Good day, ladies and gentlemen and welcome to the Ctrip.com International 2006 Second Quarter Earnings Conference Call. (Operator Instructions) I would now like to turn the presentation over to Ms. Tracy Cui, Director of Investor Relations. Please proceed ma’am.

Thank you for attending Ctrip’s second quarter 2006 earnings call. Joining me on the call today we have Mr. James Liang, Chairman of the Board; Mr. Min Fan, Chief Executive Officer; and Ms. Jane Sun, Chief Financial Officer. During this call, we may discuss our future outlook and performance, which are forward-looking statements made under Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in Ctrip’s public filings with the Security and Exchange Commission. Ctrip does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Min will provide a business update on the second quarter 2006; James will give an update on market environments and Jan will provide highlights of financial performance of the second quarter as well as our outlook for the quarter. We will also have a Q&A session toward the end of this call. With that I will turn to Min for our business update.

Thank you Tracy. We are very glad to report the solid performance by our team during the second quarter of 2006. In the second quarter, the revenues from hotel reservations grew by 28% year-over-year. The revenues from air ticketing grew by 94% year-over-year. Revenues from packaged tours grew by 48% year-over-year, among which our core FIT packaged tours grew by 121% year-over-year, demonstrating our continued strong growth in leisure travel. The newly launched corporate travel business also gained momentum in the second quarter of 2006. During the short three months since March this year, we have gained a significant presence in the market and become a formidable force to our competitors. Our supply network growth of our 3,800 hotels by the end of second quarter of 2006, compared to about 3,300 during the same period last year and the 3,500 by the end of the previous quarter. The hotels allotment rooms increased in to approximately 1,900 in the second quarter of 2006 compared to approximately 1,300 during same period last year and about 1,600 by the end of the previous quarter. More importantly, we have made concerted efforts to ensure quality of the hotels in our network, not just the quantity of the hotels. For the packaged tour business, in addition to popular package tours in domestic locations and nearby international destinations, we launched a series of high-end group tours to Japan, Korea, Australia and Europe. We differentiated our sales through novel design of routes and activities, as well as excellent customer service. By the end of the June 2006 we had over 2.1 billion cumulative customers representing an 11% growth over the last quarter. On average, we continue to add approximately 67,000 new customers on a monthly basis during the second quarter, compared to our approximately 51,000 new customers per month in the second quarter of 2005; and 60,000 new customers per month in the previous quarter. Under the competitive landscape, we are able to outpace our competitors efforts in absolute addition of transaction volume and profitability. We will strive for continuous excellence in our strategy and execution to strengthen our position. Now let me turn to James for a general market environment update.

Thank you. We continue to see a robust industry growth in the foreseeable near future, supported by increasing travel demand and development of infrastructure. To name a few, the upcoming Olympic Games in Beijing and the World Expo in Shanghai will act as significant catalysts to travel growth. Our smaller scale Macau infrastructure upgrade will also increase the leisure travel volume in the regions in the next few years. We are optimistic with the industry outlook and our capabilities to seize the opportunities presented to us. In the near term, we anticipate an accelerated adoption of e-tickets in China. The industry is currently going through a transition period where various processes are being straightened out. We are working closely with the airlines in efforts to ensure a smooth transition. In the long run, we expect that automated e-ticketing will enable us to access potential markets more swiftly and effectively. Now I will turn to Jane to discuss our financial results.

Thanks, James. I am very pleased to report another solid quarter. Our net revenues were RMB190 million or $24 million in the second quarter of 2006, representing a growth of 47% year-over-year and 22% quarter-over-quarter. Revenues from hotel reservations were RMB180 million or $50 million in the second quarter of 2006, up 28% year-over-year due to higher volumes and a commission per room compared to the same period last year; and up 23% quarter-over-quarter due to seasonally higher volumes compared to the first quarter. The total number of hotel room nights booked was approximately 1.7 million in the second quarter of 2006, compared to approximately 1.39 million in the same period last year, and 1.38 million in the first quarter of 2006. The average commission per room night increased to RMB69 or $9 in the second quarter of 2006 from RMB66 or $8 during the same period last year and remained flat with the previous quarter. The average commission margin on hotel bookings was approximately 14%. Air ticketing reached another record during the second quarter of 2006. The revenues from air ticketing were RMB73 million or $9 million in the second quarter of 2006, up 94% year-over-year and 22% quarter-over-quarter. The total number of air tickets sold in the second quarter of 2006 was approximately 1.49 million compared to approximately 0.8 million during the same period last year and 1.28 million in the previous quarter. The average commission per ticket sold with RMB47 or $6 in the second quarter of 2006, increased from RMB46 or $6 in the same period last year; and from RMB45 or $6 in the previous quarter. The average commission rate per ticket sold was 4.9% in the second quarter of 2006, and remained flat compared to the same period last year, and up slightly from…

(Operator Instructions) Your first question comes from the line of Lu Sun - Lehman Brothers. Lu Sun - Lehman Brothers: Thanks. Good morning, everyone. Congratulations on a good quarter. I have two questions. Number one is on the number of new customers added in the second quarter. It seems like the monthly run rate has slowed a little bit from the first quarter. Was that due to some seasonal reasons or is that due to a competitive reason? Thank you. I also have a follow-up.

Regarding the new customer acquisition, in fact in Q2 we are still maintaining a strong acquisition total volume. As you know, we have already accumulated a certain high volume on a QonQ basis. So if you just compare the percentage increase it's not so significant, but if you consider the total volume, it's still very significant. Lu Sun - Lehman Brothers: How many of those new customers are actually coming from the second-tier cities or provinces?

I think there are a certain amount of new customers that will be coming from second-tier cities. Right now we don't have the breakdown to disclose. Lu Sun - Lehman Brothers: My last question will be month-on-month trend, because I think in June there was World Cup and also to some extent traffic volume may be impacted by the college entrance exams. Do you actually see this kind of a pattern impacting your business in the second quarter? Also going into July, what kind of traffic volume do you actually experience with your three lines of business? Thank you.

Our April and the May volume was very strong; July definitely was a little bit impacted by the World Cup and also college entrance; obviously we are still in the process of monitoring the Q3 numbers, so we can not comment too much on Q3 yet. But you are right, the June number was a little bit softer than April and May. Lu Sun - Lehman Brothers: Okay. Thank you.

Thank you.

Your next question comes from Kit Low - Goldman Sachs. Please proceed sir.

Hi. Good morning, thanks for taking my question. Just a general question on the growth rate on a year-on-year basis. If you go back to the fourth quarter of '05 and coming all the way through the second quarter, there has been a trend of deceleration on a year-on-year basis in terms of growth. Both in terms of booked room nights and air ticket bookings on a volume basis. Just to run through the numbers very quickly: in 4Q it was up 28% year-on-year; then 25% in 1Q and now 22% in 2Q for the hotel business. For the air ticketing business, 117% in 4Q and then 88% in 1Q and now 86% in 2Q. Is that the trend we should expect or could there be some anomalies within the quarter that is causing this ratio?

As our base this growing larger and larger every day, mathematically the percentage will decrease a little bit. However, we monitor very closely as to the absolute addition of the room nights booked. If we compare our number to our competitors, our absolute additions of the room nights booked it still 200% with our next largest competitor. So we still consider the increase of the room nights booked at a very healthy pace.

Okay thank you. The only other question I have is, would you comment on occupancy rates for your hotel for the last quarter?

You mean occupancy rate for hotels?

Yes, please.

In fact, among first-tier cities this Q2 the market situation is not as good as the industry people project. Shanghai, the year-over-year occupancy rate is almost flat. In that way if we can still deliver over 20% gross here, I think it is quite reasonable. I think in the coming quarters these trends still will be maintaining similar in first-tier cities. I think in the second-tier cities yes, there little bit higher occupancy rate compared with last year’s quarter.

It sounds like pretty impressive growth on the second-tier cities. Basically most of that growth is driven off of the second-tier cities going forward, it looks like. Is that fair, to say that?

Yes.

Thank you.

Your next question comes from the line of Jason Breuschke – Citigroup. Jason Breuschke – Citigroup: Thank you. Good morning James, Min and Jane. Let me also add my congratulations on the quarter. I am going to have two broad questions; one on corporate travel and the other on competition. With respect to corporate travel, could you maybe give us a little bit more color specifically, first as to what the receptivity has been for new customers? Is this an easy or a hard sell for you? Could you then tell us what the typical sales cycle is to convince a new customer that may be currently doing their travel in-house? Third, have you won any corporate travel customers away from existing competitors in the market such as American Express or may be a local corporate travel competitor? Finally, James you mentioned you have a very strong position. Could you quantify for us what you think your market share ranking is in the corporate travel today? Thanks.

That is a lot of questions. I will just give you a general update of the corporate travel business. In general, the corporate travel business is still very early in its development cycle in China, so a lot of new customers start out being managers of corporate travel. So most of the business actually is coming from, I think it’s probably a 50-50 split. Some of the customers are just starting to adopt managed corporate travel. Some of the customers actually were won from the existing competitors such as American Express, CWT and similar others, mostly the international corporate travel service companies. The typical sales cycle is usually anywhere from one to six months. If the customer is really already educated about corporate travel then the sales cycle is pretty short. But if they need some education, then it tends to be a little bit longer. We actually our positions are getting stronger and stronger because very few other corporate travel agencies will have a very strong hotel and air ticket service capability. So with our added functionality specifically designed for the corporate travel business that we are actually overall, a very strong competitor in this arena. So we think currently we are probably the third or fourth player in this market with a small market share, but I think in the long run we will definitely be one of the leading players in this market. I am not sure if I have covered most of the question. Jason Breuschke – Citigroup: That did. I know it was multi-part question, but I wanted just some details on how the market is developing and what your position is. My second question involves competition. Today you guys are the undisputed dominant player in the travel consolidator space. But if we look out a few years, do you think that you will face any serious competition from the likes of search engines, say Baidu? Is Baidu a potential partner like Google, or is it a potential competitor? Along those same lines, what threat do you think the airlines will pose in terms of selling air ticketing directly to consumers? On the one hand, once we had this e-ticketing mandate coming in, maybe facilitating a direct from airlines to consumer selling pattern; but on the other hand recognizing that Ctrip fee trip has the ability to book hotels whereas the airlines don’t. If you could use your crystal ball and help us how you think the competitive landscape with these two issues might play out, that would be helpful. Thanks.

Well I don’t think the search engines, either Baidu or Google will ever become a serious competitor in this region. First of all, they are not likely to run a travel agency operation with thousands of people. If they are just doing the searches, because the market is currently dominated by one or two players, the customers tend to go to these two players just to look for all of the travel information directly, rather than go through an extra search through Google or Baidu. It is different from if you have dozens of travel suppliers and they have to go to each travel supplier to look for information. Then it’s maybe easier to go to one search engine or one super aggregator to compare different things. With companies like us, which is actually the aggregator with all of the information already and all the best prices already, it’s really not necessary to go to another aggregator to compare information. There are several super aggregators coming out in the last year or two. But none of them went anywhere because when they you go to these aggregators you find most of the prices the same. All of these prices are offered by one or two players. In fact, only these one or two players can deliver these services. So the customer actually in the end, they will actually go to companies like Ctrip. Regarding the e-ticket, the airlines this year started to pushing e-tickets very aggressively. They actually adopted a new type of e-ticket. There are still some of the issues regarding the e-tickets and the distribution, so the general convenience benefits of using e-ticket is not fully realized by our customers yet. So that I think is still to be fixed, before e-tickets become really mainstream and people start realizing the benefit e-tickets has. When that happens, that is certainly a big propeller of growth for us. Of course, air tickets is another potential benefiter of the adoption of e-tickets when that happens. In general I think companies of a size like us, an independent website will actually benefit more from e-ticket than the airlines because the airlines are actually pretty slow to have a very good technologically advanced website. Also they are not very good at providing the air ticket and all the logistics associated with ticket services. Also in the airline industry in China the market is actually pretty fragmented. On any given route, there are more than five or six airlines competing, similar types of airlines with similar types of pricing. So the customers tend to go to websites to compare prices and compare all of the other things. I think we will benefit more from the e-ticket than the airlines. Of course, they have the expense of all of these small and medium travel agencies, or air ticket agencies currently, which currently holds the lion’s share of the market. Jason Breuschke – Citigroup: Great. Thank you very much. That's very helpful and congratulations again.

Your next question comes from the line of Richard Ji - Morgan Stanley. Please proceed. Richard Ji - Morgan Stanley: Good morning, good quarter. I have two questions. The first one is regarding your new business, especially packaged tours and outbound travel. You clearly scaled back your low-end group tour service, which I think is the right strategic move. On a quarter-over-quarter basis, can you give us a breakdown, what is the growth rate, sequential growth rate for your core FIT tour package service? My second question is regarding outbound travel. What is the percentage of revenue contribution that you generate from outbound travel right now, and what is your target three to five years down the road?

Sure. For the core business of FIT that's our focus for the business. On a year-over-year basis it's about 121% growth. On the quarter-over-quarter basis for core business, it decrease slightly for two reasons. One is Q1 was relatively a very strong quarter for FIT business due to spring break. Secondly, in Q2 actually the transaction volume was very high, but we had a joint promotion with one of our partners and we gave a very significant discount to the credit card holder, Ctrip credit card holder for this promotion. So the revenue commission we got was a little bit lower than Q1 but on an actual volume basis, it increased from last quarter. Your second question on outbound, as of Q2 approximately 40% of our tour package revenue is for the outcome business. We are expanding our tour packages even further, such as Europe tour, an Australian and New Zealand tour, Japan and Korea. So as time goes on, I think the percentage of the outbound should increase over time.

Very good. My second question is regarding your sales and marketing expense. Clearly we see some ramp up in that area. Could you also help us understand a little better about the breakdown of your sales and marketing expense, especially how much of that have you allocated in your business for your existing airlines and hotel business?

Sales and marketing, normally the sales in the marketing should only grow in line with our revenue growth. So as a percentage of total revenues, sales and marketing is at around 21% if you take out the stock compensation. We are intending to keep that rate between 20% to 22%, that range, going forward into the year. We definitely emphasize more on our new business such as tour packages, because these businesses are still at their infant stage and we need to put more efforts to promote them.

Okay very good. Thank you.

Our next question comes from Safa Rashtchy - Piper Jaffray. Safa Rashtchy - Piper Jaffray: Hi good morning, everyone. Good quarter, again. Most of my questions have been answered, I don’t have any major questions. I was just wondering if you could give us a sense of longer term, where do you expect margins to stabilize and how long do you think it will take? Obviously you have the mix issue of the airlines at the lower margins, but I assume airline margins are improving a little bit. Can you give us some longer term outlook on the margins?

Sure. The gross margin for the next quarter should be around 80%. As our air ticketing moves up, that margin, we are closely monitoring the margin. Air ticketing, as you know, has a little lower margin then the traditional hotel margins, so we are working very hard to make sure the numbers that go into cost of sales are closely monitored. We are putting a lot of efforts in streamlining the processes and control the cost of sales. Hopefully the margin will be somewhere around 80% going forward. Safa Rashtchy - Piper Jaffray: Do you think that can be sustained over the long term?

In the long term depending on the e-ticket and how fast the air ticketing picks up and also tour package and corporate travel. I think when we move further into the line, we will have better visibility on that. Right now, I think our goal is to maintain it at around 80%. Safa Rashtchy - Piper Jaffray: Okay, thank you very much. That’s all.

Thank you.

Your next question comes from the line of William Bao Bean - Deutsche Bank. please proceed. William Bao Bean - Deutsche Bank: Thanks for taking my question. I just have some housekeeping stuff. Could you just give us the number of guaranteed allotment bookings, the percentage?

Sure. The total guaranteed allotment is around 1,900 and total hotels we have partnerships with increased to 3,800. William Bao Bean - Deutsche Bank: I meant the number of bookings, hotel bookings that were on guaranteed allotment rooms?

Its around 70%. William Bao Bean - Deutsche Bank: Your brand customers or word of mouth this quarter?

Natural customer is around 30%, very consistent from last quarter. William Bao Bean - Deutsche Bank: Online versus offline booking?

30% online bookings. William Bao Bean - Deutsche Bank: And e-tickets as a percentage of total?

E-tickets as a percentage of total, this year I think Travel Sky increased the e-ticket number. So somewhere around 25%. William Bao Bean - Deutsche Bank: Is there a reason for the increase from last quarter?

As James explained, this year in June I think Travel Sky has put a lot of efforts in promoting the e-ticket. So that’s the reason that the total e-ticket percentage increased. William Bao Bean - Deutsche Bank: I am sorry I missed it, but what was your hotel commission?

Hotel commission percentage is around 14%; on a per room rate basis it is around RMB69 per room. William Bao Bean - Deutsche Bank: You said that June was softer. Is that in line with the normal June seasonality or was there something else in there that pushed it down more than the normal June seasonality?

Definitely it has the normal June seasonality, but a couple of things happened in this June. The first thing is that there is a World Cup there. We cannot quantify exactly the impact, but there is some impact. Also the e-tickets start to pick up some speed and there is some impact there too. William Bao Bean - Deutsche Bank: Finally, the percentage of revenue from top five cities?

For hotels it is around 50% to 55%. For airline it is around 80% from the first-tier cities. William Bao Bean - Deutsche Bank: So on average, it is the low 60s?

Yes, 60% to 70%. William Bao Bean - Deutsche Bank: Thank you very much.

Your next question comes from the line of Ashish Thadhani - Gilford Securities. Ashish Thadhani - Gilford Securities: Yes, good morning. I was just wondering, given your overwhelming emphasis on business travel why would the World Cup and college entrance exams be meaningful events?

The World Cup, as we discussed, it is hard to quantify but we just noticed there are less conferences in the major cities, which impacts the hotels as well as the air ticketing. That is our observation. College entrances, normally parents tend not to travel one week before the test and one week after when they are waiting for the scores. So that is the reason. Ashish Thadhani - Gilford Securities: Okay.

It's kind of unique to China. Ashish Thadhani - Gilford Securities: Yes. Also just switching subjects to your low-end packaged tours service. What was the revenue impact of your decision to discontinue this?

Sure. The lower end revenue package we inherited when we acquired a small travel agency many years ago. We monitor it and it is definitely lower margin and lower growth rate. So we made a strategic decision last quarter to definitely end that business. The business has been around 3 million, 2 million to 3 million every quarter for the past couple of quarters. Ashish Thadhani - Gilford Securities: Okay. That's very helpful. Finally, there appears to be a new long-term investment of $6.7 million on the balance sheet. Could you provide some color on that?

That is part of our investment in East Travel in Taiwan. Ashish Thadhani - Gilford Securities: Okay. Thank you very much.

Our next question comes from Ming Zhao – Susquehanna. Ming Zhao – Susquehanna: Thank you very much. Good morning, everyone. A few small questions. First of all, can you give us a breakdown about your new customers; 67,000 I remember that you said. How many of them are using hotel booking? How many of them use the air ticketing?

All new customers, we have more percentage that will use our hotel services and also a certain percentage will use our air ticketing service. In fact, we can see this trend. During this Q2, relatively there were more air ticketing new users than before. Ming Zhao – Susquehanna: You mean than Q1, right?

In the Q1, yes. Ming Zhao – Susquehanna: Also in your revenue growth which is 22% quarter-over-quarter and 47% year-over-year, roughly what is the percentage of that from say the business found in new users and what's the percentage from the old users making more repeated bookings?

Sure. Our revenue contribution from existing old customers is around 80%, and 20% is from the new customers. Ming Zhao – Susquehanna: Okay and also I think you provided an active user base for each quarter. Is there any number that we can note if there is any churn? Meaning part of the portion of the active users in the Q1 become inactive and then you have some new customers adding in. So do we know what kind of churn do you see in your business?

We normally do not provide active users versus inactive users, but if you look into the past 12 months, on average every customer is booking about two tickets and three rooms. So very active on an overall basis. Ming Zhao – Susquehanna: Okay good. Also in terms of the cross selling, what kind of a pattern do you see in your customers? Meaning for the people who book hotel rooms, what percentage of them also book tickets concurrently?

Most of our hotel booking customers, they will also book our airline ticket. This is the general picture. Our internal operations, we will close sales, we do have some cross-selling. When a customer books the airline ticket then we will try to convert them to our hotel booking. Ming Zhao – Susquehanna: So are you suggesting on the air ticketing customers, fewer of them book hotel rooms than vice versa?

Not exactly. I think the consumer behavior patterns are quite different among each individual. So there's no very concrete, definite pattern for the general picture. Ming Zhao – Susquehanna: You just mentioned that there is some slowdown in the June month because of e-ticketing. Can you elaborate on that, why more e-ticket sales would impact the business negatively?

E-tickets, in general the e-ticket adoption is increasing, and it is a growth driver for us, but there's a new type of e-ticket being adopted by all of the airlines so initially the new type of e-ticket has some glitches at the airport. They have long lines for e-ticket and things like that. So initially there is some inconvenience to using e-ticket. So that kind of dampened our volume in e-ticket a little bit. Ming Zhao – Susquehanna: Thank you very much.

Our next question comes from Frank Ji - CLSA. Frank Ji – CLSA: Hi guys. What is the commission rate for your outbound hotel bookings, and then what's the trend for the commission rate there?

Tour packages is still a very new business so the commission rates can vary between; sometimes if we have promotions the commission rates can be very low, but if during the three golden weeks the commission rates can be very high. But overall our tour package is a combination of hotel and air tickets so once it reaches the normalized level the commission rate should be somewhere around 10%. Frank Ji – CLSA: Great thank you.

Our next question comes from Robert Peck – Bear Stearns. Lillian Chu – Bear Stearns: Hi It is actually Lillian Chu for Bob. Congrats on the excellent quarter. I just a have quick follow-up question in terms of competition. I wonder if you guys can provide any sort of color on any sort of competition from eLong?

Ctrip is growing very fast and also eLong is growing too. In a way, we are getting more and more market share, not from each other but mainly from the small players. You can see the China travel market is so big, so we don’t think there is a very big problem from eLong competition right now. Lillian Chu – Bear Stearns: Do you think that eLong’s relationship with Expedia is going to put you at any sort of a disadvantage at all?

No, not yet.

Not really.

Our next question comes from Michael Millman - Soleil Securities. Please proceed.

I want to follow-up on some previous questions regarding competition. Specifically, looking at what Priceline has done moving into secondary and tertiary cities, and then are tying up affiliates and have run up a very substantial business. Do you see not necessarily Priceline -- but maybe Priceline -- but others doing the same thing in your market? If not, why not?

Excuse me, Mike, are you talking about Priceline or eLong some other company?

Priceline.

Priceline.com?

Priceline is mainly in the U.S.

Priceline have their operations I think in Cancun, but not in Mainland China.

No, I wasn't asking if they were there yet. I was asking if they or someone else could take their business model that’s been very successful so far in European markets to China.

Regarding the competition, I think in order to compete very well in the China market, you have to have a team that knows the China market very well. The multi-nationals probably can add some value financially by bringing more money or some technology advantages to the market. However, the critical points for winning this market its really building up the relationship with the China markets, building up a strong support system with our vendors and build up a good relationship with the customers. That is what Ctrip has. So we do not see too much competition from other players, from multi-nationals and we are monitoring the process very closely and carefully.

Could someone from outside try to buy up a bunch of smaller consolidators to get a foothold?

Yes, Expedia already did that with eLong, so the next competitor in the market is eLong, and Expedia is the majority holder of that company, but right now our hotel side is still twice as big as theirs, and the airline is six times as big as theirs; tour package and corporate travel we are much ahead. They are not doing too, too much yet. So I think just rely on the multi-nationals is not going to guarantee you a winning strategy in the China market.

Thank you.

Our next question comes from Richard Cho – Alliance Bernstein. Richard Cho – Alliance Bernstein: Thank you. Congratulations all, on the excellent performance. I have a follow-up question on the acquisition strategy. I think you mentioned there was spending about $6 million per quarter on acquisitions. I just wanted you to elaborate more especially on the outbound, on the international bound business.

The acquisition stake in a Taiwan online travel company has nothing to do with outbound business. The outbound business we are currently doing is essentially everything we do, we grow organically in key cities in China. Tapping into the Hong Kong and Taiwan market is really focusing on local demand. The Taiwanese and Hong Kong people going into China. Of course, we are pursuing a very cautious strategy, we are looking for partners and the leaders in each market that we can work with in acquiring an initial position in that market stake. So we are pursuing acquisitions on a very cautious acquisition strategy in these markets. Richard Cho – Alliance Bernstein: Is there anything else you are looking at? Is it still the Greater China region that you will focus on, predominantly?

We will first look at the Hong Kong and Taiwan market. These are certainly the closest and more similar to the Chinese travel market. Richard Cho – Alliance Bernstein: When you do the acquisitions on the Taiwan e-travel, are you acquiring their customers or are you acquiring their platform?

We are just acquiring a minority stake at the current stage. Given the development of their company and the overall market, and also the relationship between China and Taiwan in terms of opening up cross-strait travel, we will see whether or not we want to increase our presence in that market. Currently we are just a minority stakeholder. Richard Cho – Alliance Bernstein: Thank you.

Our next question comes from Lu Sun – Lehman Brothers. Lu Sun – Lehman Brothers: Thank you for taking my follow-up. Two questions: one is can you give us an update on your headcount and the breakdown of headcount? And also your plans to increase that headcount by the end of this year. My second question is that some of our friends and family or some of the press also had some feedback on your service saying that the hotel prices are not the lowest on the market. How would you defend yourselves against that kind of comment? Or would you care more for quality than pricing? Or would you want to guarantee the lowest pricing for your customers? Thank you.

I will answer the first question on headcount, and our CEO will address your second part. The headcount is around 4,400 at the end of Q2, so the breakdown is about 1,800 for our call center people and around 14% for the product development; sales and marketing is around 800 and the rest is G&A. Our principle, again, for the headcount growth is it should be in line with revenue growth. A little bit below the revenue growth, but percentage should be the same.

On the international hotel chains, they will mandate the same guest price per room rate among all of the countries, and then they will mandate that all of the prices listed on the website will be the same for hotels and agencies. So what you said is right. You can see some international brand hotels where we may have already listed their price before we have some discount, and right now we have the same price as their website. But those international hotels, they are a small portion of our total hotel pool. So most of the hotels we have very good price competition, price attractiveness and also even among those international hotels which we do not enjoy a more discounted price we will try to differentiate our offers by very added service, especially for Ctrip clients. Lu Sun – Lehman Brothers: Just as a follow-up, what kind of percentage of total room bookings do you think that these major chain hotels account for in the three star and above market in China?

Around 4% to 5% production from those chain hotels. In the meantime, eventually the hotel will raise their price, that means we will get a little bit more commission as well. Lu Sun – Lehman Brothers: Thank you very much.

And your next question comes as a follow-up from the line of William Bao Bean - Deutsche Bank.

Thanks guys. I just had one follow-up. Could you give us, you said you are raising your advertising spending. Can you tell us where and what your strategy is going forward on the ad side?

Again, on the sales and marketing, we are not intending to raise advertising exceeding our revenue growth. Again, we always keep our sales and marketing costs in line with revenue growth. The timing of the advertising has some differences between quarters, so maybe certain production is not in Q1 but we put it out in Q2. On an overall basis we are intending to keep the sales and marketing at the current rate which is between 20% to 22% of the total revenue.

Thanks. I am clear on that. I was just wondering in terms of the increases that you are making, are putting them into new areas or do you have campaigns rolling out or is it more of the same?

Among those sales and marketing dollars we do have some allocated to second-tier city development. And also for corporate travel business. Again, like Jane said, we will maintain the similar portion in line with our top line growth rate.

You Next question comes from the line of David Qui - Merrill Lynch. David Qui - Merrill Lynch: Thanks for taking my call. I have two questions mainly. One is on corporate travel. I just wonder what the key difference for this product or service versus your core existing offering to FITs? How much do you plan to spend in this area, and what is the revenue potential? Another question is if you can give us some guidance on share-based compensation over the next two quarters? Thank you.

The corporate travel business is different from individual customers in that when you win a customer you tend to have that customer for the long term. So it is a very stable business. Of course initially to win the business you have to do a lot of bidding and business to business sales and typical selling. The other difference is that most of the customers apply for credit, so you don’t collect money on every ticket, so you do a monthly billing and collection process with these companies. You have to do that very carefully. You only select clients with very good credit. So we actually focus and market on the big companies, the Fortune 1000 companies, the leading international companies and leading companies in China, so to maintain our good collection and receivables, to keep the receivables and collection under control. Those are the two differences. David Qui - Merrill Lynch: Thanks James. So the key difference really is you extend credit to corporate customers? In terms of the type of hotels, the rates, just not a lot of difference?

If there is a very large corporate, sometimes they will get additional discounts from the suppliers. So we will negotiate on their behalf to get additional discounts, and we collect service charges on these kind of arrangements. But most of their transactions are actually similar to the individual customers. David Qui - Merrill Lynch: So how much are you going to spend in this area, and what is the revenue potential? Thanks.

The sales and marketing for these corporate travel businesses is not as significant because you don’t need to do a lot. It is more direct sales. You just need to establish a direct sales team. So it is not very significant sales and marketing money.

The revenue potential is in its early stages right now.

The potential is enormous but by the U.S. standards I think you can say maybe 30% to 50% of their market is actually managed [accounts]. I don’t know the exact number so don’t quote me on that, but it’s a very significant part of the overall travel business. Of course in China this business is just still at a very early stage of development, so I think in the long run it is a very big market. David Qui - Merrill Lynch: Thank you. And just some guidance on share-based compensation?

The share-based compensation currently is around RMB30 million per quarter. Going forward as we are adding new brands for the next couple of quarters it will be between probably RMB14 million to RMB15 million on a quarterly basis. David Qui - Merrill Lynch: Okay. Thank you very much.

Ladies and gentlemen this now concludes the question and answer session. At this time I would turn the call over to Ms. Cui for closing remarks.

Thank you for your participation in this call.

Thank you for your participation in today’s conference. Ladies and gentlemen, this concludes the presentation. You may all disconnect and have a good day.