##### 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 (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, 2005
 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: 0-50841
 51job, Inc.
 (Exact name of Registrant as specified in its charter)
 N/A
(Translation of Registrants name into English)
 Cayman Islands
(Jurisdiction of incorporation or organization)
 21st Floor, Wen Xin Plaza
755 Wei Hai Road
Shanghai 200041
Peoples Republic of China
(Address of principal executive offices)
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
None.
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
 American Depositary Shares
(each representing two common shares, par value US$0.0001 per share)
(Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None.
  o þ
 o þ
 þ o
  o Large accelerated filer
    
    þ Accelerated filer
    
    o Non-accelerated filer
 o þ
 o þ




---



##### 



TABLE OF CONTENTS
 PageFORWARD-LOOKING
STATEMENTS
    
    iiCERTAIN TERMS AND CONVENTIONS
    
    iiiPART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1Item 4. Information on the Company
    
    
    23Item 5. Operating and Financial Review and Prospects
    
    
    40Item 6. Directors, Senior Management and Employees
    
    
    56Item 7. Major Shareholders and Related Party Transactions
    
    
    64Item 8. Financial Information
    
    
    66Item 9. The Offer and Listing
    
    
    67Item 10. Additional Information
    
    
    68Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    73Item 12. Description of Securities Other than Equity Securities
    
    
    74PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    75Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    75Item 15. Controls and Procedures
    
    
    75Item 16A. Audit Committee Financial Expert
    
    
    76Item 16B. Code of Ethics
    
    
    76Item 16C. Principal Accountant Fees and Services
    
    
    76Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    76Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    77PART IIIItem 17. Financial Statements
    
    
    78Item 18. Financial Statements
    
    
    78Item 19. Exhibits
    
    
    78EX-4.4 Lease AgreementsEX-4.5 Lease Agreement dated as of March 11, 2005EX-4.6 Lease Agreements dated as of February 21, 2005EX-4.7 Summary of the Shanghai Commercial Building Advance Sale Contracts dated as of December 31, 2005EX-4.14 Amendment Notice to the Cooperation Agreement dated as of April 1, 2006EX-4.18 Business Alliance Agreement dated as of April 5, 2006EX-8.1 List of Subsidiaries of 51job, Inc.EX-12.1 CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-12.2 CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-13.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EX-13.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    market acceptance of our services;
    
    our ability to expand into other recruitment and human resource services
such as business process outsourcing;
    
    our ability to control our operating costs and expenses;
    
    our potential need for additional capital and the availability of such capital;
    
    behavioral and operational changes of our customers in meeting their human
resource needs as they respond to evolving social, economic and political changes in
China;
    
    changes in our management team and other key personnel;
    
    introduction by our competitors of new or enhanced products and services;
    
    price competition in the market for the various human resource services that we provide in China;
    
    seasonality of our business;
    
    fluctuations in the value of the Renminbi against the U.S. dollar and other currencies;
    
    our ability to develop or introduce new products and services outside of the human resources industry;
    
    fluctuations in general economic conditions; and
    
    other risks outlined in our filings with the Securities and Exchange
Commission, including our registration statement on Form F-1, as amended.




---



##### Table of Contents



CERTAIN TERMS AND CONVENTIONS
  
    
    ADRs are to the American depositary receipts that evidence our ADSs;
    
    ADSs are to our American depositary shares, each of which represents two common shares;
    
    China or the PRC are to the Peoples Republic of China, excluding for
the purpose of this annual report Hong Kong, Macau and Taiwan;
    
    Nasdaq are to the Nasdaq National Market;
    
    RMB are to Renminbi, the legal currency of the PRC;
    
    shares or common shares are to our common shares, with par value US$0.0001 per share;
    
    U.S. GAAP are to the generally accepted accounting principles in the United States of America; and
    
    US$ are to U.S. dollars, the legal currency of the United States of America.
   
    
    51net are to 51net.com Inc.;
    
    AdCo are to Shanghai Qianjin Advertising Co., Ltd., formerly known as
Shanghai Qianjin Culture Communication Co., Ltd.;
    
    AdCo Subsidiaries are to the subsidiaries of AdCo that conduct advertising businesses;
    
    Qian Cheng are to Beijing Qian Cheng Si Jin Advertising Co., Ltd.;
    
    RAL are to Shanghai Run An Lian Information Consultancy Co., Ltd.;
    
    Run An are to Beijing Run An Information Consultancy Co., Ltd.;
    
    Tech JV are to Qianjin Network Information Technology (Shanghai) Co., Ltd.;
    
    Wang Cai AdCo are to Shanghai Wang Cai Advertising Co. Ltd., formerly
known as Shanghai Jin Lian Advertising Co., Ltd.;
    
    WFOE are to Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd.; and
    
    Wuhan AdCo are to Wuhan Mei Hao Qian Cheng Advertising Co., Ltd.
   51job Weekly Career Post Weekly




---



##### Table of Contents








---



##### 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
 A. Selected Financial Data
  1




---



##### Table of Contents



For the year ended December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(1)Selected Consolidated Statement of
Operations Data:Revenues:Print advertising
    
    
    90,940,220
    
    
    
    116,989,356
    
    
    
    182,606,297
    
    
    
    300,651,791
    
    
    
    356,284,649
    
    
    
    44,148,181Online recruitment services
    
    
    22,586,591
    
    
    
    28,938,327
    
    
    
    76,960,121
    
    
    
    111,508,533
    
    
    
    159,494,922
    
    
    
    19,763,441Executive search
    
    
    9,126,842
    
    
    
    9,726,300
    
    
    
    15,748,331
    
    
    
    24,907,914
    
    
    
    26,306,740
    
    
    
    3,259,738Other human resource related
revenues
    
    
    5,305,068
    
    
    
    9,895,734
    
    
    
    18,019,611
    
    
    
    42,875,597
    
    
    
    53,507,789
    
    
    
    6,630,293Total revenues
    
    
    127,958,721
    
    
    
    165,549,717
    
    
    
    293,334,360
    
    
    
    479,943,835
    
    
    
    595,594,100
    
    
    
    73,801,653Net revenues
    
    
    121,970,723
    
    
    
    158,039,700
    
    
    
    280,118,941
    
    
    
    456,119,882
    
    
    
    562,026,220
    
    
    
    69,642,168Cost of services
    
    
    (84,208,642
    )
    
    
    (92,220,940
    )
    
    
    (151,477,142
    )
    
    
    (224,606,635
    )
    
    
    (269,328,384
    )
    
    
    (33,373,198
    )Gross profit
    
    
    37,762,081
    
    
    
    65,818,760
    
    
    
    128,641,799
    
    
    
    231,513,247
    
    
    
    292,697,836
    
    
    
    36,268,970Operating expenses:Sales and marketing
    
    
    (18,503,675
    )
    
    
    (24,356,157
    )
    
    
    (38,619,523
    )
    
    
    (67,271,096
    )
    
    
    (113,656,714
    )
    
    
    (14,083,507
    )General and administrative
    
    
    (33,732,311
    )
    
    
    (30,382,850
    )
    
    
    (38,135,612
    )
    
    
    (55,175,493
    )
    
    
    (88,978,985
    )
    
    
    (11,025,623
    )Share-based compensation 
share option(2)
    
    
    
    
    
    
    
    
    
    
    (13,482,546
    )
    
    
    (18,678,238
    )
    
    
    (13,073,480
    )
    
    
    (1,619,970
    )Share-based compensation 
founder shares(3)
    
    
    (8,808,931
    )
    
    
    (8,808,931
    )
    
    
    (4,622,466
    )
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    (61,044,917
    )
    
    
    (63,547,938
    )
    
    
    (94,860,147
    )
    
    
    (141,124,827
    )
    
    
    (215,709,179
    )
    
    
    (26,729,100
    )Income (loss) from operations
    
    
    (23,282,836
    )
    
    
    2,270,822
    
    
    
    33,781,652
    
    
    
    90,388,420
    
    
    
    76,988,657
    
    
    
    9,539,870Income (loss) before income tax
provision
    
    
    (22,957,650
    )
    
    
    2,686,608
    
    
    
    35,792,274
    
    
    
    95,201,216
    
    
    
    91,367,337
    
    
    
    11,321,570Income tax benefit (expense)
    
    
    
    
    
    
    1,259,194
    
    
    
    (3,192,011
    )
    
    
    (34,058,184
    )
    
    
    (29,945,033
    )
    
    
    (3,710,569
    )Net income (loss)
    
    
    (22,957,650
    )
    
    
    3,945,802
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    7,611,001Earnings (loss) per share:Basic
    
    
    (1.72
    )
    
    
    0.09
    
    
    
    0.83
    
    
    
    1.32
    
    
    
    1.10
    
    
    
    0.14Diluted(4)
    
    
    (1.72
    )
    
    
    0.07
    
    
    
    0.75
    
    
    
    1.26
    
    
    
    1.07
    
    
    
    0.13Earnings (loss) per ADS:(5)Basic
    
    
    (3.44
    )
    
    
    0.18
    
    
    
    1.65
    
    
    
    2.65
    
    
    
    2.21
    
    
    
    0.27Diluted(4)
    
    
    (3.44
    )
    
    
    0.15
    
    
    
    1.50
    
    
    
    2.52
    
    
    
    2.15
    
    
    
    0.27Other Financial Information:Aggregate share-based compensation
expense(6)
    
    
    (8,808,931
    )
    
    
    (8,808,931
    )
    
    
    (18,701,563
    )
    
    
    (20,489,734
    )
    
    
    (14,553,322
    )
    
    
    (1,803,341
    )
 As of December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(1)Selected Consolidated Balance
Sheet Data:Assets:Cash
    
    
    30,339,579
    
    
    
    68,637,760
    
    
    
    115,084,572
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    102,926,018Total current assets
    
    
    39,661,081
    
    
    
    79,635,683
    
    
    
    145,573,376
    
    
    
    893,647,186
    
    
    
    892,544,201
    
    
    
    110,597,531Total non-current assets
    
    
    20,509,537
    
    
    
    24,025,881
    
    
    
    39,830,903
    
    
    
    43,735,155
    
    
    
    70,875,359
    
    
    
    8,782,356Total assets
    
    
    60,170,618
    
    
    
    103,661,564
    
    
    
    185,404,279
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    119,379,887Liabilities:Total current liabilities
    
    
    19,806,795
    
    
    
    26,025,436
    
    
    
    56,096,191
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    13,573,405Total non-current liabilities
    
    
    849,621
    
    
    
    32,080
    
    
    
    23,533
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    20,656,416
    
    
    
    26,057,516
    
    
    
    56,119,724
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    13,573,405Total shareholders equity
    
    
    39,514,202
    
    
    
    77,604,048
    
    
    
    129,284,555
    
    
    
    851,818,322
    
    
    
    853,879,463
    
    
    
    105,806,482Total liabilities and
shareholders equity
    
    
    60,170,618
    
    
    
    103,661,564
    
    
    
    185,404,279
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    119,379,887
 
 (1)
    
    Translations from Renminbi to U.S. dollars were made at the noon buying rate in The City of
New York for cable transfers of Renminbi as certified for customs purposes by the Federal
Reserve Bank of New York. The translations of Renminbi amounts into U.S. dollar amounts have
been made at the noon buying rate in effect on December 30, 2005, which was RMB8.0702 to
US$1.00. 2




---



##### Table of Contents



(2)
    
    In 2003, RMB0.4 million of this portion of our share-based compensation expense for share
options was attributable to sales and marketing expenses and RMB13.1 million was attributable
to our general and administrative expenses. In 2004, RMB1.8 million of this portion of our
share-based compensation expense was attributable to sales and marketing expenses and RMB16.9
million was attributable to general and administrative expenses. In 2005, RMB1.4 million
(US$0.2 million) of this portion of our share-based compensation expense was attributable to
sales and marketing expenses and RMB11.6 million (US$1.4 million) was attributable to general
and administrative expenses.(3)
    
    All share-based compensation  founder shares is attributable to general and administrative
expenses.(4)
    
    Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to
holders of common shares as adjusted for the effect of dilutive common shares, if any, by the
sum of (1) the weighted average number of common shares outstanding and (2) the weighted
average number of common equivalent shares, which consist of common shares from the conversion
of Series A preference shares and common shares issuable upon the exercise of outstanding
share options as calculated under the treasury stock method. In the case of diluted earnings
(loss) per ADS, the data are adjusted to reflect the ratio of two common shares to one ADS.(5)
    
    Each ADS represents two common shares.(6)
    
    Aggregate share-based compensation expense includes share-based compensation expense
attributable to cost of services and operating expenses. We have recognized share-based
compensation in connection with our historical grant of options to employees and certain
directors, and the historical issuance of restricted common shares to our founders and one of
our directors. We recognized an aggregate of RMB35.2 million in deferred share-based
compensation in 2000 in connection with the acquisition by 51job, Inc. of all of the operating
assets of our various operating entities, whereby 51job, Inc. became the holding company of
our corporate group and entered into a purchase agreement with each of our founders to issue
to each founder restricted common shares. These shares were placed in escrow and were subject
to repurchase by us between 2000 and 2003 at a price equal to, at our option, either US$0.0001
per share or the fair market value of such shares, in the event that such founders employment
with us terminated. We amortized all of this deferred share-based compensation as an expense
from 2000 through 2003. All such shares have subsequently been released from escrow and we
will not recognize additional share-based compensation expense with respect to these
issuances. In addition, we recognized an aggregate of RMB76.9 million in immediate or deferred
share-based compensation in 2003 and 2004 in connection with the grant of options to employees
and directors, the sale of common shares to one of our directors at a price below fair market
value, and the extension of the exercise period of options held by certain terminated
employees. This resulted in additional share-based compensation expense of RMB14.1 million in
2003, RMB20.5 million in 2004 and RMB14.6 million (US$1.8 million) in 2005.In our consolidated financial statements, portions of our share-based compensation expense are
allocated separately to our cost of services and operating expenses. Since we evaluate our
performance, make determinations regarding the expansion of our operations, allocate resources
among our operations and determine the compensation of employees and management based on our
financial results before the overall effect of our aggregate share-based compensation expense,
we have separately disclosed our aggregate share-based compensation expense for each of the
periods presented. We recorded a substantial amount of our historical share-based compensation
expense in connection with our repurchase arrangement with respect to the common shares issued
to our founders. We believe that disclosure of our aggregate share-based compensation expense
allows investors to better understand the primary financial measures that we use to manage our
business. In addition, separate disclosure of our aggregate share-based compensation expense
provides a useful approximation of our taxable income for purposes of determining PRC
enterprise income tax, or EIT, which is calculated based on our income prior to any deduction
for share-based compensation expense.
 Exchange Rate Information
  3




---



##### Table of Contents



Renminbi per U.S. dollarFiscal year ended December 31,
    
    Average(1)
    
    High
    
    Low
    
    Period-end2001
    
    
    8.2770
    
    
    
    8.2786
    
    
    
    8.2676
    
    
    
    8.27662002
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2669
    
    
    
    8.28002003
    
    
    8.2772
    
    
    
    8.2800
    
    
    
    8.2765
    
    
    
    8.27672004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.0702
 Renminbi per U.S. dollarMonth
    
    High
    
    Low
    
    Period-endDecember 2005
    
    
    8.0808
    
    
    
    8.0702
    
    
    
    8.0702January 2006
    
    
    8.0702
    
    
    
    8.0596
    
    
    
    8.0608February 2006
    
    
    8.0616
    
    
    
    8.0415
    
    
    
    8.0415March 2006
    
    
    8.0505
    
    
    
    8.0167
    
    
    
    8.0167April 2006
    
    
    8.0248
    
    
    
    8.0040
    
    
    
    8.0165May 2006
    
    
    8.0300
    
    
    
    8.0005
    
    
    
    8.0215June 2006 (through June 26, 2006)
    
    
    8.0225
    
    
    
    7.9963
    
    
    
    7.9995
 
 (1)
    
    The average of the daily noon buying rates on the last business day of each month during the
year. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Related to Our Business
 Because we face significant competition, including intense competition in several of our
markets, we may lose market share and our results of operations may be materially and adversely
affected.
 51job Weekly www.51job.com 51job Weekly 51job Weekly 51job
Weekly
 ChinaHR.com Cjol.com Zhaopin.com NetEase.com Sina.com Sohu.com Tom.com ChinaHR.com Sina.com Zhaopin.com Sohu.com
   4




---



##### Table of Contents



New competitors face low entry barriers to our industries, and successful entry by new
competitors may cause us to lose market share and materially and adversely affect our results
of operations.
  If we are unable to achieve or maintain economies of scale with respect to our recruitment
advertising businesses, our results of operations from these businesses may be materially and
adversely affected.
 51job Weekly www.51job.com
 51job Weekly
 A slowdown or other adverse developments in the PRC economy may materially and adversely affect
our customers, demand for our services and our business.
  5




---



##### Table of Contents



If the use of advertising to conduct recruitment does not achieve broader acceptance in China,
we may be unable to expand our recruitment advertising businesses.
  If the Internet, and online advertising in particular, does not achieve broad acceptance in
China as a medium for recruitment, our online recruitment services business may be adversely
affected.
  The markets for executive search services and business process outsourcing are still in the
development stage in China and we may be unable to expand these businesses.
  We are dependent on local newspaper contractors in each of our geographic markets to publish
and distribute 51job Weekly.
 51job Weekly 51job Weekly
  
    
    our local newspaper contractors will fulfill their obligations under our agreements;
    
    the agreements will be renewed on terms acceptable to us or at all;
 6




---



##### Table of Contents




    
    our current contractors will not, upon termination of our agreements, seek
to compete directly against us or establish relationships with one or more of our
competitors; or
    
    in the event that we wish to do so or it is necessary to do so, we will be
able to locate and enter into an agreement with a suitable alternative local newspaper on
a timely basis or at all.
 51job Weekly 51job Weekly
 We are dependent on our Internet service provider, and we are vulnerable to failures of the
Internet, fixed line telecommunications networks in China and our technology platform.
   If we are unable to protect or promote our brand names and reputation, our business may be
materially and adversely affected.
 www.51job.com
 If we are unable to prevent others from using our intellectual property, our business may be
materially and adversely affected.
 www.51job.com 51job Weekly
 We rely heavily on our senior management team and key personnel, and the loss of any of their
services could severely disrupt our business.
  7




---



##### Table of Contents



Our business may suffer if we do not successfully manage our current and potential future
growth.
  eSearch
  Our limited operating history may not serve as an adequate basis to judge our future prospects
and results of operations.
  
    
    implement our business model and strategy and adapt and modify them as needed;
    
    increase awareness of our brands, protect our reputation and develop customer loyalty;
 
 8




---



##### Table of Contents




    
    anticipate with any degree of certainty the behavioral and operational changes of our
customers that have a significant impact on our business from time to time as they respond
to evolving social, economic and political changes in China;
    
    manage our expanding operations and service offerings, including the
integration of any future acquisitions;
    
    maintain adequate control of our expenses;
    
    adequately and efficiently operate, maintain, upgrade and develop our
website and the other systems and equipment we utilize in providing our services;
    
    attract, retain and motivate qualified personnel;
    
    maintain our current, and develop new, contractual arrangements with local
newspapers and other important operational relationships; and
    
    anticipate and adapt to changing conditions in the print, online and other
markets in which we operate as well as the impact of any changes in government regulation,
mergers and acquisitions involving our competitors, technological developments and other
significant competitive and market dynamics.
  We rely on our print advertising business to provide a significant majority of our revenues and
any adverse development in this business could materially and adversely affect our overall
results of operations.
 51job Weekly 51job Weekly 51job Weekly
 Our recruitment advertising business is subject to weekly fluctuations which hamper our ability
to predict when revenue will ultimately be recognized, if at all.
  Due to seasonal variations in demand for human resource services, we experience significant
fluctuations in our revenue streams which affect our ability to predict our quarterly results
and which may also cause quarterly results to vary from period to period.
  We may not be able to successfully execute future acquisitions or efficiently manage any
acquired business.
  
    
    our ability to identify and acquire businesses on a cost-effective basis;
 
 9




---



##### Table of Contents




    
    our ability to integrate acquired personnel, operations, products and technologies
into our organization effectively; and
    
    our ability to retain and motivate key personnel and to retain the clients
of acquired firms.
  If we are unable to attract and retain qualified personnel, our executive search, training and
business process outsourcing businesses may be materially and adversely affected.
  If we choose to develop or introduce new products and services outside of the human resource
services industry in China, these efforts may not be successful, which could materially and
adversely affect our financial condition and results of operations.
  We may be subject to liability for placing advertisements with content that is deemed
inappropriate.
  We are subject to potential legal liability from both employers and job seekers with respect to
our executive search businesses and other human resource related services.
  10




---



##### Table of Contents



We may be exposed to infringement or misappropriation claims by third parties, which, if
successful, could cause us to pay significant damage awards.
  We rely heavily on our information systems, and if our access to technology supporting our
information systems is impaired or interrupted, or if we fail to further develop our
technology, our operations may be seriously disrupted.
  If we are not able to respond successfully to technological or industry developments, our
business may be materially and adversely affected.
  Computer viruses and hacking may cause delays or interruptions on our systems and may reduce
use of our services and damage our reputation and brand names.
  Our business could be adversely affected if our software contains bugs.
 www.51job.com
 11




---



##### Table of Contents



We are controlled by a small number of our existing shareholders and our board of directors has
the power to discourage a change of control.
   
    
    Rick Yan, our chief executive officer and a director, who beneficially owned
approximately 25.5% of our outstanding common shares, including common share underlying
options outstanding;
    
    entities affiliated with DCM  Doll Capital Management, or DCM, which owned
approximately 16.7%, and which is affiliated with David K. Chao, one of our directors;
    
    Recruit, which owned approximately 14.5%;
    
    Michael Lei Feng, one of our executive officers, who owned approximately 7.6%;
    
    Norman Lui, one of our executive officers, who owned approximately 5.3%; and
    
    Kathleen Chien, one of our executive officers, who owned approximately 3.1%.
    When the preferential tax treatment elected by some of the AdCo Subsidiaries and other
subsidiaries expire, we will incur higher tax rates for these entities which could adversely
affect our overall results of operations
  12




---



##### Table of Contents



Our earnings have been and will continue to be adversely affected by the change in our
accounting policies with respect to the expensing of stock options.
   Failure to achieve and maintain effective internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse
effect on our business, results of operations and the market price of our ADSs.
    13




---



##### Table of Contents



We have no business insurance coverage.
  We are vulnerable to natural disasters and other calamities.
  We may become a passive foreign investment company, which could result in adverse U.S. tax
consequences to U.S. investors.
  Our subsidiaries face limitations on paying dividends or making other distributions to us.
  
    
    Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd., or
WFOE, a wholly foreign owned enterprise in China;
    
    Qianjin Network Information Technology (Shanghai) Co., Ltd., or Tech JV; and
    
    Shanghai Qianjin Advertising Co., Ltd., or AdCo, and its subsidiaries.
  14




---



##### Table of Contents



Risks Related to Our Corporate Structure
 If the PRC authorities determine that our past ownership structure was inconsistent with the
requirements for operating certain of our businesses, we could be subject to sanctions.
      
    
    levying fines;
    
    revoking business licenses;
 
 15




---



##### Table of Contents




    
    restricting or prohibiting our use of proceeds from our initial public offering and
any future offerings to finance our business and operations in China;
    
    requiring us to restructure the ownership structure or operations of our
subsidiaries or affiliated entities; and/or
    
    requiring us to discontinue all or a portion of our business.
  We rely on our agreements with an affiliated entity to provide human resource related services
and to act as an Internet content provider, and we rely on agreements with an affiliated entity
and its shareholders to receive all of the beneficial interest of this entity.
    If our affiliated entity RAL is found to be operating in jurisdictions outside of Shanghai
without a business license, we could be subject to sanctions and our revenues could be
adversely affected.
  Our contractual arrangements with RAL and Qian Cheng may not be as effective in providing
operational control as direct ownership of these businesses.
  16




---



##### Table of Contents




    
    levying fines;
    
    revoking business licenses;
    
    restricting or prohibiting our use of proceeds from our initial public
offering and any future offerings to finance our business and operations in China;
    
    requiring us to restructure the ownership structure or operations of our
subsidiaries or affiliated entities; and/or
    
    requiring us to discontinue all or a portion of our business.
  The PRC laws and regulations governing our current business operations and contractual
arrangements are uncertain, and if we are found to be in violation, we could be subject to
sanctions. In addition, any changes in such PRC laws and regulations may have a material and
adverse effect on our business.
   
    
    levying fines;
    
    revoking business licenses;
 17




---



##### Table of Contents




    
    restricting or prohibiting our use of proceeds from our initial public
offering and any future offerings to finance our business and operations in China;
    
    requiring us to restructure the ownership structure or operations of our
subsidiaries or affiliated entities; and/or
    
    requiring us to discontinue all or a portion our business.
   Risks Related to the Peoples Republic of China
 Our business could be affected by changes in Chinas economic, political or social conditions
or government policies.
  
    
    amount of government involvement;
    
    level of development;
    
    growth rate;
    
    control of foreign exchange; and
    
    allocation of resources.
   PRC laws and regulations governing operators of Internet websites are unclear and the
regulation of the telecommunications and Internet industries may become more burdensome, and if
we are found to be in violation of PRC laws and regulations, we could be subject to sanctions.
  18




---



##### Table of Contents



The continued growth of the Chinese Internet market depends on the establishment of an adequate
telecommunications infrastructure.
  The PRC legal system has inherent uncertainties that could materially and adversely affect us.
  You may experience difficulties in effecting service of legal process, enforcing foreign
judgments or bringing original actions in China based on United States or other foreign laws
against us or our management.
  Governmental control of currency conversion may affect the value of your investment.
  19




---



##### Table of Contents



The fluctuation of the Renminbi may materially and adversely affect your investment.
   We face risks related to health epidemics and other outbreaks.
  Recent regulations relating to offshore investment activities by PRC residents may increase the
administrative burden we face and create regulatory uncertainties that may limit our ability to
acquire PRC companies.
  20




---



##### Table of Contents



Risks Related to Our ADSs
 The market price for our ADSs may be volatile.
  
    
    actual or anticipated fluctuations in our quarterly operating results;
    
    changes or revisions by us to previously released operating and financial targets;
    
    announcements of new services by us or our competitors;
    
    changes in financial estimates or recommendations by securities analysts;
    
    conditions in our industry, which is the market for recruitment advertising
services and other human resource
related services in China;
    
    announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
    
    additions or departures of key personnel;
    
    release of transfer restrictions on our outstanding common shares or ADSs or
sales of additional common shares or ADSs; and
    
    pending or potential litigation or regulatory investigations.
  The future sales, or perceived future sales, by our existing shareholders of a substantial
number of our ADSs in the public market could adversely affect the price of our ADSs.
  Your right to participate in any future rights offerings may be limited, which may cause
dilution of your holdings.
  21




---



##### Table of Contents



You may not be able to exercise your right to vote.
  You may not receive distributions on common shares or any value for them if it is illegal or
impractical to make them available to you.
  You may be subject to limitations on transfer of your ADSs.
  You may face difficulties in protecting your interests, and your ability to protect your rights
through the U.S. federal courts may be limited, because we are incorporated under Cayman
Islands law.
   22




---



##### Table of Contents




    
    to recognize or enforce against us judgments of courts of the United States
based on certain civil liability provisions of U.S. securities laws; and
    
    to impose liabilities against us, in original actions brought in the Cayman
Islands, based on certain civil liability provisions of U.S. securities laws that are
penal in nature.
   
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
  
    
    Shanghai Qianjin Advertising Co., Ltd. (whose name we changed from Shanghai
Qianjin Culture Communications Co., Ltd. in November 2005), or AdCo, and AdCos fifteen
branch offices, seven majority owned subsidiaries and one jointly owned subsidiary with
Tech JV, or, collectively, the AdCo Subsidiaries. AdCo and the AdCo Subsidiaries hold
licenses and permits to conduct advertising businesses;
    
    Shanghai Run An Lian Information Consultancy Co., Ltd., or RAL, which holds
human resource related services and Internet content provision licenses;
    
    Qianjin Network Information Technology (Shanghai) Co., Ltd., or Tech JV,
which is allowed to conduct online advertising and holds a human resource related services
license;
    
    Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd., or
WFOE, which is wholly owned by 51net Beijing and owns certain of our trademarks and
registered copyrights;
    
    Beijing Qian Cheng Si Jin Advertising Co., Ltd., or Qian Cheng, which is our
joint venture partner in Tech JV;
    
    Beijing Run An Information Consultancy Co., Ltd., or Run An, which holds a
minority interest in Qian Cheng;
    
    Shanghai Wang Cai Advertising Co., Ltd. (whose name we changed from Shanghai
Jin Lian Advertising Co., Ltd. in July 2005), or Wang Cai AdCo, which is jointly owned by
AdCo and TechJV and a AdCo Subsidiary that holds licenses to conduct advertising
businesses;
    
    Wuhan Mei Hao Qian Cheng Advertising Co., Ltd., or Wuhan AdCo, which holds a
minority interest in Tech JV and our AdCo Subsidiary in the city of Wuhan that conducts
advertising businesses; and
    
    Wang Jin Information Technology (Shanghai) Co., Ltd., which is wholly owned
by 51net and has no current operations.
  23




---



##### Table of Contents



B. Business Overview
    51job Weekly www.51job.com www.51job.com eHire eSearch
 Our Product and Services
  
    
    recruitment related services, including print advertising, online
recruitment and executive search services; and
    
    other human resource related services, such as training and business process
outsourcing.
  24




---



##### Table of Contents



Recruitment related services
 Print advertising  51job Weekly. 51job Weekly Career Post Weekly 51job Weekly
 51job Weekly
 City
    
    Newspaper contractor(1)
    
    City
    
    Newspaper contractor(1)Beijing
    
    China Trade News
    
    Kunming
    
    Chuncheng Evening NewsChangchun
    
    City Evening News
    
    Nanjing
    
    Modern ExpressChangsha
    
    Sanxiang Metropolitan News
    
    Ningbo
    
    Modern Golden NewsChengdu
    
    Hua Xi Metropolitan News
    
    Qingdao
    
    Qingdao Financial TimesChongqing(2)
    
    Human Resource News
    
    Shanghai
    
    China Trade NewsGuangzhou
    
    Guangzhou Youth Daily
    
    Shenyang
    
    Friendly TimesDalian
    
    Dalian Evening News
    
    Shenzhen
    
    Nan Fang Metropolitan NewsFuzhou
    
    Straits Talent News
    
    Suzhou
    
    Modern ExpressHangzhou
    
    News Information Daily
    
    Tianjin
    
    Metro ExpressHarbin
    
    Harbin Lifestyle Daily
    
    Wuhan
    
    News Information DailyHefei
    
    Hefei Evening News
    
    Xian
    
    China Merchant NewsJinan
    
    Jinan Times
    
    Zhengzhou
    
    Youth Herald
 
 (1)
    
    English translations of the Chinese names.(2)
    
    In February 2006, we changed our newspaper contractor in Chongqing from Chongqing Business
Daily. 51job Weekly
 51job Weekly 51job Weekly www.51job.com 51job Weekly www.51job.com 51job Weekly 51job Weekly
 51job Weekly 51job Weekly 51job
Weekly
 51job Weekly 51job Weekly
 25




---



##### Table of Contents



51job Weekly 51job Weekly 51job Weekly 51job
Weekly
 51job Weekly
   51job Weekly
 2003
    
    2004
    
    2005Estimated number of print advertising pages(1)
    
    
    4,635
    
    
    
    9,001
    
    
    
    11,884Number of cities where 51job Weeklywas published(2)
    
    
    16
    
    
    
    19
    
    
    
    23
 
 (1)
    
    For the years ended December 31, 2003, 2004 and 2005.(2)
    
    As of December 31, 2003, 2004 and 2005.  Online recruitment services  www.51job.com www.51job.com www.51job.com www.51job.com
 www.51job.com www.51job.com www.51job.com
 www.51job.com www.51job.com 51job Weekly
 26




---



##### Table of Contents



eHire eHire www.51job.com
  For the year ended December 31,2003
    
    2004
    
    2005Estimated unique employers using online recruitment services
    
    
    25,880
    
    
    
    39,317
    
    
    
    56,599
 www.51job.com
 
    
    search and review all current recruitment advertisements;
    
    receive e-mails of advertisements matching the job seekers profile and preferences;
    
    submit resumés directly to prospective employers to apply for a desired position;
    
    organize and track job related information and applications; and
    
    obtain information about upcoming job fairs and career development and other job related information.
 www.51job.com
 51job Weekly www.51job.com 51job Weekly www.51job.com 51job Weekly
 Executive search  eSearch eSearch
 www.51job.com 51job Weekly
 Other human resource related services
  27




---



##### Table of Contents



Human Capital
   Technology
  51job Weekly www.51job.com
  28




---



##### Table of Contents



Competition
  Print advertising
 51job Weekly Beijing Youth Daily Guangzhou Daily Shanghai Talent Market Shenzhen Special Zone Daily
 Online recruitment services
 Zhaopin.com ChinaHR.com Cjol.com Zhaopin.com
 NetEase.com Sina.com Sohu.com Tom.com ChinaHR.com ChinaHR.com ChinaHR.com Sina.com Zhaopin.com Sohu.com
 Other services
  Customers
  Sales and Marketing
  
    
    employers with hiring needs;
    
    job seekers; and
    
    human resource departments with actual or potential outsourcing needs.
 29




---



##### Table of Contents



Direct marketing
 Event marketing 51job Weekly 51job Weekly www.51job.com
 Mass media advertising
 Online marketing
 Cross-marketing 51job Weekly www.51job.com Human Capital 51job Weekly www.51job.com
 Media promotions
 Intellectual Property and Proprietary Rights
 www.51job.com
 51job.com  eHire  eSearch  51job.com   51job.com
 www.51job.com www.51job.com
  30




---



##### Table of Contents



Regulation
   Limitations on Foreign Ownership of Our Businesses
 Advertising companies
  
    
    Foreign Investment Industry Guide Catalogue (2004); and
    
    Regulations on Administration of Foreign Investment in Advertising Enterprises (2004).
  Human resource services companies
  Internet content providers
   
    
    Administrative Rules for Foreign Investments in Telecommunications Enterprises (2001); and
    
    Foreign Investment Industry Guidance Catalogue (2004).
  Recent changes in regulation
  31




---



##### Table of Contents



General Regulation of Our Businesses
 Advertising
  
    
    Advertising Law (1994);
    
    Administration of Advertising Regulations (1987); and
    
    Measures for the Administration of Advertising Business Licenses (2005).
  Human resource
  Internet content services and online commerce
  
    
    Telecommunications Regulations (2000);
    
    The Administrative Measures for Telecommunications Business Operating Licenses (2001); and
    
    The Internet Information Services Administrative Measures (2000).
   Regulations Relating to Our Intellectual Property Rights
    32




---



##### Table of Contents



Regulations Relating to Internet Privacy
   Regulation of Foreign Currency Exchange and Dividend Distribution
 Foreign currency exchange
   Dividend distribution
  
    
    Wholly Foreign Owned Enterprise Law (1986), as amended;
    
    Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
    
    Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and
    
    Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.
 33




---



##### Table of Contents



C. Organizational Structure
      Our May 2004 Restructuring and Arrangements with Affiliated Entities
  34




---



##### Table of Contents




    
    online recruitment services are provided by Tech JV, which does not act as
an Internet content provider;
    
    print advertising services are provided by AdCo and the AdCo Subsidiaries,
which are all direct and indirect majority owned PRC subsidiaries of Tech JV;
    
    human resource related services are provided by RAL, which holds a license
to provide human resource related services; and
    
    Internet content provider services are provided by RAL through a contractual
arrangement with Tech JV; RAL holds a license to act as an Internet content provider and
operates our www.51job.comwebsite.
       35




---



##### Table of Contents



Group Ownership Structure
 (1)
 
 
 (1)
    
    Does not include 51net HR, a dormant entity incorporated in the Cayman Islands and wholly
owned by 51job, Inc. and Wang Jin Information Technology (Shanghai) Co., Ltd., a wholly owned
subsidiary of 51net established in the PRC with no current operations.(2)
    
    Includes the subsidiaries and branches of AdCo that conduct advertising businesses and
Shanghai Cheng An Human Resources Co., Ltd., which provides outsourcing services.(3)
    
    Excludes Wuhan AdCo and Wang Cai AdCo, which are set out separately in the chart.   36




---



##### Table of Contents



Description of the Material Group Entities
 51net
 51job.com  www.51job.com
 Tech JV
  Qian Cheng
  RAL
 www.51job.com
 AdCo and the AdCo Subsidiaries
  WFOE
  37




---



##### Table of Contents



Contractual Arrangements Among Our Group Entities
  
 Contractual arrangements with RAL
 RAL technical and consulting service agreement
 RAL equity pledge agreement.
 38




---



##### Table of Contents



Tech JV and RAL cooperation agreement. www.51job.com
 Domain name license agreement. www.51job.com
 Contractual arrangements with Qian Cheng
 Qian Cheng technical and consulting service agreement.
 Qian Cheng equity pledge agreement.
 Call option agreement.
   
    
    our current ownership structure is in compliance with existing PRC laws and
regulations;
    
    the agreements among our subsidiaries, affiliated entities and their
respective shareholders are valid and binding, and are enforceable under, and will not
result in any violation of, existing PRC laws or regulations; and
 39




---



##### Table of Contents




    
    our current business operations as described in this annual report are not
in violation of existing PRC laws, rules and regulations.
  D. Property, Plants and Equipment
    
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  A. Overview
 51job Weekly www.51job.com www.51job.com eHire eSearch
 Revenues
 51job Weekly
 40




---



##### Table of Contents



www.51job.com
  For the year ended December 31,2003
    
    2004
    
    2005Revenues:Print advertising
    
    
    62.3
    %
    
    
    62.7
    %
    
    
    59.8
    %Online recruitment services
    
    
    26.2
    
    
    
    23.2
    
    
    
    26.8Executive search
    
    
    5.4
    
    
    
    5.2
    
    
    
    4.4Other human resource related services
    
    
    6.1
    
    
    
    8.9
    
    
    
    9.0Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  2003
    
    2004
    
    2005compared to
    
    compared to
    
    compared to2002
    
    2003
    
    2004Print advertising
    
    
    56.1
    %
    
    
    64.6
    %
    
    
    18.5
    %Online recruitment services
    
    
    165.9
    
    
    
    44.9
    
    
    
    43.0Executive search
    
    
    61.9
    
    
    
    58.2
    
    
    
    5.6Other human resource related services
    
    
    82.1
    
    
    
    137.9
    
    
    
    24.8Total revenues
    
    
    77.2
    %
    
    
    63.6
    %
    
    
    24.1
    %
 Recruitment related revenues
 51job Weekly www.51job.com eSearch
 Print advertising revenues. 51job Weekly 51job Weekly 51job Weekly
   41




---



##### Table of Contents



51job Weekly
 51job Weekly
  Online recruitment services revenues. www.51job.com eHire www.51job.com
    51job Weekly
 42




---



##### Table of Contents



Executive search revenues. eSearch
 Other human resource related revenues
 eHR
  Net revenues and business taxes
  Costs
   For the year ended December 31,2003
    
    2004
    
    2005Cost of services
    
    
    (54.1
    %)
    
    
    (49.2
    %)
    
    
    (47.9
    %)Total operating expenses
    
    
    (33.9
    %)
    
    
    (30.9
    %)
    
    
    (38.4
    %)
  43




---



##### Table of Contents



Cost of services
  Operating expenses
   For the year ended December 31,2003
    
    2004
    
    2005Operating expenses:Sales and marketing
    
    
    (13.8
    %)
    
    
    (14.7
    %)
    
    
    (20.2
    %)General and administrative
    
    
    (13.6
    )
    
    
    (12.1
    )
    
    
    (15.8
    )Share-based compensation  share options
    
    
    (4.8
    )
    
    
    (4.1
    )
    
    
    (2.4
    )Share-based compensation  founder shares
    
    
    (1.7
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    (33.9
    %)
    
    
    (30.9
    %)
    
    
    (38.4
    %)
 51job Weekly
  44




---



##### Table of Contents



Income Taxation
      Critical Accounting Policies
   45




---



##### Table of Contents



Income taxes
     Share-based compensation
   
    
    our financial condition as of the date of grant;
    
    our financial and operating prospects at that time;
    
    comparable market indicators; and
    
    an independent third party analysis of the historical value of our underlying common shares.
   46




---



##### Table of Contents



Basis for consolidation and our relationships with our affiliated variable interest entities
      47




---



##### Table of Contents



Allowances for doubtful accounts
  Long-lived assets
  Results of Operations
  For the year ended December 31,2003
    
    2004
    
    2005RMB
    
    %
    
    RMB
    
    %
    
    RMB
    
    %Revenues:Print advertising
    
    
    182,606,297
    
    
    
    65.2
    
    
    
    300,651,791
    
    
    
    65.9
    
    
    
    356,284,649
    
    
    
    63.4Online recruitment services
    
    
    76,960,121
    
    
    
    27.5
    
    
    
    111,508,533
    
    
    
    24.4
    
    
    
    159,494,922
    
    
    
    28.4Executive search
    
    
    15,748,331
    
    
    
    5.6
    
    
    
    24,907,914
    
    
    
    5.5
    
    
    
    26,306,740
    
    
    
    4.7Other human resource
related revenues
    
    
    18,019,611
    
    
    
    6.4
    
    
    
    42,875,597
    
    
    
    9.4
    
    
    
    53,507,789
    
    
    
    9.5Total revenues
    
    
    293,334,360
    
    
    
    104.7
    
    
    
    479,943,835
    
    
    
    105.2
    
    
    
    595,594,100
    
    
    
    106.0Less: Business and related tax
    
    
    (13,215,419
    )
    
    
    (4.7
    )
    
    
    (23,823,953
    )
    
    
    (5.2
    )
    
    
    (33,567,880
    )
    
    
    (6.0
    )Net revenues
    
    
    280,118,941
    
    
    
    100.0
    
    
    
    456,119,882
    
    
    
    100.0
    
    
    
    562,026,220
    
    
    
    100.0Cost of services
    
    
    (151,477,142
    )
    
    
    (54.1
    )
    
    
    (224,606,635
    )
    
    
    (49.2
    )
    
    
    (269,328,384
    )
    
    
    (47.9
    )Gross profit
    
    
    128,641,799
    
    
    
    45.9
    
    
    
    231,513,247
    
    
    
    50.8
    
    
    
    292,697,836
    
    
    
    52.1Operating expenses:Sales and marketing
    
    
    (38,619,523
    )
    
    
    (13.8
    )
    
    
    (67,271,096
    )
    
    
    (14.7
    )
    
    
    (113,656,714
    )
    
    
    (20.2
    )General and administrative
    
    
    (38,135,612
    )
    
    
    (13.6
    )
    
    
    (55,175,493
    )
    
    
    (12.1
    )
    
    
    (88,978,985
    )
    
    
    (15.8
    )Share-based compensation 
share option
    
    
    (13,482,546
    )
    
    
    (4.8
    )
    
    
    (18,678,238
    )
    
    
    (4.1
    )
    
    
    (13,073,480
    )
    
    
    (2.4
    )Share-based compensation 
founder shares
    
    
    (4,622,466
    )
    
    
    (1.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    (94,860,147
    )
    
    
    (33.9
    )
    
    
    (141,124,827
    )
    
    
    (30.9
    )
    
    
    (215,709,179
    )
    
    
    (38.4
    )Income from operations
    
    
    33,781,652
    
    
    
    12.1
    
    
    
    90,388,420
    
    
    
    19.8
    
    
    
    76,988,657
    
    
    
    13.7Loss from foreign currency
translation
    
    
    (3,456
    )
    
    
    (0.0
    )
    
    
    (2,158
    )
    
    
    (0.0
    )
    
    
    (11,320,194
    )
    
    
    (2.0
    )Interest and investment income
    
    
    930,288
    
    
    
    0.3
    
    
    
    2,846,422
    
    
    
    0.6
    
    
    
    20,385,151
    
    
    
    3.6Other income
    
    
    1,083,790
    
    
    
    0.4
    
    
    
    1,968,532
    
    
    
    0.4
    
    
    
    5,313,723
    
    
    
    1.0Income before income tax
provision
    
    
    35,792,274
    
    
    
    12.8
    
    
    
    95,201,216
    
    
    
    20.9
    
    
    
    91,367,337
    
    
    
    16.3Income tax expense
    
    
    (3,192,011
    )
    
    
    (1.1
    )
    
    
    (34,058,184
    )
    
    
    (7.5
    )
    
    
    (29,945,033
    )
    
    
    (5.4
    )Net income
    
    
    32,600,263
    
    
    
    11.7
    
    
    
    61,143,032
    
    
    
    13.4
    
    
    
    61,422,304
    
    
    
    10.9Other Financial Information:Aggregate share-based
compensation
expense(1)
    
    
    (18,701,563
    )
    
    
    (6.7
    )
    
    
    (20,489,734
    )
    
    
    (4.5
    )
    
    
    (14,553,321
    )
    
    
    (2.6
    )
 
 (1)
    
    Aggregate share-based compensation expense includes share-based compensation expense
attributable to cost of services and operating expenses. 48




---



##### Table of Contents



2005 compared to 2004
 Total revenues.
 
    
    Print advertising.Our print advertising revenues increased 18.5% to
RMB356.3 million (US$44.1 million) in 2005 from RMB300.7 million in 2004. This increase
was primarily due to a higher number of recruitment advertisements placed in our editions
of 51job Weeklyas we entered into four new markets in 2005 and increased our penetration
of our existing markets. We estimate that the number of print advertising pages increased
32.0% to 11,884 in 2005 from 9,001 in 2004. The increase in revenues from higher
advertisement volumes was partially offset by a decline in our overall average revenue per
page. Our overall average revenue per page declined principally as a result of an increase
in revenue contribution from certain markets in which local prices were lower than our
average. Although the prices that we charged for our print advertising in each city
remained generally stable or moderately increased, we may adjust our sales policy on
promotions and discounts in our cities from time to time.
    
    Online recruitment services.Our online recruitment services revenues
increased 43.0% to RMB159.5 million (US$19.8 million) in 2005 from RMB111.5 million in
2004. This increase was mainly attributable to substantial growth in the number of unique
employers using our online recruitment services. We estimate that the number of unique
employers increased 44.0% to 56,599 in 2005 from 39,317 in 2004. This growth primarily
consisted of an increase in employers placing recruitment advertisements on www.51job.com
and, to a lesser extent, reflected an increase in the use of our eHireweb-based online
resumé and recruitment management platform. Our average revenue per unique employer in
2005 was relatively unchanged from the level in 2004. We believe that the increase in new
online customers, who generally purchase basic, lower priced recruitment advertisements
which drive a decline in our average revenue per unique employer was primarily offset by
the greater number of customers purchasing multiple online recruitment services and the
migration of customers to higher priced products, both factors which would increase our
average revenue per unique employer.
    
    Executive search.Our executive search revenues increased 5.6% to RMB26.3
million (US$3.3 million) in 2005 from RMB24.9 million in 2004, primarily as a result of
greater sales efforts.
    
    Other human resource related revenues. Our revenues from other human
resource related services increased 24.8% to RMB53.5 million (US$6.6 million) in 2005 from
RMB42.9 million in 2004. This increase was primarily attributable to an increase in
training revenues as we conducted a greater number of seminars and courses. In addition,
we believe the increase reflected growing customer acceptance of new services,
particularly our business process outsourcing services. In November 2004, we discontinued
the sale of stationery and offices supplies to our business customers which contributed
revenues of RMB2.2 million (US$0.3 million) in 2005 and RMB12.7 million in 2004.
 Net revenues.
 Cost of services. 51job Weekly
 Gross profit.
 Operating expenses.
 49




---



##### Table of Contents




    
    Sales and marketing expenses.Our sales and marketing expenses increased 69.0% to
RMB113.7 million (US$14.1 million) in 2005 from RMB67.3 million in 2004. This increase was
due to the expansion of our sales and marketing staff, increases in commissions paid to
sales personnel, increases in advertising and promotional expenses, and the addition of
four new sales offices in Changchun, Suzhou, Fuzhou and Zhengzhou in 2005. We calculate the
commissions paid to sales personnel based on a percentage of total revenues generated by
the employee. In addition, we pay bonuses to account executives for achieving and exceeding
certain sales targets. Our advertising and promotion expenses in 2005 increased 72.7% to
RMB21.4 million (US$2.6 million) from RMB12.4 million in 2004 due to a greater number of
promotional events and other activities principally in connection with our expansion into
new markets, and also in connection with a national television advertising campaign we
conducted in early 2005.
    
    General and administrative expenses.Our general and administrative expenses
increased 61.3% to RMB89.0 million (US$11.0 million) in 2005 from RMB55.2 million in 2004.
This increase was primarily due to greater costs incurred in connection with operating as
a public company, higher professional services expenses, and costs associated with the
opening of four new offices opened in 2005, including rent, the hiring of new personnel
and the purchase of office equipment. Contributing also to the increase was compensation
to additional office staff and depreciation and amortization.
    
    Share-based compensation.Our share-based compensation expense included in
operating expenses decreased 30.0% to RMB13.1 million (US$1.6 million) in 2005 from
RMB18.7 million in 2004. We did not recognize any additional deferred share-based
compensation in 2005. Upon adoption of SFAS No. 123R effective January 1, 2006, we expect
to incur higher share-based compensation expense.
 Loss from foreign currency translation.
 Interest and investment income.
 Income tax expense.
 Net income.
 2004 compared to 2003
 Total revenues.
 
    
    Print advertising.Our print advertising revenues increased 64.6% to
RMB300.7 million in 2004 from RMB182.6 million in 2003. This increase was primarily due to
significant growth in recruitment advertisements placed in our editions of 51job Weekly,
which reflected the revenue contribution of the three new markets we entered in 2004, and
our increased penetration of our existing markets through greater direct sales and
marketing efforts. As a result, our estimated number of print advertising pages increased
94.2% to 9,001 in 2004 from 4,635 in 2003. The increase in revenues was largely driven by
the increase in the number of print advertising pages, which was partially offset by a
decline in our overall average revenue per page. Our overall average revenue per page
declined primarily due to an increase in revenue contribution from some of our markets
that generally have lower local prices for recruitment advertisement compared to those
which we realize on average in our other markets and additional revenue contribution from
three new, lower priced markets.
    
    Online recruitment services.Our online recruitment services revenues
increased 44.9% to RMB111.5 million in 2004 from RMB77.0 million in 2003. This increase
was primarily attributable to significant growth in the number of unique employers using
our online recruitment services, partially offset by a decrease in our average revenue per
unique employer. We estimate that the number of unique employers using our online
recruitment services increased 51.9% to 39,317 in 2004 from 25,880 in 2003, primarily as a
result of increased
 50




---



##### Table of Contents



sales and marketing efforts promoting our www.51job.comwebsite and
online recruitment services. We estimate that our average revenue per unique employer
decreased primarily as a result of price reductions in 2004 for certain online products,
generally in the form of discounted introductory and promotional online recruitment
services packages, as well as a significant increase in the number of first-time online
customers, who generally purchase basic, lower priced recruitment advertisements.
    
    Executive search.Our executive search revenues increased 58.2% to RMB24.9
million in 2004 from RMB15.7 million in 2003, primarily as a result of greater sales and
marketing efforts and also, we believe an increased acceptance by employers of executive
search as a recruitment tool.
    
    Other human resource related revenues. Our revenues from other human
resource related services increased 138% to RMB42.9 million in 2004 from RMB18.0 million
in 2003. This increase was primarily driven by growth in training revenues due to an
increase in the number of seminars and human resource conferences we conducted in 2004. In
addition, revenues in 2004 reflected the contribution of new services we introduced in
mid-2003, including our eHRhuman resource management software and business process
outsourcing services, which gained increasing customer acceptance in 2004. In November
2004, we discontinued the sale of stationery and offices supplies to our business
customers which contributed revenues of RMB12.7 million in 2004 and RMB2.2 million in
2003.
 Net revenues.
 Cost of services. 51job Weekly
 Gross profit.
 Operating expenses.
 
    
    Sales and marketing expenses.Our sales and marketing expenses increased
74.2% to RMB67.3 million in 2004 from RMB38.6 million in 2003. This increase was due to
the hiring of additional sales and marketing personnel, commissions to sales personnel,
increased spending on advertising and promotional campaigns, and the addition of three new
offices in Changsha, Hefei and Ningbo in 2004. Our advertising and promotion expenses in
2004 increased 75.2% to RMB12.4 million from RMB7.1 million in 2003 as we increased our
use of direct marketing, event marketing and other forms of promotion principally in
connection with our expansion into new markets.
    
    General and administrative expenses.Our general and administrative expenses
increased 44.7% to RMB55.2 million in 2004 from RMB38.1 million in 2003. This increase was
primarily due to costs incurred in connection with the operation of the three new offices
opened in 2004. In addition, the increase reflected compensation to additional office
staff, professional services expenses, and depreciation and amortization.
    
    Share-based compensation.Our share-based compensation expense included in
operating expenses increased 3.2% to RMB18.7 million in 2004 from RMB18.1 million in 2003.
This increase was due to our recognition of
RMB6.6 million of additional deferred share-based compensation in 2004, principally as a
result of the sale of common shares to one of our directors at a price below fair market
value, which was partially offset by the full amortization of the deferred share-based
compensation that we recognized in connection with our issuance of common shares to our
founders in 2000. For further discussion with respect to our share-based compensation, see
 Critical Accounting Policies  Share-based compensation.
 Interest and investment income.
 Income tax expense.
 51




---



##### Table of Contents



Net income.
 Unaudited Quarterly Results of Operations
   For the three months ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,2005
    
    2005
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    RMBRevenues:Print advertising
    
    
    93,690,402
    
    
    
    90,502,452
    
    
    
    93,099,031
    
    
    
    78,992,763Online recruitment services
    
    
    31,805,222
    
    
    
    38,864,411
    
    
    
    44,443,053
    
    
    
    44,382,236Executive search
    
    
    6,938,222
    
    
    
    7,054,774
    
    
    
    6,326,391
    
    
    
    5,987,354Other human resource related revenues
    
    
    10,256,021
    
    
    
    10,998,124
    
    
    
    16,883,951
    
    
    
    15,369,692Total revenues
    
    
    142,689,867
    
    
    
    147,419,761
    
    
    
    160,752,426
    
    
    
    144,732,045Net revenues
    
    
    134,437,804
    
    
    
    139,164,212
    
    
    
    151,589,980
    
    
    
    136,834,223Cost of services
    
    
    (69,005,139
    )
    
    
    (69,249,300
    )
    
    
    (68,736,494
    )
    
    
    (62,337,450
    )Gross profit
    
    
    65,432,665
    
    
    
    69,914,912
    
    
    
    82,853,486
    
    
    
    74,496,773Operating expenses:Sales and marketing
    
    
    (31,703,792
    )
    
    
    (26,978,660
    )
    
    
    (27,570,088
    )
    
    
    (27,404,175
    )General and administrative
    
    
    (22,358,405
    )
    
    
    (21,207,581
    )
    
    
    (22,198,570
    )
    
    
    (23,214,429
    )Share-based compensation  share option
    
    
    (3,290,803
    )
    
    
    (3,349,954
    )
    
    
    (3,237,445
    )
    
    
    (3,195,278
    )Total operating expenses
    
    
    (57,353,000
    )
    
    
    (51,536,195
    )
    
    
    (53,006,103
    )
    
    
    (53,813,882
    )Income from operations
    
    
    8,079,665
    
    
    
    18,378,717
    
    
    
    29,847,383
    
    
    
    20,682,891Income before income tax provision
    
    
    13,375,127
    
    
    
    23,173,658
    
    
    
    24,940,902
    
    
    
    29,877,650Income tax expense
    
    
    (4,199,835
    )
    
    
    (7,281,976
    )
    
    
    (7,910,392
    )
    
    
    (10,552,830
    )Net income
    
    
    9,175,292
    
    
    
    15,891,682
    
    
    
    17,030,510
    
    
    
    19,324,820Other Financial Information:Aggregate share-based compensation expense(1)
    
    
    (3,671,596
    )
    
    
    (3,759,343
    )
    
    
    (3,597,976
    )
    
    
    (3,524,406
    )
 
 (1)
    
    Aggregate share-based compensation expense includes share-based compensation expense
attributable to cost of services and operating expenses. B. Liquidity and Capital Resources
  52




---



##### Table of Contents



Liquidity
   For the year ended December 31,2003
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    US$Net cash provided by operating activities
    
    
    65,966,668
    
    
    
    105,812,412
    
    
    
    122,025,929
    
    
    
    15,120,558Net cash used in investing activities
    
    
    (20,343,047
    )
    
    
    (13,804,765
    )
    
    
    (54,391,335
    )
    
    
    (6,739,775
    )Net cash provided by (used in) financing activities
    
    
    746,227
    
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    (9,181,677
    )Net increase (decrease) in cash
    
    
    46,446,812
    
    
    
    733,208,100
    
    
    
    (17,659,122
    )
    
    
    (2,188,189
    )
 Cash flows from operating activities.
 Cash flows from investing activities.
 Cash flows from financing activities.
 Capital resources
   53




---



##### Table of Contents



C. Research and Development
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Contractual Obligations
 51job Weekly
  54




---



##### Table of Contents



Operating Lease Commitment
    
    Capital CommitmentPublication
    
    Office
    
    
    
    
    
    Office
    
    Leaseholdfees
    
    premises
    
    Other
    
    complex
    
    improvement
    
    TotalRMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMBLess than one year
    
    
    53,958,833
    
    
    
    23,452,882
    
    
    
    140,005
    
    
    
    90,982,370
    
    
    
    68,182
    
    
    
    168,602,2721-3 years
    
    
    43,784,942
    
    
    
    10,500,551
    
    
    
    151,264
    
    
    
    
    
    
    
    
    
    
    
    54,436,7573-5 years
    
    
    1,865,850
    
    
    
    6,370,410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,236,260More than 5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    99,609,625
    
    
    
    40,323,843
    
    
    
    291,269
    
    
    
    90,982,370
    
    
    
    68,182
    
    
    
    231,275,289
     Recent Accounting Pronouncements
     55




---



##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
   Name
    
    Age
    
    Position / TitleDonald L. Lucas(1) (2)
    
    
    76
    
    
    Chairman of the board and independent directorRick Yan
    
    
    43
    
    
    Director, chief executive officer, president and secretaryDavid K. Chao(1) (2)
    
    
    39
    
    
    Independent directorShan Li(1) (3)
    
    
    42
    
    
    Independent directorKathleen Chien
    
    
    36
    
    
    Chief financial officer and senior vice presidentMichael Lei Feng
    
    
    37
    
    
    Senior vice presidentNorman Lui
    
    
    35
    
    
    Vice presidentTao Wang
    
    
    43
    
    
    Vice presidentDavid Weimin Jin
    
    
    36
    
    
    Vice presidentJones Haijun Yu
    
    
    33
    
    
    Vice president
 
 (1)
    
    Member of audit committee.(2)
    
    Member of compensation committee.(3)
    
    Member of nominating and corporate governance committee.   Biographical Information
 Donald L. Lucas
 Rick Yan
 56




---



##### Table of Contents



David K. Chao
 Shan Li
 Kathleen Chien
 Michael Lei Feng
 Norman Lui
 Tao Wang
 David Weimin Jin
 Jones Haijun Yu
 57




---



##### Table of Contents



B. Compensation
 Compensation of Directors and Executive Officers
   Directors and Officers Liability Insurance
  Employment Agreements
  Stock-Based Compensation Plans
     58




---



##### Table of Contents



Common sharesunderlying options
    
    Exercisegranted
    
    price
    
    Date of grant
    
    Date of expirationUS$Granted in 2003Kathleen Chien
    
    
    200,000
    
    
    
    0.15
    
    
    April 1, 2003
    
    March 31, 2009460,882
    
    
    
    0.50
    
    
    December 15, 2003
    
    December 14, 2009David Weimin Jin
    
    
    65,000
    
    
    
    0.15
    
    
    April 1, 2003
    
    March 31, 2009Other employees
    
    
    250,900
    
    
    
    0.15
    
    
    April 1, 2003
    
    March 31, 20095,000
    
    
    
    0.15
    
    
    September 1, 2003
    
    August 31, 2009364,450
    
    
    
    0.50
    
    
    December 15, 2003
    
    December 14, 20091,346,232Granted in 2004Donald L. Lucas
    
    
    92,176
    
    
    
    1.00
    
    
    February 17, 2004
    
    February 16, 2010138,264
    *
    
    
    1.00
    
    
    February 28, 2004
    
    Not applicableShan Li
    
    
    92,176
    
    
    
    1.00
    
    
    February 28, 2004
    
    February 27, 2010Charles E. Phillips, Jr.
    
    
    92,176
    
    
    
    3.25
    
    
    May 20, 2004
    
    May 19, 2010Other employees
    
    
    53,400
    
    
    
    1.00
    
    
    February 28, 2004
    
    February 27, 2010468,192Granted in 2005Rick Yan
    
    
    160,800
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011David K. Chao
    
    
    40,000
    
    
    
    7.00
    
    
    July 25, 2005
    
    July 24, 2011Kathleen Chien
    
    
    81,600
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Michael Lei Feng
    
    
    50,400
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Norman Lui
    
    
    21,600
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Tao Wang
    
    
    21,600
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011David Weimin Jin
    
    
    40,800
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Jones Haijun Yu
    
    
    31,200
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Other employees
    
    
    271,200
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 201130,000
    
    
    
    6.25
    
    
    November 6, 2005
    
    November 10, 2011749,200
 
 *
    
    These relate to sales of common shares, from those authorized under the stock option plan,
below fair market value. C. Board Practices
  Board Committees
  59




---



##### Table of Contents



Audit committee
   
    
    the appointment, evaluation, compensation, oversight and termination of the
work of our independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting);
    
    ensuring that it receives from our independent auditor a formal written
statement attesting to the auditors independence and describing all relationships between
the auditor and us;
    
    pre-approving any audit and non-audit services, including tax services, to
be provided by our independent auditor in accordance with Nasdaq rules;
    
    reviewing our annual audited financial statements and quarterly financial
statements with management and our independent auditor;
    
    reviewing with our independent auditor all critical accounting policies and
practices to be used by us in preparing our financial statements, all alternative
treatments of financial information within U.S. GAAP, and other material communications
between our independent auditor and management;
    
    reviewing our policies with respect to risk assessment and risk management;
    
    reviewing, with management and counsel, any legal matters that may have a
material impact on us and any material reports or inquiries from regulatory or
governmental agencies; and
    
    establishing procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls, auditing matters or
potential violations of law, and the confidential, anonymous submission by our employees
of concerns regarding questionable accounting or auditing matters or potential violations
of law.
 Nominating and corporate governance committee
   
    
    identifying and recommending to the board nominees for election or
re-election to the board, or for appointment to fill any vacancy;
    
    reviewing annually with the board the current composition of the board in
light of the characteristics of independence, age, skills, experience and availability of
service to us;
    
    reviewing the continued board membership of a director upon a significant
change in such directors principal occupation;
    
    identifying and recommending to the board the names of directors to serve as
members of the audit committee and the compensation committee, as well as the nominating
and corporate governance committee itself;
    
    advising the board periodically with respect to significant developments in
the law and practice of corporate governance as well as our compliance with applicable
laws and regulations, and making recommendations to the board on all matters of corporate
governance and on any corrective action to be taken;
    
    establishing criteria and processes for, and leading the board and each
committee of the board in, its annual performance self-evaluation;
 60




---



##### Table of Contents




    
    reviewing and approving policies and procedures with respect to proposed
transactions between us and our related parties, and approving in advance all such
related-party transactions; and
    
    monitoring compliance with our code of business conduct and ethics,
including reviewing the adequacy and effectiveness of our procedures to ensure proper
compliance.
 Compensation committee
   
    
    approving and overseeing the total compensation package for our executives;
    
    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 this evaluation;
    
    reviewing the results of, and procedures for, the evaluation of the
performance of other executive officers;
    
    reviewing periodically and making recommendations to the board regarding any
long-term incentive compensation or equity plans, programs or similar arrangements, and
administering these plans;
    
    reviewing and making recommendations to the board regarding all new
employment, consulting, retirement and severance agreements and arrangements proposed for
our executives; and
    
    selecting peer groups of companies to be used for purposes of determining
competitive compensation packages.
 Duties of Directors
   
    
    convening shareholders annual general meetings and reporting its work to shareholders at such meetings;
    
    declaring dividends and distributions;
    
    appointing officers and determining the term of office of the officers;
    
    exercising the borrowing powers of our company and mortgaging the property of our company; and
    
    approving the transfer of shares in our company, including the registering
of such shares in our share register.
 Interested Transactions
  61




---



##### Table of Contents



Remuneration and Borrowing
  Qualification
  Terms of Directors and Executive Officers
  Limitation on Liability and Other Indemnification Matters
    62




---



##### Table of Contents



D. Employees
  Sales and account management
    
    
    1,258Marketing and merchandising
    
    
    620Technology and online operations
    
    
    322Customer service and production
    
    
    365Search and training consultants
    
    
    163General and administrative
    
    
    258Total
    
    
    2,986
    *
 
 *
    
    Includes 675 temporary, part-time and contract employees.  E. Share Ownership
  63




---



##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  
    
    by each of our directors and executive officers; and
    
    each person known to us to own beneficially more than 5% of our common shares.
  Common sharesbeneficially ownedNumber
    
    %Directors and executive officers:Rick Yan
    
    
    14,842,818
    
    
    
    25.5David K. Chao(1)
    
    
    10,155,396
    
    
    
    17.4Michael Lei Feng
    
    
    4,410,660
    
    
    
    7.6Norman Lui
    
    
    3,064,403
    
    
    
    5.3Kathleen Chien(2)
    
    
    1,819,750
    
    
    
    3.1Tao Wang
    
    
    573,900
    
    
    
    1.0Donald L. Lucas
    
    
    201,157
    
    
    
    *Shan Li
    
    
    71,693
    
    
    
    *David Weimin Jin
    
    
    59,565
    
    
    
    *Jones Haijun Yu
    
    
    44,100
    
    
    
    *All directors and executive officers as a group
    
    
    35,243,442
    
    
    
    60.5Principal shareholders:Rick Yan
    
    
    14,842,818
    
    
    
    25.5Entities affiliated with DCM  Doll Capital Management(3)
    
    
    9,754,329
    
    
    
    16.7Recruit Co.,
Ltd.(4)
    
    
    8,462,916
    
    
    
    14.5FMR Corp.(5)
    
    
    5,864,000
    
    
    
    10.1Michael Lei Feng
    
    
    4,410,660
    
    
    
    7.6Norman Lui
    
    
    3,064,403
    
    
    
    5.3
 
 (1)
    
    Includes 3,201,171 common shares owned by DCM III, L.P., 84,817 common shares owned by DCM
III-A, L.P., 156,406 common shares owned by DCM Affiliates Fund III, L.P., 5,169,293 common
shares owned by Doll Technology Investment Fund II, L.P., 287,020 common shares owned by DCM
Network Fund, L.P., 530,892 common shares owned by DCM Internet Fund, L.P., and 324,730 Common
shares owned by Doll Technology Affiliates Fund II, L.P. The respective general partners of
these entities are DCM Investment Management III, L.L.C. and Doll Technology Investment
Management II, L.L.C. and share voting and investment power with respect to shares held by
each of the limited partnerships. The managing members of DCM Investment Management III,
L.L.C. are David K. Chao, Dixon R. Doll, Peter Moran and Robert Theis; the managing members of
Doll Technology Investment Management II, L.L.C. are David K. Chao and Dixon R. Doll. Each
managing member disclaims beneficial ownership of shares held by the limited partnerships,
except to the extent of their respective pecuniary interests therein. Also includes 401,067
common shares owned by David K. Chao.(2)
    
    Includes 237,867 common shares acquired through early exercise of options. The exercise price
paid by Ms. Chien to us was recognized as a liability and the shares acquired upon exercise
were not considered issued for accounting purposes until vested.(3)
    
    Name and number of shares owned by each entity affiliated with DCM are described in Note (1)
above.(4)
    
    In April 2006, entities affiliated with DCM, Rick Yan, Michael Lei Feng, and Norman Lui, and
Kathleen Chien entered into a share purchase agreement with Recruit.(5)
    
    Based on their Schedule 13F-HR filing with the Securities and Exchange Commission for the
period ended March 31, 2006.*
    
    Less than 1%.  64




---



##### Table of Contents



B. Related Party Transactions
 Stock Option Grants
  Loans and Advances
     Business Alliance with Recruit
  65




---



##### Table of Contents



Transactions Among Our Subsidiaries and Affiliated Entities
  C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  www.51job.com
 Dividend Policy
   66




---



##### Table of Contents



B. Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 A. Offer and Listing Details
   Sales priceHigh
    
    LowUS$
    

US$Annual highs and lows2004(1)
    
    
    55.55
    
    
    
    18.612005
    
    
    53.50
    
    
    
    9.71Quarterly highs and lowsFourth quarter 2004
    
    
    55.55
    
    
    
    20.35First quarter 2005
    
    
    53.50
    
    
    
    14.90Second quarter 2005
    
    
    21.22
    
    
    
    12.21Third quarter 2005
    
    
    15.91
    
    
    
    12.25Fourth quarter 2005
    
    
    15.60
    
    
    
    9.71First quarter 2006
    
    
    19.49
    
    
    
    14.40Monthly highs and lowsDecember 2005
    
    
    15.60
    
    
    
    13.16January 2006
    
    
    18.90
    
    
    
    14.60February 2006
    
    
    19.49
    
    
    
    15.90March 2006
    
    
    16.50
    
    
    
    14.40April 2006
    
    
    25.60
    
    
    
    15.50May 2006
    
    
    31.90
    
    
    
    23.54June 2006 (through June 26, 2006)
    
    
    28.50
    
    
    
    18.75
 
 (1)
    
    Our ADSs commenced trading on September 29, 2004. B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  67




---



##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
   D. Exchange Controls
     68




---



##### Table of Contents



E. Taxation
 Cayman Islands Taxation
  United States Federal Income Taxation
   
    
    dealers in securities or currencies;
    
    financial institutions;
    
    real estate investment trusts;
    
    insurance companies;
    
    tax-exempt organizations;
    
    persons holding ADSs or common shares as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;
    
    traders in securities that have elected the mark to market method of accounting;
    
    persons liable for the alternative minimum tax;
    
    a partnership or other pass-through entity for United Stated federal income tax purposes;
    
    persons who own more than 10% of our voting shares; or
    
    persons whose functional currency is not the U.S. dollar.
    
    
    an individual citizen or resident of the United States;
    
    a corporation or other entity taxable as a corporation 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 U.S. federal income taxation,
regardless of its source; or
    
    a trust if it is subject to the primary supervision of a court within the
United States and one or more U.S. persons have the authority to control all substantial
decisions of the trust or if the trust has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person.
  69




---



##### Table of Contents



ADSs
  Distributions on ADSs or common shares
  
    
    a foreign corporation that is eligible for the benefits of a comprehensive
income tax treaty with the United States that includes an exchange of information program;
and
    
    a foreign corporation if its stock with respect to which a dividend is paid
or its ADSs backed by such stock are readily tradable on an established securities market
within the United States,
     Sale, exchange or other disposition of ADSs or common shares
  Passive foreign investment company rules
  70




---



##### Table of Contents



Information reporting and backup withholding
  71




---



##### Table of Contents



Enforceability of Civil Liabilities
       F. Dividends and Paying Agents
  G. Statements by Experts
  H. Documents on Display
  72




---



##### Table of Contents



www.sec.gov
   I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest rate risk
   Foreign exchange risk
  73




---



##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  74




---



##### Table of Contents



PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS
 Use of Proceeds
    
 ITEM 15. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  75




---



##### Table of Contents



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
 ir.51job.com
 
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  Pre-Approved Policies and Procedures
  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  76




---



##### Table of Contents



ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  Approximate dollar value ofTotal number of
    
    Average price paid
    
    ADSs that may yet bePeriod
    
    ADSs purchased
    
    per share
    

purchased
under the programUS$
    
    RMB(1)
    
    US$
    
    RMB(1)January 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    July 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 2005
    
    
    201,905
    
    
    
    14.00
    
    
    
    112.98
    
    
    
    22,173,000
    
    
    
    178,941,000September 2005
    
    
    30,000
    
    
    
    14.21
    
    
    
    114.68
    
    
    
    21,746,000
    
    
    
    175,495,000October 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,746,000
    
    
    
    175,495,000November 2005
    
    
    280,500
    
    
    
    13.24
    
    
    
    106.85
    
    
    
    18,032,000
    
    
    
    145,522,000December 2005
    
    
    174,033
    
    
    
    13.62
    
    
    
    109.92
    
    
    
    15,661,000
    
    
    
    126,387,000
 
 (1)
    
    Translations from U.S. dollars to Renminbi were made at the noon buying rate in The City of
New York for cable transfers of Renminbi as certified for customs purposes by the Federal
Reserve Bank of New York. The translations of U.S. dollar amounts into Renminbi amounts have
been made at the noon buying rate in effect on December 30, 2005, which was US$1.00 to
RMB8.0702.  77




---



##### Table of Contents



PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBIT INDEX
 Exhibits
    
    Description1.
    1
    
    
    Amended and Restated Memorandum and Articles of Association.
(Incorporated by reference to Exhibit 3.1 from our
Registration Statement on Form F-1 (File No. 333-117194)
filed with the Securities and Exchange Commission on July 7,
2004)2.
    1
    
    
    Specimen of Share Certificate. (Incorporated by reference to
Exhibit 4.1 from our Registration Statement on Form F-1 (File
No. 333-117194) filed with the Securities and Exchange
Commission on July 7, 2004)2.
    2
    
    
    Specimen of American Depositary Receipt. (Incorporated by
reference to Exhibit 4.2 from our Registration Statement on
Form F-1 (File No. 333-117194) filed with the Securities and
Exchange Commission on August 2, 2004)2.
    3
    
    
    Form of Deposit Agreement among 51job, Inc., JPMorgan Chase
Bank, as Depositary, and Holders and Beneficial Holders from
time to time of American Depositary Shares evidenced by
American Depositary Receipts issued thereunder, including the
form of American Depositary Receipt. (Incorporated by
reference to the Registration Statement on Form F-6 (File No.
333-117254) filed with the Securities and Exchange Commission
with respect to American Depositary Shares representing
common shares on July 9, 2004)4.
    1
    
    
    2000 Stock Option Plan. (Incorporated by reference to Exhibit
10.1 from our Registration Statement on Form F-1 (File No.
333-117194) filed with the Securities and Exchange Commission
on July 7, 2004)4.
    2
    
    
    Form of Employment, Confidential Information and Invention
Assignment Agreement. (Incorporated by reference to Exhibit
10.2 from our Registration Statement on Form F-1 (File No.
333-117194) filed with the Securities and Exchange Commission
on July 7, 2004)4.
    3
    
    
    Form of Indemnification Agreement. (Incorporated by reference
to Exhibit 10.3 from our Registration Statement on Form F-1
(File No. 333-117194) filed with the Securities and Exchange
Commission on July 7, 2004)4.
    4*
    
    
    Lease Agreements between Shanghai Qianjin Culture
Communication Co., Ltd. (name changed to Shanghai Qianjin
Advertising Co., Ltd. in November 2005) and (1) Shanghai
Wailao Property Management Service Co., Ltd. (dated as of
November 21, 2003); and (2) Shanghai Xiesheng Industry Co.,
Ltd. (dated as of June 3, 2003)4.
    5*
    
    
    Lease Agreement dated as of March 11, 2005, as amended as of
July 2005, between Shanghai Qianjin Culture Communication
Co., Ltd. (name changed to Shanghai Qianjin Advertising Co.,
Ltd. in November 2005) and Zhang Ling4.
    6*
    
    
    Lease Agreements dated as of February 21, 2005 between
Qianjin Network Information Technology (Shanghai) Co., Ltd.
and Shanghai Golden Union Real Estate Management Co., Ltd.4.
    7*
    
    
    Summary of the Shanghai Commercial Building Advance Sale
Contracts dated as of December 31, 2005 between Shanghai
Zhangjiang Ji Cheng Dian Lu Industrial Area Development Co.,
Ltd. and entities of 51job, Inc.4.
    8
    
    
    Form of Investor Rights Agreement. (Incorporated by reference
to Exhibit 10.5 from our Registration Statement on Form F-1
(File No. 333-117194) filed with the Securities and Exchange
Commission on July 7, 2004)
 78




---



##### Table of Contents



Exhibits
    
    Description4.
    9
    
    
    Technical and Consulting Service Agreement dated as of May 3, 2004, as
amended as of July 2, 2004, between Shanghai Run An Lian Information
Consultancy Co., Ltd. and Qian Cheng Wu You Network Information Technology
(Beijing) Co., Ltd. (Incorporated by reference to Exhibit 10.7 from our
Registration Statement on Form F-1 (File No. 333-117194) filed with the
Securities and Exchange Commission on July 7, 2004)4.
    10
    
    
    Technical and Consulting Service Agreement dated as of May 3, 2004, as
amended as of July 2, 2004, between Beijing Qian Cheng Si Jin Advertising
Co., Ltd. and Qian Cheng Wu You Network Information Technology (Beijing)
Co., Ltd. (Incorporated by reference to Exhibit 10.8 from our Registration
Statement on Form F-1 (File No. 333-117194) filed with the Securities and
Exchange Commission on July 7, 2004)4.
    11
    
    
    Equity Pledge Agreement dated as of May 3, 2004 among Michael Lei Feng,
Tao Wang and Qian Cheng Wu You Network Information Technology (Beijing)
Co., Ltd. (Incorporated by reference to Exhibit 10.9 from our Registration
Statement on Form F-1 (File No. 333-117194) filed with the Securities and
Exchange Commission on July 7, 2004)4.
    12
    
    
    Equity Pledge Agreement dated as of May 3, 2004 among Michael Lei Feng,
Beijing Run An Information Consultancy Co., Ltd. and Qian Cheng Wu You
Network Information Technology (Beijing) Co., Ltd. (Incorporated by
reference to Exhibit 10.10 from our Registration Statement on Form F-1
(File No. 333-117194) filed with the Securities and Exchange Commission on
July 7, 2004)4.
    13
    
    
    Cooperation Agreement dated as of May 3, 2004 between Shanghai Run An Lian
Information Consultancy Co., Ltd. and Qianjin Network Information
Technology (Shanghai) Co., Ltd. (Incorporated by reference to Exhibit
10.11 from our Registration Statement on Form F-1 (File No. 333-117194)
filed with the Securities and Exchange Commission on July 7, 2004)4.
    14*
    
    
    Amendment Notice to the Cooperation Agreement dated as of April 1, 2006
between Shanghai Run An Lian Information Consultancy Co., Ltd. and Qianjin
Network Information Technology (Shanghai) Co., Ltd.4.
    15
    
    
    Domain Name License Agreement dated as of May 3, 2004 between Shanghai Run
An Lian Information Consultancy Co., Ltd. and 51net.com Inc. (Incorporated
by reference to Exhibit 10.12 from our Registration Statement on Form F-1
(File No. 333-117194) filed with the Securities and Exchange Commission on
July 7, 2004)4.
    16
    
    
    Call Option Agreement dated as of August 1, 2002, as supplemented and
amended as of May 3, 2004, between Beijing Qian Cheng Si Jin Advertising
Co., Ltd. and 51net.com Inc. (Incorporated by reference to Exhibit 10.13
from our Registration Statement on Form F-1 (File No. 333-117194) filed
with the Securities and Exchange Commission on July 7, 2004)4.
    17
    
    
    Share Transfer Agreement dated as of April 5, 2004 among Wuhan Mei Hao
Qian Cheng Advertising Co., Ltd., 51net.com Inc. and Beijing Qian Cheng Si
Jin Advertising Co., Ltd. (Incorporated by reference to Exhibit 10.14 from
our Registration Statement on Form F-1 (File No. 333-117194) filed with
the Securities and Exchange Commission on July 7, 2004)4.
    18*
    
    
    Business Alliance Agreement dated as of April 5, 2006 between 51job, Inc.
and Recruit Co., Ltd.8.
    1*
    
    
    List of subsidiaries of 51job, Inc.11.
    1
    
    
    Code of Business Conduct and Ethics. (Incorporated by reference to Exhibit
10.6 from our Registration Statement on Form F-1 (File No. 333-117194)
filed with the Securities and Exchange Commission on July 7, 2004)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 annual report on Form 20-F. 79




---



##### Table of Contents



SIGNATURES
  51job, Inc.By:
    
    /s/ Rick YanName:
    
    Rick YanTitle:
    
    President and Chief Executive Officer




---



##### Table of Contents



51JOB, INC.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Statements of Operations and Comprehensive Income for the years ended
December 31, 2003, 2004 and 2005
    
    
    F-3Consolidated Balance Sheets as of December 31, 2004 and 2005
    
    
    F-4Consolidated Statements of Shareholders Equity for the years ended December 31, 2003, 2004
and 2005
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2004 and 2005
    
    
    F-6Notes to the Consolidated Financial Statements for the years ended December 31, 2003, 2004
and 2005
    
    
    F-7Additional Information  Financial Statement Schedule I
    
    
    F-25
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
51JOB, INC.:
  
 F-2




---



##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Note
    
    2003
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    US$ (Note 2(c))Revenues:Print advertising
    
    
    
    
    
    
    182,606,297
    
    
    
    300,651,791
    
    
    
    356,284,649
    
    
    
    44,148,181Online recruitment services
    
    
    
    
    
    
    76,960,121
    
    
    
    111,508,533
    
    
    
    159,494,922
    
    
    
    19,763,441Executive search
    
    
    
    
    
    
    15,748,331
    
    
    
    24,907,914
    
    
    
    26,306,740
    
    
    
    3,259,738Other human resource related revenues
    
    
    
    
    
    
    18,019,611
    
    
    
    42,875,597
    
    
    
    53,507,789
    
    
    
    6,630,293Total revenues
    
    
    
    
    
    
    293,334,360
    
    
    
    479,943,835
    
    
    
    595,594,100
    
    
    
    73,801,653Less: Business and related taxes
    
    
    
    
    
    
    (13,215,419
    )
    
    
    (23,823,953
    )
    
    
    (33,567,880
    )
    
    
    (4,159,485
    )Net revenues
    
    
    
    
    
    
    280,118,941
    
    
    
    456,119,882
    
    
    
    562,026,220
    
    
    
    69,642,168Cost of services
    
    
    
    
    
    
    (151,477,142
    )
    
    
    (224,606,635
    )
    
    
    (269,328,384
    )
    
    
    (33,373,198
    )Gross profit
    
    
    
    
    
    
    128,641,799
    
    
    
    231,513,247
    
    
    
    292,697,836
    
    
    
    36,268,970Operating expenses:Sales and marketing
    
    
    
    
    
    
    (38,619,523
    )
    
    
    (67,271,096
    )
    
    
    (113,656,714
    )
    
    
    (14,083,507
    )General and administrative
    
    
    
    
    
    
    (38,135,612
    )
    
    
    (55,175,493
    )
    
    
    (88,978,985
    )
    
    
    (11,025,623
    )Share-based compensation  share option (1)
    
    
    
    
    
    
    (13,482,546
    )
    
    
    (18,678,238
    )
    
    
    (13,073,480
    )
    
    
    (1,619,970
    )Share-based compensation  founder shares (2)
    
    
    
    
    
    
    (4,622,466
    )
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    
    
    
    
    (94,860,147
    )
    
    
    (141,124,827
    )
    
    
    (215,709,179
    )
    
    
    (26,729,100
    )Income from operations
    
    
    
    
    
    
    33,781,652
    
    
    
    90,388,420
    
    
    
    76,988,657
    
    
    
    9,539,870Loss from foreign currency translation
    
    
    
    
    
    
    (3,456
    )
    
    
    (2,158
    )
    
    
    (11,320,194
    )
    
    
    (1,402,715
    )Interest and investment income
    
    
    
    
    
    
    930,288
    
    
    
    2,846,422
    
    
    
    20,385,151
    
    
    
    2,525,978Other income
    
    
    
    
    
    
    1,083,790
    
    
    
    1,968,532
    
    
    
    5,313,723
    
    
    
    658,437Income before provision for income tax
    
    
    
    
    
    
    35,792,274
    
    
    
    95,201,216
    
    
    
    91,367,337
    
    
    
    11,321,570Income tax expense
    
    
    8
    
    
    
    (3,192,011
    )
    
    
    (34,058,184
    )
    
    
    (29,945,033
    )
    
    
    (3,710,569
    )Net income for the year
    
    
    
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    7,611,001Amount allocated to participating preference
shareholders
    
    
    14
    
    
    
    (10,615,466
    )
    
    
    (13,986,417
    )
    
    
    
    
    
    
    Income attributable for common shareholders
    
    
    
    
    
    
    21,984,797
    
    
    
    47,156,615
    
    
    
    61,422,304
    
    
    
    7,611,001Other comprehensive income:Currency translation adjustments
    
    
    
    
    
    
    76,964
    
    
    
    236,144
    
    
    
    387,496
    
    
    
    48,016Unrealized loss for investment
    
    
    
    
    
    
    (279,532
    )
    
    
    (299,451
    )
    
    
    (204,011
    )
    
    
    (25,280
    )Comprehensive income
    
    
    
    
    
    
    32,397,695
    
    
    
    61,079,725
    
    
    
    61,605,789
    
    
    
    7,633,737Earnings per share:
    
    
    14 Basic
    
    
    
    
    
    
    0.83
    
    
    
    1.32
    
    
    
    1.10
    
    
    
    0.14 Diluted
    
    
    
    
    
    
    0.75
    
    
    
    1.26
    
    
    
    1.07
    
    
    
    0.13Earnings per ADS (3)
 Basic
    
    
    
    
    
    
    1.65
    
    
    
    2.65
    
    
    
    2.21
    
    
    
    0.27 Diluted
    
    
    
    
    
    
    1.50
    
    
    
    2.52
    
    
    
    2.15
    
    
    
    0.27Weighted average number of shares outstanding: Basic
    
    
    
    
    
    
    26,594,228
    
    
    
    35,593,374
    
    
    
    55,607,716
    
    
    
    55,607,716 Diluted
    
    
    
    
    
    
    29,323,325
    
    
    
    37,483,019
    
    
    
    57,254,454
    
    
    
    57,254,454(1) Share-based compensation  share options:Included in cost of services
    
    
    
    
    
    
    596,551
    
    
    
    1,811,496
    
    
    
    1,479,841
    
    
    
    183,371Included in operating expenses Sales and marketing
    
    
    
    
    
    
    423,221
    
    
    
    1,757,722
    
    
    
    1,438,083
    
    
    
    178,197 General and administrative
    
    
    
    
    
    
    13,059,325
    
    
    
    16,920,516
    
    
    
    11,635,397
    
    
    
    1,441,773
 (2)
    
    All share-based compensation  founder shares is a component of general and administrative
expense.(3)
    
    Each ADS represents two common shares.  F-3




---



##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2004 AND 2005
 Note
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    US$ (Note 2(c))ASSETSCurrent assets:Cash
    
    
    
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    102,926,018Short-term investments
    
    
    2
    (f)
    
    
    
    
    
    
    10,554,529
    
    
    
    1,307,840Accounts receivable (net of allowance
for doubtful accounts of RMB3,689,222
and RMB2,860,275 as of December 31,
2004 and 2005, respectively)
    
    
    3
    
    
    
    23,252,468
    
    
    
    22,222,865
    
    
    
    2,753,694Prepayments and other current assets
    
    
    4
    
    
    
    14,675,948
    
    
    
    23,265,437
    
    
    
    2,882,882Deferred tax assets, current
    
    
    8
    
    
    
    7,426,098
    
    
    
    5,867,820
    
    
    
    727,097Total current assets
    
    
    
    
    
    
    893,647,186
    
    
    
    892,544,201
    
    
    
    110,597,531Investments
    
    
    2
    (f)
    
    
    10,495,490
    
    
    
    
    
    
    
    Property and equipment
    
    
    5
    
    
    
    22,534,875
    
    
    
    32,357,875
    
    
    
    4,009,551Intangible assets
    
    
    6
    
    
    
    6,126,749
    
    
    
    11,380,835
    
    
    
    1,410,230Other long-term assets
    
    
    
    
    
    
    4,201,919
    
    
    
    26,724,335
    
    
    
    3,311,484Deferred tax assets, non-current
    
    
    8
    
    
    
    376,122
    
    
    
    412,314
    
    
    
    51,091Total non-current assets
    
    
    
    
    
    
    43,735,155
    
    
    
    70,875,359
    
    
    
    8,782,356Total assets
    
    
    
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    119,379,887LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    
    
    
    
    9,820,033
    
    
    
    7,358,046
    
    
    
    911,755Due to related parties
    
    
    13
    
    
    
    1,577,873
    
    
    
    1,505,515
    
    
    
    186,552Salary and employee related accrual
    
    
    
    
    
    
    11,698,665
    
    
    
    19,339,789
    
    
    
    2,396,445Taxes payable
    
    
    
    
    
    
    30,586,768
    
    
    
    23,201,967
    
    
    
    2,875,017Advance from customers
    
    
    
    
    
    
    17,777,757
    
    
    
    40,619,516
    
    
    
    5,033,273Other payables and accruals
    
    
    7
    
    
    
    13,933,686
    
    
    
    17,515,264
    
    
    
    2,170,363Deferred tax liabilities, current
    
    
    8
    
    
    
    169,237
    
    
    
    
    
    
    
    Total current liabilities
    
    
    
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    13,573,405Total liabilities
    
    
    
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    13,573,405Commitments and contingencies
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity:Common shares (US$0.0001 par value;
500,000,000 shares authorized,
55,616,679 and 54,876,079 shares
issued and outstanding as of December
31, 2004 and 2005, respectively)
    
    
    9
    
    
    
    46,044
    
    
    
    45,451
    
    
    
    5,632Additional paid-in capital
    
    
    
    
    
    
    869,125,807
    
    
    
    848,423,068
    
    
    
    105,130,365Deferred share-based compensation
    
    
    11
    
    
    
    (40,154,027
    )
    
    
    (23,141,471
    )
    
    
    (2,867,521
    )Statutory reserves
    
    
    
    
    
    
    16,756,461
    
    
    
    3,680,707
    
    
    
    456,086Other comprehensive loss
    
    
    
    
    
    
    (501,659
    )
    
    
    (318,174
    )
    
    
    (39,426
    )Retained earnings
    
    
    
    
    
    
    6,545,696
    
    
    
    25,189,882
    
    
    
    3,121,346Total shareholders equity
    
    
    
    
    
    
    851,818,322
    
    
    
    853,879,463
    
    
    
    105,806,482Total liabilities and shareholders equity
    
    
    
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    119,379,887
  F-4




---



##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Additional
    
    Additional
    
    Deferred
    
    DeferredSeries A Preference
    
    paid-in
    
    paid-in
    
    share-based
    
    share-based
    
    
    
    
    
    
    
    
    
    RetainedCommon shares
    
    Shares
    
    capital
    
    capital
    
    compensation
    
    compensation
    
    
    
    
    
    Other
    
    earnings /
    
    TotalNumber
    
    
    
    
    
    Number
    
    
    
    
    
    common
    
    preference
    
    founder
    
    common
    
    Statutory
    
    comprehensive
    
    (Accumulated
    
    shareholders'of shares
    
    Par value
    
    of shares
    
    Par value
    
    shares
    
    shares
    
    shares
    
    shares
    
    reserves
    
    income
    
    deficit)
    
    equityRMB
    
    
    
    
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMBBalance as of January 1, 2003
    
    
    28,304,781
    
    
    
    23,427
    
    
    
    13,678,466
    
    
    
    11,332
    
    
    
    36,504,160
    
    
    
    116,364,516
    
    
    
    (4,622,466
    )
    
    
    
    
    
    
    871,270
    
    
    
    (235,783
    )
    
    
    (71,312,408
    )
    
    
    77,604,048Share-based compensation 
founder shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,622,466
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,622,466Share-based compensation 
share option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,417,377
    
    
    
    
    
    
    
    
    
    
    
    (46,338,280
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,079,097Exercise of share options
    
    
    467,334
    
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    580,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    581,249Appropriation of statutory
reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,599,128
    
    
    
    
    
    
    
    (8,599,128
    )
    
    
    Adjustment of other
comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (202,568
    )
    
    
    
    
    
    
    (202,568
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,600,263
    
    
    
    32,600,263Balance as of December 31, 2003
    
    
    28,772,115
    
    
    
    23,816
    
    
    
    13,678,466
    
    
    
    11,332
    
    
    
    97,502,397
    
    
    
    116,364,516
    
    
    
    
    
    
    
    (46,338,280
    )
    
    
    9,470,398
    
    
    
    (438,351
    )
    
    
    (47,311,273
    )
    
    
    129,284,555Exercise of share options
    
    
    711,098
    
    
    
    588
    
    
    
    
    
    
    
    
    
    
    
    2,190,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,190,852Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    380,000
    
    
    
    314
    
    
    
    
    
    
    
    3,276,142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,276,456Conversion of Series A
Preference Shares to common
shares
    
    
    14,058,466
    
    
    
    11,646
    
    
    
    (14,058,466
    )
    
    
    (11,646
    )
    
    
    119,640,658
    
    
    
    (119,640,658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares
    
    
    12,075,000
    
    
    
    9,994
    
    
    
    
    
    
    
    
    
    
    
    635,487,007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635,497,001Share-based compensation 
share option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,305,481
    
    
    
    
    
    
    
    
    
    
    
    6,184,253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,489,734Appropriation of statutory
reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,286,063
    
    
    
    
    
    
    
    (7,286,063
    )
    
    
    Adjustment of other
comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,308
    )
    
    
    
    
    
    
    (63,308
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,143,032
    
    
    
    61,143,032Balance as of December 31, 2004
    
    
    55,616,679
    
    
    
    46,044
    
    
    
    
    
    
    
    
    
    
    
    869,125,807
    
    
    
    
    
    
    
    
    
    
    
    (40,154,027
    )
    
    
    16,756,461
    
    
    
    (501,659
    )
    
    
    6,545,696
    
    
    
    851,818,322Exercise of share options
    
    
    632,276
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    1,545,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546,028Share-based compensation 
share option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,459,235
    )
    
    
    
    
    
    
    
    
    
    
    17,012,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,553,321Reversal of statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,075,754
    )
    
    
    
    
    
    
    13,075,754
    
    
    
    Repurchase of common shares
    
    
    (1,372,876
    )
    
    
    (1,103
    )
    
    
    
    
    
    
    
    
    
    
    (19,789,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,853,872
    )
    
    
    (75,643,997
    )Adjustment of other
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,485
    
    
    
    
    
    
    
    183,485Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,422,304
    
    
    
    61,422,304Balance as of December 31, 2005
    
    
    54,876,079
    
    
    
    45,451
    
    
    
    
    
    
    
    
    
    
    
    848,423,068
    
    
    
    
    
    
    
    
    
    
    
    (23,141,471
    )
    
    
    3,680,707
    
    
    
    (318,174
    )
    
    
    25,189,882
    
    
    
    853,879,463Balance as of December 31,
2005 (US$ Note 2(c))
    
    
    54,876,079
    
    
    
    5,632
    
    
    
    
    
    
    
    
    
    
    
    105,130,365
    
    
    
    
    
    
    
    
    
    
    
    (2,867,521
    )
    
    
    456,086
    
    
    
    (39,426
    )
    
    
    3,121,345
    
    
    
    105,806,481
  F-5




---



##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Note
    
    2003
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    US$ (Note 2(c))Cash flows from operating activities:Net income for the year
    
    
    
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    7,611,001Adjustments for:Share-based compensation
    
    
    
    
    
    
    18,701,563
    
    
    
    20,489,734
    
    
    
    14,553,321
    
    
    
    1,803,341Depreciation
    
    
    
    
    
    
    4,677,763
    
    
    
    7,235,708
    
    
    
    13,070,492
    
    
    
    1,619,600Amortization of intangible assets
    
    
    
    
    
    
    3,230,360
    
    
    
    3,383,828
    
    
    
    3,234,693
    
    
    
    400,819Loss due to disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    85,717
    
    
    
    259,064
    
    
    
    32,101Loss from foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,320,193
    
    
    
    1,402,715(Increase) Decrease in accounts receivable
    
    
    
    
    
    
    (12,441,388
    )
    
    
    (5,833,220
    )
    
    
    1,029,603
    
    
    
    127,581Increase in prepayments and other current assets
    
    
    
    
    
    
    (4,882,969
    )
    
    
    (6,018,815
    )
    
    
    (8,589,489
    )
    
    
    (1,064,346
    )(Increase) Decrease in deferred tax assets
    
    
    
    
    
    
    (2,344,088
    )
    
    
    (3,238,432
    )
    
    
    1,522,086
    
    
    
    188,606Increase (Decrease) in accounts payable
    
    
    
    
    
    
    3,599,055
    
    
    
    (1,320,004
    )
    
    
    (2,461,987
    )
    
    
    (305,071
    )Increase (Decrease) in due to related parties
    
    
    
    
    
    
    2,275,186
    
    
    
    (4,926,900
    )
    
    
    (72,358
    )
    
    
    (8,966
    )Increase in salary and employee related accrual
    
    
    
    
    
    
    869,958
    
    
    
    2,234,180
    
    
    
    7,641,124
    
    
    
    946,832Increase (Decrease) in deferred tax liabilities
    
    
    
    
    
    
    2,305,435
    
    
    
    (2,168,278
    )
    
    
    (169,237
    )
    
    
    (20,971
    )Increase (Decrease) in taxes payable
    
    
    
    
    
    
    3,725,353
    
    
    
    24,550,704
    
    
    
    (7,384,801
    )
    
    
    (915,070
    )Increase in advance from customers
    
    
    
    
    
    
    10,652,869
    
    
    
    329,926
    
    
    
    22,841,759
    
    
    
    2,830,383Increase in other payables and accruals
    
    
    
    
    
    
    3,720,404
    
    
    
    10,428,733
    
    
    
    3,581,578
    
    
    
    443,803(Increase) Decrease in other long-term assets
    
    
    
    
    
    
    (723,096
    )
    
    
    (563,501
    )
    
    
    227,584
    
    
    
    28,200Net cash provided by operating activities
    
    
    
    
    
    
    65,966,668
    
    
    
    105,812,412
    
    
    
    122,025,929
    
    
    
    15,120,558Cash flows from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (8,839,759
    )
    
    
    (12,006,783
    )
    
    
    (45,902,556
    )
    
    
    (5,687,908
    )Purchase of intangible assets
    
    
    
    
    
    
    (770,947
    )
    
    
    (1,797,982
    )
    
    
    (8,488,779
    )
    
    
    (1,051,867
    )Purchase of investments
    
    
    
    
    
    
    (10,732,341
    )
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (20,343,047
    )
    
    
    (13,804,765
    )
    
    
    (54,391,335
    )
    
    
    (6,739,775
    )Cash flows from financing activities:Proceeds from issuance of Series A Preference
Shares, net of issuance cost
    
    
    
    
    
    
    
    
    
    
    3,276,456
    
    
    
    
    
    
    
    Proceeds from initial public offering, net of
issuance cost paid
    
    
    
    
    
    
    
    
    
    
    635,497,001
    
    
    
    
    
    
    
    Repurchase of common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75,643,997
    )
    
    
    (9,373,249
    )Proceeds from the exercise of options
    
    
    
    
    
    
    746,227
    
    
    
    2,190,852
    
    
    
    1,546,028
    
    
    
    191,572Net cash provided by (used in) financing activities
    
    
    
    
    
    
    746,227
    
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    (9,181,677
    )Effect of foreign exchange rate changes on cash
    
    
    
    
    
    
    76,964
    
    
    
    236,144
    
    
    
    (11,195,747
    )
    
    
    (1,387,295
    )Net increase (decrease) in cash
    
    
    
    
    
    
    46,446,812
    
    
    
    733,208,100
    
    
    
    (17,659,122
    )
    
    
    (2,188,189
    )Cash, beginning of year
    
    
    
    
    
    
    68,637,760
    
    
    
    115,084,572
    
    
    
    848,292,672
    
    
    
    105,114,207Cash, end of year
    
    
    
    
    
    
    115,084,572
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    102,926,018Supplemental disclosure of cash flow information:Cash paid during the years for:Income taxes
    
    
    
    
    
    
    1,900,000
    
    
    
    14,703,548
    
    
    
    41,598,483
    
    
    
    5,154,579Interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Supplemental disclosure of non-cash investing
activities:Accrual related to purchase of property, equipment
and software
    
    
    
    
    
    
    2,748,970
    
    
    
    (4,577,286
    )
    
    
    
    
    
    
    Conversion of Series A Preference Shares to common
shares
    
    
    
    
    
    
    
    
    
    
    119,652,304
    
    
    
    
    
    
    
    Accrual related to IPO costs
    
    
    
    
    
    
    
    
    
    
    2,053,164
    
    
    
    (2,053,164
    )
    
    
    (254,413
    )
  F-6




---



##### Table of Contents



51JOB, INC.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 1. ORGANIZATION AND NATURE OF OPERATIONS
        F-7




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 2. PRINCIPAL ACCOUNTING POLICIES
 (a) Basis of presentation
   (b) Basis of consolidation
        F-8




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  Technical and Consulting Service Agreements.
 Pledge and Control Agreements.
 (c) Foreign currencies
   (d) Cash
  F-9




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 (e) Accounts receivable
  (f) Investments
  (g) Property and equipment
  Estimated useful livesLeasehold improvements
    
    Lesser of the lease period or
the estimated useful lifeComputer equipment
    
    5 yearsFurniture and fixtures
    
    5 yearsMotor vehicles
    
    5 years
 (h) Intangible assets
    (i) Impairment of long-lived assets
  F-10




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 (j) Revenue recognition
 Print advertising
  Online recruitment services
 www.51job.com
 Executive search
  Other human resource related revenues
  Business and related taxes
  (k) Cost of services
  (l) Sales and marketing
  F-11




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 (m) Share-based compensation
   2003
    
    2004
    
    2005RMB
    
    RMB
    
    RMBNet income as reported
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304Add: Share-based compensation expense under APB No. 25
    
    
    18,701,563
    
    
    
    20,489,734
    
    
    
    14,553,321Less: Share-based compensation expense under SFAS No. 123
    
    
    (19,184,475
    )
    
    
    (20,980,215
    )
    
    
    (21,557,770
    )Pro forma net income
    
    
    32,117,351
    
    
    
    60,652,551
    
    
    
    54,417,855Basic earnings per share:As reported
    
    
    0.83
    
    
    
    1.32
    
    
    
    1.10Pro forma
    
    
    0.81
    
    
    
    1.31
    
    
    
    0.98Basic earnings per ADS:As reported
    
    
    1.65
    
    
    
    2.65
    
    
    
    2.21Pro forma
    
    
    1.63
    
    
    
    2.63
    
    
    
    1.96Diluted earnings per share:As reported
    
    
    0.75
    
    
    
    1.26
    
    
    
    1.07Pro forma
    
    
    0.74
    
    
    
    1.25
    
    
    
    0.95Diluted earnings per ADS:As reported
    
    
    1.50
    
    
    
    2.52
    
    
    
    2.15Pro forma
    
    
    1.48
    
    
    
    2.50
    
    
    
    1.90
  F-12




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  2003
    
    2004
    
    2005Risk-free interest rate
    
    2.65%
    
    2.65%
    
    3.87%-4.53%Expected life (years)
    
    6
    
    6
    
    4Expected dividend yield
    
    0%
    
    0%
    
    0%Volatility
    
    0%
    
    0%
    
    90%-100%Weighted average of fair value of options at grant date
    
    RMB37.59
    
    RMB42.46
    
    RMB44.42
 (n) Operating leases
  (o) Taxation
  (p) Statutory reserves
    F-13




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
    (q) Dividend
  (r) Earnings per share
  (s) Segment reporting
  (t) Recent accounting pronouncements
   F-14




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
   3. ACCOUNTS RECEIVABLE
   2004
    
    2005RMB
    
    RMBBalance at beginning of the period
    
    
    1,318,528
    
    
    
    3,689,222Additions
    
    
    2,370,694
    
    
    
    5,799,717Write-offs
    
    
    
    
    
    
    (6,628,664
    )Balance at end of period
    
    
    3,689,222
    
    
    
    2,860,275
 4. PREPAYMENTS AND OTHER CURRENT ASSETS
 2004
    
    2005RMB
    
    RMBRental and other deposits
    
    
    1,331,839
    
    
    
    4,333,790Prepayments for rental and other expenses
    
    
    6,229,135
    
    
    
    6,315,403Employee advances
    
    
    868,497
    
    
    
    1,507,761Payments made on behalf of customers
    
    
    189,449
    
    
    
    Prepaid insurance premium
    
    
    1,171,646
    
    
    
    1,704,902Merchandise  stationery
    
    
    2,507,726
    
    
    
    Subsidy income receivable
    
    
    
    
    
    
    4,660,000Interest income receivable
    
    
    
    
    
    
    2,829,274Others
    
    
    2,377,656
    
    
    
    1,914,307Total
    
    
    14,675,948
    
    
    
    23,265,437
 F-15




---



##### Table of Contents



51JOB, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 5. PROPERTY AND EQUIPMENT
 2004
    
    2005RMB
    
    RMBLeasehold improvements
    
    
    7,091,521
    
    
    
    13,085,141Computer equipment
    
    
    26,758,707
    
    
    
    36,185,945Furniture and fixtures
    
    
    3,942,323
    
    
    
    9,896,664Motor vehicles
    
    
    3,646,016
    
    
    
    3,886,016Less: accumulated depreciation
    
    
    (18,903,692
    )
    
    
    (30,695,891
    )Net book value
    
    
    22,534,875
    
    
    
    32,357,875
 6. INTANGIBLE ASSETS
 2004
    
    2005RMB
    
    RMBComputer equipment software
    
    
    10,798,362
    
    
    
    15,952,849Acquired training licenses
    
    
    3,049,274
    
    
    
    6,571,253Internally developed software
    
    
    1,568,808
    
    
    
    1,568,808Less: accumulated amortization
    
    
    (9,289,695
    )
    
    
    (12,712,075
    )Net book value
    
    
    6,126,749
    
    
    
    11,380,835
 7. OTHER PAYABLES AND ACCRUALS
 2004
    
    2005RMB
    
    RMBProfessional service fees
    
    
    6,469,433
    
    
    
    4,796,706Office expenses
    
    
    2,585,186
    
    
    
    1,327,095Deposit from customers
    
    
    3,713,147
    
    
    
    3,053,967Travelling expenses
    
    
    103,190
    
    
    
    24,420Payables to employees related to proceeds from share option exercises
    
    
    
    
    
    
    6,872,776Others
    
    
    1,062,730
    
    
    
    1,440,300Total
    
    
    13,933,686
    
    
    
    17,515,264
 8. TAXATION
 Cayman Islands
  British Virgin Islands
  Hong Kong
  F-16




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 China
  Composition of income tax expense
  2003
    
    2004
    
    2005RMB
    
    RMB
    
    RMBCurrent income tax expenses
    
    
    3,230,664
    
    
    
    39,464,894
    
    
    
    28,592,183Deferred tax
    
    
    (38,653
    )
    
    
    (5,406,710
    )
    
    
    1,352,850Income tax expense
    
    
    3,192,011
    
    
    
    34,058,184
    
    
    
    29,945,033
 Reconciliation of the differences between statutory tax rate and the effective tax rate
  2003
    
    2004
    
    2005EIT statutory rate
    
    
    33
    %
    
    
    33
    %
    
    
    33
    %Effect of tax holiday for certain subsidiaries
    
    
    (45
    %)
    
    
    (3
    %)
    
    
    (6
    %)Difference in EIT rates of certain subsidiaries
    
    
    (1
    %)
    
    
    (1
    %)
    
    
    (3
    %)Non-deductibility of expenses incurred outside the PRC
    
    
    18
    %
    
    
    8
    %
    
    
    6
    %Other permanent differences
    
    
    (1
    %)
    
    
    
    
    
    
    4
    %Provision of valuation allowance
    
    
    5
    %
    
    
    
    
    
    
    Reversal of valuation allowance
    
    
    
    
    
    
    (1
    %)
    
    
    (1
    %)Effective EIT rate of the Group
    
    
    9
    %
    
    
    36
    %
    
    
    33
    %
 F-17




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  2004
    
    2005RMB
    
    RMBDeductible temporary differences related to revenue
    
    
    5,955,432
    
    
    
    Deductible temporary differences related to accrued expenses
    
    
    656,674
    
    
    
    1,711,457Deductible temporary differences related to advertising expenses
    
    
    
    
    
    
    1,984,085Deductible temporary differences related to provision for
doubtful debts and slow moving merchandise
    
    
    1,490,856
    
    
    
    2,996,098Total current deferred tax assets
    
    
    8,102,962
    
    
    
    6,691,640Less: Valuation allowance
    
    
    (676,864
    )
    
    
    (823,820
    )Net current deferred tax assets
    
    
    7,426,098
    
    
    
    5,867,820Tax loss carryforwards
    
    
    6,387,134
    
    
    
    4,970,167Deductible temporary differences related to amortization
    
    
    376,122
    
    
    
    412,314Total non-current deferred tax assets
    
    
    6,763,256
    
    
    
    5,382,481Less: Valuation allowance
    
    
    (6,387,134
    )
    
    
    (4,970,167
    )Net non-current deferred tax assets
    
    
    376,122
    
    
    
    412,314Total deferred tax assets
    
    
    7,802,220
    
    
    
    6,280,134Taxable temporary differences related to accrued expenses
    
    
    (169,237
    )
    
    
    Total current deferred tax liabilities
    
    
    (169,237
    )
    
    
    Total deferred tax liabilities
    
    
    (169,237
    )
    
    
    
   2004
    
    2005RMB
    
    RMBBalance at beginning of the period
    
    
    7,802,306
    
    
    
    7,063,998Additions
    
    
    1,723,945
    
    
    
    1,782,902Reversals
    
    
    (2,462,253
    )
    
    
    (3,052,913
    )Balance at end of period
    
    
    7,063,998
    
    
    
    5,793,987
 9. INITIAL PUBLIC OFFERING
  F-18




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 10. SERIES A PREFERENCE SHARES
        F-19




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 11. SHARE-BASED COMPENSATION
  Shares issued
    
    Vesting17,316,000
    
    
    25% released from escrow on October 1, 2000 and one forty
eighth released from escrow at the end of each calendar
month after October 2000.6,307,021
    
    
    26.9% released from escrow on April 28, 2000 and one forty
eighth released from escrow at the end of each calendar
month after April 2000.3,696,000
    
    
    31.25% released from escrow on April 28, 2000 and one forty
eighth released from escrow at the end of each calendar
month after April 2000.1,080,000
    
    
    25% released from escrow on October 1, 2000 and one forty
eighth released from escrow at the end of each calendar
month after October 2000.28,399,021
    
    
    Balance at end of period
     2003
    
    2004
    
    2005Outstanding at beginning of years
    
    
    2,317,102
    
    
    
    2,919,728
    
    
    
    2,520,444Granted
    
    
    1,346,232
    
    
    
    468,192
    
    
    
    749,200Exercised
    
    
    (467,334
    )
    
    
    (711,097
    )
    
    
    (632,276
    )Forfeited
    
    
    (276,272
    )
    
    
    (156,379
    )
    
    
    (79,394
    )Outstanding at end of years
    
    
    2,919,728
    
    
    
    2,520,444
    
    
    
    2,557,974Vested and exercisable at end of years
    
    
    1,384,964
    
    
    
    1,426,086
    
    
    
    1,212,153
 F-20




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  Outstanding
    
    ExercisableWeighted
    
    
    
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    
    
    
    averageWeighted-
    
    remaining
    
    
    
    
    
    Weighted-
    
    remainingNumber
    
    average
    
    contractual
    
    Number
    
    average
    
    contractual lifeExercise prices
    
    of shares
    
    exercise price
    
    life (years)
    
    of shares
    
    exercise price
    
    (years)US$0.15
    
    
    1,112,556
    
    
    US$
    0.15
    
    
    
    1.37
    
    
    
    994,130
    
    
    US$
    0.15
    
    
    
    1.15US$0.50
    
    
    424,756
    
    
    US$
    0.50
    
    
    
    3.96
    
    
    
    78,725
    
    
    US$
    0.50
    
    
    
    3.96US$1.00
    
    
    179,286
    
    
    US$
    1.00
    
    
    
    4.15
    
    
    
    90,650
    
    
    US$
    1.00
    
    
    
    4.15US$3.25
    
    
    92,176
    
    
    US$
    3.25
    
    
    
    4.38
    
    
    
    48,648
    
    
    US$
    3.25
    
    
    
    4.38US$6.00
    
    
    30,000
    
    
    US$
    6.00
    
    
    
    5.86
    
    
    
    
    
    
    US$
    6.00
    
    
    
    5.86US$7.00
    
    
    40,000
    
    
    US$
    7.00
    
    
    
    5.56
    
    
    
    
    
    
    US$
    7.00
    
    
    
    5.56US$8.695
    
    
    679,200
    
    
    US$
    8.695
    
    
    
    5.31
    
    
    
    
    
    
    US$
    8.695
    
    
    
    5.312,557,974
    
    
    
    
    
    
    
    
    
    
    
    1,212,153
     12. EMPLOYEE BENEFITS
  13. RELATED PARTY TRANSACTIONS
  2004
    
    2005RMB
    
    RMBDue to related parties:Principal shareholders
    
    
    
    
    
    
    500,000Advances for share options exercised
    
    
    1,577,873
    
    
    
    1,005,5151,577,873
    
    
    
    1,505,515
 F-21




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
   14. EARNINGS PER SHARE
  2003
    
    2004
    
    2005RMB
    
    RMB
    
    RMBNumerator:Net income
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304Amount allocated to participating preference shareholders
    
    
    (10,615,466
    )
    
    
    (13,986,417
    )
    
    
    Numerator for basic earnings per share
    
    
    21,984,797
    
    
    
    47,156,615
    
    
    
    61,422,304Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted earnings per share
    
    
    21,984,797
    
    
    
    47,156,615
    
    
    
    61,422,304Denominator:Denominator for basic earnings per share 
weighted-average common shares outstanding
    
    
    26,594,228
    
    
    
    35,593,374
    
    
    
    55,607,716Effect of Series A Preference Shares
    
    
    
    *
    
    
    
    *
    
    
    Effect of unvested Founder Shares
    
    
    1,734,040
    
    
    
    
    
    
    
    Effect of dilutive share options
    
    
    731,890
    
    
    
    1,889,645
    
    
    
    1,646,738Effect of dilutive warrants
    
    
    263,167
    
    
    
    
    
    
    
    Denominator for diluted earnings per share
    
    
    29,323,325
    
    
    
    37,483,019
    
    
    
    57,254,454Basic earnings per share
    
    
    0.83
    
    
    
    1.32
    
    
    
    1.10Diluted earnings per share
    
    
    0.75
    
    
    
    1.26
    
    
    
    1.07
 
 *
    
    These potentially dilutive securities were not included in the calculation of dilutive
earnings (loss) per share because of their anti-dilutive effect.    F-22




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 15. COMMITMENTS AND CONTINGENCIES
 Operating lease commitments
 51job Weekly
 Publication
    
    Officefees
    
    premises
    
    Others
    
    TotalRMB
    
    RMB
    
    RMB
    
    RMB2006
    
    
    53,958,833
    
    
    
    23,452,882
    
    
    
    140,005
    
    
    
    77,551,7202007
    
    
    39,886,771
    
    
    
    5,843,097
    
    
    
    80,116
    
    
    
    45,809,9842008
    
    
    3,898,171
    
    
    
    4,657,454
    
    
    
    71,148
    
    
    
    8,626,7732009
    
    
    1,865,850
    
    
    
    6,370,410
    
    
    
    
    
    
    
    8,236,26099,609,625
    
    
    
    40,323,843
    
    
    
    291,269
    
    
    
    140,224,737
  Capital commitments
  Contingencies
     F-23




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  16. FINANCIAL INSTRUMENTS
  17. CERTAIN RISKS AND CONCENTRATION
    18. SUBSEQUENT EVENTS
   F-24




---



##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Note
    
    2003
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    US$ (Note 4)Net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    
    
    
    
    (19,085,436
    )
    
    
    (24,270,500
    )
    
    
    (20,818,339
    )
    
    
    (2,579,656
    )Loss from operations
    
    
    
    
    
    
    (19,085,436
    )
    
    
    (24,270,500
    )
    
    
    (20,818,339
    )
    
    
    (2,579,656
    )Equity in profit of subsidiary companies, net
    
    
    1
    
    
    
    51,682,719
    
    
    
    83,415,592
    
    
    
    79,223,274
    
    
    
    9,816,767Other income
    
    
    
    
    
    
    2,980
    
    
    
    1,997,940
    
    
    
    3,017,369
    
    
    
    373,890Income before provision for income tax
    
    
    
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    7,611,001Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income for the year
    
    
    
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    7,611,001
 F-25




---



##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2005
 Note
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    US$ (Note 4)ASSETSCurrent assets:Cash
    
    
    
    
    
    
    648,576,639
    
    
    
    247,940,580
    
    
    
    30,722,978Receivables due from related parties
    
    
    2
    
    
    
    837,728
    
    
    
    838,808
    
    
    
    103,939Prepayments and other current assets
    
    
    
    
    
    
    1,598,045
    
    
    
    1,931,937
    
    
    
    239,391Total current assets
    
    
    
    
    
    
    651,012,412
    
    
    
    250,711,325
    
    
    
    31,066,308Long term receivables due from related parties
    
    
    2
    
    
    
    39,508,874
    
    
    
    362,450,068
    
    
    
    44,912,154Investment in subsidiaries
    
    
    1
    
    
    
    165,799,867
    
    
    
    251,535,177
    
    
    
    31,168,394Total assets
    
    
    
    
    
    
    856,321,153
    
    
    
    864,696,570
    
    
    
    107,146,856LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Due to related parties
    
    
    2
    
    
    
    1,577,873
    
    
    
    2,014,535
    
    
    
    249,626Other payables and accruals
    
    
    
    
    
    
    2,924,958
    
    
    
    8,802,572
    
    
    
    1,090,748Total current liabilities
    
    
    
    
    
    
    4,502,831
    
    
    
    10,817,107
    
    
    
    1,340,374Total liabilities
    
    
    
    
    
    
    4,502,831
    
    
    
    10,817,107
    
    
    
    1,340,374Shareholders equity:Common shares (US$0.0001 par value;
500,000,000 shares authorized, 55,616,679
and 54,876,079 shares issued and
outstanding as of December 31, 2004 and
2005, respectively)
    
    
    
    
    
    
    46,044
    
    
    
    45,451
    
    
    
    5,632Additional paid-in capital
    
    
    
    
    
    
    869,125,807
    
    
    
    848,423,068
    
    
    
    105,130,365Deferred share-based compensation
    
    
    
    
    
    
    (40,154,027
    )
    
    
    (23,141,471
    )
    
    
    (2,867,521
    )Other comprehensive loss
    
    
    
    
    
    
    (501,659
    )
    
    
    (318,174
    )
    
    
    (39,426
    )Retained earnings
    
    
    
    
    
    
    23,302,157
    
    
    
    28,870,589
    
    
    
    3,577,432Total shareholders equity
    
    
    
    
    
    
    851,818,322
    
    
    
    853,879,463
    
    
    
    105,806,482Total liabilities and shareholders equity
    
    
    
    
    
    
    856,321,153
    
    
    
    864,696,570
    
    
    
    107,146,856
 F-26




---



##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Note
    
    2003
    
    2004
    
    2005
    
    2005RMB
    
    RMB
    
    RMB
    
    US$ (Note 4)Net cash provided by (used in) operating activities
    
    
    
    
    
    
    (375,103
    )
    
    
    (891,852
    )
    
    
    7,598,852
    
    
    
    941,594Net cash provided by (used in) investing activities
    
    
    
    
    
    
    
    
    
    
    7,420,016
    
    
    
    (322,941,195
    )
    
    
    (40,016,504
    )Net cash provided by (used in) financing activities
    
    
    
    
    
    
    746,227
    
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    (9,181,677
    )Effect of foreign exchange rate changes on cash
    
    
    
    
    
    
    76,964
    
    
    
    236,144
    
    
    
    (11,195,747
    )
    
    
    (1,387,296
    )Net increase (decrease) in cash
    
    
    
    
    
    
    448,088
    
    
    
    647,728,617
    
    
    
    (400,636,059
    )
    
    
    (49,643,883
    )Cash, beginning of year
    
    
    
    
    
    
    399,934
    
    
    
    848,022
    
    
    
    648,576,639
    
    
    
    80,366,861Cash, end of year
    
    
    
    
    
    
    848,022
    
    
    
    648,576,639
    
    
    
    247,940,580
    
    
    
    30,722,978
 F-27




---



##### Table of Contents



ADDITIONAL
INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 1. BASIS OF PRESENTATION
     2. RELATED PARTY BALANCES
  2004
    
    2005RMB
    
    RMBReceivables due from related parties:51net HR
    
    
    828,929
    
    
    
    822,57751net Beijing
    
    
    1,021
    
    
    
    16,231Qianjin Network Information Technology (Shanghai) Co., Ltd.
    
    
    7,778
    
    
    
    837,728
    
    
    
    838,808Long term receivables due from related parties:51net.com Inc.
    
    
    39,508,874
    
    
    
    362,450,06840,346,602
    
    
    
    363,288,876Due to related parties:Qianjin Network Information Technology (Shanghai) Co., Ltd.
    
    
    
    
    
    
    73,519Shanghai Qianjin Advertising Co., Ltd.
    
    
    
    
    
    
    935,501Advances for share options exercised
    
    
    1,577,873
    
    
    
    1,005,5151,577,873
    
    
    
    2,014,535
  3. COMMITMENTS
  F-28




---



##### Table of Contents



ADDITIONAL
INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 4. FOREIGN CURRENCIES
  F-29