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1、Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549 FORM 20-F (Mark One)Date of event requiring this shell company report.For the transition period from to Commission file number:001-33853 Securities registered or to be registered pursuant to Section 12(b)of the A

2、ct:*Not for trading but only in connection with the listing on the NASDAQ Global Select Market of American depositary shares,each representing 0.25 of an ordinary share.Securities registered or to be registered pursuant to Section 12(g)of the Act:?REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR 1

3、2(g)OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2014 OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 OR?SHELL COMPANY REPORT PURSUANT TO

4、SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 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 200335 Peoples Republic of

5、 China(Address of principal executive offices)James Jianzhang Liang,Chief Executive OfficerTelephone:+(8621)3406-4880 Facsimile:+(8621)5251-0000 99 Fu Quan Road Shanghai 200335 Peoples Republic of China(Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)Title of each

6、class Name of each exchange on which registeredOrdinary shares,par value US$0.01The NASDAQ Stock Market LLC*per ordinary share (The NASDAQ Global Select Market)None(Title of Class)Table of Contents Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act:Indicate the

7、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:Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No?If this report is an annual o

8、r transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934.Yes?No Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securitie

9、s Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No?Indicate by check mark whether the registrant has submitted electronically and posted

10、 on its corporate Web site,if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No?Indicate by check mark whether the

11、 registrant is a large accelerated filer,an accelerated filer,or a non-accelerated filer.See definition of“accelerated filer and large accelerated filer”in Rule 12b-2 of the Exchange Act.(Check one):Indicate by check mark which basis of accounting the registrant has used to prepare the financial sta

12、tements included in this filing: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.Item 17?Item 18?If this is an annual report,indicate by check mark whether the registrant is a shell company(as de

13、fined in Rule 12b-2 of the Exchange Act).Yes?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 Exchange Act o

14、f 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes?No?None(Title of Class)35,146,982 ordinary shares,par value$0.01 per ordinary share.Large accelerated filer Accelerated filer?Non-accelerated filer?U.S.GAAP International Financial Reporting Standards as issued

15、 by the International Accounting Standards Board?Other?Table of Contents TABLE OF CONTENTS i PageINTRODUCTION 1PART I 1 ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS 1 ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3.KEY INFORMATION 1 ITEM 4.INFORMATION ON THE COMPANY 23 ITEM 5.

16、OPERATING AND FINANCIAL REVIEW AND PROSPECTS 35 ITEM 6.DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES 48 ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 56 ITEM 8.FINANCIAL INFORMATION 59 ITEM 9.THE OFFER AND LISTING 60 ITEM 10.ADDITIONAL INFORMATION 60 ITEM 11.QUANTITATIVE AND QUALITATIVE DISCL

17、OSURES ABOUT MARKET RISK 67 ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 68PART II 69 ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES 69 ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 69 ITEM 15.CONTROLS AND PROCEDURES 69 ITEM 16A.AUDIT

18、COMMITTEE FINANCIAL EXPERT 69 ITEM 16B.CODE OF ETHICS 70 ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES 70 ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 70 ITEM 16E.PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 70 ITEM 16F.CHANGE IN REGISTRANTS CERTIFYI

19、NG ACCOUNTANT 70 ITEM 16G.CORPORATE GOVERNANCE 71 ITEM 16H.MINE SAFETY DISCLOSURE 71PART III 71 ITEM 17.FINANCIAL STATEMENTS 71 ITEM 18.FINANCIAL STATEMENTS 71 ITEM 19.EXHIBITS 71Table of Contents INTRODUCTION In this annual report,unless otherwise indicated,(1)the terms“we,”“us,”“our company,”“our”

20、and“Ctrip”refer to C International,Ltd.,its predecessor entities and subsidiaries,and,in the context 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

21、US$0.01 per ordinary share;(3)“ADSs”refers to our American depositary shares,four of which represent one ordinary share;(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 the PRC,Tai

22、wan,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 the legal currency of the United States.Any discrepancies in any table between the amounts identified as total amounts and the sum of th

23、e 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 31,2012,2013 and 2014.On January 21,2010,we effected a change of the ratio of our ADSs to ordinary shares from two(2)ADSs representing one

24、ordinary share to four(4)ADSs representing one ordinary share.Unless otherwise indicated,ADSs and per ADS amount in this annual report have been retroactively adjusted to reflect the changes in ratio for all periods presented.PART I ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS Not app

25、licable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable.ITEM 3.KEY INFORMATION A.Selected Financial Data The following table presents the selected consolidated financial information for our business.You should read the following information in conjunction with“Item 5.Operating and Fina

26、ncial Review and Prospects”below.The selected consolidated statement of operations data for the years ended December 31,2012,2013 and 2014 and the selected consolidated balance sheet data as of December 31,2013 and 2014 have been derived from our audited consolidated financial statements and should

27、be read in conjunction with those statements,which are included in this annual report beginning on page F-1.The selected consolidated statement of operations data for the years ended December 31,2010 and 2011 and the selected consolidated balance sheet data as of December 31,2010,2011 and 2012 have

28、been derived from our audited consolidated financial statements for these periods,which are not included in this annual report.All ADS data have been retroactively adjusted to reflect the current ADS to ordinary share ratio for all periods presented.For the Year Ended December 31,2010RMB 2011RMB 201

29、2RMB 2013 RMB 2014RMB 2014US$(in thousands,except for per ordinary share data)Consolidated Statement of Operation Data Net revenues 2,881,2333,498,0854,158,7915,386,746 7,346,9181,184,108Cost of revenues (625,261)(805,130)(1,037,791)(1,386,767)(2,100,606)(338,556)Gross profit 2,255,9722,692,9553,121

30、,0003,999,979 5,246,312845,552Operating expenses Product development (453,853)(601,485)(911,905)(1,245,719)(2,321,349)(374,134)Sales and marketing (453,293)(624,600)(984,002)(1,269,413)(2,214,210)(356,866)General and administrative (294,701)(400,876)(570,487)(646,405)(861,551)(138,856)Total operatin

31、g expenses (1,201,847)(1,626,961)(2,466,394)(3,161,537)(5,397,110)(869,856)Income/(loss)from operations 1,054,125 1,065,994 654,606 838,442 (150,798)(24,304)Net interest income and other income 136,712223,627296,088306,147 286,23546,133Income before income tax expense,equity in income of affiliates

32、and non-controlling interest 1,190,837 1,289,621 950,694 1,144,589 135,437 21,829 Income tax expense (205,017)(262,186)(294,526)(293,740)(130,821)(21,085)Equity in income of affiliates 66,17257,52534,34355,554 87,00614,023Net income 1,051,992 1,084,960 690,511 906,403 91,622 14,767 Less:Net(loss)/in

33、come attributable to non-controlling interests (3,922)(8,545)23,895 91,917 151,117 24,356 Net income attributable to Ctrips shareholders 1,048,070 1,076,415 714,406 998,320 242,739 39,123 Earnings Per Ordinary Share Data:(2)(1)(1)(1)Net income attributable to Ctrips shareholders 1,048,070 1,076,415

34、714,406 998,320 242,739 39,123 Earnings per ordinary share,basic 29.6229.9220.8730.34 7.081.14Earnings per ordinary share,diluted 27.89 28.30 19.92 26.63 6.35 1.02(3)(3)Table of Contents (1)Share-based compensation was included in the related operating expense categories as follows:(2)Translation fr

35、om RMB amounts into U.S.dollars was made at a rate of RMB6.2046 to US$1.00.See“Exchange Rate Information.”(3)Each ADS represents 0.25 of an ordinary share.Exchange Rate Information We have published our consolidated financial statements in RMB.Our business is primarily conducted in China in RMB.The

36、conversion of RMB into U.S.dollars in this annual report is based on the certified exchange rate published by the Federal Reserve Board.For your convenience,this annual report contains translations of some RMB or U.S.dollar amounts for 2014 at US$1.00:RMB6.2046,which was the certified exchange rate

37、in effect as of December 31,2014.The certified exchange rate on April 17,2015 was US$1.00:RMB6.1976.We make no representation that any RMB or U.S.dollar amounts 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.Th

38、e PRC government imposes 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.dollar for the periods indicated.The exchange rate ref

39、ers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board.These rates are provided solely for your convenience and 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 in

40、formation to be provided to you.The source of these rates is the Federal Reserve Statistical Release.2 As of December 31,2010RMB 2011RMB 2012RMB 2013 RMB 2014RMB 2014US$(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents 2,153,935 3,503,428 3,421,533 7,138,345 5,300,888 854,348 R

41、estricted cash 224,179 211,636 768,229 739,544 836,395 134,802 Short-term investment 1,178,278 1,288,472 1,408,664 3,635,091 6,438,855 1,037,755 Accounts receivable,net 621,549789,036983,8041,518,230 1,826,766294,422Prepayments and other current assets 355,831 566,188 999,149 1,237,531 2,480,276 399

42、,748 Deferred tax assets,current 37,136 39,782 61,841 96,980 193,503 31,187 Non-current assets 3,545,296 3,362,893 4,026,531 6,452,753 14,214,234 2,290,918 Total assets 8,116,204 9,761,435 11,669,751 20,818,474 31,290,917 5,043,180 Current liabilities 1,880,898 2,568,060 3,910,144 6,368,008 12,714,7

43、03 2,049,238 Deferred tax liabilities,non-current 45,383 48,309 53,309 63,197 132,507 21,356 Long-term Debt 1,121,4185,657,183 8,065,9801,300,000Total Ctrips shareholders equity 6,103,693 7,042,295 6,489,632 8,530,396 9,529,179 1,535,825 Noncontrolling interests 86,230 102,771 95,248 199,690 848,548

44、 136,761 Total shareholders equity 6,189,923 7,145,066 6,584,880 8,730,086 10,377,727 1,672,586 For the Year Ended December 31,2010RMB 2011RMB 2012RMB 2013 RMB 2014RMB 2014US$(in thousands)Product development 64,25498,955132,583138,668 184,66529,763Sales and marketing 33,203 48,191 55,892 49,105 54,

45、392 8,766 General and administrative 145,104195,645243,246250,157 257,58741,516(2)(2)Table of Contents (1)Annual averages are calculated using the average of month-end rates of the relevant year.Monthly averages are calculated using the average of the daily rates during the relevant period.B.Capital

46、ization and Indebtedness Not applicable.C.Reasons for the Offer and Use of Proceeds Not applicable.D.Risk Factors Risks Related to Our Company Our business is sensitive to global economic conditions.A severe or prolonged downturn in the global or Chinese economy may have a material and adverse effec

47、t on our business,and may materially and adversely affect our growth and profitability.The global macroeconomic environment is facing challenges,including the escalation of the European sovereign debt crisis since 2011,the end of quantitative easing by the U.S.Federal Reserve and the economic slowdo

48、wn in the Eurozone in 2014.There have been concerns over unrest in the Middle East and Africa,which have resulted in volatility in oil and other markets,and over the possibility of a war involving Ukraine.Economic conditions in China are sensitive to global economic conditions.Our business and opera

49、tions are primarily based in China and the majority of our revenues are derived from our operations in China.Accordingly,our financial results have been,and are expected to continue to be,affected by the economy and travel industry in China.Although the economy in China has grown significantly in th

50、e past decades,any severe or prolonged slowdown in the global and/or Chinese economy could reduce expenditures for travel,which in turn may adversely affect our operating results and financial condition.The Chinese economy has slowed down in recent years.According to the National Bureau of Statistic

51、s of China,in 2014,Chinas gross domestic product was 7.4%and it is unclear how the economy will fare in 2015 and beyond.Since we derive the majority of our revenues from accommodation reservation,transportation ticketing and packaged-tour services in China,any severe or prolonged slowdown in the glo

52、bal and/or Chinese economy or the recurrence of any financial disruptions may materially and adversely affect our business,operating results and financial condition in a number of ways.For example,the weakness in the economy could erode consumer confidence which,in turn,could result in changes to co

53、nsumer spending patterns relating to travel products and services.If consumer demand for travel products and services we offer decreases,our revenues may decline.Furthermore,continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liqui

54、dity needs.General declines or disruptions in the travel industry 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

55、sectors.As the travel industry is highly sensitive to business and personal discretionary spending levels,it tends to decline during general economic downturns.The recent worldwide recession has led to a weakening in the demand for travel services.Other trends or events that tend to reduce travel an

56、d are likely to reduce our revenues include:3 Certified Exchange Rate Period Period-EndAverageLow High (RMB per U.S.Dollar)2010 6.60006.76936.83306.60002011 6.2939 6.4475 6.6364 6.2939 2012 6.2301 6.2990 6.3879 6.2221 2013 6.0537 6.1412 6.2438 6.0537 2014 6.2046 6.1704 6.2591 6.0402 October 6.11246.

57、12516.13856.1107November 6.1429 6.1249 6.1429 6.1117 December 6.20466.18866.22566.14902015 January 6.2495 6.2181 6.2535 6.1870 February 6.2695 6.2518 6.2695 6.2399 March 6.1990 6.2386 6.2741 6.1955 April(through April 17,2015)6.19766.20116.19306.2152(1)Table of Contents an outbreak of H1N1 influenza

58、,ebola virus,avian flu,severe acute respiratory syndrome,or SARS,or any other serious contagious 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 conditi

59、ons;terrorist attacks or threats of terrorist attacks or wars;and any travel restrictions or other security procedures implemented in connection with any major events in China.We could be severely and adversely affected by declines or disruptions in the travel industry and,in many cases,have little

60、or no control over the occurrence of such events.Such events could result in a decrease in demand for our travel services.This decrease in demand,depending on the scope and duration,could significantly and adversely affect our business and financial performance over the short and long term.The tradi

61、ng price of our ADSs has been volatile historically and may continue to be volatile regardless of our operating performance.The trading price of our ADSs has been and may continue to be subject to wide fluctuations.In 2014,the trading prices of our ADSs on the NASDAQ Global Select Market ranged from

62、 US$35.96 to US$69.74 per ADS,and the closing price on April 24,2015 was US$65.57 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 quarterly operating results;changes in financial estimates by

63、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 in China;changes in major business terms between our travel suppliers and us;announcements by u

64、s or our competitors of new products or services,significant acquisitions,strategic partnerships,joint ventures or capital commitments;additions or departures of key personnel;and market and volume fluctuations in the stock market in general.In addition,the stock market in general,and the market pri

65、ces for Internet-related companies and companies with operations in China in particular,have experienced volatility that often has been unrelated to the operating performance of such companies.The securities of some China-based companies that have listed their securities in the United States have ex

66、perienced significant volatility since their initial public offerings,including,in some cases,substantial price declines in the trading prices of their securities.The trading performances of the securities of these China-based companies after their offerings may affect the attitudes of investors tow

67、ard Chinese companies listed in the United States,which consequently may impact the trading performance of our ADSs,regardless of our actual operating performance.Furthermore,some negative news and perceptions about inadequate corporate governance practices or fraudulent accounting,corporate structu

68、re including the use of variable interest entities or other matters of other China-based companies have negatively affected the attitudes of investors towards China-based companies,including us,in general in the past,regardless of whether we have engaged in any inappropriate activities,and any news

69、or perceptions with a similar nature may continue to negatively affect us in the future.In addition,the global financial crisis and the ensuing economic recessions in many countries have contributed and may continue to contribute to extreme volatility in the global stock markets,such as the large de

70、cline in share prices in the United States,China and other jurisdictions in late 2008,early 2009,the second half of 2011,the first half of 2012 and the second half of 2013.These broad market and industry fluctuations may continue to adversely affect the price of our ADSs,regardless of our operating

71、performance.Additionally,volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees,all of whom have been granted share-based awards.4 Table of Contents If we are unable to maintain existing relationships with travel suppliers and strateg

72、ic alliances,or establish new arrangements with travel suppliers and strategic alliances at or on favorable terms or at terms similar to those we currently have,our business and profit margins may suffer.If we are unable to maintain satisfactory relationships with our existing hotel suppliers,or if

73、our hotel suppliers establish similar or more favorable relationships with our competitors,or if our hotel suppliers increase their competition with us through their direct sales,our operating results and our business would be harmed,because we would not have the necessary supply of hotel rooms or h

74、otel rooms at satisfactory rates to meet the needs of our customers,or because of reduced demand for our services.Our business depends significantly upon our ability to contract with hotels in advance for the guaranteed availability of certain hotel rooms.We rely on hotel suppliers to provide us wit

75、h rooms at discounted prices.However,our contracts with our hotel suppliers are not exclusive and most of the contracts must be renewed semi-annually or annually.We cannot assure you that our hotel suppliers will renew our contracts in the future on favorable terms or terms similar to those we curre

76、ntly have agreed.The hotel suppliers may reduce the commission rates on bookings made through us.Furthermore,in order to maintain and grow our business and to effectively compete with many of our competitors in all potential markets,we will need to establish new arrangements with hotels and accommod

77、ations of all ratings and categories in our existing markets and in new markets.We cannot assure you that we will be able to identify appropriate hotels or enter into arrangements with those hotels on favorable terms,if at all.This failure could harm the growth of our business and adversely affect o

78、ur operating results and financial condition,which consequently will impact the price of our ADSs.We derive revenues and other significant benefits from our arrangements with major domestic airlines in China and international airlines.Our airline ticket suppliers allow us to book and sell tickets on

79、 their behalf and collect commissions on tickets booked and sold through us.Although we currently have supply relationships with these airlines,they also compete with us for ticket bookings and have entered into similar arrangements with many of our competitors and may continue to do so in the futur

80、e.Such arrangements may be on better terms than we have.In the past,airlines have from time to time reduced the commission rates on tickets booked and sold through us,which negatively affected our revenues from transportation ticketing in the relevant periods.We cannot assure you that any of these a

81、irlines will continue to have supplier relationships with us or pay us commissions at the same or similar rates as what they paid us in the past.The loss of these supplier relationships or adverse changes in major business terms with our travel suppliers would materially impair our operating results

82、 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 travel service providers are obtained through our strategic alliances with various third parties.We cannot assu

83、re you,however,that we will be able to successfully establish and maintain strategic alliances with third parties which are effective and beneficial for our business.Our inability to do so could have a material adverse effect on our market penetration,revenue growth and profitability.If we fail to f

84、urther increase our brand recognition,we may face difficulty in maintaining existing and acquiring new customers and business partners and our business may be harmed.We believe that maintaining and enhancing the Ctrip brand depends in part on our ability to grow our customer base and obtain new busi

85、ness partners.Some of our potential competitors already have well-established brands in the travel industry.The successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base,maintain relationships with our business partners,provide high-quality

86、customer service,properly address customer needs and handle customer complaints and organize effective marketing and advertising programs.If our customer base significantly declines or grows more slowly than our key competitors,the quality of our customer services substantially deteriorates,or our b

87、usiness partners cease to do business 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 existing competitors,we may lose our market share,and our business may be materially and adversely affe

88、cted.We compete primarily with other consolidators of hotel accommodations and flight reservation services based in China,such as eLong,Inc.We also compete with traditional travel agencies and new Internet travel search websites,such as Q.In the future,we may also face competition from new players i

89、n 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 with other travel consolidators.In addition,international travelers have become an increasingly importa

90、nt customer base.Competitors that have formed stronger strategic alliances with overseas travel consolidators may have more effective channels to address overseas travel needs of customers in China.Furthermore,we do not have exclusive arrangements with our travel suppliers.The combination of these f

91、actors means that potential entrants to our industry face relatively low entry barriers.In the past,certain competitors launched aggressive advertising campaigns,special promotions and engaged in other marketing activities to promote their brands,acquire new customers or to increase their market sha

92、res.In response to such competitive pressure,we started to take and may continue to take similar measures and as a result will incur significant expenses,which in turn could negatively affect our operating margins in the quarters or years when such promotional activities are carried out.For example,

93、we launched a promotion program in recent years to offer certain selected transportation tickets,hotel rooms and package tours as well as grant of e-coupons to our customers in response to promotion campaigns that our competitors have launched.Primarily as a result of the enhanced marketing efforts

94、and additional investment in product developments in response to the intensified market competition,our operational margin was negatively affected.In addition,some of our existing and potential competitors may have competitive advantages,such as significantly larger active user base on mobile or oth

95、er online platforms,greater financial,marketing and strategic relationships and alliances or other resources or name recognition,and may be able to imitate and adopt our business model.We cannot assure you that we will be able to successfully compete against new or existing competitors.In the event

96、we are not able to compete successfully,our business,results of operations and profit margins may be materially and adversely affected.5 Table of Contents Our business could suffer if we do not successfully manage current growth and potential future growth.Our business has grown significantly as a r

97、esult of both organic growth of existing operations and acquisitions.We have significantly expanded our operations and anticipate further expansion of our operations and workforce.Our growth to date has placed,and our anticipated future operations will continue to place,a significant strain on our m

98、anagement,systems and resources.In addition to training and managing our workforce,we will need to continue to improve and develop our financial and managerial controls and our reporting systems and procedures.We cannot assure you that we will be able to efficiently or effectively manage the growth

99、of our operations,and any failure to do so may limit our future growth and hamper our business strategy.Our strategy to acquire or invest in complementary businesses and assets and establish strategic alliances involves significant risk and uncertainty that may prevent us from achieving our objectiv

100、es and harm our financial condition and results of operations.As part of our plan to expand our product and service offerings,we have made and intend to make strategic acquisitions or investments in the travel service industries in Greater China and overseas.Our strategic acquisitions and investment

101、s could subject us to uncertainties and risks,including:high acquisition and financing costs;potential ongoing financial obligations and unforeseen or hidden liabilities;failure to achieve our intended objectives,benefits or revenue-enhancing opportunities;cost of,and difficulties in,integrating acq

102、uired businesses and managing a larger business;potential claims or litigation regarding our boards exercise of its duty of care and other duties required under applicable law in connection with any of our significant acquisitions or investments approved by the board;and diversion of our resources a

103、nd management attention.Our failure to address these uncertainties and risks may have a material adverse effect on our financial condition and results of operations.In addition,we establish strategic alliances with various third parties to further our business purpose from time to time.Strategic all

104、iances with third parties could subject us to a number of risks,including risks associated with sharing proprietary information,non-performance by the counter-party,and an increase in expenses incurred in establishing new strategic alliances,any of which may materially and adversely affect our busin

105、ess.We have invested through open market purchases and in a private placement transaction a total of US$92 million in an approximately 15.1%stake in Homeinns Hotel Group(formerly Home Inns&Hotels Management Inc.),or Homeinns,a leading economy hotel chain in China.The purchase prices were determined

106、based on the trading prices of Homeinns ADSs on the NASDAQ Global Market at the time of each open market purchase or the average closing prices of Homeinns ADSs as stipulated in the relevant purchase agreement.In March 2010,we invested a total of US$67.5 million in approximately 9%stake in China Lod

107、ging Group,Limited,or Hanting,a leading economy hotel chain in China,through private placement transactions and purchases in Hantings initial public offering.The purchase prices for shares acquired in both private placement transactions and the initial public offering were equal to Hantings initial

108、public offering price.In 2013 and 2014,we invested a total of US$117 million in approximately 18.5%stake in eHi Auto Services Limited,or eHi,one of the largest car rental companies in China,through private placement transactions prior to and concurrently with eHis initial public offering.In 2014,we

109、invested a total of US$30 million in approximately 4.6%stake in Tuniu Corporation,or Tuniu,a well-known service provider in the leisure package tour market,through a private placement transaction concurrently with Tunius initial public offering and private acquisitions afterwards.If the ADS prices o

110、f Homeinns,Hanting,eHi,Tuniu or other future public company targets declines and becomes lower than our share purchase price,we could incur impairment loss under U.S.GAAP,which in turn would adversely affect our financial results for the relevant periods.In addition,if any of these acquired entities

111、 incur a net loss in the future,we would share their net loss proportionate to our equity interest in them.6 Table of Contents From time to time,we selectively acquired or invested in businesses that complement our existing business,and will continue to do so in the future.See“Item 4.Information on

112、the CompanyHistory and Development of the Company”for more details of our acquisitions and investments.We cannot assure you that we will be able to achieve the benefits we expected from such acquisitions or investments.Any actual or perceived failure to realize the benefits we expected from these ac

113、quisitions or investments may cause the trading price of our ADSs to decline.Our quarterly results are likely to fluctuate because of seasonality in the travel industry in Greater China.Our business experiences fluctuations,reflecting seasonal variations in demand for travel services.For example,the

114、 first quarter of each year generally contributes the lowest portion of our annual net revenues primarily due to a slowdown in business 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.

115、Our business may be harmed if our infrastructure and technology are damaged or otherwise fail or become obsolete.Substantially all of our computer and communications systems are located at two customer service centers,one in Shanghai and the other one in Nantong,China.Therefore our computer and comm

116、unication systems are vulnerable to damage or interruption from human error,computer viruses,fire,flood,power loss,telecommunications failure,physical or electronic break-ins,sabotage,vandalism,natural disasters and other similar events.We do not carry business interruption insurance to compensate u

117、s for losses that may occur.We use an internally developed booking software system that supports nearly all aspects of our booking transactions.Our business may be harmed if we are unable to upgrade our systems and infrastructure quickly enough to accommodate future traffic levels,avoid obsolescence

118、 or successfully integrate any newly developed or purchased technology with our existing system.Capacity constraints could cause unanticipated system disruptions,slower response times,poor customer service,impaired quality and speed of reservations and confirmations and delays in reporting accurate

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

120、 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-held devices,has increased in recent years,and we expect this trend to continue while 3G,4G and more advanced mobile

121、 communications technologies are broadly implemented.As we make our services available across a variety of mobile operating systems and devices,we are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control,such as Android,iOS

122、 and Windows.Any changes in such mobile operating systems or devices that degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our services.Further,if the number of platforms for which we develop our services increases,which

123、 is typically seen in a dynamic and fragmented 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 is important that our services work well across a range of mobile operating systems,networks,mobile devices and sta

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

125、enetrate 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 our products or services.If we fail to keep up with these changes to remain competitive,our future success

126、 may be adversely affected.Our business depends substantially on the continuing efforts of our key executives,and our business may be severely disrupted if we lose their services.Our future success depends heavily upon the continued services of our key executives.We rely on their expertise in busine

127、ss operations,finance and travel services and on their relationships with our suppliers,shareholders,and business partners.We do not maintain key-man life insurance for any of our key executives.If one or more of our key executives are unable or unwilling to continue in their present positions,we ma

128、y 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 results of operations may be materially and adversely affected.In addition,if any of these key executives joins a c

129、ompetitor or forms a competing company,we may lose customers and suppliers.Each of our executive officers has entered into an employment agreement with us that contains confidentiality and non-competition provisions.If any disputes arise between our executive officers and us,we cannot assure you of

130、the extent to which any of these agreements would be enforced in China,where most of these executive officers reside and hold most of their assets,in light of the uncertainties with Chinas legal system.See“Risks Related to Doing Business in ChinaUncertainties with respect to the PRC legal system cou

131、ld adversely affect us.”7 Table of Contents 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

132、 maintain and expand our travel supplier network,information technology and engineering personnel to maintain and expand our websites,mobile platform,customer service centers and systems,and customer service representatives to serve an increasing number of customers.If we are unable to identify,attr

133、act,hire,train and retain sufficient employees in these areas,users of our websites,mobile platform and customer service centers may not have satisfactory experiences and may turn to our competitors,which may adversely affect our business and results of operations.The PRC government regulates the ai

134、r-ticketing,travel agency,advertising and Internet industries.If we fail to obtain or maintain all pertinent permits and approvals 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 agenc

135、y,advertising and Internet industries.We are required to obtain applicable permits or approvals from different regulatory authorities to conduct our business,including separate licenses for value-added telecommunications,air-ticketing,advertising and travel agency activities.If we fail to obtain or

136、maintain any of the required permits or approvals in the future,we may be subject to various penalties,such as fines or suspension of operations in these regulated businesses,which could severely disrupt our business operations.As a result,our financial condition and results of operations may be adv

137、ersely affected.In particular,the Civil Aviation Administration of China,or CAAC,together with National Development and Reform Commission,or NDRC,regulates pricing of air tickets.CAAC also supervises commissions payable to air-ticketing agencies together with China National Aviation Transportation A

138、ssociation,or CNATA.If restrictive policies are adopted by CAAC,NDRC,or CNATA,or any of their regional branches,our air-ticketing revenues may be adversely 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 re

139、gard our domain names,trade names,trademarks and similar intellectual property as critical to our success.We try to protect our intellectual property rights by relying on trademark protection and confidentiality laws and contracts.Trademark and confidentiality protection in China may not be as effec

140、tive as that in the United States.Policing unauthorized use of 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 negative effect on our business and operating res

141、ults.Furthermore,we may need to go to court to enforce our intellectual property rights.Litigation relating to our intellectual property might result in substantial costs and diversion of resources and management attention.See“Risks Related to Doing Business in ChinaUncertainties with respect to the

142、 PRC legal system could adversely affect us.”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 or deterioration in the quality of these services,our customers may not continue using our services.We rely on third

143、-party computer systems to host our websites,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 deliveries in

144、some cities in Greater China.We also rely on third party local operators to deliver on-site services to our packaged-tour customers.Any interruption in our ability to obtain the products or services of these or other third parties or deterioration in their performance,such as server errors or interr

145、uptions,could impair the timing and quality of our own service.If our service providers fail to provide high quality services in a timely manner to our customers or violate any applicable rules and regulations,our services will not meet the expectations of our customers and our reputation and brand

146、will be damaged.Furthermore,if our arrangement with any of these third parties is terminated,we may not find an alternative source of support on a timely basis or on favorable terms to us.If our hotel suppliers or customers provide us with untrue information regarding our customers stay,we may not b

147、e able to recognize and collect revenues 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 receive payment from our customers on behalf of our hotel suppliers,as our customers pay hotels

148、directly.To confirm whether a customer adheres to the booked itinerary,we routinely make inquiries with the hotel and,occasionally,with the customer.We rely on the hotel and the customer to provide us truthful information regarding the customers check-in and check-out dates,which forms the basis for

149、 calculating the commission we are entitled to receive from the hotel.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 able to collect revenues to which we are entitled.In addition,using such untrue info

150、rmation may lead to inaccurate business projections and plans,which may adversely affect our business planning and strategy.8 Table of Contents 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 se

151、asons in China,we establish limited merchant business relationships with selected travel service suppliers,particularly for our packaged-tour products,in order to secure adequate supplies for our customers.In the merchant business relationship,we buy hotel rooms and/or transportation tickets before

152、selling them to our customers and thereby incur inventory risk.If we are unable to correctly predict demand for hotel rooms and transportation tickets that we are committed to purchase,we would be responsible for covering the cost of the hotel rooms and transportation tickets we are unable to sell,a

153、nd our financial condition and results of operations 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 our business and operating results.In early 2003,several regions in Asia,includin

154、g Hong Kong and China,were affected by the outbreak of SARS.The travel industry in China,Hong Kong and some other parts of Asia suffered tremendously as a result of the outbreak of SARS.Furthermore,in early 2008,severe snowstorms hit many areas of China and particularly affected southern China.The t

155、ravel industry was severely and adversely affected during and after the snowstorms.Additionally,in May 2008,a major earthquake struck Chinas populous Sichuan Province,causing great loss of life,numerous injuries,property loss and disruption to the local economy.The earthquake had an immediate impact

156、 on our business as a result of the sharp decrease in travel in the relevant earthquake-affected areas in Sichuan Province.In 2009,an outbreak of H1N1 influenza(swine flu)occurred in Mexico and the United States and human cases of the swine flu were discovered in China and Hong Kong.In March 2011,a

157、powerful earthquake hit Japan,and the subsequent tsunami and nuclear accidents had far-reaching impact on the surrounding economies.Starting from March 2013,H7N9 bird flu,a new strain of animal influenza,has been spreading in China and has infected more than a hundred people.In October 2013,large sc

158、ale political protests began in Thailand that lasted several months and caused disruption to tourism and travel.In November 2013,one of the largest typhoons ever recorded hit the Philippines,causing widespread devastation.In March 2014,the World Health Organization,or the WHO,reported a major ebola

159、outbreak in Guinea,a western African nation.The disease then rapidly spread to the neighboring countries of Liberia and Sierra Leone.As of 3 February 2015,22,560 suspected cases and 9,019 deaths had been reported;however,the WHO has said that these numbers may be underestimated.Any future outbreak o

160、f contagious diseases,extreme unexpected bad weather or natural disasters would adversely affect our business and operating results.Ongoing concerns regarding contagious disease or natural disasters,particularly its effect on travel,could negatively impact our customers desire to travel.If there is

161、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 account of an outbreak of any contagious disease or occurrence of natura

162、l disasters may have a material adverse effect on our business and operating results.If tax benefits available to our subsidiaries in China are reduced or repealed,our results of operations could suffer.Under the PRC Enterprise Income Tax Law,or the EIT Law,effective on January 1,2008,foreign invest

163、ed enterprises,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 Law if they qualify as“high and new technology enterprises,”subject to certain general restrictions described in the EIT Law a

164、nd the related regulations.In December 2008,our PRC subsidiaries,Ctrip Computer Technology,Ctrip Travel Information,Ctrip Travel Network and Software Hotel Information were each designated by relevant local authorities as a“high and new technology enterprise”under the EIT Law with an effective perio

165、d of three years.Therefore,these entities were entitled to enjoy a preferential tax rate of 15%,as long as they maintained their qualifications for“high and new technology enterprises”that are subject to renewals every three years with the current effective period expiring by the end of 2017.We cann

166、ot assure you that our subsidiaries will continue to qualify as high and new technology enterprises when they are subject to reevaluation in the future.In 2002,the PRC State Administration of Taxation,or the SAT,started to implement preferential tax policy in Chinas western region,and companies loca

167、ted in applicable jurisdictions covered by the Catalogue of Encouraged Industries in the Western Region(initially effective through the end of 2010 and further extended to 2020)are eligible to apply for a preferential income tax rate of 15%if their businesses fall within the“encouraged”category of t

168、he policy.Benefiting from this policy,Chengdu Ctrip and Chengdu Ctrip International obtained approval from local tax authorities to apply the 15%tax rate for their annual tax filing subject to periodic renewals over the years since 2012.The two entities re-applied for this qualification after the ef

169、fective period expired in 2014 and their applications were approved by the relevant government authority.In 2013,Chengdu Information Technology Co.,Ltd.,or Chengdu Information,obtained approval from local tax authorities to apply the 15%tax rate for its 2012 tax filing and for the years from 2013 to

170、 2016.In the event that the preferential tax treatment for these entities is discontinued,these entities will become subject to the standard tax rate at 25%,which would materially increase our tax obligations.9 Table of Contents We have sustained losses in the past and may experience earnings declin

171、es or net losses in the future.We sustained net losses in the periods prior to 2002.We cannot assure you that we can sustain profitability or avoid net losses in the future.We expect that our operating expenses will increase and the degree of increase in these expenses is largely based on anticipate

172、d 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 substantial operating losses.We may be subject to legal or administrative proceedings regarding information provi

173、ded on our online portals or other aspects of our business operations,which may be time-consuming to defend.Our online portals contain information about hotels,flights,popular vacation destinations and other travel-related topics.It is possible that if any information accessible on our online portal

174、s contains errors or false or misleading information,third parties could take action against us for losses incurred in connection 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 administrative proceedings arising in the ordin

175、ary 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 believe that the resolution of our c

176、urrent pending matters will not have a material adverse effect on our business,consolidated financial position,results of operations or 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 public

177、ity,diversion of managements attention and other factors.In addition,it is possible that an unfavorable resolution of one or more legal or administrative proceedings,whether in the PRC or in another jurisdiction,could materially and adversely affect our financial position,results of operations or ca

178、sh 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 websites.The Internet industry is facing significant challenges regarding information security and privacy,including the storage,transmission and s

179、haring of confidential information.In recent years,PRC government authorities have enacted legislation on Internet use to protect personal information from any unauthorized disclosure.See“Item 4.Information on the Company B.Business OverviewPRC Government RegulationsInternet Privacy.”We conduct a si

180、gnificant portion of our transactions through Internet(including our websites and mobile platform).In such transactions,secured transmission of confidential information(such as customers itineraries,hotel and other reservation information,credit card information,personal information and billing addr

181、esses)over public networks and ensuring the confidentiality,integrity,availability and authenticity of the information of our users,customers,hotel suppliers and airline partners is essential to maintain their confidence in our online products and services.Our current security measures may not be ad

182、equate and may contain deficiencies that we fail to identify,and advances in technology,increased levels of expertise of hackers,new discoveries in the field of cryptography or others could increase our vulnerability.For example,a third-party website with focus on Internet security information excha

183、nge released a news in March 2014 that as a result of a temporary testing function performed by us,certain data files containing customers credit card information had been stored on local servers maintained by us,which may lead to potential exposure of these customers information to hackers.We remov

184、ed the cause of the potential security concern within two hours and then examined all other possible leaks and found that 93 customers credit card information might have been downloaded by the above-mentioned website for the purpose of confirming potential risks.Although to our knowledge,no customer

185、 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 security recur in the future.In August 2011,Chinas Suprem

186、e Peoples Court and Supreme Peoples Procuratorate issued judicial interpretations regarding hacking and other Internet crimes.However,its effect on curbing hacking and other illegal online activities still remains to be seen.Significant capital,managerial and human resources are required to enhance

187、information security and to address any issues caused by security failures.If we are unable to protect our systems and the information stored in our systems from unauthorized access,use,disclosure,disruption,modification or destruction,such problems or security breaches may cause loss,expose us to l

188、itigation and possible liability to the owners of confidential information,disrupt our operations and may harm our reputation and ability to attract customers.10 Table of Contents We may be the subject of detrimental conduct by third parties including complaints to regulatory agencies,negative blog

189、postings,and the public dissemination of malicious assessments of our business,which could have a negative impact on our reputation and cause us to lose market share,travel suppliers and customers and revenues,and adversely affect the price of our ADSs.We may be the target of anti-competitive,harass

190、ing,or other detrimental conduct by third parties.Such conduct may include complaints,anonymous or otherwise,to regulatory agencies regarding our operations,accounting,revenues,business relationships,business prospects and business ethics.Additionally,allegations,directly or indirectly against us,ma

191、y be posted in Internet chat-rooms or on blogs or any websites by anyone,whether or not related 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 be required to expend significant time and incur substantial costs t

192、o address such third-party conduct,and there is no assurance that we will be able to conclusively 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 public dissemination of anonymous allegations or malicious s

193、tatements about our business,which in turn may cause us to lose market share,travel suppliers and customers and revenues and adversely affect the price of our ADSs.We have limited business insurance coverage in Greater China.Insurance companies in Greater China offer limited business insurance produ

194、cts and generally do not,to our knowledge,offer business liability insurance.Business disruption insurance is available to a limited extent in Greater China,but we have determined that the risks of disruption,the cost of such insurance and the difficulties associated with acquiring such insurance ma

195、ke it impractical for us to have such insurance.We do not maintain insurance coverage 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 own resources.We hire celebrities to be our brand ambassadors to market

196、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 our business.However,we cannot give assurance that the endorsement from our brand

197、ambassadors or related advertisements will remain effective,that the brand ambassador 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 successfully find suitable celebriti

198、es to replace any of our existing brand ambassador if any of his popularities declines or if the existing brand ambassador is no longer able or suitable to continue the engagement,and termination of such engagements may have a significant impact on our brand images and the promotion or sales of our

199、products.If any of these situations occurs,our business,financial condition and results of operations could be materially and adversely affected.We may face greater risks of doubtful accounts as our corporate travel business increases in scale.Since we began providing travel booking services to corp

200、orate customers who generally request credit terms,our accounts receivable have increased.We cannot assure you that we will be able to collect payment fully and in a timely manner on our outstanding accounts receivable from our corporate travel service customers.As a result,we may face a greater ris

201、k of non-payment of our accounts receivable and,as our corporate travel business grows in scale,we may need to make increased provisions for doubtful accounts.Our operating results and financial condition may be materially and adversely affected if we are unable to successfully manage our accounts r

202、eceivable.As we have commenced accounting for employee share options using the fair value method beginning in 2006,such accounting treatment could continue to significantly reduce our net income.Since 2006,we have accounted for share-based compensation in accordance with ASC 718”CompensationStock Co

203、mpensation,”or ASC 718,which requires a public company to recognize,as an expense,the fair value of share options and other share-based compensation to employees based on the requisite service period of the share-based awards.We have granted share-based compensation awards,including share options an

204、d restricted share units,to employees,officers and directors to incentivize performance and align their interests with ours.We have adopted four share incentive plans,namely,the 2007 Share Incentive Plan,or the 2007 Plan,the 2005 Employees Stock Option Plan,or the 2005 Plan,the 2003 Employees Option

205、 Plan,or the 2003 Plan,and the 2000 Employees Stock Option Plan,or the 2000 Plan.As a result of these grants and potential future grants under these plans,we had incurred in the past and expect to continue to incur in future periods significant share-based compensation expenses.The amount of these e

206、xpenses is based on the fair value of the share-based awards.Our board of directors has the discretion to change terms of any previously issued share options and any such change may significantly increase the amount of our share-based compensation expenses for the period that the change takes effect

207、 as well as those for any future periods.In February 2009,our board of directors approved to reduce the exercise price of all outstanding unvested options that were granted by us in 2007 and 2008 under our 2007 Plan to the then fair market value of our ordinary shares underlying such options and,in

208、December 2009,our board of directors approved to extend the expiration dates of all stock options granted in 2005 and 2006 to eight years after the respective original grant dates of these options.As a result of such changes,our share-based compensation expense of 2009 reduced our diluted earnings p

209、er ADS by approximately US$0.14.In February 2010,our compensation committee approved to extend the expiration dates of all stock options granted in and after 2007 to eight years after the respective original grant dates of these options.As a result of such changes and extensions,our share-based comp

210、ensation expense of 2010 reduced our diluted earnings per ADS by approximately US$0.06.In addition,with such changes and extensions,the application of ASC 718 will continue to have a significant impact on our net income.In addition,future changes to various assumptions used to determine the fair val

211、ue of awards issued or the amount and type of equity awards granted may also create uncertainty as to the amount of future share-based compensation expense.11 Table of Contents Failure to maintain effective internal control over financial reporting could result in errors in our published financial s

212、tatements,which in turn could have a material adverse effect on the trading price of our ADSs.We are subject to the reporting obligations under the U.S.securities laws.The U.S.Securities and Exchange Commission,or the SEC,as required under Section 404 of the Sarbanes-Oxley Act of 2002,has adopted ru

213、les requiring public companies to include a report of management on the effectiveness of such companies internal control over financial reporting in its annual report.In addition,an independent registered public accounting firm for a public company must issue an attestation report on the effectivene

214、ss of the companys internal control over financial reporting.Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of December 31,2014.In addition,our independent

215、registered public accounting firm attested the effectiveness of our internal control and reported that our internal control over financial reporting was effective as of December 31,2014.If we fail to maintain the effectiveness of our internal control over financial reporting,we may not be able to co

216、nclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act.Moreover,effective internal control over financial reporting is necessary for us to produce reliable financial reports.As a result,any failure to maintain effective i

217、nternal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements,which in turn could negatively impact the trading price of our ADSs.Furthermore,we may need to incur additional costs and use additional management and other resour

218、ces 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 it.We believe that our current cash and cash equivalents,short-term investments,cash flow from operations and proceeds from our f

219、inancing activities will be sufficient to meet our anticipated cash needs for the foreseeable future.We may,however,require additional cash resources due to changed business conditions or other future developments,including any investments or acquisitions we may decide to pursue.If these resources a

220、re insufficient to satisfy our cash requirements,we may seek to sell additional equity or debt securities or obtain a credit facility.The sale of additional equity securities could result in additional dilution to our shareholders.The incurrence of indebtedness would result in increased debt service

221、 obligations and could result in operating and financing covenants that would restrict our operations.We cannot assure you that financing will be available in amounts or on terms acceptable to us,if at all.In particular,the recent financial turmoil affecting the financial markets and banking system

222、may significantly restrict our ability to obtain financing in the capital markets or from financial institutions on commercially reasonable terms,or at all.Risks Related to Our Corporate Structure PRC laws and regulations restrict foreign investment in the air-ticketing,travel agency,advertising and

223、 value-added telecommunications businesses,and substantial uncertainties exist with respect to the application and implementation of PRC laws and regulations.We are a Cayman Islands incorporated company and a foreign person under PRC law.Due to foreign ownership restrictions in the air-ticketing,tra

224、vel agency,advertising and value-added telecommunications industries,we conduct part of our business through contractual arrangements with our affiliated Chinese entities.These entities hold the licenses and approvals that are essential for our business operations.In the opinion of our PRC counsel,C

225、ommerce&Finance Law Offices,our current ownership structure,the ownership structure of our subsidiaries and our affiliated Chinese entities,the contractual arrangements among us,our subsidiaries,our affiliated Chinese entities and their shareholders,as described in this annual report,are in complian

226、ce with existing PRC laws,rules and regulations.There are,however,substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations.Accordingly,we cannot assure you that PRC government authorities will not ultimately take a view contrary to the opin

227、ion of our PRC legal counsel due to the lack of official interpretation and clear guidance.If we and our affiliated Chinese entities are found to be in violation of any existing or future PRC laws or regulations,the relevant governmental authorities would have broad discretion in dealing with such v

228、iolation,including,without limitation,levying fines,confiscating our income or the income of our affiliated Chinese entities,revoking our business licenses or the business licenses of our affiliated Chinese entities,requiring us and our affiliated Chinese entities to restructure our ownership struct

229、ure or operations and requiring us or our affiliated Chinese entities to discontinue any portion or all of our value-added telecommunications,air-ticketing,travel agency or advertising businesses.In particular,if the PRC government authorities impose penalties which cause us to lose our rights to di

230、rect the activities of and receive economic benefits from our consolidated affiliated Chinese entities,we may lose the ability to consolidate and reflect in our financial statements the operation results of our consolidated affiliated Chinese entities.Any of these actions could cause significant dis

231、ruption to our business operations,and may materially and adversely affect our business,financial condition and results of operations.12 Table of Contents Under the equity pledge agreements between our subsidiaries and the shareholders of our affiliated Chinese entities,the shareholders of our affil

232、iated Chinese entities pledged their respective equity interests in these entities to our subsidiaries.Such pledges were duly created by recording the pledge in the relevant affiliated Chinese entities register of shareholders in accordance with the PRC Collateral Law.However,according to the PRC Pr

233、operty Rights Law,effective as of October 1,2007,and the Measures for the Registration of Equity Pledge with the Administration for Industry and Commerce,effective as of October 1,2008,the effectiveness of the pledges will be denied if the pledges are not registered with the Administration for Indus

234、try and Commerce.Our affiliated Chinese entities and our subsidiaries have registered all equity pledges.The effectiveness of the pledges will be recognized by PRC courts if disputes arise on certain pledged equity interests and that our subsidiaries interests as pledgees will prevail over those of

235、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 which it believed related to the consolidation of its consolidated affiliated Chinese entities.Following the announcement,that issuers stock price decl

236、ined significantly.Although we are not aware of any actual or threatened investigation,inquiry or other action by the SEC,NASDAQ or any other regulatory authority with respect to consolidation of our consolidated affiliated Chinese entities,we cannot assure you that we will not be subject to any suc

237、h investigation or inquiry in the future.In the event we are subject to any regulatory investigation or inquiry relating to our consolidated affiliated Chinese entities,including the consolidation of such entities into our financial statements,or any other matters,we may need to spend significant am

238、ount of time and expenses in connection with the investigation or inquiry,our reputation may be harmed regardless of the outcome,and the trading price of our ADS may materially decline or fluctuate.If our affiliated Chinese entities violate our contractual arrangements with them,our business could b

239、e disrupted,our reputation may be harmed and we may have to resort to litigation to enforce our rights,which may be time-consuming and expensive.As the PRC government restricts foreign ownership of value-added telecommunications,air-ticketing,travel agency and advertising businesses in China,we depe

240、nd on our affiliated Chinese entities,in which we have no ownership interest,to conduct part of our non-accommodation reservation business activities through a series of contractual arrangements,which are intended to provide us with effective control over these entities and allow us to obtain econom

241、ic benefits from them.Although we have been advised by our PRC counsel,Commerce&Finance Law Offices,that the contractual arrangements as described in this annual report are valid,binding and enforceable under current PRC laws,these arrangements are not as effective in providing control as direct own

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

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

244、ated to Doing Business in ChinaUncertainties with respect to the PRC legal system could adversely affect us.”The principal shareholders of our affiliated Chinese entities have potential conflicts of interest with us,which may adversely affect our business.Our director,vice chairman of the board and

245、president,Min Fan,our officers,Dongjie Guo and Maohua Sun were also the principal shareholders of our consolidated affiliated Chinese entities as of the date of this report.Thus,conflicts of interest between their duties to our company and our affiliated Chinese entities may arise.We cannot assure y

246、ou that when conflicts of interest arise,these persons will act entirely in our interests or that the conflicts of interest will be resolved in our favor.In addition,these persons could violate their non-competition or employment agreements with us or their legal duties by diverting business opportu

247、nities from us to others,resulting in our loss of corporate opportunities.In any such event,we would have to rely on the PRC legal system for the enforcement of these agreements,which could have uncertain results.Any legal proceeding could result in the disruption of our business,diversion of our re

248、sources and incurrence of substantial costs.See“Risks Related to Doing Business in ChinaUncertainties with respect to the PRC legal system could adversely affect us.”13 Table of Contents Substantial uncertainties exist with respect to the enactment timetable,interpretation and implementation of draf

249、t PRC Foreign Investment Law and 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 its enactment,replace th

250、e 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 ancillary regulations.The d

251、raft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.The MOC solicit

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

253、viability of our current corporate structure,corporate governance and business operations in many aspects.Among other things,the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of“actual control”in determining whether a company is considered a f

254、oreign-invested enterprise,or an FIE.The draft Foreign Investment Law specifically provides that entities established 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 entry clearance by the MOC,tr

255、eated as a PRC domestic investor provided that the entity is“controlled”by PRC entities and/or citizens.In this connection,“control”is broadly defined in the draft law to cover any of the following summarized categories:(i)holding 50%of or more of the voting rights or similar equity interest of the

256、subject entity;(ii)holding less than 50%of the 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 decision making bodies,or having the voting power to material influence on the board,the shareholders

257、 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 key aspects of business operations.Once an entity is determined to be an FIE and its investment

258、 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 counterparts would be required.Otherwise,all foreign investors may make investments on the same

259、terms as Chinese investors without being subject to additional approval from the government authorities as mandated by the existing foreign investment legal regime.The“variable interest entity”structure,or VIE structure,has been adopted by many PRC-based companies,including us,to obtain necessary li

260、censes and permits in the industries that are currently subject to foreign investment restrictions in China.See“Risk FactorsPRC laws and regulations restrict foreign investment in the air-ticketing,travel agency,advertising and value-added telecommunications businesses,and substantial uncertainties

261、exist with respect to the application and implementation of PRC laws and regulations.”and“Major Shareholders and Related Party TransactionsRelated Party TransactionsArrangements with Consolidated Affiliated Chinese Entities.”Under the draft Foreign Investment Law,variable interest entities that are

262、controlled via contractual arrangements would also be deemed as FIEs,if they are ultimately“controlled”by foreign investors.Therefore,for any companies with a VIE structure in an industry category that is on the“negative list,”the existing VIE structure may be deemed legitimate only if the ultimate

263、controlling person(s)is/are of PRC nationality(either PRC state owned enterprises or agencies,or PRC citizens).Conversely,if the actual controlling person(s)is/are of foreign nationalities,then the variable interest entities will be treated as FIEs and any operation in the industry category on the“n

264、egative list”without market entry clearance may be considered as illegal.It is likely that we would not be considered as ultimately controlled by PRC nationals,as our shareholder base is relatively diverse and,to our knowledge,ultimate beneficial owners of our shares who are PRC nationals may not,in

265、 the aggregate,control more than 50%of our total voting power as of March 31,2015.The draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with a VIE structure,whether or not these companies are controlled by Chinese parties,while

266、 it solicited comments from the public on this point by illustrating several possible options.Under these varied options,a company that has a VIE structure and conducts the business on the“negative list”at the time of enactment of the new Foreign Investment Law has either the option or obligation to

267、 disclose its corporate structure to the authorities,while the authorities,after reviewing the ultimate share control structure of the company,may either permit the company to continue maintain the VIE structure(if the company is deemed ultimately controlled by PRC nationals),or require the company

268、to dispose of its businesses and/or VIE structure based on circumstantial considerations.Moreover,it is uncertain whether the air-ticketing,travel agency,advertising and value-added telecommunications industries,in which our variable interest entities operate,will be subject to the foreign investmen

269、t restrictions or prohibitions set forth in the“negative list”to be issued.If the enacted version of the Foreign Investment Law and the final“negative list”mandate further actions,such as MOC market entry clearance or certain restructuring of our corporate structure and operations,to be completed by

270、 companies with existing VIE structure like us,we face substantial uncertainties as to whether these actions can be timely completed,or at all,and our business and financial condition may be materially and adversely affected.The draft Foreign Investment Law,if enacted as proposed,may also materially

271、 impact our corporate governance practice and increase our compliance costs.For instance,the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs.Aside from investment implementation report and investment a

272、mendment report that are required at each investment and alteration of investment specifics,an annual report is mandatory,and large foreign investors meeting certain criteria are required to report on a quarterly basis.Any company found to be non-compliant with these information reporting obligation

273、s may potentially be subject to fines and/or administrative or criminal liabilities,and the persons directly responsible may be subject to criminal liabilities.14 Table of Contents Our contractual arrangements with our affiliated Chinese entities may result in adverse tax consequences to us.As a res

274、ult of our corporate structure and the contractual arrangements between us and our affiliated Chinese entities,we are effectively subject to the 5%PRC business tax on both revenues generated by our affiliated Chinese entities operations in China and revenues derived from our contractual arrangements

275、 with our affiliated Chinese entities.We may be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between us and our affiliated Chinese entities were not made on an arms-length basis and therefore constitute favorable transfer pricing arrangements.If

276、 this occurs,the PRC tax authorities could request that our affiliated Chinese entities adjust their taxable income upward for PRC tax purposes.Such a pricing adjustment could adversely affect us by increasing our affiliated Chinese entities tax expenses without reducing our tax expenses,which could

277、 subject our affiliated Chinese entities to late payment fees and other penalties for underpayment of taxes,and/or result in the loss of the tax benefits available to our subsidiaries in China.The EIT Law requires every enterprise in China to submit its annual enterprise income tax return together w

278、ith a report on transactions with its affiliates to the relevant tax authorities.The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arms-length principles.As a result,our contractual arrangements with ou

279、r affiliated Chinese entities may result in adverse tax consequences to us.Our subsidiaries and affiliated Chinese entities in China are subject to restrictions on paying dividends or making other payments to us,which may restrict our ability to satisfy our liquidity requirements.We are a holding co

280、mpany incorporated in the Cayman Islands.We rely on dividends from our subsidiaries in China and consulting and other fees paid to us by our affiliated Chinese entities.Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits,if any,determined in a

281、ccordance with Chinese accounting standards and regulations.In addition,our subsidiaries in China are required to set aside at least 10%of their respective accumulated profits each year,if any,to fund certain reserve funds unless these reserves have reached 50%of the subsidiaries registered capital.

282、These reserves are not distributable as cash dividends.Furthermore,if our subsidiaries and affiliated Chinese entities in China incur debt on their own behalf in the future,the instruments governing the debt may restrict their ability to pay dividends or make other payments to us,which may restrict

283、our ability to satisfy our liquidity requirements.Pursuant to the EIT Law and a circular issued by the PRC Ministry of Finance and the SAT,in February 2008,the dividends declared out of the profits earned after January 1,2008 by an FIE to its immediate holding company outside China are subject to a

284、10%withholding tax unless such foreign investors jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement,and certain supplementary requirements and procedures stipulated by SAT for such tax treaty are met and observed.Our subsidiaries in China

285、are considered FIEs and are directly held by our subsidiary in Hong Kong.According to the currently effective tax treaty between China and Hong Kong,dividends payable by an FIE in China to a company in Hong Kong which directly holds at least 25%of the equity interests in the FIE will be subject to a

286、 withholding tax of 5%.In February 2009,the SAT issued a new notice,Notice No.81.According to Notice No.81,in order to enjoy the preferential treatment on dividend withholding tax rates,an enterprise must be the“beneficial owner”of the relevant dividend income,and no enterprise is entitled to enjoy

287、preferential treatment pursuant to any tax treaties if such enterprise qualifies for such preferential tax rates through any transaction or arrangement,the major purpose of which is to obtain such preferential tax treatment.The tax authority in charge has the right to make adjustments to the applica

288、ble tax rates,if it determines that any taxpayer has enjoyed preferential treatment under tax treaties as a result of such transaction or arrangement.In October 2009,the SAT issued another notice on this matter,Notice No.601,to provide guidance on the criteria for determining whether an enterprise q

289、ualifies as the“beneficial owner”of the PRC sourced income for the purpose of obtaining preferential treatment under tax treaties.Pursuant to Notice No.601,the PRC tax authorities will review and grant tax preferential treatment on a case-by-case basis and adopt the“substance over form”principle in

290、the review.Notice No.601 specifies that a beneficial owner should generally carry out substantial business activities and own and have control over the income,the assets or other rights generating the income.Therefore,an agent or a conduit company will not be regarded as a beneficial owner of such i

291、ncome.Since the two notices were issued,it has remained unclear how the PRC tax authorities will implement them in practice and to what extent they will affect the dividend withholding tax rates for dividends distributed by our subsidiaries in China to our Hong Kong subsidiary.If the relevant tax au

292、thority determines that our Hong Kong subsidiary is a conduit company and does not qualify as the“beneficial owner”of the dividend income it receives from our PRC subsidiaries,the higher 10%withholding tax rate will apply to such dividends.Under the EIT Law,an enterprise established outside of China

293、 with its“de facto management body”within China is considered a resident enterprise and will be subject to enterprise income tax at the rate of 25%on its worldwide income.The“de facto management body”is defined as the organizational body that effectively exercises overall management and control over

294、 production and business operations,personnel,finance and accounting,and properties of the enterprise.It remains unclear how the PRC tax authorities will interpret such a broad definition.If the PRC tax authorities determine that we should be classified as a resident enterprise for PRC tax purposes,

295、our global income will be subject to income tax at a uniform rate of 25%,which may have a material adverse effect on our financial condition and results of operations.Notwithstanding the foregoing provision,the EIT Law also provides that,if a resident enterprise directly invests in another resident

296、enterprise,the dividends received by the investing resident enterprise from the invested enterprise are exempted from income tax,subject to certain conditions.However,it remains unclear how the PRC tax authorities will interpret the PRC tax resident treatment of an offshore company,like us,having in

297、direct ownership interests in PRC enterprises through intermediary holding vehicles.15 Table of Contents Moreover,under the EIT Law,foreign ADS holders that are not PRC resident enterprises may be subject to a 10%withholding tax upon dividends payable by a Chinese entity that is considered as a PRC

298、resident enterprise and gains realized on the sale or other disposition of ADSs or ordinary shares,if such income is considered as income derived from within China.Any such tax would reduce the returns on your investment in our ADSs.We face uncertainty with respect to indirect transfer of equity int

299、erests in PRC resident enterprises by their non-PRC holding companies.We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer and exchange of shares in our company by non-resident investors.According to the Notice on

300、Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises issued by the PRC State Administration of Taxation on December 10,2009,or SAT Circular 698,where a non-resident enterprise transfers the equity interests in a PRC resident enterprise indirectly

301、through a disposition of equity interests in an overseas holding company(other than a purchase and sale of shares issued by a PRC resident enterprise in public securities market),or an Indirect Transfer,the non-resident enterprise,as the seller,may be subject to PRC enterprise income tax of up to 10

302、%of the gains derived from the Indirect Transfer in certain circumstances.On February 3,2015,the SAT issued Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfers by Non-RPC Resident Enterprises,or SAT Notice No.7,to supersede the existing tax rules in rel

303、ation to the tax treatment of the Indirect Transfer,while the other provisions of SAT Circular 698 irrelevant to the Indirect Transfer remain in force.SAT Notice No.7 introduces a new tax regime that is significantly different from that under SAT Circular 698.It extends the SATs tax jurisdiction to

304、capture not only the Indirect Transfer as set forth under SAT Circular 698 but also transactions involving indirect transfer of(i)real properties in China and(ii)assets of an“establishment or place”situated in China,by a non-PRC resident enterprise through a disposition of equity interests in an ove

305、rseas holding company.SAT Notice No.7 also extends the interpretation with respect to the disposition of equity interests in an overseas holding company.In addition,SAT Notice No.7 further clarifies how to assess reasonable commercial purposes and introduces safe harbors applicable to internal group

306、 restructurings.However,it also brings challenges to both the foreign transferor and transferee as they are required to make self-assessment on whether an Indirect Transfer or similar transaction should be subject to PRC tax and whether they should file or withhold any tax payment accordingly.There

307、is uncertainty as to the application of SAT Circular 698 and SAT Notice No.7.In the event that non-PRC resident investors were involved in our private equity financing transactions and such transactions were determined by the competent tax authorities as lack of reasonable commercial purposes,we and

308、 our non-PRC resident investors may become at risk of being taxed under SAT Circular 698 and SAT Notice No.7 and may be required to expend costly resources to comply with SAT Circular 698 and SAT Notice No.7,or to establish a case to be tax exempt under SAT Circular 698 and SAT Notice No.7,which may

309、 cause us to incur additional costs and may have a negative impact on the value of your investment in us.The PRC tax authorities have discretion under SAT Circular 698 and SAT Notice No.7 to make adjustments to the taxable capital gains based on the difference between the fair value of the transferr

310、ed equity interests and the investment cost.We may pursue acquisitions in the future that may involve complex corporate structures.If we are considered as a non-PRC resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under S

311、AT Circular 698 and SAT Notice No.7,our income tax expenses associated with such potential acquisitions will be increased,which may have an adverse effect on our financial condition and results of operations.Risks Related to Doing Business in China Adverse changes in economic and political policies

312、of the PRC government could have a material adverse effect on the overall economic growth of China,which could adversely affect our business.The majority of our business operations are conducted in mainland China.Accordingly,our results of operations,financial condition and prospects are subject to

313、a significant degree to economic,political and legal developments in China.Chinas economy differs from the economies of most developed countries in many respects,including with respect to the amount of government involvement,level of development,growth rate,control of foreign exchange and allocation

314、 of resources.While the PRC economy has experienced significant growth in the past decades,that growth may not continue,as evidenced by the slowing of the growth of the Chinese economy since 2012.Any adverse changes in economic conditions in China,in the policies of the Chinese government or in the

315、laws and regulations in China could have a material adverse effect on the overall economic growth of China.Such developments could adversely affect our business and operating results,lead to reduction in demand for our services and adversely affect our competitive position.The PRC government has imp

316、lemented various measures to encourage economic development and guide the allocation of resources.Some of these measures benefit the overall PRC economy,but may also have a negative effect on us.For example,our financial condition and results of operations may be adversely affected by government con

317、trol over capital investments or changes in tax regulations that are applicable to us.In addition,future measures to control the pace of economic growth may cause a decrease in the level of economic activity in China,which in turn could adversely affect our results of operations and financial condit

318、ion.16 Table of Contents Inflation in China may disrupt our business and have an adverse effect on our financial condition and results of operations.The Chinese economy has experienced rapid expansion together with rising rates of inflation.Inflation may erode disposable incomes and consumer spendin

319、g,which may have an adverse effect on the Chinese economy and lead to a reduction in business and leisure travel as the travel industry is highly sensitive to business and personal discretionary spending levels.This in turn could adversely impact our business,financial condition and results of opera

320、tions.Future movements in exchange rates between the U.S.dollar and the RMB may adversely affect the value of our ADSs.The value of the Renminbi against the U.S.dollar and other currencies may fluctuate and is affected by,among other things,changes in political and economic conditions.The conversion

321、 of the Renminbi into foreign currencies,including the U.S.dollar,has been based on rates set by the Peoples Bank of China.The PRC government allowed the Renminbi to appreciate by more than 20%against the U.S.dollar between July 2005 and July 2008.Between July 2008 and June 2010,this appreciation ha

322、lted and the exchange rate between the Renminbi and the U.S.dollar remained within a narrow band.As a consequence,the Renminbi fluctuated significantly during that period against other freely traded currencies,in tandem with the U.S.dollar.Since June,2010,the PRC government has allowed the Renminbi

323、to appreciate slowly against the U.S.dollar again.It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between the Renminbi and the U.S.dollar in the future.The majority of our revenues and costs are denominated in Renminbi,while a portion of our

324、financial assets and our dividend payments are denominated in U.S.dollars.We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency risk.Any significant revaluation of the Renminbi or the U.S.dollar may adversely affect our cash flows,earnings and financ

325、ial position,and the value of,and any dividends payable on,our ADSs.For example,an appreciation of the Renminbi against the U.S.dollar would make any new RMB-denominated investments or expenditures more costly to us,to the extent that we need to convert U.S.dollars into Renminbi for such purposes.An

326、 appreciation of the Renminbi against the U.S.dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S.dollar-denominated financial assets into Renminbi,our reporting currency.Conversely,if we decide to convert Renminbi into U.S.dolla

327、rs for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes,appreciation of the U.S.dollar against the Renminbi would have a negative effect on the U.S.dollar amount available to us.Restrictions on currency exchange may limit our ability to recei

328、ve and use our revenues effectively.Because the majority of our revenues are in the form of Renminbi,any restrictions on currency exchange may limit our ability to use revenues generated in Renminbi to fund our business activities outside China or to make dividend payments in U.S.dollars.The princip

329、al regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules,as amended,or the Rules.Under the Rules,Renminbi is freely convertible for trade-and service-related foreign exchange transactions,but not for direct investment,loan or investment in securities ou

330、tside China unless the prior approval of the State Administration of Foreign Exchange,or SAFE,is obtained.Although the PRC government regulations now allow greater convertibility of Renminbi for current account transactions,significant restrictions still remain.For example,foreign exchange transacti

331、ons under our subsidiaries capital account,including principal payments in respect of foreign currency-denominated obligations,remain subject to significant foreign exchange controls and the approval of SAFE.These limitations could affect our ability to obtain foreign exchange for capital expenditur

332、es.We cannot be certain that the PRC regulatory authorities will not impose more stringent restrictions on the convertibility of Renminbi,especially with respect to foreign exchange transactions.PRC regulations relating to the establishment of offshore special purpose companies by PRC residents and

333、the grant of employee stock options by overseas-listed companies may subject our PRC resident shareholders to personal liability and limit our ability to inject capital into our PRC subsidiaries,limit our subsidiaries ability to distribute profits to us,or otherwise adversely affect us.SAFE issued a public notice,or SAFE Circular 75,in October 2005 requiring PRC residents to register with the loca