Bitumen Futures Key Points of Contract, Risk Control & Hedging Rules Legal Affair Dept., Shanghai Futures Exchange (the SHFE) June, 2013 SHFE Report

Bitumen Contract Specifications (Draft) Product Contract Size Price Quotation Minimum Price Fluctuation Daily Price Limit Contract Series Bitumen 10 tons/lot (RMB) Yuan/ton 2 Yuan/ton Within 3% up or down of the settlement price of the previous trading day Monthly contract of the recent 6 consecutive months and consecutive quarterly contracts within the recent 24 months Trading Hours 9:00am to 11:30am, 1:30pm to 3:00pm (Beijing Time) and other trading hours as prescribed by the SHFE Last Trading Day Delivery Period Grade and Quality Specifications Delivery Venue Minimum Trade Margin Settlement Type The 15th day of the spot month (If it is a public holiday, the Last Trading Day shall be the 1st business day after the holiday) The 5 consecutive business days after the last trading day 70# Class-A road bitumen, more details on quality specifications to be found in the Bitumen Futures Delivery Rules of the Shanghai Futures Exchange (Trial) Certified delivery warehouse of SHFE 4% of contract value Physical delivery Contract Symbol Exchange BU SHFE SHFE Report

Contract Appendix 1.Contract size The contract size of a Bitumen Contract is 10 tons/lot; The delivery unit of a standard bitumen futures contract shall be ten (10) tons and the quantity delivered shall be in multiples of ten (10) tons. 2. Grade and Quality Specifications # Class-A road bitumen, meeting all quality specifications in the Bitumen Futures Delivery Rules of the Shanghai Futures Exchange (Trial) ; 22. The bitumen being delivered must be registered commodities approved by the Exchange (bitumen under a registered brands approved by the SHFE or meets SHFE grade and quality specifications). A quality certificate is required. 2.3 The standardized warrants shall be provided by certified delivery warehouses or factory warehouses after acceptance examination; 3. Registered products approved by the SHFE The bitumen being delivered must be registered commodities approved by the Exchange. A list of registered commodities and the premium and discount standards shall be published by the Exchange. 4. Certified delivery warehouse and certified factory warehouses A list of certified delivery warehouses and certified factory warehouses shall be published by the Exchange. SHFE Report

Product —— 70# Class-A road bitumen Standards: Technical Specifications for Construction of Highway Asphalt Pavements (JTG_F ) issued by Chinese Ministry of Communications; It is one of the heavy traffic road bitumen products, accounting for around 50% of total domestic heavy traffic road bitumen supply (both domestic and imported); Distribution: Consumption and circulation distribution: most consumption and circulation happen in East China and South China regions; Factory warehouse and certified warehouses: most of them are located in East China and South China regions; Registered brands: Bitumen brands admitted into the 1 st round of registration are those renown in domestic and international market; SHFE Report

Contract Size ——10 tons/lot Conducive to encouraging middle and small investors to take part in the market and improving market liquidity; Domestic 10 tons a lot; Current domestic price: RMB 4,500-5,000 Yuan/ton; Contract value: about RMB 50,000 Yuan / lot; Global 1,000 barrels a lot (About 140 tons a lot); Or, 100 tons a lot; SHFE Report

Daily Price Limit —— Within 3% up or down of the settlement price of the previous trading day Why: according to the statistics of domestic and imported heavy traffic road bitumen spot prices from Jan. 1 st, 2008 to Dec. 31 st, 2012, on East China market, the ±3% range is enough to cover the price fluctuation risk of 98% trading days; Minimum trade Margin —— 4% of contract value Why: according to the findings of EWMA margin rate distribution analysis of domestic and imported heavy traffic road bitumen spot prices from Jan. 1 st, 2008 to Dec. 31 st, 2012, on East China market, the 4% trade margin is enough to cover the price fluctuation risk of 98% trading days; SHFE Report

Contract Series Monthly contract of the recent 6 consecutive months and consecutive quarterly contracts within the recent 24 months; Take a contract in March as an example Take a contract in April as an example SHFE Report

Delivery Venue —— Certified Delivery Warehouse of the SHFE Delivery methods: factory warehouse and certified warehouse delivery; Distribution: mainly located in East China region, paying equal attention to the delivery needs in South China and North China regions; SHFE Report

Key Amendments of Guidelines for Risk Control of SHFE 1.Based on the calculation method adopted for gold and silver contracts, adjust trade margin ratio in line with open interest, with a slight difference maintained with respect to the collection proportion of trade margin; 2.There are 4 Margin Ratios in different trading periods of bitumen contracts, with the highest Margin Ratio to be 20%; 3.When it is a one-side market, i.e. there are only bids for (or asks for) a contract and the price limits of the contract are touched for two consecutive days in the same direction, the range of price limits for bitumen contracts shall be properly expanded and the margin ratio shall be increased accordingly; 4.Clearly defined different proportions of position limits and exact position limits of a bitumen contract at different trading periods; SHFE Report

Adjust Margins based on Open Interest From the listing day on, when total position (X) reaches following levels X≤300,000 lots 300,000 ＜ X≤500,000 lots X ＞ 500,000 lots Trading Margin Ratios of bitumen contracts 4% 6% 8% Note: “X” stands for the bilateral position of a contract in a given month, unit: lots; Based on the deliverable quantity of bitumen contract, as well as the proportion of deliverable quantity and position limit of fuel oil contract, SHFE has set up the baseline position level at 300,000 lots. The position limits at the time of margin call and the ratio of trading margin adjustment shall be determined in line with that of gold and silver. This revision is based on the Article 5 of the Guidelines for Risk Control of SHFE SHFE Report Margin Collection Criteria based on Open Interest

There are 4 Margin Ratios in different trading periods of bitumen contracts, with the highest Margin Ratio to be 20%; The Margin Ratio of bitumen contract shall be adjusted from baseline level to 10% from the first trading day of the previous month prior to the Delivery Month, 15% from the first trading day of the Delivery Month, and 20% from the second trading day before the last trading day; This revision is based on the Article 5 of the Guidelines for Risk Control of SHFE; Trading period From the listing day From the first trading day of the previous month prior to the Delivery Month From the first trading day of the Delivery Month From the second trading day before the last trading day Trading Margin Ratios of bitumen contracts 4% 10% 15% 20% SHFE Report Margin Ratios Adjustment in Nearby Delivery Month Margin collection criteria in line with different trading periods

Adjust Margin Ratios in One-sided Market D1 When price limit is 3%, the Margin Ratio applied for settlement is: 8% D2 When price limit is 6%, the Margin Ratio applied for settlement is: 10% D3 When price limit is 8%, the Margin Ratio applied for settlement is: 10% This revision is based on the Article 12, 13 and 14 of the Guidelines for Risk Control of SHFE; SHFE Report

Proportion and Sizes of Position Limits for Bitumen Contract for Different Trading Periods From listing day to delivery month From listing day to the last trading day of the second month prior to the Delivery Month From the first month prior to the Delivery Month Delivery month Position limit proportion (%) Position limit (lots) Open Interest FF members Non-FF members Customers Non-FF members Customers Non-FF members Customers BU ≥300, Note: Open Interest is on a gross basis, size of the position limit for the FF member, the non-FF member and the customer is on a net basis; size of position limit for the FF is the baseline limit. SHFE Report

 Based on the position limit policies covering other contracts, SHFE adopts a proportion position limit for bitumen contract, too. Specifically speaking, when the Open Interest of a bitumen contract exceeds 300,000 lots, FF members shall be subject to a 25% proportion of position limit. Such relaxing of position limit proportion for FF members is helpful for them to scale up their business and improve their management and encourage excellent FF to step on to a higher level;  SHFE separated the trading time from the listing day to the Delivery Month into three periods and accordingly set up exact position limit sizes on non-FF members and speculative investors. Based on the 5% of the baseline 300,000 lots, the position limit sizes of a contract in average trading months is around 7,500 lots. As a result, the exact size of position limit in average months applicable for non-FF members and clients is to be 8,000 lots.  For contracts in the Delivery Month and the previous month before the Delivery Month, the position limit sizes on non-FF members and clients shall be determined in line with the proportion relation with that of other commodities. Based on the deliverable quantity and available inventory, the proportion between position limits in average months and delivery month shall be 16:1, and the position limit size on non-FF members and clients in delivery month shall be 500 lots, the proportion between position limits in previous month of delivery month and the Delivery Month shall be 3:1, and the position limit size on non-FF members and clients in the previous month of delivery month shall be 1,500 lots, This revision is based on the Articles 18 of the Guidelines for Risk Control of SHFE SHFE Report Rules about the proportion and sizes of position limits for bitumen contract at different trading periods

The hedging guidelines of bitumen is the same as that of other 9 products (except fuel oil) like copper, aluminum, zinc, lead and steel rebar; ★ Hedging position in average month: From the listing day the last trading day of the second month before the Delivery Month ★ Hedging position in Nearby delivery month: the first month before the Delivery Month and in the Delivery Month; Timing of application: Submit application in a period from the first trading day of the third month before the Delivery Month to the last trading day of the first month before the delivery month; As for non-FF members and clients whose hedging position of the contract in the Nearby Delivery Month is denied: hedging position of contracts in average months already approved or the position limits applicable to the product in line with relevant position limit rules, whichever is lower; Trial Guidelines for Hedging Business of SHFE Time of Application: Submit application before the last trading day of the second month before the Delivery Month of the involved contract; This revision is based on the Articles 2, 8, 15, 18 and 20 of the Guidelines for Hedging Business of SHFE SHFE Report

Thank You!