SINA COM - 10-K Annual Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 þ No o

Indicated by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicated by check mark whether the registrant is an accelerated filer. Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $52,798,000 as of June 28, 2002, based upon the closing sale price on computed by reference to the closing price for the Ordinary Shares as quoted by the Nasdaq National Stock Market reported for such date. Shares of Ordinary Shares held by each officer and director and by each person who owns 5% or more of the outstanding Ordinary Shares have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 28, 2003, there were 46,743,515 shares of the Registrant’s Ordinary Shares, $0.133 par value.

Items 10-13 incorporate information by reference from the definitive proxy statement for the Annual Meeting of Shareholders to be held on or about June 27, 2003.

This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the caption “Business — Risk Factors” included herein.

SINA Corporation (“SINA”, “We” or “the Company”), formerly known as SINA.com, is a leading online media company and value-added information service provider for China and the global Chinese communities. With a branded network of localized websites targeting greater China and overseas Chinese, we provide an array of services to our users including region-focused online portals, search and directory, interest-based and community-building channels, free and premium email, wireless short messaging, online games, virtual ISP, classified listings, e-commerce, e-learning and enterprise e-solutions. In turn, we generate revenue through advertising, fee-based services, e-commerce and enterprise services. With 66.1 million registered users worldwide at December 31, 2002, we believe SINA is the most recognized online brand in China and among Chinese communities world-wide.

Our primary operation focus is in China where we generated 84% of our total revenues for the six months ended December 31, 2002. According to the January 2003 survey conducted by the China Internet Network Information Center (“CNNIC”), China currently has 59 million active Internet users, the second largest in the world. If this growth rate continues, China could surpass the United States and become the country with the largest Internet user base by 2005. As a leading online media company in China, SINA is expected to benefit directly from this tremendous growth rate as China’s economy continues to leap forward.

Another area that has experienced tremendous growth in 2002 was the mobile phone market in China. As of December 2002, the number of mobile phone user in China exceeded 200 million, making China the country with the largest number of mobile phone users. According to the forecast by IDC, the total number of mobile phone users in China will reach 325 million by the end of 2005. During the year 2002, China mobile phone users sent a total of 95 billion short messages through their mobile phones. It is estimated that the total number of short messages to be sent through mobile phones in China will reach 148 billion in the year 2003. Over the past two years, we have leveraged our network of websites and our tremendous user base and have become a leading content service provider for the short messaging service (“SMS”) in China. Revenues from wireless short messaging service were one of the major drivers for our revenue growth in the past 18 months. In January 2003, we acquired Memestar Limited, a leading independent mobile value-added service provider in China to expand our customer base and product offerings for SMS.

The year 2002 also saw the booming of the online game market in China where total market size for online game reached $120 million and it is expected that the market size will double in the year 2003. In

Over the past 18 months, we have successfully transformed SINA from a pure Internet portal relying almost exclusively on online advertising to a company with multiple and sustainable revenue streams. For the six months ended December 31, 2002, non-advertising revenues accounted for 40% of our total revenues, up from 20% for the same period in 2001.

The following table presents an overview of our financial reporting structure as well as our vertical properties and services:

Our portal network consists of four destination web sites dedicated to users in greater China including mainland China (www.sina.com.cn), Taiwan (www.sina.com.tw), Hong Kong (www.sina.com.hk), and overseas Chinese in North America (www.sina.com). Each of our destination sites consists of Chinese-language content organized into interest-specific channels, extensive community and communication services and sophisticated web navigation capability through SINA Search and Directory services. As of December 2002, SINA has over 66.1 million registered users, or SINA Netizens.

On all of our portals, SINA offers a variety of interest-based channels that provide region-focused format and content. Everyday, millions of users visit these channels, which include News, Sports, Finance, Entertainment, Education, e-Ladies, Games, Healthcare, and Technology.

SINA News aggregates feeds from hundreds of news providers, bringing together content from media companies such as Central News Agency, China Central Television, People’s Daily, China Economic Times and Xinhua News Agency. Through SINA News, our users have access to breaking news coverage, from multiple sources and points of view.

SINA Sports provides access to up-to-the-minute news, real-time statistics and scores, text broadcast programming, local and global coverage. SINA Sports channel has long been recognized as the leading online sports channel in China. SINA was the official site of China’s Olympic team for the 2000 Sydney games. In 2002, SINA was chosen as the official site of China’s World Cup team. In December 2002, we entered into a strategic alliance for online marketing with NIKE and our sports channel was renamed the NIKE-SINA Sports channel. Under the co-brand alliance, NIKE and SINA work together, both online and offline, to co-develop and market the Sports channel to sports fans in China.

SINA Finance provides a comprehensive set of financial resources, from business news to personal finance columns. SINA Finance also offers stock quotes from the Shanghai and Shenzhen stock exchanges, breaking news from leading editorial companies and market analysis.

SINA Entertainment contains extensive coverage of the local and international entertainment arenas that are of interest to our users, including dining, movies, television programs, plays, operas as well as popular and classic music.

SINA Education is designed to assist students, parents and educators in the education process. The site helps educators extend traditional classrooms and communication with students onto the Internet, offers an extensive reference area through leading education material providers, and enables students to research and prepare to apply for colleges, universities and graduate schools, both domestic and abroad.

In April 2002, L’Oréal, a world-wide leader in cosmetics, selected SINA as the host and partner for a web site targeting women in China. “Women of China,” the largest women’s press group in China, provides content and editorial management for the channel. The SINA e-Ladies channel is dedicated to all women who speak Chinese and are of Chinese heritage. The site provides a wide range of information, and specific services for virtual communities that meet the day-to-day personal and professional needs of Chinese women. Lastly, users will receive up-to-date details about product launches by clicking on the links to the local Internet sites of L’Oréal group’s brands.

SINA Health, provides information on diseases, conditions, and medications, as well as access to various health information centers and online community tools.

SINA Technology is a wide-ranging web site for people who are looking for technology news, product reviews and software downloads.

SINA offers an array of community-building services designed to encourage users to become active and loyal registered members, or SINA Netizens. Our integrated SinaMail, SinaPager, SinaChat, Club Yuan, E-Card and SinaForum products and services enable SINA Netizens to communicate with each other or with groups of others in the SINA community.

SinaMail is our free email service. We operate one of the largest free email systems in China.

SinaPager is our instant-messaging service powered by our proprietary technology. The SinaPager service is currently offered in China and enables mainland Chinese SINA Netizens to determine if their friends are online and to send messages to them instantly.

Through SinaChat and SinaForum, members with similar interests can meet and share their thoughts and opinions on a variety of topics. We have also integrated the SinaForum with News service, as users can comment on the particular news they are reading with one click on the links to the related forum topic on SinaForum.

For members seeking friends and personal relationships, our Club Yuan interactive dating service provides them with a “community within a community.”

We employ a multi-pronged sales strategy that targets both short-term revenue opportunities such as banner advertising campaigns, as well as longer-term, higher-value contracts such as integrated marketing and communications packages. Our advertising product offerings consist of banner advertisements that appear on pages within the SINA network, promotional sponsorships that are typically focused on a particular event, such as the Olympics, and advertising campaign design and management services. We are also working with research firms in the United States and China to offer market survey services. By collecting and aggregating feedback from our users, we expect to be able to provide our advertisers with prompt and valuable feedback on the public’s engagement with their brands and products, thereby enabling advertisers to more easily gauge the effectiveness of their ongoing advertising campaigns.

Our primary target client base for advertisers and sponsors consists of global corporations doing business in Greater China and domestic companies in each of the regions we operate in, to which we sell from both our corporate and regional headquarters. Global corporations are typically Fortune 500 and 1000 companies with significant operations worldwide that employ a global approach to their branding, marketing and communications programs. Regional companies consist of medium to large companies that are focused on specific geographic as well as demographic markets, such as Asian-Americans or Taiwanese, and smaller companies whose markets are within a local territory, such as Beijing or Hong Kong. During the six months ended December 31, 2002, 731 clients advertised on our web sties. A partial list of our advertising clients includes: 999 Group, China Mobile, China Unicom, Charles Schwab, Dell, E*Trade, IBM, Johnson and Johnson, Legend, L’Oreal, Motorola, Nokia, Nike, Samsung, Scottstrade Securities, and TCL.

In 2001, we initiated a number of fee-based premium services that we believe will offer incremental benefits to our users who wish to fully leverage our network. SINA was among the first group of companies to enter the short messaging service (SMS) market in China. As many mobile phones are able to display and send text in Chinese, SINA developed a suite of SMS that includes user-customized information subscription, personal greetings, customized mobile phone screen decoration, personalized ring tones, mobile dating service and wireless games. SINA provides an easy to use online platform through sms.sina.com.cn and, we generated $6.1 million in revenues from SMS in the six months ended December 31, 2002, compared to $1.0 million for the same period in 2001. In January 2003, we acquired Memestar, a leading independent mobile value-added service provider in China to expand our customer base and product offerings for SMS. Also in January 2003, we signed an agreement with Motorola to host Motorola’s official site wireless Internet in China. In February 2003, we announced a joint SMS service with Microsoft for MS Office XP in China.

We introduced our paid email service in China in August 2001 and have accumulated over 700,000 registered users for the service as of February 2003. Our paid email service provides features such as anti-virus software, junk mail filter, and unlimited attachment size for a small monthly fee.

Our SINA Game channel has become one of the most popular websites in China and has provided us with an entry into the growing interactive gaming market. Through our strategic alliance with local online game publishers, we are working to become a leading partner for online game operators. Our alliances usually include arrangements for SINA to host servers and develop websites organized under the SINA Games platform that provide services such as software downloads, player reviews and forums. In January 2003, we

Through a strategic alliance with Net263Group, an independent Internet service provider (“ISP”) in China, we provide a one-stop virtual ISP service that combines content and access for end users, and covers major Internet markets in China including Beijing, Shanghai and other large cities.

Online commerce is a natural extension of our portal network. We currently offer SinaMall, an online shopping experience, on our China and North America web sites. Our technology platform enables both multinational and local merchants to transact business online. We generate revenue from monthly hosting fees and through receiving a percentage of online sales from our merchant partners. We work with merchants to design customized marketing campaigns that involve both advertising and sales of their products over our network. We have also been a leader in creating mechanisms for secure transactions on the Internet in China. We have set up online payment systems and online banking services. We have also launched a co-branded debit card with China Merchants Bank enabling users of our China web site to make online purchases from our SinaMall in China.

Our listing properties include a search engine, a directory and classified information. Our search engine and directory provide an intuitive and user-friendly online guide to web navigation and a gateway to the vertical offerings on the SINA network. Users can either browse the directory listings by subject matter, or use SINA Search, a rapid keyword search function that scans the contents of the entire directory. In addition to any relevant listings from our directory, we provide users with web-wide search results from search engines provided by our partners. For browse-driven inquiries, our directory results include Sponsored Sites, a SINA created fee-based program that allows commercial sites to receive enhanced placement in the directory. For keyword-search-driven inquiries, our search results also include SINA Sponsor matches, site listings with enhanced placement in search results that are bought by businesses or organizations.

In February 2002, SINA formed a technology service company, SINA.net to provide enterprise solutions on an integrated platform to government agencies and small to medium-sized enterprises (“SME”) in China. As part of the enterprise solution service, we provide our clients with corporate email, system integrating, online publishing software and classified listings (in conjunction with our main Listings business).

We have designed an array of proprietary software products that allow users to view Chinese-language content and switch between Chinese and English languages without regard to the underlying operating system. RichWin, first launched in April 1994, is an operating system overlay that allows users to move between a Chinese and an English operating environment. We sell the latest version of our RichWin software product to businesses and consumers as well as to original equipment manufacturers. SinaPlus, our new-generation language translation engine, bundles tools and services such as SinaMail and SinaPager to provide our users with a more integrated online experience. SinaPlus is available for free download from our portal network. We also plan to offer new corporate services software that will help businesses establish and maintain their intranet and extranet web sites by integrating their proprietary corporate content and applications with SINA’s email, publishing and content services.

We have developed strategic relationships with a range of content, service, application and distribution partners in order to serve users more effectively and to extend our brand and services to a broader audience.

The goal of our content partnerships is to provide our users with the broadest offering of Chinese-language content available. We contract with over 600 content partners to display their content on one or more of our web sites free of charge or in exchange for a share of revenue, a licensing fee, access to our content or a combination of these arrangements. Some of our leading content providers include Xinhua News Agency, China Central TV, People’s Daily, Central News Agency, FTV News, China Press, Apple Daily, AFP, Reuters and Shanghai Securities News. These content partnerships are usually of one to two years’ duration with one-year automatic renewal.

The goal of our application and service partnerships is to ensure that our users have access to user-friendly, reliable and scalable communication and search tools. Because many of our prospective partners have traditionally focused on non-Chinese speaking markets, our internal engineering and development teams often work closely with them to adapt their solutions to the Chinese-language market.

We have an agreement with Google to provide Chinese search functionality to some of our web sites, and an agreement with Ad Forward to provide advertising serving and tracking services for some of our web sites.

Our operating infrastructure is designed to serve and deliver hundreds of millions of page views per day to our users. This scalable infrastructure allows our users to access our products and services quickly and efficiently, regardless of their geographical location. Our infrastructure is also designed to provide high-speed access by forwarding queries to our web hosting sites with greater resources or lower loads. Our web pages are generated, served and cached by servers hosted at various co-location web hosting sites in China, U.S., Taiwan and Hong Kong.

Our servers run on RedHat Linux, FreeBSD, and Solaris platforms using Apache and Netscape servers. These servers are maintained at Qwest in Sunnyvale, California, China Telecom Corporation in China, Seednet and APOL in Taipei, Taiwan, as well as iAdvantage and NewT&T in Hong Kong. We believe that these hosting partners provide significant operating advantages, including an enhanced ability to protect our systems from power loss, break-ins and other potential external causes of service interruption. They provide continuous customer service, multiple connections to the Internet and a continuous power supply to our systems. In addition, we conduct online monitoring of all our systems for accessibility, load, system resources, network-server intrusion and timeliness of content. SINA’s mobile applications in China leverage the above web operation resources by utilizing the wireless infrastructure of China Mobile Communication Corporation and China Unicom Co., Ltd to provide mobile value-added services to SINA’s users.

The market for web sites offering online content and services targeting the global Chinese community is competitive and we expect competition to increase in the future. Many of the companies are attempting to address this market by offering portal, content and e-commerce services to distinct local markets within greater China. In turn, these companies compete with SINA for user traffic, advertising revenue, e-commerce transactions, short messaging service and other fee-based services, and potential partners. The Internet market is still developing and the competition is expected to be intense. We are just one of the growing number of website providers that have entered into business arrangements with the leading China mobile service providers to offer SMS content. Our primary competitors in greater China include Netease, Sohu.com, Tom.com and Yahoo! China.

We also face competition from providers of software and other Internet products and services that incorporate search and retrieval features into their offerings. In addition, entities that sponsor or maintain high-traffic web sites or that provide an initial point of entry for Internet users, such as ISPs, including large, well-capitalized entities such as Microsoft (MSN), Yahoo!, PCCW-HKT (Netvigator) and AOL, currently offer and could further develop or acquire content and services that compete with those that we offer. We expect that as Internet usage in greater China increases and the greater China market becomes more attractive to advertisers and for conducting electronic commerce, large global competitors may increasingly focus their resources on the greater China market. We also compete for advertisers with traditional media companies, such as newspapers, television networks and radio stations that have a longer history of use and greater acceptance among advertisers. In addition, providers of Chinese language Internet tools and services may be acquired by, receive investments from, or enter into other commercial relationships with, large, well-established and well-financed Internet, media or other companies.

Our ability to compete successfully depends on many factors, including the quality of our content, the breadth, depth and ease of use of our services, our sales and marketing efforts, and the performance of our technology. See also “Risk Factors — The markets in which we operate are highly competitive, and we may be unable to compete successfully against new entrants and established industry competitors, many of which have greater financial resources than we do or currently enjoy a superior market position than we do.”

The Chinese government has enacted an extensive regulatory scheme governing the operation of our business. Various Chinese governmental authorities, such as the Ministry of Information Industry, or MII, the State Administration of Industry and Commerce, or SAIC, and the Ministry of Public Security regulate the Chinese Internet industry.

On September 25, 2000, the Measures for the Administration of Internet Information Services, or the ICP Measures, went into effect. Under the ICP Measures, any entity that provides information to online users of the Internet is obliged to obtain an operating license from the MII or its local branch at the provincial level in accordance with the Telecom Regulations described below. The ICP Measures also reiterated Internet content restrictions that had been promulgated by other ministries over the past few years. Moreover, the ICP Measures stipulate that ICPs must obtain the prior consent of the MII prior to establishing an equity or cooperative joint venture with a foreign partner. On January 4, 2001, the MII issued an ICP license to Beijing SINA Internet Information Services Co., Ltd., an entity that the Company has a contractual arrangement with to operate its website in China. See also “Business — Corporate Structure.” On July 25, 2001, this entity also obtained a permit to operate its bulletin board systems pursuant to additional ICP Measure regulations issued on April 23, 2001 requiring all companies that operate bulletin board systems, or BBS, to obtain official permits.

On October 1, 2000, the Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, went into effect. The Telecom Regulations reiterated the long-standing principle that telecommunications service providers need to procure an operating license as a mandatory precondition for the commencement of operations. Under current Chinese regulations, therefore, foreign companies such as SINA cannot own or operate value-added telecommunications business in China. Consequently, we conduct our business in China through two separate Chinese business entities. For a description of the contractual arrangements we have with these entities, please see “Risk Factors — We have attempted to comply with the strict licensing and registration requirements of the PRC government by entering into agreements with two Chinese entities majority owned by our employees; if the PRC government finds that these agreements do not comply with the licensing requirements, our business in the PRC will be adversely affected.” In the opinion of our Chinese counsel, the ownership of Beijing SINA Information Technology CO. Ltd., or BSIT, (formerly known as Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS) and its businesses comply with existing Chinese laws and regulations. Nevertheless, if we are not viewed as complying with these policies or any regulations that may be created relating to foreign ownership of Internet-related businesses, the

In October 2000, the Provisional Regulations for the Administration of Web Site Operation of News Publication Services were jointly promulgated by the State Council Information Office and MII. These regulations stipulate that general web sites established by non-news organizations may publish news released by certain official news agencies, if they satisfy the requirements set forth in Article 9, but may not publish news items produced by themselves or news sources from elsewhere. The aforementioned requirements include the following:


	•	they must have a purpose and guidelines with respect to online news services that comply with laws and regulations,

	•	they must have the necessary news editorial departments, funds, equipment and premises,

	•	they must have professional staff in charge of editing who are experienced in journalism and are qualified at a medium or higher level to hold technical positions in journalism, and an appropriate number of editorial staff who are qualified at a medium or higher level to hold technical positions in journalism; and

	•	they shall have news sources such as State news agencies, news bureau of departments under the State Council or news agencies directly under the provinces, autonomous regions or directly-administered municipalities.

The above regulations also require the general web sites of non-news organizations to apply to the State Council Information Office for approval after securing the consent of the State Council Information Office at the provincial level, before they commence operating news dissemination services. Besides, the general web sites intending to publish the news released by the aforementioned news agencies or bureaus must enter into agreements with them and submit copies of those agreements to the relevant administration department. On December 27, 2000, the State Council Information Office approved Beijing SINA Internet Information Services Co., Ltd. to develop online news dissemination services.

On December 11, 2001, the day China formally joined the WTO, the PRC State Council promulgated the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FI Telecom Regulations, which became effective on January 1, 2002. The FI Telecom Regulations stipulate that the foreign party to a foreign-invested telecommunications enterprise can hold equity share in such foreign-invested telecommunications enterprise that provides basic telecom services or value-added telecom services ultimately not to exceed 49% or 50% respectively. The Administrative Measures for Telecommunications Business Operating License, were promulgated by MII on January 4, 2002 to supplement the FI Telecom Regulations. The Measures confirm that the MII is the competent approval authority for foreign-invested telecom enterprises. However, there are still some uncertainties regarding the interpretation and application of the FI Telecom Regulations.

The scope and enforcement of these regulations are uncertain given their recent enactment. Moreover, we cannot predict the effect of further developments in the Chinese legal system, particularly with regard to the Internet, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement of laws. For a description of how the unsettled nature of Chinese regulations may affect our business, please see “Risk Factors — We may not be in compliance with Chinese government regulations relating to foreign investment prohibitions and, if so determined, the Chinese government could cause us to discontinue our operations in China” and “Risk Factors — Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment prohibitions, the Chinese government may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate.”

parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our products is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriations of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations. See “Risk Factors — We may not be able to adequately protect our intellectual property, which could cause us to be less competitive” and “— We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damage awards.”

SINA Corporation (formerly known as SINA.com), a Cayman Islands company, is a holding company owning the following subsidiaries:


	•	Rich Sight Investment Limited, or RSIL, a Hong Kong company,

	•	SINA.com (Hong Kong) Limited, a Hong Kong company,

	•	SINA.com Online, a California corporation,

	•	SINA.com (B.V.I.) Ltd., a British Virgin Islands company,

	•	Memestar Limited, a British Virgin Islands company,

	•	Beijing SINA Information Technology Co. Ltd., a China company,

	•	Shanghai SINA Technology Service Co. Ltd., a China company,

	•	Star-Village.com (Beijing) Internet Technology Limited, a China company,

	•	Shanghai NC-SINA Information Technology Co. Ltd., a China company,

	•	Beijing SINA Internet Technology Services Co., Ltd., a China company,

	•	Shanghai SINA Online Information Technology Co., Ltd., a China company.

	•	Beijing SINA Interactive Advertising Co., Ltd. (“the Ad Company”), a China company controlled through business agreement, and

	•	Beijing SINA Internet Information Service Co., Ltd. (“the ICP Company”), a China company controlled through business agreement.

RSIL was formed in March 1993 to hold an interest in Beijing SINA Information Technology Co. Ltd., or BSIT, (formerly known as Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS). BSIT was formed as a Sino-Foreign joint venture company based in Beijing, China between RSIL and a third party, Beijing Stone Electronic Technology Co., Ltd., a China company. BSIT began operations in December 1993 as a computer software company focused on providing solutions to computer users wishing to communicate in Chinese. In May 1996, BSIT launched our online network, then called SRSnet.com, offering Chinese language news, information and community features such as bulletin boards and chat services targeted at online users in China. In July 1997, SRS International Limited, a Cayman Island company, was formed to become the holding company for RSIL.

In March 1999, we expanded our online network by acquiring Sinanet.com, a leading Chinese language Internet content company with offices in California and Taiwan and two distinct web sites targeting Chinese users in North America and Taiwan. In connection with the acquisition, we changed the name of Sinanet.com to SINA.com Online and the name of the holding company from SRS International Limited to SINA.com.

In November 2002, RSIL completed the acquisition of Shanghai Techur Technology Developing Co., Ltd. (“Techur”), an Internet and logistic software company providing Internet and Intranet based logistic software and online applications to shipping and export business in Eastern China. We changed the name of Techur to Shanghai SINA Technology Service Co. Ltd. In December 2002, we changed our name from SINA.com to SINA Corporation. In January 2003, Shanghai NC-SINA Information Technology Co. Ltd was formed as a joint venture company by us and NCsoft Corporation to engage in online game business in China. To expand our customer base and product offerings for SMS, we acquired Memestar, a leading independent mobile value-added service provider in China, in January 2003.

To comply with Chinese regulations, BSIT entered into agreements with two limited liability companies incorporated in China: Beijing SINA Interactive Advertising Co., Ltd. (the “Ad Company”) and Beijing SINA Internet Information Services Co., Ltd. (the “ICP Company”). The Ad Company is a Chinese advertising company that is 75% owned by Yan Wang, our president and 25% owned by BSIT. The ICP Company is a Chinese Internet content provider that is 30% owned by Daniel Mao, our chief executive officer, 30% owned by Yan Wang and 40% by four other employees of the Company. All individual shareholders of

the Ad Company and the ICP Company are required under their agreements with BSIT to transfer their interest in the Ad Company or the ICP Company to BSIT or to any person specified by BSIT at any time at BSIT’s request, provided that such transfer will not be in violation of Chinese laws and regulations. Through ten-year proxies, BSIT has complete voting control over the Ad Company and the ICP Company. Therefore, the financial position and results of operations of the ICP Company and the Ad Company are consolidated with the financial statements of SINA. In the opinion of SINA’s Chinese counsel, the ownership of BSIT and its businesses comply with existing Chinese laws and regulations.

Pursuant to these agreements, the ICP Company is responsible for operating www.sina.com.cn in connection with its Internet content company license and sells advertising space on the China web site to the Ad Company. The Ad Company, in turn, places advertisements in this space for third parties under its advertising license. In addition, BSIT has licensed intellectual property and transferred equipment to the ICP Company, and acts as the ICP Company’s provider of technical services, all in exchange for fees or other payments. BSIT also serves as a consultant and service provider to the Ad Company for its domestic Chinese customers. Substantially all of the income received from advertising sales by the Ad Company and ICP Company is paid to BSIT.

Our primary Internet address is www.sina.com. We make our periodic SEC Reports (Forms 10-Q and Forms 10-K) and current reports (Form 8-K) available free of charge through our web site as soon as reasonably practicable after they are filed electronically with the SEC. We may from time to time provide important disclosures to investors by posting them in the investor relations section of our web site, as allowed by SEC rules. Information contained on SINA’s web site is not part of this report or any other report filed with the SEC.

As of December 31, 2002, we had 524 full-time employees, of whom 501 were employed outside the United States. From time to time we employ independent contractors to support our production, engineering, marketing, and sales departments. Our Chinese employees are members of a labor association that represents employees with respect to labor disputes and other employee matters. We have never experienced a work stoppage or a labor dispute that has interfered with our operations.

Revenues are attributed to the countries in which the invoices are issued. Long-lived assets comprise the net book value of property and equipment.

We believe that our future success depends on our ability to significantly increase revenue from our operations, for which we have a limited operating history. Accordingly, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in an early stage of development. These risks include our ability to: attract buyers for our SMS content, attract advertisers; attract a larger audience to our network; derive revenue from our users from fee-based Internet services; respond effectively to competitive pressures and address the effects of strategic relationships or corporate combinations among our competitors; maintain our current, and develop new, strategic relationships; increase awareness of our brand and continue to build user loyalty; attract and retain qualified management and employees; upgrade our technology to support increased traffic and expanded services; and expand the content and services on our network.

We recorded a net income of approximately $0.9 million for the six months ended December 31, 2002. However, as of December 31, 2002, we had an accumulated deficit of approximately $114.5 million. We have only recently attained profitability and we cannot be certain to sustain profitability. If we do not sustain profitability, the market price of our ordinary shares may decline.

Our revenue growth is dependent on increased revenue from the sale of advertising space on our network. Online advertising in greater China is an unproven business and many of our current and potential advertisers have limited experience with the Internet as an advertising medium, have not traditionally devoted a significant portion of their advertising expenditures or other available funds to web-based advertising, and may not find the Internet to be effective for promoting their products and services relative to traditional print and broadcast media. Our ability to generate and maintain significant advertising revenue will depend on a number of factors, many of which are beyond our control, including: the development of a large base of users possessing demographic characteristics attractive to advertisers; downward pressure on online advertising prices; the development of independent and reliable means of verifying levels of online advertising and traffic; and the effectiveness of our advertising delivery, tracking and reporting systems.

If the Internet does not become more widely accepted as a medium for advertising, our ability to generate increased revenue will be negatively affected.

Substantially all our revenue growth for the year ended December 31, 2002 was from the development of our fee-based Internet services consisting primarily of short messaging services, paid email service and subscription service. For the six months ended December 31, 2002 and the year ended June 30, 2002, our revenues from short messaging services accounted for 65% and 53%, respectively, of our total non-advertising revenues and we are deriving an increasing portion of our revenues from these services. If users do not adopt our fee-based Internet services for which there exist extensive competitions, at a sufficient rate, our revenues growth will be negatively affected.

Our short messaging services depend mainly on the cooperation of China Mobile Communication Corporation (“CMCC”) and its subsidiaries and to a lesser extent China Unicom Co., Ltd (“Unicom”). We rely on CMCC and Unicom for providing the network and gateway for the short messaging services we provide to our users. We also utilize their billing systems to collect service fees from our short messaging subscribers.

Our fee arrangements with CMCC and Unicom could change at any time due to the dominance of these two mobile service providers, the large number of providers of SMS, and the consequent power of the mobile service providers to dictate the terms of such fee arrangements. If CMCC and Unicom choose to increase such fee charges for providing service, our gross margin for SMS and our operating profitability will be negatively affected. Further if CMCC’s or Unicom’s systems encounter technical problems or they refuse to cooperate with us, our short messaging services may cease or be severely disrupted, which would have a significant and adverse impact on our operating results.

Our revenue growth also depends on the increasing acceptance and use of electronic commerce in greater China. The Internet may not become a viable commercial marketplace in Asia for various reasons, many of which are beyond our control, including: inexperience with the Internet as a sales and distribution channel; inadequate development of the necessary infrastructure to facilitate electronic commerce; concerns about security, reliability, cost, ease of deployment, administration and quality of service associated with conducting business over the Internet; and inexperience with credit card usage or with other means of electronic payment in China.

If the Internet does not become more widely accepted as a medium for electronic commerce, our ability to generate increased revenue will be negatively affected.

The telecommunications infrastructure in China is not well developed. Although private sector ISPs exist in China, almost all access to the Internet is accomplished through ChinaNet, China’s primary commercial network, which is owned and operated by China Telecom, a state-owned enterprise directly controlled by Chinese Ministry of Information Industry (“MII”). The underdeveloped Internet infrastructure in China has limited the growth of Internet usage in China. If the necessary Internet infrastructure is not developed, or is not developed on a timely basis, future growth of the Internet in China will be limited and our business could be harmed.

The Chinese government’s interconnecting, national networks connect to the Internet through government-owned international gateways, which are the only channels through which a domestic Chinese user can connect to the international Internet network. We rely on this backbone and China Telecom to provide data communications capacity primarily through local telecommunications lines. Although the Chinese government has announced plans to develop aggressively the national information infrastructure, we cannot assure you that this infrastructure will be developed. In addition, we have no guarantee that we will have access to alternative networks and services in the event of any disruption or failure. If the necessary infrastructure standards or protocols or complementary products, services or facilities are not developed by the Chinese government, the growth of our business will be hindered.

We may experience significant fluctuations in our quarterly operating results due to a variety of factors, many of which are outside our control. Factors that may cause our quarterly operating results to fluctuate include: our ability to retain existing users, attract new users at a steady rate and maintain user satisfaction; the announcement or introduction of new or enhanced services, content and products by us or our competitors; dependence on a limited number of advertisers, many of which have agreements with us that are cancelable upon a specified notice period, and the loss of any major advertiser; significant news events that increase traffic to our web sites; technical difficulties, system downtime or Internet failures; demand for advertising space from advertisers; the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure; governmental regulation; seasonal trends in Internet use; a shortfall in our revenues relative to our forecasts and a decline in our operating results due to our inability to adjust our spending quickly; and general economic conditions and economic conditions specific to the Internet, electronic commerce and the greater China market.

As a result of these and other factors, you should not rely on quarter-to-quarter comparisons of our operating results as indicators of likely future performance. Our operating results may be below the expectations of public market analysts and investors in one or more future quarters. If that occurs, the price of our ordinary shares could decline and you could lose part or all of your investment.

We expect to derive a substantial percentage of our revenues from the greater China market. Changes in political or economic conditions in the region are difficult to predict and could adversely affect our operations or cause the greater China market to become less attractive to advertisers, which could reduce our revenues. We maintain a strong local identity and presence in each of the regions in the greater China market and we cannot be sure that we would be able to maintain effectively this local identity if political conditions were to change. Furthermore, many countries in Asia have experienced significant economic downturns since the middle of 1997, resulting in slower real gross domestic product growth for the entire region as a result of higher

interest rates and currency fluctuations. If declining economic growth rates persist, expenditures for Internet access, infrastructure improvements and advertising could decrease, which would negatively affect our business and our profitability over time. In addition, the economic downturn in Asia could also lead to a devaluation of the currency of China, Taiwan or Hong Kong, which would decrease our revenues for the greater China region in U.S. dollar terms.

In addition, economic reforms in the region could affect our business in ways that are difficult to predict. For example, since the late 1970s, the Chinese government has been reforming the Chinese economic system to emphasize enterprise autonomy and the utilization of market mechanisms. Although we believe that these reform measures have had a positive effect on the economic development in China, we cannot be sure that they will be effective or that they will benefit our business.

The Chinese government heavily regulates its Internet sector including the legality of foreign investment in the Chinese Internet sector, the existence and enforcement of content restrictions on the Internet and the licensing and permit requirements for companies in the Internet industry. Because these laws, regulations and legal requirements with regard to the Internet are relatively new and untested, their interpretation and enforcement may involve significant uncertainty. In addition, the Chinese legal system is a civil law system in which decided legal cases have limited binding force as legal precedents. As a result, in many cases it is difficult to determine what actions or omissions may result in liability.

Issues, risks and uncertainties relating to China government regulation of the Chinese Internet sector include the following:


	•	SINA only has contractual control over its web site in China; it does not own it due to the prohibition of foreign investment in businesses providing value-added telecommunication services, including computer information services, short messaging services or electronic mail box services.

	•	On December 11, 2001, the day China formally joined the WTO, the PRC State Council promulgated the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FI Telecom Regulations, which became effective on January 1, 2002. The FI Telecom Regulations stipulate that the foreign party to a foreign-invested telecommunications enterprise can hold equity share in such foreign-invested telecommunications enterprise that provides basic telecom services or value-added telecom services ultimately not to exceed 49% or 50% respectively. The Administrative Measures for Telecommunications Business Operating License, were promulgated by MII on January 4, 2002 to supplement the FI Telecom Regulations. The Measures confirm that the MII is the competent approval authority for foreign-invested telecom enterprises. However, there are still some uncertainties regarding the interpretation and application of the FI Telecom Regulations.

	•	The numerous and often vague restrictions on acceptable content in China subjects us to potential civil and criminal liability, temporary blockage of our web site or complete cessation of our web site. For example, the State Secrecy Bureau, which is directly responsible for the protection of state secrets of all Chinese government and Chinese Communist Party organizations, is authorized to block any web site it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the distribution of online information.

The interpretation and application of existing Chinese laws and regulations, the stated positions of the MII and the possible new laws or regulations have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, Chinese Internet businesses, including our business.

Because the Chinese government restricts foreign investment in Internet-related businesses, we have restructured our China Internet operations by forming two Chinese entities to acquire appropriate government licenses to conduct our business there. The legal uncertainties associated with the Chinese government regulation may be summarized as follows: whether the Chinese government may view our restructuring as being in compliance with their regulations; whether the Chinese government may revoke such business licenses; whether the Chinese government may impose additional regulatory requirements with which we may not be in compliance; whether the Chinese government will permit the Chinese entities to acquire future licenses necessary in order to conduct operations in China; and whether the Chinese government will restrict or prohibit the distribution of content over the Internet.

The Chinese government regulates Internet access and the distribution of news and other information through strict business licensing and registration requirements and other governmental regulation. With respect to licensing, our subsidiary Beijing SINA Information Technology Co. Ltd. or BSIT, (formerly known as Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS), is currently licensed to operate as a software company. BSIT has entered into agreements with two Chinese entities: Beijing SINA Interactive Advertising Co., Ltd., a Chinese advertising company that is 75% owned by Yan Wang, our president, and 25% owned by BSIT and which we refer to as the Ad Company, and Beijing SINA Internet Information Services Co., Ltd., a Chinese Internet content provider which we refer to as the ICP Company. The ICP Company is 30% owned by Daniel Mao, our chief executive officer, 30% owned by Yan Wang and 40% owned by four other employees, each of whom owns 10% of the ICP Company.

Pursuant to these agreements, the ICP Company is responsible for operating www.sina.com.cn in connection with its Internet content company license and sells advertising space on www.sina.com.cn to the Ad Company. The Ad Company, in turn, sells advertisements in this space to third parties under its advertising license. In addition, BSIT has licensed intellectual property and transferred equipment to the ICP Company, and acts as the ICP Company’s provider of technical services, all in exchange for fees or other payments. BSIT will also be a consultant and service provider to the Ad Company for its domestic Chinese customers.

We cannot be sure that these and other corporate activities carried out by us will be viewed by Chinese regulatory authorities as in compliance with applicable licensing requirements. Our business in China will be adversely affected if our business license is revoked as a result of non-compliance. In addition, we cannot be sure that we will be able to obtain all of the licenses we may need in the future or that future changes in Chinese government policies affecting the provision of information services, including the provision of online services and Internet access, will not impose additional regulatory requirements on us or our service providers or otherwise harm our business. Finally, we cannot be certain the individual equity owners in the Ad Company and ICP Company will always act in the best interest of the Company, in particular if they become disassociated with the Company.

Because we are restricted by the Chinese government from providing Internet and advertising services directly in China, we are dependent on the Ad Company, of which we own 25%, and the ICP Company, of which we have no ownership interest, to provide such services through contractual agreements between the parties. This arrangement may not be as effective in providing control over advertising and Internet content operations in China as direct ownership of these businesses. For example, the Ad Company or ICP Company could fail to take actions required for our business, such as entering into advertising contracts with potential customers or failing to maintain our China web site. The ICP Company will also be able to transact business

with third parties not affiliated with BSIT. If the Ad Company or ICP fails to perform its obligations under these agreements, we would potentially have to rely on legal remedies under Chinese law, which we cannot be sure would be effective.

Chinese government policy prohibits foreign investment in the telecommunications services industry, which it has defined to include Internet-related businesses. While we believe that we are in compliance with current Chinese government policies, we cannot be sure that the government will view our business as in compliance with these policies or any policies that may be made in the future. If we are not viewed as complying with these policies or any regulations that may be created relating to foreign ownership of Internet-related businesses, the Chinese government could require us to discontinue our operations in China or take other actions that could harm our business.

China has enacted regulations governing Internet access and the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information over the Internet that it believes to violate Chinese law, including content that it believes is obscene, incites violence, endangers national security, is contrary to the national interest or is defamatory. In addition, we may not publish certain news items, such as news relating to national security, without permission from the Chinese government. Furthermore, the Ministry of Public Security has the authority to cause any local Internet service provider to block any web site maintained outside China at its sole discretion. Even if we comply with Chinese governmental regulations relating to licensing and foreign investment prohibitions, if the Chinese government were to take any action to limit or prohibit the distribution of information through our network or to limit or regulate any current or future content or services available to users on our network, our business would be harmed.

We are also subject to potential liability for content on our web sites that is deemed inappropriate and for any unlawful actions of our subscribers and other users of our systems under regulations promulgated by the Chinese MII. Furthermore, we are required to delete content that clearly violates the laws of China and report content that we suspect may violate Chinese law. It is difficult to determine the type of content that may result in liability for us, and if we are wrong, we may be prevented from operating our web sites.

Pursuant to the Regulations for the Administration of Commercial Encryption promulgated at the end of 1999, foreign and domestic Chinese companies operating in China are required to register and disclose to Chinese regulatory authorities the commercial encryption products they use. Because these regulations have just recently been adopted and because they do not specify what constitutes encryption products, we are unsure as to whether or how they apply to us and the encryption software we utilize. We may be required to register, or apply for permits with the relevant Chinese regulatory authorities for, our current or future encryption software. If Chinese regulatory authorities request that we change our encryption software, we may have to develop or license replacement software, which could disrupt our business operations.

The Asian market for Internet content and services is competitive and rapidly changing. Barriers to entry are minimal, and current and new competitors can launch new web sites at a relatively low cost. Many companies offer Chinese language content and services, including informational and community features, and email and electronic commerce services in the greater China market that may be competitive with our future offerings. We also face competition from providers of software and other Internet products and services that incorporate search and retrieval features into their offerings. In addition, entities that sponsor or maintain high-traffic web sites or that provide an initial point of entry for Internet users, such as ISPs, including large, well-capitalized entities such as Microsoft (MSN), Yahoo!, PCCW-HKT (Netvigator) and AOL, currently offer and could further develop or acquire content and services that compete with those that we offer. We expect that as Internet usage in greater China increases and the greater China market becomes more attractive to advertisers and for conducting electronic commerce, large global competitors may increasingly focus their resources on the greater China market. We also compete for advertisers with traditional media companies, such as newspapers, television networks and radio stations, that have a longer history of use and greater acceptance among advertisers. In addition, providers of Chinese language Internet tools and services may be acquired by, receive investments from or enter into other commercial relationships with large, well-established and well-financed Internet, media or other companies.

A number of our current and potential future competitors have greater financial and other resources than we have, and may be able to more quickly react to changing consumer requirements and demands, deliver competitive services at lower prices and more effectively respond to new Internet technologies or technical standards.

Increased competition could result in reduced page views, loss of market share and lower profit margins from reduced pricing for Internet-based services.

We are developing new products and services. The planned timing or introduction of new products and services is subject to risks and uncertainties. Actual timing may differ materially from original plans. Unexpected technical, operational, distribution or other problems could delay or prevent the introduction of one or more of our new products or services. Moreover, we cannot be sure that any of our new products and services will achieve widespread market acceptance or generate incremental revenue.

We have arrangements with a number of third parties to provide content and services to our web sites and to distribute our software. In the area of content, we have relied and will continue to rely almost exclusively on third parties for content that we publish under the SINA brand. Although no single third party content provider is critical to our operations, if these parties fail to develop and maintain high-quality and successful media properties, or if a large number of our existing relationships are terminated, we could lose users and advertisers and our brand could be harmed. We have recently experienced fee increase from some of our content providers. If this trend continues, our gross profit from online advertising may be adversely affected.

In the area of web-based services, we have contracted with Google and Huicong International for integrated web search technology to complement our directory and navigational guide, and with various third-party providers for our principal Internet connections. If we experience significant interruptions or delays in service, or if these agreements terminate or expire, we may incur additional costs to develop or secure replacement services and our relationship with our users could be harmed.

As substantial part of our non-advertising revenues is generated through short messaging services where we depend on mobile network operators for message delivery and payment collection. If we were unable to continue these arrangements, our short messaging services would be severely disrupted or discontinued. Furthermore, we are highly dependent on these mobile service providers for our profitability, in that they can choose to increase their service fees at will.

We depend on a third party’s proprietary and licensed advertising serving technology to deliver advertisements to our network. If the third party fails to continue to support its technology or if its services fail to meet the advertising needs of our customers and we cannot find an alternative solution on a timely basis, our advertising revenue would decline.

In order to create traffic for our online properties and make them more attractive to advertisers and consumers, we have entered into distribution agreements and informal relationships with ISPs and personal computer manufacturers for the distribution of our software. These distribution arrangements typically are non-exclusive, and may be terminated upon little or no notice. If our software distributors were to terminate or modify their distribution arrangements, our ability to promote our network and generate revenue could be harmed.

We depend upon the continued contributions of our senior management and other key personnel, many of whom are difficult to replace. The loss of the services of any of our executive officers or other key employees could harm our business. We have experienced recent changes to our executive management team. In January 2001, Charles Chao was appointed as chief financial officer, replacing Victor Lee, and in June 2001, Daniel Mao was appointed as chief executive officer and Yan Wang was appointed as president, replacing Zhidong Wang. Our future success will also depend on our ability to attract and retain highly skilled technical, managerial, editorial, marketing and customer service personnel, especially qualified personnel for our international operations in greater China. Qualified individuals are in high demand, and we may not be able to successfully attract, assimilate or retain the personnel we need to succeed.

We anticipate significant expansion of our business as we address growth in our customer base and market opportunities. In addition, the geographic dispersion of our operations requires significant management resources that our locally-based competitors do not need to devote to their operations. In order to manage the expected growth of our operations and personnel, we will be required to improve existing and implement new operational and financial systems, procedures and controls, and to expand, train and manage our growing employee base. Further, our management will be required to maintain and expand our relationships with various other web sites, Internet and other online service providers and other third parties necessary to our business. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations.

As part of our business strategy, we have acquired and intend to identify and acquire assets, technologies and businesses that are complementary to our existing business. Acquired businesses or assets may not yield the results we expected. In addition, acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, significant amortization expenses related to goodwill and other intangible assets and exposure to potential unknown liabilities of acquired business. Moreover, the costs of identifying and consummating acquisitions, and integrating the acquired business into ours, may be significant. In addition, we may have to obtain approval from the relevant PRC governmental authorities for the acquisitions and have to comply with any applicable PRC rules and regulations.

A significant barrier to electronic commerce and communications over the Internet in general has been a public concern over security and privacy, especially the transmission of confidential information. If these concerns are not adequately addressed, they may inhibit the growth of the Internet and other online services generally, especially as a means of conducting commercial transactions. If a well-publicized Internet breach of security were to occur, general Internet usage could decline, which could reduce traffic to our destination sites and impede our growth.

We generate revenues and incur expenses and liabilities in Chinese renminbi, Taiwan dollars, Hong Kong dollars, and U.S. dollars. As a result, we are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the renminbi depends to a large extent on China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of renminbi to U.S. dollars has generally been stable and the renminbi has appreciated slightly against the U.S. dollar. However, given recent economic instability and currency fluctuations, we can offer no assurance that the renminbi will continue to remain stable against the U.S. dollar or any other foreign currency. Our results of operations and financial condition may be affected by changes in the value of renminbi and other currencies in which our earnings and obligations are denominated. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future.

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of renminbi into foreign currency for current account items, conversion of renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of the renminbi in the future. Because a significant amount of our future revenues may be in the form of renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to utilize revenue generated in renminbi to fund our business activities outside China.

The continual accessibility of our web sites and the performance and reliability of our network infrastructure are critical to our reputation and our ability to attract and retain users, advertisers and merchants. Any system failure or performance inadequacy that causes interruptions in the availability of our services or increases the response time of our services could reduce our appeal to advertisers and consumers. Factors that could significantly disrupt our operations include: system failures and outages caused by fire, floods, earthquakes, power loss, telecommunications failures and similar events; software errors; computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems; and security breaches related to the storage and transmission of proprietary information, such as credit card numbers or other personal information.

We have limited backup systems and redundancy. Recently, we experienced an unauthorized tampering of the mail server of our China web site which briefly disrupted our operations. Future disruptions or any of the foregoing factors could damage our reputation, require us to expend significant capital and other resources and expose us to a risk of loss or litigation and possible liability. We do not carry sufficient business interruption

Due to the increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, pricing, content, copyrights, distribution, antitrust and characteristics and quality of products and services. Furthermore, the growth and development of the market for electronic commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies conducting business online. The adoption of any additional laws or regulations may decrease the growth of the Internet or other online services, which could, in turn, decrease the demand for our products and services and increase our cost of doing business.

Moreover, the applicability to the Internet and other online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. For example, tax authorities in a number of states in the U.S. are currently reviewing the appropriate tax treatment of companies engaged in electronic commerce, and new state tax regulations may subject us to additional state sales and income taxes. Any new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services could significantly disrupt our operations.

As a publisher and distributor of content and a provider of services over the Internet, we face potential liability for: defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that we publish or distribute; the selection of listings that are accessible through our branded products and media properties, or through content and materials that may be posted by users in our classifieds, message board and chat room services; losses incurred in reliance on any erroneous information published by us, such as stock quotes, analyst estimates or other trading information; unsolicited email, lost or misdirected messages, illegal or fraudulent use of email or interruptions or delays in email service; and product liability, warranty and similar claims to be asserted against us by end users who purchase goods and services through our SinaMall and any future electronic commerce services we may offer.

We may incur significant costs in investigating and defending any potential claims, even if they do not result in liability. Although we carry general liability insurance, our insurance may not cover potential claims of this type or be adequate enough to indemnify us against all potential liabilities.

We collect personal data from our user base in order to understand better our users and their needs and to help our advertisers target specific demographic groups. If privacy concerns or regulatory restrictions prevent us from selling demographically targeted advertising, we may become less attractive to advertisers. For example, as part of our future advertisement delivery system, we may integrate user information such as advertisement response rate, name, address, age or email address, with third-party databases to generate comprehensive demographic profiles for individual users. In Hong Kong, however, we would be in violation of the Hong Kong Personal Data Ordinance unless individual users expressly consented to this integration of their personal information. The Ordinance provides that an Internet company may not collect information on its users, analyze the information for a profile of the user’s interests and sell or transmit the profiles to third parties for direct marketing purposes without the user’s consent. If we are unable to construct demographic

We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our products is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriations of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

Third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.

Based upon the nature of our income and assets, we may be classified as a passive foreign investment company, or PFIC, by the United States Internal Revenue Service for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to you. For example, if we are a PFIC, our U.S. investors will become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to more burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis, and those determinations depend on the composition of our income and assets, including goodwill, from time to time. Although in the past we have operated our business, and in the future we intend to operate our business so as to minimize the risk of PFIC treatment, you should be aware that certain factors that could affect our classification as PFIC are out of our control. For example, the calculation of assets for purposes of the PFIC rules depends in large part upon the amount of our goodwill, which in turn is based, in part, on the then market value of our shares, which is subject to change. Similarly, the composition of our income and assets is affected by the extent to which we spend the cash we have raised on acquisitions and capital expenditures. In addition, the relevant authorities in this area are not clear and so we operate with less than clear guidance in our effort to minimize the risk of PFIC treatment. Therefore, we cannot be sure whether we were not and will not be a PFIC for the current or any future taxable year.

The trading price of our common stock has been and may continue to be subject to wide fluctuations. During the six months ended December 31, 2002, the closing sale prices of our common stock on the Nasdaq Stock Market ranged from $1.73 to $7.25 and the sale price of our common stock closed at $6.69 on February 28, 2003. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced extreme volatility that often has been

The terrorist acts in New York, Washington, D.C. and Pennsylvania on September 11, 2001 have created an uncertain economic environment and we are unable to predict the impact these events, or the responses thereto, will have on our business. The continued threat of terrorism within the United States and abroad and military action and heightened security measures in response to such threat may cause significant economic disruptions throughout the world. Our business, results of operations and financial condition could be materially and adversely affected to the extent such disruptions result in our inability to effectively market and sell our services and software.

In San Mateo, California, we have entered into a sublease agreement that expires in February 2004. In Hong Kong, we have entered into a two-year lease agreement that expires in December 2004. In Beijing, we have offices under two lease agreements with expiration dates March 2004 and June 2007. In Shanghai, we have entered into a three-year lease agreement that expires in August 2005. We have entered into a lease agreement for our Taipei office that expires in December 2003. We have also leased sales and marketing spaces in Guangzhou and Shenzhen. We believe that our existing facilities are adequate to meet our current requirements, and that future growth can be accommodated by leasing additional or alternative space.

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of copyrights and other intellectual property rights in connection with the content published on our web sites.

The Company is not currently aware of any legal proceedings or claims that the Company believes are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, the Company may incur substantial expenses in defending against third party claims. In the event of a determination adverse to the Company, the Company may incur substantial monetary liability, and be required to change its business practices. Either of these could have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

On December 16, 2002, the Company held its Annual Meeting of Shareholders. At the meeting, the shareholders elected as directors Pehong Chen (with 30,342,148 shares voting for and 62,581 withheld), Lip-Bu Tan (with 30,342,148 shares voting for and 62,581 withheld), and Yichen Zhang (with 30,342,148 shares voting for and 62,581 withheld).

The shareholders also approved to amend the Company’s Articles of Association and to change the Company’s name to SINA Corporation (with 30,384,306 shares voting for, 17,517 against, and 2,906 abstaining).

The shareholders also approved to amend the Company’s Articles of Association to grant the Board of Directors the authority to repurchase shares in the capital of the Company (with 16,347,137 shares voting for, 58,368 against, and 4,636 abstaining).

The shareholders also approved to amend and restate the Company’s Articles of Association (with 30,307,285 shares voting for, 90,538 against, and 6,906 abstaining).

The shareholders also ratified the appointment of PricewaterhouseCoopers as the independent auditors for the current fiscal year (with 30,356,891 shares voting for, 45,512 against, and 2,326 abstaining).

SINA Corporation’s Ordinary Shares are quoted on the Nasdaq National Market System under the symbol SINA since April 13, 2000. The following table sets forth the high and low closing sales prices of the Company’s Ordinary Shares for each period indicated as reported on the Nasdaq Stock Market:

The closing price of the Company’s Ordinary Share on the Nasdaq Stock Market on February 28, 2003 was $6.69.

As of February 28, 2003, the Company had approximately 247 shareholders of record, although the Company believes that there is a significantly larger number of beneficial owners of its Ordinary Shares.

The Company has not declared or paid any cash dividends on its Ordinary Shares at any time and has no present plans to do so in the future.

The following table sets forth information for our equity compensation plans as of December 31, 2002:


(1)	Excludes purchase rights accruing under the 1999 Employee Stock Purchase Plan (“the Purchase Plan”). Under the Purchase Plan, eligible employees may purchase ordinary shares at semi-annual intervals at a purchase price per share equal to 85% of the lower of (i) the fair market value of the


	ordinary shares on an employee’s entry date into an offering period in which that semi-annual purchase date occurs or (ii) the closing selling price per share on the semi-annual purchase date.

(2)	Includes shares available for future issuance under the Purchase Plan. The Purchase Plan, designed to comply with Internal Revenue Code Section 423, includes an “evergreen” feature, which provides for an automatic annual increase in the number of shares available under the plan equal to the lesser of 600,000 shares, 0.5 % of the ordinary shares outstanding on the last day of the immediately preceding fiscal year, or such lesser number of shares as is determined by the Board of Directors.

(3)	Includes shares available for future issuance under the 1999 Stock Option Plan (the “1999 Plan”). The 1999 Plan includes an “evergreen” feature, which provides for an automatic annual increase in the number of ordinary shares available under the plan on the first day of each of the fiscal years through 2005, equal to the lesser of 750,000 shares, 3% of our outstanding ordinary shares on the last day of the immediately preceding fiscal year, or a lesser number of shares determined by the Board of Directors.

The selected consolidated financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and notes thereto and the other information contained in this Form 10-K. In November 2002, we announced a change of our fiscal year-end from June 30 to December 31. Therefore, the consolidated statement of operations includes the “transition period” from July 01 to December 31, 2002. The unaudited consolidated statement of operations for the six months from July 01 to December 31, 2001 is also presented.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect”, “anticipate”, “intend”, “believe”, or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth in this document under the caption “Business — Risk Factors” set forth herein. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

We are a leading online media company and value-added information service provider for China and the global Chinese communities. With a branded network of localized website, targeting greater China and overseas Chinese, we provide an array of services to our users including region-focused online portals, search and directory, free and premium email, wireless short messaging, online games, virtual ISP, classified listings, e-commerce, e-learning and enterprise e-solutions. In turn, we generate revenue through advertising, fee-based services, e-commerce and enterprise services. With 66.1 million registered users worldwide at December 31, 2002, we believe SINA is the most recognized online brand in China and among Chinese communities world-wide.

One of our subsidiaries, Beijing SINA Information Technology Co. Ltd., or BSIT (formerly known as Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS), a Sino-Foreign joint venture company based in Beijing, China, began operations in December 1993 as a computer software company focused on providing solutions to computer users wishing to communicate in Chinese. In May 1996, we launched our online network, then called SRSnet.com, offering Chinese-language news, information and community features such as bulletin boards and chat services targeted at online users in China. In March 1999, we expanded our online network by acquiring Sinanet.com, a leading Chinese-language Internet content company with offices in California and Taiwan and two distinct web sites targeting Chinese users in North America and Taiwan. In July 1999, we continued our network expansion by launching our Hong Kong destination web site targeting Chinese users in Hong Kong. Today, we operate separate web sites in China, Hong Kong, Taiwan, and North America to provide global content and services that speak directly to the audience of each region, enriching the online experience of their users.

We derive our revenues from advertising and non-advertising sources. Advertising revenues are derived principally from online advertising arrangements under which we receive revenues on a cost-per-thousand impression basis, fixed payment sponsorship from advertisers, and design of advertising campaigns to be placed on our network. Non-advertising revenues are primarily derived from fee-based and e-commerce services. We derive fee-based service revenues primarily from short messaging service, subscription service, online listings and paid email services. We derive e-commerce revenues mainly from transaction and slotting fees paid by merchants for selective positioning and promoting their goods or services within our online mall, SinaMall.

We recorded cumulative deferred stock compensation, which represents the difference between the exercise price of options granted and the fair market value of the underlying stock at the date of grant. Deferred stock compensation is amortized on an accelerated basis over the vesting period of the applicable options, which is generally four years. The amortization of deferred compensation was $0.7 million and $1.3 million for the six months ended December 31, 2002 and 2001, respectively, and $2.3 million, $7.5 million and $19.1 million for the years ended June 30, 2002, 2001 and 2000, respectively.

On September 28, 2001, we completed the acquisition of an approximately 27.6% equity interest in Sun Media Group (“Sun Media”), a Hong Kong Stock Exchange listed company, from Ms. Yang, the chairperson and a major shareholder of Sun Media for a consideration of $7.9 million in cash and approximately 4.6 million in newly issued ordinary shares and transaction costs of $731,000 for a total purchase price of $13.7 million. In addition, we agreed to issue 3.3 million ordinary shares if Sun Media met certain performance targets over an 18 months period after the closing. This contingent consideration of 3.3 million ordinary shares was waived in April 2002 by an amendment to the original Share Purchase Agreement with Ms. Yang. We had accounted for our investment in Sun Media using the equity method of accounting. We ceased to maintain significant influence over Sun Media’s operations after our equity interest fell below 20% and our board representation was decreased in the quarter ended December 31, 2002. Accordingly, commencing with the quarter ended December 31, 2002, we began accounting for our investment in Sun Media as an investment in marketable equity securities under the provisions of SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”). Such investment is classified as available for sale and reported at fair market value with unrealized gains/(losses), if any, recorded as accumulated other comprehensive income (loss) in shareholders’ equity. During the six months ended

December 31, 2002, we recorded $3,781,000 of unrealized gains on this investment in marketable equity securities as a component of comprehensive income. Fair market value of such investment decline from $16.6 million at December 31, 2002 to $14.2 million at March 28, 2003.

In November 2002, we completed the acquisition of 100% equity interest in Shanghai Techur Technology Developing Co., Ltd. (“Techur”) for $1.9 million in cash. If Techur meets certain performance targets during the 12 month period following the closing, the maximum consideration would increase to approximately $3.8 million in cash. The excess of the purchase price over the fair value of net tangible assets was approximately $1.1 million, representing intangible assets which will be amortized over a period of three years.

We took effective control of Techur on October 1, 2002 and completed the legal and administrative procedures of the closing of acquisition in November 2002. We consolidated the result of operations of Techur in our consolidated statements of operation commencing with the quarter ended December 31, 2002.

Techur is an Internet and logistic software company in the PRC, providing Internet and Intranet based logistic software and online applications to shipping and export business in Eastern China. Additionally, Techur operates a leading business to business (“B2B”) portal (www.eastchina.com) for various industries in Eastern China.

In November 2002, we announced the formation of joint venture in China with NC Soft, a leading online game company in Korea to operate Lineage, Asia’s No. 1 online game in China. The joint venture, Shanghai NC-SINA Information Technology Co. Ltd., was formed in January 2003. We invested $2.6 million in cash for 51% of the equity interest in the joint venture.

On January 31, 2003, the Company completed the acquisition of Memestar Limited, a British Virgin Islands limited liability corporation (“Memestar”), through a purchase of all of the outstanding shares of Memestar. As a result of such acquisition, Memestar became a wholly-owned subsidiary of SINA. Memestar, directly and through its various subsidiaries and contractual arrangements with some local entities in the People’s Republic of China (the “PRC”), is engaged in the business of providing mobile data value-added services in the China.

The aggregate purchase price comprises five elements: (a) $10,277,675 in cash paid at the closing of the Acquisition; (b) 560,374 newly issued SINA ordinary shares delivered at the closing of the Acquisition; (c) $5,250,000 in cash to be paid in four equal installments at June 15, 2003, October 28, 2003, March 12, 2004 and June 25, 2004, respectively, after the closing date of the Acquisition; (d) 560,374 newly issued SINA ordinary shares to be delivered on the first anniversary of the closing date of the Acquisition; and (e) approximately $250,000 in legal and professional fees related to the acquisition. In accordance with the terms of the Purchase Agreement, the aggregate purchase price may be adjusted and reduced by up to 10% if Memestar fails to meet certain performance targets relating to the number of paid users during the six-month period ending May 31, 2003.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to customer programs and incentives, bad debts, investments, intangible assets, income taxes, financing operations, restructuring, pensions and other post-retirement benefits, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Advertising revenues are derived principally from advertising and sponsorship arrangements. In our advertising contracts we typically guarantee a minimum number of impressions or pages to be delivered to users over a specified period of time for a fixed fee. Advertising revenues are recognized on the basis of the number of impressions delivered or ratably over the period in which the advertising is displayed, whichever amount is lower, when the collectibility is reasonably assured. To the extent that minimum guaranteed impressions deliveries is not met, we defer recognition of the corresponding revenues until the guaranteed impressions deliveries are achieved. Sponsorship arrangements typically allow advertisers to sponsor a particular area on our network in exchange for a fixed payment over the contract period. Advertising revenues are recognized ratably over the period of sponsorship. Advertising revenues derived from the design, coordination and integration of advertising campaigns and sponsorship to be placed on our web sites are recognized ratably over the term of such programs.

Revenue from barter transactions is recognized during the period in which the advertisements are displayed in our properties. Barter transactions are recorded at the lower of the fair value of the goods or services received or the fair value of the advertisement given, provided the fair value of the transaction is reliably measurable.

Non-advertising revenues are derived from proprietary software products and licenses, e-commerce and other fee-based services.

Revenue from the sale of software products is recognized primarily on the delivery of software products to end users, resellers, distributors, retail merchants and original equipment manufacturers. We deliver our software products in packaged form or under software licenses. Revenues from sales of software products in the packaged form are recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, shipment is made and collectibility is reasonably assured. Software license agreements are non-refundable and allow the OEM partners to reproduce our software products for a specified period of time for a fixed fee or a specified number of copies for a predetermined unit price. Revenues from software license agreements are recognized upon delivery of a master copy when the fixed-fee agreements become effective or based upon activity reports provided by the OEM partners under the per-copy arrangements. Provision is made for expected sales returns and allowances when revenue is recognized. Payments received in advance of revenue recognition are recorded as deferred revenue. We recognize revenues in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-4 and SOP 98-9. These Statements generally require revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the elements. Our software product agreements do not involve multiple elements.

E-commerce revenues are derived principally from slotting fees charged to merchants for selective positioning and promoting their goods or services within our online mall, SinaMall, and from commissions calculated as a percentage of the online sales transaction value of the merchants. Slotting fee revenue is recognized ratably over the period the products are shown on our web site while the commission revenue is recognized on a net basis after both successful on-line verification of customers’ credit cards and shipment of products. Product returns have not been significant and are assumed by vendors.

Fee-based services revenues mainly include wireless short messaging, subscription services and paid email services. Revenues are recognized in the period in which the service is performed, provided that no significant Company obligations remain and collection of the receivables is reasonably assured. We contract with third party mobile operators for certain services related to the wireless short messages and subscriptions transmitted to SINA’s users and records the fees charged by the third party mobile operators as cost of revenues.

In accordance with generally accepted accounting principles in the United States of America, the recognition of revenues is partly based on our assessment of the probability of collection of the resulting accounts receivable balance. As a result, the timing or amount of revenue recognition may have been different if different assessments of the probability of collection of accounts receivable had been made at the time the transactions were recorded in revenue.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of our recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be recognized as expense in the period such determination was made.

Advertising. Our advertising revenues were $13.9 million for the six months ended December 31, 2002, representing an increase of 35% compared to $10.3 million for the six months ended December 31 2001. The increase in our advertising revenues was primarily due to the growth in the China market for online advertising market. We derived 82% of our advertising revenues from China for the six months ended December 31, 2002, as compared to 77% for the six months ended December 31, 2001. Advertising revenues accounted for 60% and 80% of our total revenues for the six months ended December 31, 2002 and 2001, respectively.

Non-Advertising. Our non-advertising revenues were $9.3 million for the six months ended December 31, 2002, representing an increase of 265% compared to $2.6 million for the same period in 2001. For the six months ended December 31, 2002, non-advertising revenues consisted of $8.3 million of Internet fee-based services including short messaging service, business listings, subscription service and paid email service, $0.8 million of e-commerce services and $0.2 million of software product sales. For the six months ended December 31, 2001, non-advertising revenues consisted mainly of $1.3 million of Internet fee-based services including short messaging service, business listings, subscription service and paid email service, $0.7 million of e-commerce services and the $0.6 million of software product sales. Our short messaging service accounted for 65% and 40% of total non-advertising revenues for the six months ended December 31, 2002 and 2001, respectively.

Advertising. Our cost of advertising revenues was $5.8 million, or 42% of our advertising revenues for the six months ended December 31, 2002, as compared to $6.1 million or 59% of our advertising revenues, for the same period in 2001. Our cost of advertising revenues consists of costs associated with the production of our web sites, which includes fees paid to third parties for Internet connection, content and services, and personnel related costs and equipment depreciation expense associated with our web site production. The period-to-period decrease in cost of advertising revenues was primarily due to lower Internet connection costs as a result of a decrease in bandwidth cost in China and lower personnel related costs as a result of improved productivity and reduced headcount.

Non-advertising. Our cost of non-advertising revenues was $2.7 million, or 29% of our non-advertising revenues for the six months ended December 31, 2002, as compared to $0.5 million, or 19% of our non-advertising revenues for the same period in 2001. Our cost of non-advertising revenues consists mainly of fees or royalties paid to third parties for services and content associated with the fee-based services, and the costs of our software products. Non-advertising costs include $1.3 million and $0.2 million of fees retained by mobile operators in connection with their services relating to SMS fee collection and transmission gateways for the six months ended December 31, 2002 and 2001, respectively. The period-to-period increase in cost of non-advertising revenues was mainly due to the increase in fees to mobile phone operators in China for certain services related to the wireless short messages and subscriptions transmitted to SINA’s users.

Our sales and marketing expenses were $6.5 million, or 28% of total net revenues for the six months ended December 31, 2002, as compared to $6.5 million, or 51% of total net revenues for the same period in 2001. Sales and marketing expenses consist primarily of compensation expenses, sales commissions, advertising and promotion expenditures and travel expenses. The period-to-period decrease in sales and marketing expenses as a percentage of total revenues was due to a reduction in advertising expenses partially offset by an increase in sales commission expenses.

Our product development expenses were $2.8 million, or 12% of total net revenues for the six months ended December 31, 2002, as compared to $3.5 million, or 27% of total net revenues in the same period in 2001. Product development expenses consist primarily of personnel related expenses incurred for enhancement to and maintenance of our web sites as well as engineering costs related to the development of our wireless and web-based products. The period-to-period decrease in the absolute dollar amount was primarily attributable to our strategy of focusing new research and development efforts in China where labor costs are lower and reducing our engineering workforce in other locations.

Our general and administrative expenses were $4.5 million, or 19% of total net revenues for the six months ended December 31, 2002, as compared to $3.8 million, or 30% of total net revenues for the same period in 2001. General and administrative expenses consist primarily of compensation for personnel, fees for professional services, and provisions for doubtful accounts. The period-to-period increase in the absolute dollar amounts was primarily due to an increase in professional service fees relating to the change of our fiscal year end, an increase in insurance premiums and an increase in general expense relating to our expansion in various business segments.

In connection with the past granting of stock options, of the total, approximately $0.7 million and $1.2 million of stock compensation expense was recognized in the six months ended December 31, 2002 and 2001, respectively based on a four year vesting period.

Interest income was $1.0 million for the six months ended December 31, 2002, as compared to $2.4 million for the same period in 2001. The period-to-period decrease in interest income was primarily due to the lower average cash and short-term investment balances and lower applicable interest rates.

In September 2001, we acquired an approximately 27.6% equity interest in Sun Media and accounted for the investment using the equity method of accounting. During the three months ended September 30, 2002 and the six months ended December 31, 2001, we recorded a loss of $0.3 million and $0.4 million on our investment in Sun Media, respectively, representing our share of Sun Media’s reported loss and amortization of intangible assets, partially offset by a gain related to the issuance of new shares by Sun Media to other investors at a price higher than our investment cost. We ceased to maintain significant influence over Sun Media’s operations after our equity interest fell below 20% and our board representation was decreased. Accordingly, commencing with the quarter ended December 31, 2002, we began accounting for our investment in Sun Media as an investment in marketable equity securities under the provisions of SFAS 115. Such investment is classified as available for sale and reported at fair market value with unrealized gains (losses), if any, recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity. During the quarter ended December 31, 2002, we began marking this equity investment to market

As a result of the acquisition of Techur in November 2002, we recorded intangible assets of approximately $1.1 million, which are being amortized over a period of three years. The amortization expense was approximately $0.1 million for the six months ended December 31, 2002.

Advertising. Our advertising revenues were $21.1 million for the year ended June 30, 2002, as compared to $23.4 million and $11.0 million for the years ended June 30, 2001 and 2000, respectively. During the year ended June 30, 2002, the decrease from 2001 was mainly due to the reduced spending in the online advertising market in the U.S., Taiwan and Hong Kong. During the year ended June 30, 2001, the increase from 2000 was mainly due to the increase in the number of advertisers and the number of advertising contracts. Approximately 980 customers advertised on our web sites during the year ended June 30, 2002 as compared to approximately 970 and 730 during the years ended June 30, 2001 and 2000, respectively. For the years ended June 30, 2002, 2001 and 2000, advertising revenues accounted for 74%, 88% and 78% of our total revenues, respectively.

Non-Advertising. Our non-advertising revenues were $7.4 million, $3.3 million and $3.2 million for the years ended June 30, 2002, 2001 and 2000, respectively. For the year ended June 30, 2002, non-advertising revenues consisted of $5.0 million of Internet fee-based services including short messaging service, subscription service and paid email service, $1.5 million of e-commerce sales and $0.9 million of the sales software products. For the year ended June 30, 2001, non-advertising revenues consisted mainly of $2.3 million of the sales software products and $1.0 million of e-commerce sales. For the year ended June 30, 2000, non-advertising revenues consisted mainly of sales of software products. For the years ended June 30, 2002, 2001 and 2000, non-advertising revenues accounted for 26%, 12% and 22% of our total revenues, respectively.

Advertising. Our cost of advertising revenues was $11.5 million, or 55% of net advertising revenue, as compared to $13.8 million and $9.0 million, or 59% and 81% of net advertising revenues, for the years ended June 30, 2001 and 2000, respectively. Our cost of advertising revenues consists of costs associated with the production of our web sites, which includes fees paid to third parties for Internet connection, content and services, and personnel related costs and equipment depreciation expense associated with our web site production. The year-to-year decrease in cost of revenues from fiscal year 2001 to fiscal year 2002 was primarily due to lower Internet connection costs as a result of a decrease in bandwidth cost in China and lower personnel related costs as a result of improved productivity and reduced headcount. The year-to-year increase in cost of revenues from fiscal year 2000 to fiscal year 2001 was due to higher Internet connection costs, such as bandwidth expansion and server co-location cost to support increased Internet traffic on our web sites, and the increase in content and service provider fees to expand our web site contents and to support the increased advertisement impressions.

Non-advertising. Our cost of non-advertising revenues was $1.9 million $1.2 million and $2.0 million for the years ended June 30, 2002, 2001 and 2000, respectively. Our cost of non-advertising revenues consists mainly of fees paid to third parties for services and for content royalties associated with the fee-based services, and cost of our software products. The year-to-year increase in cost of non-advertising revenues from fiscal year 2001 to fiscal year 2002 was mainly due to the increase in fees to mobile phone operators in China for certain services related to the wireless short messages and subscriptions transmitted to SINA’s users. The year-to-year decrease in cost of revenues from fiscal year 2000 to fiscal year 2001 was primarily due to a higher percentage of the software revenues is derived from licensing arrangements which involved minimal costs during fiscal year 2001.

Our sales and marketing expenses were $12.5 million, or 44% of total net revenues for the year ended June 30, 2002, as compared to $21.7 million and $17.5 million, or 81% and 123% of total net revenues, for years ended June 30, 2001 and 2000, respectively. Sales and marketing expenses consist primarily of compensation expenses, sales commissions, advertising and promotion expenditures and travel expenses. The year-to-year decrease in absolute dollar amount from fiscal year 2001 to fiscal year 2002 was primary due to the curtailment in spending for market promotion of our web sites and cost savings from workforce reductions. The year-to-year increase in absolute dollar amount from fiscal year 2000 to fiscal year 2001 was primarily attributable to an increase in advertising expenses associated with our brand-building strategy, and increase in compensation expense associated with the growth in our direct sales force and marketing personnel, and an increase in sales commissions associated with the increased revenues.

Our product development expenses were $6.7 million, or 23% of total net revenues for the year ended June 30, 2002, as compared to $9.6 million and $7.4 million, or 36% and 52% of total net revenues, for the years ended June 30, 2001 and 2000, respectively. Product development expenses consist primarily of personnel related expenses incurred for enhancement to and maintenance of our web sites as well as engineering costs related to the development of our software products and web-based products. The year-to-year decrease in absolute dollar amount from fiscal year 2001 to fiscal year 2002 was primarily attributable to our strategy of focusing new research and development efforts in China, which has lower labor costs, and reducing our engineering workforce in other locations. The year-to-year increase in absolute dollar amount from fiscal year 2000 to fiscal year 2001 was attributable to increased staffing and associated support for engineers for developing and enhancing our online network.

Our general and administrative expenses were $8.2 million, or 29% of total net revenues for the year ended June 30, 2002, as compared to $8.9 million and $7.0 million, or 33% and 49% of total net revenues in the years ended June 30, 2001 and 2000, respectively. General and administrative expenses consist primarily of compensation for personnel, fees for professional services, and provisions for doubtful accounts. For fiscal year 2002, the slight decrease from fiscal year 2001 was a result of our cost reduction measures. For fiscal year 2001, the increase from fiscal year 2000 was mainly due to the increase in general business activities as a result of business expansion and building our administrative infrastructure.

In connection with the grant of certain stock options, the Company recorded net deferred stock compensation totaling $33.4 million through June 30, 2002, which is being amortized over the four-year vesting period of the options. Of the total deferred stock compensation, approximately $2.3 million, $7.5 million and $19.1 million was amortized in the years ended June 30, 2002, 2001 and 2000, respectively.

As a result of the acquisition of Sinanet.com in March 1999, we recorded goodwill and other intangible assets of approximately $20.3 million, which were amortized over the three-year period ended June 30, 2002. The amortization expense for the years ended June 30, 2002, 2001 and 2000 was $5.1 million, $6.8 million and $6.8 million, respectively.

Interest income was $4.2 million for the year ended June 30, 2002, as compared to $7.3 million and $3.8 million for the years ended June 30, 2001 and 2000, respectively. During the year ended June 30, 2002, the decrease from 2001 was primarily due to the lower average cash and short-term investment balances and lower applicable interest rates during the year. During the year ended 30, 2001, the increase from 2000 was

In September 2001, we acquired an approximately 27.6% equity interest in Sun Media and accounted for the investment using the equity method of accounting. Our investment in Sun Media was diluted to 21.8% as of June 30, 2002 as a result of Sun Media’s issuance of new shares. During the year ended June 30, 2002, we recorded a loss of $0.6 million on our investment in Sun Media, representing our share of Sun Media’s reported loss and amortization of intangible assets, partially offset by a gain related to the issuance of new shares by Sun Media to other investors at a price higher than our investment cost.

In December 1999, we paid $1.4 million in cash for a 35.4% interest in a joint venture with Adforce, Inc. and Compuserve Consultants, Ltd. We accounted for our investment in the joint venture using the equity method of accounting. We recorded a $501,000 loss from our investment in the joint venture in the year ended June 30, 2000 and the remaining investment of $894,000 was fully written off during the year ended June 30, 2001 upon the cessation of operations of this joint venture company.

We have financed our operations principally through private sales of our preference shares and our initial public offering. From inception through December 31, 2002, we have raised net proceeds of $97.5 million through the sale of preference shares and $68.8 million from the sale of ordinary shares in our initial public offering. As of December 31, 2002, we had $96.7 million in cash and cash equivalents and short-term investments.

For the six months ended December 31, 2002, net cash provided by operating activities was $6.3 million, primarily attributable to net income of $0.9 million, an increase in accrued liabilities of $2.8 million and depreciation expenses of $2.5 million, offset by an increase in accounts receivable of $1.1 million. For the year ended June 30, 2002, net cash used in operating activities was $6.4 million and was primarily attributable to our net loss of $16.1 million and a decrease in accrued liabilities of $2.7 million, largely offset by non-cash stock-based compensation expense of $2.3 million, amortization expense of $5.1 million related to goodwill and other intangible assets resulting from the acquisition of Sinanet.com, depreciation expense of $5.2 million and loss on equity investment of $562,000. For the year ended June 30, 2001, net cash used in operating activities was $14.2 million and was primarily attributable to our net loss of $36.4 million, largely offset by non-cash stock-based compensation expense of $7.5 million, amortization expense of $6.8 million related to goodwill and other intangible assets resulting from the acquisition of Sinanet.com, depreciation expense of $3.6 million, and an increase in accrued liabilities of $3.5 million. For the year ended June 30, 2000, net cash used in operating activities was $20.1 million and was primarily attributable to our net loss of $51.0 million, largely offset by the non-cash stock-based compensation expense of $19.1 million, amortization expense of $6.8 million related to goodwill and other intangible assets, and an increase in accrued liabilities of $6.6 million.

Net cash provided by investing activities was $15.8 million for the six months ended December 31, 2002, primarily due to the sale of short-term investments of $18.8 million, offset by net cash in the amount of $1.1 million used for the acquisition of Techur and $1.7 million used in property and equipment purchases. Net cash used in investing activities was $15.4 million for the year ended June 30, 2002, primarily due to the purchase of short-term investments of $4.8 million, the acquisition of stock of Sun Media of $8.6 million and the purchase of capital equipment of $2.0 million. Net cash used in investing activities was $34.5 million for the year ended June 30, 2001, primarily due to the purchase of short-term investments of $26.8 million and the purchase of capital equipment of $7.7 million. Net cash used in investing activities was $34.9 million for the year ended June 30, 2000, primarily due to the purchase of short-term investments of $26.5 million, the purchase of capital equipment of $7.0 million and the investment in a joint venture of $1.4 million.

Net cash provided by financing activities for the six months ended December 31, 2002 was $63,000 relating to the proceeds received from issuance of ordinary shares from employee stock purchase plan and the

exercise of stock options. Net cash provided by financing activities was $352,000 for the year ended June 30, 2002, primarily attributable to proceeds of $30,000 from sale of ordinary shares under stock plans and proceeds of $429,000 from repayment of notes receivable from shareholders, offset by the repurchase of ordinary shares of $107,000. Net cash provided by financing activities was $2.1 million for the year ended June 30, 2001, primarily attributable to proceeds of $1.5 million from sale of ordinary shares under stock plans and proceeds of $588,000 from repayment of notes receivable from shareholders. Net cash provided by financing activities was $133.5 million for the year ended June 30, 2000, primarily attributable to net proceeds of $69.1 million received from the initial public offering in April 2000 and of $63.9 million received from the Series C preference share issuances in October and November 1999. The remaining cash provided by the financing activities was primarily from the proceeds of exercising stock options and preference share warrants.

We currently have no material commitments other than the operating leases for our facilities. As of December 31, 2002, we had future minimum rental lease payments of $1.2 million, $1.4 million and $0.1 million due less than one year, one to three years and after three years, respectively, under non-cancelable operating leases.

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating activities, capital expenditures and other obligations for at least the next twelve months. However, we may sell additional equities or obtain credit facilities to enhance our liquidity position. The sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure that financing will be available in amounts or on terms acceptable to us, if at all.

There are uncertainties regarding the legal basis of our ability to operate an Internet business and to advertise in China. Although the country has implemented a wide range of market-oriented economic reforms, the telecommunication, information and media industries remain highly regulated. Not only are restrictions currently in place, but also regulations are unclear regarding in what specific segments of these industries companies with foreign investors, including us, may operate. Therefore, we might be required to limit the scope of our operations in China, and this could have a material adverse effect on our financial position, results of operations and cash flows.

We are involved in certain lawsuits in the normal course of our business operations in China, and we do not expect that the outcome of these lawsuits will have material impact on our financial positions or results of operations.

In May 2002, the EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” (“EITF No. 01-09”) was issued, addressing the accounting for consideration given by a vendor to a customer (including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller). EITF 01-09 is effective for fiscal periods beginning after December 15, 2001. We do not expect the adoption of this pronouncement will have a significant impact on our consolidated financial statements.

In November 2002, the EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”) was issued, addressing accounting for revenue arrangements with multiple deliverables and requiring that elements of an arrangement be separately accounted based on the fair value of the individual elements. EITF No. 00-21 is effective for fiscal periods beginning after June 15, 2003. We do not believe that this pronouncement will have a significant impact on our financial statements.

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”) “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee. However, the provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor’s obligations does not apply to product warranties or to guarantees accounted for as derivatives. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 will not have a significant impact on our consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”) “Consolidation of Variable Interest Entities.” Until this interpretation, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns. The adoption of FIN 46 will not have a significant impact on our consolidated financial statements.

Our investment policy limits our investments of excess cash to government or quasi-government securities and in high-quality corporate securities and limits the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Due to the fact that majority of our investments are in short-term instruments, we have concluded that there is no material market risk exposure in this area.

The majority of our revenues derived and expenses and liabilities incurred were in Chinese renminbi, Taiwan dollars and Hong Kong dollars. Thus, our revenues and operating results may be impacted by exchange rate fluctuations in the currencies of China, Taiwan and Hong Kong. See “Risk Factors — Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese renminbi into foreign currencies and, if renminbi were to decline in value, reducing our revenue in U.S. dollar terms.” We have not tried to reduce our exposure to exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future. We may not be able to do this successfully. Accordingly, we may experience economic losses and negative impacts on earnings and equity as a result of foreign exchange rate fluctuations.

We performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign exchange rates to the foreign subsidiaries and the underlying exposures described above. As of December 31 and June 30, 2002, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.

On September 28, 2001, we acquired an approximately 27.6% interest in the equity of Sun Media (“Sun Media”) Group, a satellite TV broadcaster and a cable TV program syndicator listed on the Hong Kong Stock Exchange. As of December 31, 2002, our interest had been diluted to 17.4% as a result of issuances of new shares by Sun Media. We invested in this company for business and strategic purposes and have classified this investment as a long-term investment, which had been accounted for using the equity method until

September 30, 2002. We ceased to maintain significant influence over Sun Media’s operations after our equity interest fell below 20% and our board representation was decreased. Accordingly, commencing with the quarter ended December 31, 2002, we began accounting for our investment in Sun Media as an investment in marketable equity securities under the provisions of SFAS 115. Such Investment is classified as available for sale and reported at fair market value with unrealized gains (losses), if any, recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity. During the quarter ended December 31, 2002, we began marking this investment to market value and thus recorded $3,781,000 in unrealized gains on our marketable equity securities as a component of comprehensive income. Fair market value of such investment decline from $16.6 million at December 31, 2002 to $14.2 million at March 28, 2003.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of shareholders’ equity and of cash flows expressed in U.S. dollars present fairly, in all material respects, the financial position of SINA CORPORATION and its subsidiaries at December 31, 2002, June 30, 2002 and 2001, and the results of their operations and their cash flows for the six months ended December 31, 2002 and each of the three years in the period ended June 30, 2002, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying notes are an integral part of these consolidated financial statements.

SINA CORPORATION (“SINA” or the “Company”), a Cayman Islands Corporation, is a leading online media company and value-added service provider for China and for global Chinese communities. The Company operates a branded network of web sites targeting greater China and overseas Chinese, providing an array of services including online portals, premium email, wireless short messaging, virtual ISP, search, classified information, online games, e-commerce, e-learning and enterprise e-solutions.

The consolidated financial statements include the accounts of the Company, its subsidiaries and other entities that it controls. All significant intercompany accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but which are less than majority owned and not otherwise controlled by the Company, are accounted for under the equity method.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. At December 31, 2002, June 30, 2002 and 2001, cash equivalents were comprised primarily of investments in commercial paper and money market accounts stated at cost plus accrued interest, which approximated fair value.

Short-term investments comprise marketable debt securities classified as available for sale which are reported at fair value with material unrealized gains (losses), if any, recorded as accumulated other comprehensive income in shareholders’ equity. During the six months ended December 31, 2002, the Company recorded $223,000 of unrealized gains on its marketable debt securities as a component of comprehensive income. Marketable debt securities due within one year and due from one year to two years is $28,585,000 and $14,855,000, respectively, at December 31, 2002. The Company invests in these securities with the intent to make such funds readily available for operating purposes and accordingly, classifies them as short-term investments.

Commencing with the quarter ended December 31, 2002, the Company began accounting for its investment in Sun Media as investments in marketable equity securities under SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”) and classified it as available for sale and reported it at fair value with material unrealized gains (losses), if any, recorded as comprehensive income in a component of shareholders’ equity. During the six months ended December 31, 2002, the Company recorded $3,781,000 of unrealized gains on its marketable equity securities in comprehensive income.

Property and equipment, including leasehold improvements, are stated at historical cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining lease term.

Intangible assets arising from acquisitions are amortized using the straight-line method over their estimated economic lives, generally three years from the acquisition date.

The Company evaluates the recoverability of long-lived assets whenever there is an indication of potential impairment and will recognize impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. The Company believes that there was no indication of potential impairment of its property and equipment and intangible assets in any of the periods presented.

Advertising revenues are derived principally from advertising and sponsorship arrangements. In its advertising contracts the Company typically guarantees a minimum number of impressions or pages to be delivered to users over a specified period of time for a fixed fee. Advertising revenues are recognized on the basis of the number of impressions delivered or ratably over the period in which the advertising is displayed, whichever amount is lower, when the collectibility is reasonably assured. To the extent that minimum guaranteed impressions deliveries are not met, the Company defers recognition of the corresponding revenues until the guaranteed impressions deliveries are achieved. Sponsorship arrangements typically allow advertisers to sponsor a particular area on the Company’s network in exchange for a fixed payment over the contract period. Advertising revenues are recognized ratably over the period of sponsorship. Advertising revenues derived from the design, coordination and integration of advertising campaigns and sponsorship to be placed on the Company’s web sites are recognized ratably over the term of such programs.

Revenue from barter transactions is recognized during the period in which the advertisements are displayed in the Company’s properties. Prior to January 2000, barter transactions were recorded at the fair value of goods or services provided or received, whichever was more readily determinable in the circumstances. In January 2000, the Company adopted Emerging Issues Task Force Issue No. 99-17 (“EITF 99-17”), “Accounting for Advertising Barter Transactions,” which requires advertising barter transactions to be valued based on similar cash transactions that have occurred within six months prior to the barter transaction. Barter revenues represented less than 1% of the advertising revenues for the six months ended December 31, 2002 and for the years ended June 30, 2002 and 2001, and approximately 1.3% of advertising revenues for the year ended June 30, 2000.

Non-advertising revenues are derived from fee-based services, proprietary software products and licenses and e-commerce services

Fee-based services revenues mainly include wireless short messaging, subscription services and paid email services. Revenues are recognized in the period in which the service is performed, provided that no significant Company obligations remain and collection of the receivables is reasonably assured. The Company contracts with third party mobile operators for the transmission of wireless short messages and subscriptions as well as for the billing and collection of service fees from customers. The Company recognizes the gross amount billed by the mobile operator as revenue, and the amount retained by the mobile operator as cost of revenue.

Revenue from the sale of software products is recognized primarily upon delivery of software products to end users, resellers, distributors, retail merchants and original equipment manufacturers. The Company delivers its software products in packaged form or under software licenses. Revenues from sales of software products in the packaged form are recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, shipment is made and collectibility is reasonably assured. Software license agreements are non-refundable and allow the OEM partners to reproduce the Company’s software products for a specified period of time for a fixed fee or a specified number of copies for a predetermined unit price. Revenues from software license agreements are recognized upon delivery of a master copy when the fixed-fee agreements become effective or based upon activity reports provided by the OEM partners under the per-copy arrangements. Provision is made for expected sales returns and allowances when revenue is recognized. Payments received in advance of revenue recognition are recorded as deferred revenue. The Company recognizes revenues in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-4 and SOP 98-9. These Statements generally require revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the elements. The Company’s software product agreements do not involve multiple elements.

E-commerce revenues are derived principally from slotting fees charged to merchants for selective positioning and promoting their goods or services within the Company’s online mall, SinaMall, and from commissions calculated as a percentage of the online sales transaction value of the merchants. Slotting fee revenue is recognized ratably over the period the products are shown on the Company’s web site while the commission revenue is recognized on a net basis after both successful on-line verification of customers’ credit cards and shipment of products. Product returns have not been significant and are assumed by vendors.

Product development costs include expenses incurred by the Company to maintain, monitor and manage the Company’s web site. The Company recognizes website development costs in accordance with SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” As such, the Company expenses all costs incurred that relate to the planning and post implementation phases of development and costs associated with repair or maintenance of the existing site or the development of website content. Costs incurred in the development phase are capitalized and amortized on a straight-line basis over the estimated product life or on the ratio of current revenues to total projected product revenue, whichever is greater. Since inception, the amount of costs qualifying for capitalization has been immaterial and as a result, all product development costs have been expensed as incurred.

The Company expenses the costs of producing advertisements at the time production occurs and expenses the cost of communicating advertising in the period in which the advertising space or airtime is used. Advertising expenses totaled $1.8 million, $4.7 million, $12.1 million and $8.8 million for the six months ended December 31, 2002 and for each of the three years ended June 30, 2002, 2001 and 2000 respectively.

The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” as amended by FASB Interpretation No. (“FIN”) 44 and Emerging Issues Task Force (“EITF”) No. 00-23 and complies with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” Under APB No. 25, as amended, compensation cost is, in general, recognized based on the difference, if any, on the date of grant between the fair value of the Company’s stock and the amount an employee must pay to acquire the stock. Deferred compensation is amortized over the vesting period of 4 years on an accelerated basis using the model presented in paragraph 24 of FIN 28. Accordingly, the percentages of the deferred compensation amortized in the first, second, third and fourth years following the option grant date are approximately 52%, 27%, 15% and 6%, respectively.

Income taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence assessed using the criteria in SFAS No. 109, “Accounting for Income Taxes,” will not more-likely-than-not to be realized.

The Company’s reporting currency is the US dollar. The Company’s operations in China, Hong Kong and Taiwan use the local currencies as their functional currencies. Accordingly, all assets and liabilities of the entities in China, Hong Kong and Taiwan are translated at the exchange rates in effect at the balance sheet date and revenues and expenses are translated at the average exchange rates in effect during the reporting period. Gains and losses resulting from foreign currency translation are recorded in accumulated other comprehensive income (loss) as a component of shareholders’ equity.

Net gains and losses resulting from foreign exchange transactions are included in the consolidated statement of operations and were not significant during the periods presented.

Basic earnings (loss) per share is computed using the weighted average number of the Ordinary Shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of Ordinary Share and Ordinary Share equivalents outstanding during the period. For the years ended June 30, 2002, 2001 and 2000, diluted loss per share is the same as the basic loss per share as all Ordinary Share equivalents are anti-dilutive.

Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. For the Company, comprehensive income (loss) for the periods presented includes net income (loss), foreign currency translation adjustments and unrealized gains/(losses) on marketable securities classified as available for sale.

In May 2002, the EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” (“EITF No. 01-09”) was issued, addressing the accounting for consideration given by a vendor to a customer (including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller). EITF 01-09 is effective for fiscal periods beginning after December 15, 2001. The Company does not expect the adoption of this pronouncement will have a significant impact on the Company’s consolidated financial statements.

In November 2002, the EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”) was issued, addressing accounting for revenue arrangements with multiple deliverables and requiring that elements of an arrangement be separately accounted based on the fair value of the individual elements. EITF No. 00-21 is effective for fiscal periods beginning after June 15, 2003. The Company does not believe that this announcement will have a significant impact on its financial statements.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for companies that voluntarily change to a fair value-based method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure provisions of SFAS 123. The provisions of SFAS 148 are effective for fiscal years ending after December 15, 2002. The Company does not believe that this pronouncement will have a significant impact on its financial statements.

On September 28, 2001, the Company completed the acquisition of an approximately 27.6% equity interest in Sun Media Group (“Sun Media”), a Hong Kong Stock Exchange listed company, from Ms. Yang, the chairperson and a major shareholder of Sun Media for consideration of $7.9 million in cash and approximately 4.6 million in newly issued ordinary shares and transaction costs of $731,000 for a total purchase price of $13.7 million. In addition, the Company agreed to issue 3.3 million ordinary shares if Sun Media met certain performance targets over the subsequent 18 months. This contingent consideration of 3.3 million ordinary shares was waived in April 2002 by an amendment to the original Share Purchase Agreement with Ms. Yang.

The above investment was accounted for using the equity method of accounting until September 30, 2002 when the equity investment in Sun Media dropped to below 20% and the Company ceased to maintain significant influence over its operations. Commencing with the quarter ended December 31, 2002, such investment is accounted for as an investment in marketable equity securities under the provisions of SFAS 115 and is classified as available for sale and reported at fair value with unrealized gains (losses), if any, recorded as a component of comprehensive income (loss) included in shareholders’ equity. For the six months ended December 31, 2002, the Company recorded $3,781,000 in unrealized gains on the Sun Media investment as a component of comprehensive income in shareholders’ equity.

In November 2002, we completed the acquisition of 100% equity interest in Shanghai Techur Technology Developing Co., Ltd. (“Techur”) for $1.9 million in cash. If Techur meets certain performance targets during the 12 month period following the closing, the maximum consideration would increase to approximately $3.8 million in cash. The excess of the purchase price over the fair value of net tangible assets was approximately $1.1 million, representing intangible assets relating to customer lists and user base, which will be amortized over a period of three years.

Techur is an Internet and logistic software company in the PRC, providing Internet and Intranet based logistic software and online applications to shipping and export business in Eastern China. Additionally, Techur operates a leading business to business (“B2B”) portal (www.eastchina.com) for various industries in Eastern China.

Transactions with ICP Company and Ad Company. To comply with Chinese regulations, in April 2000, Beijing SINA Information Technology Co. Ltd. or BSIT, the Company’s subsidiary in China, entered into agreements with two limited liability companies incorporated in China: Beijing SINA Interactive Advertising Co., Ltd. (the “Ad Company”) and Beijing SINA Internet Information Services Co., Ltd. (the “ICP Company”.) The Ad Company is a Chinese advertising company that is 75% owned by Yan Wang, the Company’s president, and 25% owned by BSIT. The ICP Company is a Chinese Internet content provider that is 30% owned by Daniel Mao, the Company’s chief executive officer, 30% owned by Yan Wang and 40% by four other employees of the Company. All individual shareholders of the Ad Company and the ICP Company are required under their agreements with BSIT to transfer their interest in the Ad Company or ICP Company to BSIT or to any person specified by BSIT at any time at BSIT’s request, provided that such transfer is not in violation of Chinese laws and regulations. In the opinion of SINA’s Chinese counsel, the ownership of BSIT and its businesses comply with existing Chinese laws and regulations.

Pursuant to these agreements, the ICP Company is responsible for operating www.sina.com.cn in connection with its Internet content company license and sells advertising space on the China web site to the Ad Company. The Ad Company, in turn, places advertisements in this space for third parties under its advertising license. In addition, BSIT licensed intellectual property and transferred equipment to the ICP Company and acts as the ICP Company’s provider of technical services, all in exchange for fees or other payments. BSIT is also a consultant and service provider to the Ad Company for its domestic Chinese customers. Substantially all of the income received from sales by the Ad Company and ICP Company from third parties is paid to BSIT.

Through ten-year proxies ending in the years 2011 and 2010, BSIT has complete voting control over the ICP Company and the Ad Company. The employee owners of the ICP Company and the Ad Company do not have participating rights as defined in EITF 96-16 with respect to the management of the ICP Company and the Ad Company. Therefore, the financial position and results of operations of the ICP Company and the Ad Company are consolidated with the financial statements of SINA.com, and intercompany transactions and balances are eliminated in the consolidation.

Prior to October 1, 2001, when BSIT obtained the proxy for the ICP Company, the financial position and results of operations of the ICP Company were not consolidated in the Company’s financial statements. During the quarter ended September 30, 2001 and the years ended June 30, 2001 and 2000, BSIT recorded $614,000, $924,000 and $95,000, respectively, of revenue from technical support service provided to the ICP Company, which amounts were equal to the revenue the ICP Company received from unrelated parties during the same periods. During the quarter ended September 30, 2001 and the years ended June 30, 2001 and 2000, the Ad Company paid the ICP Company $72,000, $338,000 and $434,000, respectively, for advertising

space. As a result of the transactions, BSIT recorded a receivable from the ICP Company of $436,000 and $148,000 at June 30, 2001 and 2000, respectively. These amounts plus loans by BSIT to certain employees for the purpose of setting up the ICP Company totaled to $556,000 and $268,000, which were reported as receivables from related parties as of June 30, 2001 and 2000, respectively. Also, BSIT accrued for the costs and expenses of the ICP Company in excess of its revenues as the costs are incurred by the ICP Company. For the quarter ended September 30, 2001 and the years ended June 30, 2001 and 2000, BSIT accrued $662,000, $1.6 million and $381,000, respectively, for the ICP Company’s losses. BSIT obtained the proxy for the Ad Company earlier, and the results of the Ad Company have been consolidated for all periods presented.

BSIT was formerly known as Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS.

Joint venture investment. In December 1999, the Company contributed $1.4 million in cash for a 35.4% interest in a joint venture with Adforce, Inc. and Compuserve Consultants, Ltd. The investment in the joint venture was accounted for under the equity method. The total expenses incurred from service provided by the joint venture for the year ended June 30, 2001 amounted to $309,000. The payable to the joint venture as of June 30, 2001 was $309,000. The investment was written off due to the joint venture’s cease of operation during the year ended June 30, 2001.

Shareholder notes. In 1999, certain officers of the Company exercised stock options prior to being vested with notes payable to the Company. During the six months ended December 31, 2002, and years ended June 30, 2002 and 2001, notes of zero, $429,000 and $588,000 were repaid respectively. As of December 31, 2002, notes receivable from shareholders were $1.1 million, $1.1 million and $1.5 million, respectively. Ordinary shares issued with notes payable are subject to rights of repurchase by the Company until such shares are vested. The notes were full recourse and had a five-year term expiring in 2004. They bear interest at rates ranging from 5.74% to 5.87%.

Income is subject to taxation in the various countries in which the Company and its subsidiaries operate. The components of losses before income taxes are as follows:

The components of the net deferred tax assets as of December 31, 2002, and June 30, 2002 and 2001 are as follows:

The Company has established a valuation allowance against its deferred tax assets due to its history of cumulative losses and the uncertainty surrounding the realization of such assets. Management’s assessment is that current evidence is not adequate using the assessment criteria under generally accepted accounting principles to support a conclusion that it is more likely than not that any of the deferred tax asset will be realized in the future.

As of December 31, 2002, the subsidiary of the Company in the United States had approximately $42.0 million of federal and $17.9 million of state net operating loss carryforwards available to offset future taxable income. The federal net operating loss carryforwards will expire, if unused, in fiscal years 2012 through 2022, and the state net operating loss carryforwards will expire, if unused, in fiscal years 2003 through 2011. Included in the net operating loss carryforward is $180,000 and $11,000 of federal and state net operating loss carryforwards relating to employee stock options, the benefit of which will be credited to equity when realized. The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations when changes occur in the stock ownership of a company. In the event the Company has a change in ownership, utilization of carryforwards could be restricted.

Additionally, as of December 31, 2002, the Company’s Hong Kong subsidiary had approximately $10.1 million net operating loss carryforwards which can be carried forward indefinitely to offset future taxable income.

In China, our major business operations are carried out through two subsidiaries, BSIT and Beijing SINA Internet Technology Service Co., Ltd. (“BSITS”). Both BSIT and BSITS are subject to corporate income taxes in China. Both entities qualify as new technology enterprises under China tax regulations, for which the applicable statutory tax rate is 15%. As approved by the tax authorities, both entities are entitled to a three year tax exemption followed by three years with a 50% reduction in the tax rate, commencing from the first operating year. BSIT started its operations in 1993 and therefore is currently subject to a tax rate of 15%. As of December 31, 2002, BSIT had a net operating loss carryforward of $6.9 million, which will expire starting in the year 2006. BSITS started its operations in 2002 and therefore is still under tax exemption treatment. The operating loss carryforwards for BSITS at December 31, 2002 was immaterial. As of December 31, 2002, other China subsidiaries and related entities on a combined basis had net operating losses carryforwards of approximately $1.1 million, which will expire from the year 2005 to 2007.

A reconciliation of China statutory rate to the Company’s effective tax rate is as follows:

The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods presented:

The Company has a saving plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). Under the 401(k) Plan, participating employees may defer a percentage (not to exceed 25%) of their eligible pretax earnings up to the Internal Revenue Service’s annual contribution limit. All employees on the United States payroll of the Company age 21 years or older are

eligible to participate in the 401(k) Plan. The Company has not been required to contribute to the 401(k) Plan.

The Company’s subsidiary in China participates in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiary to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution. During the six months ended December 31, 2002 and the years ended June 30, 2002, 2001 and 2000, the Company contributed to these funds a total of $0.7 million, $0.8 million, $0.7 million and $1.2 million, respectively.

Pursuant to the laws applicable to China’s Foreign Investment Enterprises, the Company’s subsidiary in China must make appropriations from after-tax profit to non-distributable reserve funds as determined by the Board of Directors. These reserve funds include a (i) general reserve, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP); the other fund appropriations are at the Company’s discretion. Since the Company’s PRC subsidiary is in an accumulated loss position, no appropriations have been made to the general reserve fund.

In May 1999, the Company adopted the 1999 Stock Option Plan (the “1999 Plan”). The 1999 Plan provides for the granting of stock options to employees, consultants and directors of the Company. Options granted under the Plan may be either incentive stock options or nonqualified stock options. Incentive stock options (“ISO”) may be granted only to Company employees (including officers and directors who are also employees). Nonqualified stock options (“NSO”) may be granted to Company employees and consultants. As of December 31, 2002, the Company has cumulatively reserved 12,108,000 ordinary shares for issuance under the 1999 Plan, including a previous plan carried over from 1997 and options assumed in the Sinanet acquisition. The 1999 Plan provides for an annual automatic increase in the number of ordinary shares reserved for issuance under the plan on the first day of our 2003, 2004 and 2005 fiscal years equal to the lesser of (1) 750,000 shares, (2) 3% of the ordinary shares outstanding on the last day of the immediately proceeding fiscal year, or (3) such lesser number of shares as is determined by the Board. The 1999 Plan will continue in effect until May 2009, unless terminated earlier in accordance with the terms of the Plan. As of December 31, 2002, there were a total of 4,066,000 options outstanding and 2,172,000 options are available for grant under the 1999 Plan.

Options under the Company’s 1999 Plan may be granted for a term of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however, that the exercise price of an ISO and NSO shall not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, respectively. The exercise price of an ISO and NSO granted to a 10% shareholder should not be less than 110% of the estimated fair value of the shares on the date of grant. Options granted under the Plan through December 31, 2002 generally vest 25% after the first year and then 2.083% each month thereafter. Certain options vest monthly over a four year term or a one year term. Certain grants are exercisable immediately under such terms and conditions as determined by the Board of Directors. Ordinary Shares issued upon such early exercises are subject to rights of repurchases by the Company until such shares become fully vested. At December 31, 2002, June 30, 2002 and 2001, there were

150,000, 309,000 and 888,000, respectively, shares of such Ordinary Shares issued that were subject to repurchase.

In October 1999, the Board adopted the 1999 Executive Stock Option Plan (the “Executive Plan”). An aggregate of 2,250,000 Ordinary Shares have been reserved for issuance under the Executive Plan. The Executive Plan provides for the granting of options to purchase Ordinary Shares and Ordinary Share purchase rights to eligible employees and consultants. As of December 31, 2002, there were a total of 2,194,000 options outstanding and no option is available for grant under the Executive Plan. Options under Executive Plan may be granted for a term of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however, that the exercise price of an ISO and NSO shall not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, respectively. The exercise price of an ISO and NSO granted to a 10% shareholder should not be less than 110% of the estimated fair value of the shares on the date of grant. Options granted under the Executive Plan through December 31, 2002 generally vest 25% after the first year and then 2.083% each month thereafter. Certain options vest monthly over a four-year term or a one year term. Certain grants are exercisable immediately under such terms and conditions as determined by the Board of Directors. Ordinary Shares issued upon such early exercises are subject to rights of repurchases by the Company until such shares become fully vested. The Executive Plan will continue in effect until October 2009, unless terminated earlier in accordance with the terms of the Executive Plan.

In October 1999, the Board approved the 1999 Directors’ Stock Option Plan (the “Directors’ Plan”) covering an aggregate of 750,000 ordinary shares. The Directors’ Plan became effective on the effective date of the initial public offering and provides a non-employee director after the completion of the offering (1) a nonstatutory stock option to purchase 37,500 ordinary shares on the date on which he or she first becomes a member of the Board of Directors, and (2) an additional nonstatutory stock option to purchase 15,000 shares on the date of each annual shareholders’ meeting immediately thereafter, if on such date he or she has served on the Board for at least six months. All options granted under the Director’s Plan shall not be less than 100% of the estimated fair value of the shares on the date of grant and shall have a maximum term of 10 years. All options granted under the Directors’ Plan vest in full immediately upon grant. As of December 31, 2002, 390,000 options are available for grant under the Directors’ Plan and 323,000 options are outstanding under this plan.

The following table summarizes stock option activity under the Company’s stock option plans:

At December 31, 2002, approximately 2,562,000 options were available for grant under the Plans.

Stock-based compensation. The Company recorded cumulative deferred stock compensation, which represents the difference between the exercise price of options granted and the fair market value of the underlying stock at the date of grant. Deferred stock compensation is amortized on an accelerated basis over the vesting period of the applicable options, which is generally four years. The amortization of deferred compensation was $0.7 million and $1.3 million for the six months ended December 31, 2002 and 2001, respectively, and $2.3 million, $7.5 million and $19.1 million for the years ended June 30, 2002, 2001 and 2000, respectively.

Fair value disclosures. The Company calculated the fair value of each option grant on the date of grant using the Black-Scholes pricing method with the following assumptions:

Prior to the Company’s initial public offering, the fair value of each option grant was determined using the minimum value method. Options granted subsequent to the initial public offering have been valued using the Black-Scholes model considering the expected volatility of our stock price, determined in accordance with FAS 123, in arriving at an option valuation. The minimum value method does not consider stock price volatility. Had compensation cost for the Company’s stock-based compensation plans been determined based on the fair value at the grant dates for the awards under a method prescribed by SFAS No. 123, the Company’s net loss per share would have been adjusted to the pro forma amounts as follows:

In October 1999, the Board adopted the 1999 Employee Stock Purchase Plan (the “Purchase Plan”). An aggregate of 3,750,000 ordinary shares have been reserved for issuance under the plan, plus annual increases equal to the lesser of (1) 600,000 shares, (2) 0.5% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year, or (3) such lesser number of shares as is determined by the Board. The Purchase Plan is implemented by a series of overlapping periods of approximately 24 months’ duration, with new offering periods (other than the first offering period which will be approximately 9 1/2 months) commencing on February 1 and August 1 of each year. The price at which stock is purchased under the Purchase Plan is equal to the lower of 85% of the fair market value of the Ordinary Shares at the beginning of each offering period or at the end of each purchase period. The eligible employees can have up to 20% of their earnings withheld to be used to purchase shares of the Company’s Ordinary Share. The Purchase Plan offers automatic withdrawal and reenrollment provision under which the participant in the ongoing offering period shall automatically be deemed to have withdrawn from the ongoing offering period and enrolled in such new offering period under the same subscription agreement in effect for such ongoing offering period if the fair market value of the shares on the new offering period is lower than the in progress offering period. The 1999 Employee Stock Purchase Plan became effective on the effective date of the initial public offering. As of December 31, 2002, total contributions by employees to the Purchase Plan was $0.7 million and 101,000 shares had been issued under the Purchase Plan.

Based on the criteria established by Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company currently operates in two principal business segments globally; advertising and non-advertising. The Company does not allocate any operating costs or assets to its segments as management does not use this information to measure the performance of these operating segments. Management does not believe that allocating these expenses or assets is meaningful in evaluating these segments’ performance.

The following is a summary of non-advertising revenues and cost of non-advertising revenues:

Revenues are attributed to the countries in which the invoices are issued. Long-lived assets comprise the net book value of property and equipment.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable debt securities and accounts receivable. The Company limits its exposure to credit loss by depositing its cash and cash equivalents with financial institutions in the U.S., China, Hong Kong and Taiwan which management believes are of high credit quality. The Company also limits investment in marketable debt securities to debt securities with AA ratings or above. The Company believes that the risk associated with accounts receivable is mitigated, to some extent, by the fact that the Company’s customer base is geographically dispersed. The Company maintains an allowance for potential credit losses that it believes to be adequate. One customer represented 11% of net revenues for the year ended June 30, 2001. No individual customer accounted for more than 10% of total net revenues for the six months ended December 31, 2002 and year ended June 30, 2002. Two customers accounted for 13% and 14% of accounts receivable at June 30, 2002. One customer accounted for 11% of accounts receivable at June 30, 2001. No individual customer accounted for more than 10% of accounts receivable at December 31, 2002.

The Company operates in business segments which are characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards. Any failure by the Company to anticipate or to respond adequately to technological changes in its industry segments, changes in customer requirements or changes in regulatory requirements or industry standards, could have a material adverse affect on the Company’s business and operating results.

The Company relies principally on two mobile operators for services relating payment collection and transmission gateway for short messaging services in China. The mobile operators dictate the fees charged to the Company for such services.

The Company relies on a number of third-party suppliers for various other services, including web server hosting, banner advertising delivery software and Internet traffic measurement software.

Leases. The Company leases office facilities under noncancelable operating leases with various expiration dates through June 2007. Rent expense for the six months ended December 31, 2002 and years ended June 30, 2002 and 2001 totaled $705,000, $1.1 million and $1.1 million, respectively.

At December 31, 2002, future minimum lease payments under noncancelable operating leases are as follows (in thousands):

Contingencies. There are uncertainties regarding the legal basis of the Company’s ability to operate an Internet business and to advertise in China. Although the country has implemented a wide range of market-oriented economic reforms, the telecommunication, information and media industries remain highly regulated. Not only are restrictions currently in place, but also regulations are unclear regarding in what specific segments of these industries companies with foreign investors, including the Company, may operate. Therefore, the Company might be required to limit the scope of its operations in China, and this could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

In November 2002, the Company announced the formation of joint venture in China with NC Soft, a leading online game company in Korea to operate Lineage, Asia’s No. 1 online game in China. The joint venture, Shanghai NC-SINA Information Technology Co. Ltd., was formed in January 2003. The Company invested $2.6 million in cash for 51% of the equity interest in the joint venture.

The following table reflects the Company’s unaudited quarterly consolidated statement of operations data for each of the eight quarters in the period ended December 31, 2002. The Company believes that the historical quarterly information has been prepared substantially on the same basis as the audited consolidated financial statements, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts below to state fairly the unaudited quarterly results of operations data. Please refer to the Company’s consolidated financial statements and the notes thereto for an explanation of the computation of basic and diluted earnings (loss) per share.

Incorporated by reference from the information under the captions “Proposal No. 1 — Election of Directors”, “Executive Officers of Registrant” and “Section 16 Beneficial Ownership Reporting Compliance” in the Registrant’s Proxy Statement for its 2003 Annual Meeting of Shareholders to be filed on or before April 30, 2003.

Incorporated by reference from the information under the captions “Compensation of Executive Officers”, “Compensation Committee Report on Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Stock Performance Graph” in the Registrant’s Proxy Statement for its 2003 Annual Meeting of Shareholders to be filed on or before April 30, 2003.

Incorporated by reference from the information under the captions “Record Date; Voting Securities” and “Information Regarding Beneficial Ownership of Principal Shareholders and Management” in the Registrant’s Proxy Statement for its 2003 Annual Meeting of Shareholders to be filed on or before April 30, 2003.

Incorporated by reference from the information under the captions “Certain Transactions” and “Compensation Committee Interlocks and Insider Participation” in the Registrant’s Proxy Statement for its 2003 Annual Meeting of Shareholders to be filed on or before April 30, 2003.

Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that the Company maintains disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such control and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. The Company also has investments in certain unconsolidated entities. As the Company does not control or manage these entities, its disclosure of controls and procedures with respect to such entities are necessarily more limited than those it maintains with respect to its consolidated subsidiaries. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.


	(1) Consolidated Financial Statements: See Index to Consolidated Financial Statements at Item 8 on page 38 of this report.

	(2) Financial Statement Schedules: See Index to Consolidated Financial Statements at Item 8 on page 38 of this report.

	(3) Exhibits are incorporated herein by reference or are filed with this report at Exhibit Index on page 66 to page 68 of this report (numbered in accordance with Item 601 of Regulation S-K).

(b) In November 2002, we filed a Current Report on Form 8-K regarding a change of the Company’s fiscal year. In February 2003, we filed a Current Report on Form 8-K regarding the acquisition of all of the share capital of Memestar Limited.

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, SINA.com has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.


	By:	/s/CHARLES CHAO



	Charles Chao
	Chief Financial Officer and Executive Vice President


	1. I have reviewed this transition report on Form 10-K of SINA CORPORATION;

	2. Based on my knowledge, this transition report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this transition report;

	3. Based on my knowledge, the financial statements, and other financial information included in this transition report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this transition report;

	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this transition report is being prepared;

	b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this transition report (the “Evaluation Date”); and

	c. presented in this transition report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


	6. The registrant’s other certifying officers and I have indicated in this transition report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


	By:	/s/ DANIEL MAO


	______________________________________ Daniel Mao
	Chief Executive Officer and Director


	1. I have reviewed this transition report on Form 10-K of SINA CORPORATION;

	2. Based on my knowledge, this transition report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this transition report;

	3. Based on my knowledge, the financial statements, and other financial information included in this transition report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this transition report;

	4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this transition report is being prepared;

	b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this transition report (the “Evaluation Date”); and

	c. presented in this transition report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


	6. The registrant’s other certifying officers and I have indicated in this transition report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


	By:	/s/ CHARLES CHAO


	______________________________________ Charles Chao
	Chief Financial Officer and
	Executive Vice President

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel Mao and Charles Chao, jointly and severally, as his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Pursuant to the requirements of the Securities Act of 1934, this From 10-K has been signed by the following persons in the capacities and on the dates indicated:


*	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Registration Statement on Form F-1 (Registration No. 333-11718) filed with the Commission on March 27, 2000, as amended.

**	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000.

***	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.

****	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Report on Form 10-K for the year ended June 30, 2001

#	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.

##	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001.

###	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

####	Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to the Company’s Report on Form 10-K for the year ended June 30, 2002.


o		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or
þ		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from July 1, 2002 to December 31, 2002


Cayman Islands		52-2236363
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)


PART I
	Item 1. Business
	Item 2: Properties
	Item 3: Legal Proceedings
	Item 4: Submission of Matters to a Vote of Security Holders
PART II
	Item 5: Market for the Registrant’s Common Equity and Related Shareholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7a. Quantitative and Qualitative Disclosure about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
302 CERTIFICATION
POWER OF ATTORNEY
EXHIBIT INDEX
EXHIBIT 3.5
EXHIBIT 10.62
EXHIBIT 10.63
EXHIBIT 10.64
EXHIBIT 10.65
EXHIBIT 10.66
EXHIBIT 10.67
EXHIBIT 10.68
EXHIBIT 10.69
EXHIBIT 10.70
EXHIBIT 10.71
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 99.1


		Page No.

PART I
Item 1.	Business		2
Item 2.	Properties		25
Item 3.	Legal Proceedings		25
Item 4.	Submission of Matters to a Vote of Security Holders		25
PART II
Item 5.	Market for the Registrant’s Common Equity and Related Shareholders Matter		26
Item 6.	Selected Financial Data		27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 8.	Financial Statements and Supplementary Data		40
	Report of Independent Accountants		41
	Consolidated Balance Sheet at December 31, 2002, June 30, 2002 and 2001		42
	Consolidated Statement of Operations for the six months ended December 31, 2002 and 2001 (unaudited) and each of the three years in the period ended June 30, 2002		43
	Consolidated Statement of Shareholders’ Equity for the six months ended December 31, 2002 and 2001 (unaudited) and each of the three years in the period ended June 30, 2002		44
	Consolidated Statement of Cash Flows for the six months ended December 31, 2002 and 2001 (unaudited) and each of the three years in the period ended June 30, 2002		46
	Notes to Consolidated Financial Statements		47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		67
PART III
Item 10.	Directors and Executive Officers of the Registrant		67
Item 11.	Executive Compensation		67
Item 12.	Security Ownership of Certain Beneficial Owners and Management		67
Item 13.	Certain Relationships and Related Transactions		67
Item 14.	Controls and Procedures		67
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8K		68
SIGNATURES			69
CERTIFICATIONS			70
POWER OF ATTORNEY			72
EXHIBIT INDEX


Revenue Classification	Advertising (online advertising) Non-advertising (Fee-based services, e-commerce and enterprise e-services)

Properties and Services	SINA Portal Network Short Messaging Services SINAMall	Interest-Based Channels Premium Email Listings	Community-Building Channels Online games Enterprise e-Solutions	Advertising Services Access and Distribution Software Products


		U.S.		China		Hong Kong		Taiwan		Total


		(In thousands)
Six months ended and as of December 31, 2002:
	Revenues	$	1,427	$	19,675	$	1,060	$	1,054	$	23,216
	Long-lived assets		362		5,453		452		1,332		7,599
Six months ended and as of December 31, 2001:
	Revenues	$	1,181	$	10,004	$	886	$	759	$	12,830
	Long-lived assets		1,221		5,882		981		2,332		10,416
Year ended and as of June 30, 2002:
	Revenues	$	2,524	$	22,832	$	1,542	$	1,610	$	28,508
	Long-lived assets		666		5,079		824		1,671		8,240
Year ended and as of June 30, 2001:
	Revenues	$	6,866	$	17,190	$	1,002	$	1,625	$	26,683
	Long-lived assets		1,754		6,103		1,317		2,737		11,911
Year ended and as of June 30, 2000:
	Revenues	$	4,414	$	8,080	$	525	$	1,151	$	14,170
	Long-lived assets		1,694		3,690		938		1,415		7,737


	Because our operating history is limited and the revenue and income potential of our business and markets are unproven, we cannot predict whether we will meet internal or external expectations of future performance.


	*Except for the six months ended December 31, 2002, we have incurred net losses since inception and we may incur future losses.*


	*We are relying on advertising sales as a significant part of our future revenue, but the Internet has not been proven as a source of significant advertising revenue in greater China.*


	*We rely on fee-based services for a significant portion of our revenues.*


	*We are relying on electronic commerce as a significant part of our future revenue, but the Internet has not yet been proven as an effective commerce medium in greater China.*


	Underdeveloped telecommunications infrastructure has limited and may continue to limit the growth of the Internet market in China which, in turn, could limit our ability to grow our business.


	*We must rely on the Chinese government to develop China’s Internet infrastructure and if it does not develop this infrastructure our ability to grow our business will be hindered.*


	*You should not rely on our quarterly operating results as an indication of our future performance because our results of operations are subject to significant fluctuations.*


	*Political and economic conditions in greater China are unpredictable and may disrupt our operations if these conditions become unfavorable to our business.*


	*Interest-Based Channels*


	*Applicable Regulations*


	*We may be adversely affected by Chinese government regulation of Internet companies.*


	We have attempted to comply with the strict licensing and registration requirements of the PRC government by entering into agreements with two Chinese entities majority owned by our employees; if the PRC government finds that these agreements do not comply with the licensing requirements, our business in the PRC will be adversely affected.


	We depend upon contractual arrangements with the ad company and the ICP company for the success of our operations in China and these arrangements may not be as effective in providing operational control as direct ownership of these businesses.


	We may not be in compliance with Chinese government regulations relating to foreign investment prohibitions and, if so determined, the Chinese government could cause us to discontinue our operations in China.


	Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment prohibitions, the Chinese government may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate.


	We may have to register our encryption software with Chinese regulatory authorities, and if they request that we change our encryption software, our business operations will be disrupted as we develop or license replacement software.


	The markets in which we operate are highly competitive, and we may be unable to compete successfully against new entrants and established industry competitors, many of which have greater financial resources than we do or currently enjoy a superior market position than we do.


	*If we fail to develop successfully and introduce new products and services, our competitive position and ability to generate revenues will be harmed.*


	We have contracted with third parties to provide content and services for our portal network and to distribute our software, and we may lose users and revenue if these arrangements are terminated.


	*Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.*


	*We may not be able to manage our expanding operations effectively, which could harm our business.*


	*Our strategy of acquiring complementary assets, technologies and businesses may fail and may result in equity or earnings dilution.*


	*Concerns about the security of electronic commerce transactions and confidentiality of information on Internet may reduce use of our network and impede our growth.*


	Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese renminbi into foreign currencies and, if renminbi were to decline in value, reducing our revenues in U.S. dollar terms.


	*Our operations could be disrupted by unexpected network interruptions caused by system failures, natural disasters or unauthorized tamperings with our systems.*


	*The law of the Internet remains largely unsettled, which subjects our business to legal uncertainties that could harm our business.*


	We may be subject to claims based on the content we provide over our network and the products and services sold on our network, which, if successful, could cause us to pay significant damage awards.


	*Privacy concerns may prevent us from selling demographically targeted advertising in the future and make us less attractive to advertisers.*


	*We may not be able to adequately protect our intellectual property, which could cause us to be less competitive.*


	*We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damage awards.*