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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 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2010.
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Date of event requiring this shell company report
 Commission file number: 333-170663
 E-Commerce China Dangdang Inc.
  (Translation of Registrants name into English)
 (Jurisdiction of incorporation or organization)
 (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 RegisteredClass A common shares, par value US$0.0001 per share
    
    The New York Stock Exchange*
 *
    
    Not for trading, but only in connection with the listing on The New York Stock Exchange of
American depositary shares (ADSs). Currently, one ADS represents five Class A common shares.
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None  (Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None  (Title of Class)
   o þ
 o þ
 þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  þ
  o
 o
  o
 o
 o þ
  o o




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TABLE OF CONTENTS
 INTRODUCTION
    
    
    3FORWARD-LOOKING INFORMATION
    
    
    3PART I
    
    
    5Item 1. Identity of Directors, Senior Management and Advisers
    
    
    5Item 2. Offer Statistics and Expected Timetable
    
    
    5Item 3. Key Information
    
    
    5Item 4. Information on the Company
    
    
    42Item 4A. Unresolved Staff Comments
    
    
    63Item 5. Operating and Financial Review and Prospects
    
    
    64Item 6. Directors, Senior Management and Employees
    
    
    81Item 7. Major Shareholders and Related Party Transactions
    
    
    95Item 8. Financial Information
    
    
    98Item 9. The Offer and Listing
    
    
    99Item 10. Additional Information
    
    
    100Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    113Item 12. Description of Securities Other than Equity Securities
    
    
    114PART II
    
    
    116Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    116Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    116Item 15. Controls and Procedures
    
    
    117Item 16A. Audit Committee Financial Expert
    
    
    118Item 16B. Code of Ethics
    
    
    118Item 16C. Principal Accountant Fees and Services
    
    
    119Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    119Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    119Item 16F. Change in Registrants Certifying Accountant
    
    
    119Item 16G. Corporate Governance
    
    
    119PART III
    
    
    120Item 17. Financial Statements
    
    
    120Item 18. Financial Statements
    
    
    120Item 19. Exhibits
    
    
    120SIGNATURES
    
    
    123EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1
  2




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INTRODUCTION
  
    
    we, us, our company, our, and Dangdang refer to E-Commerce China Dangdang
Inc., a Cayman Islands company, and its PRC subsidiary, Beijing Dangdang Information
Technology Co., Ltd., and, in the context of describing our operations and consolidated
financial information, also include its consolidated affiliated PRC entity, Beijing
Dangdang Kewen E-Commerce Co., Ltd.;
    
    active customers for a specified period refers to customers who have purchased
products offered by us at dangdang.comat least once during that period;
    
    daily unique visitors refers to unduplicated visitors to our website each day;
    
    repeat customers for a specified period refers to customers who have purchased
products offered by us at dangdang.comprior to this period;
    
    China or PRC refers to the Peoples Republic of China, excluding, for the purpose of
this annual report only, Taiwan, Hong Kong, and Macau;
    
    shares or common shares refers to our Class A and Class B common shares, par value
US$0.0001 per share, preferred shares refers to our series A, series B and series C
convertible preferred shares, par value US$0.0001 per share, which were automatically
converted into Class B common shares upon the completion of our companys initial public
offering in December 2010; in November 2010, our shareholders approved a 1:10 share split
of our authorized and outstanding share capital with retrospective effect. All presentation
of share capital information in this annual report is shown giving effect to the 1:10 share
split;
    
    ADSs refers to our American depositary shares, each of which represents five Class A
common shares;
    
    all references to RMB or Renminbi refer to the legal currency of China; and
    
    all references to US$, dollars or U.S. dollars refer to the legal currency of the
United States.
 
 FORWARD-LOOKING INFORMATION
  3




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
    
    our growth strategies;
    
    our future business development, results of operations and financial condition;
    
    trends and competition in Chinas B2C e-commerce market;
    
    expected changes in our revenues and certain cost and expense items; and
    
    assumptions underlying or related to any of the foregoing.
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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
   For the Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(in thousands, except for share and per share data)Consolidated Statements of
Operations Data:Net revenues:Product revenueMedia
    
    
    409,023
    
    
    
    697,681
    
    
    
    1,297,120
    
    
    
    1,863,431
    
    
    
    282,338General merchandise
    
    
    36,894
    
    
    
    66,829
    
    
    
    152,976
    
    
    
    392,090
    
    
    
    59,408445,917
    
    
    
    764,510
    
    
    
    1,450,096
    
    
    
    2,255,521
    
    
    
    341,746Other revenue
    
    
    947
    
    
    
    1,550
    
    
    
    7,556
    
    
    
    26,159
    
    
    
    3,963Total net revenues
    
    
    446,864
    
    
    
    766,060
    
    
    
    1,457,652
    
    
    
    2,281,680
    
    
    
    345,709Cost of revenues
    
    
    (365,284
    )
    
    
    (638,817
    )
    
    
    (1,129,961
    )
    
    
    (1,775,881
    )
    
    
    (269,073
    )
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For the Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(in thousands, except for share and per share data)Gross profit
    
    
    81,580
    
    
    
    127,243
    
    
    
    327,691
    
    
    
    505,799
    
    
    
    76,636Operating expenses (1):Fulfillment
    
    
    (85,802
    )
    
    
    (120,837
    )
    
    
    (201,270
    )
    
    
    (286,443
    )
    
    
    (43,400
    )Marketing
    
    
    (35,503
    )
    
    
    (40,766
    )
    
    
    (38,473
    )
    
    
    (76,669
    )
    
    
    (11,616
    )Technology and content
    
    
    (17,202
    )
    
    
    (26,436
    )
    
    
    (38,989
    )
    
    
    (64,682
    )
    
    
    (9,800
    )General and administrative
    
    
    (20,931
    )
    
    
    (26,991
    )
    
    
    (38,021
    )
    
    
    (67,903
    )
    
    
    (10,288
    )Government grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,805
    
    
    
    728(Loss) income from operations
    
    
    (77,858
    )
    
    
    (87,787
    )
    
    
    10,938
    
    
    
    14,907
    
    
    
    2,260(Loss) income before income taxes
    
    
    (70,511
    )
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    18,721
    
    
    
    2,838Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,061
    
    
    
    1,827Net (loss) income
    
    
    (70,511
    )
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    30,782
    
    
    
    4,665Deemed dividend on Series C
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (270
    )Net (loss) income attributable to
common shareholders
    
    
    (70,511
    )
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    29,003
    
    
    
    4,395(Loss) income per common share:Basic(2)
    
    
    (0.40
    )
    
    
    (0.47
    )
    
    
    
    
    
    
    0.02
    
    
    
    0.00Diluted(2)
    
    
    (0.40
    )
    
    
    (0.47
    )
    
    
    
    
    
    
    0.02
    
    
    
    0.00Shares used in (loss) income per
Class A and B common share
computation:Common shares:Basic
    
    
    175,644,260
    
    
    
    175,644,260
    
    
    
    175,644,260Diluted
    
    
    175,644,260
    
    
    
    175,644,260
    
    
    
    175,644,260Class A common shares:Basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,712,195
    
    
    
    6,712,195Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,359,263
    
    
    
    216,359,263Class B common shares:Basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,562,768
    
    
    
    181,562,768Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,562,768
    
    
    
    181,562,768
 
 Notes:(1)
    
    Share-based compensation expenses were allocated in operating expenses as follows: For the Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(in thousands)Fulfillment
    
    
    517
    
    
    
    469
    
    
    
    764
    
    
    
    1,096
    
    
    
    166Marketing
    
    
    111
    
    
    
    105
    
    
    
    131
    
    
    
    233
    
    
    
    35Technology and content
    
    
    266
    
    
    
    270
    
    
    
    479
    
    
    
    787
    
    
    
    119General and administrative
    
    
    2,746
    
    
    
    1,519
    
    
    
    2,623
    
    
    
    8,184
    
    
    
    1,241Total share-based compensation expenses
    
    
    3,640
    
    
    
    2,363
    
    
    
    3,997
    
    
    
    10,300
    
    
    
    1,561
 
 (2)
    
    Prior to our December 2010 initial public offering, each
holder of Series A, Series B and
Series C convertible preferred shares was entitled to dividends at the rate of US$0.0112,
US$0.0172 and US$0.0438 per share per annum (as adjusted for any stock dividends, combinations
or splits with respect to such shares), respectively, prior and in preference to any
declaration or payment of any dividend (payable other than in common shares) on the common
shares. Prior to June 2010, each holder of Series C convertible preferred shares was entitled
to dividends at the rate of US$0.0534 per share per annum. For each of the years ended
December 31, 2007, 2008, 6




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2009 and 2010, the basic and diluted (loss) income per share were calculated using the two class method
taking into consideration of the preferred dividends that each preferred shareholder was
entitled to.  For the Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(in thousands)Summary Consolidated Balance Sheet Data:Cash and cash equivalents
    
    
    63,531
    
    
    
    66,509
    
    
    
    75,759
    
    
    
    1,691,906
    
    
    
    256,349Held-to-maturity investments
    
    
    102,000
    
    
    
    50,000
    
    
    
    90,000
    
    
    
    
    
    
    
    Inventories
    
    
    169,617
    
    
    
    300,813
    
    
    
    540,744
    
    
    
    896,273
    
    
    
    135,799Accounts receivable, net
    
    
    7,925
    
    
    
    8,025
    
    
    
    11,764
    
    
    
    17,802
    
    
    
    2,697Total assets
    
    
    379,564
    
    
    
    463,821
    
    
    
    800,905
    
    
    
    2,801,457
    
    
    
    424,462Accounts payable
    
    
    235,883
    
    
    
    372,253
    
    
    
    618,062
    
    
    
    865,953
    
    
    
    131,205Convertible preferred shares:Series A
    
    
    51,314
    
    
    
    51,314
    
    
    
    51,314
    
    
    
    
    
    
    
    Series B
    
    
    57,001
    
    
    
    57,001
    
    
    
    57,001
    
    
    
    
    
    
    
    Series C
    
    
    209,716
    
    
    
    209,716
    
    
    
    209,716
    
    
    
    
    
    
    
    Common shares
    
    
    151
    
    
    
    151
    
    
    
    151
    
    
    
    
    
    
    
    Class A common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    11Class B common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    34Accumulated deficit
    
    
    (315,726
    )
    
    
    (397,483
    )
    
    
    (380,567
    )
    
    
    (351,564
    )
    
    
    (53,269
    )Total shareholders (deficit) equity
    
    
    (210,768
    )
    
    
    (291,443
    )
    
    
    (270,543
    )
    
    
    1,414,257
    
    
    
    214,280
 Exchange Rate Information
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Certified Exchange RatePeriod
    
    Period End
    
    Average(1)
    
    Low
    
    High(RMB per US$1.00)2006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.7603
    
    
    
    6.8305
    
    
    
    6.6000October
    
    
    6.6705
    
    
    
    6.6675
    
    
    
    6.6912
    
    
    
    6.6397November
    
    
    6.6670
    
    
    
    6.6538
    
    
    
    6.6892
    
    
    
    6.6330December
    
    
    6.6000
    
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.60002011January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5804February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483April (through April 15)
    
    
    6.5317
    
    
    
    6.5382
    
    
    
    6.5477
    
    
    
    6.5310
 
 Source: Federal Reserve Statistical Release(1)
    
    Annual averages are calculated by using the average of the exchange rates on the last day of
each month during the relevant year. Monthly averages are calculated by using the average of
the daily rates during the relevant month. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Related to Our Business
 Our business depends heavily on the market recognition and reputation of our dangdang.com brand,
and any harm to our brand or failure to maintain and enhance our brand recognition may
materially and adversely affect our business, financial condition and results of operations.
 dangdang.com
 
    
    our ability to maintain a convenient and reliable user experience as consumer
preferences evolve and as we expand into new product categories and new business lines;
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
    
    our ability to increase brand awareness among existing and potential customers through
various means of marketing and promotional activities;
    
    the efficiency, reliability and service quality of our courier service providers;
    
    our ability to effectively control the product and service quality of third-party
merchants and to monitor service performance of third parties as we continue to develop our
marketplace program; and
    
    any negative media publicity about e-commerce or security or product quality problems of
other e-commerce websites in China.
  We depend heavily on the continued success of our core business of selling books and other media
products online, and any event that adversely affects our sales of books and other media
products could harm our business and results of operations.
  We have a history of net losses prior to 2009 and may experience earnings declines or losses in
the future.
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If we are unable to manage our growth or execute our strategies effectively, our business and
prospects may be materially and adversely affected.
  Our success depends on our ability to identify and respond to constantly changing consumer
preferences.
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We face intense competition, and if we do not compete successfully against existing and new
competitors, we may lose market share and customers.
  dangdang.com
  Our further expansion in the general merchandise business and third-party marketplace business
may lower our profit margins. In addition, given the relatively short history of these new
businesses, it may be difficult for you to evaluate our business and prospects.
 dangdang.com
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Uncertainties regarding the growth and sustained profitability of B2C e-commerce in China could
adversely affect our net revenues and business prospects and the trading price of our ADSs.
  
    
    the growth of personal computer, internet and broadband usage and penetration in China,
and the rate of any such growth;
    
    the trust and confidence level of consumers in online shopping in China, as well as
changes in customer demographics and consumers tastes and preferences;
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
    
    the selection, price and popularity of products that we and our competitors offer on
websites;
    
    whether alternative retail channels or business models that better address the needs of
consumers emerge in China;
    
    the development of fulfillment, payment and other ancillary services associated with
online purchases; and
    
    general economic conditions, particularly economic conditions affecting discretionary
consumer spending.
  Our growth and profitability depend on the level of consumer confidence and spending in China.
  The proper functioning of our website is essential to our business and any failure to maintain
the satisfactory performance, security and integrity of our website will materially and
adversely affect our business, reputation, financial condition and results of operations.
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If we fail to manage our relationships with our suppliers, our business and prospects may
suffer.
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If we fail to successfully adopt new technologies or adapt our website and systems to customer
requirements or emerging industry standards, our business, prospects and financial results may
be materially and adversely affected.
  Any interruption in the operation of our data centers or logistics centers for an extended
period may have an adverse impact on our business.
  Failure to protect confidential information of our customers and our network against security
breaches could damage our reputation and brand and substantially harm our business and results
of operations.
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We depend on numerous third-party delivery service providers to deliver our products, and their
failure to provide high-quality delivery services to our customers may negatively impact the
shopping experience of our customers, damage our market reputation and materially and adversely
affect our business and results of operations.
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Our legal right to lease certain properties could be challenged by property owners or other
third parties, which may cause interruptions to our business operations.
  Failure to renew our current leases or locate desirable alternatives for our facilities could
materially and adversely affect our business.
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We plan to expand our logistics center and distribution network. If we are not able to manage
such expansion successfully, our growth potential, results of operations and business could be
materially and adversely affected.
  We may incur liability for counterfeit products, products sold at our website or content
provided on our website that infringe on third-party intellectual property rights.
 dangdang.com
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Our business depends substantially on the continued efforts of our executive officers and our
business may be severely disrupted if we lose their services.
  If we are unable to attract, train and retain qualified personnel, our business may be
materially and adversely affected.
  Implementation of new labor laws in China may adversely affect our business and results of
operations.
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Our existing shareholders have substantial influence over our company and their interests may
not be aligned with the interests of our other shareholders.
  We may not be able to prevent others from unauthorized use of our intellectual property, which
could harm our business and competitive position.
 dangdang.com, dangdang.com.cn dangdang.cn
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We incur significant costs on a variety of marketing efforts designed to increase sales of our
products and some marketing campaigns and methods may turn out to be ineffective.
  We may suffer losses if we are unable to efficiently manage our inventory risks, particularly
when expanding into the general merchandise business.
  Our results of operations are subject to quarterly fluctuations due to a number of factors that
could adversely affect our business and the trading price of our ADSs.
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Future strategic alliances or acquisitions may have a material and adverse effect on our
business, reputation and results of operations.
   We may need additional capital, and the sale of additional ADSs or other equity securities could
result in additional dilution to our shareholders.
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If we fail to implement and maintain an effective system of internal controls or fail to
remediate the material weakness in our internal control over financial reporting that has been
identified, we may be unable to accurately report our results of operations or prevent fraud,
and investor confidence and the market price of our ADSs may be materially and adversely
affected.
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We have limited insurance coverage and may incur losses resulting from product liability claims
or business interruptions.
  Risks Relating to Our Corporate Structure and Restrictions on Our Industry
 Substantial uncertainties and restrictions exist with respect to the interpretation and
application of PRC laws and regulations relating to online commerce and the distribution of
internet content in China. If the PRC government finds that the structure we have adopted for
our business operations does not comply with PRC laws and regulations, we could be subject to
severe penalties, including the shutting down of our website.
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We rely on contractual arrangements with our affiliated PRC entity and its shareholders for the
operation of our business, which may not be as effective as direct ownership. If our affiliated
PRC entity and its shareholders fail to perform their obligations under these contractual
arrangements, we may have to resort to litigation to enforce our rights, which may be
time-consuming, unpredictable, expensive and damaging to our operations and reputation.
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The shareholders of our affiliated PRC entity have potential conflicts of interest with us,
which may adversely affect our business.
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We may lose the ability to use and enjoy assets held by our affiliated PRC entity that are
important to the operation of our business if such entity goes bankrupt or becomes subject to a
dissolution or liquidation proceeding.
  Our contractual arrangements with our affiliated PRC entity may result in adverse tax
consequences to us.
  If our affiliated PRC entity fails to obtain and maintain the requisite assets, licenses and
approvals required under the complex regulatory environment for internet-based businesses in
China, our business, financial condition and results of operations may be materially and
adversely affected.
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Regulation and censorship of information distribution over the internet in China may adversely
affect our business, and we may be liable for information displayed on, retrieved from or linked
to our website.
  Risks Relating to Doing Business in China
 Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit
the legal protections available to you and us.
  28




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Changes in Chinas economic, political or social conditions or government policies could have a
material adverse effect on our business and operations.
    29




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Under the PRC enterprise income tax law, we may be classified as a PRC resident enterprise,
which could result in unfavorable tax consequences to us and our shareholders and have a
material adverse effect on our results of operations and the value of your investment.
    30




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PRC laws and regulations establish complex procedures for some acquisitions of Chinese companies
by foreign investors, which could make it more difficult for us to pursue growth through
acquisitions in China.
  The inability of our PRC resident shareholders to complete their registrations with SAFE may
limit our PRC subsidiaries ability to increase their registered capital or distribute profits
to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to
liability and penalties under PRC law.
  31




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Our PRC subsidiaries and affiliated PRC entities are subject to restrictions on paying dividends
or making other payments to us, which may restrict our ability to satisfy our liquidity
requirements.
  Fluctuations in exchange rates could have a material adverse effect on our results of operations
and the value of your investment.
  33




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Risks Relating to Our ADSs
 The trading prices of our ADSs are likely to be volatile, which could result in substantial
losses to investors.
   
    
    variations in our net revenues, earnings and cash flows;
    
    announcements of new investments, acquisitions, strategic partnerships or joint
ventures;
    
    announcements of new services and product category expansions by us or our competitors;
    
    fluctuations in market prices of our products;
    
    changes in financial estimates by securities analysts;
    
    additions or departures of key personnel;
    
    release of lock-up or other transfer restrictions on our outstanding equity securities
or sales of additional equity securities; and
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
    
    potential litigation or regulatory investigations.
  If securities or industry analysts do not publish research or reports about our business, or if
they adversely change their recommendations regarding our ADSs, the market price for our ADSs
and trading volume could decline.
  The sale or availability for sale of substantial amounts of our ADSs could adversely affect
their market price.
  We may be classified as a passive foreign investment company under U.S. tax law, which could
result in adverse United States federal income tax consequences to U.S. holders of our ADSs.
  35




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36




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Our dual-class common share structure with different voting rights will limit your ability to
influence corporate matters and could discourage others from pursuing any change of control
transactions that holders of our Class A common shares and ADSs may view as beneficial.
   Our articles of association contain anti-takeover provisions that could have a material adverse
effect on the rights of holders of our Class A common shares and ADSs.
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You may face difficulties in protecting your interests, and your ability to protect your rights
through U.S. 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.
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Certain judgments obtained against us by our shareholders may not be enforceable.
  The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you
may not be able to exercise your right to vote your Class A common shares.
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The depositary for our ADSs will give us a discretionary proxy to vote our Class A common shares
underlying your ADSs if you do not vote at shareholders meetings, except in limited
circumstances, which could adversely affect your interests.
  
    
    we have failed to timely provide the depositary with notice of meeting and related
voting materials;
    
    we have instructed the depositary that we do not wish a discretionary proxy to be given;
    
    we have informed the depositary that there is substantial opposition as to a matter to
be voted on at the meeting;
    
    a matter to be voted on at the meeting would have a material adverse impact on
shareholders; or
    
    the voting at the meeting is to be made on a show of hands.
  You may not receive dividends or other distributions on our Class A common shares and you may
not receive any value for them, if it is illegal or impractical to make them available to you.
  40




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You may experience dilution of your holdings due to inability to participate in rights offering
or as a result of additional securities issued under our share-based compensation plans.
  You may be subject to limitations on transfer of your ADSs.
  We incur increased costs as a result of being a public company.
  41




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Item 4. Information on the Company
 A. History and Major Development of the Company
   42




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B. Business Overview
 43




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##### Table of Contents



dangdang.com
 dangdang.com
 dangdang.com
   44




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Our Website
 dangdang.com dangdang.com
  
    
    Browsing. Our website provides users with useful information on the products for sale,
such as a description of the product and, in many cases, images of the product. Our website
also offers the following popular features: dangdang.comBest Sellers, Special Sale, Also
Buy, Also View Browsing History and Online Reading. The dangdang.comBest Sellers feature
allows users to view the most purchased items in the past. A user can sort the best selling
items by product category and by period of time. The Special Sale feature allows users to
view promotional items with deep per-item or volume discounts or free gifts on offer all on
one webpage. The Also Buy and Also View features allow users who are interested in one
particular product to obtain personalized recommendations based on the viewing or
purchasing records of other customers who have also viewed or bought the same product. The
Browsing History feature allows users to revisit the items they have browsed. The Online
Reading feature at Dangdang bookstore allows users to view the first several chapters of
new arrival books.
    
    Searching and Sorting. Our customers are able to search for more than 590,000 book
titles and approximately 30,000 other media products and approximately 56,000 general
merchandise items on our website. For books, we provide a selection of search tools based
on title, author, publisher, ISBN, price range and discount, publication date and on-shelf
date. For other media products and general merchandise, we provide search tools based on
different criteria such as product category, price, brand, size and color. Users can also
sort products by popularity, price, arrival date and rating of third-party merchants.
    
    Product Reviews and Online Community. We encourage our customers to write and post their
reviews and comments on products on the relevant product page after each
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purchase. These provide valuable and independent information to other customers who are
interested in these products. In addition, we created the dangdang.comonline community in
2007, in which users can read and post reviews on books, music, TV shows and movies and
initiate or participate in discussions in different forums. The online community provides
users of our website with an interactive experience that is intended to encourage them to
return to our website frequently, which we believe in turn promotes user loyalty and
increases repeat purchases.
    
    Personalized Services. We offer a personalized e-commerce experience by enabling our
users to build online shopper profiles reflecting their tastes and interests and by
delivering targeted product recommendations based on users browsing and purchase histories
and their wish lists. Each of our customers has a unique user name and password, which
allows him or her to track order status and check bonus points accumulated from previous
purchases. To facilitate our customers checkout process, we generate their preferred
delivery address, shipping method and payment option at checkout based on information they
have previously provided. Even before customers log into their account, our system can
recognize them by their browsing histories stored in the cookie and make personalized
recommendations based on their browsing histories. We also analyze each customers purchase
patterns and send personalized e-mail notices periodically, updating them on new product
launches and promotional and marketing events.
    
    Checking Out. To purchase products at dangdang.com, our customers simply click to add
an item to their virtual shopping cart. Customers can add or remove items in their shopping
cart before making a final purchase decision. First-time purchasers need to set up a
Dangdang account and fill out contact information, shipping and payment details. Existing
customers can access their preferred checkout options by logging into their accounts. Our
information system automatically confirms each order by e-mail within seconds after the
order is placed and updates customers by e-mail or mobile phone text message, or SMS,
shortly after orders are shipped.
 Our Product Offerings
 Books and Other Media Products
  General Merchandise
 dangdang.com
 46




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dangdang.com dangdang.com
  Product Sourcing and Pricing
 Product Procurement
   47




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dangdang.com
  Pricing
  Payment and Fulfillment
 Payment and Delivery
  48




---



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Fulfillment
    49




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dangdang.com
 Customer Service
  dangdang.com
  50




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Marketing and Promotion
 dangdang.com
   
    
    Affiliate marketing program. We expand our market presence through our affiliate
marketing program, which enables affiliated websites to earn commissions by directing their
users to purchase our products through embedded hyperlinks to our website.
    
    Paid search. We utilize various popular search engines and internet portals in China. We
pay for keywords or phrases relevant to our business and products so that users who search
for these keywords or phrases will be directed to our website or to our advertisements.
    
    Loyalty program. We provide a variety of incentives to our existing customers. Our
customers can obtain bonus points for each purchase and receive information on our latest
products and marketing events and may be eligible to receive free trial coupons for new
products. When our customers accumulated purchases within 12 months reach pre-
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set thresholds, they will be upgraded to gold or diamond member status and will be entitled
to additional incentives such as special discounts on subsequent purchases. We also
periodically send personalized e-mails and SMS messages to our customers to draw their
attention to our latest products and marketing events.
    
    Social media and other tools. We conduct marketing campaigns and offer special
promotional discounts on products from time to time. In addition, we utilize the online
community on our website and that of popular social networking sites for customers to share
their online shopping experience. We also employ other marketing channels to reach existing
and potential customers.
 Competition
  dangdang.com
 Intellectual Property
 dangdang.com, dangdang.com.cn dangdang.cn
 52




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Insurance
  Legal Proceedings
  PRC Regulation
  Corporate Laws and Industry Catalogue Relating to Foreign Investment
    53




---



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Regulations Relating to Foreign-invested Enterprises Engaging in Retail Businesses
  Regulations Relating to Telecommunications Services
  dangdang.com
 Regulations Relating to Foreign Investment in Value-Added Telecommunications Industry
  54




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Regulations Relating to Internet Information Services and Content of Internet Information
 dangdang.com
 55




---



##### Table of Contents



dangdang.com
 Regulations Relating to Privacy Protection
  Regulations Relating to Internet Publishing
  56




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Regulations Relating to Wholesale and Retail of Books and Audio-Video Products
   Regulations Relating to Taxation
  57




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Regulations Relating to Foreign Exchange
  58




---



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Regulations Relating to Labor
   59




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Regulations on Dividend Distribution
  SAFE Regulations on Offshore Special Purpose Companies Held by PRC Residents or Citizens
  60




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SAFE Regulations on Employee Share Options
  C. Organizational Structure
  61




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Our Shareholding Structure
  62




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D. Property, Plants and Equipment
  Location
    
    Space
    
    Usage of Property(in thousands of square meters)Beijing
    
    
    67.4
    
    
    Office space, Data
centers and
WarehousesShanghai
    
    
    34.5
    
    
    WarehousesGuangzhou
    
    
    29.9
    
    
    WarehousesChengdu
    
    
    20.7
    
    
    WarehousesWuhan
    
    
    15.5
    
    
    WarehousesZhengzhou
    
    
    20.9
    
    
    Warehouses
  
 Item 4A. Unresolved Staff Comments
  63




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Item 5. Operating and Financial Review and Prospects
  A. Operating Results
 Overview
 dangdang.com
  Factors Affecting Our Results of Operations
  64




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
    
    our ability to obtain new customers at reasonable cost;
    
    our ability to increase spending per customer;
    
    our ability to control product sourcing costs, fulfillment and other operating expenses;
    
    our product selection and pricing; and
    
    our ability to compete effectively.
 Total net revenues
 dangdang.com dangdang.com
  
    
    Total number of active customers. We define active customers for a given period as
customers who have purchased products offered by us at dangdang.comat least once during
that period.
    
    Total number of orders. We closely monitor the total number of orders as an indicator of
revenue trends.
  For the Year Ended December 31,2008
    
    2009
    
    2010RMB
    
    %
    
    RMB
    
    %
    
    RMB
    
    US$
    
    %(in thousands, except for percentages)Net revenues:Product revenueMedia
    
    
    697,681
    
    
    
    91.1
    
    
    
    1,297,120
    
    
    
    89.0
    
    
    
    1,863,431
    
    
    
    282,338
    
    
    
    81.7General merchandise
    
    
    66,829
    
    
    
    8.7
    
    
    
    152,976
    
    
    
    10.5
    
    
    
    392,090
    
    
    
    59,408
    
    
    
    17.2Other revenue
    
    
    1,550
    
    
    
    0.2
    
    
    
    7,556
    
    
    
    0.5
    
    
    
    26,159
    
    
    
    3,963
    
    
    
    1.1Total net revenues
    
    
    766,060
    
    
    
    100.0
    
    
    
    1,457,652
    
    
    
    100.0
    
    
    
    2,281,680
    
    
    
    345,709
    
    
    
    100.0
 65




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Cost of Revenues
  Operating Expenses
  Fulfillment
  66




---



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Marketing
  Technology and Content
  General and Administrative
  Taxation
 Cayman Islands.
 PRC.
 Dividends.
 67




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##### Table of Contents



Tax residence.
 Critical Accounting Policies
   Inventories
  68




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##### Table of Contents



dangdang.com
 Share-Based Compensation
    Number of
    
    
    
    
    
    Fair Value PerClass A
    
    
    
    
    
    Class ACommon Shares
    
    Exercise Price
    
    Common Share atUnderlying
    
    Per Share
    
    the Grant DateGrant Date
    
    Options Grant
    
    (US$)
    
    (US$)January 10, 2008April 25, 2008
    
    
    4,830,000
    
    
    
    0.466
    
    
    
    0.221September 2, 2008
    
    
    380,000
    
    
    
    0.822
    
    
    
    0.328February 12, 2009May 21, 2009
    
    
    2,940,000
    
    
    
    0.822
    
    
    
    0.573July 7, 2009December 31, 2009
    
    
    3,795,000
    
    
    
    0.822
    
    
    
    0.709March 31, 2010
    
    
    4,320,000
    
    
    
    0.822
    
    
    
    0.894June 30, 2010
    
    
    6,250,500
    
    
    
    1.20
    
    
    
    0.894
 69




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2008
    
    2009
    
    2010Expected volatility range
    
    
    76.3%76.4%
    
    
    
    74.5%77.8%
    
    
    
    70.5%Risk-free interest rate
    
    
    4.1%4.6%
    
    
    
    3.1%3.7%
    
    
    
    4.1%Dividend yield
    
    
    0%
    
    
    
    0%
    
    
    
    0%Sub optimal early exercise factor
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.5
  Valuation of
Privately-Held Company Equity Securities Issued as Compensation
  70




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Income Taxes
  Income taxes
  71




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##### Table of Contents



Results of Operations
  For the Year Ended December 31,2008
    
    2009
    
    2010% of
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    % ofTotal Net
    
    
    
    
    
    Total Net
    
    
    
    
    
    
    
    
    
    Total NetRMB
    
    Revenues
    
    RMB
    
    Revenues
    
    RMB
    
    US$
    
    RevenuesNet revenues:Product revenueMedia
    
    
    697,681
    
    
    
    91.1
    %
    
    
    1,297,120
    
    
    
    89.0
    %
    
    
    1,863,431
    
    
    
    282,338
    
    
    
    81.7
    %General merchandise
    
    
    66,829
    
    
    
    8.7
    %
    
    
    152,976
    
    
    
    10.5
    %
    
    
    392,090
    
    
    
    59,408
    
    
    
    17.2
    %764,510
    
    
    
    99.8
    %
    
    
    1,450,096
    
    
    
    99.5
    %
    
    
    2,255,521
    
    
    
    341,746
    
    
    
    98.9
    %Other revenue
    
    
    1,550
    
    
    
    0.2
    %
    
    
    7,556
    
    
    
    0.5
    %
    
    
    26,159
    
    
    
    3,963
    
    
    
    1.1
    %Total net revenues
    
    
    766,060
    
    
    
    100.0
    %
    
    
    1,457,652
    
    
    
    100.0
    %
    
    
    2,281,680
    
    
    
    345,709
    
    
    
    100.0
    %Cost of revenues
    
    
    (638,817
    )
    
    
    (83.4
    )%
    
    
    (1,129,961
    )
    
    
    (77.5
    )%
    
    
    (1,775,881
    )
    
    
    (269,073
    )
    
    
    (77.8
    )%Gross profit
    
    
    127,243
    
    
    
    16.6
    %
    
    
    327,691
    
    
    
    22.5
    %
    
    
    505,799
    
    
    
    76,636
    
    
    
    22.2
    %Operating expenses (1) :Fulfillment
    
    
    (120,837
    )
    
    
    (15.8
    )%
    
    
    (201,270
    )
    
    
    (13.8
    )%
    
    
    (286,443
    )
    
    
    (43,400
    )
    
    
    (12.6
    )%Marketing
    
    
    (40,766
    )
    
    
    (5.3
    )%
    
    
    (38,473
    )
    
    
    (2.6
    )%
    
    
    (76,669
    )
    
    
    (11,616
    )
    
    
    (3.4
    )%Technology and content
    
    
    (26,436
    )
    
    
    (3.5
    )%
    
    
    (38,989
    )
    
    
    (2.7
    )%
    
    
    (64,682
    )
    
    
    (9,800
    )
    
    
    (2.8
    )%General and administrative
    
    
    (26,991
    )
    
    
    (3.5
    )%
    
    
    (38,021
    )
    
    
    (2.6
    )%
    
    
    (67,903
    )
    
    
    (10,288
    )
    
    
    (3.0
    )%Government grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,805
    
    
    
    728
    
    
    
    0.2
    %Total operating expenses
    
    
    (215,030
    )
    
    
    (28.1
    )%
    
    
    (316,753
    )
    
    
    (21.7
    )%
    
    
    (490,892
    )
    
    
    (74,376
    )
    
    
    (21.5
    )%(Loss) income from operations
    
    
    (87,787
    )
    
    
    (11.5
    )%
    
    
    10,938
    
    
    
    0.8
    %
    
    
    14,907
    
    
    
    2,260
    
    
    
    0.7
    %Interest income
    
    
    7,740
    
    
    
    1.0
    %
    
    
    5,418
    
    
    
    0.4
    %
    
    
    7,087
    
    
    
    1,074
    
    
    
    0.3
    %Other income (expenses), net
    
    
    (1,710
    )
    
    
    (0.2
    )%
    
    
    560
    
    
    
    0.0
    %
    
    
    (3,273
    )
    
    
    (496
    )
    
    
    (0.1
    )%Total non-operating income
    
    
    6,030
    
    
    
    0.8
    %
    
    
    5,978
    
    
    
    0.4
    %
    
    
    3,814
    
    
    
    578
    
    
    
    0.2
    %(Loss) income before income taxes
    
    
    (81,757
    )
    
    
    (10.7
    )%
    
    
    16,916
    
    
    
    1.2
    %
    
    
    18,721
    
    
    
    2,838
    
    
    
    0.8
    %Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,061
    
    
    
    1,827
    
    
    
    0.5
    %Net (loss) income
    
    
    (81,757
    )
    
    
    (10.7
    )%
    
    
    16,916
    
    
    
    1.2
    %
    
    
    30,782
    
    
    
    4,665
    
    
    
    1.3
    %Deemed dividend on Series C
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (270
    )
    
    
    (0.1
    )%Net (loss) income attributable to
common shareholders
    
    
    (81,757
    )
    
    
    (10.7
    )%
    
    
    16,916
    
    
    
    1.2
    %
    
    
    29,003
    
    
    
    4,395
    
    
    
    1.3
    %
 72




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(1)
    
    Includes share-based compensation expenses as follows: For the Year Ended December 31,2008
    
    2009
    
    2010% of Total
    
    
    
    
    
    % of Total
    
    
    
    
    
    
    
    
    
    % of TotalNet
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    NetRMB
    
    Revenues
    
    RMB
    
    Revenues
    
    RMB
    
    US$
    
    Revenues(in thousands, except percentages)Fulfillment
    
    
    469
    
    
    
    0.1
    %
    
    
    764
    
    
    
    0.1
    %
    
    
    1,096
    
    
    
    166
    
    
    
    0.0
    %Marketing
    
    
    105
    
    
    
    0.0
    %
    
    
    131
    
    
    
    0.0
    %
    
    
    233
    
    
    
    35
    
    
    
    0.0
    %Technology and content
    
    
    270
    
    
    
    0.0
    %
    
    
    479
    
    
    
    0.0
    %
    
    
    787
    
    
    
    119
    
    
    
    0.0
    %General and administrative
    
    
    1,519
    
    
    
    0.2
    %
    
    
    2,623
    
    
    
    0.2
    %
    
    
    8,184
    
    
    
    1,241
    
    
    
    0.4
    %Total share-based
compensation expenses
    
    
    2,363
    
    
    
    0.3
    %
    
    
    3,997
    
    
    
    0.3
    %
    
    
    10,300
    
    
    
    1,561
    
    
    
    0.4
    %
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Total net revenues.
 dangdang.com
  Cost of revenues.
 Gross profit.
 73




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Fulfillment expenses.
 Marketing expenses.
 Technology and content expenses.
 General and administrative expenses.
 Government grants.
 Interest income and other income (expense) net.
 74




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##### Table of Contents



Tax benefit.
 Net income.
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Total net revenues.
 dangdang.com
  Cost of revenues.
 Gross profit.
 75




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##### Table of Contents



Fulfillment expenses.
 Marketing expenses.
 Technology and content expenses.
 General and administrative expenses.
 Interest income.
 Net income (loss).
 Recent Accounting Pronouncements
  76




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Inflation
  B. Liquidity and Capital Resources
   77




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##### Table of Contents



For the Year Ended December 31,2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    US$(in thousands)Net cash provided by (used in) operating activities
    
    
    (37,417
    )
    
    
    72,091
    
    
    
    (16,741
    )
    
    
    (2,536
    )Net cash provided by (used in) investing activities
    
    
    41,675
    
    
    
    (62,828
    )
    
    
    48,176
    
    
    
    7,299Net cash provided by financing activities
    
    
    166
    
    
    
    
    
    
    
    1,595,660
    
    
    
    241,766Net increase in cash and cash equivalents
    
    
    2,978
    
    
    
    9,250
    
    
    
    1,616,147
    
    
    
    244,870Cash and cash equivalents at beginning of year/period
    
    
    63,531
    
    
    
    66,509
    
    
    
    75,759
    
    
    
    11,479Cash and cash equivalents at end of year/period
    
    
    66,509
    
    
    
    75,759
    
    
    
    1,691,906
    
    
    
    256,349
 Operating Activities
    Investing Activities
  78




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Financing Activities
   Capital Expenditures
  C. Research and Development
  79




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##### Table of Contents



D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payment Due by PeriodMoreLess than
    
    1-3
    
    3-5
    
    thanTotal
    
    1 Year
    
    Years
    
    Years
    
    5 Years(in RMB thousands)Operating lease obligations
    
    
    368,846
    
    
    
    58,830
    
    
    
    82,463
    
    
    
    52,617
    
    
    
    174,936
 80




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##### Table of Contents



G. Safe Harbor
  
 Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Directors and Executive Officers
    
    Age
    
    Position/TitlePeggy Yu Yu
    
    
    46
    
    
    Co-Founder, Executive ChairwomanGuoqing Li
    
    
    47
    
    
    Co-Founder, Director and Chief Executive OfficerRuby Rong Lu
    
    
    40
    
    
    DirectorKe Zhang
    
    
    58
    
    
    Independent DirectorXiaolong Li
    
    
    47
    
    
    Independent DirectorRoger Huang
    
    
    49
    
    
    Chief Operating OfficerHubert Shio-Hsien Tai
    
    
    42
    
    
    Chief Technology OfficerConor Chia-hung Yang
    
    
    48
    
    
    Chief Financial OfficerDanqian Yao
    
    
    40
    
    
    Vice PresidentShengqing Jiang
    
    
    59
    
    
    Vice President
 Ms. Peggy Yu Yu
 Mr. Guoqing Li
 81




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##### Table of Contents



Ms. Ruby Rong Lu
 Mr. Ke Zhang
 Mr. Xiaolong Li
 Mr. Roger Huang
 82




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##### Table of Contents



Mr. Hubert Shio-Hsien Tai
 Mr. Conor Chia-hung Yang
 Mr. Danqian Yao
 Mr. Shengqing Jiang
 B. Compensation
  83




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##### Table of Contents



Share Incentive Plans
  The 2010 Plan
   Types of Awards.
 
    
    Options.Options provide for the right to purchase a specified number of our Class A
common shares at a specified price and usually will become exercisable at the discretion of
our plan administrator in one or more installments after the grant date. The option
exercise price may be paid, subject to the discretion of the plan administrator, in cash or
check, in our Class A common shares which have been held by the option holder for such
period of time as may be required to avoid adverse accounting consequences, in other
property with value equal to the exercise price, through a broker-assisted cashless
exercise, or by any combination of the foregoing.
    
    Restricted Shares.A restricted share award is the grant of our Class A common shares
which are subject to certain restrictions and may be subject to risk of forfeiture. Unless
otherwise determined by our plan administrator, a restricted share is nontransferable and
may be forfeited or repurchased by us upon termination of employment or service during a
restricted period. Our plan administrator may also impose other restrictions on the
restricted shares, such as limitations on the right to vote or the right to receive
dividends.
    
    Restricted Share Units.Restricted share units represent the right to receive our Class
A common shares at a specified date in the future, subject to forfeiture of such right upon
termination of employment or service during the applicable restriction period. If the
restricted share units have not been forfeited, then subject to the discretion of the plan
administrator, we shall pay the holder in the form of cash or unrestricted Class A common
 shares or a combination of both after the last day of the restriction period as specified
in the award agreement.
 84




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##### Table of Contents



Plan Administration.
 Award Agreement.
 Option Exercise Price.
 Eligibility.
 Term of the Awards.
 Vesting Schedule.
 Transfer Restrictions.
 Termination of Employment or Service.
 85




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##### Table of Contents



Termination and Amendment of the Plan.
 The 2004 Plan
   Types of Awards.
 
    
    Option awards.Options provide for the right to purchase a specified number of our
common shares at a specified price and usually will become exercisable in the discretion of
our plan administrator in one or more installments after the grant date. Subject to the
discretion of the plan administrator, the option exercise price may be paid, in cash, in
our Class A common shares which have been held by the option holder for at least six
months, by a reduction in the number of common shares otherwise deliverable pursuant to the
options, through a cashless exercise, by a promissory note or by any combination of the
foregoing.
    
    Share awards.Two types of share awards are available
under the 2004 plan  restricted
share awards and unrestricted share awards. A restricted share award is the grant of our
Class A common shares which are subject to certain restrictions and may be repurchased by
us upon termination of employment or service before vesting. Unless otherwise determined by
our plan administrator, holders of restricted shares shall be entitled to cash dividend and
voting rights associated with being our shareholders. Participants may also be granted
unrestricted share awards, and any such shares are not subject to any conditions and/or
restrictions.
 Plan Administration.
 86




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Award Agreement.
 Option Exercise Price.
 Eligibility.
 Term of the Awards.
 Vesting Schedule.
 Transfer Restrictions.
 Termination of Employment or Service.
 Termination and Amendment of the Plan.
  87




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##### Table of Contents



Class ACommon SharesUnderlying
    
    ExerciseOptions
    
    PriceName
    
    Awarded
    
    (US$/Share)
    
    Date of Grant
    
    Date of ExpirationGuoqing Li
    
    
    2,311,450
    
    
    
    0.065
    
    
    December 20, 2004
    
    December 20, 20144,944,320
    
    
    
    0.183
    
    
    December 20, 2004
    
    December 20, 20143,200,000
    
    
    
    1.20
    
    
    June 30, 2010
    
    June 30, 2020Roger Huang
    
    
    *
    
    
    
    0.822
    
    
    March 31, 2010
    
    March 31, 2020Hubert Shio-Hsien Tai
    
    
    *
    
    
    
    0.466
    
    
    January 8, 2007
    
    December 31, 2016*
    
    
    
    0.466
    
    
    March 20, 2008
    
    December 31, 2017*
    
    
    
    0.822
    
    
    May 21, 2008
    
    December 31, 2018Conor Chia-hung Yang
    
    
    *
    
    
    
    0.822
    
    
    March 31, 2010
    
    March 31, 2020Danqian Yao
    
    
    *
    
    
    
    0.065
    
    
    December 20, 2004
    
    December 20, 2014*
    
    
    
    0.183
    
    
    December 20, 2004
    
    December 20, 2014*
    
    
    
    0.822
    
    
    May 21, 2009
    
    December 31, 2018*
    
    
    
    0.822
    
    
    December 31, 2009
    
    December 31, 2019Shengqing Jiang
    
    
    *
    
    
    
    0.822
    
    
    February 12, 2009
    
    December 31, 2018*
    
    
    
    0.822
    
    
    May 21, 2009
    
    December 31, 2018*
    
    
    
    0.822
    
    
    December 31, 2009
    
    December 31, 2019Total
    
    
    17,123,270
 
 *
    
    Less than one percent of our total outstanding share capital and together holding stock
options exercisable for 6,667,500 Class A common shares.  C. Board Practices
  Committees of the Board of Directors
 Audit Committee.
 88




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##### Table of Contents




    
    selecting the independent registered public accounting firm and pre-approving all
auditing and non-auditing services permitted to be performed by the independent registered
public accounting firm;
    
    reviewing with the independent registered public accounting firm any audit problems or
difficulties and managements response;
    
    reviewing and approving all proposed related party transactions, as defined in Item 404
of Regulation S-K under the Securities Act;
    
    discussing the annual audited financial statements with management and the independent
registered public accounting firm;
    
    reviewing major issues as to the adequacy of our internal controls and any special audit
steps adopted in light of material control deficiencies;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    meeting separately and periodically with management and the independent registered
public accounting firm; and
    
    reporting regularly to the board.
 Compensation Committee.
 
    
    reviewing the total compensation package for our executive officers and making
recommendations to the board with respect to it;
    
    approving and overseeing the total compensation package for our executives other than
the three most senior executives;
    
    reviewing the compensation of our directors and making recommendations to the board with
respect to it; and
    
    periodically reviewing and approving any long-term incentive compensation or equity
plans, programs or similar arrangements, annual bonuses, and employee pension and welfare
benefit plans.
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##### Table of Contents



Corporate Governance and Nominating 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;
    
    identifying and recommending to the board the directors to serve as members of the
boards committees;
    
    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; and
    
    monitoring compliance with our code of business conduct and ethics, including reviewing
the adequacy and effectiveness of our procedures to ensure proper compliance.
 Duties of Directors
  Terms of Directors and Officers
  Employment Agreements
  90




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D. Employees
      91




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E. Share Ownership
  
    
    each of our directors and executive officers; and
    
    each person known to us to beneficially own more than 5% of our common shares.
  Class A Common Shares
  Class B Common Shares
   Class A
    
    Class BCommon Shares
    
    Common Shares
    
    Total Common
    
    TotalBeneficially
    
    Beneficially
    
    Shares Beneficially
    
    VotingOwned
    
    Owned
    
    Owned
    
    PowerNumber
    
    %(1)
    
    Number
    
    %(2)
    
    Number(3)
    
    %(4)
    
    %(5)Directors and Executive
Officers:**Peggy Yu Yu
    
    
    3,135,840
    (6)
    
    
    3.0
    
    
    
    15,270,000
    (7)
    
    
    5.3
    
    
    
    18,405,840
    
    
    
    4.7
    
    
    
    5.2Guoqing Li
    
    
    7,255,770
    (8)
    
    
    6.5
    
    
    
    118,876,660
    (9)
    
    
    41.5
    
    
    
    126,132,430
    
    
    
    31.6
    
    
    
    40.0Ruby Rong Lu
    
    
    
    
    
    
    
    
    
    
    25,321,400
    (10)
    
    
    8.8
    
    
    
    25,321,400
    
    
    
    6.5
    
    
    
    8.5Ke Zhang(11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Xiaolong Li(12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roger Huang
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
    
    
    
    *Hubert Shio-Hsien Tai
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
    
    
    
    *Conor Chia-hung Yang
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
    
    
    
    *Danqian Yao
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
    
    
    
    *
 92




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##### Table of Contents



Class A
    
    Class BCommon Shares
    
    Common Shares
    
    Total Common
    
    TotalBeneficially
    
    Beneficially
    
    Shares Beneficially
    
    VotingOwned
    
    Owned
    
    Owned
    
    PowerNumber
    
    %(1)
    
    Number
    
    %(2)
    
    Number(3)
    
    %(4)
    
    %(5)Shengqing Jiang
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
    
    
    
    *All directors and
executive officers as a
group
    
    
    16,099,320
    
    
    
    14.0
    
    
    
    159,468,070
    
    
    
    55.7
    
    
    
    175,567,390
    
    
    
    43.7
    
    
    
    54.0
 Class A
    
    Class BCommon Shares
    
    Common Shares
    
    Total Common
    
    TotalBeneficially
    
    Beneficially
    
    Shares Beneficially
    
    VotingOwned
    
    Owned
    
    Owned
    
    PowerNumber
    
    %(1)
    
    Number
    
    %(2)
    
    Number(3)
    
    %(4)
    
    %(5)Principal Shareholders:Science & Culture International
Limited(13)
    
    
    
    
    
    
    
    
    
    
    97,000,000
    
    
    
    33.9
    
    
    
    97,000,000
    
    
    
    24.8
    
    
    
    32.7Kewen Holding Co.
Limited(14)
    
    
    
    
    
    
    
    
    
    
    21,876,660
    
    
    
    7.6
    
    
    
    21,876,660
    
    
    
    5.6
    
    
    
    7.4Tiger Global Private Investment Partners,
LP and affiliate
    
    
    
    
    
    
    
    
    
    
    69,350,000
    (15)
    
    
    24.2
    
    
    
    69,350,000
    
    
    
    17.7
    
    
    
    23.3DCM IV, L.P. and affiliate
    
    
    
    
    
    
    
    
    
    
    25,321,400
    (16)
    
    
    8.8
    
    
    
    25,321,400
    
    
    
    6.5
    
    
    
    8.5IDG Technology Venture Investment, Inc.
    
    
    
    
    
    
    
    
    
    
    19,778,570
    (17)
    
    
    6.9
    
    
    
    19,778,570
    
    
    
    5.1
    
    
    
    6.7Artisan Partners Holdings LP(18)
    
    
    9,820,720
    (18)
    
    
    9.4
    
    
    
    
    
    
    
    
    
    
    
    9,820,720
    
    
    
    2.5
    
    
    
    0.3FMR LLC(19)
    
    
    9,685,000
    (19)
    
    
    9.2
    
    
    
    
    
    
    
    
    
    
    
    9,685,000
    
    
    
    2.5
    
    
    
    0.3Morgan Stanley and affiliate(20)
    
    
    5,439,370
    (20)
    
    
    5.2
    
    
    
    
    
    
    
    
    
    
    
    5,439,370
    
    
    
    1.4
    
    
    
    0.2
 
 Notes:*
    
    Less than 1% of our outstanding share capital.**
    
    Except for Ms. Ruby Rong Lu, Mr. Xiaolong Li and Mr. Ke Zhang, the business address of our
directors and executive officers is c/o 4/F, Tower C, The 5th Square, No. 7 Chaoyangmen North
Avenue, Dongcheng District, Beijing 100010, Peoples Republic of China.(1)
    
    For each person and group included in this column, percentage ownership is calculated by
dividing the number of Class A common shares beneficially owned by such person or group,
including shares that such person or group has the right to acquire within 60 days of March
31, 2011, by the sum of 104,893,940, being the total number of Class A common shares
outstanding, and the number of Class A common shares underlying share options held by such
person or group that are exercisable within 60 days of March 31, 2011.(2)
    
    For each person and group included in this column, percentage ownership is calculated by
dividing the number of Class B common shares beneficially owned by such person or group,
including Class B common shares that such person or group has the right to acquire within 60
days of March 31, 2011, by 286,520,870, being the total number of Class B common shares
outstanding.(3)
    
    Represents the sum of Class A common shares and Class B common shares beneficially owned by
such person or group.(4)
    
    For each person and group included in this column, percentage ownership is calculated by
dividing the number of total common shares beneficially owned by such person or group, by the
sum of 391,374,810, being the total number of common shares outstanding, and the number of
common shares that such person or group has the right to acquire within 60 days of March 31,
2011, including through the exercise of any option.(5)
    
    For each person or group included in this column, percentage of total voting power represents
voting power based on both Class A and Class B common shares held by such person or group with
respect to all outstanding 93




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shares of our Class A and Class B common shares as a single class. Each holder of
Class A common shares is entitled to one vote per Class A common share. Each holder
of our Class B common shares is entitled to ten votes per Class B common share. Our
Class B common shares are convertible at any time by the holder into Class A common
shares on a share-for-share basis.(6)
    
    Represents 3,135,840 Class A common shares held by Ms. Yu.(7)
    
    Represents 13,000,000 Class B common shares and 2,270,000 Class B common shares held by
individual shareholders who authorize Ms. Yu to vote these shares on their behalf under power
of attorney. These individual shareholders are employees or former employees of our company.(8)
    
    Represents 7,255,770 Class A common shares issuable upon exercise of options within 60 days
after March 31, 2011.(9)
    
    Represents 21,876,660 Class B common shares held by Mr. Li through Kewen Holding Co. Limited
and 97,000,000 Class B common shares held by Science & Culture International Limited. Mr. Li
is the sole director and beneficial owner of Kewen Holding Co. Limited, which holds 60% of the
shares in Science & Culture International Limited. Mr. Li disclaims beneficial ownership with
respect to the shares held by Science & Culture International Limited except to the extent of
his pecuniary interest therein.(10)
    
    Represents 24,693,420 Class B common shares held by DCM IV, L.P. and 627,980 Class B common
shares held by DCM Affiliates Fund IV, L.P. Ms. Lu is a director of our company appointed by
DCM IV, L.P. and DCM Affiliates Fund IV, L.P. She disclaims beneficial ownership with respect
to the shares held by DCM IV, L.P. and DCM Affiliates Fund IV, L.P., except to the extent of
her pecuniary interest therein. The business address for Ms. Lu is 2420 Sand Hill Road, Suite
200, Menlo Park, CA 94025, the United States.(11)
    
    The business address for Mr. Zhang is c/o 9th Floor, Fu Hua Mansion, 8 Chaoyangmen North
Avenue, Dongcheng District, Beijing 100027, China.(12)
    
    The business address for Mr. Li is 16/F, Jianda Building, 14 Dongtucheng Road, Chaoyang
District, Beijing, China.(13)
    
    The business address of Science & Culture International Limited is Offshore Incorporation
Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin
Islands.(14)
    
    The business address of Kewen Holding Co. Limited is Offshore Incorporations Limited, P.O.
Box 957, Offshore Incorporations Center, Road Town, Tortola, British Virgin Islands.(15)
    
    Represents 55,018,925 Class B common shares held by Tiger Global Private Investment Partners,
L.P., 7,998,245 Class B common shares held by Tiger Global, L.P., 250,835 Class B common
shares held by Tiger Global II, L.P. and 6,081,995 Class B common shares held by Tiger Global
Master Fund, L.P. Tiger Global Private Investment Partners, L.P., Tiger Global, L.P., Tiger
Global II, L.P. and Tiger Global Master Fund, L.P. are ultimately controlled by Mr. Charles P.
Coleman III. Information regarding beneficial ownership is reported as of December 31, 2010,
based on the information contained in the Schedule 13G filed by Tiger Global Private
Investment Partners, LP and affiliate with the SEC on February 11, 2011. Please see the
Schedule 13G for information relating to Tiger Global Private Investment Partners, LP and
affiliate. The business address of these four entities is c/o Tiger Global Management, L.L.C.,
101 Park Avenue 48th Floor, New York, NY 10178, the United States.(16)
    
    Represents 24,693,420 Class B common shares held by DCM IV, L.P. and 627,980 Class B common
shares held by DCM Affiliates Fund IV, L.P. The general partner of DCM IV, L.P. and DCM
Affiliates Fund IV, L.P. is DCM Investment Management IV, L.P., whose general partner is DCM
International IV, Ltd. DCM International IV, Ltd., through DCM Investment Management IV, L.P.,
has sole voting and investment power over these shares, and such voting and investment power
is exercised by K. David Chao, Dixon R. Doll, Peter W. Moran and Thomas Blaisdell, the
directors of DCM International IV, Ltd. Each of the directors disclaims beneficial ownership
of the shares held by DCM IV, L.P. and DCM Affiliates Fund IV, L.P., except to the extent of
each persons pecuniary interest therein. Information regarding beneficial ownership is
reported as of December 31, 2010, based on the information contained in the Schedule 13G filed
by DCM IV, L.P. and affiliate with the SEC on February 14, 2011. Please see the Schedule 13G
for information relating to DCM IV, L.P. and affiliate. The business address of DCM IV, L.P.
and DCM Affiliates Fund IV, L.P. is 2420 Sand Hill Road, Suite 200, Menlo Park, CA 94025, the
United States. 94




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##### Table of Contents



(17)
    
    Represents 19,778,570 Class B common shares held by IDG Technology Venture Investment, Inc.
IDG Technology Venture Investment, Inc. is wholly owned by International Data Group, Inc.,
whose majority shareholder and controlling person is Patrick J. McGovern. Mr. McGovern
disclaims beneficial ownership of shares held by IDG Technology Venture Investment, Inc.,
except to the extent of his pecuniary interest therein. Information regarding beneficial
ownership is reported as of December 31, 2010, based on the information contained in the
Schedule 13G filed by IDG Technology Venture Investment, Inc. with the SEC on February 10,
2011. Please see the Schedule 13G for information relating to IDG Technology Venture
Investment, Inc. The business address of IDG Technology Venture Investment, Inc. is One Exeter
Plaza, Penthouse Suite, Boston, MA 02116, the United States.(18)
    
    Represents 9,820,720 Class A common shares held by Artisan Partners Limited Partnership,
including 5,346,855 shares held on behalf of Artisan Funds, Inc. Artisan Partners Holdings LP
is the sole limited partner of Artisan Partners Limited Partnership. Artisan Investment
Corporation is the general partner of Artisan Partners Holdings LP, which is wholly owned by
ZFIC, Inc, which is controlled by Andrew A. Ziegler and Carlene M. Ziegler. Information
regarding beneficial ownership is reported as of January 31, 2011, based on the information
contained in the Schedule 13G filed by Artisan Partners Holdings LP and affiliates with the
SEC on February 9, 2011. Please see the Schedule 13G for information relating to Artisan
Partners Holdings LP. The business address of all the aforementioned entities is 875 East
Wisconsin Avenue, Suite 800, Milwaukee, WI 53202, the United States.(19)
    
    Represents 16,148,000 Class A common shares held by Fidelity Management & Research Company,
which is controlled by FMR LLC. FMR LLC is controlled by a group consisting of Edward C.
Johnson 3d and members of his family. Information regarding beneficial ownership is based on
the information contained in the Schedule 13G filed by FMR LLC with the SEC on April 8, 2011.
Please see the Schedule 13G for information relating to FMR LLC. The business address of
Fidelity Management & Research Company and FMR LLC is 82 Devonshire Street, Boston,
Massachusetts 02109, the United States.(20)
    
    Represents 5,439,370 Class A common shares held by Morgan Stanley Investment Management Inc.,
a wholly-owned subsidiary of Morgan Stanley. Information regarding beneficial ownership is
reported as of December 31, 2010, based on the information contained in the Schedule 13G filed
by Morgan Stanley and Morgan Stanley Investment Management Inc. with the SEC on February 9,
2011. Please see the Schedule 13G for information relating to Morgan Stanley and Morgan
Stanley Investment Management Inc. The business address of Morgan Stanley Investment
Management Inc. is 522 Fifth Avenue, New York, NY 10036, the United States.   
 Item 7. Major Shareholders and Related Party Transactions
 A. Major Shareholders
 95




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3⁄4
 B. Related Party Transactions
   Loan Agreement.
 Exclusive Call Option Agreement.
 Exclusive Technical Support Service Agreement.
 96




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##### Table of Contents



Power of Attorney.
 Equity Pledge Agreement.
 Transactions with Affiliates
  dangdang.com
 97




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##### Table of Contents



Employment Agreements
  Share Incentives
 See Item 6. Directors, Senior Management and EmployeesB. Compensation for a description of
share-based compensation awards we have granted to our directors, officers and other individuals as
a group.
 C. Interests of Experts and Counsel
  
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
 98




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##### Table of Contents



Dividend Policy
    B. Significant Changes
  
 Item 9. The Offer and Listing
 A. Offering and Listing Details .
  B. Plan of Distribution
  C. Markets
  99




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##### Table of Contents



Trading PriceHigh
    
    LowUS$
    
    US$Annual High and LowFiscal Year 2010
    
    
    32.79
    
    
    
    22.92Quarterly Highs and LowsFourth Fiscal Quarter of 2010
    
    
    32.79
    
    
    
    22.92First Fiscal Quarter of 2011
    
    
    34.39
    
    
    
    18.91Monthly Highs and LowsDecember 2010 (from December 8, 2010)
    
    
    32.79
    
    
    
    22.92January 2011
    
    
    34.39
    
    
    
    25.75February 2011
    
    
    29.69
    
    
    
    23.64March 2011
    
    
    27.40
    
    
    
    18.91April 2011, until April 18, 2011)
    
    
    21.80
    
    
    
    19.11
 D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 Item 10. Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
   100




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##### Table of Contents



Registered Office and Objects
  Board of Directors
  Common Shares
 General.
 Dividends.
 Conversion.
 101




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##### Table of Contents



Voting Rights.
   Transfer of Shares.
   102




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##### Table of Contents



Liquidation.
 Calls on Shares and Forfeiture of Shares.
 Redemption of Shares.
     Variations of Rights of Shares.
 Inspection of Books and Records.
 103




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##### Table of Contents



C. Material Contracts
  D. Exchange Controls
  E. Taxation
  Cayman Islands Taxation
  Peoples Republic of China Taxation
  104




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Material United States Federal Income Tax Considerations
 Code
 105




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General
    106




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##### Table of Contents



Passive Foreign Investment Company Considerations
    107




---



##### Table of Contents



Dividends
   108




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Sale or Other Disposition of ADSs or Class A Common Shares
  109




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##### Table of Contents



Passive Foreign Investment Company Rules
  
    
    excess distribution and/or gain will be allocated ratably over the U.S. Holders holding
period for the ADSs or Class A common shares;
    
    amount allocated to the current taxable year and any taxable years in the U.S. Holders
holding period prior to the first taxable year in which we are classified as a PFIC, or
pre-PFIC year, will be subject to tax as ordinary income;
    
    amount allocated to each prior taxable year, other than the current taxable year or a
pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to the
U.S. Holder for that year; and
    
    interest charge generally applicable to underpayments of tax will be imposed on the tax
attributable to each prior taxable year, other than the current taxable year or a pre-PFIC
year.
  110




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111




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##### Table of Contents



Information Reporting and Backup Withholding
    F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
 112




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##### Table of Contents



I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  113




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##### Table of Contents



Foreign Exchange Risk
     
 Item 12. Description of Securities Other than Equity Securities
 A. Debt Securities
  114




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##### Table of Contents



B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 Fees and Expenses
  Fees:
    
    Service:US$5.00 (or less) per 100 ADSs
(or portion of 100 ADSs)
    
       Issuance of ADSs, including issuances
resulting from a distribution of shares
or rights or other property   Cancellation of ADSs for the purpose
of withdrawal, including if the deposit
agreement terminatesUS$0.05 (or less) per ADS
    
       Any cash distribution to ADS holdersA fee equivalent to the fee that
would be payable if securities
distributed to you had been
Class A common shares and the
Class A common shares had been
deposited for issuance of ADSs
    
       Distribution of securities distributed
to holders of deposited securities which
are distributed by the depositary to ADS
holdersUS$0.05 (or less) per ADSs per
calendar year
    
       Depositary servicesRegistration or transfer fees
    
       Transfer and registration of Class A
common shares on our share register to
or from the name of the depositary or
its agent when you deposit or withdraw
Class A common sharesExpenses of the depositary
    
       Cable, telex and facsimile
transmissions (when expressly provided
in the deposit agreement)   converting foreign currency to U.S.
dollars
 115




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##### Table of Contents



Fees:
    
    Service:Taxes and other governmental
charges the depositary or the
custodian have to pay on any ADS
or Class A common share
underlying an ADS, for example,
stock transfer taxes, stamp duty
or withholding taxes
    
       As necessaryAny charges incurred by the
depositary or its agents for
servicing the deposited
securities
    
       As necessary
    
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  116




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Item 15. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
   117




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Changes in Internal Control over Financial Reporting
  
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  118




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##### Table of Contents



Item 16C. Principal Accountant Fees and Services
  2009
    
    2010Audit fees (1)
    
    RMB450,000
    
    RMB2,000,000Audit-related fees(2)
    
    
    
    RMB4,100,000
 
 (1)
    
    Audit fees means the aggregate fees billed or unbilled in each of the fiscal years listed
for professional services rendered by our principal auditors for the audit of our annual
financial statements.(2)
    
    Audit-related fees means the aggregate fees billed in each of the fiscal years listed for
assurance and related services by our principal auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not reported under
Audit fees. Services comprising the fees disclosed under the category of Audit-related
fees involve principally issue of the comfort letter and review of interim financial
information in 2010 in connection with our initial public offering.  
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
  119




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PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 Exhibit Number
    
    Description of Document1.1
    
    Form of Sixth Amended and Restated Memorandum and
Articles of Association of the Registrant
(incorporated by reference to Exhibit 3.2 to our Form
F-1 Registration Statement (file no. 333-170663) filed
with the Securities and Exchange Commission on
November 17, 2010.2.1
    
    Registrants Specimen Certificate for Class A common
shares (incorporated by reference to Exhibit 4.2 of
Form F-1 (file no. 333-170663) filed with the
Securities and Exchange Commission on November 17,
20102.2
    
    Form of Deposit Agreement among the Registrant, the
depositary and holder of the American Depositary
Receipts (incorporated by reference to Exhibit 4.3 to
our Amendment to Form F-1 Registration Statement (file
no. 333-170663) filed with the Securities and Exchange
Commission on November 23, 2010)2.3
    
    Registrants Specimen American Depositary Receipt
(incorporated by reference to Exhibit 4.1 to our
Amendment to Form F-1 Registration Statement (file no.
333-170663) filed with the Securities and Exchange
Commission on November 23, 2010)2.4
    
    Second Amended and Restated Shareholders Agreement
dated as of June 27, 2006 among the Registrant,
Beijing Dangdang Information Technology Co., Ltd.
(previously known as Beijing Kewen Shuye Information
Technology Co., Ltd.), its common shareholders and
preferred shareholders. (incorporated by reference to
Exhibit 4.4 to our Amendment to Form F-1 Registration
Statement (file no. 333-170663) filed with the
Securities and Exchange Commission on November 23,
2010)4.1
    
    2004 Share Incentive Plan (incorporated by reference
to Exhibit 10.1 of Form F-1 (file no. 333-170663)
filed with the Securities and Exchange Commission on
November 17, 2010
 120




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##### Table of Contents



Exhibit Number
    
    Description of Document4.2
    
    2010 Share Incentive Plan (incorporated by reference
to Exhibit 10.2 of Form F-1 (file no. 333-170663)
filed with the Securities and Exchange Commission on
November 17, 20104.3
    
    Form of Indemnification Agreement with the
Registrants directors (incorporated by reference to
Exhibit 10.3 of Form F-1 (file no. 333-170663) filed
with the Securities and Exchange Commission on
November 17, 20104.4
    
    Form of Employment Agreement between the Registrant
and an Executive Officer of the Registrant
(incorporated by reference to Exhibit 10.4 of Form F-1
(file no. 333-170663) filed with the Securities and
Exchange Commission on November 17, 20104.5
    
    English translation of Amended and Restated Loan
Agreement between Beijing Dangdang Information
Technology Co., Ltd. and the shareholders of Beijing
Dangdang Kewen E-Commerce Co., Ltd. dated July 23,
2010 (incorporated by reference to Exhibit 10.5 of
Form F-1 (file no. 333-170663) filed with the
Securities and Exchange Commission on November 17,
20104.6
    
    English translation of Amended and Restated Exclusive
Call Option Agreement between Beijing Dangdang
Information Technology Co., Ltd. and the shareholders
of Beijing Dangdang Kewen E-Commerce Co., Ltd. dated
July 23, 2010 (incorporated by reference to Exhibit
10.6 of Form F-1 (file no. 333-170663) filed with the
Securities and Exchange Commission on November 17,
20104.7
    
    English translation of Amended and Restated Exclusive
Technical Support Service Agreement between Beijing
Dangdang Information Technology Co., Ltd. and Beijing
Dangdang Kewen E-Commerce Co., Ltd. dated July 23,
2010 (incorporated by reference to Exhibit 10.7 of
Form F-1 (file no. 333-170663) filed with the
Securities and Exchange Commission on November 17,
20104.8
    
    English translation of Power of Attorney issued by
each shareholder of Beijing Dangdang Kewen E-Commerce
Co., Ltd. dated July 23, 2010 (incorporated by
reference to Exhibit 10.8 of Form F-1 (file no.
333-170663) filed with the Securities and Exchange
Commission on November 17, 20104.9
    
    English translation of Amended and Restated Equity
Pledge Agreement between Beijing Dangdang Information
Technology Co., Ltd. and the shareholders of Beijing
Dangdang Kewen E-Commerce Co., Ltd. dated July 23,
2010 (incorporated by reference to Exhibit 10.9 of
Form F-1 (file no. 333-170663) filed with the
Securities and Exchange Commission on November 17,
20108.1*
    
    List of Consolidated Entities11.1
    
    Code of Business Conduct and Ethics (incorporated by
reference to Exhibit 99.1 of Form F-1 (file no.
333-170663) filed with the Securities and Exchange
Commission on November 17, 201012.1*
    
    Certification by Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 200212.2*
    
    Certification by Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 200213.1*
    
    Certification by Principal Executive Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200213.2*
    
    Certification by Principal Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 121




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##### Table of Contents



Exhibit Number
    
    Description of Document15.1*
    
    Consent of Ernst & Young Hua Ming
 
 *
    
    Filed herewith 122




---



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SIGNATURES
  E-Commerce China Dangdang Inc.By:
    /s/ Peggy Yu YuName:
    Peggy Yu YuTitle:
    Executive Chairwoman  123




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E-COMMERCE CHINA DANGDANG INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2009, and 2010
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2008, 2009 and 2010
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010
    
    F-7Consolidated Statements of Changes in Shareholders (Deficit) Equity
for the years ended December 31, 2008, 2009 and 2010
    
    F-8Notes to Consolidated Financial Statements
    
    F-10
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ Ernst & Young Hua MingBeijing, Peoples Republic of ChinaApril 21, 2011
 F-2




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
 
 CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 December 31,Notes
    
    2009
    
    2010RMB
    
    RMB
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    
    
    75,759
    
    
    
    1,691,906
    
    
    
    256,349Held-to-maturity investments
    
    
    3
    
    
    
    90,000
    
    
    
    
    
    
    
    Inventories
    
    
    4
    
    
    
    540,744
    
    
    
    896,273
    
    
    
    135,799Accounts receivable (net of
allowance for doubtful accounts of
RMB nil and RMB1,793 (US$271) as
of December 31, 2009 and 2010,
respectively)
    
    
    
    
    
    
    11,764
    
    
    
    17,802
    
    
    
    2,697Prepaid expenses and other current
assets (Including expenses prepaid
to related parties amounting to
RMB nil and RMB9,625 (US$1,458) as
of December 31, 2009 and 2010,
respectively)
    
    
    5
    
    
    
    51,963
    
    
    
    100,639
    
    
    
    15,248Amounts due from related parties
    
    
    11
    
    
    
    3,130
    
    
    
    3,014
    
    
    
    457Deferred tax assets
    
    
    10
    
    
    
    
    
    
    
    22,095
    
    
    
    3,348Total current assets
    
    
    
    
    
    
    773,360
    
    
    
    2,731,729
    
    
    
    413,898Fixed assets, net
    
    
    6
    
    
    
    27,058
    
    
    
    55,934
    
    
    
    8,475Prepaid expenses (Including
expenses prepaid to related
parties amounting to RMB nil and
RMB9,625 (US$1,458) as of December
31, 2009 and 2010, respectively)
    
    
    
    
    
    
    487
    
    
    
    11,891
    
    
    
    1,801Deferred tax assets
    
    
    10
    
    
    
    
    
    
    
    1,903
    
    
    
    288Total assets
    
    
    
    
    
    
    800,905
    
    
    
    2,801,457
    
    
    
    424,462LIABILITIES, CONVERTIBLE PREFERRED
SHARES AND SHAREHOLDERS (DEFICIT)
EQUITYCurrent liabilities:Accounts payable
    
    
    
    
    
    
    618,062
    
    
    
    865,953
    
    
    
    131,205Deferred revenue
    
    
    
    
    
    
    38,519
    
    
    
    80,077
    
    
    
    12,133Accrued expenses and other current
liabilities
    
    
    7
    
    
    
    80,731
    
    
    
    170,349
    
    
    
    25,810Amounts due to selling shareholders
    
    
    8
    
    
    
    
    
    
    
    255,568
    
    
    
    38,723Amounts due to related parties
    
    
    11
    
    
    
    16,105
    
    
    
    15,253
    
    
    
    2,311Total current liabilities
    
    
    
    
    
    
    753,417
    
    
    
    1,387,200
    
    
    
    210,182Total liabilities
    
    
    
    
    
    
    753,417
    
    
    
    1,387,200
    
    
    
    210,182Commitments and contingencies
    
    
    13
 F-3




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E-COMMERCE CHINA DANGDANG INC.
CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 December 31,Notes
    
    2009
    
    2010RMB
    
    RMB
    
    US$Convertible preferred shares:Series A convertible preferred
shares (par value of US$0.0001 per
share; 44,285,710 shares
authorized; 44,285,710 and nil
shares issued and outstanding as at
December 31, 2009 and 2010; as at
December 31, 2009 and 2010,
aggregate liquidation preference
amounts were RMB42,321 and RMB nil,
respectively)
    
    
    16
    
    
    
    51,314
    
    
    
    
    
    
    
    Series B convertible preferred
shares (par value of US$0.0001 per
share; 43,995,740 shares
authorized; 43,995,740 and nil
shares issued and outstanding as at
December 31, 2009 and 2010,
respectively; as at December 31,
2009 and 2010, aggregate
liquidation preference amounts were
RMB51,194 and RMB nil,
respectively)
    
    
    16
    
    
    
    57,001
    
    
    
    
    
    
    
    Series C convertible preferred
shares (par value of US$0.0001 per
share; 40,419,170 shares
authorized; 40,419,170 and nil
shares issued and outstanding as at
December 31, 2009 and 2010; as at
December 31, 2009 and 2010,
aggregate liquidation preference
amounts were RMB184,361 and RMB
nil, respectively)
    
    
    16
    
    
    
    209,716
    
    
    
    
    
    
    
    Shareholders (deficit) equity:Common shares (par value of
US$0.0001 per share and US$ nil as
at December 31, 2009 and 2010,
respectively; 500,000,000 and nil
shares authorized as at December
31, 2009 and 2010, respectively;
175,644,260 and nil shares issued
and outstanding as at December 31,
2009 and 2010, respectively)
    
    
    14
    
    
    
    151
    
    
    
    
    
    
    
    Class A common shares (par value of
US$ nil and US$0.0001 per share as
at December 31, 2009 and 2010,
respectively; nil and 686,505,790
shares authorized as at December
31, 2009 and 2010, respectively;
nil and 104,533,340 shares issued
and outstanding as at December 31,
2009 and 2010, respectively)
    
    
    14
    
    
    
    
    
    
    
    71
    
    
    
    11Class B common shares (par value of
US$ nil and US$0.0001 per share as
at December 31, 2009 and 2010,
respectively; nil and 313,494,210
shares authorized as at December
31, 2009 and 2010, respectively;
nil and 286,520,870 shares issued
and outstanding as at December 31,
2009 and 2010, respectively)
    
    
    14
    
    
    
    
    
    
    
    223
    
    
    
    34Additional paid-in capital
    
    
    
    
    
    
    123,002
    
    
    
    1,787,665
    
    
    
    270,858Accumulated other comprehensive loss
    
    
    
    
    
    
    (13,129
    )
    
    
    (22,138
    )
    
    
    (3,354
    )Accumulated deficit
    
    
    
    
    
    
    (380,567
    )
    
    
    (351,564
    )
    
    
    (53,269
    )Total shareholders (deficit) equity
    
    
    
    
    
    
    (270,543
    )
    
    
    1,414,257
    
    
    
    214,280Total liabilities, convertible
preferred shares and shareholders
(deficit) equity
    
    
    
    
    
    
    800,905
    
    
    
    2,801,457
    
    
    
    424,462
  F-4




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E-COMMERCE CHINA DANGDANG INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Year Ended December 31,Notes
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    US$Net revenuesProduct revenue
    
    
    9
    
    
    
    764,510
    
    
    
    1,450,096
    
    
    
    2,255,521
    
    
    
    341,746Other revenue
    
    
    
    
    
    
    1,550
    
    
    
    7,556
    
    
    
    26,159
    
    
    
    3,963Total net revenues
    
    
    
    
    
    
    766,060
    
    
    
    1,457,652
    
    
    
    2,281,680
    
    
    
    345,709Cost of revenuesTotal cost of revenues
(including purchases from a
related party amounting to
RMB1,757, RMB4,280 and RMB4,100
(US$621) for the years ended
December 31, 2008, 2009 and
2010, respectively)
    
    
    11
    
    
    
    (638,817
    )
    
    
    (1,129,961
    )
    
    
    (1,775,881
    )
    
    
    (269,073
    )Gross profit
    
    
    
    
    
    
    127,243
    
    
    
    327,691
    
    
    
    505,799
    
    
    
    76,636Operating expenses:Fulfillment (including service
fees payable to related parties
amounting to RMB7,797, RMB13,275
and RMB9,625 (US$1,458) for the
years ended December 31, 2008,
2009 and 2010, respectively)
    
    
    11
    
    
    
    (120,837
    )
    
    
    (201,270
    )
    
    
    (286,443
    )
    
    
    (43,400
    )Marketing
    
    
    
    
    
    
    (40,766
    )
    
    
    (38,473
    )
    
    
    (76,669
    )
    
    
    (11,616
    )Technology and content
    
    
    
    
    
    
    (26,436
    )
    
    
    (38,989
    )
    
    
    (64,682
    )
    
    
    (9,800
    )General and administrative
(including consulting fees paid
to related parties amounting to
RMB2,734, RMB2,732 and RMB nil
for the years ended December 31,
2008, 2009 and 2010,
respectively)
    
    
    11
    
    
    
    (26,991
    )
    
    
    (38,021
    )
    
    
    (67,903
    )
    
    
    (10,288
    )Government grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,805
    
    
    
    728(Loss) income from operations
    
    
    
    
    
    
    (87,787
    )
    
    
    10,938
    
    
    
    14,907
    
    
    
    2,260Interest income
    
    
    
    
    
    
    7,740
    
    
    
    5,418
    
    
    
    7,087
    
    
    
    1,074Other (expenses) income, net
    
    
    
    
    
    
    (1,710
    )
    
    
    560
    
    
    
    (3,273
    )
    
    
    (496
    )(Loss) income before income taxes
    
    
    
    
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    18,721
    
    
    
    2,838Income tax benefit
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    12,061
    
    
    
    1,827Net (loss) income
    
    
    
    
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    30,782
    
    
    
    4,665Deemed dividend on Series C
convertible preferred shares
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (270
    )Net (loss) income attributable
to common shareholders
    
    
    
    
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    29,003
    
    
    
    4,395
 F-5




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E-COMMERCE CHINA DANGDANG INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Year Ended December 31,Notes
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    US$(Loss) income per
common shareBasic
    
    
    17
    
    
    
    (0.47
    )
    
    
    
    
    
    
    0.02
    
    
    
    0.00Diluted
    
    
    17
    
    
    
    (0.47
    )
    
    
    
    
    
    
    0.02
    
    
    
    0.00Shares used in (loss)
income per Class A
and B common share
computation:Common shares:Basic
    
    
    17
    
    
    
    175,644,260
    
    
    
    175,644,260Diluted
    
    
    17
    
    
    
    175,644,260
    
    
    
    175,644,260Class A common shares:Basic
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    6,712,195
    
    
    
    6,712,195Diluted
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    216,359,263
    
    
    
    216,359,263Class B common shares:Basic
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    181,562,768
    
    
    
    181,562,768Diluted
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    181,562,768
    
    
    
    181,562,768
  F-6




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Year Ended December 31,2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    US$Cash flows from operating activities:Net (loss) income
    
    
    (81,757
    )
    
    
    16,916
    
    
    
    30,782
    
    
    
    4,665Adjustments to reconcile net (loss) income to net cash
from operating activities:Allowance for doubtful receivables
    
    
    
    
    
    
    
    
    
    
    1,793
    
    
    
    271Depreciation of fixed assets
    
    
    8,057
    
    
    
    12,742
    
    
    
    20,098
    
    
    
    3,045Share-based compensation
    
    
    2,363
    
    
    
    3,997
    
    
    
    10,300
    
    
    
    1,561Changes in operating assets and liabilities:Increase in inventories
    
    
    (131,196
    )
    
    
    (239,931
    )
    
    
    (355,529
    )
    
    
    (53,868
    )Increase in accounts receivable
    
    
    (100
    )
    
    
    (3,739
    )
    
    
    (7,831
    )
    
    
    (1,186
    )Increase in prepaid expenses and other current assets
    
    
    (1,621
    )
    
    
    (34,474
    )
    
    
    (48,699
    )
    
    
    (7,379
    )Decrease in due from related parties
    
    
    1,906
    
    
    
    883
    
    
    
    116
    
    
    
    17Increase in deferred tax assets
    
    
    
    
    
    
    
    
    
    
    (23,998
    )
    
    
    (3,636
    )Increase in other non-current assets
    
    
    
    
    
    
    (487
    )
    
    
    (11,404
    )
    
    
    (1,727
    )Increase in accounts payable
    
    
    136,435
    
    
    
    245,809
    
    
    
    240,741
    
    
    
    36,475Increase in deferred revenue
    
    
    13,227
    
    
    
    22,760
    
    
    
    41,558
    
    
    
    6,296Increase in accrued expenses and other current liabilities
    
    
    15,663
    
    
    
    42,409
    
    
    
    85,852
    
    
    
    13,008(Decrease) increase in amounts due to related parties
    
    
    (394
    )
    
    
    5,206
    
    
    
    (520
    )
    
    
    (78
    )Net cash (used in) provided by operating activities
    
    
    (37,417
    )
    
    
    72,091
    
    
    
    (16,741
    )
    
    
    (2,536
    )Cash flows from investing activities:Purchases of fixed assets
    
    
    (10,325
    )
    
    
    (22,828
    )
    
    
    (41,824
    )
    
    
    (6,337
    )Proceeds received from maturity of held-to-maturity
investments
    
    
    639,000
    
    
    
    823,000
    
    
    
    1,728,000
    
    
    
    261,818Purchases of held-to-maturity investments
    
    
    (587,000
    )
    
    
    (863,000
    )
    
    
    (1,638,000
    )
    
    
    (248,182
    )Net cash provided by (used in) investing activities
    
    
    41,675
    
    
    
    (62,828
    )
    
    
    48,176
    
    
    
    7,299Cash flows from financing activities:Proceeds from amounts received in advance of stock options
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from exercise of share options
    
    
    
    
    
    
    
    
    
    
    10,398
    
    
    
    1,575Proceeds from disposal of Class B common shares received
on behalf of selling shareholders
    
    
    
    
    
    
    
    
    
    
    257,124
    
    
    
    38,958Proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    1,343,357
    
    
    
    203,539Initial public offering expenses
    
    
    
    
    
    
    
    
    
    
    (15,219
    )
    
    
    (2,306
    )Net cash provided by financing activities
    
    
    166
    
    
    
    
    
    
    
    1,595,660
    
    
    
    241,766Effect of exchange rate changes on cash and cash
equivalents
    
    
    (1,446
    )
    
    
    (13
    )
    
    
    (10,948
    )
    
    
    (1,659
    )Net increase in cash and cash equivalents
    
    
    2,978
    
    
    
    9,250
    
    
    
    1,616,147
    
    
    
    244,870Cash and cash equivalents at beginning of the year
    
    
    63,531
    
    
    
    66,509
    
    
    
    75,759
    
    
    
    11,479Cash and cash equivalents at end of the year
    
    
    66,509
    
    
    
    75,759
    
    
    
    1,691,906
    
    
    
    256,349
  F-7




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS (DEFICIT) EQUITY
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares)
 Class A
    
    Class B
    
    Additional paid-
    
    
    
    
    
    
    
    
    
    TotalCommon shares
    
    common shares
    
    common shares
    
    in
    
    Accumulated other
    
    Accumulated
    
    shareholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    capital
    
    comprehensive loss
    
    deficit
    
    (deficit) equityRMB
    
    
    
    RMB
    
    
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMBBalance at January 1,
2008
    
    
    175,644,260
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,476
    
    
    
    (11,670
    )
    
    
    (315,726
    )
    
    
    (210,769
    )Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,757
    )
    
    
    (81,757
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,446
    )
    
    
    
    
    
    
    (1,446
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,203
    )Common shares to be
issued for stock option
exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    166Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,363
    
    
    
    
    
    
    
    
    
    
    
    2,363Balance at December 31,
2008
    
    
    175,644,260
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,005
    
    
    
    (13,116
    )
    
    
    (397,483
    )
    
    
    (291,443
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,916
    
    
    
    16,916Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,903Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,997
    
    
    
    (-
    )
    
    
    
    
    
    
    3,997Balance at December 31,
2009
    
    
    175,644,260
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,002
    
    
    
    (13,129
    )
    
    
    (380,567
    )
    
    
    (270,543
    )
 F-8




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS (DEFICIT) EQUITY (continued)
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares)
 Class A
    
    Class B
    
    Additional paid-
    
    
    
    
    
    
    
    
    
    TotalCommon shares
    
    common shares
    
    common shares
    
    in
    
    Accumulated other
    
    Accumulated
    
    shareholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    capital
    
    comprehensive loss
    
    deficit
    
    (deficit) equityRMB
    
    
    
    RMB
    
    
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMBComprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,782
    
    
    
    30,782Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,009
    )
    
    
    
    
    
    
    (9,009
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,773Deemed dividend on
Series C convertible
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (1,779
    )Share-based compensation
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,300
    
    
    
    
    
    
    
    
    
    
    
    10,300Re-registration of
common shares to Class B
common shares
    
    
    (175,944,260
    )
    
    
    (151
    )
    
    
    
    
    
    
    
    
    
    
    175,944,260
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Class A
common shares
    
    
    
    
    
    
    
    
    
    
    67,500,000
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    1,343,312
    
    
    
    
    
    
    
    
    
    
    
    1,343,357Initial public offering
cost capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,058
    )
    
    
    
    
    
    
    
    
    
    
    (19,058
    )Conversion of
convertible preferred
shares into common
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,549,950
    
    
    
    91
    
    
    
    319,718
    
    
    
    
    
    
    
    
    
    
    
    319,809Conversion of Class B
common shares into Class
A common shares
    
    
    
    
    
    
    
    
    
    
    26,973,340
    
    
    
    19
    
    
    
    (26,973,340
    )
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    10,060,000
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    10,391
    
    
    
    
    
    
    
    
    
    
    
    10,398Balance at December 31,
2010
    
    
    
    
    
    
    
    
    
    
    104,533,340
    
    
    
    71
    
    
    
    286,520,870
    
    
    
    223
    
    
    
    1,787,665
    
    
    
    (22,138
    )
    
    
    (351,564
    )
    
    
    1,414,257Balance at December 31,
2010 in US$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    34
    
    
    
    270,858
    
    
    
    (3,354
    )
    
    
    (53,269
    )
    
    
    214,280
  F-9




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 1ORGANIZATION AND BASIS OF PRESENTATION
    Percentage ofDate of
    
    
    Place of
    
    
    Ownership by theCompany
    
    Establishment
    
    
    Establishment
    
    
    Company
    
    
    Principal ActivitiesBeijing Dangdang Information Technology Co.,
Ltd. (Dangdang
Information)
    
    
    July 8, 1997
    
    
    
    PRC
    
    
    
    100%
    
    
    
    Sales of books on the internetBeijing Dangdang Kewen E-Commerce Co., Ltd. (Dangdang Kewen)
    
    
    August 24, 2004
    
    
    
    PRC
    
    
    
    Nil
    
    
    
    Sales of audio-visual products, periodicals, consumer
electronics and other general merchandise on the internetWuxi Dangdang Information Technology Co., Ltd.
(Wuxi Dangdang Information)
    
    
    August 11, 2010
    
    
    
    PRC
    
    
    
    99% (1% owned by Dangdang Kewen)
    
    
    
    Sales of books, periodicals, electronic publications,
consumer electronics and other general merchandise on the internetWuxi Dangdang Kewen E-Commerce Co., Ltd.
(Wuxi Dangdang Kewen), a wholly owned subsidiary of
Dangdang Kewen
    
    
    September 20, 2010
    
    
    
    PRC
    
    
    
    Nil
    
    
    
    Sales of consumer electronics and other general
 merchandise on the internet
 F-10




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 1ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Consolidation
  Loan agreement
  Exclusive call Option agreement
  F-11




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 1ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Exclusive technical support service agreement
  Share pledge agreement
  F-12




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 1ORGANIZATION AND BASIS OF PRESENTATION (continued)
  
    
    Each shareholder of Dangdang Kewen has executed a power of attorney to appoint Dangdang
Information as the irrevocable proxy to act on his or her behalf on all matters pertaining
to Dangdang Kewen and to exercise all of his or her rights as a shareholder of Dangdang
Kewen, including the right to attend shareholders meeting, to exercise voting rights and
to transfer all or a part of his or her equity interests in Dangdang Kewen;
    
    With respect to the share pledge agreement, distributions are not permitted, however,
to the extent there is a distribution, including but not limited to any loans, the
shareholders of Dangdang Kewen have to remit amounts in full to Dangdang Information
immediately;
    
    With respect to the share pledge agreement, Dangdang Information shall provide the
necessary financial support to Dangdang Kewen to fund any losses incurred by Dangdang
Kewen during the term of the pledge and not request for repayment if Dangdang Kewen is
unable to do so;
    
    With respect to the exclusive technical support service agreement, the annual fee can
be set and revised annually by Dangdang Information unilaterally with reference to the
performance of Dangdang Kewen; and
    
    With respect to the option agreement, the purchase price of the equity interests in
Dangdang Kewen is equal to the original capital contribution amount.
 F-13




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
  Principles of consolidation
  Use of estimates
  Foreign currency translation and transactions
 Foreign Currency Matters
  F-14




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Convenience translation
  Cash and cash equivalents
  Held-to-maturity investments
 Investments-Debt and Equity
Securities
 InvestmentsDebt
and Equity Securities
 Inventories
  F-15




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fixed assets, net
  Category
    
    Estimated useful life
    
    
    Residual valueElectronic equipment
    
    
    3 years
    
    
    
    0
    %Office equipment
    
    
    3-8 years
    
    
    
    0
    %Vehicles
    
    3 years
    
    
    
    0
    %Leasehold improvements
    
    
    The shorter of the expected life of leasehold improvements and the lease term
    
    
    
    0
    %
  Impairment of long-lived assets
  F-16




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fair value
   Fair Value Measurements and Disclosures
       F-17




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Modification of Series C convertible preferred shares
  Revenue
  Revenue Recognition
   F-18




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Revenue (continued)
  Revenue Recognition
  Revenue Recognition,
  Loyalty programs
  F-19




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Cost of revenue
  Rebates and promotion fees
  F-20




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fulfillment
  Marketing
   Technology and content
   General and administrative
  F-21




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Leases
  Comprehensive income (loss)
 Comprehensive
Income,
 Government grants
  F-22




---



##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Income tax
  Income taxes
  F-23




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Share-based compensation
 Compensation-Stock Compensation,
  Loss (income) per share
 Earnings Per Share
 Earnings Per Share
 F-24




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Segment reporting
 Segment Reporting
 Concentration of risks
 Concentration of credit risk
  Concentration of customers and suppliers
  F-25




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Concentration of risks (continued)
 Currency convertibility risk
   Foreign currency exchange rate risk
  Business risk
  F-26




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent accounting pronouncements
 Multiple-Deliverable Revenue Arrangements Revenue Recognition: Multiple-Element Arrangements,
 Fair Value Measurements and
Disclosures: Improving Disclosures about Fair Value Measurements
 F-27




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 3HELD-TO-MATURITY INVESTMENTS
  Note 4INVENTORIES
 As at December 31,2009
    
    2010RMB
    
    RMB
    
    US$Media products
    
    
    505,324
    
    
    
    734,008
    
    
    
    111,213General merchandise
    
    
    29,486
    
    
    
    154,422
    
    
    
    23,398Packing materials and others
    
    
    5,934
    
    
    
    7,843
    
    
    
    1,188540,744
    
    
    
    896,273
    
    
    
    135,799
 Note 5PREPAID EXPENSES AND OTHER CURRENT ASSETS
  As at December 31,2009
    
    2010RMB
    
    RMB
    
    US$Prepayments to suppliers
    
    
    4,909
    
    
    
    572
    
    
    
    87Prepayments to related parties
    
    
    
    
    
    
    9,625
    
    
    
    1,458Rental, insurance and other expenses
    
    
    3,091
    
    
    
    7,442
    
    
    
    1,128Rebates and promotion fees receivable
    
    
    25,646
    
    
    
    49,492
    
    
    
    7,499Warehouse deposits
    
    
    4,687
    
    
    
    11,510
    
    
    
    1,744Interest receivable
    
    
    2,007
    
    
    
    
    
    
    
    Value-added tax receivable, net
    
    
    10,610
    
    
    
    16,435
    
    
    
    2,490Other receivables
    
    
    1,013
    
    
    
    5,563
    
    
    
    84251,963
    
    
    
    100,639
    
    
    
    15,248
 F-28




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 6FIXED ASSETS, NET
  As at December 31,2009
    
    
    2010RMB
    
    
    RMB
    
    
    US$Electronic equipment
    
    
    37,615
    
    
    
    76,793
    
    
    
    11,635Office equipment
    
    
    10,436
    
    
    
    15,274
    
    
    
    2,314Vehicles
    
    
    498
    
    
    
    1,304
    
    
    
    198Leasehold improvements
    
    
    4,481
    
    
    
    7,207
    
    
    
    1,09253,030
    
    
    
    100,578
    
    
    
    15,239Less: accumulated depreciation
    
    
    (25,972
    )
    
    
    (44,644
    )
    
    
    (6,764
    )Fixed assets, net
    
    
    27,058
    
    
    
    55,934
    
    
    
    8,475
  Note 7ACCRUED EXPENSES AND OTHER LIABILITIES
 As at December 31,2009
    
    2010RMB
    
    RMB
    
    US$Accrued expenses
    
    
    27,312
    
    
    
    49,818
    
    
    
    7,548Accrued payroll
    
    
    12,988
    
    
    
    19,447
    
    
    
    2,947Taxes payables
    
    
    9,006
    
    
    
    32,312
    
    
    
    4,896Deposits from service providers
    
    
    15,874
    
    
    
    27,260
    
    
    
    4,130Sales refund payable
    
    
    14,463
    
    
    
    24,300
    
    
    
    3,682Other payables
    
    
    1,088
    
    
    
    17,212
    
    
    
    2,60780,731
    
    
    
    170,349
    
    
    
    25,810
 F-29




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 8AMOUNT DUE TO SELLING SHAREHOLDERS
  Note 9PRODUCT REVENUE
 Year Ended December 312008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    US$Media products
    
    
    697,681
    
    
    
    1,297,120
    
    
    
    1,863,431
    
    
    
    282,338General merchandise
    
    
    66,829
    
    
    
    152,976
    
    
    
    392,090
    
    
    
    59,408764,510
    
    
    
    1,450,096
    
    
    
    2,255,521
    
    
    
    341,746
 Note 10INCOME TAX BENEFIT
 Cayman Islands
  China
   F-30




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 10INCOME TAX BENEFIT (continued)
  Year Ended December 312008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Non-PRC
    
    
    (6,540
    )
    
    
    (8,135
    )
    
    
    (17,386
    )
    
    
    (2,633
    )PRC
    
    
    (75,217
    )
    
    
    25,051
    
    
    
    36,107
    
    
    
    5,471(81,757
    )
    
    
    16,916
    
    
    
    18,721
    
    
    
    2,838
  Year Ended December 312008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Current income tax
    
    
    
    
    
    
    
    
    
    
    (11,937
    )
    
    
    (1,809
    )Deferred
income tax benefit
    
    
    45,916
    
    
    
    39,260
    
    
    
    40,479
    
    
    
    6,133Valuation allowance
    
    
    (45,916
    )
    
    
    (39,260
    )
    
    
    (16,481
    )
    
    
    (2,497
    )
    
    
    
    
    
    
    
    12,061
    
    
    
    1,827
  Year Ended December 312008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Income tax computed at
applicable tax rates (25%)
    
    
    (20,439
    )
    
    
    4,229
    
    
    
    4,680
    
    
    
    709Effect of different tax rates
in different jurisdictions
    
    
    1,635
    
    
    
    2,033
    
    
    
    4,347
    
    
    
    659Non-deductible expenses
    
    
    3,429
    
    
    
    386
    
    
    
    526
    
    
    
    80Effect of expired tax losses
    
    
    1,196
    
    
    
    8
    
    
    
    1,030
    
    
    
    156Other adjustments
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    20Changes in valuation allowance
    
    
    14,179
    
    
    
    (6,656
    )
    
    
    (22,779
    )
    
    
    (3,451
    )
    
    
    
    
    
    
    
    (12,061
    )
    
    
    (1,827
    )
  F-31




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 10INCOME TAX BENEFIT (continued)
  As at December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Deferred tax assets, current portionAccrued expenses
    
    
    3,581
    
    
    
    13,739
    
    
    
    19,987
    
    
    
    3,028Inventories
    
    
    4,299
    
    
    
    3,852
    
    
    
    7,961
    
    
    
    1,207Provisions
    
    
    118
    
    
    
    118
    
    
    
    832
    
    
    
    126Total deferred tax assets, current portion
    
    
    7,998
    
    
    
    17,709
    
    
    
    28,780
    
    
    
    4,361Valuation allowance
    
    
    (7,998
    )
    
    
    (17,709
    )
    
    
    (6,685
    )
    
    
    (1,013
    )Deferred tax assets, current portion, net
    
    
    
    
    
    
    
    
    
    
    22,095
    
    
    
    3,348Deferred tax assets, non-current portionFixed assets
    
    
    1,585
    
    
    
    2,470
    
    
    
    1,903
    
    
    
    288Net operating losses
    
    
    36,333
    
    
    
    19,081
    
    
    
    9,796
    
    
    
    1,484Total deferred tax assets, non-current portion
    
    
    37,918
    
    
    
    21,551
    
    
    
    11,699
    
    
    
    1,772Valuation allowance
    
    
    (37,918
    )
    
    
    (21,551
    )
    
    
    (9,796
    )
    
    
    (1,484
    )Deferred tax assets, non-current portion, net
    
    
    
    
    
    
    
    
    
    
    1,903
    
    
    
    288
   As at December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Balance at January 1
    
    
    1,083
    
    
    
    547
    
    
    
    4,664
    
    
    
    707Additions based on tax positions related
to the current year
    
    
    
    
    
    
    4,117
    
    
    
    
    
    
    
    Reductions for tax positions of prior years
    
    
    (536
    )
    
    
    
    
    
    
    (4,068
    )
    
    
    (617
    )Balance at December 31
    
    
    547
    
    
    
    4,664
    
    
    
    596
    
    
    
    90
 F-32




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 10INCOME TAX BENEFIT (continued)
    Note 11RELATED PARTY TRANSACTIONS
 a)
    
    Related parties
 Name of related parties
    
    Relationship with the CompanyMs. Yu Yu
    
    Shareholder and executive chairwoman of the
CompanyMr. Guoqing Li
    
    Shareholder, director and chief executive
officer of the CompanyBeijing Kewen Cambridge
Book Co., Ltd. (BKCB)
    
    Entity indirectly controlled by family members
of Mr. Guoqing LiBeijing Kewen Guolue
Information Technology
Co., Ltd. (BKGI)
    
    Entity indirectly controlled by family members
of Mr. Guoqing LiTripod Enterprises
Holding Limited
(Tripod)
    
    Entity indirectly controlled by a family member
of Ms. Yu YuKewen Holding Co.
Limited (Kewen
Holding)
    
    Entity indirectly controlled by Mr. Guoqing Li
 F-33




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 11RELATED PARTY TRANSACTIONS (continued)
 b)
    
    The Company had the following related party transactions for the years ended December 31,
2008, 2009 and 2010:
 Year Ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Purchases of goodsBKCB
    
    
    1,757
    
    
    
    4,280
    
    
    
    4,100
    
    
    
    621Service fees paidBKCB
    
    
    7,797
    
    
    
    5,129
    
    
    
    3,716
    
    
    
    563BKGI
    
    
    
    
    
    
    8,146
    
    
    
    5,909
    
    
    
    895Consulting fees paidTripod
    
    
    1,367
    
    
    
    1,366
    
    
    
    
    
    
    
    Kewen Holding
    
    
    1,367
    
    
    
    1,366
    
    
    
    
    
    
    
    Repayment of loansMs. Yu Yu and Mr. Guoqing Li
    
    
    1,900
    
    
    
    380
    
    
    
    
    
    
    
    
     F-34




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 11RELATED PARTY TRANSACTIONS (continued)
 c)
    
    The balances between the Company and its related parties as at December 31, 2009 and 2010 are
listed below:
 As at December 31,2009
    
    
    2010RMB
    
    
    RMB
    
    
    US$Due from related parties:BKCB
    
    
    3,128
    
    
    
    3,014
    
    
    
    457BKGI
    
    
    2
    
    
    
    
    
    
    
    3,130
    
    
    
    3,014
    
    
    
    457Prepayment to related parties:BKCB
    
    
    
    
    
    
    7,432
    
    
    
    1,126BKGI
    
    
    
    
    
    
    11,818
    
    
    
    1,790
    
    
    
    19,250
    
    
    
    2,916Due to related parties:BKCB
    
    
    3,683
    
    
    
    4,553
    
    
    
    690BKGI
    
    
    1,377
    
    
    
    
    
    
    
    Tripod
    
    
    5,592
    
    
    
    5,415
    
    
    
    820Kewen Holding
    
    
    5,453
    
    
    
    5,285
    
    
    
    80116,105
    
    
    
    15,253
    
    
    
    2,311
  Note 12EMPLOYEE BENEFITS
  F-35




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 13COMMITMENTS AND CONTINGENCIES
   Year ended December 31,
    
    RMB
    
    US$2011
    
    
    58,830
    
    
    
    8,9142012
    
    
    51,416
    
    
    
    7,7902013
    
    
    31,047
    
    
    
    4,7042014
    
    
    28,748
    
    
    
    4,3562015
    
    
    23,869
    
    
    
    3,617Thereafter
    
    
    174,936
    
    
    
    26,505368,846
    
    
    
    55,886
 Note 14COMMON SHARES
  F-36




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 15 SHARE SPLIT
   Note 16CONVERTIBLE PREFERRED SHARES
  Shares Authorized and
    
    Proceeds Net of IssuanceIssue
    
    Issuance Date
    
    Outstanding
    
    CostsRMB
    
    US$Series A
convertible
preferred shares
    
    February 28, 2000
    
    
    44,285,710
    
    
    
    51,314
    
    
    
    6,200Series B
convertible
preferred shares
    
    February 25, 2004
    
    
    43,995,740
    
    
    
    78,294
    
    
    
    9,459Series C
convertible
preferred shares
    
    June 27, 2006
    
    
    40,419,170
    
    
    
    209,716
    
    
    
    27,009128,700,620
    
    
    
    339,324
    
    
    
    42,668
  Voting
  F-37




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 16CONVERTIBLE PREFERRED SHARES (continued)
 Dividends
  Liquidation preference
  (i)
    
    US$0.668 per share to the holders of Series C convertible preferred shares, then(ii)
    
    US$0.170 per share to the holders of Series B convertible preferred shares, and(iii)
    
    US$0.140 per share to the holders of Series A convertible preferred shares, plus any
declared but unpaid dividends on such shares on a pari passu basis. Thereafter common
shareholders are entitled to receive the entire remainder of the proceeds.
  F-38




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 16CONVERTIBLE PREFERRED SHARES (continued)
 Conversion
     F-39




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 16CONVERTIBLE PREFERRED SHARES (continued)
 Earnings adjustment and modification of Series C Convertible Preferred Shares
  Registration rights
  Accounting for the Convertible Preferred Shares
  F-40




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 16CONVERTIBLE PREFERRED SHARES (continued)
 Accounting for the Convertible Preferred Shares
   Accounting for the modification of Series C Convertible Preferred Shares
   F-41




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 17(LOSS) INCOME PER SHARE
  Year Ended December 31,2008
    
    
    2009RMB
    
    
    RMBNumerator:Net (loss) income
    
    
    (81,757
    )
    
    
    16,916Undistributed income
allocated to
convertible preferred
shareholders
    
    
    
    
    
    
    (16,916
    )Net income
attributable to
common shareholders
for computing basic
and diluted loss per
common share
    
    
    (81,757
    )
    
    
    Denominator:Weighted average
number of common
shares outstanding
for computing basic
income per common
share
    
    
    175,644,260
    
    
    
    175,644,260Dilutive options
    
    
    
    
    
    
    Weighted average
number of common
shares outstanding
for computing
fully-diluted income
per common share
    
    
    175,644,260
    
    
    
    175,644,260Basic loss per share
    
    
    (0.47
    )
    
    
    Diluted loss per share
    
    
    (0.47
    )
    
    
    
 F-42




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 17(LOSS) INCOME PER SHARE (continued)
  Year Ended December 31, 2010Class A
    
    
    Class A
    
    
    Class B
    
    
    Class BRMB
    
    
    US$
    
    
    RMB
    
    
    US$Basic income per share:Numerator:Allocated net income
    
    
    150
    
    
    
    23
    
    
    
    30,632
    
    
    
    4,642Deemed dividend on Series C convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (270
    )Net income attributable to Class A and Class B common
shareholders
    
    
    150
    
    
    
    23
    
    
    
    28,853
    
    
    
    4,372Undistributed income allocated to convertible preferred
shareholders
    
    
    
    
    
    
    
    
    
    
    (24,792
    )
    
    
    (3,757
    )Net income attributable to Class A and Class B common
shareholders for computing basic income per Class A and
Class B common share
    
    
    150
    
    
    
    23
    
    
    
    4,061
    
    
    
    615Denominator:Weighted average number of Class A and Class B common
shares outstanding for computing basic income per Class
A and Class B common share
    
    
    6,712,195
    
    
    
    6,712,195
    
    
    
    181,562,768
    
    
    
    181,562,768Basic income per Class A and Class B common shares
    
    
    0.02
    
    
    
    0.00
    
    
    
    0.02
    
    
    
    0.00Diluted income per share:Numerator:Allocated net income
    
    
    714
    
    
    
    109
    
    
    
    30,068
    
    
    
    4,556Deemed dividend on Series C convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    (1,779
    )
    
    
    (270
    )Net income attributable to Class A and Class B common
shareholders
    
    
    714
    
    
    
    109
    
    
    
    28,289
    
    
    
    4,286Undistributed income allocated to convertible preferred
shareholders
    
    
    
    
    
    
    
    
    
    
    (24,561
    )
    
    
    (3,721
    )Allocation of undistributed income for diluted net
income per Class A and Class B common share computation
    
    
    714
    
    
    
    109
    
    
    
    3,728
    
    
    
    565Reallocation of undistributed income as a result of
conversion of Class B to Class A common shares
    
    
    3,728
    
    
    
    565
    
    
    
    
    
    
    
    Net income attributable to Class A and Class B common
shareholders for computing diluted income per Class A
and Class B common share
    
    
    4,442
    
    
    
    674
    
    
    
    3,728
    
    
    
    565Denominator:Weighted average number of Class A and Class B common
shares outstanding for computing basic income per Class
A and Class B common share
    
    
    6,712,195
    
    
    
    6,712,195
    
    
    
    181,562,768
    
    
    
    181,562,768Conversion of Class B to Class A common shares
    
    
    181,562,768
    
    
    
    181,562,768
    
    
    
    
    
    
    
    Dilutive options
    
    
    28,084,300
    
    
    
    28,084,300
    
    
    
    
    
    
    
    Weighted average number of Class A and Class B common
shares outstanding for computing diluted income per
Class A and Class B common share
    
    
    216,359,263
    
    
    
    216,359,263
    
    
    
    181,562,768
    
    
    
    181,562,768Diluted income per Class A and Class B common share
    
    
    0.02
    
    
    
    0.00
    
    
    
    0.02
    
    
    
    0.00
 F-43




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 17(LOSS) INCOME PER SHARE (continued)
   F-44




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 18SHARE-BASED COMPENSATION
    Weighted-Weighted
    
    
    Average
    
    
    Weighted
    
    
    WeightedAverage Per
    
    
    Grant-Date
    
    
    Average
    
    
    AverageShare
    
    
    Fair Value
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Per Share
    
    
    Contractual
    
    
    ValueNumber of shares
    
    
    Price (US$)
    
    
    (US$)
    
    
    Term (years)
    
    
    (US$)Outstanding,
January 1, 2010
    
    
    34,923,850
    
    
    
    0.34
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    10,570,500
    
    
    
    1.05
    
    
    
    0.39
    
    
    
    
    
    
    
    Exercised
    
    
    (10,060,000
    )
    
    
    0.22
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    ( 2,610,750
    )
    
    
    0.40
    
    
    
    
    
    
    
    
    
    
    
    Outstanding,
December 31, 2010
    
    
    32,823,600
    
    
    
    0.60
    
    
    
    
    
    
    
    
    
    
    
    4.81Vested and
expected to vest at
December 31, 2010
    
    
    31,273,060
    
    
    
    0.58
    
    
    
    
    
    
    
    6.61
    
    
    
    4.83Exercisable at
December 31, 2010
    
    
    18,279,230
    
    
    
    0.31
    
    
    
    
    
    
    
    4.90
    
    
    
    5.10
 F-45




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 18SHARE-BASED COMPENSATION (continued)
     2008
    
    
    2009
    
    
    2010Expected volatility range
    
    
    76.3% - 76.4
    %
    
    
    74.5% - 77.8
    %
    
    
    70.5
    %Risk-free interest rate
    
    
    4.1% - 4.6
    %
    
    
    3.1% - 3.7
    %
    
    
    4.1
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Sub optimal early exercise factor
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.5
   2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Fulfillment
    
    
    469
    
    
    
    764
    
    
    
    1,096
    
    
    
    166Marketing
    
    
    105
    
    
    
    131
    
    
    
    233
    
    
    
    35Technology and content
    
    
    270
    
    
    
    479
    
    
    
    787
    
    
    
    119General and administrative
    
    
    1,519
    
    
    
    2,623
    
    
    
    8,184
    
    
    
    1,241
 F-46




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 19  RESTRICTED NET ASSETS
    F-47




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##### Table of Contents



E-COMMERCE CHINA DANGDANG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (RMB) and US Dollar (US$)
except for number of shares and per share data)
 Note 19  RESTRICTED NET ASSETS (continued)
   F-48