1. Issuance and Marketing Strategy in the Local Currency Market –
A Case Study of the ADB “Panda Bonds”
May, 2006

2. Disclosures
The information, tools and material presented in this report are provided to you for information purposes only and shall not be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. BOCI Group may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. The contents of this report do not constitute investment advice to any person and such person shall not be treated as a customer of BOCI Group by virtue of receiving this report.
Information and opinions presented in this report have been obtained or derived from sources believed by BOCI Group to be reliable, but BOCI Group makes no representation as to their accuracy or completeness and BOCI Group accepts no liability for loss arising from the use of the material presented in this report unless such liability arises under specific statutes or regulations. This report is not to be relied upon in substitution for the exercise of independent judgment. BOCI Group may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. The reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. For the avoidance of doubt, views expressed in this report do not necessarily represent those of BOCI Group.
Information, opinions and estimates are provided on an “as in” basis without warranty of any kind and may be changed at any time without prior notice. Nothing in this report constitutes investment, legal, accounting or tax advice nor a representation that any investment or strategy is suitable or appropriate to your individual circumstances. Nothing in this report constitutes a personal recommendation to you.

3. Highlights of the ADB “Panda Bonds” Deal
The debut of Panda Bond issued by International Development Institutions
The first internationally AAA rated bond available to Chinese investors on the domestic market
Catalyst to the opening of Chinese capital market as one of the first foreign issuers
Another remarkable achievement for ADB in local currency markets
Carefully prepared and successfully arranged one-on-one meetings and roadshows helped the issuer and investors learn about each others effectively, ensuring successful pricing & optimal allocation
Book-building and pricing mechanism accurately reflected investor demand at the time, and truly achieved “market driven pricing”
Order oriented allocation ensured bonds are held by real interested investors
Close cooperation between the issuer and the lead manager
BOCI provided one-stop service from advisory, underwriting, to post-offering support
Well-established sales network guaranteed the success of the offering

4. Table of Contents Overview of China’s Bond Market
ADB Panda Bonds Case Study
1. Transaction Summary
2. Marketing Strategy
3. Deal Execution
4. For Future Issuers
BOCI Credentials

5. Overview of China’s Bond Market
STRICTLY PRIVATE AND CONFIDENTIAL

6. Shanghai & Shenzhen Stock Exchanges
Bond Market Structure
China’s Bond Market
Non- exchange markets
Exchange markets
Inter-Bank Market
OTC market
Shanghai & Shenzhen Stock Exchanges
Product Types：
Treasury bond
Policy financial bond
Corporate bond
Regulatory agency
People’s Bank Of China
Major investors
Financial institutions
Institutions and
households
Convertible bond
China Security Regulatory Commission
Institutions and households

7. China’s Market Enjoys Exponential Growth
Issuance size comparison for government, policy financial and corporate bonds
Over RMB 600 billion
in 2003
（RMB Billions）
As of April 30
Source： BOCI Research

8. ADB Panda Bonds Case Study 1. Transaction Summary
2. Marketing Strategy
3. Deal Execution
4. For Future Issuers
STRICTLY PRIVATE AND CONFIDENTIAL

9. Background
In October 2005, The Asian Development Bank (ADB) completed one of the first-ever RMB Bond issuances by a foreign entity in the domestic Chinese market. BOC International acted as the Sole-lead Manager and Bookrunner on this transaction
Domestic RMB Bonds issued by foreign entities were christened as “Panda Bonds” by the Ministry of Finance
ADB and IFC were selected as the two pilot issuers in this market
ADB and IFC simultaneously launched their issues during the week of 10th Oct, the ADB bond was listed on the Inter-Bank Market immediately following the offering
ADB’s October offering was the result of comprehensive preparation and planning as well as overcoming numerous issuance hurdles that spanned regulatory and legal aspects, settlement mechanisms and post-issuance arrangements
By following international best practices and providing full disclosure, the issuer and lead manager set a precedence and contributed to the development of the local bond market
The path blazed by this first issuance has cleared the way for further opening of this market.
BOCI successfully completed The Asian Development Bank’s inaugural Panda Bonds in October 2005

10. Key Regulators MOF NDRC CGSD PANDA BONDS PBOC SAFE CSRC
Ministry of Finance
National Development
& Reform Commission
The “window department” of RMB Bonds issued by international development institutions, coordinates applications & reports to the Sate Council for final approval.
MOF
Inspects and verifies the use of proceeds of the bond.
NDRC
CGSD
Chinese Government Securities Depository Clearing & Trust Co. Ltd
PANDA BONDS
People’s Bank of China
The only clearing and trust agency on the Inter-bank market. Who is also the paying agent for all bonds issued and traded in the Inter-bank market.
The central bank, supervising the National Inter-bank Bond Market.
PBOC
SAFE
State Administration of Foreign Exchange
China Securities Regulatory Commission
CSRC
Approves the opening of bank accounts. It will also require monthly report from foreign issuers about transactions relating to the bank account.
Regulator of the securities industry and the stock exchanges.

11. Transaction Overview : The Asian Development Bank :
Issuer :
The Asian Development Bank
Issue :
RMB denominated 10-year Fixed Rate Bond – Panda Bond
Issue Amount :
RMB 1,000,000,000
Type
General, direct, unconditional, unsubordinated and unsecured obligations of the issuer :
Maturity Date :
14 October 2015
Coupon Rate/Frequency :
3.34% Annual Fixed Coupon
Issue Price :
100%
Credit Rating :
“AAA” by S&P, “Aaa” by Moody’s, and “AAA” by Fitch
Listing :
The National Inter-bank Bond Market
Depository/Paying Agent :
China Government Securities Depository Trust and Clearing Co.,Ltd
Governing Law :
Laws of the People’s Republic of China
Sole Lead Manager and Book-Runner :
BOC International (China) Limited

12. Significant Achievements
Groundbreaking Execution
As this is the first of its kind, the ADB Bond deal overcame a significant number of execution hurdles
The transaction followed international standards of disclosure and execution, in line with the issuer’s objective to promote the development of the domestic bond market
Effective marketing strategy & strong selling effort
Attracted a high quality order book with an subscription ratio of more than 2.8x, especially when compared to an average subscription ratio of under 2.0x for other financial bonds during the same period
Conducted a domestic roadshow, a first for domestic bond issuances, in Beijing and Shanghai to introduce ADB to the Chinese investor base
Published an effective pre-deal research piece to highlight the credit of ADB
Effective Marketing Strategy
Attractive Pricing
Conducted a full marketing program tightly coordinated by BOCI, thus ensuring that pricing reflected true demand from investors
As a result, ADB’s offering achieved the tightest pricing of comparable issues

13. ADB Panda Bonds Case Study 1. Transaction Summary
2. Marketing Strategy
3. Deal Execution
4. For Future Issuers
STRICTLY PRIVATE AND CONFIDENTIAL

14. Highly Effective Marketing Strategy
Strong Syndicate Structure
Comprehensive Pre-marketing
Effective Roadshow Program
BOCI was the sole bookrunner tightly coordinating the entire marketing process
Supplemented with a syndicate of 7 domestic financial institutions to maximize investor reach and achieve a broad and stable investor base
Comprehensive pre-marketing since beginning of the deal
Full pre-deal research piece (which is an international practice, and in compliance with PRC regulations)
Market soundings by our research analyst and salespeople
The first-ever formal roadshow program used in conjunction with a domestic bond offering
Investor group meetings in Beijing and Shanghai allowed over 50 institutional investors to meet with ADB management over the marketing period

15. Highly Efficient Time Table
Form syndicate
Distribute pre-deal research
One-on-One meetings with potential anchor investors
Formal feedback from investors
Bookbuilding
Roadshow
Deal Launched
Re-priced pricing range
Pricing and Allocation
Within a short time frame of two months, BOCI successfully completed ADB’s inaugural Panda bonds in China via an extremely efficient execution process

16. Fully Leveraging the Syndicate Structure
Selection of syndicate members to complement BOCI’s strengths
The syndicate consistent with domestic practice, and syndicate members “stand by underwrite” their commitments at the beginning of the deal
However, as an innovation to satisfy ADB’s desire to achieve a balanced investor base, BOCI as bookrunner allocated the syndicate’s demand according to quality of demand. This is more common in international debt offerings
In order to maximize the syndicate’s efficiency in communicating ADB’s investment merits and pricing rationale, BOCI invested much time and effort to educate and familiarize the syndicate members with the credit story of ADB
As the sole bookrunner, BOCI was able to manage the investment story and generate demand tension
ICBC
ABC
CCB
Everbright
Guo Tai & JunAn
Shenyin &WanGuo
Changjiang BNP Paribas
Syndicate Members – 5% Stand-by underwriting each
Sole Lead Manager and Bookrunner – 65% underwriting

17. Comprehensive Pre-marketing Effort
BOCI’s top-ranked fixed income research team produced a full report on ADB in Chinese a few days prior to the offering
As the domestic investor base did not previously have much exposure to ADB, this was important in their credit assessment and pricing considerations
Following issuance of the research report, our research analyst and sales team met with potential investors to assess their preferences, concerns and demand levels prior to the official launch of the deal
BOCI has conducted pre-marketing one-on-one meeting with over institutional 14 investors
Only large size potential anchor investors were approached at this stage
The feedback was important in allowing us to recommend and set an accurate price range for the offering
Pre-marketing effort enhanced understanding of ADB by potential anchor investors

18. 17 investors in Beijing and 33 in Shanghai
Roadshow
Agricultural Bank of China
AIG Shanghai Branch
Bank of China Shanghai Capital
Mgmt Centre
Bank Of Communications
Bank Of Communications Schroder Fund Management
Changjiang BNP Paribas Securities
China Continent Property & Casualty Insurance
China Pacific Insurance (Group)
China People Insurance AM
Citibank Shanghai Branch
Deutsche Bank Shanghai Branch
Galaxy Fund Managemnet
Guolanan Fund Managemnet
Guotai Fund Managemnet
Guotai Junan Securities
Guotai Life Insurance
Agricutural Bank of China
Bank of China
Beijing Bank
Beijing Rural Commercial Bank
China Fund Management
China Life Asset Management
China Postal Savings Reserve Bureau
China Reinsurance Asset Management
China Shipping High Industry Finance
CNOOC Finance
Everbright Bank of China
Harvest Fund Management
ICBC UBS Asset Management
Mingsheng Bank of China
Mingsheng Life Insurance
Taikang Life Insurance
Beijing
Shanghai
Haifutong Fund Managemnet
Haire New York Life Insurance
HSBC Shanghai Branch
Huaan Fund Managemnet
J.P Morgan Chase Shanghai Branch
Manulife-Sinochem Insurance
Pingan Insurance (Group)
Shanghai Auto (Group) Finance
Shanghai Baoshan Steel Finance
Shanghai Baoshan Steel Group
Shanghai Pudong Development Bank
Shanghai Rural Commercial Bank
Shenyin Wanguo Securities
Sino Life Insurance
Standard Chartered Bank Shanghai
Taiping Life Insurance
Tianan Insurance Investment
Mgmt Centre
17 investors in Beijing and 33 in Shanghai

19. ADB Panda Bonds Case Study 1. Transaction Summary
2. Marketing Strategy
3. Deal Execution
4. For Future Issuers
STRICTLY PRIVATE AND CONFIDENTIAL

20. Application Preparation
Pre-Offering Phases
Policy Approval
Appointment
by ADB
Application Preparation
Application to Authorities
November 2004, Chinese government gave policy approval for Panda bond issuance
December 2004, BOCI was appointed by ADB as the manager for its inaugural Panda bond offering
All key application documents were prepared between December 2004 to March 2005
Obtain approvals from Ministry of Finance, People’s Bank of China and State Administration of Foreign Exchange
Ready to Launch
Applications to Authorities
Ministry of Finance
People’s Bank of China
State Administration of Foreign Exchange

21. The Role of The Sole Lead
Rating Advisory
BOCI acted as the interface between ADB and the various financial intermediaries in China.
BOCI also helped ADB with its communications and approval process with the Chinese Government.
Legal Opinion
Accounting Statements
Paperwork for SAFE,PBOC,SDRC,etc.

22. Marketing Plan And Investment Story (1)
PRE-MARKETING:
Target investor groups:
Banks
Insurance Companies
other Institutional investors
Rationale:
The most active and influential investors in the local bond market
With large portfolio size and appetite for quality names
Already familiar with ADB and its international issuer status

23. Marketing Plan And Investment Story (2)
Road Show:
3 major financial centers: Beijing, Shanghai and Shenzhen
Maximize Key investor coverage
Follow international practice, such as luncheon presentations and
1 on 1 meetings
Pricing in Shanghai, based on the prevailing Treasury
benchmark yield on pricing day
Invite leading domestic financial media to boost publicity

24. Marketing Plan And Investment Story (3)
First high-quality, international issuer in the RMB bond market
Strong financial position and debt servicing capacity
Government support and Quasi-Sovereign status
Proven success in local markets
Commitment to the development of China’s RMB bond market

25. ADB achieved tighter pricing than similar offerings
Pricing Parameters
ADB achieved tighter pricing than similar offerings
IFC 10 year 3.40%
CDB Bond
CDB 10 year 3.35%
Treasury Bond
ADB 10 year 3.34%
The pricing achieved was 25 bps over comparable Chinese Treasuries
One must note that only Chinese Treasury coupons are tax-exempt whereas Panda bond holders are subject to income taxes, taking that into account, the pricing is extremely favorable

26. Investors & Allocation
Order Distribution by Investor Type
Allocation By Investor Type
Instead of the “proportional” distribution, we aimed to reflect issuer preference in the allocation
The final allocation is determined based on both order demand & investor characteristics

27. Positive Media Reactions
BEST Multilateral DEAL IN Local CURRENCY
Emerging Markets - 4th May 2006
….it will help develop an interest-rate system that is more market based and provide an outlet for the country’s large pool of savings….
The success of ADB issue demonstrates the readiness of China’s bond market for participation by foreign issuers and investors….
The Panda bond represents a step towards adopting global best practices particularly in disclosure, documentation, and deal management
A well functioning bond market will enable China to reduce the risk of over dependency on bank lending……

28. Highlights of the Deal
The debut of Panda Bond issued by International Development Institutions
The first internationally AAA rated bond available to Chinese investors on the domestic market
Catalyst to the opening of Chinese capital market as one of the first foreign issuers
Another remarkable achievement for ADB in local currency markets
Carefully prepared and successfully arranged one-on-one meetings and roadshows helped the issuer and investors learn about each others effectively, ensuring successful pricing & optimal allocation
Book-building and pricing mechanism accurately reflected investor demand at the time, and truly achieved “market driven pricing”
Order oriented allocation ensured bonds are held by real interested investors
Close cooperation between the issuer and the lead manager
BOCI provided one-stop service from advisory, underwriting, to post-offering support
Well-established sales network guaranteed the success of the offering

29. ADB Panda Bonds Case Study 1. Transaction Summary
2. Marketing Strategy
3. Deal Execution
4. For Future Issuers
STRICTLY PRIVATE AND CONFIDENTIAL

30. Requirements Under Current Interpretation
Pre-Qualification of the Issuer
Potential issuer must be an international development institution with a strong focus on projects in China
Have made loans to and/or equity investments in domestic projects in excess of US$1 billion in total
Requirement for the Issuance
Proceeds from the bond to be used as mid- to long- term loans for fixed assets or equity investments, which should be in line with China’s industrial policy
Past three years financial statements audited according to PRC GAAP to be provided as part of the application package
The bond is to be rated AA or better by domestic PRC credit rating agencies

31. Key Pricing Benchmarks Adjustments Over Benchmark
Pricing Analysis
The benchmark treasury bond
Other comparable domestic issues, such as the China Development Bank (for financial institutions)
Key Pricing Benchmarks
Tax Treatment
Chinese Treasuries are the only bonds in China whose coupons are not subject to income tax. An appropriate premium due to tax treatment would need to be added for all other bonds
Adjustments Over Benchmark
Liquidity Spread
Depending on the size and estimated trading liquidity of the bond, investors would expect to receive a premium on the issue
Other Factors
Other factors may also come into play to affect the pricing of the bond, such as familiarity of the credit, investor preference and also market volatility during the time of issue

32. Comparables Pricing Issue Date Maturity Date YTM Over Treasury
Chinese Treasuries
CDB
2/28/2005
2/28/2015
2.85%1 -
8/2/2005
8/2/2015
3.10%2 25
1. Pricing as of May 23, 2006 , 2. Pricing as of May 24, 2006
10-year Chinese Treasuries are currently trading at 2.85% (May 23, 2006)
CDB’s 10-year bond currently trades at around 25 bps spread over the Treasury, while the historical spread of CDB bonds over Treasuries ranged from 15-30bps

33. BOCI Credentials
STRICTLY PRIVATE AND CONFIDENTIAL

34. BOCI: A Unique Fixed Income House
Leader in the RMB debt market
The only investment bank with full RMB and international debt capabilities
Strong backing of the BOC Group
BOCI’s Unique Advantage
Exceptional distribution capability
BOCI Research sets the industry standard
Combination of local expertise and international capital markets experience

35. BOCI: BOC’s Investment Banking Arm
Bank of China is China's oldest and pre-eminent commercial bank since 1912
BOCI is Bank of China’s wholly-owned Investment Banking arm
Premier commercial bank in China and Hong Kong
Other Businesses
Leading investment bank with global operations
100%
49% Controlling Stake
BOCI China
(Domestic Debt and Equity Markets)

36. – Hong Kong (Incl. Red Chips)
Strength of BOC Group
Bond Issuance
– Asia( ex-Japan )
G3 Bond Issuance
– Hong Kong (Incl. Red Chips)
1st Half 2005
1st Half 2005
BOC Group’s strength is demonstrated by being ranked #2 in the Asia (ex-Japan) bond issuance market since January 2005 to date, according to Finance Asia
According to AsiaMoney, BOCI ranked #7 in the Hong Kong G3 currency bond issuance market (incl. Red Chips) within a short time frame of one year
Ranking
Underwriter
Ranking
Underwriter 1 2 3 4 5 6 7 8 9 10
Korean Development Bank
BOC Group
Citibank
HSBC
JP Morgan
ICBC
Deutsche Bank
China Construction Bank
Agriculture Bank of China
Woori Finance Holding 1 2 3 4 5 6 7 8 9
JP Morgan
HSBC
Deutsche Bank
ABN Amro
Morgan Stanley
Merrill Lynch
BOCI
Citigroup
CSFB
Source： Finance Asia
Source： Asia Money

37. Leadership In The Domestic Debt Market
Corporate Bonds
Up to Oct. 30, 2006, we have led and participated in 47 corporate bond offerings. From 2002 to 2005, the annual amount of corporate bonds we underwrote grew from RMB 285 million to RMB 4.5 billion
In early 2003, BOCI joined the underwriting syndicate for exchange-listed Government bonds. In 2004, we became a tier one member of the treasury bond syndicate and a member of the underwriting syndicate for China Development Bank’s financial bonds. From then on, BOCI has continuously kept the first position among all securities companies in those two syndicates
Thanks to our research capabilities, we constantly design and promote new fixed income instruments tailored to meet our clients’ financing needs. New products such as subordinated bonds, Asset-Backed Securities, structured financing facilities, are also well received among institutional investors
Government
and Financial
New Products

38. Leader In The Domestic Bond Market
Sole Lead
Yuntianhua
Group
RMB 1 Billion
2006
Joint Lead
2006
Sole Lead
Fujian Industry
Bank
RMB 5 Billion
2006
Sole Lead
Fujian Industry
Bank
RMB 10 Billion
2005
Sole Lead
Asian Development
Bank
RMB 1 Billion
2005
China Resources
Corporation
RMB 3 Billion
Joint Lead
China Resources
Corporation
RMB 3 Billion
2005
China Railway
Department
RMB 5 Billion
2005
Joint Lead
Lead
CITIC GuoAn
Corporation
RMB 1.5 Billion
2004
Sole Lead
Zhejiang Traffic
Corporation
RMB 1.4 Billion
2004
Joint Lead
Petro China
RMB 1.5Billion
2003
2006
Zhongyuan Expressway
Company
RMB 1.5Billion
Co-Lead
2006
Sinohydro
Corporation
RMB 1.2Billion
Co-Lead
Air China
RMB 3 Billion
Co - Lead
2005
Co - Lead
State Grid
RMB 4 Billion
2005
2005
Co - Lead
China Nuclear
Industry
RMB 2 Billion

39. Unique Position in International Debt Markets
BOCI is the only Chinese institution that has the capacity of issuing and trading bonds in the international capital market
BOCI is establishing itself as a major force in G3 currency debt issuance by Chinese and Hong Kong corporates, governments and quasi-government organizations
Combining our dedication to a single issuing client market with significant international debt markets expertise
Ability to navigate local regulatory framework through strong relationships with the Ministry of Finance, PBOC, CSRC, National Development and Reform Commission and other regulatory bodies
Access to major international investors through sales teams in Hong Kong, Singapore, London, Shanghai, and Beijing
In addition, we are introducing to the fixed income investment market a new class of investors: PRC institutions investing in foreign currency assets
We have participated in major foreign currency transactions
Arranger, Joint Global Coordinator and Bookrunner for Hong Kong SAR Government’s Inaugural Multi-currency Global Bond and China Merchants Holdings (International)’s US$500m global offering
In 2005, BOCI was a Joint Lead Manager in China Eximbank’s US$1.0bn Global Bond Offering
Co-lead manager in the PRC Sovereign Issue, China Eximbank and China Development Bank in 2004 and 2005

40. Senior Roles in Major G3 Currency Bond Offerings
US$375m
Private Placement
2005
Advisor/Investor
Shui On Land
US$1.0billion
Global Bond
2005
Joint Lead Manager
US$500million
Global Bond
2005
Arranger, Joint Global Coordinator & Bookrunner
China Merchants International
Arranger, Joint Global Coordinator & Bookrunner
HKSAR Government
HK$20.0billion
Inaugural Multi-Tranche Global Bond
2004
1999
Joint Lead Manager
China Mobile (HK)
US$600m
Fixed Rate Notes
1997
Joint Lead Manager
US$300m
Fixed Rate Notes
China Export-Import Bank
Co-lead Manager
China Development Bank
US$100billion
Fixed Rate Notes
2005
2005
Chaoda Modern Agriculture
US$225m
High Yield Offering
Co-lead manager
Co-lead Manager
Peoples Republic of China
US$500m
Fixed Rate Notes
2004
Co-lead Manager
China Development Bank
US$600m/Euro 325m
Fixed Rate Notes
2004
Co-lead Manager
China Export-Import Bank
US$750m
Fixed Rate Notes
2004
Co-lead Manager
China Development Bank
US$500m
Fixed Rate Notes
2003
Co-lead Manager
CNOOC Limited
US$500m
Fixed Rate Notes
2002
Senior Co-lead Manager
Peoples Republic of China
US$1.0billion
Fixed Rate Notes
2001
Senior Co-lead Manager
China Agricultural Bank
US$140m
Fixed Rated Notes
1999
Co-lead Manager
Bank of China
US$150m
Fixed Rate Notes
1999
Co-lead Manager
China Export-Import Bank
US$200m
Fixed Rate Notes
1999
Co-lead Manager
Peoples Republic of China
DM500m
Fixed Rate Notes
1997

41. Contact Details BOC INTERNATIONAL (China) Limited Cynthia Wang
Fixed Income
Tel: –
Fax: –
BOC INTERNATIONAL (China) Limited
Room 705, Tower E1, Oriental Plaza,
No.1, East Chang An Ave.,
Dong Cheng District,
Beijing, , China
Internet: