We identify various factors which we recognize to be the main risks associated with our business. The ngi group recognizes the great importance of using new innovations in our business operations to remain a step ahead of our competition. Furthermore we also identify other factors which may not necessarily be risks associated with our business, but those which may influence decisions by investors whether or not to make an investment in our Company. Our Group also takes every measure possible to avoid the occurrence of these various risk factors and to respond to the occurrence of any risk factors. Moreover we do not make any assurances that all of the risk factors associated with an investment in our Group’s shares are listed below.

Risks Associated with the Start of New Businesses

The ngi group recognizes the great importance of using new innovations in our business operations to remain a step ahead of our competition. Consequently we perform a large amount of due dilligence prior to investing in new businesses to ascertain and validate the potential of these new businesses. Therefore we may choose to cancel investments in some new business areas resulting from changes in our outlook for the market potential and profitability of these businesses. Furthermore we may need to increase spending on personnel, and research and development and capital investments for new businesses. Aside from these risk factors, we also need to expand our management personnel in order to maintain the growth of our existing businesses. Subsequently inabilities to secure personnel could lead to lower growth than we project. Consequently all of these factors could profoundly affect both our earnings and financial position.

Venture Capital Investment, Support and Cultivation Services for Newly Founded Companies

The ngi group in its venture capital fund business makes early-stage investments in newly founded companies which have the potential to go public or to be sold in a trade or through other M&A related activities. Because newly founded companies in which we invest often have unstable management and and earnings structures, there is no guarantee that they can keep pace with technological and other changes in the markets in which they participate. Furthermore their high dependence upon key personnel may also be considered as another business risk. Our Group conducts its investment related due-dilligence after targeted companies pass various preliminary screening. And despite our best efforts, companies in which we invest may suffer from deterioration in corporate value arising from management problems, and could possibly go bankrupt. Consequently our earnings and financial position are at risk from these potential uncertainties. In addition, we second management and other personnel and introduce business partners to the companies we make investments in as part of our efforts to raise their corporate value and expand their businesses. However our activities may not necessarily result in the returns that we expect.

Time Needed to Recover Investments

Our Group primarily makes early-stage investments in newly founded companies. Therefore the timing of IPOs or sale of companies in which we invest are difficult to forecast and delays could profoundly impact our earnings. And while we seek to recover our investments through both IPOs and M&A activities including trade sales, there is no guarantee of the time required to recover investments in these companies. Furthermore we recognize the risk of a lengthening in the recovery period of our investments due to weakness and other problems in the equity markets, and to changes in listing requirements and laws relating to the securities exchanges. Aside from these risk factors, we are also vulnerable to the potential that we can not realize capital gains on our investments due to weak pricing in the IPO and M&A processes. Consequently we may incur capital losses on some of our investments, or evaluation losses on our holdings which could negatively impact our financial position and our earnings.

Volatility in Stock Market Conditions Affecting Prices of Our Shareholdings

We maintain holdings in shares of companies which are profoundly influenced by conditions within the stock markets. In our investment business, we achieve capital gains through the sale of marketable securities during and after the IPO of companies in which we invest. We usually choose to sell down our stake in companies gradually after their IPO and while considering market conditions. Therefore weakening prices and thinning of trading turnover in the stock markets could impact the pricing of our shareholdings. Furthermore weaker earnings of companies can also negatively impact share prices of our shareholdings and could lead us to incur capital losses or evaluation losses on our investment portfolio. Also prolonged periods of weak market conditions could prevent us from selling shares, which in turn could negatively impact our earnings performance.
Aside from these concerns, we may incur losses resulting from pricing volatility during the lock-up period, during which we can not sell any shares, on certain shareholdings as mandated by the stock exchanges or by the companies in which we invest. Moreover the shareholdings of the various companies which make up the ngi group are also exposed to the risk from volatility in share prices. Therefore declines in the prices of these holdings below their acquisition costs may negatively influence both our earnings and our financial position.

Legal Issues

Because our Group conducts venture capital investments, our various business activities are subject to various laws and regulations （corporate law, taxation law, financial products law, limited liability investment partnership law, and accounting laws and regulations）. Therefore we may incur higher costs from various restrictions and legal issues relating to our business activities, and we may be forced to change the scope of our consolidation. These changes could affect our earnings and financial position.

Regarding Growth in the Internet and Intternet Advertising Markets

The Inernet related businesses of our Group are dependent upon the continued growth in the Internet usage by both individuals and corporations. Therefore stagnation or declines in the usage of the Internet due to various other unforeseen reasons could lead us to fall short of our business projections, which in turn could negatively impact our financial position and our earnings. Moreover we assume growth in both the Internet and mobile advertising markets in our Internet related business. And while the markets for both Internet and mobile advetising are growing currently, there is no guarantee that this growth will continue. Furthermore because the Internet and mobile advertising markets are highly vulnerable to changes in the economy and strategies of the advertising companies, changes in the expected growth rates of the markets could profoundly impact both our financial position and our earnings.

Regarding Communication Network and System Failures

The businesses of our Group are highly dependent upon the communication networks and computer systems which connect servers with both personal computers and cellular telephones. Therefore failures in the communication netwoks and computer systems which resulting in a disruption of services could negatively impact both our financial position and our earnings.

Delays in Product and Service Deliveries

Because we develop systems, software and contents on behalf of our clients, we are committed to deliver these products and services in accourdance with our mutually agreed upon delivery dates. However delays in delivery of systems and software could cause us to fall short of our projected earnings, and could lead to a loss of our customers’ trust and penalties fees on late deliveries. Our Group takes every effort to avoid delays by ensuring timely delivery of systems and software through the strict management of the production processes. However in the event that delivery delays do occur, our Group’s earnings and financial position could be impacted.

Risks of Technological Advances and Competition

The technological advances in cellular telephones, intelligent appliances, and the Internet are progressing rapidly and the large number of companies involved in these business realms are also constantly introducing new technologies, products, and services. Our Group needs to respond quicly to the newly introduced technologies and services with development of our own new products and services in order to remain competitive. And in the unlikely event that we can not keep respond in a timely fashion to the introduction of new technologies, our software and services could become outdated and our competitive position within the industry could weaken. Consequently our financial position and earnings could be profoundly impacted.

Our Overseas Business Activities

As part of the ngi group’s venture capital business, we have established local companies in China and other parts of Asia to conduct investment activities in local companies with high growth potential. Because of our investments in companies in various overseas markets, changes in the economic, political and legal systems, fluctuations in local currencies, and threats including terrorism, disease, and political instability may severly affect our business activities in these various countries, which in turn could affect our earnings and financial position.

Our Chinese and Other Overseas Business Activities

As part of the ngi group’s overseas business, we have established local companies in both Shanghai and Beijing to conduct investment activities in China. We will continue to aggressively expand our business operations in China and other parts of Asia where economic growth is strong. Therefore changes in the economic, political and legal systems, fluctuations in local currencies, and threats including terrorism, disease, and political instability may severly affect our business activities in China and other countries, which in turn could affect our earnings and financial position.

Management Structure of Smaller Organizations

As of May 7, 2008 we are a holding company with a small organization comprised of eight managing directors （four are from outside of our company）, three operating officers （two are also directors）, 85 employees and three contracted workers. Furthermore our corporate headquarters also provides administrative support services to our consolidated subsidiaries. Therefore we will fortify our personnel, internal systems and controls, and increase our use of outsourcing to match the growth in our business. Consequently our ability to be able to expand our staffing and our overal organization will be crucial in ensuring that our businesses continue to grow.

Regarding Our Committee Structure Management

We seek to raise our corporate value and as part of this strategy we have switched to a committee structure in our management organization from June 2007 to be able to quickly and flexibly implement changes in our operations, to separate our management and operational functions, and to fortify our corporate governance. However in the operation of our committee structure we may fall short of our objectives, and the inappropriate positioning of personnel could lead a deterioration in our organizational efficiency, which could in turn impact both our earnings and our financial position.

Regarding Our Subsidiaries, Affiliates

As of May 7, 2008 the ngi group is comprised of 18 consolidated subsidiaries, and four affiliates held under the equity accouting method. In the future, changes to the composition and scope of consolidation of our Group could impact both our earnings and our financial position. Furthermore because we provide financing to our various Group companies, a worsening of their business performance could lead to the implementation of impairment accounting and bad credit reserves, which could have a negative affect upon both our earnings and our financial position.

Risk of Litigation, Trouble with Business Partners

Our Group has never been the subject of a lawsuit, and in order to reduce the risk of future lawsuits from occuring we are endeavoring to fortify and improve our risk management strcuture. Also we recognize the potential for lawsuits arising in the process of our future business expansion and realize that our Company’s reputation and business could suffer from the occurrence of such problems. Consequently our earnings and financial position could be negatively affected by such issues.

• Lawsuits for not acting in the best interest of the fund partnerships. Lawsuits relating to conflict of interest violations between the various venture capital funds or between the investors in our various funds.
• Lawsuits from the investors in our Group against companies we invest in.
• Lawsuits arising from leaks and mismanagement of confidential information.
• Lawsuits arising from infringement of intellectual property rights and patents on technologies from third parties.

Aside from these risks, we also recognize the potential for class actions lawsuits filed by our shareholders despite our best efforts to raise the corporate value of our Group companies and the companies in which we invest and to which we second managers. Therefore we maintain insurance policies designed to protect us from punitive damages arising from lawsuits and we have special contracts which limit the responsibilities of managers seconded to these companies. However the filing of lawsuits in the future could negative impact our earnings and financial position.

Information Security and Management of Private Information

Every company within the ngi group maintains confidentiality agreements with its partners and customers, and makes the utmost efforts to ensure confidentiality of personal and other information to which they have access. As part of our business operations, many of our Group companies come in contact with confidential personal information. Therefore as part of our information security measures, we are currently preparing to apply for global standard in information security system （ISMS） “ISO/IEC 27001” certification. However we recognize the potential damage to our Company’s reputation that leakage of information resulting from illegal actions, including unauthorized access to our servers and our network, and system failures. Furthermore subsequent disruption of our business could negatively impact both our earnings and our financial position.

Dilution of Shareholder Value

As a part of our incentive program we issue stock options to directors of our Group and expect to continue to do so in the future. In order to reduce the dilutive impact of these stock options, we have implemented a phased vesting schedule for them. At the same time we remain aware of the potential dilutive impact that these options may pose during times of weak supply and demand for our shares.

Individual Activities

We allow directors of our Group companies to write books and articles for other publications, and to hold speeches and seminars which do not pose any conflict of interersts with the businesses of our Group. However the potential for a deterioration in our Group image as a result of these activities does exist and it could negatively impact our earnings and financial position.

M&A Activities of Our Group

As part of our business strategy, we conduct various M&A related activities including the purchase of companies, merger of subsidiaries, and sale of companies to third parties. And while we conduct thorough due-dilligence activities prior to any M&A activity, unforseen changes in the market environment after M&A activities have been concluded could lead to business performance which is below our expectations This in turn could negatively impact both our financial position and our earnings.

Regarding Our Group Earnings Projetions

We disclose our consolidated earnings projections, of which our venture capital business is a large factor. Consequently our earnings projections are subject to potential volatility arising from fluctuations in the stock markets. Therefore we will make revisions to our earnings projections to reflect any changes in the outlook for our business environment whenever they occur and as quickly as possible.