DRS Letter

DRSLTR 1 filename1.htm DRS Letter


SKADDEN, ARPS, SLATE, MEAGHER & FLOM
	42/F, EDINBURGH TOWER, THE LANDMARK 15 QUEEN’S ROAD CENTRAL, HONG KONG	AFFILIATE OFFICES ——— BOSTON CHICAGO HOUSTON




	———	LOS ANGELES
		NEW YORK
	TEL: (852) 3740-4700	PALO ALTO
PARTNERS	FAX: (852) 3740-4727	WASHINGTON, D.C.
JOHN ADEBIYI ¿ CHRISTOPHER W. BETTS EDWARD H.P. LAM ¿* G.S. PAUL MITCHARD QC ¿ CLIVE W. ROUGH ¿ JONATHAN B. STONE *	www.skadden.com	WILMINGTON ——— BEIJING BRUSSELS FRANKFURT LONDON MOSCOW MUNICH PARIS SÃO PAULO SHANGHAI SINGAPORE




ALEC P. TRACY *
¿ (ALSO ADMITTED IN ENGLAND & WALES)
* (ALSO ADMITTED IN NEW YORK)



		SYDNEY
REGISTERED FOREIGN LAWYERS		TOKYO
Z. JULIE GAO (CALIFORNIA)	March 6, 2014	TORONTO
RORY MCALPINE (ENGLAND & WALES)
GREGORY G.H. MIAO (NEW YORK)
ALAN G. SCHIFFMAN (NEW YORK)

Confidential

Barbara C. Jacobs, Assistant Director

Jan Woo, Attorney Adviser

Christine Davis, Assistant Chief Accountant

Eiko Yaoita Pyles, Staff Accountant

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Re:

Kingsoft Internet Software Holdings Limited

CIK No. 0001597835

Response to the Staff’s Comment Letter Dated February 21, 2014

Dear Ms. Jacobs, Ms. Woo, Ms. Davis and Ms. Pyles:

On behalf of our client, Kingsoft Internet Software Holdings Limited, a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated February 21, 2014. Concurrently with the submission of this letter, the Company is submitting its revised draft registration statement on Form F-1 (the “Revised Draft Registration Statement”) and certain exhibits via EDGAR to the Commission for confidential non-public review pursuant to the Jumpstart Our Business Startups Act (the “JOBS Act”).

U.S. Securities and Exchange Commission

March 6, 2014

Page 2

To facilitate your review, we have separately delivered to you today five courtesy copies of the Revised Draft Registration Statement, marked to show changes to the draft registration statement confidentially submitted to the Commission on January 27, 2014, and two copies of the submitted exhibits.

The Staff’s comments are repeated below in bold and are followed by the Company’s responses. We have included page references in the Revised Draft Registration Statement where the language addressing a particular comment appears. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Revised Draft Registration Statement.

In addition to adding and revising disclosure in response to the Staff’s comments, the Company has updated the Revised Draft Registration Statement to include the Company’s financial statements for the full year 2013 and reflect the Company’s recent developments.

General

Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.

The Company confirms that neither the Company nor any of its authorized representatives has presented to potential investors any written communication in reliance on Section 5(d) of the Securities Act. If any such written communication is presented to potential investors in the future, the Company will promptly provide the Staff with a copy of the written communication.

The Company further confirms that to the knowledge of the Company, no broker or dealer that is participating or will participate in the Company’s offering has published or distributed any research reports about the Company in reliance upon Section 2(a)(3) of the Securities Act added by Section 105(a) of the JOBS Act. If any such research report is published or distributed by the broker or dealer that is participating or will participate in its offering in the future, the Company will provide the Staff with a copy of the research report promptly.

U.S. Securities and Exchange Commission

March 6, 2014

Page 3

We will process your amendments without price ranges. Since the price range you select will affect disclosure in several sections of the filing, we will need sufficient time to process your amendments once a price range is included and the material information now appearing blank throughout the document has been provided. The effect of the price range on disclosure throughout the document may cause us to raise issues on areas not previously commented on.

The Staff’s comment is noted. The Company confirms that it will include the estimated price range and all other required information in subsequent amendments to its Form F-1 prior to any distribution of preliminary prospectuses and as soon as such information becomes available.

Please supplementally provide us with copies of any graphical materials or artwork you intend to use in your prospectus. Upon review of these materials, we may have further comments. Please refer to Question 101.02 of our Compliance and Disclosure Interpretations relating to Securities Act Forms available on our website.

The Company respectfully advises the Staff that the Company is in the process of preparing the graphical materials and artwork that the Company intends to use in the prospectus. The Company confirms that it will provide copies of any graphical materials and artwork or include them in the subsequent amendments to its Form F-1 as soon as such materials become available.

With respect to all third-party statements in your prospectus, such as from App Annie Limited, iResearch and IDC, please provide us with the relevant portion of the industry research reports you cite. To expedite our review, please clearly mark each source to highlight the applicable portion of the section containing the statistic, and cross-reference it to the appropriate location in your prospectus. Also, please tell us whether any of the reports were prepared for you or in connection with the offering.

The Company encloses, as Annex I hereto, the relevant supporting materials, including translations of key excerpts, of the industry and market data from third party sources cited in the Revised Draft Registration Statement, with cross-references to the appropriate locations in the Revised Draft Registration Statement. The Company respectfully advises the Staff that none of the industry reports were prepared for this offering.

U.S. Securities and Exchange Commission

March 6, 2014

Page 4

Prospectus Cover Page

Please tell us the significance of the Chinese characters and logo in the heading on the prospectus cover page and why you believe that this information is appropriate for the cover page. Also, given that the company has 85 registered domain names as of January 10, 2014, please tell us why you believe that it is appropriate to include www.ijinshan.com on the prospectus cover page.

The Company respectfully advises the Staff that, as a business decision, the Company is contemplating changing its company name and company logo. The Company plans to effect the changes prior to the first public filing of the Registration Statement on Form F-1. Accordingly, the current logo has been removed from prospectus cover and back pages, and the new company logo will be inserted once it is available. The Company’s name in the Registration Statement on Form F-1 will also be updated once the name change becomes effective.

6.	Please revise to disclose the persons who hold Class B ordinary shares.

In response to the Staff’s comment, the Company has revised the cover page to disclose the holders of Class B ordinary shares.

Prospectus Summary

Please disclose the percentage amount of revenues you derive from online marketing services rather than stating that you “primarily” generate revenues by referring traffic from your platform. Given that online marketing services accounted for 73.8% and 83.2% of your revenues for the fiscal year ended December 31, 2012 and the nine months ended September 30, 2013, respectively, it appears that this quantitative information would provide appropriate context to investors regarding the source of your revenues.

In response to the Staff’s comment, the Company has revised pages 2, 89, 102 and 104 of the Revised Draft Registration Statement to disclose the percentage amount of revenues it derived from online marketing services for the years ended December 31, 2012 and 2013.

8.	Please clarify whether the company will be a “controlled company” under the definition of the applicable stock exchange and provide appropriate disclosure on the prospectus cover page, prospectus summary and risk factors to the extent appropriate.

U.S. Securities and Exchange Commission

March 6, 2014

Page 5

In response to the Staff’s comment, the Company has revised the referenced disclosure on the cover page and pages 7 and 27 of the Revised Draft Registration Statement to indicate that it will be a controlled company and to highlight related risks.

9.	Please disclose that your directors are not subject to a term of office and hold office until such time as they resign or are removed from office by special resolution or the unanimous written resolution of all shareholders.

In response to the Staff’s comment, the Company has revised the referenced disclosure on page 7 of the Revised Draft Registration Statement.

10.	Please identify China Internet Network Information Center, which you cite as the source of your information regarding the number of internet users in China, as a not-for-profit organization.

In response to the Staff’s comment, the Company has revised the referenced disclosure on pages 3 and 99 of the Revised Draft Registration Statement.

Conventions Which Apply To This Prospectus, page 13

11.	Please tell us what consideration you have given to including a short definition of “monthly active users” and “daily active users” with the first use of the terms or providing a cross-reference to the definitions on page 13.

In response to the Staff’s comment, the Company has revised the disclosure on page 1 of the Revised Draft Registration Statement to include cross-references to the definitions.

Risk Factors

Risks Relating to Our Business and Industry

We only began to offer and monetize our mission critical mobile applications…page 14

12.	You state that you have “received and may continue to receive complaints from users” regarding your mobile applications. Please tell us what consideration you have given to disclosing the nature of the complaints and discussing any material costs to address the complaints.

U.S. Securities and Exchange Commission

March 6, 2014

Page 6

In response to the Staff’s comment, the Company has revised the disclosure on page 16 of the Revised Draft Registration Statement to include the nature of complaints received.

The Company also respectfully advises the Staff that the number of complaints as compared to the number of downloads in the relevant periods is insignificant, and the Company has not incurred any material costs to address the complaints. The Company’s mobile applications are available for download and installation by end users free of charge. Accordingly, the Company addresses the users’ complaints for commercial reasons rather than to perform a contractual obligation.

Because a small number of business partners contribute to a significant portion of our revenues…, page …15

13.

Please disclose your dependence on two of your customers that accounted for 22% and 24% of your revenues for the year ended December 31, 2012 and on any other significant customers for the most recent reporting period. Please tell us what consideration you have given to identifying these customers and discussing the material terms of any agreements or fee arrangements with the customers in the Business section as well as filing the agreements as exhibits to the registration statement.

In response to the Staff’s comment, the Company has revised the disclosure on pages 16, 113 and 114 of the Revised Draft Registration Statement to disclose the identities of its top three customers in 2011, 2012 and 2013, namely, Tencent, Alibaba and Baidu, and include the material terms of its business contracts with each of these three customers.

The Company has also carefully considered whether any of the agreements with its top customers must be filed as exhibits to the Registration Statement pursuant to Item 601 of Regulation S-K:

All agreements with the three customers were made in the ordinary course of business. Item 601 of Regulation S-K provides that “[i]f the contract is such as ordinarily accompanies the kind of business conducted by the registrant and its subsidiaries, it will be deemed to have been made in the ordinary course of business and need not be filed.” Therefore, the Company’s agreements with Tencent, Alibaba and Baidu normally need not be filed as agreements made in the ordinary course of business, unless these agreements fall under other filing categories.

U.S. Securities and Exchange Commission

March 6, 2014

Page 7

ii.

However, as Tencent is a principal shareholder of the Company, the Company’s agreement with Tencent was a related party transaction. Item 601 of Regulation S-K requires a registrant to file “[a]ny contract to which directors, officers, promoters, voting trustees, security holders named in the registration statement … are parties other than contracts involving only the purchase or sale of current assets having a determinable market price, at such market price” and “except where immaterial in amount or significance.” Therefore, the Company will file its agreement with Tencent as a material agreement with a related party.

Therefore, the Company plans to file its strategic cooperation agreement with Tencent as an agreement relating to a related party transaction, but it does not plan to file the agreements which are entered into in the ordinary course of business.

If we fail to implement and maintain an effective system of internal control…, page 26

14.	Please revise to discuss any material costs that you have incurred or expect to incur to remediate the material weaknesses in your internal control over financial reporting. Also disclose the timetable for the steps that you are taking to remediate these weaknesses.

The Company respectfully advises the Staff that, with respect to the material weakness already identified, namely, its lack of financial reporting personnel with the requisite U.S. GAAP and SEC financial reporting expertise, the Company has not incurred material costs to remediate this material weakness, and it is not able to estimate with reasonable certainty the costs it will need to incur to implement further measures to remediate the material weakness and improve its internal control over financial reporting in the future. The Company has revised page 29 of the Revised Draft Registration Statement to disclose the same.

The Company has also revised the disclosure on page 79 of the Revised Draft Registration Statement to disclose the timetable for the steps the Company plans to take to remediate the material weakness.

Special Note Regarding Forward-Looking Statements and Industry Data, page 52

15.

We note your statement that some of the information in the prospectus is based on industry publications by third parties that are reliable but you “do no guarantee the accuracy and completeness of such information.” Please note that you are responsible for the entire content of the registration statement and should not include language that can be interpreted as a disclaimer of information you have chosen to include. Please revise.

U.S. Securities and Exchange Commission

March 6, 2014

Page 8

In response to the Staff’s comment, the Company has revised the referenced disclosure on page 56 of the Revised Draft Registration Statement.

Use of Proceeds, page 53

16.

To the extent known, please provide more detail regarding the plans for which the net proceeds in this offering is intended to be used. Consider disclosing the amount of proceeds that you intend to use for expanding into international markets or research and development. This section does not require disclosure of definitive plans and it is acceptable to discuss preliminary plans. See Item 3.C of Form 20-F.

In response to the Staff’s comment, the Company has revised the disclosure on page 57 of the Revised Draft Registration Statement to provide more details regarding the plans for which the net proceeds in this offering are intended to be used.

Enforceability of Civil Liabilities, page 59

17.	Your disclosure here and under the headings “PRC Regulations, page 106,” and “Taxation, page 169,” should include discussion of other material jurisdictions as necessary, for example, Hong Kong and the British Virgin Islands.

In response to the Staff’s comments, the Company has expanded the disclosure in “Enforceability of Civil Liabilities, on page 64 to include discussion of Hong Kong and the British Virgin Islands.

Regarding the “Taxation” section, the Company respectfully advises the Staff that it has included discussion related to taxation in Hong Kong and the British Virgin Islands in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Selected Statement of Operations Items—Taxation” on page 78. The Company believes the objective of the section “Taxation” is to provide a summary of material income tax consequences of an investment in the Company, and, for this purpose, discussion on Hong Kong and the British Virgin Islands will not be necessary.

U.S. Securities and Exchange Commission

March 6, 2014

Page 9

With regard to the “Regulation” section, the Company believes that the principal laws and regulations currently material to its operations are PRC laws and regulations. The Company does not believe that disclosure about Hong Kong or the British Virgin Islands is necessary. The Company respectfully advises the Staff that it does not conduct any revenue-generating activities in the British Virgin Islands. The Company’s wholly owned subsidiary incorporated in Hong Kong, Cheetah Technology Corporation Limited, only contributed nil, nil and 1.4% of the Company’s total revenues in 2011, 2012 and 2013, respectively.

Corporate History and Structure, page 62

18.	Please tell us what consideration you have given to including Kingsoft Corporation Limited, your immediate and ultimate holding company, in the charts on pages 6 and 64.

In response to the Staff’s comment, the Company has revised the charts on pages 6 and 68 of the Revised Draft Registration Statement to include its parent company, Kingsoft Corporation Limited.

19.	Here or elsewhere, as appropriate, please make clear the category of each of your wholly owned PRC subsidiaries in the Catalogue for the Guidance of Foreign Investment Industries.

In response to the Staff’s comment, the Company has revised the referenced disclosure on pages 66 and 67 of the Revised Draft Registration Statement.

U.S. Securities and Exchange Commission

March 6, 2014

Page 10

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview, page 70

20.

Please consider revising your overview section to provide a balanced, executive-level discussion that identifies the most important themes or other significant matters with which management is concerned in evaluating the company’s financial condition and operating results. In this regard, please discuss any known material trends, demands, commitments, events and uncertainties that pose a risk or threat to the company. See Item 303(a) of Regulation S-K and SEC Release No. 33-8350. For example, consider discussing the impact on your financial results of each of your fee arrangements with business partners or customers (i.e., pay per click, pay per sale, pay per time) and any material effect on the company when customers switch from one arrangement to another. We note your disclosure on page 15 that a change in the fee arrangement with one of your significant partners affected your revenues in 2013. As a further example, consider disclosing the percentage of your mobile applications that are created for the Android and how you expect that to affect your monetization of the mobile business. Finally, consider discussing your plans and timeline for international expansion, which you state is one of your key growth strategies, and any risks and uncertainties related to those plans.

The Company respectfully advises the Staff that the factors affecting its operations vary among its lines of business and are discussed in the descriptions of its various sources of revenues. However, in order to provide a more balanced, executive-level discussion, and to further address the Staff’s specific comments, the Company has revised the disclosure on pages 74 and 75 of the Revised Draft Registration Statement to highlight the potential effects of the Company’s international growth strategy and emphasis on Android application development on the Company’s financial condition and operating results. The Company has also revised the disclosure on pages 75 and 76 of the Revised Draft Registration Statement to further clarify the effect that changes in the Company’s fee arrangements with its business partners may have on its revenues.

21.

We note your disclosure throughout the prospectus that you had 301.7 million monthly active users for all your applications in November 2013. You note on page 13 that you derive the number of monthly active users for your products by combining the number of active users of each of your core applications. Please tell us whether you accounted for duplicative users who installed or downloaded multiple core applications on their electronic devices and whether you considered any risk factors in this regard. Further, tell us whether you accounted for duplicative users who installed or downloaded the same core application on multiple devices such a tablet, computer, or smartphone.

U.S. Securities and Exchange Commission

March 6, 2014

Page 11

The Company respectfully advises the Staff that it calculates monthly active users based on the number of unique devices. A single device with multiple applications installed is counted as one user. A single person with applications installed on multiple devices is counted as multiple users. Multiple persons using a single device are counted as one user. As this is consistent with industry practice and technological feasibility, the Company does not believe it should be presented as a material risk. however, in response to the Staff’s comment, the Company has detailed the disclosure on page 14 under heading “Conventions Which Apply to the Prospectus” to clarify the possible duplication of data.

22.

We note that you disclose monthly active users as of November 2013. Please tell us whether your monthly active users would materially differ if calculated using an average over a quarter or over a full year. Explain why you believe that using the monthly active user data as of November 2013 is more meaningful than providing an average.

The Company respectfully advises the Staff that November 2013 was the latest monthly users data available at the time of its initial filing. The Company believes that monthly active users data present the most meaningful and accurate information regarding the size of its user base in light of the Company’s rapidly growing number of users. The Company advises the Staff that it had 329.5 million monthly active users in December 2013 and an average of 302.4 million monthly active users in the fourth quarter of 2013. The Company does not believe that the average monthly user figure provides an accurate indication of the size and growth of the Company’s business as of the date of the Revised Draft Registration Statement. The Company has revised the disclosure on page 75 of the Revised Draft Registration Statement to reflect its number of monthly active users in December 2013.

23.

For each of the financial periods presented, please tell us what consideration you have given to discussing any material trends related to monthly active users. We note your charts on pages 97 and 98 reflecting the number of monthly active users of all your applications and the number of monthly active users for your mobile applications but it appears that you could provide meaningful geographical breakdown of the users. For example, you state on page 98 that in December 2013, approximately 46.8% of your mobile monthly active users were from China, while the remainder were from overseas markets, mostly in key markets including the United States, Japan and Europe.

U.S. Securities and Exchange Commission

March 6, 2014

Page 12

The Company respectfully advises the Staff that, as the Company has yet to fully develop and monetize its international operations, revenues from overseas markets only contributed a small percentage of its total revenues in 2012 and 2013. As the Company continues to deepen its global penetration and enhance its monetization capabilities, the Company expects the revenue contributed by overseas markets will increase over time, but the China market will likely continue to constitute the majority of its revenues for the foreseeable future. In response to the Staff’s comment, the Company has revised the disclosure on page 75 of the Revised Draft Registration Statement to disclose the same.

As for the geographical breakdown of the users, the Company respectfully advises the Staff that given the early stages of overseas operations monetization, such geographical breakdown of the users does not correlate to the Company’s results of operations in these markets. Therefore, instead of adding the relevant disclosure in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the Company has expanded the disclosure on page 103 in “Business” to disclose the geographical breakdown of its mobile users.

Selected Statement of Operations Items

IVAS, page 71

24.

We note your discussion of paying users on page 72 as well as the fact that you disclose on page 77 that there has been a significant growth in the number of paying users. It appears that the number of paying users is a key indicator of your IVAS revenue and operating performance. Please tell us what consideration was given to providing quantitative disclosure of the number of paying users. See Section III.B.1 of SEC Release No. 33-8350.

In response to the Staff’s comment, the Company has revised the disclosure on page 76 of the Revised Draft Registration Statement to disclose the number of paying users.

U.S. Securities and Exchange Commission

March 6, 2014

Page 13

Results of Operations, page 76

25.

We note that your revenue from online marketing services increased by 272.7% during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 due to an increase in online marketing revenues from your top ten online marketing customers and to a lesser extent an increase in the total number of your online marketing business partners. Please revise your disclosures to quantify each source that contributed to a material change and the extent to which the change is attributable to price versus volume. In this regard, we note your disclosure that the significant increase from your top ten online marketing customers was due to the increase in user traffic and favorable pricing terms. We refer you to III.D of SEC Release No. 33-6835.

In response to the Staff’s comment Company has revised the referenced disclosure on page 81 of the Revised Draft Registration statement to disclose the changes in revenue provided by its top ten online marketing customers as well as the changes in the number of its online marketing business partners.

The Company, however, has not further expanded the disclosure to add quantitative disclosure on the change of the marketing services price and volume. This is primarily because, as the Company has disclosed on page 89 of the Revised Draft Registration, the Company has several pricing models for its online marketing services, including cost over a time period, cost per click and cost per sale. The overall proportion of these pricing models varies from period to period, from customer to customer and from contract to contract. Therefore, it is difficult for the Company to meaningfully quantify the exact changes in overall average selling price and volume for online marketing services.

Liquidity and Capital Resources

Cash Flows and Working Capital, page 79

26.	Please revise to discuss the dividend restrictions included in your risk factor disclosures on pages 30 and 40 and the impact of those restrictions on your ability to pay dividends and meet the company’s cash obligations.

In response to the Staff’s comments, the Company has revised the referenced disclosure on page 84 of the Revised Draft Registration Statement.

U.S. Securities and Exchange Commission

March 6, 2014

Page 14

27.

We note your disclosure on page 41 which discusses the PRC government control of currency conversion. Please expand your liquidity and capital resource disclosure to include this information. Also, please revise to disclose, by respective denominations, the amount of cash located in the PRC and subject to restrictions, and cash located outside of the PRC. For entities within China, disclose the amount of cash, by denomination, held by VIEs separately from the amount of cash held by other entities.

In response to the Staff’s comments, the Company has revised the referenced disclosure on pages 84 and 85 of the Revised Draft Registration Statement.

28.

Please revise your disclosure to describe the restrictions imposed by statutory limits on loans to your PRC subsidiary as described in the risk factor on page 39, the implication on the use of proceeds from this offering, and how such restrictions could materially and adversely affect your liquidity and ability to fund operations.

In response to the Staff’s comments, the Company has revised the referenced disclosure on page 85 of the Revised Draft Registration Statement.

29.	In describing the restrictions on the transfer of cash flows, please tell us how you considered disclosing the following:

•

The requirement to obtain SAFE approval for capital account items, such as loans, repatriation of investments and investments in securities outside of China, as disclosed on page 41; and

•

Whether the amount of assets that can be transferred out of the VIE is limited to the amount owed under the annual service fee calculated under the technology development, support and consulting agreements, as disclosed on page F-11.

In response to the Staff’s comments, the Company has revised the referenced disclosure on page 85 of the Revised Draft Registration Statement.

The Company respectfully advises the Staff that the amount of assets that can be transferred out of the VIEs is not limited to the amount owed under the annual service fee calculated under the exclusive technology development, support and consultancy agreements.

U.S. Securities and Exchange Commission

March 6, 2014

Page 15

Business

Intellectual Property, page 109

30.	Please disclose which VIEs hold the patents for the proprietary technology that you note are essential to the operations of your platform and important to the operation of your business on page 31.

In response to the Staff’s comments, the Company has revised the referenced disclosure on page 115 of the Revised Draft Registration Statement.

Facilities, page 110

31.

We note your disclosure that your servers are hosted in leased internet data centers in different areas of China. Please tell us what consideration you have given to addressing the risks associated with these data centers. Also tell us what consideration you have given to including a description of any agreements with your third-party data centers and filing those agreements as exhibits to this registration statement.

The Company respectfully advises the Staff that it does not plan to include a description of agreements with its third-party data centers or file those agreements as exhibits because none of those agreements is material on a stand-alone basis, and the Company is not dependent on any of these agreements for its business operations. The Company believes that third-party data centers are a commodity and that it will be able to find an alternative third-party data centers at similar costs should any one of those agreements is terminated.

Legal Proceedings, page 110

32.	We note that you discuss additional legal proceedings in which the company is engaged on pages F-41 and F-85. Please tell us what consideration you have given to disclosing the information about the litigation in this section or providing a cross-reference to the notes to the financial statements.

In response to the Staff’s comments, the Company has revised the disclosure on page 116 of the Revised Draft Registration Statement to include a cross-reference to the notes to the financial statements on pages F-54 and F-55 of the Revised Draft Registration Statement.

U.S. Securities and Exchange Commission

March 6, 2014

Page 16

Management

Directors and Executive Officers, page 128

33.	Please disclose the business experience of Ming Xu from 2007 to 2010. Please also disclose the years that Xinhua Liu served as the chief strategy officer of Shunyu Communications Group. See Item 6 of Form 20-F.

In response to the Staff’s comments, the Company has revised the disclosure on page 136 of the Revised Draft Registration Statement.

Principal and Selling Shareholders, page 136

34.

We note that you included disclaimers of beneficial ownership in footnotes (6), (8), (9) and (10) of the table on page 136. Instruction 2 to Item 403 of Regulation S-K states that beneficial ownership pursuant to Item 403 is determined in accordance with Exchange Act Rule 13d-3, which states that beneficial ownership is based on voting and/or investment power, not pecuniary interest. Item 403 does not otherwise provide authority for registrants to issue disclaimers of beneficial ownership under Exchange Act Rule 13d-4, which only applies to the level of beneficial ownership held by persons who file beneficial ownership statements. Please revise.

In response to the Staff’s comment, the Company has revised the disclosure on page 143 of the Revised Draft Registration Statement.

35.

Please note that when you disclose the identities of the selling shareholders in the filing, with respect to the shares to be offered for resale by legal entities, the individual or individuals who exercise the voting and dispositive powers should be disclosed. For guidance, see Regulation S-K Compliance and Disclosure Interpretations Question 140.02.

The Staff’s comment is noted. The Company will identify such individuals when the identities of the selling shareholders are determined.

U.S. Securities and Exchange Commission

March 6, 2014

Page 17

Related Party Transactions

Transactions and Agreements with Kingsoft Corporation and its Subsidiaries, page 139

36.	Please revise to discuss the material terms of the licensing agreement with Kingsoft Corporation that you reference on page 110. Tell us what consideration you have given to filing the agreement as an exhibit to the registration statement.

The Company respectfully advises the Staff that it is in the processing of obtaining most of the patents, copyrights and trademarks licensed under the referenced agreement with Kingsoft Corporation by way of transfer from Kingsoft Corporation. The Company expects to complete such transfer by the initial public filing of this Registration Statement on Form F-1. With respect to the intellectual property that cannot be transferred to the Company, the Company will enter into a new licensing agreement with Kingsoft Corporation to obtain the right to use certain patents, copyrights and trademarks, which may include those that are material to its business operation. The new agreement will supercede the existing licensing agreement. To the extent that the new agreement is material to the Company, the Company will add the material terms of the agreement to the Registration Statement, and also file the agreement as an exhibit to the Registration Statement.

37.	Please disclose the identities of the company’s executive officers and directors who also serve as executive officers and/or directors of Kingsoft Corporation, your controlling shareholder.

In response to the Staff’s comment, the Company has revised the disclosure on page 145 of the Revised Draft Registration Statement. However, the Company respectfully advises the Staff that the composition of the Company’s board of directors may change, including the resignation of certain directors and the appointment of independent directors. The Company will update the relevant disclosure in the Registration Statement once the changes are confirmed.

Taxation, page 169

38.

Please reconcile your reference in the introductory paragraph to not discussing state, local and other laws with your discussion of local tax laws in China. Additionally, to the extent applicable, make clear whether your discussion of United States tax consequences represents the opinion of your United States counsel. We note your Exhibit 8.2.

U.S. Securities and Exchange Commission

March 6, 2014

Page 18

In response to the Staff’s comment, the Company has revised the disclosure on page 175 and noted that the discussion of United States tax consequences represents the opinion of its special United States counsel.

People’s Republic of China Taxation, page 169

39.	Please revise your disclosure as follows:

•

State whether you expect to be considered a resident enterprise and provide an assessment of how the four conditions in Circular 82 may apply to your business;

•

Discuss the tax consequences, if any, of a determination that you are not a resident enterprise; and

•

Make clear the effect of any applicable tax treaties with either the United States or Hong Kong.

In response to the Staff’s comments, the Company has revised the referenced disclosure on pages 175 and 176 of the Revised Draft Registration Statement.

Consolidated Financial Statements

Consolidated Statements of Comprehensive Income, page F-5

40.	We note your disclosure of related party transactions on page F-40. Please revise to disclose related party information on the face of the statement of comprehensive income. See Rule 4-08(k) and 5-03 of Regulation S-X.

In response to the Staff’s comment, the Company has revised the referenced disclosure on pages F-6 and F-51 of the Revised Draft Registration Statement.

41.

Please revise your disclosure here and throughout the filing where earnings per share is otherwise disclosed to also disclose pro forma earnings per share reflecting the conversion of the convertible preferred shares into ordinary shares that will occur immediately upon the completion of this offering.

U.S. Securities and Exchange Commission

March 6, 2014

Page 19

In response to the Staff’s comment, the Company has revised its disclosure on pages F-5, F-19 and F-62 of the Revised Draft Registration Statement to disclose pro forma earnings per share reflecting the conversion of the convertible preferred shares into ordinary shares that will occur immediately upon the completion of the proposed offering.

Notes to the Consolidated Financial Statements for the Years Ended December 31, 2011 and 2012

Note 1: Organization and Principal Activities

VIE arrangements, page F-11

42.

We note that the consideration for the services provided by the Primary Beneficiaries under the exclusive technology, support and consulting agreements is no less than 30% of the VIE’s pre-tax income. We also note that the financial support undertaking letter, which commits the Primary Beneficiaries to unlimited financial support, was not executed until January 17, 2014. Please tell us how your agreements enable you to receive substantially all of the economic benefits of the VIEs or absorb a majority of the VIE’s expected losses in determining whether you are the primary beneficiary. We refer you to ASC 810-10-25-38. Please provide us with your analysis as of December 31, 2012 and September 30, 2013.

The Company respectfully advises the Staff that pursuant to the exclusive technology development, support and consulting agreements for each of its VIEs, the Primary Beneficiaries have the sole right to adjust the service fees upon written request, enabling the Primary Beneficiaries to receive substantially all of the economic benefits of the VIEs. The Primary Beneficiaries can determine a service fee that is no less than 30% of the VIE’s pre-tax revenue rather than pre-tax earnings which has been updated on F-13. The Company makes the assessment on adjusting the service fee on a periodic basis according to the business development of VIEs and the level of services to be provided. In fact, the Company has historically charged service fees from at least 30% to 51% of the VIE’s pre-tax revenue for the years ended 2011, 2012 and 2013.

The financial support undertaking letters were executed by the Primary Beneficiaries to further formalize the Primary Beneficiaries’ commitment to the VIEs, which was mutually understood to commence from the date the other contractual agreements were executed. For example, the financial support undertaking letter executed by Beijing Security and addressed to Beike Internet states that “the undersigned agrees and acknowledges such undertaking shall be irrevocable and continuously valid from January 1, 2011….” as January 1, 2011 was the date the other contractual agreements were executed by Beijing Security, Beike Internet and its nominee shareholders. Similar wording is included in the other financial support undertaking letters executed for other VIEs. In the opinion of the Company’s PRC legal counsel, each of the Contractual Agreements, including the financial support undertaking letters, among the Primary Beneficiaries, the VIEs and their respective shareholders (as the case may be) are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect.

The analysis above is the same as of December 31, 2012 and September 30, 2013 and applies to all of the Company’s VIEs. Pursuant to ASC 810-10-25-38A, the Company, through its wholly-owned subsidiaries who are the Primary Beneficiaries, is deemed to have a controlling financial interest in its VIEs as it has both (i) the power to direct the activities of the VIEs that most significantly impact the VIE’s economic performance through the business operation agreements, shareholder voting proxy agreements and equity pledge agreements; and (ii) the obligation to absorb losses of its VIEs pursuant to the financial support undertaking letters, or the rights to receive benefits from the VIEs pursuant to the exclusive technology development, support and consultancy agreements.

U.S. Securities and Exchange Commission

March 6, 2014

Page 20

43.

ASC 810-10-50-5A.d. requires disclosure of qualitative information about the involvement with the VIE. Please revise to describe the recognized and unrecognized revenue-producing assets that are held by the VIE. These assets may include licenses, trademarks, other intellectual property, facilities or assembled workforce.

The Company respectfully advises the Staff that the revenue producing assets held by the VIEs are comprised of leasehold improvements, servers, licensed software, network equipment, acquired trade name and acquired domain name. These assets are recognized in the Company’s consolidated financial statements.

In addition, the VIEs also hold important unrecognized revenue-producing assets, such as Internet Content Provider Licenses, as well as internally developed software, trademarks and patent applications which were not recorded on the Company’s consolidated balance sheets. The VIEs also have a work force on sales, research and development and operations whose costs are expensed as incurred.

In response to the Staff’s comment, the Company has revised its disclosure on page F-15 of the Revised Draft Registration Statement to disclose additional information regarding the Company’s involvement with the VIE.

44.

We note your disclosure on page F-14 of the carrying amounts of assets and liabilities of the consolidated VIEs. Please expand your disclose to present the carrying amounts and classification of the VIEs’ assets on a more disaggregated basis, including the intercompany payable to Beijing Security and Conew Network for the service fees. We refer you to paragraphs 2AA.d and 3.bb of ASC 810-10-50.

In response to the Staff’s comment, the Company has revised the referenced disclosure on page F-17 of the Revised Draft Registration Statement to disclose the VIEs’ assets on a more disaggregated basis, including the intercompany payable to Beijing Security and Conew Network for the service fees payable pursuant to the exclusive technology, support and consulting agreements.

U.S. Securities and Exchange Commission

March 6, 2014

Page 21

Note 2: Summary of Significant Accounting Policies

Revenue recognition

(1) Online marketing services, page F-21

45.

We note that online marketing services revenue under the cost for performance model and revenue from search engine customers is generally recognized upon receiving periodic statements from your customer. Please revise your disclosure to state how often you receive these periodic statements (i.e., monthly, quarterly, etc.). As part of your response, tell us whether the report is received in the period in which the revenue was earned.

The Company respectfully advises the Staff that monthly customer statements are received either in the month in which the service is provided or in the month following the one in which the service is provided. The Company depends on the customers to track the actual performance, and recognizes revenues upon its receipt of the customer statements. In response to the Staff’s comment, the Company has revised the referenced disclosure on page F-25 in the Revised Draft Registration Statement.

(2) Internet value-added services, page F-22

46.	We note you recognize internet value-added service revenue “net” of remittances to the developer as you have concluded that you are an agent. Please tell us who the primary obligor is and who has latitude in establishing the price. Refer to ASC 605-45-45.

The Company respectfully advises the Staff that the Company enters into agreements with third party game developers to provide online and mobile distribution and payment collection services, in order for game players to purchase and recharge virtual currencies used in the games. All games are developed and hosted by third-party game developers, and accessed by game players through the Company’s online and mobile platforms or a third-party mobile platform. The payment collection services are mainly provided through third-party professional payment and settlement institutions. The Company generally charges commission as a percentage of the gross proceeds or collection amount from the settlement institutions, and pays the remaining proceeds to the game developers. When the settlement institutions directly remit the collection amount to the developers, the Company collects its commission from the developer. For games accessed by game players through the Company’s online and mobile platforms and the third-party mobile platform, the Company believes that the game developers are considered the primary obligor, primarily responsible for fulfillment of services, and generally do have the discretion in establishing prices.

U.S. Securities and Exchange Commission

March 6, 2014

Page 22

47.

We note you estimate the revenue for internet value-added services based on your internal system which is confirmed with the settlement institution. Please tell us when the confirmation from the settlement institution is received. If it is received subsequent to the period in which the revenue was earned please tell us whether you have had to record adjustments to revenue related to any differences between your internal system and the settlement institution confirmation.

The Company respectfully advises the Staff that the settlement institution processes and confirms the payments from registered game players on a real-time basis in the same period in which the revenue is earned. The Group logs into its account with the settlement institution to obtain such payment information and compares it with that recorded in its internal system in the same period in which the revenue is earned. Historically, there have been no significant differences identified through this confirmation process.

Note 8: Intangible Assets, Net, page F-31

48.	We note from your disclosure on page F-21 that the trade name has an estimated life of 2 years. However, your disclosure on page F-31 indicates that trade name has an indefinite useful life. Please clarify this inconsistency in your disclosure.

In response to the Staff’s comment, the Company has revised the referenced disclosure on F-24 of the Revised Draft Registration Statement.

Note: 10 Accrued Expenses and Other Current Liabilities, page F-32

49.

We note your accrued expenses were RMB26.161 million as of December 31, 2012 and RMB 11.776 million as of December 31, 2011, which were approximately 17% and 11% of total current liabilities, respectively. Please revise your disclosure to state separately, any item in excess of 5% of total current liabilities. Refer to Rule 5-02(20) of Regulation S-X.

In response to the Staff’s comment, the Company has revised the referenced disclosure on page F-41 of the Revised Draft Registration Statement.

U.S. Securities and Exchange Commission

March 6, 2014

Page 23

Note 13: Income Taxes, page F-33

50.	We note that your tax rate reconciliation includes the line item “Effect of different tax rates in different jurisdictions” which increased tax expenses in 2011 and 2012. Please tell us the jurisdictions and tax rates related to this line item.

The Company respectfully advises the Staff that the different jurisdictions referred to the Cayman Islands and Hong Kong, with income tax rates of 0% and 16.5%, respectively.

The Company further advises the Staff that the Company recorded a loss before tax in its separate financial statements in 2011 and 2012 primarily due to the share-based compensation costs, resulting in a “reduction” in income tax when applying the statutory tax rate of 25%. Such reduction was reversed as the Company is not subject to income tax in the Cayman Islands, which was hence reflected as an increase of tax expenses in the line item “Effect of different tax rates in different jurisdictions” in 2011 and 2012.

51.	We note deferred tax assets, current portion, includes a temporary difference related to “revenue cut-off”. Please explain the nature of this item and how it gave rise to a deferred tax asset.

The Company respectfully advises the Staff that the revenue cut-off item arose from timing differences relating to revenue recognition by a variable interest entity of the Group in U.S. GAAP financial accounting and tax reporting. The Group recognized its revenue pursuant to ASC 605-10, which requires persuasive evidence, proof of delivery, collectivity and fixed or determinable price. The Group believes the above four criteria are all met upon receiving the statements from customers. In contrast, the Group’s revenue is generally reported for income tax purpose in accordance with the local tax regulations in the period when the services are rendered. Such a difference in revenue recognition for financial reporting and tax reporting gave rise to a deductible temporary difference and hence a deferred tax asset.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements for the Nine Months Ended September 30, 2012 and 2013

Note 6: Prepayments and Other Current Assets, page F-73

52.

We note from your disclosure on page F-73 that you recorded a provision for doubtful debts of RMB6 million against the entrusted loan to third party. Please describe for us the nature of this loan in greater detail. Please tell us your basis for recording the provision and describe the factors that changed since December 31, 2012 which led you to record the provision.

U.S. Securities and Exchange Commission

March 6, 2014

Page 24

The Company advises the Staff that it made an RMB8 million entrusted loan to Beijing Antian, a third party antivirus search engine technology in China, in March 2012. The Company was interested in providing financial support to Beijing Antian as a potential business partner with the Company’s internet security services. The Company performed a credit analysis on Beijing Antian prior to extending the loan, found that Beijing Antian had a debt to equity ratio of less than 10%, and was satisfied that Beijing Antian would have sufficient liquidity to meet its debt obligations. The loan had a one-year term and a 5.83% interest rate.

Beijing Antian made a RMB2 million repayment in December 2012. However, after the repayment, Beijing Antian’s financial performance was adversely affected by delays in receiving payments relating to certain government projects. Beijing Antian then requested to roll over the remaining loan balance of RMB6 million for another year, which request was granted by the Company. However, when the Company completed an assessment of Beijing Antian’s financials in the third quarter of 2013, it determined Beijing Antian’s debt ratio had increased to approximately 30%, representing a significant increase in credit default risk. Accordingly, the Company recorded an RMB6 million provision in the third quarter of 2013.

In January 2014, Beijing Antian made an RMB1 million loan repayment but indicated that, unless its business conditions improved significantly, it would need to roll over the remaining loan balance in March 2014. The Company recorded a RMB1 million reversal adjustment to its allowance for doubtful accounts in the December 2013.

Exhibits

53.

Please tell us what consideration you have given to filing any agreements with providers of third party mobile application distribution channels such as Google Play and iOS Apple Store. We note your risk factor on page 17 that you rely on these distribution channels to distribute most of your mobile applications to users.

The Company respectfully advises the Staff that its agreements with third party mobile application distribution channels such as Google Play and iOS App Store are standard form agreements publicly available on the distribution channels’ websites and are subject to changes and amendments from time to time at the discretion of the mobile application distribution channels. Those standard form agreements were made during the course of its ordinary business. Item 601 of Regulation S-K provides that “[i]f the contract is such as ordinarily accompanies the kind of business conducted by the registrant and its subsidiaries, it will be deemed to have been made in the ordinary course of business and need not be filed.” Accordingly, the Company has not filed the agreements as exhibits.

* * *

U.S. Securities and Exchange Commission

March 6, 2014

Page 25

If you have any questions regarding the Draft Registration Statement, please contact the undersigned by phone at +852-3740-4863 or via e-mail at julie.gao@skadden.com or the audit engagement partner at Ernst & Young Hua Ming LLP, King Li, by telephone at +86-10-5815-2099, or by email at king.li@cn.ey.com. Ernst & Young Hua Ming LLP is the independent registered public accounting firm of the Company.

Very truly yours,

/s/ Z. Julie Gao

Z. Julie Gao

Enclosures

cc:	Jun Lei, Chairman, Kingsoft Internet Software Holdings Limited

Sheng Fu, Chief Executive Officer, Kingsoft Internet Software Holdings Limited

Andy Yeung, Chief Financial Officer, Kingsoft Internet Software Holdings Limited

King Li, Partner, Ernst & Young Hua Ming LLP

James C. Lin, Partner, Davis Polk & Wardwell LLP

Annex I

Kingsoft Internet Software Holding Limited

Note: Based on the F-1 confidentially submitted to the SEC on March 6, 2014.


	Statement in F-1	Page No. in F-1	Supporting Document

1-1	According to the China Internet Network Information Center, or CNNIC, a not-for-profit organization, the number of internet users in China reached 618 million as of December 31, 2013.	3, 99	Primary data for Internet development research published on the official website of CNNIC (Link: http://www.cnnic.net.cn/hlwfzyj/jcsj/)

1-1	According to CNNIC, the number of mobile internet users in China reached 500 million as of December 31, 2013.	3, 100	Primary data for Internet development research published on the official website of CNNIC (Link: http://www.cnnic.net.cn/hlwfzyj/jcsj/)

2-1	Clean Master was the No. 4 mobile utility application in China in terms of monthly active users in December 2013, according to iResearch.	1, 101	mUser Tracker database

2-1	Battery Doctor was the No. 1 mobile utility application in China in terms of monthly active users in December 2013, according to iResearch.	1, 101	mUser Tracker database

3-1	We are the second largest provider of internet security applications in China in terms of monthly active users in December 2013, according to iResearch.	1, 101	iUser Tracker database


	Statement in F-1	Page No. in F-1	Supporting Document

3-1	Duba Anti-virus was the third largest internet security application in China in terms of the number of monthly active users in December 2013, according to iResearch.	108	iUser Tracker database

4-1	Duba.com personal start page, which aggregates popular online resources and provides users quick access to most of their online destinations, had approximately 46.8 million monthly active users in December 2013, according to iResearch.	2, 101	iUser Tracker database

5-1	According to iResearch, the number of internet users in China is expected to increase to approximately 850 million in 2017.	3, 99	China Mobile Security Industry Data Report provided by iResearch in January 2014

5-1	According to iResearch, the number of mobile internet users in China is expected to increase to 745 million in 2017, representing a four-year CAGR of 10.5%.	100	China Mobile Security Industry Data Report provided by iResearch in January 2014

5-2	As a result, the internet security and system optimization market in China has grown significantly over the past five years, reaching 498 million users, or 81% of the online population in December 2013.	100	China Mobile Security Industry Data Report provided by iResearch in February 2014

5-3	The number of users of mobile internet security products reached 148 million users with a 30% penetration rate in December 2013, according to iResearch.	100	China Mobile Security Industry Data Report provided by iResearch in February 2014

Statement in F-1

Page No. in F-1

Supporting Document

5-3

The top five mobile security products covered approximately 91% of total users in 2013, according to iResearch, namely 360 Mobile Safe, Tencent Mobile Manager, LBE Safety Master, KIS Mobile Defender and SECUREit.

100

China Mobile Security Industry Data Report provided by iResearch in February 2014

5-4

According to iResearch:

Online Advertising

From 2012 to 2017, the Chinese online advertising market is projected to increase from RMB75.3 billion to RMB282.5 billion, representing a five year CAGR of 30.3%. The online advertising market primarily includes search marketing, advertising, video advertising and others. Search marketing is the main form of online advertising. From 2012 to 2017, the internet search market in China is projected to increase from RMB28.1 billion to RMB96.3 billion, representing a five year CAGR of 28.0 %.

Online Games

From 2012 to 2017, the online game market in China is projected to increase from RMB67.1 billion to RMB224.6 billion, representing a five-year CAGR of 27.3%. Online games are comprised of three main types: PC-based client-end games, web games and mobile games, with web games and mobile games expected to outgrow the overall online game market. The web game market is expected to increase from RMB9.8 billion in 2012 to RMB40.6 billion in 2017, representing a CAGR of 32.9%, and the mobile game market is expected to increase from RMB8.8 billion to RMB70.6 billion during the same period, representing a CAGR of 51.7%.

E-Commerce

From 2012 to 2017, the broad e-commerce market in China, including B2B, online shopping, online travel and offline-to-online social commerce, is projected to increase from RMB8.2 trillion to RMB21.6 trillion, representing a five-year CAGR of 21.3%. The growth in e-commerce is primarily driven by the continued growth of China’s internet and mobile internet market, the migration of commerce from offline to online, and the substantial improvement and continuing development of the e-commerce infrastructure including payment and logistics systems.

100

China Mobile Security Industry Data Report provided by iResearch in January 2014


	Statement in F-1	Page No. in F-1	Supporting Document

6-1	The following chart shows monthly active users for all of our applications in each of the months indicated. Sources: Internal records for mobile applications on Android platform, Flurry Analytics for mobile applications on iOS platform, and iResearch for internet applications.	102	iUser Tracker database; Flurry Analytics

7-1	Clean Master was the No. 6 application worldwide excluding games on Google Play in terms of the number of monthly downloads in December 2013, according to App Annie.	1, 101	Monthly summary data provided by App Annie

7-2	Battery Doctor was the sixth most downloaded productivity application on Google Play in December 2013, according to App Annie.	1, 101	Monthly summary data provided by App Annie

8-1	According to App Annie, there were more than 1.1 million apps available on Google Play worldwide, and 1.0 million apps available in the Apple App Store as of December 31, 2013.	3	Summary of data provided by App Annie

9-1	According to App Annie, there were more than 1.1 million apps available on Google Play worldwide, and 1.0 million apps available in the Apple App Store as of December 31, 2013 with cumulative downloads reaching over 50 billion in 2013.	97-98	Summary of data provided by App Annie

9-1	According to App Annie, paid applications are estimated to constitute approximately 3.3% of total application downloads including games through 2013.	99	Summary of data provided by App Annie

9-2	Three of the key categories for Google Play app downloads in 2013 were social, communication, and tools. Collectively, they accounted for 19% of Google Play downloads including games in 2013, according to App Annie.	98	Summary of data provided by App Annie

Statement in F-1

Page No. in F-1

Supporting Document

10-1

There are only eight non-game applications with over 50 million cumulative downloads on Google Play worldwide in the second half of 2013, including Facebook, WhatsApp and Clean Master. Such applications are commonly referred to as “super apps.”

3, 98

Summary of data provided by App Annie

11-1

We ranked the No. 6 publisher of applications, excluding games, worldwide on Google Play as measured by number of downloads in December 2013, according to App Annie.

102

App Annie Index published on the official website of App Annie (Link: http://blog.appannie.com/app-annie-index-apps-december-2013/ )

11-2

Top 10 Apps by Monthly Downloads Excluding Games (Google Play December 2013)

App Annie Index published on the official website of App Annie (Link: http://blog.appannie.com/app-annie-index-apps-december-2013/ )

Rank

Applications

Publisher

Headquarters

Category

Facebook

United States

Social

WhatsApp Messenger

United States

Communication

Facebook Messenger

Facebook

United States

Communication

Skype

Microsoft

United States

Communication

Instagram

Facebook

United States

Social

Clean Master

Kingsoft Internet Software

China

Tools

LINE

Japan

Communication

Twitter

United States

Social

Viber

Viber Media

Cyprus

Communication

Anti-Virus Security

AVG

Czech Republic

Tools

Source: App Annie


	Statement in F-1	Page No. in F-1	Supporting Document

12-1	According to IDC, global mobile internet users totaled approximately 1.0 billion in 2012, representing a 36.5% increase over the user base in 2009, and are expected to reach approximately 2.3 billion in 2017, representing a five-year CAGR of 15.8%.	3, 97	IDC Worldwide New Media Market Model, 1H2013: Worldwide and US, Doc#242211, July 2013

12-2	According to IDC, the mobile advertising market is expected to surge from $10.0 billion in 2012 to $52.2 billion in 2017, representing a five-year CAGR of 39.2%. Over the same period, IDC expects other forms of advertising, such as online search, online advertising and online video advertising, to grow by 6.5%, 7.8% and 21.5% respectively.	99	IDC Worldwide New Media Market Model, 1H2013: Worldwide and US, Doc#242211, July 2013

12-3	In 2012, North America had the highest mobile advertising spending, at $4.7 billion, and is expected to remain the top advertising market with US$27.0 billion spending in 2017, representing a five year CAGR of 41.9%, according to IDC.	99	IDC Worldwide New Media Market Model, 1H2013: Worldwide and US, Doc#242211, July 2013

13-1	According to IDC, Android-based smartphones are expected to have approximately 77.4% market share of global smartphone shipments in 2013, compared with 15.7% market share for iOS-based smartphones and other mobile devices.	3, 97	IDC Worldwide Quarterly Mobile Phone tracker, December 2013

13-2	According to IDC, global smartphone shipments are expected to increase from approximately 725.3 million units in 2012 to 1.7 billion units by 2017, representing a five-year CAGR of 18.4%, with the market share of smartphone increasing from approximately 41.7% to 74.7% over the same period.	97	IDC Worldwide Quarterly Mobile Phone tracker, December 2013

Statement in F-1

Page No. in F-1

Supporting Document

14-1

According to IDC, the revenue generated from mobile digital game downloads globally is expected to grow from $6.3 billion in 2012 to $14.5 billion in 2017, representing a five-year CAGR of 18.3%.

IDC#240600 - WW Ga-Optimized handled, Smartphone, and Table Gaming 2013-2017

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