UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549










FORM 20-F

(Mark One)



| |  ̈ | REGISTRATION
                                                                                                                                STATEMENT
                                                                                                                                PURSUANT
                                                                                                                                TO
                                                                                                                                SECTION
                                                                                                                                12(b)
                                                                                                                                OR
                                                                                                                                (g)
                                                                                                                                OF
                                                                                                                                THE
                                                                                                                                SECURITIES
                                                                                                                                EXCHANGE
                                                                                                                                ACT
                                                                                                                                OF
                                                                                                                                1934
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

OR



| | x | ANNUAL
                                                                                                                            REPORT
                                                                                                                            PURSUANT
                                                                                                                            TO
                                                                                                                            SECTION
                                                                                                                            13
                                                                                                                            OR
                                                                                                                            15(d)
                                                                                                                            OF
                                                                                                                            THE
                                                                                                                            SECURITIES
                                                                                                                            EXCHANGE
                                                                                                                            ACT
                                                                                                                            OF
                                                                                                                            1934
                                                                                                                            for
                                                                                                                            the
                                                                                                                            fiscal
                                                                                                                            year
                                                                                                                            ended
                                                                                                                            December
                                                                                                                            31,
                                                                                                                            2011
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

OR



| |  ̈ | TRANSITION
                                                                                                                                REPORT
                                                                                                                                PURSUANT
                                                                                                                                TO
                                                                                                                                SECTION
                                                                                                                                13
                                                                                                                                OR
                                                                                                                                15(d)
                                                                                                                                OF
                                                                                                                                THE
                                                                                                                                SECURITIES
                                                                                                                                EXCHANGE
                                                                                                                                ACT
                                                                                                                                OF
                                                                                                                                1934
                                                                                                                                for
                                                                                                                                the
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





transition period from ________________
to ________________



OR



| |  ̈ | SHELL
                                                                                                                                COMPANY
                                                                                                                                REPORT
                                                                                                                                PURSUANT
                                                                                                                                TO
                                                                                                                                SECTION
                                                                                                                                13
                                                                                                                                OR
                                                                                                                                15(d)
                                                                                                                                OF
                                                                                                                                THE
                                                                                                                                SECURITIES
                                                                                                                                EXCHANGE
                                                                                                                                ACT
                                                                                                                                OF
                                                                                                                                1934
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date of event requiring this
shell company report ________________



Commission file number:001-33134



Yucheng Technologies Limited

(Exact name of Registrant as specified
in its charter)



Not Applicable

(Translation of Registrant’s name
into English)



British Virgin Islands

(Jurisdiction of incorporation or organization)



Beijing Global Trade Center, Tower D
, Floor 9, 36 North Third Ring Road East, Dongcheng District,
Beijing
100013, P.R. China

(Address of principal executive
offices)



Weidong Hong, Chief Executive Officer,
Tel: +86 10 5913 7700, Fax: +86 10 5913 7800

Beijing Global Trade Center, Tower D
, Floor 9, 36 North Third Ring Road East, Dongcheng District,
Beijing
100013, P.R. China

(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)



Securities registered or to be registered
pursuant to Section 12(b) of the Act:



|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Ordinary shares     | The NASDAQ Stock Market LLC              



Securities registered or to be registered
pursuant to Section 12(g) of the Act:

None



Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:

None



Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

18,941,417ordinary shares



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



 ̈  Yes     x  No



If this report is an annual or transaction
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

 ̈  Yes     x  No



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

x  Yes      ̈  No



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 c) Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).

 ̈  Yes       ̈  No



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 ̈  Large
Accelerated Filer     x  Accelerated Filer       ̈    Non-Accelerated
Filer



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing.



x  U.S.
GAAP       ̈  International Financial Reporting
Standards as issued by the International Accounting
Standards Board       ̈  Other



If “Other” has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.



 ̈  Item
17       ̈  Item 18



If this is an annual report, indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



 ̈  Yes      x  No



(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court.

 ̈  Yes       ̈  No











YUCHENG TECHNOLOGIES LIMITED



TABLE OF CONTENTS












|          |                                                                        | Page
|--------- | ---------------------------------------------------------------------- | ----
|          |                                                                        |     
|ITEM 1.   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                  | 7   
|ITEM 2.   | OFFER STATISTICS AND EXPECTED TIMETABLE                                | 7   
|ITEM 3.   | KEY INFORMATION                                                        | 7   
|ITEM 4.   | INFORMATION ON THE COMPANY                                             | 30  
|ITEM 4A.  | UNRESOLVED STAFF COMMENTS                                              | 54  
|ITEM 5.   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                           | 55  
|ITEM 6.   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                             | 80  
|ITEM 7.   | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                      | 89  
|ITEM 8.   | FINANCIAL INFORMATION                                                  | 91  
|ITEM 9.   | THE OFFER AND LISTING                                                  | 92  
|ITEM 10.  | ADDITIONAL INFORMATION                                                 | 94  
|ITEM 11.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK             | 105 
|ITEM 12.  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                 | 105 
|ITEM 13.  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                        | 105 
|ITEM 14.  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS               |     
|          | AND USE OF PROCEEDS                                                    | 105 
|ITEM 15.  | CONTROLS AND PROCEDURES                                                | 106 
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT                                       | 108 
|ITEM 16B. | CODE OF ETHICS                                                         | 108 
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                 | 108 
|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES             | 109 
|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 109 
|ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS                          | 109 
|ITEM 16G. | CORPORATE GOVERNANCES                                                  | 109 
|ITEM 17.  | FINANCIAL STATEMENTS                                                   | 109 
|ITEM 18.  | FINANCIAL STATEMENTS                                                   | 110 
|ITEM 19.  | EXHIBITS                                                               | 110 



- 2 -







Introduction



Unless otherwise
indicated, references in this annual report to:



| | · | “China”
                                                                                                                                 or
                                                                                                                                 “PRC”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 People’s
                                                                                                                                 Republic
                                                                                                                                 of
                                                                                                                                 China,
                                                                                                                                 excluding,
                                                                                                                                 for
                                                                                                                                 the
                                                                                                                                 purpose
                                                                                                                                 of
                                                                                                                                 this
                                                                                                                                 annual
                                                                                                                                 report
                                                                                                                                 only,
                                                                                                                                 Hong
                                                                                                                                 Kong
                                                                                                                                 SAR,
                                                                                                                                 Macau
                                                                                                                                 SAR
                                                                                                                                 and
                                                                                                                                 Taiwan.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “NASDAQ”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 NASDAQ
                                                                                                                                 Global
                                                                                                                                 Market.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Renminbi”
                                                                                                                                 or
                                                                                                                                 “RMB”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 legal
                                                                                                                                 currency
                                                                                                                                 of
                                                                                                                                 China.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “SEC”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 United
                                                                                                                                 States
                                                                                                                                 Securities
                                                                                                                                 and
                                                                                                                                 Exchange
                                                                                                                                 Commission.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Securities
                                                                                                                                 Act”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 Securities
                                                                                                                                 Act
                                                                                                                                 of
                                                                                                                                 1933,
                                                                                                                                 as
                                                                                                                                 amended.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Shares”
                                                                                                                                 or
                                                                                                                                 “ordinary
                                                                                                                                 shares”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 our
                                                                                                                                 ordinary
                                                                                                                                 shares,
                                                                                                                                 of
                                                                                                                                 no
                                                                                                                                 par
                                                                                                                                 value.  “USD”,
                                                                                                                                 “U.S.
                                                                                                                                 dollars”,
                                                                                                                                 “dollar”
                                                                                                                                 and
                                                                                                                                 “US$”
                                                                                                                                 refer
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 legal
                                                                                                                                 currency
                                                                                                                                 of
                                                                                                                                 the
                                                                                                                                 United
                                                                                                                                 States.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, unless
otherwise indicated, references in this annual report to:



| | · | “Yucheng”
                                                                                                                                 or
                                                                                                                                 “Yuxinyicheng”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 Yucheng
                                                                                                                                 Technologies
                                                                                                                                 Limited,
                                                                                                                                 as
                                                                                                                                 a
                                                                                                                                 whole
                                                                                                                                 or
                                                                                                                                 any
                                                                                                                                 portion
                                                                                                                                 thereof,
                                                                                                                                 unless
                                                                                                                                 expressly
                                                                                                                                 stated
                                                                                                                                 otherwise.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Beijing
                                                                                                                                 Sihitech”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 Sihitech
                                                                                                                                 Technology
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
                                                                                                                                 and,
                                                                                                                                 unless
                                                                                                                                 the
                                                                                                                                 context
                                                                                                                                 otherwise
                                                                                                                                 requires,
                                                                                                                                 its
                                                                                                                                 subsidiaries.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “China
                                                                                                                                 Unistone”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 China
                                                                                                                                 Unistone
                                                                                                                                 Acquisition
                                                                                                                                 Corporation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Easycon”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 Easycon
                                                                                                                                 Electronics
                                                                                                                                 Limited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “e-Channels”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 e-Channels
                                                                                                                                 Century
                                                                                                                                 Technology
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “e-Channels
                                                                                                                                 BVI”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Port
                                                                                                                                 Wing
                                                                                                                                 Development
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Fujie”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Shanghai
                                                                                                                                 Fujie
                                                                                                                                 Business
                                                                                                                                 Consulting
                                                                                                                                 Limited.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Fuyi”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Shanghai
                                                                                                                                 Fuyi
                                                                                                                                 Business
                                                                                                                                 Consulting
                                                                                                                                 Limited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Recency”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Chengdu
                                                                                                                                 Recency
                                                                                                                                 Technologies
                                                                                                                                 Limited.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Sihitech
                                                                                                                                 BVI”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Ahead
                                                                                                                                 Billion
                                                                                                                                 Venture
                                                                                                                                 Ltd.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Sunrisk”,“Yuxinhengsheng”or
                                                                                                                                 “Yuxinhengsheng
                                                                                                                                 Information
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 Yuxinhengsheng
                                                                                                                                 Information
                                                                                                                                 Technology
                                                                                                                                 Limited.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 3 -







| | · | “YuxinData”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Yuxin
                                                                                                                                 Data
                                                                                                                                 Technologies
                                                                                                                                 Co.,
                                                                                                                                 Limited.
                                                                                                                                 (Tianjin)
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 

| | · | “Elegon”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Chengdu
                                                                                                                                 ElegonInfotech
                                                                                                                                 Ltd.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Beijing
                                                                                                                                 Huazhi”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 SihitechHuazhi
                                                                                                                                 Consulting
                                                                                                                                 Service
                                                                                                                                 Co.,Ltd.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Hainan
                                                                                                                                 Baodaotong”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Hainan
                                                                                                                                 Baodaotong
                                                                                                                                 Technology
                                                                                                                                 Limited.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Tianjin
                                                                                                                                 Yuxinyicheng”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Tianjin
                                                                                                                                 YuxinyichengTechnologyLimited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Chengdu
                                                                                                                                 Yuxinyicheng”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Chengdu
                                                                                                                                 YuxinyichengTechnologyLimited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Xiamen
                                                                                                                                 Yucheng”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Xiamen
                                                                                                                                 YuchengTechnologyLimited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Yuxinyicheng
                                                                                                                                 Software”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 Yuxinyicheng
                                                                                                                                 Software
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Guangzhou
                                                                                                                                 Yuxinyicheng”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Guangzhou
                                                                                                                                 Yuxinyicheng
                                                                                                                                 Information
                                                                                                                                 TechnologyLimited.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Shanghai
                                                                                                                                 Sihitech”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Shanghai
                                                                                                                                 Sihitech
                                                                                                                                 Technology
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Shanghai
                                                                                                                                 Software”
                                                                                                                                 refers
                                                                                                                                 toShanghai
                                                                                                                                 Yuxinyicheng Software
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Yuxinyicheng Internet”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 BeijingYuxinyicheng Internet
                                                                                                                                 Technologies
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Yuchengxin”refers
                                                                                                                                 to
                                                                                                                                 Tianjin
                                                                                                                                 Yuchengxin
                                                                                                                                 Information
                                                                                                                                 Security
                                                                                                                                 Technologies
                                                                                                                                 Limited.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Yuxinbanke”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Zhejiang
                                                                                                                                 Yuxinbanke
                                                                                                                                 Information
                                                                                                                                 Technologies
                                                                                                                                 Limited.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “Beijing
                                                                                                                                 Software”
                                                                                                                                 refers
                                                                                                                                 to
                                                                                                                                 Beijing
                                                                                                                                 Sihitech
                                                                                                                                 Software
                                                                                                                                 Co.,
                                                                                                                                 Ltd.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | “we,”
                                                                                                                                 “us,”
                                                                                                                                 “our
                                                                                                                                 company,”
                                                                                                                                 “our,”
                                                                                                                                 “the
                                                                                                                                 Company”
                                                                                                                                 and
                                                                                                                                 “Yucheng”
                                                                                                                                 refer
                                                                                                                                 to
                                                                                                                                 Yucheng
                                                                                                                                 Technologies
                                                                                                                                 Limited
                                                                                                                                 and,
                                                                                                                                 unless
                                                                                                                                 the
                                                                                                                                 context
                                                                                                                                 otherwise
                                                                                                                                 requires,
                                                                                                                                 its
                                                                                                                                 subsidiaries
                                                                                                                                 and
                                                                                                                                 predecessors.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “Tier I banks” or “Top Four banks” refers to the four largest
    state-controlled banks in China, namely the Industrial and Commercial Bank of China, the Bank of China, China Construction
    Bank and the Agricultural Bank of China; “Tier II banks” or “Joint-Stock banks” refers to the other
    13 national commercial banks and policy banks in China; and “Tier III banks” or “SMBs” refers to small
    and mid-sized banks in China.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This annual report contains
statistical data relating to the banking industry in China that we obtained from various publications.  These publications
generally indicate that they have obtained their informationfrom sources believed to be reliable, but we do not guarantee the
accuracy and completeness of their information.  Although we believe that these publications are reliable, we have not
independently verified their statistical data.  The statistical data may not be comparable to similar statistics collected
for the industry in the United States or other countries.



Forward-Looking Information



This annual report contains
forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our
industry.  All statements other than statements of historical fact in this annual report are forward-looking statements.  These
forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,”
“anticipate,” “estimate,” “plan,” “believe,” “is /are likely to” or
other similar expressions.  The forward-looking statements included in this annual report relate to, among other things:



- 4 -







| | · | our
                                                                                                                                 goals
                                                                                                                                 and
                                                                                                                                 strategies,
                                                                                                                                 including
                                                                                                                                 how
                                                                                                                                 we
                                                                                                                                 effect
                                                                                                                                 our
                                                                                                                                 goals
                                                                                                                                 and
                                                                                                                                 strategies;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | our
                                                                                                                                 expectations
                                                                                                                                 for
                                                                                                                                 our
                                                                                                                                 future
                                                                                                                                 business
                                                                                                                                 development,
                                                                                                                                 business
                                                                                                                                 prospects,
                                                                                                                                 results
                                                                                                                                 of
                                                                                                                                 operations
                                                                                                                                 and
                                                                                                                                 financial
                                                                                                                                 condition;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | expected
                                                                                                                                 changes
                                                                                                                                 in
                                                                                                                                 our
                                                                                                                                 revenue
                                                                                                                                 composition,
                                                                                                                                 margins
                                                                                                                                 and
                                                                                                                                 certain
                                                                                                                                 costs
                                                                                                                                 or
                                                                                                                                 expenditures;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | our
                                                                                                                                 future
                                                                                                                                 contracting
                                                                                                                                 and
                                                                                                                                 pricing
                                                                                                                                 strategies
                                                                                                                                 or
                                                                                                                                 policies;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | our
                                                                                                                                 plans
                                                                                                                                 to
                                                                                                                                 expand
                                                                                                                                 our
                                                                                                                                 business
                                                                                                                                 operations
                                                                                                                                 and
                                                                                                                                 product
                                                                                                                                 offerings;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | competition
                                                                                                                                 from
                                                                                                                                 other
                                                                                                                                 providers
                                                                                                                                 of
                                                                                                                                 IT
                                                                                                                                 services
                                                                                                                                 and
                                                                                                                                 products;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | the
                                                                                                                                 time
                                                                                                                                 to
                                                                                                                                 develop
                                                                                                                                 and
                                                                                                                                 market
                                                                                                                                 new
                                                                                                                                 services
                                                                                                                                 and
                                                                                                                                 products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | PRC
                                                                                                                                 governmental
                                                                                                                                 policies
                                                                                                                                 relating
                                                                                                                                 to
                                                                                                                                 the
                                                                                                                                 business
                                                                                                                                 development,
                                                                                                                                 banking
                                                                                                                                 regulation
                                                                                                                                 and
                                                                                                                                 regulation
                                                                                                                                 of
                                                                                                                                 the
                                                                                                                                 financial
                                                                                                                                 services
                                                                                                                                 sector;
                                                                                                                                 and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | Other
                                                                                                                                 “forward-looking”
                                                                                                                                 information.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe it is important
to communicate our expectations to our stockholders.  However, there may be events in the future that we are not able
to predict accurately or over which we have no control.  The risk factors and cautionary language discussed in this
annual report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the
expectations in these forward-looking statements, including, among other things:



| | · | changing
                                                                                                                                 interpretations
                                                                                                                                 of
                                                                                                                                 generally
                                                                                                                                 accepted
                                                                                                                                 accounting
                                                                                                                                 principles;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | outcomes
                                                                                                                                 of
                                                                                                                                 government
                                                                                                                                 reviews,
                                                                                                                                 inquiries,
                                                                                                                                 investigations
                                                                                                                                 and
                                                                                                                                 related
                                                                                                                                 litigation;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | continued
                                                                                                                                 compliance
                                                                                                                                 with
                                                                                                                                 government
                                                                                                                                 regulations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | legislation
                                                                                                                                 or
                                                                                                                                 regulatory
                                                                                                                                 environments,
                                                                                                                                 requirements
                                                                                                                                 or
                                                                                                                                 changes
                                                                                                                                 adversely
                                                                                                                                 affecting
                                                                                                                                 the
                                                                                                                                 businesses
                                                                                                                                 in
                                                                                                                                 which
                                                                                                                                 we
                                                                                                                                 and
                                                                                                                                 our
                                                                                                                                 PRC
                                                                                                                                 operating
                                                                                                                                 companies
                                                                                                                                 are
                                                                                                                                 engaged;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | geopolitical
                                                                                                                                 events
                                                                                                                                 and
                                                                                                                                 regulatory
                                                                                                                                 changes;
                                                                                                                                 and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | the
                                                                                                                                 effect
                                                                                                                                 of
                                                                                                                                 world
                                                                                                                                 recession
                                                                                                                                 and
                                                                                                                                 declines
                                                                                                                                 in
                                                                                                                                 global
                                                                                                                                 and
                                                                                                                                 specific
                                                                                                                                 country
                                                                                                                                 GDP
                                                                                                                                 on
                                                                                                                                 the
                                                                                                                                 world
                                                                                                                                 financial
                                                                                                                                 sector
                                                                                                                                 and
                                                                                                                                 the
                                                                                                                                 Chinese
                                                                                                                                 economy.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These forward-looking
statements involve various risks, assumptions and uncertainties.  Although we believe that our expectations expressed
in these forward-looking statements are reasonable, we cannot giveassurance that our expectations will turn out to be correct.  Our
actual results could be materially different from and worse than our expectations.  Important risks and factors that
could cause our actual results to be materially different from our expectations are generally set forth in “Item 3. Key
Information — D. Risk factors” and elsewhere in this annual report.



- 5 -









The forward-looking
statements made in this annual report relate only to events or information as of the date on which the statements are made in
this annual report.  You should not place undue reliance on these forward-looking statements, and you should read these
statements in conjunction with the risk factors disclosed in “Item 3. Key Information — D. Risk factors” in
this annual report.



All forward-looking
statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.  Except to the extent required by applicable
laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances
after the date of this annual report or to reflect the occurrence of unanticipated events.



- 6 -







PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------



Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------



Not applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------



A.    Selected financial
data.



SELECTED CONSOLIDATED FINANCIAL DATA



The
following summary consolidated financial data for the three years ended December 31, 2011are derived from our audited
consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting
principles, or U.S. GAAP, and have been audited by BDO China Shu Lun Pan Certified Public Accountants LLP and BDO Limited,
independent registered public accounting firms.  The reports of BDO China Shu Lun Pan Certified Public Accountants
LLP and BDO Limited on those consolidated financial statements areincluded elsewhere in this annual report.  This
information is only a summary and should be read together with the consolidated financial statements, the related notes and
other financial information included in this annual report.  Our selected consolidated statement of operations data
for the two years ended December 31, 2007 and 2008 and our selected consolidated balance sheet data as of December 31, 2007,
2008 and 2009 have been derived from our audited consolidated financial statements, which are not included in this annual
report, and have been retrospectively adjusted for the adoption of the new accounting standards related to the presentation
and disclosure requirements for non-controlling interests and for the discontinued operations.



Yucheng Technologies
Limited, or Yucheng, was incorporated on November 17, 2005 as a subsidiary of China Unistone.  After completion of a
redomestication merger of China Unistone with and into Yucheng and the acquisition by Yucheng of Sihitech BVI and e-Channels BVI
on November 24, 2006, Yucheng became the holding company of our business.  Sihitech BVI was our predecessor from an
accounting perspective, and the purchase method of accounting was used in consolidating e-Channels BVI and China Unistone into
Sihitech BVI.



In
2010, Yucheng sold100% of the shares in its POS company to an unrelated party and the management team of the POS business to
permit Yucheng to focus on our core business of IT solutions for banks in China.



The POS business was reclassified
to discontinued operations for the year ended December 31, 2010, and the comparative figures for the years ended December 31,
2008 and 2009 were retrospectively reclassified to discontinued operations according to U.S. GAAP accounting requirements.Yucheng's
income statements data do not include the results of POS business, which has been reclassified to discontinued operations.



Revenues represented
in this section are net of business tax.



- 7 -







The following table
sets forth our selected consolidated statement of operationsdata.



|                                                                 |  |  | 2007                               |  |  |  | 2008    |  |  |  | 2009    |   |  |  | 2010    |  |  |  | 2011    | 
|---------------------------------------------------------------- |  |  | ---------------------------------- |  |  |  | ------- |  |  |  | ------- | - |  |  | ------- |  |  |  | ------- | 
|                                                                 |  |  | RMB                                |  |  |  | RMB     |  |  |  | RMB     |   |  |  | RMB     |  |  |  | RMB     | 
|                                                                 |  |  |                                    |  |  |  |         |  |  |  |         |   |  |  |         |  |  |  |         | 
|                                                                 |  |  | (in thousands, except percentages) | 
|                                                                 |  |  |                                    | 
|Revenues                                                         |  |  | 431,875                            |  |  |  | 662,197 |  |  |  | 354,470 |   |  |  | 403,644 |  |  |  | 489,110 | 
|Income(Loss) from operations                                     |  |  | 79,541                             |  |  |  | 89,988  |  |  |  | (9,205  | ) |  |  | 37,239  |  |  |  | 52,474  | 
|Income(Loss) from continuing operations                          |  |  | 75,946                             |  |  |  | 91,331  |  |  |  | (625    | ) |  |  | 31,436  |  |  |  | 36,940  | 
|Earnings
    per share(basic) from continuing operations         |  |  | 5.64                               |  |  |  | 5.21    |  |  |  | 0.14    |   |  |  | 1.84    |  |  |  | 2.17    | 
|Earnings
    per share(fully diluted) from continuing operations |  |  | 4.82                               |  |  |  | 4.89    |  |  |  | 0.14    |   |  |  | 1.80    |  |  |  | 2.16    | 



The following table
sets forth our selected consolidated balance sheet data.



|                                           |  |  | As of December 31, | 
|------------------------------------------ |  |  | ------------------ | 
|                                           |  |  | 2007               | 
|                                           |  |  | RMB                | 
|                                           |  |  |                    | 
|                                           |  |  | (in thousands)     | 
|Cash                                       |  |  | 222,494            | 
|Trade accounts receivable                  |  |  | 203,451            | 
|                                           |  |  |                    | 
|Total current assets                       |  |  | 572,304            | 
|                                           |  |  |                    | 
|Goodwill                                   |  |  | 169,362            | 
|                                           |  |  |                    | 
|Total assets                               |  |  | 821,747            | 
|                                           |  |  |                    | 
|Total current liabilities                  |  |  | 315,727            | 
|                                           |  |  |                    | 
|Total liabilities                          |  |  | 323,450            | 
|                                           |  |  |                    | 
|Stockholders' equity                       |  |  | 493,098            | 
|Total liabilities and stockholders' equity |  |  | 821,747            | 



- 8 -







EXCHANGE RATE INFORMATION



The following table
sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated.  These
rates are provided solely for investors’ reference and are not necessarily the exchange rates that are used in this annual
report or will be used in the preparation of our other periodic reports or any other information to be provided by the company.





|               |  | Period 
End            |        | Average(1) |  | High |        | Low
|-------------- |  | ---------------------- | ------ | ---------- |  | ---- | ------ | ---
|               |  | (Renminbi per USD1.00)
|               |  |                       
|2004 full year |  |                        | 8.2765 |            |  |      | 8.2768 |    
|               |  |                        |        |            |  |      |        |    
|2005 full year |  |                        | 8.0702 |            |  |      | 8.1936 |    
|               |  |                        |        |            |  |      |        |    
|2006 full year |  |                        | 7.8041 |            |  |      | 7.9723 |    
|               |  |                        |        |            |  |      |        |    
|2007 full year |  |                        | 7.2949 |            |  |      | 7.6058 |    
|               |  |                        |        |            |  |      |        |    
|2008 full year |  |                        | 6.8225 |            |  |      | 6.9477 |    
|               |  |                        |        |            |  |      |        |    
|2009 full year |  |                        | 6.8282 |            |  |      | 6.8314 |    
|               |  |                        |        |            |  |      |        |    
|2010 full year |  |                        | 6.6227 |            |  |      | 6.7668 |    
|               |  |                        |        |            |  |      |        |    
|2011 full year |  |                        | 6.3009 |            |  |      | 6.4445 |    
|               |  |                        |        |            |  |      |        |    
|July           |  |                        | 6.4442 |            |  |      | 6.4614 |    
|               |  |                        |        |            |  |      |        |    
|August         |  |                        | 6.3867 |            |  |      | 6.4090 |    
|               |  |                        |        |            |  |      |        |    
|September      |  |                        | 6.3549 |            |  |      | 6.3837 |    
|               |  |                        |        |            |  |      |        |    
|October        |  |                        | 6.3233 |            |  |      | 6.3562 |    
|               |  |                        |        |            |  |      |        |    
|November       |  |                        | 6.3482 |            |  |      | 6.3408 |    
|               |  |                        |        |            |  |      |        |    
|December       |  |                        | 6.3009 |            |  |      | 6.3281 |    
|               |  |                        |        |            |  |      |        |    
|2012           |  |                        |        |            |  |      |        |    
|               |  |                        |        |            |  |      |        |    
|January        |  |                        | 6.3115 |            |  |      | 6.3147 |    
|               |  |                        |        |            |  |      |        |    
|February       |  |                        | 6.2919 |            |  |      | 6.3000 |    
|               |  |                        |        |            |  |      |        |    
|March          |  |                        | 6.2943 |            |  |      | 6.3081 |    










|(1) | Averages for a period are calculated by using the average of the exchange rates on
    the end of each month during the period.  Monthly averages are calculated by using the average of the daily rates
    during the relevant period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Source: Federal Reserve Bank of New
York and the Bank of China



- 9 -







This annual report
contains translations of certain Renminbi amounts into U.S. dollar amounts at specified rates.  Translations from
Renminbi to U.S. dollars at certain specified date refers to the noon buying rate on that particular date in The City of New
York for cable transfers of Renminbi as certified for customs purpose by the Federal Reserve Bank of New
York.  Unless otherwise stated, the translations of Renminbi into U.S. dollars have been made based on the noon
buying rate on December 31, 2011, which was RMB6.3009 to USD1.00.  We make no representation that the Renminbi or
U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as
the case may be, at any particular rate or at all.  See “Item 3. Key Information — Risk factors —
Risks related to doing business in China — Any fluctuations in exchange rates could result in foreign currency exchange
losses” and “— Restrictions on currency exchange may limit our ability to receive and use our revenues or
financing effectively” for discussions on the effects of fluctuating exchange rates and currency control on the value
of our ordinary shares.  On March 31, 2012, the noon buying rate was RMB6.2943 to USD1.00.



The People’s Bank of China, or
the PBOC, issued a public notice on July 21, 2005 increasing the exchange rate of the Renminbi against the U.S. dollar by
approximately 2.0% to RMB8.11 per USD1.00.  Further to this notice, the PRC government has reformed its exchange
rate regime by adopting a managed floating exchange rate regime based on market supply and demand with reference to a
portfolio of currencies.  Under this new regime, the Renminbi is no longer pegged to the U.S.
dollar.  This change in policy has resulted in an approximate 22.4% appreciation of the Renminbi against the U.S.
dollar between July 21, 2005 and March 31, 2012.  The PRC government may decide to adopt an even more flexible
currency policy in the future, which could result in a further and more significant appreciation of the Renminbi against the
U.S. dollar,or adopt a more conservative currency policy which could effectively peg the RMB to the U.S. dollar.



B.    Capitalization and
indebtedness.



Not applicable.



C.    Reasons for
the offer and use of proceeds.



Not applicable.



D.    Risk factors.



RISKS RELATING TO OUR BUSINESS



We have a limited operating history as
a combined company, which makes evaluating our business and prospects difficult.



Our current business
was formed upon the consummation of a three-party acquisition on November 24, 2006 among Yucheng, Sihitech BVI, parent of Beijing
Sihitech, a company established in June 1999 that focused on providing system integration and other IT solutions and services,
and e-Channels BVI, parent of e-Channels, a company established in February 2001 that focused on providing multi-channel software
solutions and IT consulting services.  In addition, we have followed a business strategy of acquisitions and dispositions
during the years since we went public under which we acquired five companies in 2007 and have set up joint ventures and founded
other subsidiaries and acquired other companies since then.  See “Item 4. Information on the Company - A. History
and development of the Company.”  Our combined company has a limited operating history, which makes it difficult
to evaluate our historical financial results and business prospects.  Our future success depends on a successful integration
of all these companies and the capturing of opportunities presented by these acquisitions.  If we experience difficulties
in the integration process or are not able to take advantage of the perceived synergies between us and these companies, we may
not be able to expand our operations and revenues as expected.



In addition, our management
team has worked together for a relatively short period of time and it may be difficult to evaluate their effectiveness, on an
individual or collective basis, as well as their ability to respond to future challenges to our business, including their ability
to:



- 10 -









| | · | respond to increasing competitions in the industry;
| | - | ---------------------------------------------------



| | · | adapt to changing technologies;
| | - | -------------------------------



| | · | retain and expand our client base;
| | - | ----------------------------------



| | · | expand our solution and service offerings;
| | - | ------------------------------------------



| | · | manage our business expansions, including integration of past and future acquisitions;
| | - | --------------------------------------------------------------------------------------



| | · | manage risks associated with intellectual property;
| | - | ---------------------------------------------------



| | · | maintain effective control of our costs and expenses; and
| | - | ---------------------------------------------------------



| | · | attract, retain and motivate qualified personnel.
| | - | -------------------------------------------------



If we are unsuccessful
in addressing these challenges, our results of operations and business prospects may be materially and adversely affected.



We may not be able to sustain our rate
of revenue growth.



Our
revenue increased13.9% from RMB354.5 million in 2009 revenue to RMB403.6 million(USD60.9million) in 2010, and increased by
21.2% from the 2010 revenue to RMB489.1 million (USD77.6million) in 2011.  Our revenue growth and in particular the
growth from 2006 to 2007 was primarily enhanced by our merger with e-Channels BVI on November 24, 2006 and our acquisitions
of five companies in 2007.   Without the impact of these acquisitions, our growth rate during this period
would have been much lower.  In 2009 and 2010, we did not make any acquisitions, we may not be able to make
acquisitions with a similar scale, or at all, in future periods, or give assurance that our future acquisitions, if any, will
be able to provide the same level of synergy as our past acquisitions. In addition, our past growth reflected our
success in achieving market acceptance of our IT solutions and software and establishing market leadership in certain
segments of China’s financial IT services industry.  As we become a larger and more mature company, we may not be
able to sustain our recent rate of revenue growth in future periods. Additionally, the changing economic environment as a
result of the recent world recession and PRC government economic policy decisions may have an effect on our overall
growth.



- 11 -







We have been relying on, and are expected
to continue to rely on, a limited number of clients, in particular the various separate development centers and provincial branches
of China Construction Bank, for a significant proportion of our revenues.  Any loss of these clients could significantly
impact our future revenues, and materially and adversely affect our operational results and our financial condition.



China Construction Bank
is one of the largest banks in China and our largest user of our services, accounting in the aggregate for 34.0%,22.7% and 17.1%
of our revenues in 2009, 2010 and 2011, respectively. We provide solutions and services to different provincial branch offices
of China Construction Bank and to its head office.  Although the engagements with the branches and the head office are
under separate and independent contracts, certain individual accounts still historically account for a significant amount of revenue.  For
example, our largest account within China Construction Bank was with its head office, which accounted for 21.5%,14.3% and9.1%
of our revenues in 2009, 2010 and 2011, respectively.  Notwithstanding the separate legal treatment of the engagements,
a substantial failure to provide the contracted solutions and services under one of our agreements may result in a disruption
to our overall relationship with China Construction Bank.  Also, if China Construction Bank’s general IT spending
pattern and budget changes or decreases, it could adversely affect our ability to offer services andwin contracts from different
entities within the bank.  We have no long-term contracts with China Construction Bank or any of our major clients.  There
are no assurances that we will be able to continue to retain these clients, and that we will maintain or increase our current
level of business with them in the future.  If we lose any of these significant clients, or if any of them significantly
reduces their use of our solutions and services, we may not be able to find replacement revenue sources, thus materially and adversely
impacting our operating results and financial condition.  In addition, our current clients are primarily large national
commercial banks that possess significant negotiating and pricing power, and if they exert pricing pressure on us, we cannot guarantee
that we will be able to resist this pressure or find other replacement clients.  If we have to lower prices to maintain
our business with these clients, our profitability may be materially and adversely affected.



Fluctuations in our clients’ annual
IT budgets and spending cycles and other factors can cause our revenues and results of operations to vary significantly from quarter
to quarter and from year to year.



Our revenues and results
of operations will vary significantly from quarter to quarter and from year to year due to numerous factors, many of which are
outside of our control.  As substantially all of our revenues are derived from providing services on IT projects outsourced
from our banking clients in China, the amount of our revenues for any period is affected by the timing of our clients’ IT
projects, which in turn depends on their internal budgeting and planning process, over which we have no control.  Historically,
our banking clients have been awarding more projects in the third and fourth quarters as compared to the first and second quarters;as
a result, we generally record stronger revenues in the third and fourth quarters of each year.  In addition, our revenues
are generally the lowest in the first quarter of each year due to the Chinese New Year holiday.  Furthermore, the project
mix of any given period also significantly affects our gross margin and results of operations.  For example, if we record
a higher percentage of low margin hardware pass-through revenue as compared to higher margin software development revenue in a
given quarter, our gross margin will be negatively affected.  We may not be able to control the timing and types of
projects we undertake and the revenue we can record in a given quarter.



Due to the annual budget
cycles of most of our clients, we also may be unable to accurately estimate the demand for our Software & Solutions, which
could adversely affect our business planning.  Moreover, our results will vary depending on our clients’ business
needs from year to year.



Other factors that may
cause fluctuation of our quarterly and annual results include:



| | · | our ability to successfully develop, introduce and sell new or enhanced solutions in a timely
    manner;
| | - | ---------------------------------------------------------------------------------------------------------



| | · | the announcement or introduction of new or enhanced solutions by us or our competitors;
| | - | ---------------------------------------------------------------------------------------



| | · | any delays in the completion of our projects; and
| | - | -------------------------------------------------



| | · | the results of our acquisitions of, or investments in, other businesses or assets.
| | - | ----------------------------------------------------------------------------------



Due to these and other
factors, including factors discussed elsewhere in this “Risk factors” section, our results of operations may fluctuate
significantly from quarter to quarter and from year to year, and our results of operations for any period may not be indicative
of our performance in any future period.



- 12 -







In addition, we base
our operating budget, including research and development expenses, general and administrative expenses, and hiring of additional
personnel, in part on our expectations of future revenue.  If our revenues for a particular quarter are lower than we
expect, we may be unable to proportionately reduce our operating expenses for that quarter, which would harm our corresponding
results of operations.  If our results of operations in future quarters fall below the expectations of securities analysts
or investors, the market price of our shares will likely decline significantly.



Our business depends on the banking industry
in China, and changes within that industry could reduce demand for our solutions and services.  The recent growth of
China’s banking industry and IT spending by China’s banks may not continue, which would have a material adverse effect
on our results of operations and business prospects.



Substantially all of
our revenues have been derived, and are expected to continue to be derived from, solutions and services which we provide to banks
in China.  Our revenue growth in recent years has been driven in part by the growth in China’s banking industry,
which is a result of China’s rapid economic development and recent industry-wide reforms.  These combined changes
have greatly increased IT spending by China’s banks.  This growth may not continue at the same rate or at all.  Unfavorable
economic conditions, such as a slow-down in the global economic development led by the recent economic downturn, potential instability
in the global banking system and changing monetary policies in China, have and could continue to adversely impact China’s
economy and the growth of banks operating in China, which may in turn impact their IT expenditures.  Any decreases in,
or reallocation of, capital expenditures by our current and potential clients could have a material and adverse effect on our
business, financial conditions and results of operations.  In addition, to encourage potential growth in the Chinese
economy, the PBOC has adopted, and may continue to adopt, various macroeconomic measures that may encourage banks to lend more
and to riskier clients than in the recent past.  This could cause an increase in the non-performing loan rate, which
would materially impact bank profitability.  Finally, the PBOC may also impose monetary policies or interest rates that
may reduce the profitability of China’s banks.  Any reduction in profitability of China’s banks may reduce
their spending on IT, which may materially and adversely affect our business, financial condition and results of operations.



We may lose our clients and our financial
results may suffer if our clients change the decision-making body for their IT procurement or investment, merge with or are acquired
by other banks, develop their own in-house capabilities or fail to expand.



Many factors, including
those listed below, could affect our clients’ decisions relating to their IT outsourcing and our business relationship with
our clients:



| | · | Our clients may change the way they make IT spending decisions.  We
    derive a substantial majority of our revenues from providing IT solutions, software and services to China’s banks on
    a project-by-project basis, and client relationships play an important role in our ability to win projects from our clients.  We
    strive to build long-term relationships with our clients to increase our competitive advantage over other IT vendors.  We
    have recently observed a shift in the decision-making process for IT spending in China’s banks.  More decisions
    are being made at banks’ head offices, instead of provincial level branches, primarily due to centralization of customer
    data at the bank head offices.  Such a shift, or any other change of the decision maker in our clients, may result
    in the loss of business opportunities to competitors who have closer relationships than us with the new decision-making body
    within the bank.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Consolidation of our clients.  There is a continuing trend for financial
    institutions in China to consolidate.  Our clients may be acquired by other financial institutions and adopt the
    acquirer’s IT systems.  Also, as these institutions grow in size through consolidation, they may exert pricing
    pressure on vendors.  In addition, as restrictions against foreign ownership in the financial and insurance industries
    ease, more foreign investors may acquire stakes in or form strategic alliances with financial institutions in China, and may
    direct or influence management to use IT vendors recommended or favored by the investor, leading to the loss or reduction
    of our business with these existing clients.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 13 -







| | · | Our clients may decide to develop their IT solutions in-house.  Our clients
    may find it more cost-effective to invest in and develop their own in-house IT capacity rather than relying on third-party
    vendors, thereby reducing their purchases of our solutions and services.  For example, a banking client for which
    we designed the initial online banking platform decided to later conduct further online banking development in-house, and
    as a result, we were not able to renew our contract with such client.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our clients fail to expand.  The banking industry in China is becoming increasingly
    competitive.  Our clients may not successfully compete with their domestic and foreign competitors in the future.  If
    any of our key clients suffer reduced market share or their results of operations and financial condition are otherwise adversely
    affected, they may reduce their IT spending and change expansion plans for their IT systems, which in turn may materially
    and adversely affect our growth and results of operations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The occurrence
of any of these events may materially and adversely affect our business, financial condition and results of operations.



We are facing increasing competition in
the market for IT services in China’s banking industry, and if we fail to compete successfully, we may lose clients
and our revenues and profits may decline.



There is substantial
competition in the market for IT services in China’s banking industry, and the industry is characterized by frequent technological
changes, evolving industry standards and changing client demands.  We face competition from both China’s domestic
IT service providers, such as Digital China Holdings Limited, Global InfoTech Co., Ltd , HiSun Technology Holdings Ltd. and Client
Service International Inc., as well as global IT vendors, such as IBM Global Services and SAP AG.  See “Item 4.
Information on the Company — B. Business overview — Competition”.  Some of our competitors have longer
operating histories, larger clientele, more diverse service offerings, more extensive personnel and financial resources than we
do.  While new IT service providers may also enter the industry, we also compete with the IT departments of our existing
and potential clients, which may be capable of creating in-house solutions, thereby reducing the need for outside service providers.  We
expect competition to increase, and we cannot guarantee that we will successfully compete against our competitors.  Our
current or future competitors may develop or offer solutions or services that are comparable or superior to ours at a lower price.  In
addition, only some of our solutions and services are protected by intellectual property rights, and therefore, our competitors
may copy some of our technologies without incurring the associated research and development expenses, and sell their competing
products with lower cost, which could result in the loss of sales of our solutions and services.  If we fail to successfully
compete against our current and future competitors, our business, financial condition and results of operations may be materially
and adversely affected.



We undertake many of our projects on a
fixed-price basis.  If we underestimate our costs, or fail to control our costs in the implementation of the projects,
our gross margins and profitability may be materially and adversely affected.



We typically undertake
our client projects on a fixed-price basis where we charge a fixed price to the client based on our evaluation of the estimated
resources required to implement the project.  If we overestimate costs required for the project, our bid may become
uncompetitive and we may lose business as a result.  Conversely, if we underestimate the project costs, complexity or
scope of work to be done for the projects that we win, due to miscommunication with our clients or underestimation of technical
difficulties, or if we incur additional costs due to unforeseen conditions, such as appreciation of personnel cost or the existence
of software bugs, we will not be able to change the contract value or pass such additional costs to our clients.  As
a result, we may have a reduced gross margin from such projects or even suffer a loss, which would negatively affect our overall
gross margin and profitability.



- 14 -







We may be forced to reduce the prices
of our solutions and services due to increased competition, which could lead to reduced revenues and profitability.



We may be forced to
reduce the prices of our solutions and services in response to price-cutting strategies of our competitors, in particular in the
areas of labor intensive contracts with low requirements for proprietary solutions or know-how.  Many smaller financial
IT service companies depend on offering low prices to win these contracts.  We may not be able to respond to such competition
by controlling our costs, shifting to other service areas with higher margins or providing additional solutions and services or
enhancements to enable us to charge premium prices, and we may lose clients in these particular segments of our business if we
do not reduce our prices.  Any such reduction in prices may materially and adversely affect our business, financial
condition and results of operations.



Cancellelation of projects by customers
and the risk of recognizing the cost incurred for such circumstance could adversely affect our revenues and profitability.



From time to time, projects
on which we start work are cancelled. This may be because of change in client management, client budgetary constraints, client
strategy shifts, and other similar factors. We may not be able to, or for client relations reasons, want to seek reimbursement
for all of our costs incurred for projects cancelled by customers. If the unrecovered costs of cancellation are significant, our
revenues and profitability will be adversely affected.



Changes in technology could materially
and adversely affect our business by increasing our costs, reducing our profit margins and causing a decline in our competitiveness.



The markets for
our Software & Solutions change rapidly due to technological innovation, product introductions, declining prices and
evolving industry standards, among other factors.  New solutions and technology often render existing solutions and
services obsolete, excessively costly or otherwise unmarketable.  As a result, our success depends on our ability
to keep up with the latest technological progress and anticipate technological advances and to develop or acquire and
integrate new technologies into our Software & Solutions portfolio.  We cannot give assurances that we will be
able to keep our solutions and services competitive in the evolving market.  In addition, rapid advances in
technology also require us to commit substantial resources to researching, developing or acquiring new technologies and
deploying them into our operations, as well as to continuously train personnel in new technologies and in how to integrate
existing hardware and software systems with these new technologies.  Such research, development and training place
significant burden to our financial resources.  If we are not able to devote adequate resources to keep our
technologies competitive, our ability to effectively compete in the market may suffer as a result, which may materially and
adversely affect our business, financial condition and results of operations.



Our failure to retain existing clients
or changes in their continued use of our solutions and services will adversely affect our results of operations.



We
strive to establish strong, long-term client relationships, so that our clients will come back to us project after project.  For
many projects that we undertake with our clients, there are often subsequent phases as the client’s business develops and
their IT needs evolve, and we are typically engaged for the follow-on work.  Revenue from such follow-on projects is
a source of our repeating revenues.  Historically, such repeating revenues accounted for a significant portion of our
total revenues.  Whether our clients will come back to us for such follow-on projects depends on a number of factors,
including the quality of our work, the ease of use, reliability and price,clients’ IT strategy,as
well as the cost of switching to another service provider.  Our existing clients may decide not to engage us for follow-on
projects due to quality, our competitors’ aggressive pricing or the obsolescence of our solutions or other concerns.  In
addition, our clients may decide to delay system expansions, upgrades and improvements due to a change in their own growth, spending
patterns or IT budget.  Any material reduction in our repeat revenues may materially and adversely affect our business,
financial condition and results of operations.



Furthermore, we rely
in part on our ability to cross-sell new solutions and services to our existing clients to our share of wallet with each client.  For
our new clients, we typically provide one initial service component, such as a custom application development or the integration
of a new application with legacy IT systems.  Then we seek to use such initial client engagement as a foothold to understand
the clients’ IT needs and quickly build client relationships that will provide us with opportunities to demonstrate our
capabilities and value so that they may engage us for additional projects.  If we fail to satisfy our clients in one
product line, it may negatively impact our sales of other solutions and services to that client, which may materially and adversely
affect our future revenue growth.



- 15 -







We are expanding into other business areas
through joint ventures, such as Yuxin Data and Yuxinbanke. If we fail to manage the complexity of a joint venture, the business
of the joint venture may suffer and our financial condition and results of operations may be materially and adversely affected.



We established Yuxin
Data and Yuxinbanke with a third party partner to expand into new areas of business. The additional complexity of managing a
joint venture can be challenging. We cannot give assurance that we will be successful in our management of these joint
ventures or any other joint ventures that we may set up in the future.  Many factors, some of them are beyond our
control, could materially and adversely affect our ability to operate this business, or any other business we establish, on a
profitable basis. We will regularly assess our joint venture endeavors, and from time to time we may choose to exit from them
when they no longer fit our business strategy and profit objectives. Upon exit, we may not recover our investment.



We are diversifying into other sectors
of the financial services market, and seek to establish a presence in IT services for insurance and securities companies, with
which we have limited experience.



We are seeking to become
an IT service provider for a broad range of diversified financial service companies as the market characteristics and underlying
IT capabilities are similar to the banking industry.



In the past our clients
have been predominately banks in China.  As we expand into the insurance market, we may not be able to successfully
localize the software or understand the requirements of insurance companies. Although the market for IT solutions for insurance
companies is nascent and highly fragmented, there are already competitors in the space.  We may not be able to compete
in a cost effective manner or gain successful reference sites that will enhance our reputation in this field.  Our IT
solutions may also be outdated for these markets, before they are even brought to market, or we may not be able to develop appropriate
solutions.  In addition, we do not have significant experience with insurance solutions and will be facing additional
risks and uncertainties.  If we fail to manage and grow our service capabilities, in this or other business we undertake,
our business, financial condition and results of operations may be materially and adversely affected.



We are expanding our client base to include
an increasing number of SMBs, which subjects us to additional risks, such as uncertainties of future businesses and credit risks.



As
part of our effort to diversify our business and reduce our dependence on a limited number of banking clients, we have expanded
our client base to include SMBs.  However, we have limited experience doing business with these banks, and we cannot
give any assurance that our sales strategies will be successful in obtaining repeat business, such as later phase improvement
or expansion of the initial projects we undertake, from these clients as we are typically able to do with our larger clients,
such as the Top Four bank and Joint-Stock bank clients.  In addition, as compared to Top Four banks and Joint-Stock
banks, we have less understanding of SMBs’ budgeting process and their project awarding practicesdue to much larger
number of banks and diversified characteristics among them, which makes it more difficult for us
to predict future projects in order to allocate and plan our resources.   SMBs may not be as reliable as the Top Four
banks and Joint-Stock banks in making timely payments, which would subject us to additional credit risks.  If we cannot
successfully manage these risks, our business, financial condition and results of operations may be materially and adversely affected.



- 16 -







We may not be able to prevent others from
unauthorized use of our intellectual property, which could harm our competitive position and adversely affect our business and
prospects.



We rely on a combination
of patent, copyright and trademark laws, licensing agreements, confidentiality agreements, internal confidentiality policies and
other contractual provisions, as well as technical measures to protect our intellectual property rights.  We cannot
give assurance that PRC laws and our measures will be adequate to protect our intellectual property.  PRC laws are still
developing in this area and the enforcement of such rights at the judicial level is highly uncertain and may not be as effective
as in the United States or other countries.  We may not be able to deter competitors from copying our technology, reverse-engineering
our solutions, or otherwise infringing on our intellectual property rights.  To protect our trade secrets and other
proprietary information, our employees, consultants, advisors and collaborators are required to enter into confidentiality agreements.  There
can be no assurance that these agreements will provide meaningful protection in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.  We hold registered rights covering
certain aspects of our technology, in particular software solutions, but it is uncertain how much protection such registrations
provide us.  We have 2 patents and 192 copyrights in China; however the protection is limited and may not sufficiently
protect our intellectual property rights.   If we fail to protect our intellectual property and technology, or
if our competitors independently develop technologies that are substantially equivalent or superior to our technology, our competitiveness
may be adversely affected, which may materially and adversely affect our business and prospects.



Furthermore, if we believe
third parties have infringed our intellectual property and other proprietary rights, we may have to resort to litigation to enforce
our intellectual property and proprietary rights.  Intellectual property litigation is expensive and time-consuming.  Litigation
may also cause significant diversion of company resources and management attention, cause disruptions in our daily operations,
prove to be unsuccessful, and result in our intellectual property rights being held invalid or unenforceable, all of which could
materially and adversely affect our business, financial conditions and results of operations.



If we infringe on third-parties’
intellectual property rights, we could be required to cease offering the infringing solutions, redesign those solutions or enter
into license agreements and pay royalties, any of which could have an material adverse impact on our business, financial condition
and results of operations.



There can be no assurances
that a third party will not assert that our solutions and services violate their intellectual property rights.  Intellectual
property laws are not fully developed in China, and there may be significant uncertainties in the scope and enforceability of
intellectual property rights a company holds.  As the number of solutions offered by Yucheng and our competitors increase
and the functionality of these solutions further overlaps, intellectual property related litigation in our industry may increase.  Our
competitors may claim that our solutions and services infringe their intellectual property rights and initiate litigation against
us.



Any such claims, whether
with or without merit, could be expensive and time consuming to defend, cause significant diversion of our management’s
time and our resources, disrupt our daily operations and damage our reputation.  If we are found by a competent court
to have infringed third parties’ intellectual property rights, we may be required to:



| | · | pay damages to the owner of the technology that we are found to infringe, which could be substantial;
| | - | -----------------------------------------------------------------------------------------------------



| | · | cease making, selling or using solutions that incorporate the infringed intellectual property;
| | - | ----------------------------------------------------------------------------------------------



| | · | redesign our solutions around the infringed intellectual property, which may not be feasible;
    and
| | - | -----------------------------------------------------------------------------------------------------



| | · | enter into licensing agreements and pay royalties in order to obtain the right to use necessary
    technologies.
| | - | -----------------------------------------------------------------------------------------------------------------



- 17 -







Any such litigation
and the judgment of any of these remedies may materially and adversely affect our business, financial condition and results of
operations.



We may be subject to intellectual property
infringement claims from our clients, which may force us to incur substantial legal expenses and, if the claim is upheld against
us, may materially and adversely affect our business, financial condition and results of operations.



The majority of our
contracts involving custom-designed software solutions provide that our clients own the intellectual property rights to software
solutions developed under these contracts, and we are not permitted to use such intellectual property.  We only retain
our proprietary rights to the methodologies, algorithms or patents that we use in the development of the custom-designed software
solutions.  In addition, most of these contracts are silent as to whether we can make improvements on such custom-designed
solutions and commercialize such improvements.



As a result of these
contract provisions, we may be subject to intellectual property infringement claims by our clients.  It may be difficult
to distinguish which part of the software that we developed for our clients represents our proprietary rights, and it is also
not clear whether we have rights to make improvements on the software or part of the software that we developed for our clients.  If
our clients initiate intellectual property claims against us, we may have to incur substantial legal expenses, which may also
divert significant management attention and company resources, damage our client relationships and disrupt our normal business
operations.  In addition, we may not be successful in defending against such litigation.  If we are found
to have violated our clients’ intellectual property rights, we could be forced to pay licensing fees or be enjoined from
using the related intellectual property and forced to develop and utilize alternatives.  Such a finding could also result
in substantial monetary liabilities, harm our reputation, cause a decline in our sales and negatively affect our client relationships,
all of which may materially and adversely affect our business, financial condition and results of operations.  One successful
claim may also bring a cascade of other similar claims, which may further exacerbate the material adverse effect of such litigation
on our business, financial condition and results of operations.



Our intellectual property indemnification
practices may materially and adversely impact our business.



We have agreed to defend
many of our clients at our own cost for any third-party intellectual property claims filed against them arising from the solutions
and services we furnished them, and indemnify them for any damages of intellectual property infringement.  This practice
may subject us to significant litigation costs and indemnification claims by our clients.  We cannot assure that third-parties
will not pursue such claims, which may materially and adversely affect our business, financial condition and results of operations.



We rely on selected third-party technologies
and third-party suppliers for hardware equipment and software applications for our Platform & Maintenance Services.  If
we are not able to obtain the needed items, our business could be materially and adversely affected.



We depend on the availability
of the necessary hardware equipment and software applications from third-parties for our Platform & Maintenance Services.
We have established business relationships with selected suppliers. We cannot assure that these vendors/distributors will continue
to offer needed hardware or software solutions, continue their relationships with us or provide us their products at reasonable
prices. In such an event, we may not be able to secure alternative suppliers or procure hardware equipment and software applications
at a reasonable cost. In addition, even if we are able to obtain replacement third-party products in a timely manner, our solutions
may not properly interface or interoperate with their hardware or software solutions, which may result in delays and client dissatisfaction,
or even result in contractual breaches with our clients. We may be unable to develop an alternative solution on a timely basis
or at a reasonable cost to circumvent the lack of products from third parties. Our failure or inability to acquire alternative
third-party products or develop alternative solutions on a timely basis or at a reasonable cost may subject us to contract liability
and our relationship with our clients may be negatively affected, which may materially and adversely affect our business, financial
condition and results of operations.



- 18 -







We may be unsuccessful in identifying
and acquiring suitable acquisition candidates or fail to complete acquisitions, which could adversely affect our growth.



We have grown in the
past partly through selective acquisitions.  Through these acquisitions we expanded our revenue sources, added new solutions
or services, acquired new clients and obtained qualified personnel, all of which complemented our organic growth.  We
plan to continue to pursue selective acquisitions of high-quality financial IT services companies to further our future growth.  However,
we may not be able to identify suitable future acquisition candidates or complete such acquisitions on terms commercially acceptable
to us, which may impair our ability to effectively or efficiently implement our growth strategies.  In addition, identifying
acquisition targets, due diligence and negotiations all require significant management attention and diversion of our resources.  If
we fail to successfully complete acquisitions after spending significant management time and company resources, our business,
financial condition and results of operations could be materially and adversely affected.



We face risks in connection with the acquisition
of businesses.  If we fail to manage these risks, our financial condition and results of operations may be adversely
affected.



We face risks in connection
with the acquisition of businesses.  These risks include:



| | · | difficulties integrating acquired businesses and retaining necessary personnel to run such businesses;
| | - | ------------------------------------------------------------------------------------------------------



| | · | entry into unfamiliar markets;
| | - | ------------------------------



| | · | unforeseen or hidden liabilities;
| | - | ---------------------------------



| | · | need for financial resources beyond our planned levels;
| | - | -------------------------------------------------------



| | · | inability to generate sufficient revenues and profits to offset acquisition costs;
| | - | ----------------------------------------------------------------------------------



| | · | failures in realizing anticipated synergies; and
| | - | ------------------------------------------------



| | · | potential loss of or harm to relationships with employees and clients resulting from our integration
    of the acquired businesses.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



Any of these risks may
derail the success of our acquisitions.  As a result, we may not realize the benefit we anticipated while incurring
significant costs, and our business, financial condition and results of operations may be materially and adversely affected.



If we are not able to retain our senior
management team and critical staff members, and recruit quality personnel as we expand, our business and prospects will be adversely
affected.



We depend on our ability
to retain and recruit qualified personnel, including senior management and other key staff members.  The available talent
pool, especially the more senior and experienced pool, in China is limited and competition is intense.  We depend on
our senior management team for their industry knowledge and experience as well as their relationships with existing clients.  If
we lose the service of any member of our senior management team, we may not be able to find a suitable replacement in a timely
manner or at all.  Even if we are able to find a replacement, it will take time for the new person to be integrated
into our business.  Furthermore, the ability to successfully complete client engagements depends on a trained, knowledgeable
and stable staff, such as skilled engineers and project managers.  As we continue to grow, we need additional qualified
staff to carry out our additional business projects, as well as other aspects of our business, such as sales and marketing, research
and development andaccounting. If we are not able to retain our senior management team, recruit quality personnel as we expand,
or provide appropriate training, career opportunities and otherwise motivate and retain our qualified employees, our business,
financial condition and results of operations may be materially and adversely affected.  In addition, although we have
non-competition provisions in our employment agreements with our management and key personnel, we cannot be certain that these
provisions will not be breached and that they will be enforceable in a PRC court.  If our management and key personnel
join our competitors or form competing businesses, our competitive position and business prospects may be materially and adversely
affected.



- 19 -







Increases in wages for IT professionals
will increase our costs and our gross margins and profit margins may be adversely affected.



Historically, wages
for comparably skilled technical personnel in China’s IT services industry have been lower than in developed regions, such
as in the U.S. or Europe.  However, in recent years, due to rapid economic development, and intense competition for
qualified IT professionals and general inflation, wages in China’s IT services industry have increased. Wages may continue
to increase at even faster rates considering the recent government initiatives to increase the incomes of laborers to narrow the
income gaps between rich and poor.  In addition, we may be required to implement wage increases by the relevant labor
bureaus’ guidelines, such as our average 7.9% wage increase in early January2011.  Our personnel cost accounted
for 60.4%,62.3% and 67.8% of our cost of revenues for Software & Solutions and Maintenance Services in 2009, 2010 and 2011,
respectively.  Although we were able to increase productivity to counter the increase in our IT personnel costs, we
cannot assure you that we will be able to achieve these or comparable cost savings in the future.  If we experience
significant increases in wages for IT professionals, our cost of revenues will increase significantly, which could materially
and adversely affect our gross margin and results of operations.



We provide warranties on third-party hardware
and software that we procure for our clients.  We may incur substantial costs, if our clients file a significant number
of warranty claims against us for such third-party hardware and software, and if those claims either exceed the scope of the warranties
that the manufacturers or their agents have contracted to provide to us, or if such manufacturers or their agents do not honor
their contract warranties.



Through our Platform
& Maintenance Services, we assist clients with the procurement and installation of third-party hardware and software which
best meets their system requirements.  For the individual components, we typically provide warranties similar in scope
to the warrants covered by the manufacturers.  However, we are generally responsible for the maintenance and service
of the entire system, and will act on behalf of our clients to obtain manufacturer warranted services.  Most of our
contracts do not have disclaimers or limitations on liability for special, consequential and incidental damages, nor do we limit
the amount recoverable for damages.  If our clients file a significant number of warranty claims against us for such
third-party hardware or software, we cannot be certain that the original manufacturers’ warranties will be fulfilled and
that the costs incurred will be sufficiently cover.  The warranties obtained from such manufacturers may not cover the
entire warranty claims, or the manufacturers may refuse to honor their contract warranties.  As a result, we may be
liable for damages, which could materially and adversely affect our financial condition and results of operations.



Many of our contracts with clients permit
termination by our clients as their IT requirements change, or if our performance is not consistent with the quality and other
standards specified in those contracts.  Any termination of contracts may materially and adversely affect our business,
results of operations and financial condition.



Many of our client contracts
can be terminated by our clients as their IT requirements change, and without penalty. There are a number of factors relating
to our clients that are outside of our control which might lead them to terminate a contract or project with us, including a change
in financial condition, mergers and acquisitions or significant corporate restructurings. The ability of our clients to terminate
contracts creates an uncertain revenue stream. Furthermore, many of our contracts provide that our client may terminate the contract
if we fail to meet a specified timetable or fail to achieve certain quality or other standard. If our contracts are terminated
due to this reason, in addition to the lost revenue and incurrence of penalties, our industry reputation may suffer. Any significant
contract termination, especially if unanticipated, could have a negative impact on our business, financial condition and results
of operations.



- 20 -







We may be subject to significant contract
liabilities, if we fail to complete client projects on time, or if we fail to provide required level of services under our maintenance
contracts.



Many of our client contracts
require us to complete the projects in a certain timeframe and some also impose interim milestones. We cannot make assurances
that we will always be able to complete our client projects on time or meet all the interim milestones. A number of reasons may
result in delay of our client projects, such as unforeseen bugs, technical difficulties or lack of sufficient software engineers.
Some of these factors are beyond our control. If we fail to meet the deadlines or milestones specified in the timetable, we may
be subject to contractual penalties, such as significant late fees, and the client may have the right to terminate the contract
and require us to compensate them for any loss they incurred due to our delay. If this happens, our reputation, client relationships
as well as our business, financial condition and results of operations may be materially and adversely affected.



In addition, some of
our client contracts require us to keep the client’s system in operation and are subject to contractual liabilities if the
client’s system breaks down for more than a specified period of time.  If we fail to properly maintain the client system,
or fail to fix system disruptions in a timely manner, we may breach such contracts and be subject to contractual liabilities,
which could also materially and adversely affect our client relationships as well as our business, financial condition and results
of operations.



Our solutions use internally developed
technology and third-party products, any of which may contain errors and bugs, which may require us to spend additional time and
incur additional expenses to correct.  These errors and bugs may also cause breaches in our service agreements and require
us to pay damages to our clients.



Our solutions may
contain undetected errors, defects or bugs that may or may not be correctable.  Our solutions also involve
integration with products and systems developed by third-parties.  Complex third-party software programs may
contain undetected errors or bugs when they are first introduced or as new versions are released. Because we cannot test our
existing or future solutions or third-party products upon which our solutions are dependent for all possible scenarios, our
solutions may contain errors which are not discovered until after they have been installed and we may not be able to correct
these problems on a timely manner. We may be required to devote resources and incur significant expenses to detect and
correct such errors and bugs, and we cannot guarantee that all of these errors or bugs can be corrected. These errors and
bugs may also result in delays in project completion, loss of our solutions market share, injury to our reputation and damage
our relationship with our clients. Furthermore, these errors or bugs may significantly impair their intended use and subject
us to liabilities, which may require us to pay damages, which may adversely affect our client relationships as well as our
business, financial condition and results of operations.



We may experience system failures, which
could hurt our business reputation, and subject us to contract liability to our clients for the interruption in service. Our computer
networks may be vulnerable to security risks that could materially and adversely affect our results of operations and subject
us to liability.



Our operations depend
on our ability to protect our systems from interruptions caused by damage from fire, earthquake, power loss, telecommunications
failure, unauthorized access, computer hackers, computer viruses, software malfunction or other events beyond our control. We
currently back-up data only relating to certain systems, such as financial, human resource and emails, and do not have sufficient
backup facilities to provide full system services, if the primary facility is not functioning. We currently do not have an offsite
disaster recovery system. In the event of major disasters, both primary and backup locations could be adversely impacted. We could
also experience system interruptions due to the failure of our systems to function as intended, such as the failure of the systems
relied upon to deliver online banking services or the failure of the interaction of our systems with other systems and networks
of our clients or other third parties. Loss of all or part of the systems for a period of time could have a material adverse effect
on our business reputation, financial condition and results of operations.



- 21 -







Our computer networks
may be vulnerable to unauthorized access, computer hackers, computer viruses and other security problems caused by unauthorized
access to, or improper use of, systems by third parties or employees. A hacker who circumvents security measures could misappropriate
proprietary information or cause interruptions or malfunctions in operations. Although we intend to continue to implement security
measures, computer attacks or disruptions may jeopardize the security of information stored in and transmitted through computer
systems of our clients. Actual or perceived concerns that our systems may be vulnerable to such attacks or disruptions may deter
banks and consumers from using our solutions or services. As a result, we may be required to expend significant resources to protect
against the threat of these security breaches or to alleviate problems caused by these breaches.



Data networks are also
vulnerable to attacks, unauthorized access and disruptions. For example, in a number of public networks, hackers have bypassed
firewalls and misappropriated confidential information. It is possible that, despite existing safeguards, an employee could divert
our clients’ funds, exposing us to a risk of loss or litigation and possible liability. Losses or liabilities that are incurred
as a result of any of the foregoing may materially and adversely affect our business, financial condition and results of operations.



Our business benefits from certain government
incentives. Expiration, reduction or discontinuation of, or changes to, these incentives will increase our operating expenses
and tax burden and reduce our net income.



The
PRC government has provided various incentives to domestic companies in the software industry in China in order to encourage developmentand growthof the industry. Many of our PRC subsidiaries have historically received technology
subsidies, business tax exemptions, value-added tax, or VAT, refunds and preferential income tax treatments. For example, some
of our PRC subsidiaries enjoyed reduced enterprise income tax at the applicable rate of 15% on taxable profits in China, as compared
to the statutory rate (33% prior to 2008 and 25% thereafter) and/or tax holidays due to their status as a foreign-invested enterprises,
software enterprises or high-tech enterprises situated in certain locations. Our tax savings from these preferential income tax
treatments amounted to RMB5.6 million, RMB9.3 million and RMB16.2 million (USD2.6million) in 2009, 2010 and 2011, respectively.
See “Item 5. Operating and Financial Review and Prospects — A. Operating results — Income taxes.” In addition,
due to our status as Software Enterprise in the high-tech industry, we received technology subsidies, VAT refunds, business tax
refunds and other benefits in the amount of RMB4.4 million, RMB5.4million and RMB11.8million (USD1.9million) respectively, in
2009, 2010 and 2011. See “Item 5. Operating and Financial Review and Prospects — A. Operating results — Operating
expenses — General and administrative expenses.” The PRC government may reduce or eliminate these incentives at any
time in the future. Additionally, in order to continue to qualify for some of these incentives, we are required to meet stringent
requirements on research and development activities and on our gross revenues.



On March 16, 2007, the
PRC National People’s Congress passed the PRC Enterprise Income Tax Law, or the New EIT Law, and in December 2007 the PRC
State Council issued implementation rules under the New EIT Law, both of which became effective on January 1, 2008. Under the
New EIT Law and its implementation rules, a unified enterprise income tax rate of 25% and unified tax deduction standards will
be applied equally to both domestic-invested enterprises and foreign-invested enterprises, but it repealed most of the existing
preferential tax treatments, including the preferential tax rates and the tax holidays. The New EIT Law provides a five-year transition
period that allows enterprises that enjoyed certain preferential tax treatment under the old enterprise income tax regime to gradually
transition to the 25% statutory rate in a prescribed fashion. According to a notice issued by the PRC State Council, for enterprises
that enjoyed preferential income tax rate of 15% pursuant to certain prior tax rules or regulations specified in the notice, the
applicable enterprise income tax rate will increase to 18% for 2008, 20% for 2009, 22% for 2010, 24% for 2011 and 25% for 2012
and thereafter. For tax holidays specified in the notice, enterprises already enjoying such holidays prior to January 1, 2008
can generally continue to enjoy such tax holidays until their expiration, upon which time the 25% tax rate will apply. All other
preferential tax treatments have generally terminated on December 31, 2007. Due to the application of the New EIT Law and its
implementation rules, certain of our subsidiaries may no longer be able to enjoy any preferential income tax treatment, and certain
others may need to pay higher transitional income tax rates starting January 1, 2008. As a result, we expect our effective income
tax rate to gradually increase from our 2009 level, which may materially and adversely affect our financial condition and results
of operations.



- 22 -







We may incur losses due to business interruptions
resulting from the occurrence of natural catastrophes, acts of terrorism or fires, and we have limited insurance coverage.



Insurance companies
in China offer limited business insurance products and we currently do not have insurance against business interruptions. Should
any natural catastrophes, such as earthquakes, floods, typhoons, fire or any acts of terrorism occur in China that affect our
operations, we might suffer not only significant property damages, but also the loss of revenue due to interruptions to our business
operations, which could have a material adverse effect on our business, financial condition or results of operations. In addition,
we do not have any key personnel insurance to cover any losses we may suffer due to any loss of our senior management and other
key personnel. In any such event, we may incur additional costs, which could materially and adversely affect our financial condition
and our results of operations.



Any health epidemics and other outbreaks
could severely disrupt our business operations.



Our business could be
materially and adversely affected by the outbreak of a health epidemic or pandemic. Any prolonged occurrence of a health crisis,
such as severe acute respiratory syndrome, influenza or other adverse public health developments in China could require the temporary
closure of our offices or prevent our staff from traveling to our clients’ offices to provide on-site services. Such closures
could severely disrupt our business operations and materially and adversely affect our business, financial condition and results
of operations.



RISKS RELATED TO DOING BUSINESS IN CHINA



Adverse changes in China’s political
and economic policies, including its policy of reforming its economic system, could have a material adverse effect on the growth
of private businesses in China, such as ours.



All of our operations
are conducted in China and all of our sales are made in China. Accordingly, our business, financial condition and results of operations
are significantly affected by economic, political and legal developments in China. Since the late 1970s, China has been reforming
its economic system and changing from a planned economy based on governmental dictates and priorities to one that uses market
forces to influence deployment of economic resources, labor and capital and to determine business endeavors. It is impossible
to predict whether or not the government will continue to encourage economic liberalization and further release its control over
the economy and encourage private enterprise. We also cannot predict the timing or extent of future economic reforms that may
be proposed. Any re-imposition of planned economy regulation or similar kinds of restrictions could reduce the freedom of private
businesses to operate in a profitable manner, restrict inflows of capital or stifle investor willingness to participate in China’s
economy. Any adverse change in the economic conditions or government policies in China could have a material adverse effect on
overall economic growth, which in turn could lead to a reduction in demand for our solutions and services and consequently have
a material adverse effect on our business. Moreover, to the extent we need additional capital; any restrictions on foreign ownership,
foreign investment and repatriation of profits will hamper our ability to find capital outside of China.



- 23 -







Tight credit policies seen to have
succeeded in cooling economic growth gradually in 2011, and the growth in 2012 is not expected to be robust. Given the
uncertain economic visibility, banks may be more conservative when it comes to upgrading or expanding their IT capabilities,
any reduction in IT spending by banks may affect our sales, which could materially and adversely affect our business,
financial condition and results of operations.



The rapid growth
of China’s economy after the global economic recession has resulted in higher levels of inflation. China’s consumer
price index increased 3.3% and 5.4% in the full year of 2010 and 2011, and the government has initiated a number of monetary policies
to control the potential overheating of the economy and high inflation. As part of such measure, the People’s Bank of China,
or PBOC, China’s central bank, has increased the statutory deposit reserve ratiosix times in 2010 and seven times in 2011.In
addition, PBOC increased interest rates two times in 2010 and three times in 2011. Tight credit policies seem to have succeeded
in cooling economic growth gradually in 2011, and the growth outlook for 2012 is not very positive. It is possible that the government
will loosen policy and enact stimulus measures in 2012, such as, the PBOC decreasing the statutory deposit reserve ratio, as it
did in February 2012, but it is anticipated the scale of the boost provided will be smaller than earlier. Given the uncertain
economic visibility, banks may be more conservative when it comes to upgrading or expanding their IT capabilities, any reduction
in IT spending by banks may affect our sales, which could materially and adversely affect our business, financial condition and
results of operations.



PRC laws and other conditions may limit
our ability to make dividend payments to our shareholders.



We are a holding company
in the British Virgin Islands, or the BVI. We rely on our PRC subsidiaries to provide us with cash flow and to meet our other
obligations, including paying dividends to our shareholders. Relevant PRC laws and regulations permit payment of dividends by
a PRC subsidiary only from accumulated distributable profits, if any, determined in accordance with PRC accounting standards and
regulations, and only after setting aside at least 10% of its current year profits (up to an aggregate amount equal to half of
its registered capital). See “Item 8. Financial Information — A. Consolidated statements and other financial information
— Dividend policy.” The PRC tax authorities may initiate changes in determining income of our PRC subsidiaries that
would further limit their ability to pay dividends and make other distributions to us. It is therefore possible that our PRC subsidiaries
will not have any distributable profit to pay us, even if they are profitable under U.S. GAAP.



In addition, although
PRC law currently allows enterprises owned by foreign investors to remit their profits, dividends and bonuses earned in China
to other countries, and the remittance does not require prior approval by the State Administration of Foreign Exchange, or SAFE,
we cannot assure you such policy will not change. SAFE regulations require extensive documentation and reporting, some of which
is burdensome and slows payments. If there is a return to payment restrictions and reporting, it may also adversely affect the
ability of our PRC subsidiaries to distribute their profits to us. Furthermore, if any of our PRC subsidiaries incurs debt on
its own behalf in the future, the instruments governing the debt may also restrict their ability to pay dividends or make other
payments to us. Any limitation on our subsidiaries’ ability to distribute dividends to us may adversely affect our ability
to pay dividends to our shareholders.



Any fluctuations in exchange rates could
result in foreign currency exchange losses.



Our operating subsidiaries
are all located in China and our functional currency is Renminbi, and we are subject to fluctuations of the exchange rate between
the Renminbi and the U.S. dollar. PBOC sets and publishes daily a base exchange rate between the Renminbi and the U.S. dollar.
Beginning on July 21, 2005, PBOC has set this rate with reference primarily to the supply and demand of Renminbi against a basket
of currencies in the market during the prior day, taking into account other factors such as the general conditions existing in
the international foreign exchange markets, as compared to an exchange rate pegged to the U.S. dollar before such date. As a result,
from July 21, 2005 to March31, 2012, the Renminbi appreciated approximately 22.4% against the U.S. dollar. There is increasing
international pressure for the PRC government to further loosen its control of the foreign exchange rate to allow a faster appreciation
of the Renminbi.



Because our earnings
and cash from operations are denominated in Renminbi, fluctuations in exchange rates between the U.S. dollar and the Renminbi
will affect our balance sheet and earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of
the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect
to any underlying change in our business or results of operations. Furthermore, fluctuations in the exchange rate could affect
the relative value of any dividend we issue, which will be exchanged into U.S. dollars, as well as the value of any U.S. dollar
denominated investments we make in the future and any earnings on such investments. The value in Renminbi in terms of our financing
activities denominated in U.S. dollars will also be adversely affected if Renminbi continues to appreciate against the U.S. dollar.



- 24 -







Restrictions on currency exchange may
limit our ability to receive and use our revenues or financing effectively.



Foreign exchange transactions
under capital accounts continue to be subject to significant foreign exchange controls and require the approval of PRC governmental
authorities, including SAFE. If our PRC subsidiaries borrow foreign currency loans from us or other foreign lenders, these loans
must be registered with SAFE, and if we finance our PRC subsidiaries by means of additional capital contributions, these capital
contributions must be approved by certain government authorities including the Ministry of Commerce or its local branches. These
limitations could affect the ability of our PRC subsidiaries to obtain foreign exchange through debt or equity financing.



PRC regulations relating to offshore investment
activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict
our overseas and cross-border investment activity, and a failure by our shareholders, who are PRC residents to make any required
applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us
and our PRC resident shareholders to liability under PRC law.



SAFE promulgated regulations
that required registration with local SAFE offices in connection with direct or indirect offshore investment and cross-border
investment through the special purpose vehicles byPRC residents, including PRC individual residents and PRC corporate entities.
These regulations apply to our shareholders who are PRC residents and also apply to our prior and future offshore acquisitions.
In particular, the SAFE regulations require PRC residents to file with competent SAFE offices information about offshore companies
in which they have directly or indirectly invested or through which the cross-border investment is conducted and to make follow-up
filings in connection with certain material transactions involving such offshore companies, such as increases or decreases in
investment amount, transfers or exchanges of shares, mergers or divisions, long-term equity or debt investments, external guarantees
or other material events that do not involve return investment.



The SAFE regulations
retroactively require registration by March 31, 2006 of direct or indirect investments in offshore companies or cross-border investments
previously made by PRC residents in offshore companies. If a PRC resident with a direct or indirect stake in an offshore parent
company or any cross-border investment fails to make the required SAFE registration, the PRC subsidiaries of such offshore parent
company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds
from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with
various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.



To date, our major shareholders
who are PRC residents, or whose shares are beneficially owned by PRC residents, have completed the required foreign exchange registration
with the local foreign exchange bureau according to these SAFE regulations. They are still required to file with competent SAFE
offices when there are material transactions involving us. We are committed to complying and to ensuring that our shareholders
who are subject to these regulations to continue comply with the relevant rules. However, due to the newness of the regulations
and uncertainty concerning the reconciliation of the new regulations with other approval requirements, it remains unclear how
the regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and
implemented by the relevant government authorities, and we cannot make assurances that all of our shareholders who are PRC residents
will comply with our requests to make or obtain any applicable registrations or approvals required by the regulations or other
related legislation. The failure or inability of our PRC resident shareholders to receive any required approvals or make any required
registrations may subject us to fines and legal sanctions, restrict our overseas or cross-border investment activities, limit
our PRC subsidiaries from making distributions or paying dividends or affect our ownership structure, as a result of which our
business operations and our ability to distribute dividends to you could be materially and adversely affected.



- 25 -







We may be treated as a resident enterprise
for PRC tax purposes under the New EIT Law and we may therefore be subject to PRC income tax for any dividends we receive from
our subsidiaries, which may materially and adversely affect the amount of dividends we must pay to our shareholders.



Under the New EIT Law
and its implementation rules, enterprises established under the law of non-PRC jurisdictions, but whose “de facto
management body” is located in China, are treated as resident enterprises for PRC tax purposes. Although the implementation
rules stipulate that the “de facto management body” refers to the organization which substantially manages and controls
the operation, staff, finance, properties and other aspects of the enterprises, it is currently unclear in which specific situations
a non-PRC enterprise’s “de facto management body” is located in China. All of our management is currently
based in China. If we are treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide
income at the 25% uniform tax rate, which will include any dividend income we receive from our subsidiaries. In addition, the
New EIT Law provides that the qualified dividend income between resident enterprises is exempted income, and the implementation
rules stipulates that the “the qualified dividend income between resident enterprises” refers to the direct investment
between resident enterprises, it is not clear what is considered a qualified resident enterprise under the New EIT Law. If we
are required under the New EIT Law to pay income tax for any dividends we receive from our subsidiaries, it will materially and
adversely affect the amount of dividends we may pay to our shareholders.



Dividends payable by us to our non-PRC
shareholders, and gains on the sales of our ordinary shares, may be subject to withholding taxes under PRC tax laws, which may
materially reduce the value of the investment.



The New EIT Law and
its implementation rules provide that an income tax rate of 10% will normally be applicable to dividends payable to non-PRC investors
which are derived from sources within China. This provision may apply to our non-PRC shareholders, if we are deemed as a resident
enterprise for tax purposes. According to a notice issued by the PRC State Council, this 10% income tax will apply to dividends
declared from profits generated after January 1, 2008. In addition, under the New EIT Law and its implementation rules, if we
are deemed as a resident enterprise, any gains realized on the transfer of shares by such investors are also subject to 10% tax,
if such gains are regarded as income derived from sources within China. We are a BVI holding company and substantially all of
our income may come from dividends we receive from our subsidiaries, primarily those located in China. If we declare dividends
from such income to our shareholders, it is unclear whether such dividends, or the gain our non-PRC shareholders may realize from
the transfer of our ordinary shares, would be treated as PRC-sourced income and be subject to PRC tax. If we are required under
the New EIT Law to withhold PRC income tax on our dividends payable to our non-PRC shareholders, or if non-PRC shareholders are
required to pay PRC income tax on the transfer of their ordinary shares, the value of the investment may be materially and adversely
affected.



Uncertainties with respect to the PRC
legal system could limit the protection available to investors and the company.



The PRC legal system
is a civil law system based on written statutes. Unlike in the common law system, prior court decisions may be cited for reference,
but have limited precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded
to various forms of foreign investments in China. We conduct all of our business through our consolidated entities established
in China. These entities are generally subject to laws and regulations applicable to foreign investment in China and, in particular,
laws applicable to wholly foreign-owned enterprises. However, since many laws, rules and regulations are relatively new, and the
PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protection available to us. For
example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by
law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing
statutory and contractual terms, it may be more difficult to predict the outcome of Chinese administrative and court proceedings
as well as assess the level of legal protection we enjoy in China versus in more developed legal systems. These uncertainties
may impede our ability to enforce the contracts we have entered into with our business partners, clients and suppliers. In general,
these uncertainties, including the inability to enforce our contracts, could materially and adversely affect our business and
operations. Furthermore, intellectual property rights and confidentiality protections in China may not be as effective as in the
United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC’s legal system,
particularly with regard to China’s IT industry and banking industry, including the promulgation of new laws, changes to
existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties
could limit the legal protections available to us and other foreign investors. In addition, any litigation in China may be protracted
and result in substantial costs and diversion of our resources and management attention.



- 26 -







There may be difficulties in effecting
service of legal process, enforcing foreign judgments or bringing original actions in China based on United States judgments against
us, our subsidiaries, our officers and directors and experts named in this annual report.



We are incorporated
in the British Virgin Islands and our operating subsidiaries are formed under PRC law. Substantially all of our assets are located
in China. In addition, our directors and executive officers reside within China, and substantially all of the assets of these
persons are located within China. It may not be possible to effect service of process within the United States or elsewhere outside
China upon our directors, executive officers or experts named in this annual report, including effecting service of process with
respect to matters arising under United States federal securities laws or applicable state securities laws. China does not have
treaties providing for the reciprocal recognition and enforcement of judgmentsof courts with the United States and many other
countries. As a result, recognition and enforcement in China of judgments of a court in the United States and many other jurisdictions
in relation to any matter, including securities laws, may be difficult or impossible. Furthermore, an original action may be brought
in China against our assets and our subsidiaries, our directors and executive officers and experts named in this annual report
only if the actions are required to be arbitrated by PRC law and only if the facts alleged in the complaint give rise to a cause
of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary
damages.



Our auditor, like other independent registered
public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight
Board, and as such, investors may be deprived of the benefits of such inspection.



Our independent registered
public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies
that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United
States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance
with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB
is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered
public accounting firms operating in China, is currently not inspected by PCAOB.



Inspections of other
firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality
control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of
PCAOB to conduct inspections of independent registered public accounting firms operating in China makes it more difficult to evaluate
the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may be deprived
of the benefits of PCAOB inspections.



- 27 -







RISKS RELATING TO OUR SHARES



Future sales of shares, or the perceived
sale of additional shares, may lead to a decline in the market price of our shares.



All of our shares have
either been registered for trading or may be sold under Rule 144. Those shares saleable under Rule 144 are held largely by affiliates
of the company, and therefore, they are subject to the resale limitations of Rule 144.



As a significant portion
of our shares are held by a small number of shareholders, historically trading volume of our shares has been relatively low. We
cannot predict the effect, if any, market sales of securities held by our significant shareholders or any other shareholders or
the availability of these securities for future sale will have on the market price of our ordinary shares.



Furthermore, we may
need to do additional financing in the future in the form of our ordinary shares or securities convertible into, or exchangeable
for, our ordinary shares, which will further dilute the shareholding of shareholders and may result in decline of our share price.



A large portion or our shares are owned
by two of our directors and executive officers. These shareholders will have a significant influence over our corporate transactions
and other matters that require shareholder approval.



Our executive officers
and directors, including Messrs. Weidong Hong, Chairman and Chief Executive Officer and director and ShuoZeng, Chief Operating
Officer and director, in aggregate control the vote of about 22.3% of our issued and outstanding ordinary shares, assuming they
do not sell any of their shares and our total number of issued and outstanding shares does not change. These two major shareholders
maintain a significant influence over the outcome of corporate transactions or other matters submitted to our shareholders for
approval, including the election of directors and the approval of other business transactions.



The interest of these
shareholders may not be the same as the interest of our other shareholders. This concentration of ownership could have the effect
of delaying or preventing a change in our control or discouraging a potential acquirer from attempting to obtain control of us,
which in turn could have a material adverse effect on the market price of our shares or prevent shareholders from realizing a
premium over the market price for their shares. In addition, if our major shareholders chose to dispose of a material portion
of the ordinary shares they hold, the prevailing market price of our shares may decline.



Certain provisions in our organizational
documents may discourage our acquisition by a third party, which could limit your opportunity to sell your shares at a premium.



Our Memorandum and Articles
of Association include provisions that could limit the ability of others to acquire control of us. Under those provisions, our
board has the power to issue preferred shares with such rights attaching to them as they decide and that this power could be used
in a manner that would delay, defer or prevent a change of control of our company. These provisions could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from
seeking to acquire control of us in a tender offer or similar transactions.



- 28 -







The market price for our shares may be
volatile.



Our share price has
been highly volatile and is expected to remain volatile in the future. Many factors affect the market price for our shares, including
the following:



| | · | actual or anticipated fluctuations in our quarterly results of operations;
| | - | --------------------------------------------------------------------------



| | · | changes in financial estimates by securities research analysts;
| | - | ---------------------------------------------------------------



| | · | announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures
    or capital commitments;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | the addition or departure of key personnel;
| | - | -------------------------------------------



| | · | the addition or loss of key clients;
| | - | ------------------------------------



| | · | fluctuations of exchange rates between the Renminbi and the U.S. dollar;
| | - | ------------------------------------------------------------------------



| | · | intellectual property litigation;
| | - | ---------------------------------



| | · | the release from or expiration of lock-up or other transfer restrictions on our outstanding ordinary
    shares or sales of additional shares; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | · | general economic or political conditions in China and the United States.
| | - | ------------------------------------------------------------------------



In addition, the securities
market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance
of particular companies. These market fluctuations may also materially and adversely affect the market price of our shares.



Although publicly traded, the trading
market in our ordinary shares has been substantially less liquid than the average trading market for a stock quoted on NASDAQ
and this low average trading market in our ordinary shares may adversely affect the price of our ordinary shares.



Although our ordinary
shares are traded on NASDAQ under the symbol “YTEC”, the trading market in our ordinary shares has been substantially
less liquid than the average trading market for companies quoted on NASDAQ. Reported average daily trading volume in our ordinary
shares for the three-month period ended March 31, 2012was approximately 22,348shares.Limited trading volume will subject our shares
to greater price volatility and may make it difficult to sell our shares at an attractive price.



As a foreign private issuer with ordinary
shares listed on NASDAQ, we may follow certain home country corporate governance practices instead of certain NASDAQ requirements.



As a foreign private
issuer whose ordinary shares are listed on the NASDAQ Global Market, we are permitted to follow certain home country corporate
governance practices instead of certain NASDAQ requirements. A foreign private issuer that elects to follow its home country practice
must submit to NASDAQ a written statement from an independent counsel in such issuer’s home country certifying that the
issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose
in its annual reports filed with the SEC each NASDAQ requirement with which it does not comply followed by a description of its
applicable home country practice. As a company incorporated in the British Virgin Islands and listed on the NASDAQ Global Market,
we expect to follow our home country practice with respect to, among other things, the composition of our board, director nomination
procedures, the compensation of officers, annual meetings, the distribution of annual reports to shareholders and quorum requirements
at shareholders’ meetings. In addition, we expect to follow BVI law instead of NASDAQ requirements that mandate that we
obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity-based compensation
plans, an issuance that will result in a change of control, certain transactions other than a public offering involving issuances
of 20% or greater interests in the Company and certain acquisitions of the stock or assets of another company.



- 29 -







In addition, we are
obligated to file an annual report on Form 20-F with audited financial statements and a report on Form 6-K at such times as we
release information to the public either voluntarily or pursuant to the BVI laws. Therefore, our frequency of filing financial
and other information may be less than that of a domestic United States registered company under the rules and regulations of
the SEC. Investors may not receive information on a timely basis, therefore increasing their risk of investment.



We are a BVI company and, because judicial
precedent regarding the rights of shareholders is more limited under BVI law, shareholders may have less protection for their
shareholder rights than they would under U.S. law.



Our corporate affairs
are governed by our Memorandum and Articles of Association, the BVI Business Companies Act, 2004 and the common law of the BVI.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities
of our directors to us under BVI law are to a large extent governed by the common law of the BVI. The common law of the BVI is
derived in part from comparatively limited judicial precedent in the BVI as well as from English common law, the decisions of
whose courts are of persuasive authority, but are not binding on a court in the BVI. The rights of our shareholders and the fiduciary
responsibilities of our directors under BVI law are not necessarily as clearly established as they would be under statutes or
judicial precedent in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities
laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted
bodies of corporate law. In addition, BVI companies may not have standing to initiate a shareholder derivative action in a federal
court of the United States. As a result of all of the above, public shareholders may have more difficulty in protecting their
interests in the face of actions taken by management, members of our board or controlling shareholders than they would as public
shareholders of a company incorporated in a U.S. jurisdiction.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



A.   History and development
of the Company.



CORPORATE INFORMATION



Our legal name is Yucheng
Technologies Limited, which was incorporated in the BVI on November 17, 2005. Our principal executive office is located at Beijing
Global Trade Center, Tower D , Floor 9, 36 North Third Ring Road East, Dongcheng District, Beijing 100013, P.R. China, and our
telephone number is +86 10 5913 7998. Our registered office in the BVI is at P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola. We maintain an Internet website at www.yuchengtech.com. Our agent for service of process in the United States is
National Corporate Research at 10 E. 40th Street, 10th Floor, New York, New York 10016.



CORPORATE HISTORY



Yucheng Technologies
was founded on November 24, 2006 via a three-party acquisition among China Unistone, Sihitech BVI and e-Channels BVI. Pursuant
to the acquisition agreement and its amendment, in addition to the initial purchase considerations, the selling shareholders of
Sihitech BVI and e-Channels BVI are entitled to additional cash and equity purchase consideration upon satisfaction of certain
conditions. With respect to additional cash consideration, they are entitled to:



- 30 -







| | (1) | USD4,960,000, if we receive an aggregate of USD34,250,000 in gross proceeds from an additional
    financing, including, but not limited to, (a) exercise of our warrants, (b) our successful completion of a secondary offering,
    or (c) the private investment into us by a strategic investor;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | USD1,000,000, if the average closing price of our stock in any 60 consecutive trading days of
    the year, or the Average Share Price, is above USD10.0 in 2006;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | USD2,000,000, if the Average Share Price is above USD12.0 in any 60 consecutive trading days
    of 2007; and
| | --- | -------------------------------------------------------------------------------------------------------------



| | (4) | USD3,000,000, if the Average Share Price is above USD14.4 in any 60 consecutive trading days
    of 2008;
| | --- | ---------------------------------------------------------------------------------------------------------



provided, however, that
in the event that all of the above events occur, the maximum aggregate amount to be paid by us to the selling shareholders will
be no more than USD10,000,000. As of March 31, 2009, the hurdle criteria for conditions (1), (3) and (4) have been met. We paid
USD4,960,000 to the selling shareholders in 2007, with respect to condition (1). With respect to condition (3), we have paid USD2,000,000
to the selling shareholders. With respect to condition (4) we have paid USD3,000,000 to the selling shareholders.



With respect to additional
equity consideration, the selling shareholders are entitled to receive 952,832 shares each year for four years starting from 2008,
if we achieve a net profit of the following amounts according to the financial statements audited in accordance with U.S. GAAP,
where net profit shall be determined for this purpose only, as net profit (determined on the basis of U.S. GAAP) before the amortization
expenses related to the acquisition of e-Channels:



|Year
    Ending December 31, |  | Net
    Profit 
|---------------------------- |  | ---------------
|2007                         |  | USD8.5 million 
|2008                         |  | USD11.9 million
|2009                         |  | USD16.7 million
|2010                         |  | USD23.3 million



The
net profit target for the years ended December 31, 2007 and December 31, 2008 were met. Accordingly, we issued 952,832 shares
to the selling shareholders for each year.The Company failed to meet the pre-determined financial objectives in 2009 and
2010, and as a result, no shares were issued to selling shareholders for 2009 and 2010.



In 2007, we made four
acquisitions which became wholly-owned subsidiaries: Sunrisk, Recency, Fuyi and Fujie. All acquisition related payments for Sunrisk
and Recency have been paid. For Fuyi and Fujie of the total possible RMB20.7 million consideration, RMB17.1 million has been paid
and RMB3.5 million has been accrued, with the variance due to operating results. Subsequently, we sold a 49% interest in Sunrisk.
The minority shareholders are Gu’anQihang, a private Chinese company, and three individual investors.



In May 2007, we acquired
a 75% interest of Easycon, a provider of IT solutions and services to SMBs in China. In January 2008, we acquired the remaining
25% interest and Easycon is now a wholly-owned subsidiary. All payments have been made in relation to the acquisition. An aggregate
consideration of RMB7.2 million was negotiated with the minority shareholders of Easycon. RMB6.0 million was paid on February
2, 2008 and RMB1.2 million was paid on April 1, 2008.



In August 2008, we
established a joint venture Chengdu ElegonInfotech Limited (“Elegon”), a joint venture with 3i Infotech of India.
In 2008, we made cash advances to Elegon approximately RMB1.8 million, and collected from Elegon approximately RMB1.8 million.
In June 2009 we transferred our interests of 49% in Elegon to 3i Infotech Limited for a cash consideration of RMB8.4 million.



- 31 -







In March, 2009, we
established a joint-venture, Hainan Baodaotong Technologies Limited (“Baodaotong”) in Haikou city. Total registered
capital is RMB50 million. Haikou Gas Holding Company, Yucheng and Guangzhou Tech holds 45%, 35% and 20% of Baodaotong’s
equity interests, respectively. In December, 2009,Yucheng transferred 20% of Baodaotong’s equity interest to a third party
for cash consideration of RMB2.5 million.In May, 2010, Yucheng transferred the remaining 15% of Baodaotong’s equity interest
to a third party for a total consideration of RMB7.2 million.



In April 2009 we established
a joint venture SihitechHuazhi Consulting Service, a joint venture with SmartSoft. Total registered capital is RMB1.0 million
..We hold a 40% interest in the company.



In March2010, we established
a joint-venture, Yuxin Data Technologies Co., Limited(“Yuxin Data”) in Tianjin with NTT Data Group. Total registered
capital is RMB60.0 million .We hold 49% of equity interests in the company.



In December2010, Yucheng transferred its
interests of 100% in Beijing Yuxinyicheng Information Technology Limited (“Yuxinyicheng Information”) to other investors,
for a consideration of RMB21.5 million,in order to focus on our core business.



In February
2011, we established a joint-venture, Beijing Yuxinyicheng Internet Technologies Co., Limited (“Yuxinyicheng
Internet”) in Beijing. Total registered capital is RMB17.5 million. We hold 30% of the equity interests in the
company.



In September, 2011, we established a joint-venture,
Zhejiang Yuxinbanke Information Technologies Limited (“Yuxinbanke”) in Zhejiang. Total registered capital is RMB20.0
million. We hold 40% of the equity interests in the company.



We signed an exclusive
service agreement with National Citizen Identity Information Center (“NCIIC”) to provide identification verification services within
banking industry. NCIIC is the only organization that provides citizenship information for the PRC government and social groups.
NCIIC is a company administrated by the Ministry of Public Security. We will sell to banks the access right to NCIIC information
database for online verification. We are the exclusive contractor of NCIIC for the banking system. Given banks’ increasing
demand for personal information verification for credit card, loan and personal financing business, we believe this is an important
additional service offering.



In August 2011,
we acquired a 100% interest of Tianjin Yuchengxin Information Security Technologies Limited (“Yuchengxin”) and
supporting services from service vendors experienced in development of ID information services in order to provide ID
information services to banks in China. An aggregate consideration of RMB17.0 million comprising of cash of RMB8.2million and
442,185 shares, with fair value of RMB8.8 million,was paid or borne by the Company in August 2011.We expected it will
experience rapid growth in next few years.



Pursuant to the acquisition
agreement, in addition to the initial purchase considerations, the selling shareholders of Tianjin Yuchengxin are entitled to
additional equity purchase consideration upon satisfaction of certain conditions. With respect to additional consideration, they
are entitled to:



| | (1) | As of April 30 2012, second installment
        = (2011 actual net income – RMB 10 million) + 2012 expected net income (2011 4th quarter net income *
        4)
        For 2011, no additional consideration
        was due because Yuchengxin did not achieve the required net income threshold for 2011 and the estimated net income threshold
        for 2012.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 32 -







| | (2) | As of April 30, 2013, third installment = (2011 actual net income +2012 actual net income –
    RMB 10 million-2012 expected net income) + 2013 expected net income (2012 second half net income * 2)
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | As of September 30, 2014, fourth installment = (2011 actual net income +2012 actual net income+2013
    actual net income – RMB 10 million-2012 expected net income-2013 expected net income) + 2014 actual net income for six
    month ended June 30, 2014.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on the purchase agreement, if the fourth
installment is negative, the seller is obligated to return 70% of the total consideration paid.



B.   Business overview.



OVERVIEW OF OUR BUSINESS



We are a leading provider
of information technology, or IT, software, solutions and services to China’s banking sector. Our Software & Solutions
business enables our clients to establish and maintain IT platforms to better manage their operations and serve their customers’
needs. We develop and deliver an extensive suite of technology via our Software & Solutions business, which we believe are
best in class in the Chinese market, and are tailored toward specific functional needs of our clients. Software & Solutions
provides critical functionality required in China’s banking industry, including Channel Solutions, Management Solutions
and Business Solutions. For a more detailed description, see “Item 4. INFORMATION ON THE COMPANY – B. Business overview.
– Our solutions and services – Software & Solutions.”



We generally provide
our Software & Solutions to our clients on a project-by-project basis, whereby our clients agree to enter into one or several
fixed-price, all-inclusive contracts, as opposed to purchasing separate individual service components from us on a time-and-materials
or per-segment basis.



In addition to Software
& Solutions, we also provide Platform & Maintenance Services to our clients, which involves selecting, procuring and reselling
third-party hardware equipment and software applications to our clients. This also involves monitoring and assisting in the installation
of such equipment and software at clients’ sites, as well as assisting in the integration of the installed equipment with
clients’ existing IT systems. We typically only provide Platform & Maintenance Services as part of a larger client engagement
that includes Software & Solutions, or if we anticipate that the Platform & Maintenance Services component will lead to
future Software & Solutions revenue from the same client.



Since becoming a public
company in November 2006, we have grown both organically through acquisition of other IT solutions and service providers in China’s
banking industry. In total, we have acquired five companies:



| | · | a 100% interest of Sunrisk, a provider of risk management solutions and services to China’s
    banks; subsequently in April 2008, we sold a 49% interest in Sunrisk to third-parties.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a 100% interest of Easycon, a provider of IT solutions and service to SMBs in China;
| | - | ------------------------------------------------------------------------------------



| | · | a 100% interest of Recency, a provider of business intelligence solutions and consulting services
    to China’s banks; and
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | a 100% interest of both Fujie and Fuyi, two related companies focused on ERP management consulting
    and project implementation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



These acquisitions have
enabled us to offer a broader range of solutions and services, provided us with access to a broader client base, and helped us
to strengthen our management team and employee base.



- 33 -







In January 2007,
we established Yuxinyicheng Information and Yuxinyicheng Software, through which we conducted our POS Merchant Acquiring
Services. Yucheng maintained an 80% controlling interest in Yuxinyicheng Information and an individual investor controlled a
20% non-controlling interest. In January 2009, we acquired the non-controlling interest in Yuxinyicheng Information, and in
December, 2010, we sold our entire equity interest in Yuxinyicheng Information to third parties.



In 2008, we started to
provide E-Banking ASP services to small banks in China to capitalize the opportunities presented by those banks who wish to jointly
operate their E-Banking services with a third party partner.



In August 2008, we invested
in Elegon Infotech, Ltd., a joint venture with 3i Infotech of India, to localize 3i Infotech’s relevant products into the
insurance sector in China. We held a 49% interest in the company until June 2009 when we sold all of our equity stake in ElegonInfotech,
Ltd.to 3i Infotech, Ltd.



In March 2009, we established
a joint-venture, Hainan Baodaotong Technologies Limited (“Baodaotong”) in Haikou city with a third party. Baodaotong
is focused on card issuance business for public transportation in Hainan Province. As of December 31, 2009, we held 15% of the
equity interest of the company. In May, 2010, Yucheng sold the 15% of Baodaotong’s equity interest to a third party.



In April 2009 we established
a joint venture Sihitech Huazhi Consulting Service, a joint venture with SmartSoft, to provide high end IT consulting services
for banks in China. We hold a 40% interest in the company.



In March 2010, we
established a joint-venture, Yuxin Data Technologies Limited (“Yuxin Data”) in Tianjin with NTT Data Group, to
run our E-Banking ASP businesses. We hold a 49% of equity interest in the company.



In February 2011,
we established a joint-venture, Beijing Yuxinyicheng Internet Technologies Co., Limited (“Yuxinyicheng Internet”)
in Beijing with, to provide internet finance services. We hold a 30% of equity interest in the company.



In September 2011, we
established a joint-venture, Zhejiang Yuxinbanke Information Technologies Limited (“Yuxinbanke”) in Zhejiang to provide
teller system services to banks in China. We hold a 40% of equity interest in the company.



In August 2011, we
acquired a 100% interest inTianjin Yuchengxin Information Security Technologies Limited (“Yuchengxin”), which enable
us to provide ID information services to banks in China.



We conduct our business
through various subsidiaries in the PRC. Together with our head offices in Beijing, we have subsidiaries or branch offices in
seven other cities. As of December 31, 2011, we had 2,646 employees.



OUR INDUSTRY



According to IDC, the
market for banking industry IT solution spending in China is expected to grow from RMB9.2billion (USD1.5 billion) in 2011 to RMB19.2
billion (USD3.0billion) in 2015, representing a CAGR of 20.2%. This rapid growth in IT solution spending is driven primarily by
the development in China’s economy and the ongoing regulatory reform catalyzed by China’s accession into the WTO,
and the resulting increase in competition in China’s banking industry. To meet increasingly complex customer demands and
to stay competitive in the market place, China’s banks are increasingly relying on IT systems for the management of their
operations, such as processing transactions, analyzing operational data and managing risks, thereby creating growth opportunities
for IT service providers such as us.



The following table
sets forth China’s banking industry IT solution spending by solution type from 2006 to 2015.



- 34 -











Source: IDC,
July 2011



China’s banking and financial institutions
and their IT needs



China’s banking
industry continues to be the primary provider of capital to China’s economy and bank deposits remain the primary choice
for domestic savings. According to IDC, there are currently 3,289 banking institutions operating in China as of July 2011. This
number is expected to continue to decline as the Chinese Banking Regulatory Commission (CBRC), continues to emphasis industry
consolidation to increase the efficiency of banks and the integrity of the Chinese banking system. Most of banking institutions
in China are either wholly state-owned or state-controlled, directly or through state-owned enterprises. In recent years, there
have been a growing number of privately-owned as well as foreign-owned banks, although they are still relatively small in number
to date. In addition, to promote competition the CBRC lessened regional restrictions, thereby allowing more banks, especially
joint-stock and SMBs, to expand nationally.



China’s banking
industry can be classified into four groups, including:



| | · | Tier 1 – State-controlled commercial banks. Commonly known as the
    “Big     Four,” this group is comprised of the Industrial and Commercial Bank of China, Bank of China, China
    Construction Bank     and the Agricultural Bank of China. These four banks are the largest among China’s domestic banks
    in terms of assets,     deposit base, loan portfolio and nationwide branch network. According to CBRC 2010Annual Report, the
    Big Four together account     for 49.2% of bank assets in China. In recent years, the Big Four have completed an initial
    public offering and listing of their     shares on the Hong Kong Stock Exchange or Shanghai Stock Exchange. Although the Big
    Four have substantial in-house IT capabilities,     we believe that, given their status as overseas listed companies on
    foreign exchanges and their needs to achieve global best     practices; they will continually need to use third-party IT
    solution and service providers to various degrees.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Tier 2 – National commercial banks. More commonly referred to as “Joint-Stock”
    banks, this group comprises of 13 other national commercial banks, which are owned by a combination of government entities,
    state-owned enterprises and other investors. Many members of this group, such as Bank of Communications, China Merchants Bank,
    China Minsheng Banking Corporation, Huaxia Bank, Shanghai Pudong Development Bank and Shenzhen Development Bank, are listed
    domestically and/or in Hong Kong. Joint-Stock banks generally have the financial resources necessary to maintain sufficient
    in-house IT capabilities to meet their needs. However, we believe that they are in substantial need of third-party expertise
    to enable them to sustain the growth rates that they have achieved in recent years.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 35 -







| | · | Central bank and policy banks.The People’s Bank of China, or PBOC, is PRC’s central bank, which formulates China’s monetary policies
        and implements, such policies through a number of means, such as setting deposit reserves, interest rates and foreign
        exchange rates. In addition, there are three policy banks in China: the Agricultural Development Bank of China, China
        Development Bank and the Export-Import Bank of China. These policy banks were established in the mid-1990s as a result
        of banking reforms to assume the government driven policy lending functions from the Big Four. China Development Bank
        is in the process of transforming from a policy bank to a national commercial bank.                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Tier 3 – Small and Medium-sized Banks (SMBs).According to 2011 IDC, at the end of
    2011this group comprised 147city commercial banks,40 foreign banks, and 3,081 cooperatives (including rural commercial banks
    and rural cooperative banks). We believe that most of the SMBs lack both the financial resources and in-house IT expertise
    needed to either scale up operations or to meet increasingly stringent regulatory requirements. As such, we believe they are
    most likely to allocate a majority of their IT spending to third-party providers such as us. Although foreign banks possess
    the financial resources, they are not familiar with local market practices and the regulatory requirements and often require
    the assistance of China’s domestic IT service providers.



In addition to banks,
there are numerous non-banking financial institutions in China, including insurance companies, securities brokerages, investment
companies, asset management companies, trust companies, finance companies and investment banks. This industry segment is still
in the early stages of development in China. As this industry segment matures, we expect it to undergo significant consolidation.
The IT systems and applications used in these non-banking financial institutions have similarities to those used in banking institutions.
We believe as these financial institutions become larger, they will need more complex and sophisticated IT solutions to manage
their business and service their customers. Non-banking financial institutions present potential business opportunities for IT
service providers, such as Yucheng. As we are a leader to provide IT services for banks and our systems, such as call centers
and e-transactions software, are readily adaptable to new applications.



Furthermore, we believe
that in order to continue to access new channels for growth, banks may use their strong government support and access to capital
to expand into new financial services adjacent to the banking sector, such as insurance, asset management, securities brokerage
and investment banking, if such diversification becomes allowed under PRC laws and regulations. We believe such expansion and
the need to integrate these new businesses with their existing banking businesses will require banks to place an even greater
emphasis on IT capabilities in order to increase efficiency. As their IT needs become increasingly complex, their use of third-party
IT services will continue to increase, in particular from those providers with experience in both the banking industry and the
non-banking financial services industry.



Driving forces of IT spending at China’s
banking institutions



China’s growing
economy and the ongoing regulatory reforms are two major driving forces of change for China’s banking industry. China has
experienced rapid economic growth over the past three decades, largely as a result of the PRC government’s extensive economic
reforms. China’s gross domestic product, or GDP, as measured by the National Bureau of Statistics of China, has grown in
nominal terms at a CAGR of 10.5%from 2007 to 2011. China’s economic growth, combined with increasing fixed capital formation,
high household savings rates, and a closed capital account, have driven the growth of China’s banks in the past decade.
Such a rapidly developing economy places heavy demands on the efficiency and integrity of the country’s banking system.
In recent years, China’s banking system has undergone significant changes and evolved to become an increasingly market-driven
system.



- 36 -







In addition, China’s
entry into the WTO in December 2001 and its accession commitments have served as a catalyst for regulatory reforms in China’s
banking sector. In addition to PBOC, the most important government entity overseeing China’s banks is the Chinese Banking
Regulatory Commission (CBRC). The CBRC was formed in April 2003 to assume the principal bank regulatory functions from PBOC as
a response to the WTO entry requirements and the need to improve banking regulations. Since its establishment, the CBRC has pushed
for improved disclosure, management accountability, more prudentregulatory standards and more efficient operations. It has played
a key role in carving out bad debt, recapitalizing leading banks, regulating bank operations and driving reform throughout the
banking system. The CBRC’s actions have led to significant improvements in corporate governance, risk management, internal
controls and financial and operational transparency of China’s banks. While China’s banking industry is still evolving
from a level well below the Organization for Economic Co-operation and Development’s (OECD) standards, supervision and regulation
of China’s banks has improved dramatically in recent years, and is expected to continue to improve.



As required by the WTO
accession agreement, China has gradually phased out limitations on foreign financial institutions. Foreign banks are now able
to accept Renminbi denominated deposits, which previously was a significant advantage for domestic banks. In addition, the limitations
on geographic network expansion are being reduced, which is promoting greater competition amongst domestic banks and greater access
for foreign banks. We believe that the liberalization of the banking and financial services industry in China will force domestic
banks and other financial institutions to improve their operations, increase the breadth of their product offerings and enhance
their quality of services so that they can more effectively compete with increasingly prevalent international competitors.



As such, we expect China’s
banking institutions to more aggressively seek technology and outsourced solutions to resolve inefficiencies and lower costs,
so that they can compete more effectively in the marketplace. According to CBRC Report , as of the end of 2011, China’s
domestic banks total assets were estimated to be RMB113.3trillion (USD18.0 trillion), which represents a year over year increase
of 18.9%. The tremendous growth in assets is increasing the need for efficient technology. We believe that, as part of a broad-based
effort to accelerate compliance with requirements of the WTO and Basel II (the international standards for better risk management
for banks), China’s domestic banks will increasingly benchmark themselves to their foreign counterparts, and seek to achieve
operational efficiencies through long-term increases in IT spending.



These developments in
China’s banking industry indicate strong demand for IT capabilities, a significant portion of which we expect will be outsourced
to third-party IT solution and service providers. In addition, due to their limited business scale and resources as compared to
large Big Four and Joint-Stock banks, we believe that SMBs will rely even more heavily on third-party service providers to meet
their increasingly complex IT needs. We believe that all of these developments present significant growth opportunities for IT
service providers in China.



Requirements to be a successful third-party
IT service provider for China’s banking institutions



As the market for our
services continues to evolve, the needs of our clients continue to become increasingly sophisticated. Based on our experience,
we believe the following criteria are increasingly relevant to our existing and new clients when selecting a third-party IT provider:



| | · | extensive experience in providing the specific services required;
| | - | -----------------------------------------------------------------



| | · | ability to proactively identify and address additional issues that may be encountered with a
    given client’s IT operations for a project initially undertaken for different objectives;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ability to complete the overall project and interim project milestones on timely basis;
| | - | ---------------------------------------------------------------------------------------



| | · | ability to deliver solutions and services on budget for each project;
| | - | ---------------------------------------------------------------------



| | · | best-in-class solutions which can be implemented quickly and cost effectively and which leverage
    prior solution development experience;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



- 37 -







| | · | flexible project staffing and resource allocation that best meets the project’s scope,
    scale and length; and
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | access to the deepest and most valuable technical and industry-specific expertise, such
    as highly experienced senior staff members.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



We believe that as our
clients’ needs become increasingly complex, so will the requirements for success in our industry. Our ability to remain
competitive will depend, in part, on ongoing investments in our technological capabilities and our human resources, which we believe
differentiate us from our competitors. We also expect our industry to continue to undergo rapid consolidation. China’s domestic
banks increasingly seek vendors with comprehensive service offerings and the scale necessary to provide solutions and services
seamlessly to numerous client locations across China. In order to succeed, we may need to continue to seek attractive acquisition
candidates to complement our existing core strengths.



OUR SOLUTIONS AND SERVICES



We provide a broad range
of solutions and services to meet China’s banking institutions IT needs. Based on the nature of our solutions and services,
we categorize them as Software & Solutions, Platform & Maintenance Services. Software & Solutions includes the development
and sale of our software solutions, IT consulting and implementation and customized software development. Platform & Maintenance
Services relates to the procurement, re-sale, installation, integration and maintenance of third-party hardware and software.



Software & Solutions



We primarily provide
Software & Solutions to our banking clients via customized software, standard software, customized solution development, and
consulting services; however, we believe that conceptually it is more relevant to discuss the end result of our business. Therefore,
we classify our Software & Solutions into the following sub-categories:



| | · | Business Solutions. Our Business Solutions include a wide range of transaction-related
    solutions, such as core-banking, foreign exchange and loan management. We provide our core banking solutions, which manage
    all operations relevant to deposit and loan accounts, principally to SMBs, as they usually lack the internal IT capabilities
    needed to develop and maintain their own systems. In 2009, 2010 and 2011, our revenues from Business Solutions were RMB78.9million,
    RMB131.1 million and RMB146.9million (USD23.3million), respectively, and accounted for 28.0%,39.3% and 34.5% of our Software
    & Solutions revenues, respectively.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Channel Solutions. Channel Solutions are designed to facilitate banks’ interactions
    with their customers, to improve communication and transaction efficiency and to enhance the overall customer banking experience.
    Channel Solutions include: customized online banking solutions, our E-Banking ASP, mobile banking, and call center solutions,
    which allow our clients to serve their customers in a more timely and cost effective manner. Our solutions automate our clients’
    operations and allow them to better track performance of different interaction methods. According to a July 2011report issued
    by IDC, a third-party research organization, we ranked first among all of the banking IT solution providers in China for Channel
    Solutions as measured by 2010revenues. In 2009, 2010 and 2011, our revenues from Channel Solutions were RMB131.7 million,
    RMB122.7 million and RMB164.7million (USD26.1 million), respectively, and accounted for 46.7% ,36.8%and 38.7% of our Software
    & Solutions revenues, respectively.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Management Solutions. Management Solutions help banks to collect and analyze data, so
    that they can monitor and manage risks and performance in a timely manner, as well as business intelligence. These solutions
    support intelligent data analysis to enhance management reporting and sound decision making. We provide a suite of consulting
    and implementation services in risk and performance management, such as asset and liability management, funds transfer pricing
    and profitability analysis. In 2009, 2010 and 2011, our revenues from Management Solutions were RMB71.3 million, RMB79.7million
    and RMB114.1million (USD18.1million), accounted for25.3% ,23.9%and 26.8% of our Software & Solutions revenues, respectively.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 38 -









We develop customized,
function-specific applications according to our clients’ needs and integrate these applications into our clients’
existing IT systems. Increasingly, we are leveraging our customized development work, so that we can use the same core technology
in customized projects for other clients and extract economies of scale from our own business. We believe that providing “repeatable”
solutions will become increasingly important as we target new segments of the market, such as SMBs, which have limited budgets
for large-scale, highly customized IT work.



Platform & Maintenance Services



We primarily provide
Platform & Maintenance Services in conjunction with our Software & Solutions business. Platform & Maintenance Services,
although not a primary focus or growth area for us, is necessary as it assure that our clients IT investments function correctly
and smoothly in relation to their IT infrastructure. We classify our Platform & Maintenance Services into the following sub-categories:



| | · | Platform Services.Platform Services is comprised in large part of our
    former System Integration business. As a total solutions provider, our Platform Services assists our clients with the
    selection     of appropriate third-party hardware or software, manufacturer negotiations (proposals, bids and pricing terms)
    and, as required,     installation support and testing of the third-party hardware and software. We can also integrate the
    new equipment and software     with our clients’ existing IT architecture. In 2009,2010 and 2011, our revenues from
    platform services wereRMB12.5million,     RMB8.4 million and RMB2.0 million (USD0.3million), accounted for 3.5%,2.1% and 0.4%
    of our total revenues, respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Maintenance & Ancillary Services. Comprised mainly of our former IT Services business,
    this category focuses on the maintenance and support services that we provide after a project is completed. In addition, we
    perform limited agency services where we procure third-party IT equipment for other system integrators and charge a commission.
    We record these revenues as Maintenance & Ancillary Services. In 2009,2010and 2011, our maintenance and ancillary services
    revenue amounted to RMB60.1 million, RMB61.7 million and RMB61.4 million (USD9.7 million), respectively, accounted for 16.9%
    ,15.3% and 12.6% of our total revenues, respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Nature of our client engagements



Our objective is
to maximize our share of IT spending with new and existing clients by developing an initial service relationship and then
cross-selling additional services. Large, multi-year projects are usually separated into different phases and each phase is
covered by a separate contract. For our Software & Solutions and our Platform Services, we typically enter into one
contract with our clients for each project or phase that we undertake. Our Software & Solutions contracts typically last
from two and twelve months (averaging six to seven months) to our contracts for Platform Services are generally shorter and
our Maintenance Services typically last from one to three years.



Each project typically
involves multiple service components to fulfill the project or particular project phase’s requirements. We typically price
our Software & Solutions relating to a project or a project phase based on an all-inclusive, fixed-price basis, rather than
on an à la carte basis for individual components or segments. To the extent we are successful in managing projects, fixed-price
contracts have historically allowed us to employ various process methodologies designed to improve the overall project profitability,
while maintaining the highest quality and milestone-oriented service. Our Platform Service projects are generally priced based
on the cost of the third-party hardware or software, plus an applicable margin to cover our service costs. Our clients are generally
required to pay us in installments, with a portion of payment made upon executing the contract, upon achieving certain interim
milestones, and upon completing the client inspection.



- 39 -







We are starting to implement
a re-occurring revenue model, when the functionality of our solutions is per-user or per-transaction based. Under this model,
we set up the entire IT architecture and software platform, such as an entire online banking IT platform, and charge our clients
for the use of the IT platform and on a per-user or per-transaction basis.



We believe this revenue
model appeals to the SMBs, which may not have the financial resources and internal IT capabilities to maintain their own online
banking platform.



To better serve the
market, we established Yuxin Data, a joint-venture with NTT Data Group, to operate the E-Banking ASP business. Navigating the
operational complexity of serving this market is where NTT DATA's core competency in hosted IT systems will add value to the joint
venture. NTT DATA will contribute to the joint venture with its experiences from its ANSER Unit Operation Center and Core Operating
System Data Center, as well as experience operating outsourced platforms.



OUR COMPETITIVE STRENGTHS



We believe the following
competitive strengths enable us to compete more effectively as an IT service provider to China’s banking institutions.



Broad client base and extensive domestic
Chinese bank experience.



Our client base
includes all of China’s most prominent Top Four banks as well as many of the Joint-Stock and SMBs. We have successful
reference sites at the Top Four banks, and count 16 of China’s 17 largest banks as our clients. As the Top Four and
Joint-Stock banks tend to set IT norms in China’s banking industry, our close client relationships in these segments
enable us to gather the deep expertise required to maintain our leadership position. Through the acquisition of Easycon and
also organic growth, we have also expanded our client base to include numerous SMB clients. We believe that our broad client
base and extensive industry expertise serve as a testament to our solution quality and as an endorsement to new
customers.



Deep relationships with existing clients
and effective new client development strategy.



In the course of serving
our existing clients, we typically develop a detailed and proprietary understanding of our clients’ internal IT operations,
as well as their existing and future IT needs. As our clients typically prefer to maintain continuity in their third-party IT
outsourcing relationships, we believe we are well-positioned to serve our clients’ needs on future projects, especially
where we have had significant prior input into the client’s IT systems. By undertaking of one project with a new client,
we are often able to gain insights into the client’s additional IT needs and cross-sell or up-sell solutions and services
to the client, which in turn further strengthens our relationship and increases our competitiveness.



Extensive suite of solution and service
offerings.



To date, we have developed
a broad range of solutions, which we deliver via our suite of proprietary applications. Our solutions are often packaged with
our other services, such as consulting, custom application development, legacy system integration, third-party packaged software
application implementation, application testing, and system integration services, to create a comprehensive service. Our broad
range of capabilities allows us to tailor our solutions to each of our clients’ particular business needs, providing our
clients with a “one-stop shopping” experience. Our approach has enabled us to become increasingly important to our
clients’ overall IT strategies, allowing us to more effectively cross-sell and up-sell additional solutions and services
to help better meet their long-term needs.



- 40 -







Highly leveragable product suite.



The substantial experience,
both industry-specific and technology-related, that we have gained in providing a broad range of solutions to numerous clients
historically has allowed us to develop deep insight into how best to serve both new and existing clients. This has also enabled
us to engineer applications during the course of a specific client engagement that allow us to more easily facilitate upgrades
and additional solutions at a subsequent client engagement. We believe that this capability provides us with a significant competitive
advantage as we target new clients, such as SMBs.



Strong management team and highly experienced
IT employees.



We believe that our
management team and employees are our most important assets and provide us with a substantial competitive advantage during our
day-to-day business operations. Our executive management team, on average, possesses 15 or more years of directly relevant industry
experience. These individuals have been instrumental in growing our businesses organically, as well as in identifying, acquiring
and integrating acquisition targets to date. We believe that they have demonstrated a superior understanding of and ability to
effect consolidation in our rapidly changing industry. With significant industry experience and strong track record, we believe
that our management, and our founders in particular, have established a favorable reputation within our industry and in the broader
marketplace, which can help us win additional clients as well as business partners and future acquisition targets. In addition,
we believe that our employee base, which has come together both organically and via acquisition, is a highly experienced and capable
group, allowing us to target, assess and deliver client engagements more effectively and efficiently.



Broad geographic presence.



In addition to our headquarters
in Beijing, we maintain subsidiaries and branch offices in seven other cities across China. As many of our clients, in particular
the Top Four and Joint-Stock banks, have a nationwide or multi-province presence, our broad geographic presence allows us to be
close to our clients in multiple locations, which further helps us to maintain close relationships with them. In addition, as
we further expand our SMB client base, our broad geographic coverage makes it easier for us to connect with them and provide our
solutions and services in a client-facing fashion, which we believe is critical for effective cross-selling and up-selling of
additional services and solutions.



Strong brand in the marketplace.



We have an established
reputation as a leading provider of IT services to China’s premier banking institutions with our clients and among China’s
banking IT service provider community. We have enjoyed close business relationships with many Top Four and Joint-Stock banks,
including China Construction Bank, which has been our customer on an annual basis since 1999. Our services to these premier banking
institutions has earned us credibility and prestige in the industry. For example, in 2011,we received an award “achievement
of ten year 2001-2011 Chinese software and information service leader” issued by China software association and Sai Di group,
we received two honorary titles of 2011 China’s outstanding enterprise in driving economic growth and 2011 best employer
in China, awarded by 2011 China economy CEO forum, we received an award in recognition for its 25 years of innovative application
in Beijing’s software sector from Beijing software industry association and we also awarded the first prize in the category
of IT service management plans. We were named to the Global FinTech 100 for the third year in a row in October, 2009 by American
Banker, Banker Technology News, and Financial Insights, an IDC company, and we were recognized as “Most Trusted IT Services
Brand by SMB” in 2009 and 2010 ” byChinese Finance Network and Chinese Finance Institute;We were named “Outstanding
Chinese Financial Technology Products 2008” by New Financial World magazine in 2008, a Chinese IT industry magazine. Yucheng
was recognized as “One of the ten best IT solution providers for China’s financial industry” by Computer Partner
World in 2007, a leading IT focused magazine in China. We believe that our established reputation and credibility provide us advantages
in our competition for new businesses opportunities.



OUR STRATEGIES



Our objective is to
become the leading provider of IT services to China’s diversified financial services sector.  While we believe that
we have already established an attractive market position, we intend to further grow our business and enhance our overall market
standing by implementing the following strategies:



- 41 -







Continue to drive organic growth through
cross-selling and up-selling of new and existing services to our existing bank clients.



We have established
close relationships with a larger number of banks in China, and have successfully undertaken multiple projects for these banks.  We
intend to further leverage such relationships and cross-sell more solutions and services to these banks.  For example,
we have provided numerous services, such as online banking, call center, risk management, business intelligence, foreign exchange,
and performance management solutions to China Construction Bank, which has been our largest client by revenue in each of the past
three years.  In comparison, we have provided much more limited IT solutions and services to many other banks.  We
intend to leverage our experience with China Construction Bank to actively promote our other IT solutions and services in other
banks.



Continue to expand into new client segments,
such as SMBs.



We intend to build on
top of our solid SMB client base and broaden our client base.  As compared to large Top Four and Joint-Stock banks,
SMBs do not have the business scale, financial resources or internal IT capabilities todevelop highly sophisticated IT systems
and solutions. As such, they generally demand less customization of IT solutions, providing us opportunities to sell our solutions
in a more standardized manner with minimal incremental cost per sale. In addition, due to their smaller size and increasing needs,
oftentimes we are in a superior position to negotiate contract terms with SMBs as compared to large banks. By the end of 2011,
SMBs and other banks accounted for 34.4%of our revenues, compared to 24.3% of revenues in 2010, and we expect to continue to expand
our SMB market share.



Complement our project-based revenues
with a transaction-based revenue model in certain segments.



Our traditional business
model involves negotiating a fixed-price contract with our clients based on the complexity and duration of each project we undertake.
Such projects generate one-time revenues and generally must be renegotiated should the client decide to expand the project or
make improvements, either in the current year or in subsequent years. We have initiated our transaction-based revenue model by
delivering certain of our offerings, such as online banking solutions, to our clients through a combination of a fixed fee plus
subsequent variable fees. We believe that such a delivery method is more economical and of particular interest to SMBs, which
are more likely to forgo a custom online banking project due to the upfront costs.



Expand our solutions and service offerings
to address new growth opportunities.



As banks in China are
more and more mature in understanding their needs for IT services, there areincreasingly appreciating the needs for high end consulting
in various areas such as risk management, core banking systems, and IT infrastructure planning. To address these customer needs,
we established Sihitech Huazhi Consulting Service, a joint venture with SmartSoft, to provide high end IT consulting services
for banks in China. The Smartsoft team has a strong track record in the abovementioned areas. Since the establishment of the joint
venture, we were able to secure consulting projects with one of the big four banks, along with the implementation phase of the
project.



We expanded our
customer relationship management (“CRM”) capabilities by putting together an experienced Siebel CRM implementation team in
December 2008.The team has extensive experience customizing Siebel CRM systems for customers across many industries,
including banking. As Chinese banks become more complex, having the right solutions to improve management team capabilities
will be critical. With this capability, we have the flexibility to provide our proprietary CRM software or consulting
and implementation services of Siebel CRM software to our customers.



- 42 -







Pursue selective acquisitions, joint ventures
and strategic alliances.



Historically, we
have supplemented our organic growth strategy through selective acquisitions and strategic alliances and joint ventures to
increase our solutions and service offerings and overall market share. In 2010, Yucheng formed Yuxin Data Technologies Co.,
Limited in Tianjin, a joint-venture with NTT Data Group to further expand our E-Banking ASP businesses. In 2011, Yucheng
acquired Yuchengxinin Tianjin in order to provide ID information services, and established Yuxinbankein Zhejiang to provide
teller system services. These acquisitions, strategic alliances and joint ventures have expanded our revenue sources,
increased our solution and service offerings, diversified our client base, enhanced our research and development
capabilities, augmented our management resources and employee base, and enhanced our long-term competitive position.



PROJECT DEVELOPMENT AND MANAGEMENT



The following chart
illustrates our typical project development and management process.







Project management



We manage our projects
principally through the following steps:



| | · | Project setup. We conduct feasibility and margin analysis before the set-up of each project,
    which requires approval of the sales, pre-sales implementation and technology management teams.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Project planning. Following project setup approval, the project manager designs the overall
    project plan, including estimates for workload and costs, so that necessary resources can be allocated.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Project monitoring. Our project manager then tracks the project’s progress and results
    are presented both internally and to the client, through various project progress reports. Any changes to the scope of the
    project need to be approved from our sales, pre-sales implementation and technology management teams.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Risk management. We estimate potential risks upon project setup, and establish relevant
    strategies and measures to respond to any such risks to minimize their impact.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Quality assurance. We conduct frequent tests and examinations to ensure the quality of
    our solutions and services.
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | Client satisfaction survey. We regularly distribute a client satisfaction questionnaire
    to our clients during project implementation and adopt appropriate measures to address any issues raised.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 43 -







| | · | Project closing. Our sales, pre-sales implementation and technology management teams need
    to approve the completion of each project, and we assess the overall the project achievements and financial return.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Project development



Our project development
activities include the following:



| | · | Needs analysis. The first step of our project development is to understand our client’s
    business needs for the project. We carry out frequent communications with our client and conduct extensive analyses of their
    needs based on their business and current IT system.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | System design. Based on our understanding of our client’s business needs, we design
    the overall system architecture, including databases, customer interfaces and modules to best address such needs.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Coding and module testing. Once we have a system design or part of the system design to
    meet our client’s requirements, we start coding individual functional modules. Each of our functional modules is tested
    and debugged individually to ensure quality and functionality.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We work closely with
our clients during the above steps, and these steps may be repeated or conducted in parallel to ensure that we have a system that
best meets our client’s business requirements.



| | · | System testing. After we finish coding and testing the individual modules, we start connecting
    the modules and performing testing at the system level.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | System test run and client examination. After the system passes system testing, we then
    install it at our client’s site and conduct a real data test run with our client. We work closely with our client to
    address and resolve any issues that may come up during the test run and client examination.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | System delivery and maintenance. After passing client examination, the system is delivered
    to our client and the project development cycle is closed. Generally, we provide one year of maintenance and support for most
    of our solutions. We assign an employee as the principal contact person to receive client feedback, evaluate the severity
    of any problem arising from the use of the IT solution, resolve the problem and maintain an issue log.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



QUALITY ASSURANCE



We have built quality
assurance measures into our project management process. We conduct frequent tests, both in the module level and system level,
to ensure our solutions meet our high quality standards and required functionality. We frequently interact with our clients throughout
the entire project development process, soliciting feedback and taking measures to improve our solutions and services.



We conduct various technical
and management appraisals before, during and after project implementation. Technical appraisals include demand appraisal, design
appraisal, code spot tests, internal check and acceptance, and client check and acceptance; management appraisals include project
set-up appraisal, plan appraisal and settlement appraisal. These appraisals are designed to ensure the smooth progress of our
projects and quality of our implementation.



We have established
a set of quality control procedures and follow standard software development protocols in our development processes. Beijing Sihitech
received an ISO 9001:2000 certification in March 2005 and e-Channels received an ISO 9001:2000 certification in July 2006. We
obtained level 3 certification of Capability Maturity Model Integration, or CMMI, for our software development operations in 2009.CMMI
is a framework for business process improvement that is widely accepted in the software industry.



- 44 -







SALES AND MARKETING



We employ a
direct sales model to market and sell our solutions and services. As of December 31, 2011, we had 53 sales and marketing
staff in eight cities across China. Our core business sales personnel are organized into geographical regions. Within each
region, we organize sales teamsbased on client type.



Our sales strategy also
differs depending on the type of clients. For Top Four and Joint-Stock banks, we establish and maintain long-term partnerships,
providing these leading banks with a comprehensive set of IT consulting and implementation services and a focus on growing with
the IT needs of each client. We also strive to provide our solutions and services to these clients in follow-on projects by cross-selling
our other solutions and services. For SMBs, we aim to secure a foothold with our leading IT solutions, such as online banking
or through the acquisition of companies specializing in that banking segment, such as Easycon. Due to their limited experience
with third-party IT solution and service providers, in many cases, these clients are unaware initially of the broad range of solutions
and services that may be obtained from a third-party provider, and are therefore unaware of the benefits in leveraging the experience
and capabilities of a provider such as ourselves. The initial client engagement enables us to understand clients’ IT needs,
quickly build relationships internally, and provide us opportunities to demonstrate to them our capabilities and value proposition
so that we can cross-sell or up-sell our additional solutions and services to best meet their long-term business needs.



Many banks select their
IT service providers through competitive bidding. Before submitting a bid, we usually conduct a detailed due diligence study of
the bank, our competitors, the technical advantages we have regarding the project, duration of the project, our estimated cost
and profitability and potential for a long-term relationship with the client. We selectively submit bids on projects where we
believe we have a competitive advantage. In addition to price, we believe clients usually select the winning bidder based on a
number of other factors, including reputation and track record of the IT service provider, its technical capabilities, historical
relationship with the client and the functionality of the proposed solutions.



Many of our client projects
are separated into different phases, often spanning more than one year. For the latter phases of the projects that we initially
undertake, banks usually do not engage in any additional open bidding. Instead, we typically conduct new negotiations to determine
the scope and cost of the new phase.



Our total selling
and marketing expenses were RMB41.1 million, RMB44.8 million and RMB45.6 million (USD7.2 million)for 2009, 2010 and 2011
respectively. In addition to salaries, our sales staff receives a significant portion of their compensation from sales
commissions.



OUR CLIENTS



Our current
clients consist primarily of Top Four and Joint-Stock banks that look for customized IT solutions to meet specific business
and operational requirements. Of the 17 Top Four and Joint-Stock banks, 16 are our clients and some have been so for more
than five years. We have also been adding SMBs to expand our client base, and diversify our dependence on any one client.



China
Construction Bank, one of the largest banks in China, and our client since 1999, has been our largest client through the
headquarters and its branch offices in each of 2009, 2010and 2011, accounting for 34.0%,22.7% and 17.1% of our total
revenues, respectively, in those three years. Our contracts with China Construction Bank were signed separately with
different departments within the bank group, branches at the provincial level and headquarters and we consider each of them
effectively separate clients, since the decision makers and budgets are unrelated. Treating the different decision making
bodies within China Construction Bank as separate clients, China Construction Bank head office was accounted for 21.5%,14.3%
and 9.1% of our total revenues in 2009,2010 and 2011, respectively.Revenues from each of branch office of China Construction Bank accounted for less than 3.5% of our total revenues in each of 2009, 2010 and 2011.



- 45 -







We realize the
risks involved with over-dependence on one or a few clients, and have taken measures to expand our client base. As our
Joint-Stock bank client base has grown, its contribution as a percentage of total revenues has also increased and accounted
for 24.7% in 2009,29.2% in 2010 and 36.4% in 2011,and one of our Joint-Stock bank clients accounted for 12.4%,12.3% and 16.9%
in 2009, 2010 and 2011. Our revenues from SMBs and other banks as a percentage of total revenues was 23.2% in 2009,24.3% in
2010 and 34.4% in 2011. We believe over time, Joint-Stock banks and SMBs will experience the greatest competitive pressures
and are likely to significantly increase their IT investments. We have positioned ourselves to take advantage of this
opportunity as it develops.



In addition to China’s
domestic banks, we have also begun marketing our services to the Chinese operations of foreign banks, which have expanded significantly
in recent years due to China’s WTO commitments. For example, we entered into contracts with the PRC subsidiary of a Korean
bank in late 2007 to develop their bank card processing system and online banking platform, and with the PRC subsidiary of a Hong
Kong based bank in early 2008 to develop their online banking platform. We continued our efforts in 2011 and beyond to expand
our presence in foreign banks and/or PRC Subsidiary of foreign banks. We expect to add a number of foreign banks to our client
list in 2012.



SUPPLIERS



We work with third-party
suppliers for hardware equipment and certain software components that we incorporate into our solutions. Our hardware suppliers
include IBM, HP, DELL and Sun for servers, EMC for storage, Cisco, Huawei and F5 for network equipment. Our software suppliers
include Oracle, IBM, Symantec, Microsoft, Genesys and EDIFY. We do not depend on any single supplier for either hardware or software.
In 2011, only Digital China Holdings Limited and EMC accounted for more than 10% overall third-party hardware and software purchases.



RESEARCH AND DEVELOPMENT



The market for our solutions
and services is characterized by rapid technological change. As China’s banks upgrade their technology to meet international
standards, we must ensure that we keep pace with technological developments, client demands, emerging industry standards and an
increasingly sophisticated environment by enhancing our current service offering on a timely basis and developing new solutions
that capture underdeveloped market segments.



Our research and development
at the company level focuses on developing new fundamental platforms and applications that can be used in a variety of our IT
solutions.



We also carry on research
and development activities at the business division level in our various subsidiaries. Our business divisions are more familiar
with our clients’ specific IT needs and focus on developing applications that are more closely linked to immediate trends.



As of December 31, 2011,
we had 89 employees carrying on research and development activities.



Including the amount
we capitalized, our internal software development costs amounted to RMB22.2 million,RMB18.3 million and RMB27.5 million(USD4.4million)as
of the end of each of the years 2009, 2010 and 2011, respectively. In addition, as we conduct a substantial amount of research
and development activities in connection with our client projects, a significant amount of research and development related expenses
are recorded as cost of revenues for the client project rather than research and development expenses.



- 46 -







INTELLECTUAL PROPERTY



We rely on a
combination of patent, copyright and trademark laws, licensing agreements, confidentiality agreements, internal
confidentiality policies and other contractual provisions, as well as technical measures to protect our intellectual property
rights. We have one received patent for our dynamic password method and system based on mobile communication terminals and
still have one pending patent application for our dynamic password method and system with encryption with the PRC State
Intellectual Property Office. We routinely register our proprietary software to the National Copyright Administration of the
PRC pursuant to the Regulations for the Protection of Computer Software (2002) to ensure protection under the PRC copyright
laws. As of December 31, 2011, we have 2 patents and 192 software products registered with the National Copyright
Administration of the PRC, including primarily system architecture and platforms and various software applications.



Our employees are required
to enter into agreements assigning us the intellectual property developed within the scope of their employment. We have also established
internal confidentiality procedures to safeguard our intellectual property. We enter into confidentiality agreements with all
of our employees, collaborators, clients and suppliers, and prohibit our employees from designing into our solutions intellectual
property that belongs to any third party. As intellectual property laws in China are still being developed and offer limited protection,
we rely heavily on our confidentiality procedures, confidentiality agreements as well as technical measures to protect our proprietary
technology and intellectual property.



Pursuant to the majority
of our client contracts relating to our software, solutions and services, our clients own the intellectual property developed
in connection with the projects, while we retain our proprietary rights to the methodologies, algorithms or patents that we used
in the development of custom software solutions. However, it is often difficult to distinguish the part of the software that we
developed for our clients, which represents our proprietary rights. As a result, there is a risk that our client may claim that
we infringed their intellectual property rights. See “Item 3. Key information — Risk factors — Risks relating
to our businesses — We may be subject to intellectual property infringement claims from our clients, which may force us
to incur substantial legal expenses and, if determined adversely against us, may materially and adversely affect our business,
financial condition and results of operations.” In addition, we typically agree to defend our clients on our own costs for
any third-party intellectual property claims filed against them arising from the solutions and services we provided them, and
indemnify them for any damages of intellectual property infringement, which may subject us to significant intellectual property
indemnity claims. See “Item 3. Key information — Risk factors — Risks relating to our businesses – Our
intellectual property indemnification practices may materially and adversely impact our business.”



We have registered
11 trademarks in the Trademark Office of the State Administration of Industry and Commerce of the PRC. We also own a number
of domain names, including the domain name of our main website, www.yuchengtech.com.



COMPETITION



The market for IT services
in China’s banking industry is intensely competitive and characterized by rapid technological change. As we enter the insurance
market, we expect to encounter the same level of competition. Competition in our industry is based to a great extent on industry
experience, solution quality, reference sites, breadth of services offered, reputation, price and relationship. Past track records
with a particular banking client are also of particular importance. As a result, our success rate is usually higher with banks
that we have provided solutions and services to in the past, and we are usually engaged by our existing clients to work on projects
that are the expansion of or improvements on the original projects that we undertook.



Our major competitors
can be categorized into two groups, global IT vendors and China’s domestic IT solutions and service providers. Our major
competitors in the global IT vendor category include Accenture, IBM Global Services and TCS/FNS. These competitors are strong
in high-level, enterprise-wide IT strategy consulting. Our major domestic competitors include Digital China Holdings Limited,
Global InfoTech Co., Ltd, HiSun Technology Holdings Ltd. and Client Service International Inc.. Each of these competitors has
their focus and strength in different types of IT solutions and services, and we compete with different companies depending on
the types of solutions we intend to provide to a given client.



- 47 -







We also compete with
the internal IT departments of our existing and potential clients, which may be capable of creating in-house solutions, thereby
reducing the need for outsourced service providers. For example, a banking client for which we designed an initial online banking
platform decided later to conduct further development in-house.



In addition to the competitors
listed above, there are many other smaller providers of IT solutions and services to China’s banks. Most of these providers
are small- to mid-sized companies focusing on narrowly specified niche markets within the broader IT solutions and services market.



INSURANCE



We own one property
in Xiamen and the other one in Beijing which we use as office space, and lease all of our other offices, and we do not maintain
any property insurance for such offices. In addition, consistent with industry practice in China, we do not maintain business
disruption insurance or key person insurance. We do maintain Director and Officer Liability insurance, in accordance with standard
practices for U.S. listed companies.



REGULATION



The following summarizes
major PRC laws, rules and regulations applicable to our business.



Regulation of the software and systems
integration industries



China’s State
Council and a number of ministries and agencies have issued a series of rules and regulations aimed at stimulating and regulating
the growth of the software and systems integration industries in China. The principal regulations governing the software and systems
integration industries include:



| | · | The Interim Administration Measures for Qualification of Systems Integration of Computer Information
    (1999);
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | The Certification Standards and Administration Measures of Software Enterprises (2000);
| | - | ---------------------------------------------------------------------------------------



| | · | The Appraisal Condition for Qualification Grade of Systems Integration of Computer Information
    (Revised Version) (2003);
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | · | Certain Policies for Encouraging Development of the Software Industry and Integrated Circuits
    Industry (2000);
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | The Software Products Administration Measures (2000);
| | - | -----------------------------------------------------



| | · | The Interim Administration Measures for Qualification of Systems Integration of Computer Information
    Concerning State Secrets (2001);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | The Administrative Measures on Verification of Key Software Enterprises within the State Plan
    (2005);
| | - | ---------------------------------------------------------------------------------------------------------



| | · | The Administrative Regulation for Commercial Cryptogram (1999); and
| | - | -------------------------------------------------------------------



| | · | The Administrative Measures on Examination and Sales Licensing of Security Products for Computer
    Information Systems (1997).
| | - | --------------------------------------------------------------------------------------------------------------------------------



Under these regulations,
except for software developed for self-use, software products developed in China are subject to a registration system administered
by the PRC Ministry of Information Industry (MII) and its local branches or agencies. This registration system requires software
developers to obtain registration certificates for their software products. A software product cannot be sold in China without
such registration. The valid term of each registration is for five years, and it may be renewed upon expiry.



- 48 -







Companies in China engaged
in systems integration are required to obtain qualification certificates from MII. Companies planning to setup computer information
systems are required to engage systems integration companies with appropriate qualification certificates. This qualification certificate
is subject to biannual review and is renewable every four years.



The Qualification Certificate
for Integration of Computer Information Systems Concerning State Secrets granted by the PRC State Secrecy Bureau is required for
a company to engage in computer systems integration activities involving state secrets. The valid term of such certificate is
for three years, and it may be renewed upon expiry, subject to the satisfaction of all the requirements. The State Secrecy Bureau
will only issue this special qualification certificate to China’s domestic companies. Foreign invested companies, including
Sino-foreign joint ventures and wholly foreign-owned enterprises, are not allowed to engage in any computer systems integration
activities that involve state secrets.



Encryption software
is an essential component of internet banking systems. The development, production and sale of commercial encryption products
in China is regulated by the PRC National Encryption Administrative Bureau (Encryption Bureau) and its authorized local branches.
A company engaging in the encryption-related business is subject to certain licensing requirements, such as obtaining a production
license, sale and distribution license, and a license for research and development from the Encryption Bureau. In addition, both
importing and exporting products and equipment containing encryption technology are subject to the prior approval of the Encryption
Bureau.



Companies in China engaged
in providing security products for computer information systems are required to obtain a sales license after official examination
from the PRC Ministry of Public Security (MPS) or its authorized local branches. The valid term of each license is for two years
which can be renewed upon expiry.



We generally register
our software and have obtained, or are in the process of obtaining, from MII or other regulatory agencies all the certificates,
permits or licenses necessary for conducting our business.



Regulation on foreign investment



According to The Guidelines
on Foreign Investment issued by State Council on February 11, 2002, and The Catalogue on Foreign Invested Industries (2007 Revision)
issued by National Development and Reform Commission and the Ministry of Commerce on October 31, 2007, IT solutions and services
fall into the category of industries in which foreign investment is encouraged.



Regulations on foreign exchange



The principal regulations
governing foreign exchange in China are the PRC Foreign Exchange Administration Regulations (1996), as amended in 1997. Under
these regulations, current account income denominated in foreign currencies shall be sold to designated banks or deposited into
foreign exchange bank accounts. The Renminbi is convertible for current account items including the distribution of dividends,
interest payments and trade and service-related foreign exchange transactions. For conversion of the Renminbi for capital account
items, such as making inbound and outbound direct investments, borrowing foreign loans, repatriating investments and investing
in securities outside China, prior approval of or registration with State Administration for Foreign Exchange (SAFE) is required.



Pursuant to the Administration
Rules on the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises may only buy, sell and/or remit
foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and,
in the case of capital account item transactions, obtaining approval from SAFE or its local branches. Foreign investment enterprises
are permitted to remit their profits or dividends in foreign currencies out of their foreign exchange accounts or exchange Renminbi
for foreign currencies through banks authorized to conduct foreign exchange business. Capital investments by foreign-invested
enterprises outside of China are also subject to limitations, which include approvals by SAFE, the Ministry of Commerce of the
PRC and the PRC National Development and Reform Commission or their local counterparts.



- 49 -







Pursuant to SAFE’s
Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Return Investments
via Overseas Special Purpose Vehicles, generally known in China as SAFE Circular 75, which became effective November 1, 2005,
(i) a legal person entity incorporated in China, a PRC citizen, or an individual with habitual residence in China due to certain
economic benefits, who is referred to as an onshore resident under SAFE Circular 75, shall register with the local branch of SAFE
before it establishes or controls an overseas special purpose vehicle (SPV) for the purpose of overseas equity financing (including
convertible debts financing); (ii) when a PRC resident contributes the assets or equity interests it holds in a domestic enterprise
into an SPV, or engages in overseas financing after contributing assets or equity interests into an SPV, such PRC resident shall
modify its SAFE registration in light of its interest in the SPV and any change thereof; and (iii) where an SPV undergoes material
events relating to increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions, long-term
equity or debt investments, or external guarantees, or other material events that do not involve return investments, such PRC
resident shall, within 30 days from the occurrence of such material event, apply to the local branch of SAFE to amend or file
the registration of foreign exchange of overseas investment. Onshore residents who have established or controlled SPVs and completed
return investments before November 1, 2005, the effective date of SAFE Circular 75, were also required to register with the local
SAFE branch before March 31, 2006.



To further clarify the
implementation of SAFE Circular 75, SAFE issued The Notice of the State Administration of Foreign Exchange on Operating Procedures
concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and in Return Investment via Overseas
Special Purpose Companies on May 29, 2007 (Circular 106). Under Circular 106, if the investment in the overseas SPV fails to be
registered with SAFE by the onshore residents, (1) the overseas SPV is not qualified to conduct overseas financing or return investment;
and (2) the PRC subsidiaries of the SPV are prohibited from distributing their profits and proceeds from any reduction in capital,
share transfer or liquidation to the overseas SPV. Moreover, failure to comply with the above SAFE registration requirements could
result in liabilities under PRC laws for evasion of foreign exchange restrictions. All our PRC resident beneficial owners have
registered with local SAFE branch as required under the SAFE regulations in respect to return investment.



Regulations on offshore parent holding
companies’ direct investment in and loans to their PRC subsidiaries



An offshore company
may make an equity investment in a PRC company, which will become the PRC subsidiary of the offshore holding company after the
investment. Such equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested
enterprise in China, which include the Wholly Foreign-Owned Enterprise Law, the Sino-Foreign Equity Joint Venture Enterprise Law,
the Sino-Foreign Contractual Joint Venture Enterprise Law, all as amended from time to time, and their respective implementation
rules. Under these laws and regulations, the contribution and increase of the registered capital of a foreign-invested enterprise
is subject to prior approval by the relevant authorities.



Shareholder loans made
by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purposes,
and are subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, the Interim
Measures on Administration on Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation
rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange. Under these regulations, shareholder
loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with SAFE. Furthermore, the total
amount of foreign debt that can be borrowed by such PRC subsidiaries, including any shareholder loans, shall not exceed the difference
between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which are subject to governmental
approval.



- 50 -







Regulations on dividend distribution



Under the relevant PRC
laws and regulations, foreign-invested enterprises in China may distribute dividends only out of their accumulated profits determined
in accordance with Chinese accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required
to contribute at least 10% of their after-tax profits based on PRC accounting standards each year to their general reserves fund
until the accumulative amount of the reserve fund reaches 50% of the registered capital of such wholly foreign-owned enterprise.
Contributions to the fund may not be distributed as dividends.





- 51 -







C. Organizational structure



The following diagram
illustrates our organizational structure as of December 31, 2011:









- 52 -







The following summarizes relevant information
concerning our subsidiaries:



Beijing
Yuxinyicheng Technologies Ltd, or Yuxinyicheng. Yuxinyicheng was established as a wholly foreign-owned enterprise in
China on October 19, 2006. It is 68.25% owned by Sihitech BVI and 31.75% owned by e-Channels BVI. It is a holding company in
China without its own business operations.



Beijing Sihitech
Technology Co., Ltd., or Beijing Sihitech. Beijing Sihitech, along with its subsidiaries Shanghai Software, Beijing Software,
Shanghai Sihitech, Xiamen Yucheng, ChengduYuxinyicheng and TianjinYuxinyicheng,engages in the provision of system integration,
software development, information technology consulting, maintenance and support services. Beijing Sihitech and its subsidiaries
mentioned above were the principal operating entities of Sihitech BVI prior to the three-party merger.



Beijing e-Channels
Century Technology Co., Ltd., or e-Channels. E-Channels engages in the provision of technology development, technology transfer,
consulting and training services, in particular relating to online booking-related solutions. E-Channels was the principal operating
entity of e-Channels BVI prior to the three-party merger.



Beijing Easycon
Electronics Limited, or Easycon. We acquired 75% interest of Easycon in June 2007 and the remaining 25% interest in
January 2008. Easycon specializes in providing IT services to smaller and regional commercial banks in China. Its banking
integrative service management system and credit management system both hold a significant market share and are very well
received among SMBs.



Beijing Yuxinhengsheng
Information Technology Limited, or Yuxinhengsheng. We initially acquired 100% interest of Sunrisk in March 2007. Sunrisk is
a risk management total solutions provider for the Chinese banking industry, focusing on consulting, product implementation and
system integration in the area of enterprise risk management for financial institutions. In April 2008, Yuxinyicheng introduced
a strategic investor to acquire 49% of Sunrisk’s equity interest. As a result, Yuxinyicheng’s equity interest in Sunrisk
was reducedto 51% from 100%.



Chengdu Recency Technologies
Limited, or Recency. We acquired 100% interest of Recency in June 2007. Recency is a business intelligence solution and consulting
service provider for the Chinese banking industry, focusing on software development, information technology consulting, maintenance
and support.



Shanghai Fujie Business
Consulting Limited, or Fujie.We acquired 100% interest of Fujie in October 2007. Fujie is focusing on Enterprise Resource
Planning, or ERP, management consulting, software development, maintenance and support.



Guangzhou Yuxinyicheng
Information Technology Limited, or Guangzhou Yuxinyicheng. We established Guangzhou Yuxinyicheng in November 2007, and it
provides system integration, software development, information technology consulting and maintenance and support to our customers.



Beijing Yuxinyicheng
Software Co. Ltd., or Yuxinyicheng Software.We established Yuxinyicheng Software in 2008, a wholly
owned subsidiary.



Yucheng Sinowise
Consultancy Service Limited. or Sinowise.We established Beijing Sinowisein April 2009 in conjunction with SmartSoft and
hold a 40% interest, to provide high end IT consulting services for banks in China.



Yuxin Data
Technologies Co., Limited.(Tianjin) or Yuxin Data.We established Yuxin Data in March 2010, a joint venture with NTT Data
Group and hold a 49% interest, to provide E-Banking ASP services to small banks in China.



Beijing
Yuxinyicheng Internet Technologies Co., Limitedor Yuxinyicheng Internet. We established Yucheng Internet in February
2011, to provide internet finance services. We hold 30% of the equity interests in the company.



- 53 -







Zhejiang Yuxinbanke
Information Technologies Limited or Yuxinbanke.We established Yuxinbanke in September, 2011, to provide teller system services.
We hold 40% of the equity interests in the company.



Tianjin
Yuchengxin Information Security Technologies Limited or Yuchengxin. We acquired 100% interest of Yuchengxin in August,
2011to provide ID information services.



D. Property, plant and equipment.



Our principal executive
offices is located at Beijing Global Trade Center, 36 North Third Ring Road East, Dongcheng District, Beijing where we lease approximately
3,788square meters of office space. We have seven other office locations in China, including Shanghai, Guangzhou, Xiamen, Chengdu,
Dalian, Changchun and Tianjin. We own one property in Xiamen with a gross floor area of 1,258square meters and another property
in Beijing with a gross floor area of 373 square meters, and we lease properties in all other cities with an aggregate gross floor
area of 5,145 square meters. We use all these properties as office space for our employees. The aggregate rent for all our offices
is RMB9,658,407(USD1,532,861) during 2011.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



On October 17, 2011,
the Company received a comment letter raising a number of points for explanation, which was part of a continuing correspondence
between the Company and the SEC staff about past disclosure in the Form 20-F Report filed for the fiscal year ended December 31,
2010. To date, the points raised in this letter, which are described below, are still under consideration and cover several different
topic areas.



The first topic of
the SEC staff was to obtain clarity and possible additional disclosure in Item 5 of Form 20-F, relating to “Operating and
Financial Review and Prospects” about the cost management initiatives that the Company has been implementing in 2009 and
2010 and their potential impact on the Company financial condition and results of operations.



The second topic
of the SEC staff was expansion of disclosure in the Company reports under Critical Accounting Policies relating to Goodwill, to
describe in greater detail the original businesses of the Company, which of those businesses are still in operation, and the proportion
of those original businesses making up the current business. Additionally, the SEC staff requested disclosure about the part of
the current business relating to acquired businesses, and the related goodwill impairment analysis performed by the Company for
the acquired businesses.



The third topic of
the SEC staff focused on disclosure in the Form 20-F Report discussions for the 2009 and 2010 fiscal years relating to gross profit
and gross margin and operating expenses. The staff is seeking expanded discussion of these topics in the management discussion
and analysis of financial results and operations areas and the reasons for the changes from one fiscal year to the next, with
a view of expanding the overall discussion of the factors and the results.



The fourth topic
of the SEC staff consisted of inquiries about the Company controls and procedures, which was to be provided to the staff and not
for public disclosure purposes. The staff inquired about the credentials of the personnel engaged in the financial reporting process
at many levels of the Company. The Company previously had provided information about specific persons and described levels of
employees in the financial reporting areas of management, however, the staff sought more detail analysis of each individual who
is primarily responsible for preparing and reviewing the U.S. GAAP financial statements, including detailed work experience records
and the ongoing training program in U.S. GAAP of the financial reporting team.



The company has
responded to these comments by correspondence dated April, 27, 2012, and in respect of some of the comments addressed the
outstanding inquires through additional disclosure in this Form 20-F Report.



- 54 -







|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------



The following discussion
and analysis of our financial condition and results of operations in should be read in conjunction with the section titled “Selected
Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this annual
report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results
and timing of selected events may differ materially from those anticipated in these forward-looking statements. In evaluating
our business, you should carefully consider the information provided in “Item 3. Key Information — Risk factors”.



OVERVIEW



We are a leading provider
of information technology, or IT, solutions and services to China’s domestic banking sector. Our solutions and services
enable our clients to establish and maintain IT platforms and operational capabilities to better manage their operations and serve
their customers’ needs.



Historically, we derived
a majority of our revenues from providing system integration services (now included under Platform Services), which included selecting,
procuring and reselling third-party hardware equipment and software applications to our clients, monitoring and assisting in the
installation of such equipment and software at our clients’ sites and assisting in the integration of the installed equipment
and software with our clients’ existing IT systems. Due to the lower gross margin and growth potential of Platform Services
as compared to software-related solutions and services, in 2006 we began to shift our focus away from providing Platform Services.



Our current business
focus is to develop and deliver an extensive suite of software-related solutions and services tailored toward specific functional
needs of our clients. Our software-related solutions and services encompass all major categories of IT solutions used in China’s
banking industry, namely Channel Solutions, Management Solutions and Business Solutions. Our revenues derived from providing software-related
solutions and services have grown at a much faster pace than our revenues derived from Platform Services in recent years, in part
due to our shifted business focus, and in part due to our acquisitions. For a detailed description, please see “Item 4.
Information on the Company - A. History and development of the Company. - Corporate History.”



Our clients are primarily
banking institutions in China; for a complete description, see “Item 4. B. Business Overview — Our Clients”.



We have one operating
segment, we track our revenues by types and did not track expenses, operating income, or net income by revenue streams.



Our revenues was RMB489.1million(USD77.6
million) in 2011from RMB403.6 million in 2010 and from RMB354.5 million in 2009.



- 55 -







| | · | Our Software & Solutions revenue grew from RMB281.9 million in 2009 to RMB333.5 million in
    2010 and to RMB425.7 million(USD67.6million) in 2011, representing a CAGR of 22.9%.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our Platform Services revenue decreased to RMB2.0 million (USD0.3 million) in 2011 from
    RMB8.4million     in 2010and from RMB12.5 million in 2009.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our Maintenance Services revenue grew from RMB60.1 million in 2009 to RMB61.7 million in 2010
    and decreased to RMB61.4 million (USD9.7 million) in 2011.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our gross margins were 46.0% in 2009,48.8% in 2010 and 47.4% in 2011.
| | - | ---------------------------------------------------------------------



Our net income was
RMB41.6million (USD6.6 million) in 2011as compared to RMB2.0 million in 2010 and the net loss of RMB4.2 million in
2009.



Our growth has been
and will continue to be driven in large part by the sales of our solutions and services to our banking clients. We expect our
sales of solutions and services to Joint-Stock banks and SMBs to continue to increase at a faster pace than our sales to the Top
Four banks. Our past growth has been partly attributable to the acquisitions we made in 2007 as well as our acquisition of e-Channels
in November 2006. We expect to continue to grow both organically and through acquisitions.



FACTORS AFFECTING OUR RESULTS OF OPERATIONS



Our results of operations
in any period are affected by a number of factors, including factors affecting our industry and factors related to the management
and operations of our businesses.



Factors affecting our industry



Growth of the banking industry in China
and the need for third-party IT services providers



Our growth has been
attributable to the rapid development of China’s banking industry. China’s banking industry has undergone significant
reforms and modernization in recent years in order to manage the challenges associated with a rapidly developing economy and to
fulfill China’s requirements as a WTO member. As part of such efforts, since 2005, a number of Chinese banks have listed
their shares on the international stock exchange, including ICBC, which is the largest IPO to date, China Construction Bank, and
Bank of China.



To continue to meet
the demands of the changing market landscape in China, banks have greatly increased their IT spending in order to upgrade their
systems and capabilities. As most of Chinese banks do not have strong in-house IT development capabilities, these banks largely
rely on third-party IT service suppliers, such as us, to meet their IT needs. We expect that as competition in China’s banking
industry intensifies, and as China’s banks strive to meet Basel II requirements, they will rely more heavily on third-party
IT solution and service providers for their IT needs. Any factors that adversely affect the growth of China’s banking industry,
such as a general slow-down in China’s economy, a global economic downturn, or the adoption of economic growth and inflation
rate policies by the PRC central government, may reduce the profitability of China’s banks and result in a decrease in their
IT spending, which could in turn adversely affect our business. Furthermore, our results of operations are also affected by the
extent China’s banks continue to outsource their IT services. Any increase or decrease in the extent of outsourcing IT solutions
and services by China’s banks will positively or negatively affect business opportunities available to us.



- 56 -







Changes in decision making over IT
spending among our clients



We derive the substantial
majority of our revenues by providing IT related solutions and services to China’s banks on a project-by-project basis.
We have observed a recent shift in the way IT spending is decided in China’s banks, with more decisions being made at banks’
head offices instead of provincial level branches. Such centralization changes the competitive dynamics in our industry and generally
favors large IT service providers with premium brands, broad product offerings and deep client relationships, in particular relationships
with the bank’s head offices.



Competition in China’s banking
IT service industry



Our results of operations
have been, and will continually be primarily affected by, the competitive landscape in China’s banking IT service industry.
Due to competitive pressures between banks, we have observed that SMBs in China are focusing more on an IT service provider’s
reputation and service quality as compared to price when awarding IT projects, which enhances our competitive position. On the
other hand, as more competitors enter the IT service market for big banks, these banks may be able to extract increasing pricing
concessions. In addition, as China’s banking IT service industry develops, more global IT service providers are entering
the market, which may further intensify competitive pressures.



Factors related to the management and
operation of our businesses.



Revenue mix



We derive our revenues
primarily from Software & Solutions and Platform & Maintenance Services. Platform Services has a much lower gross margin
as compared to Software & Solutions and Maintenance Services. Our consolidated gross profit and gross margin are greatly affected
by our revenue mix.



We began to shift our
business focus to Software & Solutions in 2006. We currently typically only provide Platform & Maintenance Services as
part of a larger client engagement that includes Software & Solutions, or if we anticipate that the Platform & Maintenance
Services component will lead to future Software & Solutions revenue from the same client. As a result of these factors, our
revenues from Platform & Maintenance Services as a percentage of total revenues on a net basis was 20.5% in 2009, 17.4% in
2010 and 13.0% in 2011. Our gross margins on a gross basis have therefore fluctuated in line with our revenue mix and were 47.4%
in 2011compared to 48.8% in 2010and 46.0% in 2009.We intend to continue to focus on providing Software & Solutions, and expect
the percentage of our revenues from Platform & Maintenance Services to gradually decrease.



Timing of Chinese banks’ outsourcing
IT projects



Substantially all of
our revenues are derived from IT projects for China’s Banks. As a result, our revenues for any given period are affected
by the timing of our clients’ IT projects, which in turn depends on their internal budgeting and planning process. This
process may differ, depending on the type of client and project. For example, the head offices of our Top Four and Joint-Stock
bank clients generally determine the major IT solutions and services projects according to an annual budget and plan, which is
usually finalized in the first calendar quarter of each year. In contrast, regional branches of these big banks and our SMB clients
may decide smaller projects on a local basis and follow a less precise schedule. For more detailed information, please see “Item
3. Key Information – D. Risk factors. – Risks relating to our business – Fluctuations in our clients’
annual IT budgets and spending cycles and other factors can cause our revenues and results of operations to vary significantly
from quarter to quarter and from year to year.”



Client composition



In 2006, our clients
were primarily China’s Top Four banks. Beginning in 2007, we have gradually expanded our client base to include more Joint-Stock
banks as well as SMBs. The percentage of our revenues derived from Joint-Stock banks accounted for 24.7% in 2009,29.2% in 2010
and 36.4% in 2011. At the same time, SMBs represented the following percentages of our revenues 23.2% in 2009,24.3% in 2010 and
34.4% in 2011.



- 57 -







Top Four banks, because
of their size, generally have the strongest bargaining power in their negotiations with us, and generally require extensive customization
of our solutions. On the other hand, they have not been as price sensitive in the past because of the complexity of their projects
and their financial resources; however, this trend may be changing due to increasing competition in the banking IT service industry.
Joint-Stock banks project requirement and budgets are in many respects similar to the Top Four banks. In contrast, SMBs generally
have fewer customization requirements, enabling us to sell repeatable solutions with minimal customization. In addition, we are
more in an equal footing in contract negotiations with SMBs, which have gradually realized the benefits of our leading products.
Our changing client composition and changes in their behavior are expected to affect our future results of operations.



Success in our acquisition and integration
of acquired businesses



In addition to
organic growth, we intend to grow by continuing to acquire or invest in complementary businesses to our existing business.
Our acquisition of e-Channels in November 2006 and our acquisitions of five companies in 2007 broadened our solution and
service offerings, increased our client base, strengthened our management talent and employee base and created a wider range
of cross-selling and up-selling opportunities, which greatly contributed to our past growth, in particular our revenue growth
from Software & Solutions and the improvement of our overall gross margin. Our future growth will continue to be affected
by our ability to identify appropriate acquisition targets andacquire such targets at appropriate costs. In addition, as
China’s banks are becoming more sophisticated in their IT requirements, they are increasingly favoring large solution
and service providers with solid financial background and broad product offerings. As a result, we believe our industry are
consolidating, which will favor larger players in the industry, such as us, more opportunities to grow by
acquisition and acquiring additional market share.



CRITICAL ACCOUNTING POLICIES



Our discussion and analysis
of our financial condition and results of operations are based on our consolidated financial statements which have been prepared
in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying value of our assets and liabilities that are not readily available from other sources. Actual results may differ
from these estimates under different assumptions or conditions.



An accounting policy
is considered critical, if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain
at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or if changes in
the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial
statements. We believe that the following accounting policies involve a higher degree of judgment and complexity in their application
and require us to make significant accounting estimates. The following descriptions of critical accounting policies, judgments
and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this
annual report.



Revenue recognition



The Company generates
revenues primarily from Software & Solutions and Platform & Maintenance Services. Revenue is recognized as follows:



(i)Software & Solutions–Software
& Solutions consist of software development services that require significant production, modifications, or customization
of software or software system. Due to the long-term nature of software development, contract accounting is applied in accordance
with ASC Topic 605-35, Construction-Type and Production-Type Contracts, and ASC Topic 985-605,Software - Revenue Recognition.
Based on our experience, we apply the percentage-of-completion method of revenue recognition to account for the software development
to the period from the start of the significant production, modification, or customization through to the last element delivered,
which is the end of the software development contract. Labor costs and direct project expenses are used to determine the stage
of completion. Revisions in estimated contract profits are made in the period in which the circumstances requiring the revision
first become known. Provisions, if any, are made for anticipated losses on uncompleted contracts whenever it appears there may
be a loss.



- 58 -







Costs and estimated earnings
in excess of billings on uncompleted contracts consist of recognized recoverable costs and accrued profits on contracts for which
billings had not been presented to customers as of the balance sheet date. Billings in excess of revenue recognized for which
payments have been received are deferred until the applicable revenue recognition criteria have been met.



The determination of the
amount of revenue requires us to make estimates about total cost to complete the project, including primarily labor costs, materials
costs, travelling, etc., and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the
stage of completion affect the timing and amounts of revenues and expenses reported. If we do not have a sufficient basis to measure
the progress of completion or to estimate the total contract revenues and costs, revenue is recognized when the project is complete
and, if applicable, the final acceptance is received from the customer. The over or under recognized contract profits will be
recognized in the income statement when the actual costs were known or in the year in which the project is complete.



(ii)Platform
& Maintenance Services–Platform & Maintenance Services consist of system
integration service, agency sales and maintenance services. System integration services mainly consist of value added services
of planning, designing, installing, integrating and testing of hardware sold to customers. Revenue from system integration services
is recognized in accordance with FASB ASC Topic 605, Revenue Recognition, when the following conditions are all met: persuasive
evidence of an arrangement exists, system integration services have been rendered and products have been delivered and accepted,
the price is fixed or determinable and, collectibility is reasonably assured. Customer’s acknowledgement evidences their
acceptance of the system integration work being completed at which time revenue is recognized. The contract revenue and related
costs are deferred if the customer’s acknowledgement is not obtained.



Revenue from sales of
IT equipment and software to the end users, which are limited to passing the IT equipment and software from vendors to end users,
is treated as agency sales. The Company records as revenue the net difference between the amount it bills to end users and the
fees charged by third party vendors. The Company considers the criteria set out in ASC Topic 605-45, Principal Agent Considerations,
in determining whether it should recognize such revenues at gross or net of revenue. The Company believes that based on its arrangement
with the system integrators, end users (banks) and the third party IT manufacturers, the net approach is appropriate as the Company
is not the primary obligor to the end users, does not take general inventory risk, does not have latitude in establishing price
and does not have discretion in supplier selection with respect to the IT equipment or software delivered to end users.



Maintenance service revenue
is recognized ratably over the maintenance period.



Allowance for Accounts Receivable



Accounts receivable are
carried at net realizable value. The Company reviews its accounts receivables on a periodic basis and makes specific allowances
when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable
balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its
current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. Balance
of allowance of doubtful accounts was RMB15.4 million and RMB12.6 million at December 31, 2011 and 2010, respectively.





Impairment of long-lived assets



The Company evaluates
for impairment its long-lived assets to be held and used, including property and equipment, intangible assets and other non-current
assets, when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets
may not be recoverable in accordance with ASC Topic 360, Property, Plant and Equipment, or ASC Topic 350-30, General
Intangibles Other than Goodwill, or ASC Topic 340,Other Assets and Deferred Cost. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to estimate undiscounted future cash flows expected to
be generated by the asset. If the carrying value of an asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount that the carrying value exceeds the estimated fair value.





- 59 -







Assets to be disposed
of would be separately presented in the balance sheet and reported at the lower of carrying amount or estimated fair value less
the cost to sell, and are no longer depreciated.



Judgments and assumptions
are inherent in management’s estimate of undiscounted future cash flows used to determine recoverability of an asset and
the estimate of an asset’s fair value used to calculate the amount of impairment to recognize. The use of alternate judgments
and/or assumptions could result in the recognition of different levels of impairment charges in the consolidated financial statements.



Capitalization of internal software development
costs



Internal development
of software products is accounted for in accordance with ASC Topic 985-20, Costs of Software to be Sold, Leased, or Marketed.
ASC Topic 985-20 requires that the cost of developing software be expensed prior to establishing technological feasibility and
those costs capitalized once technological feasibility has been established. Capitalization ceases upon general release of the
software. The determination of whether internal software development costs are subject to capitalization is, by its nature, highly
subjective and involves significant judgments. This decision could significantly affect earnings during the development period.
Also, judgment is required in determination of no significant subsequent testing cost will be incurred after the capitalization
of software development costs. Further, once capitalized, the software costs are generally amortized on a straight-line basis
over the estimated economic life of the product. The determination of the expected useful life of a product is highly judgmental.
Finally, capitalized software costs must be assessed for realizability at the end of each reporting period.



Pre-contract costs



Due to the business
environment in which the Company operates, it is common practice that the Company commences the software development or IT consulting
project for its banking clients without commercial contracts being signed. If the contracts are not obtained during the reporting
period where implementation costs have been incurred, the Company defers revenue recognition for the related contracts until contracts
are obtained. In accordance with ASC Topic 720-15, Start-Up Costs, costs that are incurred for a specific anticipated contract
and that will result in no future benefits unless the contract is obtained, including cost of equipment, direct labour costs,
and other ancillary costs, are deferred until receipt of the signed contract, and are then included in contract costs or inventory.Such
deferred costs, subject to their not being related to costs of start-up activities, are evaluated periodically for probability
of recoverability.If deemed unrecoverable, deferred costs are expensed to operating expenses.



Costs of start-up activities,
including organization costs, are expensed as incurred.



Costs incurred in
connection with anticipated contracts are deferred outside the contract cost or inventory classification if their recovery from
future contract revenue or from other dispositions is considered probable.



Goodwill



The company initially
measures goodwill in accordance with ASC 805, “Business Combinations”. Goodwill as of the acquisition date is measured
as the excess of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date
amounts of the identifiable assets acquired and the liabilities assumed.



- 60 -







Goodwill is required
to be tested at least on an annual basis for impairment or on an interim basis if an event occurs or circumstances change that
would indicate a potential reduction of the fair value of the acquired businesses below its carrying value. The Company assesses
goodwill for impairment by comparing the fair value of its reporting unit which contains its acquired businesses to its carrying
amount to determine if there is potential impairment. If there is a potential impairment, as the carrying amount is greater than
the fair value, we proceed to step 2 of the impairment test. An impairment loss is recognized for any excess of the carrying amount
of the goodwill over the implied fair value of that goodwill. The carrying value of the acquired businesses reporting unit was
USD56.3 million as of December 31, 2011. The implied fair value of goodwill is determined by allocating the fair value of the
acquired businesses reporting unit to the assets and liabilities including unrecorded intangible assets. The residual amount is
the implied fair value of the goodwill. Fair value for the acquired businesses reporting unit is determined based on discounted
cash flow analysis, market multiples or appraised values, as appropriate. For step one of our impairment test, we determined the
fair value of the acquired businesses reporting unit using a discounted cash flow analysis. The principal factors in the discounted
cash flow analysis are:



| | · | Forecasted
                                                                                                           revenues from three
                                                                                                           business lines, software
                                                                                                           and solutions, maintenance
                                                                                                           services, and platform
                                                                                                           service.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Forecasted
                                                                                                           18.0% weighted average
                                                                                                           cost of capital which
                                                                                                           is based on the average
                                                                                                           of the capital structure,
                                                                                                           cost of capital and
                                                                                                           inherent business risk
                                                                                                           profiles of the Company
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The calculated fair
value of the acquired businesses reporting unit amounted to USD 62.7 million which exceeded the carrying value of the acquired
businesses reporting unit, by approximately 11%. Hence, the reporting unit of acquired businesses is considered not impaired in
step one of our impairment test in accordance with ASC 350-20-35-6, and thus step two is not necessary.



As December
31, 2011, the market capitalization of the company was USD42.6 million, and the carrying value of the company including
goodwill was USD 104.9 million with the percentage excess of 146%. The fair value of the company was estimated to be USD105.7
million with the implied premium of 148%, around 40% represented control premium , control premium is the extra pricing
premium buyer normally pays when the buyer acquires the controlling ownership in a public company. There are not enough
transactions to perform a general analysis of control premium in China’s IT services industry based on the relevant
data from Bloomberg. As a result, we use all the M&A transactions in global software and IT sector as comparable
transactions to analyze the control premium. The control premium was the median of the control premiums of this sample base,
which is at about 40%, the remaining portions of the implied premium is attributable to the current factors:



| | 1) | Negative market sentiment: Overall
                                                                negative sentiment in US capital market toward Chinese companies
                                                                due to accounting scandal; especially one scandal involved Longtop,
                                                                which was considered direct competitor of the company.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | Asymmetric Information: Comparing
                                                                Yuchengthe financial results of fourth quarter of 2011 to the
                                                                same quarter in 2010, the achieved 38% increase in revenue, 26%
                                                                increase in EBIT and 28% increase in net income, It also significantly
                                                                outperformed the first three quarters in 2011. When fourth quarter
                                                                of 2011 earnings released in February, the company's stock price
                                                                rebound to USD 3, indicating that the stock price at the end of
                                                                2011 did not reflect the impact of the financial performance improvement,
                                                                therefore, was considered undervalued.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | Inactive market: Due to small size,
                                                                the company is not very actively traded in the market, and stock
                                                                price tend to show low volatility. Monthly trading volume represents
                                                                only 0.35% of total equity float during the year 2011.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Company's stock price rebound from USD 2.25 at the end of 2011 to about USD 3 in first Quarter of 2012, up by
33%. Accordingly, the implied premium, excluded control synergies, decreased from 108% as of December 31, 2011 to 35%
when the Company reached its highest price in 2012.



- 61 -







Based on above, the
management concluded that there was no impairment of goodwill as of December 31, 2011.



The following events
could change the results of our analysis, therefore, they could have a material adverse effect on the estimated future discounted
cash flows:



| | · | Significant
                                                                                                           underperformance of
                                                                                                           our business relative
                                                                                                           to expected operating
                                                                                                           results;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Significant
                                                                                                           adverse economic and
                                                                                                           industry trends;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Significant
                                                                                                           decline in our market
                                                                                                           capitalization for
                                                                                                           an extended period
                                                                                                           of time relative to
                                                                                                           net book value; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Expectations
                                                                                                           that theacquired businesses
                                                                                                           will be sold or otherwise
                                                                                                           disposed.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Income taxes



We record a valuation
allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In order for us to realize
our deferred tax assets, we must be able to generate sufficient taxable income in those jurisdictions where the deferred tax assets
are located. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in
which we operate and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event
we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment
to the deferred tax assets would be charged to earnings in the period in which we make such a determination. Likewise, if we later
determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable
portion of the previously provided valuation allowance.



RECENTLY ISSUED ACCOUNTING STANDARDS



Recently Adopted Accounting Pronouncements



In October 2009, the
FASB amended the ASC as summarized in Accounting Standards Update (“ASU”) 2009-14, “Software (ASC Topic 985):
Certain Revenue Arrangements That Include Software Elements”, and ASU 2009-13, “Revenue Recognition (ASC Topic 605):
Multiple-Deliverable Revenue Arrangements”. As summarized in ASU 2009-14, ASC Topic 985 has been amended to remove from
the scope of industry specific revenue accounting guidance for software and software related transactions, tangible products containing
software components and non-software components that function together to deliver the product’s essential functionality.
As summarized in ASU 2009-13, ASC Topic 605 has been amended (1) to provide updated guidance on whether multiple deliverables
exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) to require an entity to
allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective
evidence (“VSOE”) or third-party evidence of selling price; and (3) to eliminate the use of the residual method and
require an entity to allocate revenue using the relative selling price method. The Company adopted ASU 2009-13 and ASU 2009-14
during the year and the adoption did not have an impact on the Company’s consolidated financial statements.



In April 2010, the FASB
issued ASU 2010-13, “Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based
Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades”. It addresses the classification
of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security
trades. ASC Topic 718, “Compensation—Stock Compensation”, was amended to clarify that a share-based payment
award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity
securities trade shall not be considered to contain a market, performance or service condition. Therefore, such an award is not
to be classified as a liability if it otherwise qualifies for equity classification. The Company adopted ASU 2010-13 during the
year and the adoption did not have an impact on the Company’s consolidated financial statements.



- 62 -







In December 2010, the
FASB issued ASU 2010-28, “Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment
Test for Reporting Units with Zero or Negative Carrying Amounts”. This ASU requires that reporting units with zero or negative
carrying amounts perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.
The Company adopted ASU 2010-28 during the year and the adoption did not have an impact on the Company’s consolidated financial
statements.



RECENT ACCOUNTING PRONOUCEMENTS NOT YET
ADOPTED



In May 2011, the FASB
issued ASU 2011-04, “Fair Value Measurement (Topic 820)”: Fair Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which provided clarifications for Topic 820
and also included instances where a particular principle or requirement for measuring fair value or disclosing information about
fair value measurement has changed. This Update results in common principles and requirements for measuring fair value and for
disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs, and is effective during interim and
annual periods beginning after December 15, 2011 for public entities. Early application by public entities is not permitted, and
the adoption of ASU 2011-04 is not expected to have a material impact on the Company’s consolidated financial position and
results of operations.



In June 2011, the FASB
issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which gives an entity
the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both
choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive
income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates
the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity.
The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. ASU 2011-05 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2011 for public entities and is not expected to have a material impact on the Company’s
consolidated financial position or results of operations.



In September 2011, the
FASB issued an amendment to ASC Topic 350, in ASU 2011-08 “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill
for Impairment”, which simplifies how entities test goodwill for impairment. Under the amendment, an entity has the option
to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine
that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events
or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than
its carrying amount, then the two-step impairment test for goodwill is unnecessary. If the entity concludes otherwise, then it
is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 of the ASC. If
the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the
goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph 350-20-35-9 of the ASC.
The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December
15, 2011 and early adoption is permitted. The Company is currently evaluating the impact of adopting this amendment, but it is
not expected to have a material impact on the financial statements.



- 63 -







The Company has considered
all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results
of operations, financial condition, or cash flows, based on current information.



A. Operating Results.



The following table
sets forth a summary of our consolidated statement of operations for the periods indicated. The operation results of any period
are not necessarily indicative of the results that may be expected for any future period.



|                                                              |  | For the Year Ended December 31,    |         
|------------------------------------------------------------- |  | ---------------------------------- | --------
|                                                              |  | 2009                               |         
|                                                              |  | RMB                                |         
|                                                              |  |                                    |         
|                                                              |  | (in thousands, except percentages) |         
|                                                              |  |                                    |         
|Net revenues                                                  |  |                                    | 354,470 
|                                                              |  |                                    |         
|Cost of revenues                                              |  |                                    | (191,333
|                                                              |  |                                    |         
|Gross profit                                                  |  |                                    | 163,137 
|                                                              |  |                                    |         
|Research and development expenses                             |  |                                    | (13,829 
|Selling and marketing expenses                                |  |                                    | (41,126 
|General and administrative expenses                           |  |                                    | (117,207
|Gain (loss) on disposal of intangible assets and fixed assets |  |                                    | (182    
|Total operating expenses                                      |  |                                    | (172,344
|                                                              |  |                                    |         
|Other income (expenses):                                      |  |                                    |         
|Interest income                                               |  |                                    | 406     
|Interest expense                                              |  |                                    | (2,861  
|Income from short-term investment                             |  |                                    | 1,203   
|Other income (expense), net                                   |  |                                    | 8,414   
|Total other income (expenses)                                 |  |                                    | 7,162   
|                                                              |  |                                    |         
|Income (loss) before income taxes                             |  |                                    | (2,045  
|Income tax (expenses) benefits                                |  |                                    | 5,250   
|Incomebefore equity method investees                          |  |                                    | 3,205   
|Loss from equity method investees                             |  |                                    | (3,830  
|Income(loss) before discontinued operations                   |  |                                    | (625    
|Loss from operations of discontinued subsidiaries             |  |                                    | (6,816  
|Income (loss) before non-controlling interests                |  |                                    | (7,441  
|Non-controlling interests                                     |  |                                    | 3,241   
|                                                              |  |                                    |         
|Net income(loss)                                              |  |                                    | (4,200  



- 64 -







REVENUES



In 2009,2010 and
2011, our overall revenues amounted to RMB354.5 million, RMB403.6 million and RMB489.1 million (USD77.6million), respectively.
We categorize our revenues by source as Software & Solutions and Platform & Maintenance Services.



We derive our revenues
primarily from two sources, Software & Solutions and Platform & Maintenance Services. Platform Services has a much lower
gross margin as compared to Software & Solutions and Maintenance Services. Our consolidated gross profit and gross margin
are greatly affected by our revenue mix.



We began to shift our
business focus to Software & Solutions in 2006. We currently typically only provide Platform & Maintenance Services as
part of a larger client engagement that includes Software & Solutions, or if we anticipate that the Platform & Maintenance
Services component will lead to future Software & Solutions revenue from the same client. As a result of these factors, our
revenues from Platform & Maintenance Services as a percentage of total revenues on a net basis was 20.5% in 2009, 17.4% in
2010 and 13.0% in 2011. Our gross margins on a gross basis have therefore fluctuated in line with our revenue mix and were 47.4%
in 2011 compared to 48.8% in 2010 and 46.0% in 2009. We intend to continue to focus on providing Software & Solutions, and
expect the percentage of our revenues from Platform & Maintenance Services to gradually decrease.



Software &
Solutions



Software & Solutions
includes revenues we generated from software and software-related solutions, such as sale of software licenses, custom software
development, IT consulting services and implementation.



We generally provide
software-related solutions and services to our clients on a project-by-project basis, and record revenues based on the percentage
of completion of our client projects. Our Software & Solutions revenues can be further broken into Channel Solutions, Business
Solutions and Management Solutions.



Software & Solutions
is the focus of our core business. Software & Solutions revenue as a percentage of our revenues accounted for 79.5% in 2009,82.6%
in 2010 and 87.0% in 2011. We began to shift our business focus to Software &Solutionsin 2006, and thus we expect that Software
& Solutions revenue will be our primary area of revenue growth in the near future, and its percentage of our revenues will
continue to increase over time.



Platform &
Maintenance Services



Platform & Maintenance
Services revenue consists of revenues we generated from the procurement and resale of third-party hardware and software to our
clients, the related installation and integration services, IT maintenance and other services. Similar to our Software & Solutions,
we also provide Platform & Maintenance Services on a project-by-project basis, and record revenues based on the delivery of
the service.



Platform &
Maintenance Services have been historically a major part of our business. However, we increase the breadth of our IT
capabilities and our service strength; we have been focusing on our Software & Solutions business, which have higher
margins and greater long-term potential. We currently provide Platform & Maintenance Services as a component of a larger
client engagement that includes Software & Solutions projects, or if we anticipate that the Platform & Maintenance
Services project will lead to future Software & Solutions projects from the client. Platform & Maintenance Services
revenue as a percentage of our revenues accounted for 20.5% in 2009, 17.4% in 2010 and 13.0% in 2011. We expect to gradually
reduce Platform & Maintenance Services as a percentage of our revenuesas our business focus on software &
solution.



- 65 -







Revenues by sources



The following tablesets forth our revenue
sources and the corresponding percentage relative to our total revenues for the periods indicated. When recognizing our revenues
on a gross basis, we had a CAGR of 17.5% from 2009 to 2011, including a CAGR of 22.9% for Software&Solutions.



|                                        |  | For the Year Ended December 31,    |        
|--------------------------------------- |  | ---------------------------------- | -------
|                                        |  | 2009                               |        
|Revenues                                |  |                                    |        
|by                                      |  |                                    |        
|sources                                 |  | Amount                             |        
|                                        |  | RMB                                |        
|                                        |  |                                    |        
|                                        |  | (in thousands, except percentages) |        
|Software &
    Solutions                |  |                                    | 281,894
|Platform services                       |  |                                    | 12,505 
|Maintenance
    and ancillary  services |  |                                    | 60,070 
|Total                                   |  |                                    | 354,470



Software & Solutions revenue by solution
type



We provide
different types of software-related solutions, including Channel Solutions, Management Solutions and Business Solutions. We
experienced rapid growth in Channel Solutions and Business Solutions from 2009 to 2011. The following table sets forth our
Software & Solutions revenue by solutiontype.



|                     |  | For the Year Ended December 31,    |        
|-------------------- |  | ---------------------------------- | -------
|                     |  | 2009                               |        
|                     |  |                                    |        
|Software & Solutions |  |                                    |        
|revenue by type      |  | Amount                             |        
|                     |  | RMB                                |        
|                     |  |                                    |        
|                     |  | (in thousands, except percentages) |        
|Channel related      |  |                                    | 131,660
|Business related     |  |                                    | 78,928 
|Management related   |  |                                    | 71,306 
|Total                |  |                                    | 281,894



- 66 -







Revenues by client types



Our clients are primarily
China’s banks; however, we also provide IT-related solutions and services to certain non-banking clients, such as government
agencies and other corporations when such market demand arises. However, we generally do not actively market our solutions and
services to these clients and we do not consider them as our core clients.



We provide
Software & Solutions primarily to Top Four banks, in particular China Construction Bank. In 2009, 2010 and 2011, our
revenues from China Construction Bank, our largest client, amounted to RMB120.7 million, RMB91.6 million and RMB83.6
million (USD13.3 million), respectively, and accounted for 34.0% , 22.7% and 17.1%, respectively, of our total revenues. Our
contracts with China Construction Bank were signed separately with different departments within the bank group, branches at
the provincial level and headquarters and we consider each of them effectively separate clients, since the decision makers
and budgets are unrelated. China Construction Bank has been our client since 1999, and we have maintained a good relationship
with various organizations within the bank.



Starting in
2007, we have actively expanded our client base to include more Joint-Stock banks and SMBs, both through organic growth and
through acquisitions of companies with clients in those segments. As a result, revenues from our Joint-Stock bank clients
increased by RMB90.2 million, from RMB87.6 million in 2009 to RMB177.8 million (USD28.2 million) in 2011, and their
percentage of our total revenues increased from 24.7% in 2009 to 29.2% in 2010 and 36.4% in 2011. Furthermore, our revenues
from SMBs and other banks was RMB82.2 million in 2009, RMB98.2 million in 2010 and RMB168.4 million (USD26.7 million) in
2011, and their percentage of our total revenues increased from 23.2% in 2009 to 24.3% in 2010 and to 34.4% in 2011.



- 67 -







The following tablesets
forth our Software & Solutions revenue by client type for the periods indicated.



|                                       |  | For the Year Ended December 31,  |        
|-------------------------------------- |  | -------------------------------- | -------
|                                       |  | 2009                             |        
|Software &                             |  |                                  |        
|Solutions by                           |  |                                  |        
|client type                            |  | Amount                           |        
|                                       |  | RMB                              |        
|                                       |  |                                  |        
|                                       |  | (In thousands,except percentage) |        
|Top Four Banks
    (Tier I)            |  |                                  | 121,551
|Joint-Stock Banks (Tier II)(1)         |  |                                  | 59,195 
|SMBs (Tier III) and Other
    Banks(2) |  |                                  | 75,138 
|Other(3)                               |  |                                  | 26,010 
|Total                                  |  |                                  | 281,894



| | (1) Includes PBOC and policy banks.
        (2) Includes foreign banks.
        (3)Includes mostly platform revenues
        from security brokerage companies and telecom companies, and software revenues subcontracted from third parties, whose
        end customers are also banks in China
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



From 2010 to 2011,
our Software & Solutions revenue from Joint-Stock banks grew at 47.7%, which is much faster than our total revenue growth
because we focused on providing Software & Solutions to these bank clients. As a result, our percentage of Software &
Solutions revenue from Joint-Stock banks increased to 36.1% in 2011, compared to 31.2% in 2010. The percentage of Software
& Solutions from SMBs increased to 37.1%, compared to 24.5% in 2010.



- 68 -







The following
table sets forth our Platform & Maintenance Services revenue by client type for the periods indicated.



|                                       |  | For the Year Ended December 31,  |       
|-------------------------------------- |  | -------------------------------- | ------
|Platform &                             |  | 2009                             |       
|maintenance                            |  |                                  |       
|services by                            |  |                                  |       
|client type                            |  | Amount                           |       
|                                       |  | RMB                              |       
|                                       |  |                                  |       
|                                       |  | (In thousands,except percentage) |       
|Top Four Banks
    (Tier I)            |  |                                  | 17,143
|Joint-Stock Banks (Tier II)(1)         |  |                                  | 28,404
|SMBs (Tier III) and Other
    Banks(2) |  |                                  | 7,039 
|Other(3)                               |  |                                  | 19,990
|Total                                  |  |                                  | 72,576



| | (1) Includes PBOC and policy banks.
        (2) Includes foreign banks.
        (3)Includes mostly platform revenues
        from security brokerage companies and telecom companies, and software revenues subcontracted from third parties, whose
        end customers are also banks in China
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As we further penetrate
into Joint-Stock banks and SMBs, we expect our revenue contributions from these clients to continue to increase, in particular
revenues from Software & Solutions, resulting in further optimization of our revenue mix. Meanwhile, we expect our revenue
concentration on Top Four banks and China Construction Bank to continue to decline.



COST OF REVENUES



Our cost
of revenues includes costs directly attributable to revenues. Our overall cost of revenues on a gross basis increased 24.5%
to RMB257.3 million (USD40.8million) in 2011, compared to RMB206.6million in 2010 in line with the revenues growth. For
Software and Solutions line of businesses, cost of revenues consists mostly of wages, benefits, and travel costs for
engineers who work on projects. The headcount of our engineers increased from 1,527 in 2009, 1,971 in 2010 to 2,331 in
2011,resulting the cost of revenues increased over the year.



The following table
sets forth our cost of revenues by revenue source for the periods indicated on a gross basis.





|                                       |  | For the Year Ended December 31,    |         
|-------------------------------------- |  | ---------------------------------- | --------
|                                       |  | 2009                               |         
|                                       |  |                                    |         
|Cost of                                |  |                                    |         
|revenues by sources                    |  | Amount                             |         
|                                       |  | RMB                                |         
|                                       |  |                                    |         
|                                       |  |                                    |         
|                                       |  | (in thousands, except percentages) |         
|Software & Solutions                   |  |                                    | (156,678
|Platform services                      |  |                                    | (10,515 
|Maintenance
    and ancillary services |  |                                    | (24,140 
|Total                                  |  |                                    | (191,333





- 69 -







Our cost of revenues
on a net basis grew from RMB180.8 million in 2009to RMB199.0 million in 2010 and to RMB256.2million(USD40.7 million) in 2011,
representing a CAGR of 19.0%, including a CAGR of 23.5% for Software & Solutions and a CAGR of-15.2% for Maintenance Services.
We have included a net basis representation to reflect our costs and distinguishes between our own costs and the cost of third-party
hardware and software. Below are our costs of revenues as recognized on a net basis.



|                                       |  | For the Year Ended December 31,    |         
|-------------------------------------- |  | ---------------------------------- | --------
|                                       |  | 2009                               |         
|                                       |  |                                    |         
|Cost of                                |  |                                    |         
|revenues by sources                    |  | Amount                             |         
|                                       |  | RMB                                |         
|                                       |  |                                    |         
|                                       |  | (in thousands, except percentages) |         
|Software & Solutions                   |  |                                    | (156,678
|Platform services                      |  |                                    | 0       
|Maintenance
    and ancillary services |  |                                    | (24,140 
|Total                                  |  |                                    | (180,818



Software &
Solutions



Our cost of revenues for Software & Solutions
primarily relates to costs associated with the design, implementation, delivery and maintenance of our solutions and related services,
which includes primarily staff costs, travel expenses and outsourcing costs in connection with the development and implementation
of IT solutions and service projects for our clients, and to a lesser extent, amortization of intangible assets related to our
solutions that we provide to our clients and allocated overhead costs relating to our project development and implementation staff.
The allocated overhead costs include primarily communication costs, depreciation and other general office-related costs.



Platform &
Maintenance Services



Our cost of revenues
for Platform & Maintenance Services primarily consists of costs for purchase of third-party hardware and software that we
resell to our clients. It also includes related transportation and insurance costs as well as staff costs for the procurement
and installation of such hardware and software. We expect cost of revenues relating to Platform & Maintenance Services to
increase generally in line with the increase in revenues from such service.



GROSS PROFIT AND
GROSS MARGIN



The following table
sets forth our gross profit and gross margin for the periods indicated on a gross basis, our gross margin is more volatile due
to our revenue mix since Platform Services has a much lower gross margin as compared to Software & Solutions.



|                                   |  | For the Year Ended December 31,    |        
|---------------------------------- |  | ---------------------------------- | -------
|                                   |  | 2009                               |        
|                                   |  | Gross                              |        
|                                   |  | profit                             |        
|                                   |  | RMB                                |        
|                                   |  |                                    |        
|                                   |  | (in thousands, except percentages) |        
|Software & Solutions               |  |                                    | 125,216
|Platform services                  |  |                                    | 1,990  
|Maintenance and ancillary services |  |                                    | 35,931 
|Total                              |  |                                    | 163,137



- 70 -







Software &Solutions:
the gross margin was 43.9% for the year ended December 31, 2011 compared to 48.8% for the year end December 31, 2010. The decrease
in the gross margin was primarily due to the increase in labor costs including additional project bonus this year and increased
subcontracting to our strategic partner where our margin is significant lower.



Software &Solutions:
the gross margin was 48.8% for the year ended December 31, 2010 compared to 44.4% for the year end December 31, 2009. The increase
was primarily due tobetter cost management of the software development project.



Platform Services: the
gross margin was 46.1% for the year ended December 31, 2011 compared to 8.9% for the year end December 31, 2010.Our gross margin
of platform services was volatile since different projects had different gross margins.



Platform Services: the
gross margin was 8.9% for the year ended December 31, 2010 compared to 15.9% for the year end December 31, 2009. The decrease
was primarily due to the gross margin of several Platform Services projects in 2009 being higher than the normal level, which
is 10%.



Maintenance Services:
the gross margin was 71.7% for the year ended December 31,2011 compared to 54.2% for the year end December 31, 2010. The increase
in gross margin was due mainly due to revised accrued service fee to China Financial Certification Authority(CFCA), our partner
in the e-banking ASP business.



Maintenance Services:
the gross margin was 54.2% for the year ended December 31,2010 compared to 59.8% for the year end December 31, 2009. The decrease
was primarily due to the decrease of agency revenue.



OPERATING EXPENSES



Our operating
expenses consist of research and development expenses, selling and marketing expenses and general and administrative
expenses. Our operating expenses increased 15.4% from RMB155.4 million in 2010 to RMB179.3million (USD28.5million) in 2011,
primarily due to the increase of labor costs and the increase of research and development expenses for enhancing our research
and development capability.

Our operating
expenses decreased 9.8% from RMB172.3million in 2009 to RMB155.4 million (USD23.5 million) in 2010, primarily due to decrease
in general and administrative expenses, which will be analyzed in greater detail in the following section. The following
table sets forth our operating expenses for the periods indicated.



|                                                              |  | For the Year Ended December 31, |         
|------------------------------------------------------------- |  | ------------------------------- | --------
|                                                              |  | 2009                            |         
|                                                              |  | RMB                             |         
|                                                              |  |                                 |         
|                                                              |  | (in thousands)                  |         
|Research and development                                      |  |                                 | (13,829 
|Selling and marketing                                         |  |                                 | (41,126 
|General and administrative                                    |  |                                 | (117,207
|Gain (loss) on disposal of intangible assets and fixed assets |  |                                 | (182    
|Total                                                         |  |                                 | (172,344



- 71 -







Research and development expenses



R&D expenses
consist primarily of staff costs, which include salaries, bonuses and benefits for research and development personnel.
R&D expenses also include travel expenses of our research and development personnel as well as depreciation of hardware
equipment and software tools and other materials used in our research and development activities. We capitalize certain
internal software development expenses after technological feasibility is established, which are amortized according to its
estimated useful life. Our internal software development expenses amounted to RMB22.2 million as of the end of
2009,RMB18.3million as of the end of 2010 and RMB27.5 million(USD4.4million) as of the end of 2011, of which RMB8.4 million
and RMB7.8million and RMB12.0 million (USD1.9million) were capitalized in2009,2010 and 2011, respectively. The capitalized
amounts will be amortized according to its useful life. We also incur significant R&D related costs in connection with
our client projects, which we record as cost of revenues for the client projects rather than R&D expenses.



Our R&D
expenses increased significantly in 2007, primarily due to an expansion of our R&D staff resulting from the acquisition
of e-Channels in November 2006 and the additional acquisitions in 2007. The number of our R&D personnel totaled 52 in
2009, 71 in 2010 and 89 in 2011.We expect our R&D expenses to continue to increase as we further expand our solution and
service offerings. Our R&D expenses as a percentage of our Software&Solutions revenues were 5.1% in 2009,3.1% in 2010
and 3.6% in 2011.



Selling and marketing expenses



Selling and marketing
expenses consist primarily of salaries, bonuses, sales commissions, and benefits for sales and marketing personnel. Selling and
marketing expenses also include expenses associated with business development activities with our clients, travel expenses of
our sales and marketing personnel, as well as overhead costs allocated to our sales and marketing personnel, such as office rent,
furniture cost, communication cost and depreciation. We generally do not advertise to promote our businesses. Instead, we conduct
targeted business development activities with our clients.



We started our restructuring
initiatives in the middle of 2009, which covered improving project management and changing sales policies.



In the area of project
management, we put into much tighter monitoring on the project costs incurred to the milestone achieved. Our IT system will send
out warnings to project managers in the case of a cost overrun based on the project budget and require correction measures to
make sure the project is back on schedule. This has helped improved our gross margins in the last two years. In addition, it also
helped avoiding ramping up the cost upfront before the contract is signed, which will result in the write-off of a significant
percentage of budgeted cost for a failed project. With the better cost monitoring, we have not had the kind of write-offs on the
revenues or costs since 2010 as in the fourth quarter in 2009.



For sales system,
we made two major changes. Firstly, we improved the evaluations of sales staff and managed the sales expenses better based on
the progress of each sales staff’s quota. With the change, we were able to achieved consistent revenues growth with declining
headcount in sales staff in the last two years. Secondly, we increased the weight of incentives that is tied to the collection
of accounts receivables. This has resulted in the gradual but steady improvement in days sales outstanding (DSO) benchmark. The
following data of software solutions revenue per sale person and DSOs over the last three years are a good demonstration of the
improvements we have made in the last three years.



- 72 -







|Revenues in RMB ‘000s              |  | 2009 |         |  | 2010 |  |         | 2011 | 
|---------------------------------- |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|Software Solutions Revenues        |  |      | 281,894 |  |      |  | 333,543 |      | 
|Sales Headcount                    |  |      | 68      |  |      |  | 55      |      | 
|Software Revenues per Sales person |  |      | 4,145   |  |      |  | 6,064   |      | 
|                                   |  |      |         |  |      |  |         |      | 
|Days Sales Outstanding (DSOs)      |  |      | 215     |  |      |  | 151     |      | 
|Non-GAAP Days Sales Outstanding    |  |      | 139     |  |      |  | 95      |      | 



Note: DSOs for year
2010 were skewed as USD 2.7 million of accounts receivables were written off in Q4 of 2009. Otherwise, the DSOs have been on a
consistent decline.



Our total sales
and marketing expenses were RMB41.1 million, RMB44.8 million and RMB45.6 million (USD7.2million) for 2009, 2010 and 2011
respectively. Our selling and marketing expenses increased by 1.8% from RMB44.8 million in 2010 to
RMB45.6million (USD7.2million) in 2011, primarily due to the increase in sales personnel bonus as the increase of our signed
contracts amountand legal expenses.Our selling and marketing expenses increased by 9.0% from RMB41.1 million in 2009 to
RMB44.8 million (USD6.8million) in 2010, primarily due to the increase in personnel cost. Our overall selling and marketing
expenses as a percentage of revenues were 11.6% in 2009, 10.9% in 2010 and 9.3% in 2011.Our overall selling and marketing
expenses as a percentage of revenues decreased from 10.9% in 2010 to 9.3% in 2011, mainly due to the increase in our
revenues. Our overall selling and marketing expenses as a percentage of revenues decreased from 11.4% in 2009 to 10.9% in
2010, mainly due to the increase in our revenues. The number of our sales personnel totaled 68 in 2009, 55 in 2010 and 53 in
2011.Although the number of sales personnel decreased in last 3 years, the total signed contracts amount increased, and the
sales personnel bonus increased every year.



We expect our selling
and marketing expenses to continue increase with revenues as we expand our product offerings and revenues.



General and administrative expenses



General and administrative
expenses consist primarily of salaries, bonuses and benefits for administrative personnel, such as personnel in our management,
finance and accounting, legal and human resource functions, their travel expenses and other expenses for general administrative
functions, costs for professional services, including legal, tax and accounting services, and allocation of overhead costs to
general and administrative functions, such as rent, communication and depreciation. Our general and administrative expenses also
include amortization of intangible assets relating to our acquisition of e-Channels, which amounted to RMB1.2million and Stock-based
compensations of RMB7.5 million in 2011.



Our general and
administrative expenses were RMB117.2 million in 2009,RMB104.5 million in 2010 and RMB118.1million (USD18.7million) in 2011
respectively. Our general and administrative expenses increased13.1%from RMB104.5million in 2010 to RMB118.1 million
(USD18.7million) in 2011, primarily due to the increase of labor costs and the increase of our revenues. Our general and
administrative expenses decreased 10.9%from RMB117.2 million in 2009 to RMB104.5 million (USD15.8million) in 2010, primarily
attributable to a bad debt charge of RMB18.3 million which we took in 2009.



Our general and administrative
expenses are shown net of technology subsidies, value-added tax refunds, business tax and surcharges refunds and other government
credits we receive from the relevant PRC government authorities. Technology subsidies are granted by the relevant local PRC government
to encourage development of high-tech enterprises. Value-added tax is charged at a rate of 17% of the gross sales proceeds received.
Pursuant to relevant PRC laws and regulations, we are entitled to a refund of 14% of the value-added tax for certain self-developed
software products. Business tax and surcharges are levied based on 5.5% of revenues. We received refunds for business tax and
surcharges for revenues generated from contracts relating to technology development. Others include refund of certain loan interest
and other supporting funds from local governments. The table below sets forth the amount of technology subsidies and other refunds
that we received in the periods indicated.



- 73 -







|                                                  |  | For the Year Ended December31, |      
|------------------------------------------------- |  | ------------------------------ | -----
|                                                  |  | 2009                           |      
|                                                  |  | RMB                            |      
|                                                  |  |                                |      
|                                                  |  | (In thousands)                 |      
|Value-added tax refund for software products sold |  |                                | 3,920
|Technology subsidy                                |  |                                | 395  
|Business tax and surcharges refund                |  |                                | 60   
|Finance subsidy                                   |  |                                | -    
|Other                                             |  |                                | 30   
|Total                                             |  |                                | 4,405



INCOME BEFORE INCOME TAXES



As a result of the foregoing,
loss from operations was RMB2.0 million in 2009,income from operations was RMB37.3 million in 2010 and RMB46.7million (USD7.4million)
in 2011 and our operating margin increased to 9.6% from 9.2% in 2010.



Other expenses



Total
other expenses was RMB5.8 million (USD0.9 million) in 2011as compared to total other expensesof RMB4.3 million in 2010,
primarily due to the increase of interest expenses.



Non-controlling interests



Non-controlling interests
amounted to RMB-4.7 million (USD-0.7million) in 2011 as compared to RMB-2.7 million in 2010, primarily due to the net loss occurred
from Sunrisk business.



INCOME TAXES



Our PRC subsidiaries
are subject to PRC enterprise income tax, which is calculated based on taxable income determined under PRC accounting principles.
On March 1, 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate Income Tax Law
of the PRC (“New Tax Law”)which was taken effect on January 1, 2008. As a result of the new tax law, the statutory
income tax rate changed from 33% to 25% , taking effect from January 1, 2008. The preferential tax rate previously enjoyed by
the Company is gradually transitioned to the new standard rate of 25% over a five-year transitional period. In addition, article
28 of the New Tax Law states that the income tax rate of the “high-tech” company will remain at 15%. Accordingly,
the carrying amount of the deferred tax assets and liabilities, as a result of the change in tax rate, was adjusted in the consolidated
statements of operations of the Company for year ended December 31, 2008.



Under current enterprise
income tax regime, some of our subsidiaries reacquired the high-tech enterprises qualifications and continued enjoying the preferential
income tax rate and /or the tax holidays. As a result, our income tax expenses were RMB-5.3 million,RMB5.3 million and RMB6.5
million (USD1.0million) , and our effective tax rate was 89.4%,14.3% and 13.9% in 2009,2010 and 2011, respectively. Without the
preferential income tax rate and the tax holiday, our income tax expenses would have been RMB0.4million,RMB14.6million and RMB22.8million
(USD3.6million) in 2009,2010 and 2011, respectively.



- 74 -













The New EIT Law reduced
the statutory tax rate to 25%, but repealed most of the preferential tax treatments, including the preferential tax rates and the
tax holidays. However, the New EIT Law provides a five-year transition period that allows enterprises which enjoyed certain preferential
tax treatment under the old enterprise income tax regime to gradually transition to the 25% statutory rate in a prescribed fashion.
According to a notice issued by the PRC State Council, for enterprises which enjoyed preferential income tax rate of 15% pursuant
to certain prior tax rules or regulations specified in the notice, the applicable enterprise income tax rate will increase to 18%
for 2008, 20% for 2009, 22% for 2010, 24% for 2011 and 25% for 2012 and thereafter. For tax holidays specified in the notice, enterprises
already enjoying the holidays prior to January 1, 2008 can generally continue to enjoy such tax holidays until their expiration,
upon which time the 25% tax rate will apply. All other preferential tax treatments have generally terminated on December 31, 2007.
The New EIT Law also provides that the State Council can grant tax waivers or preferential tax rates for “qualified high-tech
or new-tech companies in need of special state support”. Due to the application of the New EIT Law and its implementation
rules, certain of our subsidiaries may no longer be able to enjoy any preferential income tax treatment, and certain others may
need to pay higher transitional income tax rates starting January 1, 2008. As a result, we expect our effective income tax rate
to gradually increase from our 2008 level unless we qualify for new tax benefits under the new tax regime.



In addition, pursuant
to the New EIT Law and its implementation rules, we may be deemed as PRC resident enterprise if our “de facto management
body” is located in China, in which case our global income will be subject to PRC income tax at the rate of 25%. However,
it is currently unclear how the “de facto management body” is determined. See “Item 3. Key information —
D. Risk factors — Risks related to doing business in China — We may be treated as a resident enterprise for PRC tax
purposes under the New EIT Law and we may therefore be subject to PRC income tax for any dividends we receive from our subsidiaries,
which may materially and adversely affect the amount of dividends we must pay to our shareholders.” If we are not deemed
as a PRC resident enterprise, then our dividend payable by our PRC subsidiaries to us will be subject to 10% withholding tax if
such dividend is derived from profits generated after January 1, 2008.



Income tax expenses



Income tax expenses
were RMB6.5million (USD1.0million) in 2011compared with an income tax expenses RMB5.3 million in 2010 and income tax benefit
RMB5.3 million in 2009. Our effective tax rate was 13.9% in 2011compared with 14.3% in 2010 and 89.4% in 2009.



NET INCOME



As a result of
the previous factors, our net income from continued operations increased from RMB34.2 million in 2010 to RMB41.6 million
(USD6.6million) in 2011. Our net income increased from RMB2.0 million in 2010 to RMB41.6million (USD6.6million) in 2011. The
corresponding net margin was 0.5% in 2010 and 8.5% in 2011.Our net income from continued operations was RMB2.6 million, our
net income was RMB-4.2 million in 2009 and the corresponding net margin was-1.2% in 2009.



INFLATION



According to the National
Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index,
was approximately -0.7%,3.3% and 5.4% in 2009, 2010and 2011, respectively. Given the volatility and uncertainty, we cannot make
any assurances that we will not be adversely affected by inflation and/or deflation in the future.



B.Liquidity and capital resources.



LIQUIDITY AND CAPITAL RESOURCES



We have historically
financed our operations through sales of equity interests, bank loans and cash generated from operations. For the years ended December
31,2009, 2010 and 2011, our operating activities, acquisitions and strategic investment have been our principal uses of cash. As
of December 31, 2011, we had RMB204.8million (USD32.5million) in cash and cash equivalents, consisting of cash on hand and bank
deposits with original maturity of three months or less.



- 75 -







We believe that our current
cash and anticipated cash flow from operations is sufficient to meet our current cash needs. We may, however, require additional
cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide
to pursue. In the long-term, we intend to rely primarily on cash flow from operations and additional borrowings from banks to meet
our anticipated cash needs. If our anticipated cash flow is insufficient to meet our requirements, we may also seek to sell additional
equity, debt or equity-linked securities. We cannot assure you that any financing will be available in the amounts we need or on
terms acceptable to us, if at all.



The following table sets
forth our outstanding borrowings as of the dates indicated.



|                         |  | For the Year Ended December 31, |       
|------------------------ |  | ------------------------------- | ------
|                         |  | 2009                            |       
|                         |  | RMB                             |       
|                         |  |                                 |       
|                         |  | (in thousands)                  |       
|Short-termbankborrowings |  |                                 | 80,000
|Total                    |  |                                 | 80,000



The short-term borrowing
of RMB120.0 million (USD19.0 million) as of December 31, 2011represented the sum of six borrowings, comprising:



(i)      	the borrowing
of RMB32,100,000 effective from March 29, 2011 to March 28, 2012 with an annual interest rate of 7.257%; and

(ii)     	the borrowing
of RMB19,853,739 effective from June 20, 2011 to June 19, 2012 with an annual interest rate of 7.544%; and

(iii)    	the borrowing
of RMB28,000,000 effective from June 29, 2011 to April 28, 2012 with an annual interest rate of 7.544%; and

(iv)    	the borrowing
of RMB15,000,000 effective from August 26, 2011 to February 25, 2012 with an annual interest rate of 6.893%; and

(v)     	the borrowing
of RMB15,000,000 effective from September 30, 2011 to March 29, 2012 with an annual interest rate of 7.015%; and

(vi)    	the borrowing
of RMB10,000,000 effective from November 17, 2011 to November 16, 2012 with an annual interest rate of 6.560%.



The preceding three
borrowings were guaranteed by Beijing Sihitech and Mr. Weidong Hong without bearing guarantee fee.

The fourth and fifth
borrowings were guaranteed by Mr. Weidong Hong without bearing guarantee fee.

The last borrowing was
guaranteed by Yuxinyicheng without bearing gurarantee fee.



The following tablesets
forth a summary of our cash flows for the periods indicated.



- 76 -







|                                                             |  | For the Year Ended December 31, |        
|------------------------------------------------------------ |  | ------------------------------- | -------
|                                                             |  | 2009                            |        
|                                                             |  | RMB                             |        
|                                                             |  |                                 |        
|                                                             |  | (in thousands)                  |        
|Net cash provided by (used in)operating activities           |  |                                 | 64,974 
|Net cash used in investing activities                        |  |                                 | (55,438
|Net cash provided by (used in) financing activities          |  |                                 | (2,710 
|Net increase (decrease) in cash and cash equivalents         |  |                                 | 6,826  
|Cash and cash equivalents at beginning of year               |  |                                 | 239,751
|Effect on exchange rate changes on cash and cash equivalents |  |                                 | -      
|Cash and cash equivalents at end of year                     |  |                                 | 246,577



We had a net
cash inflow from operating activities of RMB33.8million (USD5.4million) in 2011 compared with a net cash out flow of
RMB24.6million in 2010. Our net cash inflow from operating activities in 2011was primarily due to the net income of RMB41.6
million.



We use percentage of completion method
for revenue recognition of our Software & Solutions. However, our billing schedules are not necessarily based on percentage
of completion schedule. As a result, there may be a timing difference between revenue recognition and actual billing for uncompleted
projects.



Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts are the amount of our revenue recognition ahead of the actual billing to our customers. Billings
in Excess of Costs and Estimated Earnings on Uncompleted Contracts are the amount of actual billings ahead of our revenue recognition.



The number of
uncompleted projects as of the end of fiscal year decreased from 491 in 2010 to 943 in 2011. Accumulated billings for a
project, which is at an earlier stage of completion is normally less than accumulated billings for the project which is at a
later stage of completion. The company normally starts issuing invoices when a project is 30% completed. As of December 31,
2011, 29.1% of uncompleted projects were less than 30% completed whereas 26.0% of uncompleted projects were less than 30%
completed as of December 31, 2010.



We had a net cash outflow
from operating activities of RMB24.6million (USD3.7 million) in 2010 compared with a net cash inflow of RMB65.0 million in 2009.
Our net cash outflow from operating activities in 2010 was primarily due to an increase in trade accounts receivables of RMB77.8
million, including an impact of dispose of POS Company of RMB29.0 million.



The number uncompleted
projects as of the end of fiscal year increased from 286 in 2009 to 491 in 2010. Accumulated billings for project which is at
an earlier stage of completion is normally less than accumulated billings for project which is at a later stage of completion.
The company normally starts issuing invoices when a project is 30% completed. As of December 31, 2010, 26% of uncompleted projects
were less than 30% completed whereas 8% of uncompleted projects were less than 30% completed as of December 31, 2009.



We
had a net cash inflow from operating activities of RMB65.0million (USD9.5 million) in 2009 compared with a net cash inflow of
RMB106.3 million in 2008, while our revenues decreased to RMB380.4 million (USD55.7 million) in 2009 compared with RMB676.8 million
in 2008. Our net cash inflow from operating activities in 2009 was primarily due to an decrease in trade accounts receivables
of RMB116.4 million, offset by a decrease in trade accounts payable of RMB51 million and an increase inthe billings in
excess of costs and estimated earnings on uncompleted contracts of RMB3.7million.The decrease of
accounts receivables was mainly due to implementation of a new compensation scheme gave incentive to our sales staff which resulted
in quicker collection of receivables from our customers.



- 77 -







As of December 31, 2011, the accumulated
balance of our statutory reserve funds amounted to RMB57.3 million (USD9.1 million), and the accumulated profits of our consolidated
PRC entities that were available for dividend distribution amounted to RMB369.8 million (USD58.7 million), there are differences
between the accumulated profits pursuant to Chinese Generally Accounting Principles and the reported accumulated profits in our
Form 20-F under U.S. GAAP. The total difference approximated RMB35.4 million (USD5.6 million) as of December 31, 2011. The major
differences are due to different treatment in the areas of i) revenue recognition; ii) capitalization of intangible assets; iii)
recognition of pre-contract costs and iv) recognition of tax losses. Allocations from these statutory surplus reserves may only
be used for specific purposes and are not distributable to us in the form of loans, advances, or cash dividends. In addition, the
registered capital and additional paid-in capital of the Company's PRC entities may not be transferred to the Company in form of
loans, advances or cash dividend without the consent of PRC government. As of December 31, 2011, the registered capital, additional
paid-in capital, and statutory surplus reserves amounted to RMB778.4 million (USD123.5 million).



Investing activities



Net cash used in
investing activities was RMB30.2 million (USD4.8 million) in 2011, primarily comprising payment of capital expenditure of
RMB25.3 million, and new investment of joint venture of RMB12.3 million, partially offset by proceeds from disposal of
investment under equity method of RMB11.5 million.,



Net cash used
in investing activities was RMB54.3 million (USD8.2 million) in 2010, primarily comprising payment of capital expenditure of
RMB21.4 million, payment of purchase of subsidiaries of RMB1.6 million and new investment of joint venture of RMB29.4
million, partially offset by proceeds from disposal of investment under equity method of RMB2.6 million.



Net cash used
in investing activities was RMB55.4 million (USD8.1 million) in 2009, primarily comprising payment of capital expenditure
of RMB35.6 million, advances to investments under equity method of RMB22.8 million, payment of purchase of subsidiaries
of RMB11.1 million and investment in equity method investments of RMB13.7 million, partially offset by collection of advances
to investments under equity method of RMB21.2 million and proceeds from disposal of investment under equity method of
RMB8.0 million.



Financing activities



Net cash provided
by financing activities was RMB38.6 million (USD6.1 million) in 2011, primarily comprising repayment of bank borrowings of
RMB81.0 million, and repayment of capital lease of RMB0.3 million, partially offset by proceeds from bank borrowings of
RMB120.0 million.



Net cash used in financing
activities was RMB5.2 million (USD0.8 million) in 2010, primarily comprising repayment of bank borrowings of RMB100.0 million,
dividends paid to ex-owners of RMB3.9 million and payment of capital lease of RMB2.2 million, partially offset by proceeds from
bank borrowings of RMB101.0 million.



Net cash used in financing
activities was RMB2.7 million (USD0.4 million) in 2009, primarily comprising repayment of bank borrowings of RMB188.5 million and
deemed distribution of RMB18.3 million, partially offset by proceeds from bank borrowings of RMB208.5 million.



- 78 -







CAPITAL EXPENDITURES



Our capital
expenditures amounted to RMB35.6 million, RMB21.2 million and RMB 34.1 million (USD5.4 million) in 2009, 2010 and 2011,
respectively. The capital expenditures for fixed assets including computer equipment, office equipment and furniture, and
vehicles are RMB5.8 million (USD0.9 million) and the capital expenditures for intangible assets are RMB 28.4 million (USD 4.5
million) including internal software development and acquired intangible assets from Tianjin Yuchengxin.



C. Research and development, patents
and license, etc.



For information on our
research and development activities and intellectual property information, see “Item 4. Information on the Company —
Business overview — Research and development” and “Item 4. Information on the Company — Business overview
— Intellectual property.”



D. Trend information.



For information on the
principal trends and uncertainties affecting our results of operations, financial condition and businesses, see “Item 3.
Key Information — Risk factors”, “Item 4. Information on the Company — Business overview” and elsewhere
in this Item.



- 79 -







E. Off-balance sheet
arrangements.



We have not entered into
any financial guarantees or other commitments to guarantee payment obligations of any third-parties.



F. Disclosure of contractual
obligations.



The following table sets
forth our contractual obligations and commercial commitments as of December 31,2011.



|                      |  | Total              |         |  | Within 1 Year |  |         | 1-3 years |  |  | 3-5 years |  |  | More than 5 years |  
|--------------------- |  | ------------------ | ------- |  | ------------- |  | ------- | --------- |  |  | --------- |  |  | ----------------- | -
|                      |  | (RMB in thousands) |        
|Bank debt             |  |                    | 119,954 |  |               |  | 119,954 |           |  |  | -         |  |  |                   | -
|Interest on bank debt |  |                    | 2,389   |  |               |  | 2,389   |           |  |  | -         |  |  |                   | -
|Operating leases      |  |                    | 2,376   |  |               |  | 2,170   |           |  |  | 206       |  |  |                   |  
|Total                 |  |                    | 124,719 |  |               |  | 124,513 |           |  |  | 206       |  |  |                   | -



Our capital leases primarily
relate to leases of computers, and our operating leases relate to the renting of our offices.



G. Safe harbor.



All information included
in Item 5.E and F of this Item is deemed to be a “forward looking statement” as that term is defined in the statutory
safe harbors, except for historical facts. The safe harbor provided in Section 27A of the Securities Act and Section 21E of the
Exchange Act (“statutory safe harbors”) shall apply to all forward-looking information provided in Item 5.E and F of
this Item.



|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



A.   Directors and senior
management.



The following table sets
forth certain information regarding our directors and executive officers as of March 31, 2011.



|Name              |    | Age                     |  | Position                                         
|----------------- | -- | ----------------------- |  | -------------------------------------------------
|Weidong Hong      |    | 45                      |  | Chairman of the Board and Chief Executive Officer
|ShuoZeng          |    | 42                      |  | Director, Chief Operating Officer                
|Steve Dai         | 45 | Chief Financial Officer
|Jeffrey RWilliams |    | 58                      |  | Independent Director                             
|Tianqing Chen     |    | 68                      |  | Independent Director                             
|Yingjun Li        |    | 61                      |  | Independent Director                             
|Zhengong Chang    |    | 61                      |  | Independent Director                             
|Ning Jia          |    | 32                      |  | Independent Director                             



Weidong Hong is our Chief Executive
Officer and Chairman of our board. Previously, Mr. Hong was the founder, Chairman and Chief Executive Officer of Beijing Sihitech,
which was incorporated into Yucheng Technologies in 2006. Prior to founding Beijing Sihitech in June 1999, Mr. Hong was part of
the senior management of Secom China Ltd., the Japanese publicly listed electronic security services provider, where from December
1994 to May 1997 he served as Vice President of the PC Department. From May 1997 to June 1999, Mr. Hong held the position of General
Manager of Beijing Global Infotech Co., Ltd., a company engaged in the business of providing IT services to the Chinese banking
industry. Mr. Hong holds a B.E. and an E.M.B.A. degree from Tsinghua University.



- 80 -







ShuoZeng is our
Chief Operating Officer and has served as a director of our board since November 2004. Mr. Zeng was the founder, Chairman and Chief
Executive Officer of e-Channels BVI. From July 1991 to May 2000, Mr. Zeng held several senior positions in the Nantian Group, a
manufacturer of electronic and communication equipment in China that is publicly listed in the Shenzhen Stock Exchange, including
General Manager of the Information Product Department and Finance Project & System Integration Department. Mr. Zeng holds a
B.E. in automation from Beijing Polytechnic University.



Steve Daiis our
Chief Financial Officer. Mr. Dai joined the company in May 2009. Before that, from June 2007 to April 2009 he was the Chief Financial
Officer of Beyondsoft Limited, one of the leading IT outsourcing companies in China. From 2004 to 2007, he was the Chief Financial
Officer of Airport City Development Co., Ltd. in Beijing, a leading logistics property and airport city development company in
China. He also worked in UBS in New York City and IBM in Austin, Texas. Mr. Dai holds a M.B.A. in Finance and Strategic Management
from the Wharton Business School of University of Pennsylvania, a M.S. in Electrical and Computer Engineering from University of
Miami, and a B.S. in Electrical Engineering from the University of Science and Technology of China.



Jeffrey R. Williams
is an independent director and has served on our board since February 2009. He has over 25 years of experience in China, Hong Kong
and Taiwan in the financial services industry. He currently serves as an independent director and risk management committee chair
of China Universal Asset Management Co. Prior to that, Mr. Williams was the President of Shenzhen Development Bank, where he served
as the first foreign president of a Chinese commercial bank. Previously, he held a number of senior executive positions at Citibank,
American Express and Standard Chartered within Greater China. Mr. Williams holds an A.B., magna cum laude, from Harvard College
and a M.B.A. from Harvard Business School.



Tianqing Chenengaged
in IT solutions development and management in China’s banking industry for more than forty years. Mr. Chen is one of the
most well-known experts in the industry and has won many top awards from various Ministries of China many times during his career.
Mr. Tianqing Chen served as the manager with the technology department of People’s Bank of China before his retirement. Prior
to that, Mr. Tianqing Chen worked as deputy chief engineer at Industrial and Commercial Bank of China. Mr. Chen graduated with
degree in computational mathematics from Tsinghua University in 1968.



Yingjun Li has
spent nearly 40 years at China Construction Bank (“CCB”) where he had various roles including president of Liaoning
provincial branch and Neimeng provincial branch. Mr. Li is currently a distinguished specialist at CCB headquarter. Mr. Li is a
certified senior accountant and certified senior banking specialist.



Zhengong Chang
is the Chairman of Beijing Fuyuejiasheng Investment Co., Ltd. Mr. Chang spent over twenty years in the United States and Canada
before he returned to China in 2010. Prior to his return, Mr. Chang was the President of CBL Data Recovery Technologies Inc. in
Toronto, Canada, and co-chairman of Federation of Sino-Canadian Business Marketing Association. Mr. Chang received his Master Degree
in Computer Science from Stevens Institute of Technology in New Jersey.



Ning Jia joined
the School of Economics and Management of Tsinghua University as an associate professor in accounting and financial management
in January 2008. Ms. Jia received her Ph.D. in accounting and Master Degree in statistics, both from Stanford University, and Bachelor
Degree in computer science from University of Minnesota.



B.    Compensation.



In 2011, the
aggregate total cash compensation and shares issued to our directors and executive officers as a group was approximately
RMB3.5 million (USD0.6 million) and 12,000 shares. Shares granted from 2006 performance equity plan are stated in the chart
found below.



- 81 -







2006 PERFORMANCE EQUITY PLAN



Stock options and other
equity based awards may be granted under the China Unistone Acquisition Corporation 2006 Performance Equity Plan, which became
the Yucheng Technologies Limited 2006 Performance Equity Plan (the “Plan”) by operation of law under the terms of our
merger with China Unistone Acquisition Corporation. On December 13, 2005, China Unistone’s board approved its 2006 Performance
Equity Plan and its shareholders subsequently approved the Plan. We obtained shareholder approval of the Plan in November 2006,
under which we could issue share options and restricted stock to our directors, officers, employees, and consultants with the right
to purchase up to 1,500,000 ordinary shares. The purpose of the Plan was to enhance its ability to recruit and retain employees,
officers, directors and consultants of outstanding ability and to further motivate them by providing an opportunity to acquire
a proprietary interest in our company.



Share-based compensation



In 2010 and 2011, we
entered into award agreements pursuant to our 2006 Performance Equity Plan, or the “Equity Plan”. Under the award agreements,
we have granted 1,385,232 restricted shares as of December 31, 2011.



We recognize share-based
compensation as compensation expense in our statement of operations based on the fair value of equity awards on the grant date.
With compensation expense recognized over the period in which the recipient is required to provide service in exchange for the
award (usually the vesting period). For options and restricted share units granted to employees, we measure share-based compensation
expenses or the fair value of the options and restricted share units at the grant date. We recognize such share-based compensation
expenses over the vesting period of the options and restricted share units. The estimate of forfeitures will be adjusted over the
requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes
in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change.



Share Incentive Plans



2006 Performance Equity
Plan



Plan Administration.
Our board of directors or our compensation committee administer 2006 Performance Equity Plan. The compensation committee or
the full board of directors, as appropriate, will determine the provisions, terms and conditions of our awards.



Types of Awards. The
following briefly describe the principal features of the various awards that may be granted under our 2006 Performance Equity Plan.



•     	Restricted
Shares. A restricted share award is the grant of our ordinary shares at a price determined by our plan administrator. A restricted
share is nontransferable, unless otherwise determined by our plan administrator at the time of award and may be repurchased by
us upon termination of employment or service during a restricted period. Our plan administrator shall also determine in the award
agreement whether the participant will be entitled to vote the restricted shares or receive dividends on such shares.



The following table
summarizes, from January 1, 2010 to March 31, 2012, the outstanding restricted shares that we granted to our directors and officers
under our 2006 Performance Equity Plan.



|          |  | Restricted Shares |        |            |  | End of Vesting | 
|--------- |  | ----------------- | ------ | ---------- |  | -------------- | 
|Name      |  | Units Granted     |        | Grant Date |  | Period         | 
|ShuoZeng  |  |                   | 50,000 |            |  | August 3, 2010 | 
|Steve Dai |  |                   | *      |            |  | August 3, 2010 | 



- 82 -







|          |  | Restricted Shares |        |            |  | End of Vesting | 
|--------- |  | ----------------- | ------ | ---------- |  | -------------- | 
|Name      |  | Units Granted     |        | Grant Date |  | Period         | 
|ShuoZeng  |  |                   | 30,000 |            |  | April 18, 2011 | 
|Steve Dai |  |                   | *      |            |  | April 18, 2011 | 



*     Upon exercising of
all options that are exercisable with 60 days after March 31, 2012 and vesting of all restricted shares unites that are to be vested
within 60 days after March 31, 2012, would beneficially own less than 1% of our outstanding ordinary shares.



Administration.
Our compensation committee administers the Plan. Subject to the provisions of the Plan, the compensation committee determines,
among other things, the persons to whom from time to time awards may be granted, the specific type of award to be granted, the
number of shares subject to each award, share prices, any restrictions or limitations on the awards, and any vesting, exchange,
surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards. The committee makes
all determinations of any questions arising under the Plan or any rule or regulation established pursuant to the Plan.



Eligible participants.
Awards may be granted to employees, officers, directors and consultants who are deemed to have rendered or are able to render significant
services to us, and who have contributed or have the potential to contribute to our success. Incentive stock options may only be
awarded to individuals who are our employees at the time of grant. However, an award may be granted in connection with an individual’s
hiring or retention, at any time on or after the date he or she reaches an agreement with us.



Share reserve.
The Plan reserves 1,500,000 ordinary shares to be granted as awards. The total number of ordinary shares available for issuance
under the Plan is subject to the adjustment in the event of any merger, reorganization stock split, reverse stock split, stock
dividend payable on our ordinary shares, combination or exchange of shares, or other extraordinary event resulting in a change
of our shares as a whole.



Options. Under
the Plan, our compensation committee may award stock options that are intended to qualify as “incentive stock options”
within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, as well as those not intended
to be so qualified. Our compensation committee will fix the term of each stock option. However, incentive stock options may be
granted only within the ten-year period commencing from the effective date of the Plan, and may only be exercised within ten years
from the date of the grant, or five years from the date of the grant in the case of a participant who at the time the stock option
is granted owns more than 10% of the total combined voting power of all of our classes of voting securities. The exercise price
of stock options granted under the Plan will be determined by our compensation committee at the time of the grant, but in no event
will the price be less than the market price of any share of common stock. The number of shares covered by incentive stock options
which become exercisable for the first time by participants in any year cannot have an aggregate fair market value in excess of
USD100,000, measured at the date of the grant. Payment of the exercise price may be made in cash, in shares of our ordinary shares
owned by the participant, in a combination of the two, or otherwise, as reflected in the applicable award agreement. Unless otherwise
provided in the grant of a stock option, if a participant’s employment with us or any of our subsidiaries is terminated for
any reason other than due to death or disability, the participant’s stock option will automatically terminate. In addition,
if a holder’s employment with us is terminated for cause, the compensation committee may require this holder to return to
us the economic value of any shares realized by that holder during the six month period prior to the holder’s termination.
However, if the participant’s employment is terminated without cause or due to retirement on or after the age of 65, then
the portion of his or her stock option which has vested as of the date of termination may be exercised: for three months after
termination or for the balance of the stock option’s exercise period, whichever is shorter; or for a greater or lesser period
as may be specified by the compensation committee in the grant.



- 83 -







Stock appreciation
rights.  Under the Plan, our compensation committee may grant stock appreciation rights to participants who have received
or are receiving stock options.  A stock appreciation right entitles the holder to surrender to us all or a portion of
a stock option in exchange for a number of shares of our ordinary shares determined by multiplying the excess of the fair market
value per share of our ordinary shares on the exercise date over the exercise price per share by the number of shares subject to
the stock option and then dividing it by the fair market value of the ordinary shares on the date the stock appreciation right
is exercised.



Restricted stock.  Our
compensation committee may award shares of our ordinary shares which are subject to restrictions as the compensation committee
may determine in addition to, or in lieu of, other awards granted to participants under the Plan.  The compensation committee
will determine at the time of the award, the period during which the award may be subject to forfeiture and the vesting schedule
of the shares under the award.  A participant will have the right to vote the restricted stock granted to him and to
receive dividend payments distributed on the shares in the form of cash or cash equivalents.



Deferred stock.  Our
compensation committee may award shares of our ordinary shares to be received at the end of a specified deferral period and upon
satisfaction of any other applicable restrictions, terms and conditions provided for in the grant of the award.  Any
deferred stock that does not vest will be forfeited.  A participant will not have any rights as a stockholder by virtue
of the award of deferred stock until the expiration of the applicable deferral period and the issuance and delivery of a stock
certificate evidencing the award of the deferred stock.  A participant may request that the compensation committee defer
issuance of an award of deferred shares for an additional specified period, subject to certain conditions.



Stock reload options.  Our
compensation committee may grant to a participant an option covering a number of shares up to the amount of shares of our ordinary
shares held by the participant for at least six months, which is used to pay all or part of the exercise price of an option, and
any shares withheld by us as payment for withholding taxes.  Any stock reload option will have an exercise price equal
to the fair market value of our ordinary shares as of the date of the exercise of the stock option to which it is related.  Unless
otherwise provided in the stock reload option grant, a stock reload option may be exercised commencing one year after it is granted
and will expire on the date of expiration of the stock option to which the reload option is related.



Other stock-based
awards.  Our compensation committee may award other stock-based awards, subject to limitations under applicable law,
in addition to, or in lieu of, other awards granted to participants under the Plan.  These other stock-based awards are
payable in, valued in, or otherwise based on, or related to, our ordinary shares.  These other stock-based awards may
be in the form of the right to purchase our ordinary shares which are not subject to any restrictions or conditions, convertible
or exchangeable debentures or other rights convertible into shares of our ordinary shares, as well as awards valued by reference
to the value of securities of, or the performance of, one of our subsidiaries.



Change of control
and accelerated vesting.The Plan provides that in the event of a change of control event, as described in the plan, not
approved by our board, the vesting periods with respect to options and awards granted and outstanding under the Plan shall become
fully vested and exercisable.  Where such change of control event is approved by our board, the compensation committee
may (i) accelerate the vesting of any and all stock options and other awards granted and outstanding under the Plan or (ii) require
a holder of any award granted under the Plan to relinquish the award to us upon payment by us to the holder of cash in an amount
equal to the fair market value of the award for ordinary shares, or the difference between the fair market value of the award and
the award’s exercise price (if lower than the fair market value) for options or stock appreciation rights, or USD0.01 per
share for awards that are out-of-the money.



Transferability.  With
respect to the transferability of stock options, except as expressly provided in the Plan, expressly provided in the award agreement
or in certain limited circumstances, the right to exercise stock options, receive restricted stock after the expiration of the
restriction period or deferred stock after the expiration of the deferral period, receive payment under other stock-based awards,
or exercise a stock appreciation right cannot be transferred except by will or the laws of descent and distribution.  However,
with the approval of the compensation committee, a participant may transfer a stock option under certain limited circumstances.

- 84 -







Amendment and Termination.  The
Plan will terminate when there are no awards outstanding and when no further awards may be granted, provided that incentive options
may only be granted until December 13, 2015.  Our board has the right to amend, suspend or discontinue any provision
of the Plan, provided that the action may not adversely affect awards previously granted between a participant and us without the
participant’s consent.



EMPLOYMENT AGREEMENTS



We have entered into
employment agreements with each of Messrs. Weidong Hong and ShuoZeng.  Compensation of our executives is comprised
of salaries and bonuses, including equity bonuses.  They are also provided regular benefits in accordance with PRC laws
and regulations.  In addition, if the employment of an executive is terminated by us without cause, the executive is
entitled to USD300,000 and other benefits throughout the term of the agreement.  Our employment agreements with independent
directors can be terminated with or without cause.



C.    Board Practices.



TERMS OF DIRECTORS AND EXECUTIVE OFFICERS



Our board consists of
seven directors.  Our directors are not subject to a term of office limitation, and hold office until the next annual
meeting of members or until such director’s earlier resignation, removal from office, death or incapacity.  Any
vacancy on our board resulting from death, resignation, removal or other cause, and any newly created directorship resulting from
any increase in the authorized number of directors between meetings of members, may be filled either by the affirmative vote of
a majority of all the directors then in office (even if less than a quorum) or by a resolution of members.



Our officers are appointed
by our board.  The officers shall hold office until their successors are duly elected and qualified, but any officer
elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors.  Any
vacancy occurring in any office may be filled by resolution of directors.



INDEPENDENCE OF DIRECTORS



We have elected to follow
the rules of NASDAQ to determine whether a director is independent.  Our board will also consult with counsel to ensure
that our board’s determinations are consistent with those rules and all relevant securities and other laws and regulations
regarding the independence of directors.  The NASDAQ listing standards define an “independent director” generally
as a person, other than an officer of the Company, who does not have a relationship with the Company that would interfere with
the director’s exercise of independent judgment.  Consistent with these considerations, our board has affirmatively
determined that, Jeffrey R Williams, Tianqing Chen, Yingjun Li, Zhengong Chang, and Ning Jiaare our independent directors.



BOARD COMMITTEES



Our board has established
an audit committee, a nominating committee, a compensation
committee and a strategy committee.



- 85 -







Audit Committee



Our audit
committee consists of Yingjun Li, Jeffrey R Williams and Ning
Jia.  Our board has determined that all of our audit committee members are independent directors within the meaning
of NASDAQ Marketplace Rule 4200(a)(15), and meet the criteria for independence set forth in Rule 10A-3(b)(1) of the
Securities and Exchange Act of 1934, as amended, or the Exchange Act.



Our board has
determined that each of Yingjun Li, Jeffrey R Williams and
Ning Jia has an understanding of generally accepted accounting principles and financial statements, the ability to assess the
general application of such principles in connection with our financial statements, including estimates, accruals and reserves,
experience in analyzing or evaluating financial statements of similar breadth and complexity as our financial statements, an understanding
of internal controls and procedures for financial reporting, and an understanding of audit committee functions.



We adopted an audit
committee charter under which the committee is responsible for reviewing the scope, planning and staffing of the audit and preparation
of the financial statements.  This includes consultation with management, the auditors and other consultants and professionals
involved in the preparation of the financial statements and reports.  The committee is responsible for performing oversight
of relationship with our independent auditors.  The committee also has a general compliance oversight role in assuring
that our directors, officers and management comply with our code of ethics, reviewing and approving of related party transactions,
dealing with complaints regarding accounting, internal controls and auditing matters, and complying with accounting and legal
requirements applicable to us.



Pursuant to the terms
of its charter, the audit committee’s responsibilities include, among other things:



| | — | periodically reviewing and reassessing the adequacy of the committee’s formal charter;
| | - | --------------------------------------------------------------------------------------



| | — | reviewing our annual audited financial statements with our management and our independent auditors and the adequacy of our internal accounting controls;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | reviewing analyses prepared by management and independent auditors concerning significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | the engagement of the independent auditors;
| | - | -------------------------------------------



| | — | reviewing the independence of the independent auditors;
| | - | -------------------------------------------------------



| | — | reviewing our auditing and accounting principles and practices with the independent auditors, and reviewing major changes to our auditing and accounting principles and practices as suggested by the independent auditors or our management;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | the appointment of the independent auditors to our board, which firm is ultimately accountable to the audit committee and our board;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | — | approving professional services provided by the independent auditors, including the range of audit and non-audit fees; and
| | - | --------------------------------------------------------------------------------------------------------------------------



| | — | reviewing all related party transactions on an ongoing basis for potential conflicts of interest.
| | - | -------------------------------------------------------------------------------------------------



The audit committee will
pre-approve the services to be provided by our independent auditors.  The audit committee will also review and recommend
to the board of directors whether or not to approve transactions between us and any officer or director that occurs outside the
ordinary course of business.



- 86 -







Compensation Committee



Our compensation committee
consists of Jeffrey R Williams, Zhengong Chang and Tianqing Chen, each of whom is an “independent director” as that
term is used in the NASDAQ corporate governance rules.  Our compensation committee assists the board in reviewing and
approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided
to our directors and executive officers.  The responsibilities of our compensation committee include, among other things:



| | — | reviewing and recommending to the board with respect to the total compensation package for our executive officers;
| | - | ------------------------------------------------------------------------------------------------------------------



| | — | reviewing and recommending to the board with respect to the compensation of our directors;
| | - | ------------------------------------------------------------------------------------------



| | — | reviewing periodically and recommending to the board with respect to any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans; and administer our stock option plans, including authority to make and modify awards under such plans.  Currently, our only equity award plan is the 2006 Performance Equity Plan; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | evaluating the risk to our company of the compensation structures, policies, and amounts.
| | - | -----------------------------------------------------------------------------------------



Nominating Committee



Our nominating committee
consists of Tianqing Chen,Jeffrey R Williams and Zhengong Chang.  The nominating committee is responsible for overseeing
the selection of persons to be nominated to serve on our board.  The nominating committee will identify, evaluate and
recommend candidates to become members of our board with the goal of creating a balance of knowledge and experience. The committee
does not consider diversity to be a factor in its evaluation process.



The committee will also
consider suggestions from individual shareholders, based upon its assessment of certain criteria, including the proposed person’s
merits.  The suggested nominee must provide a statement of consent to being considered for nomination.



Strategy Committee



The Strategy Committee
is chaired by Mr. Weidong Hong and includes of Mr. ShuoZeng, Mr. Jeffrey R Williams, and Mr. Yingjun Li.



The Strategy Committee
assists the Board of Directors in carrying out its oversight responsibilities relating to potential mergers, acquisitions, divestitures
and other key strategic transactions outside the ordinary course of the Corporation’s business.  In fulfilling its role,
the Strategy Committee:



| | — | reviews, and provides guidance to management and the Board with respect to, the Corporation’s strategy for Corporate Strategic Transactions;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | — | assists management and the Board with the review of proposals made by management for Corporate Strategic Transactions, when and as appropriate;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | — | notifies the Nominating and Corporate Governance Committee of the Board of any conflict of interest or related party transaction that comes to the attention of the Committee in the exercise of its duties; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | performs any other activities or responsibilities as may be delegated to the Committee, from time to time, by the Board.
| | - | ------------------------------------------------------------------------------------------------------------------------



- 87 -







D.    Employees.



We had 2,208, 2,271 and 2,646 employees
as of December 31, 2009, 2010 and 2011, respectively. The number of employees in 2009 included the employees of POS
Company. The following table sets forth our employees as of December 31, 2011 based on functional area.



|Category                               |  | Number of Employees |      
|-------------------------------------- |  | ------------------- | -----
|Project development and implementation |  |                     | 2,331
|Research and development               |  |                     | 89   
|Sales and marketing                    |  |                     | 53   
|General and administrative             |  |                     | 173  
|Total                                  |  |                     | 2,646



We pay our sales staff
a combination of salaries, sales commissions and bonuses.  We pay salaries to all other employees, which are supplemented
by periodic cash bonuses that are generally based on performance.  We also contribute to social insurance for our employees
each month, which includes pension, medical insurance, unemployment insurance, occupational injuries insurance and housing provision
funds in accordance with PRC regulations.  Our compensation and benefits packages are competitive in the industry.  Our
employees are not represented by any collective bargaining agreement and we have never experienced any strike or similar work stoppage.  We
consider our relations with our employees to be good.



We invest significant
resources in the training and development of our employees.  We require our employees to participate in our various internal
training programs.  Through these programs, we help ensure that each entry-level employee acquires the necessary skills
to execute its duties and other employees continue to maintain and improve their current skill-sets.  In addition to
trainings on technical skills and development, we also provide training programs that cover topics ranging from our clients, our
market and the financial services industry in general.



E.    Share ownership.



The following table sets
forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2011, by:



| | — | each of our directors and executive officers who beneficially own our ordinary shares; and
| | - | ------------------------------------------------------------------------------------------



| | — | each person known to us to own beneficially more than 5.0% of our ordinary shares.
| | - | ----------------------------------------------------------------------------------



- 88 -







Related parties identified for the years
ended December 31, 2009, 2010, and 2011are summarized as follows:



|Relationship with being held by the Company     |  | Shareholding in Yucheng or
shareholding the Company |  | for 2009 |       | for 2010 |  | for 2011
|----------------------------------------------- |  | --------------------------------------------------- |  | -------- | ----- | -------- |  | --------
|                                                |  |                                                     |  |          |       |          |  |         
|Mr. Weidong Hong                                |  | Shareholder and CEO                                 |  |          | 16.47 | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|Mr. ShuoZeng                                    |  | Shareholder and COO                                 |  |          | 5.19  | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|Sihitech (HK) Co., Ltd.                         |  | Controlled by                                       |  |          |       |          |  |         
|                                                |  | Mr. Weidong Hong                                    |  |          | N/A   |          |  | N/A     
|                                                |  |                                                     |  |          |       |          |  |         
|Hainan Baodaotong                               |  | Investment under                                    |  |          |       |          |  |         
|Technologies Limited                            |  | cost method                                         |  |          |       |          |  |         
|(“Baodaotong”)                                  |  |                                                     |  |          | 15    | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|YuchengSinowise                                 |  | Investment under                                    |  |          |       |          |  |         
|Consultancy Services                            |  | equity method                                       |  |          |       |          |  |         
|Limited (“Sinowise”)                            |  |                                                     |  |          | 40    | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|Yuxin Data Technologies                         |  | Investment under                                    |  |          |       |          |  |         
|Co., Limited (“Yuxin Data”)                     |  | equity method                                       |  |          | 0     | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|Beijing Yuxinyicheng                            |  | Investment under                                    |  |          |       |          |  |         
|Internet Technologiesequity method Co., Limited |  |                                                     |  |          |       |          |  |         
|(“Yuxinyicheng Internet”)                       |  |                                                     |  |          | 0     | %        |  |         
|                                                |  |                                                     |  |          |       |          |  |         
|Zhejiang Yuxinbanke                             |  |                                                     |  |          |       |          |  |         
|Information Technologies                        |  | Investment under                                    |  |          |       |          |  |         
|Limited (“Yuxinbanke”)                          |  | equity method                                       |  |          | 0     | %        |  |         



| | Note1: | Before the Share Exchange Transaction was completed
on November 24, 2006, Mr. Weidong Hong held 42% of Sihitech.
| | ------ | ----------------------------------------------------------------------------------------------------------------

| | Note 2: | Before the Share Exchange Transaction was completed
on November 24, 2006, Mr. ShuoZeng held 43% of e-Channels.
| | ------- | --------------------------------------------------------------------------------------------------------------



None of the above shareholders
have voting rights that differ from the voting rights of other shareholders. We have not granted any stock options.



|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



A.   Major shareholders



Please refer to “Item
6. Directors, Senior Management and Employees — E. Share ownership.”



B.   Related party transactions.



CASH ADVANCES AND BORROWINGS WITH RELATED
PARTIES



In 2006, we made cash
advances to, and borrowed from certain related parties, including our executive officers and investments under equity method.  These
transactions had no fixed terms and were non-interest bearing and payable on demand.   In compliance with the provisions
of the Sarbanes-Oxley Act of 2002, we, neither directly nor indirectly nor through any subsidiary, will make loans, extend credit,
maintain credit or arrange for the extension of credit or renew an extension of credit in the form of a personal loan to or for
any director or executive officer of the Company in the future.  Moreover, we have adopted an audit committee charter
that requires our audit committee to review and approve all related party transactions, assure compliance with the Company’s
code of ethics and monitor and discuss with the auditors and outside counsel policies and compliance with applicable accounting
and legal standards and requirements.



- 89 -







Cash advances made to and borrowings with
our executives



We have made cash advances
to Mr. Weidong Hong, our Chief Executive Officer and principal shareholder and Mr. ShuoZeng, our Chief Operating Officer and principal
shareholder for incurring and paying operating expenses on behalf of the Company.  In 2009, we made cash advances to
the two executives of an aggregate of approximately RMB0.1 million(USD0.01 million), and collected the amount in 2009. In 2010,
we made cash advances for expenses to the two executives of an aggregate of RMB0.1 million (USD 0.02 million), and collected the
amount in 2010. There was no balance due to the two executives as of December 31, 2010 and 2011.



Cash advances made to and borrowings from
our affiliates



Our affiliate companies
in 2009, 2010 and 2011 included the following:

| | — | Chengdu Elegon Information Technologies Limited, or Elegon, a software and solution
    services company, in which we held 49% interest. We sold our 49% equity stake in Elegonto 3i Infotech,Ltd. in June,
    2009.   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                         
| | · | Hainan Baodaotong Technologies Limited, or Baodaotong, in which we held 15% interest in 2009. On
    April 30, 2010, Yuxinyicheng sold its entire interest in Baodaotong to a third party due to business consideration.
| |   |                                                                                                                                                                                                                         
| | · | Yucheng Sinowise Consultancy Service Limited, or Sinowise, a consulting service company, in which we held 40% interest.                                                                                                 
| |   |                                                                                                                                                                                                                         
| | · | Yuxin Data Technologies Co., Limited, or Yuxin Data, in which we held 49% interest.                                                                                                                                     
| |   |                                                                                                                                                                                                                         
| | · | Beijing Yuxinyicheng Internet Technologies Co., Limited, or Yuxinyicheng Internet, in which we held 30% interest.                                                                                                       
| |   |                                                                                                                                                                                                                         
| | · | Zhejiang Yuxinbanke Information Technologies Limited, or Yuxinbanke, in which we held 40% interest.                                                                                                                     



In 2009, we
collected RMB143 from Elegon and there was no balance due from Elegon as of December 31, 2009. We made cash advances of
approximately RMB20.9 million (USD3.1 million) to Baodaotong, and collected approximately RMB20.6 million (USD3.0
million)from Baodaotong in 2009. The balance due from Baodaotong was RMB0.3 million as of December 31, 2009. We made cash
advances of approximately RMB1.9 million (USD0.3 million) to Sinowise, and collected approximately RMB0.6 million (USD0.1
million) from Sinowise in 2009. The balance due from Sinowise was RMB1.3 million (USD0.2 million) in 2009.



In 2010, we made
cash advances of approximately RMB4.6 million (USD0.7 million) to Sinowise. The balance due from Sinowise was RMB5.9 million
(USD0.9 million)as of December 31, 2010. We made cash advances of approximately RMB0.9 million (USD0.1 million) to Yuxin
Data,and collected approximately RMB0.7 million (USD0.1 million) from Yuxin Data in 2010. The balance due to Yuxin Data was
RMB3.9 million (USD0.6 million) in 2010, including a purchase from Yuxin Data was RMB 4.1 million (USD 0.6 million)



In 2011, we
made cash advances of approximately RMB2.1 million (USD0.3 million) to Sinowise, and collected approximately RMB54.2
thousand (USD8.6 thousand) from Sinowise in 2011. The balance due from Sinowise was RMB9.0 million (USD1.4 million) in 2011.
We made cash advances of approximately RMB1.3 million (USD0.2million) to Yuxin Data, and collected approximately RMB3.8
thousand (USD0.6 thousand) from Yuxin Data in 2011. The balance due to Yuxin Data was RMB1.5 million (USD0.2 million) in
2011. We made cash advances of approximately RMB5.7 million (USD0.9 million) to Yuxinyicheng Internet,and collected
approximately RMB5.0 million (USD0.8 million) from Yuxinyicheng internet in 2011. The balance due from Yuxinyicheng Internet
was RMB3.5 million (USD0.6 million) in 2011.



C.   Interests of experts
and counsel.



Not applicable.



- 90 -







|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



A.   Consolidated statements
and other financial information.



We have appended consolidated
financial statements filed as part of this annual report.  See “Item 18. Financial Statements.”



LEGAL PROCEEDINGS



We are subject to legal
proceedings, investigations and claims incidental to the conduct of our business from time to time.  Other than the legal
proceeding described below, we are neither currently a party to, nor are we aware of, any legal proceeding, investigation or claim
that is likely to have a material adverse effect on our business, financial condition or results of operations.



The Company was a defendant
in the matter of Justin Jiang v. Yucheng Technologies Limited et al., filed on March 21, 2007 in the United States District Court
for the Southern District of California, Civil Case No. 3:07-CV-00514-H-BLM (“Federal Court”). The other defendants
were Beijing Sihitech Co. and Chih T. Cheung. As against the Company, plaintiff alleged the Company breached an oral contract with
him regarding a finder’s fee. Plaintiff has requested specific performance and/or a constructive trust.



Additionally, plaintiff
has made a demand for general damages, $109,275.36 cash, the issuance of 150,179 shares of the Company to plaintiff, and the payment
of 4% of any future compensation which Sihitech and its shareholders are entitled to receive as a result of China Unistone’s
acquisition of Sihitech.



Counsel for the Company
filed a Motion to Dismiss the action on the ground that the court lacked personal and subject matter jurisdiction over the Company. The
Motion to Dismiss was granted and the Federal Court dismissed the case on July 20, 2007. The grounds for dismissal at that time
permitted the refiling of the claims in a court of appropriate jurisdiction.



Plaintiff refiled its
action in the Superior Court of the State of California for the County of San Diego (“State Court”) in which the matter
was pending as Case No. 37-2007-00073543-CU-BC-CTL. The lawsuit named as defendants the Company, China Unistone Acquisition Corporation,
Beijing Sihitech Co., Ltd. and Chih T. Cheung. Counsel for the Company moved to dismiss the action for lack of proper service
and lack of personal jurisdiction. On April 22, 2008, the State Court granted the motion to dismiss and ordered the case dismissed
for, among other things, lack of personal jurisdiction over the defendants as they are not residents of California and did not
have sufficient contacts with California to allow this matter to proceed in California.



On September 9, 2008, plaintiff
filed an appeal of the dismissal of the State Court action and that appeal was not successful. The court of appeal issued its order
denying the appeal and affirming the dismissal on November 2009. The decision of the court of appeal is now final, and plaintiff
has no right to bring the claim against the Company in California. Because the decision of the court was on jurisdictional grounds
only, it would not prevent plaintiff from bringing claims in such other jurisdiction as might be appropriate.



DIVIDEND POLICY



We have never declared
or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future.  We
currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.



Our board of directors
may, by resolution, authorize payment of dividends if the directors are satisfied, on reasonable grounds, we will, immediately
after the distribution of dividends, satisfy the solvency test as stipulated in Section 56 of the BVI Business Companies Act.  Even
if our board decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital
requirements and surplus, general financial condition, contractual restrictions and other factors that our board may deem relevant.

- 91 -







Our ability to
pay dividends depends substantially on the payment of dividends to us by our PRC subsidiaries.  In particular, each
of our PRC subsidiaries may pay dividends only out of its accumulated distributable profits, if any, determined in accordance
with its articles of association and the accounting standards and regulations in China.  Moreover, pursuant to
applicable PRC laws and regulations, 10% of after-tax profits of each of our consolidated PRC entities is required to be set
aside in a statutory surplus reserve fund annually until the reserve balance reaches 50% of such PRC entity’s
registered capital.  As of December 31, 2011, the accumulated balance of our statutory reserve funds amounted to
RMB57.3 million (USD9.1 million), and the accumulated profits of our consolidated PRC entities that were available for
dividend distribution amounted to RMB369.8 million (USD58.7 million), there are differences between the accumulated profits
pursuant to Chinese Generally Accounting Principles and the reported accumulated profits in our Form 20-F under U.S. GAAP.
The total difference approximated RMB35.4 million (USD5.6 million) as of December 31, 2011. The major differences are due to
different treatment in the areas of i) revenue recognition; ii) capitalization of intangible assets; iii) recognition of
pre-contract costs and iv)recognition of tax losses. Allocations from these statutory surplus reserves may only be used for
specific purposes and are not distributable to us in the form of loans, advances, or cash dividends. In addition, the
registered capital and additional paid-in capital of the Company's PRC entities may not be transferred to the Company in form
of loans, advances or cash dividend without the consent of PRC government. As of December 31, 2011, the registered capital,
additional paid-in capital, and statutory surplus reserves amounted to RMB468.4 million (USD73.3 million). Furthermore, if
any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other payments to us. Moreover, under the New EIT Law and its implementation rules issued by
the PRC State Council, both of which became effective on January 1, 2008, dividends from our PRC subsidiaries to us may be
subject to a withholding tax at the rate of 10% if such dividend is derived from profits generated after January 1, 2008. If
we are deemed to be a PRC resident enterprise, the withholding tax may be exempted, but in such a case we will be subject to
a 25% tax on our global income, and our non-PRC investors may be subject to PRC income tax withholding. However, we have
never declared or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the
foreseeable future. As a result, currently it has no adverse impact on our operations and our planned use of our capital.



Under the New EIT Law
and its implementation rules issued by the PRC State Council, both of which became effective on January 1, 2008, dividends from
our PRC subsidiaries to us may be subject to a withholding tax at the rate of 10% if such dividend is derived from profits generated
after January 1, 2008.  If we are deemed to be a PRC resident enterprise, the withholding tax may be exempted, but in
such a case we will be subject to a 25% tax on our global income, and our non-PRC investors may be subject to PRC income tax withholding.  See
“Item 10. Additional Information — E. Taxation — PRC Taxation”.



Cash dividends on our
ordinary shares, if any, will be paid in U.S. dollars.



B.   Significant changes.



We have not experienced
any significant changes since the date of our audited consolidated financial statements included in this annual report.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



A.   Offering and listing
details.



The common stock of China
Unistone was quoted on the Over-The-Counter Bulletin Board, or OTCBB, under the symbol “CUAC.OB.”  China
Unistone merged with and into Yucheng for the purpose of redomestication out of the United States.  From November 27,
2004 to March 13, 2007, our ordinary shares were quoted on the OTCBB under the symbol “YCHTF.OB.”  On March
14, 2007, our ordinary shares were admitted for listing on the NASDAQ Global Market under the symbol “YTEC.”



- 92 -







The following table sets
forth the historical high and low trading prices for our ordinary shares, and those for the common stock of China Unistone, for
the periods indicated.  The OTCBB market quotations reported below reflect inter-dealer prices, without markup, markdown
or commissions and may not represent actual transactions.



|                                          |  | The OTCBB    |      |  | The NASDAQ      | 
|----------------------------------------- |  | ------------ | ---- |  | --------------- | 
|                                          |  | Price Per    |      |  | Global Market   | 
|                                          |  | Common Stock |      |  | Price Per Share | 
|                                          |  | High         |      |  | Low             | 
|                                          |  | (USD)        |     
|                                          |  |              |      |  |                 | 
|Annual Market Prices                      |  |              |      |  |                 | 
|Year 2004 (from November 24, 2004)        |  |              | 5.20 |  |                 | 
|Year 2005                                 |  |              | 6.75 |  |                 | 
|Year 2006                                 |  |              | 8.85 |  |                 | 
|Year 2007 (until March 13, 2007)          |  |              | 8.30 |  |                 | 
|Year 2007 (from March 14, 2007)           |  |              | N/A  |  |                 | 
|Year 2008                                 |  |              | N/A  |  |                 | 
|Year 2009                                 |  |              | N/A  |  |                 | 
|Year 2010                                 |  |              | N/A  |  |                 | 
|Year 2011                                 |  |              | N/A  |  |                 | 
|                                          |  |              |      |  |                 | 
|Quarterly Market Prices                   |  |              |      |  |                 | 
|First Quarter 2007 (until March 13, 2007) |  |              | 8.30 |  |                 | 
|First Quarter 2007 (from March 14, 2007)  |  |              | N/A  |  |                 | 
|Second Quarter 2007                       |  |              | N/A  |  |                 | 
|Third Quarter 2007                        |  |              | N/A  |  |                 | 
|Fourth Quarter 2007                       |  |              | N/A  |  |                 | 
|First Quarter 2008                        |  |              | N/A  |  |                 | 
|Second Quarter 2008                       |  |              | N/A  |  |                 | 
|Third Quarter 2008                        |  |              | N/A  |  |                 | 
|Fourth Quarter 2008                       |  |              | N/A  |  |                 | 
|First Quarter 2009                        |  |              | N/A  |  |                 | 
|Second Quarter 2009                       |  |              | N/A  |  |                 | 
|Third Quarter 2009                        |  |              | N/A  |  |                 | 
|Fourth Quarter 2009                       |  |              | N/A  |  |                 | 
|First Quarter 2010                        |  |              | N/A  |  |                 | 
|Second Quarter 2010                       |  |              | N/A  |  |                 | 
|Third Quarter 2010                        |  |              | N/A  |  |                 | 
|Fourth Quarter 2010                       |  |              | N/A  |  |                 | 
|First Quarter 2011                        |  |              | N/A  |  |                 | 
|Second Quarter 2011                       |  |              | N/A  |  |                 | 
|Third Quarter 2011                        |  |              | N/A  |  |                 | 
|Fourth Quarter 2011                       |  |              | N/A  |  |                 | 
|                                          |  |              |      |  |                 | 
|Monthly Market Prices                     |  |              |      |  |                 | 
|2011 November                             |  |              | N/A  |  |                 | 
|2011 December                             |  |              | N/A  |  |                 | 
|2012 January                              |  |              | N/A  |  |                 | 
|2012 February                             |  |              | N/A  |  |                 | 
|2012 March                                |  |              | N/A  |  |                 | 



On March 31, 2012, the
closing price of our ordinary shares was USD3.19 per share.



- 93 -







B.    Plan of distribution.



Not applicable.



C.   Markets.



See Item 9.A above.



D.   Selling shareholders.



Not applicable.



E.   Dilution.



Not applicable.



F.   Expenses of the issue.



Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



A.   Share capital.



Not applicable.



B.   Memorandum and articles
of association.



SUMMARY OF MEMORANDUM AND ARTICLES OF ASSOCIATION



Charter



Our charter documents
consist of our Memorandum of Association and Articles of Association.  The Memorandum of Association and the Articles
of Association loosely resemble the articles of incorporation and the bylaws, respectively, of a corporation incorporated in a
state in the United States.  We may amend our Memorandum of Association and Articles of Association by a resolution of
our shareholders or by a resolution of our directors.  This description and summary does not purport to be complete and
does not address all differences between BVI corporate laws and those in the United States.  Copies of our Memorandum
of Association and Articles of Association have been filed as exhibits to our initial registration statement on Form S-4 (file
number 333-132814).



- 94 -







Corporate Powers



Yucheng was first incorporated
as a company under the International Business Companies Act, 1984, or the IBC Act, on November 17, 2005 and became subject to the
BVI Business Companies Act, 2004 on January 1, 2007 when the BVI Business Companies Act, 2004 replaced the IBC Act.  Our
Memorandum of Association and Articles of Association state that the Company can carry out any object not prohibited by the laws
of the BVI.



Directors



The directors may fix
their compensation for services rendered to us.



By a resolution of directors,
the directors may exercise all our powers to borrow money, mortgage our property, issue debentures, and issue stock or other securities
for any debt, liability or obligation given by us.



A director may resign
or retire from our board at any time.  The director must give one month written notice of his resignation to us.  Directors
hold office until the next annual meeting of members or until such director’s earlier resignation, removal from office, death
or incapacity.  We currently do not have a staggered election of directors.



The shareholding qualification
for directors may be fixed and varied by a resolution of members and, unless it is fixed, no shareholding qualification is required.  A
director must be an individual.



To the fullest extent
permitted by the BVI Business Companies Act, 2004, none of our directors shall be personally liable to the Company or its shareholders
for or with respect to any acts or omissions in the performance of his or her duties as a director of the Company.



Rights of Shares



We are authorized to
issue 60,000,000 ordinary shares.  The ordinary shares have one vote each, are subject to purchase or acquisition by
us for fair value and have the same rights with regard to dividends and distributions upon our liquidation.  We are also
authorized to issue 1,000,000 preferred shares in one series of no par value.  The directors are authorized to issue
the preferred shares and to fix the rights and preferences attached to the preferred shares.



Shareholder Meetings



As of November 2008,
Yucheng has availed itself of the market place rules applicable to foreign private issuers and will hold shareholder meetings as
it sees fit; however, there is no annual requirement.  Special meetings of members may be called by the directors pursuant
to a resolution of directors to that effect or upon the written request of members holding more than 50 percent of the votes of
our outstanding voting shares.  No less than seven days’ notice of meetings is required to be given to members.



A meeting of members
may be called on short notice if members holding not less than 90 percent of the total number of shares entitled to vote on all
matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled
to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to a
short notice of the meeting, or if all members holding shares entitled to vote on all or any matters to be considered at the meeting
have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver.



The inadvertent failure
of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate
the meeting.



- 95 -







A member may be represented
at a meeting of members by a proxy who may speak and vote on behalf of the member.  A written instrument giving the proxy
such authority must be produced at the place appointed for the meeting before the time for holding the meeting.



A meeting of members
is duly constituted if, at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of
the votes of the shares or class or series of shares entitled to vote on resolutions of members to be considered at the meeting.



Limitations on Ownership of Securities



There are no limitations
on the right of nonresidents or foreign persons to own our securities imposed by BVI law or by our Memorandum and Articles of Association.



Change in Control of Company



There are no provisions
in our Memorandum and Articles of Association that would operate only to delay, defer or prevent a change of control of our company.  However,
the board of directors has the power to issue preferred shares with such rights attaching to them as they decide and this power
could be used in a manner that would delay, defer or prevent a change of control of our company.



Ownership Threshold



There are no provisions
governing the ownership threshold above which shareholder ownership must be disclosed.



Changes in Capital



Subject to the provisions
of the BVI Business Companies Act, 2004, we may, by a resolution of directors or members, amend our Memorandum and Articles of
Association to increase or decrease the number of shares authorized to be issued.  The directors of a company may, by
resolution, authorize a distribution (including a capital distribution) by the company at a time, of an amount, and to any members
they think fit if they are satisfied, on reasonable grounds, that the company will, immediately after the distribution, satisfy
the solvency test.  The solvency test is satisfied if the value of the company’s assets exceeds its liabilities,
and the company is able to pay its debts as they fall due.



DIFFERENCES IN CORPORATE LAW



The companies law of
the BVI differs from laws applicable to U.S. corporations and their shareholders.  Set forth below is a summary of the
significant differences between the provisions of the companies law applicable to us and the laws applicable to companies incorporated
in the United States and their shareholders.



Protection for minority shareholders



Under the laws of most
U.S. jurisdictions, majority and controlling shareholders of a company generally have certain “fiduciary” responsibilities
to the minority shareholders.  Corporate actions taken by majority and controlling shareholders, which are unreasonable
and materially detrimental to the interests of minority shareholders, may be declared null and void.  Minority shareholders
may have less protection for their rights under BVI law than they would have under U.S. law.



Powers of directors



Unlike most U.S. jurisdictions,
the directors of a BVI company, subject in certain cases to court’s approvals but without shareholders’ approval, may
implement the sale, transfer, exchange or disposition of any asset, property, part of the business, or securities of the company,
with the exception that shareholder approval is required for the disposition of over 50% in the value of the total assets of the
company.



- 96 -







Conflict of interests



Similar to the laws of
most U.S. jurisdictions, when a director becomes aware of the fact that he has an interest in a transaction which the company is
to enter into, he must disclose it to our board.  However, with sufficient disclosure of interest in relation to that
transaction, the director who is interested in a transaction entered into or to be entered into by the Company may (i) vote on
a matter relating to the transaction; (ii) attend a meeting of directors at which a matter relating to the transaction arises and
be included in the quorum; and (iii) sign a document on behalf of the company, or do any other thing in his capacity as a director,
that relates to the transaction.



Written consent and cumulative voting



Similar to the laws of
most U.S. jurisdictions, under the BVI law, shareholders are permitted to approve matters by way of written resolution in place
of a formal meeting.  BVI law does not make a specific reference to cumulative voting, and our current Memorandum and
Articles of Association have no provision authorizing cumulative voting.



Independent directors



There is no requirement
for a majority of the directors of the company to be independent as a matter of BVI law.



Redemption



Our shares are not redeemable
at the shareholders’ option.  We may redeem our shares only with the consent of the shareholders whose shares are
to be redeemed, except that the consent from the shareholders is not needed under the circumstances of (i) the compulsory redemption
with respect to fractional shares held by our shareholders in the circumstance of share division and (ii) the compulsory redemption,
at the request of the shareholders holding 90% of the votes of the outstanding shares entitled to vote, of the remaining issued
shares.



Takeover provisions



The Memorandum and Articles
of Association of our company does not alter the general provisions of BVI law and therefore measures such as a “poison pill”
would have to be in place before a takeover offer, as, if not, the directors could be seen as exercising their powers for an improper
purpose in trying to introduce such a measure.



Furthermore, the creation
of additional class of shares would require an amendment to the Memorandum and Articles of Association of our company.  This
can only be done by a resolution of shareholders or a resolution of directors.  The directors do not however, have the
power to amend the memorandum and articles to (a) restrict the rights or powers of the members to amend the memorandum or articles,
(b) to change the percentage of members required to pass a resolution to amend the memorandum and articles, or (c) in circumstances
where the memorandum or articles cannot be amended by the members.  The introduction of a poison pill would require an
amendment to the Memorandum and Articles of Association of our company which may only be done by way of shareholder resolution.



Shareholder’s access to corporate
records



A shareholder is entitled,
on giving written notice to the company, to inspect the company’s (i) Memorandum and Articles of Association; (ii) register
of members; (iii) register of directors; and (iv) minutes of meetings and resolutions of members and of those classes of members
of which the shareholder is a member.



- 97 -







The directors may, if
they are satisfied that it would be contrary to the company’s interests to allow a member to inspect any document listed
above (or any part thereof), refuse the member to inspect the document or limit the inspection of the document.  Our
board may also authorize a member to review the company account if requested.



Indemnification



Under our Memorandum
and Articles of Association, we may indemnify our directors or any person who is or was, at the request of the company, serving
as a director of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust
or other enterprise against expenses (including legal fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such persons in connection with legal, administrative or investigative proceedings to which they are a party or are
threatened to be made a party by reason of their acting as our directors or agents.  To be entitled to indemnification,
these persons must have acted honestly and in good faith and in the best interest of the company, and they must have had no reasonable
cause to believe their conduct was unlawful.



Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing
provisions, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.



Mergers and similar arrangements



Under the laws of the
BVI, two or more companies may merge or consolidate in accordance with Section 170 of the BVI Business Companies Act, 2004.  A
merger means the merging of two or more constituent companies into one of the constituent companies, and a consolidation means
the uniting of two or more constituent companies into a new company.  In order to merge or consolidate, the directors
of each constituent company must approve a written plan of merger or consolidation which must be authorized by a resolution of
shareholders.



While a director may
vote on the plan even if he has a financial interest in the plan of merger of consolidation, in order for the resolution to be
valid, the interest must have been disclosed to our board forthwith upon him becoming aware of such interest.  The transaction
will not be avoidable if the shareholders approve or ratify it.



Shareholders not otherwise
entitled to vote on the merger or consolidation may still acquire the right to vote if the plan of merger or consolidation contains
any provision which, if proposed as an amendment to the memorandum or articles of association, would entitle them to vote as a
class or series on the proposed amendment.  In any event, all shareholders must be given a copy of the plan of merger
or consolidation irrespective of whether they are entitled to vote at the meeting or consent to the written resolution to approve
the plan of merger or consolidation.



The shareholders of the
constituent companies are not required to receive shares of the surviving or consolidated company, but may receive debt obligations
or other securities of the surviving or consolidated company, or other assets, or a combination thereof.  Furthermore,
some or all of the shares of a class or series may be converted into a kind of asset while the other shares of the same class or
series may receive a different kind of asset.  As such, not all the shares of a class or series must receive the same
kind of consideration.



After the plan of merger
or consolidation has been approved by the directors and authorized by a resolution of the shareholders, articles of merger or consolidation
are executed by each company and filed with the Registrar of Corporate Affairs in the BVI.



- 98 -







A shareholder may dissent
from a mandatory redemption of his shares, an arrangement (if permitted by the court), a merger (unless the shareholder was a shareholder
of the surviving company prior to the merger and continues to hold the same or similar shares after the merger) and a consolidation.  A
shareholder properly exercising his dissent rights is entitled to payment of the fair value of their shares.



A shareholder dissenting
from a merger or consolidation must object in writing to the merger or consolidation before the vote by the shareholders on the
merger or consolidation, unless notice of the meeting was not given to the shareholder.  If the merger or consolidation
is approved by the shareholders, the company must within 20 days give notice of this fact to each shareholder who gave written
objection, and to each shareholder who did not receive notice of the meeting.  Such shareholders then have 20 days
to give to the company their written election in the form specified by the BVI Business Companies Act to dissent from the merger
or consolidation, provided that in the case of a merger, the 20 days starts when the plan of merger is delivered to the shareholder.



Upon giving notice of
his election to dissent, a shareholder ceases to have any rights of a shareholder except the right to be paid the fair value of
his shares.  As such, the merger or consolidation may proceed in the ordinary course notwithstanding the dissent.



Within seven days of
the later of the delivery of the notice of election to dissent and the effective date of the merger or consolidation, the company
must make a written offer to each dissenting shareholder to purchase his shares at a specified price that the company determines
to be their fair value.  The company and the shareholders then have 30 days to agree upon the price.  If
the company and a shareholder fail to agree on the price within the 30 days, then the company and the shareholder shall each
designate an appraiser and these two appraisers shall designate a third appraiser.  These three appraisers shall fix
the fair value of the shares as of the close of business on the day before the shareholders approved the transaction without taking
into account any change in value as a result of the transaction.



Shareholders’ suits



Similar to the laws of
most U.S. jurisdictions, BVI law permits derivative actions against its directors.  However, the circumstances under
which such actions may be brought, and the procedures and defenses available may result in the rights of shareholders of a BVI
company being more limited than those of shareholders of a company incorporated and/or existing in the United States.



We are not aware of any
reported class action having been brought in a BVI court.  Reported derivative actions have been brought but unsuccessfully
for technical reasons.  The court of the BVI may, on the application of a shareholder of a company, grant leave to that
shareholder to bring proceedings in the name and on behalf of that company, or intervene in proceedings to which the company is
a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company.  In determining
whether to grant leave, the High Court of the BVI must take into account (i) whether the shareholder is acting in good faith;
(ii) whether the derivative action is in the interests of the company taking account of the views of the company’s directors
on commercial matters; (iii) whether the proceedings are likely to succeed; (iv) the costs of the proceedings in relation
to the relief likely to be obtained; and (v) whether an alternative remedy to the derivative claim is available.



Leave to bring or intervene
in proceedings may be granted only if the High Court of the BVI is satisfied that (i) the company does not intend to bring,
diligently continue or defend, or discontinue the proceedings, as the case may be; or (ii) it is in the interests of the company
that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.



In determining whether
to grant leave to a shareholder in these circumstances, the BVI Court must take the following matters into account:



(a)   whether
the member is acting in good faith;



(b)   whether
the derivative action is in the interests of the company taking account of the views of the company’s directors on commercial
matters;



- 99 -







(c)   whether
the proceedings are likely to succeed;



(d)   the
costs of the proceedings in relation to the relief likely to be obtained; and



(e)   whether
an alternative remedy to the derivative claim is available.



C.  Material contracts.



We have not entered into
any material contracts related to our business operations other than in the ordinary course of business and other than those described
in “Item 4. Information on the Company” and in “Item 7. Major Shareholders and Related Party Transactions”
or elsewhere in this annual report.



D.  Exchange controls.



BRITISH VIRGIN ISLANDS



There are no material
exchange controls restrictions on payment of dividends, interest or other payments to the holders of our ordinary or preferred
shares or on the conduct of its operations in the BVI, where we were incorporated.  There are no material BVI laws which
impose any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident
holders of its ordinary or preferred shares.  BVI law and our Memorandum and Articles of Association impose no material
limitations on the right of nonresidents or foreign owners to hold or vote our ordinary or preferred shares.



CHINA



For exchange controls
in China, see “Item 4. Information on the Company — B. Business overview — Regulation — Regulations on
foreign exchange.”



- 100 -







E.  Taxation.



BRITISH VIRGIN ISLANDS TAXATION



Under the present laws
of the BVI, there are no applicable taxes on our profits or income.  There are no taxes on profits, income, nor are there
any capital gains tax, estate duty or inheritance taxes applicable to any ordinary shares held by nonresidents of the BVI.  In
addition, there is no stamp duty or similar duty on the issuance, transfer or redemption of the ordinary shares as the Company
does not hold any interest in land in the BVI.  Dividends remitted to the holders of ordinary shares resident outside
the BVI will not be subject to withholding tax in the BVI.



European Union Directive on the Taxation
of Savings Income (Directive 2003/48/EC)



The European Union has
formally adopted a new Directive regarding the taxation of savings income, or the EU Savings Tax Directive.  Since July
1, 2005, member states are required to provide to the tax authorities of another member state details of payments of interest and
other similar income paid by a person within its jurisdiction to or for an individual resident in that other member state, except
that Austria, Belgium and Luxembourg instead impose a withholding system for a transitional period (unless during such period they
elect otherwise).



The BVI is not a member
of the European Union and not within the European Union fiscal territory, but the government of the United Kingdom had requested
that the Government of the BVI voluntarily apply the provisions of the EU Savings Tax Directive.  The Mutual Legal Assistance
(Tax Matters) (Amendment) Act introduces a withholding tax system in respect of payments of interest, or other similar income,
made to an individual beneficial owner resident in a European Union member state by a paying agent situated in the BVI.  The
withholding tax system will apply for a transitional period prior to the implementation of a system of automatic communication
to European Union member states of information regarding such payments.  During this transitional period, such an individual
beneficial owner resident in a European Union member state will be entitled to request a paying agent not to withhold tax from
such payments but instead to apply a system by which the details of such payments are communicated to the tax authorities of the
European Union member state in which the beneficial owner is a resident.



No stamp duty is payable
in the BVI in respect of instruments relating to transactions involving our company as our company does not hold any interest in
land in the BVI.



PRC TAXATION



The New EIT Law and its
implementation rules became effective on January 1, 2008.  Under the previous income tax regime, foreign investors were
exempted from PRC income tax on dividends and gainsrealized upon liquidation of or transferring equity interest in a foreign-invested
enterprise.  Under the New EIT Law and its implementation rules, we, as a BVI company with substantially all of our management
located in China, may be deemed a resident enterprise for income tax purposes, in which case our global income may be subject to
25% of PRC income tax, and an income tax rate of 10% will normally be applicable to dividends payable to our non-PRC investors,
and gains realized on our liquidation or the transfer of our shares by our non-PRC investors, if such income or gain is derived
from sources within China.  According to a notice issued by the PRC State Council, dividend from profits generated before
January 1, 2008 will still be exempt from such taxation.  However, it is currently uncertain whether we may be deemed
a resident enterprise, or how to interpret whether any income or gain is derived from sources within China.  See “Item
3. Key information ─ D. Risk factors ─ Risks related to doing business in China ─ We may be treated as a resident
enterprise for PRC tax purposes under the New EIT Law and we may therefore be subject to PRC income tax for any dividends we receive
from our subsidiaries, which may materially and adversely affect the amount of dividends we must pay to our shareholders.”
and “Item 3. Key information ─ D. Risk factors ─ Risks related to doing business in China ─ Dividends payable
by us to our non-PRC shareholders, and gains on the sales of our ordinary shares, may be subject to withholding taxes under PRC
tax laws, which may materially reduce the value of your investment.”  If we are not deemed a resident enterprise,
then dividends payable to our non-PRC investors, and gains realized on our liquidation or the transfer of our shares by our non-PRC
investors will not be subject to PRC income tax withholding.



- 101 -







UNITED STATES FEDERAL TAXATION



The following is a discussion
of the material U.S. federal tax consequences of purchasing, owning and disposing of shares by U.S. Holders (as described below),
but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular
person’s decision to acquire the securities.



The discussion applies
to investors in shares that hold the shares as capital assets for U.S. federal income tax purposes and it does not describe all
of the tax consequences that may be relevant to holders subject to special rules, such as:



| | — | certain financial institutions;
| | - | -------------------------------



| | — | insurance companies;
| | - | --------------------



| | — | dealers and traders in securities or foreign currencies;
| | - | --------------------------------------------------------



| | — | persons holding shares as part of a hedge, “straddle,” integrated transaction or similar transaction;
| | - | -----------------------------------------------------------------------------------------------------



| | — | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
| | - | ----------------------------------------------------------------------------------------------



| | — | partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
| | - | -----------------------------------------------------------------------------------------------



| | — | persons liable for the alternative minimum tax;
| | - | -----------------------------------------------



| | — | tax-exempt organizations;
| | - | -------------------------



| | — | persons holding shares that own or are deemed to own 10% or more of our voting stock;
| | - | -------------------------------------------------------------------------------------



| | — | persons who hold the shares in connection with a trade or business outside the United States; or
| | - | ------------------------------------------------------------------------------------------------



| | — | persons who acquired our shares pursuant to the exercise of any employee stock option or otherwise as compensation.
| | - | -------------------------------------------------------------------------------------------------------------------



This discussion is based
on the U.S. Internal Revenue Code of 1986, as amended, or the Code, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations,all as of the date hereof.  These laws are subject to change, possibly on
a retroactive basis.  Persons considering the purchase of ordinary shares should consult their own tax advisors with
regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.



As used in this discussion,
the term “U.S. Holder” means a beneficial owner of shares that, for U.S. federal income tax purposes, is:



- 102 -







| | — | a citizen or resident of the United States;
| | - | -------------------------------------------



| | — | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | — | an estate or trust the income of which is subject to U.S. federal income taxation, regardless of its source.
| | - | ------------------------------------------------------------------------------------------------------------



This discussion assumes
that we are not, and will not become, a passive foreign investment company, a “PFIC,” for U.S. federal income tax purposes,
as described below.



Taxation of dividends



The gross amount of any
distributions paid with respect to shares, other than certain pro rata distributions of shares, generally will be treated as foreign
source dividend income for U.S. federal income tax purposes.  U.S. Holders will not be entitled to claim a dividends-received
deduction with respect to distributions paid by us.  Dividends will be included in a U.S. Holder’s income on the
date of such U.S. Holder’s receipt of the dividend.



Subject to applicable
limitations, dividends received by certain non-corporate U.S. Holders in taxable years beginning before January 1, 2011 will be
taxable at a maximum rate of 15%.  Non-corporate U.S. Holders should consult their own tax advisors to determine whether
they are subject to any special rules that limit their ability to be taxed at this favorable rate.



In the event that we
are deemed to be a Chinese “resident enterprise” under PRC tax law, you may be subject to PRC withholding taxes on
dividends paid to you with respect to the ordinary shares.  In addition, subject to certain conditions and limitations,
PRC withholding taxes on dividends not in excess of the rate allowed under the Treaty, if applicable, may be treated as foreign
taxes eligible for credit against your U.S. federal income tax liability.  The rules governing the foreign tax credit
are complex.  We urge interested parties to consult a tax advisor, regarding the availability of the foreign tax credit,
to review their particular circumstances.



Taxation of capital gains



Upon sale or other disposition
of the shares, a U.S. Holder will generally recognize capital gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between such holder’s tax basis in the shares sold or disposed of and the amount realized on the sale or
other disposition.  Such gain or loss will be long-term capital gain or loss if the U.S. Holder has held the shares for
more than one year and will generally be U.S. source gain or loss for foreign tax credit purposes.  However, in the event
that we are deemed to be a Chinese “resident enterprise” under PRC tax law, gains on disposal may be subject to PRC
tax.  In that event, a U.S. Holder may be eligible for the benefits of the Treaty.  Under the Treaty, if any
PRC tax were to be imposed on any gain from the disposition of the shares, the gain would be treated as PRC source income.  We
urge interested parties to consult a tax advisor to review their particular circumstances, regarding the tax consequences if a
foreign tax is imposed on gain on a disposition of our shares, including the availability of the foreign tax credit.



Passive foreign investment company rules



We believe that we were
not a PFIC for United States federal income tax purposes for our taxable year ended December 31, 2011.  However, since
PFIC status depends upon the composition of a company’s income and assets and the market value of its assets (including goodwill)
from time to time, and since we have and will continue to have a significant amount of passive assets and the value of our assets
may be based, in part, on the market value of our shares, which is subject to change, there can be no assurance that we will not
be a PFIC for any taxable year.



- 103 -







In general, if we were
a PFIC for any taxable year during which a U.S. Holder held shares, gain recognized by such U.S. Holder on a sale or other disposition
(including certain pledges) of the shares would be allocated ratably over the U.S. Holder’s holding period for the shares.  The
amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as
ordinary income.  The amount allocated to each other taxable year would be subject to tax at the highest rate in effect
for individuals or corporations, as appropriate, for such taxable year, and an interest charge would be imposed on the amount allocated
to such taxable year.  Similar rules would apply to any distribution in respect of shares in excess of 125% of the average
of the annual distributions on shares received by a U.S. Holder during the preceding three years or such holder’s holding
period, whichever is shorter.  Certain elections may be available that would result in alternative treatments (such as
a mark-to-market treatment) of the shares.  U.S. Holders should consult their tax advisers to determine whether such
elections are available and, if so, what the consequences of the alternative treatments would be in those holders’ particular
circumstances.



Information reporting and backup withholding



Payment of dividends
and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are
subject to information reporting and to backup withholding unless (i) the U.S. Holder is a corporation or other exempt recipient
or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that
backup withholding does not apply.



The amount of any backup
withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax
liability and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the Internal Revenue
Service.



F.   Dividends and paying
agents.



Not applicable.



G.   Statement by experts.



Not applicable.



H.   Documents on display.



We have filed this annual
report on Form 20-F with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act.  Statements
made in this annual report as to the contents of any document referred to are not necessarily complete.  With respect
to each such document filed as an exhibit to this annual report, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.



We are subject to the
informational requirements of the Exchange Act and file reports and other information with the SEC.  Reports and other
information which the Company filed with the SEC, including this annual report on Form 20-F, may be inspected and copied at the
public reference room of the SEC at 100 F. Street N.E., Washington, D.C. 20549.  You can also obtain copies of this annual
report on Form 20-F by mail from the Public Reference Section of the SEC, 100 F. Street N.E., Washington, D.C. 20549, at prescribed
rates.  Additionally, copies of this material may be obtained from the SEC’s Internet site at http://www.sec.gov.  The
SEC’s telephone number is 1-800-SEC-0330.  As a foreign private issuer, we are exempt from the rules under the
Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.



I.     Subsidiaries
information.



Not applicable.



- 104 -







|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



INTEREST RATE RISK



Our exposure to
interest rate risk primarily relates to the interest rates for our outstanding debt and the interest income generated by bank
deposits and other interest earning short-term investments.  As of December 31, 2011, we had short-term bank
borrowings in the amount of RMB120.0 million (USD19.0 million).  Our short-term bank borrowings are subject to
floating interest rates.  Assuming the principal amount of the outstanding bank borrowings remains approximately
the same as of December 31, 2011, each 1% increase in applicable interest rate would add RMB1.2 million per year to our
interest expenses.  On the other hand, any decrease in interest rate would reduce interest income generated from
our interest-earning instruments.  We have not used any derivative financial instruments to manage our interest
risk exposure.  We have not been exposed to material risks due to changes in interest rates.  However,
our future interest expenses may be higher and interest income may be lower than expected due to changes in market interest
rates.



FOREIGN EXCHANGE RISK



The value of the
Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in
China’s political and economic conditions.  The conversion of Renminbi into foreign currencies, including
U.S. dollars, has been based on rates set by the People’s Bank of China, the central bank of the PRC.  On
July 21, 2005, the PRC government changed its decade-old policy of pegging the value of Renminbi to the U.S.
dollar.  Under this new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a
basket of certain foreign currencies.  As a result, from July 21, 2005 to March 31, 2012, the Renminbi has
appreciated approximately 22.4% to the U.S. dollar.  While the international reaction to the Renminbi revaluation
has generally been positive, there remains significant international pressure on the PRC government to adopt an even more
flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S.
dollar.



We use Renminbi as our
reporting currency, and all of our revenues and a substantial majority of our costs are denominated in Renminbi.  However,
proceeds from many of our financing activities are denominated in U.S. dollars, and certain of our costs, in particular third-party
hardware and software products, are also denominated in U.S. dollars.  Fluctuations in exchange rates, primarily those
involving the U.S. dollar, may affect our costs and operating margins as well as our net income.  For example, to the
extent that we need to convert U.S. dollars we receive from our future financing activities into Renminbi for our operations, appreciation
of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion.  Conversely,
if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our common shares or for
other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount
available to us.  We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency
exchange risk.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



Not applicable.



PART II



|ITEM13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|------- | -----------------------------------------------



Not applicable.



|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------



Not applicable.



- 105 -







|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------



EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES



Our management has evaluated
the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the fiscal year covered by this report.  Based
on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the fiscal year
covered by this report, our disclosure controls and procedures were effective in (1) recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and
(2) ensuring that information required to be disclosed by us in such reports is accumulated and communicated to our management,
including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions. regarding required
disclosure.



MANAGEMENT’S ANNUAL REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING



The management of the
Company is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal
control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934
as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers
and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:



|— | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



|— | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|— | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



The Company’s management
assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011.  In
making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on our assessment, management believes
that, as of December 31, 2011, the Company’s internal control over financial reporting was effective based on those criteria.



There has been no change
in our internal control over financial reporting during the year ended December 31, 2011 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.



- 106 -







Our
independent auditor, BDO China Shu Lun Pan Certified Public Accountants LLP, has issued an attestation report on the
effectiveness of the Company’s internal control over financial reporting. The report is as follows:



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Shareholders
of

Yucheng Technologies Limited



We have audited the internal control over financial reporting
of Yucheng Technologies Limited and its subsidiaries (the “Company”) as of December 31, 2011, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 15,
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.



A company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.



In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.



We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Yucheng Technologies Limited and its
subsidiaries as of December 31, 2011, and the related consolidated statements of operations and comprehensive income, stockholders’
equity and cash flows for the year then ended, all expressed in Renminbi and our report dated April 27, 2012 expressed an unqualified
opinion thereon.



BDO China Shu Lun Pan Certified Public
Accountants LLP



Shenzhen, the People’s Republic of China

April 27, 2012



- 107 -







|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT.
|--------- | ---------------------------------



The board of directors
believes that Yingjun Li, Jeffery R Williams, and Ning Jia, members of our audit committee, meet the criteria for an “audit
committee financial expert” as established by the SEC.



Messrs.Liand Williams
and Ms. Jiawill not be deemed an “expert” for any purpose, including, without limitation, for purpose of Section 11
of the U.S. Securities Act of 1933, as amended, as a result of being designated or identified as an audit committee financial expert.  The
designation or identification of Mr. Li and Mr. Williams and Ms. Jia as an audit committee financial expert does not impose on
him/her any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed as a member
of the audit committee and board of directors in the absence of such designation or identification.



|ITEM 16B. | CODE OF ETHICS.
|--------- | ---------------



Our board of directors
adopted a code of ethics on March 20, 2006 that applies to our directors, officers and employees and to those of our subsidiaries.  A
copy of the form of our code of ethics was filed as Annex G to our registration statement on Form S-4 filed with the SEC on March
29, 2006, and was effective as of November 3, 2006.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|--------- | ---------------------------------------



The following are the
fees billed by BDO China Shu Lun Pan Certified Public Accountants LLP for the fiscal year ended December 31, 2011 and BDO Limited
for the fiscal year ended December 31, 2010.

|                       |  | 2010 |         |  | 2011 | 
|---------------------- |  | ---- | ------- |  | ---- | 
|                       |  | USD  |         |  | USD  | 
|Audit Fees (1)         |  |      | 260,000 |  |      | 
|Audit Related Fees (2) |  |      | 50,000  |  |      | 
|Tax Fees (3)           |  |      | -       |  |      | 
|All Other Fees (4)     |  |      | -       |  |      | 
|                       |  |      | 310,000 |  |      | 



| | (1) | Audit Fees consist of the aggregate fees billed for professional services rendered for the audit of
our annual financial statements included in our Form 20-F and for other services that are normally provided by our independent
auditor in connection with our statutory and regulatory filings or engagements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Audit Related Fees consist of the aggregate fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements and are not reported under (1) of this
Item.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Tax Fees consist of the aggregate fees billed for tax compliance, tax advice, and tax planning.
| | --- | -----------------------------------------------------------------------------------------------

| | (4) | All Other Fees consist of the aggregate fees billed for products and services provided by our independent
auditor, other than the services reported in (1) through (3) of this Item.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Audit Committee is to pre-approve all
auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms
thereof (subject to the de minimis exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act which
are approved by the Audit Committee prior to the completion of the audit).



- 108 -







|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
|--------- | -----------------------------------------------------------



We have not been granted
an exemption from the applicable listing standards for the audit committee of our board of directors.



|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|--------- | -----------------------------------------------------------------------



None



|ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS.
|--------- | ----------------------------------------------



On December 30, 2011,
the principal independent accountant, BDO Limited (“BDO Hong Kong”) resigned from its engagement with
the Company, which was effective immediately.  On December 30, 2011, the Company engaged BDO China Shu Lun Pan Certified
Public Accountants LLP (“BDO China”) to serve as its independent auditor, effective immediately.  The decision
to engage BDO China as the Company’s principal independent accountant was appointed by the Audit Committee of the Company
on December 30, 2011.



BDO Hong Kong was the
principal independent accountants of the Company and reported on the financial statements for the fiscal years ended December 31,
2009 and 2010. There were no disagreements between the Company and BDO Hong Kong on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, within the period from BDO Hong Kong’s engagement and through
the fiscal year of the Company ended December 31, 2010, and subsequently up to the date of resignation which disagreements that,
if not resolved to BDO Hong Kong’s satisfaction, would have caused BDO Hong Kong to make reference to the subject matter
of the disagreement in connection with its report issued in connection with the audit of the Company’s financial statements.



None of the reportable
events described under Item 304(a)(1)(v)(A)-(D) of Regulation S-K occurred within the period from BDO Hong Kong’s engagement
and through the fiscal year of the Company ended December 31, 2010 and subsequently up to the date of resignation.



BDO Hong Kong’s
audit reports on financial statements for the fiscal years ended December 31, 2009 and December 31, 2010 of the Company contained
no adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.



The Company provided
BDO Hong Kong with a copy of the disclosure made on the Form 6-K before its filing with the SEC on December 30, 2011, providing
BDO Hong Kong with the opportunity to furnish the Company with a letter addressed to the SEC stating whether it agrees with the
disclosures made in the filing.  A letter from BDO Hong Kong dated December 30, 2011 was provided to the company, a copy
of which is attached as an Exhibit to the Form 6-K.



|ITEM 16G. | CORPORATE GOVERNANCES
|--------- | ---------------------



As a foreign private issuer
with ordinary shares listed on NASDAQ, we may follow certain home country corporate governance practices instead of certain NASDAQ
requirements.



PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------



We have elected to provide
financial statements pursuant to Item 18.



- 109 -









|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------



The consolidated financial
statements for the Company and its subsidiaries are included at the end of this annual report.



|ITEM 19. | EXHIBITS
|-------- | --------



|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|1.1     |  | Memorandum of Association of Registrant (incorporated by reference from Registration Statement No. 333-132814 - Annex B)                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|1.2     |  | Articles of Association of Registrant (incorporated by reference from Registration Statement No. 333-132814 - Annex C)                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.1     |  | Specimen Common Stock Certificate of Registrant (incorporated by reference from Registration Statement No. 333-132814 – Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.1     |  | Securities Purchase Agreement among Registrant, Yucheng Technologies Limited, Sihitech Company Limited, Mega Capital Group Services Limited, Profit Loyal Consultants Limited, Elite Concord International Limited, China Century Holdings Group Limited, Shinning Growth Investment Group Limited, Chih Cheung, James Li, James Preissler, for the acquisition of Ahead Billion Venture Limited, and Port Wing Development Company Limited, dated December 20, 2005 (incorporated by reference from Registration Statement No. 333-132814 – Annex A)



|4.2   |  | Amendment to Securities Purchase Agreement dated June 29, 2006 (incorporated by reference from Registration Statement No. 333-132814 - Annex A)                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                
|4.3   |  | Amendment to Securities Purchase Agreement dated October 27, 2006 (incorporated by reference from Registration Statement No. 333-132814 - Annex A)                             
|      |  |                                                                                                                                                                                
|4.4   |  | Amendment to Securities Purchase Agreement dated July 31, 2007 (incorporated by reference from Foreign Issuer Report on Form 6-K, filed August 24, 2007)                       
|      |  |                                                                                                                                                                                
|4.5   |  | China Unistone/Yucheng 2006 Performance Equity Plan (incorporated by reference from Registration Statement No. 333-132814 –Annex D)                                            
|      |  |                                                                                                                                                                                
|4.6   |  | Equity Interest Transfer Agreement  re. Beijing Sunrisk Information Technology Company Limited (incorporated by reference from Exhibit 4.1 to Form 6-K filed February 13, 2007)
|      |  |                                                                                                                                                                                
|4.7   |  | Form of Employment Agreement between Yucheng Technologies Limited and Hong Weidong (incorporated by reference from Registration Statement No. 333-132814 – Exhibit 10.18)      
|      |  |                                                                                                                                                                                
|4.8   |  | Form of Employment Agreement between Yucheng Technologies Limited and ZengShuo (incorporated by reference from Registration Statement No. 333-132814 – Exhibit 10.19)          
|      |  |                                                                                                                                                                                
|8.1*  |  | List of subsidiaries                                                                                                                                                           
|      |  |                                                                                                                                                                                
|11.1  |  | Code of Ethics (incorporated by reference from Registration Statement No. 333-132814 - Annex G)                                                                                
|      |  |                                                                                                                                                                                
|12.1* |  | CEO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))                                             



- 110 -









|12.2* |  | CFO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))
|----- |  | -----------------------------------------------------------------------------------------------------------
|      |  |                                                                                                            
|13.1* |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                
|      |  |                                                                                                            
|13.2* |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                



___________________________

* Filed with this annual report on Form 20-F



SIGNATURE



The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.



Date: April
27, 2012

| | YUCHENG TECHNOLOGIES
        LIMITED
| | ------------------------------------
| |                                     
| | /s/ Weidong Hong                    
| | Name:                               
| | Title:                              



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                    | Page
|------------------------------------------------------------------------------------------------------------------- | ----
|Report of Independent Registered Public Accounting Firm                                                             | F-2 
|                                                                                                                    |     
|Consolidated Balance Sheets as of December 31, 2010 and 2011                                                        | F-4 
|                                                                                                                    |     
|Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2009, 2010 and 2011 | F-6 
|                                                                                                                    |     
|Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009, 2010 and
    2011            | F-8 
|                                                                                                                    |     
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2010 and 2011                          | F-9 
|                                                                                                                    |     
|Notes to the Consolidated Financial Statements for the Years Ended December 31, 2009, 2010 and
    2011             | F-11



- 111 -











YUCHENG TECHNOLOGIES LIMITED

AND

SUBSIDIARIES



Consolidated Financial Statements



Years Ended December 31, 2009, 2010 and
2011



F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders
of

Yucheng Technologies Limited



We have audited the accompanying consolidated balance sheet
of Yucheng Technologies Limited and its subsidiaries (the “Company”) as of December 31, 2011 and the related consolidated
statements of operations and comprehensive income, stockholders’ equity and cash flows for the year then ended, all expressed
in Renminbi. These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.



We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011 and
the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted
in the United States of America.



We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated April 27, 2012 expressed an unqualified opinion
thereon.



BDO China Shu Lun Pan Certified Public Accountants LLP



Shenzhen,People’s Republic
of China

April 27, 2012



F-2







REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

YUCHENG TECHNOLOGIES
LIMITED



We have audited the accompanying
consolidated balance sheets of Yucheng Technologies Limited (“the Company”) as of December 31, 2010, and the
related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the two
years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Yucheng Technologies Limited as
of December 31, 2010, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.



BDO Limited



Hong Kong, June 30, 2011



F-3







YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES

Consolidated
Balance Sheets

As of December 31, 2010 and 2011

(Expressed in Chinese Renminbi)








|Assets                                                                                   |  | 2010 |             |  | 2011 |  |               | 2011        | 
|---------------------------------------------------------------------------------------- |  | ---- | ----------- |  | ---- |  | ------------- | ----------- | 
|                                                                                         |  | RMB  |             |  | RMB  |  |               | USD         | 
|                                                                                         |  |      |             |  |      |  |               | (Unaudited) | 
|                                                                                         |  |      |             |  |      |  |               | (note 2(c)) | 
|                                                                                         |  |      |             |  |      |  |               |             | 
|Current assets:                                                                          |  |      |             |  |      |  |               |             | 
|Cash and cash equivalents                                                                |  |      | 162,536,258 |  |      |  | 204,800,770   |             | 
|Trade accounts receivable, net (note 3)                                                  |  |      | 196,243,059 |  |      |  | 244,549,634   |             | 
|Costs and estimated earnings in excess of billings on uncompleted
    contracts (note 4) |  |      | 132,656,349 |  |      |  | 169,384,841   |             | 
|Due from related parties (note 23)                                                       |  |      | 5,926,033   |  |      |  | 12,537,644    |             | 
|Inventories                                                                              |  |      | 695,192     |  |      |  | 1,077,150     |             | 
|Pre-contract costs                                                                       |  |      | 24,264,187  |  |      |  | 24,811,524    |             | 
|Other current assets (note 5)                                                            |  |      | 67,862,868  |  |      |  | 56,630,556    |             | 
|Deferred tax assets (note 6)                                                             |  |      | -           |  |      |  | 1,328,942     |             | 
|                                                                                         |  |      |             |  |      |  |               |             | 
|Total current assets                                                                     |  |      | 590,183,946 |  |      |  | 715,121,061   |             | 
|                                                                                         |  |      |             |  |      |  |               |             | 
|Investments under equity method (note 2(u))                                              |  |      | 24,846,083  |  |      |  | 33,835,513    |             | 
|Properties and equipment, net (note 7)                                                   |  |      | 30,409,072  |  |      |  | 29,058,859    |             | 
|Intangible assets, net (note 8)                                                          |  |      | 24,908,257  |  |      |  | 40,859,057    |             | 
|Goodwill (note 9)                                                                        |  |      | 189,009,599 |  |      |  | 189,009,599   |             | 
|Deferred tax assets (note 6)                                                             |  |      | 10,607,353  |  |      |  | 574,371       |             | 
|                                                                                         |  |      |             |  |      |  |               |             | 
|Total assets                                                                             |  |      | 869,964,310 |  |      |  | 1,008,458,460 |             | 



See accompanying notes to consolidated
financial statements.



F-4







YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES

Consolidated
Balance Sheets (continued)

As of December 31, 2010 and 2011

(Expressed in Chinese Renminbi)






|Liabilities and stockholders’ equity                                                                                                                           |  | 2010 |             |   | 2011 |  |               | 2011        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ------------- | ----------- | 
|                                                                                                                                                               |  | RMB  |             |   | RMB  |  |               | USD         | 
|                                                                                                                                                               |  |      |             |   |      |  |               | (Unaudited) | 
|                                                                                                                                                               |  |      |             |   |      |  |               | (note 2(c)) | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Current liabilities:                                                                                                                                           |  |      |             |   |      |  |               |             | 
|Short-term borrowings (note 10)                                                                                                                                |  |      | 81,000,000  |   |      |  | 119,953,739   |             | 
|Obligations under capital leases (note 11)                                                                                                                     |  |      | 314,535     |   |      |  | -             |             | 
|Trade accounts payable                                                                                                                                         |  |      | 77,613,387  |   |      |  | 97,486,311    |             | 
|Billings in excess of costs and estimated earnings on uncompleted contracts (note 4)                                                                           |  |      | 22,250,243  |   |      |  | 37,569,830    |             | 
|Employee and payroll accruals                                                                                                                                  |  |      | 18,341,699  |   |      |  | 19,544,476    |             | 
|Dividends payable to ex-owners                                                                                                                                 |  |      | 76,985      |   |      |  | 76,985        |             | 
|Outstanding payment in relation to business acquisitions                                                                                                       |  |      | 120,367     |   |      |  | -             |             | 
|Income taxes payable                                                                                                                                           |  |      | 11,103,004  |   |      |  | 2,627,884     |             | 
|Due to a related party (note 23)                                                                                                                               |  |      | 3,933,940   |   |      |  | 1,505,992     |             | 
|Deferred tax liabilities (note 6)                                                                                                                              |  |      | 829,282     |   |      |  | 2,293,492     |             | 
|Other current liabilities (note 12)                                                                                                                            |  |      | 44,720,111  |   |      |  | 64,590,498    |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Total current liabilities                                                                                                                                      |  |      | 260,303,553 |   |      |  | 345,649,207   |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Deferred tax liabilities (note 6)                                                                                                                              |  |      | 1,783,584   |   |      |  | 1,420,497     |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Total liabilities                                                                                                                                              |  |      | 262,087,137 |   |      |  | 347,069,704   |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Commitments and contingencies (note 20)                                                                                                                        |  |      |             |   |      |  |               |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Stockholders’ Equity                                                                                                                                           |  |      |             |   |      |  |               |             | 
|Preferred stock, $0.0001 par value, authorized 2,000,000 shares and none issued;                                                                               |  |      | -           |   |      |  | -             |             | 
|Common stock, $0.0001 par value, authorized 60,000,000 shares; 18,560,014 shares and 18,941,417 shares issued and outstanding as of December 31, 2010 and 2011 |  |      | 20,007,998  |   |      |  | 20,008,251    |             | 
|Additional paid-in capital                                                                                                                                     |  |      | 393,936,410 |   |      |  | 411,104,366   |             | 
|Reserves (note 14)                                                                                                                                             |  |      | 50,428,005  |   |      |  | 57,340,546    |             | 
|Retained earnings                                                                                                                                              |  |      | 141,363,202 |   |      |  | 176,077,413   |             | 
|Accumulated other comprehensive loss (note 15)                                                                                                                 |  |      | (2,992,748  | ) |      |  | (3,589,829    | )           | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Total Yucheng Technologies Limited stockholders’ equity                                                                                                        |  |      | 602,742,867 |   |      |  | 660,940,747   |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Non-controlling interests (note 13)                                                                                                                            |  |      | 5,134,306   |   |      |  | 448,009       |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Total stockholders’ equity                                                                                                                                     |  |      | 607,877,173 |   |      |  | 661,388,756   |             | 
|                                                                                                                                                               |  |      |             |   |      |  |               |             | 
|Total liabilities and  stockholders’ equity                                                                                                                    |  |      | 869,964,310 |   |      |  | 1,008,458,460 |             | 



See accompanying notes to consolidated
financial statements.



F-5









YUCHENG TECHNOLOGIES LIMITED
AND SUBSIDIARIES

Consolidated Statements of Operations
and Comprehensive Income

For the year ended December 31, 2009,
2010 and 2011

(Expressed in Chinese Renminbi)










|                                                              |  | 2009 |              |   | 2010 |  |              | 2011 |  |  | 2011         |  
|------------------------------------------------------------- |  | ---- | ------------ | - | ---- |  | ------------ | ---- |  |  | ------------ | -
|                                                              |  | RMB  |              |   | RMB  |  |              | RMB  |  |  | USD          |  
|                                                              |  |      |              |   |      |  |              |      |  |  | (Unaudited)  |  
|                                                              |  |      |              |   |      |  |              |      |  |  | (note 2(c))  |  
|Revenues (note 16):                                           |  |      |              |   |      |  |              |      |  |  |              |  
|Software & Solutions                                          |  |      | 286,892,256  |   |      |  | 340,295,171  |      |  |  | 436,134,974  |  
|Platform                                                      |  |      | 12,575,504   |   |      |  | 8,460,490    |      |  |  | 2,052,676    |  
|Maintenance Services                                          |  |      | 62,251,487   |   |      |  | 63,576,554   |      |  |  | 64,423,458   |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Total revenues                                                |  |      | 361,719,247  |   |      |  | 412,332,215  |      |  |  | 502,611,108  |  
|Business taxes                                                |  |      | (7,249,519   | ) |      |  | (8,688,023   | )    |  |  | (13,500,885  | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Net revenues                                                  |  |      | 354,469,728  |   |      |  | 403,644,192  |      |  |  | 489,110,223  |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Cost of sales:                                                |  |      |              |   |      |  |              |      |  |  |              |  
|Software & Solutions                                          |  |      | (156,677,911 | ) |      |  | (170,736,573 | )    |  |  | (238,858,026 | )
|Platform                                                      |  |      | (10,515,013  | ) |      |  | (7,687,484   | )    |  |  | (1,099,291   | )
|Maintenance Services                                          |  |      | (24,139,808  | ) |      |  | (28,222,982  | )    |  |  | (17,347,340  | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Total cost of sales                                           |  |      | (191,332,732 | ) |      |  | (206,647,039 | )    |  |  | (257,304,657 | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Gross profit                                                  |  |      | 163,136,996  |   |      |  | 196,997,153  |      |  |  | 231,805,566  |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Research and development expenses                             |  |      | (13,828,380  | ) |      |  | (10,530,618  | )    |  |  | (15,470,485  | )
|Selling and marketing expenses                                |  |      | (41,126,026  | ) |      |  | (44,761,799  | )    |  |  | (45,570,899  | )
|General and administrative expenses (note 18)                 |  |      | (117,207,162 | ) |      |  | (104,465,484 | )    |  |  | (118,122,761 | )
|Gain (loss) on disposal of intangible assets and fixed assets |  |      | (182,104     | ) |      |  | 4,314,669    |      |  |  | (167,349     | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Total operating expenses, net                                 |  |      | (172,343,672 | ) |      |  | (155,443,232 | )    |  |  | (179,331,494 | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Income (loss) from operations                                 |  |      | (9,206,676   | ) |      |  | 41,553,921   |      |  |  | 52,474,072   |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Other income (expense):                                       |  |      |              |   |      |  |              |      |  |  |              |  
|Interest income                                               |  |      | 405,618      |   |      |  | 319,484      |      |  |  | 428,931      |  
|Interest expense                                              |  |      | (2,860,851   | ) |      |  | (4,526,625   | )    |  |  | (6,204,203   | )
|Income from short-term investment                             |  |      | 1,203,274    |   |      |  | -            |      |  |  | -            |  
|Other income (expense), net (note 17)                         |  |      | 8,413,140    |   |      |  | (95,519      | )    |  |  | 18,540       |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Income (loss) before income taxes                             |  |      | (2,045,495   | ) |      |  | 37,251,261   |      |  |  | 46,717,340   |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Income tax (expense) benefits (note 6)                        |  |      | 5,250,410    |   |      |  | (5,259,223   | )    |  |  | (6,516,315   | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Net income before equity method investees                     |  |      | 3,204,915    |   |      |  | 31,992,038   |      |  |  | 40,201,025   |  
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Loss from equity method investees                             |  |      | (3,829,962   | ) |      |  | (556,665     | )    |  |  | (3,260,570   | )
|                                                              |  |      |              |   |      |  |              |      |  |  |              |  
|Net income (loss) before
    discontinued operations          |  |      | (625,047     | ) |      |  | 31,435,373   |      |  |  | 36,940,455   |  



See accompany notes to consolidated financial statements.



F-6







YUCHENG TECHNOLOGIES LIMITED
AND SUBSIDIARIES

Consolidated Statements of Operations
and Comprehensive Income (continued)

For the year ended December 31, 2009,
2010 and 2011

(Expressed in Chinese Renminbi)










|                                                                               |  | 2009 |            |   | 2010 |  |             | 2011 |  |  | 2011        |  
|------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- |  | ----------- | ---- |  |  | ----------- | -
|                                                                               |  | RMB  |            |   | RMB  |  |             | RMB  |  |  | USD         |  
|                                                                               |  |      |            |   |      |  |             |      |  |  | (Unaudited) |  
|                                                                               |  |      |            |   |      |  |             |      |  |  | (note 2(c)) |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Loss from discontinued operations, net of tax (note 25)                        |  |      | (6,815,634 | ) |      |  | (32,205,904 | )    |  |  | -           |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Net income (loss) before non-controlling interests                             |  |      | (7,440,681 | ) |      |  | (770,531    | )    |  |  | 36,940,455  |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Less: Net loss attributable to non-controlling interests                       |  |      | 3,241,083  |   |      |  | 2,735,255   |      |  |  | 4,686,297   |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Net income (loss) attributable to stockholders of Yucheng Technologies Limited |  |      | (4,199,598 | ) |      |  | 1,964,724   |      |  |  | 41,626,752  |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Other comprehensive income (loss):                                             |  |      |            |   |      |  |             |      |  |  |             |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Foreign currency translation adjustment                                        |  |      | 521,895    |   |      |  | (762,394    | )    |  |  | (597,081    | )
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Comprehensive income (loss)                                                    |  |      | (3,677,703 | ) |      |  | 1,202,330   |      |  |  | 41,029,671  |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Weighted average common shares outstanding                                     |  |      |            |   |      |  |             |      |  |  |             |  
|– basic                                                                        |  |      | 18,541,289 |   |      |  | 18,560,014  |      |  |  | 19,213,305  |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|– diluted                                                                      |  |      | 18,584,226 |   |      |  | 18,949,359  |      |  |  | 19,267,498  |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Earnings per share from continuing operations (note 19)                        |  |      |            |   |      |  |             |      |  |  |             |  
|– basic                                                                        |  |      | 0.14       |   |      |  | 1.84        |      |  |  | 2.17        |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|– diluted                                                                      |  |      | 0.14       |   |      |  | 1.80        |      |  |  | 2.16        |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|Earnings per share (note 19)                                                   |  |      |            |   |      |  |             |      |  |  |             |  
|– basic                                                                        |  |      | (0.23      | ) |      |  | 0.11        |      |  |  | 2.17        |  
|                                                                               |  |      |            |   |      |  |             |      |  |  |             |  
|– diluted                                                                      |  |      | (0.23      | ) |      |  | 0.10        |      |  |  | 2.16        |  



See accompanying notes to consolidated
financial statements.



F-7







YUCHENG TECHNOLOGIES LIMITED
AND SUBSIDIARIES

Consolidated Statements of Stockholders’
Equity

For the year ended December 31,
2009, 2010 and 2011

(Expressed in Chinese Renminbi)








|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  | Accumulated   |  |             |             |  |  |               |  
|----------------------------------------------------------------------------------------------- |  | ------ | ---------- |  | ------ |  | ---------- | ---------- |  |  | ----------- | - |  | -------- | ---------- |  | ------------- |  | ----------- | ----------- |  |  | ------------- | -
|                                                                                                |  |        |            |  |        |  |            | Additional |  |  |             |   |  |          |            |  | other         |  |             | Non-        |  |  | Total         |  
|                                                                                                |  | Common |            |  | Shares |  |            | paid-in    |  |  |             |   |  | Retained |            |  | comprehensive |  |             | controlling |  |  | stockholders’ |  
|                                                                                                |  | shares |            |  | amount |  |            | capital    |  |  | Reserves    |   |  | earnings |            |  | loss          |  |             | interests   |  |  | equity        |  
|                                                                                                |  |        |            |  | RMB    |  |            | RMB        |  |  | RMB         |   |  | RMB      |            |  | RMB           |  |             | RMB         |  |  | RMB           |  
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Balance as of January 1, 2009                                                                   |  |        | 17,575,685 |  |        |  | 20,007,320 |            |  |  | 347,254,459 |   |  |          | 38,008,846 |  |               |  | 156,017,235 |             |  |  | (2,752,249    | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Bonus shares                                                                                    |  |        | 952,832    |  |        |  | 656        |            |  |  | 37,887,742  |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Shares issued to independent directors                                                          |  |        | 5,250      |  |        |  | 4          |            |  |  | 221,452     |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Issuance on acquisition of a subsidiary                                                         |  |        | 26,247     |  |        |  | 18         |            |  |  | 1,411,185   |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Increase of interests in Yuxinyicheng Information                                               |  |        | -          |  |        |  | -          |            |  |  | (1,061,162  | ) |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Net loss                                                                                        |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | (4,199,598  | )           |  |  | -             |  
|Increase in non-controlling interest arising
    from acquisition / disposal of subsidiary, net |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Transfer to reserves                                                                            |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | 5,126,515  |  |               |  | (5,126,515  | )           |  |  | -             |  
|Foreign currency translation adjustment                                                         |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | -           |             |  |  | 521,895       |  
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Balance as of December 31, 2009                                                                 |  |        | 18,560,014 |  |        |  | 20,007,998 |            |  |  | 385,713,676 |   |  |          | 43,135,361 |  |               |  | 146,691,122 |             |  |  | (2,230,354    | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Stock based compensation expenses                                                               |  |        | -          |  |        |  | -          |            |  |  | 8,052,823   |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Shares issued to independent directors                                                          |  |        | -          |  |        |  | -          |            |  |  | 169,911     |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Net income (loss)                                                                               |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | 1,964,724   |             |  |  | -             |  
|Transfer to reserves                                                                            |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | 7,292,644  |  |               |  | (7,292,644  | )           |  |  | -             |  
|Foreign currency translation adjustment                                                         |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | -           |             |  |  | (762,394      | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Balance as of December 31, 2010                                                                 |  |        | 18,560,014 |  |        |  | 20,007,998 |            |  |  | 393,936,410 |   |  |          | 50,428,005 |  |               |  | 141,363,202 |             |  |  | (2,992,748    | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Stock based compensation expenses (note 24)                                                     |  |        | 374,653    |  |        |  | 248        |            |  |  | 7,876,250   |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Shares issued to independent directors                                                          |  |        | 6,750      |  |        |  | 5          |            |  |  | 259,306     |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Shares issued in exchange of an intangible asset
    (note 2(h))                                |  |        | -          |  |        |  | -          |            |  |  | 9,032,400   |   |  |          | -          |  |               |  | -           |             |  |  | -             |  
|Net income (loss)                                                                               |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | 41,626,752  |             |  |  | -             |  
|Transfer to reserves                                                                            |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | 6,912,541  |  |               |  | (6,912,541  | )           |  |  | -             |  
|Foreign currency translation adjustment                                                         |  |        | -          |  |        |  | -          |            |  |  | -           |   |  |          | -          |  |               |  | -           |             |  |  | (597,081      | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|Balance as of December 31, 2011                                                                 |  |        | 18,941,417 |  |        |  | 20,008,251 |            |  |  | 411,104,366 |   |  |          | 57,340,546 |  |               |  | 176,077,413 |             |  |  | (3,589,829    | )
|                                                                                                |  |        |            |  |        |  |            |            |  |  |             |   |  |          |            |  |               |  |             |             |  |  |               |  
|In USD (unaudited)(note 2(c))                                                                   |  |        |            |  |        |  | 3,175,459  |            |  |  | 65,245,341  |   |  |          | 9,100,374  |  |               |  | 27,944,803  |             |  |  | (569,733      | )



See accompanying
notes to consolidated financial statements.



F-8









YUCHENG TECHNOLOGIES LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the year ended December 31, 2009,
2010 and 2011

(Expressed in Chinese Renminbi)








|                                                                                                |  | 2009 |             |   | 2010 |  |             | 2011 |  |  | 2011        |  
|----------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | -
|                                                                                                |  | RMB  |             |   | RMB  |  |             | RMB  |  |  | USD         |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  | (unaudited) |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  | (note 2(c)) |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Cash flows from operating activities:                                                           |  |      |             |   |      |  |             |      |  |  |             |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Net income (loss)                                                                               |  |      | (4,199,598  | ) |      |  | 1,964,724   |      |  |  | 41,626,752  |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Adjustments to reconcile net income to net cash provided
    by (used in) operating activities: |  |      |             |   |      |  |             |      |  |  |             |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Depreciation and amortization                                                                   |  |      | 33,100,808  |   |      |  | 27,147,524  |      |  |  | 19,190,823  |  
|Impairment loss on receivables                                                                  |  |      | 18,348,463  |   |      |  | -           |      |  |  | 1,734,459   |  
|(Gain) loss on disposal of intangible assets and fixed
    assets                               |  |      | 243,455     |   |      |  | (4,296,232  | )    |  |  | 167,349     |  
|Loss on disposal of subsidiary                                                                  |  |      | -           |   |      |  | 25,419,346  |      |  |  | -           |  
|(Gain) loss on disposal of investments under equity
    method                                  |  |      | (6,291,960  | ) |      |  | 14,543      |      |  |  | -           |  
|Non-controlling interests                                                                       |  |      | (3,715,244  | ) |      |  | (2,735,255  | )    |  |  | (4,686,297  | )
|Loss from equity method investees                                                               |  |      | 3,829,961   |   |      |  | 542,122     |      |  |  | 3,260,570   |  
|Stock based compensation to independent directors                                               |  |      | 221,456     |   |      |  | 169,911     |      |  |  | 253,013     |  
|Compensation expenses to ex-owners                                                              |  |      | 1,411,203   |   |      |  | -           |      |  |  | -           |  
|Stock based compensation to employees                                                           |  |      | -           |   |      |  | 8,052,823   |      |  |  | 7,526,887   |  
|Changes in operating assets and liabilities:                                                    |  |      |             |   |      |  |             |      |  |  |             |  
|Trade accounts receivable                                                                       |  |      | 116,403,846 |   |      |  | (77,767,521 | )    |  |  | (48,206,710 | )
|Costs and estimated earnings in excess of billings
    on uncompleted contracts                 |  |      | (36,871,193 | ) |      |  | (26,972,237 | )    |  |  | (36,728,492 | )
|Due from related parties                                                                        |  |      | 1,477,963   |   |      |  | 407,564     |      |  |  | (6,587,903  | )
|Inventories                                                                                     |  |      | (498,457    | ) |      |  | 2,678,684   |      |  |  | (381,958    | )
|Pre-contract costs                                                                              |  |      | (1,985,384  | ) |      |  | (12,385,089 | )    |  |  | (547,337    | )
|Other current assets                                                                            |  |      | 4,294,739   |   |      |  | (34,021,862 | )    |  |  | 10,531,209  |  
|Deferred tax assets                                                                             |  |      | (8,677,236  | ) |      |  | 2,152,005   |      |  |  | 8,704,040   |  
|Trade accounts payable                                                                          |  |      | (51,042,923 | ) |      |  | (16,192,000 | )    |  |  | 19,754,226  |  
|Billings in excess of costs and estimated earnings
    on uncompleted contracts                 |  |      | 4,052,173   |   |      |  | 8,184,892   |      |  |  | 15,319,587  |  
|Employee and payroll accruals                                                                   |  |      | (8,910,863  | ) |      |  | 15,017,488  |      |  |  | 1,202,777   |  
|Income taxes payable                                                                            |  |      | 1,840,266   |   |      |  | (530,624    | )    |  |  | (8,475,120  | )
|Other current liabilities                                                                       |  |      | 3,744,120   |   |      |  | 54,393,397  |      |  |  | 533,631     |  
|Due to a related party                                                                          |  |      | -           |   |      |  | 4,116,524   |      |  |  | 8,487,964   |  
|Deferred tax liabilities                                                                        |  |      | (1,801,721  | ) |      |  | 54,853      |      |  |  | 1,101,123   |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Net cash provided by (used in) operating activities                                             |  |      | 64,973,874  |   |      |  | (24,584,420 | )    |  |  | 33,780,593  |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Cash flows from investing activities:                                                           |  |      |             |   |      |  |             |      |  |  |             |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Capital expenditure                                                                             |  |      | (35,646,705 | ) |      |  | (21,438,377 | )    |  |  | (25,316,412 | )
|Additional investment in a subsidiary                                                           |  |      | (1,500,000  | ) |      |  | -           |      |  |  | -           |  
|Payment for the purchase of subsidiaries, net of cash acquired                                  |  |      | (11,117,440 | ) |      |  | (1,607,196  | )    |  |  | (120,367    | )
|Investment in equity method investments                                                         |  |      | (13,746,920 | ) |      |  | (29,400,000 | )    |  |  | (12,250,000 | )
|Advances to investments under equity method                                                     |  |      | (22,830,589 | ) |      |  | (5,489,135  | )    |  |  | (9,237,203  | )
|Collection of advances to investments under equity method                                       |  |      | 21,222,984  |   |      |  | 670,844     |      |  |  | 5,037,809   |  
|Proceeds from disposal of equipment                                                             |  |      | 192,918     |   |      |  | 9,342,164   |      |  |  | 204,139     |  
|Proceeds from disposal of investment under equity method                                        |  |      | 7,988,321   |   |      |  | 2,590,909   |      |  |  | -           |  
|Proceeds (payment) on disposal
    of a subsidiary, net of cash disposed                        |  |      | -           |   |      |  | (8,959,768  | )    |  |  | 11,500,000  |  
|                                                                                                |  |      |             |   |      |  |             |      |  |  |             |  
|Net cash used in investing activities                                                           |  |      | (55,437,431 | ) |      |  | (54,290,559 | )    |  |  | (30,182,034 | )



See accompanying notes to consolidated
financial statements.



F-9







YUCHENG TECHNOLOGIES LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(continued)

For the year ended December 31, 2009,
2010 and 2011 
(Expressed in Chinese Renminbi)








|                                                             |  | 2009 |              |   | 2010 |  |              | 2011 |  |  | 2011        |  
|------------------------------------------------------------ |  | ---- | ------------ | - | ---- |  | ------------ | ---- |  |  | ----------- | -
|                                                             |  | RMB  |              |   | RMB  |  |              | RMB  |  |  | USD         |  
|                                                             |  |      |              |   |      |  |              |      |  |  | (unaudited) |  
|                                                             |  |      |              |   |      |  |              |      |  |  | (note 2(c)) |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Cash flows from financing activities:                        |  |      |              |   |      |  |              |      |  |  |             |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Deemed distribution                                          |  |      | (18,281,588  | ) |      |  | -            |      |  |  | -           |  
|Proceeds from bank borrowings                                |  |      | 208,540,000  |   |      |  | 101,000,000  |      |  |  | 119,953,739 |  
|Repayments of bank borrowings                                |  |      | (188,540,000 | ) |      |  | (100,000,000 | )    |  |  | (81,000,000 | )
|Repayment of capital leases                                  |  |      | (2,867,754   | ) |      |  | (2,282,497   | )    |  |  | (314,535    | )
|Dividends paid to ex-owners                                  |  |      | (1,561,017   | ) |      |  | (3,883,406   | )    |  |  | -           |  
|Net cash provided by (used in) financing activities          |  |      | (2,710,359   | ) |      |  | (5,165,903   | )    |  |  | 38,639,204  |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Net increase (decrease) in cash and cash equivalents         |  |      | 6,826,084    |   |      |  | (84,040,882  | )    |  |  | 42,237,763  |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Cash and cash equivalents at beginning of year               |  |      | 239,751,056  |   |      |  | 246,577,140  |      |  |  | 162,536,258 |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Effect of exchange rate changes on cash and cash equivalents |  |      | -            |   |      |  | -            |      |  |  | 26,749      |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Cash and cash equivalents at the end of year                 |  |      | 246,577,140  |   |      |  | 162,536,258  |      |  |  | 204,800,770 |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Supplemental disclosures of cash flow information:           |  |      |              |   |      |  |              |      |  |  |             |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Interest paid                                                |  |      | 2,860,851    |   |      |  | 4,421,938    |      |  |  | 6,243,628   |  
|Income taxes paid                                            |  |      | 1,112,009    |   |      |  | 3,990,181    |      |  |  | 5,796,502   |  
|Shares issued for exchange of an intangible asset            |  |      | -            |   |      |  | -            |      |  |  | 9,032,400   |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Supplemental disclosures of non-cash investing activities:   |  |      |              |   |      |  |              |      |  |  |             |  
|                                                             |  |      |              |   |      |  |              |      |  |  |             |  
|Consideration on disposal of a subsidiary                    |  |      | -            |   |      |  | 21,500,000   |      |  |  | -           |  



See accompanying notes to consolidated
financial statements.



F-10







| | 1 | Organization and description of business
| | - | ----------------------------------------



Yucheng Technologies Limited
(“Yucheng”), incorporated on November 24, 2006 under the laws of the British Virgin Islands (“BVI”), and
its subsidiaries are engaged in systems integration, software solution services, information technology (“IT”) consulting
and training services, maintenance and support, sales of self-developed IT products, computer software, hardware and peripheral
equipment, communication equipment and undertaking computer network projects. Its major customers are first and second tier state-owned
commercial banks in China.



On January 15, 2007, Beijing
Yuxinyicheng Technologies Limited (“Yuxinyicheng”) established a subsidiary, Beijing Yuxinyicheng Information Technology
Limited. On July 18, 2007, Yuxinyicheng established another subsidiary, Shanghai Yuxinhongzhi Information Technology Limited.
During 2007, Yuxinyicheng acquired 5 companies, Beijing Sunrisk Information Technology Limited (“Sunrisk”), Beijing
Easycon Electronics Limited, Chengdu Recency Technologies Limited, Shanghai Fujie Business Consulting Limited, and Shanghai Fuyi
Business Consulting Limited.



On January 22, 2008, Beijing
Sihitech acquired a further 25% equity interest of Easycon from its minority shareholders at an aggregate consideration of RMB7,200,000.



On April 28, 2008, the registered
capital of Sunrisk was increased to RMB20,000,000 from RMB1,000,000. Yuxinyicheng introduced a strategic investor to acquire 49%
of Sunrisk’s equity interest. As a result, Yuxinyicheng’s equity interest in Sunrisk was diluted to 51% from 100%.



On July 21, 2008, Beijing
Sunrisk Information Technology Limited was renamed to Beijing Yuxinhengsheng Information Technology Limited.



On August 13, 2009, Shanghai
Sihitech Software Co., Ltd. was renamed as Shanghai Yuxinyicheng Software Co., Ltd.



On May 13, 2009, Guangzhou
Yuxinhongtai Technology Co., Ltd. was renamed as Guangzhou Shenglihongtai Technology Co., Ltd ("Guangzhou Sihitech").
On August 30, 2009, Yuxinyicheng transferred its interest in Guangzhou Sihitech to a third party.



On October 14, 2009, Yuxinyicheng
established a wholly owned subsidiary named Tianjin Yuxinyicheng Technology Limited (“Tianjin Yuxinyicheng”) in Tianjin.
Total registered capital is RMB50 million.



On November 30, 2009, Shanghai
Fuyi Business Consulting Limited which had been inactive was closed.



On December 31, 2010, Yuxinyicheng
transferred its interests of 100% in Beijing Yuxinyicheng Information Technology Limited (“Yuxinyicheng Information”)
to the third parties.



On August 7, 2011, Tianjin
Yuxinyicheng acquired a subsidiary, Tianjin Yuchengxin Information Security Technologies Limited (“Yuchengxin”) from
third parties at a consideration of approximately RMB16,975,000, comprising of cash of approximately RMB8,143,000 plus 442,185
ordinary shares of the Company with certain contingent payments when some performance conditions are met pursuant to the agreement,
with fair value of approximately RMB8,832,000. The management considered the acquisition of Yuchengxin did not constitute a business
combination according to ASC 805. Instead, the consideration paid was for the cash and cash equivalent of approximately RMB1,000,000
recorded in the book of Yuchengxin and an intangible asset related to the services to be provided by the previous owners of Yuchengxin
(“service vendor relationships”). For more information of the intangible asset acquired from such transaction, please
refer to note 2(h). The detailed information related to the contingent payments of the transaction is disclosed in note 20.



F-11







| | 1 | Organization and description of business
                                                          - Continued
| | - | --------------------------------------------------------------------------------------------------------------



At of December 31, 2009,
2010 and 2011, details of Yucheng’s subsidiaries (collectively with Yucheng referred to as the “Company”)
are as follows:



|Name                                                               |  | Date of
    incorporation or establishment |  | Place of
    incorporation or establishment |  | Percentage of
    ownership |     |   | Principal activity | 
|------------------------------------------------------------------ |  | ------------------------------------------ |  | ------------------------------------------- |  | --------------------------- | --- | - | ------------------ | 
|                                                                   |  |                                            |  |                                             |  | 2009                        |     |   | 2010               | 
|                                                                   |  |                                            |  |                                             |  |                             |     |   |                    | 
|Port
    Wing Development Co., Ltd. (“e-Channels BVI”)             |  | November
    3, 2005                       |  | BVI                                         |  |                             | 100 | % |                    | 
|                                                                   |  |                                            |  |                                             |  |                             |     |   |                    | 
|Ahead
    Billion Venture Ltd. (“Sihitech BVI”).                   |  | November 3, 2005                           |  | BVI                                         |  |                             | 100 | % |                    | 
|                                                                   |  |                                            |  |                                             |  |                             |     |   |                    | 
|Beijing
    Yuxinyicheng Technologies Ltd. (“Yuxinyicheng”)        |  | October 19, 2006                           |  | People’s Republic
    of China (“PRC”)      |  |                             | 100 | % |                    | 
|                                                                   |  |                                            |  |                                             |  |                             |     |   |                    | 
|Beijing
    e-Channels Century Technology Co., Ltd. (“e-Channels”) |  | February 5, 2001                           |  | PRC                                         |  |                             | 100 | % |                    | 



F-12









| | 1 | Organization and description of business
                                                          - Continued
| | - | --------------------------------------------------------------------------------------------------------------



|Name                                                                                 |  | Date of
    incorporation or establishment |  | Place of
    incorporation or establishment |  | Percentage of
    ownership |     |   | Principal  activity | 
|------------------------------------------------------------------------------------ |  | ------------------------------------------ |  | ------------------------------------------- |  | --------------------------- | --- | - | ------------------- | 
|                                                                                     |  |                                            |  |                                             |  | 2009                        |     |   | 2010                | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Beijing
    Sihitech Technology Co., Ltd. (“Beijing Sihitech”)                       |  | June 16,
    1999                          |  | PRC                                         |  |                             | 100 | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Beijing
    Sihitech Software Co., Ltd. (“Beijing Software”)                         |  | January 28, 2002                           |  | PRC                                         |  |                             | 100 | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Shanghai
    Sihitech Technology Co., Ltd. (“Shanghai Sihitech”)                     |  | June 20, 2001                              |  | PRC                                         |  |                             | 100 | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Shanghai
    Yuxinyicheng Software Co., Ltd. (“Shanghai Software”)                   |  | May 28, 2005                               |  | PRC                                         |  |                             | 100 | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Beijing
    Yuxinyicheng Information Technology Limited (“Yuxinyicheng Information”) |  | January 15, 2007                           |  | PRC                                         |  |                             | 100 | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Beijing
    Yuxinhengsheng Information Technology Limited (“Sunrisk”)                |  | April 14, 2005                             |  | PRC                                         |  |                             | 51  | % |                     | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                     | 
|Beijing
    Easycon Electronics Limited (“Easycon”)                                  |  | December 25, 1997                          |  | PRC                                         |  |                             | 100 | % |                     | 



F-13









| | 1 | Organization and description of business
                                                          - Continued
| | - | --------------------------------------------------------------------------------------------------------------



|Name                                                                                 |  | Date of
    incorporation or establishment |  | Place of
    incorporation or establishment |  | Percentage of
    ownership |     |   | Principal activity | 
|------------------------------------------------------------------------------------ |  | ------------------------------------------ |  | ------------------------------------------- |  | --------------------------- | --- | - | ------------------ | 
|                                                                                     |  |                                            |  |                                             |  | 2009                        |     |   | 2010               | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Chengdu
    Recency Technologies Limited (“Recency”)                                 |  | July 15,
    1997                          |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Shanghai
    Fujie Business Consulting Limited (“Fujie”)                             |  | December 13, 2005                          |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Xiamen
    Yucheng Technology Limited (“Xiamen Yucheng”)                             |  | April 9, 2007                              |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Beijing
    Yuxinyicheng Software Co. , Ltd. (“Yuxinyicheng Software”)               |  | August 6, 2007                             |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Guangzhou
    Yuxinyicheng Information Technology Limited (“Guangzhou Yuxinyicheng”) |  | November 26, 2007                          |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Chengdu
    Yuxinyicheng Technology Limited (“Chengdu Yuxinyicheng”)                 |  | March 16, 2009                             |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Tianjin
    Yuxinyicheng Technology Limited (“Tianjin Yuxinyicheng”)                 |  | October 14, 2009                           |  | PRC                                         |  |                             | 100 | % |                    | 
|                                                                                     |  |                                            |  |                                             |  |                             |     |   |                    | 
|Yuchengxin                                                                           |  | August 5, 2011                             |  | PRC                                         |  |                             | -   |   |                    | 



F-14









| | 1 | Organization and description of business
                                                          - Continued
| | - | --------------------------------------------------------------------------------------------------------------



The IT industry is characterized
by rapid technological change and competitive pricing pressures. The Company financial results are affected by a wide variety
of factors, including general economic conditions in the local market, economic conditions specific to the IT industry, technological
and creative skills of its personnel, the timely development of new products and the ability to safeguard patents and intellectual
property in a rapidly evolving market. As a result, the Company may experience significant period-to-period fluctuations in future
operating results due to the factors mentioned above or other factors.



The majority of the revenues
of the Company are from customers who are concentrated in the financial services industry in PRC. Any unfavourable economic conditions
affecting the local financial services industry could have a material adverse effect on the Company’s future financial position
and results of operations.



The trade accounts
receivable of the Company include amounts due from banks and IT service companies. The Company performs on-going credit
evaluations of its customers (see note 2(t)). Sales to the Company's largest customer, a bank and its subsidiaries, were
approximately 39.1%, 30.7% and 17.1% of revenues in 2009, 2010 and 2011, respectively. The Company’s total revenue from
the head office of the largest customer, which is one of the primary banks in China in 2011 resulted from 70 (2010: 62)
separate and independent contracts, the head office of the largest customer, contributed to 9.1% (2010: 14.3%) of the
Company’s total revenues. Trade accounts receivable as of December 31, 2010 and 2011 included receivables from the
Company’s largest bank customer and its subsidiaries totalling RMB54.5 million and RMB41.5 million, respectively.



The Share Exchange Transactions



On December 20, 2005, China
Unistone Acquisition Corporation (“CUAC”) entered into a Stock Purchase Agreement with Sihitech BVI and e-Channels
BVI and all stockholders of Sihitech BVI and e-Channels BVI for CUAC’s acquisition of Sihitech BVI and e-Channels BVI. For
the acquisition, CUAC formed its wholly owned subsidiary, Yucheng. On November 24, 2006, the closing date of the acquisition (the
“Closing Date”), CUAC merged with and into Yucheng for the purpose of redomestication out of the United States of
America. The redomestication merger was achieved by a one-for-one exchange of all the outstanding common stock of CUAC for common
stock of Yucheng and the assumption of all the rights and obligations of CUAC by Yucheng, including assumption of the outstanding
warrants of CUAC. Immediately after the redomestication merger, Yucheng acquired all the common stock of Sihitech BVI and e-Channels
BVI by the issuance of shares and payments of cash consideration to the shareholders of Sihitech BVI (“Sihitech BVI Shareholders)
and of e-Channels BVI (“e-Channels BVI Shareholders”) or their designee, making them wholly owned subsidiaries (the
“Share Exchange Transactions”).



Sihitech BVI Shareholders and
their designee were paid an aggregate of USD2,731,884 in cash, using the funds held in the trust account of CUAC, and were issued
an aggregate of 3,754,484 ordinary shares of Yucheng for all the outstanding common stock of Sihitech BVI. This transaction was
accounted for as a recapitalisation of Sihitech BVI. Since Yucheng is not an operating company, this transaction is treated as
the issuance of shares of Sihitech BVI for the net tangible assets (consisting principally of cash and short-term investments)
of Yucheng. The carrying value of the assets of Yucheng approximated their fair value, therefore, no "purchase accounting"
fair value adjustments were required and no goodwill had been recorded in this portion of this transaction. The payment of the
cash consideration was accounted for as a deemed distribution.

F-15







| | 1 | Organization and description of business
                                                          - Continued
| | - | --------------------------------------------------------------------------------------------------------------



The Share Exchange Transactions
- Continued



e-Channels BVI Shareholders
and their designee were paid an aggregate of USD1,268,116 in cash, using the funds held in the trust account of CUAC, and were
issued an aggregate of 1,573,836 shares of common stock of Yucheng for all the outstanding common stock of e-Channels BVI. This
transaction, between the recapitalized Sihitech BVI and e-Channels BVI, was accounting for using the purchase method of accounting
with Sihitech BVI treated as the accounting acquirer.



As a result of the Share Exchange
Transactions the historical financial statements of Yucheng for the periods prior to the Closing Date are those of Sihitech and
its subsidiaries and all references to the consolidated financial statements of Yucheng apply to the historical consolidated financial
statements of Sihitech and its subsidiaries prior to the Closing Date and the consolidated financial statements of Yucheng and
its subsidiaries subsequent to the Closing Date. Yucheng’s equity components are stated in terms of Sihitech before the
Closing Date, with an adjustment to reflect the effect of the recapitalisation on the equity components at the Closing Date.



The aggregate consideration
paid at the Closing Date were USD4,000,000 and 5,328,320 common shares of Yucheng. Of the USD4,000,000, as security for the indemnification
obligations of Sihitech BVI Shareholders and e-Channels BVI Shareholders, USD250,000 has been held back by Yucheng pending resolution
of an outstanding claim. The holdback amount is not a limitation on the indemnification amounts, which are generally limited to
the full consideration paid.



Of the total number of shares
issued at the Closing Date, an aggregate of 773,045 shares of common stock issued to Sihitech BVI Shareholders were subject to
return and cancellation if the net profit as shown in the audited consolidated financial statements of Yucheng prepared in accordance
with the generally accepted accounting principles in the United States of America (“US GAAP”) for the year ended December
31, 2006 plus all compliance expenses of being public is less than USD6,073,941. Pursuant to the supplemental agreement dated
May 9, 2007, this clause was amended such that the 773,045 shares would be returned and cancelled if the proforma table in the
notes to the audited consolidated financial statements of Sihitech and its subsidiaries and e-Channels under US GAAP for the year
ended December 31, 2006 was lower than USD6,073,941. The condition was met and accordingly, no adjustment for the purchase price
in respect to the 773,045 shares of common stock was recorded in the consolidated financial statements of Yucheng for the year
ended December 31, 2006.



Additional purchase price payment
will be made to Sihitech BVI Shareholders, e-Channels BVI Shareholders and their designee up to an amount of USD9,960,000 has
been paid or accrued based on the following events:



| | (1) | Yucheng will pay an additional USD5,000,000
                                                       to Sihitech BVI Shareholders, e-Channels BVI Shareholders and their designee
                                                       if Yucheng receives at least USD34,500,000 in gross proceeds in additional
                                                       financing, including from the exercise of outstanding public warrants,
                                                       the successful completion of a secondary offering, or a private investment
                                                       by a strategic investor. According to an amendment agreement dated on August
                                                       24, 2007 (the “Amendment”), the additional USD5,000,000 was
                                                       changed to USD4,960,000.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Yucheng will pay an additional USD1,000,000
                                                       if the average closing price of the stock of Yucheng in any sixty consecutive
                                                       trading days of 2006 is above USD10.00; USD2,000,000 if the average closing
                                                       price of the stock of Yucheng in any sixty consecutive trading days of
                                                       2007 is above USD12.00; and USD3,000,000 if the average closing price of
                                                       the stock of Yucheng in any sixty consecutive trading days of 2008 is above
                                                       USD14.40.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-16











| | 1 | Organization and description of business - Continued
| | - | ----------------------------------------------------



The Share Exchange Transactions
- Continued



Notwithstanding the foregoing,
the maximum amount to be paid under the above events shall not exceed USD10,000,000.



As of December 31, 2007, Yucheng
received USD34,332,430 (equivalent to approximately RMB252,606,922) in gross proceeds as a result of the exercise of outstanding
public warrants (note 21). Accordingly, Yucheng paid an additional USD4,960,000 (equivalent to approximately RMB37,772,880) to
Sihitech BVI Shareholders, e-Channels BVI Shareholders and their designee. Among the payments of the additional purchase price,
USD3,494,707(equivalent to approximately RMB26,613,939) was paid to Sihitech BVI Shareholders and their designee which are accounted
for as a deemed distribution. The remaining of USD1,465,293 (equivalent to approximately RMB11,158,941) was paid to e-Channels
BVI Shareholders and their designee which are accounted for as an adjustment to the purchase price in respect of the acquisition
of e-Channels.



As of December 31, 2008, the
2007 and 2008 average closing price of the stock of Yucheng in any sixty consecutive trading days targets were met. USD1,200,000
has been paid in relation to the 2007 stock price target and USD800,000 has been accrued. USD3,000,000 has been accrued in relation
to the 2008 stock price target.



In addition, the condition of
the average closing price of the stock of Yucheng in any sixty consecutive trading days of 2007 being above USD12.00 was achieved,
Yucheng was obligated to make payments of the additional purchase price of USD2,000,000 to Sihitech BVI Shareholders, e-Channels
BVI Shareholders and their designee. Among the obligations of the additional purchase price, USD1,409,156 (equivalent to approximately
RMB10,293,321) was accrued to Sihitech BVI Shareholders and their designee which are accounted for as a deemed distribution. The
remaining balance of USD590,844 (equivalent to approximately RMB4,315,879) was accrued to e-Channels BVI Shareholders and their
designee which are accounted for as an adjustment to the purchase price in respect of the acquisition of e-Channels.



In addition, the condition of
the average closing price of the stock of Yucheng in any sixty consecutive trading days of 2008 being above USD14.40 was achieved,
Yucheng was obligated to make payments of the additional purchase price of USD3,000,000 to Sihitech BVI Shareholders, e-Channels
BVI Shareholders and their designee. Among the obligations of the additional purchase price, USD2,113,734 (equivalent to approximately
RMB14,836,299) was accrued to Sihitech BVI Shareholders and their designee which are accounted for as a deemed distribution. The
remaining balance of USD886,266 (equivalent to approximately RMB6,057,274) was accrued to e-Channels BVI Shareholders and their
designee which are accounted for as an adjustment to the purchase price in respect of the acquisition of e-Channels.



Following to the Amendment,
additional common shares, on an all-or-none basis, may be issued to Sihitech BVI shareholders, e-Channels BVI shareholders and
their designee on a pro rate basis, based on the amount of consideration shares issued on November 24, 2006, aggregating 952,832
common shares each year for four years beginning in 2008, if the Company achieves net profit targets in the prior year as indicated
in the following table according to the financial statements audited each year in accordance with accounting principles generally
accepted in the United States of America (“US GAAP”), where net profit shall be determined for this purpose only, as
net profit (determined on the basis of US GAAP) before the amortization expenses related to the acquisition of e-Channels. If the
net profits of the Company are not achieved, the obligation of Yucheng to issue the common shares for that year is terminated,
with no effect on subsequent years.



F-17







| | 1 | Organization and description of business - Continued
| | - | ----------------------------------------------------



The Share Exchange Transactions
- Continued



|Year ended December 31, |  |  |  |                   |  | Net Profit | 
|----------------------- |  |  |  | ----------------- |  | ---------- | 
|                        |  |  |  |                   | 
|2007                    |  |  |  | USD   8.5 million | 
|2008                    |  |  |  | USD 11.9 million  | 
|2009                    |  |  |  | USD 16.7 million  | 
|2010                    |  |  |  | USD 23.3 million  | 



As the net profit target for
year ended December 31, 2009 and 2010 had not been achieved, no shares was required to be issued to Sihitech BVI shareholders,
e-Channels BVI shareholders and their designee for 2009 and the subsequent years.



As the net profit target for
year ended December 31, 2008 was achieved, Yucheng issued 952,832 common shares valued at USD5,545,482 (equivalent to approximately
RMB37,901,151), to Sihitech BVI shareholders, e-Channels BVI shareholders and their designee in 2009 as additional purchase price.
Of the 952,832 common shares issued, 671,344 common shares, amounting to USD3,907,222 (equivalent to approximately RMB26,704,299),
were issued to Sihitech BVI Shareholders and their designee which was accrued as a liability and a deemed distribution as of December
31, 2008. The remaining 281,488 common shares, amounting to USD1,638,260 (equivalent to approximately RMB11,196,852), were issued
to e-Channels BVI Shareholders and their designee which was accrued as a liability and an adjustment to the purchase price in respect
of the acquisition of e-Channels as of December 31, 2008.



As the net profit target for
year ended December 31, 2007 was achieved, Yucheng issued 952,832 common shares, valued at USD5,930,220 (equivalent to approximately
RMB43,317,887), to Sihitech BVI shareholders, e-Channels BVI shareholders and their designee in 2008 as additional purchase price.
Of the 952,832 common shares issued, 671,344 common shares, amounting to USD4,178,302 (equivalent to approximately RMB30,520,828),
were issued to Sihitech BVI Shareholders and their designee which was accrued as a liability and a deemed distribution as of December
31, 2007. The remaining 281,488 common shares, amounting to USD1,751,918 (equivalent to approximately RMB12,797,059), were issued
to e-Channels BVI Shareholders and their designee which was accrued as a liability and an adjustment to the purchase price in respect
of the acquisition of e-Channels as of December 31, 2007.



F-18







| | 2 | Summary of significant accounting policies and practices
| | - | --------------------------------------------------------



The consolidated financial statements
have been prepared in accordance with U.S. GAAP.



| | (a) | Principles of consolidation
| | --- | ---------------------------



The consolidated financial statements
include the financial statements of Yucheng and its subsidiaries. All significant inter-company transactions and balances are eliminated
upon consolidation. Investments under equity method are accounted for under the equity method. Yucheng’s share of these companies’
earnings or losses is included in the consolidated statement of operations as income or loss from equity method investees.



| | (b) | Use of estimates
| | --- | ----------------



The preparation of the consolidated
financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions
include the carrying amounts of properties and equipment, intangible assets, goodwill, valuation allowances for receivables and
inventories, percentage of completion calculations relating to revenue recognition, pre-contract costs and valuation allowance
for deferred tax assets. Actual results could differ from those estimates.



| | (c) | Convenience translation into United States dollars
| | --- | --------------------------------------------------



The translation of Renminbi
amounts into United States dollars has been made for the convenience of the reader and has been made at the exchange rate quoted
by the People’s Bank of China on December 31, 2011 of RMB6.3009 (2010: RMB6.6227) to USD1.00. Such translation amounts should
not be construed as representations that the Renminbi amounts could be readily converted into United States dollars at that rate
or any other rate.



| | (d) | Cash and cash equivalents
| | --- | -------------------------



Cash and cash equivalents include
cash on hand, cash accounts, interest bearing savings accounts and time certificates of deposit which are unrestricted as to withdrawal
or use, and which have maturities of three months or less when purchased.



| | (e) | Inventories
| | --- | -----------



Inventories are stated at the
lower of cost or market. Cost is determined using the first-in, first-out method (FIFO). Inventories consist of IT hardware equipment,
all of which are finished goods.



F-19







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (f) | Properties and equipment
| | --- | ------------------------



Properties and equipment are
stated at cost less accumulated depreciation and impairment losses (note 2(i)). Depreciation is calculated on the straight-line
method over the estimated useful lives of the assets as follows:



|                               |  | Estimated useful life             | 
|------------------------------ |  | --------------------------------- | 
|Properties                     |  | 20 years                          | 
|Office equipment and furniture |  | 3-5 years                         | 
|Machinery                      |  | 3-5 years                         | 
|Motor vehicles                 |  | 5-10 years                        | 
|Leasehold improvements         |  | Shorter of lease terms or 5 years | 



Maintenance and repairs are charged to
expense as incurred. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed
and the resulting gain or loss is recognized for the reporting period.



| | (g) | Leases
| | --- | ------



Leases are categorized as either
operating or capital leases depending on certain criteria defined in Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) Topic 840, Leases.



Where a lease is classified
as a capital lease, the asset is treated as if it had been purchased outright. The amount initially recognized as an asset is the
lower of fair value of the leased asset or the present value at the beginning of the lease term of minimum lease payments during
the lease term, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to
be paid by the lessor, together with any profit thereon. The corresponding lease commitment is shown as liability. Lease payments
are analyzed between capital and interest. The interest element is charged to the consolidated statement of operations over the
period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces
the balance owed to the lessor.



Where a lease is classified
as an operating lease, the total rental payments made under the leases are recognized in the consolidated statement of operations
on a straight-line basis over the terms of the leases. Lease incentives received are recognized in the consolidated statement of
operations as an integral part of the total lease payments made.



F-20







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (h) | Intangible assets
| | --- | -----------------



| | (i) | Cost of intangible assets
| | --- | -------------------------



Intangible assets consist primarily
of purchased software, capitalized costs for computer software development, customer relationships and other technology. Intangible
assets are stated at cost or fair value less accumulated amortization and any impairment write-downs. Fair value of identifiable
intangible assets is estimated based upon discounted future cash flow projections.



The Company capitalizes development
costs for marketable software incurred from the time of technological feasibility until the software is ready for use in accordance
with ASC Topic 985-20, Costs of Software to be Sold, Leased, or Marketed. All costs to establish technological feasibility
of a computer product to be sold, leased or otherwise marketed are charged to research and development expense as incurred. Technological
feasibility is established through completeness of the working model and its consistency with the product design. Costs incurred
for modification, components of large products, and enhancements are expensed. As the working model is normally built during the
process of project implementation for clients, there are no high-risk development issues.



Under the provisions of ASC
Topic 350-40, Internal-Use Software, the Company capitalizes costs associated with software developed or obtained for internal
use when both the preliminary project stage is completed and management has authorized further funding for the project which it
deems probable of completion and use for the function intended. Technological feasibility is established upon completeness of the
product design and planning phases indicating that product can be built by existing technology and tools. Capitalized internal-use
software costs include only (1) external direct costs of materials and services consumed in developing or obtaining the software,
(2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project, and (3)
interest costs incurred, when material, while developing the software. Capitalization of these costs ceases no later than the point
at which the project is substantially complete and ready for its intended purpose.



The Company obtained intangible
assets in 2007, whose values have been estimated by the management in the absence of ready ascertainable market values. However,
because of the inherent uncertainty of the valuation, it is reasonably possible that those estimated values may differ significantly
from the values that would have been used had a ready market for these intangible assets existed, and the differences could be
material to the consolidated financial statements.



Software development costs
include payroll, employee benefits, and other headcount-related costs associated with product development. The Company records
expenditure incurred before technological feasibility is established into research and development cost and capitalizes expenditures
incurred after that point into the cost of intangible assets. Software development costs were RMB22,204,930, RMB18,289,465 and
RMB27,469,793 in 2009, 2010 and 2011, respectively, among which RMB8,376,550, RMB7,758,848 and RMB11,999,308 were capitalized in
2009, 2010 and 2011.



In August 2011, the Company
acquired an intangible asset related to the services to be provided by the previous owners of Yuchengxin. Such service vendor relationships
are amortized over its contractual period of three years.



F-21







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (h) | Intangible assets - Continued
| | --- | -----------------------------



| | (ii) | Amortization
| | ---- | ------------



The Company amortizes capitalized
software development costs for marketable software on a product-by-product basis. The annual amortization is the greater of the
amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated revenues
for that product or (b) the straight-line method over the remaining estimated economic life of the product including the period
being reported upon.



Purchased computer software
and capitalized computer software development costs for internal use are amortized on a straight-line basis over their estimated
useful lives, and are monitored on a regular basis to assess that the amortization method is still appropriate and the remaining
estimated useful life of the asset is reasonable.



Customer relationships and
other technology are amortized on a straight-line basis over their estimated economic useful lives.



The estimated useful lives
are as follows:



|                             |  | Estimated useful life | 
|---------------------------- |  | --------------------- | 
|Software development costs   |  |                       | 
|-    Internal-use software   |  | 3 years               | 
|-    Marketable software     |  | 3 years               | 
|Customer relationships       |  | 3-5 years             | 
|Other technology             |  | 3-5 years             | 
|Purchased software           |  | 5-10 years            | 
|Service vendor relationships |  | 3 years               | 



The straight-line method of
amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of
economic benefits obtained by the Company in each reporting period.



| | (i) | Impairment of long-lived assets
| | --- | -------------------------------



The Company evaluates for impairment
its long-lived assets to be held and used, including properties and equipment, intangible assets and other non-current assets,
when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not
be recoverable in accordance with ASC Topic 360, Property, Plant and Equipment, or ASC Topic 350-30, General Intangibles Other
than Goodwill,as appropriate. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimate undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount that the carrying value exceeds the estimated
fair value.



Assets to be disposed of would
be separately presented in the balance sheet and reported at the lower of carrying amount or estimated fair value less the cost
to sell, and are no longer depreciated.



Judgments and assumptions are
inherent in management’s estimate of undiscounted future cash flows used to determine recoverability of an asset and the
estimate of an asset’s fair value used to calculate the amount of impairment to recognize. The use of alternate judgments
and/or assumptions could result in the recognition of different levels of impairment charges in the consolidated financial statements.



F-22







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (j) | Goodwill
| | --- | --------



Goodwill represents the excess
of the purchase price over the fair value assigned to net tangible and identifiable intangible assets of business acquired and
accounted for under the acquisition method.



In accordance with ASC Topic
350, Goodwill, the impairment evaluation of goodwill is conducted annually, or more frequently, if events or changes in
circumstances indicate that an asset might be impaired. The evaluation is performed by using a two-step process. In the first step,
the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. The estimated
fair value of the reporting unit is generally determined on the basis of discounted future cash flows. If the estimated fair value
of the reporting unit is less than the carrying amount of the reporting unit, then a second step must be completed in order to
determine the amount of the goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting
unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other
than goodwill (including any unrecognized intangible assets) in a manner similar to a purchase price allocation. The resulting
implied fair value of the goodwill that results from the application of the second step is then compared to the carrying amount
of the goodwill and an impairment charge is recorded for the difference.



The assumptions used in the
estimate of fair value are generally consistent with the past performance of each reporting unit and are consistent with the projections
and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic
and competitive conditions.



| | (k) | Revenue recognition
| | --- | -------------------



The Company generates revenues
primarily from Software & Solutions, Platform Services and Maintenance Services. Revenue is recognized as follows:



| | (i) | Software & Solutions- Software & Solutions consist of software development services
that require significant production, modifications, or customization of software or software system. Due to the long-term nature
of software development, contract accounting is applied in accordance with ASC Topic 605-35, Construction-Type and Production-Type
Contracts, and ASC Topic 985-605, Software - Revenue Recognition. Based on our fact pattern, we apply the percentage-of-completion
method of revenue recognition to account for the software development to the period from the start of the significant production,
modification, or customization through to the last element delivered, which is the end of the software development contract. Labor
costs and direct project expenses are used to determine the stage of completion. Revisions in estimated contract profits are made
in the period in which the circumstances requiring the revision first become known. Provisions, if any, are made for anticipated
losses on uncompleted contracts whenever it appears there may be a loss.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-23









| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (k) | Revenue recognition - Continued
| | --- | -------------------------------



| | (i) | Continued
| | --- | ---------



Costs and estimated earnings
in excess of billings on uncompleted contracts consist of recognized recoverable costs and accrued profits on contracts for which
billings had not been presented to customers as of the balance sheet date. Billings in excess of revenue recognized for which payments
have been received are deferred until the applicable revenue recognition criteria have been met.



| | (ii) | Platform Services- Platform Services refer to
system integration service. System integration services mainly consist of value added services of planning, designing, installing,
integrating and testing of hardware sold to customers. Revenue from system integration services is recognized in accordance with
FASB ASC Topic 605, Revenue Recognition, when the following conditions are all met: persuasive evidence of an arrangement
exists, system integration services have been rendered and products have been delivered and accepted, the price is fixed or determinable
and, collectibility is reasonably assured. Customer’s acknowledgement evidences their acceptance of the system integration
work being completed at which time revenue is recognized. The contract revenue and related costs are deferred if the customer’s
acknowledgement is not obtained.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Maintenance Services - Maintenance Services consist of agency sales and maintenance services.
Revenue from sales of IT equipment and software to the end users, which are limited to passing the IT equipment and software from
vendors to the end users, is treated as agency sales. The Company records the net difference between the amount it bills to end
users and the fees charged by third party vendors as revenue. The Company considers the criteria set out in ASC Topic 605-45, Principal
Agent Considerations, in determining whether it should recognize such revenues at gross or net of revenue. The Company believes
that based on its arrangement with the system integrators, end users and the third party IT manufacturers, the net approach is
appropriate as the Company is not the primary obligor to the end users, does not take general inventory risk, does not have latitude
in establishing price and does not have discretion in supplier selection with respect to the IT equipment or software delivered
to end users.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Maintenance Service revenue is
recognized ratably over the maintenance period.



F-24







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (l) | Pre-contract costs
| | --- | ------------------



Due to the business environment
in which the Company operates, it is common practice that the Company commences the software development or IT consulting project
for its clients without commercial contracts being signed. If the contracts are not obtained during the reporting period where
implementation costs have been incurred, the Company defers revenue recognition for the related contracts until contracts are obtained.
In accordance with ASC Topic 720-15, Start-Up Costs, costs that are incurred for a specific anticipated contract and that
will result in no future benefits unless the contract is obtained, including cost of equipment, direct labor costs, and other ancillary
costs, are deferred until receipt of the signed contract, and are then included in contract costs or inventory. Such deferred costs,
subject to their not being related to costs of start-up activities, are evaluated periodically for probability of recoverability.
If deemed unrecoverable, deferred costs are expensed to operating expenses.



Costs of start-up activities,
including organization costs, are expensed as incurred.



Costs incurred in connection
with anticipated contracts are deferred outside the contract cost or inventory classification if their recovery from future contract
revenue or from other dispositions is considered probable.



| | (m) | Net earnings per common share
| | --- | -----------------------------



The Company computes net earnings
per common share in accordance with ASC Topic 260, Earnings per Share. Under the provisions of ASC Topic 260, basic earnings
per common share is computed by dividing the net earnings available to common shareholders for the period by the weighted average
number of shares of common stock outstanding during the period. The calculation of diluted net earnings per share gives effect
to common stock equivalents, however; potential common stock in the diluted net earnings per common share computation is excluded
in net loss periods if their effect is anti-dilutive.



| | (n) | Retirement benefits
| | --- | -------------------



Pursuant to the relevant laws
and regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a
governmental organization. The Company makes contributions to the retirement scheme at the applicable rate based on the employees’
salaries. The required contributions under the retirement plans are charged to the consolidated statement of operations on an accrual
basis when they are due. The Company’s contributions totaled RMB16,453,429, RMB12,794,943 and RMB12,594,520 in 2009, 2010
and 2011, respectively.



| | (o) | Interest
| | --- | --------



Interest costs are expensed as
incurred, except for those capitalized that are directly attributable to the acquisition, construction or production of qualifying
assets. No interest costs were capitalized for each of the years in the three-year period ended December 31, 2011.





F-25













| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (p) | Income taxes
| | --- | ------------



Income taxes are accounted for
under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that
some portion, or all of, the deferred tax assets will not be realized.



| | (q) | Government subsidies
| | --- | --------------------



Government subsidies are recognized
when received and when all the conditions for their receipt have been met. Such amounts are included as a credit in the operating
expense section of the consolidated statement of operations.



| | (r) | Tax refunds
| | --- | -----------



Pursuant to the laws and regulations
of the PRC, the Company is entitled to a refund of the 14.0% value-added tax (“VAT”) for certain self-developed software
products. The Company recognizes the VAT refunds upon the completion of government approval process. VAT refunds are included as
a credit in the operating expense section of the consolidated statement of operations.



| | (s) | Fair value measurement
| | --- | ----------------------



The Company measures the fair
values of its financial instruments in accordance with accounting guidance which defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The Company adopted the accounting guidance related to non-financial assets and non-financial liabilities that are
not measured at fair value on a recurring basis on January 1, 2009. In addition, the Company categorizes assets and liabilities
measured at fair value into three-level hierarchy based on the inputs to fair value measurement. The following describes the three-level
hierarchy.



F-26







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (s) | Fair value measurement - Continued
| | --- | ----------------------------------



Level 1: Quoted prices in active
markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts
that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded in over-the-counter
markets.

Level 2: Observable inputs other
than Level 1 prices, such as quoted prices for similar assets or liabilities either directly or indirectly; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.

Level 3: Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level
3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies,
or similar techniques based on significant unobservable inputs, as well as instruments for which the determination of fair value
requires significant management judgment or estimation.



The fair value of financial instruments
and the methods and assumptions used in estimating fair value amounts are detailed in note 2(t).



| | (t) | Financial instruments
| | --- | ---------------------



Exposure to credit and interest
rates arises in the normal course of the Company’s business. Financial assets of the Company include cash and cash equivalents
and trade accounts receivable, other receivables and amounts due from related parties. Financial liabilities of the Company include
trade accounts payable and other payables, short-term loans and outstanding payment in relation to business acquisitions. Adjustments
are made for financial assets if their carrying amount exceeds the value realizable in the foreseeable future. Financial liabilities
are stated at their carrying amounts.



Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade and other accounts
receivable. The Company’s cash is maintained with high quality financial institutions and the composition and maturities
are regularly monitored by management. Generally, any cash equivalents may be redeemed upon demand and bear minimal risk.



The trade and other accounts
receivable of the Company arises primarily through the provision of goods and services, and deposits and payments made for various
contracts. The Company generally does not require collateral. An allowance for doubtful accounts is determined with respect to
those amounts that the Company has determined to be doubtful of collection. The Company performs ongoing credit evaluations of
its customers based on individual accounts receivable which show signs of uncollectibility and an aging analysis. Account balances
are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. The Company does not have any off-balance-sheet credit exposure related to its customers.



The fair values of the above noted financial
assets and financial liabilities are not materially different from their carrying amounts.



The Company does not have off-balance-sheet
concentration of credit risk such as those arising from foreign exchange contracts, option contracts or other foreign hedging arrangements.



F-27







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (u) | Investments under equity method
| | --- | -------------------------------



The investments, in which the
Company has significant influence, but not control, or the Company has joint control, are accounted for using the equity method.
Investments under the equity method consist of a 40% equity interest in Yucheng Sinowise Consultancy Services Limited, (“Sinowise”),
a software and service technology company, a 49% equity interest in Yuxin Data Technologies Co., Limited (“Yuxin Data”),
a software and hardware technology company, a 30% equity interest in Beijing Yuxinyicheng Internet Technologies Co., Limited (“Yuxinyicheng
Internet”), a software and hardware technology company, and a 40% equity interest in Zhejiang Yuxinbanke Information Technologies
Limited (“Yuxinbanke”), a software and hardware technology company.



Where the Company’s share
of losses exceeds its carrying value, the Company’s interest is reduced to nil and recognition of further losses is discontinued
except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the equity method
investees. As of December 31, 2010 and December 31, 2011, there was an excess of the carrying value over the Sinowise company’s
share of net assets of the equity method investees.



Unrealized profits and losses
resulting from transactions between the Company and its equity method investees are eliminated to the extent of its carrying value,
except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately
in the consolidated statement of operations. The transactions with investments under equity method are detailed in note 23(b).



On March 31, 2009, Yuxinyicheng
established a joint-venture, Hainan Baodaotong Technologies Limited (“Baodaotong”) in Haikou city. Total registered
capital of Baodaotong is RMB50 million. Haikou Gas Holding Company, Yuxinyicheng and Guangzhou Sihitech holds 45%, 35% and 20%
of Baodaotong’s equity interests, respectively. On December 16, 2009, Yuxinyicheng transferred 20% of Baodaotong’s
equity interests to a third party. On April 30, 2010, Yuxinyicheng sold its entire interest in Baodaotong to a third party due
to business consideration. The loss resulted from the disposal was RMB14,543.



On April 3, 2009, Yuxinyicheng
established a joint-venture, Sinowise. Total registered capital of Sinowise is RMB1 million. Yuxinyicheng holds 40% equity interest
of Sinowise.



On March 15, 2010, Yuxinyicheng
established a joint-venture, Yuxin Data, in Tianjin city. Total register capital is RMB60 million. NTT Data China and Yuxinyicheng
hold 51% and 49% of interests, respectively.



On February 17, 2011, Yuxinyicheng
acquired a joint-venture, Yuxinyicheng Internet, in Beijing city. Total register capital is RMB17.5 million. Yuxinyicheng and other
investors hold 30% and 70% of equity interests, respectively.



On September 7, 2011, Yuxinyicheng
established a joint-venture, Yuxinbanke, in Hangzhou city. Total register capital is RMB20 million. Yuxinyicheng and other investors
hold 40% and 60% of equity interests respectively.



F-28







| | 2 | Summary of significant accounting policies and practices
- Continued
| | - | --------------------------------------------------------------------



| | (u) | Investments under equity method - Continued
| | --- | -------------------------------------------



The carrying amounts of the investments
under equity method as of December 31, 2010 and 2011 are as follows:



|                      |  | 2010 |            |  | 2011 |  |            | 2011        | 
|--------------------- |  | ---- | ---------- |  | ---- |  | ---------- | ----------- | 
|                      |  | RMB  |            |  | RMB  |  |            | USD         | 
|                      |  |      |            |  |      |  |            | (unaudited) | 
|                      |  |      |            |  |      |  |            |             | 
|Sinowise              |  |      | -          |  |      |  | -          |             | 
|Yuxin Data            |  |      | 24,846,083 |  |      |  | 22,875,915 |             | 
|Yuxinyicheng Internet |  |      | -          |  |      |  | 4,447,379  |             | 
|Yuxinbanke            |  |      | -          |  |      |  | 6,512,219  |             | 
|Total                 |  |      | 24,846,083 |  |      |  | 33,835,513 |             | 



Summary of the combined financial information
for the affiliates as of and for the years ended December 31, 2009, 2010 and 2011 is as follows:



|                                   |  | 2009 |            |   | 2010 |  |            | 2011 |  |  | 2011        |  
|---------------------------------- |  | ---- | ---------- | - | ---- |  | ---------- | ---- |  |  | ----------- | -
|                                   |  | RMB  |            |   | RMB  |  |            | RMB  |  |  | USD         |  
|                                   |  |      |            |   |      |  |            |      |  |  | (unaudited) |  
|Financial position                 |  |      |            |   |      |  |            |      |  |  |             |  
|Current assets                     |  |      | 44,108,369 |   |      |  | 37,187,715 |      |  |  | 63,039,130  |  
|Property, plant and equipment, net |  |      | 7,967,488  |   |      |  | 3,546,066  |      |  |  | 6,145,986   |  
|Other non-current assets           |  |      | 13,250     |   |      |  | 21,407,448 |      |  |  | 33,826,278  |  
|Total assets                       |  |      | 52,089,107 |   |      |  | 62,141,229 |      |  |  | 103,011,394 |  
|Current liabilities                |  |      | 2,363,144  |   |      |  | 9,983,041  |      |  |  | 39,617,920  |  
|Total liabilities                  |  |      | 2,363,144  |   |      |  | 9,983,041  |      |  |  | 39,617,920  |  
|Owners’ equity                     |  |      | 49,725,963 |   |      |  | 52,158,188 |      |  |  | 63,393,474  |  
|Total liabilities and equity       |  |      | 52,089,107 |   |      |  | 62,141,229 |      |  |  | 103,011,394 |  
|                                   |  |      |            |   |      |  |            |      |  |  |             |  
|Results of operations              |  |      |            |   |      |  |            |      |  |  |             |  
|Sales                              |  |      | 6,117,739  |   |      |  | 13,443,855 |      |  |  | 41,260,307  |  
|Operating loss                     |  |      | (1,294,897 | ) |      |  | (9,141,130 | )    |  |  | (13,983,658 | )
|Net loss income                    |  |      | (1,279,906 | ) |      |  | (7,100,150 | )    |  |  | (13,264,953 | )



| | (v) | Share-based compensation
| | --- | ------------------------



Yucheng has adopted ASC
Topic 718, Compensation – Stock Compensation, which requires that share-based payment transactions with employees,
such as share options, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation
expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related
to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and
is recognized over the period during which an employee is required to provide service in exchange for the award, which generally
is the vesting period.



| | (w) | Segment information
| | --- | -------------------



Management views the business
as consisting of revenue streams; however they do not produce reports for, assess the performance of, or allocate resources to
these revenue streams based upon any asset-based metrics, or based upon income or expenses, operating income or net income. Therefore,
the Company believes that it operates in one business segment.



F-29







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (x) | Disposal of discontinued operations
| | --- | -----------------------------------



The Company accounts for exit
or disposal activities in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). In accordance
with ASC 420, a business restructuring is defined as an exit activity that includes but is not limited to a program that is planned
and controlled by management, and materially.



| | (y) | Non-controlling interests
| | --- | -------------------------



Effective April 1, 2009,
the Company adopted ASC Topic 810-10-65 (SFAS 160, “Non-controlling Interests in Consolidated Financial Statements –
an amendment of ARB No. 51”), which amends previously issued guidance to establish accounting and reporting standards
for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling
interest in subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity
that should be reported as equity. Among other requirements, this statement requires that the consolidated net income (loss) attributable
to the parent and the non-controlling interest be clearly identified and presented on the face of the consolidated statements of
operations. The presentation and disclosure requirements of the ASC Topics have been applied retrospectively for all periods presented
in the accompanying consolidated balance sheets and statements of operations and comprehensive income (loss), and statements of
shareholder’s equity and statements of cash flows, to conform to the provisions of ASC Topic 810.



| | (z) | Recently issued accounting standards
| | --- | ------------------------------------



Recently adopted accounting
pronouncements



In October 2009, the FASB amended
the ASC as summarized in Accounting Standards Update (“ASU”) 2009-14, “Software (ASC Topic 985): Certain
Revenue Arrangements That Include Software Elements”, and ASU 2009-13, “Revenue Recognition (ASC Topic 605):
Multiple-Deliverable Revenue Arrangements”. As summarized in ASU 2009-14, ASC Topic 985 has been amended to remove
from the scope of industry specific revenue accounting guidance for software and software related transactions, tangible products
containing software components and non-software components that function together to deliver the product’s essential functionality.
As summarized in ASU 2009-13, ASC Topic 605 has been amended (1) to provide updated guidance on whether multiple deliverables exist,
how the deliverables in an arrangement should be separated, and the consideration allocated; (2) to require an entity to allocate
revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence
(“VSOE”) or third-party evidence of selling price; and (3) to eliminate the use of the residual method and require
an entity to allocate revenue using the relative selling price method. The Company adopted ASU 2009-13 and ASU 2009-14 during the
year and the adoption did not have an impact on the Company’s consolidated financial statements.



F-30







| | 2 | Summary of significant accounting policies and practices - Continued
| | - | --------------------------------------------------------------------



| | (z) | Recently issued accounting
standards- Continued
| | --- | -----------------------------------------------



Recently
adopted accounting pronouncement- Continued



In April 2010, the FASB issued
ASU 2010-13, “Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based
Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades”. It addresses the classification
of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security
trades. ASC Topic 718, “Compensation—Stock Compensation”, was amended to clarify that a share-based payment
award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity
securities trade shall not be considered to contain a market, performance or service condition. Therefore, such an award is not
to be classified as a liability if it otherwise qualifies for equity classification. The Company adopted ASU 2010-13 during the
year and the adoption did not have an impact on the Company’s consolidated financial statements.



In December 2010, the FASB issued
ASU 2010-28, “Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts”. This ASU requires that reporting units with zero or negative
carrying amounts perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.
The Company adopted ASU 2010-28 during the year and the adoption did not have an impact on the Company’s consolidated financial
statements.



Recent accounting pronouncements
not yet adopted



In
May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820)”: Fair
Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and
IFRSs, which provided clarifications for Topic 820 and also included instances where a particular principle or requirement
for measuring fair value or disclosing information about fair value measurement has changed. This Update results in common principles
and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S.
GAAP and IFRSs, and is effective during interim and annual periods beginning after December 15, 2011 for public entities. Early
application by public entities is not permitted, and the adoption of ASU 2011-04 is not expected to have a material impact on the
Company’s consolidated financial position and results of operations.



In June 2011, the FASB issued
ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which gives an entity
the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices,
an entity is required to present each component of net income along with total net income, each component of other comprehensive
income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the
option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The
amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. ASU 2011-05 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2011 for public entities and is not expected to have a material impact on the Company’s
consolidated financial position or results of operations.



F-31







| | 2 | Summary
                                                                                                  of significant accounting policies
                                                                                                  and practices - Continued
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (z) | Recently issued accounting standards - Continued
| | --- | ------------------------------------------------



Recent accounting pronouncements
not yet adopted - Continued



In September 2011, the FASB issued
an amendment to ASC Topic 350, in ASU 2011-08 “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for
Impairment”, which simplifies how entities test goodwill for impairment. Under the amendment, an entity has the option
to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine
that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events
or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than
its carrying amount, then the two-step impairment test for goodwill is unnecessary. If the entity concludes otherwise, then it
is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 of the ASC. If
the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill
impairment test to measure the amount of the impairment loss, if any, as described in paragraph 350-20-35-9 of the ASC. The amendments
are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and
early adoption is permitted. The Company is currently evaluating the impact of adopting this amendment, but it is not expected
to have a material impact on the Company’s consolidated financial statements.



The Company has considered all
new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results
of operations, financial condition, or cash flows, based on current information.



F-32







| | 3 | Trade
                                                                                                  accounts receivable, net
| | - | --------------------------------------------------------------------------------------------------------------------------------



Trade accounts receivable as of December
31, 2010 and 2011 consist of the following:



|                                           |  | December 31 |            
|------------------------------------------ |  | ----------- | -----------
|                                           |  | 2010        |            
|                                           |  | RMB         |            
|                                           |  | (unaudited) |            
|                                           |  |             |            
|Primary bank customer and its subsidiaries |  |             | 54,496,752 
|Other bank customers                       |  |             | 108,310,654
|General contractors                        |  |             | 33,435,653 
|Total                                      |  |             | 196,243,059



Included in the above balance was the allowance
for doubtful debt of RMB12,580,356 and RMB15,362,356 as of December 31, 2010 and 2011, respectively.



Allowance for doubtful account is as follows:



|                          |  | December 31 |           
|------------------------- |  | ----------- | ----------
|                          |  | 2010        |           
|                          |  | RMB         |           
|                          |  | (unaudited) |           
|                          |  |             |           
|Balance as of January 1   |  |             | 16,306,960
|Additions                 |  |             | -         
|Recovery                  |  |             | (59,550   
|Written off               |  |             | (3,667,054
|Balance as of December 31 |  |             | 12,580,356



The balance billed but not paid by customers
pursuant to retainage provisions in contracts will be due upon completion of the contracts and acceptance by the customers. The
retention balance as of December 31, 2011 is RMB21,438,266 equivalent to USD3,402,413 (2010: RMB20,642,213 equivalent to USD3,116,888).



F-33







| | 4 | Costs
                                                                                                                    and estimated
                                                                                                                    earnings on
                                                                                                                    uncompleted
                                                                                                                    contracts
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                        |  | December 31 |             
|--------------------------------------- |  | ----------- | ------------
|                                        |  | 2010        |             
|                                        |  | RMB         |             
|                                        |  | (unaudited) |             
|                                        |  |             |             
|Costs incurred on uncompleted contracts |  |             | 274,351,748 
|Estimated earnings                      |  |             | 200,766,895 
|                                        |  |             | 475,118,643 
|Less: Billings to date                  |  |             | (364,712,537
|                                        |  |             | 110,406,106 



The amounts are included in the accompanying
consolidated balance sheets under the following captions:



|                                                                            |  | December 31 |            
|--------------------------------------------------------------------------- |  | ----------- | -----------
|                                                                            |  | 2010        |            
|                                                                            |  | RMB         |            
|                                                                            |  | (unaudited) |            
|                                                                            |  |             |            
|Costs and estimated earnings in excess of billings on uncompleted contracts |  |             | 132,656,349
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |             | (22,250,243
|                                                                            |  |             | 110,406,106



Cost
and estimated earnings in excess of billings comprise principally amounts of revenue recognized on contracts for which billings
had not been presented to customers because the amounts were not billable at the balance sheet date. The unbilled amounts receivable
as of December 31, 2011 is RMB169,384,841 equivalent to USD26,882,642 (2010: RMB132,656,349 equivalent to USD20,030,554).



F-34







| | 5 | Other
                                                                                                                       current
                                                                                                                       assets
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                               |  | December 31 |           
|------------------------------ |  | ----------- | ----------
|                               |  | 2010        |           
|                               |  | RMB         |           
|                               |  | (unaudited) |           
|                               |  |             |           
|Payments in advance            |  |             | 20,549,650
|Project and tendering deposits |  |             | 13,136,973
|Other receivables              |  |             | 33,948,280
|Prepaid expenses               |  |             | 227,965   
|Total                          |  |             | 67,862,868



Payments in advance represent part of purchase
contract amount for which the equipment has not been delivered from the suppliers as of the end of year.



Other receivables mainly include considerations
for the disposals of a subsidiary and an equity accounted investment, deposits and staff advances for operations.



Included in other receivables is allowance
for doubtful debt of RMB2,077,500 and RMB3,811,959 as of December 31, 2010 and 2011, respectively.



F-35







| | 6 | Income
                                                                                                  taxes
| | - | --------------------------------------------------------------------------------------------------------------



A reconciliation of the expected tax with
the actual tax expense (benefit) for the years ended December 31, 2009, 2010 and 2011 are as follows:



|                                                                                  |  | 2009        |            |   | 2010 |  |            | 2011 |  |  | 2011        |  
|--------------------------------------------------------------------------------- |  | ----------- | ---------- | - | ---- |  | ---------- | ---- |  |  | ----------- | -
|                                                                                  |  | RMB         |            |   | RMB  |  |            | RMB  |  |  | USD         |  
|                                                                                  |  | (unaudited) |           
|                                                                                  |  |             |            |   |      |  |            |      |  |  |             |  
|Income (loss) before income taxes and share of results of equity method investees |  |             | (2,045,495 | ) |      |  | 37,251,261 |      |  |  | 46,717,340  |  
|Expected PRC income tax expense (benefits) (note (i))                             |  |             | (1,181,616 | ) |      |  | 9,312,817  |      |  |  | 11,679,335  |  
|Tax holiday benefits and preferential tax rates (note (ii))                       |  |             | (5,603,066 | ) |      |  | (9,415,133 | )    |  |  | (16,244,674 | )
|Tax effect related to foreign entities not subject to income taxes                |  |             | 898,695    |   |      |  | 2,223,777  |      |  |  | 2,174,327   |  
|Tax effect related to change in applicable tax rate                               |  |             | (34,185    | ) |      |  | 339,718    |      |  |  | (62,751     | )
|Non-taxable income                                                                |  |             | (907,459   | ) |      |  | (114,250   | )    |  |  | (89,759     | )
|Additional deductible research and development expense                            |  |             | (1,060,680 | ) |      |  | (375,812   | )    |  |  | (621,252    | )
|Non-deductible expenses                                                           |  |             | 3,116,305  |   |      |  | 535,507    |      |  |  | 816,502     |  
|Over provision of current tax in prior years                                      |  |             | (861,749   | ) |      |  | (2,865,082 | )    |  |  | (5,944,739  | )
|Under provision of deferred tax in prior years                                    |  |             | 16,284     |   |      |  | 1,942,138  |      |  |  | 10,013,256  |  
|Change in valuation allowance                                                     |  |             | 103,757    |   |      |  | 3,459,341  |      |  |  | 5,115,975   |  
|Others                                                                            |  |             | 263,304    |   |      |  | 216,202    |      |  |  | (319,905    | )
|Actual income tax expenses (benefits)                                             |  |             | (5,250,410 | ) |      |  | 5,259,223  |      |  |  | 6,516,315   |  
|Representing:                                                                     |  |             |            |   |      |  |            |      |  |  |             |  
|Current tax expenses (benefits)                                                   |  |             | 3,225,295  |   |      |  | 3,316,855  |      |  |  | (3,288,848  | )
|Deferred tax expenses (benefits)                                                  |  |             | (8,475,705 | ) |      |  | 1,942,368  |      |  |  | 9,805,163   |  
|Total income tax expenses (benefits)                                              |  |             | (5,250,410 | ) |      |  | 5,259,223  |      |  |  | 6,516,315   |  



F-36







| | 6 | Income
                                                                                                                    taxes - Continued
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



Notes:

| | (i) | Yucheng, and its subsidiaries, e-channels BVI and Sihitech BVI are incorporated in the British
Virgin Islands and are not subject to taxation under the British Virgin Islands. Yuxinyicheng and its major subsidiaries (together,
the “PRC entities”) are incorporated in the PRC and governed by the PRC laws.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The normal statutory rate of
the tax rate of PRC Enterprise Income tax (“EIT”) is 25% from 2008. All subsidiaries adopted this tax rate except the
following subsidiaries:



EIT rates applicable to the subsidiaries
of the Company, except for Fujie, ranged from 0% to 25% for the year ended December 31, 2011 (2010: 0% to 25%; 2009: 0% to 25%).
EIT for Fujie is calculated at 2.5% of revenue for the year ended December 31, 2011 (2010: 2.5% of revenue; 2009: 2.5% of revenue)
as it was classified as a small enterprise by the Local Tax Bureau in Shanghai City.



Pursuant to the approval issued
by the Beijing Haidian District Local Tax Bureau, e-Channels was qualified as a high-tech company, thus its applicable EIT rate
was 15% from 2008. This qualification is timed-out in 2010. Accordingly, the applicable EIT rate for e-Channels is 25% for the
year ended December 31, 2011.



Pursuant to the approval issued
by the Local Tax Bureau in Beijing Haidian District, Beijing Software was qualified as a high-tech company, thus its applicable
EIT rate was 15% from 2008. This qualification is timed-out in 2010. Accordingly, the applicable EIT rate for Beijing Software
is 25% for the year ended December 31, 2011.



Pursuant to the New Tax Law,
the applicable EIT rate of Shanghai Sihitech are 18%, 20%, 22%, 24% and 25% in 2008, 2009, 2010, 2011 and 2012 respectively.



Pursuant to the approval issued
by the Local Tax Bureau in Pudong District of Shanghai in 2006, Shanghai Software was qualified as a software development company
and entitled to a tax holiday from 2006 to 2007, and an additional 50% tax exemption of the applicable EIT rate. Pursuant to the
New Tax Law, its applicable EIT rates are 12.5%, 12.5%, 12.5%, 24% and 25% in 2008, 2009, 2010, 2011 and 2012 respectively.



Pursuant to the approval issued
by the Guangzhou Local Tax Bureau, Guangzhou Yuxinyicheng was qualified as a software development company and entitled to a tax
holiday from 2009 and 2010 and an additional 50% tax exemption of the applicable EIT rate of 25% to 12.5% from 2011 to 2013.



Pursuant to the approval issued
by the Tianjin Tax Bureau, Tianjin Yuxinyicheng was qualified as a software development company and entitled to a tax holiday from
2010 and 2011 and an additional 50% tax exemption of the applicable EIT rate of 25% to 12.5% from 2012 to 2014.



Pursuant to the approval issued
by the Local Tax Bureau in Beijing Haidian District from 2009 to 2013, Yuxinyicheng was qualified as a high-tech company and entitled
to a tax holiday from 2007 to 2008, and an additional 50% tax exemption to the applicable EIT rate of 15% to 7.5% from 2009 to
2011.



Pursuant to the approval issued
by the Local Tax Bureau in Beijing Haidian District, Sunrisk was qualified as a high-tech
company, thus its applicable EIT rate was 15% from 2010 to 2012.



F-37







| | 6 | Income
                                                                                                                    taxes - Continued
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Aggregate tax relief was approximately RMB5,603,066, RMB9,317,718 and RMB16,244,674 for the years
ended December 31, 2009, 2010 and 2011, respectively. Aggregate basic per share effect of the tax relief amounted to RMB0.30, RMB0.50
and RMB0.85 for the years ended December 31, 2009, 2010 and 2011, respectively. Aggregate dilute per share effect of the tax relief
amounted to RMB0.30, RMB0.49 and RMB0.84 for the years ended December 31, 2009, 2010 and 2011, respectively.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Pre-tax income and income tax expenses are both domestic.
| | ----- | ---------------------------------------------------------



The tax effects of temporary
differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2010 and 2011
are presented below.



|                                                  |  | December 31 |           
|------------------------------------------------- |  | ----------- | ----------
|                                                  |  | 2010        |           
|                                                  |  | RMB         |           
|                                                  |  | (unaudited) |           
|Deferred tax assets:                              |  |             |           
|Intangible assets                                 |  |             | 247,646   
|Deferred revenue                                  |  |             | -         
|Future benefit of tax losses                      |  |             | 14,088,942
|Doubtfuldebtallowances                            |  |             | -         
|Others                                            |  |             | -         
|                                                  |  |             | 14,336,588
|Less: valuation allowance                         |  |             | (3,729,235
|                                                  |  |             | 10,607,353
|Deferred tax liabilities:                         |  |             |           
|Cost and estimated earnings in excess of billings |  |             | -         
|Capitalized internal-use and marketable software  |  |             | (2,071,188
|Additional intangible assets through acquisition  |  |             | (541,678  
|Others                                            |  |             | -         
|                                                  |  |             | (2,612,866
|Net deferred tax assets (liabilities)             |  |             | 7,994,487 
|                                                  |  |             |           
|Representing:                                     |  |             |           
|                                                  |  |             |           
|Deferred tax assets – current                     |  |             | -         
|Deferred tax assets – non-current                 |  |             | 10,607,353
|Deferred tax liabilities – current                |  |             | (829,282  
|Deferred tax liabilities – non-current            |  |             | (1,783,584
|                                                  |  |             | 7,994,487 



F-38







| | 6 | Income
                                                                                                                    taxes - Continued
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Continued
| | ----- | ---------



Movement of valuation allowance on deferred
tax assets:



|                                |  | 2010        |           |  | 2011 |  |           | 2011 | 
|------------------------------- |  | ----------- | --------- |  | ---- |  | --------- | ---- | 
|                                |  | RMB         |           |  | RMB  |  |           | USD  | 
|                                |  | (unaudited) |          
|                                |  |             |           |  |      |  |           |      | 
|At the beginning of the year    |  |             | 269,895   |  |      |  | 3,729,235 |      | 
|Increase in valuation allowance |  |             | 3,459,340 |  |      |  | 5,115,975 |      | 
|At the end of the year          |  |             | 3,729,235 |  |      |  | 8,845,210 |      | 



A significant portion of the deferred tax
assets recognized relates to net tax loss and credit carry forwards. The Company operates through the PRC entities and the valuation
allowance is considered on each individual basis. Where no valuation allowance was recorded, the Company expects to generate sufficient
taxable income in the future.



The net tax loss attributable to those
PRC entities can only be carried forward for a maximum period of five years. The expiration period of unused tax losses is as follows:



|                                                    |  | December 31 |           
|--------------------------------------------------- |  | ----------- | ----------
|                                                    |  | 2010        |           
|                                                    |  | RMB         |           
|                                                    |  | (unaudited) |           
|Year ending December 31,                            |  |             |           
|2012                                                |  |             | -         
|2013                                                |  |             | 23,209,056
|2014                                                |  |             | 33,833,913
|2015                                                |  |             | 19,071,647
|2016                                                |  |             | -         
|Tax losses that can be carried forward indefinitely |  |             | -         
|                                                    |  |             | 76,114,616



Under the New
EIT Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the
PRC subsidiaries to Yucheng are subject to a withholding tax at a rate of 10%, unless Yucheng will be deemed as a resident enterprise
for tax purposes.Since the Company intends to reinvest the earnings of the PRC subsidiaries in business expansion
in mainland China, the PRC subsidiaries do not intend to declare dividends to their immediate non-PRC established holding companies
in the foreseeable future. Accordingly, no deferred taxation on undistributed earnings of the PRC subsidiaries has been recognized
as of December 31, 2011. The accumulated undistributed earnings of the PRC subsidiaries amounted to approximately RMB245.6 million
equivalent to USD37.1 million and RMB369.8 million equivalent to USD58.7 million as of December 31, 2010 and 2011, respectively.



F-39









| | 6 | Income taxes - Continued
| | - | ------------------------



(iii)  Continued



In accordance with ASC Topic
704 Income Taxes, the Company’s liability for income taxes
includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review
by taxing authorities.



Determining income tax provisions
involves judgement on the future tax treatment of certain transactions. The Company performed a self-assessment and concluded that
there was no significant uncertain tax position requiring recognition in its financial statements. The tax treatment of such transactions
is reconsidered periodically to take into account all changes in tax legislations. Where the final tax outcome of these transactions
is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provisions
in the year in which such determination is made.



There were no material interest
or penalties incurred for the years ended December 31, 2009, 2010 and 2011.



| | 7 | Properties and equipment, net
| | - | -----------------------------





|                               |  | December 31 |            
|------------------------------ |  | ----------- | -----------
|                               |  | 2010        |            
|                               |  | RMB         |            
|                               |  |             |            
|                               |  |             |            
|Properties                     |  |             | 10,769,736 
|Office equipment and furniture |  |             | 29,437,660 
|Motor vehicles                 |  |             | 4,289,692  
|Leasehold improvements         |  |             | 7,900,152  
|                               |  |             | 52,397,240 
|Accumulated depreciation       |  |             | (21,988,168
|Properties and equipment, net  |  |             | 30,409,072 



Depreciation expense on
properties and equipment were RMB16,607,137, RMB17,227,855 and RMB6,771,993, which includes amortization of properties and
equipment acquired under capital lease obligations of RMB2,867,754, RMB2,282,497 and RMB314,535 for the years ended December
31, 2009, 2010, and 2011 respectively. Gross assets remaining under capital leases were RMB8,623,510 and RMB8,623,510
at December 31, 2010 and 2011. Accumulated depreciation associated with capital leases were RMB8,308,975 and RMB8,623,510
at of December 31, 2010 and 2011.



F-40







| | 8 | Intangible assets, net
| | - | ----------------------



|                                            |  |  |                |  | Purchased software |  |            | Capitalized marketable software |  |  | Capitalized internal-use software |   |  | Customer relationships |           |   | Other technology |  |          | Service vendor relationships |  |  | Total      |  
|------------------------------------------- |  |  | -------------- |  | ------------------ |  | ---------- | ------------------------------- |  |  | --------------------------------- | - |  | ---------------------- | --------- | - | ---------------- |  | -------- | ---------------------------- |  |  | ---------- | -
|                                            |  |  |                |  |                    |  |            |                                 |  |  |                                   |   |  |                        |           |   |                  |  |          |                              |  |  |            |  
|Balance as of January 1, 2010               |  |  | RMB            |  |                    |  | 5,035,198  |                                 |  |  | 9,309,969                         |   |  |                        | 1,919,711 |   |                  |  | 982,200  |                              |  |  | 13,001,331 |  
|Additions                                   |  |  |                |  |                    |  | 70,655     |                                 |  |  | 6,216,447                         |   |  |                        | 1,542,401 |   |                  |  | -        |                              |  |  | -          |  
|Elimination
    from disposal of subsidiary |  |  |                |  |                    |  | -          |                                 |  |  | -                                 |   |  |                        | -         |   |                  |  | -        |                              |  |  | (3,249,986 | )
|Amortization                                |  |  |                |  |                    |  | (1,422,834 | )                               |  |  | (3,682,233                        | ) |  |                        | (576,710  | ) |                  |  | (392,880 | )                            |  |  | (3,845,012 | )
|                                            |  |  |                |  |                    |  |            |                                 |  |  |                                   |   |  |                        |           |   |                  |  |          |                              |  |  |            |  
|Balance as of December 31, 2010             |  |  | RMB            |  |                    |  | 3,683,019  |                                 |  |  | 11,844,183                        |   |  |                        | 2,885,402 |   |                  |  | 589,320  |                              |  |  | 5,906,333  |  
|Additions                                   |  |  |                |  |                    |  | 395,782    |                                 |  |  | 5,497,006                         |   |  |                        | 6,502,302 |   |                  |  | -        |                              |  |  | -          |  
|Amortization                                |  |  |                |  |                    |  | (1,412,586 | )                               |  |  | (4,240,859                        | ) |  |                        | (745,420  | ) |                  |  | (392,880 | )                            |  |  | (3,345,008 | )
|Balance as of December
    31, 2011         |  |  | RMB            |  |                    |  | 2,666,215  |                                 |  |  | 13,100,330                        |   |  |                        | 8,642,284 |   |                  |  | 196,440  |                              |  |  | 2,561,325  |  
|                                            |  |  | USD(unaudited) |  |                    |  | 423,148    |                                 |  |  | 2,079,121                         |   |  |                        | 1,371,595 |   |                  |  | 31,176   |                              |  |  | 406,502    |  



Amortization expense was RMB16,493,671,
RMB9,919,669 and RMB12,418,830 for the years ended December 31, 2009, 2010 and 2011 respectively. Estimated annual amortization
expense for each of the next five years is as follows:



|Year ending  |  |     |           
|------------ |  | --- | ----------
|December 31, |  | RMB |           
|             |  |     |           
|2012         |  |     | 18,119,699
|2013         |  |     | 13,944,875
|2014         |  |     | 8,609,174 
|2015         |  |     | 119,346   
|2016         |  |     | 65,963    
|             |  |     | 40,859,057



F-41







| | 9 | Goodwill
| | - | --------





|                           |  | December 31 |            
|-------------------------- |  | ----------- | -----------
|                           |  | 2010 RMB    |            
|                           |  |             |            
|                           |  |             |            
|Balance as of January 1    |  |             | 189,009,599
|Additional considerations  |  |             | -          
|Balance as of  December 31 |  |             | 189,009,599



No impairment
has been included in the above balances.



| | 10 | Short-term borrowings
| | -- | ---------------------





|                                |  | December 31 |           
|------------------------------- |  | ----------- | ----------
|                                |  | 2010        |           
|                                |  | RMB         |           
|                                |  |             |           
|                                |  |             |           
|Short-term borrowings from bank |  |             | 81,000,000



The short-term borrowing of RMB81,000,000
as of December 31, 2010 represented the sum of four borrowings, comprising:



| | (i) | the borrowing of RMB40,000,000 effective from March 29, 2010 to March 28, 2011 with an annual interest
rate of 5.912%; and
| | --- | --------------------------------------------------------------------------------------------------------------------------

| | (ii) | the borrowing of RMB20,000,000 effective from June 3, 2010 to June 2, 2011 with an annual interest
rate of 5. 935%; and
| | ---- | -----------------------------------------------------------------------------------------------------------------------

| | (iii) | the borrowing of RMB20,000,000 effective from September 15, 2010 to July 14, 2011 with an annual
interest rate of 5.615%; and
| | ----- | -----------------------------------------------------------------------------------------------------------------------------

| | (iv) | the borrowing of RMB1,000,000 effective from June 24, 2010 to June 23, 2011 with an annual interest
rate of 5.945%.
| | ---- | -------------------------------------------------------------------------------------------------------------------



The short-term borrowing of RMB119,953,739
as of December 31, 2011 represented the sum of six borrowings, comprising:



| | (i) | the borrowing of RMB32,100,000 effective from March 29, 2011 to March 28, 2012 with an annual interest
rate of 7.257%; and
| | --- | --------------------------------------------------------------------------------------------------------------------------

| | (ii) | the borrowing of RMB19,853,739 effective from June 20, 2011 to June 19, 2012 with an annual interest
rate of 7.544%; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------

| | (iii) | the borrowing of RMB28,000,000 effective from June 29, 2011 to April 28, 2012 with an annual interest
rate of 7.544%; and
| | ----- | -------------------------------------------------------------------------------------------------------------------------

| | (iv) | the borrowing of RMB15,000,000 effective from August 26, 2011 to February 25, 2012 with an annual
interest rate of 6.893%; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------

| | (v) | the borrowing of RMB15,000,000 effective from September 30, 2011 to March 29, 2012 with an annual
interest rate of 7.015%; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------

| | (vi) | the borrowing of RMB10,000,000 effective from November 17, 2011 to November 16, 2012 with an annual
interest rate of 6.560%.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------



F-42







| | 10 | Short-term borrowings - Continued
| | -- | ---------------------------------



The preceding three borrowings
were guaranteed by Beijing Sihitech and Mr. Weidong Hong, shareholder and CEO without bearing guarantee fee.



The fourth and fifth borrowings
were guaranteed by Mr. Weidong Hong, shareholder and CEO without bearing guarantee fee.



The last borrowing was guaranteed
by Yuxinyicheng without bearing gurarantee fee.



| | 11 | Obligations under capital leases
| | -- | --------------------------------



Certain of office equipment have
been acquired under capital leases. Obligations under capital were as follows:



|                                               |  | December 31 |         
|---------------------------------------------- |  | ----------- | --------
|                                               |  | 2010 RMB    |         
|                                               |  |             |         
|Net minimum lease payments due:                |  |             |         
|Within one year                                |  |             | 320,751 
|Later than one year                            |  |             | -       
|Total net minimum lease payments               |  |             | 320,751 
|                                               |  |             |         
|Less: Amount representing interest             |  |             | (6,216  
|                                               |  |             |         
|Present value of net minimum lease payments    |  |             | 314,535 
|Less: current portion                          |  |             | (314,535
|                                               |  |             |         
|Obligations under capital leases – non-current |  |             | -       



| | 12 | Other current liabilities
| | -- | -------------------------





|                                    |  | December 31 |           
|----------------------------------- |  | ----------- | ----------
|                                    |  | 2010        |           
|                                    |  | RMB         |           
|                                    |  |             |           
|                                    |  |             |           
|Advances from customers             |  |             | 14,737,775
|Taxes payable, excluding income tax |  |             | 16,550,802
|Accrued expenses                    |  |             | 2,380,004 
|Others                              |  |             | 11,051,530
|Total                               |  |             | 44,720,111



F-43











| | 13 | Non-controlling interests
| | -- | -------------------------





|                           |  | December 31 |           
|-------------------------- |  | ----------- | ----------
|                           |  | 2010        |           
|                           |  | RMB         |           
|                           |  |             |           
|                           |  |             |           
|Balance as of January 1    |  |             | 7,869,561 
|Share of loss for the year |  |             | (2,735,255
|Balance as of December 31  |  |             | 5,134,306 



Non-controlling interests as
of December 31, 2010 and 2011 represented the non-controlling shareholder’s equity interest in Sunrisk.



| | 14 | Reserves
| | -- | --------



During the three years ended
December 31, 2011, the Company has followed the PRC Company Law to make appropriation of its profit to the statutory surplus reserve.



Statutory surplus reserve



In accordance with PRC Company
Law, the Company is required to appropriate at least 10% of the profit arrived at for each year to the statutory surplus reserve.
Appropriation to the statutory surplus reserve by the Company is based on profit arrived at under PRC accounting standards for
business enterprises for each year.



The profit arrived at must be
set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory surplus
reserve. Appropriation to the statutory surplus reserve must be made before distribution of dividends to owners. The appropriation
is required until the statutory surplus reserve reaches 50% of the registered capital. This statutory surplus reserve is not distributable
in the form of cash dividends but only on liquidation. It can be used to make good of previous losses, if any, and may be utilized
for business expansion or converted into capital by increasing registered capital to existing equity owners in proportion to their
equity holding, provided that remaining reserve balance after such conversion is not less than 25% of the registered capital. As
of December 31, 2010 and 2011, the accumulated balance of our statutory surplus reserve amounted to RMB50.4 million and RMB57.3 million,
respectively.



In accordance with the PRC laws
and regulations, our PRC subsidiary is restricted in its ability to transfer a portion of its net assets to the Company in the
form of dividends, which approximated to RMB735.1 million and RMB778.4 million representing the total amount of paid in capital
and accumulated balance of statutory reserve of our PRC subsidiaries attributable to the Company as of December 31, 2010 and 2011,
respectively.



| | 15 | Accumulated other comprehensive loss
| | -- | ------------------------------------



As of December 31, 2010 and 2011,
the only component of accumulated other comprehensive loss was translation reserve.



F-44









| | 16 | Revenues
| | -- | --------



|                     |  | 2009 |             |   | 2010 |  |             | 2011 |  |  | 2011        |  
|-------------------- |  | ---- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | -
|Revenues             |  | RMB  |             |   | RMB  |  |             | RMB  |  |  | USD         |  
|                     |  |      |             |   |      |  |             |      |  |  | (unaudited) |  
|Software & Solutions |  |      |             |   |      |  |             |      |  |  |             |  
|Channel Solutions    |  |      | 133,683,101 |   |      |  | 123,966,653 |      |  |  | 168,714,337 |  
|Management Solutions |  |      | 72,395,869  |   |      |  | 81,812,009  |      |  |  | 116,036,055 |  
|Business Solutions   |  |      | 80,813,286  |   |      |  | 134,516,509 |      |  |  | 151,384,582 |  
|Platform             |  |      | 12,575,504  |   |      |  | 8,460,490   |      |  |  | 2,052,676   |  
|Maintenance Services |  |      | 62,251,487  |   |      |  | 63,576,554  |      |  |  | 64,423,458  |  
|                     |  |      |             |   |      |  |             |      |  |  |             |  
|Total revenues       |  |      | 361,719,247 |   |      |  | 412,332,215 |      |  |  | 502,611,108 |  
|Business taxes       |  |      | (7,249,519  | ) |      |  | (8,688,023  | )    |  |  | (13,500,885 | )
|                     |  |      |             |   |      |  |             |      |  |  |             |  
|Net revenues         |  |      | 354,469,728 |   |      |  | 403,644,192 |      |  |  | 489,110,223 |  



| | 17 | Other income (expenses)
| | -- | -----------------------



|                                                                                               |  | 2009 |           |   | 2010 |  |         | 2011 |  |  | 2011        | 
|---------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- |  | ------- | ---- |  |  | ----------- | 
|                                                                                               |  | RMB  |           |   | RMB  |  |         | RMB  |  |  | USD         | 
|                                                                                               |  |      |           |   |      |  |         |      |  |  | (unaudited) | 
|                                                                                               |  |      |           |   |      |  |         |      |  | 
|Gain on disposal of affiliates                                                                 |  |      | 6,291,960 |   |      |  | -       |      |  |  | -           | 
|Fair value adjustment on real estates that was received as a compensation for notes receivable |  |      | 2,236,740 |   |      |  | -       |      |  |  | -           | 
|Other                                                                                          |  |      | (115,560  | ) |      |  | (95,519 | )    |  |  | 18,540      | 
|Total                                                                                          |  |      | 8,413,140 |   |      |  | (95,519 | )    |  |  | 18,540      | 



F-45







| | 18 | General and administrative expenses
| | -- | -----------------------------------



General and administrative expenses
are shown net of the following credits:



|                                                  |  | 2009 |           |  | 2010 |  |           | 2011 |  |  | 2011        | 
|------------------------------------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- |  |  | ----------- | 
|                                                  |  | RMB  |           |  | RMB  |  |           | RMB  |  |  | USD         | 
|                                                  |  |      |           |  |      |  |           |      |  |  | (unaudited) | 
|                                                  |  |      |           |  |      |  |           |      |  |  |             | 
|Value-added tax refund for software products sold |  |      | 3,920,346 |  |      |  | 123,750   |      |  |  | 2,662,240   | 
|Technology subsidy                                |  |      | 395,000   |  |      |  | -         |      |  |  | -           | 
|Business tax and surcharges refund                |  |      | 59,555    |  |      |  | 1,258,067 |      |  |  | -           | 
|Government subsidies                              |  |      | -         |  |      |  | 4,008,500 |      |  |  | 9,822,504   | 
|Other                                             |  |      | 30,427    |  |      |  | 17,326    |      |  |  | -           | 
|Total                                             |  |      | 4,405,328 |  |      |  | 5,407,643 |      |  |  | 12,484,744  | 



Some of the subsidiaries of the
Company were granted subsidies by the local government to encourage development of high-tech enterprises. There were no unfulfilled
performance obligations related with such subsidies.



| | 19 | Earnings per share
| | -- | ------------------



The following table sets forth
the computation of basic and diluted net earnings per share for the years indicated:



|                                                                                              |  | 2009 |            |   | 2010 |  |            | 2011 |  |  | 2011        | 
|--------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- |  | ---------- | ---- |  |  | ----------- | 
|                                                                                              |  | RMB  |            |   | RMB  |  |            | RMB  |  |  | USD         | 
|                                                                                              |  |      |            |   |      |  |            |      |  |  | (unaudited) | 
|Net income (numerator) - basic and diluted                                                    |  |      |            |   |      |  |            |      |  |  |             | 
|Income from continuing operations                                                             |  |      | 2,616,036  |   |      |  | 34,170,628 |      |  |  | 41,626,752  | 
|                                                                                              |  |      |            |   |      |  |            |      |  |  |             | 
|Net income (loss)                                                                             |  |      | (4,199,598 | ) |      |  | 1,964,724  |      |  |  | 41,626,752  | 
|                                                                                              |  |      |            |   |      |  |            |      |  |  |             | 
|Shares (denominator):                                                                         |  |      |            |   |      |  |            |      |  |  |             | 
|Weighted average ordinary shares  outstanding used in computing  basic net earnings per share |  |      | 18,541,289 |   |      |  | 18,560,014 |      |  |  | 19,213,305  | 
|                                                                                              |  |      |            |   |      |  |            |      |  |  |             | 
|Incremental weighted average                                                                  |  |      |            |   |      |  |            |      |  |  |             | 
|common shares from assumed  exercise of  unit purchase  options (“UPOs”) (note 21)            |  |      | 42,937     |   |      |  | -          |      |  |  | -           | 
|restricted shares granted (note 24)                                                           |  |      | -          |   |      |  | 389,345    |      |  |  | 54,193      | 





F-46









| | 19 | Earnings per share - Continued
| | -- | ------------------------------



|                                                                                                                       |  | 2009 |            |   | 2010 |  |            | 2011 |  |  | 2011        | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- |  | ---------- | ---- |  |  | ----------- | 
|                                                                                                                       |  | RMB  |            |   | RMB  |  |            | RMB  |  |  | USD         | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  | (unaudited) | 
|Weighted average common share  outstanding used in computing  diluted net earnings per share for continuing operations |  |      | 18,584,226 |   |      |  | 18,949,359 |      |  |  | 19,267,498  | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|For whole operations                                                                                                   |  |      | 18,584,226 |   |      |  | 18,949,359 |      |  |  | 19,267,498  | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|Earnings per share from continuing operations                                                                          |  |      |            |   |      |  |            |      |  |  |             | 
|- basic                                                                                                                |  |      | 0.14       |   |      |  | 1.84       |      |  |  | 2.17        | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|- diluted                                                                                                              |  |      | 0.14       |   |      |  | 1.80       |      |  |  | 2.16        | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|Loss per share from discontinued operation                                                                             |  |      |            |   |      |  |            |      |  |  |             | 
|- basic                                                                                                                |  |      | (0.37      | ) |      |  | (1.74      | )    |  |  | -           | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|- diluted                                                                                                              |  |      | (0.37      | ) |      |  | (1.74      | )    |  |  | -           | 
|                                                                                                                       |  |      |            |   |      |  |            |      |  |  |             | 
|Earnings (loss) per share                                                                                              |  |      |            |   |      |  |            |      |  |  |             | 
|- basic                                                                                                                |  |      | (0.23      | ) |      |  | 0.11       |      |  |  | 2.17        | 
|- diluted                                                                                                              |  |      | (0.23      | ) |      |  | 0.10       |      |  |  | 2.16        | 



No diluted loss per share for
the year December 31, 2011 has been presented as the UPOs have expired.



F-47







| | 20 | Commitments and contingencies
| | -- | -----------------------------



Other than the capital leases
disclosed in note 11, the Company also leases office space under operating leases. The leases typically run for one to three years
with an option to renew the lease annually thereafter. Lease payments are revised annually to reflect market rentals. None of these
leases includes contingent rentals.



Non-cancellable operating lease
rentals at the end of each year are payable as follows:



|                 |  | 2010 |           |  | 2011 |  |           | 2011        | 
|---------------- |  | ---- | --------- |  | ---- |  | --------- | ----------- | 
|                 |  | RMB  |           |  | RMB  |  |           | USD         | 
|                 |  |      |           |  |      |  |           | (unaudited) | 
|Payable:         |  |      |           |  |      |  |           |             | 
|Within 1 year    |  |      | 4,944,672 |  |      |  | 2,170,008 |             | 
|Within 1-2 years |  |      | 919,752   |  |      |  | 206,489   |             | 
|Within 2-3 years |  |      | 120,154   |  |      |  | -         |             | 
|Within 3-4 years |  |      | -         |  |      |  | -         |             | 
|Within 4-5 years |  |      | -         |  |      |  | -         |             | 
|                 |  |      | 5,984,578 |  |      |  | 2,376,497 |             | 



The Company recognized RMB9,482,032,
RMB9,426,142 and RMB9,658,407 of rental expense for the years ended December 31, 2009, 2010 and 2011, respectively.



The
Company provides indemnifications of varying scope and size to certain customers against claims of intellectual property infringement
made by third parties arising from the use of the products. Due to thenatureof the indemnification
provided, the Company cannot estimate the fair value, nor determine the total nominal amount of the indemnification. The Company
evaluates estimated losses for such indemnifications under FASB 450 Contingencies, Including Indirect Guarantees of Indebtedness
of Others. The Company considers such factors as the degree of probability of an unfavourable outcome and the ability to make a
reasonable estimate of the amount of loss. To date, the Company has not encountered material costs as a result of such obligations
and have not accrued any liabilities related to such indemnifications in the financial statements.



The product warranty
accrual reflects management’s best estimate of probable liability under its product warranties. Management determines
the warranty accrual based on known product failures (if any), historical experience, and other currently available evidence.
As  of December 31, 2010 and 2011, the warranty accrual was nil. There has been no significant activity impacting the results
of operations for any period presented.





F-48







| | 20 | Commitments and contingencies - Continued
| | -- | -----------------------------------------



Pursuant to the agreement for
acquisition of Yuchengxin as discussed in note 1, in addition to the initial considerations, service vendors are entitled to additional
equity consideration upon satisfaction of certain conditions. With respect to additional consideration, they are entitled to:



| | (1) | As of April 30, 2012, RMB Nil, or the net income of Yuchengxin in 2011 and the estimated net income
of Yuchengxin in 2012 minus RMB10 million. Since the net income of Yuchengxin in 2011 and the estimated net income of Yuchengxin
in 2012 is less than RMB10 million, this consideration is zero.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | As of April 30, 2013, RMB Nil, or the total net income of Yuchengxin in 2011, 2012 and the estimated
net income of Yuchengxin in 2013 minus first additional consideration and RMB10 million.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | As of September 30, 2014, RMB Nil, or the total net income of Yuchengxin in 2011, 2012, 2013 and
in six months ended June 30, 2014 minus first two additional considerations and RMB10 million.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







If the total net income of Yuchengxin
from 2011 to June 2014 is less than RMB10 million, the seller of Yuchengxin should return to the Company 70% of the excess of
the total net income of Yuchengxin from 2011 to June 2014 over the RMB10 million.



| | 21 | Warrants and unit purchase options
| | -- | ----------------------------------



As part of the Share Exchange
Transaction, Yucheng assumed 4,200,000 shares of common stock, 6,900,000 redeemable common stock purchase warrants (“Warrants”)
and 300,000 UPOs issued by CUAC. There was no remeasurement required for these assumed Warrants and UPOs because such assumption
is part of the recapitalisation in connection with the Stock Exchange Transactions set forth in note 1.



Each Warrant entitled the holder
to purchase from Yucheng one share of common stock at an exercise price of USD5.00 commencing on the date of the Stock Exchange
Transactions and expired on November 17, 2009 (being five years after the date of the prospectus of CUAC). The Warrants were redeemable
at a price of USD0.01 per Warrant upon 30 days’ notice after the Warrants become exercisable, only in the event that the
last sale price of the common stock is at least USD8.50 per share for any 20 trading days within 30 trading days period ending
on the third day prior to the date on which notice of redemption was given. 6,866,486 warrants were exercised before December
31, 2007, and 33,514 warrants were redeemed.



UPOs were granted and recorded
in connection with the initial public offering of CUAC in 2004 to the underwriters for nominal consideration. UPOs were exercisable
for cash or on a cashless basis at the holders’ option, such that the holders may use the appreciated value of the UPOs to
exercise the option with the payment of any cash. UPOs were convertible into shares and Warrants at the discretion of Yucheng and
the UPOs holders. The 150,000 UPOs were converted to 216,047 common shares before December 31, 2007. The remaining 150,000 UPOs
not exercised expired on November 18, 2009.



| | 22 | Disposal of subsidiaries
| | -- | ------------------------



On December 20, 2008, Yuxinyicheng
disposed of its entire interest in Hongzhi at a consideration of RMB3,600,000. The consideration has been fully settled during
2009. The entire assets and liabilities and results of Hongzhi had been excluded from the consolidated financial statements since
the effective date of the disposal.



On August 30, 2009, Yuxinyicheng
disposed of its entire interest in Guangzhou Sihitech at a consideration appropriate the net asset value of Guanzhou Sihitech as
of the date of disposal.



On December 31, 2010, Yuxinyicheng
disposed of its entire interest in Yuxinyicheng Information at a consideration of RMB21,500,000. The entire assets and liabilities
and results of Yuxinyicheng Information had been excluded from the consolidated financial statements since the effective date of
the disposal.



F-49







| | 23 | Significant related party transactions
| | -- | --------------------------------------



| | (a) | Identity of related parties
| | --- | ---------------------------



Related parties identified for
the years ended December 31, 2009, 2010, and 2011 are summarised as follows:









|                                   |  | Relationship with the Company   |  | Shareholding in Yucheng or shareholding being held by the Company | 
|---------------------------------- |  | ------------------------------- |  | ----------------------------------------------------------------- | 
|                                   |  |                                 |  | for 2009                                                          | 
|                                   |  |                                 |  |                                                                   | 
|Mr. Weidong Hong                   |  | Shareholder and CEO             |  | 16.47%                                                            | 
|                                   |  |                                 |  |                                                                   | 
|Mr. Shuo Zeng                      |  | Shareholder and COO             |  | 5.19%                                                             | 
|                                   |  |                                 |  |                                                                   | 
|Sihitech (HK) Co., Ltd.            |  | Controlled by                   |  |                                                                   | 
|                                   |  | Mr. Weidong Hong                |  | N/A                                                               | 
|                                   |  |                                 |  |                                                                   | 
|Hainan Baodaotong                  |  | Investment under                |  |                                                                   | 
|Technologies Limited               |  | cost method                     |  |                                                                   | 
|(“Baodaotong”)                     |  |                                 |  | 15%                                                               | 
|                                   |  |                                 |  |                                                                   | 
|Yucheng Sinowise                   |  | Investment under                |  |                                                                   | 
|Consultancy Services               |  | equity method                   |  |                                                                   | 
|Limited (“Sinowise”)               |  |                                 |  | 40%                                                               | 
|                                   |  |                                 |  |                                                                   | 
|Yuxin Data Technologies            |  | Investment under                |  |                                                                   | 
|Co., Limited (“Yuxin Data”)        |  | equity method                   |  | 0%                                                                | 
|                                   |  |                                 |  |                                                                   | 
|Beijing Yuxinyicheng               |  | Investment under                |  |                                                                   | 
|Internet Technologies Co., Limited |  | equity method                   |  |                                                                   | 
|(“Yuxinyicheng Internet”)          |  |                                 |  | 0%                                                                | 
|                                   |  |                                 |  |                                                                   | 
|Yuxinbanke                         |  | Investment under 
equity method |  | 0%                                                                | 







|Note 1: | Before the Share Exchange Transaction was completed on November 24, 2006, Mr. Weidong Hong held 42% of Sihitech.
|------- | ----------------------------------------------------------------------------------------------------------------
|Note 2: | Before the Share Exchange Transaction was completed on November 24, 2006, Mr. Shuo Zeng held 43% of e-Channels. 



F-50









| | 23 | Significant related party transactions - Continued
| | -- | --------------------------------------------------



| | (b) | Related party transactions
| | --- | --------------------------



The significant related party transactions
of the Company are summarised as follows:



|                                                          |  | 2009 |             |   | 2010 |  |            | 2011 |  |  | 2011        |  
|--------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ---------- | ---- |  |  | ----------- | -
|                                                          |  | RMB  |             |   | RMB  |  |            | RMB  |  |  | USD         |  
|                                                          |  |      |             |   |      |  |            |      |  |  | (unaudited) |  
|Advances to investments under equity method               |  |      |             |   |      |  |            |      |  |  |             |  
|-Sinowise                                                 |  |      | 1,915,718   |   |      |  | 4,635,707  |      |  |  | 2,076,495   |  
|-Baodaotong                                               |  |      | 20,914,872  |   |      |  | -          |      |  |  | -           |  
|-Yuxin Data                                               |  |      | -           |   |      |  | 853,428    |      |  |  | 1,366,756   |  
|-Yuxinyicheng Internet                                    |  |      | -           |   |      |  | -          |      |  |  | 5,793,952   |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Collection of advances to investments under equity method |  |      |             |   |      |  |            |      |  |  |             |  
|-Sinowise                                                 |  |      | (625,391    | ) |      |  | -          |      |  |  | (54,203     | )
|-Baodaotong                                               |  |      | (20,597,593 | ) |      |  | -          |      |  |  | -           |  
|-Yuxin Data                                               |  |      | -           |   |      |  | (670,844   | )    |  |  | (3,828      | )
|-Yuxinyicheng Internet                                    |  |      | -           |   |      |  | -          |      |  |  | (4,979,778  | )
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Advances to shareholders                                  |  |      | 116,160     |   |      |  | 138,500    |      |  |  | -           |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Collection of advances to shareholders                    |  |      | (116,160    | ) |      |  | (138,500   | )    |  |  | -           |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Collection from Sihitech (HK) Co., Ltd                    |  |      | (1,568,105  | ) |      |  | -          |      |  |  | -           |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Collection from Baodaotong                                |  |      | 6,680,579   |   |      |  | -          |      |  |  | -           |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Sales to Baodaotong                                       |  |      | 6,770,864   |   |      |  | -          |      |  |  | -           |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Sales to Sinowise                                         |  |      | -           |   |      |  | -          |      |  |  | 1,054,327   |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Sales to Yuxin Data                                       |  |      | -           |   |      |  | -          |      |  |  | 1,365,894   |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Sales to Yuxinyicheng Internet                            |  |      | -           |   |      |  | -          |      |  |  | 4,474,680   |  
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Purchase from Yuxin Data                                  |  |      | -           |   |      |  | (4,116,524 | )    |  |  | (13,877     | )
|                                                          |  |      |             |   |      |  |            |      |  |  |             |  
|Purchase from Yuxinyicheng Internet                       |  |      | -           |   |      |  | -          |      |  |  | (8,494,088  | )



The transactions do not have fixed terms
payments. Balances relating to the above transactions are non-interest bearing and payable on demand. Other than this matter, the
Board of Directors of the Company is of the opinion that the above transactions were in the normal course of business and on normal
commercial terms.



F-51







| | 23 | Significant related party transactions - Continued
| | -- | --------------------------------------------------



| | (c) | Related party balances
| | --- | ----------------------



The balances of related party receivables
and payables at the year-end are summarized as follows:



|                                         |  | December 31 |           
|---------------------------------------- |  | ----------- | ----------
|                                         |  | 2010        |           
|                                         |  | RMB         |           
|                                         |  |             |           
|                                         |  |             |           
|Due from investments under equity method |  |             | 5,926,033 
|Due to an investment under equity method |  |             | (3,933,940
|                                         |  |             | 1,992,093 



| | 24 | Stock based compensation plan
| | -- | -----------------------------



On November 24, 2006, Yucheng adopted the
2006 performance equity plan (the “Plan”) which allows Yucheng to offer a variety of incentive awards to employees.
Under the Plan, the Company may grant either options to purchase 1,500,000 share of common stock of Yucheng or restricted shares.



On August 3, 2010, the Company has
granted 941,132 restricted shares to certain employees (“2010 Grant”) for the services provided by them. The share
grant will be fully vested on December 31, 2012. 40% of the total number of shares granted will be vested on January 1, 2011, and
7.5% of the total number of shares granted on the last day of every quarter following December 31, 2010. If the holder ceases to
be an employee of the Company, any unvested portion of the share grant shall revert to the Plan.



On April 18, 2011, the Company has
granted 444,100 restricted shares to certain employees (“2011 Grant”) for the services provided by them. The share
grant will be fully vested on January 1, 2014. 40% of the total number of shares granted will be vested on January 1, 2012, and
7.5% of the total number of shares granted on the first day of every quarter following January 1, 2012. If the holder ceases to
be an employee of the Company, any unvested portion of the share grant shall revert to the Plan.



|                                 |  | 2010 Grant  Number of restricted shares |          |   | 2011 Grant Number of restricted shares |  |         | Total Number of restricted shares |  |  | Weighted- Average Grant Date Fair Value |  
|-------------------------------- |  | --------------------------------------- | -------- | - | -------------------------------------- |  | ------- | --------------------------------- |  |  | --------------------------------------- | -
|                                 |  |                                         |          |   |                                        |  |         |                                   |  |  | USD                                     |  
|                                 |  |                                         |          |   |                                        |  |         |                                   |  |  |                                         |  
|Unvested as of January 1, 2010   |  |                                         | -        |   |                                        |  | -       |                                   |  |  | -                                       |  
|Granted                          |  |                                         | 941,132  |   |                                        |  | -       |                                   |  |  | 941,132                                 |  
|Unvested as of December 31, 2010 |  |                                         | 941,132  |   |                                        |  | -       |                                   |  |  | 941,132                                 |  
|Granted                          |  |                                         | -        |   |                                        |  | 444,100 |                                   |  |  | 444,100                                 |  
|Forfeited                        |  |                                         | (58,200  | ) |                                        |  | (24,900 | )                                 |  |  | (83,100                                 | )
|Vested                           |  |                                         | (628,792 | ) |                                        |  | -       |                                   |  |  | (628,792                                | )
|Unvested as of December 31, 2011 |  |                                         | 254,140  |   |                                        |  | 419,200 |                                   |  |  | 673,340                                 |  



F-52







| | 24 | Stock based compensation plan - Continued
| | -- | -----------------------------------------



The Company recorded stock-based compensation
expense in General and Administrative expenses of RMB Nil, RMB8,052,823 equivalent to USD1,215,943 and RMB7,526,885 equivalent
to USD1,194,573 for the years ended December 31, 2009, 2010 and 2011, respectively.



As of December 31, 2011, the unrecognized
stock-based compensation expense, net of expected forfeitures, for 2010 Grant and 2011 Grant was RMB4,978,267 equivalent to USD790,088
and RMB6,783,097 equivalent to USD1,076,528, respectively (for a total of RMB11,761,364 equivalent to USD1,866,616), and are expected
to be amortized over the weighted average period of 0.4 year.



| | 25 | Discontinued operations
| | -- | -----------------------



As discussed in note 1, the Company sold
the business of POS (Yuxinyicheng Information) in 2010. Total revenue of POS, reported in discontinued operations, for the years
ended December 31, 2009, 2010 and 2011 was RMB25,894,740, RMB30,876,334 and RMB Nil respectively. Pre-tax loss of the discontinued
operations for the years ended December 31, 2009, 2010 and 2011 was RMB9,769,322, RMB6,379,365 and RMB Nil respectively.



The following
table illustrates the reporting of the discontinued operations on the face of the Consolidated Statements of Operations and
Income for the years ended December 31, 2009, 2010 and 2011.



|                                                                     |  | 2009 |            |   | 2010 |  |             | 2011 |  |  | 2011        | 
|-------------------------------------------------------------------- |  | ---- | ---------- | - | ---- |  | ----------- | ---- |  |  | ----------- | 
|                                                                     |  | RMB  |            |   | RMB  |  |             | RMB  |  |  | USD         | 
|                                                                     |  |      |            |   |      |  |             |      |  |  | (unaudited) | 
|Discontinued operations                                              |  |      |            |   |      |  |             |      |  |  |             | 
|Results from discontinued operations                                 |  |      | (9,295,160 | ) |      |  | (6,379,364  | )    |  |  | -           | 
|Loss on disposal of a subsidiary, net                                |  |      | -          |   |      |  | (25,419,348 | )    |  |  | -           | 
|Income tax loss (benefits)                                           |  |      | 2,479,526  |   |      |  | (407,192    | )    |  |  | -           | 
|Loss from operations of discontinued subsidiaries, net of income tax |  |      | (6,815,634 | ) |      |  | (32,205,904 | )    |  |  | -           | 



F-53







| | 26 | Parent only financial statements
| | -- | --------------------------------



As of December 31, 2011, the total restricted
net assets amounted to RMB778.4 million (2010: 1,043.1 million), which exceeded 25% percentage of our consolidated net assets (RMB661.4
million (2010: 607.9 million)). As a result, parent only financial statements are prepared as follows:



Yucheng Technologies Limited

Condensed Balance Sheets

As of December 31, 2010 and 2011

(Expressed in Chinese Renminbi)








|                                                                                                                                                               |  | 2010 |             |   | 2011 |  |             | 2011        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ----------- | ----------- | 
|                                                                                                                                                               |  | RMB  |             |   | RMB  |  |             | USD         | 
|                                                                                                                                                               |  |      |             |   |      |  |             | (unaudited) | 
|Assets                                                                                                                                                         |  |      |             |   |      |  |             |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Current assets:                                                                                                                                                |  |      |             |   |      |  |             |             | 
|Cash and cash equivalents                                                                                                                                      |  |      | 1,975,787   |   |      |  | 638,797     |             | 
|Trade accounts receivable, net                                                                                                                                 |  |      | 2,055,245   |   |      |  | 1,955,380   |             | 
|Other current assets                                                                                                                                           |  |      | 287,025,875 |   |      |  | 279,651,400 |             | 
|Total current assets                                                                                                                                           |  |      | 291,056,907 |   |      |  | 282,245,577 |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Investments in subsidiaries                                                                                                                                    |  |      | 346,260,409 |   |      |  | 409,004,423 |             | 
|Total assets                                                                                                                                                   |  |      | 637,317,316 |   |      |  | 691,250,000 |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Liabilities and stockholders’ equity                                                                                                                           |  |      |             |   |      |  |             |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Current liabilities                                                                                                                                            |  |      |             |   |      |  |             |             | 
|Trade accounts payable                                                                                                                                         |  |      | 2,442,818   |   |      |  | 2,324,120   |             | 
|Other current liabilities                                                                                                                                      |  |      | 32,131,632  |   |      |  | 27,985,133  |             | 
|Total current liabilities                                                                                                                                      |  |      | 34,574,450  |   |      |  | 30,309,253  |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Stockholders’ Equity                                                                                                                                           |  |      |             |   |      |  |             |             | 
|Preferred stock, $0.0001 par value, authorized 2,000,000 shares and none issued;                                                                               |  |      | -           |   |      |  | -           |             | 
|Common stock, $0.0001 par value, authorized 60,000,000 shares; 18,560,014 shares and 18,941,417 shares issued and outstanding as of December 31, 2010 and 2011 |  |      | 20,007,998  |   |      |  | 20,008,251  |             | 
|Additional paid-in capital                                                                                                                                     |  |      | 393,936,410 |   |      |  | 411,104,366 |             | 
|Reserves                                                                                                                                                       |  |      | 50,428,005  |   |      |  | 57,340,546  |             | 
|Retained earnings                                                                                                                                              |  |      | 141,363,202 |   |      |  | 176,077,413 |             | 
|Accumulated other comprehensive loss                                                                                                                           |  |      | (2,992,749  | ) |      |  | (3,589,829  | )           | 
|Total stockholders’ equity                                                                                                                                     |  |      | 602,742,866 |   |      |  | 660,940,747 |             | 
|                                                                                                                                                               |  |      |             |   |      |  |             |             | 
|Total liabilities and stockholders’ equity                                                                                                                     |  |      | 637,317,316 |   |      |  | 691,250,000 |             | 



F-54







Yucheng Technologies Limited

Condensed Statements of
Operations and Comprehensive Income

For the year ended December 31, 2009,
2010 and 2011

(Expressed in Chinese Renminbi)








|                                    |  | 2009 |            |   | 2010 |  |            | 2011 |  |  | 2011        |  
|----------------------------------- |  | ---- | ---------- | - | ---- |  | ---------- | ---- |  |  | ----------- | -
|                                    |  | RMB  |            |   | RMB  |  |            | RMB  |  |  | USD         |  
|                                    |  |      |            |   |      |  |            |      |  |  | (unaudited) |  
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Total revenues                      |  |      | -          |   |      |  | -          |      |  |  | -           |  
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Cost of revenues:                   |  |      |            |   |      |  |            |      |  |  |             |  
|Platform Services                   |  |      | (215,733   | ) |      |  | -          |      |  |  | -           |  
|Maintenance Services                |  |      | (1,919,157 | ) |      |  | -          |      |  |  | -           |  
|Total cost of revenues              |  |      | (2,134,890 | ) |      |  | -          |      |  |  | -           |  
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Gross profit                        |  |      | (2,134,890 | ) |      |  | -          |      |  |  | -           |  
|General and administrative expenses |  |      | (1,458,349 | ) |      |  | (8,912,151 | )    |  |  | (8,698,450  | )
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Income (loss) from operations       |  |      | (3,593,239 | ) |      |  | (8,912,151 | )    |  |  | (8,698,450  | )
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Other income                        |  |      | -          |   |      |  | 1,899      |      |  |  | 3,331       |  
|Share of results of subsidiaries    |  |      | (606,359   | ) |      |  | 10,874,976 |      |  |  | 50,321,871  |  
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Income (loss) before income taxes   |  |      | (4,199,598 | ) |      |  | 1,964,724  |      |  |  | 41,626,752  |  
|Income tax expenses                 |  |      | -          |   |      |  | -          |      |  |  | -           |  
|                                    |  |      |            |   |      |  |            |      |  |  |             |  
|Net income (loss)                   |  |      | (4,199,598 | ) |      |  | 1,964,724  |      |  |  | 41,626,752  |  



F-55







Yucheng Technologies Limited

Condensed Statements of Cash Flows

For the year ended December 31, 2009,
2010 and 2011

(Expressed in Chinese Renminbi)








|                                                             |  | 2009 |             |   | 2010 |  |             | 2011 |  |  | 2011        |  
|------------------------------------------------------------ |  | ---- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | -
|                                                             |  | RMB  |             |   | RMB  |  |             | RMB  |  |  | USD         |  
|                                                             |  |      |             |   |      |  |             |      |  |  | (unaudited) |  
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Net cash (used in) provided by operating activities          |  |      | 24,138,668  |   |      |  | (12,708,129 | )    |  |  | (1,152,049  | )
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Net cash used in investing activities                        |  |      | (8,117,439  | ) |      |  | -           |      |  |  | -           |  
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Net cash used in financing activities                        |  |      | (18,281,588 | ) |      |  | -           |      |  |  | -           |  
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Net decrease in cash and cash equivalents                    |  |      | (2,260,359  | ) |      |  | (12,708,129 | )    |  |  | (1,152,049  | )
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Cash and cash equivalents at beginning of year               |  |      | 16,944,275  |   |      |  | 14,683,916  |      |  |  | 1,975,787   |  
|Effect of exchange rate changes in cash and cash equivalents |  |      | -           |   |      |  | -           |      |  |  | (184,941    | )
|                                                             |  |      |             |   |      |  |             |      |  |  |             |  
|Cash and cash equivalents at the end of year                 |  |      | 14,683,916  |   |      |  | 1,975,787   |      |  |  | 638,797     |  



Basis of presentation



The condensed financial
information has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements
except that the parent company has used equity method to account for its investments in subsidiaries.



F-56