Cayman Islands
|
7011 | Not Applicable | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Howard Zhang, Esq.
Davis Polk & Wardwell LLP 26/F, Twin Towers (West) B12 Jian Guo Men Wai Avenue, Chaoyang District Beijing 100022, China (86) 10-8567-5000 |
Chris K.H. Lin, Esq.
Simpson Thacher & Bartlett LLP 35/F, ICBC Tower 3 Garden Road Central, Hong Kong (852) 2514-7600 |
Title of each class of
|
Amount to be
|
Proposed maximum offering
|
Proposed maximum
|
Amount of
|
||||||||
securities to be registered | registered(1)(2) | price per ordinary share(1) | aggregate offering price(1) | registration fee | ||||||||
Ordinary shares, par value US$0.0001 per share(3)
|
41,400,000 | US$3.0625 | US$126,787,500 | US$9,040(4) | ||||||||
(1) | Estimated solely for the purpose of computing the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended. |
(2) | Includes (a) ordinary shares represented by American depositary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public, and (b) ordinary shares represented by American depositary shares that are issuable upon the exercise of the underwriters over-allotment option to purchase additional shares. These ordinary shares are not being registered for the purposes of sales outside the United States. |
(3) | American depositary shares issuable upon deposit of the ordinary shares registered hereby will be registered pursuant to a separate registration statement on Form F-6 (Registration No. 333-165402). Each American depositary share represents four ordinary shares. |
(4) | Of which US$3,565 was previously paid. |
The information
in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any
jurisdiction where such offer or sale is not permitted.
|
Per ADS | Total | |||||||
Public offering price
|
US$ | US$ | ||||||
Underwriting discount
|
US$ | US$ | ||||||
Proceeds, before expenses, to us
|
US$ | US$ |
Goldman Sachs | Morgan Stanley |
Your home on the journey 39 cities 236 hotels 6,181 staff 38,360 Rooms 1,505,442 Hanting Club Members HANTING SEASONS HOTEL HENATING EXPRES HANTING |
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F-1
EX-3.2
EX-4.3
EX-5.1
EX-8.1
EX-10.9
EX-10.10
EX-23.1
EX-23.9
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ADRs are to the American depositary receipts that
may evidence our ADSs;
ADSs are to our American depositary shares, each
representing four ordinary shares;
China or the PRC are to the
Peoples Republic of China, excluding, for purposes of this
prospectus, Hong Kong, Macau and Taiwan;
Ordinary shares are to our ordinary shares, par
value US$0.0001 per share;
Series A preferred shares are to our
Series A convertible preferred shares, par value US$0.0001
per share;
Series B preferred shares are to our
Series B convertible redeemable preferred shares, par value
US$0.0001 per share;
RMB and Renminbi are to the legal
currency of China;
US$, U.S. dollars, $,
and dollars are to the legal currency of the United
States; and
we, us, our company,
our, and HanTing refer to China Lodging
Group, Limited, a Cayman Islands company, and its predecessor
entities and subsidiaries.
ii
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10
42
43
F-33
Chinas robust economic growth which drives overall travel
and tourism industry;
increasing domestic business travel, particularly with the
growing importance of small and medium enterprises;
1
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rapidly growing domestic leisure travel as a result of higher
disposable income and changing lifestyle;
increasing attractiveness of branded economy hotel
chains; and
emerging segmentation within the economy hotel industry.
we have established a premium brand and achieved the highest
RevPAR and occupancy rate in 2008 and for the first half of
2009, according to the October 2009 Inntie Report;
we have successfully established a portfolio of diversified
products;
we have adopted a disciplined return-driven development model
with a proven track record;
we have been able to achieve operational efficiency while
improving productivity;
we have an efficient and scalable operating system supported by
advanced technology platform; and
we have an experienced management team supported by a
well-trained workforce.
enhance our market leadership through prudent return-driven
network expansion;
meet evolving market demand through product diversification and
customer segmentation;
further enhance our brand recognition and expand our customer
base by leveraging our loyalty program;
continue to invest in human capital to support future growth; and
continue to implement cost control measures to enhance our
profitability.
Our operating results are subject to conditions affecting the
lodging industry in general, which include, among other things,
changes and volatility in general economic conditions,
competition, and local market conditions.
Our limited operating history makes it difficult to evaluate our
future prospects and results of operations.
We incurred net losses attributable to our company of
RMB111.6 million and RMB136.2 million in 2007 and
2008, respectively, and may incur losses in the future.
We may not be able to manage our planned growth.
We may not be able to identify additional hotel properties for
lease that satisfy our return threshold and achieve the expected
economic returns on our
leased-and-operated
hotels.
2
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Our legal right to lease certain properties could be challenged
by property owners or other third parties or subject to
government regulation.
Any failure to comply with land- and property-related PRC laws
and regulations may negatively affect our ability to operate our
hotels and we may suffer significant losses as a result.
Our success could be adversely affected by the performance of
our
franchised-and-managed
hotels.
We may not be able to maintain and enhance the attractiveness of
our hotels and our reputation.
As we operate as a holding company, any limitation on the
ability of our subsidiaries to make payments to us could have a
material adverse effect on our ability to conduct our business.
Rapid urbanization and changes in zoning and urban planning in
China may cause our leased properties to be demolished, removed
or otherwise affected.
(1)
Winner Crown Holdings Limited, or Winner Crown, is a British
Virgin Islands company wholly owned by Sherman Holdings Limited,
a Bahamas company, which is in turn wholly owned by Credit
Suisse Trust Limited, or CS Trustee. CS Trustee
acts as trustee of the Ji Family Trust, of which Mr. Qi Ji,
our founder and executive chairman, and his family members, are
the beneficiaries. Mr. Ji is the sole director of Winner
Crown and beneficially owns approximately 60.2% of our total
outstanding ordinary shares on an as-converted basis, including
a certain number of shares that are held by East Leader
International Limited (see footnote (2) below), over which
Mr. Ji has voting power pursuant to certain powers of
attorney.
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(2)
East Leader International Limited, or East Leader, is a British
Virgin Islands company wholly owned by Perfect Will Holdings
Limited, a British Virgin Islands company, which is in turn
wholly owned by Bank Sarasin Nominees (CI) Limited, as nominee
for Sarasin Trust Company Guernsey Limited, or Sarasin
Trust. Sarasin Trust acts as trustee of the Tanya Trust, of
which Ms. Tongtong Zhao, a co-founder of our company, and
her family members, are the beneficiaries. Ms. Zhao is the
sole director of East Leader and beneficially owns approximately
20.2% of our total outstanding ordinary shares on an
as-converted basis.
(3)
The Chengwei Funds include (i) Chengwei Partners, L.P.,
(ii) Chengwei Ventures Evergreen Fund, L.P. and
(iii) Chengwei Ventures Evergreen Advisors Fund, LLC.
Chengwei Partners, L.P. is an exempted limited partnership
incorporated in the Cayman Islands. Chengwei Ventures Evergreen
Fund, L.P. is an exempted limited partnership incorporated in
the Cayman Islands. Chengwei Ventures Evergreen Advisors Fund,
LLC is an exempted limited liability corporation incorporated in
the Cayman Islands. Chengwei Ventures Evergreen Management, LLC,
a Cayman Islands exempted limited liability company, is the
general partner of Chengwei Partners, L.P. and Chengwei Ventures
Evergreen Fund, L.P., as well as the managing member of Chengwei
Ventures Evergreen Advisors Fund, LLC.
(4)
CDH Courtyard Limited is a British Virgin Islands company.
(5)
The IDG Funds include (i) IDG-Accel China Growth
Fund L.P., (ii) IDG-Accel China Growth Fund-A L.P. and
(iii) IDG-Accel China Investors L.P. Each of the IDG Funds
is an exempted limited partnership incorporated in the Cayman
Islands. IDG-Accel China Growth Fund GP Associates Ltd., a
Cayman Islands limited company, is the general partner of
IDG-Accel China Growth Fund Associates L.P., a Cayman
Islands limited partnership, which in turn is the general
partner of IDG-Accel China Growth Fund L.P. and IDG-Accel
China Growth Fund-A L.P. Each of the two directors of IDG-Accel
China Growth Fund GP Associates Ltd., Mr. Patrick J.
McGovern and Mr. Quan Zhou, owns 50% of IDG-Accel China
Growth Fund GP Associates Ltd.s voting shares.
IDG-Accel China Investors Associates Ltd., a Cayman Islands
limited company, is the general partner of IDG-Accel China
Investors L.P. Mr. James Breyer is the sole shareholder and
one of the two directors of IDG-Accel China Investors Associates
Ltd. Mr. Quan Zhou is the other director of IDG-Accel China
Investors Associates Ltd.
(6)
The Northern Light Funds include (i) Northern Light Venture
Fund, L.P., (ii) Northern Light Partners Fund, L.P., and
(iii) Northern Light Strategic Fund, L.P. Each of the
Northern Light Funds is an exempted limited partnership
incorporated in the Cayman Islands. Northern Light Venture
Capital Limited, a Cayman Islands exempted limited liability
company, is the general partner of Northern Light
Partners, L.P., a Cayman Islands limited partnership, which
in turn is the general partner of the Northern Light Funds.
(7)
Pinpoint Capital 2006 A Limited is a British Virgin Islands
company.
(8)
Formerly known as Lishan Senbao (Shanghai) Investment Management
Co., Ltd.
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Total ADSs offered by us
9,000,000 ADSs
Price per ADS
We currently estimate that the initial public offering price
will be between US$10.25 and US$12.25 per ADS.
Over-allotment option
We have granted the underwriters an option, exercisable for
30 days from the date of this prospectus, to purchase an
additional 1,350,000 ADSs to cover over-allotments.
The ADSs
Each ADS represents four ordinary shares. The depositary will
hold the shares underlying your ADSs and you will have rights as
provided in the deposit agreement.
We do not expect to pay dividends in the foreseeable future. If,
however, we declare dividends on our ordinary shares, the
depositary will pay you the cash dividends and other
distributions it receives on our ordinary shares, after
deducting its fees and expenses in accordance with the terms set
forth in the deposit agreement.
You may surrender your ADSs to the depositary to be cancelled in
exchange for ordinary shares. The depositary will charge you
fees for any cancellation.
We may amend or terminate the deposit agreement without your
consent. If you continue to hold your ADSs, you agree to be
bound by the deposit agreement as amended.
To better understand the terms of the ADSs, you should carefully
read the Description of American Depositary Shares
section of this prospectus. You should also read the deposit
agreement, which is filed as an exhibit to the registration
statement that includes this prospectus.
9,000,000 ADSs (or 10,350,000 ADSs if the underwriters
exercise the over-allotment option in full).
235,618,079 ordinary shares (or 241,018,079 ordinary
shares if the underwriters exercise the over-allotment option in
full).
Use of proceeds
We anticipate using approximately 90% of the net proceeds of
this offering for our hotel network expansion purposes and the
remaining amount for general corporate purposes. See Use
of Proceeds for more information.
Listing
We have applied to have our ADSs listed on the NASDAQ Global
Market.
HTHT
Depositary
Citibank, N.A.
Lock-up
We, our directors and executive officers, Ctrip.com
International, Ltd., or Ctrip, and all of our existing
shareholders as well as option holders under our Amended and
Restated 2007 Global Share Plan and Amended and Restated 2008
Global Share Plan have agreed
7
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with the underwriters for a period of 180 days after the
date of this prospectus not to sell, transfer or otherwise
dispose of, and not to announce an intention to sell, transfer
or otherwise dispose of any ADSs, ordinary shares or similar
securities. See Underwriting for more information.
Reserved ADSs
At our request, the underwriters have reserved for sale, at the
initial public offering price, up to an aggregate of
585,000 ADSs, to our directors, officers, employees,
business associates and related persons through a directed share
program.
Risk factors
See Risk Factors and other information included in
this prospectus for a discussion of risks you should carefully
consider before investing in the ADSs.
excludes 2,168,848 ordinary shares issuable upon the exercise of
stock options issued under our Amended and Restated 2007 Global
Share Plan that are outstanding as of the date of this
prospectus;
excludes 5,876,085 ordinary shares issuable upon the exercise of
stock options issued under our Amended and Restated 2008 Global
Share Plan that are outstanding as of the date of this
prospectus;
excludes 2,385,470 ordinary shares issuable upon the exercise of
stock options issued under our Amended and Restated 2009 Share
Incentive Plan that are outstanding as of the date of this
prospectus;
assumes that the underwriters do not exercise their
over-allotment option to purchase additional ADSs;
assumes that Ctrip acquires 7,202,482 ordinary shares from
us at a price equal to the initial public offering price per
ordinary share; and
excludes the additional ordinary shares Ctrip may acquire from
us if (i) the underwriters exercise their over-allotment
option to purchase additional ADSs or (ii) we increase the
total number of ADSs to be issued in this offering.
8
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Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands, except per share and per ADS data)
248,199
797,815
1,288,898
188,825
1,210
12,039
44,965
6,587
249,409
809,854
1,333,863
195,412
(14,103
)
(45,605
)
(73,672
)
(10,793
)
235,306
764,249
1,260,191
184,619
(228,362
)
(687,364
)
(1,004,472
)
(147,156
)
(17,581
)
(40,810
)
(57,818
)
(8,470
)
(65,653
)
(81,665
)
(83,666
)
(12,257
)
(61,020
)
(108,062
)
(37,821
)
(5,541
)
(372,616
)
(917,901
)
(1,183,777
)
(173,424
)
(137,310
)
(153,652
)
76,414
11,195
(131,001
)
(156,463
)
69,438
10,173
(113,739
)
(132,583
)
51,448
7,537
(2,116
)
3,579
8,903
1,304
(111,623
)
(136,162
)
42,545
6,233
(2.85
)
(2.52
)
0.24
0.03
(2.85
)
(2.52
)
0.23
0.03
(11.41
)
(10.07
)
0.95
0.14
(11.41
)
(10.07
)
0.93
0.14
45,248
54,071
57,562
57,562
45,248
54,071
183,632
183,632
0.24
0.03
0.23
0.03
0.95
0.14
0.93
0.14
179,621
179,621
183,632
183,632
Note: (1)
Include share-based compensation expenses as follows:
9
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Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
14,785
4,815
7,955
1,165
(2)
Each ADS represents four ordinary shares.
(3)
Pro forma basic and diluted earnings (loss) per ordinary share
is computed by dividing income (loss) attributable to holders of
ordinary shares by the weighted average number of ordinary
shares outstanding for the year plus the number of ordinary
shares resulting from the assumed conversion of the outstanding
convertible preferred shares upon the closing of the planned
initial public offering.
on an actual basis;
on a pro forma basis as of December 31, 2009 to give effect
to (i) the automatic conversion of all of our outstanding
Series A preferred shares into 44,000,000 ordinary shares,
at a conversion ratio of one Series A preferred share to
one ordinary share; and (ii) the automatic conversion of
all of our outstanding Series B preferred shares into
78,058,919 ordinary shares, at a conversion ratio of one
Series B preferred share to one ordinary share; and
on a pro forma as adjusted basis as of December 31, 2009 to
further reflect (i) the issuance of 1,700,000 ordinary
shares upon exercise of warrants at US$1.54 per share in
February 2010; (ii) the issuance of 7,708,665 ordinary
shares upon exercise of options for total consideration of
US$6,021,365 in March 2010; (iii) the issuance of 7,202,482
ordinary shares to Ctrip.com International, Ltd. assuming an
initial public offering price of US$11.25 per ADS, the midpoint
of the estimated range; (iv) the issuance and sale of
36,000,000 ordinary shares in the form of ADSs by us in this
offering, assuming an initial public offering price of
US$11.25 per ADS, the midpoint of the estimated range of
the initial public offering price, after deducting estimated
underwriting discounts and commissions and offering expenses
payable by us and assuming no exercise of the underwriters
over-allotment option. A US$1.00 increase (decrease) in the
assumed initial public offering price of US$11.25 per ADS,
the midpoint of the estimated range of the initial public
offering price, would increase (decrease) the amounts
representing cash and cash equivalents, total assets and total
equity (deficit) by US$10.2 million.
As of December 31,
2007
2008
2009
Pro Forma
Actual
Actual
Actual
Pro Forma
As Adjusted
(unaudited)
(unaudited)
(RMB)
(RMB)
(RMB)
(US$)
(RMB)
(US$)
(RMB)
(US$)
(in thousands)
173,636
183,246
270,587
39,641
270,587
39,641
1,094,225
160,304
23,650
5,597
500
73
500
73
500
73
465,186
957,407
1,028,267
150,642
1,028,267
150,642
1,028,267
150,642
836,045
1,432,940
1,581,131
231,637
1,581,131
231,637
2,404,769
352,300
-
27,500
80,000
11,720
80,000
11,720
80,000
11,720
46,084
138,207
174,775
25,605
174,775
25,605
174,775
25,605
293,062
665,378
678,875
99,456
678,875
99,456
678,875
99,456
437,829
796,803
796,803
116,732
-
-
-
-
105,154
(29,241
)
105,453
15,449
902,257
132,181
1,725,895
252,844
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Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
(95,983
)
(67,957
)
214,893
31,482
(34,963
)
40,105
252,714
37,023
(1)
We believe that earnings before interest expense, tax expense
(benefit) and depreciation and amortization, or EBITDA, is a
useful financial metric to assess our operating and financial
performance before the impact of investing and financing
transactions and income taxes. Given the significant investments
that we have made in leasehold improvements, depreciation and
amortization expense comprises a significant portion of our cost
structure. In addition, we believe that EBITDA is widely used by
other companies in the lodging industry and may be used by
investors as a measure of our financial performance. We believe
that EBITDA will provide investors with a useful tool for
comparability between periods because it eliminates depreciation
and amortization expense attributable to capital expenditures.
We also use EBITDA from Operating Hotels, which is defined as
EBITDA before pre-opening expenses, to assess operating results
of the hotels in operation. We believe that the exclusion of
pre-opening expenses, a portion of which is non-cash rental
expenses, helps facilitate
year-on-year
comparison of our results of operations as the number of hotels
in the development stage may vary significantly from year to
year. Therefore, we believe EBITDA from Operating Hotels more
closely reflects the performance of hotels currently in
operation. Our calculation of EBITDA and EBITDA from Operating
Hotels does not deduct interest income, which was
RMB1.2 million, RMB3.8 million and RMB1.9 million
in 2007, 2008, and 2009, respectively. The presentation of
EBITDA and EBITDA from Operating Hotels should not be construed
as an indication that our future results will be unaffected by
other charges and gains we consider to be outside the ordinary
course of our business.
The uses of EBITDA and EBITDA from Operating Hotels have certain
limitations. Depreciation and amortization expense for various
long-term assets, income tax and interest expense have been and
will be incurred and are not reflected in the presentation of
EBITDA. Pre-opening expenses have been and will be incurred and
are not reflected in the presentation of EBITDA from Operating
Hotels. Each of these items should also be considered in the
overall evaluation of our results. Additionally, EBITDA or
EBITDA from Operating Hotels does not consider capital
expenditures and other investing activities and should not be
considered as a measure of our liquidity. We compensate for
these limitations by providing the relevant disclosure of our
depreciation and amortization, interest expense, income tax
expense, pre-opening expenses, capital expenditures and other
relevant items both in our reconciliations to the financial
measures under accounting principles generally accepted in the
United States, or U.S. GAAP, and in our consolidated
financial statements, all of which should be considered when
evaluating our performance.
The terms EBITDA and EBITDA from Operating Hotels are not
defined under U.S. GAAP, and neither EBITDA nor EBITDA from
Operating Hotels is a measure of net income, operating income,
operating performance or liquidity presented in accordance with
U.S. GAAP. When assessing our operating and financial
performance, you should not consider this data in isolation or
as a substitute for our net income, operating income or any
other operating performance measure that is calculated in
accordance with U.S. GAAP. In addition, our EBITDA or EBITDA
from Operating Hotels may not be comparable to EBITDA or EBITDA
from Operating Hotels or similarly titled measures utilized by
other companies since such other companies may not calculate
EBITDA or EBITDA from Operating Hotels in the same manner as we
do.
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Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
(111,623
)
(136,162
)
42,545
6,233
-
1,249
8,787
1,287
(17,262
)
(23,880
)
17,990
2,636
32,902
90,836
145,571
21,326
(95,983
)
(67,957
)
214,893
31,482
61,020
108,062
37,821
5,541
(34,963
)
40,105
252,714
37,023
As of December 31,
2007
2008
2009
67
167
236
62
145
173
5
22
63
8,089
21,033
28,360
7,583
18,414
21,658
506
2,619
6,702
23
35
39
Pre-conversion
Conversion
Period
(1)
Period
(2)
Total
8
13
21
31
92
123
39
105
144
(1)
Includes hotels for which we have entered into binding leases or
franchise-and-management agreements but of which the property
has not been delivered by the respective lessors or managed
hotel owners, as the case may be. The majority of these hotels
are expected to commence operations by June 30, 2011.
(2)
Includes hotels for which we have commenced conversion
activities but that have not yet commenced operations. The
majority of these hotels are expected to commence operations by
December 31, 2010.
Year Ended December 31,
2007
2008
2009
85
89
94
82
74
91
85
87
94
181
178
174
176
180
172
181
178
174
154
158
165
145
132
156
154
156
163
12
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changes and volatility in general economic conditions;
our ability to maintain or increase sales to existing customers
and attract new customers;
competition from other hotels;
natural disasters or travelers fears of exposure to
contagious diseases and social unrest;
seasonality of our business;
changes in travel patterns or in the desirability of particular
locations;
increases in operating costs and expenses due to inflation and
other factors;
local market conditions such as an oversupply of, or a reduction
in demand for, hotel rooms;
the quality and performance of managers and other employees of
our hotels;
the availability and cost of capital to allow us and our
franchisees to fund construction and renovation of, and make
other investments in, our hotels; and
the possibility that leased properties may be subject to
challenges as to their compliance with the relevant government
regulations.
we may not be able to successfully identify additional hotel
properties for lease that satisfy our return threshold and we
may not be able to achieve the expected economic returns on our
leased-and-operated
hotels;
we may not be able to control our costs effectively as
anticipated; and
our limited operating history makes it difficult to evaluate our
future prospects and results of operations.
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the uncertainties associated with our ability to continue our
growth while trying to achieve and maintain our profitability;
preserving our competitive position in the economy hotel segment
of the lodging industry in China;
offering innovative products to attract recurring and new
customers;
implementing our strategy and modifying it from time to time to
respond effectively to competition and changes in customer
preferences and needs;
increasing awareness of our brand and products and continuing to
develop customer loyalty; and
attracting, training, retaining and motivating qualified
personnel.
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actual or anticipated fluctuations in our quarterly operating
results;
changes in financial estimates by securities research analysts;
conditions in the travel and lodging industries;
changes in the economic performance or market valuations of
other lodging companies;
announcements by us or our competitors of new products,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
addition or departure of key personnel;
fluctuations of exchange rates between the RMB and
U.S. dollar or other foreign currencies;
potential litigation or administrative investigations;
release of
lock-up
or
other transfer restrictions on our outstanding ADSs or ordinary
shares or sales of additional ADSs; and
general economic or political conditions in China.
the assumed initial public offering price of US$11.25 per
ADS (the midpoint of the estimated initial public offering price
range set forth on the front cover of this prospectus), and
the pro forma as adjusted net tangible book value per ADS of
US$4.20 as of December 31, 2009, assuming the automatic
conversion of our outstanding Series A and Series B
preferred shares into ordinary shares and after giving effect to
this offering.
29
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30
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31
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32
Table of Contents
our anticipated growth strategies, including developing new
hotels at desirable locations in a timely and cost-effective
manner;
our future business development, results of operations and
financial condition;
expected changes in our revenues and certain cost or expense
items;
our ability to attract customers and leverage our brand; and
trends and competition in the lodging industry.
33
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34
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35
Table of Contents
on an actual basis;
on a pro forma basis to give effect to (i) the automatic
conversion of all of our outstanding Series A preferred
shares into 44,000,000 ordinary shares, at a conversion ratio of
one Series A preferred share to one ordinary share; and
(ii) the automatic conversion of all of our outstanding
Series B preferred shares into 78,058,919 ordinary shares,
at a conversion ratio of one Series B preferred share to
one ordinary share;
on a pro forma as adjusted basis to further reflect (i) the
issuance of 1,700,000 ordinary shares upon exercise of warrants
at US$1.54 per share in February 2010; (ii) the
issuance of 7,708,665 ordinary shares upon exercise of
options for total consideration of US$6,021,365 in March 2010;
(iii) the issuance of 7,202,482 ordinary shares to
Ctrip.com International, Ltd. at the midpoint of the estimated
range of the initial public offering price of US$11.25 per ADS;
and (iv) the issuance and sale of 36,000,000 ordinary
shares in the form of ADSs by us in this offering, assuming an
initial public offering price of US$11.25 per ADS, the
midpoint of the estimated range of the initial public offering
price, after deducting estimated underwriting discounts and
commissions and offering expenses payable by us and assuming no
exercise of the underwriters over-allotment option.
As of December 31, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(unaudited)
(unaudited)
(RMB)
(US$)
(RMB)
(US$)
(RMB)
(US$)
(in thousands, except share data)
80,000
11,720
80,000
11,720
80,000
11,720
796,803
116,732
-
-
-
-
46
7
125
18
161
24
34
5
-
-
351,994
51,567
1,148,753
168,293
1,972,355
288,950
(245,457
)
(35,960
)
(245,457
)
(35,960
)
(245,457
)
(35,960
)
(12,529
)
(1,835
)
(12,529
)
(1,835
)
(12,529
)
(1,835
)
11,365
1,665
11,365
1,665
11,365
1,665
105,453
15,449
902,257
132,181
1,725,895
252,844
982,256
143,901
982,257
143,901
1,805,895
264,564
(1)
Assuming the number of ADSs offered
by us, as set forth on the cover page of this prospectus,
remains the same, and after deducting estimated underwriting
discounts and commissions and offering expenses payable by us, a
US$1.00 increase (decrease) in the assumed initial public
offering price of US$11.25 would increase (decrease) each of
additional paid-in capital and total equity by
US$10.2 million.
36
Table of Contents
Per Ordinary
Share
Per ADS
US$
2.81
US$
11.25
2.08
8.30
0.69
2.76
1.05
4.20
0.36
1.44
1.76
7.05
37
Table of Contents
Ordinary Shares
Total
Average Price
Purchased
Consideration
Per Ordinary
Average Price
Number
Percent
Amount
Percent
Share
(1)
Per
ADS
(1)
192,415,597
81.7
%
US$
176,516,182
59.2
%
US$
0.92
US$
3.67
43,202,482
18.3
121,506,982
40.8
2.81
11.25
235,618,079
100.0
%
US$
298,023,164
100.0
%
(1)
Assumes an initial public offering
price of US$11.25 per ADS, the midpoint of the estimated
range of the initial public offering price, the automatic
conversion of all of our outstanding 44,000,000 Series A
preferred shares and 78,058,919 Series B preferred shares
into ordinary shares upon the completion of this offering, the
issuance of 1,700,000 ordinary shares upon exercise of warrants,
the issuance of 7,708,665 ordinary shares upon exercise of
options and the issuance of 7,202,482 ordinary shares to Ctrip.
38
Table of Contents
Noon Buying Rate
Period
Period End
Average
(1)
Low
High
(RMB per US$1.00)
8.0702
8.1826
8.2765
8.0702
7.8041
7.9579
8.0702
7.8041
7.2946
7.6058
7.8172
7.2946
6.8225
6.9477
7.2946
6.7800
6.8259
6.8307
6.8470
6.8176
6.8262
6.8277
6.8303
6.8247
6.8264
6.8267
6.8292
6.8248
6.8265
6.8271
6.8300
6.8255
6.8259
6.8275
6.8299
6.8244
6.8268
6.8269
6.8295
6.8258
6.8258
6.8285
6.8330
6.8258
6.8263
6.8261
6.8265
6.8258
(1)
Averages for a period are calculated by using the average of the
exchange rates at the end of each month during the period.
Monthly averages are calculated by using the average of the
daily rates during the relevant period.
39
Table of Contents
recognize or enforce judgments of United States courts obtained
against us or our directors or officers predicated upon the
civil liability provisions of the securities laws of the United
States or any state in the United States; or
entertain original actions brought in each respective
jurisdiction against us or our directors or officers predicated
upon the securities laws of the United States or any state in
the United States.
40
Table of Contents
Year Ended December 31,
2006
2007
2008
2009
(RMB)
(RMB)
(RMB)
(RMB)
(US$)
(in thousands, except per share and per ADS data)
54,031
235,306
764,249
1,260,191
184,619
(94,069
)
(372,616
)
(917,901
)
(1,183,777
)
(173,424
)
(40,038
)
(137,310
)
(153,652
)
76,414
11,195
(36,623
)
(131,001
)
(156,463
)
69,438
10,173
(29,954
)
(113,739
)
(132,583
)
51,448
7,537
(425
)
(2,116
)
3,579
8,903
1,304
(29,529
)
(111,623
)
(136,162
)
42,545
6,233
(2.85
)
(2.52
)
0.24
0.03
(2.85
)
(2.52
)
0.23
0.03
(11.41
)
(10.07
)
0.95
0.14
(11.41
)
(10.07
)
0.93
0.14
45,248
54,071
57,562
57.562
45,248
54,071
183,632
183,632
0.24
0.03
0.23
0.03
0.95
0.14
0.93
0.14
41
Table of Contents
Year Ended December 31,
2006
2007
2008
2009
(RMB)
(RMB)
(RMB)
(RMB)
(US$)
(in thousands, except per share and per ADS data)
179,621
179,621
183,632
183,632
Note: (1)
Include share-based compensation
expenses as follows:
Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
14,785
4,815
7,955
1,165
(2)
Each ADS represents four ordinary shares.
(3)
Pro forma basic and diluted earnings (loss) per ordinary share
is computed by dividing income (loss) attributable to holders of
ordinary shares by the weighted average number of ordinary
shares outstanding for the year plus the number of ordinary
shares resulting from the assumed conversion of the outstanding
convertible preferred shares upon the closing of the planned
initial public offering.
on an actual basis;
on a pro forma basis as of December 31, 2009 to give effect
to (i) the automatic conversion of all of our outstanding
Series A preferred shares into 44,000,000 ordinary shares,
at a conversion ratio of one Series A preferred share to
one ordinary share; and (ii) the automatic conversion of
all of our outstanding Series B preferred shares into
78,058,919 ordinary shares, at a conversion ratio of one
Series B preferred share to one ordinary share; and
on a pro forma as adjusted basis as of December 31, 2009 to
further reflect (i) the issuance of 1,700,000 ordinary
shares upon exercise of warrants at US$1.54 per share in
February 2010; (ii) the issuance of 7,708,665 ordinary shares
upon exercise of options for total consideration of US$6,021,365
in March 2010; (iii) the issuance of 7,202,482 ordinary
shares to Ctrip at the midpoint of the estimated initial public
offering price range; and (iv) the issuance and sale of
36,000,000 ordinary shares in the form of ADSs by us in this
offering, assuming an initial public offering price of
US$11.25 per ADS, the midpoint of the estimated range of
the initial public offering price, after deducting estimated
underwriting discounts and commissions and offering expenses
payable by us and assuming no exercise of the underwriters
over-allotment option. A US$1.00 increase (decrease) in the
assumed initial public offering price of US$11.25 per ADS,
the midpoint of the estimated range of the initial public
offering price, would increase (decrease) the amounts
representing cash and cash equivalents, total assets and total
equity (deficit) by US$10.2 million.
Table of Contents
As at December 31,
2006
2007
2008
2009
2009
2009
Pro Forma
Actual
Actual
Actual
Actual
Pro Forma
As Adjusted
(unaudited)
(unaudited)
(RMB)
(RMB)
(RMB)
(RMB)
(US$)
(RMB)
(US$)
(RMB)
(US$)
(in thousands)
33,272
173,636
183,246
270,587
39,641
270,587
39,641
1,094,225
160,304
27,330
23,650
5,597
500
73
500
73
500
73
159,216
465,186
957,407
1,028,267
150,642
1,028,267
150,642
1,028,767
150,642
280,593
836,045
1,432,940
1,581,131
231,637
1,581,131
231,637
2,404,769
352,300
-
-
27,500
80,000
11,720
80,000
11,720
80,000
11,720
6,028
46,084
138,207
174,775
25,605
174,775
25,605
174,775
25,605
175,382
293,062
665,378
678,875
99,456
678,875
99,456
678,875
99,456
-
437,829
796,803
796,803
116,732
-
-
-
-
105,211
105,154
(29,241
)
105,453
15,449
902,257
132,181
1,725,895
252,844
Table of Contents
AND RESULTS OF OPERATIONS
General
factors affecting our results of operations
Changes in the national, regional or local economic
conditions in China
. Our financial performance
depends upon the demand for our products, which is closely
linked to the general economy and sensitive to business and
individual discretionary spending levels in China. While the
lodging industry in China has benefited from the significant
growth experienced by the PRC economy in recent years, the
recent global financial crisis and economic slowdown in 2008 and
2009 have negatively affected business and consumer confidence
and contributed to slowdowns
44
Table of Contents
in most industries, including the lodging industry. Despite
signs of recoveries, there remain uncertainties regarding the
general economic conditions and demand for our products. Our
costs and expenses may also be affected by Chinas
inflation level. We may not be able to pass on the increased
costs to our customers. Other macro-economic factors beyond our
control may also affect our results of operations. For example,
any prolonged recurrence of contagious diseases, social
instability or significant natural disasters may have a negative
impact on the demand for our products.
PRC government policies and regulations.
Our
future business and results of operations could be significantly
affected by PRC government policies and regulations,
particularly those that relate to zoning and licensing.
Competition
. The lodging industry in China is
highly competitive. We compete primarily with other economy
hotel chains as well as various local lodging facilities.
Competition among economy hotels in China is primarily based on
location, room rates, brand recognition, the quality of the
accommodations and service levels.
Access to capital
. The lodging industry is a
capital intensive business that requires significant amounts of
capital expenditures to develop, maintain and improve hotel
properties. Access to the capital that we or our franchisees
need to finance the development of new hotels or to maintain and
improve existing hotels is critical to the continued growth of
our business.
Seasonality and special events
. The lodging
industry is subject to fluctuations in revenues due to
seasonality. Generally, the first quarter, in which both the New
Year and Spring Festival holidays fall, accounts for a lower
percentage of our annual revenues than other quarters of the
year. In addition, certain special events, such as the China
Import and Export Fair held twice a year in Guangzhou and the
upcoming World Expo in Shanghai in 2010, may increase the demand
for our hotels as such special events may attract travelers into
and within the regions in China where we operate hotels.
Specific
factors affecting our results of operations
The total number of hotels and hotel rooms in our hotel
network.
Our revenues largely depend on the size
of our hotel network. Furthermore, we believe the expanded
geographic coverage of our hotel network will enhance our brand
recognition. Whether we can successfully increase the
45
Table of Contents
number of hotels and hotel rooms in our hotel chain is largely
affected by our ability to effectively identify and lease or
franchise additional hotel properties at desirable locations on
commercially favorable terms and the availability of funding to
make necessary capital investments to open these new hotels.
The fixed-cost nature of our business.
A
significant portion of our operating costs and expenses,
including rent and base salary, is relatively fixed. As a
result, an increase in our revenues achieved through higher
RevPAR generally will result in higher profitability.
Vice
versa
, a decrease in our revenues could result in a
disproportionately larger decrease in our earnings because our
operating costs and expenses are unlikely to decrease
proportionately.
The mix of
leased-and-operated
hotels and
franchised-and-managed
hotels in our hotel portfolio.
The mix of
leased-and-operated
hotels and
franchised-and-managed
hotels in our hotel portfolio affects our results of operations
in a given period. Our
leased-and-operated
hotels have been and will continue to be the main contributor to
our revenues. Under the
lease-and-operate
model, while each hotel incurs certain upfront development costs
and pre-opening expenses, we generally expect more revenues and
profit contribution once a hotels operations mature. Under
the franchise-and-manage model, we generate revenues from fees
we charge to each
franchised-and-managed
hotel while a franchisee bears substantially all the capital
expenditures, pre-opening and operational expenses. As such, our
franchise-and-manage
model enables us to quickly expand our network through
franchisees without incurring significant capital expenditures
or expenses. We intend to increase the percentage of
franchised-and-managed
hotels in our hotel portfolio to expand our geographic presence
and diversify our revenue mix.
The proportion of mature hotels in our
leased-and-operated
hotel portfolio.
Generally, the operation of each
leased-and-operated
hotel goes through three stages: development,
ramp-up
and
mature operations. During the development stage,
leased-and-operated
hotels generally incur pre-opening expenses ranging from
approximately RMB1.0 to RMB2.0 million per hotel. During
the
ramp-up
stage, when the occupancy rate is relatively low, revenues
generated by these hotels may be insufficient to cover their
operating costs, which are relatively fixed in nature. The
pre-opening expenses incurred during the development stage and
the lower profitability during the
ramp-up
stage for
leased-and-operated
hotels may have a significant negative impact on our financial
performance. It typically takes our hotels three to six months
to ramp up, which may be affected by factors such as seasonality
and location. We define mature leased-and-operated hotels as
those that have been in operation for more than six months.
2007
2008
2009
24
62
145
38
83
28
158
%
134
%
19
%
46
Table of Contents
Year Ended
December 31,
2007
2008
2009
(RMB in millions, except RevPAR and percentages)
147
171
169
174
491
1,080
151
398
841
22
94
238
13
%
19
%
22
%
112
116
124
61
262
138
77
288
159
(16
)
(27
)
(21
)
(26
)%
(10
)%
(15
)%
47
Table of Contents
Year Ended December 31,
2007
2008
2009
(RMB)
%
(RMB)
%
(RMB)
(US$)
%
(in thousands except percentages)
248,199
99.5
797,815
98.5
1,288,898
188,825
96.6
1,210
0.5
12,039
1.5
44,965
6,587
3.4
249,409
100.0
809,854
100.0
1,333,863
195,412
100.0
(14,103
)
(5.7
)
(45,605
)
(5.6
)
(73,672
)
(10,793
)
(5.5
)
235,306
94.3
764,249
94.4
1,260,191
184,619
94.5
Leased-and-operated
Hotels.
In 2008, we generated revenues of
RMB797.8 million from our
leased-and-operated
hotels, which accounted for 98.5% of our total revenues for the
year. In 2009, we generated revenues of RMB1,288.9 million
from our
leased-and-operated
hotels, which accounted for 96.6% of our total revenues for the
year. We expect that revenues from our
leased-and-operated
hotels will continue to constitute a substantial majority of our
total revenues in the foreseeable future. As of
December 31, 2009, we had 21 leased-and-operated hotels
under development.
the total number of
leased-and-operated
hotels in our hotel chain;
the total number of
leased-and-operated
hotel rooms in our hotel chain; and
RevPAR achieved by our
leased-and-operated
hotels, which represents the product of average daily rates and
occupancy rates.
48
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Franchised-and-managed
Hotels.
In 2008, we generated revenues of
RMB12.0 million from our
franchised-and-managed
hotels, which accounted for 1.5% of our total revenues for the
year. In 2009, we generated revenues of RMB45.0 million
from our
franchised-and-managed
hotels, which accounted for 3.4% of our total revenues for the
year. We expect that revenues from our
franchised-and-managed
hotels will increase in the foreseeable future as we add more
franchised-and-managed
hotels in our hotel chain. We also expect the number of our
franchised-and-managed
hotels as a percentage of the total number of hotels in our
network to increase. As of December 31, 2009, we had 123
franchised-and-managed hotels under development.
49
Table of Contents
Year Ended December 31,
2007
2008
2009
(RMB)
%
(RMB)
%
(RMB)
(US$)
%
(in thousands except percentages)
249,409
100.0
809,854
100.0
1,333,863
195,412
100.0
(14,103
)
(5.7
)
(45,605
)
(5.6
)
(73,672
)
(10,793
)
(5.5
)
235,306
94.3
764,249
94.4
1,260,191
184,619
94.5
(112,787
)
(45.2
)
(322,809
)
(39.9
)
(508,579
)
(74,507
)
(38.1
)
(34,411
)
(13.8
)
(137,231
)
(16.9
)
(169,248
)
(24,795
)
(12.7
)
(33,234
)
(13.3
)
(92,838
)
(11.5
)
(141,600
)
(20,744
)
(10.6
)
(35,597
)
(14.3
)
(82,662
)
(10.2
)
(119,056
)
(17,442
)
(8.9
)
(12,333
)
(5.0
)
(51,824
)
(6.4
)
(65,989
)
(9,668
)
(5.0
)
(228,362
)
(91.6
)
(687,364
)
(84.9
)
(1,004,472
)
(147,156
)
(75.3
)
(17,581
)
(7.0
)
(40,810
)
(5.0
)
(57,818
)
(8,470
)
(4.3
)
(65,653
)
(26.3
)
(81,665
)
(10.1
)
(83,666
)
(12,257
)
(6.3
)
(61,020
)
(24.5
)
(108,062
)
(13.3
)
(37,821
)
(5,541
)
(2.8
)
(372,616
)
(149.4
)
(917,901
)
(113.3
)
(1,183,777
)
(173,424
)
(88.7
)
Hotel operating costs.
Our hotel operating
costs consist of costs and expenses directly attributable to the
operation of our
leased-and-operated
and
franchised-and-managed
hotels.
Leased-and-operated
hotel operating costs primarily include rental payments and
utility costs for hotel properties, compensation and benefits
for our hotel-based employees, costs of hotel room consumable
products and depreciation and amortization of leasehold
improvements.
Franchised-and-managed
hotel operating costs primarily include compensation and
benefits for
franchised-and-managed
hotel managers and other limited number of employees directly
hired by us, which are recouped by us in the form of monthly
service fees. We anticipate that our hotel operating costs will
increase as we continue to open new hotels. However, we
anticipate that our hotel operating costs as a percentage of our
total revenues will decrease in general primarily due to
(i) the enlarged base of relatively mature hotels in our
leased-and-operated hotel portfolio and (ii) the relatively
fixed nature of a significant portion of our operating costs and
expenses.
Selling and marketing expenses.
Our selling
and marketing expenses consist primarily of commissions to
travel intermediaries, expenses for marketing programs and
materials, bank fees for processing bank card payments, and
compensation and benefits for our sales and marketing personnel,
including personnel at our centralized reservation center. We
expect that our selling and marketing expenses will increase as
our sales increase and as we further expand into new geographic
locations and promote our brand.
General and administrative expenses.
Our
general and administrative expenses consist primarily of
compensation and benefits for our corporate and regional office
employees and other employees who are not sales and marketing or
hotel-based employees, travel and communication expenses of our
general and administrative staff, costs of third-party
professional services, and office expenses for corporate and
regional office. We expect that our general and administrative
expenses will increase in the near term as we hire additional
personnel and incur additional costs in connection with the
expansion of our business and with being a public company,
including costs of enhancing our internal controls.
Pre-opening expenses.
Our pre-opening expenses
consist primarily of rents, personnel cost, and other
miscellaneous expenses incurred prior to the opening of a new
leased-and-operated
hotel.
50
Table of Contents
Our pre-opening expenses are largely determined by the number of
pre-opening hotels in the pipeline and the rental fees incurred
during the development stage. Landlords typically offer a three-
to six-months rent-free period at the beginning of the lease.
Nevertheless, rental is booked during this period on a
straight-line basis. Therefore, a portion of pre-opening
expenses is non-cash rental expenses. The following table sets
forth the components of our pre-opening expenses for the periods
indicated.
Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
41,515
77,764
29,907
4,381
11,585
16,402
3,584
526
7,920
13,896
4,330
634
61,020
108,062
37,821
5,541
Year Ended December 31,
2007
2008
2009
(RMB)
(%)
(RMB)
(%)
(RMB)
(US$)
(%)
(in thousands except percentages)
24
0.2
116
2.4
523
77
6.6
107
0.7
178
3.7
465
67
5.8
14,654
99.1
4,521
93.9
6,967
1,021
87.6
14,785
100.0
4,815
100.0
7,955
1,165
100.0
51
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52
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53
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54
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no material changes in the existing political, legal, fiscal and
economic conditions in China;
no major changes in tax law in China or the tax rates applicable
to our subsidiaries and consolidated affiliated entities in
China;
no material changes in the exchange rates and interest rates
from the presently prevailing rates;
availability of finance not a constraint on our future growth;
our ability to retain competent management, key personnel and
technical staff to support our ongoing operations; and
no material deviation in market conditions from economic
forecasts.
55
Table of Contents
Midpoint of
Purchase
Fair Value of
Estimated
Ordinary
Price/Exercise
Ordinary
Initial Public
Intrinsic
Type of
Grant Date
Shares
Options
Price
Shares
Offering Price
Value*
Valuation
-
227,000
US$1.53
US$
0.64
US$
2.81
US$290,560
Retrospective
-
110,000
US$1.53
US$
1.36
US$
2.81
US$140,800
Retrospective
-
3,756,100
US$1.53
US$
1.51
US$
2.81
US$4,807,680
Retrospective
1,982,509
-
US$1.80
US$
1.51
US$
2.81
US$2,002,334
Retrospective
-
1,596,000
US$1.53
US$
1.63
US$
2.81
US$2,042,880
Retrospective
-
16,875
US$1.53
US$
1.63
US$
2.81
US$21,600
Retrospective
-
600,000
US$1.53
US$
1.76
US$
2.81
US$768,000
Retrospective
-
118,000
US$1.53
US$
2.23
US$
2.81
US$151,040
Contemporaneous
-
54,595
US$1.53
US$
2.81
US$
2.81
0
-**
*
Intrinsic value equals the difference between the midpoint of
the estimated initial public offering price and the purchase
price/exercise price of the ordinary shares/options, multiplied
by the number of ordinary shares/options.
**
We used the midpoint of the estimated price range of this
initial public offering as the fair value of our ordinary shares
underlying the options granted on February 5, 2010 without
separately performing a valuation in connection with these
options as we believe the number of these options is
insignificant.
56
Table of Contents
The prospect for the global economy became more optimistic and
Chinas economy showed robust growth since the second
quarter of 2009. This was evidenced by a number of indicators,
including a 14.9% annualized quarter-over-quarter gross domestic
product, or GDP growth from the first quarter of 2009, according
to a report issued by the Peoples Bank of China on
July 28, 2009, the expansion of the Purchasing
Managers Index (PMI) and a significant increase in banking
loans and investments.
57
Table of Contents
We increased the number of our hotels in operation from
167 hotels as of January 1, 2009 to 200 hotels as
of June 30, 2009. For the first time in our history, we
were able to generate a quarterly profit. We generated a net
income attributable to our company of RMB27.9 million in
the three months ended June 30, 2009. We generated an
operating cash in flow of RMB101.4 million for the six
months ended June 30, 2009 compared to an operating cash
outflow of RMB30.1 million for the six months ended
June 30, 2008. The improved operating performance in the
second quarter as well as the first half of 2009 contributed to
the increase in our projections used in the July 2009 valuation.
The improved profitability, among others, led us to increase the
probability of an initial public offering in calculating the
fair value of the ordinary shares from January 1, 2009 to
June 30, 2009. In addition, we decreased the discount for
lack of marketability from 25% as of January 1, 2009 to 19%
as of June 30, 2009 given the increased likelihood of and
proximity to an initial public offering.
As a result of the above, inclusive of our ability to achieve or
exceed our business plan, we decreased the overall discount rate
by 1% from 14% as of January 1, 2009 to 13% as of
June 30, 2009.
Chinas economy continued to show robust growth during this
period, which was evidenced by a number of indicators, including
accelerating annualized quarter-over-quarter GDP growth in the
last quarter of 2009 and the improving export figures.
We have been able to successfully carry out our expansion plan
by operating 20 more hotels in the three months ended
December 31, 2009 as compared to the three months ended
September 30, 2009.
The cash flow generated from our operating activities during the
six months ended December 31, 2009 has enabled us to
accelerate our hotel expansion plan for 2010.
We generated net income attributable to our company of
RMB42.1 million for the six months ended December 31,
2009, exceeding the forecast we used to determine the fair value
of our ordinary shares as of November 20, 2009. The
improvement in profitability, among other things, led us to
increase the projected total number of our new hotels.
We increased the probability of our initial public offering and
decreased the discount for lack of marketability in calculating
the fair value of our ordinary shares given the progress we have
achieved in the public offering preparation process.
58
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the liquidity of our ordinary shares will increase following the
consummation of this offering and the listing of our ADSs on the
NASDAQ Global Market; and
Ctrip.com International, Ltd., or Ctrip, one of the largest
online travel services providers in China, has entered into an
agreement with us to purchase certain of our shares at the
initial public offering price, subject to the completion of this
offering.
As of December 31,
2007
2008
2009
67
167
236
62
145
173
5
22
63
8,089
21,033
28,360
7,583
18,414
21,658
506
2,619
6,702
23
35
39
Year Ended December 31,
2007
2008
2009
85
89
94
82
74
91
85
87
94
181
178
174
176
180
172
181
178
174
154
158
165
145
132
156
154
156
163
59
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Note: (1)
Include share-based compensation expenses as follows:
Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
14,785
4,815
7,955
1,165
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For the Year Ended
December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
(95,983
)
(67,957
)
214,893
31,482
(34,963
)
40,105
252,714
37,023
(1)
We believe that EBITDA is a useful financial metric to assess
our operating and financial performance before the impact of
investing and financing transactions and income taxes. Given the
significant investments that we have made in leasehold
improvements, depreciation and amortization expense comprises a
significant portion of our cost structure. In addition, we
believe that EBITDA is widely used by other companies in the
lodging industry and may be used by investors as a measure of
our financial performance. We believe that EBITDA will provide
investors with a useful tool for comparability between periods
because it eliminates depreciation and amortization expense
attributable to capital expenditures. We also use EBITDA from
Operating Hotels, which is defined as EBITDA before pre-opening
expenses, to assess operating results of the hotels in
operation. We believe that the exclusion of pre-opening
expenses, a portion of which is non-cash rental expenses, helps
facilitate
year-on-year
comparison of our results of operations as the number of hotels
in the development stage may vary significantly from year to
year. Therefore, we believe EBITDA from Operating Hotels more
closely reflects the performance capability of hotels currently
in operation. Our calculation of EBITDA and EBITDA from
Operating Hotels does not deduct interest income, which was
RMB1.2 million, RMB3.8 million and RMB1.9 million
in 2007, 2008, and 2009, respectively. The presentation of
EBITDA and EBITDA from Operating Hotels should not be construed
as an indication that our future results will be unaffected by
other charges and gains we consider to be outside the ordinary
course of our business.
The use of EBITDA and EBITDA from Operating Hotels has certain
limitations. Depreciation and amortization expense for various
long-term assets, income tax and interest expense have been and
will be incurred and are not reflected in the presentation of
EBITDA. Pre-opening expenses have been and will be incurred and
are not reflected in the presentation of EBITDA from Operating
Hotels. Each of these items should also be considered in the
overall evaluation of our results. Additionally, EBITDA or
EBITDA from Operating Hotels does not consider capital
expenditures and other investing activities and should not be
considered as a measure of our liquidity. We compensate for
these limitations by providing the relevant disclosure of our
depreciation and amortization, interest expense, income tax
expense, pre-opening expenses, capital expenditures and other
relevant items both in our reconciliations to the U.S. GAAP
financial measures and in our consolidated financial statements,
all of which should be considered when evaluating our
performance.
The terms EBITDA and EBITDA from Operating Hotels are not
defined under U.S. GAAP, and neither EBITDA nor EBITDA from
Operating Hotels is a measure of net income, operating income,
operating performance or liquidity presented in accordance with
U.S. GAAP. When assessing our operating and financial
performance, you should not consider this data in isolation or
as a substitute for our net income, operating income or any
other operating performance measure that is calculated in
accordance with U.S. GAAP. In addition, our EBITDA or EBITDA
from Operating Hotels may not be comparable to EBITDA or EBITDA
from Operating Hotels or similarly titled measures utilized by
other companies since such other companies may not calculate
EBITDA or EBITDA from Operating Hotels in the same manner as we
do.
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For the Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
(111,623
)
(136,162
)
42,545
6,233
-
1,249
8,787
1,287
(17,262
)
(23,880
)
17,990
2,636
32,902
90,836
145,571
21,326
(95,983
)
(67,957
)
214,893
31,482
61,020
108,062
37,821
5,541
(34,963
)
40,105
252,714
37,023
Leased-and-operated
hotels
. Revenues from our
leased-and-operated
hotels increased by 61.6% from RMB797.8 million in 2008 to
RMB1,288.9 million in 2009. This increase was primarily due
to our continued expansion of
leased-and-operated
hotels from 145 hotels and 18,414 hotel rooms as of
December 31, 2008 to 173 hotels and 21,658 hotel
rooms as of December 31, 2009, and an increase in RevPAR.
RevPAR for our
leased-and-operated
hotels increased from RMB158 in 2008 to RMB165 in 2009 due to an
increase in occupancy rate of our
leased-and-operated
hotels from 89% in 2008 to 94% in 2009. The increase in this
occupancy rate resulted primarily from the increased proportion
of room nights in our mature leased-and-operated hotels, which
have been in operation for more than six months, from 57% in
2008 to 85% in 2009. The average daily rate for our
leased-and-operated
hotels decreased from RMB178 in 2008 to RMB174 in 2009,
primarily reflecting room rate decreases during the economic
slowdown.
Franchised-and-managed
hotels
. Revenues from our
franchised-and-managed
hotels increased significantly from RMB12.0 million in 2008
to RMB45.0 million in 2009. This growth was primarily due
to an increase in the number of
franchised-and-managed
hotels from 22 as of December 31, 2008 to 63 as of
December 31, 2009, and an increase in RevPAR. RevPAR for
our
franchised-and-managed
hotels increased from RMB132 in 2008 to RMB156 in 2009 driven by
the increase in occupancy rate of our
franchised-and-managed
hotels from 74% in 2008 to 91% in 2009. The increase in this
occupancy rate resulted primarily from the increased proportion
of our
franchised-and-managed
hotels that are located in Chinas economically more
developed cities. The average daily rate for our
franchised-and-managed
hotels decreased from RMB180 in 2008 to RMB172 in 2009,
primarily reflecting room rate decreases during the economic
slowdown.
Hotel operating costs
. Our hotel operating
costs increased by 46% from RMB687.4 million in 2008 to
RMB1,004.5 million in 2009. This increase was primarily
because of our substantial expansion of hotels from
167 hotels as of December 31, 2008 to 236 hotels
as of December 31, 2009. Our hotel operating costs as a
percentage of total revenues decreased from 84.9% in 2008 to
75.3% in 2009, primarily due to cost control of personnel costs,
consumables, food and beverage and other hotel operating costs.
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Table of Contents
Selling and marketing expenses
. Our selling
and marketing expenses increased by 42% from
RMB40.8 million in 2008 to RMB57.8 million in 2009.
This increase was primarily due to RMB9.5 million of
additional expenses for marketing and promotional activities,
RMB6.3 million of additional commissions to travel
intermediaries, RMB5.7 million of additional compensation
and benefits for our sales and marketing personnel, and
RMB4.1 million of additional bank fees for processing bank
card payments as we expanded our business. We recorded less
expenses relating to our customer loyalty program in 2009 due to
(i) an amendment to franchise-and-management agreements to
discontinue reimbursing franchisees for free room nights
provided in connection with point redemption; and (ii) the
application of a point expiration rate in estimating the costs
of our customer loyalty program. Our selling and marketing
expenses as a percentage of total revenues decreased from 5.0%
in 2008 to 4.3% in 2009.
General and administrative expenses
. Our
general and administrative expenses increased slightly from
RMB81.7 million in 2008 to RMB83.7 million in 2009,
primarily as a result of an increase in personnel costs, an
increase in provision for contingent liabilities, and an
increase in
share-based
compensation expenses, partially offset by a decrease of
RMB9.2 million in professional service fees. Our general
and administrative expenses as a percentage of total revenues
decreased from 10.2% in 2008 to 6.3% in 2009.
Pre-opening expenses.
Our pre-opening expenses
decreased from RMB108.1 million in 2008 to
RMB37.8 million in 2009, primarily due to a decrease in the
number of newly opened
leased-and-operated
hotels from 83 in 2008 to 28 in 2009 in an effort to balance
growth and profitability during the global economic downturn.
Our pre-opening expenses as a percentage of total revenues
decreased from 13.3% in 2008 to 2.8% in 2009.
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Leased-and-operated
hotels
. Revenues from our
leased-and-operated
hotels more than tripled from RMB248.2 million in 2007 to
RMB797.8 million in 2008. This increase was primarily due
to our substantial expansion of
leased-and-operated
hotels from 62 hotels and 7,583 hotel rooms, as of
December 31, 2007 to 145 hotels and 18,414 hotel rooms as
of December 31, 2008, and the increased proportion of
mature leased-and-operated hotels, which have been in operation
for more than six months, in our portfolio and an increase in
RevPAR. RevPAR for our
leased-and-operated
hotels increased from RMB154 in 2007 to RMB158 in 2008 due to an
increase in occupancy rate of our
leased-and-operated
hotels from 85% in 2007 to 89% in 2008. The average daily rate
for our
leased-and-operated
hotels decreased from RMB181 in 2007 to RMB178 in 2008,
primarily as a result of the decreased proportion of our
leased-and-operated
hotels that are located in Chinas economically more
developed cities.
Franchised-and-managed
hotels
. Revenues from our
franchised-and-managed
hotels substantially increased from RMB1.2 million in 2007
to RMB12.0 million in 2008. This growth was primarily due
to our substantial expansion of
franchised-and-managed
hotels from five hotels as of December 31, 2007 to 22
hotels as of December 31, 2008, partially offset by a
decrease in RevPAR for our franchised-and-managed hotels from
RMB145 in 2007 to RMB132 in 2008.
Hotel operating costs
. Our hotel operating
costs increased from RMB228.4 million in 2007 to
RMB687.4 million in 2008. This increase was primarily
because of our substantial expansion from 67 hotels as of
December 31, 2007 to 167 hotels as of
December 31, 2008. Our hotel operating costs as a
percentage of total revenues decreased from 91.6% in 2007 to
84.9% in 2008.
Selling and marketing expenses
. Our selling
and marketing expenses increased from RMB17.6 million in
2007 to RMB40.8 million in 2008, primarily due to
RMB6.6 million of additional expenses for marketing and
promotional activities, RMB5.0 million of additional bank
fees for processing bank card payments, RMB4.2 million of
additional personnel costs as we expanded our business and
RMB2.3 million of additional commissions to travel
intermediaries. Our selling and marketing expenses as a
percentage of total revenues decreased from 7.0% in 2007 to 5.0%
in 2008.
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General and administrative expenses
. Our
general and administrative expenses increased from
RMB65.7 million in 2007 to RMB81.7 million in 2008.
This increase was primarily due to an increase of
RMB5.3 million in professional service fees and an increase
of RMB5.2 million in travelling and other expenses as a
result of wider geographic coverage and an increased number of
hotels in our portfolio, partially offset by a decrease of
RMB10.1 million in related share-based compensation
expenses. Our general and administrative expenses as a
percentage of total revenues decreased from 26.3% in 2007 to
10.2% in 2008.
Pre-opening expenses.
Our pre-opening expenses
increased from RMB61.0 million in 2007 to
RMB108.1 million in 2008, primarily due to an increase in
our rental costs as a result of an increase in the number of our
newly opened
leased-and-operated
hotels from 38 in 2007 to 83 in 2008. Our pre-opening expenses
as a percentage of total revenues decreased from 24.5% in 2007
to 13.3% in 2008.
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For the Three Months Ended
March 31,
June 30,
September 31,
December 31,
March 31,
June 30,
September 31,
December 31,
2008
2008
2008
2008
2009
2009
2009
2009
(in RMB thousands)
127,856
179,467
223,943
266,549
262,482
321,528
349,788
355,100
531
2,236
2,617
6,655
6,024
12,282
11,325
15,334
128,387
181,703
226,560
273,204
268,506
333,810
361,113
370,434
(7,282
)
(10,071
)
(12,379
)
(15,873
)
(14,970
)
(18,514
)
(20,004
)
(20,184
)
121,105
171,632
214,181
257,331
253,536
315,296
341,109
350,250
(117,272
)
(142,466
)
(187,443
)
(240,183
)
(241,650
)
(239,090
)
(256,268
)
(267,464
)
(6,360
)
(8,772
)
(10,287
)
(15,391
)
(8,847
)
(16,305
)
(18,546
)
(14,120
)
(19,151
)
(19,216
)
(22,277
)
(21,021
)
(19,814
)
(14,225
)
(21,724
)
(27,902
)
(37,952
)
(25,412
)
(30,219
)
(14,479
)
(14,963
)
(7,718
)
(7,518
)
(7,622
)
(180,735
)
(195,866
)
(250,226
)
(291,074
)
(285,274
)
(277,338
)
(304,056
)
(317,108
)
(59,630
)
(24,234
)
(36,045
)
(33,743
)
(31,738
)
37,958
37,053
33,142
215
959
1,687
925
271
206
630
763
(1,249
)
(1,338
)
(2,422
)
(2,493
)
(2,534
)
(1,557
)
(1,533
)
(10,879
)
85
(3
)
8
12
(77
)
4,016
4,520
(56,956
)
(20,288
)
(45,237
)
(33,982
)
(32,808
)
35,750
35,202
31,294
(8,544
)
(3,043
)
(6,786
)
(5,507
)
(5,577
)
6,078
9,112
8,377
(48,412
)
(17,245
)
(38,451
)
(28,475
)
(27,231
)
29,672
26,090
22,917
(265
)
(1,467
)
(655
)
(1,192
)
(276
)
(1,725
)
(3,826
)
(3,076
)
(48,677
)
(18,712
)
(39,106
)
(29,667
)
(27,507
)
27,947
22,264
19,841
66
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Note: (1)
Includes share-based compensation
expenses as follows:
For the Three Months Ended
March 31,
June 30,
September 31,
December 31,
March 31,
June 30,
September 31,
December 31,
2008
2008
2008
2008
2009
2009
2009
2009
(in RMB thousands)
1,173
1,273
1,185
1,184
1,251
1,264
2,158
3,282
As of and for the Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
2008
2008
2008
2008
2009
2009
2009
2009
86
102
145
167
181
200
216
236
81
96
127
145
151
160
166
173
5
6
18
22
30
40
50
63
10,562
12,863
18,076
21,033
22,744
24,707
26,475
28,360
9,993
12,224
16,123
18,414
19,223
20,235
20,906
21,658
569
639
1,953
2,619
3,521
4,472
5,569
6,702
27
29
35
35
36
38
38
39
84
91
87
90
86
96
98
96
78
83
61
78
80
91
95
91
84
90
85
89
85
96
98
95
176
181
180
177
169
175
175
178
183
179
184
177
170
173
171
173
176
181
180
177
169
174
174
177
148
164
157
159
145
168
172
171
143
149
113
138
136
157
163
158
148
163
153
157
144
167
171
168
67
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Year Ended December 31,
2007
2008
2009
(RMB)
(RMB)
(RMB)
(US$)
(in thousands)
(68,254
)
(13,738
)
296,340
43,414
(284,014
)
(451,589
)
(256,027
)
(37,508
)
499,307
482,479
47,064
6,895
(6,676
)
(7,541
)
(36
)
(6
)
140,363
9,611
87,341
12,795
33,272
173,636
183,246
26,846
173,635
183,247
270,587
39,641
68
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69
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Payment Due by Period
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in RMB millions)
147
64
83
-
-
5,205
460
931
929
2,885
22
22
-
-
-
5,374
546
1,014
929
2,885
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Outstanding
Balance
Maximum
Drawdown as
as of
Date of
Credit Line
Credit Line
of December 31,
December 31,
Interest
Lender
Credit Line
Maturity Date
Amount
2009
2009
Rate
(in RMB)
June 2009
June 2010
150,000,000
-
-
4.98
%
September 2008
September 2011
172,000,000
172,000,000
137,000,000
(1)
5.72
%
Note: (1)
We repaid the total outstanding balance on February 1, 2010.
71
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72
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73
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74
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% of
Number of
% of
Number of Hotels
Total
Hotel Rooms
Total
315,893
100.0
%
27,346,500
100.0
%
2,253
0.7
%
526,482
1.9
%
313,640
99.3
%
26,820,018
98.1
%
(1)
Euromonitor International, 2009
(2)
National Tourism Administration of China, 2008
*
Represents the difference between the number for total lodging
facilities and the number for four and five star hotels
2003-2008
2003
2004
2005
2006
2007
2008
CAGR
87
166
522
906
1,698
2,805
100.3
%
10,292
19,199
56,854
98,817
188,788
312,930
98.0
%
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Chinas
robust economic growth drives overall travel and tourism
industry
Increasing
domestic business travel, particularly with the growing
importance of small and medium enterprises
Rapidly
growing domestic leisure travel as a result of higher disposable
income and changing lifestyle
Increasing
attractiveness of branded economy hotel chains
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China
312,930
(1)
602,317
45.6
%
0.52
(1)
October 2009 Inntie Report
(2)
Euromonitor International, 2009
*
Represents the ratio of the number of branded economy hotel
chain rooms in 2008 to urban population (in thousands) in 2008
Emerging
segmentation within the economy hotel industry
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We
have established a premium brand and achieved the highest RevPAR
and occupancy rate
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We
have successfully established a portfolio of diversified
products
We
have adopted a disciplined return-driven development model with
a proven track record
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We
have been able to achieve operational efficiency while improving
productivity
We
have an efficient and scalable operating system supported by
advanced technology platform
Real-time inventory management maximizing occupancy and
booking efficiency
: Our real-time inventory
management system allows us to lower our booking costs relative
to our competitors, efficiently manage room inventory across our
hotels to maximize occupancy and enhance our customer
satisfaction by improving reservation efficiency and accuracy.
RevPAR management maximizing revenues
: Our
system allows our management to centrally control pricing across
our hotel network. We track industry-wide room pricing
information to determine our pricing structure across products,
locations and seasons to enhance RevPAR by optimizing daily room
rate and occupancy.
Membership management enhancing loyalty
: Our
system is capable of tracking and monitoring the data,
preferences, activities and needs of our individual and
corporate members. As a result, we are able to implement more
focused marketing initiatives and provide more tailored services
that can enhance our customers experience and loyalty.
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Franchisee management
: We manage our
franchised-and-managed
hotels through our centralized and standardized information
platform. Key functions such as bookings are monitored by our
central reservation system.
Performance management
: Our real-time system
provides valuable data for management to monitor, evaluate and
make important business decisions on a real-time basis. It also
enhances our ability to manage our entire operations and
therefore allows us to maintain product and service quality and
consistency while growing rapidly.
We
have an experienced management team supported by a well-trained
workforce
Enhance
our market leadership through prudent return-driven network
expansion
Grow our leased-and-operated hotels in pursuit of long-term
profitability
: We believe that the
leased-and-operated hotels will continue to be the main
contributor to our revenues and long-
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term profitability. As of December 31, 2009, we had 21
leased-and-operated hotels under development. We plan to gain
greater market share and strengthen our leadership position
through opening more leased-and-operated hotels that meet our
stringent strategic and financial return criteria in selective
locations. While screening new opportunities, our key criterion
remains the expected return on investment.
Further expand our network growth through
franchised-and-managed hotels
: We believe the
franchise-and-manage model enables us to quickly and effectively
expand our coverage and market share in a less capital-intensive
manner with substantially lower execution risks. We intend to
supplement the expansion of our network coverage with
franchised-and-managed hotels. As of December 31, 2009, we
had 123 franchised-and-managed hotels under development. We plan
to continue to enhance our marketing activities to attract new
franchisees while encouraging our existing franchisees to expand
their hotel businesses under our brand and management.
Pursue selective acquisitions
: We have in the
past made selective acquisitions. For instance, we acquired
three hotels at prime locations in Hangzhou, China which were
originally franchised hotels of an international hotel operator
but are now under our leased-and-operated hotel operation. When
opportunities arise, we may continue to selectively acquire
economy hotel operators who operate either leased or franchised
hotels. In identifying potential acquisition targets, we will
adhere to our return-driven development model.
Meet
evolving market demand through product diversification and
customer segmentation
Further
enhance our brand recognition and expand our customer base by
leveraging our loyalty program
Continue
to invest in human capital to support future
growth
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Continue
to implement cost control measures to enhance our
profitability
Information technology systems.
We intend to
continue to upgrade our information technology systems,
including our web property management, central reservation,
customer relationship management and enterprise resource
planning systems, to further improve our financial, operational
and managerial efficiency and reduce personnel costs.
Procurement system.
We will continue to
enhance our centralized procurement of construction materials
and other consumable items, which we believe will help lower our
procurement costs, ensure consistent quality of materials and
increase our rate of return.
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Leased-and-
Franchised-and-
Leased-and-Operated
Franchised-and-Managed
Operated
Managed
Hotels Under
Hotels Under
Hotels
Hotels
Development
(1)
Development
(1)
55
24
6
32
80
25
8
42
38
14
7
49
173
63
21
123
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(1)
Include hotels for which we have entered into binding leases or
franchise-and-management agreements but that have not yet
commenced operations.
(2)
According to the National Bureau of Statistics of China, in
addition to Shanghai and Beijing, the top 20 cities, as
measured by 2007 GRP, include Guangzhou, Shenzhen, Suzhou,
Tianjin, Chongqing, Hangzhou, Wuxi, Qingdao, Foshan, Ningbo,
Chengdu, Nanjing, Dongguan, Wuhan, Dalian, Shenyang, Yantai and
Tangshan. We currently have no operation in Foshan, Dongguan,
Tangshan and Yantai.
(3)
Include Changchun, Changsha, Changzhou, Fuzhou, Guilin, Harbin,
Hefei, Jinan, Kunshan, Nanning, Nantong, Shijiazhuang, Taiyuan,
Wuhu, Xian, Xiamen, Yangzhou, Yiwu, Zhenjiang, Zhengzhou,
Zibo, Taizhou, Putian, Taian, Huaian, Yixing,
Zhangjiagang, Xining, Tongxiang, Yancheng and Jinzhou.
Pre-conversion
Conversion
Period
(1)
Period
(2)
Total
8
13
21
31
92
123
39
105
144
(1)
Include hotels for which we have entered into binding leases or
franchise-and-management agreements but of which the property
has not been delivered by the respective lessors or managed
hotel owners, as the case may be. The majority of these hotels
are expected to commence operations by December 31, 2010.
(2)
Include hotels for which we have commenced conversion activities
but that have not yet commenced operations. The majority of
these hotels are expected to commence operations by
June 30, 2010.
Leased-and-operated
hotels
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Franchised-and-managed
hotels
As of December 31,
2005
2006
2007
2008
2009
5
24
62
145
173
-
2
5
22
63
5
26
67
167
236
HanTing
Express Hotel
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HanTing
Seasons Hotel
HanTing
Hi Inn
Leased-and-operated
hotels
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Franchised-and-managed
hotels
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to ensure that commodities and services meet with certain safety
requirements;
to disclose serious defects of a commodity or a service and to
adopt preventive measures against damage occurrence;
to provide consumers with accurate information and to refrain
from conducting false advertising;
not to set unreasonable or unfair terms for consumers or
alleviate or release itself from civil liability for harming the
legal rights and interests of consumers by means of standard
contracts, circulars, announcements, shop notices or other
means; and
not to insult or slander consumers or to search the person of,
or articles carried by, a consumer or to infringe upon the
personal freedom of a consumer.
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the name, domiciles, legal representative, registered capital,
scope of business and basic information relating to its
commercial franchising;
basic information relating to the registered trademark, logo,
patent, know-how and business model;
the type, amount and method of payment of franchise fees
(including payment of deposit and the conditions and method of
refund of deposit);
the price and conditions for the franchisor to provide goods,
service and equipment to the franchisee;
the detailed plan, provision and implementation plan of
consistent services including operational guidance, technical
support and business training provided to the franchisee;
detailed measures for guiding and supervising the operation of
the franchisor;
investment budget for all franchised hotels of the franchisee;
the current numbers, territory and operation evaluation of the
franchisors within China;
a summary of accounting statements audited by an accounting firm
and a summary of audit reports for the previous two years;
information on any lawsuit in which the franchisor has been
involved in the previous five years;
basic information regarding whether the franchisor and its legal
representative have any record of material violation; and
other information required to be disclosed by the MOC.
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Directors and Executive
Officers
Age
Position/Title
43
Founder, Executive Chairman of the Board of Directors
42
Co-founder, Director
43
Co-founder, Director
44
Director Appointee*
35
Independent Director
42
Independent Director
44
Chief Executive Officer
36
Chief Financial Officer
33
Executive Vice President
*
Mr. Min Fan has accepted our appointment to be a director
of our company upon the completion of this offering.
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Audit
Committee
selecting the independent auditors and pre-approving all
auditing and non-auditing services permitted to be performed by
the independent auditors;
selecting independent auditors and pre-approving all auditing
and non-auditing services permitted to be performed by the
independent auditors;
setting clear hiring policies for employees or former employees
of the independent auditors;
reviewing with the independent auditors any audit problems or
difficulties and managements response;
reviewing and approving all proposed related-party transactions;
discussing the annual audited financial statements with
management and the independent auditors;
discussing with management and the independent auditors major
issues regarding accounting principles and financial statement
presentations;
reviewing reports prepared by management or the independent
auditors relating to significant financial reporting issues and
judgments;
reviewing with management and the independent auditors
related-party transactions and off-balance sheet transactions
and structures;
reviewing with management and the independent auditors the
effect of regulatory and accounting initiatives and actions;
reviewing policies with respect to risk assessment and risk
management;
reviewing our disclosure controls and procedures and internal
control over financial reporting;
timely reviewing reports from the independent auditors regarding
all critical accounting policies and practices to be used by our
company, all alternative treatments of financial information
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within GAAP that have been discussed with management and all
other material written communications between the independent
auditors and management;
establishing procedures for the receipt, retention and treatment
of complaints received from our employees regarding accounting,
internal accounting controls or auditing matters and the
confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters;
annually reviewing and reassessing the adequacy of our audit
committee charter;
such other matters that are specifically delegated to our audit
committee by our board of directors from time to time; and
meeting separately, periodically, with management, the internal
auditors and the independent auditors.
Compensation
Committee
reviewing and approving the compensation for our senior
executives;
reviewing and evaluating our executive compensation and benefits
policies generally;
reporting to our board of directors periodically;
evaluating its own performance and reporting to our board of
directors on such evaluation;
periodically reviewing and assessing the adequacy of the
compensation committee charter and recommending any proposed
changes to our board of directors; and
such other matters that are specifically delegated to the
compensation committee by our board of directors from time to
time.
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Options.
Each option agreement must specify
the exercise price. The exercise price of an option must not be
less than 100% of the fair market value of the underlying shares
on the option grant date, and a higher percentage may be
required. The term of an option granted under the Amended and
Restated 2007 and 2008 Plans must not exceed ten years from the
date the option is granted, and a shorter term may be required.
Share Purchase Rights.
A share purchase right
is a right to purchase restricted shares. Each share purchase
right under the Amended and Restated 2007 and 2008 Plans must be
evidenced by a restricted share purchase agreement between the
purchaser and us. The purchase price will be determined by the
administrator. The share purchase rights will automatically
expire if not exercised by the purchaser within 30 days
after the grant date.
Options.
The purchase price per share under an
option will be determined by a committee appointed by our board
and set forth in the award agreement. The term of an option
granted under the Amended and Restated 2009 Plan must not exceed
ten years from the grant date, and a shorter term may be
required.
Restricted Stock and Restricted Stock
Units.
An award of restricted stock is a grant of
our ordinary shares subject to restrictions the committee
appointed by our board may impose. A restricted stock unit is a
contractual right that is denominated in our ordinary shares,
each of which represents a right to receive the value of a share
or a specified percentage of such value upon the terms and
conditions set forth in the Amended and Restated 2009 Plan and
the applicable award agreement.
Other Stock-based Awards.
The committee is
authorized to grant other stock-based awards that are
denominated or payable in or otherwise related to our ordinary
shares such as stock appreciation rights and rights to dividends
and dividend equivalents. Terms and conditions of such awards
will be determined by the committee appointed by our board.
Unless the awards are granted in substitution for outstanding
awards previously granted by an entity that we acquired or
combined, the value of the consideration for the ordinary shares
to be purchased upon the exercise of such awards shall not be
less than the fair market value of the underlying ordinary
shares on the grant date.
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Ordinary Shares
Underlying
Exercise Price
Name
Options
Awarded
(1)
(US$/Share)
Date of Grant
Date of Expiration
400,000
1.53
October 1, 2009
October 1, 2019
100,000
1.53
October 1, 2009
October 1, 2019
100,000
1.53
October 1, 2009
October 1, 2019
*
1.53
October 1, 2009
October 1, 2019
*
1.53
October 1, 2009
October 1, 2019
2,270,000
1.40/
1.53/
1.53
October 20, 2007/ August 3, 2009/November 20, 2009
October 20, 2017/ August 3, 2019/November 20, 2019
*
1.40/
1.53
October 20, 2007/November 20, 2009
October 20, 2017/November 20, 2019
*
0.50
February 4, 2007
February 4, 2017
11,829,068
0.50-1.53
February 4, 2007-
February 4, 2017-
February 5, 2010
February 5, 2020
*
Upon exercise of all options granted, would beneficially own
less than 1% of our outstanding ordinary shares.
(1)
Includes options to purchase an
aggregate of 3,276,875 ordinary shares that have been exercised
by certain officers and options to purchase an aggregate of
4,431,790 ordinary shares that have been exercised by certain
employees.
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each of our directors and executive officers; and
each person known to us to own beneficially more than 5% of our
ordinary shares and each person who owns our Series A
preferred shares or Series B preferred shares.
Ordinary
Shares
Ordinary Shares
Beneficially
Beneficially Owned
Owned After
Prior to This
This
Offering
(1)
Offering
(1)(2)
Number
%
Number
%
115,759,849
(3
)
60.16
115,759,849
49.13
38,920,000
(4
)
20.23
38,920,000
16.52
9,633,333
(5
)
5.01
9,633,333
4.09
-
-
-
-
-
-
-
-
-
-
-
-
*
*
*
*
*
*
*
*
*
*
*
*
132,773,807
69.00
132,773,807
56.35
80,759,849
(7
)
41.97
80,759,849
34.28
38,920,000
(8
)
20.23
38,920,000
16.52
14,768,868
(9
)
7.68
11,608,330
(14
)
4.93
14,768,868
(10
)
7.68
11,608,330
(15
)
4.93
8,550,949
(11
)
4.44
6,721,046
(16
)
2.85
6,340,428
(12
)
3.30
4,983,577
(17
)
2.12
2,139,134
(13
)
1.11
-
(18
)
-
-
-
18,849,446
(19
)
8.00
*
Less than 1%.
(1)
The number of ordinary shares outstanding in calculating the
percentages for each listed person or group includes the
ordinary shares underlying options held by such person or group
exercisable within 60 days of the date of this prospectus.
Percentage of beneficial ownership of each listed person or
group prior to this offering is based on (i) 192,415,597
ordinary shares outstanding as of the date of this prospectus,
including ordinary shares convertible from our outstanding
Series A preferred shares and Series B preferred
shares, and (ii) the ordinary shares underlying share
options exercisable by such person within 60 days of the
date of this prospectus. Percentage of beneficial ownership of
each listed person or group after this offering is based on
235,618,079 ordinary shares outstanding immediately after the
completion of this offering and additional shares issuable upon
the exercise of the outstanding options within 60 days of
the date of this prospectus.
(2)
Assumes that the underwriters do not exercise the over-allotment
option.
(3)
Includes (i) 34,822,510 ordinary shares, 20,000,000 ordinary
shares issuable upon conversion of the same number of Series A
preferred shares and 25,937,339 ordinary shares issuable upon
conversion of the same number of Series B preferred shares held
by Winner Crown Holdings Limited, or Winner Crown, a British
Virgin Islands company wholly owned by Sherman Holdings Limited,
a Bahamas company, which is in turn wholly owned by Credit
Suisse Trust Limited, or CS Trustee. CS Trustee acts as trustee
of the Ji Family Trust, of which Mr. Qi Ji and his family
members, are the beneficiaries, (ii) 15,000,000 ordinary
shares held by East Leader International Limited, or East
Leader, a
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British Virgin Islands company,
over which Mr. Ji has voting power pursuant to a power of
attorney dated February 25, 2010, and (iii) 20,000,000
ordinary shares issuable upon conversion of the same number of
Series A preferred shares held by East Leader, over which
Mr. Ji has voting power pursuant to a power of attorney
dated September 29, 2009. East Leader is wholly owned by
Perfect Will Holdings Limited, a British Virgin Islands company,
which is in turn wholly owned by Bank Sarasin Nominees (CI)
Limited, as nominee for Sarasin Trust Company Guernsey Limited,
or Sarasin Trust. Sarasin Trust acts as trustee of the Tanya
Trust, of which Ms. Tongtong Zhao and her family members,
are the beneficiaries.
(4)
Includes (i) 15,000,000 ordinary shares,
(ii) 20,000,000 ordinary shares issuable upon conversion of
the same number of Series A preferred shares and
(iii) 3,920,000 ordinary shares issuable upon conversion of
the same number of Series B preferred shares, all of which
are held by East Leader, a British Virgin Islands company wholly
owned by Perfect Will Holdings Limited, a British Virgin Islands
company, which is in turn wholly owned by Bank Sarasin Nominees
(CI) Limited, as nominee for Sarasin Trust Company Guernsey
Limited, or Sarasin Trust. Sarasin Trust acts as trustee of the
Tanya Trust, of which Ms. Tongtong Zhao and her family
members, are the beneficiaries. Ms. Zhao is the sole director of
East Leader.
(5)
Includes 4,000,000 ordinary shares, 4,000,000 ordinary shares
issuable upon conversion of the same number of Series A
preferred shares, and 1,633,333 ordinary shares issuable upon
conversion of the same number of Series B preferred shares.
(6)
Includes (i) 7,202,482 ordinary shares that Ctrip has
agreed to purchase from us and (ii) an aggregate of
11,646,964 of our ordinary shares that Ctrip has agreed to
purchase from the Chengwei Funds, CDH Courtyard Limited, the IDG
Funds, the Northern Light Funds and Pinpoint Capital 2006 A
Limited subject to the completion of this offering. In addition,
if upon the exercise of the over-allotment option by the
underwriters, or, if the underwriters do not exercise this
option, upon the
30
th
day
following the closing of this offering, Ctrip owns less than 8%
of our total outstanding shares solely as a result of
(i) the underwriters exercise of their over-allotment
option or (ii) our issuing of ADSs in this offering in
excess of 9,000,000, Ctrip has agreed to purchase an additional
number of our ordinary shares such that Ctrip will hold 8% of
our total outstanding ordinary shares after such purchase.
Mr. Fan is a director, the chief executive officer and
president of Ctrip. Mr. Fan disclaims beneficial ownership
of the shares beneficially owned by Ctrip except to the extent
of his pecuniary interests therein. Mr. Fans business
address is 99 Fu Quan Road, Shanghai 200335, Peoples
Republic of China.
(7)
Includes 34,822,510 ordinary shares, 20,000,000 ordinary shares
issuable upon conversion of the same number of Series A
preferred shares and 25,937,339 ordinary shares issuable upon
conversion of the same number of Series B preferred shares.
Winner Crown is a British Virgin Islands company wholly owned by
Sherman Holdings Limited, a Bahamas company, which is in turn
wholly owned by Credit Suisse Trust Limited, or CS Trustee.
CS Trustee acts as trustee of the Ji Family Trust, of which
Mr. Qi Ji, our founder and executive chairman, and his
family members, are the beneficiaries. Mr. Ji is the sole
director of Winner Crown. The address of Winner Crown is Akara
Bldg., 24 De Castro Street, Wickhams Cay I, Road Town,
Tortola, British Virgin Islands.
(8)
Includes (i) 15,000,000 ordinary shares,
(ii) 20,000,000 ordinary shares issuable upon conversion of
the same number of Series A preferred shares and
(iii) 3,920,000 ordinary shares issuable upon conversion of
the same number of Series B preferred shares. East Leader
is a British Virgin Islands company wholly owned by Perfect Will
Holdings Limited, a British Virgin Islands company, which is in
turn wholly owned by Bank Sarasin Nominees (CI) Limited, as
nominee for Sarasin Trust Company Guernsey Limited, or Sarasin
Trust. Sarasin Trust acts as trustee of the Tanya Trust, of
which Ms. Tongtong Zhao and her family members, are the
beneficiaries. Ms. Zhao is the sole director of East
Leader. The address of East Leader is P.O. Box 957,
Offshore Incorporations Centre, Road Town,Tortola, British
Virgin Islands.
(9)
Includes 516,910, 12,684,242 and 1,567,716 ordinary shares
issuable upon conversion of the same numbers of Series B
preferred shares held by Chengwei Partners, L.P., Chengwei
Ventures Evergreen Fund, L.P. and Chengwei Ventures Evergreen
Advisors Fund, LLC, respectively, collectively referred to as
the Chengwei Funds. Chengwei Partners, L.P. is an exempted
limited partnership incorporated in the Cayman Islands. Chengwei
Ventures Evergreen Fund, L.P. is an exempted limited partnership
incorporated in the Cayman Islands. Chengwei Ventures Evergreen
Advisors Fund, LLC is an exempted limited liability corporation
incorporated in the Cayman Islands. Chengwei Ventures Evergreen
Management, LLC, a Cayman Islands exempted limited liability
company, is the general partner of Chengwei Partners, L.P. and
Chengwei Ventures Evergreen Fund, L.P., as well as the managing
member of Chengwei Ventures Evergreen Advisors Fund, LLC.
Mr. Eric X. Li and Mr. Pei Kang, the directors of
Chengwei Ventures Evergreen Management, LLC, hold voting and
dispositive power over the Chengwei Funds. The address of the
Chengwei Funds is P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands.
(10)
Includes 14,768,868 ordinary shares issuable upon conversion of
the same number of Series B preferred shares. CDH Courtyard
Limited is a company incorporated in the British Virgin Islands.
All of the issued and outstanding shares of CDH Courtyard
Limited are wholly owned by CDH Venture Partners, L.P., a Cayman
Islands exempted limited
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(11)
Includes 6,590,216, 1,346,774 and 613,959 ordinary shares
issuable upon conversion of the same numbers of Series B
preferred shares held by IDG-Accel China Growth Fund L.P.,
IDG-Accel China Growth Fund-A L.P. and IDG-Accel China Investors
L.P., respectively, collectively referred to as the IDG Funds.
Each of the IDG Funds is an exempted limited partnership
incorporated in the Cayman Islands. IDG-Accel China Growth
Fund GP Associates Ltd., a Cayman Islands limited company,
is the general partner of IDG-Accel China Growth
Fund Associates L.P., a Cayman Islands limited partnership,
which in turn is the general partner of IDG-Accel China Growth
Fund L.P. and IDG-Accel China Growth Fund-A L.P. Each of
the two directors of IDG-Accel China Growth Fund GP
Associates Ltd., Mr. Patrick J. McGovern and Mr. Quan
Zhou, owns 50% of IDG-Accel China Growth Fund GP Associates
Ltd.s voting shares. IDG-Accel China Investors Associates
Ltd., a Cayman Islands limited company, is the general partner
of IDG-Accel China Investors L.P. Mr. James Breyer is the sole
shareholder and one of the two directors of
IDG-Accel
China Investors Associates Ltd. Mr. Quan Zhou is the other
director of IDG-Accel China Investors Associates Ltd. The
address of the IDG Funds is Unit 1509, the Center, 99
Queens Road Central, Hong Kong.
(12)
Includes 4,769,269, 523,720, and 1,047,439 ordinary shares
issuable upon conversion of the same numbers of Series B
preferred shares held by Northern Light Venture Fund, L.P.,
Northern Light Partners Fund, L.P., and Northern Light Strategic
Fund, L.P., respectively, collectively referred to as the
Northern Light Funds. Each of the Northern Light Funds is an
exempted limited partnership incorporated in the Cayman Islands.
Northern Light Venture Capital Limited, a Cayman Islands
exempted limited liability company, is the general partner of
Northern Light Partners, L.P., a Cayman Islands limited
partnership, which in turn is the general partner of the
Northern Light Funds. Feng Deng, Yan Ke and Jeffrey Lee,
directors of Northern Light Venture Capital Limited, hold voting
and dispositive power over the Northern Light Funds. The address
of the Northern Light Funds is 2440 Sand Hill Road
Suite 201, Menlo Park, CA 94025, USA.
(13)
Includes 2,139,134 ordinary shares issuable upon conversion of
the same number of Series B preferred shares. Pinpoint
Capital 2006 A Limited is a company incorporated in the British
Virgin Islands. All of the issued and outstanding shares of
Pinpoint Capital 2006 A Limited are wholly owned by Pinpoint
China Direct Investment Fund, L.P., a Cayman Islands exempted
limited partnership. Pinpoint Capital Limited, a Cayman Islands
exempted limited liability company, is the general partner of
Pinpoint China Direct Investment Fund, L.P. and has the power to
direct Pinpoint China Direct Investment Fund, L.P. as to the
voting and disposition of shares directly and indirectly held by
Pinpoint China Direct Investment Fund, L.P.. Mr. Jiyi Weng
and Mr. Qiang Wang are directors and members of the
investment committee of Pinpoint Capital Limited. Mr. Jiyi Weng
and Mr. Qiang Wang are also directors of Pinpoint Capital
2006 A Limited. The address of Pinpoint Capital 2006 A Limited
is 2nd Floor, Abbott Building, Road Town, Tortola, British
Virgin Islands.
(14)
The Chengwei Funds have agreed to sell and Ctrip.com
International, Ltd., or Ctrip, has agreed to purchase 3,160,538
ordinary shares held by the Chengwei Funds, of which 110,619 are
held by Chengwei Partners, L.P., 2,714,428 are held by Chengwei
Ventures Evergreen Fund, L.P. and 335,491 are held by Chengwei
Ventures Evergreen Advisors Fund, LLC. After the sale, 406,291,
9,969,814 and 1,232,225 ordinary shares will be held by Chengwei
Partners, L.P., Chengwei Ventures Evergreen Fund, L.P. and
Chengwei Ventures Evergreen Advisors Fund, LLC, respectively.
(15)
CDH Courtyard Limited has agreed to sell and Ctrip has agreed to
purchase 3,160,538 ordinary shares held by CDH Courtyard Limited.
(16)
The IDG Funds have agreed to sell and Ctrip has agreed to
purchase 1,829,903 ordinary shares held by the IDG Funds, of
which 1,410,306 are held by IDG-Accel China Growth Fund L.P.,
288,210 are held by IDG-Accel China Growth Fund-A L.P. and
131,387 are held by IDG-Accel China Investors L.P.. After the
sale, 5,179,910, 1,058,564 and 482,572 ordinary shares will be
held by IDG-Accel China Growth Fund L.P., IDG-Accel China Growth
Fund-A L.P. and IDG-Accel China Investors L.P., respectively.
(17)
The Northern Light Funds have agreed to sell and Ctrip has
agreed to purchase 1,356,851 ordinary shares held by the
Northern Light Funds, of which 1,020,623 are held by Northern
Light Venture Fund, L.P., 112,076 are held by Northern Light
Partners Fund, L.P. and 224,152 are held by Northern Light
Strategic Fund, L.P.. After the sale, 3,748,646, 411,644 and
823,287 ordinary shares will be held by Northern Light Venture
Fund, L.P., Northern Light Partners Fund, L.P. and Northern
Light Strategic Fund, L.P., respectively.
(18)
Pinpoint Capital 2006 A Limited has agreed to sell and Ctrip has
agreed to purchase all of the shares held by Pinpoint Capital
2006 A Limited.
108
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(19)
Includes (i) 7,202,482 ordinary shares that Ctrip has
agreed to purchase from us and (ii) an aggregate of
11,646,964 of our ordinary shares that Ctrip has agreed to
purchase from the Chengwei Funds, CDH Courtyard Limited, the IDG
Funds, the Northern Light Funds and Pinpoint Capital 2006 A
Limited subject to the completion of this offering. In addition,
if upon the exercise of the over-allotment option by the
underwriters, or, if the underwriters do not exercise this
option, upon the
30
th
day
following the closing of this offering, Ctrip owns less than 8%
of our total outstanding shares as solely a result of
(i) the underwriters exercise of their over-allotment
option or (ii) our issuing of ADSs in this offering in
excess of 9,000,000, Ctrip has agreed to purchase an additional
number of our ordinary shares such that Ctrip will hold 8% of
our total outstanding ordinary shares after such purchase. Ctrip
is a Cayman Islands company and its address is 99 Fu Quan
Road, Shanghai 200335, Peoples Republic of China.
109
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110
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111
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is a company that conducts its business outside the Cayman
Islands;
is exempted from certain requirements of the Companies Law,
including the filing of an annual return of its shareholders
with the Registrar of Companies;
does not have to make its register of shareholders open to
inspection; and
may obtain an undertaking against the imposition of any future
taxation.
112
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113
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114
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increase our capital by such sum, to be divided into shares of
such amounts, as the resolution shall prescribe;
consolidate and divide all or any of our share capital into
shares of larger amount than our existing shares;
cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any
person, and diminish the amount of its share capital by the
amount of the shares so cancelled subject to the provisions of
the Companies Law;
sub-divide
our shares or any of them into shares of smaller amount than is
fixed by our amended and restated memorandum of association,
subject nevertheless to the Companies Law, and so that the
resolution whereby any share is
sub-divided
may determine that, as between the holders of the shares
resulting from such subdivision, one or more of the shares may
have any such preferred or other special rights, over, or may
have such deferred rights or be subject to any such restrictions
as compared with the others as we have power to attach to
unissued or new shares; and
divide shares into several classes and without prejudice to any
special rights previously conferred on the holders of existing
shares, attach to the shares respectively any preferential,
deferred, qualified or special rights, privileges, conditions or
such restrictions that in the absence of any such determination
in general meeting may be determined by our directors.
the instrument of transfer is lodged with us accompanied by the
certificate for the shares to which it relates and such other
evidence as our directors may reasonably require to show the
right of the transferor to make the transfer;
the instrument of transfer is in respect of only one class of
share;
the instrument of transfer is properly stamped (in circumstances
where stamping is required);
in the case of a transfer to joint holders, the number of joint
holders to whom the share is to be transferred does not exceed
four; and
fee of such maximum sum as the NASDAQ Global Market may
determine to be payable or such lesser sum as our directors may
from time to time require is paid to us in respect thereof.
115
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116
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all checks or warrants in respect of dividends of such shares,
not being less than three in number, for any sums payable in
cash to the holder of such shares have remained un-cashed for a
period of 12 years prior to the publication of the
advertisement and during the three months referred to in third
bullet point below;
we have not during that time received any indication of the
whereabouts or existence of the shareholder or person entitled
to such shares by death, bankruptcy or operation of law; and
we have caused an advertisement to be published in newspapers in
the manner stipulated by our amended and restated articles of
association, giving notice of our intention to sell these
shares, and a period of three months has elapsed since such
advertisement and the NASDAQ Global Market has been notified of
such intention.
117
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a company is acting or proposing to act illegally or beyond the
scope of its authority;
118
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the act complained of, although not beyond the scope of its
authority, could be effected duly if authorized by more than a
simple majority vote which has not been obtained; or
those who control the company are perpetrating a fraud on
the minority.
119
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the designation of the series;
the number of shares of the series;
the dividend rights, dividend rates, conversion rights and
voting rights; and
the rights and terms of redemption and liquidation preferences.
Ordinary
Shares
120
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Series A
Preferred Shares
Convertible
Notes
Series B
Preferred Shares
121
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Demand
Registration Rights
122
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At least 25% of all registrable securities requested by the
holders of Series B preferred shares to be included in the
underwriting are included; and
All shares that are not held by the holders of Series B
preferred shares are first excluded from the registration,
following which all shares that are not held by the holders of
Series A preferred shares are subsequently excluded from
the registration.
Piggyback
Registration Rights
The number of registrable securities held by holders of
Series B preferred shares included in such registration is
not reduced below 25% of the aggregate number of securities
included in such registration statement; and
The number of shares that may be included in the registration
shall be allocated, first, to us, second, to each of the
requesting holders of Series B preferred shares, third, to
each of the requesting holders of Series A preferred
shares, and fourth, to holders of our other securities.
Form F-3
Registration Rights
123
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Expenses
of Registration
Termination
124
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125
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Distributions
of Cash
Distributions
of Ordinary Shares
Distributions
of Rights
126
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We do not timely request that the rights be distributed to you
or we request that the rights not be distributed to you; or
We fail to deliver satisfactory documents to the
depositary; or
It is not reasonably practicable to distribute the rights.
Elective
Distributions
Other
Distributions
We do not request that the property be distributed to you or if
we ask that the property not be distributed to you; or
We do not deliver satisfactory documents to the
depositary; or
The depositary determines that all or a portion of the
distribution to you is not reasonably practicable.
Redemption
127
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The ordinary shares are duly authorized, validly issued, fully
paid, non-assessable and legally obtained.
All preemptive (and similar) rights, if any, with respect to
such ordinary shares have been validly waived or exercised.
You are duly authorized to deposit the ordinary shares.
The ordinary shares presented for deposit are free and clear of
any lien, encumbrance, security interest, charge, mortgage or
adverse claim, and are not, and the ADSs issuable upon such
deposit will not be, restricted securities (as
defined in the deposit agreement).
The ordinary shares presented for deposit have not been stripped
of any rights or entitlements.
128
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ensure that the surrendered ADR certificate is properly endorsed
or otherwise in proper form for transfer;
provide such proof of identity and genuineness of signatures as
the depositary deems appropriate;
provide any transfer stamps required by the State of New York or
the United States; and
pay all applicable fees, charges, expenses, taxes and other
government charges payable by ADR holders pursuant to the terms
of the deposit agreement, upon the transfer of ADRs.
Temporary delays that may arise because (i) the transfer
books for the ordinary shares or ADSs are closed, or
(ii) ordinary shares are immobilized on account of a
shareholders meeting or a payment of dividends.
Obligations to pay fees, taxes and similar charges.
Restrictions imposed because of laws or regulations applicable
to ADSs or the withdrawal of securities on deposit.
129
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Service
Fees
Issuance of ADSs
Up to U.S. 5¢ per ADS issued
Cancellation of ADSs
Up to U.S. 5¢ per ADS canceled
Distribution of cash dividends or other cash distributions
Up to U.S. 5¢ per ADS held
Distribution of ADSs pursuant to stock dividends, free stock
distributions or exercise of rights
Up to U.S. 5¢ per ADS held
Distribution of securities other than ADSs or rights to
purchase additional ADSs
Up to U.S. 5¢ per ADS held
Depositary Services
Up to U.S. 5¢ per ADS held on the applicable record
date(s) established by the Depositary
Fees for the transfer and registration of ordinary shares
charged by the registrar and transfer agent for the ordinary
shares in the Cayman Islands (
i.e.
, upon deposit and
withdrawal of ordinary shares).
Expenses incurred for converting foreign currency into
U.S. dollars.
Expenses for cable, telex and fax transmissions and for delivery
of securities.
Taxes and duties upon the transfer of securities (
i.e.
,
when ordinary shares are deposited or withdrawn from deposit).
Fees and expenses incurred in connection with the delivery or
servicing of ordinary shares on deposit.
130
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131
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We and the depositary are obligated only to take the actions
specifically stated in the deposit agreement without negligence
or bad faith.
The depositary disclaims any liability for any failure to carry
out voting instructions, for any manner in which a vote is cast
or for the effect of any vote, provided it acts in good faith
and in accordance with the terms of the deposit agreement.
The depositary disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the
content of any document forwarded to you on our behalf or for
the accuracy of any translation of such a document, for the
investment risks associated with investing in ordinary shares,
for the validity or worth of the ordinary shares, for any tax
consequences that result from the ownership of ADSs, for the
credit-worthiness of any third party, for allowing any rights to
lapse under the terms of the deposit agreement, for the
timeliness of any of our notices or for our failure to give
notice.
We and the depositary will not be obligated to perform any act
that is inconsistent with the terms of the deposit agreement.
We and the depositary disclaim any liability if we are prevented
or forbidden from acting on account of any law or regulation,
any provision of our amended and restated Memorandum and
Articles of Association, any provision of any securities on
deposit or by reason of any act of God or war or other
circumstances beyond our control.
We and the depositary disclaim any liability by reason of any
exercise of, or failure to exercise, any discretion provided for
the deposit agreement or in our amended and restated Memorandum
and Articles of Association or in any provisions of securities
on deposit.
We and the depositary further disclaim any liability for any
action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting
ordinary shares for deposit, any holder of ADSs or authorized
representatives thereof, or any other person believed by either
of us in good faith to be competent to give such advice or
information.
We and the depositary also disclaim liability for the inability
by a holder to benefit from any distribution, offering, right or
other benefit which is made available to holders of ordinary
shares but is not, under the terms of the deposit agreement,
made available to you.
We and the depositary may rely without any liability upon any
written notice, request or other document believed to be genuine
and to have been signed or presented by the proper parties.
We and the depositary also disclaim liability for any
consequential or punitive damages for any breach of the terms of
the deposit agreement.
132
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Convert the foreign currency to the extent practical and lawful
and distribute the U.S. dollars to the holders for whom the
conversion and distribution is lawful and practical.
Distribute the foreign currency to holders for whom the
distribution is lawful and practical.
Hold the foreign currency (without liability for interest) for
the applicable holders.
133
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134
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135
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PRC
taxation on us
PRC
taxation of our overseas shareholders
136
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certain financial institutions;
dealers or traders in securities who use a
mark-to-market
method of tax accounting;
137
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persons holding ordinary shares or ADSs as part of a hedging
transaction, straddle, wash sale, conversion transaction or
integrated transaction or persons entering into a constructive
sale with respect to the ordinary shares or ADSs;
persons whose functional currency for U.S. federal income
tax purposes is not the U.S. dollar;
entities classified as partnerships for U.S. federal income
tax purposes;
tax-exempt entities, including individual retirement
accounts or Roth IRAs;
persons that own or are deemed to own ten percent or more of our
voting stock; or
persons holding shares in connection with a trade or business
conducted outside of the United States.
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, any
state therein or the District of Columbia; or
an estate or trust the income of which is subject to
U.S. federal income taxation regardless of its source.
138
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Taxation
of Distributions
Sale
or Other Disposition of Ordinary Shares or ADSs
Passive
Foreign Investment Company Rules
139
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Information
Reporting and Backup Withholding
140
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Number of ADSs
9,000,000
No Exercise
Full Exercise
US$
US$
US$
US$
141
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142
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143
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than A43,000,000 and
(3) an annual net turnover of more than A50,000,000, as
shown in its last annual or consolidated accounts;
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the representatives for any such
offer;
or in any other circumstances which do not require the
publication by the company of a prospectus pursuant to
Article 3 of the Prospectus Directive.
144
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145
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a corporation (which is not an accredited investor as defined in
Section 4A of the SFA) the sole business of which is to
hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited
investor; or
a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary of the
trust is an individual who is an accredited investor,
to an institutional investor (for corporations, under 274 of the
SFA) or to a relevant person defined in Section 275(2) of
the SFA, or to any person pursuant to an offer that is made on
terms that such shares, debentures and units of shares and
debentures of that corporation or such rights and interest in
that trust are acquired at a consideration of not less than
S$200,000 (or its equivalent in a foreign currency) for each
transaction, whether such amount is to be paid for in cash or by
exchange of securities or other assets, and further for
corporations, pursuant to Section 275(1A), and in
accordance with the conditions specified in Section 275 of
the SFA;
where no consideration is or will be given for the
transfer; or
where the transfer is by operation of law.
146
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US$
9,040
150,000
13,179
100,000
1,100,000
650,000
350,000
US$
2,372,219
147
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148
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149
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F-2
Table of Contents
CONSOLIDATED BALANCE SHEETS
(In Renminbi, except share and per share data, unless otherwise
stated)
As of December 31,
2007
2008
2009
2009
2009
2009
RMB
RMB
RMB
US$
RMB
US$
(Note 2)
(pro forma
(pro forma
Note 2)
Note 2)
173,635,533
183,245,953
270,587,296
39,641,263
270,587,296
39,641,263
23,649,851
5,597,087
500,000
73,250
500,000
73,250
4,474,877
12,561,853
15,157,758
2,220,624
15,157,758
2,220,624
7,710,712
5,383,680
4,632,338
678,641
4,632,338
678,641
39,933,563
76,146,217
69,618,106
10,199,110
69,618,106
10,199,110
9,525,296
22,650,516
8,883,092
1,301,380
8,883,092
1,301,380
11,832,305
12,101,324
28,974,813
4,244,835
28,974,813
4,244,835
11,129,810
12,237,797
18,272,303
2,676,908
18,272,303
2,676,908
281,891,947
329,924,427
416,625,706
61,036,011
416,625,706
61,036,011
465,186,042
957,406,825
1,028,266,722
150,641,926
1,028,266,722
150,641,926
21,451,215
21,968,917
20,394,760
2,987,849
20,394,760
2,987,849
15,691,670
19,550,138
18,452,163
2,703,257
18,452,163
2,703,257
35,195,077
53,475,709
61,170,258
8,961,493
61,170,258
8,961,493
16,629,545
50,614,278
36,221,906
5,306,539
36,221,906
5,306,539
836,045,496
1,432,940,294
1,581,131,515
231,637,075
1,581,131,515
231,637,075
Liabilities, mezzanine equity and equity (deficit)
37,800,000
80,000,000
-
-
-
-
-
2,000,000
57,000,000
8,350,547
57,000,000
8,350,547
83,778,041
182,802,970
141,570,710
20,740,226
141,570,710
20,740,226
15,852,646
1,508,860
927,584
135,892
927,584
135,892
13,282,933
33,754,970
29,596,685
4,335,939
29,596,685
4,335,939
3,710,888
16,007,757
43,203,003
6,329,276
43,203,003
6,329,276
68,451,945
147,140,993
89,383,392
13,094,741
89,383,392
13,094,741
3,008,467
5,128,662
3,869,445
566,877
3,869,445
566,877
8,536,094
-
-
-
-
-
234,421,014
468,344,212
365,550,819
53,553,498
365,550,819
53,553,498
-
27,500,000
80,000,000
11,720,066
80,000,000
11,720,066
46,084,073
138,207,438
174,775,327
25,604,730
174,775,327
25,604,730
3,403,163
16,141,135
31,557,934
4,623,263
31,557,934
4,623,263
3,619,012
8,246,385
20,452,463
2,996,303
20,452,463
2,996,303
5,534,566
6,938,951
6,538,231
957,856
6,538,231
957,856
293,061,828
665,378,121
678,874,774
99,455,716
678,874,774
99,455,716
F-3
Table of Contents
CONSOLIDATED BALANCE SHEETS
(In Renminbi, except share and per share data, unless otherwise
stated)
As of December 31,
2007
2008
2009
2009
2009
2009
RMB
RMB
RMB
US$
RMB
US$
(Note 2)
(pro forma
(pro forma
Note 2)
Note 2)
437,829,389
796,803,452
796,803,452
116,732,365
-
-
41,792
41,792
46,490
6,811
124,918
18,300
34,136
34,136
34,136
5,001
-
-
260,251,508
265,066,530
351,994,132
51,567,431
1,148,753,292
168,293,308
(151,838,975
)
(288,001,442
)
(245,456,912
)
(35,959,641
)
(245,456,912
)
(35,959,641
)
(5,667,361
)
(12,493,880
)
(12,529,459
)
(1,835,576
)
(12,529,459
)
(1,835,576
)
102,821,100
(35,352,864
)
94,088,387
13,784,026
890,891,839
130,516,392
2,333,179
6,111,585
11,364,902
1,664,968
11,364,902
1,664,968
105,154,279
(29,241,279
)
105,453,289
15,448,994
902,256,741
132,181,359
836,045,496
1,432,940,294
1,581,131,515
231,637,075
1,581,131,515
231,637,075
F-4
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Renminbi, except share and per share data,
unless otherwise stated)
Year Ended December 31
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
248,198,634
797,814,566
1,288,897,954
188,824,617
1,209,782
12,039,268
44,964,749
6,587,373
249,408,416
809,853,834
1,333,862,703
195,411,990
14,103,419
45,605,227
73,671,579
10,792,947
235,304,997
764,248,607
1,260,191,124
184,619,043
228,361,572
687,364,048
1,004,472,153
147,156,002
17,581,275
40,810,261
57,818,168
8,470,409
65,653,021
81,665,318
83,665,425
12,257,054
61,019,864
108,062,318
37,821,018
5,540,811
372,615,732
917,901,945
1,183,776,764
173,424,276
(137,310,735
)
(153,653,338
)
76,414,360
11,194,767
1,219,045
3,786,416
1,870,177
273,983
-
1,248,509
8,787,096
1,287,317
(145,096
)
(13,883,784
)
(59,677
)
(8,743
)
5,235,236
8,536,094
-
-
(131,001,550
)
(156,463,121
)
69,437,764
10,172,690
(17,262,118
)
(23,879,778
)
17,989,675
2,635,502
(113,739,432
)
(132,583,343
)
51,448,089
7,537,188
(2,116,309
)
3,579,124
8,903,559
1,304,379
(111,623,123
)
(136,162,467
)
42,544,530
6,232,809
(17,499,012
)
-
-
-
(129,122,135
)
(136,162,467
)
42,544,530
6,232,809
(2.85
)
(2.52
)
0.24
0.03
(2.85
)
(2.52
)
0.23
0.03
45,248,223
54,071,135
57,562,440
57,562,440
45,248,223
54,071,135
183,631,885
183,631,885
0.24
0.03
0.23
0.03
179,621,359
179,621,359
183,631,885
183,631,885
F-5
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(DEFICIT) AND COMPREHENSIVE INCOME (LOSS)
(In Renminbi, except share and per share data, unless otherwise
stated)
Accumulated
Ordinary
Series A
Additional
Other
Shares
Preferred Shares
Paid-in
Accumulated
Comprehensive
Noncontrolling
Total
Comprehensive
Share
Amount
Share
Amount
Capital
deficit
Income (loss)
interest
equity (deficit)
income (loss)
40,000,000
31,045
40,000,000
31,045
144,648,748
(40,740,038
)
755,675
546,487
105,272,962
-
-
-
-
-
524,186
(755,675
)
-
(231,489
)
-
-
-
-
1,552,260
-
-
-
1,552,260
4,000,000
3,091
4,000,000
3,091
37,976,801
-
-
-
37,982,983
7,840,001
5,973
-
-
76,180,000
-
-
-
76,185,973
1,843,500
1,389
-
-
9,201,288
-
-
518,001
9,720,678
387,634
294
-
-
8,191,423
-
-
-
8,191,717
-
-
-
-
-
-
-
3,385,000
3,385,000
-
-
-
-
-
(111,623,123
)
-
(2,116,309
)
(113,739,432
)
(111,623,123
)
-
-
-
-
(17,499,012
)
-
-
-
(17,499,012
)
-
-
-
-
-
-
(5,667,361
)
-
(5,667,361
)
(5,667,361
)
54,071,135
41,792
44,000,000
34,136
260,251,508
(151,838,975
)
(5,667,361
)
2,333,179
105,154,279
(117,290,484
)
-
-
-
-
4,815,022
-
-
-
4,815,022
-
-
-
-
-
-
-
580,000
580,000
-
-
-
-
-
-
-
627,615
627,615
-
-
-
-
-
(136,162,467
)
-
3,579,124
(132,583,343
)
(136,162,467
)
-
-
-
-
-
-
-
(1,008,333
)
(1,008,333
)
-
-
-
-
-
-
(6,826,519
)
-
(6,826,519
)
(6,826,519
)
54,071,135
41,792
44,000,000
34,136
265,066,530
(288,001,442
)
(12,493,880
)
6,111,585
(29,241,279
)
(142,988,986
)
6,141,878
4,195
-
-
75,702,439
-
-
-
75,706,634
735,000
503
-
-
3,764,755
-
-
-
3,765,258
-
-
-
-
7,955,166
-
-
-
7,955,166
-
-
-
-
(494,758
)
-
-
(1,450,242
)
(1,945,000
)
-
-
-
-
-
42,544,530
-
8,903,559
51,448,089
42,544,530
-
-
-
-
-
-
-
(2,200,000
)
(2,200,000
)
-
-
-
-
-
-
(35,579
)
-
(35,579
)
(35,579
)
60,948,013
46,490
44,000,000
34,136
351,994,132
(245,456,912
)
(12,529,459
)
11,364,902
105,453,289
42,508,951
F-6
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Renminbi, except share and per share date,
unless otherwise stated)
Year Ended December 31,
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
(113,739,432
)
(132,583,343
)
51,448,089
7,537,188
14,785,372
4,815,022
7,955,166
1,165,438
32,901,981
90,835,965
145,571,393
21,326,330
(19,746,205
)
(34,126,710
)
7,957,146
1,165,728
500,000
423,368
1,252,275
183,459
(5,235,236
)
(8,536,094
)
-
-
30,974,828
92,123,365
36,567,889
5,357,226
-
-
1,947,873
285,365
1,191,869
(8,891,721
)
(2,848,180
)
(417,261
)
(27,492,705
)
(35,792,771
)
6,528,111
956,374
(7,612,112
)
(12,823,253
)
13,767,424
2,016,939
-
-
374,203
54,821
38,913,118
2,133,771
(16,873,489
)
(2,471,980
)
(26,100,307
)
(18,280,632
)
(8,694,549
)
(1,273,759
)
(5,303,367
)
(8,938,700
)
4,254,720
623,320
567,611
668,275
(581,276
)
(85,157
)
10,313,853
20,023,538
(4,158,285
)
(609,192
)
6,319,058
25,032,969
42,612,045
6,242,700
(3,372,300
)
3,125,029
(1,994,232
)
(292,157
)
2,409,901
2,120,195
(1,259,217
)
(184,476
)
1,470,369
4,934,203
12,512,907
1,833,152
(68,253,704
)
(13,737,524
)
296,340,013
43,414,058
(257,701,910
)
(469,501,431
)
(263,775,540
)
(38,643,335
)
(2,132,000
)
(848,077
)
(1,005,300
)
(147,277
)
-
-
3,280,000
480,523
(2,024,152
)
(1,619,753
)
-
-
1,493,729
2,327,032
377,139
55,251
(23,649,850
)
18,052,764
5,097,087
746,727
(284,014,183
)
(451,589,465
)
(256,026,614
)
(37,508,111
)
F-7
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Renminbi, except share and per share date, unless otherwise
stated)
Year Ended December 31,
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
(14,923,921
)
-
-
-
1,552,260
-
-
-
76,185,973
-
24,432,215
3,579,340
-
-
30,512,946
4,470,172
310,383,483
270,804,804
-
-
86,321,354
74,274,859
-
-
30,472,000
-
-
-
-
-
3,765,258
551,613
158,220,000
262,200,000
150,000,000
21,975,124
(157,920,000
)
(220,000,000
)
(230,000,000
)
(33,695,190
)
-
30,000,000
142,000,000
20,803,118
-
(500,000
)
(34,500,000
)
(5,054,279
)
15,124,635
6,749,121
14,215,330
2,082,558
(4,823,135
)
(3,483,400
)
(7,930,550
)
(1,161,832
)
(716,993
)
-
(1,945,000
)
(284,944
)
(2,400,000
)
-
-
-
(1,554,165
)
(402,861
)
-
-
3,385,000
580,000
-
-
-
105,264,538
-
-
-
(42,000,000
)
(42,503,065
)
(6,226,734
)
-
(1,008,333
)
(2,200,000
)
(322,302
)
-
-
1,216,389
178,201
499,306,491
482,478,728
47,063,523
6,894,845
(6,675,561
)
(7,541,319
)
(35,579
)
(5,213
)
140,363,043
9,610,420
87,341,343
12,795,579
33,272,490
173,635,533
183,245,953
26,845,684
173,635,533
183,245,953
270,587,296
39,641,263
3,680,512
7,840,117
10,473,755
1,534,414
423,842
6,306,496
11,315,848
1,657,781
14,692,432
-
-
-
61,854
-
-
-
37,979,892
-
-
-
30,803,215
-
-
-
-
13,894,400
-
-
8,366,787
-
-
-
9,201,288
-
-
-
16,030,885
-
-
-
73,629,452
170,897,262
125,410,282
18,372,710
-
-
20,761,473
3,041,573
F-8
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
1.
ORGANIZATION
AND PRINCIPAL ACTIVITIES
F-9
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
1.
ORGANIZATION
AND PRINCIPAL ACTIVITIES (CONTINUED)
Percentage of
Date of
Place of
Ownership
or acquisition
incorporation
100
%
October 22, 2008
Hong Kong Special Administrative region of PRC
100
%
November 17, 2004
PRC
100
%
March 3, 2006
PRC
100
%
January 16, 2008
PRC
100
%
April 12, 2007
PRC
Leased-and-operated
hotels
Franchised-and-managed
hotels
F-10
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES
Basis
of presentation
Basis
of consolidation
Use of
estimates
Cash
and cash equivalents
Restricted
cash
F-11
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Accounts
receivable, net of allowance
Inventories
Property
and equipment, net
over the shorter of the lease term or their estimated useful
lives
40 years
3-5 years
5 years
Intangible
assets, net and unfavorable lease
Goodwill
F-12
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Goodwill
(continued)
Impairment
of long-lived assets
Accruals
for customer loyalty program
F-13
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Accruals
for customer loyalty program (continued)
Deferred
revenue
Revenue
recognition
Business
tax and related taxes
F-14
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Advertising
and promotional expenses
Government
grants
Leases
Capitalization
of interest
Income
taxes
Foreign
currency translation and comprehensive loss
F-15
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Foreign
currency translation and comprehensive loss
(continued)
Concentration
of credit risk
Fair
value
F-16
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Fair
value (continued)
Warrants
Share-based
compensation
At December 31,
2007
2008
2009
23,938
115,576
523,208
107,616
178,090
465,239
14,653,818
4,521,356
6,966,719
14,785,372
4,815,022
7,955,166
Earnings
(Loss) per share
F-17
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Earnings
(Loss) per share (continued)
Segment
reporting
Recently
issued accounting pronouncements
Future
Adoption of Accounting Standards
F-18
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Future
Adoption of Accounting Standards (continued)
F-19
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
2.
SUMMARY
OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Future
Adoption of Accounting Standards (continued)
Unaudited
pro forma information
Unaudited
pro forma net earnings per share
Translation
into United States Dollars
3.
ACQUISITIONS
(i) Yiju
F-20
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
3.
ACQUISITIONS
(CONTINUED)
(i) Yiju
(continued)
Amortization period
7,288,686
(40,751,037
)
48,144,045
5-10 years
15,184,140
remaining lease term
12,503,372
(786,917
)
remaining lease term
(3,599,306
)
37,982,983
(ii) Others
2007
2008
11,517,502
4,230,000
9,202,677
-
20,720,179
4,230,000
F-21
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
3.
ACQUISITIONS
(CONTINUED)
(ii) Others
(continued)
Amortization
2007
2008
period
19,174,542
3,539,708
(44,704,897
)
(12,152,725
)
41,138,602
8,297,038
5-10 years
5,110,772
1,753,501
remaining lease term
357,413
-
3,188,298
3,858,468
(1,536,980
)
-
remaining lease term
(1,250,862
)
(438,375
)
(756,709
)
(627,615
)
20,720,179
4,230,000
(iii) Pro
forma (unaudited)
Year ended
December 31,
2007
(Unaudited)
262,850,688
(136,312,072
)
(3.01
)
(3.01
)
F-22
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
3.
ACQUISITIONS
(CONTINUED)
(iv)
In
2009 the Group acquired noncontrolling interests in five
existing subsidiaries for cash consideration of RMB1,945,000.
The acquisitions of the noncontroling interests were accounted
for as equity transactions. The difference between the purchase
consideration and the related carrying value of the
noncontrolling interests amount of RMB494,758 was recorded as a
reduction of additional paid-in capital.
4.
PROPERTY
AND EQUIPMENT, NET
As of December 31,
2007
2008
2009
11,859,649
11,859,649
11,859,649
351,378,761
901,755,476
1,096,753,728
73,271,951
157,911,986
182,790,955
552,060
191,967
191,967
437,062,421
1,071,719,078
1,291,596,299
(46,933,302
)
(135,992,221
)
(277,529,412
)
390,129,119
935,726,857
1,014,066,887
75,056,923
21,679,968
14,199,835
465,186,042
957,406,825
1,028,266,722
F-23
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
5.
INTANGIBLE
ASSETS, NET AND UNFAVORABLE LEASE
As of December 31,
2007
2008
2009
20,294,912
22,048,413
21,538,254
2,132,000
2,980,077
3,985,377
22,426,912
25,028,490
25,523,631
(975,697
)
(3,059,573
)
(5,128,871
)
21,451,215
21,968,917
20,394,760
As of December 31,
2007
2008
2009
2,323,897
2,323,897
2,323,897
(175,255
)
(482,084
)
(788,913
)
2,148,642
1,841,813
1,534,984
Amortization for
Amortization for
Net
intangible assets
unfavorable lease
Amortization
2,202,306
(306,829
)
1,895,477
2,202,306
(306,829
)
1,895,477
2,198,827
(306,829
)
1,891,998
2,152,766
(208,180
)
1,944,586
2,028,240
(167,806
)
1,860,434
9,610,315
(238,511
)
9,371,804
20,394,760
(1,534,984
)
18,859,776
F-24
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
6.
GOODWILL
Gross
Accumulated
Net
Amount
Impairment Loss
Amount
-
-
-
15,691,670
-
15,691,670
-
-
-
15,691,670
-
15,691,670
3,858,468
-
3,858,468
-
-
-
19,550,138
-
19,550,138
-
-
-
-
(1,097,975
)
(1,097,975
)
19,550,138
(1,097,975
)
18,452,163
7.
DEBT
As of December 31,
2007
2008
2009
37,800,000
80,000,000
-
-
2,000,000
57,000,000
37,800,000
82,000,000
57,000,000
-
27,500,000
80,000,000
37,800,000
109,500,000
137,000,000
F-25
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
7.
DEBT
(CONTINUED)
57,000,000
80,000,000
137,000,000
8.
ACCRUED
EXPENSES AND OTHER CURRENT LIABILITIES
As of December 31,
2007
2008
2009
-
63,264,538
-
6,529,795
8,450,430
12,471,140
1,160,288
6,271,534
1,875,817
21,902,401
25,168,122
31,452,902
11,986,188
18,073,418
11,108,184
17,543,265
10,392,775
11,562,013
3,622,436
8,881,883
12,235,690
5,707,572
6,638,293
8,677,646
68,451,945
147,140,993
89,383,392
F-26
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
9.
CONVERTIBLE
NOTES
10.
PREFERRED
SHARES, WARRANT I and WARRANT II
Series B Shares
Warrant I
Warrant II
Proceeds
29,008,007
10,565,952
3,136,001
RMB281,866,019 (US$37,000,003
)
3,136,002
1,142,266
-
RMB 30,472,014 (US$4,000,001
)
3,729,526
1,358,452
-
-
35,873,535
13,066,670
3,136,001
RMB312,338,033 (US$41,000,004
)
F-27
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
10.
PREFERRED
SHARES, WARRANT I and WARRANT II (CONTINUED)
Dividends
Voting
Rights
Conversion
F-28
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
10.
PREFERRED
SHARES, WARRANT I and WARRANT II (CONTINUED)
Redemption
Liquidation
Preferences
Investor
Put Option
Warrant I
Warrant II
1 year
1 year
45.386
%
45.386
%
-
-
5.329
%
5.329
%
F-29
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
10.
PREFERRED
SHARES, WARRANT I and WARRANT II (CONTINUED)
Warrant I
Warrant II
Warrant III*
Proceeds
1,142,266
3,136,001
4,704,001
RMB86,321,354 (US$
11,748,367
)
7,069,778
-
-
RMB74,274,859 (US$
10,821,087
)
F-30
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
10.
PREFERRED
SHARES, WARRANT I and WARRANT II (CONTINUED)
Amount
Share
(in Renminbi)
-
-
32,144,009
310,383,483
3,729,526
30,803,215
-
(15,544,462
)
8,982,268
86,321,354
-
8,366,787
-
17,499,012
44,855,803
437,829,389
24,826,671
270,804,804
1,306,667
13,894,400
7,069,778
74,274,859
78,058,919
796,803,452
78,058,919
796,803,452
11.
ORDINARY
SHARES and WARRANT III
1 year
45.386
%
-
5.329
%
F-31
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
11.
ORDINARY
SHARES and WARRANT III (CONTINUED)
12.
HOTEL
OPERATING COSTS
Year Ended December 31,
2007
2008
2009
94,035,579
263,332,528
418,543,806
18,751,449
59,476,726
90,034,744
34,411,037
137,230,935
169,248,048
33,234,234
92,838,032
141,599,824
35,597,064
82,662,332
119,055,974
12,332,209
51,823,495
65,989,757
228,361,572
687,364,048
1,004,472,153
13.
PRE-OPENING
EXPENSES
F-32
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
13.
PRE-OPENING
EXPENSES (CONTINUED)
Year Ended December 31,
2007
2008
2009
41,515,191
77,764,122
29,906,758
11,585,041
16,401,710
3,584,149
7,919,632
13,896,486
4,330,111
61,019,864
108,062,318
37,821,018
14.
SHARE-BASED
COMPENSATION
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009
(In Renminbi, except share and per share data, unless otherwise
stated)
14.
SHARE-BASED
COMPENSATION (CONTINUED)
2007
2008
2009
2.5
2.5
2.5
5.12 to 5.30%
5.22 to 5.58%
3.95 to 4.58%
41.38 to 47.61%
41.77 to 43.30%
52.33 to 55.12%
-
-
-
10 years
10 years
10 years
Weighted-
Weighted-average
Number of
average
remaining
Aggregate
options
exercise price
contractual life
intrinsic value
US$
Years
US$
12,677,410
0.92
6,305,975
1.53
(281,912
)
1.30
(735,000
)
0.75
17,966,473
1.13
7.01
19,695,659
16,169,826
1.13
7.01
17,726,094
8,664,265
0.70
7.28
12,839,688
F-34
Table of Contents
15.
EARNINGS
(LOSS) PER SHARE
Year Ended December 31,
2007
2008
2009
(129,122,135
)
(136,162,467
)
13,634,052
-
-
28,910,478
(129,122,135
)
(136,162,467
)
42,544,530
45,248,223
54,071,135
57,562,440
-
-
4,010,526
-
-
122,058,919
45,248,223
54,071,135
183,631,885
(2.85
)
(2.52
)
0.24
(2.85
)
(2.52
)
0.23
57,562,440
122,058,919
179,621,359
4,010,526
183,631,885
0.24
0.23
Year Ended December 31,
2007
2008
2009
44,000,000
44,000,000
-
44,855,803
78,058,919
-
11,924,404
-
-
11,785,340
12,677,410
11,260,935
112,565,547
134,736,329
11,260,935
F-35
Table of Contents
16.
INCOME
TAXES
Cayman
Islands
Hong
Kong
PRC
As of December 31,
2007
2008
2009
2,484,087
10,246,932
10,032,529
(19,746,205
)
(34,126,710
)
7,957,146
(17,262,118
)
(23,879,778
)
17,989,675
F-36
Table of Contents
16.
INCOME
TAXES (CONTINUED)
Year
Ended
December 31,
2007
2008
2009
33
%
25
%
25
%
(8
)%
(1
)%
3
%
(2
)%
(2
)%
1
%
(9
)%
-
-
(1
)%
(7
)%
(3
)%
13
%
15
%
26
%
As of December 31,
2007
2008
2009
8,796,195
61,143,357
45,046,819
14,403,598
344,433
1,341,553
1,171,698
5,602,416
11,346,999
5,442,259
7,320,959
7,756,106
329,437
278,057
226,677
-
105,842
168,911
290,072
1,567,884
468,954
(2,673,904
)
(13,510,873
)
(11,861,810
)
27,759,355
62,852,075
54,494,209
4,628,955
4,630,054
4,100,055
905,611
2,308,897
2,438,176
5,534,566
6,938,951
6,538,231
11,129,810
12,237,797
18,272,303
16,629,545
50,614,278
36,221,906
27,759,355
62,852,075
54,494,209
-
-
-
5,534,566
6,938,951
6,538,231
5,534,566
6,938,951
6,538,231
F-37
Table of Contents
16.
INCOME
TAXES (CONTINUED)
Future reversals of existing taxable temporary differences;
Further taxable income exclusive of reversing temporary
differences and carryforwards;
Future taxable income arising from implementing tax planning
strategies.
17.
MAINLAND
CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATON
18.
RESTRICTED
NET ASSETS
F-38
Table of Contents
19.
RELATED
PARTY TRANSACTIONS AND BALANCES
Related Party
Nature of the party
Commercial leasing business
Controlled by Qi Ji
Commercial leasing business
Controlled by Qi Ji
Online travel services provider
Qi Ji is a director
Investment Company
Controlled by Qi Ji
Investment Company
Controlled by Qi Ji
Founder
Founder
(a) Related
party balances
At December 31,
2007
2008
2009
3,000,000
-
-
4,710,712
5,006,541
4,632,338
-
377,139
-
7,710,712
5,383,680
4,632,338
At December 31,
2007
2008
2009
840,585
1,508,860
927,584
14,609,200
-
-
402,861
-
-
15,852,646
1,508,860
927,584
F-39
Table of Contents
19.
RELATED
PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(a) Related
party balances (continued)
(b) Related
party transactions
Year Ended December 31,
2007
2008
2009
3,450,799
3,542,963
3,613,509
5,569,353
7,515,618
9,949,158
20.
COMMITMENTS
AND CONTINGENCIES
(a) Operating
lease commitments
459,778,942
461,692,798
469,555,727
463,524,584
465,113,186
2,884,821,462
5,204,486,699
(b) Purchase
Commitments
(c) Contingencies
F-40
Table of Contents
21.
SUBSEQUENT
EVENTS
F-41
Table of Contents
CHINA LODGING GROUP, LIMITED
FINANCIAL INFORMATION FOR PARENT COMPANY
BALANCE SHEETS
(In Renminbi, except share and per share data, unless otherwise
stated)
As of December 31,
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
123,643,114
5,516,776
8,847,298
1,296,136
-
13,669,200
13,654,400
2,000,381
136,564
-
51,827,668
7,592,796
123,779,678
19,185,976
74,329,366
10,889,313
428,349,063
765,868,852
817,568,539
119,774,469
552,128,741
785,054,828
891,897,905
130,663,782
-
1,075,237
-
-
2,942,158
22,529,003
1,006,068
147,391
8,536,094
-
-
-
11,478,252
23,604,240
1,006,068
147,391
437,829,389
796,803,452
796,803,452
116,732,365
41,792
41,792
46,490
6,811
34,136
34,136
34,136
5,001
260,251,508
265,066,530
351,994,132
51,567,431
(151,838,975
)
(288,001,442
)
(245,456,912
)
(35,959,641
)
(5,667,361
)
(12,493,880
)
(12,529,459
)
(1,835,576
)
102,821,100
(35,352,864
)
94,088,387
13,784,026
552,128,741
785,054,828
891,897,907
130,663,782
F-43
Table of Contents
CHINA LODGING GROUP, LIMITED
FINANCIAL INFORMATION FOR PARENT COMPANY
STATEMENTS OF OPERATIONS
(In Renminbi, except share and per share data, unless otherwise
stated)
Year Ended December 31
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
22,776,088
7,756,402
9,663,763
1,415,749
22,776,088
7,756,402
9,663,769
1,415,749
(22,776,088
)
(7,756,402
)
(9,663,769
)
(1,415,749
)
836,659
1,178,661
13,097
1,919
331,215
-
-
-
(1,740
)
(10,478,098
)
-
-
5,235,236
8,536,094
-
-
(94,585,975
)
(127,642,722
)
52,195,196
7,646,639
(111,623,123
)
(136,162,467
)
42,544,530
6,232,809
(17,499,012
)
-
-
-
(129,122,135
)
(136,162,467
)
42,544,530
6,232,809
F-44
Table of Contents
CHINA LODGING GROUP, LIMITED
FINANCIAL INFORMATION FOR PARENT COMPANY
STATEMENTS OF CASH FLOWS
(In Renminbi, except share and per share date, unless otherwise
stated)
Year Ended December 31,
2007
2008
2009
2009
RMB
RMB
RMB
US$
(Note 2)
(111,623,123
)
(136,162,467
)
42,544,530
6,232,809
14,785,372
4,815,022
7,955,166
1,165,438
(5,235,236
)
(8,536,094
)
-
-
94,585,975
127,642,722
(52,195,196
)
(7,646,639
)
331,215
-
-
-
(136,564
)
136,564
(487,056
)
(71,354
)
-
1,075,237
(1,075,237
)
(157,523
)
2,941,011
(2,677,694
)
(264,466
)
(38,744
)
(4,351,350
)
(13,706,710
)
(3,552,259
)
(516,013
)
(371,253,245
)
(465,162,510
)
(51,340,612
)
(7,521,442
)
(371,253,245
)
(465,162,510
)
(51,340,612
)
(7,521,442
)
(14,885,029
)
-
-
-
1,552,260
-
-
-
76,185,973
-
24,432,215
3,579,340
-
-
30,512,946
4,470,172
-
-
3,765,258
551,613
310,383,483
270,804,804
-
-
86,321,354
74,274,859
-
-
30,472,000
-
-
-
-
22,264,538
-
-
-
-
(1,503,065
)
(220,200
)
-
-
1,006,068
147,390
490,030,041
367,344,201
58,213,422
8,528,315
(5,667,361
)
(6,601,319
)
(20,029
)
(2,934
)
108,758,085
(118,126,338
)
3,330,522
487,924
14,885,029
123,643,114
5,516,776
808,212
123,643,114
5,516,776
8,847,298
1,296,136
13,715,546
-
-
-
61,854
-
-
-
37,979,892
-
-
-
30,803,215
-
-
-
. -
13,894,400
-
-
8,366,787
-
-
-
9,201,288
-
-
-
-
-
20,761,473
3,041,573
F-45
Table of Contents
CHINA LODGING GROUP, LIMITED
FINANCIAL INFORMATION FOR PARENT COMPANY
F-46
Table of Contents
(In Renminbi)
Charge
Charge to
taken
Balance at end
Balance at
costs and
against
of
Beginning of year
expenses
allowance
year
-
500,000
-
500,000
500,000
423,368
-
923,368
923,368
1,252,275
-
2,175,643
1,082,187
1,591,717
-
2,673,904
2,673,904
10,836,969
-
13,510,873
13,510,873
8,472,009
(10,121,072
)
11,861,810
F-47
Table of Contents
Your home on the journey HANTING INNS & HOTELS
Table of Contents
Table of Contents
ITEM 6
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
ITEM 7
RECENT
SALES OF UNREGISTERED SECURITIES
II-1
Table of Contents
Underwriting
Date of Sale or
Number of
Consideration in
Discount and
Purchaser
Issuance
Securities
U.S. dollars
Commission
February 4, 2007
40,000,000, of
which 20,000,000
held on behalf of
Qi Ji and
20,000,000 held on
behalf of Tongtong
Zhao
US$20,000,000 ((i)
in the form of 100%
of registered
capital of HanTing
Xingkong
(Shanghai)
Hotel Management
Co., Ltd. and
Shanghai HanTing Hotel
Management Group, Ltd.,
representing 100%
shares of such
companies, and (ii)
payment of
US$200,000 in cash
to us)
-
February 4, 2007
4,000,000
US$2,000,000 (in
the form of 100%
registered capital
of Yiju (Shanghai)
Hotel Management
Co., Ltd.
-
June 20, 2007
466,480
US$594,999.90
-
June 20, 2007
11,446,755
US$14,600,450.47
-
June 20, 2007
1,414,768
US$1,804,550.73
-
June 20, 2007
13,328,003
US$17,000,001.11
-
June 20, 2007
1,568,001
US$2,000,000.96
-
June 20, 2007
1,179,450
US$1,504,400.27
-
June 20, 2007
129,517
US$165,200.23
-
June 20, 2007
259,034
US$330,400.46
-
June 20,2007
4,687,033
US$5,428,408.85
(including
US$2,312,100.43 in
cash and
US$3,116,308.42 in
cancellation of an
outstanding
convertible
promissory note)
-
June 20, 2007
957,840
US$1,109,347.18
(including
US$472,499.41 in
cash and
US$636,847.77 in
cancellation of an
outstanding
convertible
promissory note)
-
June 20, 2007
436,654
US$505,722.19
(including
US$215,400.48 in
cash and
US$290,321.71 in
cancellation of an
outstanding
convertible
promissory note)
-
December 21, 2007
4,704,001
US$6,000,000
II-2
Table of Contents
Underwriting
Date of Sale or
Number of
Consideration in
Discount and
Purchaser
Issuance
Securities
U.S. dollars
Commission
December 21, 2007
1,440,865
US$1,837,837.72
-
December 21, 2007
571,133
US$874,183.02
-
December 21, 2007
429,606
US$657,560.10
-
December 21, 2007
47,176
US$72,208.15
-
December 21, 2007
94,351
US$144,414.77
-
December 30, 2007
50,430
US$64,323.97
December 30, 2007
1,237,487
US$1,578,427.04
-
December 30, 2007
152,948
US$195,086.70
-
December 30, 2007
195,966
US$249,956.59
-
December 30, 2007
40,048
US$51,081.62
-
December 30, 2007
18,257
US$23,286.99
-
February 5, 2008
7,513,335
US$11,500,000
-
February 5, 2008
3,266,667
US$5,000,000
-
February 5, 2008
980,000
US$1,500,000
-
March 15, 2008
11,760,002
US$18,000,000
-
May 31, 2008
1,306,667
US$2,000,000 (all
in the form of
assignment of loan
to us)
-
May 31, 2008
1,306,667
US$2,000,000
-
July, 4 2008
3,160,213
US$4,837,059.97
-
July 4, 2008
347,027
US$531,163.46
-
July 4, 2008
694,054
US$1,062,326.92
-
July 4, 2008
1,707,217
US$2,613,086.83
-
July 4, 2008
348,886
US$534,009.10
-
July 4, 2008
159,048
US$243,440.78
-
July 4, 2008
653,333
US$1,000,000
-
January 4, 2007
1
US$0.0001
-
February 4, 2007
3,999,999
US$400
-
February 4, 2007
25,000,000
US$2,500
-
February 4, 2007
15,000,000
US$1,500
-
June 20, 2007
7,840,001
US$9,999,996.68
-
Yongbin Cai, Yangqing Shi, Wenying Yang and Hui Zhu
August 14, 2007
1,550,533
US$1,977,718.06
Jihua Ma, Shengli Wang and Rongying Xue
December 21, 2007
680,601
US$1,129,864.07
May 22, 2009
811,539
US$1,464,236
-
May 22, 2009
807,418
US$1,456,800
-
May 22, 2009
554,241
US$1,000,000
-
May 22, 2009
405,770
US$732,118
-
May 22, 2009
358,435
US$646,713
-
May 22, 2009
243,462
US$439,271
-
May 22, 2009
113,616
US$204,993
-
May 22, 2009
81,154
US$146,424
-
August 6, 2009
735,000
US$551,250
August 6, 2009
1,982,509
US$3,576,981
-
August 6, 2009
482,866
US$871,220
-
August 6, 2009
162,308
US$292,847
-
August 6, 2009
138,560
US$250,000
-
February 8, 2010
1,500,000
US$2,310,000
-
II-3
Table of Contents
Underwriting
Date of Sale or
Number of
Consideration in
Discount and
Purchaser
Issuance
Securities
U.S. dollars
Commission
February 8, 2010
200,000
US$308,000
-
March 8, 2010
3,276,875
US$3,264,625
-
March 8, 2010
4,431,790
US$2,756,740
-
(1)
Include Series B preferred shares issued as a result of the
exercise of warrants.
(2)
Include ordinary shares issued as a result of the exercise of
warrants and options.
Number of Series B
Preferred Shares
Per Share Exercise
Purchaser
Covered
Price
Current Status
Chengwei Partners, L.P.
169,912
US$1.530612
Exercised in full
Chengwei Ventures Evergreen Fund, L.P.
4,169,396
US$1.530612
Exercised in full
Chengwei Ventures Evergreen Advisors Fund, LLC
515,319
US$1.530612
Exercised in full
CDH Courtyard Limited
4,854,626
US$1.530612
Expired. Not exercised.
Pinpoint Capital 2006 A Limited
571,133
US$1.530612
Exercised in full
Northern Light Venture Fund, L.P.
429,606
US$1.530612
Exercised in full
Northern Light Partners Fund, L.P.
47,176
US$1.530612
Exercised in full
Northern Light Strategic Fund, L.P.
94,351
US$1.530612
Exercised in full
IDG-Accel China Growth Fund L.P.
1,707,217
US$1.530612
Exercised in full
IDG-Accel China Growth Fund-A L.P.
348,886
US$1.530612
Exercised in full
IDG-Accel China Investors L.P.
159,048
US$1.530612
Exercised in full
Chengwei Partners, L.P.
50,430
US$1.27551
Exercised in full
Chengwei Ventures Evergreen Fund, L.P.
1,237,487
US$1.27551
Exercised in full
Chengwei Ventures Evergreen Advisors Fund, LLC
152,948
US$1.27551
Exercised in full
CDH Courtyard Limited
1,440,865
US$1.27551
Exercised in full
IDG-Accel China Growth Fund L.P.
195,966
US$1.27551
Exercised in full
IDG-Accel China Growth Fund-A L.P.
40,048
US$1.27551
Exercised in full
IDG-Accel China Investors L.P.
18,257
US$1.27551
Exercised in full
Winner Crown Holdings Limited
4,704,001
US$1.27551
Exercised in full
Underwriting
Discount and
Purchaser
Principal Amount
Consideration
Commission
Growth Fund L.P.
US$3,082,800
US$3,082,800
-
Growth Fund-A L.P.
US$630,000
US$630,000
-
Investors L.P.
US$287,200
US$287,200
-
II-4
Table of Contents
Number of
Ordinary
Per Share
Purchaser
Shares Covered
Exercise Price
Current Status
Everlasting Investment Management Co., Ltd.
1,500,000
US$1.54
Exercised in full
Tongren Investment Holdings Limited
200,000
US$1.54
Exercised in full
ITEM 8
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
(a)
Exhibits
(b)
Financial Statement Schedules
ITEM 9
UNDERTAKINGS
II-5
Table of Contents
Executive Chairman of the Board of Directors
Chief Executive Officer
(principal executive officer)
Chief Financial Officer
(principal financial and accounting officer)
Director
Director
Independent Director
Independent Director
*By:
Attorney-in-fact
II-6
Table of Contents
Name:
Donald J. Puglisi
Title:
Managing Director
II-7
Table of Contents
Exhibit Number
Description
1
.1*
Form of Underwriting Agreement
3
.1
Amended and Restated Memorandum and Articles of Association of
the Registrant, as currently in effect
3
.2
Amended and Restated Memorandum and Articles of Association of
the Registrant, to become effective upon the completion of this
offering
4
.1
Form of the Registrants American Depositary Receipt
(included in Exhibit 4.3)
4
.2
Specimen Certificate for Ordinary Shares of the Registrant
4
.3
Form of Deposit Agreement among the Registrant, the Depositary
and all Holders and Beneficial Owners of the American Depositary
Shares issued thereunder
4
.4
Ordinary Share and Series A Preferred Share Purchase
Agreement, dated February 4, 2007
4
.5
Supplemental Agreement of Ordinary Share and Series A
Preferred Share Purchase Agreement, dated April 18, 2007
4
.6
Series A Preferred Shareholders Agreement, dated
February 4, 2007
4
.7
Series B Preferred Share Purchase Agreement, dated
June 20, 2007
4
.8
Amended and Restated Shareholders Agreement, dated June 20,
2007
4
.9
Form of Certificate of Warrant to Purchase Series B
Preferred Stock
4
.10
Form of Series B Convertible Preferred Shares Subscription
Agreement and its amendment
4
.11
Warrant for the Purchase of Shares of Common Stock of the
Registrant, dated January 8, 2010
4
.12
Warrant for the Purchase of Shares of Common Stock of the
Registrant, dated January 15, 2010
5
.1
Opinion of Conyers Dill & Pearman regarding the
validity of the ordinary shares being registered
8
.1
Opinion of Conyers Dill & Pearman regarding certain
Cayman Islands tax matters
8
.2
Opinion of Davis Polk & Wardwell LLP regarding certain
U.S. tax matters
10
.1
Amended and Restated 2007 Global Share Plan, amended and
restated as of December 12, 2007
10
.2
Amended and Restated 2008 Global Share Plan, amended and
restated as of October 31, 2008
10
.3
Amended and Restated 2009 Share Incentive Plan, amended and
restated as of October 1, 2009
10
.4
Form of Indemnification Agreement with the Registrants
Directors
10
.5
Form of Employment Agreement between the Registrant and
Executive Officers of the Registrant
10
.6
Facility Agreement between China Merchants Bank and HanTing
Xingkong (Shanghai) Hotel Management Co., Ltd., dated
June 19, 2009
10
.7
Fixed Assets Loan Agreement between the Industrial and
Commercial Bank of China and Shanghai HanTing Hotel Management
Group, Ltd. (formerly known as Lishan Senbao (Shanghai)
Investment Management Co., Ltd.), dated September 22, 2008
10
.8
Fixed Assets Loan Contract between the Industrial and Commercial
Bank of China and HanTing Xingkong (Shanghai) Hotel Management
Co., Ltd., dated January 4, 2010
10
.9
Subscription Agreement between the Registrant and Ctrip.com
International, Ltd., dated March 12, 2010
10
.10
Investor and Registration Rights Agreement between the
Registrant and Ctrip.com International, Ltd., dated
March 12, 2010
16
.1
Letter from Ernst & Young Hua Ming regarding change in
certifying accountant
21
.1
Subsidiaries of the Registrant
23
.1
Consent of Deloitte Touche Tohmatsu CPA Ltd.
23
.2
Consent of Conyers Dill & Pearman (included in
Exhibits 5.1 and 8.1)
23
.3
Consent of Davis Polk & Wardwell LLP (included in
Exhibit 8.2)
23
.4
Consent of Jun He Law Offices
23
.5
Consent of Shanghai Inntie Hotel Management Consulting Co., Ltd.
23
.6
Consent of Euromonitor International
23
.7
Consent of Smith Travel Research
23
.8
Consent of iResearch Consulting Group
23
.9
Consent of Min Fan
24
.1
Powers of Attorney (included on the signature page in
Part II of this registration statement)
99
.1
Code of Business Conduct and Ethics of the Registrant
II-8
1. | The name of the Company is China Lodging Group, Limited. | ||
2. | The Registered Office of the Company shall be at the offices of Cricket Square, Hutchins Drive, P.O.Box 2681, Grand Cayman KY1-1111, Cayman Islands. | ||
3. | Subject to the following provisions of this Memorandum, the objects for which the Company is established are unrestricted. | ||
4. | Subject to the following provisions of this Memorandum, the Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided by Section 27(2) of the Companies Law. | ||
5. | Nothing in this Memorandum shall permit the Company to carry on a business for which a licence is required under the laws of the Cayman Islands unless duly licensed. | ||
6. | The Company shall not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this clause shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands. | ||
7. | The liability of each member is limited to the amount from time to time unpaid on such members shares. | ||
8. | The authorized share capital of the Company is US$900,000 divided into 8,000,000,000 ordinary shares of par value US$0.0001 each and 1,000,000,000 preferred shares of par value US$0.0001 each, with the power for the Company, insofar as is permitted by law, to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Companies Law and the Articles of Association and to issue any part of its capital, whether |
original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference or otherwise shall be subject to the powers hereinbefore contained. | |||
9. | The Company may exercise the power contained in the Companies Law to deregister in the Cayman Islands and be registered by way of continuation in another jurisdiction. |
SUBJECT
Article No.
1
2
3
4-7
8-9
10-11
12-15
16-21
22-24
25-33
34-42
43-44
45
46-51
52-54
55
56-58
59-60
61-65
66-77
78-83
84
85
86
87
88-89
90-93
94-96
97-100
101-106
107-110
111-120
121-123
124-127
128
129
130
131
132
133-142
143
144-145
146
147-151
152-156
SUBJECT
Article No.
157-159
160
161-162
163
164
165
166
- 1 -
WORD
MEANING
the audit committee of the Company formed by the Board pursuant to Article
121) hereof, or any successor audit committee.
the independent auditor of the Company which shall be an internationally
recognized firm of independent accountants.
these Articles in their present form or as supplemented or amended or substituted
from time to time.
the board of directors of the Company or the directors present at a
meeting of directors of the Company at which a quorum is present.
the share capital from time to time of the Company.
in relation to the period of a notice, that period excluding the day when the
notice is given or deemed to be given and the day for which it is given or on which it
is to take effect.
a clearing house recognised by the laws of the jurisdiction in which the
shares of the Company (or depositary receipts therefor) are listed or quoted on a stock
exchange or interdealer quotation system in such jurisdiction.
China Lodging Group, Limited.
authority
a competent regulatory authority in the territory where
the shares of the Company (or depositary receipts therefor) are listed or quoted
on a stock exchange or interdealer quotation system in such territory.
- 2 -
WORD
MEANING
include debenture stock and debenture stockholder
respectively.
Exchange
the Global Select Market of The NASDAQ OMX Group, Inc.
dollars, the legal currency of the United States of America.
the Securities Exchange Act of 1934, as amended.
such office of the Company as the Directors may from time to time
determine to be the principal office of the Company.
The Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the
Cayman Islands.
a duly registered holder from time to time of the shares in the capital of the
Company.
a calendar month.
written notice unless otherwise specifically stated and as further defined in these
Articles.
the registered office of the Company for the time being.
a resolution shall be an ordinary resolution when it has been passed
by a simple majority of votes cast by such Members as, being entitled so to do, vote in
person or, in the case of any Member being a corporation, by its duly authorised
representative or, where proxies are allowed, by proxy at a general meeting of which
not less than five (5) clear days Notice has been duly given;
paid up or credited as paid up.
the principal register and where applicable, any branch register of Members to be
maintained at such place
within or outside the Cayman Islands as the Board shall
determine from time to time.
in respect of any class of share capital such place as the Board may
from time to time determine to keep a branch
- 3 -
WORD
MEANING
register of Members in respect of that
class of share capital and where (except in cases where the Board otherwise directs)
the transfers or other documents of title for such class of share capital are to be
lodged for registration and are to be registered.
the United States Securities and Exchange Commission.
common seal or any one or more duplicate seals of the Company (including a
securities seal) for use in the Cayman Islands or in any place outside the Cayman
Islands.
any person, firm or corporation appointed by the Board to perform any of the
duties of secretary of the Company and includes any assistant, deputy, temporary or
acting secretary.
a resolution shall be a special resolution when it has been passed by a
majority of not less than two-thirds of votes cast by such Members as, being entitled
so to do, vote in person or, in the case of such Members as are corporations, by their
respective duly authorised representative or, where proxies are allowed, by proxy at a
general meeting of which not less than five (5) clear days Notice, specifying (without
prejudice to the power contained in these Articles to amend the same) the intention to
propose the resolution as a special resolution, has been duly given. Provided that,
except in the case of an annual general meeting, if it is so agreed by a majority in
number of the Members having the right to attend and vote at any such meeting, being a
majority together holding not less than ninety-five per cent. (95%) in nominal value of
the shares giving that right and in the case of an annual general meeting, if it is so
agreed by all Members entitled to attend and vote thereat, a resolution may be proposed
and passed as a special resolution at a meeting of which less than five (5) clear days
Notice has been given;
a special resolution shall be effective for any purpose for
which an ordinary resolution is expressed to be
required under any provision of these Articles or the
Statutes.
the Law and every other law of the Legislature of the Cayman Islands for the time
being in force applying to or affecting the Company, its Memorandum of Association
and/or these Articles.
- 4 -
WORD | MEANING | |
|
||
year
|
a calendar year. |
(a) | words importing the singular include the plural and vice versa; | ||
(b) | words importing a gender include both gender and the neuter; | ||
(c) | words importing persons include companies, associations and bodies of persons whether corporate or not; | ||
(d) | the words: |
(i) | may shall be construed as permissive; | ||
(ii) | shall or will shall be construed as imperative; |
(e) | expressions referring to writing shall, unless the contrary intention appears, be construed as including printing, lithography, photography and other modes of representing words or figures in a visible form, and including where the representation takes the form of electronic display, provided that both the mode of service of the relevant document or notice and the Members election comply with all applicable Statutes, rules and regulations; | ||
(f) | references to any law, ordinance, statute or statutory provision shall be interpreted as relating to any statutory modification or re-enactment thereof for the time being in force; | ||
(g) | save as aforesaid words and expressions defined in the Statutes shall bear the same meanings in these Articles if not inconsistent with the subject in the context; | ||
(h) | references to a document being executed include references to it being executed under hand or under seal or by electronic signature or by any other method and references to a notice or document include a notice or document recorded or stored in any digital, electronic, electrical, magnetic or other retrievable form or medium and information in visible form whether having physical substance or not. |
- 5 -
(a) | increase its capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe; | ||
(b) | consolidate and divide all or any of its capital into shares of larger amount than its existing shares; | ||
(c) | without prejudice to the powers of the Board under Article 12 , divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions which in the absence of any such determination by the Company in general meeting, as the Directors may determine provided always that, for the avoidance of doubt, where a class of shares has been authorized by the Company no resolution of the Company in general meeting is required for the issuance of shares of that class and the Directors may issue shares of that class and determine such rights, privileges, conditions or restrictions attaching thereto as aforesaid, and further provided that where the Company issues shares which do not carry voting rights, the words non-voting shall appear in the designation of such shares and where the equity capital includes shares with different voting rights, the designation of each class of shares, other than those with the most favourable voting rights, must include the words restricted voting or limited voting; | ||
(d) | sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the Companys Memorandum of Association (subject, nevertheless, to the Law), and may by such resolution determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred, deferred or other rights or be subject to any such restrictions as compared with the other or others as the Company has power to attach to unissued or new shares; and |
- 6 -
(e) | cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled or, in the case of shares, without par value, diminish the number of shares into which its capital is divided. |
- 7 -
(a) | the necessary quorum (whether at a separate general meeting or at its adjourned meeting) shall be a person or persons or (in the case of a Member being a corporation) its duly authorized representative together holding or representing by proxy not less than one-third in nominal value of the issued shares of that class; | ||
(b) | every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him; and | ||
(c) | any holder of shares of the class present in person or by proxy or authorised representative may demand a poll. |
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- 9 -
- 10 -
- 11 -
- 12 -
(a) | requiring payment of the amount unpaid together with any interest which may have accrued and which may still accrue up to the date of actual payment; and | ||
(b) | stating that if the Notice is not complied with the shares on which the call was made will be liable to be forfeited. |
- 13 -
(a) | the name and address of each Member, the number and class of shares held by him and the amount paid or agreed to be considered as paid on such shares; | ||
(b) | the date on which each person was entered in the Register; and | ||
(c) | the date on which any person ceased to be a Member. |
- 14 -
- 15 -
(a) | a fee of such maximum sum as the Designated Stock Exchange may determine to be payable or such lesser sum as the Board may from time to time require is paid to the Company in respect thereof; | ||
(b) | the instrument of transfer is in respect of only one class of share; | ||
(c) | the instrument of transfer is lodged at the Office or such other place at which the Register is kept in accordance with the Law or the Registration Office (as the case may be) accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require to show the right of the transferor |
- 16 -
to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do); and |
(d) | if applicable, the instrument of transfer is duly and properly stamped. |
- 17 -
(a) | all cheques or warrants in respect of dividends of the shares in question, being not less than three in total number, for any sum payable in cash to the holder of such shares in respect of them sent during the relevant period in the manner authorised by the Articles have remained uncashed; | ||
(b) | so far as it is aware at the end of the relevant period, the Company has not at any time during the relevant period received any indication of the existence of the Member who is the holder of such shares or of a person entitled to such shares by death, bankruptcy or operation of law; and | ||
(c) | the Company, if so required by the rules governing the listing of shares on the Designated Stock Exchange, has given notice to, and caused advertisement in newspapers to be made in accordance with the requirements of, the Designated Stock Exchange of its intention to sell such shares in the manner required by the Designated Stock Exchange, and a period of three (3) months or such shorter period as may be allowed by the Designated Stock Exchange has elapsed since the date of such advertisement. |
- 18 -
(a) | in the case of a meeting called as an annual general meeting, by all the Members entitled to attend and vote thereat; and | ||
(b) | in the case of any other meeting, by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than ninety-five per cent. (95%) in nominal value of the issued shares giving that right. |
(a) | the declaration and sanctioning of dividends; |
- 19 -
(b) | consideration and adoption of the accounts and balance sheet and the reports of the Directors and Auditors and other documents required to be annexed to the balance sheet; | ||
(c) | the election of Directors; | ||
(d) | appointment of Auditors (where special notice of the intention for such appointment is not required by the Law) and other officers; | ||
(e) | the fixing of the remuneration of the Auditors, and the voting of remuneration or extra remuneration to the Directors; | ||
(f) | the granting of any mandate or authority to the Directors to offer, allot, grant options over or otherwise dispose of the unissued shares in the capital of the Company representing not more than twenty per cent. (20%) in nominal value of its existing issued share capital; and | ||
(g) | the granting of any mandate or authority to the Directors to repurchase securities of the Company. |
- 20 -
(a) | by the chairman of such meeting; or | ||
(b) | by at least three Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or | ||
(c) | by a Member or Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all Members having the right to vote at the meeting; or | ||
(d) | by a Member or Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right; or | ||
(e) | if required by the rules of the Designated Stock Exchange, by any Director or Directors who, individually or collectively, hold proxies in respect of shares |
- 21 -
representing five per cent. (5%) or more of the total voting rights at such meeting. |
- 22 -
(a) | any objection shall be raised to the qualification of any voter; or | ||
(b) | any votes have been counted which ought not to have been counted or which might have been rejected; or | ||
(c) | any votes are not counted which ought to have been counted; |
- 23 -
- 24 -
- 25 -
(a) | Ctrip shall have the right to appoint one (1) Director to the Board (the Ctrip Director); | ||
(b) | the Ctrip Director may only be removed or replaced by Ctrip; and |
- 26 -
(c) | Notwithstanding the foregoing, a person nominated by Ctrip to serve as the Ctrip Director must be accepted by a majority of the Board, in their reasonable discretion, before such nomination becomes effective. |
- 27 -
- 28 -
(a) | hold any other office or place of profit with the Company (except that of Auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine. Any remuneration (whether by way of salary, commission, participation in profits or otherwise) paid to any Director in respect of any such other office or place of profit shall be in addition to any remuneration provided for by or pursuant to any other Article; | ||
(b) | act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor) and he or his firm may be remunerated for professional services as if he were not a Director; | ||
(c) | continue to be or become a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of any other company promoted by the Company or in which the Company may be interested as a vendor, shareholder or otherwise and (unless |
- 29 -
otherwise agreed) no such Director shall be accountable for any remuneration, profits or other benefits received by him as a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of or from his interests in any such other company. Subject as otherwise provided by these Articles the Directors may exercise or cause to be exercised the voting powers conferred by the shares in any other company held or owned by the Company, or exercisable by them as Directors of such other company in such manner in all respects as they think fit (including the exercise thereof in favour of any resolution appointing themselves or any of them directors, managing directors, joint managing directors, deputy managing directors, executive directors, managers or other officers of such company) or voting or providing for the payment of remuneration to the director, managing director, joint managing director, deputy managing director, executive director, manager or other officers of such other company and any Director may vote in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or about to be, appointed a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in manner aforesaid. |
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(a) | he is a member or officer of a specified company or firm and is to be regarded as interested in any contract or arrangement which may after the date of the Notice be made with that company or firm; or | ||
(b) | he is to be regarded as interested in any contract or arrangement which may after the date of the Notice be made with a specified person who is connected with him; |
- 31 -
(a) | to give to any person the right or option of requiring at a future date that an allotment shall be made to him of any share at par or at such premium as may be agreed; | ||
(b) | to give to any Directors, officers or employees of the Company an interest in any particular business or transaction or participation in the profits thereof or in the general profits of the Company either in addition to or in substitution for a salary or other remuneration; and | ||
(c) | to resolve that the Company be deregistered in the Cayman Islands and continued in a named jurisdiction outside the Cayman Islands subject to the provisions of the Law. |
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- 33 -
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- 35 -
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(a) | of all elections and appointments of officers; | ||
(b) | of the names of the Directors present at each meeting of the Directors and of any committee of the Directors; | ||
(c) | of all resolutions and proceedings of each general meeting of the Members, meetings of the Board and meetings of committees of the Board and where there are managers, of all proceedings of meetings of the managers. | ||
(2) | Minutes shall be kept by the Secretary at the Office. |
- 37 -
(a) | any share certificate which has been cancelled at any time after the expiry of one (1) year from the date of such cancellation; | ||
(b) | any dividend mandate or any variation or cancellation thereof or any notification of change of name or address at any time after the expiry of two (2) years from the date such mandate variation cancellation or notification was recorded by the Company; | ||
(c) | any instrument of transfer of shares which has been registered at any time after the expiry of seven (7) years from the date of registration; |
- 38 -
(d) | any allotment letters after the expiry of seven (7) years from the date of issue thereof; and | ||
(e) | copies of powers of attorney, grants of probate and letters of administration at any time after the expiry of seven (7) years after the account to which the relevant power of attorney, grant of probate or letters of administration related has been closed; |
(a) | all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share |
- 39 -
in advance of calls shall be treated for the purposes of this Article as paid up on the share; and | |||
(b) | all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. |
- 40 -
(a) | that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the Members entitled thereto will be entitled to elect to receive such dividend (or part thereof if the Board so determines) in cash in lieu of such allotment. In such case, the following provisions shall apply: |
(i) | the basis of any such allotment shall be determined by the Board; | ||
(ii) | the Board, after determining the basis of allotment, shall give not less than ten (10) days Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective; | ||
(iii) | the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and | ||
(iv) | the dividend (or that part of the dividend to be satisfied by the allotment of shares as aforesaid) shall not be payable in cash on shares in respect whereof the cash election has not been duly exercised (the non-elected shares) and in satisfaction thereof shares of the relevant class shall be |
- 41 -
allotted credited as fully paid up to the holders of the non-elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and apply out of any part of the undivided profits of the Company (including profits carried and standing to the credit of any reserves or other special account, share premium account, capital redemption reserve other than the Subscription Rights Reserve) as the Board may determine, such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment and distribution to and amongst the holders of the non-elected shares on such basis; or |
(b) | that the Members entitled to such dividend shall be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. In such case, the following provisions shall apply: |
(i) | the basis of any such allotment shall be determined by the Board; | ||
(ii) | the Board, after determining the basis of allotment, shall give not less than ten (10) days Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective; | ||
(iii) | the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and | ||
(iv) | the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable in cash on shares in respect whereof the share election has been duly exercised (the elected shares) and in lieu thereof shares of the relevant class shall be allotted credited as fully paid up to the holders of the elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and apply out of any part of the undivided profits of the Company (including profits carried and standing to the credit of any reserves or other special account, share premium account, capital redemption reserve other than the Subscription Rights Reserve) as the Board may determine, such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment and distribution to and amongst the holders of the elected shares on such basis. |
(2) | (a) | The shares allotted pursuant to the provisions of paragraph (1) of this Article shall rank pari passu in all respects with shares of the same class (if any) then in issue save only as regards participation in the relevant dividend or in any other distributions, bonuses or rights paid, made, |
- 42 -
declared or announced prior to or contemporaneously with the payment or declaration of the relevant dividend unless, contemporaneously with the announcement by the Board of their proposal to apply the provisions of sub-paragraph (a) or (b) of paragraph (2) of this Article in relation to the relevant dividend or contemporaneously with their announcement of the distribution, bonus or rights in question, the Board shall specify that the shares to be allotted pursuant to the provisions of paragraph (1) of this Article shall rank for participation in such distribution, bonus or rights. | |||
(b) | The Board may do all acts and things considered necessary or expedient to give effect to any capitalisation pursuant to the provisions of paragraph (1) of this Article, with full power to the Board to make such provisions as it thinks fit in the case of shares becoming distributable in fractions (including provisions whereby, in whole or in part, fractional entitlements are aggregated and sold and the net proceeds distributed to those entitled, or are disregarded or rounded up or down or whereby the benefit of fractional entitlements accrues to the Company rather than to the Members concerned). The Board may authorise any person to enter into on behalf of all Members interested, an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made pursuant to such authority shall be effective and binding on all concerned. |
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(1) | If, so long as any of the rights attached to any warrants issued by the Company to subscribe for shares of the Company shall remain exercisable, the Company does any act or engages in any transaction which, as a result of any adjustments to the subscription price in accordance with the provisions of the conditions of the warrants, would reduce the subscription price to below the par value of a share, then the following provisions shall apply: | ||
(a) | as from the date of such act or transaction the Company shall establish and thereafter (subject as provided in this Article) maintain in accordance with the provisions of this Article a reserve (the Subscription Rights Reserve) the amount of which shall at no time be less than the sum which for the time being would be required to be capitalised and applied in paying up in full the nominal amount of the additional shares required to be issued and allotted credited as fully paid pursuant to sub-paragraph (c) below on the exercise in full of all the subscription rights outstanding and shall apply the Subscription Rights Reserve in paying up such additional shares in full as and when the same are allotted; | ||
(b) | the Subscription Rights Reserve shall not be used for any purpose other than that specified above unless all other reserves of the Company (other than share premium account) have been extinguished and will then only be used to make good losses of the Company if and so far as is required by law; | ||
(c) | upon the exercise of all or any of the subscription rights represented by any warrant, the relevant subscription rights shall be exercisable in respect of a nominal amount of shares equal to the amount in cash which the holder of such warrant is required to pay on exercise of the subscription rights represented thereby (or, as the case may be the relevant portion thereof in the event of a partial exercise of the subscription rights) and, in addition, there shall be allotted in respect of such subscription rights to the exercising warrantholder, credited as fully paid, such additional nominal amount of shares as is equal to the difference between: |
(i) | the said amount in cash which the holder of such warrant is required to pay on exercise of the subscription rights represented thereby (or, as the case may be, the relevant portion thereof in the event of a partial exercise of the subscription rights); and |
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(ii) | the nominal amount of shares in respect of which such subscription rights would have been exercisable having regard to the provisions of the conditions of the warrants, had it been possible for such subscription rights to represent the right to subscribe for shares at less than par and immediately upon such exercise so much of the sum standing to the credit of the Subscription Rights Reserve as is required to pay up in full such additional nominal amount of shares shall be capitalised and applied in paying up in full such additional nominal amount of shares which shall forthwith be allotted credited as fully paid to the exercising warrantholders; and |
(d) | if, upon the exercise of the subscription rights represented by any warrant, the amount standing to the credit of the Subscription Rights Reserve is not sufficient to pay up in full such additional nominal amount of shares equal to such difference as aforesaid to which the exercising warrantholder is entitled, the Board shall apply any profits or reserves then or thereafter becoming available (including, to the extent permitted by law, share premium account) for such purpose until such additional nominal amount of shares is paid up and allotted as aforesaid and until then no dividend or other distribution shall be paid or made on the fully paid shares of the Company then in issue. Pending such payment and allotment, the exercising warrantholder shall be issued by the Company with a certificate evidencing his right to the allotment of such additional nominal amount of shares. The rights represented by any such certificate shall be in registered form and shall be transferable in whole or in part in units of one share in the like manner as the shares for the time being are transferable, and the Company shall make such arrangements in relation to the maintenance of a register therefor and other matters in relation thereto as the Board may think fit and adequate particulars thereof shall be made known to each relevant exercising warrantholder upon the issue of such certificate. |
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(a) | if served or delivered by post, shall where appropriate be sent by airmail and shall be deemed to have been served or delivered on the day following that on which the envelope containing the same, properly prepaid and addressed, is put into the post; in proving such service or delivery it shall be sufficient to prove that the envelope or wrapper containing the notice or document was properly addressed and put into the post and a certificate in writing signed by the Secretary or other officer of the Company or other person appointed by the Board that the envelope or wrapper containing the Notice or other document was so addressed and put into the post shall be conclusive evidence thereof; | ||
(b) | if sent by electronic communication, shall be deemed to be given on the day on which it is transmitted from the server of the Company or its agent. A Notice placed on the Companys website is deemed given by the Company to a Member on the day following that on which a notice of availability is deemed served on the Member; | ||
(c) | if served or delivered in any other manner contemplated by these Articles, shall be deemed to have been served or delivered at the time of personal service or delivery or, as the case may be, at the time of the relevant despatch or transmission; and in proving such service or delivery a certificate in writing signed by the Secretary or other officer of the Company or other person appointed by the Board as to the act and time of such service, delivery, despatch or transmission shall be conclusive evidence thereof; and | ||
(d) | may be given to a Member either in the English language or the Chinese language, subject to due compliance with all applicable Statutes, rules and regulations. |
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ARTICLE I DEFINITIONS | 1 | |||||
Section 1.1
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ADS Distribution Record Date | 1 | ||||
Section 1.2
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ADS Record Date | 1 | ||||
Section 1.3
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Affiliate | 2 | ||||
Section 1.4
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American Depositary Receipt(s), ADR(s) and Receipt(s) | 2 | ||||
Section 1.5
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American Depositary Share(s) and ADS(s) | 2 | ||||
Section 1.6
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Articles of Association | 2 | ||||
Section 1.7
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Beneficial Owner | 2 | ||||
Section 1.8
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Certificated ADS(s) | 3 | ||||
Section 1.9
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Commission | 3 | ||||
Section 1.10
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Company | 3 | ||||
Section 1.11
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Custodian | 3 | ||||
Section 1.12
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Deliver and Delivery | 3 | ||||
Section 1.13
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Deposit Agreement | 3 | ||||
Section 1.14
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Depositary | 3 | ||||
Section 1.15
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Deposited Securities | 3 | ||||
Section 1.16
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Dollars and $ | 4 | ||||
Section 1.17
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DTC | 4 | ||||
Section 1.18
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DTC Participant | 4 | ||||
Section 1.19
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Exchange Act | 4 | ||||
Section 1.20
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Foreign Currency | 4 | ||||
Section 1.21
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Full Entitlement ADR(s), Full Entitlement ADS(s) and Full Entitlement Share(s) | 4 | ||||
Section 1.22
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Holder(s) | 4 | ||||
Section 1.23
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Partial Entitlement ADR(s), Partial Entitlement ADS(s) and Partial Entitlement Share(s) | 5 | ||||
Section 1.24
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Pre-Release Applicant and Pre-Cancellation Applicant | 5 | ||||
Section 1.25
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Pre-Release Transactions and Pre-Cancellation Transactions | 5 | ||||
Section 1.26
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Principal Office | 5 | ||||
Section 1.27
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Registrar | 5 | ||||
Section 1.28
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Restricted Securities | 5 | ||||
Section 1.29
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Restricted ADR(s), Restricted ADS(s) and Restricted Shares | 6 | ||||
Section 1.30
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Securities Act | 6 | ||||
Section 1.31
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Share Registrar | 6 | ||||
Section 1.32
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Shares | 6 | ||||
Section 1.33
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Uncertificated ADS(s) | 6 | ||||
Section 1.34
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Uncertificated Restricted ADS(s) | 6 | ||||
Section 1.35
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United States and U.S. | 6 | ||||
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ARTICLE II APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES; EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS | 6 | |||||
Section 2.1
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Appointment of Depositary. | 6 | ||||
Section 2.2
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Form and Transferability of ADSs. | 7 | ||||
Section 2.3
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Deposit of Shares. | 8 |
Section 2.4
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Registration and Safekeeping of Deposited Securities. | 10 | ||||
Section 2.5
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Issuance of ADSs. | 10 | ||||
Section 2.6
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Transfer, Combination and Split-up of ADRs. | 11 | ||||
Section 2.7
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Surrender of ADSs and Withdrawal of Deposited Securities. | 11 | ||||
Section 2.8
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Limitations on Execution and Delivery, Transfer, etc. of ADSs; Suspension of Delivery, Transfer, etc. | 13 | ||||
Section 2.9
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Lost ADRs, etc. | 14 | ||||
Section 2.10
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Cancellation and Destruction of Surrendered ADRs; Maintenance of Records. | 14 | ||||
Section 2.11
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Escheatment. | 14 | ||||
Section 2.12
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Partial Entitlement ADSs. | 14 | ||||
Section 2.13
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Certificated/Uncertificated ADSs. | 15 | ||||
Section 2.14
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Restricted ADSs. | 16 | ||||
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ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF ADSs | 18 | |||||
Section 3.1
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Proofs, Certificates and Other Information. | 18 | ||||
Section 3.2
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Liability for Taxes and Other Charges. | 19 | ||||
Section 3.3
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Representations and Warranties on Deposit of Shares. | 19 | ||||
Section 3.4
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Compliance with Information Requests. | 19 | ||||
Section 3.5
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Ownership Restrictions. | 20 | ||||
Section 3.6
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Reporting Obligations and Regulatory Approvals. | 20 | ||||
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ARTICLE IV THE DEPOSITED SECURITIES | 20 | |||||
Section 4.1
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Cash Distributions. | 20 | ||||
Section 4.2
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Distribution in Shares. | 21 | ||||
Section 4.3
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Elective Distributions in Cash or Shares. | 22 | ||||
Section 4.4
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Distribution of Rights to Purchase Additional ADSs. | 23 | ||||
Section 4.5
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Distributions Other Than Cash, Shares or Rights to Purchase Shares. | 24 | ||||
Section 4.6
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Distributions with Respect to Deposited Securities in Bearer Form. | 25 | ||||
Section 4.7
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Redemption. | 25 | ||||
Section 4.8
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Conversion of Foreign Currency. | 26 | ||||
Section 4.9
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Fixing of ADS Record Date. | 27 | ||||
Section 4.10
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Voting of Deposited Securities. | 27 | ||||
Section 4.11
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Changes Affecting Deposited Securities. | 29 | ||||
Section 4.12
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Available Information. | 30 | ||||
Section 4.13
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Reports. | 30 | ||||
Section 4.14
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List of Holders. | 30 | ||||
Section 4.15
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Taxation. | 30 | ||||
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ARTICLE V THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY | 31 | |||||
Section 5.1
|
Maintenance of Office and Transfer Books by the Registrar. | 31 | ||||
Section 5.2
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Exoneration. | 32 | ||||
Section 5.3
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Standard of Care. | 33 |
Section 5.4
|
Resignation and Removal of the Depositary; Appointment of Successor Depositary. | 33 | ||||
Section 5.5
|
The Custodian. | 34 | ||||
Section 5.6
|
Notices and Reports. | 35 | ||||
Section 5.7
|
Issuance of Additional Shares, ADSs etc. | 36 | ||||
Section 5.8
|
Indemnification. | 37 | ||||
Section 5.9
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Fees and Charges of Depositary. | 38 | ||||
Section 5.10
|
Pre-Release and Pre-Cancellation Transactions. | 39 | ||||
Section 5.11
|
Restricted Securities Owners. | 40 | ||||
|
||||||
ARTICLE VI AMENDMENT AND TERMINATION | 40 | |||||
Section 6.1
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Amendment/Supplement. | 40 | ||||
Section 6.2
|
Termination. | 41 | ||||
|
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ARTICLE VII MISCELLANEOUS | 42 | |||||
Section 7.1
|
Counterparts. | 42 | ||||
Section 7.2
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No Third-Party Beneficiaries. | 42 | ||||
Section 7.3
|
Severability. | 42 | ||||
Section 7.4
|
Holders and Beneficial Owners as Parties; Binding Effect. | 43 | ||||
Section 7.5
|
Notices. | 43 | ||||
Section 7.6
|
Governing Law and Jurisdiction. | 44 | ||||
Section 7.7
|
Assignment. | 45 | ||||
Section 7.8
|
Compliance with U.S. Securities Laws. | 45 | ||||
Section 7.9
|
Cayman Islands Law References. | 45 | ||||
Section 7.10
|
Titles and References. | 46 | ||||
|
||||||
EXHIBITS
|
Form of ADR. | A-1 | ||||
|
Fee Schedule. | B-1 |
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CHINA LODGING GROUP, LIMITED
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By: | ||||
Name: | ||||
Title: | ||||
CITIBANK, N.A.
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By: | ||||
Name: | ||||
Title: |
49
Number | CUSIP NUMBER: | |
American Depositary Shares (each American Depositary Share representing the right to receive four (4) ordinary shares of China Lodging Group, Limited) |
A-2
A-3
A-4
A-5
A-6
(i) | Issuance Fee : to any person depositing Shares or to whom ADSs are issued upon the deposit of Shares, a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) so issued under the terms of the Deposit Agreement (excluding issuances as a result of distributions described in paragraph (iv) below); |
A-7
(ii) | Cancellation Fee : to any person surrendering ADSs for cancellation and withdrawal of Deposited Securities, a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) surrendered; | ||
(iii) | Cash Distribution Fee : to any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for the distribution of cash dividends or other cash distributions ( i.e. , sale of rights and other entitlements); and | ||
(iv) | Stock Distribution/Rights Exercise Fee : to any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for (i) stock dividends or other free stock distributions or (ii) exercise of rights to purchase additional ADSs; | ||
(v) | Other Distribution Fee : to any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for the distribution of securities other than ADSs or rights to purchase additional ADSs; and | ||
(vi) | Depositary Services Fee : to any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary. |
(i) | taxes (including applicable interest and penalties) and other governmental charges; | ||
(ii) | such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; | ||
(iii) | such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing or withdrawing Shares or Holders and Beneficial Owners of ADSs; | ||
(iv) | the expenses and charges incurred by the Depositary in the conversion of foreign currency; | ||
(v) | such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and |
A-8
(vi) | the fees and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the delivery or servicing of Deposited Securities. |
A-9
A-10
CITIBANK, N.A.
Transfer Agent and Registrar |
CITIBANK, N.A.
as Depositary |
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By:
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By: | ||||||
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Authorized Signatory | Authorized Signatory |
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A-20
A-21
A-22
A-23
A-24
A-25
Dated: | Name: | |||
By: | ||||
Title: | ||||
NOTICE: The signature of the Holder to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatsoever. | ||||
If the endorsement be executed by an attorney, executor, administrator, trustee or guardian, the person executing the endorsement must give his/her full title in such capacity and proper evidence of authority to act in such capacity, if not on file with the Depositary, must be forwarded with this ADR. | ||||
SIGNATURE GUARANTEED |
||||
All endorsements or assignments of ADRs must be guaranteed by a member of a Medallion Signature Program approved by the Securities Transfer Association, Inc. |
A-26
I. | Depositary Fees |
Service | Rate | By Whom Paid | ||||
(1)
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Issuance of ADSs upon deposit of Shares (excluding issuances as a result of distributions described in paragraph (4) below). | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) issued. | Person depositing Shares or person receiving ADSs. | |||
(2)
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Delivery of Deposited Securities against surrender of ADSs. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) surrendered. | Person surrendering ADSs for the purpose of withdrawal of Deposited Securities or person to whom Deposited Securities are delivered. | |||
(3)
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Distribution of cash dividends or other cash distributions ( i.e. , sale of rights and other entitlements). | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | Person to whom distribution is made. | |||
(4)
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Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | Person to whom distribution is made. | |||
(5)
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Distribution of securities other than ADSs or rights to purchase additional ADSs ( i.e. , spin-off shares). | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | Person to whom distribution is made. |
B-1
Service | Rate | By Whom Paid | ||||
6)
|
Depositary Services. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary. | Person holding ADSs on the applicable record date(s) established by the Depositary. |
II. | Charges |
(i) | taxes (including applicable interest and penalties) and other governmental charges; | |
(ii) | such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; | |
(iii) | such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing or withdrawing Shares or Holders and Beneficial Owners of ADSs; | |
(iv) | the expenses and charges incurred by the Depositary in the conversion of foreign currency; | |
(v) | such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and | |
(vi) | the fees and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the servicing or delivery of Deposited Securities. |
B-2
China Lodging Group, Limited
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DIRECT LINE: | 852 2842 9550 | ||
5th Floor, Block 57
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Brian.lee@conyersdillandpearman.com | |||
No. 461, Hongcao Road
|
OUR REF: | BLHK/321081(M#873821) | ||
Shanghai 200233
|
YOUR REF: | |||
Peoples Republic of China
|
1. | As at the Certificate Date, the Company is duly incorporated and existing under the laws of the Cayman Islands in good standing (meaning solely that it has not failed to make any filing with any the Cayman Islands government authority or to pay any Cayman Islands government fees or tax which would make it liable to be struck off the Register of Companies and thereby cease to exist under the laws of the Cayman Islands). |
2. | When issued and paid for as contemplated by the Registration Statement, the Ordinary Shares will be validly issued, fully paid and non-assessable (which term means when used herein that no further sums are required to be paid by the holders thereof in connection with the issue of such shares). |
China Lodging Group, Limited
|
DIRECT LINE: | 852 2842 9550 | ||
5th Floor, Block 57
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Brian.lee@conyersdillandpearman.com | |||
No. 461, Hongcao Road
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OUR REF: | BLHK/kl/320389(M#873821) | ||
Shanghai 200233
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YOUR REF: | |||
Peoples Republic of China
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(i) | the Registration Statement; and | |
(ii) | a draft of the prospectus (the Prospectus ) contained in the Registration Statement. |
2 of 2
(1) | China Lodging Group, Limited, a company incorporated in the Cayman Islands (the Company ); and | ||
(2) | Ctrip.com International, Ltd., a company incorporated in the Cayman Islands (the Purchaser ). The Purchaser and the Company are sometimes herein referred to each as a Party, and collectively as the Parties . |
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If to Purchaser, at: | Ctrip.com International, Ltd. |
With copy to: | Skadden, Arps, Slate, Meagher & Flom |
If to the Company, at: | China Lodging Group, Limited |
With copy to: | Davis Polk & Wardwell LLP |
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China Lodging Group, Limited
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By: | /s/ Min (Jenny) Zhang | |||
Name: | Min (Jenny) Zhang | |||
Title: | Chief Financial Officer |
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CTRIP.COM INTERNATIONAL, LTD.
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By: | /s/ Min Fan | |||
Name: | Min Fan | |||
Title: | Chief Executive Officer and President | |||
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(1) | China Lodging Group, Limited, a company incorporated in the Cayman Islands (the Company ); | ||
(2) | Ctrip.com International, Ltd., a company incorporated in the Cayman Islands (the Investor ). |
A. | The Company and the Investor have entered into a Subscription Agreement dated as of the date hereof (the Subscription Agreement ); and | |
B. | In connection with the Subscription Agreement and in order to induce the Investor to consummate the transactions contemplated under the Subscription Agreement, the Company and the Investors have agreed to enter into this Agreement. |
1. | Interpretation |
1.1 | Definitions . The following terms shall have the meanings ascribed to them below: |
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2. | Corporate Governance. |
2.1 | Board of Directors . |
3. | Registration Rights. |
3.1 | Demand Registration . |
(a) | Request by Holders . |
4
If the Company shall, at any time or from time to time after the date that is six (6) months after the closing of the IPO, receive a written request from the Investor that the Company file a Registration Statement under the Securities Act covering the registration of at least fifty percent (50%) of the Registrable Securities held by the Investor, then the Company shall, within ten (10) Business Days of the receipt of such written request, give written notice of such request to all Existing Registration Right Holders, and use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Holders request to be registered and included in such registration; provided that the Company shall not be obligated to effect any such registration if the Company has, within the six (6) month period preceding the date of such request, already effected a registration under the Securities Act pursuant to this Section 3.1 or Section 3.3 or in which the Holders had an opportunity to participate pursuant to Section 3.2 , other than a registration from which the Registrable Securities of the Investor has been excluded (with respect to all or any portion of the Registrable Securities the Investor requested be included in such registration) pursuant to Section 3.2(a). The Company shall not be obligated to effect more than three (3) such demand registrations for the Investor pursuant to this Section 3.1(a). | |||
(b) | Underwriting . If the Investor who initiates the registration request under this Section 3.1 (such Investor, the Initiating Holder ) intends to distribute the Registrable Securities covered by its request by means of an underwriting, then it shall so advise the Company as a part of its request made pursuant to this Section 3.1(a) and the Company shall include such information in the Request Notice. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in voting power of the Initiating Holder and other Holders) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Holders representing a majority in voting power of the Registrable Securities requested to be registered. Notwithstanding any other provision of this Section 3.1, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be reduced as required by the underwriter(s) and allocated among the Holders of Registrable Securities on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration (including the Initiating Holder); provided , however , that the number of Registrable Securities held by the Investor to be included in such underwriting and registration shall not be reduced unless all other securities (other than Registrable Securities held by Existing |
5
Registration Right Holders) are first excluded from the underwriting and registration (including, without limitation, any securities which the Company may seek to include in the underwriting for its own account); provided further, that at least 25% of any Registrable Securities requested by the Investor to be included in such underwriting and registration shall be so included. If the Investor disapproves of the terms of any such underwriting, the Investor may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. | |||
(c) | Deferral . Notwithstanding the foregoing, if the Company shall furnish to the Investor requesting registration pursuant to this Section 3.1(a) , a certificate signed by its Chief Executive Officer stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for such Registration Statement to be filed at such time, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holder; provided , however , that the Company may not utilize this right more than once in any twelve (12) month period; provided , further , that the Company shall not register any other of its Ordinary Shares during such twelve (12) month period. A demand right shall not be deemed to have been exercised until such deferred registration shall have been effected. |
3.2 | Piggyback Registrations . | ||
(a) | The Company shall notify the Investor in writing at least thirty (30) days prior to filing any Registration Statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements filed under Section 3.3 of this Agreement or relating to any employee benefit plan or a corporate reorganization), and shall afford the Investor an opportunity to include in such Registration Statement all or any part of the Registrable Securities then held by the Investor. If the Investor desires to include in any such registration statement all or any part of the Registrable Securities held by it, it shall within twenty (20) days after receipt of the above-described notice from the Company so notify the Company in writing and in such notice shall inform the Company of the number of Registrable Securities the Investor wishes to include in such registration statement. If the Investor decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, the Investor shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company |
6
with respect to offerings of its securities, all upon the terms and conditions set forth herein. | |||
(b) | Underwriting . If a registration statement under which the Company gives notice under this Section 3.2(a) is for an underwritten offering, then the Company shall so advise the Investor. In such event, the right of any the Investors Registrable Securities to be included in a registration pursuant to this Section 3.2(a) shall be conditioned upon the Investors participation in such underwriting and the inclusion of the Investors Registrable Securities in the underwriting to the extent provided herein. If the Investor proposes to distribute its Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. If the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of Ordinary Shares to be underwritten, then the managing underwriter(s) may exclude Ordinary Shares from the registration and the underwriting, and the number of Ordinary Shares that may be included in the registration and the underwriting shall be allocated, first , to the Company, second, to the Investor, and thereafter to the Existing Registration Right Holders according to the Shareholder Agreement. If the Investor disapproves of the terms of any such underwriting, the Investor may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. | ||
(c) | Not Demand Registration . Registration pursuant to this Section 3.2 shall not be deemed to be a demand registration as described in Section 3.1 above. There shall be no limit on the number of times the Holders may request registration of Registrable Securities under this Section 3.2 . |
3.3 | Form F-3 Registration . |
(a) | In case the Company shall receive from the Investor a written request or requests that the Company effect a registration on Form F-3 (and any related qualification or compliance) with respect to all or any part of the Registrable Securities owned by the Investor, then the Company shall promptly give written notice of the proposed registration and the Investors request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities; and as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of such Registrable Securities of the Investor as are specified in such request, together with all or such portion of the Registrable Securities of any other |
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Holders joining in such request as are specified in a written request given within twenty (20) days after the Company provides the notice contemplated above. | |||
(b) | Notwithstanding anything to the contrary provided above, the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 3.3 : |
(1) | if Form F-3 is not available for such offering by the Holders; | ||
(2) | if the aggregate anticipated price to the public of any Registrable Securities which such Holders propose to sell pursuant to such registration, together with the aggregate anticipated price to the public of any other securities of the Company entitled to inclusion in such registration, is less than US$500,000 (or the equivalent thereof in other currencies); | ||
(3) | if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for such Form F-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form F-3 registration statement no more than once during any twelve (12) month period for a period of not more than ninety (90) days after receipt of the request of the Investor or other Holders under this Section 3.3(a) ; provided , that the Company shall not register any of its other Shares during such ninety (90) day period; or | ||
(4) | if the Company has, within the six (6) month period preceding the date of such request, already effected a registration under the Securities Act other than a registration from which the Registrable Securities of Holders have been excluded (with respect to all or any portion of the Registrable Securities the Holders requested be included in such registration) pursuant to Section 3.1(b) or Section 3.2(b) . |
(c) | Not Demand Registration . Form F-3 registrations shall not be deemed to be demand registrations as described in Section 3.1 above. Except as otherwise provided herein, there shall be no limit on the number of times the Holders may request registration of Registrable Securities under this Section 3.3 . |
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(a) | Registration Statement . Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities, use its best efforts to cause such Registration Statement to become effective and keep such Registration Statement effective for a period of up to 120 days or, in the case of Registrable Securities registered under Form F-3 in accordance with Rule 415 under the Securities Act or a successor rule, until the distribution contemplated in the registration statement has been completed; provided , however , that (i) such 120 day period shall be extended for a period of time equal to the period any Holder refrains from selling any securities included in such registration at the request of the underwriter(s), and (ii) in the case of any registration of Registrable Securities on Form F-3 which are intended to be offered on a continuous or delayed basis, such 120 day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold. | ||
(b) | Amendments and Supplements . Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. | ||
(c) | Prospectuses . Furnish to the Investor such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration. | ||
(d) | Blue Sky . Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such |
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jurisdictions as shall be reasonably requested by the Investor, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. | |||
(e) | Underwriting . In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement in usual and customary form, with the managing underwriter(s) of such offering. If the Investor participates in such underwriting, the Investor shall also enter into and perform its obligations under such an agreement. | ||
(f) | Notification . Notify the Investor if the Investor has Registrable Securities covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of (i) the issuance of any stop order by the SEC in respect of such Registration Statement, or (ii) the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of the Investor, prepare and furnish to the Investor a reasonable number of copies of a supplement or amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Ordinary Shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing. | ||
(g) | Opinion and Comfort Letter . Furnish, at the request of the Investor, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) opinion letters, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to the Investor, addressed to the underwriters, if any, and to the Investor and (ii) a comfort letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to the Investor, addressed to the underwriters, if any, and to the Investor. |
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(h) | Transfer Agent and CUSIP . Provide a transfer agent and registrar for all Registrable Securities covered by such registration statement and held by the Investor and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration. | ||
(i) | Further Actions . Take all reasonable action necessary to list the Registrable Securities on the primary exchange upon which the Companys securities are traded. |
(a) | Indemnification by the Company . To the extent permitted by law, the Company shall indemnify and hold harmless the Investor, its partners, officers, directors, legal counsel, any underwriter (as defined in the Securities Act) for the Investor and each Person, if any, who controls the Investor or underwriter within the meaning of the Securities Act or the Exchange Act, against all losses, claims, damages and liabilities (joint or several; or actions, proceedings or settlements in respect thereof) to which they may become subject under laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any registration, qualification or compliance, insofar as such losses, claims, damages or liabilities (or actions, proceedings or settlements in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a Violation ): |
(i) | any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; | ||
(ii) | the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or |
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(iii) | any violation or alleged violation by the Company of the Applicable Securities Law, or any rule or regulation promulgated under the Applicable Securities Law; |
and the Company shall reimburse the Investor, and its respective partners, officers, directors, legal counsel, underwriter and controlling Person for any legal or other expenses reasonably incurred by them, as such expenses are incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the indemnity agreement contained in this Section 3.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Investor, partner, officer, director, legal counsel, underwriter or controlling Person of such Investor. | |||
(b) | Indemnification by the Investor . To the extent permitted by law, the Investor shall, if Registrable Securities held by the Investor are included in the securities as to which such registration, qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act and any underwriter, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, legal counsel, controlling Person underwriter may become subject under the Securities Act, the Exchange Act or other United States federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements, omissions or Violations, in each case to the extent (and only to the extent) that such statement, omission or Violation occurs in sole reliance upon and in conformity with written information furnished by the Investor expressly for use in connection with such registration: |
(i) | untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; or | ||
(ii) | omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, |
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and the Investor shall reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling Person or underwriter in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the indemnity agreement contained in this Section 3.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld; and provided , further , that except for liability for willful fraud or misrepresentation, in no event shall any indemnity under this Section 3.7(b) exceed the net proceeds received by the Investor in such registration. | |||
(c) | Notice . Promptly after receipt by an indemnified party of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, as incurred, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. | ||
(d) | Survival; Consents to Judgments and Settlements . The obligations of the Company and Holders under this Section 3.7 shall survive the completion of any offering of Registrable Securities in a registration statement, regardless of the expiration of any statutes of limitation or extensions of such statutes. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. |
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(a) | Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public; | ||
(b) | File with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and | ||
(c) | So long as the Investor owns any Registrable Securities, to furnish to the Investor forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the Companys initial public offering), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or its qualification as a registrant whose securities may be resold pursuant to Form F-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and (iii) such other reports and documents of the Company as the Investor may reasonably request in availing itself of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form F-3. |
4. | Miscellaneous. |
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CHINA LODGING GROUP, LIMITED
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By: | /s/ Min (Jenny) Zhang | |||
Name: | Min (Jenny) Zhang | |||
Title: | Chief Financial Officer |
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CTRIP.COM INTERNATIONAL, LTD.
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By: | /s/ Min Fan | |||
Name: | Min Fan | |||
Title: | Chief Executive Officer and President | |||
S-2
Sincerely yours,
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/s/ Min Fan | ||||
Name: | Min Fan | |||