##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
  o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Date of event requiring this shell company report
 Commission file number 001-34563
 
 Concord Medical Services Holdings Limited
  
 (Jurisdiction of Incorporation or Organization)
 (Address of Principal Executive Offices)
 (Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredAmerican Depositary Shares, each representing three
    
    New York Stock Exchangeordinary shares, par value US$0.0001 per share
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
 None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 None
 
  142,353,532 Ordinary Shares
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes þ
No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued by the o
    
    Other oInternational Accounting Standards Board
  o o
 o þ
  o o




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##### 



TABLE OF CONTENTS
 PagePART I
    
    
    4ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    4ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    4ITEM 3. KEY INFORMATION
    
    
    4ITEM 4. INFORMATION ON THE COMPANY
    
    
    34ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    58ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    84ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    93ITEM 8. FINANCIAL INFORMATION
    
    
    94ITEM 9. THE OFFER AND LISTING
    
    
    95ITEM 10. ADDITIONAL INFORMATION
    
    
    96ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    102ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    103PART II
    
    
    105ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    105ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    105ITEM 15. CONTROLS AND PROCEDURES
    
    
    106ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    107ITEM 16B. CODE OF ETHICS
    
    
    107ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    107ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    107ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES
    
    
    107ITEM
16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    108ITEM
16G. CORPORATE GOVERNANCE
    
    
    108PART III
    
    
    109ITEM 17. FINANCIAL STATEMENTS
    
    
    109ITEM 18. FINANCIAL STATEMENTS
    
    
    109ITEM 19. EXHIBITS
    
    
    109EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2




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##### Table of Contents



CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F
  
    
    ADRs are to the American depositary receipts, which, if issued, evidence our ADSs;
    
    ADSs are to our American depositary shares, each of which represents three
ordinary shares;
    
    China and the PRC are to the Peoples Republic of China, excluding, for the
purposes of this annual report only, Taiwan and the special administrative regions of
Hong Kong and Macau;
    
    Concord Medical, we, us, our company and our are to Concord Medical
Services Holdings Limited, its predecessor entities and its consolidated subsidiaries;
    
    ordinary shares are to our ordinary shares, par value US$0.0001 per share;
    
    PRC subsidiaries are to our subsidiaries incorporated in the Peoples Republic of
China, including Aohua Medical, Aohua Leasing, Shanghai Medstar, CMS Hospital
Management Co., Ltd., or CMS Hospital Management, Xing Heng Feng Medical, Tianjin
Kangmeng Radiology Equipment Management Co., Ltd., Shenzhen Lingdun Medical Investment
Management Co., Ltd., and Wan Jie Hua Xiang Medical Technology Development Limited;
    
    RMB and Renminbi are to the legal currency of China;
    
    US$ and U.S. dollars are to the legal currency of the United States; and
    
    £ is to the legal currency of the United Kingdom of Great Britain and Northern
Ireland.
   3




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##### Table of Contents



PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 Selected Financial Data
   4




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##### Table of Contents



Predecessor
    
    
    Concord Medical (Successor)Period from
    
    
    Period fromYear Ended
    
    
    January 1,
    
    
    September 10,December
    
    
    2007 to
    
    
    2007 to
    
    
    Year Ended December 31,31, 2006
    
    
    October 30, 2007
    
    
    December 31, 2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands, except
share, per share and per ADS data)Selected Consolidated Statements of
Operations DataRevenues, net of business tax, value-added
tax and related surcharges:Lease and management services
    
    
    61,440
    
    
    
    63,082
    
    
    
    13,001
    
    
    
    155,061
    
    
    
    260,162
    
    
    
    349,248
    
    
    
    52,916Management services
    
    
    876
    
    
    
    4,340
    
    
    
    982
    
    
    
    12,677
    
    
    
    28,739
    
    
    
    22,805
    
    
    
    3,455Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,051
    
    
    
    3,535
    
    
    
    17,471
    
    
    
    2,647Total net revenues
    
    
    62,316
    
    
    
    67,422
    
    
    
    13,983
    
    
    
    171,789
    
    
    
    292,436
    
    
    
    389,524
    
    
    
    59,018Cost of revenues:Lease and management services
    
    
    (22,388
    )
    
    
    (20,396
    )
    
    
    (1,908
    )
    
    
    (25,046
    )
    
    
    (60,937
    )
    
    
    (93,771
    )
    
    
    (14,208
    )Amortization of acquired intangibles
    
    
    
    
    
    
    
    
    
    
    (2,002
    )
    
    
    (20,497
    )
    
    
    (26,493
    )
    
    
    (26,488
    )
    
    
    (4,013
    )Management services
    
    
    (24
    )
    
    
    (20
    )
    
    
    (4
    )
    
    
    (54
    )
    
    
    (131
    )
    
    
    (2,441
    )
    
    
    (370
    )Total cost of revenues
    
    
    (22,412
    )
    
    
    (20,416
    )
    
    
    (3,914
    )
    
    
    (45,597
    )
    
    
    (87,561
    )
    
    
    (122,700
    )
    
    
    (18,591
    )Gross profit
    
    
    39,904
    
    
    
    47,006
    
    
    
    10,069
    
    
    
    126,192
    
    
    
    204,875
    
    
    
    266,824
    
    
    
    40,427Operating expenses:Selling expenses(1)
    
    
    (1,267
    )
    
    
    (1,601
    )
    
    
    (757
    )
    
    
    (5,497
    )
    
    
    (7,675
    )
    
    
    (17,150
    )
    
    
    (2,598
    )General and administrative expenses (1)
    
    
    (15,600
    )
    
    
    (8,467
    )
    
    
    (57,171
    )
    
    
    (18,869
    )
    
    
    (29,821
    )
    
    
    (70,008
    )
    
    
    (10,607
    )Operating income (loss)
    
    
    23,037
    
    
    
    36,938
    
    
    
    (47,859
    )
    
    
    101,826
    
    
    
    167,379
    
    
    
    179,666
    
    
    
    27,222Interest expense
    
    
    (1,710
    )
    
    
    (954
    )
    
    
    (279
    )
    
    
    (7,455
    )
    
    
    (6,891
    )
    
    
    (7,448
    )
    
    
    (1,128
    )Change in fair value of convertible notes
    
    
    
    
    
    
    
    
    
    
    (341
    )
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (325
    )
    
    
    (213
    )
    
    
    (5,436
    )
    
    
    (824
    )(Loss) gain from disposal of equipment
    
    
    (469
    )
    
    
    (1,555
    )
    
    
    (25
    )
    
    
    658
    
    
    
    
    
    
    
    543
    
    
    
    82Interest
income
    
    
    68
    
    
    
    15
    
    
    
    
    
    
    
    430
    
    
    
    948
    
    
    
    7,865
    
    
    
    1,192Other income (expenses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,734
    
    
    
    
    
    
    
    (399
    )
    
    
    (60
    )Income (loss) before income taxes
    
    
    20,926
    
    
    
    34,444
    
    
    
    (48,508
    )
    
    
    102,404
    
    
    
    161,223
    
    
    
    174,791
    
    
    
    26,484Income tax (expenses) benefit
    
    
    (4,097
    )
    
    
    (15,014
    )
    
    
    182
    
    
    
    (23,335
    )
    
    
    (36,396
    )
    
    
    (43,873
    )
    
    
    (6,647
    )Net income (loss)
    
    
    16,829
    
    
    
    19,430
    
    
    
    (48,326
    )
    
    
    79,069
    
    
    
    124,827
    
    
    
    130,918
    
    
    
    19,837Net loss attributable to
non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,518
    )
    
    
    (230
    )Accretion of Series A contingently
redeemable convertible
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (270,343
    )
    
    
    (30,050
    )
    
    
    
    
    
    
    Accretion of Series B contingently
redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (304,763
    )
    
    
    (48,359
    )
    
    
    
    
    
    
    Net income (loss) attributable to
ordinary shareholders
    
    
    16,829
    
    
    
    19,430
    
    
    
    (48,326
    )
    
    
    (496,037
    )
    
    
    46,418
    
    
    
    129,400
    
    
    
    19,607Income (loss) per share  basic and
diluted (2)
    
    
    0.34
    
    
    
    0.39
    
    
    
    (0.97
    )
    
    
    (8.63
    )
    
    
    0.62
    
    
    
    0.89
    
    
    
    0.13Income (loss) per ADS  basic and
diluted
    
    
    1.02
    
    
    
    1.17
    
    
    
    (2.91
    )
    
    
    (25.89
    )
    
    
    1.86
    
    
    
    2.66
    
    
    
    0.40Shares used in computation  basic and
diluted(2)
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    57,481,400
    
    
    
    74,648,779
    
    
    
    146,040,594
    
    
    
    ADSs used in computation  basic and
diluted
    
    
    16,666,667
    
    
    
    16,666,667
    
    
    
    16,666,667
    
    
    
    19,160,467
    
    
    
    24,882,926
    
    
    
    48,680,198
    
    
    
    
 
 (1)
    
    Our selling expenses included share-based compensation, RMB0.3 million in 2009, and RMB2.5
million (US$0.4 million) in 2010. Our general and administrative
expenses included share-based
compensation expenses related to certain share options granted in 2007, 2008, and 2009 that
amounted to RMB49.5 million, RMB4.2 million, RMB0.7 million and RMB7.0 million (US$1.1
million) in 2007, 2008, 2009 and 2010, respectively. We did not recognize any share-based
compensation expenses in 2006. We did not grant any share options under our 2008 share
incentive plan in 2010.(2)
    
    On November 17, 2009, we effected a share split whereby all of our issued and outstanding
704,281 ordinary shares of a par value of US$0.01 per share were split into 70,428,100
ordinary shares of US$0.0001 par value per share and the number of our authorized ordinary
shares was increased from 4,500,000 to 450,000,000. The share split has been retroactively
reflected in this annual report so that share numbers, per share price and par value data are
presented as if the share split had occurred from our inception. 5




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##### Table of Contents



As of December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Balance Sheet DataCash
    
    
    606
    
    
    
    39,792
    
    
    
    353,991
    
    
    
    1,037,239
    
    
    
    535,783
    (1)
    
    
    81,179Total current assets
    
    
    23,333
    
    
    
    66,135
    
    
    
    492,978
    
    
    
    1,252,512
    
    
    
    904,416
    
    
    
    137,032Property, plant and equipment, net
    
    
    231,215
    
    
    
    54,703
    
    
    
    349,121
    
    
    
    573,042
    
    
    
    907,336
    
    
    
    137,475Goodwill
    
    
    
    
    
    
    259,282
    
    
    
    300,163
    
    
    
    300,163
    
    
    
    300,163
    
    
    
    45,479Acquired intangible assets, net
    
    
    
    
    
    
    129,998
    
    
    
    181,838
    
    
    
    155,345
    
    
    
    146,113
    
    
    
    22,138Total assets
    
    
    256,330
    
    
    
    543,023
    
    
    
    1,514,395
    
    
    
    2,443,865
    
    
    
    2,663,044
    
    
    
    403,490Long-term bank borrowings, current portion
    
    
    
    
    
    
    
    
    
    
    39,840
    
    
    
    57,487
    
    
    
    60,906
    
    
    
    9,228Long-term bank borrowings, non-current portion
    
    
    
    
    
    
    
    
    
    
    52,120
    
    
    
    80,915
    
    
    
    45,089
    
    
    
    6,832Series A contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    254,358
    
    
    
    
    
    
    
    
    
    
    
    Series B contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    411,101
    
    
    
    
    
    
    
    
    
    
    
    Total shareholders equity
    
    
    134,264
    
    
    
    394,878
    
    
    
    565,020
    
    
    
    2,153,748
    
    
    
    2,301,835
    
    
    
    348,762Total liabilities and shareholders equity
    
    
    256,330
    
    
    
    543,023
    
    
    
    1,514,395
    
    
    
    2,443,865
    
    
    
    2,663,044
    
    
    
    403,490
 
 (1)
    
    The decrease in cash as of the December 31, 2010 as compared to December 31, 2009 was
primarily the results of PPE purchasing and acquisition occurred in 2010. Concord MedicalPredecessor
    
    
    (Successor)
    
    
    Concord Medical (Successor)Period from
    
    
    Period fromJanuary 1, 2007
    
    
    September 10, 2007to October 30,
    
    
    to December 31,
    
    
    Year Ended December 31,2007
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Statements of Cash
Flow DataNet cash generated from operating activities
    
    
    44,593
    
    
    
    6,103
    
    
    
    46,774
    
    
    
    135,883
    
    
    
    190,972
    
    
    
    28,936Net cash used in investing activities (1)
    
    
    (50,452
    )
    
    
    (30,441
    )
    
    
    (376,371
    )
    
    
    (272,269
    )
    
    
    (529,468
    )
    
    
    (80,222
    )Net cash generated from (used in) financing
activities
    
    
    6,020
    
    
    
    63,225
    
    
    
    649,494
    
    
    
    819,846
    
    
    
    (154,933
    )
    
    
    (23,475
    )Exchange rate effect on cash
    
    
    
    
    
    
    138
    
    
    
    (5,698
    )
    
    
    (212
    )
    
    
    (8,027
    )
    
    
    (1,217
    )Net increase (decrease) in cash
    
    
    161
    
    
    
    39,025
    
    
    
    314,199
    
    
    
    683,248
    
    
    
    (501,456
    )
    
    
    (75,978
    )
 
 (1)
    
    Net cash used in investing activities in 2008, 2009 and 2010 includes acquisitions, net of
cash acquired, of RMB231.5 million, RMB32.2 million and RMB45.0 million (US$6.8 million),
respectively. 6




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##### Table of Contents



Concord MedicalPredecessor
    
    
    (Successor)
    
    
    Concord Medical (Successor)Period from
 January 1,
    
    
    Period from

September 1,2007 to
    
    
    2007 toOctober 30,
    
    
    December 31,
    
    
    Year Ended December 31,2007
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Total net revenues
generated by our primary
medical equipment under
lease and management
services arrangements:Linear accelerators
    
    
    3,206
    
    
    
    877
    
    
    
    40,506
    
    
    
    90,278
    
    
    
    108,974
    
    
    
    16,511Head gamma knife systems
    
    
    40,408
    
    
    
    8,731
    
    
    
    65,365
    
    
    
    67,406
    
    
    
    80,909
    
    
    
    12,259Body gamma knife systems
    
    
    13,537
    
    
    
    2,565
    
    
    
    20,071
    
    
    
    25,241
    
    
    
    38,599
    
    
    
    5,848PET-CT scanners
    
    
    
    
    
    
    
    
    
    
    5,241
    
    
    
    24,196
    
    
    
    41,036
    
    
    
    6,218MRI scanners
    
    
    2,899
    
    
    
    437
    
    
    
    15,123
    
    
    
    33,880
    
    
    
    51,738
    
    
    
    7,839Others (1)
    
    
    3,032
    
    
    
    391
    
    
    
    8,755
    
    
    
    19,161
    
    
    
    27,992
    
    
    
    4,241Total net revenues 
lease and management
services
    
    
    63,082
    
    
    
    13,001
    
    
    
    155,061
    
    
    
    260,162
    
    
    
    349,248
    
    
    
    52,916
 
 (1)
    
    Other primary medical equipment used includes CT scanners and ECT scanners for diagnostic
imaging, electroencephalography for the diagnosis of epilepsy, thermotherapy to increase the
efficacy of and for pain relief after radiotherapy and chemotherapy, high intensity focused
ultrasound therapy for the treatment of cancer, stereotactic radiofrequency ablation for the
treatment of Parkinsons Disease and refraction and tonometry for the diagnosis of ophthalmic
conditions. Exchange Rate Information
   Exchange Rate (Renminbi per US Dollar)(1)Period End
    
    
    Average(2)
    
    
    Low
    
    
    HighPeriod
    
    
    
    
    
    (RMB per US$1.00)2006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.6072
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9477
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8307
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.60002011January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483April
    
    
    6.4900
    
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900May
    
    
    6.4786
    
    
    
    6.4957
    
    
    
    6.5073
    
    
    
    6.4786June
(through June 24)
    
    
    6.4737
    
    
    
    6.4757
    
    
    
    6.4824
    
    
    
    6.4628
 7




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(1)
    
    The source of the exchange rate is: (i) with respect to any period ending on or prior to
December 31, 2008, the Federal Reserve Bank of New York, and (ii) with respect to any period
ending on or after January 1, 2009, the H.10 statistical release of the Federal Reserve Board.(2)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period. B.
    
    Capitalization and IndebtednessNot Applicable.C.
    
    Reasons for the Offer and Use of ProceedsNot Applicable.D.
    
    Risk Factors
 Risks Related to Our Company
 We may encounter difficulties in successfully opening new centers or renewing agreements for
existing centers due to the limited number of suitable hospital partners and their potential
ability to finance the purchase of medical equipment directly.
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We have historically derived a significant portion of our revenues from centers located at a
limited number of our hospital partners and regions in which we operate and our accounts receivable
are also concentrated with a few hospital partners.
  
    
    reduction in the number of patient cases at the centers located at these partner
hospitals;
    
    loss of key experienced medical professionals;
    
    decrease in the profitability of such centers;
    
    failure to maintain or renew our agreements with these hospital partners;
    
    any failure of these hospital partners to pay us our contracted percentage of any
such centers revenue net of specified operating expenses;
    
    any regulatory changes in the geographic areas where our hospital partners are
located; or
    
    any other disputes with these hospital partners.
  We conduct our business in a heavily regulated industry.
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We depend on our hospital partners to recruit and retain qualified doctors and other medical
professionals to ensure the high quality of treatment services provided in our network of centers.
  Any failure by our hospital partners to make contracted payments to us or any disputes over, or
significant delays in receiving, such payments could have a material adverse effect on our business
and financial condition.
  We may not be able to effectively manage the expansion of our operations through new acquisitions
or joint ventures or to successfully realize the anticipated benefits of any such acquisition or
joint venture.
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We may not be successful in negotiating the conversion of a few of our cooperation agreements with
our partner hospitals into lease and management agreements due to regulatory changes.
   We cannot assure you that government authorities will not interpret regulations differently from us
to find that our lease and management agreements are still not in compliance with relevant
regulations.
  11




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There may be corrupt practices in the healthcare industry in China, which may place us at a
competitive disadvantage if our competitors engage in such practices and may harm our reputation if
our hospital partners and the medical personnel who work in our centers, over whom we have limited
control, engage in such practices.
  We are planning to establish and operate specialty cancer hospitals that will be majority owned by
us and are subject to significant risks.
   12




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We rely on the doctors and other medical professionals providing services in our network of centers
to make proper clinical decisions and we rely on our hospital partners to maintain proper control
over the clinical aspects of the operation of our network of centers.
  Any failures or defects of the medical equipment in our network of centers or any failure of the
medical personnel who work at the centers in our network to properly operate our medical equipment
could subject us to liability claims and we may not have sufficient insurance to cover any
potential liability.
  13




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Any downtime for maintenance and repair of our medical equipment could lead to business
interruptions that could be expensive and harmful to our reputation and to our business.
  We rely on a limited number of equipment manufacturers.
  We may fail to protect our intellectual property rights or we may be exposed to misappropriation
and infringement claims by third parties, either of which may have a material adverse effect as to
our business.
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Our business depends substantially on the continuing efforts of our executive officers and other
key personnel, and our business may be severely disrupted if we lose their services.
  Our reported earnings could decline if we recognize impairment losses on intangible assets and
goodwill relating to the OMS reorganization and other acquisitions.
  15




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We do not have insurance coverage for some of our medical equipment and do not carry any business
interruption insurance.
  Most of our radiotherapy and diagnostic imaging equipment contains radioactive materials or emits
radiation during operation.
  Any change in the regulations governing the use of medical data in China, which are still in
development, could adversely affect our ability to use our medical data and could potentially
subject us to liability for our past use of such medical data.
  Our directors, executive officers and significant shareholders have substantial influence over our
company and their interests may not be aligned with the interests of our other shareholders.
  16




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Our articles of association contain anti-takeover provisions that could adversely affect the rights
of holders of our ordinary shares and ADSs.
  We have identified material weaknesses in our internal control over financial reporting and cannot
assure you that additional material weaknesses will not be identified in the future. Our failure to
implement and maintain effective internal control over financial reporting could result in material
misstatements in our financial statements which could require us to restate financial statements in
the future, or cause us not to be able to provide timely financial information, which may cause
investors to lose confidence in our reported financial information and have a negative effect on
our stock price.
   We may require additional funding to finance our operations, which financing may not be available
on terms acceptable to us or at all, and if we are able to raise funds, the value of your
investment in us may be negatively impacted.
  17




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
    
    our future financial condition, results of operations and cash flows;
    
    general market conditions for capital raising and debt financing activities; and
    
    economic, political and other conditions in China and elsewhere.
  We have granted security interests over certain of our medical equipment in order to secure bank
borrowings. Any failure to satisfy our obligations under such borrowings could lead to the forced
sale of such equipment.
  Our business may be adversely affected by fluctuations in the value of the Renminbi as a
significant portion of our capital expenditures relates to the purchase of medical equipment priced
in U.S. dollars.
  If we grant employee share options, restricted shares or other equity incentives in the future, our
net income could be adversely affected.
 Compensation-Stock Compensation, Overall .
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We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than that under U.S. law, you may have less
protection for your shareholder rights than you would under U.S. law.
   You may have difficulty enforcing judgments obtained against us.
  We are exempt from certain corporate governance requirements of the New York Stock Exchange.
  
    
    have a majority of the board be independent (other than due to the requirements for
the audit committee under the United States Securities Exchange Act of 1934, as
amended, or the Exchange Act);
    
    have a minimum of three members in our audit committee;
    
    have a compensation committee, a nominating or corporate governance committee;
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
    
    provide annual certification by our chief executive officer that he or she is not
aware of any non-compliance with any corporate governance rules of the NYSE;
    
    have regularly scheduled executive sessions with only non-management directors;
    
    have at least one executive session of solely independent directors each year;
    
    seek shareholder approval for (i) the implementation and material revisions of the
terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding
ordinary shares or 1% of the voting power outstanding to a related party, (iii) the
issuance of more than 20% of our outstanding ordinary shares, and (iv) an issuance that
would result in a change of control;
    
    adopt and disclose corporate governance guidelines; or
    
    adopt and disclose a code of business conduct and ethics for directors, officers and
employees.
  We may be classified as a passive foreign investment company, which could result in adverse United
States federal income tax consequences to United States Holders.
  Risks Related to Our Industry
 Healthcare administrative authorities in China currently set procurement quotas for certain types
of medical equipment.
 on Procurement and Use of Large Medical Equipment
 20




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Certain of our hospital partners have not received large medical equipment procurement licenses or
interim procurement permits for some of the medical equipment in our network of centers which could
result in fines or the suspension from use of such medical equipment.
  21




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Pricing for the services provided by our network of centers may be adversely affected by reductions
in treatment and examination fees set by the Chinese government.
  Our business may be harmed by technological and therapeutic changes or by shifts in doctors or
patients preferences for alternative treatments.
  22




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The technology used in some of our radiotherapy equipment, particularly our body gamma knife and
our proton beam therapy system, has been in use for a limited period of time and the international
medical community has not yet developed a large quantity of peer-reviewed literature that supports
their safe and effective use.
  Our business may be adversely affected by impending healthcare reforms in China.
   23




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We or our hospital partners may be unable to obtain various permits and authorizations from
regulatory authorities in China relating to our medical equipment, which could delay the
installation or interrupt the operation of our equipment.
   If the government and public insurers in the PRC do not continue to provide sufficient coverage and
reimbursement for the radiotherapy and diagnostic imaging services provided by our network of
centers, our revenues could be adversely affected.
  24




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Risks Related to Doing Business in China
 Adverse changes in political, economic and other policies of the Chinese government could have a
material adverse effect on the overall economic growth of China, which could materially and
adversely affect the growth of our business and our competitive position.
  
    
    the degree of government involvement;
    
    the level of development;
    
    the growth rate;
    
    the control of foreign exchange;
    
    the allocation of resources;
    
    an evolving regulatory system; and
    
    lack of sufficient transparency in the regulatory process.
    Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
  25




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The M&A rule establishes more complex procedures for some acquisitions of Chinese companies by
foreign investors, which could make it more difficult for us to pursue growth through acquisitions
in China.
  Recent PRC regulations, particularly SAFE Circular No. 75 relating to acquisitions of PRC companies
by foreign entities, may limit our ability to acquire PRC companies and adversely affect the
implementation of our strategy as well as our business and prospects.
  26




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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from using the proceeds of our initial public offering to make loans or
additional capital contributions to our PRC subsidiaries.
   Governmental control of currency conversion may limit our ability to use our revenues effectively
and the ability of our PRC subsidiaries to obtain financing.
  27




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Fluctuations in the value of the Renminbi may have a material adverse effect on your investment.
   28




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The increase in the PRC enterprise income tax and the discontinuation of the preferential tax
treatment currently available to us could, in each case, result in a decrease of our net income and
materially and adversely affect our financial condition and results of operations.
    We rely on dividends paid by our subsidiaries for our cash needs, and any limitation on the ability
of our subsidiaries to make payments to us could have a material adverse effect on our ability to
conduct our business.
  29




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Notice of the State Administration of Taxation on
Negotiated Reduction of Dividends and Interest Rates Arrangement between the PRC and the Hong Kong Special Administrative Region on the
Avoidance of Double Taxation and Prevention of Fiscal Evasion Notice of the State Administration
of Taxation Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties
 Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
    We may be classified as a resident enterprise for PRC enterprise income tax purposes, which could
result in unfavorable tax consequences to us and our non-PRC shareholders.
  30




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Dividends payable by us to our foreign investors and gains on the sale of our ADSs or ordinary
shares may become subject to taxes under PRC tax laws.
  If we are found to have failed to comply with applicable laws, we may incur additional expenditures
or be subject to significant fines and penalties.
  We face risks related to natural disasters and health epidemics in China, which could have a
material adverse effect on our business and results of operations.
  31




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Risks Related to Our Ordinary Shares and ADSs
 The market price for our ADSs may be volatile.
  
    
    announcements of technological or competitive developments;
    
    regulatory developments in China affecting us or our competitors;
    
    announcements of studies and reports relating to the effectiveness or safety of the
services provided in our network of centers or those of our competitors;
    
    actual or anticipated fluctuations in our quarterly operating results and changes or
revisions of our expected results;
    
    changes in financial estimates by securities research analysts;
    
    changes in the economic performance or market valuations of other medical services
companies;
    
    addition or departure of our senior management and other key personnel;
    
    release or expiry of lock-up or other transfer restrictions on our outstanding
ordinary shares or ADSs; and
    
    sales or perceived sales of additional ordinary shares or ADSs.
  Substantial future sales or perceived sales of our ADSs in the public market could cause the price
of our ADSs to decline.
  32




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Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise
those rights.
  You may be subject to limitations on transfers of your ADSs.
  Your right to participate in any future rights offerings may be limited, which may cause dilution
to your holdings and you may not receive cash dividends if it is impractical to make them available
to you.
   33




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ITEM 4. INFORMATION ON THE COMPANY
 History and Development of the Company
        34




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
    
    Shenzhen Aohua Medical Services Co., Ltd., our wholly owned subsidiary incorporated
in the PRC that engages in the provision of radiotherapy and diagnostic center
management services to hospitals in the PRC;
    
    Shenzhen Aohua Medical Leasing and Services Co., Ltd., our wholly owned subsidiary
incorporated in the PRC that engages in the provision of radiotherapy and diagnostic
equipment leasing services to hospitals in the PRC;
    
    Medstar (Shanghai) Leasing Co., Ltd., our wholly owned subsidiary incorporated in
the PRC that engages in the sale of medical equipment and the provision of radiotherapy
and diagnostic equipment leasing and management services to hospitals in the PRC;
    
    CMS Hospital Management Co., Ltd., our wholly owned subsidiary incorporated in the
PRC that engages in the provision of radiotherapy and diagnostic equipment management
services to hospitals in the PRC;
    
    Beijing Xing Heng Feng Medical Technology Co., Ltd., our wholly owned subsidiary
incorporated in the PRC that engages in the provision of radiotherapy and diagnostic
equipment management services to hospitals in the PRC;
    
    Changan CMS International Cancer Center, which specializes in cancer diagnosis and
treatment in XiAn, was established by us and Changan Hospital in which we will have
controlling equity interest upon the consummation of the acquisition described above;
and
    
    Tianjing Kangmeng Radiology Equipment Management Co., Ltd, our wholly owned
subsidiary incorporate in the PRC that manages four radiotherapy and diagnostic imaging
centers in Hebei province.
   35




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Business Overview
 Overview
      36




---



##### Table of Contents



Our Network of Centers and Specialty Cancer Hospitals
   Our Arrangements with Hospital Partners
 Lease and Management Services Arrangements
   37




---



##### Table of Contents



Service-Only Arrangements
   Specialty Cancer Hospitals
  38




---



##### Table of Contents



Changan CMS International Cancer Center
   Beijing Proton Medical Center
    39




---



##### Table of Contents



Financing Leases
  Other Business Arrangements
  Service Offerings in Our Network
  Linear Accelerators External Beam Radiotherapy
  Gamma Knife Radiosurgery
  40




---



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Head Gamma Knife Systems
  Body Gamma Knife Systems
  Proton Beam Therapy
  Diagnostic Imaging
  41




---



##### Table of Contents



Other Treatment and Diagnostic Modalities
  Medical Equipment Procurement
    42




---



##### Table of Contents



Operation of Radiotherapy and Diagnostic Imaging Centers in Our Network
  Management Structure
     Staffing
  43




---



##### Table of Contents



Medical Affairs
    Marketing
   44




---



##### Table of Contents



Accounting and Payment Collection
  Medical Equipment Maintenance and Repair
  Pricing of Medical Service
  Business Development
  
    
    population density, demographics and the level of economic development of the
regions or cities in which such new centers would be located; and
    
    the reputation of the potential hospital partner and its doctors, nurses and other
personnel and the number of licensed patient beds and patient volume.
 45




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Competition
   Environmental Matters
  Insurance
  46




---



##### Table of Contents



Legal and Administrative Proceedings
   Regulation of Our Industry
  General Regulatory Environment
  47




---



##### Table of Contents



Permits Required by Our Company
 Medical Equipment Operating Enterprise Permits
  Radiation Safety Permits
   Leasing Company Permit
  48




---



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Regulation of Medical Institutions
 Distinction between For-Profit and Non-Profit Medical Institutions
   Medical Institution Practicing License
  Large Medical Equipment Procurement License
  49




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Radiotherapy Permit
  Radiation Worker Permit
  Regulation of Military Hospitals
  50




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##### Table of Contents



Restrictions on Cooperation Agreements
  Regulation of Proton Treatment Centers
  Registration of Doctors
   51




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##### Table of Contents



Pricing of Medical Services
  Medical Insurance Coverage
   Urban Employees Basic Medical
    
    Urban Residents Basic Medical
    
    Rural Cooperative MedicalInsurance Program
    
    Insurance Program
    
    ProgramLaunch Time
    
    1998
    
    2007
    
    2003Participants
    
    Urban employees
    
    Urban non-employees
    
    Rural residentsParticipation
    
    Mandatory
    
    Voluntary
    
    Voluntary
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Urban Employees Basic Medical
    
    Urban Residents Basic Medical
    
    Rural Cooperative MedicalInsurance Program
    
    Insurance Program
    
    ProgramNumber of People covered in 2008
    
    Approximately 200.0 million
(33.0% of Chinas urban
population)
    
    Approximately 118.3 million
(19.5% of Chinas urban
population)
    
    Approximately 815 million
(91.5% of Chinas rural
population)Total reimbursement amount in 2008
    
    RMB208.4 billion
    
    N/A
    
    RMB66.2 billionFunding
    
    Employers and employees:
    
    Households and the government:
    
    Individuals and the government:     employer contributes
approximately 6% of each
employees total salary; and
     employee
contributes approximately 2%
of such employees total
salary.
    
          monthly premium are
paid by each household; and
     government
subsidizes no less than RMB80 per
person annually and RMB40 per
person annually for the
mid/western regions of China,
with greater subsidies provided
to low-income families and
disabled persons.
    
         individual pays no
less than RMB20 per year and
local government subsidizes no
less than RMB40 per person
annually; and     government subsidizes
RMB40 per person annually for
the middle and western regions
of the country and a smaller
amount for the eastern region.General Reimbursement Policy
    
    Reimbursement comes from two
sources  individuals
reimbursement account and the
social medical expense pool:     All of the employees
contribution and 30% of the
employers contribution are
allocated to the individuals
reimbursement account; the
reimbursement cap from the
individual account is the
balance of that account; and
     The remaining 70%
of the employers contribution is
aggregated into a social medical
expense pool; the reimbursement
cap from the social medical
expense pool for an individual
participant in a calendar year
is around four times the
regional average annual
salary.
    
    There is no specific
requirement or guidance from
the central government.
Reimbursement policy is
separately determined by
local governments.
    
    The central government
suggests that, beginning in
the second half of 2009, the
reimbursement cap for all
regions should be no less than
six times the average annual
per capita net income of rural
residents in the region.Examples of Local Reimbursement
Policy
    
    Shanghai: reimbursement cap from
the social medical expense pool
for an individual participant in
a calendar year is approximately
four times the average annual
salary in Shanghai from the
previous year.Inner Mongolia: reimbursement
cap from the social medical
expense pool for an individual
participant in a calendar year
is RMB25,000.
    
    Jiangsu Province:
approximately 50% to 60% of
medical expense can be
reimbursed by the program.Sichuan Province:
approximately 60% (and not
less than 50%) of medical
expense can be reimbursed by
the program.Guangdong Province:
approximately 40% to 60% of
medical expense can be
reimbursed by the program;
maximum reimbursement amount
is approximately two times
the average annual salary in
Guangdong province from the
previous year.
    
    Guangdong Province: maximum
reimbursement amount is
approximately RMB50,000 per
person per year.Hubei Province: maximum
reimbursement amount for
hospitalization is
approximately RMB30,000 per
person per year.Anhui Province: maximum
reimbursement amount for
hospitalization is
approximately RMB30,000 per
person per year.
 
 Sources: MOH, MHRSS, National Bureau of Statistics, and various other central and local PRC
government websites. Foreign Exchange Control and Administration
  53




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Dividend Distributions
  Regulations Relating to Employee Share Options
  54




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Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and
Overseas Listings
  Regulation of Loans between a Foreign Company and its Chinese Subsidiary
   55




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Taxation
  Regulation on Employment
  Organizational Structure
  
 56




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##### Table of Contents



Property, Plant and Equipment
  Location
    
    Size (in square meters)
    
    Expiration DateBeijing
    
    
    348
    
    
    December 2012Shanghai
    
    
    24
    
    
    May 2012Shanghai
    
    
    342
    
    
    April 2013Shenzhen
    
    
    522
    
    
    November 2012
   Number of primary medical equipment owned(1) :Linear accelerators (2)
    
    
    25Head gamma knife systems
    
    
    22
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Body gamma knife systems
    
    
    13PET-CT scanners
    
    
    13MRI scanners
    
    
    21Others(3)
    
    
    23Total
    
    
    117
 
 (1)
    
    Excluding data from 4 centers under service-only agreements as of the date of this report.(2)
    
    Including a MM50 intensity-modulated radiation therapy system.(3)
    
    Other primary medical equipment used includes CT scanners and ECT scanners for diagnostic
imaging, electroencephalography for the diagnosis of epilepsy, thermotherapy to increase the
efficacy of and for pain relief after radiotherapy and chemotherapy, high intensity focused
ultrasound therapy for the treatment of cancer, stereotactic radiofrequency ablation for the
treatment of Parkinsons Disease and refraction and tonometry for the diagnosis of ophthalmic
conditions. ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Operating Results
 Overview
    58




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Factors Affecting Our Results of Operations
    
    
    our ability to expand our network of centers;
    
    the number of patient cases treated in our network;
    
    the operational arrangements with our hospital partners;
    
    the range and mix of services provided in our network; and
    
    the cost of our medical equipment.
 Our Ability to Expand Our Network of Centers
  59




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
    
    the reputation of our existing network of centers and doctors providing services in
our network of centers;
    
    our financial resources;
    
    our ability to timely establish and manage new centers in conjunction with our
hospital partners; and
    
    our relationship with our hospital partners.
  The Number of Patient Cases Treated in Our Network
  The Operational Arrangements with Our Hospital Partners
   
    
    the size and location of potential hospital partner;
    
    the length of the arrangement;
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
    
    the type of medical equipment to be installed in the hospitals center;
    
    the capabilities of the doctors that will provide services at the centers; and
    
    the potential growth of such center.
    The Range and Mix of Services Provided in Our Network
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The Cost of Our Medical Equipment
  Financial Impact of Our Reorganization and Acquisitions
  
    
    China Medstar in July 2008 for approximately £17.1 million or approximately RMB238.7
million;
    
    Xing Heng Feng Medical in October 2008 for approximately RMB35.0 million;
    
    Tianjin Kangmeng Radiology Equipment Management Co., Ltd. in April 2010 for
approximately RMB60.0 million (US$9.1 million);
    
    certain medical equipment located in Tianjin Peoples Liberation Army 272 Hospital
and the related business from a third party for RMB14.0 million;
    
    certain medical equipment located in Peoples Liberation Army 254 Hospital and the
related business from another third party for RMB4.0 million;
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Revenues
       Year Ended December 31,2008
    
    
    2009
    
    
    2010% of Total Net
    
    
    
    
    
    
    % of Total Net
    
    
    
    
    
    
    
    
    
    
    % of Total NetRMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues
    
    
    RMB
    
    
    US$
    
    
    Revenues(in thousands, except for percentages)Lease and management services
    
    
    155,061
    
    
    
    90.3
    
    
    
    260,162
    
    
    
    89.0
    
    
    
    349,248
    
    
    
    52,916
    
    
    
    89.7
    %Management services
    
    
    12,677
    
    
    
    7.4
    
    
    
    28,739
    
    
    
    9.8
    
    
    
    22,805
    
    
    
    3,455
    
    
    
    5.9
    %Other, net
    
    
    4,051
    
    
    
    2.3
    
    
    
    3,535
    
    
    
    1.2
    
    
    
    17,471
    
    
    
    2,647
    
    
    
    4.4
    %Total net revenues
    
    
    171,789
    
    
    
    100.0
    
    
    
    292,436
    
    
    
    100.0
    
    
    
    389,524
    
    
    
    59,018
    
    
    
    100.0
    %
  63




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Cost of Revenues and Operating Expenses
  Year Ended December 31,2008
    
    
    2009
    
    
    2010% of Total Net
    
    
    
    
    
    
    % of Total Net
    
    
    
    
    
    
    
    
    
    
    % of Total NetRMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues
    
    
    RMB
    
    
    US$
    
    
    Revenues(in thousands, except for percentages)Cost of revenues:Lease and management services
    
    
    25,046
    
    
    
    14.6
    
    
    
    60,937
    
    
    
    20.8
    
    
    
    93,771
    
    
    
    14,208
    
    
    
    24.1Amortization of acquired intangibles
    
    
    20,497
    
    
    
    11.9
    
    
    
    26,493
    
    
    
    9.1
    
    
    
    26,488
    
    
    
    4,013
    
    
    
    6.8Management services
    
    
    54
    
    
    
    0.0
    
    
    
    131
    
    
    
    0.0
    
    
    
    2,441
    
    
    
    370
    
    
    
    0.6Total cost of revenues
    
    
    45,597
    
    
    
    26.5
    
    
    
    87,561
    
    
    
    29.9
    
    
    
    122,700
    
    
    
    18,591
    
    
    
    31.5Gross Profit
    
    
    126,192
    
    
    
    73.5
    
    
    
    204,875
    
    
    
    70.1
    
    
    
    266,824
    
    
    
    40,427
    
    
    
    68.5Operating expenses:Selling expenses
    
    
    5,497
    
    
    
    3.2
    
    
    
    7,675
    
    
    
    2.6
    
    
    
    17,150
    
    
    
    2,598
    
    
    
    4.4General and administrative expenses
(1)
    
    
    18,869
    
    
    
    11.0
    
    
    
    29,821
    
    
    
    10.2
    
    
    
    70,008
    
    
    
    10,607
    
    
    
    18.0Total operating expenses
    
    
    24,366
    
    
    
    14.2
    
    
    
    37,496
    
    
    
    12.8
    
    
    
    87,158
    
    
    
    13,205
    
    
    
    22.4
 
 (1)
    
    Our selling expenses included share-based compensation, RMB0.3 million in 2009, and RMB2.5
million (US$0.4 million) in 2010. Our general and administrative expenses included share-based
compensation expenses related to certain share options granted in 2007, 2008 and 2009 that
amounted to RMB4.2 million,RMB0.7 million and RMB7.0 million (US$1.1 million) in 2008, 2009
and 2010, respectively. We didnt grant any share options under our 2008 share incentive plan
in 2010. Cost of Revenues
   Selling Expenses.
 General and Administrative Expenses
 65




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Share-based Compensation
    Accretion of Series A and Series B Contingently Redeemable Convertible Preferred Shares
  66




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Taxation
 Cayman Islands
  British Virgin Islands
  Hong Kong
  Singapore
  Peoples Republic of China
   67




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Critical Accounting Policies
  Revenue
 Lease and Management Services.
 68




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##### Table of Contents



Leases, Overall Leases
 Leases, Overall, Recognition, Lessors Leases, Overall, Recognition, General
  Management Services
 Medical Equipment Sales. Revenue Recognition, Principal Agent Considerations,
 Financing Lease. Leases, Capital Leases
 69




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Others.
 Accounts Receivable and Allowance for Doubtful Accounts
  Goodwill
 Intangibles, Goodwill and Other, Goodwill
  Acquired Intangible Asset, net
   70




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Share-based Compensation
 Compensation - Stock Compensation
  Business Combinations
  71




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Results of Operations
  Year Ended December 312008
    
    
    2009
    
    
    2010RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in thousands, except for percentages)Summary Consolidated
Statements of
Operation DataRevenues, net of
business tax,
value-added tax and
related surcharges:Lease and management
services
    
    
    155,061
    
    
    
    90.3
    
    
    
    260,162
    
    
    
    89.0
    
    
    
    349,248
    
    
    
    52,916
    
    
    
    89.7Management services
    
    
    12,677
    
    
    
    7.4
    
    
    
    28,739
    
    
    
    9.8
    
    
    
    22,805
    
    
    
    3,455
    
    
    
    5.8Other, net
    
    
    4,051
    
    
    
    2.3
    
    
    
    3,535
    
    
    
    1.2
    
    
    
    17,471
    
    
    
    2,647
    
    
    
    4.5Total net revenues
    
    
    171,789
    
    
    
    100.0
    
    
    
    292,436
    
    
    
    100.0
    
    
    
    389,524
    
    
    
    59,018
    
    
    
    100Cost of revenues:Lease and management
services
    
    
    (25,046
    )
    
    
    (14.6
    )
    
    
    (60,937
    )
    
    
    (20.8
    )
    
    
    (93,771
    )
    
    
    (14,208
    )
    
    
    (24.1
    )Amortization of
acquired intangibles
    
    
    (20,497
    )
    
    
    (11.9
    )
    
    
    (26,493
    )
    
    
    (9.1
    )
    
    
    (26,488
    )
    
    
    (4,013
    )
    
    
    (6.8
    )Management services
    
    
    (54
    )
    
    
    (0.0
    )
    
    
    (131
    )
    
    
    (0.0
    )
    
    
    (2,441
    )
    
    
    (370
    )
    
    
    (0.6
    )Total cost of revenues
    
    
    (45,597
    )
    
    
    (26.5
    )
    
    
    (87,561
    )
    
    
    (29.9
    )
    
    
    (122,700
    )
    
    
    (18,591
    )
    
    
    (31.5
    )Gross profit
    
    
    126,192
    
    
    
    73.5
    
    
    
    204,875
    
    
    
    70.1
    
    
    
    266,824
    
    
    
    40,427
    
    
    
    (68.5
    )Operating expenses:Selling expenses (2)
    
    
    (5,497
    )
    
    
    (3.2
    )
    
    
    (7,675
    )
    
    
    (2.6
    )
    
    
    (17,150
    )
    
    
    (2,598
    )
    
    
    (4.4
    )General and
administrative
expenses (1)
    
    
    (18,869
    )
    
    
    (11.0
    )
    
    
    (29,821
    )
    
    
    (10.2
    )
    
    
    (70,008
    )
    
    
    (10,607
    )
    
    
    (18.0
    )Operating income
    
    
    101,826
    
    
    
    59.3
    
    
    
    167,379
    
    
    
    57.2
    
    
    
    179,666
    
    
    
    27,222
    
    
    
    46.1Interest expense
    
    
    (7,455
    )
    
    
    (4.3
    )
    
    
    (6,891
    )
    
    
    (2.4
    )
    
    
    (7,448
    )
    
    
    (1,128
    )
    
    
    (1.9
    )Change in fair value
of convertible notes
    
    
    (464
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange loss
    
    
    (325
    )
    
    
    (0.2
    )
    
    
    (213
    )
    
    
    (0.1
    )
    
    
    (5,436
    )
    
    
    (824
    )
    
    
    (1.4
    )Gain from
disposal of equipment
    
    
    658
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    543
    
    
    
    82
    
    
    
    0.1Interest income
    
    
    430
    
    
    
    0.3
    
    
    
    948
    
    
    
    0.3
    
    
    
    7,865
    
    
    
    1,192
    
    
    
    2.0Other income (expense)
    
    
    7,734
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    (399
    )
    
    
    (60
    )
    
    
    (0.1
    )Income
before
income taxes
    
    
    102,404
    
    
    
    59.6
    
    
    
    161,223
    
    
    
    55.1
    
    
    
    174,791
    
    
    
    26,484
    
    
    
    44.9Income tax expenses
    
    
    (23,335
    )
    
    
    (13.6
    )
    
    
    (36,396
    )
    
    
    (12.4
    )
    
    
    (43,873
    )
    
    
    (6,647
    )
    
    
    (11.3
    )Net income
    
    
    79,069
    
    
    
    46.0
    
    
    
    124,827
    
    
    
    42.7
    
    
    
    130,918
    
    
    
    19,837
    
    
    
    33.6
 
 (1)
    
    Our general and administrative expenses included share-based compensation expenses related to
certain share options granted in 2007, 2008 and 2009 that amounted to RMB4.2 million and
RMB0.7 million, and RMB7.0 million (US$1.1 million) in 2008, 2009 and 2010, respectively. We
didnt grant any share options under our 2008 share incentive plan in 2010.(2)
    
    Our selling expense included share-based compensation expenses amounted to RMB0.3
million in 2009 and RMB2.5 million (US$0.4 million) in 2010.  Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009
 Total Net Revenues.
 Cost of Revenues.
  72




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
    
    an increase in the number of new centers that are in operation and the higher cost
of revenues as a percentage of total net revenues associated with such centers during
their ramp-up period; and
    
    an increase in the number of new centers that offer diagnostic imaging services,
which have a higher cost of revenues as a percentage of total net revenues as compared
to radiotherapy treatments.
 Gross Profit and Gross Margin.
 Operating Expenses.
 Selling Expenses.
 General and Administrative Expenses.
 Operating Income.
 Interest Expense.
 Foreign Exchange Loss.
 Gain from Disposal of Equipment.
 Interest Income.
 Income Taxes.
 73




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Net Income and Net Margin.
 Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008
 Total Net Revenues.
 Cost of Revenues.
  
    
    an increase in the number of new centers that are in operation and the higher cost
of revenues as a percentage of total net revenues associated with such centers during
their ramp-up period; and
 
    
    an increase in the number of new centers that offer diagnostic imaging services,
which have a higher cost of revenues as a percentage of total net revenues as compared
to radiotherapy treatments.
  Gross Profit and Gross Margin.
 Operating Expenses.
 
    
    Selling Expenses.Our selling expenses increased by 39.6% to RMB7.7 million for the
year ended December 31, 2009 from RMB5.5 million for the year ended December 31, 2008.
This increase in our selling expenses was due primarily to an approximately 172.0%
increase in travelling expenses and
 74




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office expenses to approximately RMB2.3 million related to increased business
development efforts. Selling expenses as a percentage of our total net revenues
decreased to 2.6% for the year ended December 31, 2009 from 3.2% for the year ended
December 31, 2008 mainly due to increased economies of scale.
 
    
    General and Administrative Expenses.Our general and administrative expenses
increased by 58.0% to RMB29.8 million for the year ended December 31, 2009 from RMB18.9
million for the year ended December 31, 2008. This increase was due primarily to (i)
increases in salaries and benefits payment in connection with the increased headcount
of our personnel and their travel related expenses, and (ii) increases in auditing
expenses. Our share-based compensation charges in 2009 includes options that we
granted in November 2009 to our executive officers, directors and other employees to
purchase pursuant to our 2008 share incentive plan an aggregate of 4,765,800 ordinary
 shares. General and administrative expenses as a percentage of our total net revenues
decreased to 10.2% for the year ended December 31, 2009 from 11.0% for the year ended
December 31, 2008 mainly due to economies of scale.
 Operating Income.
 Interest Expense.
 Change in Fair Value of Convertible Notes.
 Foreign Exchange Loss.
 Gain from Disposal of Equipment.
 Interest Income.
 Income Taxes.
 Net Income and Net Margin.
 75




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B.
    
    Liquidity and Capital Resources
     Year Ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Statements of Cash
Flow DataNet cash generated from operating activities
    
    
    46,774
    
    
    
    135,883
    
    
    
    190,972
    
    
    
    28,936Net cash used in investing activities (1)
    
    
    (376,371
    )
    
    
    (272,269
    )
    
    
    (529,468
    )
    
    
    (80,222
    )Net cash generated from (used in) financing
activities
    
    
    649,494
    
    
    
    819,846
    
    
    
    (154,933
    )
    
    
    (23,475
    )Exchange rate effect on cash
    
    
    (5,698
    )
    
    
    (212
    )
    
    
    (8,027
    )
    
    
    (1,217
    )Net increase (decrease) in cash
    
    
    314,199
    
    
    
    683,248
    
    
    
    (501,456
    )
    
    
    (75,978
    )Cash at beginning of the year
    
    
    39,792
    
    
    
    353,991
    
    
    
    1,037,239
    
    
    
    157,157Cash at end of the year
    
    
    353,991
    
    
    
    1,037,239
    
    
    
    535,783
    
    
    
    81,179
 
 (1)
    
    Net cash used in investing activities in 2008, 2009 and 2010 includes acquisitions, net of
cash acquired, of RMB231.5 million, RMB32.2 million and RMB45.0 million (US$6.8 million),
respectively. Operating Activities
   76




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Investing Activities
    Financing Activities
    77




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Acquisitions and Capital Expenditures
      Recently Issued Accounting Pronouncements
 Multiple-Deliverable Revenue Arrangements
 78




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Fair Value Measurements and
Disclosures
  C.
    
    Research and Development
  Intellectual Property
  79




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D.
    
    Trend Information
  E.
    
    Off Balance Sheet Arrangements
  F.
    
    Tabular Disclosure of Contractual Obligations
  Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 years(RMB in thousands)Short-term debt obligations-principal
    
    
    83,000
    
    
    
    83,000
    
    
    
    
    
    
    
    
    
    
    
    Short-term debt obligations-interest
    
    
    420
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt obligations-principal
    
    
    105,995
    
    
    
    60,906
    
    
    
    45,089
    
    
    
    
    
    
    
    Long-term debt obligations-interest
    
    
    5,065
    
    
    
    1,627
    
    
    
    3,438
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    10,173
    
    
    
    3,781
    
    
    
    6,392
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    8,234
    
    
    
    4,448
    
    
    
    3,786
    
    
    
    
    
    
    
    Purchase obligations
    
    
    46,912
    
    
    
    46,912
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    259,799
    
    
    
    201,094
    
    
    
    58,705
    
    
    
    
    
    
    
    
    80




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G.
    
    Safe Harbor
  
    
    the risks, challenges and uncertainties in the radiotherapy and diagnostic imaging
industry and for our business generally;
    
    our current expansion strategy, including our ability to expand our network of
centers and to establish specialty cancer hospitals;
    
    our ability to maintain strong working relationships with our hospital partners;
    
    our expectations regarding patients and their referring doctors demand for and
acceptance of the radiotherapy and diagnostic imaging services offered by our centers;
    
    changes in the healthcare industry in China, including changes in the healthcare
policies and regulations of the PRC government;
    
    technological or therapeutic changes affecting the field of cancer treatment and
diagnostic imaging;
    
    our ability to comply with all relevant environmental, health and safety laws and
regulations;
    
    our ability to obtain and maintain permits, licenses and registrations to carry on
our business;
    
    our future prospects, business development, results of operations and financial
condition; and
    
    fluctuations in general economic and business conditions in China.
  83




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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Senior Management
 Directors and Executive Officers
  Name
    
    Age
    
    Position/ TitleJianyu Yang
    
    
    39
    
    
    Director, chief executive officer and presidentZheng Cheng
    
    
    46
    
    
    Co-chairman of the board of directors and chief operating officerSteve Sun
    
    
    49
    
    
    Co-chairman of the board of directors and chief financial officerJing Zhang
    
    
    46
    
    
    Director and executive presidentYaw Kong Yap
    
    
    46
    
    
    Director and financial controllerShirley Chen
    
    
    45
    
    
    DirectorFeng Xiao
    
    
    38
    
    
    DirectorWai Hong Ku
    
    
    59
    
    
    DirectorElaine Zong
    
    
    39
    
    
    Independent directorDenny Lee
    
    
    42
    
    
    Independent directorHongbin Cai
    
    
    44
    
    
    Independent director
 Dr. Jianyu Yang
 Dr. Zheng Cheng
 Mr. Steve Sun
 Mr. Jing Zhang
 Mr. Yaw Kong Yap
 84




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Ms. Shirley Chen
 Mr. Feng Xiao
 Mr. Wai Hong Ku
 Ms. Elaine Zong
 Mr. Denny Lee
 Dr. Hongbin Cai
 85




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Compensation of Directors and Executive Officers
 Compensation of Directors and Executive Officers
  Share Incentive Plans
 OMS Share Option Plan
   2008 Share Incentive Plan
  86




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Termination of Awards.
 Administration.
 Option Exercise.
 Change in Control.
 Amendment and Termination of Plan.
   87




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OrdinarySharesUnderlying
    
    
    Exercise PriceOutstanding
    
    
    UnderlyingOptions or
    
    
    OutstandingRestricted
    
    
    OptionsName
    
    Shares
    
    
    (US$/Share)
    
    Grant Date
    
    Expiration DateMr. Jianyu Yang
    
    
    288,700
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Mr. Zheng Cheng
    
    
    288,700
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Mr. Steve Sun
    
    
    264,400
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Mr. Jing Zhang
    
    
    250,000
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Mr. Yaw Kong Yap
    
    
    230,000
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Mr. Denny Lee
    
    
    130,300
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017Other individuals as group
    
    
    3,049,300
    
    
    3.7
    
    November 27, 2009
    
    November 26, 2017
 Board Practices
 Committees of the Board of Directors
 Board of Directors
  Audit Committee
  
    
    selecting our independent registered public accounting firm and pre-approving all
auditing and non-auditing services permitted to be performed by our independent
registered public accounting firm;
    
    reviewing with our independent registered public accounting firm any audit problems
or difficulties and managements response;
    
    reviewing and approving all proposed related-party transactions, as defined in Item
404 of Regulation S-K under the Securities Act;
    
    discussing the annual audited financial statements with management and our
independent registered public accounting firm;
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of significant control deficiencies;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our
board of directors from time to time;
 88




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
    
    meeting separately and periodically with management and our internal auditor and
independent registered public accounting firm; and
    
    reporting regularly to the full board of directors.
 Compensation Committee
  
    
    approving and overseeing the compensation package for our executive officers;
    
    reviewing and making recommendations to the board with respect to the compensation
of our directors;
    
    reviewing and approving corporate goals and objectives relevant to the compensation
of our chief executive officer, evaluating the performance of our chief executive
officer in light of those goals and objectives, and setting the compensation level of
our chief executive officer based on such evaluation; and
    
    reviewing periodically and making recommendations to the board regarding any
long-term incentive compensation or equity plans, programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.
 Duties of Directors
   
    
    convening shareholders annual general meetings and reporting its work to
shareholders at such meetings;
    
    declaring dividends and other distributions;
    
    appointing officers and determining the term of office of officers;
    
    exercising the borrowing powers of our company and mortgaging the property of our
company; and
    
    approving the transfer of shares of our company, including the registration of such
shares in our share register.
 89




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Terms of Directors and Executive Officers
  Employment Agreements
   Interested Transactions
  Remuneration and Borrowing
  Qualification
  90




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Employees
  As of December 31, 2010Employees
    
    
    % of TotalAdministration
    
    
    50
    
    
    
    21.6Financial control
    
    
    36
    
    
    
    15.5Operation
    
    
    109
    
    
    
    47.0Marketing
    
    
    16
    
    
    
    6.9Business development
    
    
    13
    
    
    
    5.6Medical development
    
    
    8
    
    
    
    3.4Total
    
    
    232
    
    
    
    100.0
    Share Ownership
  91




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
    
    each of our directors and executive officers; and
    
    each person known to us to own beneficially more than 5.0% of our ordinary shares.
 Ordinary Shares Beneficially Owned(1)(2)Number
    
    
    %Directors and Executive Officers:Jianyu Yang(3)
    
    
    4,836,611
    
    
    
    3.4Zheng Cheng(4)
    
    
    8,861,525
    
    
    
    6.2Steve Sun(5)
    
    
    4,836,611
    
    
    
    3.4Jing Zhang(6)
    
    
    2,646,129
    
    
    
    1.9Yaw Kong Yap(7)
    
    
    541,800
    
    
    
    0.4Shirley Chen(8)
    
    
    7,533,800
    
    
    
    5.3Feng Xiao(9)
    
    
    26,172,700
    
    
    
    18.4Elaine Zong
    
    
    
    
    
    
    Wai Hong Ku(10)
    
    
    2,889,500
    
    
    
    2.0All directors and executive officers as a group
    
    
    58,318,676
    
    
    
    41.0Principal Shareholders:Carlyle Entities(11)
    
    
    26,172,700
    
    
    
    18.4Notable Enterprise Limited(12)
    
    
    19,716,524
    
    
    
    13.9Starr Investments Cayman II, Inc.(13)
    
    
    10,418,000
    
    
    
    7.3CZY Investments Limited(14)
    
    
    8,861,525
    
    
    
    6.2
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1.0% of our
outstanding ordinary shares.(1)
    
    Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, and includes voting or investment power with respect to
the securities and outstanding share options exercisable within 60 days of this annual report.(2)
    
    The number of ordinary shares outstanding in calculating the percentages for each listed
person includes the ordinary shares underlying options held by such person. Percentage of
beneficial ownership of each listed person is based on 142,353,532 ordinary shares outstanding
as of the date of this annual report, and includes the ordinary shares underlying share options exercisable
by such person within 60 days of this annual report.(3)
    
    Represents 4,836,611 ordinary shares held by Daketala International Investment Holdings Ltd.,
a limited liability company organized under the laws of the British Virgin Islands wholly
owned by Dr. Yang.(4)
    
    Represents 8,861,525 ordinary shares held by CZY Investment Ltd., a limited liability company
organized under the laws of the British Virgin Islands wholly owned by Mr. Cheng. 2,087,700 of
the ordinary shares held by CZY Investment Ltd. have been pledged to certain of our
shareholders as security for a loan.(5)
    
    Represents 4,836,611 ordinary shares held by Dragon Image Investment Ltd., a limited
liability company organized under the laws of the British Virgin Islands wholly owned by Mr.
Sun.(6)
    
    Represents 2,646,129 ordinary shares held by Thousand Ocean Group Limited, a limited
liability company organized under the laws of the British Virgin Islands wholly owned by Mr.
Zhang.(7)
    
    Represents 541,800 ordinary shares held by Top Mount Group Limited, a limited liability
company organized under the laws of the British Virgin Islands wholly owned by Mr. Yap.(8)
    
    Represents 7,177,200 and 356,600 ordinary shares held by CICC Sun Company Limited and Perfect
Key Holdings Limited, respectively. For a description of the beneficial ownership of our
ordinary shares by CICC Sun Company Limited, see Note 16 below. Ms. Shirley Chen disclaims
beneficial ownership of our ordinary shares held by CICC Sun Company Limited except to the
extent of her pecuniary interest in these shares. Perfect Key Holdings Limited is a limited
liability company organized under the laws of the British Virgin Islands in which Ms. Shirley
Chen holds 47.4% beneficial ownership.(9)
    
    Represents 25,169,000 and 1,003,700 ordinary shares held by Carlyle Asia Growth Partners III,
L.P. and CAGP III Co-Investment, L.P., respectively. Carlyle Asia Growth Partners III, L.P.
and CAGP III Co-Investment, L.P. are collectively referred to in this annual report as the
Carlyle Entities. For a description of the beneficial ownership of our ordinary shares by the
Carlyle Entities, see Note 11 below. Mr. Feng Xiao disclaims beneficial ownership of our
ordinary shares held by the Carlyle Entities, except to the extent of his pecuniary interest
in these shares.(10)
    
    Represents 2,889,500 ordinary shares held by Grand Best Group Limited, a limited liability
company organized under the laws of the British Virgin Islands. For a description of the
beneficial ownership of our ordinary shares held by Grand Best Group Limited, see Note 14
below. Mr. Ku owns 31.4% of the equity interest in Grand Best Group Limited. 92




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(11)
    
    Represents 25,169,000 and 1,003,700 ordinary shares held by Carlyle Asia Growth Partners III,
L.P. and CAGP III Co-Investment, L.P., respectively. The general partner of each Carlyle
Entity is CAGP General Partner, L.P., which is in turn managed by its general partner, CAGP
Ltd. The directors of CAGP Ltd. are Mr. William E. Conway, Jr., Mr. Daniel A. DAniello, Mr.
David Rubenstein, Mr. Jeffery Ferguson and Mr. Curtis L. Buser. The address of the Carlyle
Entities is Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9002, Cayman Islands.(12)
    
    Notable Enterprise Limited is a limited liability company organized under the laws of the
British Virgin Islands wholly owned by Ms. Bona Lau. Ms. Lau is the daughter of Mr. Haifeng
Liu, the chairman of Aohua Medical from December 2005 to December 2007 and our director until
July 2009. Prior to serving as chairman of Aohua Medical, Mr. Liu was detained in March 2004
by the authorities of Luoyang city, Henan Province, for alleged misappropriation of funds
while serving as chairman of a company unrelated to Aohua Medical or us. Mr. Liu was released
in June 2005 by the local prosecutor without an indictment due to insufficient evidence.
Notable Enterprise Limited was originally owned by Mr. Liu, who irrevocably transferred all of
his interest in Notable Enterprise Limited to Ms. Lau in November 2007 for consideration not
significantly lower than the then fair market value. At the time of the transfer, Notable
Enterprise Limited indirectly held a 44.2% equity interest in OMS. The address of Notable
Enterprise Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands.(13)
    
    Represents 10,418,000 ordinary shares held by Starr Investments Cayman II, Inc. Starr
Investments Cayman II, Inc. is ultimately controlled by Starr International Company, Inc.
whose voting shareholders (none of whom control 10% or more individually) are Mr. Maurice R.
Greenberg, Mr. Edward E. Matthews, Mr. Howard I. Smith, Mr. John J. Roberts, Mr. Houghton
Freeman, Mr. Joseph C. H. Johnson, Mr. Cesar Zalamea, Mr. Peter Hammer, Mr. Michael Morrison,
Mr. Bertil P. Lundqvist and Ms. Florence Davis. The address of Starr Investments Cayman II,
Inc. is Avalon Management Limited, Landmark Square, 64 Earth Close, West Bay Beach, Grand
Cayman, KY1-1107, Cayman Islands.(14)
    
    CZY Investments Limited is a limited liability company organized under the laws of the
British Virgin Islands wholly owned by Dr. Zheng Cheng. The address of CZY Investments Limited
is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Major Shareholders
  Related Party Transactions
 Non-Interest Bearing Borrowings from Related Parties
  Reorganization and Private Placement
  93




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Share Incentives
  C.
    
    Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 Consolidated Statements and Other Financial Information
  Legal and Administrative Proceedings
   Dividend Policy
   94




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Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 Offering and Listing Details.
  Market Price Per ADSHigh
    
    
    Low2009(from December 11)
    
    
    8.82
    
    
    
    8.512010
    
    
    10.42
    
    
    
    5.50Quarterly Highs and LowsFourth Quarter 2009 (from December 11)
    
    
    8.82
    
    
    
    8.51First Quarter 2010
    
    
    10.42
    
    
    
    6.81Second Quarter 2010
    
    
    7.43
    
    
    
    5.50Third Quarter 2010
    
    
    7.41
    
    
    
    5.50Fourth Quarter 2010
    
    
    7.79
    
    
    
    6.70First Quarter 2011
    
    
    7.58
    
    
    
    5.06Monthly Highs and Lows2011January
    
    
    7.58
    
    
    
    7.22February
    
    
    7.08
    
    
    
    6.25March
    
    
    6.32
    
    
    
    5.06April
    
    
    5.86
    
    
    
    5.46May
    
    
    5.19
    
    
    
    3.91June
(through June 27)
    
    
    4.41
    
    
    
    3.99
  Plan of Distribution
  Markets
  Selling Shareholders
  Dilution
  95




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Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 Share Capital
  Memorandum and Articles of Association
  Material Contracts
  Exchange Controls
  Taxation
 Cayman Islands Taxation
  Peoples Republic of China Taxation
  96




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##### Table of Contents



United States Federal Income Taxation
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation for
United States federal income tax purposes) created or
organized in or under the laws of the United States, any
state thereof or the District of Columbia;
    
    an estate the income of which is subject to United States
federal income taxation regardless of its source; or
    
    a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United
States persons have the authority to control all
substantial decisions of the trust or (2) has a valid
election in effect under applicable United States Treasury
regulations to be treated as a United States person.
  97




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
    
    a dealer in securities or currencies;
    
    a financial institution;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    an insurance company;
    
    a tax exempt organization;
    
    a person holding our ordinary shares or ADSs as part of a hedging,
integrated or conversion transaction, a constructive sale or a
straddle;
    
    a trader in securities that has elected the mark-to-market method of
accounting for your securities;
    
    a person liable for alternative minimum tax;
    
    a person who owns or is deemed to own more than 10% of our voting stock;
    
    a partnership or other pass-through entity for United States federal
income tax purposes; or
    
    a person whose functional currency is not the United States dollar.
   If you are considering the purchase,
ownership or disposition of our ordinary shares or ADSs, you should consult your own tax advisors
concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences arising
under the laws of any other taxing jurisdiction.
 ADSs
  98




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Taxation of Dividends
    99




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Passive Foreign Investment Company
   
    
    at least 75% of our gross income is passive income; or
    
    at least 50% of the value of our assets (based on an
average of the quarterly values) is attributable to
assets that produce or are held for the production of
passive income (which includes cash).
    
    
    the excess distribution or gain will be
allocated ratably over your holding period for
the ADSs or ordinary shares;
    
    the amount allocated to the current taxable
year, and any taxable year prior to the first
taxable year in which we were a PFIC, will be
treated as ordinary income; and
    
    the amount allocated to each other year will be
subject to tax at the highest tax rate in effect
for that year and the interest charge generally
applicable to underpayments of tax will be
imposed on the resulting tax attributable to
each such year.
   100




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Taxation of Capital Gains
  Information Reporting and Backup Withholding
  101




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Dividends and Paying Agents
  Statement by Experts
  Documents on Display
       Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange Risk
  102




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Foreign Currency Matters
 Interest Rate Risk
  Inflation
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 Debt Securities
  Warrants and Rights
  103




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Other Securities
  American Depositary Shares
   
    
    a fee of up to US$1.50 per ADR or ADRs for transfers of certificated or direct
registration ADRs;
    
    a fee of up to US$0.05 per ADS for any cash distribution made pursuant to the
deposit agreement;
    
    a fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services
performed by the depositary in administering the ADRs (which fee may be charged on a
periodic basis during each calendar year and shall be assessed against holders of ADRs
as of the record date or record dates set by
the depositary during each calendar year and shall be payable in the manner described in
the next succeeding provision);
    
    reimbursement of such fees, charges and expenses as are incurred by the depositary
and/or any of the depositarys agents (including, without limitation, the custodian and
expenses incurred on behalf of holders in connection with compliance with foreign
exchange control regulations or any law or regulation relating to foreign investment)
in connection with the servicing of the shares or other deposited securities, the
delivery of deposited securities or otherwise in connection with the depositarys or
its custodians compliance with applicable law, rule or regulation (which charge shall
be assessed on a proportionate basis against holders as of the record date or dates set
by the depositary and shall be payable at the sole discretion of the depositary by
billing such holders or by deducting such charge from one or more cash dividends or
other cash distributions);
    
    a fee for the distribution of securities (or the sale of securities in connection
with a distribution), such fee being in an amount equal to the fee for the execution
and delivery of ADSs which would have been charged as a result of the deposit of such
securities (treating all such securities as if they were shares) but which securities
or the net cash proceeds from the sale thereof are instead distributed by the
depositary to those holders entitled thereto;
    
    stock transfer or other taxes and other governmental charges;
    
    cable, telex and facsimile transmission and delivery charges incurred at your
request in connection with the deposit or delivery of shares;
    
    transfer or registration fees for the registration of transfer of deposited
securities on any applicable register in connection with the deposit or withdrawal of
deposited securities; and
    
    expenses of the depositary in connection with the conversion of foreign currency
into U.S. dollars.
 104




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PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Material Modifications to the Rights of Securities Holders
  Use of Proceeds
   105




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ITEM 15. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Assessment of Internal Control over Financial Reporting
     Remediation Plans
  Changes in Internal Control over Financial Reporting
   106




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ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Year EndedDecember 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Audit Fees(1)
    
    
    
    
    
    
    7,031
    
    
    
    7,909
    
    
    
    1,198
 
 (1)
    
    Audit fees include the aggregate fees billed in each of the fiscal periods listed for
professional services rendered by Ernst & Young for the audits of our annual consolidated
financial statements. Fees billed and incurred during fiscal 2009 also include other
professional services rendered in conjunction with our initial public offering.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  107




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Total number of
    
    
    Approximate dollarTotal number
    
    
    
    
    
    
    
    
    
    
    ADSs purchased as
    
    
    value of ADSs that mayof ADSs
    
    
    Average price
    
    
    part of publicly
    
    
    yet be purchased underPeriod
    
    purchased
    
    
    paid per ADS
    
    
    announced program
    
    
    the programUS$
    
    
    RMB(1)
    
    
    
    
    
    
    US$
    
    
    RMB(1)(in thousands)January 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000February 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000March 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000April 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000May 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000June 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    132,000July 2010
    
    
    287,959
    
    
    
    5.7
    
    
    
    37.9
    
    
    
    287,959
    
    
    
    18,347
    
    
    
    121,090August 2010
    
    
    428,015
    
    
    
    6.3
    
    
    
    41.7
    
    
    
    715,974
    
    
    
    15,641
    
    
    
    103,230September 2010
    
    
    301,197
    
    
    
    6.9
    
    
    
    45.6
    
    
    
    1,017,171
    
    
    
    13,554
    
    
    
    89,456October 2010
    
    
    298,711
    
    
    
    7.1
    
    
    
    47.2
    
    
    
    1,315,882
    
    
    
    11,408
    
    
    
    75,293November 2010
    
    
    384,774
    
    
    
    7.4
    
    
    
    49.0
    
    
    
    1,700,656
    
    
    
    8,533
    
    
    
    56,318December 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,700,656
    
    
    
    8,533
    
    
    
    56,318
 
 (1)
    
    The translations of U.S. dollar amounts into Renminbi amounts have been made at the noon
buying rate in effect on December 30, 2010, which was US$1.00 to RMB6.6000. See Introduction
and Part I.  Item 3.  Key Information  Selected Financial Data  Exchange Rate
Information. 
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G. CORPORATE GOVERNANCE
  
    
    have a majority of the board be independent (other than due to the requirements for
the audit committee under the United States Securities Exchange Act of 1934, as
amended, or the Exchange Act);
    
    have a minimum of three members in our audit committee;
    
    have a compensation committee, a nominating or corporate governance committee;
    
    provide annual certification by our chief executive officer that he or she is not
aware of any non-compliance with any corporate governance rules of the NYSE;
    
    have regularly scheduled executive sessions with only non-management directors;
    
    have at least one executive session of solely independent directors each year;
    
    seek shareholder approval for (i) the implementation and material revisions of the
terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding
ordinary shares or 1% of the
 108




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##### Table of Contents



voting power outstanding to a related party, (iii) the issuance of more than 20% of our
outstanding ordinary shares, and (iv) an issuance that would result in a change of
control;
    
    adopt and disclose corporate governance guidelines; or
    
    adopt and disclose a code of business conduct and ethics for directors, officers and
employees.
  
    
    we have established a compensation committee;
    
    we will seek shareholder approval for the
implementation of share incentive plans and for the increase in the number of shares available to
be granted under share incentive plans;
    
    we have adopted and disclosed corporate governance
guidelines and a code of business conduct and ethics for directors, officers and employees; and
    
    we have an audit committee with three independent directors,
  
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
    
    Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    Consolidated Statements of Operations for the years ended December 31, 2008, 2009
and 2010 for Concord Medical Services Holdings Limited
    
    Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009
and 2010 for Concord Medical Services Holdings Limited
    
    Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2008,
2009 and 2010 for Concord Medical Services Holdings Limited
    
    Notes to the Consolidated Financial Statements for the years ended December 31,
2008, 2009 and 2010
 
 ITEM 19. EXHIBITS
 ExhibitNumber
    
    Description of Document1.1
    
    Third Amended and Restated Memorandum and Articles of Association
(incorporated by reference to Exhibit 3.3 from our Registration
Statement on Form F-1 (File No. 333-163155) filed with the
Securities and Exchange Commission on November 27, 2009)2.1
    
    Form of American Depository Receipt (incorporated by reference to
Exhibit 4.1 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
December 7, 2009)2.2
    
    Specimen Certificate for Ordinary Shares (incorporated by
reference to Exhibit 4.2 from our Registration Statement on Form
F-1 (File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)
 109




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##### Table of Contents



ExhibitNumber
    
    Description of Document2.3
    
    Form of Deposit Agreement among Concord Medical, the Depositary and
Owners and Beneficial Owners of the American Depository Shares issued
thereunder (incorporated by reference to Exhibit 4.3 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on December 7, 2009)2.4
    
    Series A Preferred Shares Subscription Agreement, dated as of
February 5, 2008, as amended on April 2, 2008 and on October 20,
2008, among CICC Sun Company Limited, Carlyle Asia Growth Partners
III, L.P., CAGP III Co-Investment, L.P., Liu Haifeng, Steve Sun, Yang
Jianyu, Bona Liu, Our Medical Services, Ltd., Ascendium Group
Limited, Shenzhen Aohua Medical Services Co., Ltd. and Concord
Medical Services Holdings Limited (incorporated by reference to
Exhibit 4.4 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.5
    
    Amendment No. 1 to Series A Preferred Shares Subscription Agreement,
dated as of April 2, 2008, among CICC Sun Company Limited, Carlyle
Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Liu
Haifeng, Steve Sun, Yang Jianyu, Bona Liu, Our Medical Services,
Ltd., Ascendium Group Limited, Shenzhen Aohua Medical Services Co.,
Ltd. and Concord Medical Services Holdings Limited (incorporated by
reference to Exhibit 4.5 from our Registration Statement on Form F-1
(File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)2.6
    
    Amendment No. 2 to Series A Preferred Shares Subscription Agreement,
dated as of October 20, 2008, among CICC Sun Company Limited, Carlyle
Asia Growth Partners III, L.P., CAGP III Co-Investment, L.P., Liu
Haifeng, Steve Sun, Yang Jianyu, Bona Liu, Our Medical Services,
Ltd., Ascendium Group Limited, Shenzhen Aohua Medical Services Co.,
Ltd. and Concord Medical Services Holdings Limited (incorporated by
reference to Exhibit 4.6 from our Registration Statement on Form F-1
(File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)2.7
    
    Series B Preferred Shares Subscription Agreement, dated as of October
10, 2008, as amended on October 20, 2008, among CICC Sun Company
Limited, Carlyle Asia Growth Partners III, L.P., CAGP III
Co-Investment, L.P., Starr Investments Cayman II, Inc., Concord
Medical Services Holdings Limited and other persons named therein
(incorporated by reference to Exhibit 4.7 from our Registration
Statement on Form F-1 (File No. 333-163155) filed with the Securities
and Exchange Commission on November 17, 2009)2.8
    
    Amendment to Series B Preferred Shares Subscription Agreement, dated
as of October 20, 2008, among CICC Sun Company Limited, Carlyle Asia
Growth Partners III, L.P., CAGP III Co-Investment, L.P., Starr
Investments Cayman II, Inc., Concord Medical Services Holdings
Limited and other persons named therein (incorporated by reference to
Exhibit 4.8 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.9
    
    Amended and Restated Shareholders Agreement, dated as of October 20,
2008 among Concord Medical Services Holdings Limited, Carlyle Asia
Growth Partners III, L.P., CAGP III Co-Investment, CICC Sun Company
Limited, Perfect Key Holdings Limited, Starr Investments Cayman II,
Inc. and certain other persons named therein (incorporated by
reference to Exhibit 4.9 from our Registration Statement on Form F-1
(File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)2.10
    
    Share Charge, dated as of November 10, 2008, by CZY Investments
Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth
Partners III, L.P., CAGP III Co-Investment, L.P. and Starr
Investments Cayman II, Inc. (incorporated by reference to Exhibit
4.10 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.11
    
    Share Charge, dated as of November 10, 2008, by Daketala
International Investment Holdings Ltd. in favor of CICC Sun Company
Limited, Carlyle Asia Growth Partners III, L.P., CAGP III
Co-Investment, L.P. and Starr Investments Cayman II, Inc.
(incorporated by reference to Exhibit 4.11 from our Registration
Statement on Form F-1 (File No. 333-163155) filed with the Securities
and Exchange Commission on November 17, 2009)
 110




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ExhibitNumber
    
    Description of Document2.12
    
    Share Charge, dated as of November 10, 2008, by Dragon Image
Investment Ltd. in favor of CICC Sun Company Limited, Carlyle Asia
Growth Partners III, L.P., CAGP III Co-Investment, L.P. and Starr
Investments Cayman II, Inc. (incorporated by reference to Exhibit
4.12 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.13
    
    Share Charge, dated as of November 10, 2008, by Notable Enterprise
Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth
Partners III, L.P., CAGP III Co-Investment, L.P. and Starr
Investments Cayman II, Inc. (incorporated by reference to Exhibit
4.13 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.14
    
    Share Charge, dated as of November 10, 2008, by Thousand Ocean Group
Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth
Partners III, L.P., CAGP III Co-Investment, L.P. and Starr
Investments Cayman II, Inc. (incorporated by reference to Exhibit
4.14 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.15
    
    Share Charge, dated as of November 10, 2008, by Top Mount Group
Limited in favor of CICC Sun Company Limited, Carlyle Asia Growth
Partners III, L.P., CAGP III Co-Investment, L.P. and Starr
Investments Cayman II, Inc. (incorporated by reference to Exhibit
4.15 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)2.16
    
    Deed of Amendment, dated as of September 14, 2009, among CICC Sun
Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III
Co-Investment, L.P., Starr Investments Cayman II, Inc. and Notable
Enterprise Limited (incorporated by reference to Exhibit 4.16 from
our Registration Statement on Form F-1 (File No. 333-163155) filed
with the Securities and Exchange Commission on November 17, 2009)2.17
    
    Deed of Partial Release, dated as of September 14, 2009, by CICC Sun
Company Limited, Carlyle Asia Growth Partners III, L.P., CAGP III
Co-Investment, L.P. and Starr Investments Cayman II, Inc. in favor of
CZY Investment Limited (incorporated by reference to Exhibit 4.17
from our Registration Statement on Form F-1 (File No. 333-163155)
filed with the Securities and Exchange Commission on November 17,
2009)2.18
    
    Amendment to Amended and Restated Shareholders Agreement, dated as of
November 17, 2009, among Concord Medical Services Holdings Limited,
Carlyle Asia Growth Partners III, L.P., CAGP III Co-Investment, CICC
Sun Company Limited, Perfect Key Holdings Limited, Starr Investments
Cayman II, Inc. and certain other persons named therein (incorporated
by reference to Exhibit 4.18 from our Registration Statement on Form
F-1 (File No. 333-163155) filed with the Securities and Exchange
Commission on November 20, 2009)2.19
    
    Amendment No. 2 to Amended and Restated Shareholders Agreement, dated
as of December 7, 2009, among Concord Medical Services Holdings
Limited, Carlyle Asia Growth Partners III, L.P., CAGP III
Co-Investment, CICC Sun Company Limited, Perfect Key Holdings
Limited, Starr Investments Cayman II, Inc. and certain other persons
named therein (incorporated by reference to Exhibit 4.18 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on December 7, 2009)4.1
    
    2008 Share Incentive Plan adopted as of October 16, 2008
(incorporated by reference to Exhibit 10.1 from our Registration
Statement on Form F-1 (File No. 333-163155) filed with the Securities
and Exchange Commission on November 17, 2009)4.2
    
    Form of Indemnification Agreement with the Registrants directors and
officers (incorporated by reference to Exhibit 10.2 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on November 20, 2009)
 111




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##### Table of Contents



ExhibitNumber
    
    Description of Document4.3
    
    Form of Medical Equipment Lease Agreement (incorporated by reference
to Exhibit 10.3 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)4.4
    
    Form of Equipment Management Services Agreement (incorporated by
reference to Exhibit 10.4 from our Registration Statement on Form F-1
(File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)4.5
    
    Form of Service-only Management Agreement (incorporated by reference
to Exhibit 10.5 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 17, 2009)4.6
    
    Summary of the Oral Agreement entered into between China Medstar Pte.
Ltd. and Beijing Medstar Hi-Tech Investment Co., Ltd. (incorporated
by reference to Exhibit 10.6 from our Registration Statement on Form
F-1 (File No. 333-163155) filed with the Securities and Exchange
Commission on November 17, 2009)4.7
    
    Summary of the Oral Agreement entered into between China Medstar Pte.
Ltd. and Cheng Zheng (incorporated by reference to Exhibit 10.7 from
our Registration Statement on Form F-1 (File No. 333-163155) filed
with the Securities and Exchange Commission on November 17, 2009)4.8
    
    Summary of the Oral Agreement entered into between China Medstar Pte.
Ltd. and Yaw Kong Yap (incorporated by reference to Exhibit 10.8 from
our Registration Statement on Form F-1 (File No. 333-163155) filed
with the Securities and Exchange Commission on November 17, 2009)4.9
    
    Translation of Medical Equipment Lease Agreement, dated as of August
25, 2009, by and between Medstar (Shanghai) Leasing Co., Ltd. and
Changan Hospital Co., Ltd. (incorporated by reference to Exhibit
10.9 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on
November 23, 2009)4.10
    
    Translation of Service-Only Management Agreement, dated as of August
1, 2008, among CMS Hospital Management Co., Ltd., Xian
Wanjiechangxin Medical Services Company Limited and Changan Hospital
Co., Ltd. (incorporated by reference to Exhibit 10.10 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on November 23, 2009)4.11
    
    Translation of Agreement Concerning the Establishment of the Aohai
Radiotherapy Treatment and Diagnosis Research Center, dated as of
September 19, 1995, by and between the Chinese Peoples Liberation
Army Navy General Hospital and Beijing Our Medical Equipment
Development Company, which transferred its interest in the agreement
to Shenzhen Aohua Medical Services Co., Ltd. (incorporated by
reference to Exhibit 10.11 from our Registration Statement on Form
F-1 (File No. 333-163155) filed with the Securities and Exchange
Commission on November 23, 2009)4.12
    
    Translation of Supplemental Agreement Concerning the Development of
the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated
as of March 18, 1999, by and between Shenzhen Aohua Medical Services
Co., Ltd. and the Chinese Peoples Liberation Army Navy General
Hospital. (incorporated by reference to Exhibit 10.12 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on November 23, 2009)4.13
    
    Translation of Supplemental Agreement Concerning the Development of
the Aohai Radiotherapy Treatment and Diagnosis Research Center, dated
as of September 27, 2003, by and between Shenzhen Aohua Medical
Services Co., Ltd. and the Chinese Peoples Liberation Army Navy
General Hospital. (incorporated by reference to Exhibit 10.13 from
our Registration Statement on Form F-1 (File No. 333-163155) filed
with the Securities and Exchange Commission on November 23, 2009)4.14
    
    Translation of Medical Equipment Lease Agreement, dated as of
September 29, 2006, by and between Shanghai Medstar Investment
Management Co., Ltd., the predecessor of Medstar (Shanghai) Leasing
Co., Ltd., and the Chinese Peoples Liberation Army Navy General
Hospital. (incorporated by reference to Exhibit 10.14 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on November 17, 2009)
 112




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##### Table of Contents



ExhibitNumber
    
    Description of Document4.15
    
    Translation of Supplemental Agreement Concerning the Development of the
Aohai Radiotherapy Treatment and Diagnosis Research Center, dated as of
July 8, 2009, by and between Shenzhen Aohua Medical Services Co., Ltd. and
the Chinese Peoples Liberation Army Navy General Hospital. (incorporated
by reference to Exhibit 10.15 from our Registration Statement on Form F-1
(File No. 333-163155) filed with the Securities and Exchange Commission on
November 23, 2009)4.16
    
    Translation of Supplemental Agreement to the Service-only Management
Agreement, dated as of August 1, 2008, among Xian Wanjiechangxin Medical
Services Company Limited, Changan Hospital Co., Ltd. and CMS Hospital
Management Co., Ltd. (incorporated by reference to Exhibit 10.16 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with the
Securities and Exchange Commission on November 17, 2009)4.17
    
    Translation of Agreement Regarding the Transfer of Equity in Aohai
Radiotherapy Treatment and Diagnosis Research Center, dated as of May 5,
1997, among Beijing Our Medical Equipment Development Company, Shenzhen
Aohua Medical Services Co., Ltd. and the Chinese Peoples Liberation Army
Navy General Hospital. (incorporated by reference to Exhibit 10.17 from
our Registration Statement on Form F-1 (File No. 333-163155) filed with
the Securities and Exchange Commission on November 17, 2009)4.18
    
    Translation of Supplemental Agreement to the Supplemental Agreement
Concerning the Development of the Aohai Radiotherapy Treatment and
Diagnosis Research Center, dated as of September 15, 2004, by and between
Shenzhen Aohua Medical Services Co., Ltd. and the Chinese Peoples
Liberation Army Navy General Hospital. (incorporated by reference to
Exhibit 10.18 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on November
17, 2009)4.19
    
    Translation of Supplemental Agreement to the Cooperation Contract
Concerning the Aohai Radiotherapy Treatment and Diagnosis Research Center,
dated as of August 16, 2003, by and between Shenzhen Aohua Medical
Services Co., Ltd. and the Chinese Peoples Liberation Army Navy General
Hospital. (incorporated by reference to Exhibit 10.19 from our
Registration Statement on Form F-1 (File No. 333-163155) filed with the
Securities and Exchange Commission on November 17, 2009)4.20
    
    Amendment to 2008 Share Incentive Plan adopted as of November 17, 2009
(incorporated by reference to Exhibit 10.19 from our Registration
Statement on Form F-1 (File No. 333-163155) filed with the Securities and
Exchange Commission on November 20, 2009)4.21
    
    Translation of Strategic Cooperative Agreement, dated as of November 17,
2009, between China Construction Bank Corporation, Shenzhen Branch and
China Medical Services Holdings Limited (incorporated by reference to
Exhibit 10.19 from our Registration Statement on Form F-1 (File No.
333-163155) filed with the Securities and Exchange Commission on December
7, 2009)8.1*
    
    List of Subsidiaries11.1
    
    Code of Business Conduct and Ethics (incorporated by reference to Exhibit
99.1 from our Registration Statement on Form F-1 (File No. 333-163155)
filed with the Securities and Exchange Commission on November 20, 2009)12.1*
    
    CEO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 200212.2*
    
    CFO Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 200213.1*
    
    CEO Certification Pursuant to Section 906 of the Sarbanes Oxley Act of 200213.2*
    
    CFO Certification Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
 
 *
    
    Filed with this report 113




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##### Table of Contents



SIGNATURES
  CONCORD MEDICAL SERVICES HOLDINGS LIMITEDBy
    /s/ Jianyu YangName:
    Jianyu YangTitle:
    Chief Executive Officer  114




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated financial statementsReport of Independent Registered Public Accounting Firm
    
    
    F-2  F-4Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    
    F-5  F-6Consolidated Statements of Operations for the Years Ended December
31, 2008, 2009 and 2010
    
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December
31, 2008, 2009 and 2010
    
    
    F-8  F-9Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 2008, 2009 and 2010
    
    
    F-10  F-11Notes to the Consolidated Financial Statements
    
    
    F-12  F-64
 F-1




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##### Table of Contents



F-2




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##### Table of Contents



F-3




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##### Table of Contents



F-4




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
 
 CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (RMB) and US dollar (US$),except for number of shares)
 As at December 31Note
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash
    
    
    
    
    
    
    1,037,239
    
    
    
    535,783
    
    
    
    81,179Restricted cash, current portion
    
    
    5
    
    
    
    293
    
    
    
    102,873
    
    
    
    15,587Notes receivable
    
    
    
    
    
    
    
    
    
    
    900
    
    
    
    136Accounts receivable (net of allowance of RMB2,000
and RMB1,431 (US$217) as of December 31, 2009 and
2010, respectively)
    
    
    6
    
    
    
    111,328
    
    
    
    169,389
    
    
    
    25,665Prepayments and other current assets
    
    
    7
    
    
    
    100,484
    
    
    
    74,469
    
    
    
    11,283Net investment in financing leases, current portion
    
    
    12
    
    
    
    
    
    
    
    19,498
    
    
    
    2,954Deferred tax assets, current portion
    
    
    21
    
    
    
    3,168
    
    
    
    1,504
    
    
    
    228Total current assets
    
    
    
    
    
    
    1,252,512
    
    
    
    904,416
    
    
    
    137,032Non-current assets:Property, plant and equipment, net
    
    
    8
    
    
    
    573,042
    
    
    
    907,336
    
    
    
    137,475Goodwill
    
    
    10
    
    
    
    300,163
    
    
    
    300,163
    
    
    
    45,479Acquired intangible assets, net
    
    
    10
    
    
    
    155,345
    
    
    
    146,113
    
    
    
    22,138Deposits for non-current assets (net of allowance of
RMB nil and RMB2,513 (US$381) as of December 31,
2009 and 2010, respectively)
    
    
    11
    
    
    
    127,150
    
    
    
    222,019
    
    
    
    33,639Net investment in financing leases, non-current
portion
    
    
    12
    
    
    
    
    
    
    
    66,356
    
    
    
    10,054Deferred tax assets, non-current portion
    
    
    21
    
    
    
    19,700
    
    
    
    21,869
    
    
    
    3,313Other non-current assets
    
    
    13
    
    
    
    11,532
    
    
    
    51,867
    
    
    
    7,859Restricted cash, non-current portion
    
    
    5
    
    
    
    4,421
    
    
    
    14,792
    
    
    
    2,241Prepaid land lease payments
    
    
    9
    
    
    
    
    
    
    
    28,113
    
    
    
    4,260Total non-current assets
    
    
    
    
    
    
    1,191,353
    
    
    
    1,758,628
    
    
    
    266,458Total assets
    
    
    
    
    
    
    2,443,865
    
    
    
    2,663,044
    
    
    
    403,490LIABILITIES AND EQUITYCurrent liabilities:Short-term bank borrowings
    
    
    14
    
    
    
    11,500
    
    
    
    83,000
    
    
    
    12,576Long-term bank borrowings, current portion
    
    
    14
    
    
    
    57,487
    
    
    
    60,906
    
    
    
    9,228Accounts payable
    
    
    
    
    
    
    9,759
    
    
    
    10,332
    
    
    
    1,565Accrual for purchase of property, plant and equipment
    
    
    
    
    
    
    12,043
    
    
    
    10,404
    
    
    
    1,576Obligations under capital leases, current portion
    
    
    16
    
    
    
    3,582
    
    
    
    3,582
    
    
    
    543Accrued expenses and other liabilities
    
    
    15
    
    
    
    48,663
    
    
    
    49,935
    
    
    
    7,566Income tax payable
    
    
    21
    
    
    
    14,642
    
    
    
    25,401
    
    
    
    3,849Deferred revenue, current portion
    
    
    
    
    
    
    10,401
    
    
    
    11,520
    
    
    
    1,745Contingent business acquisition consideration
    
    
4
    
    
    
    
    
    
    
    14,072
    
    
    
    2,132Amount due to related parties
    
    
    23
    
    
    
    1,546
    
    
    
    
    
    
    
    Total current liabilities
    
    
    
    
    
    
    169,623
    
    
    
    269,152
    
    
    
    40,780
 F-5




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS (continued)

(Amounts in thousands of Renminbi (RMB) and US dollar (US$), except for number of shares)
 As at December 31Note
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Non-current liabilities:Long-term bank borrowings, non-current portion
    
    
    14
    
    
    
    80,915
    
    
    
    45,089
    
    
    
    6,832Deferred revenue, non-current portion
    
    
    
    
    
    
    5,188
    
    
    
    9,081
    
    
    
    1,376Obligations under capitalized leases,
non-current portion
    
    
    16
    
    
    
    8,074
    
    
    
    5,325
    
    
    
    807Lease deposits
    
    
    
    
    
    
    1,000
    
    
    
    5,110
    
    
    
    774Deferred tax liabilities, non-current portion
    
    
    21
    
    
    
    25,317
    
    
    
    27,452
    
    
    
    4,159Total non-current liabilities
    
    
    
    
    
    
    120,494
    
    
    
    92,057
    
    
    
    13,948Total liabilities
    
    
    
    
    
    
    290,117
    
    
    
    361,209
    
    
    
    54,728Commitments and contingencies
    
    
    25Equity:Ordinary shares (par value of US$0.0001 per
share; Authorized450,000,000 shares; issued
and outstanding147,455,500 and 142,353,532
shares at December 31, 2009 and 2010,
respectively)
    
    
    19
    
    
    
    108
    
    
    
    105
    
    
    
    16Additional paid-in capital
    
    
    
    
    
    
    2,671,910
    
    
    
    2,604,704
    
    
    
    394,652Accumulated other comprehensive loss
    
    
    
    
    
    
    (3,987
    )
    
    
    (14,835
    )
    
    
    (2,248
    )Accumulated deficit
    
    
    
    
    
    
    (514,283
    )
    
    
    (384,883
    )
    
    
    (58,316
    )Total Concord Medical Services Holdings
Limited shareholders equity
    
    
    
    
    
    
    2,153,748
    
    
    
    2,205,091
    
    
    
    334,104Non-controlling interests
    
    
    
    
    
    
    
    
    
    
    96,744
    
    
    
    14,658Total equity
    
    
    
    
    
    
    2,153,748
    
    
    
    2,301,835
    
    
    
    348,762Total liabilities and equity
    
    
    
    
    
    
    2,443,865
    
    
    
    2,663,044
    
    
    
    403,490
  F-6




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands of Renminbi (RMB) and US dollar (US$),
except for number of shares and per share data )
 For the Year Ended December 31Note
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues, net of business tax, value-added tax and
related surcharges :Lease and management services
    
    
    
    
    
    
    155,061
    
    
    
    260,162
    
    
    
    349,248
    
    
    
    52,916Management services
    
    
    
    
    
    
    12,677
    
    
    
    28,739
    
    
    
    22,805
    
    
    
    3,455Other, net
    
    
    
    
    
    
    4,051
    
    
    
    3,535
    
    
    
    17,471
    
    
    
    2,647Total net revenues
    
    
    
    
    
    
    171,789
    
    
    
    292,436
    
    
    
    389,524
    
    
    
    59,018Cost of revenues:Lease and management services
    
    
    
    
    
    
    (25,046
    )
    
    
    (60,937
    )
    
    
    (93,771
    )
    
    
    (14,208
    )Amortization of acquired intangible assets
    
    
    
    
    
    
    (20,497
    )
    
    
    (26,493
    )
    
    
    (26,488
    )
    
    
    (4,013
    )Management services
    
    
    
    
    
    
    (54
    )
    
    
    (131
    )
    
    
    (2,441
    )
    
    
    (370
    )Total cost of revenues
    
    
    
    
    
    
    (45,597
    )
    
    
    (87,561
    )
    
    
    (122,700
    )
    
    
    (18,591
    )Gross profit
    
    
    
    
    
    
    126,192
    
    
    
    204,875
    
    
    
    266,824
    
    
    
    40,427Operating expenses:Selling expenses
    
    
    
    
    
    
    (5,497
    )
    
    
    (7,675
    )
    
    
    (17,150
    )
    
    
    (2,598
    )General and administrative expenses
    
    
    
    
    
    
    (18,869
    )
    
    
    (29,821
    )
    
    
    (70,008
    )
    
    
    (10,607
    )Total operating expenses
    
    
    
    
    
    
    (24,366
    )
    
    
    (37,496
    )
    
    
    (87,158
    )
    
    
    (13,205
    )Operating income
    
    
    
    
    
    
    101,826
    
    
    
    167,379
    
    
    
    179,666
    
    
    
    27,222Interest expense (including related party amounts
of RMB2,991, RMB55 and nil for the years ended
December 31, 2008, 2009 and 2010, respectively)
    
    
    23
    
    
    
    (7,455
    )
    
    
    (6,891
    )
    
    
    (7,448
    )
    
    
    (1,128
    )Change in fair value of convertible notes
    
    
    
    
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    Foreign exchange loss
    
    
    
    
    
    
    (325
    )
    
    
    (213
    )
    
    
    (5,436
    )
    
    
    (824
    )Gain from disposal of property ,plant and equipment
    
    
    
    
    
    
    658
    
    
    
    
    
    
    
    543
    
    
    
    82Interest income
    
    
    
    
    
    
    430
    
    
    
    948
    
    
    
    7,865
    
    
    
    1,192Other income (expense)
    
    
    
    
    
    
    7,734
    
    
    
    
    
    
    
    (399
    )
    
    
    (60
    )Income before income taxes
    
    
    
    
    
    
    102,404
    
    
    
    161,223
    
    
    
    174,791
    
    
    
    26,484Income tax expenses
    
    
    21
    
    
    
    (23,335
    )
    
    
    (36,396
    )
    
    
    (43,873
    )
    
    
    (6,647
    )Net income
    
    
    
    
    
    
    79,069
    
    
    
    124,827
    
    
    
    130,918
    
    
    
    19,837Net loss attributable to non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,518
    )
    
    
    (230
    )Accretion of Series A contingently redeemable
convertible preferred shares
    
    
    18
    
    
    
    (270,343
    )
    
    
    (30,050
    )
    
    
    
    
    
    
    Accretion of Series B contingently redeemable
convertible preferred shares
    
    
    18
    
    
    
    (304,763
    )
    
    
    (48,359
    )
    
    
    
    
    
    
    Net (loss) income attributable to ordinary
shareholders
    
    
    
    
    
    
    (496,037
    )
    
    
    46,418
    
    
    
    129,400
    
    
    
    19,607(Loss) income per shareBasic/Diluted
    
    
    27
    
    
    
    (8.63
    )
    
    
    0.62
    
    
    
    0.89
    
    
    
    0.13Weighted average number of ordinary shares
outstanding:Basic/Diluted
    
    
    27
    
    
    
    57,481,400
    
    
    
    74,648,779
    
    
    
    146,040,594
    
    
    
    146,040,594
  F-7




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi (RMB) and US dollar (US$))
 For the Year Ended December 312008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    
    79,069
    
    
    
    124,827
    
    
    
    130,918
    
    
    
    19,837Adjustments to reconcile net income to net cash
generated from operating activities:Share-based compensation
    
    
    4,215
    
    
    
    1,006
    
    
    
    9,571
    
    
    
    1,450Imputed interest on amounts due to related
parties (note 23)
    
    
    2,991
    
    
    
    55
    
    
    
    
    
    
    
    Depreciation of property, plant and equipment
    
    
    17,629
    
    
    
    51,681
    
    
    
    82,889
    
    
    
    12,559Amortization of acquired intangible assets
    
    
    20,497
    
    
    
    26,493
    
    
    
    26,488
    
    
    
    4,013Amortization of prepaid land lease payments
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    47Gain on disposal of property, plant and equipment
    
    
    (658
    )
    
    
    
    
    
    
    (543
    )
    
    
    (82
    )Deferred tax benefits
    
    
    (5,080
    )
    
    
    (2,330
    )
    
    
    (3,634
    )
    
    
    (551
    )Allowance for doubtful accounts
    
    
    22
    
    
    
    2,402
    
    
    
    2,650
    
    
    
    402Change in fair value of contingent business
acquisition consideration
    
    
    
    
    
    
    
    
    
    
    536
    
    
    
    81Change in fair value of convertible notes
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Increase in notes receivable
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    (136
    )Increase in accounts receivable
    
    
    (19,305
    )
    
    
    (20,958
    )
    
    
    (57,492
    )
    
    
    (8,711
    )(Increase) decrease in prepayments and other
current assets
    
    
    (23,043
    )
    
    
    (43,012
    )
    
    
    33,742
    
    
    
    5,112(Increase) decrease in deposits for non-current
assets
    
    
    (621
    )
    
    
    585
    
    
    
    (40,680
    )
    
    
    (6,164
    )(Decrease) increase in accounts payable
    
    
    (20,221
    )
    
    
    18
    
    
    
    573
    
    
    
    87(Decrease) Increase in accrued expenses and
other liabilities
    
    
    (13,709
    )
    
    
    3,586
    
    
    
    1,443
    
    
    
    219(Decrease) increase in deferred revenue
    
    
    (1,666
    )
    
    
    (3,856
    )
    
    
    5,012
    
    
    
    759Increase (decrease) in lease deposits
    
    
    30
    
    
    
    (2,215
    )
    
    
    4,110
    
    
    
    623Increase (decrease) in income tax payable
    
    
    5,265
    
    
    
    (2,399
    )
    
    
    10,759
    
    
    
    1,630Increase in prepaid land lease payments
    
    
    
    
    
    
    
    
    
    
    (14,780
    )
    
    
    (2,239
    )Net cash generated from operating activities
    
    
    46,774
    
    
    
    135,883
    
    
    
    190,972
    
    
    
    28,936CASH FLOWS FROM INVESTING ACTIVITIESReceipts under arrangements with Changan
Hospital (note 28)
    
    
    
    
    
    
    
    
    
    
    15,007
    
    
    
    2,274Payments under arrangements with Changan
Hospital (note 28)
    
    
    (20,821
    )
    
    
    (11,800
    )
    
    
    (12,000
    )
    
    
    (1,818
    )Acquisitions, net of cash acquired (note 4)
    
    
    (231,481
    )
    
    
    (32,205
    )
    
    
    (45,000
    )
    
    
    (6,818
    )Acquisition of property, plant and equipment
    
    
    (31,575
    )
    
    
    (106,984
    )
    
    
    (111,124
    )
    
    
    (16,837
    )Deposits for the purchase of non-current assets
    
    
    (95,110
    )
    
    
    (121,755
    )
    
    
    (293,905
    )
    
    
    (44,531
    )Proceeds from disposal of property, plant and
equipment
    
    
    2,616
    
    
    
    475
    
    
    
    3,408
    
    
    
    516Net investment in financing leases
    
    
    
    
    
    
    
    
    
    
    (85,854
    )
    
    
    (13,008
    )Net cash used in investing activities
    
    
    (376,371
    )
    
    
    (272,269
    )
    
    
    (529,468
    )
    
    
    (80,222
    )
 F-8




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS  (continued)

(Amounts in thousands of Renminbi (RMB) and US dollar (US$))
 For the Year Ended December 312008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of convertible notes
    
    
    140,241
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from issuance of Series A contingently
redeemable convertible preferred shares (net of paid
issuance costs of RMB2,449 for the year ended December
31, 2008)
    
    
    67,671
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from issuance of Series B contingently
redeemable convertible preferred shares (net of paid
issuance costs of RMB5,664 for the year ended
December 31, 2008)
    
    
    405,331
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from initial public offering (net of
underwriter commissions of RMB63,088 and issuance
cost of RMB17,296 for the year ended December 31,
2009)
    
    
    
    
    
    
    820,872
    
    
    
    
    
    
    
    Proceeds from exercise of share options
    
    
    114,606
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from short-term bank borrowings
    
    
    20,800
    
    
    
    19,000
    
    
    
    214,500
    
    
    
    32,500Proceeds from long-term bank borrowings
    
    
    7,460
    
    
    
    135,580
    
    
    
    55,710
    
    
    
    8,441Repayment of obligations under capitalized leases
    
    
    (5,525
    )
    
    
    (3,719
    )
    
    
    (2,749
    )
    
    
    (417
    )Repayment of long-term bank borrowings
    
    
    (37,890
    )
    
    
    (89,138
    )
    
    
    (88,117
    )
    
    
    (13,351
    )Repayment of short-term bank borrowings
    
    
    (21,500
    )
    
    
    (28,300
    )
    
    
    (143,000
    )
    
    
    (21,667
    )Increase in restricted cash
    
    
    
    
    
    
    (4,714
    )
    
    
    (112,951
    )
    
    
    (17,114
    )Dividends paid to preferred shareholders
    
    
    
    
    
    
    (10,867
    )
    
    
    
    
    
    
    Dividends paid to ordinary shareholders
    
    
    
    
    
    
    (16,338
    )
    
    
    
    
    
    
    Decrease in amounts due to related parties
    
    
    (41,700
    )
    
    
    (2,000
    )
    
    
    (1,546
    )
    
    
    (234
    )Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    (76,780
    )
    
    
    (11,633
    )Others
    
    
    
    
    
    
    (530
    )
    
    
    
    
    
    
    Net cash generated from (used in) financing activities
    
    
    649,494
    
    
    
    819,846
    
    
    
    (154,933
    )
    
    
    (23,475
    )Exchange rate effect on cash
    
    
    (5,698
    )
    
    
    (212
    )
    
    
    (8,027
    )
    
    
    (1,217
    )Net increase (decrease) in cash
    
    
    314,199
    
    
    
    683,248
    
    
    
    (501,456
    )
    
    
    (75,978
    )Cash at beginning of year
    
    
    39,792
    
    
    
    353,991
    
    
    
    1,037,239
    
    
    
    157,157Cash at end of year
    
    
    353,991
    
    
    
    1,037,239
    
    
    
    535,783
    
    
    
    81,179Supplemental schedule of cash flows information:Income tax paid
    
    
    (11,688
    )
    
    
    (37,740
    )
    
    
    (36,187
    )
    
    
    (5,483
    )Interest paid
    
    
    (3,538
    )
    
    
    (5,371
    )
    
    
    (3,338
    )
    
    
    (506
    )Supplemental schedule of non-cash activities:Acquisition of property, plant and equipment and
other intangible assets through utilization of
deposits
    
    
    50,601
    
    
    
    153,153
    
    
    
    181,273
    
    
    
    27,466Acquisition of property, plant and equipment under
capitalized lease
    
    
    14,520
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of property, plant and equipment included
in accrual for purchase of property, plant and
equipment
    
    
    
    
    
    
    17,137
    
    
    
    
    
    
    
    Conversion of convertible notes into Series A
contingently redeemable convertible preferred shares
    
    
    176,082
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series A and Series B contingently
redeemable convertible preferred shares to ordinary
shares upon initial public offering
    
    
    
    
    
    
    704,276
    
    
    
    
    
    
    
    
  F-9




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 (Amounts in thousands of Renminbi (RMB) and United States Dollar (US$), except for number of shares)
 AccumulatedNumber of
    
    
    
    
    
    
    
    
    
    
    OtherOrdinary
    
    
    Ordinary
    
    
    Additional
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Shares
    
    
    Paid-in Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Total EquityRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance as of January 1, 2008
    
    
    50,000,000
    
    
    
    41
    
    
    
    443,016
    
    
    
    147
    
    
    
    (48,326
    )
    
    
    394,878Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,069
    
    
    
    79,069Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,969
    )
    
    
    
    
    
    
    (3,969
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,100Imputed interest on related parties loan (note 23)
    
    
    
    
    
    
    
    
    
    
    2,991
    
    
    
    
    
    
    
    
    
    
    
    2,991Exercise of share options
    
    
    21,184,600
    
    
    
    15
    
    
    
    114,591
    
    
    
    
    
    
    
    
    
    
    
    114,606Redesignation of 756,500 ordinary shares to Series A contingently
redeemable convertible preferred shares (note 19)
    
    
    (756,500
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    4,215
    
    
    
    
    
    
    
    
    
    
    
    4,215Recognition of beneficial conversion feature upon issuance of Series A
contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    253,317
    
    
    
    
    
    
    
    
    
    
    
    253,317Recognition of beneficial conversion feature upon issuance of Series B
contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    295,019
    
    
    
    
    
    
    
    
    
    
    
    295,019Accretion of Series A contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (270,343
    )
    
    
    (270,343
    )Accretion of Series B contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (304,763
    )
    
    
    (304,763
    )Balance as of December 31, 2008
    
    
    70,428,100
    
    
    
    55
    
    
    
    1,113,150
    
    
    
    (3,822
    )
    
    
    (544,363
    )
    
    
    565,020Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,827
    
    
    
    124,827Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    (165
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,662Imputed interest on related parties loan (note 23)
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    55Accretion of Series A contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,050
    )
    
    
    (30,050
    )Accretion of Series B contingently redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,359
    )
    
    
    (48,359
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,338
    )
    
    
    (16,338
    )Initial public offering of ordinary shares
    
    
    36,000,000
    
    
    
    25
    
    
    
    813,938
    
    
    
    
    
    
    
    
    
    
    
    813,963Conversion of Series A contingently redeemable convertible preferred
shares into ordinary shares
    
    
    17,694,200
    
    
    
    12
    
    
    
    286,421
    
    
    
    
    
    
    
    
    
    
    
    286,433Conversion of Series B contingently redeemable convertible preferred
shares into ordinary shares
    
    
    23,333,200
    
    
    
    16
    
    
    
    457,340
    
    
    
    
    
    
    
    
    
    
    
    457,356Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,006
    
    
    
    
    
    
    
    
    
    
    
    1,006Balance as
of December 31, 2009
    
    
    147,455,500
    
    
    
    108
    
    
    
    2,671,910
    
    
    
    (3,987
    )
    
    
    (514,283
    )
    
    
    2,153,748
 F-10




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$), except for number of shares)
 Concord Medical Services Holdings Limited shareholdersAccumulatedOtherNumber of
    
    
    
    
    
    
    Additional
    
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    
    Non-Ordinary
    
    
    Ordinary
    
    
    Paid-in
    
    
    Income
    
    
    Accumulated
    
    
    
    
    
    
    controlling
    
    
    TotalShares
    
    
    Shares
    
    
    Capital
    
    
    (Loss)
    
    
    Deficit
    
    
    Total
    
    
    interest
    
    
    EquityRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance as of January 1, 2010
    
    
    147,455,500
    
    
    
    108
    
    
    
    2,671,910
    
    
    
    (3,987
    )
    
    
    (514,283
    )
    
    
    2,153,748
    
    
    
    
    
    
    
    2,153,748Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,400
    
    
    
    129,400
    
    
    
    1,518
    
    
    
    130,918Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,848
    )
    
    
    
    
    
    
    (10,848
    )
    
    
    
    
    
    
    (10,848
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,552
    
    
    
    1,518
    
    
    
    120,070Share-based compensation
    
    
    
    
    
    
    
    
    
    
    9,571
    
    
    
    
    
    
    
    
    
    
    
    9,571
    
    
    
    
    
    
    
    9,571Share repurchase (note 19)
    
    
    (5,101,968
    )
    
    
    (3
    )
    
    
    (76,777
    )
    
    
    
    
    
    
    
    
    
    
    (76,780
    )
    
    
    
    
    
    
    (76,780
    )Purchase of
CCICC (note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,226
    
    
    
    95,226Balance as of December 31, 2010
    
    
    142,353,532
    
    
    
    105
    
    
    
    2,604,704
    
    
    
    (14,835
    )
    
    
    (384,883
    )
    
    
    2,205,091
    
    
    
    96,744
    
    
    
    2,301,835Balance as of December 31,
2010 (US$)
    
    
    
    
    
    
    16
    
    
    
    394,652
    
    
    
    (2,248
    )
    
    
    (58,316
    )
    
    
    334,104
    
    
    
    14,658
    
    
    
    348,762
  F-11




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION
 The accompanying consolidated financial statements include the financial statements of Concord
Medical Services Holdings Limited (the Company) and its subsidiaries, including Ascendium
Group Limited (Ascendium), China Medical Services (Holdings) Limited (CMS Holdings), Our
Medical Services Limited (OMS), China Medstar Pte Limited (China Medstar), Cyber Medical
Networks Limited (Cyber), King Cheers Holdings Limited (King Cheers), CMS Hospital
Management Co., Ltd. (CHM), Shenzhen Aohua Medical Services Co., Ltd (AMS), Shenzhen Aohua
Medical Leasing & Services Limited (AML), Medstar (Shanghai) Leasing Co., Ltd. (MSC),
Beijing Xing Heng Feng Medical Technology Co., Ltd. (XHF), Tianjin Kangmeng Radiology
Equipment Management Co., Ltd. (TKM), Shenzhen Lingdun Medical Investment & Management Co.,
Ltd. (XLD) and XiAn Wanjiehuaxiang Medical Technology Development Co., Ltd. (CCICC). The
Company and its subsidiaries are collectively referred to as the Group.
 The Group is principally engaged in the leasing of radiotherapy and diagnostic imaging
equipment and the provision of management services to hospitals located in the Peoples
Republic of China (PRC). The Group develops and operates its business through its
subsidiaries. Details of the Companys subsidiaries as of December 31, 2010 are as follows:
 Percentage ofDate of
    
    Place of
    
    Ownership by theCompany
    
    Establishment
    
    Establishment
    
    Company
    
    Principal ActivitiesAscendium
    
    September 10, 2007
    
    BVI
    
    
    100
    %
    
    Investment HoldingOMS
    
    August 22, 1996
    
    BVI
    
    
    100
    %
    
    Investment HoldingChina Medster
    
    August 8, 2003
    
    Singapore
    
    
    100
    %
    
    Investment HoldingCyber
    
    May 26, 2006
    
    Hong Kong
    
    
    100
    %
    
    Investment HoldingCMS Holdings
    
    July 18, 2008
    
    Hong Kong
    
    
    100
    %
    
    Investment HoldingKing Cheers
    
    May 18, 2001
    
    Hong Kong
    
    
    100
    %
    
    Investment HoldingAMS
    
    July 23, 1997
    
    PRC
    
    
    100
    %
    
    Leasing of medical equipment and
provision of management servicesAML
    
    February 21, 2008
    
    PRC
    
    
    100
    %
    
    Leasing of medical equipment and
provision of management servicesMSC
    
    March 21, 2003
    
    PRC
    
    
    100
    %
    
    Leasing of medical equipment and
provision of management servicesCHM
    
    July 23, 2008
    
    PRC
    
    
    100
    %
    
    Provision of management servicesXHF
    
    July 26, 2007
    
    PRC
    
    
    100
    %
    
    Provision of management servicesTKM
    
    April 22, 2010
    
    PRC
    
    
    100
    %
    
    Leasing of medical equipment and
provision of management servicesCCICC
    
    July 06, 2010
    
    PRC
    
    
    52
    %
    
    Medical care co-operation with hospitalXLD
    
    August 25, 2010
    
    PRC
    
    
    100
    %
    
    Leasing of medical equipment
 F-12




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Prior to October 30, 2007, OMS was owned by a group of individuals (the OMS Individual
Shareholders) through two intermediate investment holding companies (IIHC), there was no
ultimate controlling shareholder of OMS. OMS together with AMS, OMS wholly owned subsidiary,
were the predecessors of the Group and operated the business of the Group prior to the
reorganization on October 30, 2007 (the Reorganization).
 Ascendium is a limited liability company that was incorporated in the British Virgin Islands
(the BVI) on September 10, 2007. The Reorganization agreement provided that Ascendium (a
shell company owned by a nominee shareholder prior to the Reorganization), upon completion of
the Reorganization, be owned by a group of individuals (Ascendiums shareholders), who as a
group are substantively different than the shareholders of the IIHC (IIHC directly owned 100%
of OMS prior to October 30, 2007). In accordance with the Reorganization agreement, Ascendiums
shareholders acquired 100% ownership in OMS in exchange for issuing Ascendium shares to a
portion of the IIHC shareholders. The agreement also provided for the settlement of certain
unspecified obligations amongst the IIHC shareholders and IIHC. The majority of Ascendiums
shareholdings was acquired by a number of indirect shareholders of OMS, however because there
was no controlling shareholder and the differences in shareholders is substantive, Ascendium
accounted for the acquisition of 100% of OMS. The aggregate purchase price for the acquisition
on October 30, 2007 was determined to be RMB393,435, which represents the fair value of the
Ascendium shares issued as consideration.
 The Company was incorporated under the law of the Cayman Islands on November 27, 2007. On March
7, 2008, all the then existing shareholders of Ascendium exchanged their respective shares of
Ascendium for shares of the Company at a ratio of 10 shares in the Company in return for each
share in Ascendium. As a result, Ascendium became the wholly-owned subsidiary of the Company.
 On July 31, 2008, the Group acquired 100% of the equity interest in China Medstar. On October
28, 2008, the Group consummated 100% of the equity interest in XHF. The acquisitions were
accounted for using the purchase method of accounting pursuant to ASC subtopic 805-10, Business
Combinations, Overall. The acquired assets and liabilities of China Medstar and XHF were
recorded at estimated fair values on their respective acquisition dates.
 Shenzhen Aohua Medical Services (AMS) was incorporated by OMS on July 23, 1997 and OMS
contributed RMB 4,800 representing 90% equity interest in AMS. Since the incorporation of AMS,
10% of its equity interest was held by two third party nominees who acted as the custodians of
such equity interest. The two nominees did not maintain their required capital contributions
at any time subsequent to the incorporation of AMS. In December 2007, the Group entered into
an agreement with the two nominees to obtain title of their 10% equity interest. The two
nominees agreed to complete all legal procedures required to effect
legal transfer of the shares to OMS on June 10, 2009 upon approval by the Shenzhen Industrial and Commercial
Administration Bureau in return for a fee of RMB 4,200.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Due to the two nominees failure to complete their capital injection obligations as required by
PRC Company Law, it is in the Companys view that the two nominees never possessed any ordinary
shareholding rights, including dividend or voting rights. Consequently, OMS effectively
controlled 100% of the equity of AMS prior to the legal reacquisition of shares subsequent to
December 31, 2009. As such, the Groups consolidated financial statements do not present a
minority interest for the financial statement periods presented.
 On December 15, 2009, the Company acquired 100% equity interest of King Cheers at a
consideration of HK$2. King Cheers was incorporated in Hong Kong on May 18, 2001 under the Hong
Kong Companies Ordinance. It is an investment holding company and has no business operation of
its own.
 On December 16, 2009, the Company completed its initial public offering of 12,000,000 American
Depositary Shares (ADSs) at US$11.0 per ADS. Each ADS comprises three ordinary shares of the
Company. The net proceeds to the Company from the offering amounted to approximately RMB
813,938 (US$119,211), net of underwriter Commission and issuance costs paid and payable.
 On April 22, 2010, the Group acquired 100% of the equity interest in TKM. The acquisition was
accounted for using the purchase method of accounting pursuant to ASC subtopic 805-10, Business
Combinations, Overall. The acquired assets and liabilities of TKM were recorded at estimated
fair values on their respective acquisition dates.
 On July 6, 2010, the Group acquired 52% of the equity interest in CCICC from Changan Hospital
Co. Ltd. (Changan), in accordance with the framework agreement entered into in 2008. The
transaction was accounted for as an acquisition of assets pursuant to ASC subtopic 805-50,
Business Combinations, Related Issues,as the assets acquired did not constitute a business.
 XLD was set up as a 100% owned subsidiary by AML and CHM, with ownership of 90% and 10%,
respectively, on August 25, 2010, for purpose of expanding the Groups medical equipment
leasing business. As of December 31, 2010, XLD had not commenced operations.
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentation and use of estimates
 The accompanying consolidated financial statements have been prepared in accordance with United
States generally accepted accounting principles (U.S. GAAP).
 The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and
the reported amounts of revenues and expenses during the reporting periods. Significant
estimates and assumptions reflected in the Companys financial statements include, but are not
limited to, purchase price allocation, contingent business acquisition consideration, revenue
recognition, allowance for doubtful accounts, useful lives of property, plant and equipment and
acquired intangible assets, realization of deferred tax assets, share-based compensation
expense, and the valuation of the Companys acquired tangible and intangible assets and
liabilities and ordinary shares, Series A and B contingently redeemable convertible preferred shares and
convertible notes. Actual results could materially differ from those estimates.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Principles of consolidation
 The consolidated financial statements of the Group include the financial statements of the
Company and its subsidiaries. All transactions and balances between the Company and its
subsidiaries have been eliminated upon consolidation.Foreign currency translation and transactions
 The Companys PRC subsidiaries determine their functional currencies to be the Chinese Renminbi
(RMB) based on the criteria of ASC subtopic 830-10, Foreign Currency Matters, Overall. The
Company uses the RMB as its reporting currency. The Company uses the monthly average exchange
rate for the year and the exchange rate at the balance sheet date to translate the operating
results and financial position, respectively. Translation differences are recorded in
accumulated other comprehensive loss, a component of shareholders equity. The functional
currency of the Company and its subsidiaries, Ascendium, CMS Holdings, OMS, Cyber, China
Medstar and King Cheers is the United States dollar (US$).
 Transactions denominated in foreign currencies are remeasured into the functional currency at
the exchange rates prevailing on the transaction dates. Foreign currency denominated financial
assets and liabilities are remeasured at the exchange rates prevailing at the balance sheet
date. Exchange gains and losses are included in the consolidated statements of operations.Convenience translation
 Amounts in U.S. dollars (US$) are presented for the convenience of the reader and are
translated at the noon buying rate of RMB6.6000 to US$1.00 on December 30, 2010 as published on
the website of the Federal Reserve Board. No representation is made that the RMB amounts could
have been, or could be, converted into US$ at such rate.Cash
 Cash consists of cash deposits, which are unrestricted as to withdrawal and use.Restricted cash
 Short-term and long-term restricted cash represent collateral required to be maintained
pursuant to certain contractual financing arrangements the Group entered into with certain
financial institutions (see note 5).Accounts receivable and allowance for doubtful accounts
 The Group considers many factors in assessing the collectability of its receivables due from
its customers, such as, the age of the amounts due, the customers payment history and
credit-worthiness. An allowance for doubtful accounts is recorded in the period in which
uncollectability is determined to be probable. Accounts receivable balances are written off
after all collection efforts have been exhausted.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Lease obligations
 In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as
either a capital lease or an operating lease. The Company assesses a lease to be a capital
lease if any of the following conditions exist: a) ownership is transferred to the lessee by
the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least
75% of the propertys estimated remaining economic life or d) the present value of the minimum
lease payments at the beginning of the lease term is 90% or more of the fair value of the
leased property to the lessor at the inception date. A capital lease is accounted for as if
there was an acquisition of an asset and an incurrence of an obligation at the inception of the
lease. The capitalized lease obligation reflects the present value of future rental payments,
discounted at the appropriate interest rates. The cost of the asset is amortized over the lease
term. However, if ownership is transferred at the end of the lease term, the cost of the asset
is amortized as set out below under property, plant and equipment.
 Operating lease expenses are recognized on a straight-line basis over the applicable lease
term.Property, plant and equipment, net
 Property, plant and equipment are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, as follows:
 EstimatedCategory
    
    Estimated useful life
    
    residual valueBuilding
    
    38 years
    
    
    Medical equipment*
    
    Shorter of customer contract or 6-20 years
    
    
    Electronic and office equipment
    
    5 years
    
    
    5-10
    %Motor vehicles
    
    5 years
    
    
    5-10
    %Leasehold improvement
    
    shorter of lease term or 5 years
    
    
    
 
 *
    
    The cost of the asset is amortized over the lease term. However, if ownership is
transferred at the end of the lease term, the cost of the asset is amortized over the
shorter of customer contract or the useful life of the asset which ranges from 6-20 years. Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals
and betterments that extends the useful lives of property, plant and equipment are capitalized
as additions to the related assets. Retirements, sales and disposals of assets are recorded by
removing the cost and accumulated depreciation from the asset and accumulated depreciation
accounts with any resulting gain or loss reflected in the consolidated statements of
operations.
 Costs incurred in constructing new facilities, including progress payment, interest and other
costs relating to the construction are capitalized and transferred to fixed assets upon
completion. Total interest costs incurred and capitalized during the years ended December 31,
2008, 2009 and 2010 amounted to RMB2,179, RMB1,310 and RMB2,517 (US$381), respectively.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Goodwill
 Goodwill represents the excess of the purchase price over the estimated fair value of net
tangible and identifiable intangible assets acquired. The Companys goodwill and acquisition
related intangible assets outstanding at December 31, 2008, 2009 and 2010 were related to the
Companys Reorganization, the acquisition of China Medstar, XHF and other businesses (see notes
1 and 4). In accordance with ASC subtopic 350-20, Intangibles, Goodwill and Other, Goodwill,
goodwill amounts are not amortized, but rather are tested for impairment at least annually or
more frequently if there are indicators of impairment present. An impairment loss must be
measured if the sum of the expected future undiscounted cash flows from the use and eventual
disposition of the asset is less than the net book value of the asset. The amount of the
impairment loss will generally be measured as the difference between the net book value of the
asset and their estimated fair value. The Company determined it has one reporting unit in which
all goodwill was tested for impairment at each reporting period end resulting in no impairment
charges.Acquired intangible assets, net
 Acquired intangible assets relate to customer relationships and operating leases that are not
considered to have an indefinite useful life. These intangible assets are amortized on a
straight line basis over the economic life. The customer relationship assets relate to the
ability to sell existing and future services to existing customers and have been estimated
using the income method. Operating leases relate to favorable operating lease terms based on
market conditions that existed on the date of acquisition and are amortized over the term of
the leases.Prepaid land lease payments
 Prepaid land lease payments represent amounts paid for the right to use land in the PRC and are
recorded at purchase cost less accumulated amortization. Amortization is provided on a
straight-line basis over the terms of the land use rights agreement, which is 38 years.Impairment of long-lived assets and acquired intangibles
 The Group evaluates its long-lived assets or asset group including acquired intangibles with
finite lives for impairment whenever events or changes in circumstances (such as a significant
adverse change to market conditions that will impact the future use of the assets) indicate
that the carrying amount of a group of long-lived assets may not be fully recoverable. When
these events occur, the Group evaluates the impairment by comparing the carrying amount of the
assets to future undiscounted cash flows expected to result from the use of the assets and
their eventual disposition. If the sum of the expected undiscounted cash flows is less than the
carrying amount of the assets, the Group recognizes an impairment loss based on the excess of
the carrying amount of the asset group over its fair value, generally based upon discounted
cash flows. No such impairment charge was recognized for any of the years presented.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Net investment in financing leases
 Net investment in financing leases represents direct financing leases of medical equipment
arising from sales and leaseback transactions. For leases where the Group is the lessor, a
transaction is accounted for as a direct financing lease if the transaction satisfies one of the
four capital lease conditions as discussed under the leases obligations section of this note,
the collectability of the minimum lease payments is reasonably predictable, and there are no
important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by
the Group under the lease.
 The net investment in the financing leases consists of the minimum lease payments receivable
less unearned income. Over the period of a lease, each lease payment received is allocated
between the repayment of the net investment in the lease and financing lease income based on
the effective interest method so as to produce a constant rate of return on the balance of the
net investment in the lease. The leased property is collateralized against the lease payments
and is transferred to the lessee upon the maturity of the lease.Fair value of financial instruments
 The carrying amounts of the Groups financial instruments, including cash, notes receivable,
accounts receivable, accounts payable, and other liabilities approximate fair value because of
their short maturities. The carrying amounts of the Groups short-term and long-term bank
borrowings bear interest at floating rates and therefore approximate the fair value of these
obligations based upon managements best estimates of interest rates that would be available
for similar debt obligations at December 31, 2009 and 2010.Revenue recognition
 The majority of the Groups revenues are derived directly from hospitals that enter into
medical equipment lease and management service arrangements with the Group. A lease and
management service arrangement will typically include the purchase and installation of
diagnostic imaging and/or radiation oncology system (medical equipment) at the hospital, and
the full-time deployment of a qualified system technician that is responsible for certain
management services related to the radiotherapy or diagnostic services being performed by the
hospital centers doctors to their patients. To a lesser extent, revenues are generated from
stand-alone management service arrangements where a hospital has previously acquired the
equipment from the Company or through another vendor or sale of medical equipment.
 Revenues arising from sales of medical equipment and services are recognized when there is
persuasive evidence of an arrangement, the fee is fixed or determinable, collectability is
reasonably assured and the delivery of the medical equipment or services has occurred. When the
fees associated with an arrangement containing extended payment terms are not considered to be
fixed or determinable at the outset of arrangement, revenue is recognized as payments become
due, and all of the other criteria above have been met.
 The Group is subject to approximately 5% business tax and related surcharges on the revenue
earned from provision of leasing and management services except for that disclosed in note 21.
The Group has recognized revenues net of these business taxes and other surcharges. Such
business tax and related surcharges for the years ended December 31, 2008, 2009 and 2010 are
approximately RMB4,500, RMB10,771 and RMB17,511 (US$2,653), respectively. In the event that
revenue recognition is deferred to a later period, the related business tax and other
surcharges and fees are also deferred and will be recognized only upon recognition of the
deferred revenue.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Revenue recognition (continued)Lease and management services
 The Group enters into both leases and management service arrangements with independent
hospitals consisting of terms that range from 6 to 20 years. Pursuant to these arrangements,
the Group receives a percentage of the net profit (profit share as defined in the
arrangement) of the hospital unit that delivers the diagnostic imaging and/or radiation
oncology services determined in accordance with the terms of the arrangement.
 Pursuant to ASC subtopic 840-10, Leases, Overall,the Group determined that the lease and
management service arrangements contain a lease of medical equipment. The hospital has the
ability and right to operate the medical equipment while obtaining more than a minor amount of
the output. The arrangement also contains a non-lease deliverable being the management service
element. The arrangement consideration should be allocated between the lease element and the
non-lease deliverables on a relative fair value basis, however because all of the consideration
is earned through the contingent rent feature discussed below, there is no impact of such
allocation.
 ASC 840, Leases, is applied to the lease elements of the arrangement and U.S. Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 104 is applied to other elements of
the arrangement not within the scope of ASC 840.
 The lease rentals and management service receivable under the lease arrangement are based
entirely on a profit sharing formula (contingent rent feature). The profitability of the
business unit is not only dependent on the medical equipment placed at the hospital, but also
the hospitals ability to manage the costs and appoint doctors and clinical staff to operate
the equipment. Certain of the lease and management service arrangements may include a transfer
of ownership or bargain purchase option at the end of the lease term. Due to the length of the
lease term, the collectability of these minimum lease payments are not considered reasonably
predictable and there are also inherent uncertainties regarding the future costs to be incurred
by the Group relating to the arrangement. Given these uncertainties, the Group accounts for all
of these lease arrangements as operating leases.
 As the collectability of the minimum lease rental is not considered predictable, and the
remaining rental is considered contingent, the Group recognizes revenue when a lease payment
under the arrangement become fixed, i.e. when the profit share under the arrangement is
determined and agreed upon by both parties to the agreement. Similarly, for the service element
of the arrangement, revenue is only considered determinable at the time a payment under the
arrangement becomes fixed, i.e. when the profit share under the arrangement is determined and
agreed upon by both parties. Revenue is recognized when it is determined that the basic
criteria, referred to above, have also been met.Management services
 The Group provides stand-alone management services to certain hospitals which are already in
possession of radiotherapy and diagnostic equipment. The fee for the management service
arrangement is either based on a contracted percentage of monthly revenue generated by the
specified hospital unit (revenue share) or in limited instances on a fixed monthly fee. The
consideration that is based on a contracted percentage of revenue is recognized when the
monthly fees under the arrangement become due, i.e. when the revenue share under the
arrangement is determined and agreed upon by both parties to the agreement. Fixed monthly fees
are recognized ratably over the service term.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Revenue recognition(continued)Medical equipment sales
 Pursuant to the application of ASC subtopic 605-45, Revenue Recognition, Principal Agent
Consideration, the Group records revenue related to medical equipment sales on a net basis when
the equipment is delivered to the customer and the sales price is determinable. During the
years ended December 31, 2008, 2009 and 2010, the Company had medical equipment sales, of
RMB1,725, RMB2,675 and RMB3,475 (US$527), net of 17% value-added tax of approximately RMB863,
RMB1,519 and RMB1,244 (US$189) taxes, respectively. Revenue derived from medical equipment
sales is recorded as other revenue in the consolidated statements of operations.Trial operations of CCICC
 Pursuant to the supplemental agreement entered into between the Group and Changan (see note 28), CCICC recognized other revenue amounting to RMB8,254
(US$1,251) for the year ended December 31, 2010 in relation to the operations of the oncology
center of Changan during the trial period from July 1, 2010 to December 31, 2010.Financing lease income
 Pursuant to ASC subtopic 840-30, Leases, Capital Leases, the Group records revenue related to
financing lease income attributable to direct financing leases so as to produce a constant rate
of return on the balance of the net investment in the lease. During the years ended December
31, 2008, 2009 and 2010, the Company had financing lease income of nil, nil and RMB5,147
(US$780), net of tax, respectively. Income derived from financing leases is recorded as other
revenue in the consolidated statements of operations.Cost relating to lease and management service arrangement
 The cost of medical equipment that is leased under an operating lease is included in property,
plant and equipment in the balance sheet. The medical equipment is depreciated using the
Groups depreciation policy. The costs of the management service component is recognized as an
expense as incurred.Cost of management services
 Costs of management services mainly include the labor costs of technicians and management
staff.Cost of equipment sales
 Cost of equipment sales, recorded net against the related revenue, include the cost of the
equipment purchased and other direct costs involved in the equipment sales.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Income taxes
 The Group follows the liability method of accounting for
income taxes. Under this method,
deferred tax assets and liabilities are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted tax rates that will
be in effect in the period in which the differences are expected to reverse. The Group records
a valuation allowance to offset deferred tax assets if based on the weight of available
evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will
not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax
expense in the period that includes the enactment date of the change in tax rate.
 The Group adopted ASC subtopic 740-10, Income Taxes, Overall, which clarifies the
accounting and disclosure for uncertainty in income taxes. Interests and penalties arising from underpayment of income taxes shall be computed in
accordance with the related PRC tax laws. The amount of interest expense is computed by
applying the applicable statutory rate of interest to the difference between the tax position
recognized and the amount previously taken or expected to be taken in a tax return. Interests
and penalties recognized in accordance with ASC subtopic 740-10 is classified in the financial
statements as a component of income tax expense. In accordance with the provisions of ASC
subtopic 740-10, the Group recognizes in its financial statements the impact of a tax position if a tax
return position or future tax position is more likely than not to prevail based on the facts
and technical merits of the position. Tax positions that meet the more likely than not
recognition threshold are measured at the largest amount of tax benefit that has a greater than
fifty percent likelihood of being realized upon settlement. The Groups estimated liability for
unrecognized tax positions which is included in the accrued expenses and other liabilities
account is periodically assessed for adequacy and may be affected by changing interpretations
of laws, rulings by tax authorities, changes and/or developments with respect to tax audits,
and expiration of the statute of limitations. The outcome for a particular audit cannot be
determined with certainty prior to the conclusion of the audit and, in some cases, appeal or
litigation process. The actual benefits ultimately realized may differ from the Groups
estimates. As each audit is concluded, adjustments, if any, are recorded in the Groups
financial statements. Additionally, in future periods, changes in facts, circumstances, and new
information may require the Group to adjust the recognition and measurement estimates with
regard to individual tax positions. Changes in recognition and measurement estimates are
recognized in the period in which the changes occur.Share-based compensation
 The Groups employees participate in the Companys share-based scheme which is discussed in
more details under note 22. Share-based awards granted to employees are accounted for under ASC
subtopic 718-10, Compensation-Stock Compensation, Overall.
 In accordance with ASC 718, Compensation-Stock Compensation,the Company determines whether a
share option should be classified and accounted for as a liability award or equity award. All
grants of share-based awards to employees classified as equity awards are recognized in the
financial statements based on their grant date fair values which are calculated using an option
pricing model. The Group has elected to recognize compensation expense using the straight-line
method for all share options granted with graded vesting based on service conditions. To the
extent the required vesting conditions are not met resulting in the forfeiture of the
share-based awards, previously recognized compensation expense relating to those awards are
reversed. ASC subtopic 718-10 requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent period if actual forfeitures differ from initial
estimates. Share-based compensation expense was recorded net of estimated forfeitures such that
expense was recorded only for those share-based awards that are expected to vest.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Income (loss) per share
 Income (loss) per share is computed in accordance with ASC 260, Earnings Per Share. Basic
income (loss) per ordinary share is computed by dividing income (loss) attributable to holders
of ordinary shares by the weighted average number of ordinary shares outstanding during the
period. Diluted income (loss) per ordinary share reflects the potential dilution that could
occur if securities or other contracts to issue ordinary shares were exercised or converted
into ordinary shares. Ordinary shares issuable upon the conversion of the contingently
redeemable convertible preferred shares are included in the computation of diluted income
(loss) per ordinary share on an if-converted basis when the impact is dilutive. The dilutive
effect of outstanding share-based awards is reflected in the diluted income (loss) per share by
application of the treasury stock method. Two-Class Method prescribed under ASC subtopic
260-10, Earnings Per Share, Overall, is used to calculate income (loss) per share data for
preferred shares that are participating securities in the event the Group has reportable net
income.Comprehensive income
 Comprehensive income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, ASC subtopic
220-10, Comprehensive Income, Overall,requires that all items that are required to be
recognized under current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other financial
statements. During the periods presented, the Groups comprehensive income includes net income
and foreign currency translation adjustments and is presented in the statement of changes in
shareholders equity.Recent accounting pronouncements
 In October 2009, the Financial Accounting Standard Board (the FASB) issued Accounting
Standards Update (ASU) No. 2009-13 (ASU 2009-13), Multiple-Deliverable Revenue
Arrangements. ASU 2009-13 amends ASC subtopic 605-25, Revenue Recognition, Multiple-Element
Arrangements, regarding revenue arrangements with multiple deliverables. These updates
addresses how to determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting, and how the arrangement consideration should be allocated among
the separate units of accounting. These updates are effective for fiscal years beginning after
June 15, 2010 and may be applied retrospectively or prospectively for new or materially
modified arrangements. In addition, early adoption is permitted. By providing another
alternative for determining the selling price of deliverables, the guidance for arrangements
with multiple deliverables will allow companies to allocate arrangement consideration in
multiple deliverable arrangements in a manner that better reflects the transactions economics
and will often result in earlier revenue recognition. The new guidance modifies the fair value
requirements of previous guidance by allowing best estimate of selling price in addition to
vendor-specific objective evidence (VSOE) and other third-party evidence (TPE) for
determining the selling price of a deliverable. A vendor is now required to use its best
estimate of the selling price when VSOE or TPE of the selling price cannot be determined. In
addition, the residual method of allocating arrangement consideration is no longer permitted
under the new guidance. The Group will adopt ASU 2009-13 for the fiscal year commencing January
1, 2011. The Group does not expect that the adoption of ASU 2009-13 will have a material impact
on its consolidated financial statements.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent accounting pronouncements (continued)
 In January 2010, the FASB issued ASU No. 2010-06 (ASU 2010-06), Fair Value Measurements and
Disclosures, Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820,
Fair Value Measurements and Disclosures, to require a number of additional disclosures
regarding (1) the different classes of assets and liabilities measured at fair value, (2) the
valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and
(4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of
existing disclosures are effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. The Group does not expect that the adoption of ASU 2010-06
will have a material impact on its consolidated financial statements.
 In December 2010, the FASB issued ASU No. 2010-29 (ASU 2010-29),Disclosure of Supplementary
Pro Forma Information for Business Combinations (ASC 805). The objective of this standard is
to address diversity in practice about the interpretation of the pro forma revenue and earnings
disclosure requirements for business combinations. This standard specifies that if a public
entity presents comparative financial statements, the entity should disclose revenue and
earnings of the combined entity as though the business combination(s) that occurred during the
current year had occurred as of the beginning of the comparable prior annual reporting period
only. This standard also expands the supplemental pro forma disclosures under ASC 805 to
include a description of the nature and amount of material, nonrecurring pro forma adjustments
directly attributable to the business combination included in the reported pro forma revenue
and earnings. This standard is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2010. Early adoption is permitted. The Company does not expect the
adoption of ASU 2010-29 will have a material impact on its consolidated financial statements.
 3.
    
    CONCENTRATION OF RISKSConcentration of credit risk
 Assets that potentially subject the Group to significant concentration of credit risk primarily
consist of cash, accounts receivable and advances made to suppliers and hospital customers.
 As of December 31, 2010, substantially all of the Groups cash was deposited in financial
institutions located in the PRC and in Hong Kong, which management believes are of high credit
quality.
 Accounts receivable are typically unsecured and are derived from revenue earned from hospitals
in the PRC. The risk with respect to accounts receivable is mitigated by credit evaluations the
Group performs on its customers and its ongoing monitoring of outstanding balances.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 3.
    
    CONCENTRATION OF RISKS (continued)
 Concentration of credit risk (continued)
 Advances made to suppliers are typically unsecured and arise from deposits paid in advance for
future purchases of medical equipment. As a percentage of total advances, the top five
suppliers accounted for 70% and 71% as of December 31, 2009 and 2010, respectively. Due to the
Groups concentration of advances made to a limited number of suppliers and the significant
prepayments that are made to them, any negative events or deterioration in financial strength
with respect to the Groups suppliers may cause material loss to the Group and have a material
adverse effect on the Groups financial condition and results of operations. The risk with
respect to advances made to suppliers is mitigated by credit evaluations that the Group
performs on its suppliers prior to making any advances and the ongoing monitoring of its
suppliers performance.
 With respect to advances made to hospital customers, the Group conducts periodic credit
evaluation of its customers but does not require collateral or other security from its hospital
customers.Concentration of customers
 The Group currently generates a substantial portion of its revenue from a limited number of
customers. As a percentage of revenues, the top five customers accounted for 38%, 33% and 32%
for the years ended December 31, 2008, 2009 and 2010, respectively. The loss of revenue from
any of these customers would have a significant negative impact on the Groups business.
However, arrangements with customers are mostly long-term in nature. Due to the Groups
dependence on a limited number of customers and the contingent fees received based on variables
the Group does not control, any negative events with respect to the Groups customers may cause
material fluctuations or declines in the Group revenue and have a material adverse effect on
the Groups financial condition and results of operations.Concentration of suppliers
 A significant portion of the Groups medical equipment is sourced from its five largest
suppliers who collectively accounted for 96%, 69% and 55% of total medical equipment purchases
of the Group for the years ended December 31, 2008, 2009 and 2010, respectively. Failure to
develop or maintain the relationships with these suppliers may cause the Group not able to
identify other suppliers timely in order to expand its business with new hospitals. Any
disruption in the supply of medical equipment to the Group may adversely affect the Groups
business, financial condition and results of operations.Current vulnerability due to certain other concentrations
 The Groups operations may be adversely affected by significant political, economic and social
uncertainties in the PRC. Although the PRC government has been pursuing economic reform
policies for more than 20 years, no assurance can be given that the PRC government will
continue to pursue such policies or that such policies may not be significantly altered,
especially in the event of a change in leadership, social or political disruption or unforeseen
circumstances affecting the PRCs political, economic and social conditions. There is also no
guarantee that the PRC governments pursuit of economic reforms will be consistent or
effective.
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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 3.
    
    CONCENTRATION OF RISKS (continued)
 Current vulnerability due to certain other concentrations (continued)
 The Group transacts all of its business in RMB, which is not freely convertible into foreign
currencies. On January 1, 1994, the PRC government abolished the dual rate system and
introduced a single rate of exchange as quoted daily by the Peoples Bank of China (the
PBOC). However, the unification of the exchange rates does not imply that the RMB may be
readily convertible into United States dollars or other foreign currencies. All foreign
exchange transactions continue to take place either through the PBOC or other banks authorized
to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of
foreign currency payments by the PBOC or other institutions requires submitting a payment
application form together with suppliers invoices, shipping documents and signed contracts.
 Additionally, the value of the RMB is subject to changes in central government policies and
international economic and political developments affecting supply and demand in the PRC
foreign exchange trading system market.
 A medical-related business is subject to significant restrictions under current PRC laws and
regulations. Currently, the Group conducts its operations in China through contractual
arrangements entered into with hospitals in the PRC. The relevant regulatory authorities may
find the current contractual arrangements and businesses to be in violation of any existing or
future PRC laws or regulations. If so, the relevant regulatory authorities would have broad
discretion in dealing with such violations.
 4.
    
    ACQUISITIONSAcquisition of China Medstar
 China Medstar was a publicly listed company on the Alternative Investment Market (the AIM) of
the London Stock Exchange in the United Kingdom. Consistent with the Companys business, MSC,
the wholly-owned subsidiary of China Medstar, was also principally engaged in leasing of
medical equipment to hospitals and provision of management services in the PRC.
 In July 2008, the Group acquired China Medstar for cash consideration of £17.1 million or 62
pence per share in exchange for 100% of Medstars issued and outstanding share capital. On July
31, 2008, the Company completed the acquisition of China Medstar at which China Medstar became
a 100% owned subsidiary of the Group. The acquisition of China Medstar was designed to
complement the Groups existing network of treatment and diagnostic lease and management
service arrangements. The results of China Medstars operations have been included in the
Companys consolidated financial statements commencing August 1, 2008, the acquisition date.
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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 4.
    
    ACQUISITIONS (continued)Acquisition of China Medstar (continued)The purchase price allocation for the acquisition is primarily based on valuations determined
by the Group with the assistance of American Appraisal China Limited (American Appraisal), an
independent valuation firm. The consideration paid by the Company was more than the fair value
of the net identifiable assets which led to the realization of goodwill. The purchase price was
allocated to net assets acquired at fair value as follows:
 RMBGoodwill
    
    
    21,210Current assets
    
    
    77,053Long-term receivables
    
    
    9,397Property, plant and equipment
    
    
    217,965Other intangible assets- customer relationships and operating lease
    
    
    52,380Deposit for property, plant and equipment
    
    
    83,505Deferred tax assets, non-current portion
    
    
    23,089Deferred tax liabilities, non-current portion
    
    
    (12,529
    )Liabilities assumed
    
    
    (233,323
    )Total consideration paid
    
    
    238,747
 The Company, with the assistance of American Appraisal, determined the fair value of the
acquired customer relationships and operating lease agreements (acquired intangibles) to be
approximately RMB52,380. The Company amortizes acquisition related intangible assets on a
straight line basis over the economic life.The following unaudited pro forma consolidated financial information reflects the Groups
consolidated results of operations for the year ended December 31, 2008 as if the acquisition
of China Medstar had occurred on January 1, 2008. These unaudited pro forma results have been
prepared for information purposes only and do not purport to be indicative of what the
Companys consolidated results of operations would have been had the acquisition of China
Medstar actually taken place on January 1, 2008, and may not be indicative of future results of
operations.
 For the Year EndedDecember 31, 2008RMBRevenues, net
    
    
    234,662Net income
    
    
    106,626Net loss attributable to ordinary shareholders
    
    
    (603,628
    )Net loss per common share  basic and diluted
    
    
    (10.50
    )
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 4.
    
    ACQUISITIONS (continued)Acquisition of XHFXHF was established in Beijing, the PRC on July 27, 2007 as a limited liability company. The
registered and paid-in capital of XHF amounted to RMB10,000. Similarly, XHF is principally
engaged in the provision of leasing of medical equipment and management services. On October
28, 2008, the Group consummated 100% of the equity interest of XHF for cash consideration of
approximately RMB34,979. The consideration was fully paid in March 2009.The Company, with the assistance of American Appraisal, determined the fair value of the
acquired customer relationships to be approximately RMB18,000. The Company amortizes
acquisition related intangible assets on a straight basis over the economic life.Unaudited pro forma consolidated financial information has not been provided due to the overall
insignificance of the acquisition relative to the Companys results of operations and financial
condition for the year ended December 31, 2008. The results of XHFs operations have been
included in the Companys consolidated financial statements since October 28, 2008, the
acquisition date.The purchase price allocation for the acquisition is primarily based on valuations determined
by the Group with the assistance of American Appraisal. The purchase price was allocated to net
assets acquired at estimated fair value as follows:
 RMBGoodwill
    
    
    10,906Current assets
    
    
    12,680Property, plant and equipment
    
    
    15,288Other intangible assets- customer contracts and customer relationships
    
    
    18,000Liabilities assumed
    
    
    (21,895
    )Total consideration paid
    
    
    34,979
 Acquisition of TKMTKM was established in Tianjin, the PRC, on November 16, 2007 as a limited liability company.
The registered and paid-in capital of TKM amounted to RMB5,000 (US$732). Similarly, TKM is
principally engaged in the provision of leasing of medical equipment and management services.
On April 22, 2010, the Group consummated 100% of the equity interest of TKM for RMB42,000
(US$6,364) and contingent consideration of up to RMB18,000 (US$2,727) based on the achievement
of pre-determined net profit and accumulated net profit targets of the existing contracts
entered into by TKM up to March 2013. The acquisition of TKM was designed to strengthen the
Groups presence in northern China, an important market for the Groups business.The contingent consideration has been recorded at its present value of RMB16,536 at the date of
acquisition, and subsequently remeasured to fair value at each reporting date until the
contingency is resolved, with changes in fair value recognized in the consolidated statement of
operations. As at December 31, 2010, RMB14,072 (US$2,132) was recorded in Contingent business
acquisition consideration.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 4.
    
    ACQUISITIONS (continued)Acquisition of TKM(continued)The Group, with the assistance of an independent appraiser, determined the fair value of the
acquired intangible assets to be approximately RMB22,579 (US$3,421). The Company amortizes
acquisition related intangible assets on a straight basis over their estimated economic lives.Unaudited pro forma consolidated financial information has not been provided due to the overall
insignificance of the acquisition relative to the Companys results of operations and financial
condition for the year ended December 31, 2010. The results of TKMs operations have been
included in the Companys consolidated financial statements since consummation of the
acquisition.The purchase price allocation for the acquisition is primarily based on valuations determined
by the Group with the assistance of the appraiser. The purchase price was allocated to net
assets acquired at estimated fair value as follows:
 RMB
    
    
    US$Current assets
    
    
    4
    
    
    
    1Property, plant and equipment
    
    
    41,217
    
    
    
    6,245Contract with hospitals
    
    
    22,579
    
    
    
    3,421Deferred tax assets
    
    
    381
    
    
    
    57Deferred tax liabilities
    
    
    (5,645
    )
    
    
    (855
    )Total purchase price allocated
    
    
    58,536
    
    
    
    8,869Including: cash consideration
    
    
    42,000
    
    
    
    6,364fair value of contingent consideration
    
    
    16,536
    
    
    
    2,505
 Acquisition of CCICCCCICC was established in Xian, the PRC on March 2, 2009 as a limited liability company. The
registered and paid-in capital of CCICC amounted to RMB150,000 (US$22,727). On July 6, 2010,
the Group consummated 52% of the equity interest of CCICC for total consideration of
approximately RMB103,181 (US$15,633). The transaction was accounted for as an acquisition of
assets pursuant to ASC subtopic 805-50, Business Combinations, Related Issues,given the assets
acquired consisted mainly of a building and prepaid land lease payments and did not constitute
a business. The carrying value of the acquired assets were allocated based on their relative
fair value, and subsequently depreciated or amortized over the straight line method over their
respective estimated economic lives.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 4.
    
    ACQUISITIONS (continued)Other acquisitionsIn order to expand the Groups network in cancer radiotherapy and diagnosis, on March 31, 2008,
the Group acquired certain medical equipment located in Tianjin People Liberation Army 272
Hospital and the related business from a third party for cash
consideration of RMB14,000. On August 31, 2008, the Group acquired certain medical equipment located in People
Liberation Army 254 Hospital and the related business from another third party for cash
consideration of RMB3,980. These acquired assets and activities were considered to constitute
businesses in accordance with ASC subtopic 805-10, Business Combinations, Overall.The Company, with the assistance of American Appraisal, determined the estimated fair value of
the goodwill and intangible assets to be approximately RMB8,766 and RMB1,957, respectively. The
Company amortizes acquisition related intangible assets based on the benefits expected to be
realized, considering the related cash flows over the life of each relationship, up to a period
of 12 years.5.
    
    RESTRICTED CASHRestricted cash includes bank deposits that are required under the Companys borrowing
arrangements to be kept as part of the security required under the respective loan agreements.
The current and non-current restricted cash amounted to RMB102,873
(US$15,587) (2009: RMB293) and RMB14,792 (US$2,241) (2009: RMB4,421),
as of December 31, 2010 respectively, based on the
classification of the underlying financing (see note 14).6.
    
    ACCOUNTS RECEIVABLE
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Accounts receivable
    
    
    113,328
    
    
    
    170,820
    
    
    
    25,882Allowance for doubtful accounts
    
    
    (2,000
    )
    
    
    (1,431
    )
    
    
    (217
    )Accounts receivable, net
    
    
    111,328
    
    
    
    169,389
    
    
    
    25,665
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Movement in allowance for
doubtful accounts:Balance at beginning of the year
    
    
    3,808
    
    
    
    3,830
    
    
    
    2,000
    
    
    
    293Provisions
    
    
    22
    
    
    
    2,402
    
    
    
    1,431
    
    
    
    217Written back
    
    
    
    
    
    
    
    
    
    
    (2,000
    )
    
    
    (293
    )Write-offs
    
    
    
    
    
    
    (4,232
    )
    
    
    
    
    
    
    Balance at end of the year
    
    
    3,830
    
    
    
    2,000
    
    
    
    1,431
    
    
    
    217
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 6.
    
    ACCOUNTS RECEIVABLE (continued)As at December 31, 2009 and 2010, accounts receivable with carrying value of RMB8,487 and
RMB7,883 (US$1,194) are used to secure bank borrowings of RMB70,359 and RMB42,865 (US$6,495) as
at December 31, 2009 and 2010, respectively (see note 14).7.
    
    PREPAYMENTS AND OTHER CURRENT ASSETSPrepayments and other current assets consist of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Deposits to a hospital*
    
    
    15,000
    
    
    
    15,000
    
    
    
    2,273Prepayments to suppliers**
    
    
    14,393
    
    
    
    1,340
    
    
    
    203Due from suppliers**
    
    
    27,636
    
    
    
    26,607
    
    
    
    4,031Advances to hospitals***
    
    
    18,038
    
    
    
    18,110
    
    
    
    2,744Advances to employees****
    
    
    14,368
    
    
    
    3,612
    
    
    
    547Deferred costs
    
    
    7,005
    
    
    
    6,200
    
    
    
    939Others
    
    
    4,044
    
    
    
    4,306
    
    
    
    653100,484
    
    
    
    75,175
    
    
    
    11,390Allowance for doubtful accounts
    
    
    
    
    
    
    (706
    )
    
    
    (107
    )100,484
    
    
    
    74,469
    
    
    
    11,283
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Movement in allowance for
doubtful accounts:Balance at beginning of the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provisions
    
    
    
    
    
    
    
    
    
    
    706
    
    
    
    107Balance at end of the year
    
    
    
    
    
    
    
    
    
    
    706
    
    
    
    107
 
 *
    
    The amount represents an interest-free cash deposit paid to a customer hospital
pursuant to the management service contract to which the deposit is repayable at the
termination of the service contract (see note 28).**
    
    Prepayments and amounts due from suppliers represent interest-free non-refundable
payments in connection with purchase contracts the Group enters into for future delivery
of medical equipment and supply materials for external sales and returnable deposits of
cancelled orders from suppliers respectively. The remaining contractual obligations
associated with the purchase contracts are approximately RMB1,400 and nil as at December
31, 2009 and 2010, respectively. The risk of loss arising from non-performance by or
bankruptcy of suppliers is assessed prior to order equipment. To date, the Group has not
experienced any loss on prepayments to and amounts due from suppliers. F-30




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 7.
    
    PREPAYMENTS AND OTHER CURRENT ASSETS (continued)
 ***
    
    The amount represents interest-free advances to a hospital. Management has assessed
the impact of such advances on revenue recognition at the outset of the arrangement. The
risk of loss arising from any failure by hospital customers to fulfill their financial
obligations is assessed prior to making the advances and is monitored for recoverability
on a regular basis by management. A charge to cost of revenue is recorded in the period in
which a loss is incurred. The Group has provided RMB706 (US$107) provision on advances to
hospitals in year 2010.****
    
    The amount represents interest-free advance to hospitals held by the Companys
employees to cover expenses incurred by centers. A formal loan agreement is in place
binding the employees as to the uses of advances and terms and conditions of repayment.
The risk of loss arising from inadequate or failure of operation of internal process is
assessed prior to making the advances and is monitored on a regular basis by management.
To date, the Group has not experienced any loss of such advances.
 8.
    
    PROPERTY, PLANT AND EQUIPMENT, NETProperty, plant and equipment consist of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Buildings
    
    
    
    
    
    
    170,002
    
    
    
    25,758Medical equipment
    
    
    614,238
    
    
    
    767,001
    
    
    
    116,212Electronic and office equipment
    
    
    2,377
    
    
    
    5,260
    
    
    
    797Motor vehicles
    
    
    520
    
    
    
    424
    
    
    
    64Leasehold improvement and building improvement
    
    
    4,246
    
    
    
    4,681
    
    
    
    709Construction in progress
    
    
    20,345
    
    
    
    110,808
    
    
    
    16,790Total
    
    
    641,726
    
    
    
    1,058,176
    
    
    
    160,330Less: accumulated depreciation
    
    
    (68,684
    )
    
    
    (150,840
    )
    
    
    (22,855
    )573,042
    
    
    
    907,336
    
    
    
    137,475
 Depreciation expenses were approximately RMB17,629, RMB51,681 and RMB82,889 (US$12,559) for the
years ended December 31, 2008, 2009 and 2010, respectively.As at December 31, 2009 and 2010, certain of the Groups property, plant and equipment with a
net book value of approximately RMB155,836 and RMB173,517 (US$26,290) were pledged as security
for bank borrowings of RMB101,670 and RMB77,086 (US$11,680), respectively.As at December 31, 2009 and 2010, the Company held equipment under operating lease contracts
with customers with an original cost of RMB614,238 and RMB767,001 (US$116,212) and accumulated
depreciation of RMB64,217 and RMB140,509 (US$21,289), respectively.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 9.
    
    PREPAID LAND LEASE PAYMENTS
 As at December, 312009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Prepaid land lease payments
    
    
    
    
    
    
    28,423
    
    
    
    4,307Less: accumulated amortization
    
    
    
    
    
    
    (310
    )
    
    
    (47
    )Net carrying value
    
    
    
    
    
    
    28,113
    
    
    
    4,260
 The land use right was obtained through the acquisition of 52% equity interest in CCICC during
2010, and is amortized under the straight-line method over the land useful certification of 38
years. Amortization expenses for the years ended December 31, 2008, 2009 and 2010 were nil, nil
and RMB310 (US$47), respectively.As of December 31, 2010, estimated amortization expense of the prepaid land lease payments
acquired for each of next five years is as follows:
 AmortizationRMB
    
    
    US$2011
    
    
    743
    
    
    
    1132012
    
    
    743
    
    
    
    1132013
    
    
    743
    
    
    
    1132014
    
    
    743
    
    
    
    1132015
    
    
    743
    
    
    
    1133,715
    
    
    
    565
 10.
    
    OTHER INTANGIBLE ASSETS AND GOODWILLGoodwill is comprised of the following:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Balance at beginning of year
    
    
    259,282
    
    
    
    300,163
    
    
    
    300,163
    
    
    
    45,479Goodwill recognized upon
acquisition of China
Medstar (note 4)
    
    
    21,209
    
    
    
    
    
    
    
    
    
    
    
    Goodwill recognized upon
acquisition of XHF (note 4)
    
    
    10,906
    
    
    
    
    
    
    
    
    
    
    
    Goodwill recognized in
other business acquisitions
(note 4)
    
    
    8,766
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    300,163
    
    
    
    300,163
    
    
    
    300,163
    
    
    
    45,479
 No impairment loss was recognized in any of the years presented.
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 10.
    
    OTHER INTANGIBLE ASSETS AND GOODWILL (continued)Acquired intangible assets consist of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Customer relationship intangibles  OMS (note 1)
    
    
    122,000
    
    
    
    116,677
    
    
    
    17,678Operating lease intangibles  OMS (note 1)
    
    
    10,000
    
    
    
    10,000
    
    
    
    1,515Customer relationship intangibles  China
Medstar and other acquisition (note 4)
    
    
    67,259
    
    
    
    67,259
    
    
    
    10,192Customer relationship intangibles  TKM (note 4)
    
    
    
    
    
    
    22,579
    
    
    
    3,421Operating lease intangibles  China Medstar and
other acquisition (note 4)
    
    
    5,078
    
    
    
    5,078
    
    
    
    769Less: accumulated amortization
    
    
    (48,992
    )
    
    
    (75,480
    )
    
    
    (11,437
    )155,345
    
    
    
    146,113
    
    
    
    22,138
 Acquired intangible amortization expenses were approximately RMB20,497, RMB26,493 and RMB26,488
(US$4,013) for the years ended December 31, 2008, 2009 and 2010, respectively. The estimated
annual amortization expenses for the above intangible assets for each of the five succeeding
years are as follows:
 AmortizationRMB
    
    
    US$2011
    
    
    24,085
    
    
    
    3,6492012
    
    
    24,085
    
    
    
    3,6492013
    
    
    21,441
    
    
    
    3,2492014
    
    
    18,805
    
    
    
    2,8492015
    
    
    17,108
    
    
    
    2,592105,524
    
    
    
    15,988
 11.
    
    DEPOSITS FOR NON-CURRENT ASSETSDeposits for non-current assets consist of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Deposits for purchase of property,
plant and equipment *
    
    
    94,543
    
    
    
    194,932
    
    
    
    29,535Others **
    
    
    32,607
    
    
    
    29,600
    
    
    
    4,485127,150
    
    
    
    224,532
    
    
    
    34,020Allowance for doubtful accounts
    
    
    
    
    
    
    (2,513
    )
    
    
    (381
    )127,150
    
    
    
    222,019
    
    
    
    33,639
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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 11.
    
    DEPOSITS FOR NON-CURRENT ASSETS (continued)
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Movement in allowance for
doubtful accounts:Balance at beginning of the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provisions
    
    
    
    
    
    
    
    
    
    
    2,513
    
    
    
    381Balance at end of the year
    
    
    
    
    
    
    
    
    
    
    2,513
    
    
    
    381
 
 *
    
    Represents interest-free non-refundable partial payments to suppliers associated with
contracts the Group enters into for the future scheduled delivery of medical equipment to
customers. As at December 31, 2010 the remaining contractual obligations associated with
these purchase contracts are approximately RMB46,912 (US$7,108) which is included in the
amount disclosed as purchase commitments in note 25. The risk of loss arising from
non-performance by or bankruptcy of the suppliers is assessed prior to ordering the
equipment. On October 31, 2007, the Group entered into a long-term sale and purchase
agreement with Shenzhen Our Medical New Technology Development Co. Ltd (Our Medical New
Technology), under which the Group agreed to purchase gamma knife systems at agreed upon
prices and Our Medical New Technology also agreed to provide the Group relevant
maintenance and repair services and training. Our Medical New Technology is controlled by
an individual who was a director of a subsidiary of the Group until July 2009. The balance
with Our Medical amounting to RMB15,370 and RMB31,500(US$4,773) as of December 31, 2009
and 2010, respectively.**
    
    The Group has entered into two distinct framework agreements with Changan and
Changan Information Industry (Group) Co., Ltd., (Changan Information) towards the
development and construction of the following two medical facilities:
 On December 18, 2007, the Group entered into a framework agreement to build a proton
treatment center in Beijing, pursuant to which the Group paid deposits to a subsidiary of
Changan Information to be used towards the construction of the proton treatment center
(Beijing Proton Treatment Center). Total deposits paid as of December 31, 2009 and 2010
pursuant to this arrangement amounted to RMB14,600 and RMB26,600 (US$4,030), respectively.On July 1, 2008, the Group entered into a framework agreement with Changan to build a
cancer center in northwest China, pursuant to which the Group paid deposits to Changan
totaling RMB 18,007, which have been recorded as a non-current deposits as of December 31,
2009 (see note 28).In December 2010, the Group entered into a framework agreement for acquisition of Changan
(see note 28). A deposit of RMB3,000 (US$455) was made in accordance with the planned
acquisition.
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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 12.
    
    NET INVESTMENT IN FINANCING LEASESThe Group operated as a lessor in direct financing lease agreements for medical
equipment, with hospitals and other companies that engaged in ongoing cooperation
agreements with hospitals. These leases have remaining terms ranging generally from three
to five years.Net investment in financing leases is comprised of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Minimum lease payments receivable
    
    
    
    
    
    
    105,351
    
    
    
    15,962Unearned income
    
    
    
    
    
    
    (19,497
    )
    
    
    (2,954
    )Finance lease receivables, net
    
    
    
    
    
    
    85,854
    
    
    
    13,008Current
    
    
    
    
    
    
    19,498
    
    
    
    2,954Non-current
    
    
    
    
    
    
    66,356
    
    
    
    10,054Total
    
    
    
    
    
    
    85,854
    
    
    
    13,008
 The future minimum lease payments to be received from such non-cancelable financing
leases are as follows:
 Future minimum leasepaymentsRMB
    
    
    US$2011
    
    
    27,214
    
    
    
    4,1242012
    
    
    25,590
    
    
    
    3,8772013
    
    
    22,529
    
    
    
    3,4132014
    
    
    19,353
    
    
    
    2,9322015
    
    
    10,665
    
    
    
    1,616Total
    
    
    105,351
    
    
    
    15,962
 13.
    
    OTHER NON-CURRENT ASSETSOther non-current assets consist of the following:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Deferred cost
    
    
    9,664
    
    
    
    5,671
    
    
    
    859VAT recoverable
    
    
    890
    
    
    
    
    
    
    
    Deposit  long-term*
    
    
    
    
    
    
    40,000
    
    
    
    6,061Others
    
    
    978
    
    
    
    6,196
    
    
    
    93911,532
    
    
    
    51,867
    
    
    
    7,859
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 13.
    
    OTHER NON-CURRENT ASSETS (continued)
 *
    
    On Feb 26 and March 8, 2010, the Group made interest-free performance security
deposits amounting to RMB40,000 to Weifang hospital, for management services to be
rendered to Weifang PET-CT center (RMB30,000) and LAC center (RMB10,000). The deposit for
PET-CT center is refundable in seven annual installments, at 3,000 each, starting 2013,
with the remaining RMB9,000 to be repaid at the end of contract term subject to
fulfillment of a profit guarantee under which Weifang hospital is entitled to an annual
profit of RMB3,000. The deposit for LAC center will be refundable at the termination of
service contract by Mar 31, 2012.
 14.
    
    BANK BORROWINGS
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Total bank borrowings
    
    
    149,902
    
    
    
    188,995
    
    
    
    28,636Comprised of:Short-term
    
    
    11,500
    
    
    
    83,000
    
    
    
    12,576Long-term, current portion
    
    
    57,487
    
    
    
    60,906
    
    
    
    9,22868,987
    
    
    
    143,906
    
    
    
    21,804Long-term, non-current portion
    
    
    80,915
    
    
    
    45,089
    
    
    
    6,832149,902
    
    
    
    188,995
    
    
    
    28,636
 All bank borrowings at December 31, 2009 and 2010 are obtained from financial
institutions in the PRC and are secured by equipment with a net carrying value of
RMB155,836 and RMB173,517(US$26,290), accounts receivable with carrying value of RMB8,487
and RMB7,883 (US$1,194) and restricted cash with carrying value of RMB4,714 and
RMB117,665 (US$17,828), respectively. Restricted cash is classified as current and
non-current in the amount of RMB102,873 (US$15,587) and RMB14,792 (US$2,241),
respectively, based on the classification of the underlying financing.As at December 31, 2009 and 2010, the short-term bank borrowing bore a weighted average
interest of 5.21% and 4.60% per annum, and the long-term bank borrowings bore a weighted
average interest of 5.29% and 5.30% per annum, respectively. All borrowings are denominated in
RMB.The Group entered into nine new bank borrowings with PRC financial institutions during the year
ended December 31, 2010 with an aggregate principal amount of
RMB270,210 (US$40,941), of which
RMB155,250 (US$23,523) was drawn down as at December 31, 2010. The weighted average interest
rate of these nine new bank borrowings was 4.67% per annum.
 F-36




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 14.
    
    BANK BORROWINGS (continued)One of the borrowing arrangements were entered into by a subsidiary of the Group, MSC, which
requires MSC and AMS, another subsidiary of the Group, in accordance with PRC GAAP, to maintain
a financial reporting covenant of tangible net worth of at least RMB400,000 and RMB180,000 and
total gearing ratio of less than 0.5 and 0.36 respectively. Tangible net worth is calculated as
the sum of issued share capital and reserves, less goodwill and intangible assets and any
amount due from shareholders. The total gearing ratio is calculated as the ratio of total
liabilities to tangible net worth. The Group was in compliance with these financial covenants
as at December 31, 2010. The remaining bank borrowings do not have any financial reporting or
administrative covenants restricting the Companys operating, investing and financing
activities.As of December 31, 2010, the maturity of these long-term bank borrowings was as follows:
 RepaymentRMB
    
    
    US$Within one year
    
    
    60,906
    
    
    
    9,228Between one and two years
    
    
    41,719
    
    
    
    6,321Between two and three years
    
    
    3,370
    
    
    
    511105,995
    
    
    
    16,060
 15.
    
    ACCRUED EXPENSES AND OTHER LIABILITIESThe components of accrued expenses and other liabilities are as follows:
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Accrued expenses
    
    
    10,224
    
    
    
    4,954
    
    
    
    751Salary and welfare payable
    
    
    2,085
    
    
    
    2,984
    
    
    
    452Business and other taxes payable
    
    
    10,340
    
    
    
    13,782
    
    
    
    2,088Unrecognized tax positions (note 21)
    
    
    23,894
    
    
    
    24,455
    
    
    
    3,705Other accruals
    
    
    2,120
    
    
    
    3,760
    
    
    
    57048,663
    
    
    
    49,935
    
    
    
    7,566
 16.
    
    OBLIGATIONS UNDER CAPITAL LEASESThe Company has one capital lease obligation with an independent financing company,
collateralized by medical equipment with a net book value of approximately RMB15,982 and
RMB14,841 (US$2,249) as at December 31, 2009 and 2010, respectively. As at December 31, 2010,
the obligation has a stated interest rate of 9.96%, and is repayable in 32 monthly installments
by August 2013.
 F-37




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 16. OBLIGATIONS UNDER CAPITAL LEASES (continued)
  Minimum Lease PaymentsRMB
    
    
    US$2011
    
    
    3,781
    
    
    
    5732012
    
    
    3,781
    
    
    
    5732013
    
    
    2,611
    
    
    
    395Total capital lease payments
    
    
    10,173
    
    
    
    1,541Less: imputed interest
    
    
    (1,266
    )
    
    
    (191
    )8,907
    
    
    
    1,350Less: current portion
    
    
    (3,582
    )
    
    
    (543
    )5,325
    
    
    
    807
  17. CONVRTIBLE NOTES
 Tranche A Convertible Notes
  Automatic Conversion
   F-38




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 17. CONVRTIBLE NOTES (continued)
 Tranche B Convertible Notes
  Conversion
   Accounting for the Tranche A and Tranche B Convertible Notes
 Distinguishing Liabilities from Equity
  RMBBalance as at January 1, 2008
    
    
    36,853Issuance of Tranche B Convertible Notes
    
    
    140,241Fair value loss
    
    
    464Foreign exchange translation gain
    
    
    (1,476
    )Conversion to Series A Preferred Shares
    
    
    (176,082
    )Balance as at December 31, 2008, 2009 and 2010
    
    
    
 F-39




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 18. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES
     Voting rights
  Dividends
   F-40




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 18. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES (continued)
 Liquidation Preference
  Conversion
  (i)
    
    if there was a share split or reverse share split, the conversion price should be
adjusted proportionally;(ii)
    
    if new equity or equity-linked securities (either ordinary or preferred shares, but
not including securities issued to employees pursuant to employee benefit plans) were
subsequently issued at a lower price than the then-Conversion Price of any class of
Preferred Shares, the Conversion Price of such Preferred Shares shall be adjusted to the
price of the newly issued shares.
  Redemption
   (i)
    
    the Company has not completed a qualified initial public offering by the third
anniversary of the closing date of the subscription of the Series B Preferred Shares;(ii)
    
    any of certain key directors has resigned from the Company and its subsidiaries,
which resignation, in the sole determination of a majority of the Investors, has resulted
in or would be likely to result in, a material adverse effect; or(iii)
    
    the Company or any of its Subsidiaries has breached or failed to be in compliance
with any applicable laws that has had or would be reasonably likely to have, a material
adverse effect.
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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 18. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES (continued)
 Earning adjustments
  Accounting for the contingently redeemable convertible preferred shares
  Derivatives and Hedging, Overall, Scope and Scope Exceptions, General,
  F-42




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 18. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES (continued)
 Accounting for the contingently redeemable convertible preferred shares
 Debt, Debt with Conversion and
Other Options,
   F-43




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 18. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED SHARES (continued)
 Accounting for the contingently redeemable convertible preferred shares
  Series A
    
    
    Series B
    
    
    TotalRMB
    
    
    RMB
    
    
    RMBMezzanine
equityBalance as at January 1, 2008
    
    
    
    
    
    
    
    
    
    
    Conversion of Convertible Notes into Series A
Preferred Shares
    
    
    176,082
    
    
    
    
    
    
    
    176,082Issuance of Series A Preferred Shares
    
    
    70,120
    
    
    
    
    
    
    
    70,120Less: Series A Preferred Shares issuance costs
    
    
    (2,964
    )
    
    
    
    
    
    
    (2,964
    )Issuance of Series B Preferred Shares
    
    
    
    
    
    
    411,021
    
    
    
    411,021Less: Series B Preferred Shares issuance costs
    
    
    
    
    
    
    (5,677
    )
    
    
    (5,677
    )Redesignation of 756,500 ordinary shares to Series A
Preferred Shares
    
    
    895
    
    
    
    
    
    
    
    895Allocation of proceeds to beneficial conversion feature
    
    
    (253,317
    )
    
    
    (295,019
    )
    
    
    (548,336
    )Accretion of beneficial conversion feature
    
    
    253,317
    
    
    
    295,019
    
    
    
    548,336Accretion of 5% fixed dividend
    
    
    6,801
    
    
    
    3,987
    
    
    
    10,788Accretion to the redemption amount
    
    
    10,225
    
    
    
    5,757
    
    
    
    15,982Total
    
    
    261,159
    
    
    
    415,088
    
    
    
    676,247Mezzanine equityBalance as at December 31, 2008
    
    
    254,358
    
    
    
    411,101
    
    
    
    665,459Dividend payableBalance as at December 31, 2008
    
    
    6,801
    
    
    
    3,987
    
    
    
    10,788Accretion of 5% fixed dividend
    
    
    11,584
    
    
    
    19,464
    
    
    
    31,048Accretion to the redemption amount
    
    
    18,466
    
    
    
    28,895
    
    
    
    47,361Preference share dividend paid
    
    
    (4,776
    )
    
    
    (6,091
    )
    
    
    (10,867
    )Conversion to ordinary shares immediately upon the
completion of initial public offering
    
    
    (286,433
    )
    
    
    (457,356
    )
    
    
    (743,789
    )Total
    
    
    
    
    
    
    
    
    
    
    Mezzanine equityBalance as at December 31, 2009 and
2010
    
    
    
    
    
    
    
    
    
    
    Mezzanine equityBalance as at December 31, 2009 and
2010, in US$
    
    
    
    
    
    
    
    
    
    
    Dividend payableBalance as at December 31, 2009 and
2010
    
    
    
    
    
    
    
    
    
    
    Dividend payableBalance as at December 31, 2009 and
2010, in  US$
    
    
    
    
    
    
    
    
    
    
    
 F-44




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 19. SHAREHOLDERS EQUITY
 Redesignation of 756,500 ordinary shares
  Qualified initial public offering
  Share repurchase program
  20. RESTRICTED NET ASSETS
  F-45




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 20. RESTRICTED NET ASSETS (continued)
    21. TAXATION
 Enterprise income tax:
 Cayman Islands
  British Virgin Islands
  Hong Kong
   F-46




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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 21. TAXATION (continued)
 Enterprise income tax: (continued)
 Singapore
  China
      For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Non  PRC
    
    
    (6,335
    )
    
    
    (2,044
    )
    
    
    (25,256
    )
    
    
    (3,827
    )PRC
    
    
    108,739
    
    
    
    163,267
    
    
    
    200,047
    
    
    
    30,311102,404
    
    
    
    161,223
    
    
    
    174,791
    
    
    
    26,484
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CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 21. TAXATION (continued)
 Enterprise income tax: (continued)
  For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Current tax expense
    
    
    28,395
    
    
    
    38,726
    
    
    
    47,507
    
    
    
    7,198Deferred tax benefit
    
    
    (5,060
    )
    
    
    (2,330
    )
    
    
    (3,634
    )
    
    
    (551
    )23,335
    
    
    
    36,396
    
    
    
    43,873
    
    
    
    6,647
  For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Income before income taxes
    
    
    102,404
    
    
    
    161,223
    
    
    
    174,791
    
    
    
    26,484Income tax computed at the
statutory tax rate of 25%)
    
    
    25,601
    
    
    
    40,306
    
    
    
    43,698
    
    
    
    6,621Effect of different tax rates
in different jurisdictions
    
    
    1,548
    
    
    
    457
    
    
    
    6,298
    
    
    
    954Non-deductible expenses
    
    
    1,181
    
    
    
    1,101
    
    
    
    1,483
    
    
    
    225Effect of preferential tax rate
    
    
    (8,684
    )
    
    
    (7,910
    )
    
    
    (5,695
    )
    
    
    (863
    )Effect of tax rate changes
    
    
    (378
    )
    
    
    275
    
    
    
    141
    
    
    
    21Interests and penalties on
unrecognized tax positions
    
    
    4,067
    
    
    
    2,167
    
    
    
    (2,052
    )
    
    
    (311
    )23,335
    
    
    
    36,396
    
    
    
    43,873
    
    
    
    6,647
  For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Balance at beginning of year
    
    
    3,218
    
    
    
    12,905
    
    
    
    14,054
    
    
    
    2,129Additions based on tax positions related
to the current year
    
    
    7,393
    
    
    
    1,217
    
    
    
    2,613
    
    
    
    397Addition arising from business acquisitions
    
    
    2,294
    
    
    
    
    
    
    
    
    
    
    
    Decrease related to prior year tax position
    
    
    
    
    
    
    (68
    )
    
    
    (91
    )
    
    
    (14
    )Balance at end of year
    
    
    12,905
    
    
    
    14,054
    
    
    
    16,576
    
    
    
    2,512
 F-48




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 21. TAXATION (continued)
 Enterprise income tax: (continued)
     For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$The aggregate amount
    
    
    8,684
    
    
    
    7,910
    
    
    
    5,695
    
    
    
    863The aggregate effect on
basic and diluted
earnings per share:-Basic
    
    
    0.15
    
    
    
    0.11
    
    
    
    0.04
    
    
    
    0.01-Diluted
    
    
    0.15
    
    
    
    0.11
    
    
    
    0.04
    
    
    
    0.01
 F-49




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 21. TAXATION (continued)
 Enterprise income tax: (continued)
  As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Deferred tax assets, current portionAccrued expenses
    
    
    418
    
    
    
    696
    
    
    
    105Accounts receivable
    
    
    1,663
    
    
    
    
    
    
    
    Allowance for doubtful accounts
    
    
    891
    
    
    
    817
    
    
    
    124Deferred revenue
    
    
    1,560
    
    
    
    1,704
    
    
    
    259Revenue generated from financing lease
    
    
    
    
    
    
    128
    
    
    
    194,532
    
    
    
    3,345
    
    
    
    507Deferred tax liability, current portionDeferred cost
    
    
    (1,364
    )
    
    
    (1,841
    )
    
    
    (279
    )Deferred tax assets, current portion, net*
    
    
    3,168
    
    
    
    1,504
    
    
    
    228Deferred tax assets, non-current portionAccounts receivable
    
    
    2,947
    
    
    
    1,955
    
    
    
    296Property, plant and equipment.
    
    
    50,378
    
    
    
    46,748
    
    
    
    7,084Intangible assets
    
    
    
    
    
    
    352
    
    
    
    53Deferred revenue, non-current portion
    
    
    941
    
    
    
    832
    
    
    
    126Long term receivables
    
    
    
    
    
    
    432
    
    
    
    65Others
    
    
    528
    
    
    
    436
    
    
    
    6654,794
    
    
    
    50,755
    
    
    
    7,690Deferred tax liabilities, non-current portionDeferred costs
    
    
    (1,013
    )
    
    
    (5,304
    )
    
    
    (804
    )Intangible assets
    
    
    (39,234
    )
    
    
    (12,529
    )
    
    
    (1,898
    )Property, plant and equipment
    
    
    (20,164
    )
    
    
    (38,505
    )
    
    
    (5,834
    )(60,411
    )
    
    
    (56,338
    )
    
    
    (8,536
    )Deferred tax assets, non-current portion, net **
    
    
    19,700
    
    
    
    21,869
    
    
    
    3,313Deferred tax liabilities, non-current portion, net **
    
    
    (25,317
    )
    
    
    (27,452
    )
    
    
    (4,159
    )
 
 *
    
    As at December 31, 2009 and 2010, deferred tax assets, current portion of
approximately RMB1,364 and RMB1,841 (US$279) have been offset against deferred tax
liabilities, current portion relating to a particular tax-paying component of an
enterprise and within a particular tax jurisdiction,
respectively.**
    
    As at December 31, 2009 and 2010, deferred tax assets, non-current portion of
approximately RMB35,094 and RMB28,886 (US$4,377) have been offset against deferred tax
liabilities, non-current portion relating to a particular tax-paying component of an
enterprise and within a particular tax jurisdiction, respectively. F-50




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 21. TAXATION (continued)
 Enterprise income tax: (continued)
 Income Taxes, Other Considerations or Special Areas
  Business taxes
  22. EMPLOYEE SHARE OPTIONS
 OMS Share Options
    F-51




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 22. EMPLOYEE SHARE OPTIONS (continued)
 OMS Share Options (continued)
 Accounting for Expenses or Liabilities Paid by Principal Stockholder(s)
  August 18, 2008
    
    
    August 18, 2008OMS Options
    
    
    Concord OptionsRisk-free interest rate
    
    
    2.94
    %
    
    
    2.94
    %Dividend yield
    
    
    
    
    
    
    Expected volatility range
    
    
    39.53
    %
    
    
    39.53
    %Sub optimal early exercise factor
    
    1.5 times
    
    1.5 times
  Concord 2008 Share Incentive Plan
  F-52




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 22. EMPLOYEE SHARE OPTIONS (continued)
 Concord 2008 Share Incentive Plan (continued)
   December 11, 20092008 Share Incentive PlanRisk-free interest rate
    
    
    2.36
    %Dividend yield
    
    
    Expected volatility range
    
    
    35.99
    %Expected term
    
    5.25 years
 Staff Accounting Bulletin
 F-53




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 22. EMPLOYEE SHARE OPTIONS (continued)
 Concord 2008 Share Incentive Plan (continued)
  Weighted AverageWeighted-Average
    
    RemainingShare Options Granted to
    
    
    
    
    
    Weighted-Average
    
    Grant-date Fair
    
    Contractual Term
    
    Aggregate IntrinsicEmployees
    
    Number of Shares
    
    Exercise Price
    
    Value
    
    (Years)
    
    ValueOutstanding, January 1, 2010
    
    
    4,765,800
    
    
    US$3.67
    
    US$1.33Forfeited
    
    
    (437,950
    )
    
    US$3.67
    
    US$1.33Outstanding, December 31, 2010
    
    
    4,327,850
    
    
    US$3.67
    
    US$1.33
    
    
    6.91
    
    
    
    0.00Vested and expected to vest
at December 31, 2010
    
    
    4,327,850
    
    
    US$3.67
    
    US$1.33
    
    
    6.91
    
    
    
    0.00Exercisable at December 31,
2010
    
    
    1,081,963
    
    
    US$3.67
    
    US$1.33
    
    
    6.91
    
    
    
    0.00
      For the Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$General and administrative expenses
    
    
    4,215
    
    
    
    744
    
    
    
    7,046
    
    
    
    1,068Selling expenses
    
    
    
    
    
    
    262
    
    
    
    2,525
    
    
    
    3824,215
    
    
    
    1,006
    
    
    
    9,571
    
    
    
    1,450
 F-54




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 23. RELATED PARTY TRANSACTIONS
  Name of Related Parties
    
    Relationship with the GroupMr. Haifeng Liu
    
    A relative of a shareholder of the CompanyMr. Jianyu Yang
    
    Director and a shareholder of the CompanyMr. Zheng Cheng
    
    Director and a shareholder of the CompanyMr. Yaw Kong Yap
    
    Director and a shareholder of the CompanyShenzhen Hai Ji Tai
Technology Co., Ltd.
(Haijitai)
    
    A company owned by Mr. Haifeng LiuBeijing Medstar Hi-Tech
Investment Co., Ltd.
(Beijing Medstar)
    
    A company under the control of Mr. Zheng ChengOur Medical New Technology
Co., Ltd (Our Medical)
    
    A company under the control of Mr. Haifeng Liu
  For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Short-term interest-free
loans borrowed from:HaijitaiMr. Haifeng LiuMr. Jianyu Yang
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    Repayment of interest-free
loans borrowed from:Haijitai
    
    
    38,700
    
    
    
    
    
    
    
    
    
    
    
    Mr. Haifeng Liu
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    Mr. Jianyu Yang
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    Non-current deposits made to:Our Medical
    
    
    1,726
    
    
    
    12,497
    
    
    
    *
    
    
    
    *
  
  F-55




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 23. RELATED PARTY TRANSACTIONS (continued)
  As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Amount due to related parties:Beijing Medstar
    
    
    196
    
    
    
    
    
    
    
    Mr. Haifeng Liu
    
    
    
    
    
    
    
    
    
    
    Mr. Zheng Cheng
    
    
    1,190
    
    
    
    
    
    
    
    Mr. Yaw Kong Yap
    
    
    160
    
    
    
    
    
    
    
    1,546
    
    
    
    
    
    
    
    
  24. EMPLOYEE DEFINED CONTRIBUTION PLAN
   F-56




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 25. COMMITMENTS AND CONTINGENCIES
 Operating lease commitments
  RMB
    
    
    US$2011
    
    
    4,448
    
    
    
    6742012
    
    
    3,303
    
    
    
    5002013
    
    
    483
    
    
    
    738,234
    
    
    
    1,247
  Purchase commitments
  Income taxes
  26. SEGMENT REPORTING
 Segment Reporting
  F-57




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 26. SEGMENT REPORTING (continued)
    27. INCOME (LOSS) PER SHARE
  For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Numerator:Net income (loss) attributable to
ordinary shareholders used in
calculating (loss) income per ordinary
share  basic and diluted
    
    
    (496,037
    )
    
    
    46,418
    
    
    
    129,400
    
    
    
    19,607Denominator:Weighted average number of ordinary
shares outstanding used in calculating
basic and diluted (loss) income per
share
    
    
    57,481,400
    
    
    
    74,648,779
    
    
    
    146,040,594
    
    
    
    146,040,594Basic and diluted (loss) income per share
    
    
    (8.63
    )
    
    
    0.62
    
    
    
    0.89
    
    
    
    0.13
    F-58




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 28. ARRANGEMENTS WITH CHANGAN HOSPITAL CO., LTD.
  Management agreements to provide stand-alone management services
    F-59




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 28. ARRANGEMENT WITH CHANGAN HOSPITAL CO., LTD. (continued)
 Beijing Proton Treatment Center
   Changan CMS International Cancer Center
   Financing lease
  
 F-60




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 28. ARRANGEMENT WITH CHANGAN HOSPITAL CO., LTD. (continued)
 Acquisition of Changan
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenue:Medical Equipment Entrusted Management Agreement
    
    
    8,000
    
    
    
    10,921
    
    
    
    
    
    
    
    Entrusted Management Contract
    
    
    2,000
    
    
    
    11,807
    
    
    
    18,190
    
    
    
    2,756Lease and Management Service Agreement
    
    
    
    
    
    
    8,388
    
    
    
    21,462
    
    
    
    3,252Trial operations of CCICC
    
    
    
    
    
    
    
    
    
    
    8,254
    
    
    
    1,251Financing lease income
    
    
    
    
    
    
    
    
    
    
    2,767
    
    
    
    419Total revenue
    
    
    10,000
    
    
    
    31,116
    
    
    
    50,673
    
    
    
    7,678
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Net investment in financing leases
    
    
    
    
    
    
    21,574
    
    

    3,269Accounts receivable due from Changan
    
    
    13,047
    
    
    
    39,886
    
    

    6,043
  As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Current  Entrusted Management Contract (note 7)
    
    
    15,000
    
    
    
    15,000
    
    
    
    2,273Non-current  Proton Center and CCICC (note 11)
    
    
    32,607
    
    
    
    29,600
    
    
    
    4,485Total
    
    
    47,607
    
    
    
    44,600
    
    
    
    6,758
 29. SUBSEQUENT EVENTS
  F-61




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 29. SUBSEQUENT EVENTS (continued)
  30. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
 Condensed balance sheets
 As at December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash
    
    
    601,040
    
    
    
    8,034
    
    
    
    1,217Restricted cash, current portion
    
    
    
    
    
    
    66,227
    
    
    
    10,035Amounts due from subsidiaries
    
    
    505,558
    
    
    
    377,403
    
    
    
    57,182Prepayments and other current assets
    
    
    16,732
    
    
    
    15,788
    
    
    
    2,392Total current assets
    
    
    1,123,330
    
    
    
    467,452
    
    
    
    70,826Non-current assets:Investment in subsidiaries
    
    
    1,040,899
    
    
    
    1,747,331
    
    
    
    264,747Deposit for non-current assets
    
    
    15,007
    
    
    
    
    
    
    
    Total assets
    
    
    2,179,236
    
    
    
    2,214,783
    
    
    
    335,573LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accrued expenses and other liabilities
    
    
    7,905
    
    
    
    4,531
    
    
    
    687Amounts due to subsidiaries
    
    
    17,583
    
    
    
    5,161
    
    
    
    782Total current liabilities
    
    
    25,488
    
    
    
    9,692
    
    
    
    1,469Total liabilities
    
    
    25,488
    
    
    
    9,692
    
    
    
    1,469Shareholders equity:Ordinary shares (par value of US$0.0001
per share; Authorized - 450,000,000
shares; Issued and outstanding -
147,455,500 and 142,353,532 shares at
December 31, 2009 and 2010, respectively)
    
    
    108
    
    
    
    105
    
    
    
    16Additional paid-in capital
    
    
    2,671,910
    
    
    
    2,604,704
    
    
    
    394,652Accumulated other comprehensive loss
    
    
    (3,987
    )
    
    
    (14,835
    )
    
    
    (2,248
    )Accumulated deficit
    
    
    (514,283
    )
    
    
    (384,883
    )
    
    
    (58,316
    )Total shareholders equity
    
    
    2,153,748
    
    
    
    2,205,091
    
    
    
    334,104Total liabilities and shareholders equity
    
    
    2,179,236
    
    
    
    2,214,783
    
    
    
    335,573
 F-62




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 30. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
 Condensed statements of operations
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General and administrative expenses
    
    
    (4,593
    )
    
    
    (2,372
    )
    
    
    (27,626
    )
    
    
    (4,186
    )Selling expenses
    
    
    
    
    
    
    (262
    )
    
    
    (2,524
    )
    
    
    (382
    )Operating loss
    
    
    (4,593
    )
    
    
    (2,634
    )
    
    
    (30,150
    )
    
    
    (4,568
    )Equity in profit of subsidiaries
    
    
    84,731
    
    
    
    126,621
    
    
    
    155,397
    
    
    
    23,546Interest income
    
    
    364
    
    
    
    818
    
    
    
    742
    
    
    
    112Interest expense
    
    
    (895
    )
    
    
    
    
    
    
    
    
    
    
    Change in fair value of convertible notes
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    Exchange (loss)/ gain
    
    
    (74
    )
    
    
    22
    
    
    
    3,411
    
    
    
    517Net income
    
    
    79,069
    
    
    
    124,827
    
    
    
    129,400
    
    
    
    19,607Accretion of Series A contingently redeemable
convertible preferred shares
    
    
    (270,343
    )
    
    
    (30,050
    )
    
    
    
    
    
    
    Accretion of Series B contingently redeemable
convertible preferred shares
    
    
    (304,763
    )
    
    
    (48,359
    )
    
    
    
    
    
    
    Net (loss) income attributable to ordinary shareholders
    
    
    (496,037
    )
    
    
    46,418
    
    
    
    129,400
    
    
    
    19,607
 F-63




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##### Table of Contents



CONCORD MEDICAL SERVICES HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (RMB) and United States Dollar (US$),
except for number of shares)
 30. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
 Condensed statements of cash flows
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Net cash generated from/(used in) operating activities
    
    
    526
    
    
    
    34
    
    
    
    (16,765
    )
    
    
    (2,540
    )Net cash used in investing activities
    
    
    (448,224
    )
    
    
    (466,520
    )
    
    
    (423,931
    )
    
    
    (64,232
    )Net cash generated from/(used in) financing activities
    
    
    727,849
    
    
    
    793,138
    
    
    
    (145,574
    )
    
    
    (22,057
    )Exchange rate effect on cash
    
    
    (5,636
    )
    
    
    (127
    )
    
    
    (6,736
    )
    
    
    (1,021
    )Net increase/(decrease) in cash
    
    
    274,515
    
    
    
    326,525
    
    
    
    (593,006
    )
    
    
    (89,850
    )Cash at beginning of the year
    
    
    
    
    
    
    274,515
    
    
    
    601,040
    
    
    
    91,067Cash at end of the year
    
    
    274,515
    
    
    
    601,040
    
    
    
    8,034
    
    
    
    1,217Supplemental schedule of non-cash activities:Conversion of convertible loans into Series A
contingently redeemable convertible preferred shares
    
    
    176,082
    
    
    
    704,276
    
    
    
    
    
    
    
    Conversion of Series A and Series B convertible
contingently redeemable preferred shares to ordinary
shares upon initial public offering
    
    
    
    
    
    
    704,276
    
    
    
    
    
    
    
    
 Basis of Presentation
 InvestmentsEquity Method and Joint Ventures
 F-64