Table of Contents

004（I）Important Notes

005（II）Company Profile

007（III）Financial and Operating Highlights

010（IV）Changes in Equity and Shareholders

017（V）Directors, Supervisors and Senior Management026（VI）Corporate Governance034（VII）Shareholders’Meeting

035（VIII）Reports of the Board of Directors

061（IX）Reports of the Board of Supervisors

063（X）Important issues

075（XI）Financial Report

203（XII）Documents Available For Inspection

Neusoft Corporation

Annual Report 2011

The year 2011 saw the 20th anniversary of Neusoft, a milestone year for us. Focusing on
business model innovation, global strategy and operational excellence, we have mapped out
future development strategies to build up necessary power and capacities for a sustainablegrowth. In the aspect of business model innovation, we have been devoted to building acompany driven by innovation and service through leveraging our competitiveness and competence. In the aspect of global strategy, we have combined all business lines in and outside
China, making all products and services available in both local and international markets. In
the aspect of operational excellence, we have made some reforms covering organization,technology, culture, leadership and human resources to ensure that Neusoft operates at increasingly high efficiency levels.
However, the past years were merely a start for our future adventure at Neusoft. We
need more entrepreneurial employees to stand out and continue our growth with passion
and wisdom. In the coming years, Neusoft will strive to maintain a fast sustainable growththrough business innovations to build up an emerging multinational company.

Dr. Liu Jiren
ChairmanAs the economy was in a complicated ever-changing state in 2011, we have made continuous efforts in extending our global presence, building the marketing system focusing on
key accounts, optimizing the distributed delivery model, implementing effective market competition strategies, expanding core business offerings to high-profile customers, and accelerating mergers and acquisitions across industries. On another dimension, we launched an operational excellent plan, which, through constantly optimizing resource allocation and improving
organizational capabilities, has helped ensure a sustainable growth for all of our businesses.
In 2012, we will implement an innovation-based strategy aiming for global expansion.
More input will be made in designing and developing new businesses to facilitate business restructuring towards an innovation/service-driven growth. In the meantime, with continued
building of a highly efficient global service support system across the company, we need tofurther optimize and implement our operational excellence plan for improved management
and operational efficiency. Specifically, for China’s market, we will aggressively extend our offerings for high-profile customers for fast business growth, mostly by reinforcing our leading
competitiveness in those industries and markets where we play. Globally, we will further increase input in international market development. Therefore, we need to improve our engineering service capabilities, such as planning, consulting, system design, etc., and build up
our knowledge assets. Overall, we will further accelerate business integration and inter-promotion in both Chinese and international markets, thereby realizing a blistering growth.

Wang Yongfeng
PresidentNeusoft Corporation

Annual Report 2011

（I）Important Notes
1）The Board of Directors, Board of Supervisors, directors, and supervisors as well as the senior management of the Company hereby represent and warrant that this Report contains no false representations, misleading statements or material omissions, and shall be individually and jointly reliable for the authenticity, accuracy and integrity of the contents.
2）BDO CHINA SHU LUN PAN Certified Public Accountants LLP has issued a standard and unqualified auditor’s report.
3）Liu Jiren, Chairman & CEO, Wang Li, Senior Vice President & CFO, and Chen Lei, Head of Finance Operation Division hereby confirm the authenticity and integrity of financial reports in the Annual Report.
4） This Report is primarily about Neusoft Corporation （“Neusoft” or the “Company”）, including any and/or all branches andsubsidiaries of the Company.

004

（II）Company Profile
2.1 Overview
Registered Company Name in Chinese“东软集团股份有限公司”

Abbreviation of Registered Company Name in Chinese“东软集团”

Registered Company Name in English

Neusoft Corporation

Abbreviation of Registered Company Name in English

Neusoft

Legal Representative

Liu Jiren

2.2 Contact
Secretary of the Board of Directors

Representative for Securities Affairs

Wang Nan

Zhang Long

Neusoft Park, No.2 Xinxiu Street, Hunnan New District,

Neusoft Park, No.2 Xinxiu Street, Hunnan New District,

Shenyang 110179, PR China

Shenyang 110179, PR China

Tel:8624-83662115

8624-83662115

Fax:

8624-23783375

8624-23783375

Email:

investor@neusoft.com

investor@neusoft.com

Name
Address005

2.3 Basic information
Registered officeNo.2 Xinxiu Street, Hunnan New District, Shenyang 110179, PR China

Address of office

Neusoft Park, No.2 Xinxiu Street, Hunnan New District, Shenyang 110179, PR China

Official website

http://www.neusoft.com

Email:

investor@neusoft.com

2.4 Information disclosure and venue of report preparation
Newspaper designated by the Company for information disclosure
Website designated by China Securities Regulatory Commission for
publication of annual report
Venue of preparation of annual report

China Securities Journal, Shanghai Securities News
http://www.sse.com.cn
Office of the Board of Directors

2.5 Company stock
Company StockClass of stock

Stock exchange

Stock name

Stock code

Name of stock before alteration

A

Shanghai Stock Exchange

Neusoft Corporation

600718

Neusoft Stock/ Neu-Alpine

Neusoft Corporation

Annual Report 2011

2.6 Others
Date of initial registration

June 17th, 1991

Place of initial registration

No. 11, Lane 3, Wenhua Road, Heping District, Shenyang 110819, PR China

Date of registration alternation

October 28th, 2010

Place of registration alternation

No. 2, Xinxiu Street, Hunnan New District, Shenyang 110179, PR China

Registered No. of Corporate Business License

210100402001491

Tax Registration No.

210132604608172

Organization code

60460817-2
BDO CHINA SHU LUN PAN Certified Public Accountants LLPName of the appointed CPA firm

(Formally known as BDO CHINA SHU LUN PAN Certified Public Accountants Co.,Ltd.)

Office address of the CPA firm

006

F4, New Huangpu Financial Plaza, No. 61, East Nanjing Road, Shanghai 201804,
PR China

（III）Financial and Operating Highlights
3.1 Key accounting data
Unit: RMB Yuan
Item

AmountOperating income

310,300,179

Total profit

492,886,660

Net profit attributable to shareholders of listed company

417,068,980

Net profit attributable to shareholders of listed company after deducting non-recurring profits and losses

286,807,569

Net cash flow from operating activities

300,196,604

3.2 Non-recurring profits/losses
Unit: RMB Yuan
Non-recurring profits/losses

2011

Remarks

2010

2009

Profits and losses arising from
Profit/loss on disposal of non-current assets

18,180,599

disposal of fixed assets, intangible asset and long-term equi-

43,302,916-7,903,766
007

ty investment
Government grants recorded in current profit

Government

and loss, with exception of those closely related to the normal operations of the Company
and continuously received at certain quotation

search105,173,354

grantsprojects

and

for

re-

variousgovernment funds and subsi-

109,335,552

38,968,688

9,897,547

7,730,763

26,753———diaries recorded in the current

or quantity according to the policies and regu-

profit and loss

lations of China

Surcharges received from Nanhai Neusoft Institute of InforPayment from non-financial businesses for use
of funds recorded in current profit and loss

9,946,738

mation Technology and Chengdu Neusoft Institute of Information Technology on delayed
payment for assets transfer

Profits from fair value of the investee’s net
identifiable assets attributable to the Company
when the investment cost acquired from thesubsidiary, associated or joint-venture is lower——

than the investment

Profits and losses from investGains/losses from exchange of non-monetary
assets24,934,400

ment into Appconomy, Inc.
with the right to use technicalintangible asset

Neusoft Corporation

Annual Report 2011

Continued table
Non-recurring profits/losses

2011

Remarks

2010

2009

Profits/losses on changes in fair value from
Profits on changes in fair value

held-for-trading financial assets/liabilities, investment income from disposal of held-for-trading

950,557

financial assets/liabilities and available-for-salefinancial assets, except for hedging business re-of held-for-trading financial assets （Foreign exchange for--694,314

83,998,795

ward contract）

lated to normal operation of the Company
Reversal of provision for depreciation of recei-——

6,600,000

13,400,000

1,313,927—-1,945,474

2,295,537——

vables measured separately
Other non-operating income/expenses

Investment income from acquiOther non-recurring gains/losses

1,221,899

sition of Beijing LBS Social Insurance Information Technology Co., Ltd.

008

Minority shareholders’interests-11,201,619—-21,764,898-10,030,006

Income tax consequences-20,258,444—-17,278,655-9,690,610

Total

130,261,411—

127,479,427

118,769,401

3.3 Three-year key accounting data and financial indicators before the end of reporting period
Unit: RMB Yuan
Key accounting data
Total operating income

2011

2010

2009

Year-on-yearchange（%）

BeforeAfter

5,751,249,330

4,937,696,440

16.48

4,166,055,393

4,166,055,393

Operating profit

310,300,179

407,491,880-23.85

671,687,541

671,687,541

Total profits

492,886,660

560,105,328-12.00727,756,717

727,756,717

417,068,980

484,675,178-13.95640,564,034

640,590,492

deducting

286,807,569

357,195,751-19.71

521,794,633

521,821,091

Net cash flows from operating activities

300,196,604

381,889,530-21.39772,564,482

772,564,482

Net profit attributable to shareholdersof listed company
Net profit attributable to shareholders
oflistedcompany

after

non-recurring gains/losses

Key accounting data

Year-on-year

Year-end 2009

Year-end 2011

Year-end 2010

BeforeAfter

Total assets

7,925,285,114

6,858,879,805

15.55

6,209,047,971

6,209,047,971

Total liabilities

2,910,161,846

2,273,667,334

27.99

1,936,157,245

1,936,157,245

4,674,677,555

4,280,208,312

9.22

3,997,562,677

3,997,589,135

1,227,594,245

1,227,594,245—

944,303,265

944,303,265

Ownership equity attributable to shareholders of listed company
Total equity

change（%）

Unit: RMB Yuan
Key financial indicators

2011

2009

Year-on-year

2010change（%)

BeforeAfter

Basic earnings per share（RMB Yuan/share）

0.34

0.39

-13.950.52

0.52

Diluted earnings per share（RMB Yuan/share）

0.34

0.39

-13.950.52

0.52

Earning per share based on current equity

0.34

0.39

-13.95

0.52

0.52

0.23

0.29

-19.71

0.43

0.43

9.34

11.67

17.21

17.21

6.42

8.60

14.02

14.02

0.24

0.31

0.82

0.82

Year-end

Year-end

Year-on-year

2011

2010

change（%）

Basic earnings per share after deducting non-recurring gains/losses（RMB Yuan/share）
Average weighted rate of return on equity
Average weighted rate of return on equity after
deducting non-recurring gains/losses
Net cash flows per share from operating activities（RMB Yuan/share）
Key financial indicators
Book value per share attributable to shareholders

percents
Decline by 2.18
percents-21.39Year-end 2009
009

3.81

3.49

9.22

4.23

4.23

36.72

33.15

+3.57

31.18

31.18

of listed company
Asset-liability ratio（%）

Decline by 2.33

Note:（1）In accordance with relevant provisions of the Accounting Standards for Business Enterprises No. 16 issued by the Ministry of Finance of the People’s Republic of China, net profit attributable to shareholders of listed company, net profit attributable to shareholdersof listed company after deducting non-recurring gains/losses and ownership equity attributable to parent company which was adjusted in2009 shall be based on the data with retroactive adjustments;（2）In accordance with relevant regulations, earnings per share shall be calculated by 1,227,594,245 shares while cash flow fromoperating activities per share and book value per share shall be accounted by 1,227,594,245 shares for both 2010 and 2011 and944,303,265 shares for 2009.

3.4 Fair value-measured items
Unit: RMB Yuan
Item

Influence on current

Year-begin balanceYear-end balanceHeld-for-trading financial assets

969,350

863,170-106,180-95,562

Held-for-trading financial liabilities

1,227,304

170,567-1,056,737

951,063———855,501

Total

Changeprofits（after tax）

Neusoft Corporation

Annual Report 2011

（IV）Changes in Equity and Shareholders
4.1 Changes in equity（1）Statement of changes in equity
Unit: Share
BeforeItem

010

Changes (+/-)
New Bonus
issue issue

Conversion
fromreserves

After

Quantity

Percent(%)

Shares with selling restrictions

900,294,040

73.3381-900,294,040 -900,294,040a）State-owned shares

121,838,079

9.9249-121,838,079 -121,838,079b）Shares held bystate-owned companies

216,361,562

17.6248-216,361,562 -216,361,562c） Shares held by otherdomestic investors

382,071,106

31.1236-382,071,106 -382,071,106

Including: Shares held bycompanies other thanstate-owned companies

382,071,106

31.1236-382,071,106 -382,071,106d）Shares held by foreign
investors

180,023,293

14.6647-180,023,293 -180,023,293

Include: Shares held byforeign companies

180,023,293

14.6647-180,023,293 -180,023,293

Floating shares without
trading restrictions

327,300,205

26.6619

900,294,040 900,294,040 1,227,594,245 100.0000a）RMB-denominatedordinary shares

327,300,205

26.6619

900,294,040 900,294,040 1,227,594,245 100.0000

1,227,594,245 100.0000

1,227,594,245 100.0000

OthersSub-total

Quantity

Percent（%）

Shares held by domestic
natural persons

Shares held by foreign
natural personsb）Shares traded in
non-RMB currencies andlisted domesticallyc）Shares listed overseasd）Others
Total shares

On March 5th, 2011, the Company announced that 900,294,040 floating shares with trading restrictions held by its shareholders including NEU Science & Technology Industry Group Co., Ltd. were to be listed for sales on the stock market on March 14th, 2011 by publishing the Notice on Listing of Floating Shares with Trading Restrictions on both China Securities Journal and Shanghai Securities News.
By then, 1,227,594,245 shares of the Company had been turned into floating ones without trading restrictions.

（2）Changes in shares with trading restrictions
Unit: Share
Number ofshares withtrading
Shareholder

restrictions
at thebeginning of
2011

NEU Science & Technology Industry Group

Number of

Number of

Number ofshares withadditional

shares withtrading

shares withtrading

restrictions

trading

restrictions

expired in

restrictions

at the end

2011

in 2011of 2011

Expiry date of
trading
restrictions

216,361,562

216,361,562

00March 13th, 2011

Chengdu Huixu Technology Co., Ltd.

210,807,559

210,807,559

00March 13th, 2011

Alpine Electronics (China) Co., Ltd.

171,263,547

171,263,547

00March 13th, 2011

Baosteel Group Corporation

121,838,079

121,838,079

00March 13th, 2011

Toshiba Solutions Corporation

58,228,036

58,228,036

00March 13th, 2011

INTEL CAPITAL CORPORATION

52,181,184

52,181,184

00March 13th, 2011PHILIPS ELECTRONICS CHINA B.V.

24,954,871

24,954,87100March 13th, 2011

Alpine Electronics Inc.

20,057,144

20,057,144

00March 13th, 2011

SAP AG

16,283,768

16,283,768

00March 13th, 2011

Toshiba Corporation

8,318,290

8,318,290

00March 13th, 2011

900,294,040

900,294,040

0

0

—

Co., Ltd.

Total

According to the undertakings made by 10 shareholders who have hold floating shareswith trading restrictions of the Company, including NEU Science & Technology Industry
Reasons for trading restrictions

Co., Ltd., upon stock subscription, the shares held by such shareholders should not betransferred within three years from March 13th, 2008 until the expiry of such restrictions.
On March 14th, 2011, the shares with trading restrictions held by the said shareholders
were made available for sale on the stock market upon the expiry of trading restrictions.

4.2 Issue and listing of securities（1）Issue of securities in the past three years
No securities were issued and listed in the past three years prior to the end of the reporting period.

（2）Changes in the total number of shares and shareholding structure of the Company
There is no change in the total number of shares and shareholding structure caused by bonus issue and allotted shares during the reporting period.

011

Neusoft Corporation

Annual Report 2011（3）Shares held by employees
During the reporting period, no shares for employees of the Company were in issue.

4.3 Shareholders and ultimate controllers（1）Number of shareholders and their shareholdings
Unit: ShareTotal number of shareholders at the end of 2011

79,200Total number of shareholders as of

77,775February 29th, 2012

Shareholdings of the top ten shareholders

Shareholder

Nature ofshareholder

Co., Ltd.

company

NumberNumberShareholding

Number ofshareholdingsof shares

percentage

total

during the

with

（%）

shareholdings

reportingtrading

periodrestrictions

012
NEU Science & Technology Industry Group State-owned

Changes inof thesharespledgedorfrozen17.6248

216,361,562

0

0

N/A

13.9512

171,263,547

0

0

N/A

-58,838,079

0

N/A

Domestic
Alpine Electronics (China) Co., Ltd.

non-state-owned
company

Baosteel Group Corporation

The state

5.132063,000,000

Toshiba Solutions Corporation

Foreign company

4.743358,228,036

0

0

N/A

INTEL CAPITAL CORPORATION

Foreign company

2.604531,973,228-20,207,956

0

N/A

PHILIPS ELECTRONICS CHINA B.V.

Foreign company

2.032824,954,871

0

0

N/A

Alpine Electronics Inc.

Foreign company

1.633920,057,144

0

0

N/A

China Construction Bank - LOF

Unknown

1.5477

18,999,769

15,999,769

0

N/A

SAP AG

Foreign company

1.3265

16,283,768

0

0

N/A

National Social Security Fund 103

Unknown

1.1812

14,499,750

11,499,750

0

N/A

Shareholdings of top ten shareholders with shares without trading restrictions
Shareholder

Number of shares without
trading restrictions

NEU Science & Technology Industry Group Co., Ltd.

216,361,562

Alpine Electronics（China）Co., Ltd.

171,263,547

Baosteel Group Corporation

63,000,000

Classes and number of shares
RMB-denominatedordinary shares
RMB-denominatedordinary shares
RMB-denominatedordinary shares

216,361,562
171,263,547
63,000,000

Continued table
Toshiba Solutions Corporation

58,228,036

INTEL CAPITAL CORPORATION

31,973,228

PHILIPS ELECTRONICS CHINA B.V.

24,954,871

Alpine Electronics Inc.

20,057,144

China Construction Bank - LOF

18,999,769

SAP AG

16,283,768

National Social Security Fund 103

14,499,750

RMB-denominated58,228,036

ordinary shares
RMB-denominated

31,973,228

ordinary shares
RMB-denominated

24,954,871

ordinary shares
RMB-denominated

20,057,144

ordinary shares
RMB-denominated

18,999,769

ordinary shares
RMB-denominated

16,283,768

ordinary shares
RMB-denominated

14,499,750

ordinary shares

Alpine Electronics （China） Co., Ltd. operates as an investment company
Notes on the relationship or XX action of the said shareholders

solely owned by Alpine Electronics Inc. in China. The Company has no knowledge of the relationship of other shareholders such as concerted actor.

（2）Holding shareholders and ultimate controllers
At present, the Company, with stock held in separate shareholdings, has no holding shareholders or ultimate controllers. The largest
shareholder is NEU Science & Technology Industry Group Co., Ltd. with a shareholding percentage of 17.6248%.
Shareholders and Control Relations Chart
Ministry of
Education of
the People’s
Republic of
China

State-owned Assets
Supervision and
Administration
Commission of the StateCouncils Republic of China

100%

100%

Northeastern
University

AlpineElectronics
Inc.

Toshiba
Corporation

INTEL
CORPORATIONROYALPHILIPSELECTRONICS

100%

100%

100%

100%

AlpineElectronics（China）Co.,Ltd.

ToshibaSolutions
Corporation

INTEL
CAPITALCORPORATIONPHILIPSELECTRONICSCHINA B.V

100%

NEU Science& Technology
Industry
Group Co.,Ltd.

BaosteelGroup
Corporation

17.6248%5.1320%13.9512%4.7433%2.6045%100%

Neusoft Corporation

2.0328%AlpineElectronics
Inc.

1.6339%SAP
AGToshiba
Corporation

1.3265%0.6776%

PublicShares50.2734%013

Neusoft Corporation

Annual Report 2011

（3）Introduction to major shareholdersa）NEU Science & Technology Industry Group Co., Ltd.
NEU Science & Technology Industry Group Co., Ltd., approved by the Ministry of Education of the People’s Republic of China
through issuing the Document of No.11［2005］of Department of Science and Technology, the Ministry of Education on July 1st, 2005,
was incorporated as a limited liability company wholly owned by Northeastern University in compliance with a judicial restructure of NEU
Industry Development Co., Ltd.（a company owned by all members of Northeastern University）in accordance with the Guidelines for Pro-

moting the Development of Technology Industry in China’s Colleges and Universities. It holds the equity and business assets of investees
on behalf of Northeastern University.
Date of incorporation: August 5th, 2005
Registered capital: RMB 500 million Yuan
Registered office: No. 11, Lane 3, Wenhua Road, Heping District, Shenyang 110819, PR China
Business scope: Research/development/manufacturing/contracting of computer software/hardware, mechatronics, high-tech products,
emerging materials and metallurgical products, technology consulting/service/transfer/training, importing/exporting of self-owned and commissioned products and technologies, corporate investment management, corporate assets management, property management
014b）Baosteel Group Corporation
Baosteel Group Corporation is a legally incorporated and wholly state-owned corporation for which the State-owned Assets Supervision & Administration Commission under the State Council of the People’s Republic of China performs the duty of investor on behalf of
the State Council.
Date of incorporation: January 1st, 1992
Registered capital: RMB 5,108,262.1 Yuan
Registered office: Baosteel Plaza, No.370, Pudian Road, Pudong New Area, Shanghai 200122, PR China
Business scope: State-owned assets business under authorization of the State Council of the People’s Republic of China and relevant
investment business, other business related to steel, mineral & metals, chemicals（except for hazardous goods）, power supply, terminal
service, warehousing and transpiration and development/transfer/management/consulting of technologies relating to such business, importing/exporting services approved by the Ministry of Foreign Trade and Economic Cooperation, domestic and foreign trading （except
for those under special regulations of China）and relevant servicesc）Alpine Electronics Inc.
Alpine Electronics Inc., organized and existing under the laws of Japan, is an auto electronics manufacturer mainly engaged in the
production of in-car audio, information and communication products. It is listed on Tokyo Stock Exchange.
Date of incorporation: May 10th, 1967
Registered capital: 25,920,599,127 Yen
Registered office: 1-1-8 Nishi-Gotanda, Shinagawa-ku, Tokyo 141-8501, Japan
Business scope: In-car audio products/in-car information & communication productsd）Alpine Electronics（China）Co., Ltd.
Alpine Electronics（China）Co., Ltd., established in Beijing, China in 1994, operates as an investment company wholly owned by Alpine Electronics Inc.
Date of incorporation: December 28th, 1994

Registered capital: 90 million US dollars
Registered office: F4, Block R2, China Merchants Tower, No.116, Jianguo Road, Chaoyang District, Beijing 100022, PR China
Business scope: Investment in in-car audio products, in-car information/communication/navigation products and relevant parts, salesof and services for products designed for investeese）Toshiba Corporation
Toshiba Corporation, a company organized and existing under the laws of Japan, is listed on the Tokyo Stock Exchange.
Date of incorporation: 1875
Registered capital: 439,901,268,477 Yen
Registered office: 1-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8001, Japan
Business scope: Digital products, electronic devices and components, infrastructure systems, home appliance & othersf）Toshiba Solutions Corporation
Toshiba Solutions Corporation is a company incorporated and existing under the laws of Japan. Its major shareholder is Toshiba Corporation.
Date of incorporation: October 2003
Registered capital: 23,500,000,000 Yen
Registered office: 1-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8001, Japan
Business scope: Software development and solutions offering. Its software is now widely used in the infrastructure development industry covering government, roadways, transpiration and exhibition as well as other sectors such as manufacturing, industries, logistics,
service offering, finance, telecommunication, and media.
g）Philips Electronics China B.V.
Philips Electronics China B.V., a limited liability company organized and existing under the laws of the Netherlands, operates as a subsidiary of Koninklijke Philips Electronics NV. Based in Eindhoven, the Netherlands, the company is dedicated to Philips’investment and development in China.
Date of incorporation: September 12th, 1946
Registered capital: 15,750,000 European Dollars
Registered office: Eindhoven, Groenewoudseweg 1
Business scope: Healthcare, high-quality lifestyle, lighting systemsh）SAP AGSAP AG, organized under the laws of Germany, is one of the global leading software providers, ranking third among the world’s independent software developers in terms of market. Serving more than 183,000 customers from 130-plus countries, the company has
55,000 employees in 60-plus countries including EMEA, USA, Asia Pacific and Japan. SAP is listed on a number of stock exchanges suchas Frankfurt Stock Exchange and New York Stock Exchange.
Date of incorporation: 1972
Registered capital: 1,228,083,382 European Dollars
Registered office: SAP AG, Dietmar-Hopp-Allee 16,69190 Walldorf, Germany
Business scope: Development/sales/implementation of commercial software solutions and relevant support & consulting servicesi）Intel Capital Corporation
Listed on NASDAQ Stock Market, Intel Capital Corporation operates as a wholly owned subsidiary of Intel Corporation. Being a capi-

015

Neusoft Corporation

Annual Report 2011

tal venture company under the control of Intel, it is dedicated to providing innovative technology enterprises and fresh businesses with access to capital investments.
Date of incorporation: April 6th, 1998
Registered capital: 10 US Dollars
Registered office: 2200 Mission College Boulevard, Santa Clara, California 95052, USA
Business scope: Capital venture016

（V）Directors, Supervisors and Senior Management
5.1 Changes in shareholdings of directors, supervisors and senior management and their compensation

Name

Title

Compensation
received from Compensation/
NumberNumber of
the Company
allowanceof shares
Expiryshares at Reason during thereceived from
Commencement
at theGender Ageofthe end offorreportingshareholders’of service
beginning
service2011
changesperiodfirms or otherof 2011（RMB’
000
affiliatedYuan/before
enterprises
tax）

Liu Jiren

Chairman &
CEO

Male

57

May 25th, 2011

May
24th,
2014

Wang
Yongfeng

Vice
Chairman &President

Male

42

May 25 , 2011

May
24th,
2014

Wang Li

Director,
Senior Vice
President &CFO

Female 47

Seizo
Ishiguro

Director

Male

Klaus
MichaelZimmerDirector &Senior Vice
President

Akira
Kasano456,681

7,160,832

See
Note 1

256.00No

146,085

See
Note 1
3,178,391
See
Note 2168.00No

May 25 , 2011

May
24th,
2014

0

See
Note 1
1,445,403
See
Note 2

87.00

No

69

May 25th, 2011

May
24th,
2014

0

0

0

Yes

Male

56

May 25th, 2011

May
24th,
2014

0

0

See
Note 3188.22

No

Director

Male

56

May 25th, 2011

May
24th,
2014

0

0

See
Note 3

0

Yes

Fang
Hongxing

Independent
Director

Male

40

May 25th, 2011

May
24th,
2014

0

0

8.00

No

Xue Lan

Independent
Director

Male

53

May 25th, 2011

May
24th,
2014

0

0

8.00

No

Gao WenIndependent
Director

Male

56

May 25th, 2011

May
24th,
2014

0

0

8.00

No

Chairman,
Tu Ganfeng Board ofSupervisors

Male

48

May 25th, 2011

May
24th,
2014

0

0

0

Yes

Hu AiminMale

39

May 25th, 2011

May
24th,
2014

0

0

0

Yes

Supervisor

th

th

017

Neusoft Corporation

Annual Report 2011

Continued table

Name

Title

Compensation
received from Compensation/
NumberNumber of
the Company
allowanceof shares
Expiryshares at Reason during thereceived from
Commencement
at theGender Ageofthe end offorreportingshareholders’of service
beginning
service2011
changesperiodfirms or otherof 2011（RMB’
000
affiliatedYuan/before
enterprises
tax）

ShingoKurataSupervisor

Male

41

May 25th, 2011

May
24th,
2014

0

0

Ge
Shengliu

Supervisor

Male

37

May 25th, 2011

May
24th,
2014

315,267

315,267

Ma ChaoSupervisor

Male

35

May 25th, 2011

May
24th,
2014

0

0

Chen
Ximin

Senior Vice
President &
COO

Male

43

May 25th, 2011

May
24th,
2014

0

Lu
Zhaoxia

Senior Vice
Priesident

Female 55

May 25th, 2011

May
24th,
2014

22,274

Zhang
Xia

Senior Vice
President,
CTO & CKO

Female 47

May 25th, 2011

May
24th,
2014

Wang
Jingxi

Senior Vice
Priesident

Male

43

May 25th, 2011

May
24th,
2014

Zhang
Xiao’ou

Senior Vice
President &
CFO

Male

40

Li JunSenior Vice
President &
CMO

Male

0

Yes

See
Note 3

59.62

No

See
Note 3

38.60

No

See
Note 1
449,272
See
Note 295.00

No2,201,949

See
Note 1

97.00

No

0

1,103,048

See
Note 1

84.00

N/A

0

792,609

See
Note 1

78.00

N/A

May 25 , 2011

May
24th,
2014

0

See
Note 1
370,000
See
Note 2

78.00

N/A

39

May 25th, 2011

May
24th,
2014

0

660,508

See
Note 1

78.00

No

Wang
Nan

Senior Vice
President &Secretary of Female 36
the Board of
Directors

May 25th, 2011

May
24th,
2014

344,278

344,278

See
Note 3

62.00

No

Zhao
Hong

FormerDirector &Senior Vice
President

May 30 , 2008

May
25th,
2011

See
Note 1
3,669,253
See
Note 4

48.00

Yes

018

Male

58

th

th

247,824

Continued table
Compensation
received from Compensation/
NumberNumber of
the Company
allowanceof shares
Expiryshares at Reason during thereceived from
Commencement
at theGender Ageofthe end offorreportingshareholders’of service
beginning
service2011
changesperiodfirms or otherof 2011（RMB’
000
affiliatedYuan/before
enterprises
tax）

Name

Title

Kazuaki
Onchi

FormerDirector

Male

58

May 30th, 2008

May
25th,
2011

Xu
Qingrong

FormerSupervisor

Female 42

May 30 , 2008

May
25th,
2011

Zhang
Hong

FormerSupervisor

Female 41

May 30 , 2008

May
25th,
2011

Wang
ZidongFormerSenior Vice
President &Secretary of
the Board of
Directors

Male

47

May 30 , 2008

May
25th,
2011

/

/

/

/

Total

/

th

th

th

0

0

See
Note 4

0

Yes

0

See
Note 1
3,170,436
See
Note 4

32.50

N/A

0

See
Note 1
359,824
See
Note 4

23.40

Yes

See
Note 1
970,946
See
Note 454.00

Yes

1,551.34/

01,532,409 26,192,016/

019

Note 1: In accordance with the Notification of Neusoft Corporation on Changes in and Transfer of Shareholders’Equity published on

China Securities Journal and Shanghai Securities News, 210,807,559 shares held by Chengdu Huixu Technology Co., Ltd.（“Huixu Technology”）, previously the second largest shareholder of the Company, has been transferred to 137 shareholders based on shareholding
percentage with the help of China Securities Depository & Clearing Corporation Limited Shanghai Branch. Therefore, Huixu Technology
has no longer owned any share of the Company. As a result, shares held by the directors, supervisors and senior management of theCompany have increased.
Note 2: The shares held by Zhang Xiao’ou decreased by 72,540 on June 14th, 2011, and those held by Chen Ximin decreased by
85,248 on June 30th, 2011. From July 20th to 21st, 2011, shares held by Wang Yongfeng decreased by 1,010,000 and those held by
Wang Li cut down by 120,000 on December 27th, 2011.
Note 3: The data shows the changes in shareholdings from one’s commencement of service to the end of the reporting period.
Note 4: The data indicates the changes in shareholdings within six months from the beginning of the reporting period to one’s termination of service.
Present directors, supervisors and senior management’s working experience in the past five years（1）Liu Jiren
Dr. Liu has been Chairman & CEO at Neusoft since August 1999. As one of the founders of Neusoft, which was established in 1991,

Neusoft Corporation

Annual Report 2011

Dr. Liu has successfully transformed a small college business into a leading IT solutions & services provider in China with his exceptional
academic record and unparalleled industry insight. Dr. Liu also holds the positions of Vice President of Northeastern University of China,
Vice-chairman of the China Software Industry Association（CSIA） and Director of Harman International Industries Inc. Prior to this, heserved as Director and General Manager of Neusoft from June 1993 to August 1999.
After completing the research on his doctoral thesis at the American National Standards Institute（ANSI）from 1986 to 1987, Dr. Liu
returned to China in 1987. He then earned his doctorate degree in computer applications at the Northeastern University, China, thus becoming the first person in China to receive a doctorate degree in computer applications.
Dr. Liu has received a number of awards, such as 6th CNBC Asia Business Leaders Awards - Innovator of the Year, 2009 CCTV Economic Person of the Year, Ernst & Young Entrepreneur of the Year 2010 China Awards, and 2011 China Software Industry Leaders in the
Past Decade.
（2）Wang Yongfeng
Mr. Wang serves as Vice Chairman & President at Neusoft. He joined Neusoft in May 1992 and served as Vice General Manager
from Feb. 1998 to Aug. 1999.
Mr. Wang received his master’s degree in artificial intelligence of computer applications from Jilin University, China.
（3）Wang Li
020

Ms. Wang has served as Senior Vice President & CFO at Neusoft since June 2008. As a senior certified public accountant, she joined
Neusoft in Feb 1997 and served as Senior Vice President & Financial Director with the company from Feb. 1997 to Aug. 2003.
Ms. Wang received her master’s degree in management engineering from Northeastern University, China and an EMBA degree from
China European International Business School.
（4）Seizo Ishiguro
Mr. Seizo Ishiguro has been President of Alpine Electronics Inc. since June 2010. Having successively held a number of positions including Manager of Operations Division, Managing Director and Vice General Manager, Mr. Seizo served as General Manager of the company from 1997 to June 2010. He joined Alpine in 1978.
Mr. Seizo Ishiguro graduated from the Law School of Waseda University, Japan.
（5）Klaus Michael Zimmer
Mr. Klaus Michael Zimmer is Director and Senior Vice President at Neusoft and President of Neusoft Europe. Prior to joining Neusoft
in 2009, Mr. Zimmer was with SAP, where he served as Chairman & CEO SAP, North Asia.
Mr. Zimmer received his master’s degree from the University of Trier, Germany.
（6）Akira Kasano
Mr. Akira Kasano is Director at Neusoft. He also serves as Director and Executive Quality Leader at Toshiba Solutions Corporation.
Mr. Akira Kasano received his bachelor’s degree from the Faculty of Science, University of Tokyo, Japan.
（7）Fang Hongxing
Dr. Fang is President of the Accountant Institute of Northeastern University of Finance & Economics, Director of MPAcc Education
Center, Vice-President and General Manager of Northeastern University of Finance & Economics Press. Currently, he also serves as consulting expert for the Accounting Standards Committee of the Ministry of Finance & China Internal Control Standards Committee, Director of
Accounting Society of China, Deputy Director of Chinese Institute of Finance and Cost for Young and Mid-career Professionals, memberof the Technological Guidance Committee of the Chinese Institute of Certified Public Accountants and expert of Accounting and AuditingStandards Panel. Besides, Dr. Fang is a professor and doctorial tutor and has a special government allowance granted by the State Coun-cil of People’s Republic of China whilst serving as Independent Director at Shenyang Machine Tool Co., Ltd. and Dalian Zhangzidao
Fishery Group Co., Ltd..
Dr. Fang received his doctorate degree in accounting from Northeastern University of Finance & Economics, China.
（8）Xue Lan
Dr. Xue holds three titles with Tsinghua University, China, namely, Dean of School for Public Policy and Management, Deputy Presidentof Chinese Institute of Engineering Development Strategies and Director of China Institute for Science and Technology Policy. He is also amember of the Emergency Rescue Plan Group under the Office of the State Council, Vice President of the China Administration Society, Vice
General Director of Chinese Association for Science of Science and S&T Policy, Vice President of Society of Management Science of China,
Vice Director of National MPA Education Steering Committee, Director of International Development and Research Center（IDRC）, non-permanent senior researcher of Brookings Institution, member of Advisory Committee of John F. Kennedy School of Government（KSG）, visiting Professor at Carnegie-Mellon University, doctorial tutor and specially employed professor for Cheung Kong Scholars Program.
Dr. Xue received his doctorate degree in engineering and public policy from Carnegie-Mellon University, the United States.
（9）Gao Wen
Dr. Gao is currently a professor at the School of Electronic Engineering and Computer Science, Peking University as well as a memberof Chinese Academy of Engineering. He also maintains an active presence in the industry, currently serving as Dean of the National Engineering Laboratory for Video Technology, President of Audio Video Coding Standard Group of China, Executive Director of China Computer Association, and Director of Langchao Electronic Information Industry Co. Ltd.
Dr. Gao received his doctorate degree in electronics from the University of Tokyo, Japan.
（10）Tu Ganfeng
Dr. Tu is General Manager of Northeastern University Science & Technology Industry Group Co., Ltd.. He is also Standing Director of
Chinese University Industry Association and Director of the China Metallurgical University Industry Association.
Dr. Tu received his doctorate degree in nonferrous metal metallurgy from Northeastern University, China.
（11）Hu Aimin
Mr. Hu currently works as Vice General Manager and Chief Project Manager of Capital Operations Department, Baosteel Group Co.
Ltd. After joining Baosteel in 1995, he successively served as Senior Manager of Financial Planning Department and Investment & Merger
Manager of Capital Operations Department.
Mr. Hu earned his bachelor’s degree in business administration from Jiangxi University of Finance & Economics, China.
（12）Shingo Kurata
Mr. Shingo Kurata is the Legal Manager of Business Planning Department of Alpine Electronics Inc. After joining Alpine in 1999, heserved as Legal Manager at the Intellectual Property Rights Department.
Mr. Shingo Kurata received his bachelor’s degree in law from Meiji University, Japan and holds a master’s degree in law from the
Law Center of Georgetown University, the United States.
（13）Ge Shengliu
Mr. Ge is Vice General Manager of IA Business Division at Neusoft. Since his accession in July 1997, he has served as Manager of the
3rd Department of IA Business Division and Embedded Application Development Department of NEU-APN IA Business Division successively.
Mr. Ge received his bachelor’s degree in Computer Applications from Northeastern University, China.
（14）Ma Chao
Mr. Ma currently works as Assistant to the General Manager of International Business Development Division at Neusoft. Since his ac-

021

Neusoft Corporation

Annual Report 2011

cession in May 2005, he has served successively as Sales Manager and Senior Sales Manager of Neusoft’s International Business Development Division.
Mr. Ma received his bachelor’s degree in Computer Applications from Northeastern University, China and master’s degree in Information System from the University of Liverpool, England.
（15）Chen Ximin
Dr. Chen is Senior Vice President and Chief Operating Officer at Neusoft as well as General Manager of Embedded Software Divisionof the Company. Prior to this, he has served successively as Manager of the Intelligent Device Development Department, Deputy General
Manager of Neusoft Middleware Technologies, Manager of Embedded Software Division and Vice President with the Company. He joined
Neusoft in Jan. 1999.
Dr. Chen received his doctorate degree in automatic control from Tsinghua University, China.
（16）Lu Zhaoxia
Ms. Lu is currently Senior Vice President at Neusoft. She joined Neusoft as Deputy General Manager in 1995 and later served as Deputy
General Manager, Marketing and COO successively with the company. Prior to that, she was Director of Management Control Center ofNortheastern University, China.
Ms. Lu received her master’s degree in computer applications from Northeastern University, China.
022（17）Zhang Xia
Dr. Zhang is Senior Vice President, CTO & CKO at Neusoft. She joined Neusoft in Nov. 1994 and has been serving as CTO & CKO
since November 2004.
Dr. Zhang received her doctorate degree in computer applications from Northeastern University, China.
（18）Wang Jingxi
Mr. Wang has served as Senior Vice President at Neusoft since Feb. 2002. He joined Neusoft in Mar. 1999 and served as Director of
Administrations from 2001.
Mr. Wang received his bachelor’s degree in computer applications from Northeastern University, China.
（19）Zhang Xiao’ou
Mr. Zhang has been serving as Senior Vice President and Financial Operating Officer at Neusoft since June 2008. As a senior certified
public accountant, Mr. Zhang joined Neusoft in April 2000 and has worked as Financial Director with the company.
Mr. Zhang received his master’s degree in accounting from Northeastern University of China, where he also earned a bachelor’s degree. He also has an EMBA degree from China European International Business School.
（20）Li Jun
Mr. Li has served as Senior Vice President & CMO at Neusoft since May 2008. Since joining the company in July 1995, he has served
successively as General Manager of East China Region and Sales Director of Neusoft.
Mr. Li received his bachelor’s degree in computer software from the Northeastern University of China.
（21）Wang Nan
Dr. Wang has been Senior Vice President since May 2011 in addition to holding the position of Secretary of the Board of Directors at
Neusoft from December 2011. Also, she is presently General Manager of the Company’s International Business Development Division.
Prior to this, she has served successively as Manager of Java Application Department of Software Center, Vice General Manager of Middleware Technology Branch, Manager of Mobile Internet Division and Deputy Director of Advanced Automotive Electronic Technology Research Center of the company since her accession in 1995.

Dr. Wang received her doctorate degree in Computer Applications from Northeastern University, China.

5.2 Posts held in shareholding companies
Name
Liu Jiren

Shareholding company

Title

Northeastern University

Seizo Ishiguro Alpine Electronics Inc.

Compensation/allowance

Vice President

No

Chairman

Yes

Director, Executive Director, General Manager of OpeAkira Kasano

Toshiba Solutions Corporation

ration Reform, Manager of Reform Promotion Division

Yes& General Manager of Solutions and Technologies
Tu Ganfeng

Hu AiminNEU Science & Technology Industry
Group Co., Ltd.

General Manager

Yes

Vice General Manager of Capital Operation Division &Baosteel Group Corporation

Chief Project Manager

Seizo Ishiguro Alpine Electronics Inc.

Legal Manager of Business Planning Department

Yes
Yes

Posts in other organizations excluding wholly-owned subsidiaries, holding subsidiaries and associated shareholders’firms
Name

Liu Jiren

Wang
Yongfeng

Wang Li

Company

Title

Compensation/allowance

Philips and Neusoft Medical Systems Co., Ltd.

ChairmanNo

Nokia Siemens Networks Neusoft Commtech Company

Director

No

Dongzhong Commtech Co., Ltd.

Director

No

Chongqing Guo’ao 100 Years Xikang Health Management Co., Ltd.

Vice Chairman

No

Liaoning Shengjing Xikang Healthcare Co., Ltd.

Director

No

Dalian Neusoft Information Services Co., Ltd.

Director

No

Dalian Kangruidao Investment Co., Ltd.

ChairmanNo

Dalian Neusoft Holdings Co., Ltd.

ChairmanNo

Tianjin Neusoft Ruidao Education Information Technology Co., Ltd.

ChairmanNo

Dalian Neusoft Institute of Information

ChairmanNo

Dalian Neusoft Institute of Information Technology

ChairmanNo

Chengdu Neusoft Institute of Information

ChairmanNo

Neusoft Institute of Information Technology, Nanhai

Chairman

No

Harman International Industries, Incorporated

Director

Yes

Nokia Siemens Networks Neusoft Commtech Company

Director

No

Liaoning Shengjing Xikang Healthcare Co., Ltd.

DirectorNo

Shenyang CataData Technology Co., Ltd.

Director

No

Dalian Kangruidao Investment Co., Ltd.

Director

No

Dalian Neusoft Holdings Co., Ltd.

Director

No

Chongqing Guo’ao 100 Years Xikang Health Management Co., Ltd.

Supervisor

No

Dalian Kangruidao Investment Co., Ltd.

Supervisor

No

023

Neusoft Corporation

Annual Report 2011

Continued table
Name

Company

Title

Compensation/allowance

Klaus
MichaelAerotel Medical Systems（1998）Ltd.

Director

No

School of Accounting, Dongbei University of Finance and Economics

President

Yes

ZimmerFang
Hongxing

President

Yes

School of Public Policy and Management, Tsinghua University

Dean

Yes

China Institute for Science and Technology Policy, Tsinghua University

President

Yes

School of Electronic Engineering and Computer Science, Peking University

Professor

Yes

National Engineering Laboratory for Video Technology

Director

Yes

Tu Ganfeng Dalian Neusoft Holdings Co., Ltd.

Director

No

Lu Zhaoxia

Chongqing Guo’ao 100 Years Xikang Health Management Co., Ltd.

DirectorNo

Shenyang Toshiba Neusoft Information Systems Co., Ltd.

Director

No

NEC Neusoft Information Technology Co., Ltd.

DirectorNo

Xue Lan

Gao WenLi Jun024

Dongbei University of Finance and Economics Press Co., Ltd.

Vice Chairman &5.3 Compensation for directors, supervisors and senior management
Decision-making process of compensation for directors, supervisors and senior management: The Company shall pay compensation
to the directors, supervisors and senior management who hold administrative positions at the Company while those taking no administrative posts will receive no payments from the Company. In accordance with the decision of the Shareholders’Meeting, the Company shall
pay an allowance of RMB 80,000 Yuan（before tax） to each independent director every year since 2010; other expenses arising frompresence at the meeting shall be paid on an incurred basis.
Decision basis of compensation for directors, supervisors and senior management: Compensation for the directors, supervisors and senior management holding administrative positions at the Company shall be determined by the Board of Directors after the review by its
compensation & evaluation committee based on business performance and industry reference in accordance with the Company’s generalcompensation polities and standards.
Actual payment of compensation for directors, supervisors and senior management: The Company has paid off the compensation forthe directors, supervisors and senior management holding administrative positions as well as allowance for independent directors.

5.4 Changes in directors, supervisors and senior management
At the 2010 Shareholders’Meeting held on May 25th, 2011, Liu Jiren, Wang Yongfeng, Wang Li, Seizo Ishiguro, Klaus Michael Zimmer and Akira Kasano were elected as non-independent directors of the 6th Board of Directors, Fang Hongxing, Xue Lan and Gao Wen as
independent directors of the Board, Tu Ganfeng, Hu Aimin and Seizo Ishiguro as supervisors of the 6th Board of Supervisors, and Ge
Shengliu and Ma Chao as members of the Board on behalf of employees, each having a term of service of three years.
At the 6th Board Meeting on May 25th, 2011, Liu Jiren was appointed as the Chairman of the 6th Board of Directors as well as CEO
while Wang Yongfeng was elected as Vice Chairman of the Board and President, Chen Ximin as Senior Vice President and COO, Lu
Zhaoxia as Senior Vice President, Wang Li as Senior Vice President, CTO and CKO, Wang Jingxi as Senior Vice President, Zhang Xiao’ou

as Senior Vice President and CFO, Li Jun as Senior Vice President and CMO, and Klaus Michael Zimmer and Wang Nan as Senior Vice
President, each having a term of service of three years.
At the first meeting held by the 6th Board of Supervisors on May 25th, 2011, Tu Ganfeng was appointed as Chairman of the Board
with a term of service of three years.
At the seventh meeting held by the 6th Board of Directors on December 21st, 2011, Wang Nan was appointed to service as Secretaryof the Board prior to the expiry of the Board in addition to holding the positions of Senior Vice President concurrently.

5.5 Employees
By the end of the reporting period, the Company has a total number of 20,121 employees, none of which are retirees whose expenses
are undertaken by the Company. The staff structure is listed as follows:（1）Employee functions
Category

No. of employees

Technology development

16,813Marketing

1,435

Administration

1,686

Logistics

187
20,121

Total（2）Geographical distribution
Country/city

No. of employees

Shenyang

7,356

Dalian5,132

Other cities in China

6,993

Japan

230

Europe/America

410
20,121

Total（3）Education
Education

No. of employees

Master and above

2,305

Bachelor

15,374

College（3-year）

2,177

Others265
Total

20,121025

Neusoft Corporation

Annual Report 2011

（VI）Corporate Governance
6.1 Corporate governanceTo ensure its smooth operation, the Company has been devoted to developing and improving its corporate governance system in accordance with the Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China, and relevant regulations formulated by China Securities Regulatory Commission and stock exchanges in China. By revising the Articles of Association according to the Guidelines for Articles of Association of Listed Companies and the Code of Corporate Governance for Listed Companies, formulating and improving the Rules of Procedure for the Shareholders’Meeting, Rules of Procedure for the Board of Directors, Rules of Proce-dure for the Board of Supervisors, Investors Relations Management System, and Information Disclosure Management System, the Company has defined the authorities and procedures for decision making to make scientific reasonable decisions. Prior to the Guidelines on Es-

tablishment of Independent Director System of Listed Companies issued by China Securities Regulatory Commission, the Company has developed its independent director system and organized various committees for the Board of Directors to promote standard development
and corporate governance under the Code of Corporate Governance for Listed Companies in China. Also, it is a constituent stock of SSE
Corporate Governance Index.
In accordance with the Notice on the Matters concerning Carrying out a Special Campaign to Strengthen the Corporate Governanceof Listed Companies（No.28［2007］of China Securities Regulatory Commission）issued by China Securities Regulatory Commission, the026

Company initiated a dedicated campaign involving the establishment and implementation of a series of reforming measures and actions,which helped further enhance the Company’s corporate governance. Consequently, the Company received the Best Board of Directors
Award granted by the Board of Directors in both 2007 and 2010. In 2010, it also received the 2010 Best Board of Directors Award at the
9th China Corporate Governance Forum hosted by Shanghai Stock Exchange, demonstrating its efforts and achievements in corporate
governance.
In 2011, the Company continued its actions relating to corporate governance for further optimized and improved governance. During the reporting period, the Company further improved the systems related to corporate governance by formulating the Related transac-

tion Management System, Donation Management System and Working System for Secretary of the Board of Directors. Furthermore, theCompany also worked harder in building the Board of Directors, managing investor relations and perfecting a series of systems covering
incentives, monitoring, internal control and training of directors, supervisors and senior management, including:（1）Strengthen the construction of the Board of Directors
At the 2010 Shareholders’Meeting held on May 25th, 2011, the 6th Board of Directors was set up, which was made of 9 members
from China, Japan and Europe, including experienced professionals in the fields of IT, management and finance, well-known scholars as
independent directors and outside directors with an absolute majority. With the help of the Board of Directors, the Company made continuous improvements in corporate governance as well as innovations to both management and business models to move towards international development at a faster pace. Also, it provided the Company with valuable experience and support for global deployment of business and effective implementation of international merge & acquisition strategies.
All directors fulfilled their duties diligently and faithfully, attended the meetings of the Board of Directors actively, and provided professional opinions on a wide range of topics, including strategic planning, business plans, internal management optimization and risk
management, thus helping the Company make scientific and reasonable decisions. Also, they protected the interests of the Company andits shareholders through strict oversight and evaluation on business affairs. As a special committee for decision making, nomination, auditing, compensation and evaluation, they played an essential role in decision making for important issues.

（2）Enhance investor relations management
With an always focus on minority investors, the Company used its best efforts to provide them with easy access to company information, making them more confident in their shareholdings. Relying on the Information Disclosure Management System and the Investor Re-

lations Management System, the Company was able to make integral accurate disclosure of information on an instant, effective and equitable basis and give investors a good understanding of its status, thereby winning great trust and high recognitions from them.
The Company made good preparation for each session of Shareholders’Meeting, offered detailed introduction of both business anddevelopment strategies, and responded to the questions and views of investors seriously. In addition, it also provided them with opportunities to visit and understand relevant projects, making them really owners of the Company. During the reporting period, the Company invited these investors to the events relating to the 20th anniversary and gave them a better understanding of future vision and development strategies. Moreover, the Company carried out in-depth communications with investors on relevant services during visit to Tangshan
Xikang Digital Health Management System. The Company received a total number of 100 investors throughout 2011.

（3）Build up incentive/monitoring systems
Up to now, no equity incentive plans have been made available. As a high-tech company focusing on computer software, the Company has a number of high-quality talents who are important to its survival and development. Due to inadequate senior talents and fasttalent turnover existing in China’s computer software industry, the Company will, in accordance with the regulations of competent authorities, develop equity incentive plans based on actual conditions to protect the interests of the Company and its shareholders and employees, thus perfecting corporate governance and promoting normal operation and sustainable development.

（4）Optimize internal control system
The Company always values internal control. With its rapid business expansion and globalization, the Company continued to complete and implement internal control system effectively. During the reporting period, the Company helped the Board of Directors strengthen the auditing and guidance of internal control system and further completed the system through comprehensive systematic streamlining
and evaluation on the system as well as in-depth assessment of risks.

（5）Reinforce the training of directors, supervisors and senior management
In May 2011, the Company established the new term of the Board of Directors, Board of Supervisors and senior management. By collating and issuing the Manual for Directors, Supervisors and Senior Management of Listed Companies compiled by Shanghai Stock Exchange, the Company gave directors, supervisors and senior management a good understanding of applicable laws and regulations aswell as securities market rules. During the reporting period, the Company helped the directors, supervisors and senior management enforce self-discipline by causing them to learn the laws, regulations and rules formulated by competent authorities in order to promote normal operation and improve corporate governance.
In addition to continuous consolidation and perfection of corporate governance, the Company will further enhance the developmentof corporate management and internal control systems accordingly, standardize the operation of the Shareholders’Meeting, Board of Directors and Board of Supervisors, and continually improve the directors, supervisors and senior management’s knowledge and understanding of standard operation in good faith in accordance with applicable laws and regulations as well as relevant regulatory documents suchas the Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China, Administrative Measures for027

Neusoft Corporation

Annual Report 2011

the Disclosure of Information of Listed Companies and Stock Listing Rules to promote standard operation and corporate governance.

6.2 Directors’performance of duties and responsibilities（1）Attendance to the meetings of the Board of Directors
During the reporting period, the Board of Directors held 12 sessions of meeting in total, including 3 in-person meetings and 9 tele/
video conferences. The content below shows the attendance of directors in such meetings.
Failure to

Number ofattend theattendance
Name ofDirector

Number ofInde-

to meetings

Numbercentof theof personal

director

Board ofattendanceDirectors

attendance bytelephone/video
means

Number ofdelegate
attendance

meeting of
Numberthe Boardof absenceof Directors
for twoconsecutive

in 2011028

years

Liu Jiren

No

12

12

9

0

0

No

Wang Yongfeng

No

12

12

9

0

0

No

Wang Li

No

12

12

9

0

0

No

Seizo Ishiguro

No

12

11

9

1

0

No

Klaus Michael Zimmer

No

7

6

5

1

0

No

Akira Kasano

No

7

7

5

0

0

No

Fang Hongxing

Yes

12

11

9

1

0

No

Xue Lan

Yes

12

11

9

1

0

No

Gao Wen

Yes

12

12

9

0

0

No

（2）Dissidence to items relevant to the Company from independent directors
During the reporting period, no independent directors raise any objection against the resolutions and other items of the Board of Directors.

（3）Development, improvement and main contents of relevant working systems for independent directors andtheir performance of duties and responsibilities
The Company formulated the Working System for Annual Reports of Independent Directors which provided the independent directors’duties/responsibilities in annual report preparation, financial report auditing and information disclosure. In addition, the Articles of
Association states the appointment, nomination, election and replacement of independent directors as well as their rights and obligations.
During the reporting period, no independent directors raised any objection against the matters related to the Company. Independent
directors fulfilled their duties and responsibilities in accordance with applicable laws and regulations as well as the Company’s Articles of
Association. When these meetings were not in session, they were active in understanding the operation and management as well as
studying and analyzing basic information of the Company and paid close attention to the decision making related to business. At themeetings of the Board of Directors and the Shareholders’Meeting, they offered a number of advices based on the interests of the Company and its shareholders to help the Board of Directors make smart and legal decisions, thus protecting the interests of minority shareholders and advancing the development of the Company’s modern enterprise systems.
During the reporting period, independent directors protected the interests of the Company and its shareholders effectively by making
objective and equitable judgment and giving independent opinions on the Company’s acquisitions, investments, external guaranties,
related transactions, election of non-independent directors, and appointment/removal of senior management.

6.3 The Company’s business, staff, assets, organization and finance separation from holding shareholders
By the end of the reporting period, no holding shareholders have been found in the Company.

6.4 Development and improvement of internal control system（1）General planning of internal control system
In order to maintain a sound operation, protect the legal rights of investors and promote the implementation of development strategies, the Company strengthened the management of service procedures, enhanced risk management for major services and accelerated
the construction and implementation of internal control system based on the characteristics of the industry in accordance with applicablelaws and regulations such as the Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China, Basic Standards of Enterprise Internal Control and Guidelines for Enterprise Internal Control while implementing all systems relating to internal control effectively during the reporting period.
The purposes of internal control include: a）maintain a normal operation in accordance with the laws of China and implement all
management systems effectively; b）build and perfect corporate governance and organization structure in line with modern management
requirements and develop scientific systems covering decision making, execution and supervision to achieve the objectives of operationand management; c）develop effective systems for risk management, keep financial reports and relevant information authentic, accurate
and complete and avoid and correct wrongful practices in a timely manner to protect the property of the Company.
In 2011, the Company was selected as a pilot enterprise for the implementation of internal control by Liaoning Provincial Securities
Regulatory Bureau. Setting this process on a high priority, the Board of Directors approved the proposal of making the Plan for Implementation of Internal Control Rules and made relevant plans and preparations. The Company established an internal control team to direct
and manage the implementation of internal control. The team consists of the Company’s Chairman, CEO & President as team leader,
Vice President & CFO as deputy leader & chief-coordinator, three Senior Vice Presidents as deputy leaders and division heads as teammembers. Also, the Company appointed Ernst & Young（China）Business Consulting Co., Ltd. to provide consulting services relating tointernal control, facilitating the implementation of the plan for internal control rules.

（2）Plan for development and improvement of internal control system and its implementation
With respect to management decision making, the Company not only improved the systems related to corporate governance by issuing the Working System for Secretary of the Board of Directors and normalizing the appointment and performance of the Secretary of
the Board of Directors, but also revised the Working Rules for Infrastructure Committee to further define the responsibilities of the Infrastructure Committee and its divisions. In order to further standardize the donations of the Company, reinforce the management of donation events and protect the interests of shareholders, creditors and employees, the Company formulated the Donation Management Sys-

029

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Annual Report 2011

tem which provided the principles, targets, scope and procedures for making donations in 2011.
In terms of operation and management, the Company has developed a complete effective internal control system covering various aspects, especially human resource and information security and made amendments and improvements to the internal control system basedon changes in services and management model. In addition, the Company also intensified the development of internal control systemthrough detailed management at a higher level. During the reporting period, the Company built the procedures and systems for investment, mergers & acquisitions through innovation, prepared a series of documents such as Merger & Acquisition Service Procedures andMerger & Acquisition Implementation Guide, optimized the management of 14 control procedures including proposal, valuation, feasibility analysis, due diligence, decision making, implementation, management, benefits sharing and disposal of projects and enhanced the risk
management for mergers and acquisitions, thus greatly reducing the risks existing in mergers and acquisitions. The newly-issued SalesManagement Procedures and Customer Manager Specifications strengthens the standard control of sales process while the Requirements
on Review and Approval of Contracting Procedures further stating the deadline, key points and necessary materials of each procedure forthe review of various contracts creates a more standard and transparent operation system that is easy to monitor. During the reporting period, the Company finished the draft of infrastructure management system by specifying every part of the procedure for infrastructure
projects from proposal to evaluation, optimized the Rules on Approval Power for Infrastructure Management, defined the authority andpower for managing infrastructure at the level of the Company and its divisions and worked out the principles of infrastructure manage030

ment focusing on comprehensive management, key points and process control. The Company also issued a complete administrative system which provided the standards for the implementation of each administrative procedure.
All of these systems helped the Company define the responsibilities of related parties and optimize relevant procedures so thatit maintained an orderly operation and management and kept authentic, accurate and complete financial data, thereby protecting theproperty of the Company and the interests of investors as well as paving the way for normal operation and long-term healthy development.

（3）Supervision of internal control
The Company established an internal control team to plan, conduct and direct the evaluation of internal control. Under the leadership of the Financial Operation Division, the internal control team carried out the evaluation on internal control by joining hands with other divisions and business teams of the Company.
Also, the Company set up the Investment Auditing Division to supervise the implementation of internal control systems by the Company and its holding subsidiaries and the Supervision Division to audit and supervise the Company’s officers through independent exercise of supervision power.

（4）Self-evaluation of internal supervision and control
The Company performed evaluation on the design and operation of internal control through daily and special supervision in accordance with applicable laws and regulations such as the Basic Standards of Enterprise Internal Control and Guidelines for Evaluation of Enterprise Internal Control by integrating internal control system and relevant evaluation measures.
Internal control evaluation is divided into three parts covering preparation, implementation and reporting. Its main procedures include: a）make schedules and plans for internal control evaluation and define its principles, items, measures and reporting to the Boardof Directors for approval; b） establish an internal control team to direct the evaluation of internal control; c） conduct internal control
evaluation across the Company and ensure the internal control team to have a good understanding of each internal control procedure tobe evaluated, identify key points, determine the number of to-be-checked samples based on specific services and record the results ofevaluation; and d）summarize the results of evaluation and analyze the problems existing in internal control in accordance with the identification standards for defects of internal control to prepare on-site evaluation reports. The on-site evaluation reports confirmed by theevaluated targets shall be reported to the internal control team for the purpose of preparing internal control evaluation reports which will
be filed to the Board of Directors, Board of Supervisors and senior management and disclosed following the approval of the Board of Directors.
Based on internal environment risk assessment, control events/information/communication and internal supervision, internal control
evaluation covers the design and operation of internal control on all services and items relating to the Company and its business focusing
on organization structure, development strategies, human resources, social responsibility, corporate culture, capital management, purchasing, assets management, sales, R&D, projects, guarantee, financial reports, overall budget, contract management, internal information
communication and information systems. These services and items are the main contents of internal control without material omissions.
During evaluation, the Company collected evidences related to the design and implement of internal control such as accurate evaluation drafts by means of individual interview, system review, walk-through testing, on-site inspection, comparative analysis and topic discussion. These measures and evidences have proved to be effective and appropriate. The consulting agency who offered assistance in theevaluation of internal control gave high recognition on our internal control as no material defects, omissions or conflicts were found. According to it, our internal control was better compared with our counterparts in China.
In accordance with the Annual Auditing Plan, the Investment Auditing Division performed both routine and special audits on the financial results, internal control and operations of each service to promote effective implementation of the Company’s systems and rules
and avoid risks existing in operation and management. In 2011, the Company, with a focus on management and risk control, enhanced
the audit of business development, investments and M&A projects, helping reduce the risks in operation and M&A. In 2011, the Supervision Division successfully completed the audit for 32 official posts. With a 100% rate of off-office audit for senior executives as well as report response and acceptance, it played an important role in the supervision and checking the corruptibility of officers.

（5）Actions of the Board of Directors concerning internal control
The Company built a complete structure of corporate governance involving shareholders, Board of Directors, Board of Supervisorsand senior management in accordance with the Company Law of the People’s Republic of China, Securities Laws of the People’s Republic of China as well as its Articles of Association. With the supreme power and authority, the Shareholders are entitled to legal rights under application laws and regulations and the Company’s Articles of Association and they exercise the right to vote on important matterssuch as business policies, financing, investment and profit distribution. As a standing body of decision making, the Board of Directors consisting of 9 members, including 6 outside directors and 3 independent directors, is dedicated to making decisions on long-term development strategies, important investments and financial affairs of the Company. As the supreme decision-making body, its main responsibilities are to build and monitor internal control systems, develop corrective measures for material defects in internal control as well as risk
management policies and review self-evaluation reports and auditing reports on internal control. The Board of Supervisors, as the supervisory body of the Company is under liability to the Shareholders’body and is responsible for supervising directors, senior management
and financial affairs of the Company.
The Board of Directors has four special committees including the Strategy/Decision Making Committee, Nomination Committee, Auditing Committee and Compensation & Evaluation Committee. The Auditing Committee is made up of 4 members including 3 independent directors, one of whom serves as Chairman of the Committee and is responsible for auditing internal control, supervising the implementation and self-evaluation of internal control and offer coordination in internal control and other related matters.

031

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Annual Report 2011

（6）Perfection of internal control systems for financial reports
Based on actual conditions, the Company developed a series of internal control systems related to financial reports and made modifications and improvements to such systems in accordance with applicable laws and regulations in 2011. The newly-formulated Capital Rolling Budget Management Standards aiming to enhance mid/long-term planning and monthly rolling estimation of capital helped the Company build a more secure and efficient environment for capital. As foreign exchange tends to be complicated and ever-changing, theCompany revised the Foreign Exchange Management System to reinforce integrated management of foreign exchange, further improved
the management model for exposure of foreign exchange risks for application into practices and controlled these risks with financial tools
like sale and purchase of forward foreign currencies against the RMB. In 2011, the Company enacted the Related Transaction Management System to define the policies for the management of related transactions and revised the Related Transaction Reconciliation Procedures to complete reconciliation operations in accordance with applicable laws and regulations as well as listing requirements. Along withcompletion of the integration and upgrading of information systems, the Company not only revised the Financial Information System
Management Rules to optimize the processes of relevant services, but also made modifications to a series of systems including Financial
Reports Preparation Procedures, Consolidated Statements System and Financial Information Disclosure System to standardize the preparationof financial reports and further increase the authenticity, accuracy and security of financial information.
032（7）Problems and corrective measures of internal control
During the reporting period, the Company performed comprehensive integration and evaluation of internal control, further completed internal control systems and improved the knowledge and capability of internal control teams through close partnership with consulting
service providers. Through self-evaluation of internal control, no material or important defects in connection with the design and operationof internal control as specified in rules for identifying defects in internal control were found during the reporting period. The current
internal control systems considered reasonable and complete can meet the Company’s requirements of management as well as needs ofdevelopment. Allowing for effective management of various risks, these systems not only promoted business development and target
achievement, but also protected the interests of the Company, creditors and investors. Through a wide range of internal summary andevaluation, the Company made the procedures of internal control more systemic and standard by adding measures for risk management
and further perfecting internal control processes, thus improving the overall quality of internal control.

6.5 Evaluation and incentives for senior management
In order to protect the interests of the Company and its shareholders, the Company has to deal with the challenges existing in world
economy and exploit opportunities found in the industry. It has to maintain a steady development during globalization with an effectively
motivated senior management. At Neusoft, senior management strives to keep abreast of developments in industry and market trends
and company conditions. Neusoft has perfected the competency model of senior management, kept evaluation by means of balanced
score card and 360° feedback, continuously aroused the attention from senior management to business performance and long-term
development targets, set great value on leadership improvement and contribution to corporate development and heightened senior
management’s responsibility and created pride in their posts, thus achieving better results in the stability and development of senior
management. Based on the good momentum in globalized and enlarged development, the Company will continue to develop more
complete and effective incentive and control systems for senior management in order to achieve continuous improvements in businessperformance and operation quality.

6.6 Report related to the disclosure of internal control
When announcing this Report, the Company shall disclose the Internal Control Evaluation Report 2011 as well as the Internal Control
Auditing Report 2011 issued by BDO China Sun Lun Pan Certified Public Accountants LLP. For more information, please visit the official
website of Shanghai Stock Exchange（http://www.sse.com.cn）.

6.7 Report relating to social responsibility
When announcing this Report, the Company shall disclose the Annual Social Responsibility Report 2011 concurrently. For more information, please visit the official website of Shanghai Stock Exchange （http://www.sse.com.cn）.

6.8 Responsibility system for material errors in information disclosure of annual report
The Company developed the Responsibility System for Material Errors in Information Disclosure of Annual Reports, defining the bodythat shall be reliable for material errors in information disclosure of annual reports and relevant punishments.
During the reporting period, no correction of material accounting errors, supplementation of material omissions or rectification of performance prediction was made by the Company.
033

Neusoft Corporation

Annual Report 2011

（VII）Shareholders’Meeting
7.1 Annual Shareholders’Meeting
On May 25th, 2011, the Company held a session of Annual Shareholders’Meeting. For more information, please refer to China Securities Journal and Shanghai Securities News on May 26th, 2011.

7.2 Interim Shareholders’Meeting
On December 22nd, 2011, the Company held the first session of Interim Shareholders’Meeting. For more information, please refer toChina Securities Journal and Shanghai Securities News on December 23rd, 2011.

034

（VIII）Reports of the Board of Directors
8.1 Discussion and analysis of senior management
8.1.1 Discussion and analysis on overall operation during the reporting period
The year 2011 not only saw the 20th anniversary of Neusoft but was also a milestone for the Company. During the reporting period,as the economy was in a complicated ever-changing state, the Company kept enhancing the layout of global market and the building ofa marketing system oriented to accounts, optimized the distributed delivery model, implemented effective market competition strategies,
expanded its orientation to high-profile customers, promoted inter-industry mergers and acquisitions, embarked on the improvement planfor outstanding operation, improved resource allocation and strengthened the building of organizational functionalities for sustainable development. During the reporting period, the Company gained an operating income of RMB 5,751,250,000 Yuan increasing by 16.5%
over the previous year, net profit（attributable to shareholders of listed companies）of RMB 417.07 million Yuan and net profit after deducting non-recurring profits/losses of RMB 286.81 million Yuan decreasing by 19.7% with an earning per share of RMB 0.34 Yuan reducing by 13.9% over the previous year.
During the reporting period, the Company strengthened its leading position in various industries and markets of existing services andpromoted continuous expansion of business scale by innovating business model and developing new services. In addition, for the purposeof maintaining sustainable development, the Company suffered a profit drop as a result of greater inputs into market expansion, technology research & development and human resources, including:（1）more resources used for platform building and international market development during the layout of globalized development;（2）increasing input into R&D and market relating to cloud computing/Internetof thing, in-car information technologies, healthcare services, medical systems and smart grid; and （3） higher labor cost arising fromstaff size growth, continuous implementation of compensation improvement plan and high-quality talents acquisition. During the reporting period, the Company kept an assets liability rate of 26.7% to a reasonable extent. The net cash flow arising from business operation
amounted to RMB 300 million Yuan, decreasing by RMB 80 million Yuan as a result of rise in purchase expenditure and labor cost.
With respect to international services, affected by a number of factors such as weak economic recovery in developed countries, Japan’s Earthquake, Fukushima’s Nuclear Crisis and changes in major customers’strategies, the Company made strategic adjustment actively, reinforced the layout of global services, tried to get a deeper understanding of customer needs, optimized onshore/nearshore/offshore distributed delivery models, enhanced the interaction between services provided in China and abroad and promoted innovation ofbusiness model by leveraging competence and experience in major services to shift business up the value chain and further intensify themulti-point layout of major services to achieve blistering growth. During the reporting period, the Company made capital contribution to
Aerotel and Appconomy to develop channels for international cooperation.
In the aspect of domestic solutions, the Company, targeting high-profit customers, further improved its competence in major services
oriented to the industries of government, medical IT, telecommunication and finance with boosting of business sale and market position.
Besides, the Company strengthened the adjustment of organization structure and integration of business units to optimize resource allocation aiming to promote the development of competitive services. During the reporting period, the Company enhanced its power in the
products, technologies and talents related to hospital information and public health by acquiring Beijing Viewhigh Technology Co., Ltd. Inorder to speed up the development of Xikang management service, the Company invested to open up a subsidiary of Neusoft Xikang
Holdings Co., Ltd. and introduced Neusoft Xikang Cloud Strategy and Xikang-branded products including Xikang Healthy Watch and Xikang Healthy Terminal, paving the way for the development of innovative services in the future.
In the field of medical systems, the Company made advances to the research and development of new products through the launch

035

Neusoft Corporation

Annual Report 2011of NeuPioneer Dr and clinical testing of 64-slice CT R&D project. During the reporting period, the Company strived to address the troubles and stresses caused by rising prices of raw material and strengthened cost control and inventory management for continuous
development. In addition, the Company set up international parts centers in the United States and Dubai as well as service centersin Germany and Vietnam to constantly optimize the layout of global sales and services network.
During the reporting period, the Company was well recognized for its management, innovation and competence. “Neusoft 东 软 ”
was regarded as a well-know brand in China by the State Administration for Industry and Commerce of the People’s Republic of China,
benefiting the communication of the Company’s brand and the internationalized development of business. Moreover, the Company became the first PCMM Level 15 certified Chinese enterprise. This reflected that Neusoft’s process improvement and human capital management had been at a leading level around the world. Also, the Company was named as the Best Employer in Asia and the Pacific 2011,
ranking first among the Best Employers in China 2011. The Company was listed among the Global Services 100 and the Best IT Outsourcing Providers by the Global Services Magazine for the seventh time. During the reporting period, the Company was included in the First
Model Enterprise Developing by Innovation in Modern Service Industry accredited by the Ministry of Science and Technology of the People’s Republic of China. The Company was again crowned as the Most Globally Competitive Chinese Enterprise by Roland Berger Strategy Consultants and Global Entrepreneur.

8.1.2 Business Operations
036（1）Software and system integration
During the reporting period, the software and system integration services developed at a good pace, generating an income（after deducting inter-industry off-set）of RMB 4,830,520,000 Yuan, increasing by 24.6% over the same period of the previous year and accounting for 84.0% of the Company’s total income.
In the telecommunication industry, the Company maintained a robust growth in major services such as business support system（BBS）, operation support system（OSS）, business intelligence（BI）and network management thanks to its partnership with three leading service providers in China. In addition, being the strategic partner of China’s cloud computing, the Company won bids for the construction of public cloud support platform and resource pool management platform for China Mobile’s Southern Base. Playing an active
part in the building of cloud and application platforms for China Unicom and China Telecom, the Company became the only successful
software enterprise among the national-wide strategic partners of China Unicom. Furthermore, the Company made outstanding breakthroughs in new services, such as pilot operation of paperless office system for China Mobile Limited（Hainan Branch）as well as official
operation of the Internet of Car-based platform and school car management platform for Zhengzhou Yutong Bus Group Co., Ltd.
In the field of government information, as the“new rural cooperative medical service”was shaping up well and bringing in fast income growth, the Company continued to lead China’s social insurance industry. During the reporting period, the Company acquired anumber of customers in the “golden social security service” in Liaoning, Jiangxi and Ningxia. In the e-government field, the Company
won a bid floated by the Ministry of Construction. In the environmental protection industry, the Company continued to promote services
involving vehicles and solid wastes, making even and sustained progress. By furthering its reach into new services, the Company developed
the service of water resources survey successfully and signed relevant agreements with a number of water resources departments
and related survey bodies. In the field of agriculture product sourcing, the Company was listed among the first-class suppliers for foodsourcing pilot cities and won the bid for the project for the quality tracing system of meat and vegetables in Kunming.
In the public health and medical IT industry, the Company won a higher market share with its better performance. In the field ofhealthcare and government affairs, the Company held a competitive position in the markets of Hunan, Anhui, Luoyang and Qingdao by

perfecting and expanding its business into these markets. In the medical IT field, the Company played an active role in the formulation of
the Ministry of Health’s standards and criteria concerning electronic medical records acquisition and hospital information platforms aswell as the introduction of new systems covering generation of electronic medical records and in-surgery anesthesia into the market. Also,
it concluded agreements with many 3A hospitals such as Wuhan University Zhongnan Hospital, Northern Jiangsu People’s Hospital andShandong Cancer Hospital. In the field of healthcare services, the Company launched a series of healthcare products including healthcare
watch and healthcare terminal in addition to the services provided by data center and call center to improve the quality of healthcare services.
In the energy industry, the Company promoted the expansion of the model of whole industry chain actively. As the State Grid
SG186 Project, a sales business application system of the State Grid Corporation was completed and accepted, new opportunities in themarket were made available to the Company. The Company worked actively on the standard design of China Southern Power Grid’s marketing system as well as billing and assets management solutions for Dalian Port and Karamay. In the smart grid industry, the Company
signed contracts with regard to power information collection and relevant matters in Liaoning and Henan. In the industries of power
generation, petroleum and petrochemicals, the Company strengthened technical reserves and market-related education, mapping out
a favorable layout of the whole industry chain oriented to the future.
In the business & e-commerce industry, the Company helped customers upgrade business systems, thus increasing the number of important clients. In the tobacco industry, as several customers at provincial level were added to the customer list, the Company maintained
powerful competence and dominance in the market. In the ERP industry, the Company deepened the partnership with customers such as
SAP and Haier, helping increase the proportion of ERP operation/maintenance/technology service in existing services.
In the financial industry, the Company expanded service sale by helping leading customers including ICBC, SPD Bank, Industrial Bank
（China）and the State Administration of Foreign Exchange. During the reporting period, the Company provided China Financial Futures
Exchange with consulting service for its first generation information system, thus enhancing its competitive power in this industry.
In the education industry, the Company maintained close partnership with the Ministry of Education to promote vertical businessmodel. During the reporting period, the Company helped Beijing Foreign Studies University launch a community platform successfully in
addition to concluding a contract with Communication University of China with regard to the digital campus platform.
In the transportation industry, the Company with great attention to leading customers in the industry, continued to optimize business structure. In the intelligent logistics industry, the Company moved ahead steadily in the projects of Hainan Airlines Freight andZhoushan Port Logistics. In the field of intelligent transportation, it finished the Project I of China Air Transportation Association andmade it available to the users.
In the field of software products, the Company maintained a good momentum. In the network security field, the Company kept aleading position and high market share due to active part in the research, development and formulation of China’s national network security standards. In the E-HR field, the Company made more inputs into the research and development of new products as well as market
layout in important industries such as banking, insurance and real estate for a higher market share. In the field of records management,
the Company successfully completed the E-document-enabled Platform Project II of the State Archives Administration of the People’s Republic of China and acquired a series of high-profile customers including Beijing Municipal Archives Bureau and Hangzhou Archives Bureau.
In the BPO field, the Company focusing on market development, provided customers from various industries in different areas with adiversity of one-stop services in multiple languages and integrated services covering SME information service platform and information
management platform for enterprises engaged in retail business. During the reporting period, the Company received the certificate of per-037

Neusoft Corporation

Annual Report 2011

sonal information protection from PIPA/P-MARK and a number of awards such as the Best Outsourcing Information Center in China in addition to contracting with key accounts, thus promoting business growth.
In the field of international software, the Company further improved its deployment in global market and promoted the innovation
and restructuring of business model to make major services competitive. In the Japan market, the Company helped important customers
such as Alpine and Toshiba maintain a growth with restoration and furthered the partnership with Sony, DENSO and Panasonic throughbetter understanding of their needs for IT services. In the European market, with changes in the strategies of major customers like Harman and Intel, the Company made strategic adjustments and developed new services to help them maintain a blistering growth and promoted the interaction of services in China and abroad to establish closer partnership with international automotive manufacturers. During
the reporting period, the income from international software service amounted to RMB 309.71 million Yuan, increasing by 23.0% overthe same period of the previous year. Income from international sources accounted to 34.5% of the Company’s total income.
（2）Medical systems
In 2011, the Company further enhanced the sales and services network of medical systems, completed the deployment of Global Service Parts Center, continually optimized the facilities for global direct marketing and distribution team and expanded into international
markets for continuous growth in the sale of medical systems. During the reporting period, the Company began the clinical testing of
R&D project for 64-slice CTs, which would help enhance its leading position in the medical imaging market. During the reporting period,038

the income from medical systems amounted to RMB 803.44 million Yuan, increasing by 1.2% over the same period of the previous year
and accounting for 14.0% of the Company’s total income. Also, export income reached 25.59 million US dollars, decreasing by 2.1%
over the same period of the previous year.

8.1.3 Problems and challenges existing in operation and management
In 2011, with continuous expansion of business scale, the Company encountered many problems and challenges.
With the slow pace of recovery of the world economy and the international financial crisis, sovereign-debt crisis continues to be a major issue in some countries, leading to insufficient impetus driving economic growth. Also, China’s economy is facing inflationary pressure, losing more growth momentum, which has resulted in a rise in labor cost and in RMB appreciation. Consequently, the cycle of inputs into the information industry and IT demands of the community and businesses are influenced, bringing in increasingly fierce competition.
Therefore, the Company adjusted market strategies, promoted existing services, consolidated its position in the industry and enhanced its partnership with key customers to have a better understanding of their needs and advance the continuous growth of business.
Moreover, the Company took greater efforts in business and R&D planning and provided more inputs for the research and developmentof major services to make innovations in the business model and develop new services. During the reporting period, the Company embarked on the improvement plan for outstanding operation to optimize business structure and reformed the compensation systems for
major services to acquire more high-quality talents and enhance core competences. In addition, the Company paid greater attention to
the management and utilization of operation capital as well as the allocation of resources to maintain a robust business growth.

8.1.4 Technological innovation
As an enterprise focusing on software technology, the Company places high priority on the strategy of "open innovation”. Ever since
establishment, it has made generous inputs into the research and development of new services/products, technologies and approaches topromote business innovation. In 2011, with the booming of Internet, mobile Internet and Internet of Things as well as rapid development

of relevant technologies, the Company invested its energies in building a corporate-level R&D team and set up an advanced technology
study and application innovation center to do prospective research. The center strives to make application innovations relating to commercial value and generic technology in various emerging fields such as cloud computing, Internet of Things and mobile Internet with a view
to improve the ability of sustainable innovation. In order to support the building of B2B2C applications, the Company not only carried out
research and development of new network application reference structures and products covering ACAP（agile cloud application-enabled
platform）, ACAP-SNAP（social network application platform）, ACAP-AppMart（application mart platform）, Aclome（agile cloud application management environment）and Xikang intelligent health management system, but also embarked on the research and developmentof next generation in-car electronics products.
As market opportunities such as China’s 12th Five-year Plan, new policy of“mode transfer and internal demands increase”, new medical system reform, 3G development, smart grid, Internet of thing, tri-networks integration and China-made upgrading and shift arose,
the Company increased inputs into market research, improved the planning ability of new organization-level services and products and developed a series of R&D portfolio in line with overall development strategy. Through research and development of platforms for core services covering healthcare affairs, digital hospitals, smart grids, IOT in-car teleservices, 3G, tri-networks integration and mobile Internet, theCompany promoted integrated innovations in the aspects of industry solutions and product engineering, hence increasing the competence and advantages in core services.
The Company further implemented NeuSATM, an efficient strategy designed for Neusoft solutions to promote open and cooperative innovations and improve integrated competences. In 2011, the Company worked on the building of architect team and software productline as well as R&D of UniEAP v4, a basic service platform enabling software product line and other platforms built upon UniEAP v4, making application solutions competitive. It was also active in standard organizations in China and abroad and played a leading role in the development of various industry standards. By advancing the building of State Key Library of Software Architecture and developing the systems for Competence Center with partners, the Company introduced a number of cutting-edge technologies to improve the ability ofcontinuous innovation through open cooperation.
The Company took an active part in protecting technological innovations with intellectual rights. As of the end of 2011, it has applied for 218 patents, has been granted 111 patents and registered 354 software rights. This has not only helped the Company protect
core technologies and maintain a leading position in China market but also facilitated development of international markets and corecompetencies. In 2011, as another 6 subsidiaries received the certificate of high-tech enterprise, the Company had a total number of 18
subsidiaries certified high-tech enterprises covering its major services.

8.1.5 Future vision
As China’s first listed software enterprise（listing done in 1996）, Neusoft has now become the largest IT solutions and services provider in China. With 20,121 employees, it boasts of 6 software R&D bases, 8 regional headoffices, 16 software R&D and technical centers
across China as well as marketing and service networks in 40-plus cities. Focusing on software technologies, the Company provides anumber of offerings including industry solutions, product engineering solutions and relevant software products, platforms and services byintegrating software with service provision and production.
With the implementation of China’s 12th Five-year Plan as well as policies favorable for the development of China’s software industry, investments into the information field of China have been growing at a rapid pace and the software industry has been restructuring
rapidly. Emerging sectors like cloud computing and mobile Internet have also been developing quickly. Moreover, the global software industry is also changing, propelling China’s software industry to develop towards the trend of R&D, design and full lifecycle solutions with

039

Neusoft Corporation

Annual Report 2011

the industry chain moving from low end to high end solutions. This creates a benign market environment and brings a lot of development opportunities for China’s software businesses.
In the coming years, China’s software and information service industry will be globalized at an even faster pace. Therefore, Neusoft
will strive to adapt to the ever-changing market and business environment, thus building a mature emerging multinational enterprise, rather than one based in China by replacing people-based growth with knowledge assets-driven growth, technology-focused business modelwith customer value-centered model and China-based growth with global market-guided development. Besides, the Company will keep
improving core competence through innovation and restructuring to create a best-in-class IT solutions and services providers all over theworld.
In addition to opportunities, we also encounter a series of difficulties and challenges.
a）As the world economy develops with increasing uncertainties, the driving force behind the economic growth of developed countries has reduced and the rate of foreign exchange tends to fluctuate greatly, bringing a number of challenges to us in the aspect of developing international markets.
b）Due to its complex status, China’s economy is growing at a slower pace. This may result in a reduction in IT demand as well as
severe market competition in China.
c）Outstanding talents are crucial to the sustainable development of a labor-intensive enterprise. With increasing competition in the040

IT market, we spend more on human resources, which causes strain on our bottom-line.
d）To maintain sustainable development, the Company will make attempts to restructure its business model with greater inputs into
R&D and market development. Given the time aspect of business development and promotion, we are likely to be under severe market
pressure during business expansion.
For these reasons, the Company has worked out the following plans for sustainable development in 2012:a）Make innovations and implement the strategy of globalized development, promote the planning and development of new services based on customer value and build a business model powered by innovation and services to maintain sustainable development.
b） Continue to build an organization-level service support system designed for globalization and efficient development, implement
the improvement plan for excellence in operations and improve the overall management quality and operation efficiency.
c）In the field of solutions, we will maintain and strengthen the leading position in the market of existing services, develop services
for high-profile clients, map out future services for customers, enhance the ability of development driven by technology and consulting
service and reinforce the general planning of market development and the construction of distributed delivery organization to speed up
the growth of solution services in China.
d）In the international markets, we plan to intensify the development of markets in Japan, Europe and North America, continually increase our ability for upstream projects covering planning, consulting and system design, enhance the construction of key knowledge assets, develop strategic partners and further the integration and interaction of services in China and abroad to accelerate the developmentof international software.
e）In the field of medical systems, we will make greater inputs into R&D, boost the construction of organizational ability, increase
the general value of products and full lifecycle services, promote the planning of globalized marketing, expand the sales team, improve
the ability of organization-level market development and develop Chinese and global markets through optimizing direct marketing anddistribution.
In 2012, our operating income is expected to hit RMB 6.9 billion Yuan, operating cost would amount to RMB 4.8 billion Yuan andperiod cost is estimated to be RMB 1.6 billion Yuan. In order to achieve these planning targets mentioned above, it is estimated that anamount of RMB 2.2 billion Yuan, mainly sourced from self-owned funds, bank loans and bond financing will be required for purpose ofdaily operation, infrastructure and equity investments.

8.1.6 Major operationsa）Related industries
Unit: RMB Yuan
Year-on-year Year-on-year
OperatingIndustry

incomeSoftware and system integration
Medical systems
Including: related transactions
Pricing basis for related transactions

Operating cost

Operatingchange inchange inprofit（%）

operatingoperatingincome（%）

cost（%）

Year-on-yearchange in therate ofoperatingincome（%）

4,830,519,072

3,476,555,703

28.03

24.59

27.61

-1.70

803,436,708

486,024,807

39.51

1.21

-1.89

+1.91

692,501,476

525,886,032

24.06

24.54

38.44

-17.62

Subject to market price agreements

Details of changes in operating income:

041i）During the reporting period, operating income form software and system integration reduced by 1.70 percent over the previous
year due to rise in labor cost;ii）During the reporting period, operating income from medical systems increased by 1.91 percent over the previous years as a resultof product restructuring.
b）Distribution of main business
Unit: RMB Yuan
Country/city

Operating income

Year-on-year change in operating income (%)

China

3,897,770,840

15.81

Foreign countries

1,853,478,490

17.90

Details of changes in operating income:During the reporting period, the Company’s operating income from overseas sources increased by 17% over the previous year which
is mainly attributed to international software business. At the same time, the operating income from China increased by 15.81% as a result of business expansion.

Neusoft Corporation

Annual Report 2011c）Invested companies with effects on 10% net profit of the Company
Unit: RMB Yuan
Proportion
Invested

Scope ofRegisteredcompanybusiness

capitalof shares

Total assets

Net assets

directlyat the end

at the end

held by theof 2011of 2011

OperatingOperatingCurrent

incomeprofitnet profit

Company
Shenyang Neusoft
Medical Systems

Medical systems

78,000,000

100% 1,422,937,977 804,382,313 889,512,382 34,319,203 58,494,719

300,000,000

100%Co., Ltd.
Neusoft Group（Dalian）Co., Ltd.

Computersoftware and765,827,435 456,685,151 737,038,510 70,779,034 75,430,505

hardwared）Other companies
Unit: RMB Yuan

042
Proportion
Invested

Scope ofRegisteredcompanybusiness

capitalof shares

Total assets

Net assets

directlyat the end

at the end

held by theof 2011of 2011

OperatingCurrent

incomenet profit

Company
Shenyang Neusoft Information
Technology Co., Ltd.
Neusoft（Japan）Co., Ltd.

Neusoft（Europe）Co., Ltd.

Computersoftware andhardware
Computer

310,000,000
187,750,000
Yen
CHF

100% 838,452,813 429,291,565 179,844,465

20,944,312

100% 240,511,864

3,385,691

83,686,375 760,828,661

100% 239,403,494 204,996,898 257,912,149 -16,247,176

software,technical
Neusoft Technology Co., Ltd.

consulting
and services

1,000
US Dollars

100%

35,576,819

30,417,876

13,702,816 -20,671,860

100% 130,598,204

83,070,439

56,594,335

Development,
Neusoft（Hong Kong）
Co., Ltd.

sales and
consulting ofcomputer

850,000
US Dollars-8,915,930

softwareNote: During the reporting period, there was no income from investments into a single shareholding company equaling to no lessthan 10% of the Company’s net profit.

e）Major suppliers and clients
Unit: RMB Yuan
Total payment for top 5 suppliers

579,596,457

Total payment from top 5 clients

1,163,204,403

Percentage in total purchase expenses (%)

38.53

Percentage in total sales amount (%)

20.22

8.1.7 Internal control system relating to the measurement of fair value
In accordance with the Accounting Standards for Business Enterprises and Basic Standards for Enterprise Internal Control, the Company worked out the internal control system related to fair value to specify the utilization, acquisition, measurement and disclosure of fairvalue. In the aspect of financial accounting, the Company conducted financial accounting and disclosure pursuant to applicable provisionsof Accounting Standards for Business Enterprises while for internal control, it designated professional staff to check the utilization and acquisition of fair value in addition to supervising the implementation of the system.
Items relating to the measurement of fair value:
Unit: RMB’0,000 Yuan
Amountat theItembeginningofreportingperiodGains/losses
fromchanges incurrent fair
value

Changes in

Current

fair value

provision

listed inforequitydepreciation

Amount043

at theend ofreportingperiodFinancial assets
Include: Financial assets measured by fair value with chang-

97

-11

86

Sub-total

97

-11

86

Financial liabilities

123

106

17

es accounted into current profit and loss
Include: a) Derivative financial assetsb) Available-for-sale financial assets

Investment property
Productive biological assets
Others

8.1.8 Financial assets and liabilities denominated in foreign currency
During the reporting period, financial assets denominated in foreign currency held by the Company was in forward foreign exchange
contracts.

Neusoft Corporation

Annual Report 2011

8.2 Analysis of financial and business performance during the reporting period（1）Analysis of financial and business performance during the reporting period
Unit: RMB Yuan
Dec. 31, 2010/

Jan. 1-Dec. 31, 2011

Jan. 1-Dec. 31, 2010

Total assets

7,925,285,114

6,858,879,805

1,066,405,309

15.55 （1）Total liabilities

2,910,161,846

2,273,667,334

636,494,512

27.99 （2）4,674,677,555

4,280,208,312

394,469,243

9.22 （3）310,300,179

407,491,880-97,191,701-23.85 （4）417,068,980

484,675,178-67,606,198-13.95 （5）Net cash flow from operating activities

300,196,604

381,889,530-81,692,926-21.39 （6）Net increase in cash and cash equivalents

48,727,823

71,990,061-23,262,238-32.31 （7）Ownership equity attributable to shareholders oflisted companies
Operating profit
Net profit attributable to shareholders of listedcompanies
044

Rate ofDec. 31, 2011/

Item

Changechange No.
（%）

Details of change:a）With a growth of 15.55%, total assets at the end of 2011 increased by RMB 1,066,410,000 Yuan over the last year as a resultof increase in both current assets such as receivables and inventory and non-current assets like under-construction projects andheld-to-maturity investments;b）With a growth of 27.99%, total liabilities at the end of 2011 increased by RMB 636.49 million Yuan over the year 2010 as a result of rise in short-term borrowings, bonds payable and taxes payable;c）With a growth of 9.22%, the ownership equity attributable to shareholders of listed companies at the end of 2011 increased by
RMB 394 million Yuan over the last year as a result of rise in net profit attributable to shareholders of listed companies by RMB 417.07
million Yuan during the reporting period;d）With a decline of 23.85%, operating profit reduced by RMB 97.19 million Yuan over the same period of the previous year as a result of decrease in gross profit margin as well as increase in labor cost, market/R&D inputs and expenses on sales and management during the reporting period;e）With a decline of 13.95%, net profit attributable to shareholders of listed companies reduced by RMB 67.61 million Yuan overthe same period of the previous year as a result of decrease in operating profit by RMB 97.19 million Yuan and increase in non-operating
income by RMB 27.26 million Yuan during the reporting period;f）With a decline of 21.39%, net cash flow from operating activities decreased by RMB 81.69 million Yuan over the same period of
the previous year as a result of larger increase in purchase expenditure and labor cost than payments received;g）With a decline of 32.31%, net increase in cash and cash equivalents decreased by RMB 23.26 million Yuan over the same periodof the previous year as a result of decrease in net cash flow from operating activities, including respective decline in net cash flows fromoperating activities and investment activities by RMB 81.69 million Yuan and 544.69 million Yuan and increase in net cash flow from fi-

nancing activities by RMB 616.97 million Yuan.
According to the above analysis on financial and business performance, the Company kept a robust growth in income from main
business; nevertheless, with a rise in both labor cost and market/R&D inputs into core business, operating profit declined, resulting in decline in overall profitability and cash inflow;（2）Comparative analysis on indicators of business performance
Unit: RMB Yuan

Item

Dec. 31, 2011/

Dec. 31, 2010/

Jan. 1-Dec. 31, 2011

Jan. 1-Dec. 31, 2010

Rate of
ChangechangeNo.

（%）

Operating income

5,751,249,330

4,937,696,440

813,552,890

16.48 （1）Operating costs

4,004,998,405

3,383,628,845

621,369,560

18.36 （2）Selling expense

497,920,161

391,904,135

106,016,026

27.05 （3）Administrative expense

819,957,825

713,916,675

106,041,150

14.85 （4）Financing cost

23,649,196-356,749

24,005,945

6,729.09 （5）Investment income

42,136,578

46,121,940-3,985,362-8.64 （6）Net non-operating income/expenses

182,586,481

152,613,448

29,973,033

19.64 （7）Income tax expense

69,341,108

52,802,832

16,538,276

31.32 （8）Details of change:a）With a growth of 16.48%, operating income increased by RMB 813.55 million Yuan over the same period of the previous year asa result of rise in income from domestic solutions service and international services during the reporting period;b）With a growth of 18.36%, operating costs increased by RMB 621.37 million Yuan over the same period of the previous year as aresult of rise in both operating income and labor cost during the reporting period;c）With a growth of 27.05%, selling expenses increased by RMB 106.02 million Yuan over the same period of the previous year as aresult of expansion in sales and rise in market input costs;d）With a growth of 14.85%, administrative expenses increased by RMB 106.04 million Yuan over the same period of the previous
year as a result of rise in labor cost and R&D expenses;e）With a growth of 6,729.09%, financing cost increased by RMB 24.01 million Yuan over the same period of the previous year asa result of increasing band loans based on capital position and interest provisions for outstanding medium term note and payments forunderwriting fee at the end of year in addition to rise in interest expense and service fee expense included in financing cost by RMB
20.07 million Yuan during the reporting period;f）With a decline of 8.64%, investment income reduced by RMB 3.99 million Yuan over the same period of the previous year as a result of decrease in income on investments into associated companies during the reporting period;g）With a growth of 19.64%, net non-operating income/expenses increased by RMB 29.97 million Yuan over the same period of
the previous year as a result of non-operating income amounting to RMB 24.93 million Yuan recognized by the equity of Appconomy,
Inc. that was acquired by the Company through contribution with technology use right during the reporting period;045

Neusoft Corporation

Annual Report 2011h）With a growth of 31.32%, tax income expense increased by RMB 16.54 million Yuan over the same period of the previous year
as a result of rise in tax income expense of Neusoft Group（Dalian）Co., Ltd., a subsidiary of the Company（“Dalian Subsidiary”）by
RMB 9.48 million Yuan due to the payment of enterprise income tax based on 10% taxable income upon the expiration of tax holiday
during the reporting period in addition to increase in taxable income of the Company and its subsidiaries capturing the gains.

（3）Comparative analysis on indicators of financial performance
Unit: RMB Yuan
Dec. 31, 2010/

Jan. 1-Dec. 31, 2011

Jan. 1-Dec. 31, 2010

Notes receivable

36,215,245

12,798,400

23,416,845

182.97（1）

Other current assets

14,262,836

10,313,513

3,949,323

38.29

（2）

Held-to-maturity investments

401,931,507

401,931,507—（3）Long-term receivables

150,710,187

283,406,306-132,696,119-46.82（4）

Under-construction projects

307,799,158

84,731,103

223,068,055

263.27（5）

Goodwill

227,376,502

144,880,456

82,496,046

56.94

（6）

Short-term borrowings

470,000,000

160,000,000

310,000,000

193.75（7）

170,567

1,227,304-1,056,737-86.10（8）

Notes payable

83,204,957

145,564,320-62,359,363-42.84（9）

Taxes payable

67,567,092

685,326

66,881,766

9759.12（10）

71,666

21,33650,330235.89（11）

136,060,526-136,060,526-100.00（12）

403,658,667

—

（13）

Item

046

Rate ofDec. 31, 2011/

Held-for-trading financial liabilities

Other current liabilities
Non-current liabilities due within one year

Changechange（%）

Reasonfor change

Bonds payable

403,658,667

Retained profits

2,536,698,174

2,171,819,047

364,879,127

16.80

（14）

-48,565,779-26,721,620-21,844,159-81.75（15）

Operating income

5,751,249,330

4,937,696,440

813,552,890

16.48

（16）

Operating costs

4,004,998,405

3,383,628,845

621,369,560

18.36

（17）

Selling expense

497,920,161

391,904,135

106,016,026

27.05

（18）

Administrative expense

819,957,825

713,916,675

106,041,150

14.85

（19）

Financing cost

23,649,196-356,749

24,005,945

6729.09（20）

Losses from assets depreciation

41,405,012

5,344,100

36,060,912

674.78（21）

Profits from changes in fair value

950,557-694,314

1,644,871

236.91（22）

Non-operating income

188,085,954

160,821,056

27,264,898

16.95

（23）

Non-operating expenses

5,499,473

8,207,608-2,708,135-33.00（24）

Income tax expense

69,341,108

52,802,832

16,538,276

31.32

（25）

Minority interest income

6,476,572

22,627,318-16,150,746-71.38（26）

Foreign currency translation reserve

Details of change:a）With a growth of 182.97%, notes receivables increased by RMB 23.42 million Yuan over the year 2010 as a result of rise in payments by bank acceptance received from customers during the reporting period;b）With a growth of 38.29%, other current assets increased by RMB 3.95 million Yuan as a result of rise in unamortized expenses;c）Held-to-maturity investments increased by RMB 401.93 million Yuan over last year due to purchase of wealth investment products
and income from such products amounting to RMB 1.93 million Yuan;d）With a decline of 46.82%, long-term receivables reduced by RMB 132.70 million Yuan over last year as a result of payments for
assets transfer in the previous years received from Chengdu Neusoft Institute of Information Technology（“Chengdu Neusoft Institute”）
during the reporting period;e） With a growth of 263.27% , under-construction projects increased by RMB 223.07 million Yuan over the year 2010 caused by
new construction of Beijing Neusoft Park as well as continued construction of Shanghai and Guangzhou Neusoft Parks;f）With a growth of 56.94%, goodwill increased by RMB 82.50 million Yuan over last year as a result of a goodwill of RMB 99.95
million Yuan arising due to the payments for the purchase of Neusoft Corporation （Beijing）Co., Ltd. operating as a subsidiary of theCompany for 73.14% equity from Beijing Viewhigh Technology Co., Ltd. （later known as Beijing Neusoft Viewhigh Technology Co.,
Ltd.）being larger than fair value of net identifiable assets. This was in addition to losses in goodwill amounting to RMB 8.98 million
Yuan caused by provisions for mergers & acquisitions in Europe and America as well as changes in foreign exchange rates;g）With a growth of 193.75%, short-term borrowings increased by RMB 310 million Yuan over the year 2010 as a result of increasein such borrowings of the Company and Shenyang Neusoft Medical Systems Co., Ltd., a subsidiary of the Company（“Neusoft Medical”）
by RMB 120 million Yuan and 190 million Yuan respectively;h）With a decline of 86.1%, held-for-trading financial liabilities reduced by RMB 1.06 million Yuan as compared to last year as an increase in estimated floating loss by RMB 1.06 million Yuan which, in accordance with the forward foreign exchange contracts signed by
the Company, was accounted by different foreign currencies based on open market exchange rates during the reporting period was listed
into the gains/losses from changes in fair value for the purpose of lowering held-for-trading financial assets;i）With a decline of 42.84%, notes payable reduced by RMB 62.36 million Yuan over last year as a result of payment for bank acceptances due within the reporting period;j）Taxes payable increased by RMB 66.88 million Yuan over last year as a result of rise in value-added tax and income tax payable;k）With a growth of 235.89%, other current liabilities increased by RMB 50,000 Yuan as a result of rise in provisions;l）With a decline of 100%, non-current liabilities due within one year reduced by RMB 136.06 million Yuan over last year as a resultof the payment by Chengdu Neusoft Information Technology Development Co., Ltd. （“Chengdu Neusoft Development”） for government loans with no interest for the purpose of the construction of Phase III, Chengdu Software Park;m）Bonds payable increased by RMB 403.66 million Yuan over the year 2010 as a result of issuance of medium term notes valuing
RMB 400 million Yuan as well as provision for interest amounting to RMB 3.66 million Yuan during the reporting period;n） With a growth of 16.80% , retained profits increased by RMB 364.88 million Yuan over the last year as a result of net profit
amounting to RMB 417.07 million Yuan during the reporting period;o）With a decline of 81.75%, foreign currency translation reserve reduced by RMB 21.84 million Yuan over the beginning of 2011as a result of decrease in the reserve by RMB 16.63 million Yuan caused by a big gap between annual average exchange rate（9.0230）
and year-end exchange rate（8.1625）used by Neusoft（Europe）Co., Ltd., a subsidiary wholly owned by the Company（“Neusoft Europe”）for the purpose of translation of foreign currency statements due to fast appreciation of the Renminbi against the Euro;

047

Neusoft Corporation

Annual Report 2011p）With a growth of 16.48%, operating income increased by RMB 813.55 million Yuan over the same period of the previous year
as a result of rise in income from the domestic solutions business and international software during the reporting period;q）With a growth of 18.36%, operating costs increased by RMB 621.37 million Yuan over the same period of the previous year as aresult of increases in both operating income and labor cost during the reporting period;r）With a growth of 27.05%, selling expense increased by RMB 106.02 million Yuan over the same period of the previous year as aresult of increase in sales and rise in market input costs;s）With a growth of 14.85%, administrative expenses increased by RMB 106.04 million Yuan over the same period of the previous
year as a result of rise in labor cost and R&D expenses;t）With a growth of 6,729.09%, financing cost increased by RMB 24.01 million Yuan over the same period of the previous year as a resultof increasing band loans based on capital position and interest provisions for outstanding medium term note and payments for underwriting fee
at the end of year in addition to rise in interest expense and service fee expense included in financing cost by RMB 20.07 million Yuan;u）With a growth of 674.78%, losses from assets depreciation increased by RMB 36.06 million Yuan over the same period of theprevious year as a result of rise in losses from receivables depreciation estimated based on receivables outstanding and account age in addition to full provision for bad debts of RMB 8.85 million Yuan related to the receivable that was not expected to be paid by Sesca（Seethe Annual Report 2011 and Semi-annual Report 2011 for other information）as well as provision for bad debts of RMB 6.60 million
048

Yuan related to long-term receivables that was reversed by Chengdu Neusoft Development based on actual conditions;v）With a growth of 236.91%, profits from changes in fair value increased by RMB 1.64 million Yuan over the same period of theprevious year as a result of changes in fair value of forward foreign exchange contract;w）With a growth of 16.95%, net non-operating income/expenses increased by RMB 27.26 million Yuan as over the same period of
the previous year a result of non-operating income amounting to RMB 24.93 million Yuan recognized by the equity of Appconomy, Inc.
that was acquired by the Company through contribution with the right to use technology during the reporting period;x）With a decline of 33%, non-operating expenses reduced by RMB 2.71 million Yuan over the same period of the previous year aresult of Neusoft Medical’s payment of RMB 2.36 million Yuan for an indemnity arising from legal proceedings;y）With a growth of 31.32%, tax income expense increased by RMB 16.54 million Yuan over the same period of the previous year
as a result of rise in tax income expense of Neusoft Group （Dalian）Co., Ltd., a subsidiary of the Company by RMB 9.48 million Yuan due to the payment of enterprise income tax based on 10% taxable income upon the expiration of tax holiday during the reporting
period in addition to increase in taxable income of the Company and its subsidiaries capturing the gains;z）With a decline of 71.38%, minority interest income reduced by RMB 16.15 million Yuan over the same period of the previous
year caused by current profit that was impaired by Chengdu Neusoft Development’s transfer of investment property to Chengdu Neusoft
Institute during the report period.

（4）Comparative analysis on indicators of cash flow
Unit: RMB Yuan
Item

2011

2010

ChangeRate ofchangeRemarks

Net cash flows from operating activities

300,196,604

381,889,530-81,692,926-21.39%（1）

Net cash flows from investment activities-769,257,253-224,563,973-544,693,280-242.56%（2）

Net cash flows from financing activities

529,377,797-87,587,228

616,965,025

704.40%（3）

Details of change:a）With a decline of 21.39%, net cash flow from operating activities decreased by RMB 81.69 million Yuan over the same period of
the previous year as a result of rise in purchase expenditure and labor cost during the reporting period;b）With a decline of 242.56%, net cash flow from investment activities reduced by RMB 544.69 million Yuan over the same periodof the previous year as a result of the company’s purchase of wealth management products amounting to RMB 400 million Yuan following the issue of medium term notes for the purpose of minimizing the cost of bond financing. The rise in cash flow was also due to purchase/ construction of fixed assets and other long-term assets and acquisition of its subsidiary and other organizations by RMB 216.59 million Yuan in addition to Chengdu Neusoft Development’s receipt of payment from Chengdu Neusoft Institute for assets transfer in theprevious years up to RMB 107.75 million Yuan;c）With a growth of 704.40%, net cash flow from financing activities increased by RMB 616.97 million Yuan over the same periodof the previous year as a result of the Company’s receipt of the principal of outstanding medium term notes amounting to RMB 400 million Yuan as well as decrease in both distributed dividends and interest expenses by RMB 151.95 million Yuan due to payment for cash
dividends during the reporting period.

8.3 Analysis of reasons for material changes in business performance and profit structure; Analysis ofreasons for material changes in financial performance
Unit: RMB Yuan
2011
Item

Amount2010
Percentage intotal profit（%）

AmountPercentage intotal profit（%）

Operating income

5,751,249,330

1166.85

4,937,696,440

881.57

Operating cost

4,004,998,405

812.56

3,383,628,845

604.11

Period cost

1,341,527,182

272.181,105,464,061

197.37

Operating profit

310,300,179

62.96

407,491,880

72.75

Investment income

42,136,578

8.55

46,121,940

8.23

Net non-operation income/expenses

182,586,481

37.04

152,613,448

27.25

Total profit

492,886,660

100.00560,105,328

100.00Compared with 2010, changes in operating costs and period costs in 2011 are attributed to higher labor cost caused by continued
implementation of compensation improvement plan and expansion of business scale in addition to greater market/R&D inputs into major
services. Increase in net non-operating income/expenses resulted from an non-operating income of RMB 24.93 million Yuan recognizedby the equity of Appconomy, Inc. that was acquired by the Company through capital infusion with the right to use technology during thereporting period.

049

Neusoft Corporation

Annual Report 2011

Unit: RMB Yuan
December 31 , 2011

December 31 , 2010

st

Item

Percent in total
assets（%）

Percent in total

Amountprofit（%）

Receivables

1,161,288,549

14.65

959,725,130

13.99

Inventory

585,158,868

7.38

486,823,705

7.10

Held-to-maturity investments

401,931,507

5.07

—

—

Investment property

438,134,937

5.53

437,011,923

6.37

Long-term equity investments

703,226,389

8.87

614,836,497

8.96

1,395,400,942

17.61

1,429,649,069

20.84

Under-construction projects

307,799,158

3.88

84,731,103

1.24

Long-term borrowings

104,000,000

1.31

129,000,000

1.88

Bonds payable

403,658,667

5.09

—

—

Total assets

7,925,285,114

100.006,858,879,805

100.00

Fixed assets

050

Amountst

During the reporting period, bonds payable increased by RMB 400 million Yuan owing to the issue of medium term notes; wealth investment products purchased by the Company based on capital position were added into the held-to-maturity investments; the proportion of under-construction projects increased as a series of projects including Beijing Neusoft Park, Shanghai Neusoft Park and Guangzhou
Neusoft Park are underway.

8.4 Notes on reasons for material changes in portability （gross profit margin）of main businessCompared with 2010, no material changes have taken place in the profitability of main business in 2011.

8.5 Investment profile
Unit: RMB’0,000 Yuan
Amount of investment during the reporting period

147,129

Change in the amount of investment

106,955

Amount of investment in the previous year

40,174Rate of change in the amount of investment（%）

266.23

（1）Information about invested companies
Unit: RMB’0,000 Yuan
Percent
No.

Invested

Main businesscompanyof equity

Amount ofheld byinvestment

RemarkstheCompany

（1）

（2）

（3）

Neusoft Group

Computer software/hardware, technical con-

（Wuhu）Co., Ltd.

sulting and services

Neusoft Medical

Product R&D/ manufacturing and related tech-（U.S.A.）Co., Ltd.

nical consulting/services

Neusoft Group（Beijing）Co., Ltd.
Chongqing Guo’ao（4）

100 Years Xikang
Health Management
Co., Ltd.

（5）

Technology development/ consulting/services

1,000
1.725
million US Dollars
18,500100.00%

Newly-incorporated wholly
owned subsidiary

100.00% Capital increase

100.00% Capital increase

Xikang management services（excluding treatment）, development of Xikang technology

40

20.00% Share participation

projects

Neusoft Medical

Medical systems and relevant technical con-730,000（MEFTA）Co., Ltd.

sulting and services

US Dollars

100.00% Capital increase

Guangdong（6）

Neufashion Digital

Computer software/hardware, protection de-Technology

vices for medical purpose

2,250

60.00%

2,760

9.01%

Newly-incorporated holding
subsidiaryCo., Ltd.
Nanchang Biotech（7）

A&C Biotechnical

In-vitro diagnostic products for medical pur-Industry Incorporated pose, medical systems, software development

Subscription of newly-added
registered capitalCompany
Beijing Neusoft（8）

Yuetong Software
Technology

Computer software/hardware/services

350

70.00% Capital increaseCo., Ltd.
（9）

Neusoft（Europe）

Computer software/hardware, technical con-

7.4849Co., Ltd.

sulting and services

million Euro

Computer services

353.5

100.00% Capital increase

Shenyang Neusoft
Transportation（10） Information
Technology
Co., Ltd.

50.5%

Newly-incorporated holding
subsidiary051

Neusoft Corporation

Annual Report 2011

Continued table
Percent
Invested

No.

Main businesscompany

Amount ofinvestmentof equity
held byRemarkstheCompany

Neusoft Group（11）（Nanjing）Co., Ltd.
（12）

Neusoft Xikang
Holdings Co., Ltd.

Computer software/hardware and its development, sales and technical consulting
IT and related consulting services

Neusoft Xikang（13） International

IT and related consulting services

Co., Ltd.
Neusoft Xikang
（14）
052

Healthcare
Technology
Co., Ltd.

Computer software/hardware, electronics product development, corporate investment management & consulting

Aerotel Medical（15） Systems（1998）（16） Neusoft Information
Systems Co., Ltd.

35,000US Dollars
1 million
HK Dollars

8 million
US Dollars

100.00%70.00%

100.00%100.00%1.777
Tele-diagnosis/healthcare/wellness solutions

Ltd.
Shenyang Toshiba

1,200

million30.77%US Dollars
Development of software products, wholesale
and retail of software/hardware products

Newly-incorporated wholly
owned subsidiary
Newly-incorporated holding
subsidiary
Merge & acquisition, capitalincrease

Newly-incorporated indirectly-holding subsidiary

Subscription of newly-issued
common stocks

905.1

40.00% Share participation

450

30.00% Share participation

NEC Neusoft（17）

Information

Computer software system integration, com-

Technology

puter software/hardware development

Co., Ltd.
Beijing LBS Social
Insurance（18） Information
Technology

Technology development/consulting services,
product selling

539.0361.67% Acquisition, shareholding

11,41073.14%

3,000

100.00%Co., Ltd.
Beijing Neusoft（19）

Viewhigh

Computer software development/production,

Technology

self-made product sales, technical support

Acquisition, indirect shareholding

Co., Ltd.
Liaoning Neusoft

Health information management/consulting,（20） Xikang Healthcare

management services, management system

Co., Ltd.

development

Newly-incorporated indirectly-holding subsidiary

Continued table
Percent
No.

Invested

Main businesscompany

Amount ofinvestmentof equity
held byRemarkstheCompany（21） Appconomy, Inc.
Neusoft Group（22）（Zhengzhou）
Co., Ltd.
Shenyang Neusoft（23） Xikang Medical
Systems Co., Ltd.
Neusoft Group（24）（Nanchang）
Co., Ltd.
Shenzhen（25）

Neufashion
Digital Technology
Co., Ltd.

Neusoft Group（26）（Dalian）Co., Ltd.
Tianjin Xikang（27）

Healthcare
Technology
Co., Ltd.

Application software for mobile Internet

2,493.44

13.32%

1,000

100.00%1,000

100.00%2,000

100.00%100

100.00%

Sales and development of computer software/
hardware

Computer software/hardware development for
medical systems, healthcare consulting services

Computer hardware development/production,technical consulting and other services

Design/R&D/production/sales of watch mobiles,
technology development/sales of computer software/hardware

Computer software/hardware

20,000agement & consulting

450

referred stocks
Newly-incorporated wholly
owned subsidiary

Newly-incorporated indirectly-holding subsidiary

Newly-incorporated wholly
owned subsidiary

Newly-incorporated indirectly-holding subsidiary

100.00% Capital increase

Computer software/hardware, electronics product development, corporate investment man-

Subscription of newly-issued

100.00%

Newly-incorporated indirectly-holding subsidiarya）In March 2011, the Company established Neusoft Group（Wuhu）Co., Ltd. by making a contribution of RMB 10 million Yuan
and held 100% of its shares, which has been recorded in the consolidated financial statements from the said month.
b）In March 2011, Shenyang Neusoft Medical Systems Co., Ltd., a subsidiary wholly owned by the Company, made a decision to infuse an additional 3 million US Dollars into the registered capital of Neusoft Medical（U.S.A.）Co., Ltd. With this infusion, the total registered capital of the US entity reached 4 million US dollars. Till date, an accumulative contribution of 2.5 million US dollars has been madeas an amount of 1.725 million US dollars was paid during the reporting period.
c）In March 2011, the Company infused RMB 185 million Yuan into the registered capital of Neusoft Group（Dalian）Co., Ltd., asubsidiary wholly owned by it, achieving a total investment of RMB 249.94 million Yuan.
d）In April 2011, Shenyang Neusoft Medical Systems Co., Ltd., a subsidiary wholly owned by the Company established Chongqing
Guo’ao 100 Years Xikang Health Management Co., Ltd. and held 20% of its shares by paying a contribution of RMB 400,000 Yuan.
e）In May 2011, Shenyang Neusoft Medical Systems Co., Ltd., a subsidiary wholly owned by the Company, made a decision on an053

Neusoft Corporation

Annual Report 2011

increase of 2.5 million US dollars into the registered capital of Neusoft Medical（Middle East）Co., Ltd., thus taking its registered capital
to 3.5 million US dollars. Till date, an accumulative contribution of 1.4 million US dollars has been made as an amount of 730,000 US dollars was paid during the reporting period.
f）In May 2011, the Company, by contributing RMB 22.5 million Yuan, established Neusoft Group（Nanchang）Co., Ltd. and held
60% of its shares, which was recorded in the consolidated financial statements from the said month.
g）In June 2011, Shenyang Neusoft Medical Systems Co., Ltd., a subsidiary wholly owned by the Company, paid an amount of RMB
27.60 million Yuan for an increase in the registered capital of Nanchang Biotech A&C Biotechnical Industry Incorporated Company, increasing its shareholding to 9.01%.
h）In June 2011, Liaoning Neusoft Venture Capital Investment Co., Ltd., a subsidiary controlled by the Company, made an increaseof RMB 3.5 million Yuan in the registered capital of its subsidiary Beijing Neusoft Yuetong Software Technology Co., Ltd., total investments till date reach RMB 10.50 million Yuan.
i）In March and October 2011, the Company made a total increase of 7.4849 Euros into the registered capital of its subsidiary Neusoft（Europe）Co., Ltd., total investments amounting to 28.0146 million Euros.
j）In July 2011, the Company set up Shenyang Neusoft Transportation Information Technology Co., Ltd. by investing RMB 3.535 million Yuan and held 50.5% of its shares, which was recorded in the consolidated financial statements from the said month.
054k）In July 2011, the Company established Neusoft Group（Nanjing）Co., Ltd. by investing RMB 12 million Yuan and held 100% of
its shares, which was recorded in the consolidated financial statements from the said month.
l）In July 2011, Neusoft（Hong Kong）Co., Ltd., a subsidiary wholly owned by the Company, established Neusoft Xikang Holdings
Co., Ltd. and held 70% of its shares by contributing 35,000 US dollars, which was recorded in the consolidated financial statements fromthe said month.
m）In July 2011, Neusoft Xikang Holdings Co., Ltd., a subsidiary indirectly controlled by the Company, acquired Neusoft Xikang International Co., Ltd. with a shareholding percentage of 100% and increased its registered capital to 1 million HK dollars, which was recorded in the consolidated financial statements from the said month.
n）In July 2011, Neusoft Xikang Healthcare Technology Co., Ltd., a subsidiary indirectly controlled by the Company, established Neusoft Xikang Healthcare Technology Co., Ltd. and held 100% of its shares by investing 8 million US dollars, which was listed in the consolidated financial statements from the said month.
o）In July 2011, Neusoft（Europe）Co., Ltd., a subsidiary of the Company acquired 26,915 ordinary shares newly issued by Aerotel
Medical Systems（1998）Ltd. at the price of 66.02 US dollars per share, taking its shareholding percentage to 30.77% and investments
amounting to a total of 1.777 million US dollars.
p）In July 2011, the Company set up Shenyang Toshiba Neusoft Information Systems Co., Ltd. and held 40% of its shares by investing RMB 9.051 million Yuan.
q） In July 2011, Shenyang Neusoft Information Technology Services Co., Ltd., a subsidiary wholly owned by the Company set up
NEC Neusoft Information Technology Co., Ltd. and held 30% of its shares by investing RMB 4.50 million Yuan.
r）In August 2011, the Company acquired 28.33% equity of Beijing LBS Social Insurance Information Technology Co., Ltd., taking its
shareholding to 61.67%, which was recorded in the consolidated financial statements from the said month.
s）In August 2011, Neusoft Group（Beijing）Co., Ltd., a subsidiary wholly owned by the Company, acquired Beijing Viewhigh Technology Co., Ltd.（later known as Beijing Neusoft Viewhigh Technology Co., Ltd.） and held 73.14% of its shares by contributing RMB
114.10 million Yuan, which was recorded in the consolidated financial statements from the said month.

t）In October 2011, Neusoft Xikang Healthcare Technology Co., Ltd., a subsidiary indirectly controlled by the Company, established
Shenyang Neusoft Medical Systems Co., Ltd. and held 100% of its shares by investing RMB 30 million Yuan, which was recorded in the
consolidated financial statements from the said month.
u）In October 2011, the Company subscribed for 6,903,220 preferred shares newly issued by Appconomy, Inc. with technology use
right, a kind of intangible asset with an estimated value of RMB 24,934,400 Yuan. As of date, the Company holds 13.32% of the sharesof Appconomy, Inc.
v）In October 2011, the Company established Neusoft Group（Zhengzhou）Co., Ltd. and held 100% of its shares by investing RMB
10 million Yuan, which was recorded in the consolidated financial statements from the said month.
w） In November 2011, Neusoft Xikang Healthcare Technology Co., Ltd., a subsidiary indirectly controlled by the Company, established Shenyang Neusoft Xikang Medical Systems Co., Ltd. and held 100% of its shares by contributing RMB 10 million Yuan, which wasrecorded in the consolidated financial statements from the said month.
x）In November 2011, the Company, with a total investment of RMB 20 million Yuan, established Neusoft Group （Nanchang）Co.,
Ltd. and held 100% of its shares, which was recorded in the consolidated financial statements from the said month.
y） In December 2011, Guangdong Neufashion Digital Technology Co., Ltd., a subsidiary controlled by the Company, established
Shenzhen Neufashion Digital Technology Co., Ltd. and held 100% of its shares by contributing RMB 1 million Yuan, which was recordedin the consolidated financial statements from the said month.

055z）In December 2011, the Company made an increase of RMB 200 million Yuan into the registered capital of Neusoft Group （Dalian）Co., Ltd., taking its investments to RMB 300 million Yuan.
aa） In December 2011, Neusoft Xikang Healthcare Technology Co., Ltd., a subsidiary indirectly controlled by the Company, established Tianjin Xikang Healthcare Technology with a registered capital of RMB 30 million Yuan and held 75% of its shares, by investing
RMB 4.50 million Yuan, which was recorded in the consolidated financial statements from the said month.

（2）Wealth management
During the reporting period, the Company purchased the following wealth management products:
Unit: RMB’0,000 Yuan
AmountDate ofDate of Compen-

Agency Amount commence- terminament

IndustrialBank

30,000（China）
Industrial
Bank

10,000（China）
Total

40,000tion

Subject

AmountofofActually

to legal

sationactually

gainedproceed- deprecia-

mode

retracted income

ings

tion

principal

or notprovision

Dec.

Feb.

Floating

1, 201128, 2012

incomeDec.

Feb.

Floating

23, 2011

6, 2012

income———Relatedtransaction
or notSourcefrom

Association

financing relationshipcapitalor notor not

—

—

Yes

—

No

No

No

—

—

Yes

—

No

No

No

—

—

—

—

—

—

—

Accumulative amount of overdue principal and income outstanding（RMB Yuan）

0Neusoft Corporation

Annual Report 2011

Note: With regard to the wealth management products mentioned above, the Board of Directors has agreed that the managementof the Company may, at its discretion, purchase wealth management products amounting to a total amount of RMB 400 million Yuan
based on capital position at any time following the bond issuance and use such an amount within two years from the date of the Boardof Directors’resolution. This resolution was passed for the purpose of reducing the total interest cost on bonds to the greatest extent inaccordance with the Proposal on the Purchase of Wealth Management Products which was approved by the Board of Directors at the26th session of its meeting. At the end of the reporting period, the principal and income related to the two of the above wealth management products that had not been received as they were under recognized as an investment and an income of RMB 1.93 million Yuan
was entered into the balance sheet based on an estimate. The company subsequently received the principal and income of the said products totaling RMB 405.86 million Yuan upon their expiration following the date of balance sheet.

（3）Utilization of raised capital
No raised capital or funds raised from previous offering were in use during the reporting period.

（4）Utilization of non-raised capital
During the reporting period, the Company and its subsidiaries made a total investment of RMB 226.85 million Yuan for the construc056

tion of projects including Beijing Software Park and Shanghai Neusoft Park with their own capital:
Unit: RMB’0,000 Yuan
Item

AmountBeijing Neusoft Park

12,893

Shanghai Neusoft Park

5,527

Guangzhou Neusoft Park（Phase I）

1,690

Renovation of club in Shenyang Neusoft Park72

Medical information construction system

295

Hainan Neusoft Park（Phase I）

74

Renovation of canteen of Shenyang Neusoft Park

2,134

Total

22,685

8.6 Results of discussion on reasons for and effects of changes in accounting policies/estimates
No material changes have been found in the accounting policies and estimates of the Company during the reporting period.

8.7 Daily work of the Board of Directors（1）Details and resolutions of meetings of the Board of Directors
Designatednewspaper ofTerm number

Date ofof meetings

meeting

Content of resolution

information
disclosure forpublishing
resolutions
China Securities Journal

Session 23, Term 5 Jan. 7, 2011

Session 24, Term 5 Mar. 31, 2011

Shanghai Securities News

China Securities Journal
Shanghai Securities News
China Securities Journal
Shanghai Securities News
China Securities Journal

Session 27, Term 5 May 17, 2011

Session 2, Term 6

Jul. 25, 2011

Session 3, Term 6

Aug. 24, 2011

Shanghai Securities News
China Securities Journal
Shanghai Securities News
China Securities Journal
Shanghai Securities News
China Securities Journal
Shanghai Securities News
Resolution on the establishment of a subsidiary:
1. The Board of Directors agreed that Neusoft Xikang
Technology Co., Ltd., a subsidiary indirectly controlled
by the Company could establish Liaoning Neusoft Xikang Healthcare Co., Ltd. which would operating as its
wholly owned subsidiary （“Liaoning Neusoft Xikang”）

Session 4, Term 6

publishing
resolutions

Jan. 11, 2011

nal Control Rules

Session 26, Term 5 Apr. 25, 2011

May 25, 2011

information
disclosure for

Proposal of Making the Plan for Implementation of Inter-

Session 25, Term 5 Apr. 11, 2011

Session 1, Term 6

Date ofSep. 14, 2011 through contributing RMB 30 million Yuan.
2. The Board of Directors agreed that Liaoning Neusoft
Xikang, jointly with Shengjing Hospital of China Medical
University could establish Liaoning Shengjing Xikang
Healthcare Investment Co., Ltd. with a cash contributionof RMB 75 million Yuan, accounting for 75 of its registered capital amounting to RMB 100 million Yuan.

Apr. 14, 2011057
Apr. 28, 2011

May 18, 2011

May 26, 2011

Jul. 19, 2011

Aug. 27, 2011

Neusoft Corporation

Annual Report 2011

Continued table
Designatednewspaper ofTerm number

Date ofof meetings

meeting

Content of resolution

information
disclosure forpublishing
resolutions

Session 5, Term 6

Oct. 27, 2011

Session 6, Term 6

Dec. 5, 2011

Session 7, Term 6

Dec. 21, 2011

China Securities Journal
Shanghai Securities News
China Securities Journal
Shanghai Securities News
China Securities Journal
Shanghai Securities News

Date ofinformation
disclosure forpublishing
resolutions

Oct. 29, 2011

Dec. 7, 2011

Dec. 23, 2011

（2）Execution of the resolutions passed in the Shareholders’Meeting by the Board of Directors
058

The Board of Directors executes any and/or all resolutions passed in the Shareholders’Meeting in strict compliance with its power
and authority.
Partnering with Industrial Bank Co., Ltd., which acted as the lead underwriter, the Company issued the first phase of its three-year
fixed-interest bearing medium-term notes （Name: 11 Neusoft MTN1, Code: 1182321）in 2011 that amounted to a total of RMB 400
million Yuan with each note of value RMB 100 Yuan and coupon rate of 6.86%. This offering was done by means of book building andconcentrative allotment on November 11th, 2011, in accordance with the Proposal on the Issuance of Short-term Financing Bonds and Medium-term Notes during the reporting period, from which the capital raised was made available on November 14th, 2011.
For documents relating to this issuance of medium-term notes, please visit http://www.chinamoney.com.cn or http://www.chinabond.
com.cn.

（3） Summary of development/improvement and main contents of relevant working system for the Auditing
Committee and its performance of duties and responsibilities
The Auditing Committee of the Board of Directors consists of four members, of which, the majority are independent directors （including an expert in accounting）with one serving as Chairman of the Committee.
During the reporting period, the Auditing Committee fulfilled its duties and responsibilities in a diligent and faithful manner. During
the auditing of Annual Report 2011, the Committee played the following role:a）Review financial statements and make a resolution that these financial statements that truly reflect the financial and business performance of the Company can be delivered to BDO China Shu Lun Pan Certified Accountants LLP for auditing;b）Enhance and maintain communication with the accountant during auditing, review financial statements after the accountant expresses his opinions, make a resolution that the financial statements have truthfully and completely reflected the status of the Company
and push the accountant to finish auditing on time;c） Vote on financial statements and submit them to the Board of Directors after making relevant resolutions prior to the annual
meeting of the Board. This will be done in addition to providing a summary report on the auditing of BDO China Shu Lun Pan Certified

Accountants LLP, detailing that the said accountant firm has completed auditing in an independent, objective, fair and timely basis andthat the auditor’s report issued by it has been verified.

（4）Summary of the Compensation and Evaluation Committee’s performance of duties and responsibilities
The Compensation and Evaluation Committee is made up of three members, of which, at least two are independent directors with
one serving as Chairman of the Committee. In 2011, the Committee fulfilled its duties and responsibilities actively including reviewing theCompany’s compensation systems for employees and senior executives for the year 2011.

（5）Development and improvement of the system of management of external information users
The Company has built a System of Management of External Information Users to specify the rules for reporting and use of external
information during the compilation, review and disclosure of regular reports and important events.

（6）Declaration of the Board of Directors on responsibility for internal control
Under the supervision of the Board of Supervisors, the Board of Directors is responsible for the development, improvement and effective implementation of internal control with the help of the management directing daily operation of internal control. By developing integrated and effective internal control systems in accordance with applicable laws and regulations, the Company maintains compliant operation and secured assets in addition to keeping authentic, accurate and integral financial statements and information disclosures.

（7）Development and implementation of the system of management of insider information sources
The Company has developed a System of management of Insider Information Sources to define the scope of insider information andits sources as well as registration, confidentiality, obligation and responsibility of the sources.
During the reporting period, no insider information sources have bought or sold any share of the Company by leveraging the information they possess prior to the disclosure of material sensitive information.

（8）Ensuring absence of the Company and its subsidiaries from the environmental protection authority’s list ofenterprises causing severe environmental pollution
No problems resulting in severe environmental pollution and other social concerns are found in the Company.

8.8 Cash dividends policy making and implementation
The Articles of Association provides for cash dividends as follows:“The Company may distribute dividends by cash or shares. The Company shall put high value on investors’return on investment and keep the dividends distribution policy running continuously and stably.”
The Board of Directors shall work out the dividends distribution plan which shall be approved at the Shareholders Meeting by a resolution in accordance with the operating conditions of the Company.
A company which has made profits and fails to prepare any cash dividends distribution plan shall detail the reasons for such failure
and the purpose that such cash dividends are reserved and used for.
During the reporting period, no cash dividend has been distributed by the Company.

059

Neusoft Corporation

Annual Report 2011

8.9 Profit distribution/capital reserve-based capitalization proposal
According to the audit conducted by BDO China Shu Lun Pan Certified Accountants LLP, the Company has made a net profit
amounting to RMB 346,932,350 Yuan in 2011. In accordance with the Company Law of the People’s Republic of China and the Articles
of Association, the Company will provide 10% of the net profit for legal capital reserve amounting to RMB 34,793, 235 Yuan and 10%
for optional capital reserve equaling to RMB 17,396,638 Yuan. Therefore, the profit available for shareholders’distribution for the year
2011 works out to RMB 295,742,497 Yuan which, plus the undistributed profit of the previous year amounting to RMB 1,306,861,484
Yuan, results in a total undistributed profit of RMB 1,602,603,981 Yuan at the end of the year 2011.
In line with the future vision of the Company, the Board of Directors has agreed that no dividends will be distributed and no capitalreserve will be capitalized in 2011. The undistributed profit will be used for the purposes of R&D and Xikang business expansion in 2012.
The sections mentioned above shall be approved at the Shareholders’Meeting.

8.10 Undistributed dividends or capitalization and dividends distribution from capital reserve in thepast three years
Unit: RMB Yuan
060
Net profit
Number of
Year

bonus
shares per 10
ordinary shares

attributable to

Number of

Number ofdividends

shares converted

Amount of（taxes included）

by capitalcash dividends

per 10reserve per 10（taxes included）

ordinary sharesordinary sharesshareholders oflisted companies
recorded in the
consolidated
financial statements
for distribution year

Percentage innet profit
attributable toshareholders oflisted companies
recorded in the
consolidated
financialstatements

2008

2.00

0.25

6.00

13,115,323

490,778,900

2.67

2009

0

2.00

3

188,860,653

640,590,492

29.48

2010

0

0

0

0

484,675,178

08.11 Independent directors’special explanations and independent opinions on the security provided
by the Company for third parties
In accordance with the rules of China Securities Regulatory Commission relating to the securities provided by listed companies forthird parties, independent directors have carried out special audits on the securities provided by the Company to third parties. In 2011,
the Company has made decisions on the securities given to third parties subject to applicable laws and regulations of China and the Articles of Association in addition to complete information disclosure.
Independent directors: Fang Hongxing, Xue Lan and Gao Wen

（IX）Reports of the Board of Supervisors
9.1 Operation of the Board of Supervisors
During the reporting period, the Board of Supervisors held 4 sessions of meetings as follows:（1）At the 16th session of the 5th meeting of the Board of Supervisors, the following reports and proposals wereapproved:a）Annual Report of the Board of Supervisors for 2010;b）Proposal on the Election of the Board of Supervisors;c）Annual Report for 2010;d）First Quarterly Report for 2011;e）Annual Financial Report for 2010;f）Proposal on Profit Distribution for 2010;g）Proposal on Employment of Financial Auditing Agency for 2011;h）Proposal on Execution of Route Related Transactions for 2010;i）Proposal on Estimate of Route Related Transactions for 2011;j）Proposal on Issuance of Short-term Financing Bonds and Medium-term Notes; andk）Proposal on Purchase of Wealth Management Products（2）At the 1st session of the 6th meeting of the Board of Supervisors, the following resolutions were approved:a）Proposal on Election of Chairman of the Board of Supervisorsb）Introduction to Members of the Board of Supervisors on behalf of Employees（3）At the 2nd session of the 6th meeting of the Board of Supervisors held on August 24th, 2011, the Full Text andSummary of Semi-annual Report 2011 was approved.
（4）At the 3rd session of the 6th meeting of the Board of Supervisors held on October 27th, 2011, the Third Quar-

terly Report 2011 was approved.

9.2 Independent opinions of the Board of Supervisors on the Company’s compliant operation
In 2011, the Company maintained compliant operations and decision making and developed complete internal control systems. Being aggressive, its directors and senior management carried on business compliantly and implemented the resolutions of the Shareholders’Meeting diligently without violation of any laws, regulation and the Articles of Association as well as impairment of the interest ofshareholders and employees.

9.3 Independent opinions of the Board of Supervisors on the Company’s financial performance
According to BDO China Shu Lun Pan Certified Public Accountants LLP, the financial statements for 2011 have indicated the financial
and business performance of the Company on an objective and equitable basis.

061

Neusoft Corporation

Annual Report 2011

9.4 Independent opinions of the Board of Supervisors on the Company’s Paid-in Input to the Latest
Financing
The Company made investments into the latest financing project as promised which played an important role in the development of
the Company.

9.5 Independent opinions of the Board of Supervisors on assets acquisition and selling
The Company acquired and sold assets at reasonable prices and no insider transactions impairing the interest of shareholders or resulting in any loss of assets were found.

9.6 Independent opinions of the Board of Supervisors on the Company’s related transactions
In 2011, the Company completed related transactions at fair prices, causing no damage to its interest.

9.7 Review and independent opinions of the Board of Supervisors on self-evaluation reports on internal control
062

The Board of Supervisors reviewed and approved the Self-evaluation Report on Internal Control. By building integrated and effective
internal control systems, the company developed a series of scientific systems covering decision making, execution and supervision tomaintain a secured compliant operation. The Report has reflected the conditions of the company’s internal control on a compete, authentic and accurate basis.

（X）Important issues
10.1 Material litigation and arbitration
In 2011, the Company was not involved in any material litigation and arbitration.

10.2 Bankruptcy reorganization and listing suspension or termination
In 2011, the Company has not experienced any bankruptcy reorganization.

10.3 Shareholding in other listed companies and share participation into financial businesses
In 2011, the Company has not received any shareholding from other listed companies nor engaged in any share participation into financial businesses.

10.4 Assets trading（1）Assets acquisition
Unit: RMB Yuan

Counterparty
or ultimate Assets acquired
controller

Date ofacquisition

Beijing
Viewhigh
73.14% ofTechnology
equity in BeijingCo., Ltd.,
Viewhigh
Intel China
Technology
Ltd. andCo., Ltd.
natural（Latter known
Augustpersons2011
as Beijing
including
Neusoft Viewhigh
Guo
Technology
Xuewen,Co., Ltd.
Duanfollowing
Chenghuiacquisition）
and ZhangWei（Note）

Net profit
contributed
Percentage
to theIs it aof netlistedrelatedNet profit
Are theprofitcompany transaction
Are thecontributed
property
contributfrom the（PleasePricingclaimsto the listed
rightsed
beginninggive anbasis
andIs therecompanyofto the list
Acquisition
to the end explanationforliabilities
any
from theassetscompany
priceof 2011of pricing
assetsinvolved
reledate of
involved
by the（Applicable basis inacquisifullyvance?
acquisition
fully
purchased
to business
case
tion）
transto the end
transassets
combina- of a related
ferred?
of 2011ferred?
gainsttiontransactotal net
undertion）?
profit（%）
commoncontrol）

No morethan RMB
114,101,440
Yuan

1,221,257

N/ANo

Marketpricesandthose asagreedby theparties

Yes

Yes

0.29

No

063

Neusoft Corporation

Annual Report 2011

Continued table

Counterparty
or ultimate Assets acquired
controller

064

Date ofacquisition

Net profit
contributed
Percentage
to theIs it aof netlistedrelatedNet profit
Are theprofit
Are thecompany transaction
contributed
property
contributfrom the（PleasePricingclaimsto the listed
rightsed
give anbasis
andIs there
beginning
companyofto the list
Acquisition
to the end explanationforliabilities
any
from theassetscompany
priceof 2011of pricing
assetsinvolved
reledate of
involved
by theacquisifully（Applicable basis invance?
acquisition
fully
purchased
to business
case
tion）
transto the end
transassets
combina- of a related
ferred?
of 2011ferred?
gainsttiontransactotal net
undertion）?
profit（%）
commoncontrol）

Naturalpersons
including
Yue Liuping
and YinSheng

All existing
physical/intangible
asset and partial
employees ofShenzhen Lezhiyi
September
RMB 25
Technology
2011
million YuanCo., Ltd. and
ShenzhenLezhiyuan
Communication
Co., Ltd.

Sinobest
Information
Technology
Ltd. and
Bohai
International
TrustCo., Ltd.

28.33% of equity
in Beijing LBS
Social Insurance AugustInformation
2011
Technology
Co., Ltd.

RMB
5,390,275
Yuan-1,698,703-641,235

N/A

N/A

No

Marketpricesandthoseasagreedby theparties

Yes

Yes

-0.41

No

No

Marketpricesandthoseasagreedby theparties

Yes

Yes

-0.15

No

Note: For more information, please refer to the Notice of Neusoft Corporation on Acquiring the Equity of Beijing Viewhigh Technolo-

gy Co., Ltd. published in China Securities Journal and Shanghai Securities News.
At the 5th session of the 6th meeting of the Board of Directors held on October 27th, 2011, the Proposal on Acquiring Assets in Tianjin was approved. The Board of Directors agreed that Neusoft Corporation（Tianjin）Co., Ltd., a subsidiary wholly owned by the Company will acquire the rights to use a land lot covering an area of 40,003 square meters located in Tianjin Free Trade Zone from Tianjin Port
Free Trade Zone Investment Co., Ltd. as well as the ownership of a newly-built R&D office building with a floor area of 31,484 square meters and its facilities on the land lot. Through negotiation by the parties, the land use right was transferred at the rate of RMB 120 Yuan
per square meter and the building on the land lot was priced based on project estimates. The total transfer price as agreed by the parties
was no more than RMB 150 million Yuan. For more information, please refer to the notice of Neusoft Corporation on Resolutions of the
5th Session of the 6th Meeting of the Board of Directors published in the China Securities Journal and Shanghai Securities News. By theend of the reporting period, the transfer of land use right has not been achieved as relevant ownership certificate of assets has not been
made available.

（2）Sale of assets
Unit: RMB’0,000 Yuan

Date
Counterparty

Sold assets

to theofSelling listed company

sale

price

by the soldassets fromthe beginningof netrelatedprofitcontributed

Percentage

Is it anNettransaction

Are theAre theGains/（PleasePricing

property

claimslossesgive anbasisrights of

and

from

explanationforassetsliabilities

assetsof pricing

assetsinvolved

involved

sellingbasis inselling

fully

fully

case of aof 2011 to thetransferred? transferred?

relateddate of saleprofitcontributed
to the list
company bythepurchased

Is thereany
relevance?

assetsagainsttotal nettransaction）?

profit（%）

065
Intangible asset
includingdesign/process
data, process
data, patented/
non-patented
Nanchang
Biotech A&C
BiotechnicalIndustry
Incorporated
Companytechnology,

Marketregistration

pricescertificate,software &software copyrightMay
14, 2011

and
2,000

N/A

1,966

No

those asagreed by（including source

thecode）andparties

production
documents, andfixed assets suchas product-related
tools, moulds andequipment

Yes

Yes

4.71

No

Neusoft Corporation

Annual Report 201110.5 Material related transactions that occurred in the reporting period（1）Execution of estimated route related transactions for 2011 during the reporting period
Unit: RMB Yuan
Related transaction

Amount incurred in 2011

Total amount

Percentage against total

estimated in 2011

amount estimated in 2011

Raw material/finished product purchase371,450,925

460,000,000

80.75%

Product/commodity selling

666,991,819

605,000,000

110.25%

Labor service receiving

5,210,855

2,000,000

260.54%

Labor service rendering

45,136,950

47,000,000

96.04%（2）Related transactions in connection with normal business
Unit: RMB Yuan

066

Cause forRate ofCounterparty

Relevance

Relatedtransaction

Pricingchangebasis forover therelatedAmounttransaction

previousyear（%）

material
Percentage
to theamount ofsimilartransaction

Settling
method ofrelatedtransaction

difference
betweentransaction
price andmarketreference
price

Alpine Electronics Inc.
and its subsidiaries（collectively referred
to as“Alpine”）
Harman International

Hold morethan 5%of theCompany’s
equityThe Company’s

Industries, Incorporated Chairman
and its subsidiaries

serves as（collectively referred to director in

Systemintegration/
softwareMarket price

109,640,721

9.16

2.27

Market price

206,724,653

116.78

4.28

Market price

164,878,360

5.20

3.41

Cash
settlement

N/A

selling

Systemintegration/
softwareCashsettlement

N/A

sellingas“Harman”）

HarmanToshiba Corporation

Hold more than System

and its subsidiaries

5% of theintegration/（collectively referred

Company’s

softwareto as“Toshiba”）

equitysellingCashsettlement

N/A

Continued table
Cause forRate ofCounterparty

Relevance

PricingchangeRelatedbasis forover thetransaction

relatedAmounttransaction

previousyear（%）

material
Percentage
to theamount ofsimilartransaction

Settling
method ofrelatedtransaction

difference
betweentransaction
price andmarketreference
price

Nokia Siemens
Networks Neusoft
Commtech Company（“Nokia Siemens
Neusoft”）

The Company’s System
Chairman

integration/

serves as its

softwareVice Chairman

selling

Philips and Neusoft

The Company’s

Medical Systems

ChairmanCo., Ltd.

serves as its（“Neusoft Philips”）

Chairman

Total—

Market price132,531,471

13.19

2.74

Market price363,490,009-18.61

67.39—

977,265,214—

Cashsettlement

N/A

Raw material,
finishedproduct/
serviceCashsettlement

N/A

purchase
—

—

—

—

The amount of transactions with Alpine, Harman, Toshiba and Nokia Siemens Neusoft was equivalent to the accumulative amount ofrelated transactions in its kind. By leveraging the advantages in software development, the Company provides Alpine, Harman, Toshiba
and Nokia Siemens Neusoft with software products in the fields of in-car audio, navigation and industry solutions, thus generating stable
and continuous income and promoting the development of its international software business.
The amount of related transactions with Neusoft Philips, mainly focusing on acquiring medical imaging systems including CT, MRI,
X-ray and B-mode ultrasound systems from Neusoft Philips which was the production base for such medical imaging systems was equivalent to the accumulative amount of such transactions in 2011. By selling these products through its own channels, the Company helped
the medical systems business develop on a scaled basis continuously.

（3）Related transactions caused by assets acquisition and sellingAt the first interim Shareholders’Meeting 2011 held on December 22nd, 2011, the proposal on selling equity and other related educational assets of subsidiaries indirectly controlled by Neusoft Corporation was approved. According to this, the Company and Shenyang
Neusoft Information Technology Services Co., Ltd., a subsidiary wholly owned by the Company（collectively referred to as the “Transferor”） agreed to conclude the Transfer Agreement with Dalian Neusoft Holdings Co., Ltd. （the “Transferee”）. In accordance with theTransfer Agreement, Shenyang Neusoft Information Technology Services Co., Ltd. will transfer its equity relating to educational assets andthe Company will assign its contribution to Chengdu Neusoft Institute of Information, Nanhai Neusoft Institute of Information Technology, Dalian Neusoft Institute of Information and Dalian Neusoft Institute of Information Technology to Dalian Neusoft Holdings Co., Ltd. or
any subsidiary assigned by it. In accordance with the assessment report issued by China Enterprise Appraisals Co., Ltd., the total appraisal

067

Neusoft Corporation

Annual Report 2011

value of the said equity and contribution amounted to RMB 424,171,800 Yuan. Through negotiation, the Transferor and Transferee
reached an agreement on the transfer price of RMB 442,343,800 Yuan, increasing the total appraisal value by 4.28%. For more information, please refer to the notice of Neusoft Corporation on the related transaction concerning the sale of equity and other related educational assets of its indirectly controlled subsidiaries as well as the notice of Neusoft Corporation on Resolutions of the First Interim Shareholders’Meeting 2011 published in China Securities Journal and Shanghai Securities News on December 7th and 23rd, 2011 respectively.
By the end of the reporting period, the transfer of assets has not been achieved.

10.6 Major contracts and their performance（1）Custody, contracting and leasing services generating profits accounting for 10% or more in current profita）Custody
The Company did not provide any custodian in 2011.
b）Contracting
The Company was not engaged in any contracting service in 2011.
c）Leasing
068

The Company was not engaged in any leasing service in 2011.

（2）Security
Unit: RMB’0,000 Yuan
Security provided by the Company for third parties（Excluding the subsidiaries controlled by the Company）
Relationshipbetween
Guarantor

theguarantor

AmountDate ofHas thesecurity

securityIs thebeen

security

ful-

overdue?

Guarantee of the （Date of
securityand listed

agree-

Commence-

ExpirySecurity

ment date

date

type

ment）

company

filled?

Default Is there
penaltyany

forcounter

security security

Is thesecurity
for theRelevance

relatedparty?
The

Neusoft
Corporation

Headquartersof theCompany

DalianJoint and

NeusoftseveralInstitute of

5,000 2011.10.19 2012.03.19 2014.3.19

Information

liability

Company’s
No

No

0

No

Yes

security

Chairmanserves as
its
ChairmanThe

Neusoft
Corporation

Headquartersof theCompany

DalianJoint and

NeusoftseveralInstitute of

5,000 2011.11.07 2012.11.07 2014.04.20

Information

liability

Company’s
No

No

0

No

Yes

security

Chairmanserves as
its
ChairmanThe

Neusoft
Corporation

Headquartersof theCompany

DalianJoint and

NeusoftseveralInstitute ofInformation

5,000 2011.12.15 2012.12.14 2014.12.13

liability
security

Company’s
No

No

0

No

Yes

Chairmanserves as
its
Chairman

Continued table
Security provided by the Company for third parties（Excluding the subsidiaries controlled by the Company）
Relationshipbetweenthe

Guarantor

guarantor

Amountsecurity

MobileSolutionsOy

indirectly
whollyowned bythe Company

securityIs thebeen

security

ful-

overdue?

agree-

Commence-

ExpirySecurity

ment date

date

type

ment）

company
A subsidiary

Has thesecurity

Guarantee of the （Date ofand listed

Neusoft

Date of

Euler
HermesLuottovakuutus

filled?

penaltyany

forcounter

security security

Is thesecurity
for theRelevance

relatedparty?

Joint and

4,500
EuropeanDefault Is there——

2012.03.15

dollars

severalliability

No

No

0

No

No

—

security

Total amount of security occurred in the reporting period（excluding that for the Company’s
subsidiaries）
Total balance of security occurred the reporting period（excluding that for the Company’s subsidiaries）-1,37615,004

Security provided by the Company for its controlled subsidiaries
Total amount of security for the Company’s subsidiaries during the reporting period0

Total balance of security for the Company’s subsidiaries during the reporting period（B）

0

Total security provided by the Company（Excluding that for its controlled subsidiaries）
Total security（A+B）
Percentage of total security to the Company’s net assets（%）

15,004
3.21

Include:Amount of security for shareholders, ultimate controllers and their associates（C）
Amount of security directly or indirectly provided for guarantees whose asset/liability ration ismore than 70%（D）00Amount of security amount exceeding 50% of net assets（E）

0

Total amount of security mentioned above（C+D+E）

0a）The first three security items mentioned above refer to the proposal on the amount of security for bank loans of Dalian Neusoft
Institute of Information that was approved at the 2009 Annual Shareholders’Meeting on June 3rd, 2010. In the said meeting, it wasagreed that the company would provide a total amount of RMB 160 million Yuan as security for bank loans of Dalian Neusoft Institute ofInformation for two years from the approval date of the proposal.
b）For more information about the four security items mentioned above, please refer to the Important Notes provided in the Company’s Semi-annual Report 2011. During the reporting period, Neusoft Mobile Solutions Oy fulfilled its obligation of counter-security
amounting to 19,800 Euros.

（3）Other service
The dispute incurred by Neusoft （Europe）Co., Ltd.（“Neusoft Europe”）and the bankruptcy curator of Sesca Group Oy（“SESCA”）arising out of or in connection with the equity acquisition agreement and the purchase price（See the Important Issues or Events in
the Annual Report 2010 and Semi-Annual Report 2011 of the Company）was filed at the Arbitration Court of Central Chamber of Commerce of Finland for settlement on May 20th, 2011. On January 9th, 2012, the parties entered into a dispute resolution agreement. According to the agreement, Neusoft Europe will pay 990,000 Euros to the bankruptcy curator of SESCA and it will have no obligation to pay

069

Neusoft Corporation

Annual Report 2011

the remaining transaction price amounting to 1.8 million Euros provided that the parties shall, at their own cost, pay any expense arisingfrom the dispute respectively incurred by them as well as the arbitration fees shared by them. This agreement shall not affect Neusoft’s
continuous role in the bankruptcy liquidation of SESCA as well as its relevant claims. The arbitration came to an end when Neusoft Europe paid 990,000 Euros to the bankruptcy curator of SESCA on January 19th, 2012.

（4）Other important contracts
During the reporting period, no other important contracts have been entered into by the Company.

10.7 Fulfillment of undertakings
Undertakings of listed company and shareholders that occurred or continued in the reporting period
The shareholders of the Company holding floating shares with trading restrictions have made the following undertakings upon stockacquisition:
No.

Undertaker

Undertaking

Fulfillment

Previous 10 shareholders070

who held floating shares
1with trading restrictions
including NEU Science &Technology Industry

They will not transfer the issuers’ shares they hold within As the undertaking expires on the date
three years from March 13th, 2008 until the expiry of trading of this report, these issuers’ shares
restrictions for such shares.

have been listed on the stock market.

Group Co., Ltd.
Undertaking with regard to the eight premises and one land
lot for which the Company has not received any property rightcertificate as of September 30th, 2007: In the event that theCompany fails to receive the property right certificate for anyof the said land lot or premises as of December 31st, 2008 fol2

NEU Science &lowing the merge, NEU Science & Technology Industry Group

Technology Industry

Co., Ltd. will pay the Company in cash equivalent to the net

Group Co., Ltd.

assessable value of premises or land lot without a property
right certificate (from December 31st, 2006).The said payment
in cash (excluding interest) will be refunded to NEU Science &Technology Industry Group Co., Ltd. provided that the property right certificates are made available for all of the said premis-

NEU Science & Technology Industry
Group Co., Ltd. has paid the Company
RMB 12,975,375 Yuan in cash as it undertook. At present, the Company isgoing through relevant procedures andit will refund the said payment (excluding any and/or all interest thereof) to
NEU Science & Technology Industry
Group Co., Ltd. following receipt of
the said property right certificates.

es and land lot.
NEU Science & Technology Industry Group Co., Ltd. shall inNEU Science &3

Technology Industry
Group Co., Ltd.

demnify the Company for any and/or all economic losses
against the issuers as a result of the security provided by theCompany for third parties on the day prior to the emerge ofthe previous Neusoft Corporation following April 28th, 2008
on incurred basis.

The said security provided by the Company has terminated upon the date ofthis report and the Company has suffered from no losses caused thereby.
Thus, NEU Science & Technology Industry Group Co., Ltd. is under no obligation of the said undertaking.

Continued table
No.

Undertaker

Undertaking

Fulfillment
According to the resolution of the 1st
Interim Shareholders’ Meeting 2011
held on December 22nd, 2011, all edu-

In the event that any educational assets result in any loss cational assets would be sold at the
NEU Science &4

Technology Industry
Group Co., Ltd.

against the issuers within five years from April 28th, 2008, NEU price that is higher than the original
Science & Technology Industry Group Co., Ltd. will acquire contribution made by sponsors, caussuch assets in accordance with the Assessment Report（No.28 ing no economic losses to the Compa［2007］ of CEA） issued by China Enterprise Appraisals Co., ny. Therefore, NEU Science & TechnoloLtd.

gy Industry Group Co., Ltd. is under
no obligation of the said undertaking.
The sale of such assets has not beenclosed.

10.8 Employment and dismissal of CPA firm
071
At the 2010 Annual Shareholders’Meeting held on May 25th, 2011, the Proposal on Employment of Financial Auditing Agency for2011 was approved and the resolution relating to the appointment of BDO China Shu Lun Pan Certified Accountants LLP to perform financial auditing for 2011 was made. The service term was fixed from the date of approval at the 2010 Annual Shareholders’Meeting till
the date of holding the 2011 Annual Shareholders’Meeting.
In 2011, BDO China Shu Lun Pan Certified Accountants LLP audited the Annual Report 2011 of the Company, for which the Company paid an amount of RMB 1.3 million Yuan. Till the end of the reporting period, BDO China Shu Lun Pan Certified Accountants LLP has
performed auditing service for the Company for four years. Li Chen and Jiang Lijun, public certified accountants of BDO China Shu Lun
Pan Certified Accountants were the authorized signatories on the relevant auditors’reports.

10.9 Punishments and rectifications received by the listed company, its directors, supervisors, senior
management, shareholders and ultimate controllers
In 2011, the Company, its directors, supervisors, senior management and shareholders have not received any inspection orders, administrative punishment and public reprimand or censure from the China Securities Regulatory Commission or any stock exchange andhave not engaged in any illegal dealings in shares.

10.10 Description of other important issues
No other important issues were encountered by the Company in 2011.

Neusoft Corporation

Annual Report 201110.11 Index of information disclosure
Website and path
Newspaper and page for
Itempublishing index offor disclosing
Date of publication

information disclosureindex ofinformation
disclosure

Notice of Neusoft Corporation on Acquiring the Equity of B008, China Securities Journal
Beijing Viewhigh Technology Co., Ltd.

B22, Shanghai Securities News

Notice of Neusoft Corporation on Listing of Floating B004, China Securities Journal
Shares with Trading Restrictions

48, Shanghai Securities News

Notice of Neusoft Corporation on Changes in Sharehold- B004, China Securities Journal
ers’Equity
Short Report of Neusoft Corporation on Changes in Equity
072

20, Shanghai Securities News
B004, China Securities Journal
20, Shanghai Securities News

Notice of Neusoft Corporation on Judicial Freezing of B004, China Securities Journal
Shareholders’Equity

20, Shanghai Securities News

Notice of Neusoft Corporation on Changes in and Trans- A08, China Securities Journal
fer of Shareholders’Equity

B64, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at A24, China Securities Journal
the 25th Session of Meeting of the 5th Board of Directors
Notice of Neusoft Corporation on Capital Contribution of
Neusoft （Europe） Co., Ltd. to Aerotel Medical Systems（1998）Ltd
Annual Report of Neusoft Corporation 2010

First Quarterly Report of Neusoft Corporation 2011

B16, Shanghai Securities News
A24, China Securities Journal
B16, Shanghai Securities News
B081, China Securities Journal
B129, Shanghai Securities News
B081, China Securities Journal
B129, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B083, China Securities Journal
the 26th Session of Meeting of the 5th Board of Directors

B129, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at the B083, China Securities Journal
16th Session of Meeting of the 5th Board of Supervisors

B130, Shanghai Securities News

Notice of Neusoft Corporation on Estimates for Route Re- B083, China Securities Journal
lated Transactions Occurred in 2011

B130, Shanghai Securities News

Notice of Neusoft Corporation on Shareholders’Meeting B083, China Securities Journal
2010

B130, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B005, China Securities Journal
the 27th Session of Meeting of the 5th Board of Directors

B16, Shanghai Securities News

January 1st, 2011www.sse.com.cn

March 5th, 2011www.sse.com.cn

March 21st, 2011www.sse.com.cn

March 21st, 2011www.sse.com.cn

March 21st, 2011www.sse.com.cn

April 1st, 2011www.sse.com.cn

April 14th, 2011www.sse.com.cn

April 14th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

April 28th, 2011www.sse.com.cn

May 18th, 2011www.sse.com.cn

Continued table
Website and path
Newspaper and page for
Itempublishing index offor disclosing
Date of publication

information disclosureindex ofinformation
disclosure

Notice of Neusoft Corporation on Resolutions of Share- B005, China Securities Journal
holders’Meeting 2010

B11, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B005, China Securities Journal
the 1st Session of Meeting of the 6th Board of Directors

B11, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B005, China Securities Journal
the 1st Session of Meeting of the 6th Board of Supervisors

B11, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B005, China Securities Journal
the 2nd Session of Meeting of the 6th Board of Directors
Notice of Neusoft Corporation on Related Transaction
Concerning Establishment of and Financial Aid to Neusoft
Xikang Holdings Co., Ltd. and Its Subsidiary

B16, Shanghai Securities News
B005, China Securities Journal
B16, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B162, China Securities Journal
the 3rd Session of Meeting of the 6th Board of Directors

171, Shanghai Securities NewsMay 26th, 2011www.sse.com.cn

May 26th, 2011www.sse.com.cn

May 26th, 2011www.sse.com.cn

July 19th, 2011www.sse.com.cn

July 19th, 2011www.sse.com.cn

August 27th, 2011www.sse.com.cn

August 27th, 2011www.sse.com.cn

August 27th, 2011www.sse.com.cn

October 10th, 2011www.sse.com.cn

October 29th, 2011www.sse.com.cn

October 29th, 2011www.sse.com.cn

December 7th, 2011www.sse.com.cn

December 7th, 2011www.sse.com.cn

December 7th, 2011www.sse.com.cn

Notice of Neusoft Corporation on Amount of Security for
Bank Loans of Neusoft（Europe） Co., Ltd., Neusoft（Ja- B162, China Securities Journalpan） Co., Ltd. and Neusoft Corporation （Hong Kong） 171, Shanghai Securities News
Co., Ltd.
Summary of Semi-annual Report of Neusoft Corporation 2011

B162, China Securities Journal
171, Shanghai Securities News

Notice of Neusoft Corporation on Approval for Issuing B008, China Securities Journal
Short-term Financing Bonds and Medium-term Notes

44, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B022, China Securities Journal
the 5th Session of Meeting of the 6th Board of Directors
Third Quarterly Report of Neusoft Corporation 201117, Shanghai Securities News
B022, China Securities Journal
17, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions Made at B004, China Securities Journal
the 6th Session of Meeting of the 6th Board of Directors
Notice of Neusoft Corporation on Related Transaction
Concerning the Sale of Its Indirectly Controlled Subsidiary
and Other Related Educational assets

B24, Shanghai Securities News
B004, China Securities Journal
B24, Shanghai Securities News

Notice of Neusoft Corporation on the 1st Session of Inter- B004, China Securities Journal
im Shareholders’Meeting in 2011

B24, Shanghai Securities News

073

Neusoft Corporation

Annual Report 2011

Continued table
Website and path
Newspaper and page for
Itempublishing index offor disclosing
Date of publication

information disclosureindex ofinformation
disclosure

Notice of Neusoft Corporation on Resolutions Made at B005, China Securities Journal
the 7th Session of Meeting of the 6th Board of Directors

B25, Shanghai Securities News

Notice of Neusoft Corporation on Resolutions of the 1st B005, China Securities Journal
Session of Shareholders’Meeting in 2011074

B25, Shanghai Securities News

December 23rd, 2011www.sse.com.cn

December 23rd, 2011www.sse.com.cn

（XI）Financial Report
AUDITORS’REPORT TO SHAREHOLDERS OF NEUSOFT CORPORATION
Report No.: BDO［2012］111331
We have audited the accompanying financial statements of Neusoft Corporation（“the Company”）, which comprise the balance
sheet/consolidated balance sheet as at December 31, 2011, the income statement/consolidated income statement, the cash flow statement/consolidated cash flow statement, the statement of changes in equity/the consolidated statement of changes in equity and thenotes thereto for the year then ended.

Directors’Responsibility for the Financial Statements
The directors are responsible for the preparation and fair presentation of these financial statements. This responsibility include: selecting and applying appropriate accounting policies; making accounting estimates that are reasonable in the circumstances; and designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors’Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith Chinese Certified Public Accountants Auditing Standards. Those Standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors’judgment, including the assessment of the risks of material misstatement of the financials
statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Company as at December 31, 2011
and of its financial performance and its cash flows for the year then ended in accordance with the Accounting Standards for Business Enterprises.

Li Chen/Jiang Lijun, Chinese Certified Accountants,
BDO CHINA SHU LUN PAN Certified Public Accountants LLP
Shanghai China
Date: March 29th, 2012075

Neusoft Corporation

Annual Report 2011

Neusoft Corporation
Balance Sheet at December 31（Expressed in Renminbi unless otherwise indicated）
Assets

Note 13Year-end balanceYear-begin balance

Current assets:
Monetary capital

831,393,669

Trading financial assets
Notes receivable
Accounts receivable

13.1

Prepayments
Interest receivable

932,706,502

863,170969,350

3,042,407

4,172,400

512,545,772

352,624,613

42,660,634

36,230,144

304,676

231,575

231,779,851

476,272,599

234,673,448

174,878,414

Dividend receivable
Other receivables

13.2

Inventories
Non-current assets due within one year
076

Other current assets
Subtotal

168,595,350

156,641,652

2,025,858,977

2,134,727,249

Non-current assets:
Available-for-sale financial assets
Held-to-maturity investment

13.3

401,931,507

13.4

2,149,288,869

1,574,164,020

Investment properties

305,082,712

298,593,107

Fixed assets

675,191,398

680,133,686

9,967,715

2,270,340

141,016,756

136,049,697

Long-term deferred expenses

11,667,429

11,762,482

Deferred tax assets

31,162,641

23,290,105

Subtotal

3,725,309,027

2,726,263,437

Total

5,751,168,004

4,860,990,686

Long-term accounts receivable
Long-term equity investment

Construction in progress
Construction supplies
Disposal of fixed assets
Capitalized biological assets
Oil & gas assets
Intangible asset
Development expenditures
Goodwill

Other non-current assets

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation
Balance Sheet at December 31（Continued）（Expressed in Renminbi unless otherwise indicated）
Liabilities and owners’（shareholders’）equityNote 13Year-end balanceYear-begin balance

Current liabilities
Short-term borrowings
Trading financial liabilities
Notes payable

250,000,000

130,000,000

170,567

1,227,304

83,204,957

145,564,320

Accounts payable

367,795,074

341,416,967

Advance receipts

325,614,892

347,289,078

Employee pays payable

132,562,557

112,903,711

Taxes payable

28,775,208-21,261,484

114,428,677

145,833,565

Interests payable
Dividends payable
Other payables
Non-current liabilities due within one year
077

Other current liabilities
Subtotal

1,302,551,932

1,202,973,461

Non-current liabilities:
Long-term borrowings
Bonds payable
Long-term accounts payable

13.5

403,658,667
134,501,075

134,501,075

11,890,630

10,162,649

86,31796,935Special accounts payable
Estimated liabilities
Deferred tax liabilities
Other non-current liabilities

126,805,810

89,515,343

Subtotal

676,942,499

234,276,002

1,979,494,431

1,437,249,463

1,227,594,245

1,227,594,245

353,061,885

353,061,885

588,413,462

536,223,609

Total
Owners' （shareholders'） equity
Paid-in capital （share capital）
Capital reserves
Less: treasury stocks
Special reserves
Surplus reserves
General risk provisions
Undistributed profits

1,602,603,981

1,306,861,484

Subtotal

3,771,673,573

3,423,741,223

Total

5,751,168,004

4,860,990,686

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation

Annual Report 2011

Neusoft Corporation
Consolidated Balance Sheet at December 31(Expressed in Renminbi unless otherwise indicated)

078

AssetsCurrent assets:
Monetary capital
Deposit reservation for balance
Lendings to banks and other financial institutions
Trading financial assets
Notes receivable
Accounts receivable
Prepayments
Premiums receivable
Cession premiums receivable
Provision of cession receivable
Interests receivable
Dividends receivable
Other receivables
Securities purchased under resale agreements
Inventories
Non-current assets due within one year
Other current assets
Subtotal
Non-current assets:
Disbursement of entrusted loans and advances
Available-for-sale financial assets
Held-to-maturity investment
Long-term accounts receivable
Long-term equity
Investment properties
Fixed assets
Construction in progress
Construction supplies
Disposal of fixed assets
Capitalized biological assets
Oil & gas assets
Intangible asset
Development expenditures
Goodwill
Long-term deferred expenses
Deferred tax assets
Other non-current assets
Subtotal
Total

Note 5Year-end balanceYear-begin balance

5.1

1,738,515,965

1,690,979,107

5.2
5.3
5.4
5.6

863,170
36,215,245
1,161,288,549
57,312,087

969,350
12,798,400
959,725,130
51,875,861

5.5

179,486,463

172,339,920

5.7

585,158,868

486,823,705

5.8

14,262,836
3,773,103,183

10,313,513
3,385,824,986

5.9
5.10
5.12
5.13
5.14
5.15

401,931,507
150,710,187
703,226,389
438,134,937
1,395,400,942
307,799,158

283,406,306
614,836,497
437,011,923
1,429,649,069
84,731,103

5.16

428,316,641

388,855,100

5.17
5.18
5.19

227,376,502
53,694,146
45,591,522

144,880,456
54,917,207
34,767,158

4,152,181,931
7,925,285,114

3,473,054,819
6,858,879,805

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation
Consolidated Balance Sheet at December 31（Continued）(Expressed in Renminbi unless otherwise indicated)
Liabilities and owners’（shareholders’）equityNote 5Year-end balanceYear-begin balance

Current liabilities:
Short-term borrowings

5.21

470,000,000

160,000,000

Trading financial liabilities

5.22

170,567

1,227,304

Notes payable

5.23

83,204,957

145,564,320

Accounts payable

5.24

543,996,141

566,932,526

Advance receipts

5.25

452,920,955

437,504,595

Employee pays payable

5.26

292,042,551

229,463,755

Taxes payable

5.27

67,567,092

685,326

205,724

280,005

149,882,015

160,184,537

Borrowings from central bank
Customers and interbank deposits
Borrowings from bank and other financial institutions

Securities sold under repurchase agreements
Fees and commissions payable

Interest payable
Dividend payable
Other payables

5.28

Cession insurance premiums payable
Provision for insurance contracts
Acting trading securities
Acting underwriting securities
Non-current liabilities due within one year

5.30

Other current liabilities
Subtotal

136,060,526
71,666

21,3362,060,061,668

1,837,924,230

129,000,000

Non-current liabilities:
Long-term borrowings

5.31

104,000,000

Bonds payable

5.32

403,658,667

Long-term accounts payable

5.33

134,609,431

134,609,431

Estimated liabilities

5.29

15,686,425

13,631,955

Deferred tax liabilities

5.19

2,409,781

2,629,393

Other non-current liabilities

5.34

189,735,874

155,872,325

Special accounts payable

Subtotal
Total

850,100,178

435,743,104

2,910,161,846

2,273,667,334

079

Neusoft Corporation

Annual Report 2011

Continued table
Liabilities and owners’（shareholders’）equityNote 5Year-end balanceYear-begin balance

Owners' (shareholders') equity
Paid-in capital (share capital)

5.35

1,227,594,245

1,227,594,245

Capital reserves

5.36

362,247,201

363,002,779

5.37

596,703,714

544,513,861

5.38

2,536,698,174

2,171,819,047

Converted difference in foreign currency statements-48,565,779-26,721,620

Total owners' equity attributable to parent company

4,674,677,555

4,280,208,312

340,445,713

305,004,159

Subtotal

5,015,123,268

4,585,212,471

Total

7,925,285,114

6,858,879,805

Less: treasury stocks
Special reserves
Surplus reserves
General risk provisions
Undistributed profits

Minority interest

080

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation
Income Statement 2011
(Expressed in Renminbi unless otherwise indicated)

Item

Note 13

Amount in thisAmount inperiodprevious period

1. Revenue from operations

13.6

3,027,330,275

2,660,986,880

Less: operating costs

13.6

2,193,319,213

1,962,554,694

Business taxes and surtaxes

55,114,928

45,005,550

Sales expenses

153,527,526

123,679,115

Administrative expenses

354,954,095

311,935,243

Financial expenses

5,338,347-9,855,196

Impairment loss on assets

12,104,692-5,822,840

950,557-694,314

14,018,085-9,218,107

6,038,618

7,719,289

2. Operating profit（“-”for loss）

267,940,116

223,577,893

Add: Non-operating incomes

115,768,235

99,196,479

Less: Non-operating expenses

3,391,560

1,609,671

Including: Loss on disposal of non-current assets

1,594,749

418,598

380,316,791

321,164,701

32,384,441

28,508,127

347,932,350

292,656,574

347,932,350

292,656,574

Add: Income from change in fair value（“-”for loss）
Investment income（“-”for loss）
Including: Income from investment on associates and joint ventures

3. Total profit（“-”for loss）
Less: Income tax
4. Net profit（“-”for loss）

13.7

5. Earning per share（EPS）：（1）Basic EPS（2）Diluted EPS
6. Other composite income
7. Total composite income
The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

081

Neusoft Corporation

Annual Report 2011

Neusoft Corporation
Consolidated Income Statement 2011
(Expressed in Renminbi unless otherwise indicated)
Item

082

1. Revenue from operations
Including: Operating income
Interest income
Earned premium
Fee and commission income
2. Total cost of operations
Including: Operating costs
Interest expenses
Fee and commission expenses
Retirement pension
Net compensation expenses
Net reserves for reinsurance contract
Policy dividend expenses
Reinsurance expenses
Business taxes and surtaxes
Sales expenses
Administrative expenses
Financial expenses
Impairment loss on assets
Add: Income from change in fair value（“-” for loss）
Investment income（“-” for loss）
Including: Income from investment on associates and joint ventures
Exchange income（“-” for loss）
3. Operating profit（“-” for loss）
Add: Non-operating incomes
Less: Non-operating expenses
Including: Loss on disposal of non-current assets
4. Total profit（“-” for loss）
Less: Income tax
5. Net profit（“-” for loss）
Including: Net profit of the merged party which has been realized prior to the combination
Net profit attributable to the shareholders of the parent company
Minority interest
6. EPS：（1）Basic EPS（2）Diluted EPS
7. Other composite income
8. Total composite income
Total composite income attributable to the shareholders of the parent
company
Total composite income attributable to minority shareholders

Note 5

Amount in thisAmount in

5.39

period5,751,249,330
5,751,249,330

previous period
4,937,696,440
4,937,696,440

5.39

5,484,036,286
4,004,998,405

4,575,632,186
3,383,628,845

96,105,687
497,920,161
819,957,825
23,649,196
41,405,012
950,557
42,136,578
39,714,198

81,195,180
391,904,135
713,916,675-356,749
5,344,100-694,314
46,121,940
46,038,503

310,300,179
188,085,954
5,499,473
2,748,601
492,886,660
69,341,108
423,545,552

407,491,880
160,821,056
8,207,608
2,540,307
560,105,328
52,802,832
507,302,496

417,068,980
6,476,572

484,675,178
22,627,318

0.34
0.34
-22,413,285
401,132,267

0.39
0.39
-7,899,412
499,403,084

394,468,919

476,775,766

6,663,348

22,627,318

5.40
5.41
5.42
5.43
5.46
5.44
5.45

5.47
5.48

5.49

5.50
5.50
5.51

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation
Cash Flow Statement 2011
(Expressed in Renminbi unless otherwise indicated)
Item

Amount in thisAmount in previous

periodperiod

1. Cash flow from operating activities
Cash received from the sales of products or provision of labor services

3,015,281,197

2,857,963,512

58,520,232

27,667,471

1,325,930,211

719,099,113

4,399,731,640

3,604,730,096

3,048,007,907

2,407,717,254

Cash paid to and for employees

607,331,520

546,872,113

Payments for taxes

144,833,142

163,672,616

Other cash payments relating to operating activities

183,083,465

168,163,985

3,983,256,034

3,286,425,968

416,475,606

318,304,128

6,047,960

1,390,458

25,126,894

387,866

126,446,883

142,366,194

157,621,737

144,144,518

123,858,787

68,487,171

Tax refund
Other cash receipts relating to operating activities
Subtotal
Cash paid for goods and labor services

Subtotal
Net cash flow from operating activities
2. Cash flow from investment activities
Cash received from disinvestment
Cash received from investment income
Net cash received from disposal of fixed assets, intangible asset and otherlong-lived assets
Net cash received from disposal of subsidiaries and other operating units
Other cash received relating to investment activities
Subtotal
Cash paid for purchase/construction of fixed assets, intangible asset andother long-lived assets
Cash paid for investment

400,000,000

Net cash received from subsidiaries and other operating units

544,151,832

222,282,520

Other cash payments relating to investment activities

109,149,331

183,299,046

Subtotal

1,177,159,950

474,068,737

Net cash flow from investment activities-1,019,538,213-329,924,219

Cash received from borrowings

300,000,000

130,000,000

Cash received from issuing bonds

400,000,000

3. Cash flow from financing activities
Cash received from investors

083

Neusoft Corporation

Annual Report 2011

Continued table
Item

Amount in thisAmount in previous

periodperiodOther cash received relating to financing activities
Subtotal
Cash paid for borrowings

180,000,000

Cash paid for dividends, profit distribution or interest expenses

14,325,313

Other cash paid relating to financing activities

1,242,000

130,000,000

176,224,398

Subtotal

195,567,313

176,224,398

Net cash flow from financing activities

504,432,687-46,224,398-2,682,913-1,524,827-101,312,833-59,369,316

932,706,502

992,075,818

831,393,669

932,706,502

4. Effect of change in exchange rate on cash and cash equivalents
5. Net increase of cash and cash equivalents
Add: Year-begin cash and cash equivalent balance
6. Year-end cash and cash equivalent balance084

700,000,000

The accompanying Notes are integral part of these financial statements.
Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

Neusoft Corporation
Consolidated Cash Flow Statement 2011
(Expressed in Renminbi unless otherwise indicated)

Item

Note 5

Amount in

Amount inthis periodprevious period

5,904,584,629

4,981,750,925

1. Cash flow from operating activities
Cash received from the sales of products or provision of labor services
Net increase of customer deposits and inter-bank deposits
Net increase of loans from central bank
Net increase of borrowings from other financial institutions
Cash received from primary insurance premium
Net cash received from reinsurance business
Net increase of policy holder reserve and investment fundNet increase of disposal of trading financial assets
Cash received from interests, fees and commissions

085

Net increase of borrowings from banks and other financial institutions
Net increase of repurchase business fundTax refund
Other cash receipts relating to operating activities

5.52

Subtotal
Cash paid for goods and labor services

91,508,307

47,906,852

341,055,750

215,378,655

6,337,148,686

5,245,036,432

2,888,590,902

2,166,788,694

2,327,332,220

1,944,537,687

337,820,086

319,780,146

483,208,874

432,040,375

6,036,952,082

4,863,146,902

300,196,604

381,889,530

Net increase of loans and advances to customers
Net increase of deposits in central bank and other banks
Cash paid for primary insurance indemnity
Cash paid for interests, fees and commissions
Cash paid for policy dividend
Cash paid to and for employees
Payments for taxes
Other cash payments relating to operating activities
Subtotal
Net cash flow from operating activities

5.52

2. Cash flow from investment activities
Cash received from disinvestment
Cash received from investment income
Net cash received from disposal of fixed assets, intangible asset and otherlong-lived assets

57,14324,010,000

24,010,000

158,526,740

81,113,246

Neusoft Corporation

Annual Report 2011

Continued table
Item

Note 5

Amount in

Amount inthis periodprevious period

Net cash received from disposal of subsidiaries and other operating units
Other cash received relating to investment activities

12,920,000
5.52

Subtotal
Cash paid for purchase/construction of fixed assets, intangible asset and otherlong-lived assets
Cash paid for investment

15,905,244

24,670,000

198,441,984

142,770,389

412,253,867

333,603,072

400,000,000

Net increase of pledged loan
Net cash received from subsidiaries and other operating units

153,044,444

15,100,935

2,400,926

18,630,355

Subtotal

967,699,237

367,334,362

Net cash flow from investment activities-769,257,253-224,563,973

21,561,981

2,025,000

21,561,981

2,025,000

Cash received from borrowings

677,000,000

190,000,000

Cash received from issuing bonds

400,000,000

Other cash payments relating to investment activities

5.52

3. Cash flow from financing activities
086

Cash received from investors
Including: cash received from investment absorption of minority shareholders bysubsidiaries

Other cash received relating to financing activities
Subtotal

1,098,561,981

192,025,000

Cash paid for borrowings

533,277,160

93,000,000

Cash paid for dividends, profit distribution or interest expenses

34,665,024

186,612,228

3,244,741

702,246

Including: Dividends & profits paid to minority shareholders by subsidiaries
Other cash paid relating to financing activities

5.52

1,242,000

Subtotal

569,184,184

279,612,228

Net cash flow from financing activities

529,377,797-87,587,228

4. Effect of change in exchange rate on cash and cash equivalents-11,589,325

2,251,732

5. Net increase of cash and cash equivalents

48,727,823

71,990,061

1,687,979,107

1,615,989,046

1,736,706,930

1,687,979,107

Add: Year-begin cash and cash equivalent balance
6. Year-end cash and cash equivalent balance
The accompanying Notes are integral part of these financial statements.

Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

reserves（share capital）

1,227,594,245 353,061,885

1,227,594,245 353,061,885

1,227,594,245 353,061,885

CapitalPaid-in capital
Total

588,413,462

52,189,853
52,189,853

347,932,350

1,602,603,981 3,771,673,573-52,189,853-52,189,853

347,932,350

1,306,861,484 3,423,741,223
295,742,497
347,932,350
347,932,350
347,932,350

profits

Undistributed

536,223,609
52,189,853

provisions

risk
1,306,861,484 3,423,741,223

reserves

reserves

General536,223,609

SurplusSpecialAmount in this period

Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

sharesTreasuryLess:(Expressed in Renminbi unless otherwise indicated)

The accompanying Notes are integral part of these financial statements.

uities1）Capitalized capital reserves2）Capitalized surplus reserves3）Surplus reserves for making up losses4）Other（6）Special reserves1）Appropriation2）Use3）Other
4. Balance at the end of 2011

recognized in owners' equity
3）Other（4）Dividends1）Appropriation of surplus reserves2）Appropriation of general risk provisions3）Dividends to owners （shareholders）
4）Other（5） Internal carry-over of shareholders’eq-

1. Balance at the end of 2010
Add: Change in accounting policies
Prior-period error correction
Other
2. Balance at the beginning of 2011
3. Change through 2011（"-" for decrease）（1）Net profit（2）Other composite income
Subtotal of（1）&（2）（3）Capital paid in and reduced by owners
1）Capital paid in by owners
2）Amounts of share-based payments

Item

Neusoft Corporation
Statement of Changes in Equity 2011087

283,290,980 -283,290,980

1,227,594,245

353,061,885

283,290,980 -283,290,980

283,290,980 -283,290,980

Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

536,223,609

43,898,486
43,898,486

43,898,486

944,303,265

1,306,861,484 3,423,741,223-188,860,653-188,860,653

292,656,574

292,656,574-188,860,653

292,656,574

292,656,574-232,759,139-43,898,486

103,795,921

59,897,435

1,246,964,049 3,319,945,302

492,325,123

636,352,865

944,303,265

Paid-in capital（share capital）

Amount in previous period
Less:
GeneraCapitalSpecialSurplus
Undistributed
Treasuryrisk
Total
reserves
reserves
reserves
profits
sharesprovisions
636,352,865
492,325,123
1,246,964,049 3,319,945,302(Expressed in Renminbi unless otherwise indicated)

The accompanying Notes are integral part of these financial statements.

1. Balance at the end of 2010
Add: Changes in accounting policies
Prior-period error correction
Other
2. Balance at the beginning of 2011
3. Changes through 2011（“-”for decrease）（1）Net profit（2）Other composite income
Subtotal of（1）&（2）（3）Capital paid in and reduced byowners1）Capital paid in by owners
2） Amounts of share-based payments
recognized in owners’equity
3）Other（4）Dividends1）Appropriation of surplus reserves2）Appropriation of general risk provisions3）Dividends to owners（shareholders）
4）Other（5）Internal carry-over ofshareholders’equities
1）Capitalized capital reserves2）Capitalized surplus reserves3）Surplus reserves for making up losses4）Other（6）Special reserves1）Appropriation2）Use（7）Other
4. Balance at the end of 2011

Item

Neusoft Corporation

088
Statement of Changes in Equity 2011 (Continued)

Neusoft Corporation
Annual Report 2011

of general risk

596,703,714

52,189,853
52,189,853

52,189,853

Total

423,545,552-22,413,285
401,132,267
32,023,271
32,925,815-902,544-3,244,741-3,244,741

32,022,947
32,925,491-902,544-3,244,741-3,244,741

429,910,797

6,476,572
186,776
6,663,348

35,441,554

2,536,698,174 -48,565,779 340,445,713 5,015,123,268-52,189,853-52,189,853-21,844,159
417,068,980 -21,844,159

417,068,980

364,879,127 -21,844,159

Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

The accompanying Notes are integral part of these financial statements.

4）Other（6）Special reserves1）Appropriation2）Use（7）Others
4. Balance at the end of 20113）Surplus reserves for making up
losses1）Capitalized capital reserves2）Capitalized surplus reserves（5）Internal carry-over ofshareholders’equities

3）Dividends to owners（shareholders）
4）Other2）Appropriation
provisions3）Other（4）Dividends1）Appropriation of surplus reserves

1,227,594,245 362,247,201

3241）Capital paid in by owners-755,902-755,902-755,578

3242）Amounts of share-based payments
recognized in owners’equity

Minority
interest

2,171,819,047 -26,721,620 305,004,159 4,585,212,471

Other544,513,861

General
Undistributed
risk
profits
provisions

1,227,594,245 363,002,779

Surplusreserves
2,171,819,047 -26,721,620 305,004,159 4,585,212,471

Less:
SpecialTreasury
reserves
shares544,513,861

Capitalreserves

1,227,594,245 363,002,779

Paid-in capital（share capital）

Amount in this period
Equity attributable to parent company(Expressed in Renminbi unless otherwise indicated)（3）Capital paid in and reducedby owners（1）Net profit（2）Other composite income
Subtotal of（1）&（2）3. Change through 2011（“-”fordecrease）

1. Balance at the end of 2010
Add: Changes in accounting policies
Prior-period error correction
Other
2. Balance at the beginning of 2011

Item

Neusoft Corporation
Consolidated Statement of Changes in Equity 2011089

544,513,861

Total-189,562,899-355,734-189,562,899-355,734-702,246-702,246

2,837,294
8,133,230

2,481,560

507,302,496-7,899,412
499,403,084

312,321,745

2,171,819,047 -26,721,620 305,004,159 4,585,212,471-188,860,653-232,759,139-43,898,486

Neusoft’s legal representative: Liu Jiren Neusoft’s accounting principal: Wang Li Accounting body’s principal: Chen Lei

The accompanying Notes are integral part of these financial statements.

363,002,779

283,290,980 -283,290,980

283,290,980 -283,290,980

1,227,594,245

22,627,318-7,899,412
484,675,178 -7,899,412-5,223,992

22,627,318

484,675,178

7,777,496

29,702,568

246,692,047 -7,899,412-71,944

43,898,486
43,898,486

Minority
interest

1,925,127,000 -18,822,208 275,301,591 4,272,890,726-5,223,992

43,898,486

283,290,980 -283,362,924

Others1,925,100,542 -18,822,208 275,328,049 4,272,890,726
26,458-26,458

General
Undistributed
risk
profits
provisions-71,944

500,615,375

646,365,703

500,615,375

Surplusreserves

944,303,265

Less:
SpecialTreasury
reserves
shares646,365,703

Capitalreserves

Amount in previous period
Equity attributable to parent company(Expressed in Renminbi unless otherwise indicated)

944,303,265

Paid-in capital（share capital）

1. Balance at the end of 2010
Add: Changes in accounting policies
Prior-period error correction
Other
2. Balance at the beginning of 2011
3. Change through 2011（“-” fordecrease）（1）Net profit（2）Other composite income
Subtotal of（1）&（2）（3）Capital paid in and reduced byowners1）Capital paid in by owners
2）Amounts of share-based payments
recognized in owners’equity
3）Other（4）Dividends1）Appropriation of surplus reserves2）Appropriation of general risk provisions3）Dividends to owners（shareholders）
4）Other（5）Internal carry-over of shareholders’equities
1）Capitalized capital reserves2）Capitalized surplus reserves3）Surplus reserves for making up
losses4）Other（6）Special reserves1）Appropriation2）Use（7）Other
4. Balance at the end of 2011

Item

Neusoft Corporation

090
Consolidated Statement of Changes in Equity 2011（Continued）

Neusoft Corporation
Annual Report 2011

Neusoft Corporation
Notes to Financial Statements 2011
Note 1 Company Profile
Neusoft Corporation（“the Company”）, formerly“Shenyang Neusoft Co., Ltd.”, is a Sino-foreign joint venture duly organized andregistered in the People’s Republic of China, under the approval and authorization numbered（1993）47 by Shenyang Economic System
Reform Commission on June 7th, 1993. The registration number of the Company’s Business License is 210100402001491. In June 1996,
the Company was listed on Shanghai Stock Exchange in the category of IT.
The company came from two college start-ups of the Northeastern University, OPENSOFT System Co., Ltd. of Northeast Institute ofTechnology（“OPENSOFT System”）and Shenyang Neu-Alpine Software Co., Ltd.（“Neu-Alpine Software”）. OPENSOFT System was incorporated as a high-tech company in Shenyang National New and High-tech Industrial Development Zone, formerly known as Shenyang
Nanhu Sci-tech Development Zone, in April 1991; it was also one of the earliest high-tech companies going through ownership restructuring in the Zone. Neu-Alpine Software was a joint venture established in June 1991 with Alpine Electronics Inc. In June 1993, the Company initiated its shareholding reform program. On May 9th, 1996, under the authorization of China Securities Regulatory Commission（“CSRC”）, the Company issued 15 million shares of common stocks during its domestic initial public offering; on June 18th, 1996, theCompany was listed on the Shanghai Stock Exchange. On February 5th, 2004, Neusoft Group Ltd., the original controlling shareholder of
the Company, acquired the foreign legal person’s shares held by Alpine Electronic（China）Co., Ltd., formerly the Company’s second
largest shareholder. The Company hereto became a domestic-funded stock corporation after finishing Registration of Change on March
5th, 2004. On March 27th, 2006, the Company’s Meeting of Shareholders approved its Split Share Structure Reform Proposal; further, on
April 7th, 2006, Neusoft Group Ltd. completed the payment to shareholders of tradable shares with 28,314,574 shares and cash of RMB
41,339,277 Yuan（2.5 shares and 3.65 Yuan for every 10 tradable shares）. With the same total shares as before, the Company’s stock
structure was changed after the reform. The Company merged Neusoft Group Ltd. on January 16th, 2008 and finished corresponding
share registration and cancellation procedures in Shanghai Branch of China Securities Depository and Clearing Corporation Limited under
the authorization of CSRC on March 11th, 2008. After the registration of cancellation on April 28th, 2008, the Company became a Sino-foreign joint venture with 28.62% of shares owned by foreign shareholders. On May 30th, 2008, the Meeting of Shareholders for Year2007 approved the change of company name from “Shenyang Neusoft Co., Ltd.” to “Neusoft Corporation”. On June 5th, 2008, theCompany finished registration of changes in name and domicile. On October 29th, 2008, the Company carried out 2008 Half-yearly Profit
Distribution and Share Capital Raise Program, under which, based on total share capital of 524,612,925 shares as at June 30th, 2008, bonus shares were distributed to all shareholders on a 2-for-10 basis, and capital reserves were converted into share capital on a 6-for-10
basis. Total 419,690,340 shares were distributed and converted, increasing the Company’s registered capital to RMB 944,303,265 Yuan.
In July 2010, the Company executed 2009 Profit Distribution and Share Capital Raise Program, under which, based on total share capital of524,612,925 shares as at December 31st, 2009, capital reserves were converted into share capital on a 3-for-10 basis. Total 283,290,980
shares were converted, increasing the Company’s registered capital to RMB 1,227,594,245 Yuan. On March 14th, 2011, 900,294,040
tradable shares held by the Company’s shareholders such as Northeastern University Science & Technology Industry Group Co., Ltd.,subject to trading restrictions, were listed. Till then, all the Company’s 1,227,594,245 shares were tradable shares without trading restrictions hereto.
As at December 31st, 2011, the Company and its subsidiaries（“the Group”）have evolved into a high-tech complex specialized in in-

091

Neusoft Corporation

Annual Report 2011

dustry solutions, product engineering solutions related software products/platform and services through seamless integration of softwareand services, and manufacturing/sales of digital medical systems covering CT, X-ray, Color Doppler Ultrasound and Nuclear Magnetic Resonance, etc. The Company’s registered address is at No. 2 Xinxiu Street, Hunnan New District, Shenyang, China; and the headquarter is located at Neusoft Software Park, No. 2 Xinxiu Street, Hunnan New District, Shenyang, China.
As at December 31st, 2011, the Company’s corporate structure is as follows:
The Company

40 directly-controlledsubsidiaries

10 directly-held（holding 50% equity above
or below but having actual
control rights）

other investments

associates and1 branch

Note 2 Principal Accounting Policies, Accounting Estimates and Errors
2.1 Basis of Preparation of the Financial Statements
092

These Financial Statements have been prepared on the basis of the Company’s continuous operations and actually occurred transactions and events in accordance with the Accounting Standards for Business Enterprises, including the Basic Standards and 38 detailed
standards issued by the Ministry of Finance of the People’s Republic of China on February 15th, 2006 and the subsequently issued application guide, interpretations and other relevant provisions（“hereafter collectively referred to as“Accounting Standards for Business Enterprises”）, as well as the Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No.15: General Requirements for Financial Reports（revision 2010）issued by the CSRC.
2.2 Statement of Compliance with the Accounting Standards for Business Enterprises
The Company’s Financial Statements have been prepared in accordance with the Accounting Standards for Business Enterprises andgive a true and fair view of the Company’s financial position, results of operations, cash flows and other relevant information obtained
and applied in 2011.
2.3 Accounting Period
The accounting period is from January 1 to December 31, 2011.
2.4 Functional Currency
The functional currency of the Company is Chinese Renminbi（RMB）.
The functional currencies of the Company’s overseas subsidiaries/units are based on local currencies and translated into RMB when
preparing the Financial Statements.
2.5 Accounting Methods for Business Combination
2.5.1 Business combination under common control
The assets and liabilities obtained by the Company through business combination under common control shall be measured on thebasis of their book values within the acquiree on the acquisition date. If the accounting policies adopted by the acquiree are different
from that of the Company, the Company shall, on the acquisition date, adjust the book values according to its accounting policies andrecognize the assets and liabilities based on the book values after the adjustment.
The difference between the book value of the net assets obtained from the acquisition and that of the acquisition consideration （orthe total amount of par value of the shares issued）shall be firstly offset against capital surplus and then debited to retained earnings if
the capital surplus is insufficient for offsetting.
The Company’s direct costs arising from the business combination, including the expenses for audit, assessment and legal services
shall be included in current profit and loss statement（P&L）.
The handling fees, commissions and other expenses for the issuance of equity securities for the business combination shall be firstly
offset against the surplus revenue from equity securities and then debited to retained earnings if the surplus revenue is insufficient for offsetting.
2.5.2 Business combination under non-common control
The assets paid and liabilities assumed by the Company through business combination not under common control on the acquisition
date shall be measured by their fair values. The difference between their fair values and book values shall be included in current P&L.
The Company shall allocate the combination costs on the acquisition date and recognize the fair values of all identifiable assets, liabilities and contingent liabilities obtained from the acquiree.
If the combination cost exceeds the fair value of the identifiable net assets obtained from the acquiree, the difference shall be recognized as goodwill; otherwise, it will be included in current P&L after review.
As for all the other assets excluding intangible asset acquired from the acquiree in the combination（not limited to the assets whichhave been recognized by the acquiree）, if the economic benefit brought by them is likely to flow in the Company and their fair values
can be measured reliably, they shall be separately recognized and measured by their fair values; for any intangible asset, if its fair value
can be measured reliably, it shall be separately recognized as intangible asset and measured at fair value; for all the other liabilities excluding contingent liabilities, if the performance of the relevant obligations is likely to result in any out-flow of economic benefits from theCompany, and their fair values can be measured reliably, they shall be separately recognized and measured at fair value; and for the contingent liabilities, if their fair value can be measured reliably, they shall be separately recognized as liabilities and measured at fair value.
The deductible temporary differences obtained from the acquiree through the combination shall not be recognized if they are notqualified for conditions of recognition of deferred income tax assets on the acquisition date. Within 12 months after the acquisition date,
if any new information or further information can prove the relevant situation has existed since the acquisition date and the economic
benefit from the deductible temporary differences may be achieved, such deductible temporary differences shall be recognized as deferred income tax assets; Goodwill shall be deducted hereto. If the goodwill is not sufficient for offsetting, the difference shall be included in current P&L. Otherwise the above-mentioned conditions, deferred income tax assets related to business combination shall be recognized and included in current P&L.
In any business combination under non-common control, the acquirer’s expenses of audit, legal services, assessment and consulting
services, agent fees and other related administrative expenses shall be included in current P&L; the transaction expenses for the issuanceof equity securities for the business combination shall be included in the initially recognized amount of equity securities or bonds.
2.6 Preparation of the consolidated financial statements
The scope of consolidated financial statements is confirmed based on the Company’s control over its subsidiaries; and all the Company’s subsidiaries are included in the consolidated financial statements.
The accounting policies and period adopted by the subsidiaries shall be in accordance with that of the Company; otherwise, theyshall be adjusted according to the Company’s policies and period when preparing the consolidated financial statements. For any subsidiary acquired from business combination under non-common control, its financial statements shall be adjusted based on the fair value ofidentifiable net assets on the acquisition date. Based on the financial statements of the Company and subsidiaries and other relevant ma-

093

Neusoft Corporation

Annual Report 2011terials, the consolidated financial statements have been prepared by the Company after adjusting long-term equity investment on the subsidiaries by equity method.
When consolidating the financial statements, effect of internal transactions between the Company and subsidiaries or among the subsidiaries on the consolidated balance sheet, consolidated income statement, consolidated cash flow statement, and consolidated statement of changes in equity shall be offset.
The equity, profit and loss attributable to the minority shareholders of the subsidiaries shall be separately indicated under the item ofowners’equity in the consolidated balance sheet and the item of net profit in the consolidated income statement. The difference bywhich the current loss assumed by the minority shareholders of the subsidiaries exceeds the share belonging to them at the beginning of
the period shall offset against the minority interest.
During the reporting period, if any subsidiary is obtained through business combination under common control, the year-begin balanceof the consolidated balance sheet shall be adjusted; the subsidiary’s income, expenses, profit from the beginning of the combination period
to the end of the reporting period shall be included in the consolidated income statement; and cash flow in the consolidated cash flow
statement.
During the reporting period, if any subsidiary is obtained through business combination under non-common control, the year-beginbalance of the consolidated balance sheet shall have no change; the subsidiary’s income, expenses, profit from the acquisition date to094

the end of the reporting period shall be included in the consolidated income statement; and cash flow in the consolidated cash flow statement. For subsidiary obtained by stages through business combination under non-common control, equity in the acquiree held by theCompany before the acquisition date shall be re-measured based on its fair value on the acquisition date. Difference between the fair value
and book value shall be included into current investment income. If other composite income is involved with the foregoing equity,
such income shall be converted into current investment income on the acquisition date.
During the reporting period, in case of disposal of a subsidiary, the subsidiary’s income, expenses, profit from the beginning of theperiod to the disposal date shall be included in the consolidated income statement; and the cash flow included in the consolidated cash
flow statement. If the Company loses control over a subsidiary it originally owns due to disposal of part of equity investment or other reasons, the remaining equity investment shall be re-measured based on its fair value on the date when the control is lost. Difference bywhich the sum of the consideration received on the disposal of equity and the fair value of the remaining equity subtracts the amount of
attributable net assets calculated from the purchase date on the basis of the original equity ratio shall be included in investment incomein the period when the control is lost. Other composite income relevant to the equity investment in the originally owned subsidiary shallbe converted into investment income in the period when the control is lost.
The difference between long-term equity investment newly obtained from purchasing minority interest and the subsidiary’s identifiable net assets attributable to the Company which is calculated according to newly increased equity ratio, and the difference between disposal price obtained from disposal of equity investment to the subsidiary, without losing control over the subsidiary, and attributable net
assets from disposal of long-term equity investment, shall be firstly offset against capital surplus in the consolidated balance sheet andthen debited to retained earnings if the capital surplus is insufficient for offsetting.
2.7 Determination of cash and cash equivalents
In the Financial Statements, cash refers to all cash on hand and deposit held at call with banks. Cash equivalents refer to short-term（due in three months after the purchase date）, highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.

2.8 Foreign currency transactions and translation
2.8.1 Foreign currency transactions
Foreign currency transactions shall be translated into RMB at the spot exchange rate on the transaction date.
The foreign currency-dominated monetary items shall be translated into RMB at the spot exchange rate on the balance sheet date;
and the resulting currency translation difference shall be included in current P&L, except for the exchange difference arising from special
foreign currency borrowings related to purchase/construction of assets compliant with capitalization conditions, which shall be disposed
according to the principles of capitalization of borrowings. The foreign currency-dominated non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not
be changed. The foreign currency-dominated non-monetary items measured at the fair value shall be translated at the spot exchange rateon the date when the fair value is determined; the resulting currency translation differences shall be included in current P&L or capital reserves.
Overseas subsidiaries use their local currencies as the functional currencies. Their foreign currency operations shall be recorded in local currencies at the exchange rate on the operation date. Overseas subsidiaries’monetary assets and liabilities dominated in foreign currencies in the balance sheets shall be translated into local currencies; and the resulting translation difference shall be included in current
P&L.
2.8.2 Translation of financial statements represented in foreign currency
Foreign currency-dominated assets and liabilities of overseas subsidiaries included in the Company’s financial statements shall betranslated into RMB at the spot exchange rate on the balance sheet date; All the other items except for the“Undistributed profits”under the owners’equity shall be translated into RMB at the spot exchange rate on the date of the transactions. Foreign currency-dominatedincome and expenses in the income statement shall be translated into RMB at the average exchange rate during the reporting period. The
resulting translation difference shall be separately indicated under the item of owners’equity in the balance sheet.
When disposing the overseas operations, relevant translation difference indicated under the item of the owners’equity in the balance
sheet shall be included in current P&L. If the overseas operations are disposed partially, relevant translation difference based on percentageof the disposal shall be included in current P&L.
2.9 Financial Instruments
Financial instruments include financial asset, financial liability and equity instrument.
2.9.1 Classification
For the purpose of holding financial assets and assuming financial liabilities on a contract basis, the Company’s managements classify financial instruments into financial assets measured at fair value through profit or loss, including trading financial assets or liabilities（and directly recognized as financial assets or liabilities measured at fair value through profit or loss）; held-to-maturity investment; loans
and accounts receivable; available-for-sale financial assets; and other financial liabilities.
2.9.2 Recognition and measurement（1）Financial assets（liabilities）measured at fair value through profit or loss
Its fair value（deducting cash dividends that have been recognized but not issued or bond interests to be received）upon the acquisition shall be identified as initially recognized amount and the related transaction expenses thereof shall be included in current P&L.
The interests or cash dividends obtained during the holding period shall be recognized as investment income, and change in fair value
shall be, at the end of the period, included in current P&L.
On the disposal of the assets, the difference between their fair value and initial book value shall be recognized as investment income,095

Neusoft Corporation

Annual Report 2011

and the profit or loss of change in fair value shall be accordingly adjusted.
（2）Held-to-maturity investment
The sum of fair value（deducting bond interests to be received）of the assets on the acquisition and relevant transaction expenses
shall be identified as initially recognized amount.
During the holding period, the interest income shall be calculated on the basis of amortized cost and real interest rate（coupon rate
prevails in case of insignificant difference between real interest rate and coupon rate）and included in the investment income. The real interest rate shall be recognized upon the acquisition and shall have no change during the predicted duration or a shorter applicable term.
On the disposal of the assets, the difference between the sale price and book value shall be included in investment income.
If the Company reclassifies or sells large amount of held-to-maturity investment before maturity（compared with the total amount ofsuch investment before re-classification or sale）, the rest of such investment will be re-classified as available-for-sale financial asset; meanwhile, no financial asset shall be classified as a held-to-maturity investment within the current accounting year and the following two complete accounting years. However, the following circumstances shall be excluded:a）The date of sale or re-classification is quite near to the maturity date or the repurchase date of the said investment（e.g., within
3 months prior to maturity）that any change of the market interest rate has little impact upon the fair value of the said investment;b）After almost all the initial principal of the investment has been drawn back by way of repayment at fixed intervals or repayment096

ahead of schedule according to the provisions of the contract, the remaining part of the investment will be sold or re-classified; andc）The sale or re-classification is caused by any independent event that the Company cannot control, is predicted not to occur again
and is hard to be reasonably predicted.
（3）Accounts receivable
The contract price charged to the buyers shall be recognized as initial amount for those receivables which is composed of the Company’s accounts receivable by the sale of goods and provision of labor services, and receivables in other companies excluding debt instruments priced in active markets, including accounts receivable, other receivables, notes receivable, prepayments and long-term receivables.
Finance receivables shall be initially recognized based on their present value.
On recovery or disposal of accounts receivable, the difference between sale value and book value shall be included in current P&L.
（4）Available-for-sale financial assets
The sum of fair value（deducting cash dividends that have been recognized but not issued or bond interests to be received）andrelevant transaction expenses of the assets on the acquisition shall be identified as initially recognized amount.
The interests and cash dividend received during the holding period shall be recognized as investment income and measured at fairvalue at the end of the period; and change in fair value shall be included in capital reserves（other capital reserves）.
On the disposal of the assets, the difference between sale price and book value shall be recognized as investment P&L, and the accumulated amount of changes in fair value caused by the disposal shall be accordingly converted into investment P&L from owners’equity.
（5）Other financial liabilities
The sum of fair value and relevant transaction expenses shall be confirmed as initially recognized amount, and amortized cost shallbe used for subsequent measurement.
2.9.3 Recognition and measurement of transfer of financial assets
On the transfer of financial assets, recognition of these assets shall be terminated if nearly all the risks and rewards relating to theownership have been transferred to the transferee; otherwise, they shall be still recognized as financial assets of the Company.
The principle of“Substance over Form”is adopted in judging the termination or not of recognizing financial assets. The transfer offinancial assets is also divided into two cases: entire transfer and partial transfer. If the transfer of an entire financial asset satisfies theconditions for termination of recognition, the difference between the amounts of the following two items shall be included in current P&L:
（1）The book value of the transferred financial asset; and（2）Sum of the consideration received from the transfer, and the accumulated amount of the changes in fair value originally recorded in the owners’equity（in the event that the financial asset involved in the transfer is available-for-sale financial asset）.
If the transfer of partial financial asset satisfies the conditions for termination of recognition, the book value of the entire financial asset transferred shall, between the portion whose recognition has been terminated and the portion whose recognition has not been terminated, be allocated at their respective relative fair value, and the difference between the amounts of the following two items shall be included in current P&L:
（1）The book value of the portion whose recognition has been terminated; and（2） The sum of the consideration of the portion whose recognition has been terminated, and the portion of the accumulated
amounts of the changes in fair value originally recorded in the owners’equity which is corresponding to the portion whose recognition
has been terminated （in the event that the financial asset involved in the transfer is available-for-sale financial asset）. The Company
shall continue to recognize the financial assets and recognize the received consideration as a financial liability in case the transfer of thesefinancial assets cannot meet the conditions of termination.
2.9.4 Termination of recognition of financial liabilities
If the existing obligations of the financial liabilities have been removed in whole or in part, recognition of the financial liabilities or apart of them shall be terminated. If the Company enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different
from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the sametime recognize the new financial liability.
Where the Company makes substantial revisions to some or all of the contractual stipulations of the existing financial liability, it shallterminate the recognition of the existing financial liabilities or part of them, and at the same time recognize the financial liability after therevisions as a new financial liability.
If the recognition of financial liabilities is terminated in whole or in part, the difference between the book value and paid consideration（including transferred non-cash assets or newly assumed financial liabilities）shall be included in current P&L.
If the Company buys back part of its financial liabilities, it shall distribute, on the repurchase day, the entire book value of the financial liabilities in light of the comparative fair values of the part that continues to be recognized and the part whose recognition has already been terminated. The difference between the book value which is distributed to the part whose recognition has been terminatedand the paid consideration（including transferred non-cash assets or newly assumed financial liabilities）shall be included in current P&L.
2.9.5 Recognition of fair values of financial assets and liabilities
Financial assets and liabilities measured at fair value shall be directly based on quotation price in active market. During the reporting
period, if estimated P&L of the long-term foreign exchange contract is not calculated according to the quoted exchange rate, estimatedprofit shall be included in P&L of change in fair value and trading financial assets; and estimated loss shall be included in P&L of change
in fair value and trading financial liabilities.
2.9.6 Appropriation of impairment provision for financial assets（excluding receivables）
The Company carries out an inspection, on the balance sheet date, on the book value of the financial assets other than those measured at fair value through profit and loss. If there is any objective evidence proving that such financial asset has been impaired, an impair-097

Neusoft Corporation

Annual Report 2011

ment provision shall be made.
（1）Impairment provision for available-for-sale financial assets
At the end of the period, if there is a significant decline in the fair value of an available-for-sale financial asset, or the decline isdeemed non-temporary after considering all relevant factors, impairment of such asset shall be recognized; and the accumulated losses asa result of the decline in the fair value that is originally included in the owners’equity shall be removed and recognized as impairment
losses.
（2）Held-to-maturity investment
The impairment loss of held-to-maturity investment is calculated in the light of the measurement method of impairment loss on accounts receivable.
2.10 Provision for bad debts in accounts receivable
2.10.1 Appropriation of provision for bad debts in receivables with significant single amount:
Determination of significant single amountThe balance of accounts receivable is above RMB 10 million Yuan and the balance of otherreceivables is above RMB 2 million Yuan.
The Company shall take independent impairment test for the accounts receivable with sig-

098

nificant single amount at the end of the year, recognize the impairment loss and make proAppropriation method

vision for bad debts based on difference by which the present value of future cash flow isless than its book value. If the future cash flow is not less than the book value, provision
for bad debts shall be appropriated according to aging analysis method.

2.10.2 Appropriation of provision for bad debts in accounts receivable by portfolio:
Basis for determination of the portfolio
Portfolio

The Company determines the following proportion of provision for bad debts based on the actual loss ratio of the previous
periods’receivable accounts with similar credit risk feature and taking the actual situation into consideration.
Appropriation method

Portfolio

Account receivable aging analysis method

Appropriation of provision for bad debts by aging analysis method in portfolio:
Appropriation ratio of

Appropriation ratio of otherreceivables（%）

receivables（%）

Within 1 year

11

1-2 years222-3 years

553-5 years

1010Over 5 years

100

100

Accounting age

2.10.3 Single appropriation of provision for bad debts in receivables with insignificant single amountReasonAppropriation method

The single amount is insignificant but obvious impairment has been shown. Independent impairment loss test
indicates that the present value of its future cash flow is less than the book value.
Specific identification method will be adopted to recognize impairment loss and appropriate provision for bad
debts based on the difference by which the present value of its future cash flow is less than the book value.

2.11 Inventories
2.11.1 Classification
Inventories are classified into raw materials, work in process, and finished products.
2.11.2 Valuation of outgoing inventories
Outgoing freight costs on raw materials shall be counted with weighted average method. Costs of work in process and finished products include materials, labor force and manufacturing expenses proportioned according appropriate percentage under normal production
capacity.
The cost of work in process, including the contract cost, is calculated as follows:
The start date and finish date of system integration that is customized according to customer’s special requirements are usually
attributable to different accounting years. The Company therefore adopts principles of construction contracts to calculate the cost.
The contract cost mainly refers to the cost of contracted projects in process, including cost of system hardware that have been delivered
to customer’s designated location, cost of installation work that is being conducted or system integration cost, direct labor force cost and indirect expenses arising from contract which has been performed and cost occurred by being performing obligations under other contracts.
As of the balance sheet date, if the sum of accumulated cost of contract in process and accumulated gross profit of the contract ismore than the sum of settled price and recognized accumulated losses, the difference shall be listed into inventories in the current assets;otherwise, the difference shall be listed into settled but uncompleted items in the current liabilities.
2.11.3 Recognition of net realizable value of inventories and appropriation method of provision for depreciation of inventories
The Company checks up inventory at the end of each accounting period, and makes or adjusts provision for depreciation of inventories based on the cost and net realizable value of inventories, whichever is lower.
During normal production, the net realizable value of inventories directly for sale, such as finished products, inventory products and materials for sale, is calculated by the estimated price less the estimated sales expenses and taxes; and the net realizable value of materials to beprocessed is calculated by the estimated price of finished products less the estimated cost, sales expenses and taxes. For those inventories
held for the purpose of implementing sales contract or labor contract, the net realizable value is based on the contract price; if the inventories held are more than ordered quantities in the contract, the net realizable value of the surplus is calculated based on the market price.
In case the factors causing the write-down of the inventories disappear, the write-down shall be recovered to the original amount;and the depreciation amount shall be recorded as current P&L from the provision.
2.11.4 Inventory system
The Company adopts perpetual inventory system.
2.12 Long-term equity investment
2.12.1 Determination of investment cost
（1）Long-term equity investment through business combination
Business combination under common control: if the consideration of the combination is satisfied by paying cash, transfer of non-cash

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assts or assumption of liabilities, the book value of owners’equity obtained from the acquiree on the acquisition date is recognized as initial investment cost of the long-term equity investment. The difference between the initial investment cost and acquisition consideration
shall be recorded as capital surplus. If the capital surplus is not sufficient for offsetting, the retained earnings shall be adjusted. The direct
costs arising from the business combination, including the expenses for audit, assessment and legal services, shall be included in current
P&L. The bonds issued for the business combination or the handling fees, commissions and expenses for assuming other liabilities shall be
included in initially measured amount of the bonds or other debts. The handling fees, commissions and expenses for the issuance of equity securities for the business combination shall be credited against the surplus of equity securities; if the surplus is not sufficient, the retained earnings shall be offset.
Business combination under non-common control: The combination cost confirmed on the acquisition date is recognized as initial investment cost of the long-term equity investment. Combination cost refers to paid assets, assumed liabilities and fair value of the issued
equity securities for obtaining right of control over the acquiree on the acquisition date. The acquirer’s expenses of audit, legal services,
assessment and consulting services, agent fee and other related administrative expenses shall be included in current P&L; the transaction
expenses for the issuance of equity securities for the business combination shall be included in the initially recognized amount of equity
securities or bonds. In business combination under non-common control which is achieved through more than one transaction, the sumof book value of the acquiree’s equity held by the Company before the acquisition date and newly increased investment cost on the ac100

quisition date shall be recognized as initial investment cost of the investment. The contingent consideration under the combination agreement is recognized as a part of transferred consideration for the combination and included in combination cost based on its fair value on
the acquisition date.
（2）Long-term equity investment through other methods
For long-term equity investment through cash, the actual paid price shall be recognized as initial investment cost.
For long-term equity investment through issuing equity securities, the fair value of issued equity securities shall be recognized as initial investment cost.
For long-term equity investment by investor, the value contracted in the investment contract or agreement （deducting cash dividends or interests that have been recognized but not issued）shall be recognized as initial investment cost, unless it is not stipulated fairin the contract or agreement. Provided that exchange of non-monetary assets has business substance and the fair value of the ingoing assets or outgoing assets can be measured reliably, its initial investment cost shall be determined based on fair value of the outgoing assets,
unless there is obvious proof indicating the fair value of the ingoing asset is much more reliable. If the exchange of non-monetary assets
can not meet foregoing condition, book value of outgoing asset and payable taxes shall be recognized as initial investment cost of ingoing long-term equity investment.
For long-term equity investment through debt restructuring, its initial investment cost is recognized based on its fair value.
2.12.2 Subsequent measurement and recognition of P&L（1）Subsequent measurement
The Company’s long-term equity investment on subsidiary is measured by cost method and adjusted by equity method when preparing the consolidated financial statements.
For long-term equity investment where the Company dose not have joint control or significant influence over the investee, the investment is not quoted in an active market, and its fair value cannot be measured reliably, it shall be measured by cost method.
For long-term equity investment where the Company has joint control or significant influence over the investee, it shall be measured
by equity method. If the initial investment cost is more than the fair value of the investee’s identifiable net assets attributable to the Com-pany, the difference shall not be recorded as initial investment cost of the long-term equity investment; Otherwise, the difference shall be
included in current P&L.
As for other change in owners’equity of the investee except for net P&L, the Company’s attributable P&L calculated based on theshareholding ratio which has no change, shall be recorded as book value of the long-term equity investment; and the capital reserves（other capital reserves）shall be accordingly increased or reduced.
（2）Recognition of P&L
According to the cost method, except for actually paid price or cash dividends or interests that have been recognized but not issued
in the consideration, the Company recognizes the investment income according to the cash dividends or interests that have been announced by the investee.
Under the equity method, based on the carrying amount of the investee’s net profit, net P&L of the investee attributable to the Company shall be recognized after adjustments to following circumstances: if the accounting policies adopted by the investee are different
from that of the Company, the Company, according to its accounting policies, adjusts the relevant items in the financial statements of
the investee; depreciation amount or amortized amount that is appropriated based on fair value of the investee’s fixed assets, intangible
asset upon the investment, and amount of provisions for asset impairment have impact on the investee’s net profit; and unfulfilled internal transactions between the Company and associates and joint ventures are offset.
Upon determination of the investee’s losses attributable to the Company, book value of the long-term equity investment shall be offset first; If the book value is not sufficient, investment losses shall be further recognized, subject to the long-term equity that materiallyconstitute net investment on the investee, to offset against the book value of long-term receivables. At last, estimated liabilities shall berecognized according to additional attributable obligations under the investment contract or agreement and included in current investment loss. If the investee makes profits in following accounting periods, book balance of estimated liabilities that have been recognizedshall be written down, and book values of long-term equity which materially constitutes net investment on the investee and long-term
equity investment shall be recovered; investment income shall be recognized.
During the investment period, if the investee can provide consolidated financial statements, the recognition of P&L shall be based on
net profit and other change in equity in its consolidated financial statements.
2.12.3 Determination of common control or significant influence over investee
Common control refers to the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. If the investing enterprise and other party exercise common control over the investee, the investee is its joint venture.
Significant influence refers to the investing enterprise’s power to participate in decision making of the investee’s financial and operating
policies, but the investing enterprise cannot control or jointly control over decision making of those policies. If an investing enterprise canexert significant influence on the investee, the investee is its associate.
2.12.4 Impairment test method and appropriation method for impairment provision
As for long-term equity investment that has no significant influence on the investee and no quotation in an active market and whose
fair value cannot be measured reliably, its impairment loss is determined according to the difference between its book value and cash valueof future cash flow recognized based on current rate of return.
If the measurement result reveals that the recoverable amount of other long-term equity investment （except for goodwill arisingfrom business combination）with impairment signs is lower than its book value, the difference shall be recognized as impairment loss.
Upon recognition, the impairment loss of the long-term equity investment will not be recovered.

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Annual Report 20112.13 Investment Property
Investment property is a property held to earn rentals, or for capital appreciation or both, including land use right that is leased out,
land use right held for transfer upon capital appreciation, and building that is leased out.
The Company adopts cost method for measurement of investment property. As for investment property measured by cost method,
the Company adopts the same depreciation policy as that of fixed assets for measurement of building for rental, and the same amortization policy of intangible asset for land use right for rental.
On appearance of evidence for depreciation, the Company estimates the recoverable amount and recognizes the impairment loss if
the recoverable amount is lower than its book value.
Upon recognition, the impairment loss of investment property will not be recovered.
2.14 Fixed assets
2.14.1 recognition of fixed assets
Fixed assets refer to as the tangible assets possessed for producing goods, providing labor, lease or operation and management withmore than one fiscal year of service life. Fixed assets are recognized when satisfying the following conditions:（1）The economic benefits related to such fixed assets can flow into the Company; and（2）The cost of such fixed assets can be measured reliably.
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2.14.2 Depreciation of fixed assets
The depreciation of fixed assets is made by use of life averaging method. The depreciation rate is determined according to the natureand use of different types of the fixed assets, estimated useful life and estimated net residual value rate.
The depreciation period and annual depreciation rate of fixed assets are as follows:
Category

Depreciation period（Years）

Residual value rate（%）

Annual depreciation rate（%）

Houses and buildings

30-50

5

1.90-3.20

Electronic equipment

3

5

31.70

Transportation equipment

5

5

19.00

Other equipment

3-5

519.00-31.70

2.14.3 Impairment test method and appropriation method of provision for fixed assets
The Company reviews whether there are signs indicating impairment of fixed assets at the end of every accounting period.
When such signs do exist, impairment tests will be conducted to recognize the recoverable amount of fixed assets. The recoverable
amount of the fixed assets is recognized based on the higher between the net amount of the fair value of the assets after deducting thedisposal expenses and the present value of future cash flow of the assets.
If the recoverable amount is lower than the book value of the fixed assets, the book value shall be written down to its recoverable
amount; the write-down amount shall be recognized as impairment loss of fixed assets and included in current P&L; and impairment provision for the fixed asset shall be appropriated.
Upon recognition of impairment loss of the fixed assets, depreciation of the fixed assets shall be adjusted in the future periods sothat their adjusted book value（deducting estimated net residual value）can be properly apportioned in the remaining service periods.
Once the impairment loss is recognized, it shall not be recovered in subsequent accounting periods.
If there is any sign indicating a fixed asset may have impairment, the Company shall recognize the recoverable amount based onsuch fixed asset. If recognition of its recoverable amount is not reachable, its recognition shall be based on the asset group it is attribut-

able to.
2.14.4 Other Remarks
In term of the Company’s any land-based construction project for own use from January 1st, 2002 to December 31st, 2006, the bookvalue of the land use right constitutes the cost of houses and buildings. As for land use right that has been recorded into the cost ofhouses and buildings, the Company has removed it from book value of its original asset and recorded it into intangible asset on January
1st, 2007 provided that it has been separately recognized as intangible asset according to relevant standards. Since January 1st, 2007, thecost of land use right was not included in the cost of houses and buildings for any land-based construction project for own use.
2.15 Construction in progress
2.15.1 Classification
Construction in progress is calculated according to project classification.
2.15.2 Criteria and timing for conversion of construction in progress into fixed assets
For construction in progress, the Company shall record all the expenditures for this asset to reach usable condition as the account valueof the fixed assets. If the construction in process has been available for intended use but final account is not made, it shall be counted
into fixed assets at the estimated value based on construction budget, cost or actual cost upon it is available for intended use; and depreciation of fixed assets shall be made as per the Company’s depreciation policy of fixed assets. After the final account, the originally estimated value shall be accordingly adjusted based on actual cost, without changing the appropriated depreciation amount.
2.15.3 Impairment test method and provision appropriation for construction in progress
The Company reviews whether there are signs indicating impairment of construction in progress at the end of every accounting period.
When such signs do exist, impairment tests shall be conducted to recognize the recoverable amount. If there is any sign indicating
any construction in progress may have impairment, the Company shall recognize the recoverable amount based on such construction inprogress. If recognition of its recoverable amount is not reachable, its recognition shall be based on the asset group it is attributable to.
The recoverable amount of the construction in progress shall be decided based on the higher between the net amount of its fairvalue after deducting the disposal expenses and its present value of future cash flow.
If the recoverable amount is lower than the book value, the book value shall be written down to its recoverable amount; thewrite-down amount shall be recognized as impairment loss on construction in progress and included in current P&L; and impairment provision for the construction in progress shall be appropriated.
Once the impairment loss is recognized, it shall not be recovered in subsequent accounting periods.
2.16 Borrowing costs
2.16.1 Recognition of capitalization of borrowing costs
Borrowing costs include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses and exchange balance on foreign currency borrowings.
Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production ofassets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current P&L.
The term “assets eligible for capitalization” shall refer to the fixed assets, investment real estate, inventories and other assets, ofwhich the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale.
The borrowing costs shall not be capitalized unless they simultaneously meet the following requirements:（1） The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest-bearing103

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Annual Report 2011debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization;（2）The borrowing costs has already incurred; and（3） The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale
have already started.
2.16.2 Capitalization period
Capitalization period refers to the period from the commencement to the termination of the capitalization of borrowing costs, which
excludes the suspension period of the borrowing cost capitalization.
When the assets with its purchase and construction or production meeting the capitalization conditions have reached expected purpose for use or sale, the capitalization of borrowing cost shall be stopped.
If part of projects of the assets with its purchase and construction or production meeting the capitalization conditions have been
finished respectively and can be used separately, the capitalization of such projects shall be stopped.
If part of projects of the assets with its purchase and construction or production meeting the capitalization conditions have been
finished respectively but they are not available for use or sale until the whole assets are finished, the capitalization of such projects shallbe stopped upon the whole assets are finished.
2.16.3 Suspension of capitalization
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Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts
for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period
shall be recognized as expenses, and shall be recorded into current P&L, till the acquisition and construction or production of the asset restarts. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for theintended use or sale, the capitalization of the borrowing costs shall continue.
2.16.4 Calculation of capitalized amount of borrowing costs
If the special loan is borrowed for purchase or production of the assets meeting the condition of capitalization, the interest chargesof special loan actually occurring in current period deducted by the interest income of the not-used-loan fund in the bank or the income
obtained from temporary investment shall be confirmed as the capitalized amount of the interest charge of special loan.
If the Company uses the general loan in order to purchase or produce the assets meeting the conditions of capitalization, it shall use
the weighted average（at the end of each month）of the portion by which the total expenditure for assets exceeds the special loan multiplied by the capitalization rate of the occupied general loan to calculate the interest amount of the general loan which should be capitalized.
The capitalization rate shall be calculated based on weighted average interest rate of the general loan.
For a borrowing at a discount or premium, the actual interest rate method shall be used to determine amortization for each accounting period and adjust interest amount of each period.
2.17 Intangible asset
2.17.1 Measurement of intangible asset（1）The company measures its intangible asset initially by cost.
The cost of the purchased intangible asset shall include the purchase price, relevant taxes and other necessary expenditures directly
attributable to intangible asset for the expected purpose. Where the payment of purchase price for intangible asset is delayed beyond thenormal credit conditions, which is for financing purpose, the cost of intangible asset shall be determined on the basis of the current valueof the purchase price.
For intangible asset obtained from the debtor for payment of debts through debt restructuring, its account value shall be recognizedbased on its fair value. The difference between the book value of the restructured debts and fair value of the intangible asset for payment of debts shall be included in current P&L.
Provided that exchange of non-monetary assets has business substance and the fair value of the ingoing assets or outgoing assets
can be measured reliably, its account value shall be determined based on fair value of the outgoing assets, unless there is obvious proof
indicating the fair value of the ingoing asset is much more reliable. If the exchange of non-monetary assets can not meet foregoing condition, book value of outgoing asset and payable taxes shall be recognized as cost of ingoing intangible asset and not recorded into P&L.
For intangible asset obtained through business combination under common control, its account value shall be recognized based on
acquiree’s book value of the asset; for intangible asset obtained through business combination under non-common control, its accountvalue shall be based on its fair value.
The cost of intangible asset formed during internal development activities consists of the materials, labor cost, register fee, amortization of other patents and franchise right during development period, interests paid for capitalization, and other direct expenses before theintangible asset is available for intended use.
（2）Subsequent measurement
The service life of intangible asset shall be analyzed and judged upon acquisition.
Intangible asset with limited service life shall be amortized by straight-line method within the period when it brings economic benefit
to the Company. If it is unable to forecast the period when the intangible asset can bring economic benefit to the Company, it shall be
regarded as an intangible asset with uncertain service life and not be amortized.
2.17.2 Estimate of service life of intangible asset:
Item

Estimated service life

BasisLand use right

40-50 years

Term prescribed in the land use certificate

Property use right

50 years

Term prescribed in the property use contract or agreement

Industrial property right and proprietary technology

10 years

Term prescribed in relevant contract or estimated life

Other intangible asset

5-10 years

Term prescribed in relevant contract or estimated life

Service life and amortization method of the intangible asset with limited service life shall be rechecked at the end of each report year.
The rechecked result in current period shows that there is no difference in the estimate of service life and amortization method.
2.17.3 Appropriation of impairment provision for intangible asset
If there are signs indicating impairment of intangible asset with certain service life, impairment test shall be conducted at the end of
the period.
Impairment test on intangible asset with uncertain service life shall be conducted at the end of every period.
Recoverable amount shall be estimated through impairment test on the intangible asset. If there is any sign indicating any intangible
asset may have impairment, the enterprise shall recognize the recoverable amount based on single intangible asset. If recognition of its recoverable amount is not reachable, its recognition shall be based on the asset group it is attributable to.
The recoverable amount shall be decided based on the higher between the net amount of its fair value after deducting the disposal
expenses and its present value of future cash flow.
If the recoverable amount is lower than the book value, the book value shall be written down to its recoverable amount; thewrite-down amount shall be recognized as impairment loss on intangible asset and included in current P&L; and impairment provision for
the intangible asset shall be appropriated.

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Upon recognition of impairment loss on intangible asset, depreciation of the asset or amortization expense shall be adjusted in the
future periods so that the adjusted book value（deducting estimated net residual value）can be properly apportioned in the remaining
service periods.
Once the impairment loss is recognized, it shall not be recovered in subsequent accounting periods.
2.17.4 Determination of research phase and development phase of internal R&D projects
Expenses of internal R&D projects are divided into expense during research phase and expense during development phase.
Research phase refers to the period when special planned survey and research activities are carried out to obtain and understand any
new technology or knowledge.
Development phase refers to the period when research results or other knowledge is applied to specific plan or design, before its
commercial production or use, to create new or essentially improved material, device and products, etc.
2.17.5 Capitalization of expense during development phase
The expenditure in development phase which meets the following conditions shall be confirmed as intangible asset:（1）Complete this intangible asset and make it usable or salable technically;（2）Have the intention of completing this intangible asset and using or selling it;（3）The way for generating economic interest by the intangible asset, includes the proof that the products produced with this intan106

gible asset have a market or this intangible asset self has a market, and if the intangible asset is used inside the Company, it can beproved to be useful;（4）Have the support with sufficient source of technique and finance and other resources to complete the development of this intangible asset, and the ability to use or sell this intangible asset;（5）The expenditure in the development phase of this intangible asset can be measured reliably.
Expenditure during development phase which cannot meet foregoing conditions shall be recorded into current P&L.
Expenditure during research phase shall be recorded into current P&L.
2.17.6 Other Remarks
Fair value of land use right has been included in construction in progress during land-based construction of project for own use fromJanuary 1st, 2002 to December 31st, 2006. Land use right is recorded into intangible asset and amortized before the project starts. As forland use right that has been recorded into the cost of houses and buildings, the Company has removed it from book value of its original
asset and recorded it into intangible asset on January 1st, 2007 provided that it has been separately recognized as intangible asset according to relevant standards. Since January 1st, 2007, the cost of land use right shall not included in the cost of houses and buildings for any
land-based construction project for own use.
2.18 Goodwill
As for good will arising from business combination under non-common control, its initial cost is based on the difference by which
the combination cost exceeds the fair value of acquired identifiable net assets.
On disposal of relevant asset group or asset group portfolio, the goodwill shall be removed and included into current P&L.
The Company does not amortize the goodwill. Impairment test on goodwill is conducted at the end of every year.
The Company conducts impairment test on goodwill. Fair value of goodwill arising from business combination is amortized into relevant asset group since the acquisition date by proper method, or into relevant asset group portfolio if it is unable to amortize into the asset group. Amortization of fair value of goodwill shall be based on the proportion of fair value of each asset group or asset group portfolio to the total amount of fair value of relevant asset group or asset group portfolio. If the fair value cannot be measured reliably, theamortization shall be based on the proportion of book value of each asset group or asset group portfolio to the total amount of fairvalue of relevant asset group or asset group portfolio.
If asset group or asset group portfolio with respect to goodwill shows signs of impairment, impairment test on asset group or asset
group portfolio that does not include goodwill shall be conducted firstly; recoverable amount will be calculated and impairment loss will
be recognized after comparison with the book value. Impairment test on asset group or asset group portfolio that included goodwill will
be followed. Comparison of its book value（including book value of amortized goodwill）and recoverable amount will be made. If the recoverable amount is less than the book value, the difference shall be recognized as impairment loss of goodwill. The impairment loss will
be recorded in current P&L and will not be recovered in following accounting periods.
2.19 Long-term deferred expenses
Long-term deferred expenses refer to all the expenses paid but attributable to the current and subsequent accounting periods.
Long-term deferred expenses include expenses covering decoration fee, expenses of refurbishment of leased fixed assets, etc, of
which, the deferred period is over one year（excluding one year）. They shall be amortized on average according to estimated profitable
period and presented by net amount by which the actual expenses less accumulated amortization. If the long-term deferred expense cannot be profitable in future accounting periods, the amortized value of the expense shall be all counted into current P&L.
2.20 Estimated liabilities
The obligation related to contingencies, if meeting all following conditions, shall be confirmed as estimated liabilities:（1）The obligation is the current obligation borne by the Company;（2）The fulfillment of the obligation shall most likely cause the economic interest flowing out from the Company; and（3）The amount of the obligation can be measured reliably.
The Company’s estimated liabilities mainly refer to liabilities caused by product quality warranty. Based on previous experience, certain labor or business travel expense occurred during the warranty period is recorded as estimated liabilities. Hardware quality warranty is
generally assumed by OEMs.
2.21 Share-based payments and equity instruments
Share-based payment refers to a transaction in which the Company grants equity instruments or undertakes equity-instrument-based
liabilities in return for services from employee or other parties. The share-based payments consist of equity-settled share-based payments
and cash-settled share-based payments.
2.21.1 Equity-settled share-based payment and equity instruments
Equity-settled share-based payment in return for employee services shall be measured at the fair value of the equity instruments
granted to the employees. As to an equity-settled share-based payment in return for services of employees, if the right may be exercised
immediately after the grant, the fair value of the equity instruments shall, on the granting date, be included in the relevant cost or expense and the capital reserves shall be increased accordingly. As to a equity-settled share-based payment in return for employee services,
if the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then oneach balance sheet date within the vesting period, the services obtained in the current period shall, based on the best estimate of thenumber of vested equity instruments, be included in the relevant costs or expenses and the capital reserves at the fair value of the equities instruments on the granting date.
During the period when performance conditions or service term conditions are satisfied, cost or expense of equity-settled share-based
payment shall be recognized as capital reserves. Before the vesting date, recognized accumulated amount of equity-settled share-based
payment on each balance sheet date reflects the best estimate of expired part and the Company’s quantity of actually vested equity in-107

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struments.
Share-based payment in which the vesting is not performed eventually, its cost or expense shall not be recognized, unless the vesting
conditions are involved with market conditions or non-vesting conditions. If so, no matter the market conditions or non-vesting conditions
are met or not, vesting shall be recognized as long as all the non-market conditions in the vesting conditions are met.
If provisions of equity-settled share-based payment are modified, obtained service shall be recognized according to the original provisions. Any increase of fair value of the granted equity instruments or change that is beneficial to employees on the modification dateshall be recognized as increase of obtained service.
If equity-settled share-based payment is canceled, undetermined amount shall be recognized on the cancellation date to accelerate
the vesting. If employees or other party select non-vesting conditions, which are not met during the vesting period, the equity-settled
share-based payment shall be deemed canceled. However, if new equity instrument is granted and recognized as substitution of the canceled equity instrument on the granting date, modification methods for the terms and conditions of original equity instrument shall be adopted for the new equity instrument.
2.21.2 Cash-settled share-based payment
Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated and confirmed based on
the shares or other equity instruments undertaken by the Company. As to cash-settled share-based payment instruments, if the right may
108

be exercised immediately after the grant, the fair value of the liability undertaken by the enterprise shall, on the granting date, be included in the relevant costs or expenses, and the liabilities shall be increased accordingly. As to cash-settled share-based payment, if the rightmay not be exercised until the vesting period comes to an end or until the specified performance conditions are met, on each balance
sheet date within the vesting period, the services obtained in the current period shall, based on the best estimate of the information
about the exercisable right, be included in the relevant costs or expenses and the corresponding liabilities at the fair value of the liability
undertaken by the Company. On each balance sheet date and on each account date prior to the settlement of the relevant liabilities, thefair values of the liabilities shall be re-measured and the changes shall be included in current P&L.
2.22 Income
The Company’s operating income is mostly from system integration contracts, sales of software products and medical systems, software development and other services, property services, rental, advertising, etc. Business income shall be presented based on the net
amount deducting all discounts. Recognition basis of each income item is as follows:
2.22.1 Income from system integration contracts
According to the accounting standards for construction contracts, the Company recognizes income from system integration development projects in process based on percentage-of-completion method. If the project result can be estimated reliably, the Company shalladopt the percentage-of-completion method to confirm the income from the projects on the balance sheet date. The completion progress shall be determined at the proportion of the completed contract work to the expected total contract work.
If the final result of a construction contract can not be estimated reliably, it shall be dealt with as follows:（1） If the contract costs can be recovered, the contract revenue shall be recognized based on actually recoverable contract costs;
and the contract costs shall be recognized as contract expenses in the current period they are incurred; and（2）If the contract costs cannot be recovered, these costs shall be recognized as contract expenses immediately when incurred andno contract revenue shall be recognized.
The current contract revenues in the current period shall, on the balance sheet date, be recognized in accordance with the balanceof the total contract revenues multiplied by the schedule of completion then deducting the accumulated revenue recognized in previous

accounting periods. At the same time, the current contract expenses in the current period shall be recognized in accordance with thebalance of the expected total contract costs multiplied by the schedule of completion then deducting the accumulated expenses recognizedin preceding accounting periods. If the total expected contract costs exceed the total expected contract revenue, the expected loss shallbe recognized as current expenses.
2.22.2 Income from sales of software products
Income from sales of software products shall be recognized provided that main risks and rewards related to the ownership of the
products have been transferred to the buyers and the products will not be managed and controlled by the Company; economic benefit
with respect to the sales transaction may flow into the Company; and relevant income and costs can be measured reliably.
2.22.3 Income from sales of medical systems
Income from sales of medial systems shall be recognized after the installation and debugging have been finished, and main risks andrewards related to them have been transferred to the customers.
2.22.4 Income from labor services
Income from labor services mainly refers to revenue from the provision of customized software, software maintenance/upgrade, training, web page creation, etc.
Income from provision of services of which the start date and finish date are in the same accounting year shall be recognized uponcompletion of the provision.
If the start date and finish date are attributed to different accounting years, and the transaction results can be measured reliably, therelevant service income shall be recognized on the balance sheet date based on percentage-of-completion method.
The start date and finish date of providing customized software are usually attributed to different accounting years, and the results
can be measured reliably. Therefore, the Company adopts percentage-of-completion method to recognize the service income. The percentage of completion is determined at the proportion of labor hour for software production to the total labor hour.
2.22.5 Income from property service and leasing
Income from property service and leasing is recognized by direct method within the leasing term.
2.22.6 Income from advertising
Advertising income is mainly from advertising agency service, which is recognized upon the ad is broadcasted; and advertising production, which is recognized based on production schedule.
2.23 Government Subsidies
2.23.1 Types
Government subsidies refer to monetary or non-monetary assets obtained free from the government. Government subsidies consistof asset-related subsidies and income-related subsidies.
2.23.2 Accounting treatment
Government subsidies related to long-term assets such as purchased or constructed fixed assets and intangible asset shall be recognized
as deferred income and included in current non-operating income after being averagely allocated over the useful life of the related assets;
Income-related subsidies used for compensating future expenses or losses of the Company shall be recognized as deferred income
and included in current non-operating income during the period when the relevant expenses are recognized; Those subsidies used forcompensating the related expenses or losses incurred to the Company shall be directly included in current non-operating income.
2.24 Deferred income tax assets/liabilities
The Company shall recognize the deferred income tax assets arising from a deductible temporary difference to the extent of the109

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Annual Report 2011

amount of the taxable income which it is most likely to obtain and can be used for offsetting the deductible temporary difference in following accounting period.
Taxable temporary difference shall be recognized as deferred income tax liabilities unless following special circumstances: initial recognition of goodwill; and other transactions or items that have no impact on accounting profits or taxable amount （or deductible loss）.
2.25 Operating lease
Accounting treatment（1）Lease fee paid by the Company shall be equally amortized by straight-line method based on the whole lease term without deducting rent-free period and be included in current expenses. Initial direct expenses paid by the Company for the transactions related to
the lease shall be included in current expenses.
If the asset lessor assumes the related expense that should have been borne by the Company, the Company shall deduct the expensefrom the total rent. Deducted rent shall be equally amortized based on the lease term and included in current expenses.
（2）Rental fee received by the Company shall be equally amortized by straight-line method based on the whole lease term without
deducting rent-free period and be recognized as lease income. Initial direct expense paid by the Company for the leasing transactions
shall be included in current expenses; if the amount of the expense is large, it shall be capitalized and included in current income as thesame as the recognition of lease income.
110

If the Company assumes the related expense that should have been borne by the lessee, the Company shall deduct the expensefrom the total lease income. Deducted lease income shall be equally allocated based on the lease term.
2.26 Related parties
When a party controls, jointly controls or exercises significant influence over another party, or when two or more parties are under
the control, joint control or significant influence of the same party, the related party relationships are constituted. Related parties may be
individuals or corporate entities. Enterprises shall not be regarded as the Company’s related parties if they are all under the control of thestate without any other affiliated relationships.
The Company’s related parties include, but not limited to:（1）The parent company thereof;（2）The subsidiaries thereof;（3）Other enterprises under the control of the same parent company thereof;（4）The investors having joint control over the Company;（5）The investors having significant influence thereon;（6）The joint ventures thereof, including their subsidiaries;（7）The associates thereof, including their subsidiaries;（8）The main individual investors and their close family members;（9）Key managements of the Company or its parent company and their close family members; and（10）Other enterprises that is controlled or jointly controlled by the Company’s main individual investors, key managements or theirclose family members.
2.27 Changes in principal accounting policies and estimates
2.27.1 Change in principal accounting policies
The company has no change in principal accounting policies in this reporting period.

2.27.2 Change in accounting estimates
The company has no change in principal accounting estimates in this reporting period.
2.28 Correction of previous accounting errors
The company doesn’t make any correction for previous accounting errors in this reporting period.

Note 3 Taxes
Tax type and rateType

Tax basisTax rate

The VAT payable is recognized as the difference between output VAT whichVAT

is calculated based on income from sales of products and provision of services

17%（Note 1）

according to the tax law and deductible input VAT in the current period.
Business tax
Property tax

Based on taxable business income

5%（Note 2）

Leasing property: Based on rental income

12%

Own property: Based on the original value of the fixed asset

1.2%

Urban maintenance andconstruction tax,
Educational surtax andBased on actually paid business tax, VAT and consumption tax

7%, 3%, 1%, 1%-7%（Note 3）

local education surtax
Corporate income tax

Based on taxable income amount

10%, 15%, 24%, 25%（Note 4）Note 1: According to the Policies to Further Support the Development of Software and Integrated Circuit Industry issued by the StateCouncil of China（GF［2011］ NO. 4）, the portion of VAT on software products independently developed by the taxpayers which exceeds 3% of the taxpayers’sales income from such software products will be refunded after the collection at the legal tax rate of 17%.
Note 2: Business tax was paid by 5% of income from software technology development, transfer and service, system integration, leasing, labor service, ad production as well as net income from advertising agency. According to the Notice about Taxation related to theState Council’s Announcement to Advance Technology Innovation, Develop High-tech and Promote Industrialization issued by the Ministry of Finance and State Taxation Administration（CSZ［1999］ No. 273）and executed by Shenyang Bureau of Finance and Shenyang
Taxation Bureau（SCYZ［2000］No. 102）
, income from technology transfer, development, consulting and technology service shall be exempted from business tax. As per the requirements of the Administrative Notice（GSH［2004］NO. 825）given by the State Administration of Taxation, the Company was entitled to the foregoing preferential policy after registration of the approved technology contract andrelevant certificates in local tax bureau.
Note 3: Urban maintenance and construction tax, educational surtax and local educational surtax were paid respectively at 7%, 3%
and 1% of the sum of taxable VAT, consumption tax and business tax in January 2011. According to the Notice about Unification of Lo-

cal Education Surtax Policies （CZ［2010］NO. 98）, the Company shall pay 7%, 3% and 2% of the sum of taxable VAT, consumption
tax and business tax respectively for the urban maintenance and construction tax, educational surtax and local educational surtax since
February 1st, 2011. Subsidiaries except for overseas ones shall pay 1%-7%, 3% and 2% of the actually paid goods turnover tax respectively for foregoing taxes.

111Neusoft Corporation

Annual Report 2011

Note 4: According to the Corporate Income Tax Law of the People’s Republic of China（ZXL［2007］NO. 63）, rate of corporate income tax shall be cut off to 15% for high-tech companies that are supported by the State. The Company and its subsidiary Neusoft
Group（Dalian）Co., Ltd.（“Dalian Neusoft”）, as high-tech companies, were entitled to this preferential policy in 2011. In addition, according to the Notice about Corporate Income Tax Preferential Policy （CS［2008］ NO.1） given by the State Taxation Administration,
rate of corporate income tax shall be cut off to 10% for key software companies under certain national plan. As of the approved reporting date of this financial report, the Company and Dalian Neusoft were not recognized as key software companies in 2011 under certain
national plan because the recognition process has not yet begun, but we believe that the companies can meet the recognition conditions.
Therefore, the companies’corporate income tax in 2011 was calculated at the rate of 10%.
According to the Corporate Income Tax Law of the People’s Republic of China（ZXL［2007］NO. 63）, corporate income taxes onfollowing high-tech subsidiaries were paid at the rate of 15%: Neusoft Group （Beijing）Co., Ltd., Shenyang Neusoft Medical Systems
Co., Ltd., Chengdu Neusoft System Integration Co., Ltd., Xi’an Neusoft System Integration Co., Ltd., Qinhuangdao Neusoft Co., Ltd.,
Nanjing Neusoft System Integration Co., Ltd., Shenyang Neusoft Information Technology Service Co., Ltd., Shanghai Neusoft Times Digital
Technology Co., Ltd., Hunan Neusoft Co., Ltd. and Guangdong Neusoft Co., Ltd..
The Company’s subsidiary Shenzhen Neusoft Co., Ltd. paid the corporate income tax at the rate of 24% according to the Noticeabout Transitory Preferential Policy on Corporate Income Tax（GF［2007］NO. 39）issued by the State Council.
112

According to the Notice about Corporate Income Tax Preferential Policy（CS［2008］NO.1）given by the State Council, the Company’s subsidiaries including Neusoft Group（Shanghai）Co., Ltd., Neusoft Group（Tianjin）Co., Ltd., Shenyang Neusoft System Integration Technology Co., Ltd., and Neusoft Group（Guangzhou）Co., Ltd. were exempted from corporate income tax in the first two years
since the profit-making year and pay the tax by half from the third to fifth year. After recognition by relevant tax bureau, Year 2011 istax holiday for Neusoft Group（Shanghai）Co., Ltd., Shenyang Neusoft System Integration Technology Co., Ltd., Neusoft Group（Tianjin）Co., Ltd., Neusoft Group（Guangzhou）Co., Ltd..
Other domestic subsidiaries paid the tax at the rate of 25% according to the Corporate Income Tax Law of the People's Republic ofChina.

Whollyowned

Shandong Neusoft System

Integration Co., Ltd.

Con-

trolledWhollyowned

Software Co., Ltd.

Nanjing Neusoft System

Integration Co., Ltd.

owned

Shenyang Neusoft BoanCo., Ltd.

Information Technology

Whollyowned

Systems Co., Ltd.

Dalian Neusoft Finance

Whollyowned

Whollyowned

Whollyowned

WhollyType

Shenyang Neusoft Medical

Shenzhen Neusoft Co., Ltd.

Hunan Neusoft Co., Ltd.

Co., Ltd.

Advertising Communications

Shenyang Zhuri Digital

Subsidiary

Nanjing

Shenyang

DalianQingdao

Shenyang

Shenzhen

Changsha

Shenyang

Domicilecompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedNaturesoftware/hardware

Computersoftware/hardware

Computerproduction/publicity

Ad

Business scope

12,000,000

USD2,500,000

USD3,000,000

15,000,000

software/hardware

Computersoftware/hardware

Computersoftware/hardware

Computersoftware/hardware

Computer

78,000,000 Medical systems

5,000,000

12,000,000

1,000,000

capitalRegistered4.1.1 Wholly-owned or controlled subsidiaries

4.1 Subsidiaries

12,000,000

12,416,895

13,491,850

15,000,000

87,082,539

5,000,000

12,000,000

1,000,000

the period

the end ofamount atinvestment

Actual

100

100

100

100

100

100

69

60

100

60

100

31

Indirect:

100

100

100

Direct:

100

100

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

statements

ed295,462

interest

subsidiary

（%）

（%）

Minorityin theconsolidatfinancial

share

ratio

on theinvestment

net

VotingEquityprofit/loss

minority

offsetused tointerestofminority

it isincludeditems

of otherAmountWhether

Balanceconstituting

Monetary unit in following tables is expressed in Renminbi unless otherwise indicated.

Note 4 Business Combination and Consolidation of Financial Statements

113

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’sWholly

owned

Con-

trolledWhollyChengdu Neusoft System

Integration Co., Ltd.

Qinhuangdao Neusoft

Co., Ltd.

Neusoft Group

Whollyowned

WhollytrolledWhollyowned

Guangdong Neusoft

Co., Ltd.

Digital Technology Co., Ltd. owned

Shanghai Neusoft Times（Nanchang）Co.,Ltd.

Neusoft Group

Technology Co., Ltd.

Transportation Information

Con-

owned

Co., Ltd.

Shengyang Neusoft

WhollyNeusoft Group（Nanjing）

owned

owned

（Zhengzhou）Co., Ltd.

WhollyCo., Ltd.

Type

Neusoft（Hong Kong）

Subsidiary

Limitedcompany

liability

Limitedcompany

liability

LimitedNatureGuangzhou

Shanghai

Nanchang

Shenyang

Nanjing

Zhengzhou

company

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

Qinhuangdao liability

ChengduHong Kong

Domicile

Computer software

software/hardware

Computer

consulting

development/sales/

Computer software

Business scopesales of computer

Development andetc.

software/hardware,sales of computer

Development and20,000,000

20,000,000

software/hardware

Computersoftware/hardware

Computer

consulting/service

20,000,000 R&D, technology

Computer hardware

7,000,000 Computer service

consulting, etc.

technology

12,000,000 software/hardware,

10,000,000

network integration

10,000,000 development &20,000,000

850,000

USD

capitalRegistered

Actual

20,000,000

20,000,000

20,000,000

3,535,000

12,000,000

10,000,000

8,500,000

20,000,000

7,037,915

the period

the end ofamount atinvestment
ratio

share

in the

100

100

100

50.5

100

100

85

100

100

100

100

50.5

100

100

85

100

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

statements

edconsolidat-

subsidiary

100

（%）
financial

100

（%）

on theinvestment

net

constituting

it isincluded

items
Votingof otherEquityWhether

Balance114
3,112,163

2,096,540interest

Minority

profit/loss

minority

offsetused tointerest

minorityofAmountContinued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’s

Neusoft Corporation
Annual Report 2011

ownedWhollyowned

WhollyownedCo., Ltd.

owned

Whollyowned

Neusoft Group（Tianjin）

Hangzhou Neusoft Co., Ltd.

Co., Ltd.

Neusoft Group（Shanghai） Wholly（Guangzhou）Co., Ltd.

Neusoft Group

Co., Ltd.

Integration Technology

WhollyownedCo., Ltd. （Note 1）

Shenyang Neusoft System

Whollyowned

Neusoft Group（Beijing）

Co., Ltd.

Information Technology

Whollyowned

Wuhan Neusoft

WhollyIntegration Co., Ltd.

Type

Xi’an Neusoft System

Subsidiary

TianjinHangzhouShanghai

Guangzhou

Shenyang

Beijing

Wuhan

Xi’an

Domicilecompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedNaturesoftware/hardware,

Computersoftware/hardware

Computersoftware/hardware

ComputerBusiness scope

20,000,000

500,000

100,000,000

100,000,000

20,000,000

software/hardware

Computer

consulting/service

technology

software/hardware,

Computer

consulting/service

technology

software/hardware,

Computer

consulting/service

technology

software/hardware,

Computer

consulting/service

technology

software/hardware,

Computertechnologies

related goods and

250,000,000 import/export of

15,000,000

25,000,000

capitalRegistered

Actual

20,000,000

500,000

100,000,000

100,000,000

20,000,000

249,396,361

15,000,000

22,502,469

the period

the end ofamount atinvestment
interest

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

statements

subsidiaryed

Minorityin theconsolidatfinancial

share
（%）

ratio

on theinvestment

net

constituting（%）

profit/loss

minority

offsetused tointerestofminority

Votingit isEquityincludeditems

of otherAmountWhether

Balance

115

Continued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’sownedWhollyowned

Wholly

owned

Con-

Co., Ltd.

Neusoft Group（Wuxi）

Co., Ltd.

Neusoft Group（Wuhu）

Co., Ltd.

Guangdong Neufashion

Whollyowned

U.S.A. Inc. （Note 4）

owned

Neusoft Medical System

Co., Ltd.（Note 3）

Systems Import & Export

WhollyownedCo., Ltd. （Note 2）

Shenyang Neusoft Medical

WhollyTianjin Neusoft Technology

Digital Technology Co., Ltd. trolled

Whollyowned

Whollyowned

WhollyType

Neusoft Group（Hannan）（Tangshan）Co., Ltd.

Neusoft Group

Neusoft（Europe）Co., Ltd.

Subsidiary

U.S.A.

Shenyang

Tianjin

Guangzhou

Wuhu

Wuxi

HannanTangshan

Switzerland

Domicile

ComputerBusiness scopeComputer

consulting/service

technology

software/hardware,

Computer

consulting/service

technology

software/hardware,

Computer

consulting/service

technology

software/hardware,

Computercompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

Import & export oftechnology consulting

system integration,

software/hardware,

Computer& service

4,000,000 technology consulting

USD of medical systems,

R&D/manufacturing

technologies

5,000,000 goods and

5,000,000

development & sales

37,500,000 software/hardware

Limitedliability

development & service

10,000,000 software/hardware

20,000,000

100,000,000

30,000,000

Computer

consulting/service

37,900,000 technology

CHF software/hardware,

capitalRegisteredcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedNatureActual

16,525,050

5,000,000

5,000,000

22,500,000

10,000,000

20,000,000

100,000,000

30,000,000

259,661,002

the period

the end ofamount atinvestment
ratio

share

in the

60

100

100

100

100

100

100

100

60

100

100

100

100

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

statements

edconsolidat-

subsidiary

100

（%）
financial

100

（%）

on theinvestment

net

constituting

it isincluded

items
Votingof otherEquityWhether

Balance116
13,867,532

interest

Minority

profit/loss

minority

offsetused tointerest

minorityofAmountContinued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’s

Neusoft Corporation
Annual Report 2011

Whollyowned

Dalian Neusoft BPO Service

Co., Ltd.（Note 10）

Co., Ltd.（Note 13）

Technology （Dalian）

Neusoft Yuetong softwareCo., Ltd.（Note 12）

Information Technology

Beijing Neusoft Huiju（Note 11）

Technology Co., Ltd.

owned

Whollytrolled

Con-

owned

WhollyownedCo., Ltd.（Note 9）

Hefei Neusoft Information

WhollytrolledCon-

trolledCon-

trolledCon-

trolled

Con-

Type

Beijing InBridge Consulting

Co., Ltd.（Note 8）

software Technology

Beijing Neusoft Yuetong（Note 7）

Terminal Design Co., Ltd.

Shenzhen Neusoft Mobile（Note 6）

Systems Co., Ltd.

Neusoft Positron Medical

Co., Ltd.（Note 5）

Spectrum MRI Technologies

Shenyang Neusoft

Subsidiary

DalianBeijing

Hefei

DalianBeijing

Beijing

Shenzhen

Shenyang

Shenyang

Domicile

R&D/manufacturing

Business scopeComputertechnology consulting

technologies,of electronics

company

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedComputertechnology consulting

system integration,

software/hardware,

Computersoftware/hardware

Computertechnology consulting

5,000,000 software/hardware,

Computertechnology service

26,650,000 software/hardware,

500,000

5,000,000

liability
hunting service

Recruitment process
100,000 outsourcing & talent

Limitedcompany& service

15,000,000 software/hardware

5,000,000

Development & sales

consulting/service

3,500,000 technology

USD & manufacturing,

PET-CT development

technology consulting

10,000,000 of MRI products,

capitalRegisteredcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedNatureActual5,000,000

27,265,000

500,000

5,000,000

100,000

10,500,000

3,500,000

21,150,450

8,000,000

the period

the end ofamount atinvestment

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

80

99

70

70

100

100

100

80.28

100

statements

subsidiary

5,852,441

4,346,376

531,733

27,612

3,092,567

interested

Minorityin theconsolidatfinancial

share
（%）

ratio

on theinvestment

net

constituting（%）

profit/loss

minority

offsetused tointerestofminority

Votingit isEquityincludeditems

of otherAmountWhether

Balance

117

Continued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’strolled（Note19）

Medical Systems Co., Ltd.

Shenyang Neusoft Xikang（Note 18）

Healthcare Co., Ltd.

Liaoning Neusoft Xikang（Note 17）

Technology Co., Ltd.

Neusoft Xikang Healthcare

ownedWhollyowned

Whollyowned

Whollyowned

Neusoft Xikang International WhollyCon-

Shenyang

Shenyang

BeijingHong Kong

Islands

Caymanowned Emirates

Co., Ltd. （Note 15）

Co., Ltd.（Note 16）

Domicile

Wholly United ArabType

Neusoft Xikang Holding（Note 14）

Middle East Co., Ltd.

Neusoft Medical Systems

Subsidiarycompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

Limitedcompany

liability

LimitedNatureMedical systems,

Business scope

management &information

Healthcare

consulting

management

investment

electronics, corporate

development ofsoftware/hardware,

Computer

IT and IT consulting

10,000,000
healthcare consulting

software/hardware,

medicalDevelopment ofservice/systemmanagement

development of

30,000,000 consulting;

8,000,000

USD

1,000,000

HKD

USD50,000 IT and IT consulting

consulting/service

USD3,500,000 technology

capitalRegistered

Actual

10,000,000

30,000,000

8,000,000

USD

1,000,000

HKD

35,000USD

9,236,815

the period

the end ofamount atinvestment
ratio

share

in the

100

100

100

100

70

Yes

Yes

Yes

Yes

Yes

Yes

statements

edconsolidat-

subsidiary

100

（%）
financial（%）

on theinvestment

net

constituting

it isincluded

items
Votingof otherEquityWhether

Balance

118-4,747,484

interest

Minority

profit/loss

minority

offsetused tointerest

minorityofAmountContinued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’s

Neusoft Corporation
Annual Report 2011

trolled

Con-

owned

WhollyType

TianjinShenzhen

Domicilecompany

liability

Limitedcompany

liability

LimitedNatureDevelopment /salesof watch phones;

manufacturing/sales

Design/R&D/

Business scope

consulting

management

investment

30,000,000 electronics, corporate

development ofsoftware/hardware,

Computertechnologies

goods and

import/export ofsoftware/hardware;

1,000,000 of computer

capitalRegisteredamount at

4,500,000

1,000,000

the period

the end of

Yes

Yes

100

75

statements

subsidiary

1,500,000

interested

Minorityin theconsolidatfinancial

share
（%）

ratio

on theinvestment

net

constituting（%）

Continued table

minority shareholders

subsidiary shared by theowner’s equity of the

beginning balance ofsubsidiary exceeds theshareholders of thethe minority

current period borne by

by which the loss ofoffsetting the portion

company after

equity of parent

Balance of the owner’s

Note 11: This subsidiary was invested by another subsidiary Shanghai Neusoft Times Digital Technology Co., Ltd. with an equity ratio of 100%;

Note 10: This subsidiary was invested by another subsidiary Shenyang Neusoft IT Service Co., Ltd. with an equity ratio of 100%;

Note 9: This subsidiary was invested by the indirect holding subsidiary Beijing Neusoft Huiju Information Technology Co., Ltd. with an equity ratio of 100%;

Note 8: This subsidiary was invested by another subsidiary Liaoning Neusoft Venture Capital Investment Co., Ltd. with an equity ratio of 70%;

Note 7: This subsidiary was invested by another subsidiary Liaoning Neusoft Venture Capital Investment Co., Ltd. with an equity ratio of 70%;

Note 6: This subsidiary was invested by another subsidiary Shenyang Neusoft Medical Systems Co., Ltd. with an equity ratio of 99%;

Note 5: This subsidiary was invested by another subsidiary Shenyang Neusoft Medical Systems Co., Ltd. with an equity ratio of 80%;

Note 4: This subsidiary was invested by another subsidiary Shenyang Neusoft Medical Systems Co., Ltd. with an equity ratio of 100%;

Note 3: This subsidiary was invested by another subsidiary Shenyang Neusoft Medical Systems Co., Ltd. with an equity ratio of 100%;

profit/loss

minority

offsetused tointerestofminority

Votingit isEquityincludeditems

of other

Note 2: This subsidiary was invested by another subsidiary Neusoft Group（Beijing）Co., Ltd. with an equity ratio of 100%;

Note 1: This subsidiary is formerly known as Beijing Beyond Technology Co., Ltd.;（Note 21）

Technology Co., Ltd.

Tianjin Xikang Healthcare（Note 20）

Digital Technology Co., Ltd.

Shenzhen Neufashion

Subsidiary

Actualinvestment

AmountWhether

Balance119120Note 21: This subsidiary was invested by the indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. with an equity ratio of 75%.

Note 20: This subsidiary was invested by another subsidiary Guangdong Neufashion Digital Technology Co., Ltd. with an equity ratio of 100%; andNote 19: This subsidiary was invested by the indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. with an equity ratio of 100%;

Note 18: This subsidiary was invested by the indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. with an equity ratio of 100%;

Note 17: This subsidiary was invested by the indirect holding subsidiary Neusoft Xikang International Co., Ltd. with an equity ratio of 100%;

Note 16: This subsidiary was invested by the indirect holding subsidiary Neusoft Xikang Holding Co., Ltd. with an equity ratio of 100%;

Note 15: This subsidiary was invested by another subsidiary Neusoft Group（Hong Kong）Co., Ltd. with an equity ratio of 70%;

Note 14: This subsidiary was invested by another subsidiary Shenyang Neusoft Medical Systems Co., Ltd. with an equity ratio of 100%;

Note 13: This subsidiary was invested by the indirect holding subsidiary Beijing Neusoft Yuetong software Technology Co., Ltd. with an equity ratio of 100%;

Note 12: This subsidiary was invested by another subsidiary Liaoning Neusoft Venture Capital Investment Co., Ltd. with an equity ratio of 80.28%;

Neusoft Corporation
Annual Report 2011

FoshanChengdFoshan Nanhai Neusoft
Information Technology ConDevelopment Co., Ltd. trolled（Note 2）Chengdu Neusoft
Information Technology ConDevelopment Co., Ltd. trolled（Note 3）59,400,000

59,400,000

Computer software/hardware,development/rental/sales of
education courseware; real estate
60,000,000 development and sales; property
management; venue rental; IT,management talent training andconsulting

Limitedliability
company

Limitedliability
company

Investment/construction/
management of Nanhai Neusoft
60,000,000 Information Institute; IT,management talent education/
training and consulting

63,329,610

299,879,128

Computer software/hardware,technology consulting & service

Computer software development
Limitedand technology consulting;liability 359,000,000 property rental service; property
company
management; import/export ofgeneral goods and technologies

USD 1,000

Yes

Yes

Yes

Yes

100

100

100

60

99

99

100

100

100

Yes

Yes

Yes

100

100

Yes

100

100

1,590,049

657,401

248,450,289

Minority
interest

Balance of the owner’sequity of parent
company after
Amountoffsetting the portionofby which the loss ofminority
current period borne
interestby the minority
used toshareholders of theoffsetsubsidiary exceeds theminority
beginning balance ofprofit/loss
owner’s equity of thesubsidiary shared by
the minority

Note 3: This subsidiary was invested by another subsidiary Dalian Neusoft Park Industrial Development Co., Ltd. with an equity ratio of 99%.

Note 2: This subsidiary was invested by another subsidiary Dalian Neusoft Park Industrial Development Co., Ltd. with an equity ratio of 99%; andNote 1: This subsidiary was invested by another subsidiary Shenyang Neusoft IT Service Co., Ltd. with an equity ratio of 60%;

DalianWhollyU.S.A.
owned

Dalian Neusoft Park
ConIndustrial Development
trolledCo., Ltd.（Note 1）

Neusoft Science &Technology Co., Ltd.

Limitedliability
company

300,000,000

Limitedliability 300,000,000 Computer software/hardware
company

Neusoft Group（Dalian）Co., Ltd.

WhollyDalianowned

310,000,000

LimitedWhollyShenyang liability 310,000,000 Computer software/hardware
owned
company

Shenyang Neusoft IT
Service Co., Ltd.

1,000,000

1,000,000 Computer software/hardware

1,000,000

LimitedWhollyChengdu liability
owned
company

Business scope

Neusoft Group（Chengdu）Co., Ltd.

Registeredcapital1,000,000 Property management & service

Domicile Nature

LimitedWhollyShenyang liability
owned
companyType

Shenyang Neusoft
Property Management
Co., Ltd.

Subsidiary

Balance of
Whether it
Actualother items
is included
investment constituting Equity Votingin theamount atnet
ratio shareconsolidated
the end of investment （%） （%）
financial
the periodon thestatements
subsidiary

4.1.2 Subsidiaries obtained through business combination under common control

121

ConDaliantrolledLiaoning Neusoft
Venture Capital
Investment Co., Ltd.

Limitedliability
company

Limitedliability
company

Business scope

Limitedliability
company

Beijing Neusoft
ConViewhigh Technology
BeijingtrolledCo., Ltd. （Note 6）

SME venture capital investment& management

Development/design/production/
sales of computer software

27,790,000

15,000,000

ROL 94,000

ERU8,578

ERU1,025,000

10,390,275

ERU
1,017,600

ERU
2,857,600

ERU
6,029,000

15,119,513

80,552,833

9,454,820

Development/manufacturing ofcomputer software; sales of
114,101,440
products; technology support
serviceTechnology development,
consulting and sales of products

Computer software/hardware,technology consulting/service

Computer software/hardware,technology consulting/service

Computer software/hardware,technology consulting/service

Design, development,
manufacturing, service and29,646,100
sales of computer equipment
and software products

105,000,000

10,000,000

11,826,901

61.67

71.43

100

100

73.14

61.67

100

100

100

51

71.43

100

100

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

5,644,163

5,769,562

15,788,736

32,570,571

Note 6: This subsidiary（former Beijing Viewhigh Technology Co., Ltd.）was acquired by Neusoft Group （Beijing）Co., Ltd. with an equity ratio of 73.14%.

Note 5: This subsidiary was acquired by the Company with an equity ratio of 61.67%; andNote 4: This subsidiary was acquired by another subsidiary Neusoft （Europe）Co., Ltd. with an equity ratio of 100%;

Note 3: This subsidiary was acquired by another subsidiary Neusoft （Europe）Co., Ltd. with an equity ratio of 100%;

Note 2: This subsidiary was acquired by another subsidiary Neusoft （Europe）Co., Ltd. with an equity ratio of 100%;

Note 1: This subsidiary was acquired by another subsidiary Liaoning Neusoft Venture Capital Investment Co., Ltd. with an equity ratio of 51%；

Limitedliability
company

Beijing LBS Social
Insurance Information ConBeijing
Technology Co., Ltd. trolled（Note 5）

LimitedWhollyRoumania liability
owned
company

Neusoft Mobile
Solutions SRL（Note 4）

Limitedliability
company

WhollyFinlandowned

LimitedWhollyGermany liability
owned
company

Neusoft Mobile
Solutions Oy（Note 3）

Neusoft Technology
Solutions GmbH
（Note 2）

Kunming Neusoft
LimitedJinsha Information
ConKunming liability
Technology Co., Ltd. trolled
company（Note 1）

WhollyBeijingowned

Beijing Lanruisoft
Co., Ltd.

RegisteredcapitalLimitedliability JPY187,750,000 Computer software/hardware
company

Domicile Nature

Wholly
Japan
owned

Type

Neusoft （Japan）
Co., Ltd.

Subsidiary122
Balance of the owner’sequity of parent
company after
AmountBalance ofoffsetting the portionofActualother items
Whether it isby which the loss ofminority
investment constituting Equity Voting
included incurrent period borne
Minority
interest
amount atnet
ratio share the consolidated
by the minority
interest
used tothe end of investment （%） （%）
financialshareholders of theoffsetthe periodon thestatements
subsidiary exceeds theminority
subsidiary
beginning balance ofprofit/loss
owner’s equity of thesubsidiary shared by
the minority

4.1.3 Subsidiaries obtained through business combination under non-common control

Neusoft Corporation
Annual Report 2011

4.2 Notes to the changes in consolidation
4.2.1 There are 15 newly consolidated companies in this year including Neusoft Group（Wuhu）Co., Ltd., Guangdong Neufashion
Digital Technology Co., Ltd., Neusoft Group（Nanchang）Co., Ltd., Neusoft Group （Zhengzhou）Co., Ltd., Shengyang Neusoft Transportation Information Technology Co., Ltd., Neusoft Group（Nanjing）Co., Ltd., Beijing LBS Social Insurance Information Technology Co.,
Ltd., Beijing Neusoft Viewhigh Technology Co., Ltd., Neusoft Xikang Holding Co., Ltd., Neusoft Xikang International Co., Ltd., Neusoft Xikang Healthcare Technology Co., Ltd., Liaoning Neusoft Xikang Healthcare Co., Ltd., Shenyang Neusoft Xikang Medical Systems Co., Ltd.,
Shenzhen Neufashion Digital Technology Co., Ltd., Tianjin Xikang Healthcare Technology Co., Ltd.; and4.2.2 The subsidiary Beijing YYT Software Technology Co., Ltd. is not included in the consolidation in this reporting period due toliquidation.
4.3 Entities newly included in the consolidated financial statements
EntityNet assets at theNet profit ofend of this period

this period

Neusoft Group（Wuhu）Co., Ltd.（Note 1）

10,005,974

5,974

Guangdong Neufashion Digital Technology Co., Ltd.（Note 2）

34,668,829-2,831,171

Shengyang Neusoft Transportation Information Technology Co., Ltd.（Note 3）

6,287,199-713,442

Neusoft Group（Nanjing）Co., Ltd.（Note 4）

9,613,032-2,386,968

Neusoft Xikang Holding Co., Ltd.（Note 5）-32,236-357,490

Neusoft Xikang International Co., Ltd.（Note 6）

103,222-1,325,944

Neusoft Xikang Healthcare Technology Co., Ltd.（Note 7）

36,005,044-15,074,156

Beijing LBS Social Insurance Information Technology Co., Ltd.（Note 8）

15,051,031-1,039,841

Beijing Neusoft Viewhigh Technology Co., Ltd.（Note 9）

21,013,264

1,669,753

Liaoning Neusoft Xikang Healthcare Co., Ltd.（Note 10）29,995,111-4,889Neusoft Group（Zhengzhou）Co., Ltd.（Note 11）9,998,082-1,918

Shenyang Neusoft Xikang Medical Systems Co., Ltd.（Note 12）9,993,811-6,189Neusoft Group（Nanchang）Co., Ltd.（Note 13）

20,000,000

Shenzhen Neufashion Digital Technology Co., Ltd.（Note 14）

1,000,000

Tianjin Xikang Healthcare Technology Co., Ltd.（Note 15）

6,000,000

Note 1: This entity was invested by the Company in March 2011 with an equity ratio of 100% and included in the consolidated financial statements since the month of investment.
Note 2: This entity was invested by the Company in May 2011 with an equity ratio of 60% and included in the consolidated financial statements since the month of investment.
Note 3: The Company invested RMB 3,535,000 Yuan in July 2011 into this entity with an equity ratio of 50.5％ and included it in
the consolidated financial statements since the month of investment.
Note 4: The Company invested RMB 12 million Yuan in July 2011 into this entity with an equity ratio of 100％ and included it in the
consolidated financial statements since the month of investment.

123

Neusoft Corporation

Annual Report 2011

Note 5: The Company invested USD 35,000 in July 2011 into this entity with an equity ratio of 70％ and included it in the consolidated financial statements since the month of investment.
Note 6: This entity was acquired by the Company’s indirect holding subsidiary Neusoft Xikang Holding Co., Ltd. in July 2011 and included in the consolidated financial statements since the month of acquisition.
Note 7: The Company’s indirect holding subsidiary Neusoft Xikang International Co., Ltd. invested USD 8 million in July 2011 into
this entity with an equity ratio of 100% and it was included in the consolidated financial statements since the month of investment.
Note 8: The Company purchased 28.33% equity in this entity with RMB 5,390,300 Yuan in August 2011, totally holding 61.67% after adding up the 33.33% it held before. The entity was included in the consolidated financial statements since the month of purchase.
Note 9: Neusoft Group（Beijing）Co., Ltd. purchased 73.14％ equity in this entity（former Beijing Viewhigh Technology Co., Ltd.）
with RMB 114.1 Yuan in August 2011 and it was included in the consolidated financial statements since the month of purchase.
Note 10: The Company’s indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. invested RMB 30 million Yuan
in this entity with an equity ratio of 100% in October 2011 and it was included in the consolidated financial statements since the monthof investment.
Note 11: The Company invested RMB 10 million Yuan in this entity with an equity ratio of 100% in October 2011 and included it in
the consolidated financial statements since the month of investment.
124

Note 12: The Company’s indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. invested RMB 10 million Yuan
in this entity with an equity ratio of 100% in November 2011 and it was included in the consolidated financial statements since themonth of investment.
Note 13: The Company invested RMB 20 million Yuan in this entity with an equity ratio of 100% in November 2011 and included itin the consolidated financial statements since the month of investment.
Note 14: Guangdong Neufashion Digital Technology Co., Ltd. invested RMB 30 million Yuan in this entity with an equity ratio of
100% in December 2011 and it was included in the consolidated financial statements since the month of investment.
Note 15: The Company’s indirect holding subsidiary Neusoft Xikang Healthcare Technology Co., Ltd. invested RMB 4.5 million Yuan
in this entity（registered capital of 30 million）with an equity ratio of 75% in October 2011 and it was included in the consolidated financial statements since the month of investment.
4.4 There is no business combination under common control in this period.
4.5 Business combination under non-common control in this period
4.5.1 Overview（1）On the acquisition date August 31st, 2011, the Company purchased 28.33% equity in Beijing LBS Social Insurance Information
Technology Co., Ltd. （“BJ LBS”） with RMB 5,390,275 Yuan in cash. The recognition of fair value of the acquisition consideration isbased on the fair value of the net assets in the Asset Assessment Report（Report NO.: ZRJS 2010-1-032）issued by Beijing Zhongrunjingshi Asset Assessment Co., Ltd., which has been agreed upon by both the Company and BJ LBS. The Company held 33.33% equity in BJ
LBS before the acquisition. According to equity method, the book value of the investment was RMB 5,875,503 Yuan; the fair value ofthe 33.33% equity on the acquisition date was RMB 6,341,500 Yuan; and the investment income in the consolidated statements which
was re-measured and recognized based on fair value was RMB 465,997 Yuan. In addition, other changes in equity in the Company’s
long-term equity investment on BJ LBS with the amount of RMB 755,902 Yuan, which was confirmed before the acquisition, were recognized as investment income in the consolidated financial statements.
BJ LBS, established and headquartered in Beijing on January 16th, 2001, is a company specialized in technology development, consult-ing services and sales of products. It had no parent company or final controller before the acquisition. The acquisition date is determined
upon payment of over 50% equity is made whilst the process of register of change is finished.
Acquiree

Goodwill

Calculation method
The Company totally held 61.67% equity in BJ LBS（newly acquired 28.33% + 33.33% held before）; the acquisition cost and fair value of BJ LBS’identifiable net assets obtained by the Company

Beijing LBS Social
Insurance Information 1,809,071
Technology Co., Ltd.

on the acquisition date is RMB 11,731,775 Yuan and RMB 16,090,872 respectively. The differencewith amount of RMB 1,809,071 Yuan by which the acquisition cost exceeds the fair value of BJ
LBS’identifiable net assets obtained by the Company based on its equity ratio, is recognized as
goodwill.

Identifiable assets and liabilities of the Acquiree（BJ LBS）
Acquisition date

Item

Book value

Fair value

Current assets

15,472,729

15,472,729

Fixed assets

823,757

823,757

Intangible asset

287,930

287,930

Total assets

17,230,575

17,230,575

Total liabilities

1,139,703

1,139,703

Net assets

16,090,872

16,090,872（2）On the acquisition date August 31st, 2011, the Company’s subsidiary Neusoft Group（Beijing）Co., Ltd. acquired 73.14% equity of Beijing Viewhigh Technology Co., Ltd. （renamed as “Beijing Neusoft Viewhigh Technology Co., Ltd.”, “Neusoft Viewhigh” forshort, after the acquisition）with RMB 114,101,440 Yuan in cash. The recognition of fair value of the acquisition consideration is basedon the whole corporate value, which has been agreed upon by both the Company and Neusoft Viewhigh（Please refer to Neusoft Corporation’s announcement with NO. 2011-001 for details）. Neusoft Viewhigh, established and headquartered in Beijing in May 27th, 2003, isa company specialized in development, manufacturing and sales of computer software/hardware, technology support and service, commission agent（excluding auction）, export and import business. The controlling shareholder of Neusoft Viewhigh before the acquisition was
natural person Mr. Guo Xuewen.
The acquisition date is determined upon payment of over 50% equity interest is made whilst the process of register of change isfinished.
Acquiree

Goodwill

Calculation method
The Company acquired 73.14% equity in Neusoft Viewhigh with RMB 114,101,440 Yuan. The

Beijing Neusoft ViewhighTechnology Co., Ltd.

fair value of Neusoft Viewhigh’s identifiable net assets obtained by the Company on the acqui99,953,597 sition date is RMB 19,343,510 Yuan. The difference with amount of RMB 99,953,597 Yuan bywhich the acquisition cost exceeds the fair value of Neusoft Viewhigh’s identifiable net assets
obtained by the Company based on its equity ratio, is recognized as goodwill.

125

Neusoft Corporation

Annual Report 2011

Identifiable assets and liabilities of the Acquiree （Neusoft Viewhigh）
Acquisition date

Item

Book value

Fair value

Current assets

35,158,967

35,158,967

Fixed assets

457,648457,648

Intangible asset

217,806

217,806

Total assets

36,485,258

36,485,258

Total liabilities

17,141,748

17,141,748

Net assets

19,343,510

19,343,510（3）Financial situation of subsidiaries through business combination under non-common control after consolidation:

Acquiree126

Income from the

Net profit from theCash flow from theacquisition date to theacquisition date to theacquisition date to theend of this period

end of this period

end of this period

Beijing LBS

3,598,028-1,039,841

1,036,558

Neusoft Viewhigh

19,080,938

1,669,753

231,731

4.6 No subsidiary is lost as a result of losing control right through selling equity in this period.
4.7 There is no reverse acquisition in this period.
4.8 There is no merger in this period.
4.9 Exchange rate for financial statements of overseas entities
The foreign currency-dominated assets and liabilities in balance sheets of the Company’s overseas subsidiaries which were includedin the consolidated financial statements were translated at the spot exchange rate on the balance sheet date; all the other items under
the owners’equity except for“Undistributed Profits" were translated at the spot exchange rate on the date of the transactions. Income
and expenses in the income statement were translated at the average rate in the reporting period. Difference arising from the translationof foreign currency was separately presented under the item of owners’equities in the balance sheet.

Note 5 Notes to Main Items in Consolidated Financial Statements（Expressed in Renminbi unless otherwise indicated）
5.1 Monetary capital
Item

Year-end balance
Foreign currency

Translation rateYear-begin balance
RMB

Foreign currency

Translation rate

RMB

Cash
RMB

198,093

254,766

USD

2,000

6.300 912,602

1

6.622 77JPY

23,2990.081 103

1,890

205,5110.081 260

16,700Continued table
Item

Year-end balanceYear-begin balance

Foreign currency

Translation rate

Foreign currency

Translation rate

ERU

5,462

8.162 544,584HKD

1,392

0.810 7

1,128

967

0.850 9

823

AED

1,467

1.715 92,517

12,2361.812 922,183ROL

3,203

1.897 2

6,077

Subtotal

RMB

RMB

266,891

294,479

1,500,755,787

1,473,722,991

Bank deposit
RMB
USD

17,631,079

6.300 9111,091,666

11,890,672

6.622 778,748,353

JPY

1,112,200,915

0.081 103

90,202,831

1,200,795,563

0.081 260

97,576,647

ERU

3,461,400

8.162 528,253,678

3,050,726

8.806 5

26,866,219

HKD

1,294,766

0.810 7

1,049,667

283,8470.850 9241,525

SGD

499,0144.867 92,429,150

925,3425.119 1

4,736,918

CHF

1,619

6.728 7

10,894

146,133

7.056 2

1,031,144

ROL

229,574

1.897 2435,548

1,013,672

2.011 52,039,001

VND

304,611,815

0.000 391,384

460,171,165

0.000 339

155,998AED

986,564

1.715 91,692,845

97,1051.812 9176,042

CAD

69,053

6.177 7426,589

Subtotal

1,736,440,039

1,685,294,838

RMB

1,809,035

5,389,790

Subtotal

1,809,035

5,389,790

Total

1,738,515,965

1,690,979,107

Other currency

1）The balance of overseas deposited monetary capital at the end of this period is RMB 170,496,927 Yuan after translation.
2）Among other monetary capital at the end of this period, RMB 1,809,035 Yuan is Beijing LBS Social Insurance Information Technology
Co., Ltd.’s margin deposit, which was not recognized as cash or cash equivalent when preparing the cash flow statement.
5.2 Trading financial assets
Item

Year-end balanceYear-begin balance

Trading financial assets
Foreign exchange forward contracts（Note）
Total

863,170969,350

863,170969,350

Note: Foreign exchange forward contracts shall be calculated based on exchange rate quoted in the open market; estimated floating
income shall be included in income from change in fair value and presented as trading financial assets.

127

Neusoft Corporation

Annual Report 2011

5.3 Notes receivable
5.3.1 TypeType

Year-end balanceBanker’s acceptanceYear-begin balance

33,772,838

Commercial acceptance bill

2,442,407

Total

36,215,245

12,798,400

12,798,400

5.3.2 There is no pledged note receivable as of the end of this period;
5.3.3 There is no note that is converted into account receivable due to the drawer has no ability to perform the obligation and nonote endorsed by the Company but undue yet as of the end of this period;
5.3.4 There is no undue but discounted banker’s acceptance or commercial acceptance bill as of the end of this period;
5.3.5 Among notes receivable as of the end of this period, there is no note receivable from any shareholding company holding over
5%（including 5%）voting share of the Company.
5.4 Accounts receivable
5.4.1 Disclosure by type
128

Year-end balance
TypeBook balance
AmountYear-begin balance

Provision for bad debts

Ratio
（%）

AmountRatio（%）

Book balance
AmountProvision for bad debts

Ratio
（%）

AmountRatio（%）

Account receivable withsignificant single amountand single appropriation of

203,808,369

16.70

13,811,688

6.78

117,846,230

11.76

9,903,231

8.40

971,097,433

79.57

31,862,593

3.28

856,562,486

85.48

22,911,031

2.67

45,459,795

3.73

13,402,767

29.48

27,605,463

2.76

9,474,787 34.32

1,220,365,597 100.00

59,077,048

provision for bad debts
Account receivable withappropriation of provision
for bad debts by portfolio
Account receivable withinsignificant single amountbut single appropriation ofprovision for bad debts
Total

1,002,014,179 100.00

42,289,049

5.4.2 Account receivable with significant single amount and single appropriation of provision for bad debts
ProvisionBook

Account receivable fromamountChina Netcom

Appropriation

for baddebts

139,469,434

11,180,373

8.02

33,113,689

2,040,901

6.16

Liaoning Jinhui IT Service Co., Ltd.

16,074,138

253,094

1.57

Shenyang Metro Co., Ltd.

15,151,108

337,320

2.23

203,808,369

13,811,688

Nokia Siemens Networks Neusoft
Commtech Company Ltd.（“NSNN”）

Total

Reasonratio（%）

Significant amount with receivable proportionof over 90%
Significant amount with recoverable proportionof over 90%
Significant amount with recoverable proportionof over 95%
Significant amount with recoverable proportionof over 95%

Accounts receivable with appropriation of provision for bad debts by aging analysis method in portfolio:
Year-end balanceBook amountAge

Amount129

Year-begin balanceBook amount

Ratio

Provision for bad debts（%）

Amount

Ratio

Provision for bad debts（%）

Within 1 year

753,616,537

77.61

7,536,165

699,564,802

81.67

6,995,648

1-2 years

131,858,322

13.58

2,637,167

80,423,826

9.39

1,608,477

2-3 years

41,610,955

4.28

2,080,548

41,877,917

4.89

2,093,896

3-5 years

27,114,340

2.79

2,711,434

24,981,035

2.92

2,498,104

Over 5 years

16,897,279

1.74

16,897,279

9,714,906

1.13

9,714,906

Total

971,097,433

100.0031,862,593

856,562,486

100.0022,911,031

Account receivable with insignificant single amount but single appropriation of provision for bad debts
Account receivable forContract payment for software andsystem integration
Contract payment for software andsystem integration
Contract payment for software andsystem integration
Total

Book

Provision forAppropriation

amountbad debts

ratio（%）

6,697,327

6,697,327

100.005,849,575

3,317,221

56.71

32,912,893

3,388,219

10.29

45,459,795

13,402,767

ReasonAccount receivable with long age which is estimatedly unrecoverable
Account receivable with long age with recoverable
proportion of about 50%
Account receivable with long age with recoverable
proportion of about 90%

Neusoft Corporation

Annual Report 2011

5.4.3 Accounts receivable received in full or part amount in this period with appropriation of provision for bad debts in full amountor at large proportion in preceding year:

Account receivable from

Receivable

Provision for badbalance at

debts at thethe beginning

beginning ofof this year

this year

Qingdao Technicians College

ratio

Received amountin this period（%）

1,141,700

1,110,200

97.24

740,700

Heilongjiang Electric Power Company Limited

273,000

273,000

100.00273,000

Jinan Dezhou Power Plant Materials Company Limited

820,060

820,060

100.00820,060

Fujian Electric Power Company Limited

593,001

593,001

100.00593,001

Shanghai Toshiba Elevator Co., Ltd.

325,980

325,980

100.00325,980

Huangneng Dezhou Power Plant

210,000

210,000

100.00210,000

3,363,741

3,332,241

Total
130

Appropriation

2,962,741

5.4.4 There is no account receivable received through reorganization or other methods in this period;
5.4.5 Actual write-off accounts receivable:
Whether
Receivable from

Category

Write-offcaused by

Reasonamountrelatedtransaction

The Fifth People’s Hospital of
Hengyang, Hunan Province
Other

Sales payment

24,861 It is estimatedly unrecoverable.

Sales payment

325,750

Total

No

Estimatedly unrecoverable sales payment to the Company’s
subsidiary Shenyang Neusoft Boan Software Co., Ltd.

No

350,611

5.4.6 Accounts receivable from shareholder companies with over 5%（including 5%）voting share of the Company:
Receivable fromYear-end balanceYear-begin balanceBook amount

Provision for bad debts

Book amount

Provision for bad debts

Toshiba Corporation

4,616,409

46,164

6,825,586

68,256

Alpine3,982,428

39,824

720,348

7,203

100,000

50,0001,398,500

13,985

Baosteel Group Corporation（“Baosteel”）

5.4.7 Top 5 debtors of accounts receivable
Relationship
Debtor

Proportion to thewith theAmountAgetotal accounts

Company

receivable（%）

China Netcom

Non-related party

139,469,434

Within 1 year-Over 5 years

11.43

Shanxi Xingji Technology And Trade Co., Ltd.

Non-related party

47,394,000

Within 1 year

3.88

Sony

Non-related party

47,242,012

Within 1 year

3.87

HarmanRelated party

34,075,916

Within 1 year

2.79

NSNN

Related party

33,113,689

Within 2 years

2.71

301,295,051

Total

24.68

5.4.8 Accounts receivable from related parties
The accounts receivable from related parties is RMB 76,471,290 Yuan, accounting for 6.27% of the total, please refer to Note
7.4.12 for details.
5.4.9 Account receivable with terminated recognition due to transfer of financial assets:
Item
Shenyang Branch of China CITIC Bank Corporation Limited

131

AmountProfit or loss related to the termination

20,098,337

NA

Note: The account receivable with terminated recognition due to transfer of financial assets is caused by the non-recourse factoringbusiness between Shenyang Neusoft Medical Systems Co., Ltd. and Shenyang Branch of China CITIC Bank Corporation Limited.
5.5 Other receivables
5.5.1 Disclosure by type:Year-end balance
TypeBook balance
AmountRatio（%）

Year-beginning balance

Provision for bad debts
AmountRatio（%）

Book balance
Amount

Ratio（%）

Provision for bad debts
AmountRatio（%）

Accounts receivable with significant single amount and single appropriation of provision for bad

8,854,730

4.55

8,854,730

100.00165,647,630

85.13

4,227,351

2.55

176,766,721

99.19

4,739,469

2.68

20,086,790

10.32

2,020,606

10.06

1,447,777

0.81

1,135,109

78.40

194,589,150 100.00

15,102,687

178,214,498 100.00

5,874,578

debts
Accounts receivable with appropriation of provision for bad debts byportfolio
Accounts receivable with insignificant single amount and single appropriation of provision for bad
debts
Total

Neusoft Corporation

Annual Report 2011

5.5.2 Other receivables with significant single amount and single appropriation of provision for bad debts
Receivable fromBook amount

Sesca

Provision forAppropriation

bad debts

ratio（%）

8,854,730

8,854,730

Reason
It is estimatedly unrecoverable and provision for depreciation is100.00appropriated in full amount.

5.5.3 Other receivables with appropriation of provision for bad debts by aging analysis method in portfolio:
Year-end balance
AgeBook amountAmount132

Ratio（%）

Year-beginning balance

Provision for bad debts

Book amountAmountProvision for bad debts

Ratio（%）

Within 1 year

128,905,982

77.83

1,289,060

144,490,646

81.74

1,444,906

1-2 years

20,513,771

12.38

410,275

9,528,751

5.39

190,575

2-3 years

2,754,906

1.66

137,745

17,724,394

10.03

886,220

3-5 years

12,314,111

7.43

1,231,411

3,116,847

1.76

311,685

Over 5 years

1,158,860

0.70

1,158,860

1,906,083

1.08

1,906,083

Total

165,647,630

100.004,227,351

176,766,721

100.004,739,469

Appropriation of provision for bad debts in other receivables with insignificant single amount and separate impairment test:
Provision forAppropriation

bad debts

ratio（%）

Other receivables

Book amount

Revolving fund lending

16,644,588

1,810,069

10.87

Open credit

3,442,202

210,537

6.12

20,086,790

2,020,606

Total

Reason
It is estimated that the recoverable proportionis over 85%
It is estimated that the recoverable proportionis over 90%

5.5.4 Other receivables received in full or part amount in this period with appropriation of provision for bad debts in full amount orat large proportion in preceding year:
Provision for bad
Other receivables

Year-beginningdebts at thebalance

beginning ofReceived amount
Appropriation ratio（%）

periodthis year
Margin lending

in this reporting

1,136,162

990,12287.15

1,136,162

Revolving fund lending

713,547

634,032

88.86

713,547

Open credit

247,943

178,643

72.05

247,943

2,097,652

1,802,797

Total

2,097,652

5.5.5

Other actual write-off receivables:

Receivable

Category

from
Other

Write-off

Personal debt

256,828

Whether caused by

Reasonamountrelated transaction

Estimatedly unrecoverable personal debt to Shenyang Neusoft

No

Boan Software Co., Ltd.

5.5.6 There is no other receivable from Shareholding Company with over 5%（including 5%）voting share of the Company;
5.5.7 Top 5 debtors of other receivables
Proportion to

Relationship
Debtorwith theAmountAge

Company

the total other

Remarkreceivables（%）

Deposit for dealing with

China Merchants Bank Hong Kong Branch Non-related party 11,089,978 Within 1 year

5.70

Sesca（Note）

Non-related party

8,854,730 1-2 years

4.55 Open credit

Henan Provincial Bureau of Health

Non-related party

5,799,750 Within 1 year

2.98 Margin

Pishro Darman Saz Co., Ltd.

Non-related party

3,299,681 Within 1 year

1.70 Open credit

Non-related party

1,473,212 Within 1 year

0.75 Margin

Yunnan Provincial Research Institute ofMedical Informatics

30,517,351

Total

the letter of credit
133

15.68

Note: Impairment loss of this receivable has been appropriated in full amount in this reporting period;
5.5.8 Receivables from related parties
The accounts receivable from related parties is RMB 50,000 Yuan, accounting for 0.03% of the total, please refer to Note 7.4.12 fordetails;
5.5.9 There is no termination of recognition of other receivables in this period.
5.6 Prepayments
5.6.1 Presentation by age
AgeYear-end balance
AmountYear-beginning balance

Ratio（%）

AmountRatio（%)）

Within 1 year

55,337,045

96.55

42,366,359

81.68

1-2 years

1,434,498

2.50

6,020,193

11.60

2-3 years

250,5250.44

3,223,287

6.21Over 3 years

290,0190.51

266,0220.51

57,312,087

100.0051,875,861

100.00Total

Neusoft Corporation

Annual Report 2011

5.6.2 Top 5 prepayments
RelationshipPrepayment towith theAmountTerm

RemarkCompany
Oracle（China）Software System Co., Ltd.

Non-related party

7,098,892

Within 1 year

Contracted prepayment

H3C Technologies Co., Limited

Non-related party

6,594,111

Within 1 year

Contracted prepayment

Yuncheng Constant Magnetic Technology Co., Ltd.

Non-related party

5,800,000

Within 1 year

Contracted prepayment

Dalian Powerstar Power Company Limited

Non-related party

4,480,000

Within 1 year

Contracted prepayment

Dalian Yuming Electronic Engineering Co., Ltd.

Non-related party

4,092,386

Within 1 year

Contracted prepayment

28,065,389

Total

5.6.3 Among the prepayments at the end of this period, no Shareholding Company with over 5% （including 5%）voting share of
the Company owes any debt for prepayment.
5.6.4 Prepayment to related parties
134

The prepayment to related parties is RMB 2,571,900 Yuan, accounting for 4.49% of the total, please refer to Note 7.4.12 for details;
5.7 Inventories
5.7.1 Presentation by typeYear-end balance
Item

Book
amountYear-begin balance

provision for

Provisions forinventory

Book value

Book amountwrite-down

inventory

Book value

write-down

Raw materials

174,664,750

10,058,024

164,606,726

150,094,897

9,422,858

140,672,039

Work in process

354,575,117

13,071,448

341,503,669

301,332,722

8,629,468

292,703,254

Finished products

79,252,821

204,348

79,048,473

53,652,760

204,348

53,448,412

608,492,688

23,333,820

585,158,868

505,080,379

18,256,674

486,823,705

Total

5.7.2 Provision for inventory write-down

TypeYear-begin book balanceAppropriation
amountWrite-down amount
Reversed

Write-offYear-end book balance

Raw materials

9,422,858

635,166

10,058,024

Work in process

8,629,468

4,441,980

13,071,448

Finished products

204,348

Total

18,256,674

204,348
5,077,146

23,333,820

5.7.3 Depreciation provision for inventory write-down

Item

Raw materials

Work in process

Finished products

Proportion of reversed

Reason for reversion

Basisamount to year-endof the provisionbalance of the inventory

Provision for inventory write-down is made or adjusted at There is no reversion in
the lower one between the cost and net realizable value

0%

this period

Provision for inventory write-down is made or adjusted at There is no reversion in
the lower one between the cost and net realizable value

0%

this period

Provision for inventory write-down is made or adjusted at There is no reversion in
the lower one between the cost and net realizable value

0%

this period

5.8 Other current assets
Item

Year-end balance

Deferred business tax

Year-begin balance
7,293,081

4,656,766

Leasing expenses

337,391

472,575

Deferred property tax

289,335

264,031

6,343,029

4,920,141

14,262,836

10,313,513

Other（Note）
Total
Note: Other mainly refers to amortized heating expense.
5.9 Held-to-maturity investment
Item

Year-end balanceYear-begin balanceBank finance product（Note）

401,931,507

Total

401,931,507

Note: The Company purchased finance product from bank based on its financial situation. The investment has been recovered at theend of February 2012.
5.10 Long-term receivables
Year-end balance
Item

AmountRatio（%）

Year-begin balance

Provisionfor badNet value

Amount

debts

Ratio
（%）

Provisionfor badNet value

debts

Rental deposit（Note 1）

5,075,500

3.30

5,075,500

5,234,855

1.83

Instalment（Note 2）

42,830,601

27.88

826,061

42,004,540

67,825,066

23.67

1,011,857

66,813,209

105,745,047

68.82

2,114,900

103,630,147

213,493,174

74.50

2,134,932

211,358,242

153,651,148 100.00

2,940,961

150,710,187

286,553,095 100.00

3,146,789

283,406,306

Receivable from transfer
of assets（Note 3）
Total

5,234,855

135

Neusoft Corporation

Annual Report 2011

Note 1: This refers to the deposit paid by Neusoft （Japan）Co., Ltd. for rental which will be recovered upon the lease contract is terminated; Based on the operations of the subsidiary, the period when the contract will be terminated cannot be estimated precisely.
Note 2: This refers to receivable of Shenyang Neusoft Medical Systems Co., Ltd. from sales of products by instalment; and provision
for bad debt based on the age of the receivable is appropriated.
Note 3: This refers to the payment for transfer of assets by Chengdu Neusoft Information Technology Development Co., Ltd. to
Chengdu Neusoft Institute of Information Technology. The amount of this long-term receivable is RMB 2011105,745,047 Yuan; and theprovision for bad debt is RMB 2,114,900 Yuan.
5.11 Investment in joint ventures and associates
Equity Voting Total assets at Total liabilities Net assets at Total business
Investeeratio

Net profit inshare

the end of

at the end of

the end ofincome in this（%） （%）

the period

the period

the period

period

46.00

46.00

513,658,789

402,984,686

110,674,103

465,910,571

17,894,061

16.67

16.67

18,155,172

11,20818,143,964

151,293-5,037,182

49.00

49.00

540,092,308

149,404,722

390,687,586 1,062,264,293

70,916,509

49.00

49.00

239,884

3,337

236,547

45,290-332,420

20.00

20.00

1,694,253

292,765

1,401,488

3,397,864-598,512

30.00

30.00

19,086,153

8,292,517

10,793,636

40.00

40.00

21,221,510

834,640

20,386,870

840,418-2,240,630

30.76

30.76

18,906,472

7,351,046

11,555,426

17,430,591

775,418

this period

Associates
Nokia Siemens Networks Neusoft
Commtech Company Ltd.
136

Shenyang CataData Technology
Co., Ltd.
Philips-Neusoft Medical Systems
Co., Ltd.
Liaoning Shengjing Xikang HealthManagement Co., Ltd.
Chongqing Guo’ao 100 Years
Xikang Health Management Co., Ltd.
NEC Neusoft Information
Technologies Company Limited
Shengyang Toshiba Neusoft
Information Systems Co., Ltd.
AerotelMedical Systems（1998）Ltd.

-4,206,364

EquitymethodEquitymethodEquitymethodEquitymethodEquitymethodLiaoning Shengjing Xikang
Healthcare Co., Ltd.

Chongqing Guo’ao 100 Years
Xikang Health Management
Co., Ltd.

Shengyang Toshiba Neusoft
Information Systems Co., Ltd.

NEC Neusoft Information
Technologies Company Limited

Aerotel Medical Systems（1998）
Ltd.

3,238,091

8,154,748

212,290

115,908

11,073,220 11,073,220

3,238,091

8,154,748

212,290-162,886

6,332,370 -6,332,370

278,794

Cost
methodCostmethodCostmethodChengdu Neusoft Institute ofInformation Technology

Nanhai Neusoft Institute ofInformation Technology

Dalian Neusoft Information Services
Co., Ltd.
1,877,722

1,877,722

21,227,945 21,227,945

15,118,334 15,118,334

3,600,000

Cost
methodDalian Neusoft Institute ofInformation Technology
3,600,000

Cost
336,022,775 336,022,775
method45,352

Dalian Neusoft Institute ofInformation

45,352

Cost
method

1,877,722

21,227,945

15,118,334

3,600,000

336,022,775

45,352

197,270,444 235,891,011 34,313,920 270,204,931

10,390,275

10,675,548

4,500,000

9,051,000

400,000

490,000

Dalian WeaveSoft Co., Ltd.

Subtotal

Beijing LBS Social Insurance
Information Technology Co., Ltd.
（Note 1）Equity120,050,000 171,925,837 10,739,089 182,664,926
method-839,530 13,835,661

Philips-Neusoft Medical Systems
Co., Ltd.

15,000,000 14,675,191

EquitymethodShenyang CataData Technology
Co., Ltd.

26,713,621 42,678,819 8,231,268 50,910,087

EquitymethodYear-endbalanceNokia Siemens Networks Neusoft
Commtech Company Ltd.

Investee

InitialChange inYear-begin
Method investment
owners’balancecostequity5.12 Long-term equity investment

46.00
16.67
49.00
49.00

20.00

40.00
30.00
30.76

61.67

5.00
98.84
60.00
88.35
91.45
10.00

16.67
49.00
49.00

20.00

40.00
30.00
30.76

61.67

5.00
Direct:1.74
Indirect:97.10
60.00
Direct:17.47
Indirect:70.88
Direct:12.82
Indirect:78.63
10.00

6,050,000

24,010,000

24,010,000

Difference
AppropriatedVoting between Accumulated
provision for Cash dividend
share equity ratio provision for
impairment in this period（%） and voting impairment
in this period
share

46.00

Equity
ratio
（%）

137

3,350,000
3,000,000
100,000
347,358
3,000,000
27,600,000
24,934,400

CostmethodCostmethodCostmethodCostmethodCostmethodCostmethodCostmethodCostmethodBeijing Co-Create Open Source
Software Co., Ltd.

Beijing Shoufa Xin’an Data System
Technology Co., Ltd.

Dongzhong Commtech Co., Ltd.

Shenyang Torch Company Limited

Lotus Business Consulting Co., Ltd.

Tianjin Shenzhou General Data
Technology Co., Ltd.

Nanchang Biotech A&C Biotechnical Cost
Industry Incorporated Company
methodCostmethodBeijing Huada Infosec Technology
Co., Ltd.

Appconomy, Inc.

Beijing YYT Software technology
Co., Ltd.（Note2）

9.01

5.00

6.30

10.00

8.86

6.29

0.90

8.00

10.00

74.00

74.00

12,368,028

12,368,028

1,448,028

100,000

3,000,000

770,000

1,000,000

1,448,028

1,448,028

1,448,028

24,010,000

Difference
AppropriatedVoting between Accumulated
provision for Cash dividend
share equity ratio provision for
impairment in this period（%） and voting impairment
in this periodshare

13.3226 13.3226

9.01

5.00

6.30

10.00

8.86

6.29

0.90

8.00

10.00

Equityratio（%）2）Limitation to the ability of transferring capital to the investee: NA.

is recognized as impairment loss of long-term equity investment and included in current P&L.

investment of the long-term equity investment is RMB 2,989,600 Yuan; RMB 1,541,572 Yuan may be recovered estimatedly; the difference RMB 1,448,028 Yuan

Note 2: This company went into liquidation in this reporting period and was not included in the consolidated financial statements since July 2011. The initialments since August 2011 and no accounting by equity method will be made for BJ LBS as an associate.

Note 1: The Company acquired 28.33% equity in Beijing LBS in this period, totally holding 61.67% equity. BJ LBS was included in the consolidated state-1）Remarks642,659,930 625,756,497 89,837,920 715,594,417

2,989,600

Total

2,989,600

24,934,400 24,934,400

27,600,000 27,600,000

3,000,000

347,358

100,000

3,000,000

3,350,000

770,000

150,000

256,000

1,000,000

445,389,486 389,865,486 55,524,000 445,389,486

3,000,000

347,358

100,000

3,000,000

3,350,000

770,000

150,000

256,000

1,000,000

Subtotal

2,989,600

770,000

150,000

256,000

Cost
methodTianjin Dongtai Development
Co., Ltd.

1,000,000

Cost
methodDalian Neusoft Education Services
Co., Ltd.

InvesteeYear-endbalance

138

InitialChange inYear-begin
Method investment
owners’balancecostequityContinued table

Neusoft Corporation
Annual Report 2011

5.13 Investment property
Item

Year-begin balance

Increase

Decrease

Year-end balance

1. Original book value

525,029,863

14,868,562

539,898,425（1）Houses and buildings

452,306,650

14,862,941

467,169,591（2）Land use right

72,723,213

5,621

72,728,834

2. Accumulated depreciation and amortization

88,017,940

13,745,548

101,763,488（1）Houses and buildings

78,668,817

11,959,756

90,628,573（2）Land use right

9,349,123

1,785,792

11,134,915

3. Net value of investment properties

437,011,923

2,903,185 1,780,171

438,134,937（1）Houses and buildings

373,637,833

2,903,185

376,541,018（2）Land use right

63,374,090

1,780,171

61,593,919

5. Book value of investment properties

437,011,923

2,903,185 1,780,171

438,134,937（1）Houses and buildings

373,637,833

2,903,185

376,541,018（2）Land use right

63,374,090

4. Accumulated provisions for impairment of investment properties（1）Houses and buildings（2）Land use right139

1,780,171

61,593,919

5.13.1 The increase of accumulated depreciation and amortization is RMB 13,745,548 Yuan, of which, 13,294,350 Yuan is appropriated and 451,198 Yuan is transferred into depreciation due to re-classification.
5.13.2 For underlying security of investment properties as of December 31st, 2011, please refer to Note 5.31 for details.
5.14 Original price and accumulated depreciation of fixed assets
5.14.1 Fixed assets
Item

Year-begin balance

Increase

1. Original book value:

1,883,699,754

119,849,712

81,626,744

1,921,922,722

Including: Houses and buildings

1,356,084,769

24,660,776

31,122,837

1,349,622,708

Electronic equipment

321,865,524

67,814,492

41,242,536

348,437,480

Transportation equipment

16,389,141

2,473,889

2,508,532

16,354,498

Other equipment

189,360,320

24,900,555

6,752,839

207,508,036

Increase inthis period

Decrease

Year-end balance

Including:appropriationin this period

2. Accumulated depreciation:

451,725,684

115,875,583

115,031,451

42,830,401

524,770,866

Including: Houses and buildings

132,572,833

40,181,086

40,181,086

10,736,153

162,017,766

Neusoft Corporation

Annual Report 2011

Continued table
Item

Year-begin balance

Increase

Electronic equipment

223,722,915

50,894,585

50,050,453

25,998,802

248,618,698

Transportation equipment

9,578,151

2,571,998

2,571,998

2,236,688

9,913,461

Other equipment

85,851,785

22,227,914

22,227,914

3,858,758

104,220,941

1,676,173

36,498,387

1,397,151,856

35,906,994

1,187,604,942

3. Net book value of fixed assets

1,431,974,070

Including: Houses and buildings

1,223,511,936

Decrease

Year-end balanceElectronic equipment

98,142,609

Transportation equipment

6,810,990

369,953

6,441,037

103,508,535

221,440

103,287,095

2,325,001

574,087

1,750,914

2,294,105

545,649

1,748,456

30,89628,4382,458

36,469,949

1,395,400,942

35,906,994

1,187,604,942

Other equipment
4. Provisions for impairment

1,676,173

99,818,782

Including: Houses and buildings
Electronic equipment
140

Transportation equipment
Other equipment
5. Book value of fixed assets

1,429,649,069

Including: Houses and buildings

1,223,511,936

2,221,822

Electronic equipment

95,848,504

Transportation equipment

6,810,990

369,953

6,441,037

103,477,639

193,002103,284,637

Other equipment

2,221,822

98,070,326

RMB 115,031,451 is appropriated for depreciation of fixed assets in this period.
The original value of fixed assets transferred from construction in process is RMB 3,779,233 Yuan.
For underlying security of investment properties as of December 31st, 2011, please refer to Note 5.31 for details.
The increase of accumulated depreciation of fixed assets caused by change in consolidation range is RMB 844,132 Yuan.
5.14.2 There is no idle fixed asset as of the end of this period;
5.14.3 There is no leased fixed asset based on financing lease;
5.14.4 There is no leased fixed asset based on operating lease;
5.14.5 There is no hold-to-sale fixed asset as of the end of this period;
5.14.6 Fixed assets without property right certificates:
Item
House and building

Book value
270,881,609

ReasonRemarkThe application and approval procedures are in The certificates will be obtained after the
progress.

procedures are finished.

5.15 Construction in progress
5.15.1 Overview
Year-end balance
Project

Book amount

Provision for
impairment

Year-begin balanceBook value

Book amount

Provision for
impairment

Book value

Beijing Software Park

128,934,960

128,934,960

Shanghai Software Park

106,928,658

106,928,658

51,660,104

51,660,104

Guangzhou Software Park（Phase 1）

46,514,334

46,514,334

29,615,808

29,615,808

21,337,672

21,337,672

2,270,340

2,270,340

Reconstruction of dining hall in
Shenyang Software Park
Reconstruction of club in Shenyang
Software Park
Medical informationization system

2,659,595

2,659,595

502,011502,011

Hannan Software Park（Phase 1）

1,423,939

1,423,939

682,840

682,840

307,799,158

307,799,158

84,731,103

84,731,103

Total
5.15.2

Changes in construction in progress

Project

BudgetAccumu- Including:
Proportion
Interest
lated amount ofof project
capitaTransfer
rate of amountinterest
Year-begin Increase in
Otherinput tolization Capital
into fixed
progressofcapitalizabalance
this period
decreasetherate in source
assets（%） interesttionbudgetthis
capitain this（%）
periodlization
periodYear-endbalance

Beijing
Software Park

336,000,000

128,934,960

38

1

Owned
128,934,960
capitalShanghai
Software Park

192,860,014 51,660,104 55,268,554

55

90

Owned
106,928,658
capitalGuangzhou
SoftwarePark（Phase 1）

95,240,339 29,615,808 16,898,526

49

85

Owned
capital46,514,334

Reconstructionof dining hall in
Shenyang
Software Park

35,000,000

61

45

Owned
capital21,337,672

29

36

Owned
capital2,659,595

1,423,939

21,337,672

Medicalinformationization 11,950,392
system502,0112,948,117

Hannan Software
166,180,897
Park（Phase 1）

682,840

741,099

1

1

Owned
capital718,360 2,988,700

75

100

Owned
capitalReconstruction ofclub in Shenyang
Software Park
Total

4,000,000

2,270,340

790,533

841,231,642 84,731,103 226,847,288 3,779,233

307,799,158

141

Neusoft Corporation

5.15.3

Annual Report 2011

Schedule of major constructions in progress
Project

Rate of progress

Beijing Software Park

This project is being constructed with rate of progress of 1%

Shanghai Software Park

This project is being constructed with rate of progress of 90%

Guangzhou Software Park（Phase 1）

This project is being constructed with rate of progress of 85%

5.16 Intangible asset
Item

Increase

1. Original book value

618,754,840

65,121,493（1）Land use right

413,142,884

37,086,048（2）Property use right142

Year-begin book balance

Decrease
540,959

Year-end book balance
683,335,374
450,228,932

5,000,000

5,000,000（3）Purchased proprietary technology

177,559,324

23,726,237（4）Other

23,052,632

4,309,208

2. Accumulated amortization

229,715,421

25,163,072

254,878,493（1）Land use right

75,350,263

8,833,052

84,183,315（2）Property use right

1,750,000

500,000

2,250,000

144,230,931

9,317,036

153,547,967

8,384,227

6,512,984

14,897,211

3. Net book value of intangible asset

389,039,419

42,662,197（1）Land use right

337,792,621

28,252,996（3）Purchased proprietary technology（4）Other

201,285,561
540,959

3,244,735

26,820,881

428,456,881
366,045,617（2）Property use right

3,250,000（3）Purchased proprietary technology

33,328,393（4）Other

14,668,405

2,744,735

11,923,670

184,31944,079140,240（3）Purchased proprietary technology

44,07944,079（4）Other140,240

4. Provisions for impairment

500,000
14,409,201

2,750,000
47,737,594（1）Land use right（2）Property use right

140,240

5. Total of book value of intangible asset

388,855,100

42,706,276（1）Land use right

337,792,621

28,252,996（2）Property use right

3,250,000（3）Purchased proprietary technology

33,284,314（4）Other

14,528,165

3,244,735

428,316,641
366,045,617

500,000
14,453,280

2,750,000
47,737,594

2,744,735

11,783,430

5.16.1 All the decrease under the original book value of intangible asset is caused by change in exchange rate with overseas
subsidiaries.
5.16.2 The amortization amount of intangible asset is RMB 25,163,072 Yuan.
5.16.3 For underlying security of intangible asset as of December 31st, 2011, please refer to Note 5.31 for details.
5.17 Goodwill
ChangeInvestee or item forming goodwill

Year-beginbalance

Increase

Decrease

Provision forcaused byYear-end

exchangebalance

rate
Neusoft（Japan）Co., Ltd.（Note1）
Dalian Neusoft Finance Information Technology
Co., Ltd.（Note2）
Liaoning Neusoft Venture Capital Investment Co.,
Ltd. （Note3）
Beijing Lanruisoft Co., Ltd.（Note4）
Beijing YYT Software technology Co., Ltd.（Note5）

at the ofthe period

3,928,116

3,928,116

1,420,366

1,420,366

77,123

77,123

315,360

315,360

1,151,846

impairment

143

1,151,846

NMSG business and assets（including goodwill of
Neusoft Mobile Solutions Oy, former Almitas Oy

85,148,351-6,226,712

78,921,639

14,065,480

35,226-2,57632,65032,650

VND business and assets（Note8）

50,964,360-3,726,911

47,237,449

4,283,792

Taproot business and assets（Note9）19,482,458-946,661

18,535,797

6,472,744

and Neusoft Mobile Solutions SRL）
（Note 6）
Neusoft Technology Solutions GmbH（NTS）
（Note 7）

Beijing LBS Social Insurance Information
Technology Co., Ltd.（Note10）
Beijing Neusoft Viewhigh Technology Co., Ltd.
（Note11）
Total

1,809,071

1,809,071

99,953,597

99,953,597

162,523,206 101,762,668

1,151,846 -10,902,860 252,231,168

24,854,666

The Company conducted impairment test on goodwill at the end of this period; the present value of estimated future cash flow is adopted as the recoverable amount of related asset group and asset group portfolio. According to the Five-year Budget-based Cash Flow
Forecast approved by the Company’s managements, if the book value of goodwill is higher than the recoverable amount of related asset
group, the difference shall appropriated as provision for impairment of goodwill. RMB 8,981,071 Yuan is appropriated as impairment lossof goodwill with operations and assets of NMSG and Taproot. Other provision for impairment is subject to change in exchange rate.
Note 1: This Company invested into the subsidiary in June 2001 with an equity ratio of 60%. In December 2003, the Company ac-Neusoft Corporation

Annual Report 2011quired the remaining 40%. The difference by which the acquisition price exceeds the attributable net assets was recognized as equity investment difference and amortized by 10 years starting January 2004; On January 1st, 2007, according to the Accounting Standards for

Business Enterprises No. 38 - First Time Adoption of Accounting Standards for Business Enterprises, the Company presented the amortization of debit balance of the equity investment balance as of the end of 2006 as goodwill when preparing the consolidated financial statement.
Note 2: In April 2004, Neusoft （Japan） Co., Ltd. acquired 31% equity of this company. The difference by which the acquisition
price exceeds the attributable net assets was recognized as equity investment difference and amortized by 10 years since May 2004; On
January 1st, 2007, according to the Accounting Standards for Business Enterprises No. 38 - First Time Adoption of Accounting Standards
for Business Enterprises, the amortization of debit balance of the equity investment balance as of the end of 2006 was presented as goodwill when preparing the consolidated financial statements.
Note 3: On December 27th, 2004, the Company invested additional RMB 500 Yuan to acquire 4.76% equity in Liaoning Neusoft Venture Capital Investment Co., Ltd.. The difference by which the purchase price exceeds the fair value of identifiable net assets attributable
to the Company was presented as goodwill; On January 1st, 2007, according to the Accounting Standards for Business Enterprises No.
38 - First Time Adoption of Accounting Standards for Business Enterprise, the amortization of debit balance of the equity investment
balance as of the end of 2006 was presented as goodwill when preparing the consolidated financial statements.
144

Note 4: The Company acquired 14% equity in Beijing Lanruisoft Co., Ltd. in April 2007; the difference by which the purchase priceexceeds the fair value of identifiable net assets attributable to the Company was presented as goodwill when preparing the consolidated
financial statements.
Note 5: In October 2009, the Company’s indirect holding subsidiary Beijing Neusoft Yuetong software Technology Co., Ltd. acquired
74% equity in this company with RMB 2,990,000 Yuan; the difference by which the purchase price exceeds the fair value of identifiable
net assets attributable to Beijing Neusoft Yuetong software Technology Co., Ltd. was presented as goodwill when preparing the consolidated financial statements. Beijing YYT Software technology Co., Ltd. went into liquidation in this reporting period, the goodwill andlong-term equity investment are considered recoverable and provision for impairment of long-term equity investment is appropriated.
Note 6: In October 2009, Neusoft（Europe）Co., Ltd.（Neusoft Europe）acquired 100% equity in Sesca Mobile Software Oy（laterchanged for“Neusoft Mobile Solutions Oy”）, Almitas Oy（nullified in 2012 with all operations and employees merged into Neusoft Mobile Solutions Oy）and Sesca Technologies SRL（later changed for“Neusoft Mobile Solutions SRL”）, the consideration of the transactions
aggregated 9 million ERU, the difference by which the acquisition price exceeds the fair value of identifiable net assets was presented as
goodwill when preparing the consolidated financial statements. Because the key accounts, operations, management team of Neusoft Mobile Solutions Oy（including Almitas Oy）and Neusoft Mobile Solutions SRL are basically same, they are recognized as an asset group for
goodwill impairment test; Among the change amount of provision for goodwill impairment comparing with the beginning of the year,
RMB 4,551,431 Yuan was added for the provision after the impairment test; other was subject to change in exchange rate.
Note 7: In April 2010, Neusoft Europe acquired 100% equity in Johanna GmbH（later changed for“Neusoft Technology Solutions
GmbH”）; the consideration for this transaction aggregated 290,000 ERU; the difference by which the acquisition price exceeds the fairvalue of identifiable net assets attributable to Neusoft Europe was recognized as goodwill when preparing the consolidated financial statements.
Note 8: In June 2010, Neusoft Europe’s subsidiary in Germany, Neusoft Technology Solutions GmbH（NTS）, acquired the businessof Car Navigation System-related computer hardware, mechanical hardware and applications as well as all supporting tangible fixed assets, inventories, rights, contracts, labor contracts from its subsidiary Harman（collectively referred to as“VND Operations and Assets”）

with transaction consideration of ERU 6 million; the difference by which the acquisition price exceeds the fair value of its attributable net
assets was recognized as goodwill when preparing the consolidated financial statements; Based on the result of impairment test, no provision for goodwill impairment was appropriated in this reporting period. The change amount was subject to exchange rate.
Note 9: In February 2010, the Company’s wholly owned subsidiary Neusoft Science & Technology Co., Ltd. acquired the development
service business for high-end smart phone embedded software from the US-based Taproot System Inc. with transaction consideration of
USD 3.1 million; the difference by which the acquisition price exceeds the fair value of its attributable net assets was recognized as goodwill
when preparing the consolidated financial statements; Among the change amount of provision for goodwill impairment comparing withthe beginning of the year, RMB 4,429,640 Yuan was added for the provision after the impairment test, other was subject to change inexchange rate.
Note 10: In August 2011, the Company acquired 28.33% equity in Beijing LBS, totally holding 61.67% after that. The difference bywhich the combination cost exceeds the fair value of identifiable net assets, RMB 1,809,071 Yuan, was presented as goodwill when preparing the consolidated financial statements.
Note 11: In August 2011, the Company’s wholly owned subsidiary Neusoft Group（Beijing）Co., Ltd. acquired 73.14% equity in Beijing Viewhigh Technology Co., Ltd.（changed for“Beijing Neusoft Viewhigh Technology Co., Ltd.”after the acquisition）; the difference
by which the combination cost exceeds the fair value of identifiable net assets attributable, RMB 1,809,071 Yuan, was presented as goodwill when preparing the consolidated financial statements.

145

5.18 Long-term deferred expenses
Item

Year-begin balance

Increase

Decoration expense

38,346,103

8,714,705

Landscaping expense

8,565,073

Reconstruction of leased fixed assets for
operation
Other
Total

Amortization amount Decrease Year-end balance
8,607,314

38,453,494

3,442,646

5,122,427

3,099,456

725,415

1,009,534

2,815,337

4,906,575

4,132,293

1,735,980

7,302,888

54,917,207 13,572,413

14,795,474

53,694,146

5.19 Deferred income tax assets/liabilities
Deferred income tax assets and liabilities are not presented as net value after offsetting.
5.19.1 Recognized deferred income tax assets/liabilities
Item

Year-end balanceYear-begin balance

Government subsidy

15,889,963

9,922,524

Withholding expense

13,432,311

12,285,848

Appropriated impairment provision above the standard in the Tax Law of P.R. China

7,134,586

5,096,663

Provision for inventory write-down

2,312,947

1,805,233

Estimated liabilities

1,758,432

1,536,661

Deferred income tax assets:

Neusoft Corporation

Annual Report 2011

Continued table
Item

Year-end balanceYear-begin balance

Undue loss not offsetted

1,588,528

1,588,528

Impairment of long-lived assets

1,122,869

610,616

Change in fair value of assets

17,057

122,730

Depreciation of fixed assets and other asset amortization

10,144

19,721

Amortization of organization expense

6,259

Other

2,324,685

1,772,375

Subtotal

45,591,522

34,767,158

86,31796,9352,323,464

2,532,458

2,409,781

2,629,393

Deferred income tax liabilities:
Change in fair value of assets
Other
Subtotal
146
5.19.2 Taxable differences and deductible differences:
Item

AmountDeductible differences
Government subsidy

146,661,733

Withholding expense

125,696,411

Appropriated impairment provision above the standard in the Tax Law of P.R. China

54,536,844

Provision for inventory write-down

23,129,472

Estimated liabilities

15,686,425

Undue loss not offsetted

6,354,112

Impairment of long-lived assets

8,056,326

Change in fair value of assets

170,567

Depreciation of fixed assets and other asset amortization

70,396

Other

5,656,031

Subtotal

386,018,317

Deferred taxable differences
Change in fair value of assets

863,170

Other

15,489,758
Subtotal

16,352,928

5.20 Provision for asset impairment
Year-begin

Itembalance

Decrease

Increase

Reversed Write-off

Other (Note) Year-end balance

Provision for bad debts

51,310,416 25,898,767

Provision for inventory write-down

18,256,674

5,077,146

Provision for impairment of goodwill

17,642,750

8,981,071

Provision for long-term equity investment

10,920,000

1,448,028

Provision for impairment of fixed assets

2,325,001

574,087

1,750,914

184,31944,079140,240

Provision for impairment of intangible asset

607,439

77,120,696
23,333,820-1,769,155

24,854,666
12,368,028

100,639,160 41,405,012

Total

518,952

1,225,605-1,250,203

139,568,364

Note: Other refers to change subject to fluctuation of exchange rate.
5.21 Short-term borrowings
5.21.1 Type
Item

2011

2010

Debt of honor

470,000,000

160,000,000

5.21.2 There is no unpaid due short-term borrowing in this period.
5.22 Trading financial liabilities
Item

Year-end balanceYear-begin balance

Trading financial liabilities
Foreign exchange forward contract（Note）
Total

170,567

1,227,304

170,567

1,227,304

Note: Foreign exchange forward contract was calculated based on exchange rate quoted in the open market; estimated floating income was included in income from changes in fair value and presented under the tradable financial assets.
5.23 Note payable
5.23.1 Overview
TypeYear-end balanceBanker’s acceptanceYear-begin balance

83,204,957

145,564,320

5.23.2 The amount due in following accounting period is RMB 83,204,957 Yuan.
5.23.3 There is no note payable to related party.
5.24 Accounts payable
5.24.1 Overview
Item
Purchase payment

Year-end balance
543,996,141

Year-begin balance
566,932,526

147

Neusoft Corporation

Annual Report 20115.24.2 There is no account payable to Shareholding Company with over 5%（including 5%）voting share of the Company in this period.
5.24.3 Account payable to related parities at the end of this period is RMB 88,260,754 Yuan. Please refer to Note 7.4.12 for details.
5.24.4 Large-amount accounts payable with age of over 1 year
Relationship
Debtorwith theAmountRemarkCompany
Sihua Tech（Shanghai）Co., Ltd.

Non-related party

3,973,478 Unsettled project payment

European Aeronautic Defense and Space Company N.V.（EADS）

Non-related party

3,072,341 Unsettled project payment

Dawning Information Industry（Beijing）Limited

Non-related party

2,815,869 Unsettled project payment

Beijing Beichen Xintong Network Technology Service Co., Ltd.

Non-related party

2,726,467 Unsettled project payment

Beijing Jiaxun Feihong Electrical Co., Ltd.

Non-related party

2,644,168 Unsettled project payment
15,232,323

Total
5.25 Advance receipt
5.25.1 Overview
148

Item

Year-end balanceContract payment received in advanceYear-begin balance

452,920,955

437,504,595

5.25.2 Advance receipt from Shareholding Company with over 5%（including 5%）voting share of the Company
Advance receipt fromYear-end balance

Toshiba Corporation

Year-begin balance
16,382

553,188

5.25.3 Advance receipt from related parties
Advance receipt from related parties at the end of this period is RMB 3,640,710 Yuan; please refer to Note 7.4.12 for details.
5.25.4 Large-amount advance receipt with age of over 1 year:
Relationship
Debtorwith theAmountRemarkCompany
Harbin Lanke Technology Development Co., Ltd.

Non-related
party

Beijing Railway Construction and Management

Non-relatedCo., Ltd.

party

Gansu Branch of China National Tobacco

Non-related

Corporation

party

The 205th Hospital of People's Liberation Army

Non-related
party
Non-related

PT. Sani Tiara Prima

party
Total

6,913,000 Unsettled project payment for contract being performed
5,046,640 Unsettled project payment for contract being performed
3,547,090 Unsettled project payment for contract being performed
3,305,617 Unsettled project payment for contract being performed
3,181,822 Unsettled project payment for contract being performed
21,994,169

5.26 Employee pays payable
Item

Year-begin balance（1）wage, bonus, allowance and subsidy

193,187,114（2）Reward and welfare fund

18,314,894（3）welfare expense

Increase

Decrease

1,886,014,660

1,830,861,323

Year-end balance
248,340,451
18,314,894

240,601

28,432,246

28,460,889

211,958（4）social insurance premium

1,031,242

307,858,404

306,614,443

2,275,203

Covering: medical insurance

201,261

84,354,583

83,855,993

699,851

Basic pension insurance

374,491

156,954,907

157,046,480

282,918

Annuity359,704

8,538,440

8,072,887

825,257

unemployment insurance

82,652

19,979,355

19,768,569

293,438

Employment injury insurance

7,626

7,277,682

7,279,856

5,452

Maternity insurance

5,508

30,753,437

30,590,658

168,287-12,336

84,816,140

84,649,580

154,224

13,928,276

14,530,011

9,913,665

18,544,622

225,815

225,815

2,773,964

1,461,087

33,8524,201,199

229,463,755

2,323,338,363

2,260,759,567

292,042,551（5）Housing reserve（6）Labor union fund and employee education fund（7）Compensation for terminating labor relation（8）Retirement allowance
Total
5.26.1 There is no delinquent pay in this period;

5.26.2 The retirement allowance refers to the payment paid by Neusoft（Japan）Co., Ltd. for its employee retirement according tolocal applicable laws and regulations;5.26.3 Wage, bonus, allowance and subsidy payable have been given before March 2012.
5.27 Taxes payable
Item

Year-end balanceYear-begin balance

Corporate income tax

12,479,460-28,866,166

VAT

23,402,130

2,252,044

Business tax

15,111,631

13,581,853

Urban maintenance and construction tax

2,957,016

1,477,673

Other

13,616,855

12,239,922

67,567,092

685,326

Total

149

Neusoft Corporation

Annual Report 20115.28 Other accounts payable
5.28.1 Overview
Item

Year-end balanceYear-begin balance

Temporary receipt payable to other company

78,710,156

100,018,304

Withholding account payable

19,263,076

12,498,478

Deposit for property

14,905,894

15,094,534

Margin for construction or project

9,550,877

9,501,958

Temporary receipt payable to individual

2,263,291

768,533

Other

25,188,721

22,302,730

149,882,015

160,184,537

Total

5.28.2 Other account payable to Shareholding Company with over 5%（including 5%）voting share of the Company:
Payable toYear-end balance

Northeastern University, China
150

AlpineYear-begin balance

19,659,255

38,492,058

772,303772,3035.28.3 Other accounts payable to related parties
Other account payable to related parties at the end of this period is RMB 20,431,558 Yuan; please refer to Note 7.4.12 for details.
5.28.4 Other large-amount account payable with age of over 1 year:
Payable to
Northeastern University, China

AmountReason19,659,255

Based on related agreement

Remarks（Note）

5.28.5 Other account payable with large amount
Payable to
Northeastern University, China

AmountNature or content

19,659,255

Including: Temporary receipt for right assignment commitment 12,975,375 Committed but undue payment
Deferred payment for transfer of property

Remarks（Note）

6,683,880 Final instalment payment for transfer of property （Note）

Note: The temporary receipt for right assignment commitment（RMB 12,975,375 Yuan）refers to NEU Science & Technology Industry Co., LTD （NEU）’s cash payment for 8 properties and a plot of land without obtaining the ownership certificates yet after it merged
the Company in 2008. This payment will be refunded after the ownership certificates are obtained; and the deferred payment for transfer
of property refers to the final instalment payment for buying property from NEU in 2006 as contracted.

5.29 Estimated liabilities
Item

Year-begin balance

Product Quality Assurance

Increase

13,631,955

Decrease

Year-end balance

2,054,470

15,686,425

5.30 Non-current liabilities due within one year
Item

Year-end balanceLong-term account payable due within one year（Note）

Year-begin balance

0.00

136,060,526

Note: Chengdu Neusoft Information Technology Development Co., Ltd.（CD Neusoft Development）and Dujiangyan Qingcheng Information Industry Co., Ltd.（DJY QC）signed an agreement on September 27th, 2005, under which a special capital of RMB 180 million
Yuan was financed by Municipal Government of Dujiangyan by interest-free loan to CD Neusoft Development for its construction of Software Park in Qingchengshan region. On December 7th, 2010, CD Neusoft Development refunded RMB 40 million Yuan. According to the
Supplementary Agreement made by and between CD Neusoft Development and DJY QC in December 2010, CD Neusoft Development
shall refund RMB 80 million Yuan on April 9th, 2011 and 60 million on May 25th, 2011. CD Neusoft Development has refunded all theloans within this reporting period.
5.31 Long-term borrowings

151

5.31.1 Overview
TypeYear-end balance

Mortgage loan（Note）

Year-begin balance

104,000,000

129,000,000

Note: Dalian Neusoft Park Industrial Development Co., Ltd. mortgaged its land and property with book value of RMB 93,423,943 Yuan, of which the investment property is RMB 82,410,455 Yuan, fix assets is RMB 2,976,303 Yuan, and intangible asset is RMB 8,037,186
Yuan.
5.31.2 Top five long-term borrowings

Borrowing from

Term

Shengyang Nanhu Branch of

2007.06.11-

China Construction Bank

2015.06.11

Currency

RMB

Interestrate（%）

5.940

Year-end balance
Foreigncurrency

Year-begin balance

Local currency

Foreigncurrency

Local currency

104,000,000

129,000,000

5.32 Bonds Payable

Bond

Par value

Date of
issue

Term

AmountNeusoft Corporation’s
first tranche of medium- 400,000,000 2011.11.14 3 years 400,000,000
term notes in 2011

Interest
Accruedpayableinterest
at thein thisbeginning
periodof the year
3,658,667

Interest
paid in
thisperiodInterest
payableat theend ofthe yearYear-endbalance

3,658,667 403,658,667

Neusoft Corporation

Annual Report 2011

In this reporting period, based on the Proposal to Issue Short-term Financing Bonds and Medium-term Notes approved at the 2010
Meeting of Shareholders, the Company issued the first tranche of medium-term note in 2011 （Neusoft MTN 1/code:1182321） in inter-bank bond market on November 11th, 2011 by way of Book Building and concentrative allotment. Industrial Bank Co., Ltd. was thelead underwriter for this issuance with total amount of RMB 0.4 billion with a term of 3 years; the par value was RMB 100 Yuan per
notes. It is a fixed interest bearing instrument with an interest rate of 6.86%. The raised capital has been arrived in the account on November 14th, 2011; the provision for interest as of the end of the year was RMB 3.66 million Yuan. For more information about the issuance of the MTNs, please refer to www.chinamoney.com.cn or www.chinabond.com.cn.
5.33 Long-term accounts payable

Item

Year-begin

Termbalance

Operating fund for housing
Construction fund for Shenyang Neusoft IT
Talent Training BaseAccruedYear-endrate（%） interest

Interestbalance

Condition

14,609,431

14,609,431

2008.10.01-2018.10.01 120,000,000

120,000,000

134,609,431

134,609,431

Total（Note）

152
Note: This fund was borrowed from Administrative Committee of Hunnan New District, Shengyang in preceding year with use termof 10 years since October 1st, 2008 without paying any interest or any other fee. The Company shall refund RMB 24,000,000 Yuan as at
every October 31st within 5 year since 2013.
5.34 Other non-current liabilities
Item

Year-end balance

Deferred income（Note）
Other
Total

Year-begin balance

186,425,966

155,208,310

3,309,908

664,015

189,735,874

155,872,325

Note: Deferred income refers to income-related subsidy received from the government for compensating for relevant expenses in following years.
5.35 Share capital
Increase（+）/ Decrease（-）
Share
Item

Year-begin

Newlybalanceissuedshare

Share
dividend

Year-endtransferred
from

Other

Subtotal

surplusreserve

1. Shares with restrictive selling conditions（1）Share held by the state

121,838,079-121,838,079 -121,838,079（2）Share held by state-owned companies

216,361,562-216,361,562 -216,361,562

balanceContinued table
Increase（+）/ Decrease（-）
Share
Item

Year-begin

Newlybalanceissuedshare

Share
dividend

Year-endtransferred
from

Other

Subtotalbalancesurplusreserve（3）Share held by other domestic-funded
companies

382,071,106-382,071,106 -382,071,106

382,071,106-382,071,106 -382,071,106

180,023,293-180,023,293 -180,023,293

180,023,293-180,023,293 -180,023,293

900,294,040-900,294,040 -900,294,040

327,300,205

900,294,040 900,294,040 1,227,594,245

327,300,205

900,294,040 900,294,040 1,227,594,245

1,227,594,245

1,227,594,245

Including:Share held by domestically non-state
owned companies
Share held by domestically natural person（4）Share held by foreign companies
Including:Share held by foreign companies

153

Share held by foreign natural person
Subtotal
2. Shares outstanding without restrictive
selling conditions（1）RMB-dominated common share（2）Foreign share e listed in China（3）Foreign share listed overseas（4）Other
Subtotal
Total

On March 5th, 2011, the Company released its Announcement about the Issuance of Shares Outstanding with Restrictive Selling Con-

ditions in China Securities Journal and Shanghai Securities News, under which 900,294,040 shares outstanding held by shareholders including NEU Science & Technology Industry Co., Ltd. would be issued on March 14th, 2011. The Company’s total 1,227,594,245 capitalshares are all shares outstanding without restrictive selling conditions hereto.
On March 21st, 2011, the Company released it Suggestive Announcement about Equity Change and Equity Change Briefing in China Securities Journal and Shanghai Securities News, under which Chengdu Huixu Science & Technology Company Limited（“HX Sci-tech”）was
being put into compulsory liquidation. The Liquidation Program made by the liquidation group of HX Sci-tech was recognized after adjudication and the Company’s 210,807,559 shares held by HX Sci-tech was distributed based on its shareholders’equity ratio in HX Sci-tech.
April 1st, 2011, the Company released it Suggestive Announcement about Completion of Equity Change in China Securities Journaland Shanghai Securities News, under which Shanghai Branch of China Securities Depository and Clearing Corporation Limited has madeover the 210,807,559 shares originally held by HX Sci-tech to its 137 shareholders. No share of the Company is held by HX Sci-tech hereto.

Neusoft Corporation

Annual Report 20115.36 Capital reserves
Item

Year-begin balance

Increase

Decrease

Year-end balance

1. Capital share premium（share premium）

340,128,038

2. Other capital reserves（Note）

22,874,741

324

755,902

22,119,163

363,002,779

324

755,902362,247,201

Total

340,128,038

Note: The decrease of other capital reserves was caused by the Company’s business combination with Beijing LBS Social Insurance
Information Technology Co., Ltd.（BJ LBS）. After the combination, the other composite income with amount of RMB 755,902 Yuanpreviously included in capital reserves was recognized as investment income when consolidating the financial statements of BJ LBS.
5.37 Surplus reserves
Item

Year-begin balance

Increase

Decrease

Year-end balance

Statutory surplus reserve349,584,231

34,793,235

384,377,466

Arbitrary surplus reserve

194,929,630

17,396,618

212,326,248

544,513,861

52,189,853

596,703,714

Total

Note: The Company and domestic subsidiaries’policies for surplus reserves are as follows:
154

5.37.1 Statutory surplus reserve
According to the Company Law of the People’s Republic of China and the Company’s by-laws, the Company and its subsidiaries
shall appropriate their respective surplus reserves based on 10% of the after-tax profit of statutory accounts（after the losses in preceding year are offsetted） prepared according to the Accounting Standards for Business Enterprises; and the appropriation of the reserve
may be terminated if its balance aggregates 50% of the registered capital.
Statuary surplus reserve can be used to offset loss or increase capital upon approval. However, the balance after offsetting or transfer
shall not lower than 25% of the registered capital.
5.37.2 Arbitrary surplus reserve
After the statutory surplus reserves are appropriated, arbitrary surplus reserve shall be then appropriated based on the by-laws after
the appropriation proposal filed by the Board of Directors is approved by the Meeting of Shareholders. An amount of RMB 17,396,618
Yuan was appropriated as arbitrary surplus reserves of the Company and its subsidiaries at 5% the after-tax profit of statutory accounts（after the losses in preceding year are offsetted）prepared according to the Accounting Standards of Business Enterprises.
5.38 Undistributed profits
Item
Undistributed profits at the beginning of the year

AmountAppropriation/distribution rate

2,171,819,047

Add: Net profit attributable to the shareholders of the parent company

417,068,980

Less: Appropriated statutory surplus reserves

34,793,235

Please refer to Note 5.37

Appropriated arbitrary surplus reserves

17,396,618

Please refer to Note 5.37

2,536,698,174

13Common stock dividends payable
Common stock dividends transferred into capital share
Other
Undistributed profit at the end of this period

5.39 Operating income and cost
5.39.1 Operating income
Item

Amount in this period

Amount in previous period

Primary business income

5,681,821,459

4,720,773,137

Other business income

69,427,871

216,923,303

Total

5,751,249,330

4,937,696,440

5.39.2 Operating cost
Item

Amount in this period

Amount in previous period

Primary business cost

3,968,485,614

3,232,117,807

Other business cost

36,512,791

151,511,038

Total

4,004,998,405

3,383,628,845

5.39.3 Operating income & cost（by industry）:
Item

Amount in this period

Amount in previous period

Operating income

Operating cost

Operating income

Operating cost

4,830,519,072

3,476,555,703

3,876,980,401

2,724,331,275

Medical systems

803,436,708

486,024,807

793,799,786

495,381,828

Property management service and rental

108,831,844

36,999,793

259,297,915

158,448,967

8,461,706

5,418,102

7,618,338

5,466,775

5,751,249,330

4,004,998,405

4,937,696,440

3,383,628,845

System integration, sales of software products,
software customization and other labor services

Advertising
Total
5.39.4 Primary business income and costPrimary business income and cost（by industry）:

Item
System integration, sales of software products,

Amount in this period
IncomeCost

Amount in previous period
IncomeCost

4,830,111,571

3,476,259,142

3,876,978,301

2,724,331,275

Medical systems

739,011,299

450,972,804

741,808,389

468,613,895

Property management service and rental

104,236,883

35,835,566

94,368,109

33,705,862

8,461,706

5,418,102

7,618,338

5,466,775

5,681,821,459

3,968,485,614

4,720,773,137

3,232,117,807

software customization and other labor services

Advertising
Total

155

Neusoft Corporation

Annual Report 2011

5.39.5 Operating income from top 5 customers:
Customer

Operating income

Proportion to the total（%）

Sony

330,734,579

5.75

Nokia

240,001,827

4.17

China Netcom

220,864,984

3.84

Haman

206,724,653

3.59

Toshiba Corporation

164,878,360

2.87

1,163,204,403

20.22

Total
5.40 Business tax and surtax
Item

156

Amount in this period

Amount in previous period

Tax rate（%）

Business tax

73,204,360

70,827,892

5urban maintenance and construction tax

11,666,600

5,318,097

1-7

Educational surtax

9,816,712

3,123,856

2, 3

Other

1,418,015

1,925,335

96,105,687

81,195,180

Total
5.41 Sales expenses
Item

Amount in this period

Amount in previous period

Employee compensation

278,160,881

212,197,272

Transportation and business travel expenses

62,678,714

48,388,749

Advertising

48,043,707

39,723,746

Office materials

43,585,948

30,306,924

Entertainment expense

19,365,360

9,474,341

Rental and property management fee

6,252,920

6,343,166

Depreciation and amortization

5,848,673

4,897,512

Other

33,983,958

40,572,425

497,920,161

391,904,135

Total

5.42 Administrative expenses
Item

Amount in this period

Amount in previous period

Employee pay

459,790,468

365,382,578

Entertainment expense

60,590,196

60,403,411

Depreciation and amortization

65,556,233

66,402,268

Office materials

82,462,759

41,927,831

Transportation and business travel expenses

40,242,683

40,277,684

Rental and property management fee

32,015,989

33,773,823

Advertising

4,170,350

3,337,954

Other

75,129,147

102,411,126

819,957,825

713,916,675

Total
5.43 Financial expenses
Type

Amount in this period

157

Amount in previous period

Interest expenses

34,540,370

16,279,491

Less: Interest income

20,429,876

19,302,754

Profit or loss on exchange

6,278,727

1,219,820

Handling fee and other

3,259,975

1,446,694

23,649,196-356,749

Total
5.44 Income from changes in fair value
Cause
Trading financial assets - Foreign exchange forward contract

Amount in this period

Amount in previous period-106,180

532,990

1,056,737-1,227,304

950,557-694,314

Including: Income from changes in fair value caused by derivative financial instrument
Trading financial liability - Foreign exchange forward contract
Investment property measured by fair value
Total

Neusoft Corporation

Annual Report 20115.45 Investment income
5.45.1 Details
Item

Amount in this period

Amount in previous period

39,714,198

46,038,503-731,026

83,437

Income from long-term equity investment calculated by cost method
Income from long-term equity investment calculated by equity method
Investment income from disposal of long-term equity investment（Note 1）
Investment income obtained during the holding period of held-to-maturity

1,931,507

investment
Investment income obtained during the holding period of available-for-salefinancial assets
Investment income from disposal of trading financial assets
Investment income from disposal of available-for-sale financial assets
Other（Note 2）

1,221,899
42,136,578

Total

46,121,940

158
Note 1: Investment loss of RMB 731,026 Yuan was recognized in this period due to the liquidation of Beijing YYT Software technology Co., Ltd.
Note 2: This refers to that the Company purchased 28.33% equity in Beijing LBS Social Insurance Information Technology Co., Ltd.
（BJ LBS）, totally holding 61.67% after adding the 33.33% it holds before. BJ LBS was included in the consolidated financial statements
after the acquisition. The difference of RMB 465,997 Yuan between the investment cost before the acquisition and the fair value of identifiable net assets attributable to the Company was recognized as investment income. In addition, other composite income with theamount of RMB 755,902 Yuan previously included in capital reserve was recognized as investment income when consolidating the financial statements.
5.45.2 Long-term equity investment income calculated by equity method:

InvesteeAmount inthis period

Amount inprevious

Cause of change

periodNokia Siemens Networks Neusoft Commtech Company Ltd.

8,231,268

9,586,872 Change in net profit of investee

Beijing LBS Social Insurance Information Technology Co., Ltd.

-456,868-1,542,774 Change in net profit of investee

Shenyang CataData Technology Co., Ltd.

-839,530-324,809 Change in net profit of investee

Shengyang Toshiba Neusoft Information Systems Co., Ltd.

-896,252

Change in net profit of investee

Neusoft-Philips Medical Systems Co., Ltd.

34,780,482

38,165,939 Change in net profit of investee

Liaoning Shengjing Xikang Healthcare Co., Ltd.

-162,886

153,275 Change in net profit of investee

Chongqing Guo’ao 100 Years Xikang Health Management Co., Ltd.

-119,702

Change in net profit of investee

439,595

Change in net profit of investee-1,261,909

Change in net profit of investee

Aerotel Medical Systems（1998）Ltd.
NEC Neusoft Information Technologies Company Limited
Total

39,714,198

46,038,503

5.45.3 Note:
There is no significant limitation to the remittance of investment income.
5.46 Impairment losses on assets
Item

Amount in this period

Amount in previous period

Bad debt

25,898,767-13,931,157

Inventory write-down

5,077,146

1,632,507

Impairment of long-term equity investment

1,448,028

Impairment of investment property
Impairment of fixed assets
Impairment of construction supplies
Impairment of construction in progress
Impairment of intangible asset
Impairment of goodwill
Total

8,981,071

17,642,750

41,405,012

5,344,100

5.47 Non-operating income
5.47.1 Overview

Item

Amount inthis period

Amount in

Amount included inprevious

non-recurring profit & loss

periodof this period

Profits from disposal of non-current assets（Note 1）

21,660,226

18,735,735

21,660,226

Including: Profit from disposal of fixed assets

2,380,226

302,620

2,380,226

19,280,000

18,433,115

19,280,000

Government subsidies

105,173,354

109,335,552

105,173,354

VAT refund

32,253,175

29,001,189

Other（Note 2）

28,999,199

3,748,580

28,999,199

188,085,954

160,821,056

155,832,779

Profit from disposal of intangible asset

Total

Note 1: The profits from disposal of non-current assets are mainly composed of the transfer income with amount of RMB 19,280,000
Yuan from selling of patent technology and non-patent technology by Shenyang Neusoft Medical Systems Co., Ltd. to Nanchang Biotech
A&C Biotechnical Industry Incorporated Company.
Note 2: The Company subscribed the equity in U.S.A. Appconomy, Inc. with intangible asset - technology use right. The transfer
price of the intangible asset was recognized based on evaluated price and the amount of non-operating income was recognized as RMB
24,930,000 Yuan.

159

Neusoft Corporation

Annual Report 2011

5.47.2 Government subsidies

Item（1） Fund appropriation for scientific research （included in

Amount in thisperiodAmount in

Amount included inprevious

non-recurring profit & loss

periodof this period

58,128,282

53,518,252

58,128,282（2）Development fund for service outsourcing business

28,066,200

32,298,300

28,066,200（3）Industry supporting fund

3,598,709

6,466,991

3,598,709（4）Fiscally subsidized interest

2,416,600

4,274,100

2,416,600（5）Other government subsidies

12,963,563

12,777,909

12,963,563

Total

105,173,354

109,335,552

105,173,354

current profit and loss）

5.48 Non-operating expenses

Item

160

Amount inthis period

Amount in

Amount included inprevious

non-recurring profit & loss

periodof this period

Loss on disposal of non-current assets

2,748,601

2,540,307

2,748,601

Including: Loss on disposal of fixed assets

2,717,587

1,920,307

2,717,587

31,014620,000

31,014

Donation（Note）

1,136,014

3,205,474

1,136,014

Other

1,614,858

2,461,827

1,614,858

5,499,473

8,207,608

5,499,473

Loss on disposal of intangible asset

Total
Note: This refers to donation for Japan Earthquake in 2011.
5.49 Income tax
Item

Amount in this period

Amount in previous period

Income tax calculated by the Tax Laws and related regulations.

80,385,084

53,667,578

Adjustment of deferred income tax-11,043,976-864,746

69,341,108

52,802,832

Total
5.50 Calculation of Basic EPS and Diluted EPS
Formula:5.50.1 Basic EPS
Basic EPS = P0 ÷ S
S = S0 + S 1 + S i × M i ÷ M 0 - S j × M j ÷ M 0 - S k

PO means net profit attributable to the Company’s common shareholders or net profit attributable to them after deducting non-recurring profit and loss; S means weighted average number of ordinary shares outstanding; S0 means total shares at the beginning of thisperiod; S1 means increased shares transferred from capital reserve or stock dividends in this reporting period; Si means increased sharesfrom issuance of new shares or debt-to-equity swap in this reporting period; Sj means decreased shares caused by buy-back in this reporting period; Sk means shares of reserve stock split; M0 means the number of months in the reporting period; Mi means accumulated number of months from the following month of the share increase to the end of the reporting period; Mj means accumulated number ofmonths from the following month of the share decrease to the end of the reporting period.
5.50.2 Diluted EPS
Diluted EPS = P1 /（S0 ＋S1 ＋Si × Mi ÷ M0 - Sj × Mj ÷ M0 - Sk + weighted average number of increased ordinary shares from Warrants,
Stock Option and convertible bonds）
P1 means net profit attributable to the Company’s common shareholders or net profit attributable to them after deducting non-recurring profit and loss, which will be adjusted according to the Accounting Standards for Business Enterprises after considering the dilutive potential ordinary shares’influence on it. When calculating the diluted EPS, the Company shall consider the dilutive potential ordinary shares’influence on the net profit attributable to the Company’s common shareholders or net profit attributable to them after deducting non-recurring profit and loss and weighted average number of shares, and include it in diluted EPS in the order of high to low dilution degree, up to the minimum value of diluted EPS.
5.50.3

Basic EPS and Diluted EPS
161

EPS（Yuan）

Item

Basic EPS

Net profit attributable to the Company's common shareholders
Net profit attributable to Company's common shareholders after deducting non-recurring
profit and loss

Diluted EPS

0.34

0.34

0.23

0.23

5.50.4 Calculation process of basic EPS:
Item

FormulaAmountNet profit attributable to the Company's common shareholders

P0

417,068,980

Non-recurring profit and loss

F

130,261,411

P1 = P0 - F

286,807,569

Net profits attributable to Company's common shareholders after
deducting non-recurring profit and loss
Total shares at the beginning of this period

S0

Increased shares transferred from capital reserve or stock dividends

S1

Increased shares from issuance of new shares or debt-to-equity swap

Si

Accumulated number of months from the following month of theshare increase to the end of the reporting period
Decreased shares caused by buy-backAccumulated number of months from the following month of theshare decrease to the end of the reporting period

Mi
Sj
Mj

1,227,594,245

Neusoft Corporation

Annual Report 2011

Continued table
Item

FormulaAmountShares of reserve stock split

Sk

The number of months in the reporting period

M0

Weighted average number of ordinary shares outstanding

S = S0 + S 1 + S i × M i ÷ M 0 - S j × M j ÷ M 0 - S k

Basic EPSEPS = P0 / S

0.34

Basic EPS after deducting non-recurring profit and loss

EPS1 = P1 / S

0.23

12
1,227,594,245

5.50.5 The Company does not have dilutive potential common share outstanding, so the diluted EPS is equal to the basic EPS.
5.51 Other composite income

Item

162

Amount inthis period

Amount inprevious
period

1. Profit（loss）occurred by available-for-sale financial assets
Less: Related income tax
Net value previously included in other composite income and transferred into current
profit and loss
Subtotal
2. Attributable amount in other composite income of the investee calculated by equity
methodLess: Related income tax
Net value previously included in other composite income and transferred into current
profit and loss
Subtotal

755,902-755,902

3. Profit（loss）occurred by cash flow hedging instrument
Less: Related income tax
Net value previously included in other composite income and transferred into current
profit and loss
Adjustment of initially recognized amount of converted arbitraged items
Subtotal
4. Translation difference in foreign currency-dominated statements-21,844,159-7,899,412-21,844,159-7,899,412

Less: Net value transferred into current profit and loss when disposing overseas operations
Subtotal

Continued table
Amount in

Amount inItemprevious

this period

5. Other composite income attributable to minority shareholders（translation difference inforeign currency-dominated statements）
Subtotal

period186,776
186,776

6. OtherLess: Related income tax
Other Net value previously included in other composite income and transferred intocurrent profit and loss
Subtotal-22,413,285

Total-7,899,412

5.52 Note to the cash flow statement

163

5.52.1 Other cash receipt relating to operating activities
Item

AmountInterest income

20,074,310

Scientific research appropriation

84,352,442

Other transactions

236,628,998
341,055,750

Total
5.52.2 Other cash disbursement relating to operating activities
Item

AmountBusiness promotion expense

32,425,704

Transportation and business travel expenses

102,925,105

Energy, automobile consumption and material expenses

39,915,082

Office, network and telephone expenses

30,602,105

Training, consulting, seminar expenses

41,291,790

Rental and property management expense

25,210,351

Transportation and property insurance expenses

5,127,890

Other transactions

205,710,847
Total

483,208,874

Neusoft Corporation

Annual Report 2011

5.52.3 Other cash receipt relating to investment activities
Item

AmountInterest income of fixed deposit

355,566

The portion by which the reduced money capital paid for purchasing equity in the subsidiary is

1,239,678

less than the balance of the subsidiary’s monetary capital（Note）
Government investment and infrastructure construction allowance

14,310,000
15,905,244

Total

Note: The refer to the difference by which the reduced money capital paid for purchasing equity in Beijing LBS Social Insurance Information Technology Co., Ltd. （included in the consolidated financial statement after the purchase）is less than the balance of monetary
capital of Beijing LBS Social Insurance Information Technology Co., Ltd..
5.52.4 Other cash disbursement relating to investment activities
Item

AmountDividend income tax of subsidiaries withheld at the source

149,331Reduced monetary capital due to the subsidiary is not included in the consolidation（Note）

2,251,595

Total

2,400,926

164

Note: Beijing YYT Software technology Co., Ltd. is not included in the consolidation due to liquidation.
5.52.5 Other cash disbursement relating to financing activities
Item

Amount in this period

Underwriting expense and register service expense for issuing bonds

1,242,000
1,242,000

Total
5.53 Supplementary Information to cash flow statements
5.53.1 Supplementary information to cash flow statements
Item

Amount in this period

Amount in previous period

Net profit

423,545,552

507,302,496

Add: Provision for asset impairment

41,405,012

5,344,100

Depreciation of fixed assets and investment properties

128,325,801

151,634,147

Amortization of intangible asset

25,163,072

24,772,476

Amortization of long-term deferred expenses

14,795,474

12,614,781-18,911,625-43,338,675

1. The net profit is converted into cash flow from operating activities

Loss on disposal of fixed assets, intangible asset and other long-lived assets（“－”for profit）
Abandonment loss of fixed assets（“－”for profit）
Loss on change of fair value（“－”for profit）

119,196-950,557

694,314

Continued table
Item

Amount in this period

Amount in previous period

Financial expenses（“－”for profit）

41,705,531

15,279,240

Investment loss（“－”for profit）-42,136,578-46,121,940

Decrease of deferred income tax assets（“－”for increase）-10,824,364-851,455

Increase of deferred income tax liabilities（“－”for decrease）-219,612-13,291

Decrease of inventories（“－”for increase）-98,335,163-189,541,274

Decrease of operating accounts receivable（“－”for increase）-241,512,356-272,589,823

Increase of operating accounts payable（“－” for decrease）

38,146,417

216,585,238

300,196,604

381,889,530

Other
Net value of cash flow from operating activities
2. Significant investment and financing activities not relating to cash receipt
and disbursement
Debt conversion to equity
165

Convertible Bonds due within one year
Leased fixed assets from financing
3. Change in cash and cash equivalentYear-end cash balance

1,736,706,930

1,687,979,107

Less: Year-begin cash balance

1,687,979,107

1,615,989,046

48,727,823

71,990,061

Add: Year-end cash equivalent balanceLess: Year-begin cash equivalent balance
Net increase in cash and cash equivalents

5.53.2 Information relating to obtaining or disposing subsidiaries and other operating units

Item

Amount in thisAmount inperiodprevious period

1. Information relating to obtaining subsidiaries and other operating units:
1）Acquisition price

197,778,092

43,895,212

2）Cash and cash equivalent paid for the acquisition

172,843,692

43,895,212

21,038,926

28,794,277

3）Net cash received from subsidiaries and other operating units

151,804,766

15,100,935

4）Net assets obtained from the subsidiaries

35,434,382

29,921,677

Current assets

50,631,696

32,649,843

Non-current assets

3,084,138

215,065

Less: Cash and cash equivalent held by subsidiaries and other operating units

Neusoft Corporation

Annual Report 2011

Continued table
Item
Current liabilities

Amount in thisAmount inperiodprevious period

18,281,452

2,943,231

Non-current liabilities
2. Information relating to disposing subsidiaries and other operating units:
1）Disposal price

12,920,000

2）Cash and cash equivalent received from the disposal

12,920,000

Less: Cash and cash equivalent held by subsidiaries and other operating units3）Net cash received from disposal of subsidiaries and other operating units

12,920,000

4）Net assets from disposal of subsidiaries
Current assets
Non-current assets
166

Current liabilities
Non-current liabilities
5.53.3 Composition of cash and cash equivalent:

Item
1. CashIncluding: Cash on handBank deposit which can be used for payment at anytime

Amount in

Amount inthis periodprevious period

1,736,706,930

1,687,979,107

266,891

294,479

1,736,440,039

1,685,294,838

Other money capital which can be used for payment at anytime

2,389,790

2. Cash equivalent
Including: Bond investment due within three months
3. Ending balance in cash and cash equivalents
Note: Cash and cash equivalent with use limitation are not covered.

Note 6 There is no accounting treatment for asset backed securitization.

1,736,706,930

1,687,979,107

Wang Jingxi

Liu Jiren

LimitedWhollyliability
Shenyangowned
company

LimitedWhollyliability
U.S.A.
owned
company

Shenyang Shenyang Neusoft
Property Management Co., Ltd.

Neusoft Science & Technology
Co., Ltd.

Wang Jingxi

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

LimitedWhollyliability
Shenyangowned
company

LimitedWhollyliability
Xi’an
owned
company

LimitedWhollyliability
Nanjingowned
company

LimitedWhollyliability
Shanghaiownedcompany

LimitedWhollyliability
Shanghaiownedcompany

LimitedWhollyliability
Hangzhouowned
company

Shenyang Zhuri Digital Advertising
Communications Co., Ltd.

Xi’an Neusoft System Integration
Co., Ltd.

Nanjing Neusoft System Integration
Co., Ltd.

Shanghai Neusoft Times Digital
Technology Co., Ltd.

Neusoft Group（Shanghai）Co., Ltd.

Hangzhou Neusoft Co., Ltd.

Liu Jiren

Wang Yongfeng

LimitedWhollyliability
Shenyangowned
company

Shenyang Neusoft IT Service
Co., Ltd.

LimitedShenyang Neusoft Medical Systems Wholly
liability
ShenyangCo., Ltd.
owned
company

Wang Yongfeng

LimitedWhollyliability
Dalianowned
companyLegalrepresentative

Neusoft Group（Dalian）Co., Ltd.

Domicile

Wang Jingxi

Type

LimitedWhollyliability
Chengduowned
companyType

Neusoft Group（Chengdu）Co., Ltd.

Name

7.1 Subsidiaries:

Note 7 Related Party and Related Transactions

50

Computer software/hardware,technology consulting and service

2,000

Computer software/hardware

10,0001,200

Computer software/hardware

Computer software/hardware,technology consulting and service

2,500

Computer software/hardware

Ad production/publicity

100

100

100

100

100

100

100

100

7,800

Medical systems

100

USD 1,000

100

100

Computer software/hardware,technology consulting & service

31,000Computer software/hardware

100

100

30,000Computer software/hardware

100

Equity
ratio
（%）

100

100

100

100

100

100

100

100

100

100

100

100

Votingshare（%）

68908449-3

68095364-8

70333930-x

72173264-x

72628571-1

24376645-7

70208754-2

72091468-7

78872654-3

79202132-7

78812157-9

Organization
Code（Unit: RMB 10,000 Yuan）

Property management & service

100

RegisteredcapitalComputer software/hardware

Business scope

167

Computer software/hardware

Computer software/hardware

Computer software/hardware,technology consulting and service

Computer software/hardware

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

Wang Yongfeng

LimitedWhollyliability
Wuhan
owned
company

LimitedWhollyliability
Qingdaoowned
company

LimitedWhollyliability
Chengduowned
company

LimitedWhollyliability
Shenzhenowned
company

LimitedWhollyliability
Guangzhou Liu Jiren
owned
company

Liu Jiren

LimitedWhollyliability
Changshaowned
company

LimitedWhollyliability
Guangzhou Wang Yongfeng
owned
company

Wang Yongfeng

LimitedWhollyliability
Tianjinowned
company

LimitedWhollyliability
Dalianowned
company

LimitedWhollyliability
Japan
owned
company

LimitedWhollyliability
Hong Kong Liu Jiren
owned
company

Neusoft Group（Tianjin）Co., Ltd.

Hunan Neusoft Co., Ltd.

Wuhan Neusoft Information
Technology Co., Ltd.

Shandong Neusoft System
Integration Co., Ltd.

Chengdu Neusoft System
Integration Co., Ltd.

Shenzhen Neusoft Co., Ltd.

Guangdong Neusoft Co., Ltd.

Neusoft Group（Guangzhou）
Co., Ltd.

Dalian Neusoft Finance Information
Technology Co., Ltd.

Neusoft（Japan）Co., Ltd.

Neusoft（Hong Kong）Co., Ltd.

Computer software development/
sales/consulting

Computer software/hardware

Computer software/hardware

Computer software/hardware

Computer software/hardware

Computer software/hardware

Computer software/hardware

Development/design/production/
sales of computer software

Lu Zhaoxia

LimitedWhollyliability
Beijingowned
company

Computer software/hardware
and related products

Business scope

Beijing Lanruisoft Co., Ltd.

Legal
representative

Wang Yongfeng

Domicile

LimitedWhollyliability
Beijingowned
companyType

Neusoft Group（Beijing）Co., Ltd.

Type

168

Name

USD 850,000

JPY 187,750,000

USD 3 million

10,000

2,000

500

2,000

1,500

1,500

1,200

2,000

1,000

25,000Registeredcapital100

100

Direct:69
Indirect:31

100

100

100

100

100

100

100

100

100

100

Equity
ratio
（%）

100

100

100

100

100

100

100

100

100

100

100

100

100

70219661-8

67972637-6

73144432-6

19236465-x

72539482-8

70620482-2

74143252-1

18378979-5

69740643-x

78398520-4

77545727-6

Organization
Code

Continued table
Votingshare（%）

Neusoft Corporation
Annual Report 2011

Limited
Whollyliability
Shenyangowned
company

Shenyang Neusoft System
Integration Technology Co., Ltd.

Wang Yongfeng

Wang Yongfeng

LimitedWhollyliability
Zhengzhou
owned
company

LimitedWhollyliability
Nanchangowned
company

Neusoft Group（Zhengzhou）
Co., Ltd.

Neusoft Group（Nanchang）
Co., Ltd.

1,000

2,000

Computer hardware R&D,
technology consulting/service, etc.

700

Development and sales ofcomputer hardware and software

Computer service & consulting

Wang Yongfeng

Limitedliability
Shenyang
company

3,750

Shengyang Neusoft Transportation ConInformation Technology Co., Ltd.
trolled

1,000

Computer software/hardware
development & service

Wang Yongfeng

LimitedWhollyliability
Wuhu
owned
company

Neusoft Group（Wuhu）Co., Ltd.

Development and sales ofcomputer hardware and software

2,000

Computer software/hardware,technology consulting/service

Wang Yongfeng

LimitedWhollyliability
Wuxi
owned
company

Neusoft Group（Wuxi）Co., Ltd.

Limitedliability
Guangzhou Lu Zhaoxia
company

10,000Computer software/hardware,technology consulting/service

Wang Yongfeng

LimitedWhollyliability
Hannanowned
company

Neusoft Group（Hannan）Co., Ltd.

Guangdong Neufashion Digital Tech- Connology Co., Ltd.
trolled

3,000

Computer software/hardware,technology consulting/service

Lu Zhaoxia

LimitedWhollyliability
Tangshanowned
company

Neusoft Group（Tangshan）
Co., Ltd.

CHF 37,900,000

Computer software/hardware,technology consulting and service

LimitedWhollyliability
Switzerland Liu Jiren
owned
company

10,500

Neusoft（Europe）Co., Ltd.

SME venture capital investment& management

2,000

Computer software/hardware,technology consulting and service

Controlled
Liu Jiren

1,000

USD 2.5 million

RegisteredcapitalComputer software development& network integration

Computer software/hardware

Business scope

Liaoning Neusoft Venture Capital
Investment Co., Ltd.

Limitedliability
Daliancompany

Xu Hongli

LimitedQinhuangliability
dao
company

Controlled

Qinhuangdao Neusoft Co., Ltd.

Wang Yongfeng

Wang YongfengLegalrepresentative

Domicile

Limitedliability
Shenyang
company

Type

ControlledType

Shenyang Neusoft Boan SoftwareCo., Ltd.

Name

169

100

100

50.5

60

100

100

100

100

100

71.43

100

85

60

Equityratio（%）

57175470-3

56176638-0

55737352-5

55330512-x

71578937-5

67533650-6

60128505-6

71114763-1

100

100

50.5

58657721-X

58288499-2

573458836

60 6057403343-4

100

100

100

100

100

71.43

100

85

60

Organization
Code

Continued table
Voting
share
（%）

Type

Domicile

Klaus Zimmer

LimitedWhollyliability
Germany
owned
company

Neusoft Technology Solutions GmbHHKD 1 million

USD 8 million

IT and related consulting
Computer software/hardware,development of electronic
products, corporate investment
management and consulting

Lu Zhaoxia

Lu Zhaoxia

Lu Zhaoxia

Lu Zhaoxia

LimitedWhollyliability
Beijingowned
company

LimitedWhollyliability
Shenyangowned
company

LimitedWhollyliability
Shenyangowned
company

LimitedWhollyliability
Shenzhenowned
company

Neusoft Xikang Healthcare
Technology Co., Ltd.

Liaoning Neusoft Xikang HealthcareCo., Ltd.

Shenyang Neusoft Xikang Medical
Systems Co., Ltd.

Shenzhen Neufashion Digital
Technology Co., Ltd.

100

1,000

Development of medical system,computer software/hardware;
health management andconsulting
Development and sales ofcomputer hardware and software

3,000

Healthcare information
management & consulting;development of management
service/system

USD 50,000

LimitedWhollyliability
Hong Kong Zhao Hongowned
company

IT and related consulting

Neusoft Xikang International
Co., Ltd.

Liu Jiren

LimitedWhollyCaymanliability
owned
Islands
company

Neusoft Xikang Holding Co., Ltd.

2,779

ERU 10,250,000

ROL 90,000

ERU 8600

1,500

1,200

RegisteredcapitalControlled

Development and sales/wholesaleof computer hardware andsoftware; technology support,
import/export agent

Computer software/hardware,technology consulting/service

Computer software/hardware,technology consulting/service

Computer software/hardware,technology consulting/service

Technology development,
consulting and sales of products

Development and sales ofcomputer hardware and software,technology consulting, etc.

Business scope

Beijing Neusoft ViewhighTechnology Co., Ltd.
Lu Zhaoxia

Klaus Zimmer

LimitedWhollyliability
Roumania
owned
company

Neusoft Mobile Solutions SRL

Limitedliability
Beijingcompany

Klaus Zimmer

LimitedWhollyliability
Finlandowned
company

Hu Weiwei

Wang YongfengLegalrepresentative

Neusoft Mobile Solutions Oy

Limitedliability
Beijingcompany

Whol- Limitedlyliability
Nanjingowned company

Beijing LBS Social Insurance Informa- Contion Technology Co., Ltd.
trolledNeusoft Group（Nanjing）Co., Ltd.

Type

170

Name

100

100

100

100

100

70

73.14

100

100

100

61.67

100

Equity
ratio
（%）

100

100

100

100

100

70

73.14

100

100

100

61.67

100

58790030-6

58387954-6

58385530-9

57515244-3

75010398-1

80204827-6

57593939-3

Organization
Code

Continued table
Votingshare（%）

Neusoft Corporation
Annual Report 2011

Domicile

Controlled

Controlled

Controlled

Controlled

Controlled

Controlled

Neusoft Positron Medical Systems
Co., Ltd.

Beijing Neusoft Huiju Information
Technology Co., Ltd.

Shenzhen Neusoft Mobile Terminal
Design Co., Ltd.

Beijing Neusoft Yuetong software
Technology Co.,Ltd.

Dalian Neusoft Park Industrial
Development Co., Ltd.

Foshan Nanhai Neusoft Information
Technology Development Co., Ltd.

Jiang Genmiao

Jiang Genmiao

Rong Xinjie

Chen Ximin

Wang Limin

Liu Jiren

Liu Jiren

Limitedliability
Shenyang
company
Limitedliability
Shenyang
company
Limitedliability
Beijingcompany
Limitedliability
Shenzhencompany
Limitedliability
Beijingcompany
Limitedliability
Daliancompany

Limiteliability
Foshancompany

Liu Jiren

LimitedWhollyliability
U.S.A.
owned
company

Neusoft Medical System U.S.A. Inc.

Controlled

Jiang Genmiao

LimitedWhollyliability
Shenyangowned
company

Shenyang Neusoft Medical Systems
Import & Export Co., Ltd.

Shenyang Neusoft Spectrum MRI
Technologies Co., Ltd.

Wang Yongfeng

LimitedWhollyliability
Tianjinowned
company

Lu Zhaoxia

Legal
representative

Tianjin Neusoft Technology Co., Ltd.

Limitedliability
Tianjincompany

Type

ControlledType

Tianjin Xikang Healthcare
Technology Co., Ltd.

Name

500

USD 4 million

Import & export of goods andtechnologies
R&D/manufacturing of medical
systems, technology consulting& service1,500

35,9006,000

Computer software development
and technology consulting;property rental service; property
management; import/export ofgeneral goods and technologies
Investment/construction/
management of Nanhai Neusoft
Information Institute; IT,management talent education/
training and consulting

500

2,665

3,500,000 USD

Computer software/hardware &service

Development & sales ofelectronics technologies,
technology consulting

Computer software/hardware,technology service

Development and manufacturingof PET systems, technology
consulting/service

1,000

500

Computer software/hardware,system integration, technology
consulting

R&D and manufacturing of
Low-filed permanent magnet
products, MRI technology
development and consulting

3,000

RegisteredcapitalComputer software/hardware,development of electronic
products, corporate investment
management and consulting

Business scope

171

99

60

70

70

80.28

99

80

100

100

100

75

Equity
ratio
（%）

99

60

70

70

80.28

99

80

100

100

100

75

73500424-8

74090764-4

69230700-2

68537951-8

66217772-9

78005017-1

73464528-976439265-7

78639469-6

58975520-2

Organization
Code

Continued table
Votingshare（%）

Domicile

Controlled

LimitedUnitedWhollyliability
Arab
owned
company Emirates

Kunming Neusoft Jinsha
Information Technology Co., Ltd.

Neusoft Medical Systems（Middle
East）Co., Ltd.

Limitedliability
Kunmingcompany

LimitedNeusoft Yuetong software Technolo- Wholly
liability
Daliangy（Dalian）Co., Ltd.
owned
company

Limitedliability
Beijingcompany

Computer software/hardware,system integration, technology
consulting

Computer software/hardware

Recruitment process outsourcing& talent hunting service

Computer software/hardware,development/rental/sales of
education courseware; realestate development and sales;
property management; venue
rental; IT, management talenttraining and consulting

Business scope

Jiang Genmiao

Shan Zhenglong

Medical systems, technology
consulting/service

Design, development,
manufacturing, service and salesof computer equipment andsoftware products

Computer software/hardware

Cheng- Computer software development
and service

Ma Ximing

Wang
peng

Wang Yongfeng

LimitedWhollyliability
Hefei
owned
company

Hefei Neusoft Information
Technology Co., Ltd.

Controlled

Wang Yongfeng

LimitedWhollyliability
Dalianowned
company

Dalian Neusoft BPO Service co., Ltd.

Beijing YYT Software technology
Co., Ltd.

Song Li

LimitedWhollyliability
Beijingowned
company

Beijing InBridge Consulting Co., Ltd.

Liu Jiren

Legal
representative

Controlled

Limitedliability
ChengducompanyType

Chengdu Neusoft Information
Technology Development Co., Ltd.

Type

172

Name

USD 3.5 million

2,965

500

100

50

500

10

6,000

Registeredcapital

100

51

100

74

100

100

100

99

Equity
ratio
（%）

100

51

100

74

100

100

100

99

21663341-3

55981522-7

76679629-2

77735490-8

69600028-6

69231782-5

74031031-1

Organization
Code

Continued table
Votingshare（%）

Neusoft Corporation
Annual Report 2011

Dalian

Shenyang

Shenyang

Shenyang

Chongqing

DalianIsraelShenyang

Limitedliability
company
Limitedliability
company
Limitedliability
company

Limitedliability
company
Limitedliability
company
Limitedliability
company
Limitedliability
company

Shenyang CataData Technology Co., Ltd.

Neusoft-Philips Medical Systems Co., Ltd.
（”Neusoft-Philips”）

Liaoning Shengjing Xikang HealthcareCo., Ltd.（“SJ XK”）

Chongqing Guo’ao 100 Years Xikang
Health Management Co., Ltd.

NEC Neusoft Information Technologies
Company Limited

Aerotel Medical Systems（1998）Ltd.

Shenyang Toshiba Neusoft Information
Systems Co., Ltd.（Toshiba Neusoft）

Domicile

Limitedliability
companyType

Nokia Siemens Networks Neusoft
Commtech Company Ltd.

Investee

7.2 Joint ventures and associates

MasahikoyabuuchiDavid Rubin

Tohru Miwa

Zhang Jingdong

Xian Jianfei

Liu Jiren

Dongyanchun

Zhangzhiqiang

Legal
representative

Registeredcapital

USD 7 million

RMB 12
million Yuan

USD 29.6
million Yuan

RMB 1
million Yuan

RMB 2
million Yuan

RMB 50
million Yuan

ILS 35,000

USD 3.5
millionBusiness scope

Mobile application products
and solutions
Development and sales ofcomputer software andhardware
R&D, manufacturing andsales of CT equipment
Development of healthscience and technology
projects; healthmanagement service
Development of healthscience and technology
projects; healthmanagement service
Development and sales ofcomputer hardware andsoftware
Remote medical diagnosis,
healthcare solutions
Development and sales ofcomputer hardware andsoftware

173

40.00

30.77

30.00

20.00

49.00

49.00

16.67

46.00

Equity
ratio
（%）

40.00

30.77

30.00

20.00

49.00

49.00

16.67

46.00

Votingshare（%）

Associate

Associate

Associate

Associate

Associate

Associate

Associate

Associate

Relation

57349218-8

57088436-2

57342964-8

69651276-7

76007551-5

55079395-7

71699395-x

Organization
CodeNeusoft Corporation

Annual Report 2011

7.3 Other related parties
Other related party

Relation

NEU Science & Technology Industry Co., Ltd.（“NEU”） Shareholder with over 5% equity in the Company
Alpine Electronics, Inc., Alpine Electronics（China）

Shareholder with over 5% equity in the Company, where

Co., Ltd.（“Alpine”）

the Company’s directors take important position

Organization
Code
11772782-8

Toshiba Solutions Corporation（“Toshiba Corporation”） Shareholder with over 5% equity in the Company
Baosteel Group Corporation
Nanhai Neusoft Institute of Information Technology

Chengdu Neusoft Institute of Information Technology

Dalian Neusoft Institute of Information

Shareholder with over 5% equity in the Company
Education organization jointly established by the Company
and its subsidiary
Education organization jointly established by the Company
and its subsidiary
Education organization jointly established by the Company
and its subsidiary

13220082-1
74919300-0

74963918-0

76544538-6

174
Dalian Neusoft Institute of Information Technology

Education organization established by the Company

Dalian Neusoft Education Services Co., Ltd.

Holding subsidiary owned by the education organization（“DL Neusoft Education”）

established by the Company

42244491-2
75155503-1

Harman International Industries, Incorporated and its The Company's chairman and CEO serves as director at
subsidiaries（Collectively referred to as“Harman”）
Dalian Neusoft Holding Co., Ltd.

Chengdu Neusoft Co., Ltd.（”CD Neusoft”）

HarmanThe Company's chairman and CEO serves as Chairman of
the Board at Dalian Neusoft Holding Co., Ltd.
Wholly owned subsidiary owned by the education organization jointly established by the Company and its subsidiary

58203862-2

55643276-5

7.4 Related-party transactions
7.4.1 Transactions among the subsidiaries that are controlled by the Company and included in the consolidated financial statements
and between such subsidiaries and the Company have been offsetted.

7.4.2 Related transactions from purchase of products and labor service
Amount in this period

Amount in previous period

Proportion
Related party

Type

Content

PricingAmountto similartransaction

Proportion
Amount（%）

Neusoft-Philips

Purchase

Purchase

NSNN

Raw material or

Negotiation basedof products finished products on market priceRaw material or

Negotiation basedof products finished products on market price363,490,009

67.39

7,906,916

0.69

54,0000.03

to similartransaction（%）

446,580,509

78.14

Payment for
Purchase

NEU

training andof products technology

Negotiation basedon market priceservice fees

CD Neusoft

NEU

Dalian Neusoft
Institute of Information
Technology
Chengdu Neusoft
Institute of Information
Technology

SJ XK
Total

175

Labor

Payment for

Negotiation based

servicelabor service

on market price

Labor

Payment for

Negotiation based

servicelabor service

on market price

Labor

Payment for

Negotiation based

servicetraining fee

on market price

Labor

Payment for

Negotiation based

servicetraining fee

on market price

Labor

Payment for

Negotiation based

serviceservice fee

on market price

5,090,855

0.69

108,000

0.01

12,0000.002

376,661,780

1,464,496

0.46

380,000

0.12

620,000

0.19

1,718,800

0.54

450,763,805

Neusoft Corporation

Annual Report 2011

7.4.3 Related transactions from product sales and provision of labor service

Related party

Type

Content

PricingAmount in this period

Amount in previous period

Proportion

Proportion

Amountto similartransaction

Amount（%）
Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Neusoft Information

Product

System integration

Negotiation based on

Institutesales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

System integration

Negotiation based onsales

or software

market price

Product

Materials and

Negotiation based on

sales

accessories

market price

HarmanToshiba Corporation

NSNN

Alpine176

Dalian Neusoft Instituteof Information
Technology
Chengdu Neusoft
Institute of Information
Technology
CQ Guo’ao 100 Years
Nanhai Neusoft
Institute of Information
Technology
BaosteelToshiba Neusoft

Neusoft-Philips

Neusoft Information
Institute

Provisionof labor

Training service

service

Dalian Neusoft Institute Provisionof Informationof labor

Technology

service

Training service

Negotiation based onmarket price

Negotiation based onmarket priceto similartransaction（%）

206,724,653

4.28

95,361,624

2.46

164,878,360

3.41

156,733,219

4.04

132,531,471

2.74

117,083,320

3.02

109,640,721

2.27

100,441,334

2.59

10,967,200

0.23

11,467,200

0.30

5,000,000

0.10

5,345,000

0.14

3,933,333

0.08

5,150,000

0.13

3,522,802

0.07

1,500,000

0.03

3,774,466

0.10

291,000

0.04

3,282,653

0.08

265,364

0.01

27,736,915

3.38

33,577,350

4.14

13,697,000

0.28

12,536,000

0.32

7,200,000

0.15

7,482,000

0.19

Continued table

Related party

Type

Content

PricingAmount in this period

Amount in previous period

Proportion

Proportion

to similar

Amounttransaction

to similar

Amounttransaction（%）
Provision Rental and property
Neusoft-Philipsof labor

management

service

incomeProvision
Alpineof labor
servicemarket price

Rental and propertyof labor

Management service

service
Provision

Neusoft Informationof labor

Institute

Negotiation based on

management income market price

Provision
Neusoft-Philips

Negotiation based on

Negotiation based onmarket price

Negotiation based onService fee

market priceservice（%）

10,935,815

10.05

15,582,006

15.54

8,691,478

7.99

8,391,259

8.37

4,012,657

0.08

3,200,956

0.08

600,000

0.01

600,000

0.02

712,128,769

Total

580,008,387

7.4.4 There is no related-party trusteeship in this period.
7.4.5 There is no related-party contract in this period.
7.4.6 Related leasing

LessorLesseeLeased

Asset

asset

amountStart date Finish date

Income26,174,59 2011.01.01 2011.12.31

8,691,478

Recognition
basis

Dalian Neusoft Park
Industrial
Development

AlpineProperty

Lease
agreement

Co., Ltd.

Neusoft Corporation Neusoft-Philips Property

Neusoft Corporation Neusoft-Philips Property

5,814,803 2011.09.01 2012.08.31

33,718,538 2005.07.01 2012.08.31

343,077

7,562,184

Shenyang Neusoft
Medical Systems
Co., Ltd.

Neusoft-Philips Property

16,689,355 2011.01.01 2011.12.31

3,030,554

Leaseagreement

Lease
agreement

Lease
agreement

Treatment

100% of the rental
is recognized aslease income
100% of the rental
is recognized aslease income
100% of the rental
is recognized aslease income
100% of the rental
is recognized aslease income

177

Neusoft Corporation

Annual Report 2011

7.4.7 Related guarantee

Warrantor

Warrantee

AmountStart date

Expiration
date

Whether the
performance of the
grantee is finished

Neusoft Corporation

Dalian Neusoft Institute of Information

RMB 50 million Yuan

2012.03.19 2014.3.19

No

Neusoft Corporation

Dalian Neusoft Institute of Information

RMB 50 million Yuan

2012.11.07 2014.04.20

No

Neusoft Corporation

Dalian Neusoft Institute of Information

RMB 50 million Yuan

2012.12.14 2014.12.13

No

Note: these guarantees are jointly and severally liable.
7.5 Other related-party transaction（Unit: RMB 10,000 Yuan）
Item

Amount in this period

Amount in previous period

1,551.34

1,010.30

Benefits and compensations to directors, supervisors and senior executives
178

7.6 Borrowing to related party
There is no borrowing to related party in this period.
7.7 There is no asset transfer and debt restructuring of related party in this period.
7.8 Other related transaction
In 2010, Chengdu Neusoft Development transferred it assets to Chengdu Neusoft Institute of Information Technology with total
price of RMB 213,493,174 Yuan paid by installment based on People’s Bank of China’s benchmark interest rate for loan. Chengdu Neusoft Institute of Information Technology repaid RMB 107,748,127 Yuan in this period. The balance is RMB 105,745,047 Yuan. Chengdu
Neusoft Development’s recognized interest income in this period is RMB 9,946,738 Yuan.
7.9 Related-party accounts receivable and payable
Year-end balance
Item

Related party

Year-begin balance

Including:Amountappropriation for

Including:Amountimpairment

appropriation for
impairment

accounts receivable
Harman34,075,916

340,759

24,364,840

243,648

NSNN

33,113,689

2,040,901

31,857,976

2,760,339

Toshiba Corporation

4,616,409

46,164

6,825,586

68,256

Alpine3,982,428

39,824

720,348

7,203

CQ Guo’ao 100 Years

320,400

3,204

Toshiba Neusoft

261,233

2,612

Baosteel

100,000

50,0001,398,500

13,985

Continued tableYear-end balance
Item

Related party

Year-begin balance

Including:AmountIncluding:appropriation for

Amountimpairment
Neusoft-Philips
Total

appropriation for
impairment

1,215

12

9,967,920

99,72676,471,290

2,523,476

75,135,170

3,193,157

Prepayments receivable
Dalian Neusoft Institute of Information

1,333,333

1,333,333

1,000,000

1,000,000

1,000,000

1,000,000

Harman290,995

1,232,545

Toshiba Corporation

16,382

553,188

Technology
Chengdu Neusoft Institute of Information
Technology
Nanhai Neusoft Institute of Information
Technology

Alpine179

357,017
Total

3,640,710

5,476,083

Notes receivable
Baosteel

1,100,000

Other receivable
Nanhai Neusoft Institute of Information
Technology

50,000500

15,980,200

159,802105,745,047

2,114,900

213,493,174

2,134,932

Long-term receivable
Chengdu Neusoft Institute of Information
Technology
Account payable
Neusoft-Philips

88,260,754

149,496,216

NSNN

2,571,900

NEU

19,659,255

38,492,058

Alpine772,303772,303

20,431,558

39,264,361

Prepayment

Other accounts payable

Total

Neusoft Corporation

Annual Report 20117.10 Related-party commitment
1）Listed company/Shareholding Company’s commitment in or due in this reporting period
Commitment made by the Company’s original shareholders of shares outstanding with restrictive selling conditions in the
Share-for-Share merger:
Commitment

Content

made by

PerformanceThis commitment was made for 8 properties and a plot of land for which
NEU Science &Technology
Industry Co.,
Ltd.（NEU）

the Company didn't obtain the ownership certificates as at September 30th,
2007. As NEU committed, provided that the certificates was not obtained as
at December 31st, 2008, NEU should pay cash equivalent to the evaluated
net value of the properties and land（base day: December 31st, 2006）, which（excluding interest）would be refunded by the Company after obtaining thecertificates.

NEU has paid RMB 12,975,375 Yuan in
cash. The Company is dealing with theapplication procedures for the certificates and will refund the money （excluding interest） after the certificatesare obtained.

2）Contracted but not necessarily presented commitments with respect to related parties as at the balance sheet date:

180

Type
Sales of products to related party

Provision of labor service for related party

Content

Related party

Amount at the endof this period

System integration or software

Alpine4,366,919

System integration or software

Harman4,359,166

System integration or software

Toshiba

19,493,248

System integration or software

Toshiba Neusoft

2,914,356

System integration or software

NSNN

47,179,171

Subtotal

78,312,860

Neusoft-Philips

5,727,741

Subtotal

5,727,741

Rental and property management income

Total

84,040,601

Note 8 Share-based Payment
There is no share-based payment in this reporting period.

Note 9 Contingent Items
9.1 No contingent liability and related financial impact caused by pending action or arbitration occur in this reporting period.

9.2 Contingent liability and related financial impact caused by debt guarantee for related party
AmountGuaranteed party

guaranteed

Maturity Date

Financial impact（unit: 10,000 Yuan）
Related party:
Dalian Neusoft Institute of Information

5,000

2012.03.19

It is estimated that no guarantee loss will occur.

Dalian Neusoft Institute of Information

5,000

2012.04.20

It is estimated that no guarantee loss will occur.

Dalian Neusoft Institute of Information

5,000

2012.12.14

It is estimated that no guarantee loss will occur.

Total

15,000Note 10 Commitments
Significant commitments
10.1 Investment contract signed but not performed or fully performed yet and relevant expenditure
10.1.1 On March 18th, 2011, the Company and two natural persons Le Liuping and Yin Sheng signed an agreement on investment
on new joint venture Guangdong Neufashion Digital Technology Co., Ltd.（GD Neufashion）, where the Company invested 22,500,000
Yuan, accounting for 60% of the registered capital. GD Neufashion signed acquisition contract with Shenzhen Lezhiyi Technology Co.,
Ltd.（Lezhiyi）and Shenzhen Lezhiyuan Communications Co., Ltd.（Lezhiyuan）respectively to acquire all tangible assets, intangible asset
and took over a certain number of employees with consideration of 22 million and 3 million Yuan. Le Liuping and Yin Sheng are theshareholders and actual controllers（hereafter refer to as“Counterparties”）. In addition, the contract parties make following provisions
about equity adjustment:（1）Within 36 months after the establishment of GD Neufashion, if its net profit of every 12 months exceeds
the estimated net profit, the joint venture shall pay certain amount of reward in cash for the excess to the Counterparties（Le Liuping
and Yin Sheng）; otherwise, equity depreciation ratio shall be calculated based on the difference; and the Counterparties shall convert the
depreciated equity without any condition or payment or transfer it to the Company. The term of the first 12 months is from June 1st,
2011 to May 31st, 2012, which is not applicable for this report as of the approved reporting date.
10.1.2 At the 23rd section of the 5th Meeting of Board of Directors on January 7th 2011, the Board of Directors agreed to acquire theequity of Beijing Neusoft Viewhigh Technology Co., Ltd.（Neusoft Viewhigh） and sign MoU, Equity Transfer Agreement and Letter ofAgreement respectively with Viewhigh Technology Co., Ltd.（authorized representative Guo Xuewen）, Intel China（authorized representative Duan Chenghui） and Beijing Taihedingcheng Investment Consulting Co., Ltd. （hereafter collectively referred to as “Counterparties”）. According to the agreements, the acquisition consideration is within RMB 114,101,440 Yuan, and the Company will accept thetransfer of 73.14 equity in Neusoft Viewhigh after the equity adjustment and completion of Registration of Change; In addition, following provisions for equity reward for managements and further acquisition are covered:（1）Provided that Neusoft Viewhigh’s net profit
reach contracted amount in 2011 and 2012 and relevant conditions are met, the Company will provide 3,00,00 shares as rewards for its
managements and other qualified employees;（2）the Company will acquire the remaining equity of Neusoft Viewhigh by cash or shareof Neusoft Corporation in 2014 and 2015 and hold 100% equity.（Please refer to Neusoft Corporation Announcement with number ofL2011-001 for other transactions）. Within this reporting period, the Company’s wholly owned subsidiary Neusoft Group（Beijing）Co.,
Ltd. （Neusoft Beijing） has finished all the payments for the equity acquisition, counterparties’equity adjustment and Registration of181

Neusoft Corporation

Annual Report 2011

Change have been completed. Neusoft Viewhigh’s net profit didn’t reach the contracted amount, and the managements and other qualified employees didn’t get the equity rewards.
10.1.3 At the 2nd section of the 6th Meeting of Board of Directors on January 7th 2011, the Board of Directors agreed to set up Neusoft Xikang Holding Co., Ltd. （Neusoft Xikang）and its subsidiaries in Cayman Islands and provide financial support for them. The Company’s wholly owned subsidiary Neusoft（Hong Kong） Co., Ltd.（Neusoft Hong Kong） invested USD 35,000 to hold 70% shares of
Neusoft Xikang and Smyway Holding Co., Ltd. invested 15,000 Yuan to hold 30% . The Company provided Neusoft Xikang with RMB
200 million Yuan to support it to set up subsidiaries and expand operations. As at the approved reporting date of this financial report,
Neusoft Hong Kong provided financial assistance to Neusoft Xikang and Neusoft Xikang International Co., Ltd.（Subsidiary of Neusoft Xikang）respectively with HKD 1.5 million and USD 8 million; the Company provided Neusoft Xikang Healthcare Technology Co., Ltd. with
entrusted loan with an amount of RMB 39 million Yuan.
10.2 Merger Agreement signed and being performed or to be performed
In December 2009, the Company acquired all the assets of software business for electric power information collection systems
owned by Zhejiang Hiker Electric Power Software Technology Co., Ltd.（Zhejiang Hiker）with total consideration of RMB 23,268,000 Yuan. As at the approved reporting date of this financial report, the Company has paid RMB 19,400,000 Yuan, the remaining due payment
will be paid after Zhejiang Hiker finishes the performance of contracted transactions.
182

10.3 There is no signed and being performed or to be performed restructuring plan in this reporting period.
10.4 There is no performance of significant financial commitment in this reporting period.
10.5 Other significant financial commitments
As at December 31st, 2011, the balance of Bank Guarantee of the Company and its subsidiaries which is within the period of validity
is as follows:
Balance of Bank Guarantee: RMB 171,764,281 Yuan; USD 7,000,000.

Note 11 Items after the Balance Sheet Date
11.1 Profit distribution
According to the Profit Distribution Proposal 2011 approved at the 9th section of the 6th Meeting of Board of Directors on March 29th,
2012, no dividend is distributed and no capital reserve is shifted to share capital in this year.
Foregoing proposal shall be executed after approval by the Meeting of Board of Directors.
11.2 Other items
11.2.1 According to the Proposal about Selling Equity of Indirect Holding Subsidiary and Other Related Education Assets approved at
the 1st temporary meeting of shareholders on December 22nd, 2011, the Company and Shenyang Neusoft IT Service Co., Ltd.（Neusoft IT
Service）, collectively as assignor, were approved to sign a transfer agreement with Dalian Neusoft Holding Co., Ltd.（assignee）, underwhich, Neusoft IT Service shall transfer its education asset-related equity in its holding subsidiary（Dalian Neusoft Park Industrial Development Co., Ltd.,“DNPID”for short）and the Company’s investments on Chengdu Neusoft Institute of Information Technology, Nanhai
Neusoft Institute of Information Technology, Dalian Neusoft Institute of Information and Dalian Neusoft Institute of Information Technology to Dalian Neusoft Holding Co., Ltd.. According to the evaluation report issued by China Enterprise Appraisals, the evaluated value of
foregoing equity and investments is RMB 424,171,800 Yuan in total. Based on negotiation, the total price of foregoing transaction is
RMB 44,234.38 Yuan, with a premium of 4.28% compared with the evaluated value. The concluded price of each subject matter is RMB
426,015,700 Yuan, 3,140,000 Yuan, 3,140,000 Yuan, 6,280,100 Yuan and 3,768,000 Yuan respectively. The payment is made in cash

by three instalments, of which the first instalment is 20% of the total price requiring payment within 20 days after the effective date of
the Transfer Agreement; the second is 65% requiring payment within 30 days after the completion of registration of change in equity;and the third is 15% requiring payment within 30 days after the completion of registration of change in sponsors for the four educational organizations. The Transfer Agreement became to be effective since the approval date（December 22nd, 2011）.
For more details, please refer to the Announcement about Selling Equity in Indirect Subsidiary and Other Education Asset Related

Transaction released on China Securities Journal and Shanghai Securities News dated December 7th, 2011 as well as the Announcement
about Decisions at the 1st Temporary Meeting of Shareholders released on China Securities Journal and Shanghai Securities News dated
December 23rd, 2011. On January 10th, 2012, the Company and Neusoft IT Service received the first instalment with an amount of 88,470,
000 Yuan; On February 15th, 2012, DNPID finished the registration of change in equity; on March 15th, Neusoft IT Service received the second payment with an amount of 287,520,000 Yuan. 85% of the total payment, with an amount of 375,990,000 Yuan, was received
and the balance will be paid according to the agreement.
11.2.2 Settlement of large-amount account receivables, advance receipts and other receivable with age of over 1 year
Item

Receivable fromYear-end balance

Settled amountAccount receivable
Sihua Tech（Shanghai）Co., Ltd.

3,973,478

European Aeronautic Defense and Space Company N.V.（EADS）

3,072,341

Dawning Information Industry（Beijing）Limited

2,815,869

Beijing Beichen Network Technology Service Co., Ltd.

2,726,467

2,726,467

Beijing Jiaxun Feihong Electrical Co., Ltd.

2,644,168

512,968

Northeastern University

19,659,255

Harbin Lanke Technology Development Co., Ltd.

6,913,000

Beijing Railway Construction and Management Co., Ltd.

5,046,640

Gansu Branch of China National Tobacco Corporation

3,547,090

The 205 Hospital of People's Liberation Army

3,305,617

PT. Sani Tiara Prima

3,181,822

183

Other receivable

Advance receiptsth

11.2.3 There is no event the Company shall announce occurring after the balance sheet date.

Note 12 Other Significant Items
12.1 There is no outstanding, convertible-for-share financial instrument in this period.

5,550,000

Neusoft Corporation

Annual Report 201112.2 Assets and liabilities measured by fair value
Unit: RMB

Profit/loss
Item

Year-begin

from changebalancein fair value

Accumulated
fair valuechangeincluded in

Appropriation

Year-end

for impairment

balance

profit/loss
Financial assets
Financial assets measured at fair value throughprofit or loss（excluding derivative financial asset）

969,350-106,180

863,170969,350-106,180

863,170969,350-106,180

863,170

1,227,304

1,056,737

170,567

Derivative financial asset
Available-for-sale financial assets
Subtotal184

Investment properties
Capitalized biological assets
Other
Total
Financial liabilities
12.3 Pension Plan and significant change
The Company initiated the Corporate Pension Plan in January 2008. The Company’s contractual employees who have worked formore than a year and are legally involved in the basic pension insurance scheme are qualified to participate in the plan voluntarily. The
Company and participating employees are jointly responsible for the payment of the pensions on a quarterly basis. The pensions assumed
by the Company are appropriated on a monthly basis and included in related costs. The Company uses fund and entrust based measuresand exclusive accounts to manage the pension plan; and the fund is strictly separated with fixed assets or other assets and not includedin the financial statements.
12.4 There is no other significant item to be disclosed.

Note 13 Notes to Main Items of the Parent Company’s Financial Statements
13.1 Accounts receivable13.1.1 Accounts receivable
Year-end balance
Provision forBook balance

Type

Ratio

Amount（%）

Year-begin balancebad debts
Amount

Ratio（%）

Provision forBook balance

Amountbad debts

Ratio
（%）

AmountRatio（%）

Accounts receivable with significant single amount and single appropriation of

185,834,934

34.10

13,626,325

7.33

117,159,077

31.11

9,903,231

8.45

317,436,339

58.25

6,059,356

1.91

233,285,668

61.95

6,109,695

2.62

41,665,897

7.65

12,705,717 30.49

26,147,625

6.94

7,954,831

30.42

provision for bad debts
Accounts receivable with portfolio appropriation of provision for bad debts
Accounts receivable with non-significant
single amount and single appropriationof provision for bad debts
Total

185
544,937,170

100.0032,391,398

376,592,370 100.00

23,967,757

13.1.2 Accounts receivable with significant single amount and single appropriation of provision for bad debts

Receivable fromBook amount

Provision forAppropriation

bad debts

ratio（%）

China Netcom

126,948,787

11,049,537

8.70

NSNN

27,660,903

1,986,373

7.18

Liaoning Jinhui IT Service Co., Ltd.

16,074,136

253,094

1.57

Shenyang Metro Co.,Ltd.

15,151,108

337,3212.23

185,834,934

13,626,325

Total

ReasonSignificant amount with receivable proportionof over 90%
Significant amount with receivable proportionof over 90%
Significant amount with receivable proportionof over 95%
Significant amount with receivable proportionof over 95%

Neusoft Corporation

Annual Report 2011

In account receivable portfolio, accounts receivable with appropriation of provision for bad debts by aging analysis method:Year-end balance
AgeBook amountAmountWithin 1 year

Ratio（%）

Year-begin balance

Provision for bad debts

Book amountAmountRatio （%）

Provision for bad debts

314,522,206

99.08

3,145,223

229,470,680

98.36

2,294,707

2,914,133

0.92

2,914,133

3,814,988

1.64

3,814,988

317,436,339

100

6,059,356

233,285,668

100.006,109,695

1-2 years
2-3 years
3-5 years
Over 5 years
Total

Account receivable with insignificant single amount but single appropriation of provision for bad debts

Account receivable for
186

Book amountbad debts

ratio（%）

6,000,277

6,000,277

100.006,362,145

3,422,635

53.80

29,303,475

3,282,805

11.20

41,665,897

12,705,717

Contract payment for softwareand system integration
Contract payment for softwareand system integration
Contract payment for softwareand system integration
Total

Provision for Appropriation

ReasonAccount receivable with long-time age which is estimatedly unrecoverable
Account receivable with long age with recoverable
proportion of about 50%
Account receivable with long age with recoverable
proportion of about 85%

13.1.3 Accounts receivable received in full or part amount in this period with appropriation of provision for bad debts in full amountor at large proportion in previous year:
Receivable
Account receivable fromYear-beginbalance

Qingdao Technicians College

Provision forbad debts at

Appropriation

the beginning

ratio（%）

of this year

Received amountin this reporting
period1,141,700

1,110,200

97.24

740,700

Heilongjiang Electric Power Company Limited

273,000

273,000

100.00273,000

Jinan Jinan Dezhou Power Plant Materials Company Limited

820,060

820,060

100.00820,060

Fujian Electric Power Company Limited

593,001

593,001

100.00593,001

Shanghai Toshiba Elevator Co., Ltd.

325,980

325,980

100.00325,980

Huangneng Dezhou Power Plant

210,000

210,000

100.00210,000

3,363,741

3,332,241

Total

2,962,741

13.1.4 Actual write-off accounts receivable in this period is RMB 79 Yuan.
13.1.5 Accounts receivable from shareholder Companies with over 5%（including 5%）voting share of the Company:
Year-begin balanceYear-end balance

Receivable fromBook balance

Provision for bad debts

Alpine2,676,358

26,764

Baosteel

100, 000

50,000Book balance

Provision for bad debts

1,398,500

13,98513.1.6 Top 5 debtors of accounts receivable
Relationship
Debtor

Proportion to thewith theAmountAge

Company

total accounts
receivable（%）

Within 1 year-Over

China Netcom

Non-related party

126,948,787

NSNN

Related party

27,660,903 Within 5 years

5.08

Liaoning Jinhui IT Service Co., Ltd.

Non-related party

16,074,136 Within 2 years

2.95

Shenyang Metro Co., Ltd.

Non-related party

15,151,108 Within 2 years

2.78

Jiangsu Electric Power Information Technology Co., Ltd.

Non-related party

7,373,780 Within 1 year

1.35

5 years

193,208,714

Total

23.30

35.46

13.1.7 Accounts receivable from related parties
Receivable

Relationship with the Company

fromAmountProportion to the total
accounts receivable（%）

AlpineShareholder

2,676,358

0.49

NSNN

Associate

27,660,903

5.08

Baosteel

Shareholder

100,000

0.02

HarmanThe Company’s chairman & CEO serves as director in Harman

842,830

0.15

Toshiba Neusoft

Associate261,2330.05

31,541,324

5.79

Total

13.1.8 There is no account receivable which is consistent with conditions for termination of recognition.

187

Neusoft Corporation

Annual Report 201113.2 Other receivables
13.2.1 Other receivables
Year-end balance
Provision forBook balance

Type

Amount（%）

Provision forBook balancebad debts

Ratio

AmountYear-begin balance

Ratio
（%）

Amountbad debts

Ratio

Ratio

Amount（%）（%）

Accounts receivable with significant single
amount and single appropriation of provision for bad debts
Accounts receivable with portfolio appropriation of provision for bad debts

229,216,237

96.41

3,195,621

1.39

482,197,025

99.70

8,537,693

3.59

2,778,458

32.54

1,445,829

0.30

237,753,930 100.00

5,974,079

6,477,082

1.34

Accounts receivable with non-significant single amount and single appropriation of pro188

893,173 61.78

vision for bad debts
Total

483,642,854 100.00

7,370,255

13.2.2 Other receivables with appropriation of provision for bad debts by aging analysis method in portfolio
Year-end balance
AgeBook amountAmountYear-begin balanceBook amount

Provision for bad

Ratio（%）

debts

AmountProvision for bad

Ratio（%）

debts

Within 1 year

209,047,100

91.20

2,090,471

463,879,091

96.20

4,638,792

1-2 years

15,157,705

6.61

303,154

7,811,383

1.62

156,228

2-3 years

2,449,847

1.07

122,491

7,274,212

1.51

363,7113-5 years

2,091,200

0.91

209,120

2,126,653

0.44

212,665

Over 5 years

470,3850.21

470,385

1,105,686

0.23

1,105,686

Total

229,216,237

100.003,195,621

482,197,025

100.006,477,082

Other receivables with insignificant single amount but single appropriation of provision for bad debts

Other receivables

Book amount

Provision forAppropriation

bad debts

ratio（%）

ReasonAccount receivable with long age with recoverable proportion

Revolving fund lending

4,295,491

1,767,921

41.16

Open credit

4,242,202

1,010,537

23.82 It is estimated that the recoverable proportion is over 90%

8,537,693

2,778,458

Totalof about 50%

13.2.3 Other receivables received in full or part amount in this period with appropriation of provision for bad debts in full amount orat large proportion in previous year:
Provision for bad debts
Other receivables

Year-begin balanceat the beginning ofAppropriation

Received amount in thisratio （%）

reporting period

this year
Margin lending

1,136,163

990,12387.15

1,136,163

Revolving fund lending

713,547

634,032

88.86

713,547

Open credit

247,943

178,643

72.05

247,943

2,097,653

1,802,798

Total

2,097,653

13.2.4 There is no other actual write-off receivable in this period.
13.2.5 There is no other receivable from Shareholding Company with over 5%（including 5%）voting share of the Company;
13.2.6 Top 5 debtors of other receivables:
Relationship with

Debtorthe Company

Nature or content

AmountAge

Proportion to
the total（%）

Henan Provincial Bureau of Health

Non-related party

Margin5,799,750 Within 1 year

2.44

Zhen Li

Non-related party

Borrowing to employee

2,459,474 Within 1 year

1.03

Wang Jinsheng

Non-related party

Borrowing to employee

2,400,000 Within 1 year

1.01

Non-related party

Margin1,473,212 Within 1 year

0.62

Non-related party

Margin1,470,000 Within 1 year

0.62

13,602,436

5.72

Yunnan Provincial Research Institute ofMedical Informatics
Renmin University of China
Total

13.2.7 Other receivable from related party
There is no other receivable from related party.
13.2.8 There is no transfer of other receivable inconsistent with recognition termination conditions.
13.3 Held-to-maturity investment
Item
Bank finance product（Note）

Year-end balanceYear-begin balance

401,931,507

Note: The Company purchased finance product from bank based on its financial situation. The investment has been recovered at theend of February 2012.

189

method

EquitymethodEquitymethodCommtech Company Ltd.

Shenyang CataData Technology

Co., Ltd.

Shengyang Toshiba Neusoft

Information Systems Co., Ltd.

Cost

methodCostmethodBeijing LBS Social Insurance

Information Technology Co., Ltd.

Shengyang Neusoft Transportation

Information Technology Co., Ltd.

Neusoft Group

Neusoft Group（Nanchang）Co., Ltd.

（Zhengzhou）Co., Ltd.

methodCostmethodCostmethodCostmethodNeusoft Group（Nanjing）Co., Ltd.

Cost

Systems Co., Ltd.

methodCost

Shenyang Neusoft Medical

Shenzhen Neusoft Co., Ltd.

methodCostmethodCommunications Co., Ltd.

Hunan Neusoft Co., Ltd.

Cost

Shenyang Zhuri Digital Advertising

Subtotal（Note）

Information Technology Co., Ltd.

Beijing LBS Social Insurance

EquityNokia Siemens Networks Neusoft

Method20,000,000

10,000,000

12,000,000

3,535,000

10,390,275

87,082,539

5,000,000

12,000,000

1,000,000

50,764,621

9,051,000

15,000,000

26,713,621

Investment

87,082,539

5,000,000

12,000,000

1,000,000

63,686,380

6,332,370

14,675,191

20,000,000

10,000,000

12,000,000

3,535,000

11,265,778

9,214,116-6,332,370

8,154,748-839,530

8,231,268

decreasebalance

42,678,819

Increase/

Year-begin

40.00

16.67

46.00

40.00

16.67

46.00

50.50

61.67

50.50

61.67

20,000,000 100.00 100.00

10,000,000 100.00 100.00

12,000,000 100.00 100.00

3,535,000

11,265,778

87,082,539 100.00 100.00

5,000,000 100.00 100.00

12,000,000 100.00 100.00

share（%） and voting impairment impairment

provision forAppropriated

（%）

for

Provision
dividend

Cash

Unit: RMB

share equity ratio

between

Difference
ratio

Equity Voting

1,000,000 100.00 100.00

72,900,496

8,154,748

13,835,661

50,910,087

balanceYear-end

190

Investee13.4 Long-term equity investment

Neusoft Corporation
Annual Report 2011

Cost

methodCostmethodCostmethodDalian Neusoft Finance Information

Technology Co., Ltd.

Shenyang Neusoft Boan SoftwareCo., Ltd.

Nanjing Neusoft System Integration

Co., Ltd.

Cost

methodWuhan Neusoft Information Technology

Co., Ltd.

methodCost

Management Co., Ltd.

methodShenyang Shenyang Neusoft Property Cost

Neusoft Group（Beijing）Co., Ltd.

methodCostmethodBeijing Lanruisoft Co., Ltd.

Cost

Co., Ltd.

methodCost

Xi’an Neusoft System Integration

Guangdong Neusoft Co., Ltd.

methodCostmethodTechnology Co., Ltd.

Neusoft（Japan）Co., Ltd.

Cost

Shanghai Neusoft Times Digital

methodCostmethodCo., Ltd.

Qinhuangdao Neusoft Co., Ltd.

Cost

Chengdu Neusoft System Integration

methodCostmethodNeusoft（Hong Kong）Co., Ltd.

Cost

Co., Ltd.

MethodShandong Neusoft System Integration

Investee

1,000,000

249,396,361

9,454,820

15,000,000

22,502,469

20,000,000

11,826,901

20,000,000

8,500,000

20,000,000

7,037,915

12,000,000

12,416,895

13,491,850

15,000,000

Investment
decreasebalance

1,000,000

64,396,361 185,000,000

9,454,820

15,000,000

22,502,469

20,000,000

11,826,901

20,000,000

8,500,000

20,000,000

7,037,915

12,000,000

12,416,895

13,491,850

15,000,000

Increase/

Year-begin

60.00

12,416,895

60.00

69.00

85.00

85.00

1,000,000 100.00 100.00

249,396,361 100.00 100.00

9,454,820 100.00 100.00

15,000,000 100.00 100.00

22,502,469 100.00 100.00

20,000,000 100.00 100.00

11,826,901 100.00 100.00

20,000,000 100.00 100.00

8,500,000

20,000,000 100.00 100.00

7,037,915 100.00 100.00

12,000,000 100.00 100.00

69.00

13,491,850

share（%） and voting impairment impairment

provision forAppropriated

（%）

for

Provision

1,493,307

983,224

dividend

CashContinued tableshare equity ratio

between

Difference
ratio

Equity Voting

15,000,000 100.00 100.00

balanceYear-end191

Neusoft Group（Wuhu）Co., Ltd.

Neusoft Group（Wuxi（Co., Ltd.

Neusoft Group（Hannan）Co., Ltd.

Neusoft Group（Tangshan）Co., Ltd.

Neusoft Group（Tianjin）Co., Ltd.

Neusoft（Europe）Co., Ltd.

methodCostmethodCostmethodCostmethodCostmethodCostmethodCostmethodCostmethodInvestment Co., Ltd.

Hangzhou Neusoft Co., Ltd.

Cost

Liaoning Neusoft Venture CapitalmethodCostmethodNeusoft Science & Technology Co., Ltd.

Cost

Technology Co., Ltd.

methodCostmethodCostmethodCostmethodCostmethodCost

MethodShenyang Neusoft System Integration

Neusoft Group（Guangzhou）Co., Ltd.

Neusoft Group（Shanghai）Co., Ltd.

Neusoft Group（Dalian）Co., Ltd.

Shenyang Neusoft IT Service Co., Ltd.

Neusoft Group（Chengdu）Co., Ltd.

Investee

10,000,000

20,000,000

100,000,000

30,000,000

20,000,000

220,908,545

500,000

80,552,833

63,329,610

20,000,000

100,000,000

100,000,000

100,000,000

310,000,000

1,000,000

Investment
decreasebalance

20,000,000

100,000,000

30,000,000

20,000,000

10,000,000

192,985,447 66,675,555

500,000

80,552,833

63,329,610

20,000,000

100,000,000

100,000,000

100,000,000 200,000,000

310,000,000

1,000,000

Increase/

71.43

71.43

10,000,000 100.00 100.00

20,000,000 100.00 100.00

100,000,000 100.00 100.00

30,000,000 100.00 100.00

20,000,000 100.00 100.00

259,661,002 100.00 100.00

500,000 100.00 100.00

80,552,833

63,329,610 100.00 100.00

20,000,000 100.00 100.00

100,000,000 100.00 100.00

100,000,000 100.00 100.00

300,000,000 100.00 100.00

310,000,000 100.00 100.00

share（%） and voting impairment impairment

provision forAppropriated

（%）

for

Provision

share equity ratio

between3,571,429

dividend

CashContinued table

ratio

Equity Voting

1,000,000 100.00 100.00

balanceYear-end

192

Year-begin

Difference

Neusoft Corporation
Annual Report 2011

method

Technology

methodTechnology

60.00

17.47

12.82

3,600,000

3,000,000

3,000,000

12.82

17.47

60.00

1.74

4,300,000

1,200,000

100,000

3,000,000

1,891,825,034 1,578,464,020 575,124,849 2,153,588,869

24,934,400 13.3226 13.3226

1.74

6,000,000

10.00

60.00

Total

24,934,400

10.00

3,000,000

100,000

60.00

share

（%） and voting impairment impairment

provision for

（%）

for

Appropriatedshare equity ratio

Provision

6,047,960

6,047,960

dividend

CashContinued table

ratio

22,500,000

balancebetween

4,300,000

3,000,000

3,000,000

3,600,000

6,000,000

100,000

3,000,000

22,500,000

decreasebalance

Equity Voting

1,841,060,413 1,514,777,640 565,910,733 2,080,688,373

24,934,400

3,000,000

3,000,000

3,600,000

6,000,000

100,000

3,000,000

22,500,000

Investment

Year-end

Difference

SubtotalmethodCost

Cost

Nanhai Neusoft Institute of Information

Appconomy, Inc.

methodTechnology

Chengdu Neusoft Institute of Information Cost

Cost

methodCostmethodCost

Dalian Neusoft Institute of Information

Dalian Neusoft Institute of Information

Shenyang Torch Company Limited

methodCostmethodDongzhong Commtech Co., Ltd.

Cost

Technology Co., Ltd.

MethodGuangdong Neufashion Digital

Investee

Increase/

Year-begin

193

Neusoft Corporation

Annual Report 201113.5 Bonds Payable

Bond

Par value

Date of issue

Term

AmountInterest
payableat thebeginningof theyear

Neusoft Corporation’s
first tranche ofYear-end
400,000,000
3 years 400,000,000
medium-term notes
balance.11.14
in 2011

Accruedinterestin thisperiod3,658,667

Interest
paidInterest
payableat theend ofthe yearYear-endbalance

3,658,667 403,658,667

In this reporting period, based on the Proposal to Issue Short-term Financing Bond and Medium-term Note approved at the year-begin balance meeting of stockholders, the Company issued the first tranche of medium-term note in Year-end balance（Neusoft MTN 1/
code:1182321）in inter-bank bond market on November 11th, Year-end balance by way of Book Building and concentrative allotment.
Industrial Bank Co., Ltd. was the lead underwriter for this issuance with total amount of RMB 0.4 billion with a term of 3 years; the parvalue was RMB 100 Yuan per notes. It is a fixed interest bearing instrument with an interest rate of 6.86%. The raised capital has been194

arrived in the account on November 14th, Year-end balance; the provision for interest as of the end of the year was RMB 3.66 million Yuan. For more information about the issuance of the MTNs, please refer to www.chinamoney.com.cn or www.chinabond.com.cn.
13.6 Operating income and cost
13.6.1 Operating income
Item
Primary business income

Year-end balanceYear-begin balance

3,027,330,275

2,645,006,680

Other business income

15,980,200
Total

3,027,330,275

2,660,986,880

13.6.2 Operating cost
Item

Year-end balancePrimary business costYear-begin balance

2,193,319,213

1,952,280,277

Other business cost

10,274,417
2,193,319,213

Total

1,962,554,694

13.6.3 Operating income & cost（by industry）

Item
System integration, sales of software products, software
customization and other labor services
Property management service and rental
Total

Year-end balanceYear-begin balance

Operating income Operating cost Operating income Operating cost
2,956,396,915

2,172,504,576

2,580,884,178

1,932964,714

70,933,360

20,814,637

80,102,702

29,589,980

3,027,330,275

2,193,319,213

2,660,986,880

1,962,554,694

13.6.4 Primary business income and cost（by industry）
Year-end balance

Item
System integration, sales of software products, software
customization and other labor services

IncomeCost

2,956,396,915

2,172,504,576

2,580,884,178

1,932,964,714

70,933,360

20,814,637

64,122,502

19,315,563

3,027,330,275

2,193,319,213

2,645,006,680

1,952,280,277

Property management service and rental
Total

Year-begin balance
IncomeCost

13.6.5 Operating income from top 5 customers:
Customer

Operating income

Proportion to the total（%）

China Netcom

189,545,537

6.26

Shenyang Metro Co.,Ltd.

133,910,635

4.42

Alpine105,840,835

3.50

Toshiba Corporation

101,656,159

3.36

NSNN

72,210,985

2.39

603,164,151

19.93

Total
13.7 Investment income
13.7.1 Details
Item

Year-end balanceYear-begin balance

Income from long-term equity investment calculated by cost method

6,047,960

1,390,458

Income from long-term equity investment calculated by equity method

6,038,618

7,719,289

Investment income from disposal of long-term equity investment
Investment income obtained during the holding period of held-to-maturity investment-18,327,854
1,931,507

Investment income obtained during the holding period of available-for-sale financial assets
Investment income from disposal of trading financial assets
Investment income from disposal of available-for-sale financial assets
Other
Total

14,018,085-9,218,107

195

Neusoft Corporation

Annual Report 201113.7.2 Long-term equity investment income calculated by cost method
Year-end

Year-beginbalancebalance

Neusoft（Japan）Co., Ltd.

1,493,307

1,390,458 Attributable cash dividend received by the Company

Liaoning Neusoft Venture Capital Investment Co., Ltd.

3,571,429

Attributable cash dividend received by the Company

Qinhuangdao Neusoft Co., Ltd.

983,224

Attributable cash dividend received by the Company

Total

6,047,960

InvesteeCause of change

1,390,458

13.7.3 Long-term equity investment income calculated by equity method
Year-end

Year-beginbalancebalanceNokia Siemens Networks Neusoft Commtech Company Ltd.

8,231,268

9,586,872 Change in net profit of investee

Beijing LBS Social Insurance Information Technology Co., Ltd.

-456,868-1,542,774 Change in net profit of investee

Shenyang CataData Technology Co., Ltd.

-839,530-324,809 Change in net profit of investee

Shengyang Toshiba Neusoft Information Systems Co., Ltd.

-896,252

Change in net profit of investee

Investee

196

6,038,618

Total

Cause of change

7,719,289

13.8 Supplementary information to cash flow statement
Item

Year-endbalanceYear-beginbalance

1. The net profit is converted into cash flow from operating activities
Net profit

347,932,350

292,656,574

Add: Provision for asset impairment

12,104,692-5,822,840

Depreciation of fixed asset, oil & gas assets and capitalized biological assets

52,414,605

82,469,050

Amortization of intangible asset

6,689,718

6,636,218

Amortization of long-term deferred expenses

3,618,351

4,412,407

253,794-4,435,825-950,557

694,314

Financial expenses（“－”for profit）

21,735,445

843,030

Investment loss（“－”for profit）-14,018,085

9,218,107

Decrease of deferred income tax assets（“－”for increase）-7,872,536

3,690,815

Increase of deferred income tax liabilities（“－”for decrease）-10,618

53,299-59,795,034-95,164,312

Loss on disposal of fixed assets, intangible asset and other long-lived assets（“－”for profit）
Abandonment loss of fixed assets（“－”for profit）
Loss on change of fair value（“－”for profit）

Decrease of inventories（“－”for increase

Continued tableYear-endbalance

Item

Year-beginbalance

Decrease of operating accounts receivable（“－”for increase）

67,317,394

56,132,554

Increase of operating accounts payable（“－”for decrease）-12,943,913-33,079,263

416,475,606

318,304,128

Year-end cash balance

831,393,669

932,706,502

Less: Year-begin cash balance

932,706,502

992,075,818

Other
Net value of cash flow from operating activities
2. Significant investment and financing activities not relating to cash receipt and disbursement
Debt conversion to equity
Convertible Bonds due within one year
Leased fixed assets from financing
3. Change in cash and cash equivalent

Add: Year-end cash equivalent balance197

Less: Year-begin cash equivalent balance
Net increase in cash and cash equivalents-101,312,833-59,369,316

Note 14 Supplementary Information
14.1 Non-recurring profits and losses
Item
Profit and loss on disposal of non-current assets

Year-end balance

Remark18,180,599

Note 1

105,173,354

Note 2

9,946,738

Note 324,934,400

Note 4

Tax refund & exemption through examination and approval in excess of authority or
without official approval document
Government subsidy included in current profits and losses （excluding the government subsidy highly associated with corporate business and issued by certain amountbased on national standards）
Payment for the use of funds charged to non-financial institutions and included incurrent profits and losses
Revenue from the difference by which the investment cost for acquiring subsidiaries,
associates an joint ventures is less than fair value of attributable net assets
Profit and loss on non-monetary asset exchange
Profit and loss on assets invested or managed by client
Appropriation of provision for asset impairment caused by force majeure such as natural disasterNeusoft Corporation

Annual Report 2011

Continued table
Item

Year-end balance

RemarkProfit and loss on debt restructuring
Expenses for business restructuring, such as staffing and integration expenses
Profit and loss on transactions with obvious unfair transaction price
Subsidiaries' year-to-date net profit/loss arising from business combination under common control
Profit and loss arising from contingent items which are not related to the Company's
normal operations
Except for effective hedging business related to normal operations, profit and loss onchange in fair value arising from holding trading financial assets/liabilities, and investment income from disposal of trading financial assets/liabilities and available-for-sale

950,557

Note 5financial assets
Impairment provision for account receivable with separate impairment test which isreversed back198

Profit and loss on entrust loans
Profit and loss on change in fair value of investment properties with subsequent measurement by fair value
Effect by one-off adjustment on current profits and losses according to relevant tax
and accounting laws and regulations
Trusteeship revenue from trust operation
Other non-operating income and expenditure
Other profit and loss items consistent with the definition of non-recurring profit andloss

1,313,927
1,221,899

Amount effected by minority interest-11,201,619

Amount effected by income tax-20,258,444
Total

Note 6130,261,411

Note 1: This is mainly caused by profit arising from asset transfer by Shenyang Neusoft Medical Systems Co., Ltd.;
Note 2: This mainly refers to government subsidy for science research projects and investment subsidy;
Note 3: This mainly refers to the payment for use of funds charged to Chengdu Neusoft Institute of Information Technology due todelayed payment;
Note 4: This mainly refers to profit and loss arising from acquisition of equity in Appconomy, Inc. by the Company with technology
use right. Please refer to Note 5.47 for details;
Note 5: This mainly refers to profit and loss on change in fair values of trading financial assets/liabilities; andNote 6: The Company acquired 28.33% equity in Beijing LBS Social Insurance Information Technology Co., Ltd. and finished businesscombination under common control, the equity held by the Company before the acquisition was recalculated based on its fair value onthe acquisition date, the difference between fair value and book value, together with other composite income relevant to the equity heldby the Company before the acquisition date were recognized as investment income in the consolidated financial statements. Please refer
to Note 5.45 for details.
14.2 Net asset’s rate of return and EPS:
EPS（Yuan）

Weighted
average ofProfits in this reporting period

return of net

Basic EPS

Diluted EPS

assets（%）
Net profit attributable to the shareholders of the parent company
Net profit attributable to the shareholders of the parent company after
deducing non-recurring profit and loss

9.34

0.34

0.34

6.42

0.23

0.23

14.3 Main financial items with abnormal change and reasons
Financial items with abnormal amount or abnormal change during comparison period

Item

Notes receivable

199

Year-end

Year-beginbalancebalance

Change（or amount of（or amount ofratio（%）

year-end）

previous year）

Reason36,215,245

12,798,400

182.97（1）

14,262,836

10,313,513

38.29

（2）

Held-to-maturity investment

401,931,507

Long-term accounts receivable

150,710,187

283,406,306-46.82（4）

Construction in progress

307,799,158

84,731,103

263.27（5）

Goodwill

227,376,502

144,880,456

56.94

（6）

Short-term borrowing

470,000,000

160,000,000

193.75（7）

170,567

1,227,304-86.10（8）

Notes payable

83,204,957

145,564,320-42.84（9）

Taxes payable

67,567,092

685,326

9759.12（10）

71,666

21,336235.89（11）

136,060,526-100.00（12）

Trading financial liabilities

Other current liabilities
Non-current liabilities due within one year
Bonds payable
Undistributed profits（3）403,658,667（13）

2,536,698,174

2,171,819,047

16.80

（14）

-48,565,779-26,721,620-81.75（15）

Operating incomes

5,751,249,330

4,937,696,440

16.48

（16）

Operating costs

4,004,998,405

3,383,628,845

18.36

（17）

Converted difference in foreign currency Statements

Neusoft Corporation

Annual Report 2011

Continued tableYear-endItembalancebalance

Change（or amount of（or amount ofratio（%）

year-end）

previous year）

ReasonSales expenses

497,920,161

391,904,135

27.05

（18）

Administrative expenses

819,957,825

713,916,675

14.85

（19）

Financial expenses

23,649,196-356,749

6729.09（20）

Impairment Losses on Assets

41,405,012

5,344,100

674.78（21）

950,557-694,314

236.91（22）

Non-operating income

188,085,954

160,821,056

16.95

（23）

Non-operating expenses

5,499,473

8,207,608-33.00（24）

Income tax

69,341,108

52,802,832

31.32

（25）

Minority interest

6,476,572

22,627,318-71.38（26）

Income from changes in fair value

200

Year-begin

Reasons:（1） This item increases by 23,420,000 Yuan, an increase of 182.97% over the year beginning, which is mainly caused by the increase of customer refund by banker’s acceptance;（2）This item increases by 3,950,000 Yuan, an increase of 38.29% over the year beginning, which is mainly caused by the increaseof deferred expenses;（3） This item increases by 401,930,000 Yuan compared with that of the year beginning, which is mainly caused by purchase ofbank financing products;（4）This item reduces by 132,700,000 Yuan, a decrease of 46.82% over the year beginning, which is mainly caused by the payment
made by Chengdu Neusoft Institute of Information Technology for asset transfer in preceding year;（5）This item increases by 223,070,000 Yuan, an increase of 263.27% over the year beginning, which is mainly caused by newly
added investment into Beijing Software Park, further investment into Shanghai Software Park and Guangzhou Software Park;（6）This item increases by 82,500,000 Yuan, an increase of 56.94% over the year beginning, which is mainly caused by acquisitionof 73.14% equity in Beijing Viewhigh Technology Co., Ltd.（renamed as“Beijing Neusoft Viewhigh Technology Co., Ltd.”after theacquisition） by Neusoft Group（Beijing） Co., Ltd. Goodwill arising from the difference by which the paid consideration is higher than
the fair value of attributable identifiable net assets is 99,950,000 Yuan. Besides, 8980,000 Yuan is appropriated for goodwill impairment
loss for merger business in Europe and the USA, and the other is caused by change in exchange rate;（7）This item increases by 310 million Yuan, an increase of 193.75% over the year beginning, which is mainly caused by increase of
short-term borrowing within Shenyang Neusoft Medical Systems Co., Ltd.;（8）This item reduces by 1,060,000 Yuan, a decrease of 86.1% over the year beginning, which is mainly caused by the foreign exchange forward contract signed by the Company. In this reporting period, the foreign exchange forward contract is not quoted based on
exchange rate and is calculated by different foreign currencies. The estimated fluctuation loss with a reduction amount of 1,060,000 Yuan is recorded in profit and loss on change in fair value and accordingly the trading financial liabilities are reduced;（9）This item reduces by 62,360,000 Yuan, a decrease of 42.84% over the year beginning, which is mainly caused by payment forbank’s acceptance;（10）This item increases by 66,880,000 Yuan compared with that of the year beginning, which is mainly caused by increase of due
VAT and income tax;（11）This item increases by 50,000 Yuan, an increase of 235.89% over the year beginning, which is mainly caused by increase of accrued expenses;（12）This item reduces by 136,060,000 Yuan, a decrease of 100.00% over the year beginning, which is mainly caused by refund ofinterest-free loan to the government by Chengdu Neusoft Information Technology Development Co., Ltd.（Special fund for the 3rd phase
construction of Chengdu Software Park provided by the government in manner of interest-free loan）;（13） This item increases by 403,660,000 Yuan compared with that of the year beginning, which is mainly caused by issuance of
400 million Yuan MTN and accrued interest with an amount of 3,660,000 Yuan;（14） This item increases by 364,880,000 Yuan, an increase of 16.80% over the year beginning, which is mainly caused by theachievement of net profit with an amount of 417,070,000 Yuan;（15）This item reduces by 21,840,000 Yuan, a decrease of 81.75% over the year beginning, which is mainly caused by fast growthof exchange rate between RMB and ERU. The annual average exchange rate（9.0230）for translation of foreign currency-dominated financial statement adopted by the Company’s wholly owned subsidiary Neusoft（Europe） Co., Ltd. has a big difference with the rate
（8.1625） at the end of this period. As a result, the converted difference in foreign currency statements reduces by 16,630,000 Yuan
over the same period of last year;（16）This item increases by 813,550,000 Yuan, an increase of 16.48% over the same period of last year, which is mainly caused by
growth of revenue from domestic solution operations and international software business;（17）This item increases by 621,370,000 Yuan, an increase of 18.36% over the same period of last year, which is mainly caused bycost increase（such as labor expense）due to the revenue growth;（18）This item increases by 106,020,000 Yuan, an increase of 27.05% over the same period of last year, which is mainly caused bybusiness expansion and marketing promotion;（19）This item increases by 106,040,000 Yuan, an increase of 14.85% over the same period of last year, which is mainly caused byincrease of labor expense and R&D expenses;（20）This item increases by 24,010,000 Yuan, an increase of 6729.09% over the same period of last year, which is mainly caused
by increase of bank loan based on the Company’s fund condition, accrued interest and underwriting expense for the MTN issued in thisperiod, increase of interest expenses and handling expenses among comprehensive financial expenses by 20,070,000 Yuan;（21）This item increases by 36,060,000 Yuan, an increase of 674.78% over the same period of last year, which is mainly caused byincrease of impairment loss on account receivable estimated based on balance and age, 8,850,000 Yuan appropriated for loss on bad
debt from account receivable which is not recovered in full amount by Neusoft Europe from Sesca; In addition, at the same period of previous year, Chengdu Neusoft Development, based on actual situation, reversed back 6,600,000 Yuan exclusively appropriated for bad
debt provision for long-term accounts receivable due to Sichuan Earthquake;（22）This item increases by 1,640,000 Yuan, an increase of 236.91% over the same period of last year, which is mainly caused bychange in fair value of the foreign exchange forward contract;（23）This item increases by 27,260,000 Yuan, an increase of 16.95% over the same period of last year, which is mainly caused by
the non-operating income, with an amount of 27,260,000 Yuan, from purchase of equity in Appconomy, Inc. by the Company with technology use right;

201

Neusoft Corporation

Annual Report 2011（24）This item reduces by 2,710,000 Yuan, a decrease of 33.00% over the same period of last year, which is mainly caused by payment by Neusoft Medical for indemnity from legal action;（25）This item increases by 16,540,000 Yuan, an increase of 31.32% over the same period of last year, which is mainly caused by
expiration of Neusoft Group（Dalian）Co., Ltd.’s tax holiday, 9480,000 Yuan income tax is increased accordingly based the tax rate at
10%; and increase of taxable income of the Company and profitable subsidiaries; and（26） This item reduces by 16,150,000 Yuan, a decrease of 33.00% over the same period of last year, which is mainly caused bytransfer of investment property from Chengdu Neusoft Development to Chengdu Neusoft Institute of Information Technology.

Note 15 Authorization of Publication of Financial Statements
The Board of Directors has authorized to publicize the financial statements on March 29th, 2012.

Neusoft Corporation

Date: March 29th, 2012
202

（XII）Documents Available For Inspection
1. Annual Report 2011 with signature of the Chairman Liu Jiren and seal of the Company;
2. Financial Report with signatures of Chairman Liu Jiren, Senior VP & CFO Wang Li and Finance Operation Director Chen Lei andseal of the Company; and3. All the original documents and announcements disclosed in newspapers or magazines designated by CSRC.

Liu Jiren

Chairman of Neusoft Corporation

Date: March 29th, 2012203

Neusoft Corporation

Annual Report 2011

Neusoft Corporation
Directors’Statement on the Company’s Annual Report 2011
In accordance with the Securities Law of the People’s Republic of China and relevant regulations made by the CSRC, we hereby represent and warrant that Neusoft Corporation’s annual report for year 2011 does not contain any false record, misleading presentation ormaterial omission, and shall assume individual, joint, and several liability for its genuineness, accuracy and completeness.

Signatures:
Liu Jiren, Wang Yongfeng, Wang Li, Seizo Ishiguro, Klaus Michael Zimmer, Akira Kasano, Fang Hongxing, Xue Lan, Gao Wen

Date: March 29th, 2012204

Neusoft Corporation
Senior Executives’Statement on the Company’s Annual
Report 2011
In accordance with the Securities Law of the People’s Republic of China and relevant regulations made by the CSRC, we hereby represent and warrant that Neusoft Corporation’s annual report for year 2011 does not contain any false record, misleading presentation ormaterial omission, and shall assume individual, joint, and several liability for its genuineness, accuracy and completeness.

Signatures:
Liu Jiren, Wang Yongfeng, Chen Ximin, Lu Zhaoxia, Wang Li, Zhang Xia, Wang Jingxi, Zhang Xiaoou, Li Jun, Klaus Michael Zimmer,
Wang Nan

Date: March 29th, 2012