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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, 2006
 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)
 Building 3
No. 1387, Zhang Dong Road
Shanghai 201203
Peoples Republic of China
(Address of principal executive offices)
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 (Title of Each Class)
    
    (Name of Each Exchange on Which Registered)American Depositary Shares,
    
    The NASDAQ Stock Market LLCeach representing two common shares,
    
    (The NASDAQ Global Select Market)par value US$0.0001 per share
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None.
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None.
  o þ
 o þ
 þ o
  o þ o
 o þ
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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 4A. Unresolved Staff Comments
    
    
    40Item 5. Operating and Financial Review and Prospects
    
    
    41Item 6. Directors, Senior Management and Employees
    
    
    56Item 7. Major Shareholders and Related Party Transactions
    
    
    64Item 8. Financial Information
    
    
    67Item 9. The Offer and Listing
    
    
    67Item 10. Additional Information
    
    
    68Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    74Item 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
    
    
    76PART IIIItem 17. Financial Statements
    
    
    78Item 18. Financial Statements
    
    
    78Item 19. Exhibits
    
    
    78EX-4.10 SUPPLEMENTAL AGREEMENT DATED APR 1, 2007EX-4.11 DOMAIN NAME LICENSE AGREEMENTEX-8.1 LIST OF SUBSIDIARIESEX-12.1 CEO CERTIFICATION TO SECTION 302EX-12.2 CFO CERTIFICATION TO SECTION 302EX-13.1 CEO CERTIFICATION TO SECTION 906EX-13.2 CFO CERTIFICATION TO SECTION 906EX-15.1 CONSENT OF MAPLES AND CALDEREX-15.2 CONSENT OF JUN HE LAW OFFICESEX-15.3 CONSENT OF PRICEWATERHOUSECOOPERS
  i




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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
as well as stock market volatilities;
    
    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 this annual report on Form 20-F and any amendments thereto.
  ii




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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 Global Select 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.;
    
    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.;
    
    Wang Ju are to Shanghai Wang Ju Human Resource Consulting 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
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iv




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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




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For the year ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(1)Selected Consolidated Statement of
Operations Data:Revenues:Print advertising
    
    
    116,989,356
    
    
    
    182,606,297
    
    
    
    300,651,791
    
    
    
    356,284,649
    
    
    
    389,534,921
    
    
    
    49,914,137Online recruitment services
    
    
    28,938,327
    
    
    
    76,960,121
    
    
    
    111,508,533
    
    
    
    159,494,922
    
    
    
    219,793,658
    
    
    
    28,163,870Executive search
    
    
    9,726,300
    
    
    
    15,748,331
    
    
    
    24,907,914
    
    
    
    26,306,740
    
    
    
    19,937,806
    
    
    
    2,554,786Other human resource related
revenues
    
    
    9,895,734
    
    
    
    18,019,611
    
    
    
    42,875,597
    
    
    
    53,507,789
    
    
    
    68,586,465
    
    
    
    8,788,517Total revenues
    
    
    165,549,717
    
    
    
    293,334,360
    
    
    
    479,943,835
    
    
    
    595,594,100
    
    
    
    697,852,850
    
    
    
    89,421,310Net revenues
    
    
    158,039,700
    
    
    
    280,118,941
    
    
    
    456,119,882
    
    
    
    562,026,220
    
    
    
    659,843,231
    
    
    
    84,550,842Cost of services
    
    
    (92,220,940
    )
    
    
    (151,477,142
    )
    
    
    (224,606,635
    )
    
    
    (269,328,384
    )
    
    
    (294,068,613
    )
    
    
    (37,681,297
    )Gross profit
    
    
    65,818,760
    
    
    
    128,641,799
    
    
    
    231,513,247
    
    
    
    292,697,836
    
    
    
    365,774,618
    
    
    
    46,869,545Operating expenses:Sales and marketing
    
    
    (24,356,157
    )
    
    
    (39,042,744
    )
    
    
    (69,028,818
    )
    
    
    (115,094,797
    )
    
    
    (136,770,315
    )
    
    
    (17,525,443
    )General and administrative
    
    
    (39,191,781
    )
    
    
    (55,817,403
    )
    
    
    (72,096,009
    )
    
    
    (100,614,382
    )
    
    
    (114,321,711
    )
    
    
    (14,648,930
    )Total operating expenses
    
    
    (63,547,938
    )
    
    
    (94,860,147
    )
    
    
    (141,124,827
    )
    
    
    (215,709,179
    )
    
    
    (251,092,026
    )
    
    
    (32,174,373
    )Income from operations
    
    
    2,270,822
    
    
    
    33,781,652
    
    
    
    90,388,420
    
    
    
    76,988,657
    
    
    
    114,682,592
    
    
    
    14,695,172Income before income tax provision
    
    
    2,686,608
    
    
    
    35,792,274
    
    
    
    95,201,216
    
    
    
    91,367,337
    
    
    
    127,900,988
    
    
    
    16,388,948Income tax benefit (expense)
    
    
    1,259,194
    
    
    
    (3,192,011
    )
    
    
    (34,058,184
    )
    
    
    (29,945,033
    )
    
    
    (28,559,639
    )
    
    
    (3,659,569
    )Net income
    
    
    3,945,802
    
    
    
    32,600,263
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379Earnings per share:Basic
    
    
    0.09
    
    
    
    0.83
    
    
    
    1.32
    
    
    
    1.10
    
    
    
    1.79
    
    
    
    0.23Diluted(2)
    
    
    0.07
    
    
    
    0.75
    
    
    
    1.26
    
    
    
    1.07
    
    
    
    1.76
    
    
    
    0.23Earnings per ADS(3):Basic
    
    
    0.18
    
    
    
    1.65
    
    
    
    2.65
    
    
    
    2.21
    
    
    
    3.58
    
    
    
    0.46Diluted(2)
    
    
    0.15
    
    
    
    1.50
    
    
    
    2.52
    
    
    
    2.15
    
    
    
    3.52
    
    
    
    0.45Other Financial Information:Share-based compensation(4):Included in cost of services
    
    
    
    
    
    
    (596,551
    )
    
    
    (1,811,496
    )
    
    
    (1,479,841
    )
    
    
    (4,620,675
    )
    
    
    (592,083
    )Included in operating expenses:Sales and marketing
    
    
    
    
    
    
    (423,221
    )
    
    
    (1,757,722
    )
    
    
    (1,438,083
    )
    
    
    (3,972,118
    )
    
    
    (508,978
    )General and administrative
    
    
    (8,808,931
    )
    
    
    (17,681,791
    )
    
    
    (16,920,516
    )
    
    
    (11,635,397
    )
    
    
    (19,926,274
    )
    
    
    (2,553,308
    )
 As of December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(1)Selected Consolidated Balance Sheet Data:Assets:Cash
    
    
    68,637,760
    
    
    
    115,084,572
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    868,698,254
    
    
    
    111,313,060Total current assets
    
    
    79,635,683
    
    
    
    145,573,376
    
    
    
    893,647,186
    
    
    
    892,544,201
    
    
    
    919,575,700
    
    
    
    117,832,383Total non-current assets
    
    
    24,025,881
    
    
    
    39,830,903
    
    
    
    43,735,155
    
    
    
    70,875,359
    
    
    
    208,039,501
    
    
    
    26,657,718Total assets
    
    
    103,661,564
    
    
    
    185,404,279
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    1,127,615,201
    
    
    
    144,490,101Liabilities:Total current liabilities
    
    
    26,025,436
    
    
    
    56,096,191
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    139,074,706
    
    
    
    17,820,723Total non-current liabilities
    
    
    32,080
    
    
    
    23,533
    
    
    
    
    
    
    
    
    
    
    
    122,757
    
    
    
    15,730Total liabilities
    
    
    26,057,516
    
    
    
    56,119,724
    
    
    
    85,564,019
    
    
    
    109,540,097
    
    
    
    139,197,463
    
    
    
    17,836,453Total shareholders equity
    
    
    77,604,048
    
    
    
    129,284,555
    
    
    
    851,818,322
    
    
    
    853,879,463
    
    
    
    988,417,738
    
    
    
    126,653,648Total liabilities and shareholders equity
    
    
    103,661,564
    
    
    
    185,404,279
    
    
    
    937,382,341
    
    
    
    963,419,560
    
    
    
    1,127,615,201
    
    
    
    144,490,101
 
 (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 29, 2006, which was RMB7.8041 to US$1.00. 2




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(2)
    
    Diluted earnings per share is calculated by dividing net income 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 per ADS, the data
are adjusted to reflect the ratio of two common shares to one ADS.(3)
    
    Each ADS represents two common shares.(4)
    
    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. 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 share-based compensation expense, we have separately disclosed our
share-based compensation expense for each of the periods presented. We believe that disclosure
of our 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
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
   Noon buying rate of Renminbi per U.S. dollarPeriod
    
    Period-end
    
    Average(1)
    

    Low
    
    High2002
    
    
    8.2800
    
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.26692003
    
    
    8.2767
    
    
    
    8.2772
    
    
    
    8.2800
    
    
    
    8.27652004
    
    
    8.2765
    
    
    
    8.2768
    
    
    
    8.2771
    
    
    
    8.27652005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.8041December
    
    
    7.8041
    
    
    
    7.8219
    
    
    
    7.8350
    
    
    
    7.80412007January
    
    
    7.7714
    
    
    
    7.7876
    
    
    
    7.8127
    
    
    
    7.7705February
    
    
    7.7410
    
    
    
    7.7502
    
    
    
    7.7632
    
    
    
    7.7410March
    
    
    7.7232
    
    
    
    7.7369
    
    
    
    7.7454
    
    
    
    7.7232April
    
    
    7.7090
    
    
    
    7.7247
    
    
    
    7.7345
    
    
    
    7.7090May
    
    
    7.6516
    
    
    
    7.6773
    
    
    
    7.7065
    
    
    
    7.6463June (through June 25)
    
    
    7.6187
    
    
    
    7.6370
    
    
    
    7.6680
    
    
    
    7.6175
 
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated
using the average of the daily rates during the relevant period. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  3




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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 ChinaHR.com Zhaopin.com
   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
 4




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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.
  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.
  5




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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;
    
    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.
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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.
   Our business may suffer if we do not successfully manage our current and potential future
growth.
  7




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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;
    
    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 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
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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;
    
    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.
  9




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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.
  We may be exposed to infringement or misappropriation claims by third parties, which, if
successful, could cause us to pay significant damage awards.
  10




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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
 We are controlled by a small number of our existing shareholders, whose interests may differ
from other 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 28.7% of our outstanding common shares;
    
    Recruit, which beneficially owned approximately 20.1%, and which is affiliated with
Hiroyuki Honda, one of our directors;
    
    entities affiliated with DCM, which beneficially owned approximately 17.3%, and which is
affiliated with David K. Chao, one of our directors; and
    
    Norman Lui, one of our executive officers, who beneficially owned approximately 5.0%.
 11




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If certain tax exemptions and preferential tax treatments we currently possess become
unavailable in China, our effective income tax rate would increase.
     12




---



##### Table of Contents



Our earnings have been and will continue to be adversely affected by changes in our accounting
policies, including those related to the expensing of stock options.
  If we do not appropriately maintain effective internal controls in accordance with Section 404
of the Sarbanes-Oxley Act of 2002, our business, results of operations and the market price of
our ADSs may be materially and adversely affected.
   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.
  13




---



##### Table of Contents



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;
    
    Shanghai Qianjin Advertising Co., Ltd., or AdCo, and its subsidiaries; and
    
    Shanghai Wang Ju Human Resource Consulting Co., Ltd., or Wang Ju.
  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.
  14




---



##### 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.
  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.
  15




---



##### Table of Contents



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.
   
    
    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;
 16




---



##### Table of Contents




    
    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;
    
    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.
  
 17




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##### Table of Contents




    
    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.
  The continued growth of the Chinese Internet market depends on the establishment of an adequate
telecommunications infrastructure.
  18




---



##### Table of Contents



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.
  The fluctuation of the Renminbi may materially and adversely affect your investment.
  19




---



##### Table of Contents



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.
   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;
 20




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##### Table of Contents




    
    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 or through private transactions 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.
  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.
  21




---



##### Table of Contents



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.
    
    
    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.
   22




---



##### Table of Contents



ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
  
    
    Shanghai Qianjin Advertising Co., Ltd., or AdCo, and AdCos eight 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., or Wang Cai AdCo, which is an AdCo
Subsidiary jointly owned by AdCo and TechJV and holds licenses to conduct advertising
businesses;
    
    Shanghai Wang Ju Human Resource Consulting Co., Ltd., or Wang Ju, which is
owned by 51net HR and Run An and holds a license to provide human resource related
services; and
    
    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.
      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.
   Recruitment related services
 Print advertising  51job Weekly. 51job Weekly 51job Weekly
 24




---



##### Table of Contents



51job Weekly
 City
    
    Newspaper contractor(1)Beijing
    
    China Trade NewsChangchun
    
    City Evening NewsChangsha(2)
    
    Human Resource NewsChengdu
    
    Hua Xi Metropolitan NewsChongqing
    
    Human Resource NewsDalian
    
    Dalian Evening NewsFuzhou
    
    Straits Talent NewsGuangzhou
    
    Guangzhou Youth DailyHangzhou
    
    News Information DailyHarbin
    
    Harbin Lifestyle DailyHefei
    
    Hefei Evening NewsJinan
    
    Jinan TimesKunming
    
    Chuncheng Evening NewsNanjing
    
    Modern ExpressNingbo
    
    Modern Golden NewsQingdao
    
    Qingdao Financial TimesShanghai
    
    China Trade NewsShenyang
    
    Friendly TimesShenzhen
    
    Nan Fang Metropolitan NewsTianjin
    
    Metro ExpressWuhan
    
    News Information DailyXian
    
    China Merchant NewsZhengzhou
    
    Youth Herald
 
 (1)
    
    English translations of the Chinese names.(2)
    
    In September 2006, we changed our newspaper contractor in Changsha from Sanxiang Metropolitan
News. 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 51job Weekly 51job Weekly 51job Weekly 51job Weekly 51job Weekly
 51job
Weekly
 25




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##### Table of Contents



51job Weekly
 2004
    
    2005
    
    2006Estimated number of print advertising pages(1)
    
    
    9,001
    
    
    
    11,884
    
    
    
    12,609Number of cities where 51job Weeklywas published(2)
    
    
    19
    
    
    
    23
    
    
    
    23
 
 (1)
    
    For the years ended December 31, 2004, 2005 and 2006.(2)
    
    As of December 31, 2004, 2005 and 2006.  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 31,2004
    
    2005
    
    2006Estimated unique employers using online recruitment services
    
    
    39,317
    
    
    
    56,599
    
    
    
    74,950
 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
 Other human resource related services
   27




---



##### Table of Contents



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




---



##### Table of Contents



Print advertising
 51job Weekly Beijing Evening News 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 Zhaopin.com Zhaopin.com
 Other services
  Customers
  Sales and Marketing
  
    
    employers with hiring needs;
    
    job seekers; and
    
    human resource departments with actual or potential outsourcing needs.
 Direct marketing
 Event marketing
 29




---



##### Table of Contents



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
  Regulation
   30




---



##### Table of Contents



Limitations on Foreign Ownership of Our Businesses
 Advertising
  
    
    Foreign Investment Industrial Guidance 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
  General Regulation of Our Businesses
 Advertising
  
    
    Advertising Law (1994);
    
    Administration of Advertising Regulations (1987); and
    
    Measures for the Administration of Advertising Business Licenses (2005).
  31




---



##### Table of Contents



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
     Regulations Relating to Internet Privacy
  32




---



##### Table of Contents



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.
  C. Organizational Structure
  33




---



##### Table of Contents



Our May 2004 Restructuring and Arrangements with Affiliated Entities
    
    
    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;
 34




---



##### Table of Contents




    
    human resource related services are provided by RAL and Shanghai Wang Ju
Human Resource Consulting Co., Ltd., or Wang Ju, which hold licenses 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.
       Group Ownership Structure
  35




---



##### Table of Contents



(1)
    
    Does not include 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
 37




---



##### Table of Contents



AdCo and the AdCo Subsidiaries
  WFOE
  Wang Ju
  Contractual Arrangements Among Our Group Entities
  
 38




---



##### Table of Contents



Contractual arrangements with RAL
 RAL technical and consulting service agreement
 RAL equity pledge agreement.
 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.
 39




---



##### Table of Contents



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
    
    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 4A. UNRESOLVED STAFF COMMENTS
  40




---



##### Table of Contents



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  A. Overview
   Revenues
 51job Weekly www.51job.com
  For the year ended December 31,2004
    
    2005
    
    2006Revenues:Print advertising
    
    
    62.7
    %
    
    
    59.8
    %
    
    
    55.8
    %Online recruitment services
    
    
    23.2
    
    
    
    26.8
    
    
    
    31.5Executive search
    
    
    5.2
    
    
    
    4.4
    
    
    
    2.9Other human resource related services
    
    
    8.9
    
    
    
    9.0
    
    
    
    9.8Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  2004
    
    2005
    
    2006compared to
    
    compared to
    
    compared to2003
    
    2004
    
    2005Print advertising
    
    
    64.6
    %
    
    
    18.5
    %
    
    
    9.3
    %Online recruitment services
    
    
    44.9
    
    
    
    43.0
    
    
    
    37.8Executive search
    
    
    58.2
    
    
    
    5.6
    
    
    
    (24.2
    )Other human resource related services
    
    
    137.9
    
    
    
    24.8
    
    
    
    28.2Total revenues
    
    
    63.6
    %
    
    
    24.1
    %
    
    
    17.2
    %
 41




---



##### Table of Contents



Recruitment related revenues
 51job
Weekly www.51job.com eSearch
 Print advertising revenues. 51job Weekly 51job Weekly 51job Weekly
     51job Weekly
 51job Weekly
 42




---



##### Table of Contents



Online recruitment services revenues. www.51job.com eHire www.51job.com
    51job Weekly
 Executive search revenues. eSearch
 Other human resource related revenues
  43




---



##### Table of Contents



Net revenues and business taxes
  Costs
   For the year ended December 31,2004
    
    2005
    
    2006Cost of services
    
    
    (49.2
    %)
    
    
    (47.9
    %)
    
    
    (44.6
    %)Total operating expenses
    
    
    (30.9
    %)
    
    
    (38.4
    %)
    
    
    (38.0
    %)
   Cost of services
  44




---



##### Table of Contents



Operating expenses
   For the year ended December 31,2004
    
    2005
    
    2006Operating expenses:Sales and marketing
    
    
    (15.1
    %)
    
    
    (20.5
    %)
    
    
    (20.7
    %)General and administrative
    
    
    (15.8
    )
    
    
    (17.9
    )
    
    
    (17.3
    )Total operating expenses
    
    
    (30.9
    %)
    
    
    (38.4
    %)
    
    
    (38.0
    %)
 51job Weekly
  Income Taxation
     45




---



##### Table of Contents



Critical Accounting Policies
   Income taxes
   46




---



##### Table of Contents



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.
    47




---



##### Table of Contents



Basis for consolidation and our relationships with our affiliated variable interest entities
      Allowances for doubtful accounts
  Long-lived assets
  48




---



##### Table of Contents



Results of Operations
  For the year ended December 31,2004
    
    2005
    
    2006RMB
    
    %
    
    RMB
    
    %
    
    RMB
    
    %Revenues:Print advertising
    
    
    300,651,791
    
    
    
    65.9
    
    
    
    356,284,649
    
    
    
    63.4
    
    
    
    389,534,921
    
    
    
    59.0Online recruitment services
    
    
    111,508,533
    
    
    
    24.4
    
    
    
    159,494,922
    
    
    
    28.4
    
    
    
    219,793,658
    
    
    
    33.3Executive search
    
    
    24,907,914
    
    
    
    5.5
    
    
    
    26,306,740
    
    
    
    4.7
    
    
    
    19,937,806
    
    
    
    3.0Other human resource related
revenues
    
    
    42,875,597
    
    
    
    9.4
    
    
    
    53,507,789
    
    
    
    9.5
    
    
    
    68,586,465
    
    
    
    10.4Total revenues
    
    
    479,943,835
    
    
    
    105.2
    
    
    
    595,594,100
    
    
    
    106.0
    
    
    
    697,852,850
    
    
    
    105.8Less: Business and related tax
    
    
    (23,823,953
    )
    
    
    (5.2
    )
    
    
    (33,567,880
    )
    
    
    (6.0
    )
    
    
    (38,009,619
    )
    
    
    (5.8
    )Net revenues
    
    
    456,119,882
    
    
    
    100.0
    
    
    
    562,026,220
    
    
    
    100.0
    
    
    
    659,843,231
    
    
    
    100.0Cost of services
    
    
    (224,606,635
    )
    
    
    (49.2
    )
    
    
    (269,328,384
    )
    
    
    (47.9
    )
    
    
    (294,068,613
    )
    
    
    (44.6
    )Gross profit
    
    
    231,513,247
    
    
    
    50.8
    
    
    
    292,697,836
    
    
    
    52.1
    
    
    
    365,774,618
    
    
    
    55.4Operating expenses:Sales and marketing
    
    
    (69,028,818
    )
    
    
    (15.1
    )
    
    
    (115,094,797
    )
    
    
    (20.5
    )
    
    
    (136,770,315
    )
    
    
    (20.7
    )General and administrative
    
    
    (72,096,009
    )
    
    
    (15.8
    )
    
    
    (100,614,382
    )
    
    
    (17.9
    )
    
    
    (114,321,711
    )
    
    
    (17.3
    )Total operating expenses
    
    
    (141,124,827
    )
    
    
    (30.9
    )
    
    
    (215,709,179
    )
    
    
    (38.4
    )
    
    
    (251,092,026
    )
    
    
    (38.0
    )Income from operations
    
    
    90,388,420
    
    
    
    19.8
    
    
    
    76,988,657
    
    
    
    13.7
    
    
    
    114,682,592
    
    
    
    17.4Loss from foreign currency
translation
    
    
    (2,158
    )
    
    
    (0.0
    )
    
    
    (11,320,194
    )
    
    
    (2.0
    )
    
    
    (9,440,242
    )
    
    
    (1.4
    )Interest and investment income
    
    
    2,846,422
    
    
    
    0.6
    
    
    
    20,385,151
    
    
    
    3.6
    
    
    
    20,744,357
    
    
    
    3.1Other income
    
    
    1,968,532
    
    
    
    0.4
    
    
    
    5,313,723
    
    
    
    1.0
    
    
    
    1,914,281
    
    
    
    0.3Income before income tax provision
    
    
    95,201,216
    
    
    
    20.9
    
    
    
    91,367,337
    
    
    
    16.3
    
    
    
    127,900,988
    
    
    
    19.4Income tax expense
    
    
    (34,058,184
    )
    
    
    (7.5
    )
    
    
    (29,945,033
    )
    
    
    (5.4
    )
    
    
    (28,559,639
    )
    
    
    (4.3
    )Net income
    
    
    61,143,032
    
    
    
    13.4
    
    
    
    61,422,304
    
    
    
    10.9
    
    
    
    99,341,349
    
    
    
    15.1Other Financial Information:Share-based compensation expense:Included in cost of services
    
    
    (1,811,496
    )
    
    
    (0.4
    )
    
    
    (1,479,841
    )
    
    
    (0.3
    )
    
    
    (4,620,675
    )
    
    
    (0.7
    )Included in operating expenses:Sales and marketing
    
    
    (1,757,722
    )
    
    
    (0.4
    )
    
    
    (1,438,083
    )
    
    
    (0.3
    )
    
    
    (3,972,118
    )
    
    
    (0.6
    )General and administrative
    
    
    (16,920,516
    )
    
    
    (3.7
    )
    
    
    (11,635,397
    )
    
    
    (2.1
    )
    
    
    (19,926,274
    )
    
    
    (3.0
    )
 2006 compared to 2005
 Total revenues.
 
    
    Print advertising.Our print advertising revenues increased 9.3% to RMB389.5
million (US$49.9 million) in 2006 from RMB356.3 million in 2005. This growth was primarily
due to a greater volume of print advertisements in our editions of 51job Weekly,which
reflected increased penetration in existing markets and our sales and marketing efforts,
as well as higher overall average revenue per page. We estimate that the number of print
advertising pages increased 6.1% to 12,609 in 2006 from 11,884 in 2005. Our overall
average revenue per page rose approximately 3.0% over 2005 as a result of modest price
increases we
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##### Table of Contents



made for certain print advertisement products in some cities in late 2005. The local
prices we charge for print advertising in each city vary significantly across our markets
and our overall average revenue per page may fluctuate from period to period depending on
the revenue contribution from these markets. We may also adjust our sales policy on
promotions and discounts in our cities from time to time, which may lower average revenue
per page. In addition, we estimate that as revenue contribution from our newer, lower
priced markets increase, our average revenue per page may decrease over time.
    
    Online recruitment services.Our online recruitment services revenues
increased 37.8% to RMB219.8 million (US$28.2 million) in 2006 from RMB159.5 million in
2005. This increase was primarily the result of significant growth in the number of unique
employers using our online recruitment services complemented by a modest increase in our
average revenue per unique employer. We estimate that the number of unique employers
increased 32.4% to 74,950 in 2006 from 56,599 in 2005, mainly due to our greater sales and
marketing efforts and increased customer acceptance of the Internet as a channel for
recruitment advertising. Our average revenue per unique employer in 2006 increased 4.1%
from 2005. Although the prices we charge for our online recruitment services were
generally unchanged in 2006, 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, more than offset 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.
    
    Executive search.Our executive search revenues decreased 24.2% to RMB19.9
million (US$2.6 million) in 2006 from RMB26.3 million in 2005 due to fewer candidate
assignments and case closings.
    
    Other human resource related revenues. Our revenues from other human
resource related services increased 28.2% to RMB68.6 million (US$8.8 million) in 2006 from
RMB53.5 million in 2005. This increase was primarily driven by growth in sales of training
and outsourcing services. Training revenues grew as a result of an increase in the number
of public and in-house seminars we conducted in 2006. In addition, we believe the increase
in revenues from our human resource outsourcing business reflected growing customer
acceptance and demand for these services as well as our sales and marketing efforts.
 Net revenues.
 Cost of services. 51job Weekly
 Gross profit.
 Operating expenses.
 
    
    Sales and marketing expenses.Our sales and marketing expenses increased
18.8% to RMB136.8 million (US$17.5 million) in 2006 from RMB115.1 million in 2005. This
increase was primarily due to increases in commissions and bonuses paid to sales
personnel, the hiring of additional sales and marketing staff, increases in employee
salaries and benefits, increases in marketing and promotional expenses, and the addition
of a new sales office in Tianjin in 2006. We calculate commissions based on a percentage
of total revenues generated by a salesperson. In addition, we pay bonuses to account
executives for achieving and exceeding certain sales targets and goals. Our total
advertising and promotion expenses in 2006 decreased 11.1% to RMB19.0 million (US$2.4
million) from RMB21.4 million in 2005 due to lower advertising expenses which were
partially offset by higher promotion expenses from conducting a greater number of
promotional events and other brand awareness activities. Our sales and marketing expenses
in 2006 also included an increase in share-based compensation expense to RMB4.0 million
(US$0.5 million) from RMB1.4 million in 2005 due to the adoption of SFAS No. 123R.
 50




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
    
    General and administrative expenses.Our general and administrative expenses
increased 13.6% to RMB114.3 million (US$14.6 million) in 2006 from RMB100.6 million in
2005. This increase was primarily due to higher share-based compensation expense, hiring
of additional office staff, higher employee salaries and bonuses, higher professional
services fees, and costs associated with our purchase of office facilities in Shanghai,
including greater depreciation expenses, moving and renovation expenses, and office
management fees. Our general and administrative expenses in 2006 included a 71.3% increase
in share-based compensation expense to RMB19.9 million (US$2.6 million) from RMB11.6
million in 2005 due to the adoption of SFAS No. 123R.
 Loss from foreign currency translation.
 Interest and investment income.
 Income tax expense.
 Net income.
 2005 compared to 2004
 Total revenues.
 
    
    Print advertising.Our print advertising revenues increased 18.5% to
RMB356.3 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.
    
    Online recruitment services.Our online recruitment services revenues
increased 43.0% to RMB159.5 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.comand, 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 as many first-time customers who generally
purchase discounted introductory and promotional online recruitment services packages were
offset by customers who purchased multiple online services or higher priced products.
    
    Executive search.Our executive search revenues increased 5.6% to RMB26.3
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 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 in
2005 and RMB12.7 million in 2004.
 Net revenues.
 51




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Cost of services. 51job Weekly
 Gross profit.
 Operating expenses.
 
    
    Sales and marketing expenses.Our sales and marketing expenses increased
66.7% to RMB115.1 million in 2005 from RMB69.0 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. Our advertising and
promotion expenses in 2005 increased 72.7% to RMB21.4 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. Our sales and marketing
expenses in 2005 also included share-based compensation expense of RMB1.4 million compared
with RMB1.8 million in 2004.
    
    General and administrative expenses.Our general and administrative expenses
increased 39.6% to RMB100.6 million in 2005 from RMB72.1 million in 2004. Although a
decrease in share-based compensation expense partially offset the growth, 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. Our general and administrative
expenses in 2005 included a decrease in share-based compensation expense to RMB11.6
million from RMB16.9 million in 2004.
 Loss from foreign currency translation.
 Interest and investment income.
 Income tax expense.
 Net income.
 Unaudited Quarterly Results of Operations
  52




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For the three months ended,March 31,
    
    June 30,
    
    September 30,
    
    December 31,2006
    
    2006
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    RMBRevenues:Print advertising
    
    
    106,655,304
    
    
    
    97,061,127
    
    
    
    98,399,311
    
    
    
    87,419,178Online recruitment services
    
    
    48,526,777
    
    
    
    55,059,451
    
    
    
    57,591,608
    
    
    
    58,615,822Executive search
    
    
    5,050,135
    
    
    
    4,549,848
    
    
    
    4,887,422
    
    
    
    5,450,401Other human resource related revenues
    
    
    12,309,018
    
    
    
    16,692,897
    
    
    
    19,959,081
    
    
    
    19,625,471Total revenues
    
    
    172,541,234
    
    
    
    173,363,323
    
    
    
    180,837,422
    
    
    
    171,110,872Net revenues
    
    
    162,816,444
    
    
    
    163,988,492
    
    
    
    170,849,399
    
    
    
    162,188,897Cost of services
    
    
    (72,727,133
    )
    
    
    (72,184,698
    )
    
    
    (74,847,284
    )
    
    
    (74,309,498
    )Gross profit
    
    
    90,089,311
    
    
    
    91,803,794
    
    
    
    96,002,115
    
    
    
    87,879,399Operating expenses:Sales and marketing
    
    
    (28,608,989
    )
    
    
    (31,401,232
    )
    
    
    (35,539,657
    )
    
    
    (41,220,437
    )General and administrative
    
    
    (27,465,897
    )
    
    
    (30,997,664
    )
    
    
    (29,639,979
    )
    
    
    (26,218,171
    )Total operating expenses
    
    
    (56,074,886
    )
    
    
    (62,398,896
    )
    
    
    (65,179,636
    )
    
    
    (67,438,608
    )Income from operations
    
    
    34,014,425
    
    
    
    29,404,898
    
    
    
    30,822,479
    
    
    
    20,440,791Income before income tax provision
    
    
    36,886,222
    
    
    
    33,244,946
    
    
    
    34,026,516
    
    
    
    23,743,304Income tax expense
    
    
    (10,385,590
    )
    
    
    (7,279,781
    )
    
    
    (6,945,105
    )
    
    
    (3,949,162
    )Net income
    
    
    26,500,632
    
    
    
    25,965,165
    
    
    
    27,081,411
    
    
    
    19,794,142Other Financial Information:Share-based compensation expense:Included in cost of services
    
    
    (947,028
    )
    
    
    (1,279,327
    )
    
    
    (1,193,812
    )
    
    
    (1,200,508
    )Included in operating expenses:Sales and marketing
    
    
    (814,103
    )
    
    
    (1,099,762
    )
    
    
    (1,026,250
    )
    
    
    (1,032,003
    )General and administrative
    
    
    (4,149,829
    )
    
    
    (5,605,952
    )
    
    
    (5,231,229
    )
    
    
    (4,939,264
    )
 B. Liquidity and Capital Resources
  Liquidity
   For the year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    US$Net cash provided by operating activities
    
    
    105,812,412
    
    
    
    122,025,929
    
    
    
    185,229,227
    
    
    
    23,734,861Net cash used in investing activities
    
    
    (13,804,765
    )
    
    
    (54,391,335
    )
    
    
    (144,402,140
    )
    
    
    (18,503,369
    )Net cash provided by (used in) financing
activities
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    6,099,209
    
    
    
    781,539Net increase (decrease) in cash
    
    
    733,208,100
    
    
    
    (17,659,122
    )
    
    
    38,064,704
    
    
    
    4,877,526
 Cash flows from operating activities.
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Cash flows from investing activities.
 Cash flows from financing activities.
 Capital resources
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##### Table of Contents



C. Research and Development
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Contractual Obligations
 51job Weekly
  CapitalOperating Lease Commitments
    
    CommitmentsPublication
    
    Office
    
    
    
    
    
    Officefees
    
    premises
    
    Others
    
    equipment
    
    TotalRMB
    
    RMB
    
    RMB
    
    RMB
    
    RMBLess than one year
    
    
    73,638,678
    
    
    
    11,437,006
    
    
    
    8,263,476
    
    
    
    827,177
    
    
    
    94,166,3371-3 years
    
    
    10,214,334
    
    
    
    16,372,359
    
    
    
    9,798,381
    
    
    
    
    
    
    
    36,385,0743-5 years
    
    
    1,490,000
    
    
    
    6,166,516
    
    
    
    88,667
    
    
    
    
    
    
    
    7,745,183More than 5 years
    
    
    1,080,000
    
    
    
    24,346,307
    
    
    
    1,521,000
    
    
    
    
    
    
    
    26,947,307Total
    
    
    86,423,012
    
    
    
    58,322,188
    
    
    
    19,671,524
    
    
    
    827,177
    
    
    
    165,243,901
    55




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Recent Accounting Pronouncements
     
 ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  56




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Name
    
    Age
    
    Position / TitleDonald L. Lucas(1) (2)
    
    
    77
    
    
    Chairman of the board and independent directorRick Yan
    
    
    44
    
    
    Director, chief executive officer, president and secretaryDavid K. Chao(1) (2) (3)
    
    
    40
    
    
    Independent directorHiroyuki Honda(4)
    
    
    46
    
    
    Non-executive directorShan Li(1) (3).
    
    
    43
    
    
    Independent directorKathleen Chien
    
    
    37
    
    
    Chief financial officer and senior vice presidentDavid Weimin Jin
    
    
    37
    
    
    Senior vice presidentNorman Lui
    
    
    36
    
    
    Vice presidentTao Wang
    
    
    44
    
    
    Vice presidentJones Haijun Yu
    
    
    34
    
    
    Vice president
 
 (1)
    
    Member of audit committee.(2)
    
    Member of compensation committee.(3)
    
    Member of nominating and corporate governance committee.(4)
    
    Pursuant to the share purchase agreement between Recruit and the selling shareholders, each
of the selling shareholders has agreed that it will use its commercially reasonable best
efforts in cooperating with Recruit to have a representative of Recruit nominated to stand for
election to our board of directors and that it will vote all of its shares in favor of the
election of such nominee to our board of directors at any annual or extraordinary general
meetings of our members at which such nominee may stand for election for the duration of the
agreement. Mr. Hiroyuki Honda, Recruits nominee, was elected to our board of directors on
July 28, 2006.  Biographical Information
 Donald L. Lucas
 Rick Yan
 David K. Chao
 57




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Hiroyuki Honda
 Shan Li
 Kathleen Chien
 David Weimin Jin
 Norman Lui
 Tao Wang
 Jones Haijun Yu
 B. Compensation
 Compensation of Directors and Executive Officers
  58




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##### Table of Contents



Directors and Officers Liability Insurance
  Employment Agreements
  Stock-Based Compensation Plans
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Common sharesunderlying options
    
    Exercisegranted
    
    price
    
    Date of grant
    
    Date of expirationUS$Granted 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, 2010Other employees
    
    
    145,576
    
    
    
    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, 2011David Weimin Jin
    
    
    40,800
    
    
    
    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, 2011Jones Haijun Yu
    
    
    31,200
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 2011Other employees
    
    
    321,600
    
    
    
    8.695
    
    
    April 22, 2005
    
    April 21, 201130,000
    
    
    
    6.25
    
    
    November 6, 2005
    
    November 10, 2011749,200Granted in 2006Donald L. Lucas
    
    
    40,032
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Rick Yan
    
    
    160,800
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012David K. Chao
    
    
    40,032
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Hiroyuki Honda
    
    
    14,976
    
    
    
    9.83
    
    
    July 28, 2006
    
    July 27, 2012Shan Li
    
    
    14,976
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Kathleen Chien
    
    
    81,600
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012David Weimin Jin
    
    
    31,200
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Norman Lui
    
    
    31,200
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Tao Wang
    
    
    31,200
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Jones Haijun Yu
    
    
    31,200
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012Other employees
    
    
    391,776
    
    
    
    8.365
    
    
    April 3, 2006
    
    April 2, 2012868,992
 
 *
    
    These relate to sales of common shares, from those authorized under the stock option plan,
below fair market value. C. Board Practices
  Board Committees
  Audit committee
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
    
    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;
    
    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
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
    
    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
  62




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Remuneration and Borrowing
  Qualification
  Terms of Directors and Executive Officers
  Limitation on Liability and Other Indemnification Matters
    63




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D. Employees
  Sales and account management
    
    
    1,421Marketing and merchandising
    
    
    873Technology and online operations
    
    
    371Customer service and production
    
    
    353Search and training consultants
    
    
    178General and administrative
    
    
    321Total
    
    
    3,517
    *
 
 *
    
    Includes 895 temporary, part-time and contract employees.  E. Share Ownership
  
 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.
  64




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Common shares beneficially ownedNumber
    
    %Directors and executive officers:Rick Yan
    
    
    16,205,336
    
    
    
    28.7David K. Chao(1)
    
    
    10,187,906
    
    
    
    18.1Norman Lui
    
    
    2,792,315
    
    
    
    5.0Kathleen Chien(2)
    
    
    1,697,658
    
    
    
    3.0Shan Li
    
    
    96,856
    
    
    
    *David Weimin Jin
    
    
    76,700
    
    
    
    *Tao Wang
    
    
    44,100
    
    
    
    *Donald L. Lucas
    
    
    44,066
    
    
    
    *Jones Haijun Yu
    
    
    27,300
    
    
    
    *Hiroyuki Honda(3)
    
    
    3,744
    
    
    
    *All directors and executive officers as a group
    
    
    31,175,981
    
    
    
    54.9Principal shareholders:Rick Yan
    
    
    16,205,336
    
    
    
    28.7Recruit Co., Ltd.(3)
    
    
    11,325,199
    
    
    
    20.1Entities affiliated with DCM(4)
    
    
    9,754,329
    
    
    
    17.3Norman Lui
    
    
    2,792,315
    
    
    
    5.0
 
 (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 beneficial
ownership of 433,577 common shares by David K. Chao. The address of David K. Chao and the
entities affiliated with DCM is 2420 Sand Hill Road, Suite 200, Menlo Park, CA 94025.(2)
    
    Includes 48,010 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)
    
    The address for Hiroyuki Honda and Recruit Co., Ltd. is Recruit GINZA8 Bldg., 8-4-17 Ginza,
Chuo-ku, Tokyo 104-8001, Japan.(4)
    
    Name and number of shares owned by each entity affiliated with DCM are described in Note (1)
above.*
    
    Less than 1%.   65




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##### Table of Contents



B. Related Party Transactions
 Stock Option Grants
  Loans and Advances
     Business Alliance with Recruit
   Transactions Among Our Subsidiaries and Affiliated Entities
  C. Interests of Experts and Counsel
  66




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##### Table of Contents



ITEM
8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  www.51job.com
 Dividend Policy
   B. Significant Changes
  
 ITEM
9. THE OFFER AND LISTING
 A. Offer and Listing Details
   67




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##### Table of Contents



Sales priceHigh
    
    
    LowUS$
    
    
    US$Annual highs and lows2004(1)
    
    
    55.55
    
    
    
    18.612005
    
    
    53.50
    
    
    
    9.712006
    
    
    31.90
    
    
    
    12.70Quarterly highs and lowsFirst 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
    
    
    
    14.40Second quarter 2006
    
    
    31.90
    
    
    
    15.50Third quarter 2006
    
    
    23.79
    
    
    
    13.20Fourth quarter 2006
    
    
    18.46
    
    
    
    12.70First quarter 2007
    
    
    18.39
    
    
    
    14.02Monthly highs and lowsDecember 2006
    
    
    18.46
    
    
    
    15.87January 2007
    
    
    17.70
    
    
    
    15.15February 2007
    
    
    18.39
    
    
    
    15.56March 2007
    
    
    17.47
    
    
    
    14.02April 2007
    
    
    18.04
    
    
    
    15.52May 2007
    
    
    19.44
    
    
    
    15.90June 2007 (through June 25, 2007)
    
    
    18.94
    
    
    
    16.75
 
 (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
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  68




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C. Material Contracts
   D. Exchange Controls
     E. Taxation
 Cayman Islands Taxation
  United States Federal Income Taxation
  69




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##### Table of Contents




    
    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.
  ADSs
  Distributions on ADSs or common shares
  70




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##### Table of Contents




    
    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
   71




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##### Table of Contents



Information reporting and backup withholding
   Enforceability of Civil Liabilities
  72




---



##### Table of Contents



F. Dividends and Paying Agents
  G. Statements by Experts
  H. Documents on Display
  www.sec.gov
  73




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##### Table of Contents



I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest rate risk
   Foreign exchange risk
   
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  74




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##### 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
  
 ITEM 15.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Report of Management on Internal Control over Financial Reporting
   Internal Control-Integrated Framework
  Changes in Internal Controls
  75




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##### Table of Contents



ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B.
    
    CODE OF ETHICS
 ir.51job.com
 
 ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2005
    
    2006
    
    2006RMB
    
    RMB
    
    US$Audit fees
    
    
    3,080,932
    
    
    
    4,456,566
    
    
    
    571,054
 Pre-Approved Policies and Procedures
  
 ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  76




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##### Table of Contents



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)May 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -June 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -July 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 2005
    
    
    201,905
    
    
    
    14.00
    
    
    
    109.26
    
    
    
    22,173,000
    
    
    
    173,040,000September 2005
    
    
    30,000
    
    
    
    14.21
    
    
    
    110.90
    
    
    
    21,746,000
    
    
    
    169,708,000October 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,746,000
    
    
    
    169,708,000November 2005
    
    
    280,500
    
    
    
    13.24
    
    
    
    103.33
    
    
    
    18,032,000
    
    
    
    140,724,000December 2005
    
    
    174,033
    
    
    
    13.62
    
    
    
    106.29
    
    
    
    15,661,000
    
    
    
    122,220,000January 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,661,000
    
    
    
    122,220,000February 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,661,000
    
    
    
    122,220,000March 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,661,000
    
    
    
    122,220,000April 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,661,000
    
    
    
    122,220,000May 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,661,000
    
    
    
    122,220,000
 
 (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 29, 2006, which was US$1.00 to
RMB7.8041. 
 77




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##### 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
    
    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)4.5
    
    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)4.6
    
    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)4.7
    
    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)
 78




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##### Table of Contents



Exhibits
    
    Description4.8
    
    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)4.9
    
    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)4.10*
    
    Supplemental Agreement to the Cooperation Agreement effective as of April
1, 2007 between Shanghai Run An Lian Information Consultancy Co., Ltd. and
Qianjin Network Information Technology (Shanghai) Co., Ltd.4.11*
    
    Domain Name License Agreement dated as of May 3, 2006 between Shanghai Run
An Lian Information Consultancy Co., Ltd. and 51net.com Inc.4.12
    
    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)4.13
    
    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)4.14
    
    Business Alliance Agreement dated as of April 5, 2006 between 51job, Inc.
and Recruit Co., Ltd. (Incorporated by reference to Exhibit 4.18 from our
Annual Report on Form 20-F for the year ended December 31, 2005 filed with
the Securities and Exchange Commission on June 29, 2006)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 200215.1*
    
    Consent of Maples and Calder15.2*
    
    Consent of Jun He Law Offices15.3*
    
    Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company
 
 *
    
    Filed with this annual report on Form 20-F. 79




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SIGNATURES
  51job, Inc.By:
    
    /s/ Rick YanName:
    
    Rick YanTitle:
    
    President and Chief Executive OfficerDate: June 28, 2007
 80




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##### 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, 2004, 2005 and 2006
    
    
    F-3Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    F-4Consolidated Statements of Shareholders Equity for the years ended December 31, 2004, 2005
and 2006
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006
    
    
    F-6Notes to the Consolidated Financial Statements for the years ended December 31, 2004, 2005
and 2006
    
    
    F-7Additional Information  Financial Statement Schedule I
    
    
    F-25
 F-1




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F-2




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##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Note
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2006RMB
    
    
    RMB
    
    
    RMB
    
    
    US$ (Note 2(c))Revenues:Print advertising
    
    
    
    
    
    
    300,651,791
    
    
    
    356,284,649
    
    
    
    389,534,921
    
    
    
    49,914,137Online recruitment services
    
    
    
    
    
    
    111,508,533
    
    
    
    159,494,922
    
    
    
    219,793,658
    
    
    
    28,163,870Executive search
    
    
    
    
    
    
    24,907,914
    
    
    
    26,306,740
    
    
    
    19,937,806
    
    
    
    2,554,786Other human resource related revenues
    
    
    
    
    
    
    42,875,597
    
    
    
    53,507,789
    
    
    
    68,586,465
    
    
    
    8,788,517Total revenues
    
    
    
    
    
    
    479,943,835
    
    
    
    595,594,100
    
    
    
    697,852,850
    
    
    
    89,421,310Less: Business and related taxes
    
    
    
    
    
    
    (23,823,953
    )
    
    
    (33,567,880
    )
    
    
    (38,009,619
    )
    
    
    (4,870,468
    )Net revenues
    
    
    
    
    
    
    456,119,882
    
    
    
    562,026,220
    
    
    
    659,843,231
    
    
    
    84,550,842Cost of services(1)
    
    
    
    
    
    
    (224,606,635
    )
    
    
    (269,328,384
    )
    
    
    (294,068,613
    )
    
    
    (37,681,297
    )Gross profit
    
    
    
    
    
    
    231,513,247
    
    
    
    292,697,836
    
    
    
    365,774,618
    
    
    
    46,869,545Operating expenses(1):Sales and marketing
    
    
    
    
    
    
    (69,028,818
    )
    
    
    (115,094,797
    )
    
    
    (136,770,315
    )
    
    
    (17,525,443
    )General and administrative
    
    
    
    
    
    
    (72,096,009
    )
    
    
    (100,614,382
    )
    
    
    (114,321,711
    )
    
    
    (14,648,930
    )Total operating expenses
    
    
    
    
    
    
    (141,124,827
    )
    
    
    (215,709,179
    )
    
    
    (251,092,026
    )
    
    
    (32,174,373
    )Income from operations
    
    
    
    
    
    
    90,388,420
    
    
    
    76,988,657
    
    
    
    114,682,592
    
    
    
    14,695,172Loss from foreign currency translation
    
    
    
    
    
    
    (2,158
    )
    
    
    (11,320,194
    )
    
    
    (9,440,242
    )
    
    
    (1,209,652
    )Interest and investment income
    
    
    
    
    
    
    2,846,422
    
    
    
    20,385,151
    
    
    
    20,744,357
    
    
    
    2,658,136Other income
    
    
    
    
    
    
    1,968,532
    
    
    
    5,313,723
    
    
    
    1,914,281
    
    
    
    245,292Income before provision for income tax
    
    
    
    
    
    
    95,201,216
    
    
    
    91,367,337
    
    
    
    127,900,988
    
    
    
    16,388,948Income tax expense
    
    
    8
    
    
    
    (34,058,184
    )
    
    
    (29,945,033
    )
    
    
    (28,559,639
    )
    
    
    (3,659,569
    )Net income
    
    
    
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379Amount allocated to participating
preference shareholders
    
    
    14
    
    
    
    (13,986,417
    )
    
    
    
    
    
    
    
    
    
    
    Income attributable for common shareholders
    
    
    
    
    
    
    47,156,615
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379Other comprehensive income:Currency translation adjustments
    
    
    
    
    
    
    236,144
    
    
    
    387,496
    
    
    
    578,650
    
    
    
    74,147Unrealized loss for investment
    
    
    
    
    
    
    (299,451
    )
    
    
    (204,011
    )
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    
    61,079,725
    
    
    
    61,605,789
    
    
    
    99,919,999
    
    
    
    12,803,526Earnings per share:
    
    
    14- Basic
    
    
    
    
    
    
    1.32
    
    
    
    1.10
    
    
    
    1.79
    
    
    
    0.23- Diluted
    
    
    
    
    
    
    1.26
    
    
    
    1.07
    
    
    
    1.76
    
    
    
    0.23Earnings per ADS(2):- Basic
    
    
    
    
    
    
    2.65
    
    
    
    2.21
    
    
    
    3.58
    
    
    
    0.46- Diluted
    
    
    
    
    
    
    2.52
    
    
    
    2.15
    
    
    
    3.52
    
    
    
    0.45Weighted average number of shares
outstanding:- Basic
    
    
    
    
    
    
    35,593,374
    
    
    
    55,607,716
    
    
    
    55,422,447
    
    
    
    55,422,447- Diluted
    
    
    
    
    
    
    37,483,019
    
    
    
    57,254,454
    
    
    
    56,409,260
    
    
    
    56,409,260(1) Share-based compensation:Included in cost of services
    
    
    
    
    
    
    (1,811,496
    )
    
    
    (1,479,841
    )
    
    
    (4,620,675
    )
    
    
    (592,083
    )Included in operating expenses- Sales and marketing
    
    
    
    
    
    
    (1,757,722
    )
    
    
    (1,438,083
    )
    
    
    (3,972,118
    )
    
    
    (508,978
    )- General and administrative
    
    
    
    
    
    
    (16,920,516
    )
    
    
    (11,635,397
    )
    
    
    (19,926,274
    )
    
    
    (2,553,308
    )(2) Each ADS represents two common shares.
  F-3




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##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND 2006
 Note
    
    
    2005
    
    
    2006
    
    
    2006RMB
    
    
    RMB
    
    
    US$ (Note 2(c))ASSETSCurrent assets:Cash
    
    
    
    
    
    
    830,633,550
    
    
    
    868,698,254
    
    
    
    111,313,060Short-term investments
    
    
    2
    (f)
    
    
    10,554,529
    
    
    
    
    
    
    
    Accounts receivable (net of allowance
for doubtful accounts of RMB2,860,275
and RMB2,611,810 as of December 31,
2005 and 2006, respectively)
    
    
    3
    
    
    
    22,222,865
    
    
    
    28,431,123
    
    
    
    3,643,101Prepayments and other current assets
    
    
    4
    
    
    
    23,265,437
    
    
    
    18,063,571
    
    
    
    2,314,626Deferred tax assets, current
    
    
    8
    
    
    
    5,867,820
    
    
    
    4,382,752
    
    
    
    561,596Total current assets
    
    
    
    
    
    
    892,544,201
    
    
    
    919,575,700
    
    
    
    117,832,383Property and equipment
    
    
    5
    
    
    
    32,357,875
    
    
    
    194,315,313
    
    
    
    24,899,132Intangible assets
    
    
    6
    
    
    
    11,380,835
    
    
    
    9,363,060
    
    
    
    1,199,762Other long-term assets
    
    
    
    
    
    
    26,724,335
    
    
    
    3,856,621
    
    
    
    494,179Deferred tax assets, non-current
    
    
    8
    
    
    
    412,314
    
    
    
    504,507
    
    
    
    64,645Total non-current assets
    
    
    
    
    
    
    70,875,359
    
    
    
    208,039,501
    
    
    
    26,657,718Total assets
    
    
    
    
    
    
    963,419,560
    
    
    
    1,127,615,201
    
    
    
    144,490,101LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    
    
    
    
    7,358,046
    
    
    
    9,691,511
    
    
    
    1,241,849Due to related parties
    
    
    13
    
    
    
    1,505,515
    
    
    
    464,501
    
    
    
    59,520Salary and employee related accrual
    
    
    
    
    
    
    19,339,789
    
    
    
    26,676,545
    
    
    
    3,418,273Taxes payable
    
    
    
    
    
    
    23,201,967
    
    
    
    23,751,099
    
    
    
    3,043,413Advance from customers
    
    
    
    
    
    
    40,619,516
    
    
    
    57,930,216
    
    
    
    7,423,049Other payables and accruals
    
    
    7
    
    
    
    17,515,264
    
    
    
    20,560,834
    
    
    
    2,634,619Total current liabilities
    
    
    
    
    
    
    109,540,097
    
    
    
    139,074,706
    
    
    
    17,820,723Deferred tax liabilities, non-current
    
    
    8
    
    
    
    
    
    
    
    122,757
    
    
    
    15,730Total liabilities
    
    
    
    
    
    
    109,540,097
    
    
    
    139,197,463
    
    
    
    17,836,453Commitments and contingencies
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity:Common shares (US$0.0001 par value;
500,000,000 shares authorized,
54,876,079 and 56,119,761 shares issued
and outstanding as of December 31, 2005
and 2006, respectively)
    
    
    9
    
    
    
    45,451
    
    
    
    46,435
    
    
    
    5,950Additional paid-in capital
    
    
    
    
    
    
    848,423,068
    
    
    
    859,898,889
    
    
    
    110,185,529Deferred share-based compensation
    
    
    11
    
    
    
    (23,141,471
    )
    
    
    
    
    
    
    Statutory reserves
    
    
    
    
    
    
    3,680,707
    
    
    
    4,848,986
    
    
    
    621,338Other comprehensive gain (loss)
    
    
    
    
    
    
    (318,174
    )
    
    
    260,476
    
    
    
    33,377Retained earnings
    
    
    
    
    
    
    25,189,882
    
    
    
    123,362,952
    
    
    
    15,807,454Total shareholders equity
    
    
    
    
    
    
    853,879,463
    
    
    
    988,417,738
    
    
    
    126,653,648Total liabilities and shareholders equity
    
    
    
    
    
    
    963,419,560
    
    
    
    1,127,615,201
    
    
    
    144,490,101
  F-4




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##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Additional
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RetainedCommon shares
    
    
    Series A Preference Shares
    
    
    paid-in capital
    
    
    paid-in capital
    
    
    Deferred
    
    
    
    
    
    
    Other
    
    
    earnings /
    
    
    TotalNumber
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    - common
    
    
    - preference
    
    
    share-based
    
    
    Statutory
    
    
    comprehensive
    
    
    (Accumulated
    
    
    shareholdersof shares
    
    
    Par value
    
    
    of shares
    
    
    Par value
    
    
    shares
    
    
    shares
    
    
    compensation
    
    
    reserves
    
    
    income
    
    
    deficit)
    
    
    equityRMB
    
    
    
    
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance as of January 1, 2004
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    853,879,463Exercise of share options
    
    
    1,243,682
    
    
    
    984
    
    
    
    
    
    
    
    
    
    
    
    6,098,225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,099,209Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,377,596
    
    
    
    
    
    
    
    23,141,471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,519,067Appropriation of statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,168,279
    
    
    
    
    
    
    
    (1,168,279
    )
    
    
    Adjustment of other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    578,650
    
    
    
    
    
    
    
    578,650Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,341,349
    
    
    
    99,341,349Balance as of December 31, 2006
    
    
    56,119,761
    
    
    
    46,435
    
    
    
    
    
    
    
    
    
    
    
    859,898,889
    
    
    
    
    
    
    
    
    
    
    
    4,848,986
    
    
    
    260,476
    
    
    
    123,362,952
    
    
    
    988,417,738Balance as of December 31, 2006 (US$
Note 2(c))
    
    
    56,119,761
    
    
    
    5,950
    
    
    
    
    
    
    
    
    
    
    
    110,185,529
    
    
    
    
    
    
    
    
    
    
    
    621,338
    
    
    
    33,377
    
    
    
    15,807,454
    
    
    
    126,653,648
  F-5




---



##### Table of Contents



51JOB, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Note
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2006RMB
    
    
    RMB
    
    
    RMB
    
    
    US$ (Note 2(c))Cash flows from operating activities:Net income for the year
    
    
    
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379Adjustments for:Share-based compensation
    
    
    
    
    
    
    20,489,734
    
    
    
    14,553,321
    
    
    
    28,519,067
    
    
    
    3,654,370Depreciation
    
    
    
    
    
    
    7,235,708
    
    
    
    13,070,492
    
    
    
    15,890,589
    
    
    
    2,036,185Amortization of intangible assets
    
    
    
    
    
    
    3,383,828
    
    
    
    3,234,693
    
    
    
    3,132,310
    
    
    
    401,367Loss due to disposal of fixed assets
    
    
    
    
    
    
    85,717
    
    
    
    259,064
    
    
    
    250,948
    
    
    
    32,156Loss due to impairment of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,966
    
    
    
    6,274Loss from foreign currency translation
    
    
    
    
    
    
    
    
    
    
    11,320,193
    
    
    
    9,440,242
    
    
    
    1,209,652(Increase) Decrease in accounts receivable
    
    
    
    
    
    
    (5,833,220
    )
    
    
    1,029,603
    
    
    
    (6,208,258
    )
    
    
    (795,512
    )(Increase) Decrease in prepayments and other
current assets
    
    
    
    
    
    
    (6,018,815
    )
    
    
    (8,589,489
    )
    
    
    5,201,866
    
    
    
    666,555(Increase) Decrease in deferred tax assets
    
    
    
    
    
    
    (3,238,432
    )
    
    
    1,522,086
    
    
    
    1,392,875
    
    
    
    178,480Increase (Decrease) in accounts payable
    
    
    
    
    
    
    (1,320,004
    )
    
    
    (2,461,987
    )
    
    
    777,658
    
    
    
    99,647Decrease in due to related parties
    
    
    
    
    
    
    (4,926,900
    )
    
    
    (72,358
    )
    
    
    (1,041,014
    )
    
    
    (133,393
    )Increase in salary and employee related accrual
    
    
    
    
    
    
    2,234,180
    
    
    
    7,641,124
    
    
    
    7,336,756
    
    
    
    940,116Increase (Decrease) in deferred tax liabilities
    
    
    
    
    
    
    (2,168,278
    )
    
    
    (169,237
    )
    
    
    122,757
    
    
    
    15,730Increase (Decrease) in taxes payable
    
    
    
    
    
    
    24,550,704
    
    
    
    (7,384,801
    )
    
    
    549,132
    
    
    
    70,365Increase in advance from customers
    
    
    
    
    
    
    329,926
    
    
    
    22,841,759
    
    
    
    17,310,700
    
    
    
    2,218,155Increase in other payables and accruals
    
    
    
    
    
    
    10,428,733
    
    
    
    3,581,578
    
    
    
    3,045,570
    
    
    
    390,253(Increase) Decrease in other long-term assets
    
    
    
    
    
    
    (563,501
    )
    
    
    227,584
    
    
    
    117,714
    
    
    
    15,082Net cash provided by operating activities
    
    
    
    
    
    
    105,812,412
    
    
    
    122,025,929
    
    
    
    185,229,227
    
    
    
    23,734,861Cash flows from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (12,006,783
    )
    
    
    (45,902,556
    )
    
    
    (153,842,134
    )
    
    
    (19,712,989
    )Purchase of intangible assets
    
    
    
    
    
    
    (1,797,982
    )
    
    
    (8,488,779
    )
    
    
    (1,114,535
    )
    
    
    (142,814
    )Proceeds from the maturity of short-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,554,529
    
    
    
    1,352,434Net cash used in investing activities
    
    
    
    
    
    
    (13,804,765
    )
    
    
    (54,391,335
    )
    
    
    (144,402,140
    )
    
    
    (18,503,369
    )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
    )
    
    
    
    
    
    
    Proceeds from the exercise of options
    
    
    
    
    
    
    2,190,852
    
    
    
    1,546,028
    
    
    
    6,099,209
    
    
    
    781,539Net cash provided by (used in) financing
activities
    
    
    
    
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    6,099,209
    
    
    
    781,539Effect of foreign exchange rate changes on cash
    
    
    
    
    
    
    236,144
    
    
    
    (11,195,747
    )
    
    
    (8,861,592
    )
    
    
    (1,135,505
    )Net increase (decrease) in cash
    
    
    
    
    
    
    733,208,100
    
    
    
    (17,659,122
    )
    
    
    38,064,704
    
    
    
    4,877,526Cash, beginning of year
    
    
    
    
    
    
    115,084,572
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    106,435,534Cash, end of year
    
    
    
    
    
    
    848,292,672
    
    
    
    830,633,550
    
    
    
    868,698,254
    
    
    
    111,313,060Supplemental disclosure of cash flow information:Cash paid during the years for:Income taxes
    
    
    
    
    
    
    14,703,548
    
    
    
    41,598,483
    
    
    
    24,467,059
    
    
    
    3,135,154Interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Supplemental disclosure of non-cash investing
activities:Accrual related to purchase of property,
equipment and software
    
    
    
    
    
    
    (4,577,286
    )
    
    
    
    
    
    
    (1,555,807
    )
    
    
    (199,358
    )Conversion of Series A Preference Shares to
common shares
    
    
    
    
    
    
    119,652,304
    
    
    
    
    
    
    
    
    
    
    
    Accrual related to IPO costs
    
    
    
    
    
    
    2,053,164
    
    
    
    (2,053,164
    )
    
    
    
    
    
    
    
  F-6




---



##### Table of Contents



51JOB, INC.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 1. ORGANIZATION AND NATURE OF OPERATIONS
        F-7




---



##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 2. PRINCIPAL ACCOUNTING POLICIES
 (a) Basis of presentation
   (b) Basis of consolidation
        F-8




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  Technical and Consulting Service Agreements.
 Pledge and Control Agreements.
 (c) Foreign currencies
   (d) Cash
  F-9




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 (e) Accounts receivable
  (f) Investments
  (g) Property and equipment
  Estimated useful livesLand
    
    48 to 50 yearsBuilding
    
    20 yearsLeasehold improvements
    
    Lesser of the lease period or the estimated useful
lifeComputer equipment
    
    5 yearsFurniture and fixtures
    
    5 yearsMotor vehicles
    
    5 yearsOther assets
    
    5 years
 (h) Intangible assets
    (i) Impairment of long-lived assets
  F-10




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 (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




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 (m) Share-based compensation
       F-12




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 2004
    
    2005RMB
    
    RMBNet income as reported
    
    
    61,143,032
    
    
    
    61,422,304Add: Share-based compensation expense under APB No. 25
    
    
    20,489,734
    
    
    
    14,553,321Less: Share-based compensation expense under SFAS No. 123
    
    
    (20,980,215
    )
    
    
    (21,557,770
    )Pro forma net income
    
    
    60,652,551
    
    
    
    54,417,855Basic earnings per share:As reported
    
    
    1.32
    
    
    
    1.10Pro forma
    
    
    1.31
    
    
    
    0.98Basic earnings per ADS:As reported
    
    
    2.65
    
    
    
    2.21Pro forma
    
    
    2.63
    
    
    
    1.96Diluted earnings per share:As reported
    
    
    1.26
    
    
    
    1.07Pro forma
    
    
    1.25
    
    
    
    0.95Diluted earnings per ADS:As reported
    
    
    2.52
    
    
    
    2.15Pro forma
    
    
    2.50
    
    
    
    1.90
  2004
    
    2005
    
    2006Risk-free interest rate
    
    
    2.65
    %
    
    
    3.87%-4.53
    %
    
    
    4.85%-4.93
    %Expected life (years)
    
    
    6
    
    
    
    4
    
    
    
    4Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    0
    %
    
    
    90%-100
    %
    
    
    80
    %Weighted average of fair value of options at grant date
    
    RMB42.46
    
    RMB44.42
    
    RMB40.39
 (n) Operating leases
  (o) Taxation
  F-13




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 (p) Statutory reserves
      (q) Dividend
  F-14




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 (r) Earnings per share
  (s) Segment reporting
  (t) Recent accounting pronouncements
     (u) Reclassifications
  F-15




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 3. ACCOUNTS RECEIVABLE
   2005
    
    2006RMB
    
    RMBBalance at beginning of the period
    
    
    3,689,222
    
    
    
    2,860,275Additions
    
    
    5,799,717
    
    
    
    Reversals
    
    
    
    
    
    
    (246,962
    )Write-offs
    
    
    (6,628,664
    )
    
    
    (1,503
    )Balance at end of period
    
    
    2,860,275
    
    
    
    2,611,810
 4. PREPAYMENTS AND OTHER CURRENT ASSETS
 2005
    
    2006RMB
    
    RMBRental and other deposits
    
    
    4,333,790
    
    
    
    1,770,282Prepayments for rental and others
    
    
    6,315,403
    
    
    
    5,573,569Employee advances
    
    
    1,507,761
    
    
    
    1,760,343Payments made on behalf of customers
    
    
    
    
    
    
    370,999Prepaid insurance premium
    
    
    1,704,902
    
    
    
    2,224,911Subsidy income receivable
    
    
    4,660,000
    
    
    
    Interest income receivable
    
    
    2,829,274
    
    
    
    4,864,170Others
    
    
    1,914,307
    
    
    
    1,499,297Total
    
    
    23,265,437
    
    
    
    18,063,571
 5. PROPERTY AND EQUIPMENT
 2005
    
    2006RMB
    
    RMBLand and building
    
    
    
    
    
    
    164,873,963Leasehold improvements
    
    
    13,085,141
    
    
    
    10,436,140Computer equipment
    
    
    36,185,945
    
    
    
    40,376,503Furniture and fixtures
    
    
    9,896,664
    
    
    
    11,939,772Motor vehicles
    
    
    3,886,016
    
    
    
    3,823,860Other assets
    
    
    
    
    
    
    4,900,714Less: impairment
    
    
    
    
    
    
    (48,966
    )Less: accumulated depreciation
    
    
    (30,695,891
    )
    
    
    (41,986,673
    )Net book value
    
    
    32,357,875
    
    
    
    194,315,313
 6. INTANGIBLE ASSETS
 2005
    
    2006RMB
    
    RMBComputer equipment software
    
    
    15,952,849
    
    
    
    16,818,306Acquired training licenses
    
    
    6,571,253
    
    
    
    6,571,253Internally developed software
    
    
    1,568,808
    
    
    
    1,568,808Less: accumulated amortization
    
    
    (12,712,075
    )
    
    
    (15,595,307
    )Net book value
    
    
    11,380,835
    
    
    
    9,363,060
 F-16




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 7. OTHER PAYABLES AND ACCRUALS
 2005
    
    2006RMB
    
    RMBProfessional service fees
    
    
    4,796,706
    
    
    
    4,633,303Office expenses
    
    
    1,327,095
    
    
    
    1,504,416Deposit from customers
    
    
    1,880,392
    
    
    
    4,031,346Marketing expenses
    
    
    
    
    
    
    3,538,428Revenue from newspaper sales collected on behalf of newspaper
contractors
    
    
    1,173,575
    
    
    
    4,950,877Payables to employees related to proceeds from share option exercises
    
    
    6,872,776
    
    
    
    549,469Others
    
    
    1,464,720
    
    
    
    1,352,995Total
    
    
    17,515,264
    
    
    
    20,560,834
 8. TAXATION
 Cayman Islands
  British Virgin Islands
  Hong Kong
  China
  Composition of income tax expense
  2004
    
    2005
    
    2006RMB
    
    RMB
    
    RMBCurrent income tax expense
    
    
    39,464,894
    
    
    
    28,592,183
    
    
    
    27,044,007Deferred tax expense (benefit)
    
    
    (5,406,710
    )
    
    
    1,352,850
    
    
    
    1,515,632Income tax expense
    
    
    34,058,184
    
    
    
    29,945,033
    
    
    
    28,559,639
 F-17




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Reconciliation of the differences between statutory tax rate and the effective tax rate
  2004
    
    2005
    
    2006EIT statutory rate
    
    
    33
    %
    
    
    33
    %
    
    
    33
    %Effect of tax holiday for certain subsidiaries
    
    
    (3
    %)
    
    
    (6
    %)
    
    
    (21
    %)Difference in EIT rates of certain subsidiaries
    
    
    (1
    %)
    
    
    (3
    %)
    
    
    (4
    %)Non-deductibility of expenses incurred outside the PRC
    
    
    8
    %
    
    
    6
    %
    
    
    8
    %Other permanent differences
    
    
    
    
    
    
    4
    %
    
    
    4
    %Provision of valuation allowance
    
    
    
    
    
    
    
    
    
    
    3
    %Reversal of valuation allowance
    
    
    (1
    %)
    
    
    (1
    %)
    
    
    (1
    %)Effective EIT rate of the Group
    
    
    36
    %
    
    
    33
    %
    
    
    22
    %
  2005
    
    2006RMB
    
    RMBDeductible temporary differences related to accrued expenses
    
    
    1,711,457
    
    
    
    1,692,076Deductible temporary differences related to advertising expenses
    
    
    1,984,085
    
    
    
    1,877,826Deductible temporary differences related to provision for doubtful debts
and slow moving merchandise
    
    
    2,996,098
    
    
    
    1,626,466Total current deferred tax assets
    
    
    6,691,640
    
    
    
    5,196,368Less: Valuation allowance
    
    
    (823,820
    )
    
    
    (813,616
    )Net current deferred tax assets
    
    
    5,867,820
    
    
    
    4,382,752Tax loss carryforwards
    
    
    4,970,167
    
    
    
    7,058,016Deductible temporary differences related to fixed assets impairment
    
    
    
    
    
    
    7,345Deductible temporary differences related to residual value reconciliation
    
    
    
    
    
    
    197,992Deductible temporary differences related to amortization
    
    
    412,314
    
    
    
    256,685Total non-current deferred tax assets
    
    
    5,382,481
    
    
    
    7,520,038Less: Valuation allowance
    
    
    (4,970,167
    )
    
    
    (7,015,531
    )Net non-current deferred tax assets
    
    
    412,314
    
    
    
    504,507Total deferred tax assets
    
    
    6,280,134
    
    
    
    4,887,259Taxable temporary differences related to depreciation period
    
    
    
    
    
    
    (122,757
    )Total non-current deferred tax liabilities
    
    
    
    
    
    
    (122,757
    )Total deferred tax liabilities
    
    
    
    
    
    
    (122,757
    )
  F-18




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  2005
    
    2006RMB
    
    RMBBalance at beginning of the period
    
    
    7,063,998
    
    
    
    5,793,987Additions
    
    
    1,782,902
    
    
    
    3,589,202Reversals
    
    
    (3,052,913
    )
    
    
    (1,554,042
    )Balance at end of period
    
    
    5,793,987
    
    
    
    7,829,147
 9. INITIAL PUBLIC OFFERING
  10. SERIES A PREFERENCE SHARES
        F-19




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 11. SHARE-BASED COMPENSATION
   WeightedWeighted
    
    
    averageaverage
    
    
    remainingNumber
    
    
    exercise
    
    
    contractual
    
    
    Aggregateof shares
    
    
    price
    
    
    life (years)
    
    
    intrinsic valueOutstanding at January 1, 2004
    
    
    2,919,728
    
    
    US$
    0.31Granted
    
    
    468,192
    
    
    US$
    1.44Exercised
    
    
    (711,097
    )
    
    US$
    0.37Forfeited
    
    
    (156,379
    )
    
    US$
    0.34Outstanding at December 31, 2004
    
    
    2,520,444
    
    
    US$
    0.43Granted
    
    
    749,200
    
    
    US$
    8.51Exercised
    
    
    (632,276
    )
    
    US$
    0.30Forfeited
    
    
    (79,394
    )
    
    US$
    0.48Outstanding at December 31, 2005
    
    
    2,557,974
    
    
    US$
    2.82Granted
    
    
    868,992
    
    
    US$
    8.39Exercised
    
    
    (1,243,682
    )
    
    US$
    0.62Forfeited
    
    
    (142,658
    )
    
    US$
    5.78Outstanding at December 31, 2006
    
    
    2,040,626
    
    
    US$
    6.34
    
    
    
    4.29
    
    
    US$
    4,599,070Vested and expected to vest at December 31, 2006
    
    
    1,954,581
    
    
    US$
    6.28
    
    
    
    4.27
    
    
    US$
    4,523,955Exercisable at December 31, 2006
    
    
    594,082
    
    
    US$
    3.88
    
    
    
    3.32
    
    
    US$
    2,801,543
    F-20




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  WeightedaverageNumber
    
    
    grant-dateof shares
    
    
    fair valueNon-vested at January 1, 2006
    
    
    1,345,821
    
    
    US$
    5.54Granted
    
    
    868,992
    
    
    US$
    5.18Vested
    
    
    (625,611
    )
    
    US$
    5.38Forfeited
    
    
    (142,658
    )
    
    US$
    5.66Non-vested at December 31, 2006
    
    
    1,446,544
    
    
    US$
    5.37Expected to vest at December 31, 2006
    
    
    1,360,499
    
    
    US$
    5.36
  Outstanding
    
    
    ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    Weighted
    
    
    averageaverage
    
    
    remaining
    
    
    
    
    
    
    average
    
    
    remainingNumber
    
    
    exercise
    
    
    contractual
    
    
    Number of
    
    
    exercise
    
    
    contractualExercise prices
    
    of shares
    
    
    price
    
    
    life (years)
    
    
    shares
    
    
    price
    
    
    life (years)US$0.15
    
    
    177,336
    
    
    US$
    0.15
    
    
    
    2.00
    
    
    
    158,180
    
    
    US$
    0.15
    
    
    
    1.97US$0.50
    
    
    233,102
    
    
    US$
    0.50
    
    
    
    2.96
    
    
    
    75,655
    
    
    US$
    0.50
    
    
    
    2.96US$1.00
    
    
    128,572
    
    
    US$
    1.00
    
    
    
    3.16
    
    
    
    109,755
    
    
    US$
    1.00
    
    
    
    3.16US$6.25
    
    
    30,000
    
    
    US$
    6.25
    
    
    
    4.86
    
    
    
    8,125
    
    
    US$
    6.25
    
    
    
    4.86US$7.00
    
    
    40,000
    
    
    US$
    7.00
    
    
    
    4.56
    
    
    
    14,167
    
    
    US$
    7.00
    
    
    
    4.56US$8.365
    
    
    825,840
    
    
    US$
    8.365
    
    
    
    5.26
    
    
    
    
    
    
    US$
    8.365
    
    
    
    US$8.695
    
    
    590,800
    
    
    US$
    8.695
    
    
    
    4.31
    
    
    
    228,200
    
    
    US$
    8.695
    
    
    
    4.31US$9.83
    
    
    14,976
    
    
    US$
    9.83
    
    
    
    5.58
    
    
    
    
    
    
    US$
    9.83
    
    
    
    2,040,626
    
    
    
    
    
    
    
    
    
    
    
    594,082
   12. EMPLOYEE BENEFITS
  F-21




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 13. RELATED PARTY TRANSACTIONS
  2005
    
    2006RMB
    
    RMBDue to related parties:Principal shareholders
    
    
    500,000
    
    
    
    Advances for share options exercised
    
    
    1,005,515
    
    
    
    464,5011,505,515
    
    
    
    464,501
   14. EARNINGS PER SHARE
  2004
    
    2005
    
    2006RMB
    
    RMB
    
    RMBNumerator:Net income
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349Amount allocated to participating preference shareholders
    
    
    (13,986,417
    )
    
    
    
    
    
    
    Numerator for basic earnings per share
    
    
    47,156,615
    
    
    
    61,422,304
    
    
    
    99,341,349Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted earnings per share
    
    
    47,156,615
    
    
    
    61,422,304
    
    
    
    99,341,349Denominator:Denominator for basic earnings per share  weighted
average common shares outstanding
    
    
    35,593,374
    
    
    
    55,607,716
    
    
    
    55,422,447Effect of dilutive share options
    
    
    1,889,645
    
    
    
    1,646,738
    
    
    
    986,813Denominator for diluted earnings per share
    
    
    37,483,019
    
    
    
    57,254,454
    
    
    
    56,409,260Basic earnings per share
    
    
    1.32
    
    
    
    1.10
    
    
    
    1.79Diluted earnings per share
    
    
    1.26
    
    
    
    1.07
    
    
    
    1.76
    F-22




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 15. COMMITMENTS AND CONTINGENCIES
 Operating lease commitments
 51job Weekly
 Publication
    
    Officefees
    
    premises
    
    Others
    
    TotalRMB
    
    RMB
    
    RMB
    
    RMB2007
    
    
    73,638,678
    
    
    
    11,437,006
    
    
    
    8,263,476
    
    
    
    93,339,1602008
    
    
    8,201,792
    
    
    
    8,440,576
    
    
    
    8,653,748
    
    
    
    25,296,1162009
    
    
    2,012,542
    
    
    
    7,931,783
    
    
    
    1,144,633
    
    
    
    11,088,9582010
    
    
    1,010,000
    
    
    
    5,590,273
    
    
    
    52,667
    
    
    
    6,652,9402011
    
    
    480,000
    
    
    
    576,243
    
    
    
    36,000
    
    
    
    1,092,243After 2011
    
    
    1,080,000
    
    
    
    24,346,307
    
    
    
    1,521,000
    
    
    
    26,947,30786,423,012
    
    
    
    58,322,188
    
    
    
    19,671,524
    
    
    
    164,416,724
  Capital commitments
  Contingencies
     F-23




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##### Table of Contents



51JOB, INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 16. FINANCIAL INSTRUMENTS
  17. CERTAIN RISKS AND CONCENTRATION
    18. SUBSEQUENT EVENTS
  F-24




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Note
    
    2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    US$ (Note 4)Net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    
    
    
    
    (24,270,500
    )
    
    
    (20,818,339
    )
    
    
    (32,918,440
    )
    
    
    (4,218,096
    )Loss from operations
    
    
    
    
    
    
    (24,270,500
    )
    
    
    (20,818,339
    )
    
    
    (32,918,440
    )
    
    
    (4,218,096
    )Equity in profit of subsidiary companies, net
    
    
    1
    
    
    
    83,415,592
    
    
    
    79,223,274
    
    
    
    129,688,596
    
    
    
    16,618,008Other income
    
    
    
    
    
    
    1,997,940
    
    
    
    3,017,369
    
    
    
    2,571,193
    
    
    
    329,467Income before provision for income tax
    
    
    
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income for the year
    
    
    
    
    
    
    61,143,032
    
    
    
    61,422,304
    
    
    
    99,341,349
    
    
    
    12,729,379
 F-25




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2006
 Note
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    US$ (Note 4)ASSETSCurrent assets:Cash
    
    
    
    
    
    
    247,940,580
    
    
    
    257,771,578
    
    
    
    33,030,276Receivables due from related parties
    
    
    2
    
    
    
    838,808
    
    
    
    818,668
    
    
    
    104,902Prepayments and other current assets
    
    
    
    
    
    
    1,931,937
    
    
    
    1,562,985
    
    
    
    200,277Total current assets
    
    
    
    
    
    
    250,711,325
    
    
    
    260,153,231
    
    
    
    33,335,455Long term receivables due from related parties
    
    
    2
    
    
    
    362,450,068
    
    
    
    340,167,130
    
    
    
    43,588,259Investment in subsidiaries
    
    
    1
    
    
    
    251,535,177
    
    
    
    392,208,294
    
    
    
    50,256,698Total assets
    
    
    
    
    
    
    864,696,570
    
    
    
    992,528,655
    
    
    
    127,180,412LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Due to related parties
    
    
    2
    
    
    
    2,014,535
    
    
    
    3,124,593
    
    
    
    400,378Other payables and accruals
    
    
    
    
    
    
    8,802,572
    
    
    
    986,324
    
    
    
    126,386Total current liabilities
    
    
    
    
    
    
    10,817,107
    
    
    
    4,110,917
    
    
    
    526,764Total liabilities
    
    
    
    
    
    
    10,817,107
    
    
    
    4,110,917
    
    
    
    526,764Shareholders equity:Common shares (US$0.0001 par value;
500,000,000 shares authorized, 54,876,079
and 56,119,761 shares issued and
outstanding as of December 31, 2005 and
2006, respectively)
    
    
    
    
    
    
    45,451
    
    
    
    46,435
    
    
    
    5,950Additional paid-in capital
    
    
    
    
    
    
    848,423,068
    
    
    
    859,898,889
    
    
    
    110,185,529Deferred share-based compensation
    
    
    
    
    
    
    (23,141,471
    )
    
    
    
    
    
    
    Other comprehensive gain (loss)
    
    
    
    
    
    
    (318,174
    )
    
    
    260,476
    
    
    
    33,377Retained earnings
    
    
    
    
    
    
    28,870,589
    
    
    
    128,211,938
    
    
    
    16,428,792Total shareholders equity
    
    
    
    
    
    
    853,879,463
    
    
    
    988,417,738
    
    
    
    126,653,648Total liabilities and shareholders equity
    
    
    
    
    
    
    864,696,570
    
    
    
    992,528,655
    
    
    
    127,180,412
 F-26




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 Note
    
    2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    US$ (Note 4)Net cash provided by (used in) operating activities
    
    
    
    
    
    
    (891,852
    )
    
    
    7,598,852
    
    
    
    (9,689,559
    )
    
    
    (1,241,599
    )Net cash provided by (used in) investing activities
    
    
    
    
    
    
    7,420,016
    
    
    
    (322,941,195
    )
    
    
    22,282,938
    
    
    
    2,855,286Net cash provided by (used in) financing activities
    
    
    
    
    
    
    640,964,309
    
    
    
    (74,097,969
    )
    
    
    6,099,209
    
    
    
    781,539Effect of foreign exchange rate changes on cash
    
    
    
    
    
    
    236,144
    
    
    
    (11,195,747
    )
    
    
    (8,861,590
    )
    
    
    (1,135,504
    )Net increase (decrease) in cash
    
    
    
    
    
    
    647,728,617
    
    
    
    (400,636,059
    )
    
    
    9,830,998
    
    
    
    1,259,722Cash, beginning of year
    
    
    
    
    
    
    848,022
    
    
    
    648,576,639
    
    
    
    247,940,580
    
    
    
    31,770,554Cash, end of year
    
    
    
    
    
    
    648,576,639
    
    
    
    247,940,580
    
    
    
    257,771,578
    
    
    
    33,030,276
 F-27




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 1. BASIS OF PRESENTATION
     2. RELATED PARTY BALANCES
  2005
    
    2006RMB
    
    RMBReceivables due from related parties:51net HR
    
    
    822,577
    
    
    
    802,96251net Beijing
    
    
    16,231
    
    
    
    15,706838,808
    
    
    
    818,668Long term receivables due from related parties:51net.com Inc.
    
    
    362,450,068
    
    
    
    340,167,130363,288,876
    
    
    
    340,985,798Due to related parties:Qianjin Network Information Technology (Shanghai) Co., Ltd.
    
    
    73,519
    
    
    
    231,137Shanghai Qianjin Advertising Co., Ltd.
    
    
    935,501
    
    
    
    2,424,17351net.com Inc.
    
    
    
    
    
    
    4,782Advances for share options exercised
    
    
    1,005,515
    
    
    
    464,5012,014,535
    
    
    
    3,124,593
  3. COMMITMENTS
  F-28




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 51JOB, INC.
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
 4. FOREIGN CURRENCIES
  F-29