Legal issues relating to Overseas Listing Jones Day 9th April 2007 XiaoWei Ye

2 Chinese Corporation overseas listing in two models little uncertainty in local admission procedure for directly listing companies international trading is possible additional equities Overseas financing is limited by Chinese legislation Cannot operate incentive mechanism Based on local established firms Directly issuing equities in international market once red chip completed, little influence equities are traded internationally Bringing in incentive mechanism High flexibility in overseas financing Uncertainty in Local admission for red chip re-organization Establishing overseas holding company - overseas listing based on the holding company featuremeaning Red Chip Direct listing

3 The structure of Red Chip Re-organization inter natio nal natio nal National residence ／ corporation National corporation International residence/corpor ation National corporation Overseas holding company National residence ／ corporation Overseas holding company Privativel y funding Overseas public National corporation Convertibl e equities/c ash buying the earliest national corporation Establishing overseas corporation for special purposes Purchasing national corporations’ equities Bringing overseas privatively funding Rising national corporation profit level Issuing in overseas market National residence ／ corporation

4 Local admission for Red Chip Re- organization is complex SAFE * investment legislation for overseas companies local investment National residence establishing overseas company for special purposes has to be admitted by SAFE National assets are invested in company with special purposes or financing in overseas market have to register for changing foreign currency National residence profits from company with special company ought to repot within 180 days * State Admission of Foreign Exchange Chinese admission’s international merging relevant legislation Widen definition for company with special purposes company with special purposes merging through merging equities in national company has to be admitted by Ministry Commerce of PRC (MCPRC) After admitting by MCPRC ， applying listing to China Securities Regulatory Commission company with special purposes have to list after 1 year of merging Profit from International listing financing should be brought into national company National company and public profiting from company with special purposes in foreign currency has to be brought to to national company within 6 months.

5 structure of direct listing and admission Overseas public shares group share Core assets Non- prim ary asse ts internation al national Admission Mechanism State-owned Assets Supervision and Admission Commission of the State Council Main supervising department China Securities Regulatory Commission Social security fund

6 Roadshow and Issuance listing Preparation Overseas listing procedure Re-organization before overseas listing 挂牌交易 Red Chip Privatively funding Assets reorganization finance Other legal issues Chinese admission Establish work-team Due diligence research Prospectus editing and publishing Handing in prospectus and applying listing to overseas supervision and admission commission Roadshow pricing Establishing underwriting group Issuance Exchange large part of shares

7 Establishing listing work-team management Executive board underwriter Legal consultant auditor Underwriter legal consultant publisher Professional consultant Public relationship management firm

8 obligations and duties under overseas securities legislation Overseas security market legislation requirement Prospectus must not contain false description No fault or missing statement during Issuing procedure Must not deceive or manipulate during issuing procedure Responsibility taken by: management Executive board underwriter Professional consultant

9 Function and content of diligence research Function of diligence and its standard Ensure prospectus stating accurately without missing information Provide defending evidence for responsible party Diligence researcher must conduct his/her reasonable duties Diligence research content: Legal diligence research Commercial diligence research Executive management introduction Suggestion Statement Comfort letters Other experts’ suggestions

10 Prospectus Issuance or listing requires a prospectus Prospectus have to be examined by Securities Regulatory Commission in issuing country Prospectus must contain complete and accurate information about issuer and his/her business operation Prospectus is drafted by issuer’s legal consultant Main chapters in prospectus includes:  Risk factors  services  Executive discussion and analysis  Financial information

11 Post-listing legal requirements Continuously publish corporations' information Publish corporations’ major issues as soon as possible Must not trade by using internal information Publish executive borders’ trading Publish holding shares Relationship among investors

12 Jones Day Equity Market department members' contact detail: Xiaowei Ye Partner China World Center, JianGuoMenWai Street No.1, Beijing Post code ： tel ： fax ： ： Peilin Jia Lawyer China World Center, JianGuoMenWai Street No.1, Beijing Post Code ： Tel ： Fax ： ：