actions could cause significant disruption to our business operations,and may materially and adversely affect ourbusiness,financial condition and results of op

284、erations.16Table of Contents Under the equity pledge agreements between our subsidiaries and the shareholders of our consolidated affiliated Chinese entities,the shareholders of ourconsolidated affiliated Chinese entities pledged their respective equity interests in these entities to our subsidiarie

285、s.According to the PRC Property RightsLaw,effective as of October 1,2007,and the Measures for the Registration of Equity Pledge with the Administration for Industry and Commerce,effective asof October 1,2008,the effectiveness of the pledges will be denied if the pledges are not registered with the A

286、dministration for Industry and Commerce.Ourconsolidated affiliated Chinese entities and our subsidiaries have registered most of the equity pledges,except that registration process for a few equitypledges was pending as of the date of this annual report.The effectiveness of the pledges will be recog

287、nized by PRC courts if disputes arise on certainpledged equity interests and that our subsidiaries interests as pledgees will prevail over those of third parties.Furthermore,we were aware that a China-based company listed in the U.S.announced in 2012 that it was subject to the SECs investigation whi

288、ch itbelieved related to the consolidation of its consolidated affiliated Chinese entities.Following the announcement,that issuers stock price declinedsignificantly.Although we are not aware of any actual or threatened investigation,inquiry or other action by the SEC,NASDAQ or any other regulatoryau

289、thority with respect to consolidation of our consolidated affiliated Chinese entities,we cannot assure you that we will not be subject to any suchinvestigation or inquiry in the future.In the event we are subject to any regulatory investigation or inquiry relating to our consolidated affiliated Chin

290、eseentities,including the consolidation of such entities into our financial statements,or any other matters,we may need to spend significant amount of time andexpenses in connection with the investigation or inquiry,our reputation may be harmed regardless of the outcome,and the trading price of our

291、ADS maymaterially decline or fluctuate.If our consolidated affiliated Chinese entities violate our contractual arrangements with them,our business could be disrupted,our reputationmay be harmed and we may have to resort to litigation to enforce our rights,which may be time-consuming and expensive.As

292、 the PRC government restricts foreign ownership of value-added telecommunications,air-ticketing and travel agency businesses in China,we dependon our consolidated affiliated Chinese entities,in which we have no ownership interest,to conduct part of our non-accommodation reservation businessactivitie

293、s through a series of contractual arrangements,which are intended to provide us with effective control over these entities and allow us to obtaineconomic benefits from them.Although we have been advised by our PRC counsel,Commerce&Finance Law Offices,that the contractual arrangements asdescribed in

294、this annual report are valid,binding and enforceable under current PRC laws,except for certain equity pledge agreements whose registrationprocess was pending as of the date of this annual report and thus may not be enforceable,these arrangements are not as effective in providing control as directown

295、ership of these businesses.For example,our consolidated affiliated Chinese entities could violate our contractual arrangements with them by,amongother things,failing to operate our air-ticketing or packaged-tour business in an acceptable manner or pay us for our consulting or other services.In any s

296、uchevent,we would have to rely on the PRC legal system for the enforcement of those agreements,which could have uncertain results.Any legal proceedingcould result in the disruption of our business,damage to our reputation,diversion of our resources and incurrence of substantial costs.See“Risks Relat

297、edto Doing Business in China Uncertainties with respect to the PRC legal system could adversely affect us.”The principal shareholders of our consolidated affiliated Chinese entities have potential conflicts of interest with us,which may adversely affectour business.Our director,vice chairman of the

298、board and president,Min Fan,our officers,Tao Yang,Qi Shi,Maohua Sun,Hui Cao and Hui Wang were also theprincipal shareholders of our consolidated affiliated Chinese entities as of the date of this report.Thus,conflicts of interest between their duties to ourcompany and our consolidated affiliated Chi

299、nese entities may arise.We cannot assure you that when conflicts of interest arise,these persons will act entirelyin our interests or that the conflicts of interest will be resolved in our favor.In addition,these persons could violate their non-competition or employmentagreements with us or their le

300、gal duties by diverting business opportunities from us to others,resulting in our loss of corporate opportunities.In any suchevent,we would have to rely on the PRC legal system for the enforcement of these agreements,which could have uncertain results.Any legal proceedingcould result in the disrupti

301、on of our business,diversion of our resources and incurrence of substantial costs.See“Risks Related to Doing Business inChina Uncertainties with respect to the PRC legal system could adversely affect us.”Substantial uncertainties exist with respect to the enactment timetable,interpretation and imple

302、mentation of draft PRC Foreign Investment Lawand how it may impact the viability of our current corporate structure,corporate governance and business operations.The Ministry of Commerce,or MOC,published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to,upon itsenact

303、ment,replace the trio of existing laws regulating foreign investment in China,namely,the Sino-foreign Equity Joint Venture Enterprise Law,the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law,together with their implementation rules and ancillaryreg

304、ulations.The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in linewith prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.Th

305、eMOC solicited comments on this draft and substantial uncertainties exist with respect to its enactment timetable,interpretation and implementation.Thedraft Foreign Investment Law,if enacted as proposed,may materially impact the entire legal framework regulating the foreign investments in China as w

306、ell asthe viability of our current corporate structure,corporate governance and business operations in many aspects.17Table of Contents Among other things,the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of“actual control”indetermining whethe

307、r a company is considered a foreign-invested enterprise,or an FIE.The draft Foreign Investment Law specifically provides that entitiesestablished in China but“controlled”by foreign investors will be treated as FIEs,whereas an entity set up in a foreign jurisdiction would nonetheless be,upon market e

308、ntry clearance by the MOC,treated as a PRC domestic investor provided that the entity is“controlled”by PRC entities and/or citizens.In thisconnection,“control”is broadly defined in the draft law to cover any of the following summarized categories:(i)holding 50%of or more of the equityinterest,share

309、of interests,voting rights or similar equity interest of the subject entity;(ii)holding less than 50%of the equity interest,share of interests,voting rights or similar equity interest of the subject entity but having the power to secure at least 50%of the seats on the board or other equivalent decis

310、ionmaking bodies,or having the voting power to material influence on the board,the shareholders meeting or other equivalent decision making bodies;or(iii)having the power to exert decisive influence,via contractual or trust arrangements,over the subject entitys operations,financial matters or other

311、key aspectsof business operations.Once an entity is determined to be an FIE and its investment amount exceeds certain thresholds or its business operation falls within a“negative list”to be separately issued by the State Counsel Council in the future,market entry clearance by the MOC or its local co

312、unterparts would berequired.Otherwise,all foreign investors may make investments on the same terms as Chinese investors without being subject to additional approval from thegovernment authorities as mandated by the existing foreign investment legal regime.The“variable interest entity”structure,or VI

313、E structure,has been adopted by many PRC-based companies,including us,to obtain necessary licenses andpermits in the industries that are currently subject to foreign investment restrictions in China.See“Item 3.Key Information D.Risk Factors RisksRelated to Our Corporate Structure PRC laws and regula

314、tions restrict foreign investment in the air-ticketing,travel agency,advertising and value-addedtelecommunications businesses,and substantial uncertainties exist with respect to the application and implementation of PRC laws and regulations.”and“Item 7.Major Shareholders and Related Party Transactio

315、ns Related Party Transactions Arrangements with Consolidated Affiliated Chinese Entities.”Under the draft Foreign Investment Law,variable interest entities that are controlled via contractual arrangements would also be deemed as FIEs,if they areultimately“controlled”by foreign investors.Therefore,fo

316、r any companies with a VIE structure in an industry category that is on the“negative list,”theexisting VIE structure may be deemed legitimate only if the ultimate controlling person(s)is/are of PRC nationality(either PRC state owned enterprises oragencies,or PRC citizens).Conversely,if the actual co

317、ntrolling person(s)is/are of foreign nationalities,then the variable interest entities will be treated asFIEs and any operation in the industry category on the“negative list”without market entry clearance may be considered as illegal.It is likely that we would not be considered as ultimately control

318、led by PRC nationals,as our shareholder base is relatively diverse and,to ourknowledge,ultimate beneficial owners of our shares who are PRC nationals may not,in the aggregate,control more than 50%of our total voting power as ofMarch 31,2016.The draft Foreign Investment Law has not taken a position o

319、n what actions will be taken with respect to the existing companies with a VIEstructure,whether or not these companies are controlled by Chinese parties,while it solicited comments from the public on this point by illustrating severalpossible options.Under these varied options,a company that has a V

320、IE structure and conducts the business on the“negative list”at the time of enactment ofthe new Foreign Investment Law has either the option or obligation to disclose its corporate structure to the authorities,while the authorities,after reviewingthe ultimate share control structure of the company,ma

321、y either permit the company to continue maintain the VIE structure(if the company is deemedultimately controlled by PRC nationals),or require the company to dispose of its businesses and/or VIE structure based on circumstantial considerations.Moreover,it is uncertain whether the air-ticketing,travel

322、 agency and value-added telecommunications industries,in which our variable interest entitiesoperate,will be subject to the foreign investment restrictions or prohibitions set forth in the“negative list”to be issued.If the enacted version of the ForeignInvestment Law and the final“negative list”mand

323、ate further actions,such as MOC market entry clearance or certain restructuring of our corporate structureand operations,to be completed by companies with existing VIE structure like us,we face substantial uncertainties as to whether these actions can be timelycompleted,or at all,and our business an

324、d financial condition may be materially and adversely affected.The draft Foreign Investment Law,if enacted as proposed,may also materially impact our corporate governance practice and increase our compliancecosts.For instance,the draft Foreign Investment Law imposes stringent ad hoc and periodic inf

325、ormation reporting requirements on foreign investors and theapplicable FIEs.Aside from investment implementation report and investment amendment report that are required at each investment and alteration ofinvestment specifics,an annual report is mandatory,and large foreign investors meeting certain

326、 criteria are required to report on a quarterly basis.Anycompany found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminalliabilities,and the persons directly responsible may be subject to criminal liabilities.Our con

327、tractual arrangements with our consolidated affiliated Chinese entities may result in adverse tax consequences to us.As a result of our corporate structure and the contractual arrangements between us and our consolidated affiliated Chinese entities,we are effectivelysubject to the 5%PRC business tax

328、 or 6%PRC value-added taxes on both revenues generated by our consolidated affiliated Chinese entities operations inChina and revenues derived from our contractual arrangements with our consolidated affiliated Chinese entities.We may be subject to adverse taxconsequences if the PRC tax authorities w

329、ere to determine that the contracts between us and our consolidated affiliated Chinese entities were not made on anarms-length basis and therefore constitute favorable transfer pricing arrangements.If this occurs,the PRC tax authorities could request that our consolidatedaffiliated Chinese entities

330、adjust their taxable income upward for PRC tax purposes.Such a pricing adjustment could adversely affect us by increasing ourconsolidated affiliated Chinese entities tax expenses without reducing our tax expenses,which could subject our consolidated affiliated Chinese entities tolate payment fees an

331、d other penalties for underpayment of taxes,and/or result in the loss of the tax benefits available to our subsidiaries in China.The EITLaw requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its affiliates to the relevantt

332、ax authorities.The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistentwith arms-length principles.As a result,our contractual arrangements with our consolidated affiliated Chinese entities may result in adverse ta

333、xconsequences to us.18Table of Contents Our subsidiaries and consolidated affiliated Chinese entities in China are subject to restrictions on paying dividends or making other payments tous,which may restrict our ability to satisfy our liquidity requirements.We are a holding company incorporated in the Cayman Islands.We rely on dividends from our subsidiaries in China and consulting and other fees