Passive Foreign Investment Company ("PFIC")

CDC Corporation (formerly chinadotcom corporation) was a Passive Foreign Investment Company, or PFIC, for U.S. Federal income tax purposes in 2004 and 2005 because at least 50% of our assets, measured by value on a quarterly average basis, produced or were held for the production of passive income.


As we were a PFIC for 2004 and 2005, each of our shareholders who held Class A Common Shares during the 2004 and 2005 tax years AND who are subject to U.S. Federal income taxes will be required to file concurrently with its annual return to the U.S. Internal Revenue Service, Form 8621 regarding distributions received with respect to the Class A Common Shares and any gain realized on the disposition of the Class A Common Shares. On Form 8621, such shareholders are entitled to make either "mark to market" or "QEF" elections.

Attached are the following documents which shareholders may use to help complete their Federal income tax filings for 2004 and 2005.

Additional information on the PFIC rules as well as their effect on CDC Corporation's shareholders is provided in the "Taxation" and "Risk Factors" sections of our 2005 Form 20-F which has been filed with the SEC.

Entire Annual Report on Form 20-F for the year ended December 31, 2005

You are strongly urged to consult your own tax advisors regarding the application of the PFIC rules to your particular circumstances.

Website for the U.S. Internal Revenue Service where you may find Form 8621 and the Instructions to Form 8621.

http://www.irs.ustreas.gov

SPECIAL NOTE FOR SHAREHOLDERS MAKING A "QUALIFIED ELECTING FUND" (OR QEF) ELECTION

Under the PFIC rules, because CDC Corporation is a PFIC, we are required to analyze further the subsidiaries in which we own, directly or indirectly, more than 25% of the outstanding shares. If the analysis indicates that such subsidiary is a PFIC under the PFIC rules, CDC Corporation is required to include its proportionate share of the ordinary earnings (as defined in the PFIC rules) and net capital gains (as defined in the PFIC rules) of such subsidiary in the PFIC ordinary earnings and PFIC net capital gains reported by CDC Corporation. The PFIC rules do not allow losses from our loss making entities to be offset against those entities which generated PFIC ordinary earnings and PFIC net capital gains. As a result, even though CDC Corporation reported a loss for 2005 under US generally accepted accounting principles, CDC Corporation is reporting PFIC ordinary earnings and PFIC net capital gains under the PFIC rules.