Sohu.com (SOHU)

As of the date of Changyou’s filing of the registration statement, Sohu, through Sohu Game, owned 84.2% of outstanding shares in Changyou and Prominence Investments Ltd. (“Prominence”), an entity deemed under applicable SEC rules to be beneficially owned by Changyou management, owned the remaining 15.8%. Under generally accepted accounting principles in the United States, Sohu has been consolidating 100% of Changyou’s net income into Sohu’s consolidated financial statements, without any provision for minority interests, because Prominence is not entitled to participate in any distributions by Changyou until the earlier of Changyou’s completion of an IPO or February 2012. If the offering is completed, Sohu’s equity interest in Changyou will be reduced from 84.2% to 70.7%. Sohu will continue to consolidate 100% of Changyou’s revenue and expenses, but there will be a provision for minority interests reflecting the Class B ordinary shares held by Prominence and the Class A ordinary shares represented by ADSs sold in the IPO and Sohu’s net income and earnings per share will be reduced accordingly.

Sohu will recognize a one-time gain on its disposal and deemed disposal of Changyou shares, approximately in the range of $75 to $85 million, which will be recorded directly to equity in accordance with FAS 160 effective for fiscal years and interim periods beginning on or after December 15, 2008.

The Sohu Group (including Changyou and Sohu Game) would receive net proceeds from the offering estimated to be $104.6 million assuming an initial public offering price per ADS of $15.00, which is the midpoint of the estimated public offering price range, and after deducting underwriting discounts and commissions but without deducting any share of offering expenses payable by Changyou and Sohu Game, and assuming the underwriters do not exercise the over-allotment option. This would represent approximately $2.75 per share of common stock of Sohu currently outstanding.

Sohu’s equity interests in Changyou

Sohu’s voting interests in Changyou

Sohu’s economic interests in Changyou as reflected in accounting treatment

Sohu’s gain on disposal of interests in Changyou as an increase in equity

of $75 to $85 million

Listing proceeds per Sohu share, net of underwriting discounts and commission