Major Shareholder:

• Naspers Limited ¡V 37.50% interest
• Mr. Ma Huateng ¡V 14.43% interest
• Mr. Zhang Zhidong ¡V 6.43% interest

The Group is a leading provider of Internet services and mobile value-added services in China, with the largest instant messaging (¡§IM¡¨) community in China. The IM platform, branded QQ, allows users to communicate in real-time across the Internet, and mobile and fixed line telecommunications networks using various terminal devices. The Group have been able to leverage the large user community and the recognition of the QQ brand to attract Internet and mobile users to pay for the consumer-oriented Internet and mobile value-added services and products.

The Group believes that the largest IM community in China as measured by registered user accounts. As of March 31, 2004, The Group had 291.3 million registered IM user accounts. During the 16-day period ended March 31, 2004, the peak number of simultaneous online user accounts was 6.1 million, the average number of daily user hours was 64.7 million and the average number of messages sent daily was 848.8 million. The Group are also one of the leading mobile value-added service providers in China. For 2003, China Mobile recognized us as its ¡§Best Performing Partner¡¨ for SMS services on its Monternet platform.

The Group currently owned three principal lines of business: Internet value-added services, mobile and telecommunications value-added services and online advertising. The Group launched the basic online IM service in February 1999. Since then, the Internet services have evolved into a variety of value-added services for users, including various feebased IM service packages, community services such as online dating, alumni club, electronic cards and email, and entertainment services such as casual games, avatars and massive multiple-player online games. Revenues from the Internet value-added services accounted for 31.3% of the total revenues in 2003 and 40.6% of the total revenues in the three months ended March 31, 2004.

As the customer base has grown in recent years, The Group was able to leverage the significant traffic in the community to market online advertising services to the corporate clients. Revenues from online advertising accounted for 4.5% of the total revenues in 2003 and 3.2% of the total revenues in the three months ended March 31, 2004. In addition, The Group are making long-term investments building on the technical expertise to develop IM solutions targeted for enterprises in China. The Group launched the enterprise IM solution, RTX, in September 2003, and intends to grow this business over time.

The Directors believe that the Group has the following competitive advantages:

• large and active user base;
• distinctive community experience;
• compelling and creative value-added services;
• strong brand recognition; and
• strong strategic relationships with telecommunications operators and terminal
• device manufacturers in China.

• The business plan is based on a new business model that may not be successful, and The Group may not be successful in implementing the future business strategies.
• If Tencent Computer and Shiji Kaixuan are unable to maintain existing, and establish new, arrangements with mobile and other telecommunications operators, the business will suffer.
• As the Group depend on mobile operators to maintain accurate records concerning the fees paid by customers for mobile value-added services and the portion of those fees, and the Group have had to make estimates on occasion as to what revenue. The Group should record in this regard, any errors in this process could adversely affect the results of operations.
• The revenues will be adversely impacted if mobile or other telecommunications operators refuse to pay, or delay payment of, fees to Tencent Computer or Shiji Kaixuan.
• Tencent Computer's and Shiji Kaixuan's ability to provide value-added mobile services and products could be constrained if network operators insist on exclusivity provisions and Tencent Computer or Shiji Kaixuan, as the case may be, is deemed not to be in compliance with such provisions.
• If business conditions of mobile operators deteriorate, the business operations and financial condition may be materially and adversely affected.
• The Group operates in a very competitive market.

The goal is to be the leading Internet and telecommunications value-added service provider in China. The Group developed the IM platform into a comprehensive service platform that provides a portfolio of IM, value-added services and online entertainment to the large and growing community. To grow the business and maximize shareholder value, the Group will seek to:

Continue to expand the user base. The Group seek to continue to expand the user base, as the Group believe the size of the user base is an important competitive advantage. The Group believe that by being the largest IM community in China, the user base will grow in tandem with the increase in Internet and mobile phone users in China. In addition, the Group target the youth segment in China, which the Group believe is a main source for the growth of Internet usage in China. To reinforce this leading position, the Group will continue to increase the customer satisfaction through continuously upgrading the user experience, functionality, and services provided as part of the free IM service. In addition, the Group intends to further differentiate and cater to different needs of the various customer segments.

Deliver new services and products to enrich the QQ community experience. The Group intend to continue to develop and deliver new value-added communications, community, entertainment and information-based services and products to enrich the experience of the users and generate new sources of revenues. The Group intend to integrate and distribute online content such as music, video and other forms of multimedia content through the IM platform and to further expand the service offerings in the online dating, avatars and online game services.

Continue to strengthen the strategic relationships with telecommunications operators, device manufacturers and content providers. The Group intends to strengthen the relationships with telecommunications operators in China through joint marketing, co-branding and joint development initiatives. The Group believes it can develop value-added services to help telecommunications operators in China attract new subscribers to their data service platforms and increase data traffic on their networks. In return, the Group can utilize their billing and network infrastructure to attract users for the value-added services. The Group also intends to strengthen existing, and build new, relationships with handset, PC, PDA, game console and other device manufacturers to pre-install the value-added software applications on the devices they manufacture.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$1,258 million (based on the offer price HK$3.235 per share). The Group at present intends to apply the net proceeds as follows: