424b5
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities, nor are they soliciting offers to buy
these securities, in any jurisdiction where the offer or sale is
not permitted.
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Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-168009
Subject to Completion, Dated
July 7, 2010
PRELIMINARY
PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 7, 2010)
5,300,000 American Depositary
Shares
Representing 106,000,000
Ordinary Shares
CNINSURE INC.
CNinsure Inc. is offering 4,600,000 ADSs and the selling
shareholder is offering 700,000 ADSs. Each ADS represents
20 of our ordinary shares.
Our ADSs are listed on the Nasdaq Global Select Market under the
symbol CISG. On July 6, 2010, the last reported
sale price of our ADSs on the Nasdaq Global Select Market was
$26.78 per ADS.
See Risk Factors
beginning on
page S-13
to read about the factors you should consider before buying the
ADSs.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus
supplement or the accompanying prospectus. Any representation to
the contrary is a criminal offense.
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Underwriting
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Proceeds to
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Price to
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Discounts and
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Proceeds to
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the Selling
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Public
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Commissions
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CNinsure Inc.
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Shareholder
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Per ADS
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$
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$
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$
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$
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Total
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$
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$
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$
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$
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The underwriters have the option to purchase up to an additional
795,000 ADSs from CNinsure Inc. to cover over-allotments.
The underwriters expect to deliver the ADSs on or
about ,
2010.
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Morgan
Stanley |
BofA Merrill Lynch |
Prospectus Supplement
dated ,
2010.
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
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S-1
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S-13
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S-16
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S-17
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S-18
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S-19
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S-20
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S-21
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S-22
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S-23
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S-29
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S-30
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S-31
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S-31
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PROSPECTUS
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ABOUT
THIS PROSPECTUS SUPPLEMENT
This document comprises two parts. The first part is this
prospectus supplement, which describes the specific terms of
this offering and also adds to and updates information contained
in the accompanying prospectus. The second part, the
accompanying prospectus, gives more general information, some of
which may not apply to this offering. If the description of the
offering varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information
contained in this prospectus supplement. However, if any
statement in one of these documents is inconsistent with a
statement in another document having a later datefor
example, a document incorporated by reference in the
accompanying prospectusthe statement in the document
having the later date modifies or supersedes the earlier
statement.
You should rely only on the information contained in or
incorporated by reference into this prospectus supplement and
the accompanying prospectus. No dealer, salesperson or other
person is authorized to give any information or to represent
anything not contained in this prospectus supplement or the
accompanying prospectus. You must not rely on any unauthorized
information or representations. The information contained in or
incorporated by reference into this prospectus supplement and
the accompanying prospectus is accurate only as of the
respective dates thereof, regardless of the time of delivery of
this prospectus supplement and the accompanying prospectus, or
of any sale of ADSs. This prospectus supplement is an offer to
sell the ADSs offered hereby only under circumstances and in
jurisdictions where it is lawful to do so.
In this prospectus supplement, unless otherwise indicated,
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we, us, our company,
our or CNinsure refer to CNinsure Inc.,
its predecessor entities and its subsidiaries;
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China or PRC refers to the Peoples
Republic of China, excluding Taiwan, Hong Kong and Macau;
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provinces of China refers to the 22 provinces, the
four municipalities directly administered by the central
government (Beijing, Shanghai, Tianjin and Chongqing) and the
five autonomous regions (Xinjiang, Tibet, Inner Mongolia,
Ningxia and Guangxi);
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shares or ordinary shares refers to our
ordinary shares, par value US$0.001 per share;
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ADSs refers to our American depositary shares, each
of which represents 20 ordinary shares;
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all references to RMB or Renminbi are to
the legal currency of China and all references to $,
dollars, US$ and
U.S. dollars are to the legal currency of the
United States; and
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all discrepancies in any table between the amounts identified as
total amounts and the sum of the amounts listed therein are due
to rounding.
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i
SUMMARY
This prospectus supplement summary highlights selected
information included elsewhere in or incorporated by reference
into this prospectus supplement and the accompanying prospectus
and does not contain all the information that you should
consider before making an investment decision. You should
carefully read this entire prospectus supplement and the
accompanying prospectus , including the Risk Factors
section and the financial statements and related notes and other
information incorporated by reference, before making an
investment decision.
Overview
of Our Business
We are a leading independent insurance intermediary company
operating the largest independent insurance agency business in
China. With 48,693 sales professionals, 1,421 claims adjustors
and 571 sales and service outlets operating in 23 out of 31
provinces as of April 15, 2010, our distribution and
service network reaches some of Chinas most economically
developed regions and some of the most affluent cities in China,
such as Beijing, Shanghai, Guangzhou and Shenzhen.
As an insurance intermediary company, we do not assume
underwriting risks. Instead, we distribute to customers in China
a wide variety of property, casualty and life insurance products
underwritten by domestic and foreign insurance companies
operating in China and provide insurance claims adjusting
services, such as damage assessment, survey, authentication and
loss estimation. We also provide certain value-added services,
such as 24 hour emergency services in select cities and
assistance with claim settlement, to our
customersindividuals and institutions that purchase
insurance products through us. In addition, we provide
information about potential customers to insurance companies,
which then sell insurance products to them, either directly or
through our affiliated insurance intermediaries. Furthermore, in
November 2009, we started to offer certain consumer financial
products and services through a consumer credit brokerage
company in which we hold noncontrolling interests. We are
compensated for our services primarily by commissions and fees
paid by insurance companies, typically based on a percentage of
the premium paid by the insured or a percentage of the amount
recovered from insurance companies. Commission and fee rates
generally depend on the type of insurance products, the
particular insurance company and the region in which the
insurance products are sold.
As of April 15, 2010, we had 56 affiliated insurance
intermediary companies in the PRC, of which 49 are insurance
agencies, three are insurance brokerages and four are insurance
adjusting firms. According to the Insurance Intermediary Market
Development Report for 2009 published by China Insurance
Regulatory Commission, or the CIRC, our affiliates included:
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eight of Chinas top 20 insurance agencies, accounting for
approximately 11.5% of total insurance agency revenue in China
in 2009; and
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three of Chinas top 20 insurance claims adjusting firms,
accounting for approximately 13.2% of total claims adjusting
firm revenue in China in 2009.
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The professional insurance intermediary sector in China is at an
early stage of development and highly fragmented. We believe
this offers substantial opportunities for further growth and
consolidation. We will continue to take advantage of these
opportunities to increase our market share by aggressively
expanding our distribution network through selective
acquisitions, recruitment of experienced and entrepreneurial
sales agents and franchising. In particular, we intend to devote
significant resources to distributing life insurance products in
order to benefit from the recurring fee income they generate and
to better capture the significant opportunities presented by
Chinas rapidly growing life insurance market. We will
expand our product offerings from retail to commercial lines
through our newly established insurance brokerage business unit.
We will continue to grow our claims adjusting business to
capture the substantial growth in this sector. We have developed
and refined our unified operating platform through more than ten
years of operations and have successfully implemented it across
our company. We believe our scalable unified operating platform
has been key in our ability to expand our distribution network
and launch new products and services rapidly and efficiently
while maintaining the quality of our products and services.
S-1
Industry
Background
The Chinese insurance industry was the third largest in Asia and
the sixth largest in the world by premium in 2008. The industry
has grown substantially in recent years, with industry-wide
insurance premiums increasing from RMB978.4 billion in 2008
to RMB 1,113.7 billion (US$163.2 billion) in 2009,
according to data published by the CIRC. Despite this
substantial growth and scale, Chinas insurance penetration
rates, which measure industry-wide insurance premiums as a
percentage of GDP, were only 2.2% for life insurance and 1.0%
for non-life insurance in 2008, compared to 4.1% and 4.6%,
respectively, for the United States, 12.8% and 2.9% for the
United Kingdom, respectively, and 7.6% and 2.2% for Japan,
respectively. These low penetration rates relative to those of
developed economies suggest that Chinas insurance market
has significant growth potential. We believe that continued
economic growth and the aging of Chinas population, among
other factors, will drive the future growth of Chinas
insurance industry. In particular, we expect that changing
demographics will generate substantial demand for life insurance
products.
Within Chinas insurance industry, independent insurance
agencies and brokerages are referred to as professional
insurance intermediaries, to be differentiated from
entities that distribute insurance products as an ancillary
business, such as commercial banks, postal offices and
automobile dealerships. The professional insurance intermediary
sector in China has also grown significantly in recent years.
According to data released by the CIRC, total insurance premiums
generated by independent insurance agencies and brokerages
increased by 41.5% and 47.0%, respectively, from 2007 to 2008,
and total insurance premiums generated by independent insurance
agencies increased by 21.9% from 2008 to 2009. We believe that
there will continue to be substantial growth opportunities in
the professional insurance intermediary sector for the following
reasons:
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Chinas insurance industry as a whole has significant
growth potential;
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as competition among insurance companies intensifies, insurance
companies will focus more on their core competencies and
increasingly outsource part of the distribution of their
products;
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an increasing number of international insurance companies are
entering the Chinese market and they tend to outsource the
distribution of their products because they seek to quickly
penetrate the market but lack a distribution network and sales
force of their own;
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as Chinese consumers become more sophisticated, they will
increasingly seek a greater selection of insurance products and
services from different insurance companies with the benefit of
independent professional advice; and
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the favorable regulatory environment will benefit professional
insurance intermediaries with potential to grow into nation-wide
service providers.
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Despite rapid growth in recent years, the professional insurance
intermediary sector in China is still at an early stage of
development and highly fragmented. According to the Insurance
Intermediary Market Development Report for 2009 released by the
CIRC, as of December 31, 2009 there were 1,903 insurance
agencies and 378 insurance brokerages in China.
Our
Competitive Strengths
We believe that the following competitive strengths contribute
to our success and differentiate us from our competitors:
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Scalable Unified Operating Platform. We
have developed and refined our unified operating platform
through more than ten years of operations and have successfully
implemented the following components of our operating platform
across our company:
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standardized operating procedures;
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a core business system, which encompasses our property and
casualty insurance unit, life insurance unit, and claims
adjusting unit, that will better support business operations and
facilitate risk control;
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a centralized and computerized accounting and financial
management system;
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S-2
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a human resources management system and an
e-learning
system to provide online training to sales agents, which enhance
our control over the quality of our sales agents and strengthens
our top-down implementation of sales policies;
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an office automation system; and
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a nationwide IT network and data center to support front-office
operations.
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Our unified operating platform allows for standardized business
and financial management, operational efficiency and active
management control and enhanced risk control. Because the
various systems, policies and procedures of our operating
platform can be introduced quickly as we enter new regions or
make acquisitions, we believe we can expand our distribution
network rapidly and efficiently while maintaining the quality of
our services. In addition, we believe our operating platform has
enabled us to efficiently launch new products and services to
further diversify our revenue sources. We have a proven track
record of leveraging our operating platform to successfully grow
our life insurance business and integrating acquired businesses.
Furthermore, a unified platform and the scale it generates allow
us to build close relationships with the head offices of
insurance companies and obtain preferential commission rates for
distributing high-margin products. We believe that it is
difficult for our competitors, particularly new market entrants,
to create a similar platform of a comparable scale without
substantial financial resources and efforts.
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Entrenched Leadership Position among Professional
Insurance Intermediaries in China. We are a
leading professional insurance intermediary in China in terms of
insurance premiums generated and the size of distribution
network, and have maintained this leadership position for over
three years. Our intermediary role enables us to benefit from
the strong premium growth in China without assuming underwriting
risks. According to the Insurance Intermediary Market
Development Report for 2009 published by the CIRC, our
affiliates included eight of Chinas top 20 insurance
agencies, accounting for approximately 11.5% of total insurance
agency revenue in China in 2009; and three of Chinas top
20 insurance claims adjusting firms, accounting for
approximately 13.2% of total claims adjusting firm revenue in
China in 2009. Our leadership position allows us to negotiate
preferential commission rates from insurance companies, recruit
and retain quality sales agents, attract insurance customers,
expand into new markets and achieve economies of scale. Our
access to the U.S. capital markets in the United States
provides us with strong liquidity to undergo rapid and quality
acquisitions and expand into new markets, as well as to entrench
our leadership position in existing markets. We believe our
leading market position also enables us to establish business
relationships with a large number of insurance companies and
offer a wide variety of insurance products. As of April 15,
2010, we had established business relationships with 57
insurance companies and one reinsurance company operating in
China. In recent years, we have entered into contracts with the
head offices of nine life insurance companies, including
AVIVA-COFCO and Minsheng, and five property and casualty
insurance companies, including PICC P&C, Ping An P&C
and China Pacific Insurance Company, for the distribution of
insurance products and the outsourcing of claims adjusting
services. We believe our leading position will also enable us to
explore consolidation opportunities to further expand our
network.
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Diversified Product and Service
Offerings. We have a proven track record of
expanding our product and service offerings. We began our
insurance intermediary business in 1999 by distributing
automobile insurance products. In 2002, we began distributing
other property and casualty insurance products. In January 2006,
we further expanded our product mix to cover life insurance
products, which accounted for 20.0% of our total net revenues in
2009. In recent years, we also started to offer insurance claims
adjusting services such as claims assessments, survey,
authentication and loss estimation. In 2009, total net revenues
from claims adjusting services accounted for 12.2% of our total
net revenue. We expanded into the consumer financial services
sector through acquisition. We also recently established an
insurance brokerage business unit. We believe our ability to
offer an expanding and diversified product and service mix makes
us an attractive distributor for our insurance company partners,
enables us to provide customers with sophisticated, quality
service to meet their insurance needs, creates more
cross-selling opportunities and allows us to further improve our
profitability.
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S-3
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Extensive Customer Reach through Nationwide Distribution
Network and Customer Database. Since our
establishment in 1998, we have built a distribution and service
network that, as of April 15, 2010, consisted of 49
insurance agencies, three insurance brokerages and four claims
adjusting firms, with 571 sales and service outlets, 48,460
registered sales agents, 233 in-house sales representatives and
1,421 in-house claims adjustors. Our distribution and service
network covers 23 provinces and reaches some of the most
economically developed regions in China and some of the most
affluent Chinese cities, such as Beijing, Shanghai, Guangzhou
and Shenzhen. In 2009, our approximately 1.3 million
customers included approximately 1.0 million customers who
bought property and casualty insurance products and
approximately 0.3 million customers who bought life
insurance products. By providing certain value-added services to
these customers at no additional charge, we seek to build a
loyal customer base that generates referral and cross-selling
opportunities. In addition, we have built a database of more
than one million individuals. Using information in this
database, our sales agents contact potential customers with our
target demographics on a regular basis. With the development of
a diversified product and service offering, we believe we will
be able to leverage our vast consumer database to increase sales
per account.
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Successful Acquisitions and Integration Track
Record. We have demonstrated a strong
capability to take advantage of consolidation opportunities to
aggressively increase market share in addition to growing
organically. We have a strong, professional team experienced in
acquisitions and joint ventures in Chinas insurance
industry. Since November 2007, we have completed 20 acquisitions
and established 15 joint ventures. Three out of the four claims
adjusting firms we acquired were among top 20 claims adjusting
firms in China as of December 31, 2009. We employ prudent
and effective acquisition and integration strategy by setting up
guaranteed performance targets for acquired businesses. We allow
previous owners of an acquired business to stay on as minority
stake owners and sell their remaining stakes to us if the
business is successful after the acquisition. This strategy
contributes significantly to a successful business integration
by aligning the interests of the previous owners with ours, as
well as providing strong incentive to those previous owners to
ensure a smooth integration and transition process. Furthermore,
we also utilize our standardized operating platform to
effectively integrate these acquired businesses after the
acquisition.
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Attractive and Differentiated Performance-Based
Entrepreneurial Agent Program. In recent
years, some entrepreneurial management staff and senior sales
agents of major insurance companies in China have left their
employers or principals and become independent. We call these
individuals entrepreneurial agents. As of
April 15, 2010, our entrepreneurial agent base had expanded
from 24 sales teams in 2007 to 697 entrepreneurial sales teams.
We have designed and implemented a comprehensive program to
attract and retain productive entrepreneurial agents. Under this
program, only entrepreneurial agents who meet specific
professional criteria and successfully pass a six-month trial
period will be formally admitted to our distribution and service
network, and only those who continue to meet specified
performance standards will be allowed to remain in our network.
In addition to cash compensation, these entrepreneurial agents
also have the opportunity to participate in the equity of our
business. We believe that our entrepreneurial agent program
provides productive entrepreneurial agents a strong incentive to
grow their business within our network and enables us to grow
our sales force with productive, motivated professionals.
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Experienced Management Team With a Successful Track
Record. Our top 6 executive officers on
average have over 10 years of insurance industry experience
and are familiar with the insurance intermediary industry in
China and the related regulatory environment. Our chairman and
chief executive officer, Mr. Yinan Hu, and our president,
Mr. Qiuping Lai, founded our company in 1998 and together
with Mr. Peng Ge, our chief financial officer, have led us
to our current leading position. Mr. Hu was recognized as
one of The 60 Greatest Insurance Leaders in 60 Years
of New Chinas History by China Insurance News in
2010. Under the leadership of our senior management, we have a
proven track record of successfully diversifying our product and
service offerings, expanding our distribution network, making
strategic acquisitions and integrating acquired businesses, and
achieving significant revenue and profit growth. In addition,
since our establishment in 1998, we have recruited, retained and
trained a significant number of experienced managerial staff to
support our senior management in expanding our operations. All
of our senior executive officers and other managerial staff
indirectly hold equity interests in our company, which aligns
their interests with those of our shareholders.
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S-4
Our
Strategies
As the largest independent insurance agency company in China, we
will continue to leverage our unified business platform to
enhance our leadership position in the insurance agency and
brokerage market. Our long term goal is to establish a
leadership position as an intermediary offering a broader range
of financial services and products in China. To achieve this
goal, we intend to capitalize on the growth potential of
Chinas insurance industry and insurance intermediary
sector, leverage our competitive strengths and pursue the
following elements of our strategy:
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Further Improve Our Unified Operating Platform to Support
Future Growth. As we increase our operation
scale and enter into new regions and segments, we will continue
to improve our operating platform by improving existing
components and adding new components. We plan to continue our
investments in various aspects of our operating platforms,
including financial reporting, branding, information technology,
and risk management. We believe that further improvements to our
unified operating platform will enhance centralized management
control and facilitate the timely execution of our corporate
strategy and the establishment of a standardized, transparent
and integrated business process, from product research to
customer service. In addition, we expect our unified platform to
evolve into a scalable operation system that will allow us to
attract new agents, brokers and direct customers at lower costs
and therefore expedite our expansion. We also plan to utilize
and expand our platform to support our increasingly diversified
product and service offerings.
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Further Expand Our Distribution Network Through Selective
Acquisitions, Recruitment of Entrepreneurial Agents and
Franchising. The professional insurance
intermediary sector in China is still at an early stage of
development and highly fragmented. We believe this offers
substantial opportunities for consolidation. We intend to
further grow our distribution network through selective
acquisitions of high-quality independent insurance agencies and
brokerages. We also have been actively recruiting and will
continue to recruit entrepreneurial agents. We believe that
these entrepreneurial agents will help us expand our
distribution network more rapidly and productively. In addition,
we started a franchising program to further expand our
distribution network. We believe that the franchising program
will help us quickly expand our distribution network while
allowing us to nurture targets for our future acquisitions.
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Further Expand Our Life-Insurance
Business. The life insurance sector has grown
at a faster pace than the rest of Chinas insurance
industry in recent years. In addition, life insurance products
that require periodic premium payments generate sustained and
recurring income over an extended period of time, sometimes up
to 25 years, generally generating higher margin than
property, casualty and life insurance products. In order to
benefit from this recurring fee income and take advantage of the
significant growth potential of Chinas life insurance
market, we will continue to devote significant resources to
further growing this business. We intend to actively recruit
entrepreneurial agents to help us increase the sales of life
insurance products, both within our existing geographic markets
and in regions that we will enter in the future. In addition, we
intend to improve the productivity of individual sales agents
through training. Furthermore, we will leverage our extensive
experience, customer base and distribution network established
over the past 12 years to cross-sell life insurance
products to our non-life insurance customers.
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Further Expand Our Other Product and Service
Offerings. As competition among insurance
companies in China intensifies, some insurance companies have
started to outsource their claim settlement functions to
insurance claims adjusting companies. We have taken advantage of
this new trend and added insurance adjustment to our service
offerings. We believe that we are well positioned to provide
insurance claims adjusting services since we already have been
providing certain settlement-related services to our insurance
customers and have personnel with relevant expertise in place.
In October 2009, we invested in a holding company that owns 100%
of the equity interest in China Financial Services Group
Limited, a consumer credit brokerage company specializing in the
distribution of personal loans and residential mortgage loans
for commercial banks. This investment marked our expansion into
the consumer financial services sector, and we plan to continue
our expansion in this sector in the future. We expect our
expansion into this new sector will create synergies with our
existing businesses, such as client referral, cross-selling
opportunities, as well as cost savings from leveraging
distribution network and back-office operating
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S-5
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system. In June 2010, we established an insurance brokerage
business unit in an effort to expand our product offerings from
retail to commercial lines. Furthermore, as a result of rapid
economic growth and accumulation of wealth in China in recent
years, we believe there are substantial growth opportunities for
personal wealth management products, such as securities, trust
products and mutual fund products. We plan to actively explore
these opportunities and expand our product offerings to cover
more wealth management products in the future. We also intend to
explore other business opportunities such as corporate brokerage
in order to meet increasing customer needs.
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Increase the Use of New Distribution
Channels. In China, insurance products
traditionally have been sold primarily through face-to-face
sales efforts by individual salespersons, but some international
insurance companies have recently introduced new distribution
methods as they enter Chinas insurance market. In recent
years, top insurance companies in China have also seen strong
growth from their call center and Internet sales channels. We
believe that call centers and Internet are becoming the main
distribution channels for standardized insurance products such
as auto and accidental insurance. Accordingly, we have
established new distribution channels, such as call centers,
Internet websites and bancassurance, to complement our
traditional sales channels. We intend to further enhance the
effectiveness of these new distribution channels through
technological upgrade. We will continue to explore additional
new channels to expand our customer base and increase our sales.
For example, we recently started working with automobile 4S
shops to distribute automobile insurance.
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Our
Challenges
The successful execution of our strategies is subject to certain
risks and uncertainties, including those relating to:
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our ability to adapt to the evolving macroeconomic environment
and regulatory environment in the Chinese insurance industry;
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our ability to attract and retain productive agents, especially
entrepreneurial agents;
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our ability to maintain existing and develop new business
relationships with insurance companies;
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our ability to execute our growth strategy by successfully
acquiring and integrating insurance agencies and
brokerages; and
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our ability to compete effectively against insurance companies,
professional insurance intermediaries and other entities that
distribute insurance products.
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Recent
Developments
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Strategic Partnership with PICC
P&C. On May 13, 2010, we entered
into a strategic partnership agreement with PICC Property and
Casualty Company Limited, or PICC P&C, the largest property
and casualty insurance company in China, for cooperation in
product distribution, development of customized products, data
sharing as well as outsourcing of claims adjusting services. The
agreement aims to enhance competitiveness and profitability of
both companies through product innovation and improved sales
quality as well as better after-sales services while continuing
to expand sales volume.
|
|
|
|
Cathay Investment Funds Distribution of Our Shares
as Dividends to Its Stockholders. The Cathay
Investment Fund, Limited , or CIF, one of our substantial
shareholders, has notified us in a letter dated May 19,
2010 received after the close of the U.S. financial
markets, that the board of directors of CIF has approved the
distribution of 6,477,579 ADSs, representing 129,551,580
ordinary shares, to CIFs stockholders as dividends. These
shares represent CIFs entire holdings in us, or
approximately 14.2% of our issued share capital as of
April 15, 2010. According to CIF, this dividend was deemed
distributed effective May 13, 2010.
|
|
|
|
Strategic Partnership with Taiping General
Insurance. In May 2010, we entered into a
strategic partnership agreement with Taiping General Insurance
Co., Ltd., or Taiping General, a national property and casualty
insurance company in China, to cooperate in product
distribution, development of high-
|
S-6
|
|
|
|
|
margin customized products, data sharing as well as outsourcing
of claims adjusting services. Taiping Generals businees
covers a wide range of insurance services including property
insurance, accident insurance, health insurance and reinsurance.
|
|
|
|
|
|
Establishment of our Insurance Brokerage Business
Unit. In June 2010, we established an
insurance brokerage business unit in an effort to expand our
product offerings from retail to commercial lines. Our insurance
brokerage team will focus on providing property and casualty,
liability, credit and guarantee, cargo, employee benefits and
specialty risk insurance and reinsurance services to corporate
clients.
|
|
|
|
Acquistion of Henan Zhongrui Insurance
Agency. In July 2010, we acquired an
additional 45% of the equity interests in Henan Zhongrui
Insurance Agency Co., Ltd., or Henan Zhongrui, an insurance
agency primarily engaged in the distribution of life insurance
products in Henan Province. Following the completion of the
transaction, we will hold 55% of the equity interests in Henan
Zhongrui. The transaction is expected to close in the third
quarter of 2010, subject to certain consents, authorizations and
other customary closing conditions.
|
Corporate
Structure
In 1998, our founders, Mr. Yinan Hu and Mr. Qiuping
Lai, formed two PRC companies, Guangzhou Nanyun Car Rental
Services Co., Ltd. and Guangdong Nanfeng Automobile Association
Co., Ltd., initially to provide automobile-related services. In
2001, our founders transferred their interests in the two PRC
companies to China United Financial Services Holdings Limited
(then known as China Automobile Association Holdings Limited), a
newly established British Virgin Islands company. As part of its
corporate restructuring to facilitate international fundraising,
China United Financial Services incorporated CISG Holdings Ltd.,
a British Virgin Islands company, in June 2004 as the holding
company for its insurance agency and brokerage businesses and
transferred to CISG Holdings all of its rights and interests in
four PRC insurance intermediary companies it then controlled.
In anticipation of our initial public offering, we incorporated
CNinsure Inc. in the Cayman Islands in April 2007. In July 2007,
CNinsure Inc. acquired all of the equity interests in CISG
Holdings. CISG Holdings became our wholly-owned subsidiary. On
October 31, 2007, we completed our initial public offering
and listed our ADSs on the Nasdaq Global Market.
Corporate
Information
Our principal executive offices are located at 22/F, Yinhai
Building, No. 299 Yanjiang Zhong Road, Guangzhou, Guangdong
510110, Peoples Republic of China. Our telephone number at
this address is
+86-20-6122-2777
and our fax number is +86-20-6126-2893. Our registered office is
at the offices of Maples Corporate Services Limited,
PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands, or at such other place as our board of directors
may from time to time decide.
Investor inquiries should be directed to us at the address and
telephone number of our principal executive offices set forth
above. Our website is
http://
www.cninsure.net. The information contained on our website does
not form part of this prospectus supplement or the accompanying
prospectus. Our agent for service of process in the United
States is CT Corporation System, located at 111 Eighth Avenue,
New York, New York 10011.
S-7
The
Offering
|
|
|
ADSs Offered: |
|
|
|
By us in this offering |
|
4,600,000 ADSs. |
|
By the selling shareholder |
|
700,000 ADSs. |
|
Total |
|
5,300,000 ADSs. |
|
Ordinary Shares Outstanding After this Offering
|
|
1,008,997,726 ordinary shares outstanding (including the
3,218,900 ordinary shares that we reserved for issuance upon the
exercise of our outstanding options), or 1,024,897,726 ordinary
shares outstanding (including the 3,218,900 ordinary shares that
we reserved for issuance upon the exercise of our outstanding
options) if the underwriters exercise the options to purchase
additional 795,000 ADSs in full. |
|
Options to Purchase Additional ADSs |
|
We have granted the underwriters an option, exercisable within
30 days from the date of this prospectus supplement, to
purchase up to an aggregate of 795,000 additional ADSs. |
|
The ADSs |
|
Each ADS represents 20 ordinary shares, par value US$0.001 per
share. The ADSs may be evidenced by a global American Depositary
Receipt. |
|
|
|
The depositary will be the holder of the ordinary shares
underlying the ADSs and you will have the rights of an ADS
holder as provided in the deposit agreement among us, the
depositary and owners and beneficial owners of ADSs, as amended
from time to time. |
|
|
|
You may surrender your ADSs to the depositary to withdraw the
ordinary shares underlying your ADSs. The depositary will charge
you a fee for such an exchange. |
|
|
|
We may amend or terminate the deposit agreement for any reason
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 the accompanying prospectus. We also encourage you to
read the deposit agreement, which is filed as an exhibit to the
registration statement that includes this prospectus supplement. |
|
Depositary |
|
JPMorgan Chase Bank N.A. |
|
Dividend Policy |
|
We may declare dividend from time to time. Our board of
directors has full discretion as to whether to distribute
dividends. |
|
Use of Proceeds |
|
We estimate that we will receive net proceeds from this offering
of approximately US$117.0 million based on the assumed
public offering price of US$26.78, which was the last reported
sale price of our ADSs on the NASDAQ Global Select Market on
July 6, 2010, after deducting the underwriting discounts
and commissions and estimated aggregate offering expenses
payable by us. We intend to use the net proceeds we receive from
this offering to establish four new profit centers. |
S-8
|
|
|
|
|
We will not receive any of the proceeds from the sale of ADSs by
the selling shareholder. |
|
|
|
See Use of Proceeds for additional information. |
|
Risk Factors |
|
See Risk Factors and other information included in
this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference in this prospectus
supplement, as such factors may be amended, updated or modified
periodically in our reports filed with the SEC, for a discussion
of factors you should carefully consider before deciding to
invest in the ADSs. |
|
Nasdaq Global Select Market Symbol |
|
CISG |
|
Lock-up |
|
We, our directors and executive officers, and the selling
shareholder have agreed with the underwriters not to sell,
transfer or dispose of any ADSs, ordinary shares or similar
securities for a period of 90 days after the date of this
prospectus supplement. See Underwriting for more
information. |
S-9
Summary
Consolidated Financial Data
The following summary consolidated statements of operations data
for the years ended December 31, 2007, 2008 and 2009 and
the selected consolidated balance sheet data as of
December 31, 2008 and 2009 have been derived from our
audited consolidated financial statements included in our annual
report on
Form 20-F
for the year ended December 31, 2009. The following summary
unaudited consolidated statement of operations data for the
three months ended March 31, 2009 and 2010, and the summary
unaudited consolidated balance sheet data as of March 31,
2010, have been prepared on the same basis as our audited
consolidated financial statements included in our annual report
on
Form 20-F
for the year ended December 31, 2009.
The summary consolidated financial data should be read in
conjunction with those financial statements and the accompanying
notes and Item 5. Operating and Financial Review and
Prospects included in our annual report on
Form 20-F
for the year ended December 31, 2009. The unaudited
financial information includes all adjustments, consisting only
of normal and recurring adjustments, that we consider necessary
for a fair presentation of our financial position and operating
results for the periods presented. Our consolidated financial
statements are prepared and presented in accordance with United
States generally accepted accounting principles, or
U.S. GAAP. Our historical results do not necessarily
indicate our results expected for any future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
For the Three Months Ended March 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
(As
Adjusted)(1)
|
|
(As
Adjusted)(1)
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
(in thousands, except shares, per share and per ADS data)
|
|
Consolidated Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
|
|
446,929
|
|
|
|
843,107
|
|
|
|
1,154,090
|
|
|
|
169,075
|
|
|
|
215,654
|
|
|
|
281,927
|
|
|
|
41,303
|
|
Other service fees
|
|
|
1,216
|
|
|
|
855
|
|
|
|
761
|
|
|
|
112
|
|
|
|
217
|
|
|
|
29
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
448,145
|
|
|
|
843,962
|
|
|
|
1,154,851
|
|
|
|
169,187
|
|
|
|
215,871
|
|
|
|
281,956
|
|
|
|
41,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
|
|
(232,550
|
)
|
|
|
(436,803
|
)
|
|
|
(579,911
|
)
|
|
|
(84,957
|
)
|
|
|
(121,627
|
)
|
|
|
(140,953
|
)
|
|
|
(20,650
|
)
|
Selling expenses
|
|
|
(9,514
|
)
|
|
|
(17,328
|
)
|
|
|
(49,498
|
)
|
|
|
(7,252
|
)
|
|
|
(7,764
|
)
|
|
|
(14,478
|
)
|
|
|
(2,121
|
)
|
General and administrative
expenses(2)
|
|
|
(68,177
|
)
|
|
|
(180,031
|
)
|
|
|
(199,246
|
)
|
|
|
(29,190
|
)
|
|
|
(40,571
|
)
|
|
|
(53,857
|
)
|
|
|
(7,890
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
(310,241
|
)
|
|
|
(634,162
|
)
|
|
|
(828,655
|
)
|
|
|
(121,399
|
)
|
|
|
(169,962
|
)
|
|
|
(209,288
|
)
|
|
|
(30,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
137,904
|
|
|
|
209,800
|
|
|
|
326,196
|
|
|
|
47,788
|
|
|
|
45,909
|
|
|
|
72,668
|
|
|
|
10,646
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposal of investment in a subsidiary
|
|
|
|
|
|
|
525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
|
|
|
|
|
|
|
|
18,905
|
|
|
|
2,770
|
|
|
|
|
|
|
|
10,230
|
|
|
|
1,499
|
|
Interest income
|
|
|
16,235
|
|
|
|
47,967
|
|
|
|
33,299
|
|
|
|
4,878
|
|
|
|
9,775
|
|
|
|
6,289
|
|
|
|
921
|
|
Interest expense
|
|
|
(25
|
)
|
|
|
(95
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
Others, net
|
|
|
(2
|
)
|
|
|
(28
|
)
|
|
|
1,408
|
|
|
|
206
|
|
|
|
854
|
|
|
|
100
|
|
|
|
15
|
|
Changes in fair value of contingent consideration payables
|
|
|
|
|
|
|
|
|
|
|
(5,946
|
)
|
|
|
(871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before income taxes and income of affiliates
|
|
|
154,112
|
|
|
|
258,169
|
|
|
|
373,858
|
|
|
|
54,770
|
|
|
|
56,536
|
|
|
|
89,287
|
|
|
|
13,081
|
|
S-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
For the Three Months Ended March 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
(As
Adjusted)(1)
|
|
(As
Adjusted)(1)
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
(in thousands, except shares, per share and per ADS data)
|
|
Income tax expense
|
|
|
(3,178
|
)
|
|
|
(62,438
|
)
|
|
|
(95,618
|
)
|
|
|
(14,008
|
)
|
|
|
(15,493
|
)
|
|
|
(22,973
|
)
|
|
|
(3,366
|
)
|
Share of income (loss) of affiliates
|
|
|
|
|
|
|
135
|
|
|
|
774
|
|
|
|
114
|
|
|
|
(34
|
)
|
|
|
3,500
|
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
150,934
|
|
|
|
195,866
|
|
|
|
279,014
|
|
|
|
40,876
|
|
|
|
41,009
|
|
|
|
69,814
|
|
|
|
10,228
|
|
Less: Net loss (income) attributable to the noncontrolling
interests
|
|
|
(2,424
|
)
|
|
|
4,129
|
|
|
|
(21,827
|
)
|
|
|
(3,197
|
)
|
|
|
(4,537
|
)
|
|
|
2,466
|
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Companys shareholders
|
|
|
153,358
|
|
|
|
191,737
|
|
|
|
300,841
|
|
|
|
44,073
|
|
|
|
45,546
|
|
|
|
67,348
|
|
|
|
9,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share (giving effect to the
10,000-for-1 share exchange in 2007):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.2178
|
|
|
|
0.2101
|
|
|
|
0.3297
|
|
|
|
0.0483
|
|
|
|
0.050
|
|
|
|
0.074
|
|
|
|
0.011
|
|
Diluted
|
|
|
0.2143
|
|
|
|
0.2090
|
|
|
|
0.3241
|
|
|
|
0.0475
|
|
|
|
0.050
|
|
|
|
0.071
|
|
|
|
0.010
|
|
Net income per ADS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4.3551
|
|
|
|
4.2025
|
|
|
|
6.5938
|
|
|
|
0.9660
|
|
|
|
0.998
|
|
|
|
1.476
|
|
|
|
0.216
|
|
Diluted
|
|
|
4.2858
|
|
|
|
4.1803
|
|
|
|
6.4815
|
|
|
|
0.9495
|
|
|
|
0.997
|
|
|
|
1.429
|
|
|
|
0.209
|
|
Shares used in calculating net income per share (giving
effect to the 10,000-for-1 share exchange in 2007):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
704,273,232
|
|
|
|
912,497,726
|
|
|
|
912,497,726
|
|
|
|
912,497,726
|
|
|
|
912,497,726
|
|
|
|
912,497,726
|
|
|
|
912,497,726
|
|
Diluted
|
|
|
715,649,950
|
|
|
|
917,335,390
|
|
|
|
928,312,312
|
|
|
|
928,312,312
|
|
|
|
913,489,567
|
|
|
|
942,535,742
|
|
|
|
942,535,742
|
|
Dividends declared per
share(3)
|
|
|
0.1023
|
|
|
|
|
|
|
|
0.075
|
|
|
|
0.011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
ADS(3)
|
|
|
2.046
|
|
|
|
|
|
|
|
1.5
|
|
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Effective January 1, 2009, we
adopted Financial Accounting Standards Board (FASB)
Accounting Standards Codification 810 (ASC 810),
Noncontrolling Interests (formerly FASB Statement
(SFAS) No. 160, Noncontrolling Interests in
Consolidated Financial Statements). As a result, revised
presentation and disclosure requirements were applied
retrospectively to all periods presented, requiring
noncontrolling interests to be separately presented as a
component of shareholders equity on the consolidated
balance sheets. The balance sheet data as of December 31,
2007 and 2008 were extracted from the annual report on Form 20-F
for the year ended December 31, 2008, as adjusted to give
the effect of the adoption of ASC 810.
|
|
(2)
|
|
Share-based compensation expenses
included in our general and administrative expenses were
RMB5.0 million, RMB45.7 million and
RMB7.6 million (US$1.1 million) in 2007, 2008 and
2009, respectively, and RMB4.5 million
(US$0.7 million) for the three months ended March 31,
2010.
|
|
(3)
|
|
The 2006 and 2007 dividends were
declared in 2007. These dividends were not paid at the time they
were declared. In 2007, we paid all of the previously declared
but unpaid dividends totaling approximately
RMB140.0 million. Dividend of US$0.22 per ADS was declared
on May 21, 2009, payable to our shareholders of record as
of the close of business on June 26, 2009.
|
S-11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of March 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
|
(As
Adjusted)(1)
|
|
(As
Adjusted)(1)
|
|
|
|
|
|
(unaudited)
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
RMB
|
|
US$
|
|
|
(in thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,544,817
|
|
|
|
1,510,432
|
|
|
|
1,457,890
|
|
|
|
213,582
|
|
|
|
1,346,181
|
|
|
|
197,220
|
|
Total current assets
|
|
|
1,608,256
|
|
|
|
1,876,883
|
|
|
|
1,727,499
|
|
|
|
253,080
|
|
|
|
1,619,072
|
|
|
|
237,199
|
|
Total assets
|
|
|
1,640,164
|
|
|
|
2,046,515
|
|
|
|
2,545,965
|
|
|
|
372,986
|
|
|
|
2,559,566
|
|
|
|
374,984
|
|
Total current liabilities
|
|
|
53,337
|
|
|
|
190,222
|
|
|
|
337,648
|
|
|
|
49,466
|
|
|
|
222,295
|
|
|
|
32,567
|
|
Total liabilities
|
|
|
54,928
|
|
|
|
200,444
|
|
|
|
359,260
|
|
|
|
52,632
|
|
|
|
250,899
|
|
|
|
36,758
|
|
Noncontrolling interests
|
|
|
18,324
|
|
|
|
94,423
|
|
|
|
194,897
|
|
|
|
28,553
|
|
|
|
245,049
|
|
|
|
35,900
|
|
Total shareholders equity
|
|
|
1,585,236
|
|
|
|
1,846,071
|
|
|
|
2,186,705
|
|
|
|
320,354
|
|
|
|
2,308,667
|
|
|
|
338,226
|
|
Total liabilities and shareholders equity
|
|
|
1,640,164
|
|
|
|
2,046,515
|
|
|
|
2,545,965
|
|
|
|
372,986
|
|
|
|
2,559,566
|
|
|
|
374,984
|
|
|
|
|
(1)
|
|
Effective January 1, 2009, we
adopted FASB ASC 810, Noncontrolling Interests (formerly
FASB No. 160, Noncontrolling Interests in Consolidated
Financial Statements). As a result, revised presentation and
disclosure requirements were applied retrospectively to all
periods presented, requiring noncontrolling interests to be
separately presented as a component of stockholders equity
on the consolidated balance sheets. The balance sheet data as of
December 31, 2007 and 2008 were extracted from the annual
report on
Form 20-F
for the years ended December 31, 2007 and 2008, as adjusted
to give effect to the adoption of ASC 810.
|
S-12
RISK
FACTORS
You should carefully consider the risks described below and
in our annual report on
Form 20-F
for the year ended December 31, 2009, as well as the other
information included or incorporated by reference in this
prospectus supplement and the accompanying prospectus before you
decide to buy our ADSs. The risks described below are not the
only risks we face. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial
may also materially and adversely affect our business
operations. Any of the following risks could materially
adversely affect our business, financial condition or results of
operations. In such case, you may lose all or part of your
original investment.
Risks
Related to This Offering
The
market price for our ADSs may be volatile.
The market price for our ADSs may be volatile and subject to
wide fluctuations in response to factors including the following:
|
|
|
|
|
actual or anticipated fluctuations in our quarterly operating
results;
|
|
|
|
changes in financial estimates by securities research analysts;
|
|
|
|
conditions in the Chinese insurance industry;
|
|
|
|
changes in the economic performance or market valuations of
other insurance intermediaries;
|
|
|
|
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;
|
|
|
|
sales of additional ADSs; and
|
|
|
|
general economic or political conditions in China.
|
In addition, the securities market has from time to time
experienced significant price and volume fluctuations that are
not related to the operating performance of particular
companies. These market fluctuations may also materially and
adversely affect the market price of our ADSs.
Our
management will have considerable discretion as to the use of
the net proceeds from this offering.
Our management will have considerable discretion in the
application of the net proceeds received by us. You will not
have the opportunity, as part of your investment decision, to
assess whether proceeds are being used appropriately. You must
rely on the judgment of our management regarding the application
of the net proceeds of this offering. The net proceeds may be
used for corporate purposes that do not improve our efforts to
maintain profitability or increase the price of our ADSs. The
net proceeds from this offering may be placed in investments
that do not produce income or that lose value.
We may
need additional capital, and the sale of additional ADSs or
other equity securities could result in additional dilution to
our shareholders.
We believe that our current cash and cash equivalents,
anticipated cash flow from operations and the proceeds from this
offering will be sufficient to meet our anticipated cash needs
for the foreseeable future. We may, however, require additional
cash resources due to changed business conditions or other
future developments, including any investments or acquisitions
we may decide to pursue. If these resources are insufficient to
satisfy our cash requirements, we may seek to sell additional
equity or debt securities or obtain a credit facility. The sale
of additional equity securities could result in additional
dilution to our shareholders. The incurrence of indebtedness
would result in increased debt service obligations and could
result in operating and financing covenants that would
S-13
restrict our operations. We cannot assure you that financing
will be available in amounts or on terms acceptable to us, if at
all.
You
may not have the same voting rights as the holders of our
ordinary shares and may not receive voting materials in time to
be able to exercise your right to vote.
Except as described in our annual report on
Form 20-F
for the year ended December 31, 2009 and in the deposit
agreement, holders of our ADSs will not be able to exercise
voting rights attaching to the shares evidenced by our ADSs on
an individual basis. Holders of ADSs may instruct the depositary
to exercise the voting rights attaching to the shares
represented by the ADSs. If no instructions are received by the
depositary on or before a date established by the depositary,
the depositary shall deem the holders to have instructed it to
give a discretionary proxy to a person designated by us to
exercise their voting rights. You may not receive voting
materials in time to instruct the depositary to vote, and it is
possible that you, or persons who hold their ADSs through
brokers, dealers or other third parties, will not have the
opportunity to exercise a right to vote.
You
may not be able to participate in rights offerings and may
experience dilution of your holdings as a result.
We may from time to time distribute rights to our shareholders,
including rights to acquire our securities. Under the deposit
agreement for the ADSs, the depositary will not offer those
rights to ADS holders unless both the rights and the underlying
securities to be distributed to ADS holders are either
registered under the Securities Act of 1933 or exempt from
registration under the Securities Act with respect to all
holders of ADSs. We are under no obligation to file a
registration statement with respect to any such rights or
underlying securities or to endeavor to cause such a
registration statement to be declared effective. In addition, we
may not be able to take advantage of any exemptions from
registration under the Securities Act. Accordingly, holders of
our ADSs may be unable to participate in our rights offerings
and may experience dilution in their holdings as a result.
You
may be subject to limitations on transfer of your
ADSs.
Your ADSs are transferable on the books of the depositary.
However, the depositary may close its transfer books at any time
or from time to time when it deems expedient in connection with
the performance of its duties. In addition, the depositary may
refuse to deliver, transfer or register transfers of ADSs
generally when our books or the books of the depositary are
closed, or at any time if we or the depositary deem it advisable
to do so because of any requirement of law or of any government
or governmental body, or under any provision of the deposit
agreement, or for any other reason.
Substantial
future sales or perceived sales of our ADSs in the public market
could cause the price of our ADSs to decline.
Sales of our ADSs in the public market after this offering, or
the perception that these sales could occur, could cause the
market price of our ADSs to decline. Upon completion of this
offering, we will have 1,008,997,726 ordinary shares outstanding
(including the 3,218,900 ordinary shares that we reserved for
issuance upon the exercise of our outstanding options),
including 669,057,400 ordinary shares represented by
33,452,870 ADSs, and 1,024,897,726 ordinary shares
outstanding (including the 3,218,900 ordinary shares that we
reserved for issuance upon the exercise of our outstanding
options), including 684,957,400 ordinary shares represented by
34,247,870 ADSs, if the underwriters exercise their option
to purchase an additional 795,000 ADSs in full. All ADSs
sold in this offering will be freely transferable without
restriction or additional registration under the Securities Act
of 1933, as amended, or the Securities Act. Shares owned by our
directors, executive officers and certain other shareholders
will be available for sale upon the expiration of the
90-day
lock-up
period from the date of this prospectus supplement, subject to
volume and other restrictions as applicable under Rule 144
and Rule 701 under the Securities Act. Any or all of these
shares may be released prior to expiration of the
lock-up
period at the discretion of the representatives of the
underwriters. To the extent shares are released before the
expiration of the
lock-up
period and these shares are sold into the market, the market
price of our ADSs could decline.
S-14
We may
become a passive foreign investment company, which could result
in adverse U.S. federal income tax consequences for U.S. Holders
of our ADSs or ordinary shares.
Based on the market price of our ADSs, the value of our assets,
and the composition of our income and assets, we do not expect
to be a passive foreign investment company, or PFIC,
for U.S. federal income tax purposes for our taxable year
ending December 31, 2010. A
non-U.S. corporation
will be a PFIC for any taxable year if either (1) at least
75% of its gross income for such year is passive income or
(2) at least 50% of the value of its assets (based on an
average of the quarterly values of the assets) during such year
is attributable to assets that produce passive income or are
held for the production of passive income. We must make a
separate determination after the close of each taxable year as
to whether we were a PFIC for that year. The composition of our
income and assets will be affected by how, and how quickly, we
use any cash we generate from our operations or raise in this or
any subsequent offering. Because the value of our assets for
purposes of the PFIC test will generally be determined by
reference to the market price of our ADSs or ordinary shares,
fluctuations in the market price of our ADSs or ordinary shares
may cause us to become a PFIC. If we are a PFIC for any taxable
year during which a U.S. Holder (as defined in
TaxationUnited States Federal Income Taxation
in the accompanying prospectus) holds our ADSs or ordinary
shares, certain adverse U.S. federal income tax
consequences could apply to such U.S. Holder. See
TaxationUnited States Federal Income
TaxationPassive Foreign Investment Company in the
accompanying prospectus.
S-15
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the
information incorporated herein and therein by reference may
contain forward-looking statements intended to
qualify for the safe harbor from liability
established by the U.S. Private Securities Litigation
Reform Act of 1995. These statements, which are not statements
of historical fact, may contain estimates, assumptions,
projections
and/or
expectations regarding future events, which may or may not
occur. You can identify these forward-looking statements by
terminology such as may, will,
expect, anticipate,
forecast, intend, plan,
predict, propose, potential,
continue, believe, estimate,
is/are likely to, or the negative of these terms,
and other similar expressions. We have based these
forward-looking statements largely on our current expectations
and projections about future events and financial trends that we
believe may affect our financial condition, results of
operations, business strategy and financial needs. We do not
guarantee that the transactions and events described in this
prospectus or in any prospectus supplement will happen as
described or at all. You should read this prospectus supplement
and the accompanying prospectus completely and with the
understanding that actual future results may be materially
different from what we expect.
Whether actual results will conform to our expectations and
predictions is subject to a number of risks and uncertainties,
many of which are beyond our control, and reflect future
business decisions subject to change. Some of the assumptions,
future results and levels of performance expressed or implied in
the forward-looking statements we make inevitably will not
materialize, and unanticipated events may occur that will affect
our results.
We would like to caution you not to place undue reliance on
these forward-looking statements we make, and you should read
these statements in conjunction with the risk factors set forth
under the heading Risk Factors in this prospectus
supplement and the accompanying prospectus for a more complete
discussion of the risks of an investment in our securities.
These risks are not exhaustive. We operate in an emerging and
evolving environment. New risk factors emerge from time to time
and it is impossible for our management to predict all risk
factors, nor can we assess the impact of all risk factors on our
business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from
those contained in any forward-looking statement.
The forward-looking statements made in this prospectus
supplement and the accompanying prospectus relate only to events
as of the date on which the statements are made. We undertake no
obligation, beyond that required by law, to update any
forward-looking statement to reflect events or circumstances
after the date on which the statement is made, even though our
situation may change in the future.
S-16
USE OF
PROCEEDS
We estimate that we will receive net proceeds from this offering
of approximately US$117.0 million based on the assumed
public offering price of US$26.78, which was the last reported
sale price of our ADSs on the NASDAQ Global Select Market on
July 6, 2010, after deducting the underwriting discounts
and commissions and estimated aggregate offering expenses
payable by us. We intend to use the net proceeds we receive from
this offering to establish four new profit centers.
The foregoing use of our net proceeds from this offering
represents our current intentions based upon our present plans
and business condition. The amounts and timing of any
expenditure will vary depending on the amount of cash generated
by our operations, competitive and technological developments
and the rate of growth, if any, of our business. Accordingly,
our management will have significant discretion in the
allocation of the net proceeds we will receive from this
offering. Depending on future events and other changes in the
business climate, we may determine at a later time to use the
net proceeds for different purposes. Pending the use of the net
proceeds, we intend to invest the net proceeds in a variety of
capital preservation instruments, including short-term,
investment-grade, interest-bearing instruments.
We will not receive any of the proceeds from the sale of ADSs by
the selling shareholder.
S-17
CAPITALIZATION
The following table sets forth our capitalization as of
March 31, 2010.
|
|
|
|
|
on an actual basis; and
|
|
|
|
on an as adjusted basis to give effect to the completion of this
offering, after deducting the underwriting discounts and
commissions and estimated aggregate offering expenses payable by
us and assuming no exercise of the underwriters
over-allotment option.
|
You should read this table together with our financial
statements and the related notes, the information under
Item 5. Operating and Financial Review and
Prospects included in our annual report on
Form 20-F
for the year ended December 31, 2009, and the information
under SummaryRecent Developments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010
|
|
|
Actual (unaudited)
|
|
As
Adjusted(1)
|
|
|
RMB
|
|
US$
|
|
RMB
|
|
US$
|
|
|
(in thousands)
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares, $0.001 par value,
10,000,000,000 shares authorized; 912,497,726 shares
issued and outstanding, and 1,004,497,726 shares issued and
outstanding, as
adjusted(2)
|
|
|
7,036
|
|
|
|
1,031
|
|
|
|
7,659
|
|
|
|
1,123
|
|
Additional paid-in
capital(3)
|
|
|
1,609,223
|
|
|
|
235,756
|
|
|
|
2,400,989
|
|
|
|
352,693
|
|
Statutory reserves
|
|
|
103,874
|
|
|
|
15,218
|
|
|
|
103,874
|
|
|
|
15,218
|
|
Retained earnings
|
|
|
416,011
|
|
|
|
60,947
|
|
|
|
416,011
|
|
|
|
60,947
|
|
Accumulated other comprehensive loss
|
|
|
(72,526
|
)
|
|
|
(10,626
|
)
|
|
|
(72,526
|
)
|
|
|
(10,626
|
)
|
Total CNinsure Inc. shareholders equity
|
|
|
2,063,618
|
|
|
|
302,326
|
|
|
|
2,856,007
|
|
|
|
419,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
245,049
|
|
|
|
35,900
|
|
|
|
245,049
|
|
|
|
35,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders
equity(3)
|
|
|
2,308,667
|
|
|
|
338,226
|
|
|
|
3,101,056
|
|
|
|
455,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capitalization(3)
|
|
|
2,308,667
|
|
|
|
338,226
|
|
|
|
3,101,056
|
|
|
|
455,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The as adjusted information is
illustrative only. Our additional paid-in capital, total
shareholders equity and total capitalization following the
completion of this offering are subject to adjustment based on
the actual public offering price and other terms of this
offering determined at pricing.
|
|
(2)
|
|
Does not include the
underwriters option to purchase an additional 795,000 ADSs
as described on the cover page of this prospectus supplement.
|
|
(3)
|
|
Assuming the number of ADSs offered
by us as set forth on the cover page of this prospectus
supplement remains the same, and after deduction of underwriting
discounts and commissions and the estimated offering expenses
payable by us, a US$1.00 increase (decrease) in the assumed
public offering price of US$26.78 per ADS would increase
(decrease) each of additional paid-in capital, total
shareholders equity and total capitalization by US$0.95
per ADS.
|
Except as disclosed above, there have been no material changes
to our capitalization since March 31, 2010.
S-18
DILUTION
If you invest in our ADSs, your interest will be diluted to the
extent of the difference between the public offering price per
ADS and our net tangible book value per ADS after this offering.
Dilution results from the fact that the public offering price
per ADS is substantially in excess of the net book value per ADS
after this offering.
Our net tangible book value as of March 31, 2010 was
approximately RMB1,324.7 million (US$194.1 million),
or RMB1.45 (US$0.21) per ordinary share based upon 912,497,726
ordinary shares outstanding as of that date, and
US$4.25 per ADS. Net tangible book value per ADS is
calculated by subtracting our total liabilities from our total
assets, and dividing this amount by the number of ordinary
shares outstanding as of December 31, 2009 as represented
by ADSs.
Without taking into account any other changes in such net
tangible book value after March 31, 2010, other than to
give effect to the sale by us of 4,600,000 ADSs offered in this
offering at an assumed public offering price of
US$26.78 per ADS (the last sale price of our ADSs as
reported on the NASDAQ Global Select Market on July 6,
2010) and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, our
as adjusted net tangible book value as of March 31, 2010
would have been RMB2,117.1 million (US$311.1 million),
or RMB2.11 (US$0.31) per outstanding ordinary share, and
RMB42.15 (US$6.19) per ADS. This represents an immediate
increase in the net tangible book value of US$0.10 per ordinary
share and US$1.94 per ADS, to our existing shareholders and
an immediate dilution in the net tangible book value of
US$1.03 per ordinary share and US$20.59 per ADS, to
purchasers of our ADSs in this offering. The following table
illustrates such dilution on a per ADS basis:
|
|
|
|
|
Assumed public offering price per ADS
|
|
US $
|
26.78
|
|
Net tangible book value per ADS as of March 31, 2010
|
|
|
4.25
|
|
Increase in net tangible book value per ADS to existing
shareholders attributable to the offering
|
|
|
1.94
|
|
As adjusted net tangible book value per ADS after giving effect
to the offering
|
|
|
6.19
|
|
Dilution in net tangible book value per ADS to new investors in
the offering
|
|
|
20.59
|
|
Each US$1.00 increase (decrease) in the assumed public offering
price of US$26.78 per ADS would increase (decrease) our as
adjusted net tangible book value after this offering by
approximately US$4.4million, or approximately US$0.004 per
ordinary share, or US$0.09 per ADS, and the dilution in net
tangible book value per ADS to new investors by approximately
US$0.91 per ADS, assuming that the number of ADS offered by
us, as set forth on the cover page of this prospectus
supplement, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. The information discussed above is
illustrative only and will adjust based on the actual public
offering price and other terms of this offering determined at
pricing.
If the underwriters exercise their option in full to purchase
795,000 additional ADSs in this offering, the as adjusted net
tangible book value per ADS after the offering would be
US$6.72 per ADS, and the dilution to the new investors
would be US$20.06 per ADS.
The foregoing table does not take into effect further dilution
to new investors that could occur upon the exercise of
outstanding options having a per share exercise price less than
the offering price per share in this offering. As of
March 31, 2010, there were:
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|
|
|
|
94,566,631 ordinary shares issuable upon the exercise of options
outstanding; and
|
|
|
|
46,960,659 ordinary shares reserved for future issuance under
our share incentive plan.
|
S-19
DIVIDEND
POLICY
In 2006, we declared dividends of RMB170 and RMB523 per share
for 2004 and 2005, respectively. In March 2007, we declared a
dividend of RMB585 per share for 2006. These dividends were not
paid at the time they were declared. In 2007, we paid all of the
previously declared but unpaid dividends totaling approximately
RMB140.0 million. In October 2007, after we issued new
ordinary shares on a 10,000 for-one basis in exchange for CISG
shares, we declared a dividend of RMB0.102308 per share for
2007. In May 2009, we declared a dividend of US$0.22 per ADS
payable to our shareholders of record as of the close of
business on June 26, 2009 and paid in July 2009. On
April 23, 2010, our board of directors approved a cash
dividend of US$0.013 per ordinary share, equivalent to US$0.26
per ADS. On June 10, 2010, we paid a cash dividend in the
aggregate amount of $5,876,923 to our public shareholders of
record as of the close of business on May 20, 2010. The
cash dividend is payable on or around July 20, 2010 to the
rest of our shareholders of record as of the close of business
on May 20, 2010.
We may declare dividend from time to time. Our board of
directors has full discretion as to whether to distribute
dividends. Even if our board of directors decides to pay
dividends, the timing, amount and form of future dividends, if
any, will depend on, among other things, our future results of
operations and cash flow, our capital requirements and surplus,
the amount of distributions, if any, received by us from our
subsidiaries, our financial condition, contractual restrictions
and other factors deemed relevant by our board of directors.
If we pay any dividends, we will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to the terms
of the deposit agreement, including the fees and expenses
payable thereunder. See Description of American Depositary
Shares section of the accompanying prospectus. Cash
dividends on our ordinary shares, if any, will be paid in
U.S. dollars.
We are a holding company incorporated in the Cayman Islands. We
rely on dividends from our subsidiaries in China to fund our
payment of dividends, if any, to our shareholders. Current PRC
regulations permit our subsidiaries to pay dividends to us only
out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In
addition, each of our subsidiaries in China is required to set
aside a certain amount of its accumulated after-tax profits each
year, if any, to fund certain statutory reserves. These reserves
may not be distributed as cash dividends. Further, if our
subsidiaries in China incur debt on their own behalf, the
instruments governing the debt may restrict their ability to pay
dividends or make other payments to us. Furthermore, there are
still uncertainties under the new PRC Enterprise Income Tax Law
promulgated on March 16, 2007 and the related regulations
regarding whether the dividends we receive from our PRC
subsidiaries or dividends paid to our shareholders will be
subject to PRC withholding tax. See Item 3.D. Key
InformationRisk FactorsRisks Related to Doing
Business in ChinaOur global income or the dividends we
receive from our PRC subsidiaries may be subject to PRC tax
under the EIT Law, which could have a material adverse effect on
our results of operations. and Item 3.D. Key
InformationRisk FactorsRisks Related to Doing
Business in ChinaUnder the EIT Law, dividends payable by
us and gains on the disposition of our shares or ADSs could be
subject to PRC taxation. included in our annual report on
Form 20-F
for the year ended December 31, 2009.
S-20
MARKET
PRICE INFORMATION FOR OUR AMERICAN DEPOSITARY SHARES
On October 31, 2007, we listed our ADSs on the Nasdaq
Global Market under the symbol CISG. Since
January 2, 2009, our ADSs have been listed on the Nasdaq
Global Select Market under the symbol CISG. The
following table provides the high and low trading prices for our
ADSs on the Nasdaq Global Select Market (and the Nasdaq Global
Market prior to January 2, 2009) for the periods
indicated.
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Sales Price
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High
|
|
Low
|
|
|
US$
|
|
US$
|
|
Annual High and Low
|
|
|
|
|
|
|
|
|
2007 (from October 31, 2007)
|
|
|
28.74
|
|
|
|
12.00
|
|
2008
|
|
|
16.63
|
|
|
|
5.44
|
|
2009
|
|
|
24.74
|
|
|
|
6.26
|
|
Quarterly Highs and Lows
|
|
|
|
|
|
|
|
|
First Quarter of 2008
|
|
|
15.69
|
|
|
|
8.51
|
|
Second Quarter of 2008
|
|
|
16.63
|
|
|
|
11.30
|
|
Third Quarter of 2008
|
|
|
14.41
|
|
|
|
8.16
|
|
Fourth Quarter of 2008
|
|
|
11.00
|
|
|
|
5.44
|
|
First Quarter of 2009
|
|
|
9.59
|
|
|
|
6.26
|
|
Second Quarter of 2009
|
|
|
14.20
|
|
|
|
7.00
|
|
Third Quarter of 2009
|
|
|
24.74
|
|
|
|
12.92
|
|
Fourth Quarter of 2009
|
|
|
24.64
|
|
|
|
18.42
|
|
First Quarter of 2010
|
|
|
27.46
|
|
|
|
16.49
|
|
Second Quarter of 2010
|
|
|
28.62
|
|
|
|
20.25
|
|
Monthly Highs and Lows
|
|
|
|
|
|
|
|
|
January 2010
|
|
|
22.82
|
|
|
|
17.40
|
|
February 2010
|
|
|
22.29
|
|
|
|
16.49
|
|
March 2010
|
|
|
27.46
|
|
|
|
21.64
|
|
April 2010
|
|
|
28.62
|
|
|
|
24.77
|
|
May 2010
|
|
|
28.40
|
|
|
|
20.84
|
|
June 2010
|
|
|
27.80
|
|
|
|
24.10
|
|
July 2010 (through July 6)
|
|
|
27.67
|
|
|
|
24.95
|
|
S-21
SELLING
SHAREHOLDER
The following table sets forth information with respect to the
beneficial ownership of our ordinary shares by the selling
shareholder as of the date of this prospectus.
The calculations in the table below assume there are
916,997,726 ordinary shares outstanding (including the
3,218,900 ordinary shares that we reserved for issuance
upon the exercise of our outstanding options) as of the date of
this prospectus and 1,008,997,726 ordinary shares
outstanding (including the 3,218,900 ordinary shares that
we reserved for issuance upon the exercise of our outstanding
options) immediately after the closing of this offering.
Beneficial ownership is determined in accordance with the rules
and regulations of the SEC. In computing the number of shares
beneficially owned by the selling shareholder and the percentage
ownership of the selling shareholder, we have included shares
that the selling shareholder has the right to acquire within 60
days, including through the exercise of any option, warrant or
other right or the conversion of any other security.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares
|
|
Number of
|
|
Number of
|
|
|
Beneficially Owned
|
|
Ordinary Shares
|
|
Ordinary Shares
|
|
|
Prior to
|
|
Being Sold
|
|
Beneficially Owned
|
|
|
This Offering
|
|
in This Offering
|
|
After This Offering
|
|
|
Number
|
|
%
|
|
Number
|
|
%
|
|
Number
|
|
%
|
|
Selling Shareholder:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kingsford Resources
Limited(1)
|
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219,041,373
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|
|
|
23.9
|
|
|
|
14,000,000
|
|
|
|
1.4
|
|
|
|
205,041,373
|
|
|
|
20.3
|
|
|
|
|
(1) |
|
Kingsford Resources Limited, a British Virgin Islands company,
is 93.3% owned by High Rank Investments, which is in turn 87.6%
owned by Mr. Yinan Hu, our chairman and chief executive
officer, and 12.4% owned by Mr. Qiuping Lai, our president.
The remaining 6.7% of the total outstanding shares of Kingsford
Resources are held by Better Rise Investments, which is owned by
three of our executive officers and Mr. Yinan Hus
wife. The registered address of Kingsford Resources is Beaufort
House, P.O. Box 438, Road Town, Tortola, British
Virgin Islands. |
S-22
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus
supplement, the underwriters named below, for whom Morgan
Stanley & Co. International plc and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are acting as
representatives, have agreed to purchase, severally and not
jointly, and we and the selling shareholder have agreed to sell
to them, severally, the number of ADSs indicated below:
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|
|
|
|
Name
|
|
Number of ADSs
|
|
|
Morgan Stanley & Co. International plc
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
|
|
|
|
|
|
|
|
|
|
|
5,300,000
|
|
|
|
|
|
|
The underwriters are offering the ADSs subject to their
acceptance of the ADSs from us and the selling shareholder and
subject to prior sale. The underwriting agreement provides that
the obligations of the several underwriters to pay for and
accept delivery of the ADSs offered by this prospectus
supplement are subject to the approval of certain legal matters
by their counsel and to certain other conditions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.
The underwriters are obligated to take and pay for all of the
ADSs to be sold under the underwriting agreement if any such
ADSs are taken. However, the underwriters are not required to
take or pay for the ADSs covered by the underwriters
over-allotment option described below. If an underwriter
defaults, the underwriting agreement provides that the
underwriting commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.
Some of the underwriters are expected to make offers and sales
both inside and outside the United States through their
respective selling agents. Any offers and sales in the United
States will be conducted by broker-dealers registered with the
Securities and Exchange Commission. Morgan Stanley &
Co. International plc will offer ADSs in the United States
through its registered broker-dealer affiliate in the United
States, Morgan Stanley & Co. Incorporated.
The underwriters initially propose to offer part of the ADSs
directly to the public at the public offering price listed on
the cover page of this prospectus supplement. After the initial
offering of the ADSs, the offering price and other selling terms
may be changed.
We expect to grant to the underwriters an option, exercisable
for 30 days from the date of this prospectus supplement, to
purchase up to an additional 795,000 ADSs at the public
offering price set forth on the cover page of this prospectus
supplement, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of
covering over-allotments, if any. To the extent the option is
exercised, in whole or in part, each underwriter will become
obligated, subject to certain conditions, to purchase about the
same percentage of the additional ADSs as the number listed next
to the underwriters name in the preceding table bears to
the total number of ADSs listed next to the names of all
underwriters in the preceding table.
The representatives have advised us that the underwriters
propose initially to offer the shares to the public at the
public offering price set forth on the cover page of this
prospectus and to dealers at that price less a concession not in
excess of $ per share. After
the initial offering, the public offering price, concession or
any other term of the offering may be changed.
The following table shows the public offering price,
underwriting discount and proceeds before expenses to us. The
information assumes either no exercise or full exercise by the
underwriters of their overallotment option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ADS
|
|
|
Without Option
|
|
|
With Option
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Underwriting discount
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to CNinsure
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to the selling shareholder
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
S-23
Total expenses for this offering are estimated to be
approximately US$ million and
payable by us.
We have agreed that, without the prior written consent of the
representatives on behalf of the underwriters, we will not,
during the period ending 90 days after the date of this
prospectus supplement:
|
|
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or sell, lend, or
otherwise transfer or dispose of, directly or indirectly, any
ordinary shares, any ADSs, or any securities convertible into or
exercisable or exchangeable for ordinary shares or ADSs;
|
|
|
|
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the ordinary shares or ADSs, whether any such
transaction described above is to be settled by delivery of
ordinary shares or ADSs or such other securities, in cash or
otherwise; or
|
|
|
|
file any registration statement with the SEC relating to the
offering of any ordinary shares or ADSs or any securities
convertible into or exercisable or exchangeable for Ordinary
Shares or ADSs.
|
These restrictions do not apply to:
|
|
|
|
|
the sale of ordinary shares in the form of ADSs to the
underwriters in this offering;
|
|
|
|
the grant of options to purchase ordinary shares that would not
vest, restricted shares that would not become freely
transferable, and restricted share units that would not vest
under our share incentive plan; or
|
|
|
|
the issuance by us of ordinary shares upon the exercise of an
option or warrant or the conversion of a security outstanding on
the date hereof of this prospectus supplement of which the
underwriters have been advised in writing.
|
Each of the selling shareholder and our directors and executive
officers has agreed that, without the prior written consent of
the representatives on behalf of the underwriters, it will not,
during the period ending 90 days after the date of this
prospectus supplement:
|
|
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
ordinary shares, any ADSs, or any securities convertible into or
exercisable or exchangeable for ordinary shares or ADSs; or
|
|
|
|
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the ordinary shares or ADSs,
|
whether any such transaction described above is to be settled by
delivery of ordinary shares or ADSs or such other securities, in
cash or otherwise.
These restrictions do not apply to transactions relating to
ordinary shares, ADSs or other securities acquired in open
market transactions after the closing of the offering of the
ADSs and certain other exceptions.
In order to facilitate the offering of the ADSs, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the ADSs. Specifically, the
underwriters may sell more ADSs than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no
greater than the number of ADSs available for purchase by the
underwriters under the over-allotment option. The underwriters
can close out a covered short sale by exercising the
over-allotment option or purchasing ADSs in the open market. In
determining the source of ADSs to close out a covered short
sale, the underwriters will consider, among other things, the
open market price of ADSs compared to the price available under
the over-allotment option. The underwriters may also sell ADSs
in excess of the over-allotment option, creating a naked short
position. The underwriters must close out any naked short
position by purchasing ADSs in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
the ADSs in the open market after pricing that could adversely
affect investors who purchase in this offering. As an additional
means of facilitating the offering, the underwriters may bid
for, and purchase, ADSs in the open market to stabilize the
price of the ADSs. The underwriting syndicate may also reclaim
selling concessions allowed to an underwriter or a dealer for
distributing the ADSs in the offering, if the syndicate
S-24
repurchases previously distributed ADSs to cover syndicate short
positions or to stabilize the price of the ADSs. These
activities may raise or maintain the market price of the ADSs
above independent market levels or prevent or retard a decline
in the market price of the ADSs. Neither we nor any of the
underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions
described above may have on the price of the ADSs. The
underwriters are not required to engage in these activities, and
may end any of these activities at any time.
From time to time, certain of the underwriters or their
affiliates have provided, and continue to provide investment
banking and other financial services to us, our affiliates or
employees, for which they have received and continue to receive
customary fees and commissions.
We, the selling shareholder and the underwriters have agreed to
indemnify each other against certain liabilities, including
liabilities under the Securities Act.
The address of Morgan Stanley & Co. International plc
is 25 Cabot Square, Canary Wharf, London E14 4QA, England.
The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated is One Bryant Park, New York, NY 10036,
United States of America.
In connection with this offering, underwriters and selling group
members may engage in passive market making transactions in the
common stock on the Nasdaq Global Market in accordance with
Rule 103 of Regulation M under the Exchange Act during
a period before the commencement of offers or sales of common
stock and extending through the completion of distribution. A
passive market maker must display its bid at a price not in
excess of the highest independent bid of that security. However,
if all independent bids are lowered below the passive market
makers bid, that bid must then be lowered when specified
purchase limits are exceeded. Passive market making may cause
the price of our common stock to be higher than the price that
otherwise would exist in the open market in the absence of those
transactions. The underwriters and dealers are not required to
engage in passive market making and may end passive market
making activities at any time.
Selling
Restrictions
No action has been taken or will be taken by us or any
underwriters in any jurisdiction (except in the United States)
that would permit a public offering of the ADSs, or the
possession, circulation or distribution of this prospectus
supplement, the accompanying prospectus or any other material
relating to us or the ADSs in any country or jurisdiction where
action for that purpose is required. Accordingly, the ADSs may
not be offered or sold, directly or indirectly, and neither this
prospectus supplement, the prospectus accompanying it, nor any
other offering material or advertisements in connection with
this offering or the ADSs may be distributed or published, in or
from any country or jurisdiction except in compliance with any
applicable rules and regulations of any such country or
jurisdiction.
Australia. Neither this prospectus supplement
nor the accompanying prospectus:
|
|
|
|
|
constitutes a disclosure document under Chapter 6D.2 of the
Corporations Act 2001 of the Commonwealth of Australia
(Corporations Act);
|
|
|
|
has been, or will be, lodged with the Australian Securities and
Investments Commission (ASIC) as a disclosure
document for the purposes of the Corporations Act and does not
purport to include the information required of a disclosure
document under Chapter 6D.2 of the Corporations
Act; and
|
|
|
|
may only be provided in Australia other than to select investors
who are able to demonstrate that they fall within one or more of
the categories of Investors (Exempt Investors)
available under section 708 of the Corporations Act.
|
The ADSs may not be directly or indirectly offered for
subscription or purchased or sold, and no invitations to
subscribe for or buy the ADSs may be issued, and no draft or
definitive offering memorandum, advertisement or other offering
material relating to any ADSs may be distributed in Australia,
except where disclosure to investors is not required under
Chapter 6D of the Corporations Act or is otherwise in
compliance with all applicable Australian laws and regulations.
By submitting an application for the ADSs, you represent and
warrant to us that you are an Exempt Investor.
S-25
As any offer of ADSs under this prospectus supplement or the
accompanying prospectus will be made without disclosure in
Australia under Chapter 6D.2 of the Corporations Act, the
offer of those ADSs for resale in Australia within
12 months may, under section 707 of the Corporations
Act, require disclosure to investors under Chapter 6D.2 if
none of the exemptions in section 708 applies to that
resale. By applying for the ADSs you undertake to us that you
will not, for a period of 12 months from the date of issue
of the ADSs, offer, transfer, assign or otherwise alienate those
ADSs to investors in Australia except in circumstances where
disclosure to investors is not required under Chapter 6D.2
of the Corporations Act or where a compliant disclosure document
is prepared and lodged with ASIC.
The Cayman Islands. Neither this prospectus
supplement nor the accompanying prospectus constitutes a public
offer of the ADSs or ordinary shares, whether by way of sale or
subscription, in the Cayman Islands. Each underwriter has
represented and agreed that it has not offered or sold, and will
not offer or sell, directly or indirectly, any ADSs or ordinary
shares to any member of the public in the Cayman Islands.
European Economic Area. In relation to each
member state of the European Economic Area which has implemented
the Prospectus Directive (each, a Relevant Member
State), with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) the ADSs
may not be offered to the public in that Relevant Member State
prior to the publication of a prospectus in relation to the ADSs
which has been approved by the competent authority in that
Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in
that Relevant Member State, all in accordance with the
Prospectus Directive, except that, with effect from and
including the Relevant Implementation Date, an offer of ADSs to
the public may be made in that Relevant Member State at any
time: (a) 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; (b) 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 43,000,000 and (3) an annual net
turnover of more than 50,000,000, as shown in its last
annual or consolidated accounts; (c) 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 representatives of the underwriters; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive. For the purposes
of this provision, the expression an offer of ADSs to the
public in relation to any ADSs in any Relevant Member
State means the communication in any form and by any means of
sufficient information on the terms of the offer and the ADSs to
be offered so as to enable an investor to decide to purchase or
subscribe the ADSs, as the same may be varied in that Relevant
Member State by any measure implementing the Prospectus
Directive in that Relevant Member State and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant
Member State.
Hong Kong. The ADSs may not be offered or sold
by means of any document other than (i) in circumstances
which do not constitute an offer to the public within the
meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong),
or (ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap.571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap.32, Laws of Hong Kong), and no advertisement,
invitation or document relating to the ADSs may be issued or may
be in the possession of any person for the purpose of issue (in
each case whether in Hong Kong or elsewhere), which is directed
at, or the contents of which are likely to be accessed or read
by, the public in Hong Kong (except if permitted to do so under
the laws of Hong Kong) other than with respect to ADSs which are
or are intended to be disposed of only to persons outside Hong
Kong or only to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws
of Hong Kong) and any rules made thereunder.
Kingdom of Saudi Arabia. No action has been or
will be taken in the Kingdom of Saudi Arabia that would permit a
public offering or private placement of the ADSs in the Kingdom
of Saudi Arabia, or possession or distribution of any offering
materials in relation thereto. The ADSs may only be offered and
sold in the Kingdom of Saudi Arabia in accordance with
Part 5 (Exempt Offers) of the Offers of Securities
Regulations dated
20/8/1425 AH
corresponding to
4/10/2004)
(the Regulations) and, in accordance with
Part 5 (Exempt Offers) Article 17(a)(3) of the
Regulations, the ADSs will be offered to no more than 60
offerees in the Kingdom of Saudi Arabia with each such offeree
paying an amount not less than Saudi Riyals one million or its
equivalent. Investors are informed that
S-26
Article 20 of the Regulations places restrictions on
secondary market activity with respect to the ADSs. Any resale
or other transfer, or attempted resale or other transfer, made
other than in compliance with the above-stated restrictions
shall not be recognized by us.
Peoples Republic of China. Neither this
prospectus supplement nor the accompanying prospectus has been
or will be circulated or distributed in the PRC, and ADSs may
not be offered or sold, and will not be offered or sold to any
person for re-offering or resale, directly or indirectly, to any
resident of the PRC except pursuant to applicable laws and
regulations of the PRC.
Singapore. Each underwriter has acknowledged
that neither this prospectus supplement nor the accompanying
prospectus has been registered as a prospectus with the Monetary
Authority of Singapore. Accordingly, each underwriter has
represented and agreed that it has not offered or sold any ADSs
or caused the ADSs to be made the subject of an invitation for
subscription or purchase and will not offer or sell the ADSs or
cause the ADSs to be made the subject of an invitation for
subscription or purchase, and has not circulated or distributed,
nor will it circulate or distribute, this prospectus supplement,
the accompanying prospectus, or any other document or material
in connection with the offer or sale, or invitation for
subscription or purchase, of the ADSs, whether directly or
indirectly, to persons in Singapore other than (i) to an
institutional investor under Section 274 of the Securities
and Futures Act, Chapter 289 of Singapore (the
SFA), (ii) to a relevant person pursuant to
Section 275(1), or any person pursuant to
Section 275(1A), and in accordance with the conditions,
specified in Section 275, of the SFA or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
Note: Where the ADSs are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
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(a)
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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
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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, shares,
debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest
(howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has
acquired the ADSs pursuant to an offer made under
Section 275 except:
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(1)
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to an institutional investor (for corporations, under
Section 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, in accordance with the
conditions specified in Section 275 of the SFA;
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(2)
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where no consideration is or will be given for the
transfer; or
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(3)
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where the transfer is by operation of law.
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Taiwan. The ADSs have not been and will not be
registered or filed with, or approved by, the Financial
Supervisory Commission of Taiwan pursuant to relevant securities
laws and regulations and may not be offered or sold in Taiwan
through a public offering or in circumstances which constitute
an offer within the meaning of the Securities and Exchange Act
of Taiwan or relevant laws and regulations that require a
registration, filing or approval of the Financial Supervisory
Commission of Taiwan. No person or entity in Taiwan has been
authorized to offer or sell the ADSs in Taiwan.
Japan. The underwriters will not offer or sell
any of our ADSs directly or indirectly in Japan or to, or for
the benefit of any Japanese person or to others, for re-offering
or re-sale directly or indirectly in Japan or to any Japanese
person, except, in each case, pursuant to an exemption from the
registration requirements of, and otherwise in compliance with,
the Securities and Exchange Law of Japan and any other
applicable laws and
S-27
regulations of Japan. For purposes of this paragraph,
Japanese person means any person resident in Japan,
including any corporation or other entity organized under the
laws of Japan.
State of Kuwait. The ADSs have not been
authorized or licensed for offering, marketing or sale in the
State of Kuwait. The distribution of this prospectus supplement
and the accompanying prospectus and the offering and sale of the
ADSs in the State of Kuwait is restricted by law unless a
license is obtained from the Kuwaiti Ministry of Commerce and
Industry in accordance with Law 31 of 1990. Persons into whose
possession this prospectus supplement and the accompanying
prospectus come are required by us and the underwriters to
inform themselves about and to observe such restrictions.
Investors in Kuwait who approach us or any of the underwriters
to obtain copies of this prospectus are required by us and the
underwriters to keep such prospectus confidential and not to
make copies thereof or distribute the same to any other person
and are also required to observe the restrictions provided for
in all jurisdictions with respect to offering, marketing and the
sale of the ADSs.
Switzerland. Neither this prospectus
supplement nor the accompanying prospectus constitutes a
prospectus within the meaning of Art. 625a of the Swiss Code of
Obligations. The ADSs may not be sold directly or indirectly in
or into Switzerland except in a manner which will not result in
a public offering within the meaning of the Swiss Code of
Obligations. Neither this prospectus supplement nor any other
offering materials relating to the ADSs may be distributed,
published or otherwise made available in Switzerland except in a
manner which will not constitute a public offer of the ADSs in
Switzerland.
United Arab Emirates. Neither this prospectus
supplement nor the accompanying prospectus is intended to
constitute an offer, sale or delivery of ADSs or other
securities under the laws of the United Arab Emirates (UAE). The
ADSs have not been and will not be registered under Federal Law
No. 4 of 2000 Concerning the Emirates Securities and
Commodities Authority and the Emirates Security and Commodity
Exchange, or with the UAE Central Bank, the Dubai Financial
Market, the Abu Dhabi Securities Market or with any other UAE
exchange. This Offering, the ADSs and interests therein have not
been approved or licensed by the UAE Central Bank or any other
relevant licensing authorities in the UAE, and do not constitute
a public offer of securities in the UAE in accordance with the
Commercial Companies Law, Federal Law No. 8 of 1984 (as
amended) or otherwise. In relation to its use in the UAE, this
prospectus supplement and the accompanying prospectus are
strictly private and confidential and are being distributed to a
limited number of investors and must not be provided to any
person other than the original recipient, and may not be
reproduced or used for any other purpose. The ADSs may not be
offered or sold directly or indirectly to the public in the UAE.
United Kingdom. Each underwriter has
represented, warranted and agreed that (i) it has only
communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning
of section 21 of the Financial Services and Markets Act
2000, or FSMA) received by it in connection with the issue or
sale of any ADSs in circumstances in which section 21(1) of
the FSMA does not apply to us and (ii) it has complied, and
will comply with, all applicable provisions of the FSMA and
Markets Act 2000 with respect to anything done by it in relation
to the ADSs in, from or otherwise involving the United Kingdom.
The foregoing shall apply in addition to the restrictions set
out under the heading European Economic Area above.
Canada. The ADSs may not be offered or sold,
directly or indirectly, in any province or territory of Canada
or to or for the benefit of any resident of any province or
territory of Canada except pursuant to an exemption from the
requirement to file a prospectus in the province or territory of
Canada in which the offer or sale is made and only by a dealer
duly registered under applicable laws in circumstances where an
exemption from applicable registered dealer registration
requirements is not available.
S-28
WHERE YOU
CAN FIND MORE INFORMATION ABOUT US
We file reports and other information with the SEC. Information
filed with the SEC by us can be inspected and copied at the
Public Reference Room maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of this information by mail from the
Public Reference Section of the SEC at prescribed rates. Further
information on the operation of the SECs Public Reference
Room in Washington, D.C. can be obtained by calling the SEC
at
1-800-SEC-0330.
The SEC also maintains a web site that contains reports, proxy
and information statements and other information about issuers,
such as us, who file electronically with the SEC. The address of
that site is
http://www.sec.gov.
Our website address is
http://www.cninsure.net.
The information contained in, or that can be accessed through,
our website, however, is not, and should not be deemed to be, a
part of this prospectus supplement or any accompanying
prospectus.
S-29
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC. This means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is
considered to be a part of this prospectus supplement and should
be read with the same care.
Any reports filed by us with the SEC after the date of this
prospectus supplement and before the date that the offering of
securities by means of this prospectus supplement is terminated
will automatically update and, where applicable, supersede any
information contained in this prospectus supplement or
incorporated by reference in this prospectus supplement. This
means that you must look at all of the SEC filings that we
incorporate by reference to determine if any of the statements
in this prospectus supplement or in any documents previously
incorporated by reference have been modified or superseded.
We incorporate by reference into this prospectus supplement the
following documents:
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our annual report on
Form 20-F
for the fiscal year ended December 31, 2009 filed on
May 7, 2010;
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our current report on
Form 6-K
on May 25, 2010;
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the description of our securities contained in our registration
statement on
Form 8-A
(File
No. 001-33768),
filed with the SEC on October 25, 2007 pursuant to
Section 12(g) of the Exchange Act, including all amendments
and reports subsequently filed for the purpose of updating that
description; and
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all subsequent annual reports on
Form 20-F
and any amendment thereto and any report on
Form 6-K
that so indicates it is being incorporated by reference that we
file with the SEC on or after the date hereof and until the
termination or completion of the offering by means of this
prospectus supplement.
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Our annual report on
Form 20-F
for the fiscal year ended December 31, 2009 filed on
May 7, 2010 contains a description of our business and
audited consolidated financial statements with a report by our
independent registered accounting firm. These financial
statements are prepared in accordance with United States
generally accepted accounting principles.
We will provide at no cost to each person, including any
beneficial owner, to whom this prospectus is delivered, upon
oral or written request of such person, a copy of any or all of
the reports or documents that have been incorporated by
reference in this prospectus, but not delivered with the
prospectus. Requests for such copies should be directed to:
22/F, Yinhai
Building
No. 299 Yanjiang Zhong Road
Guangzhou, Guangdong 510110
Peoples Republic of China
+86-20-6122-2777
Attention: Investor Relations Department
Exhibits to the filings will not be sent, however, unless those
exhibits have specifically been incorporated by reference into
this prospectus supplement and any accompanying prospectus.
These documents may also be accessed through our website at
http://www.cninsure.net
or as described under the heading Where You Can Find More
Information About Us above. The information contained in,
or that can be accessed through, our website is not a part of
this prospectus supplement or any accompanying prospectus.
S-30
LEGAL
MATTERS
We are being represented by Latham & Watkins with
respect to legal matters of United States federal securities and
New York state law. The underwriters are being represented by
Simpson Thacher & Bartlett LLP with respect to certain
legal matters as to United States federal securities and New
York state law. The validity of the ordinary shares represented
by the ADSs offered in this offering and certain legal matters
as to Cayman Islands law will be passed on for us by Maples and
Calder. Legal matters as to PRC law will be passed upon for us
by Commerce & Finance Law Offices and for the
underwriters by Jun He Law Offices. Latham & Watkins
may rely upon Maples and Calder with respect to matters governed
by Cayman Islands law and Commerce & Finance Law
Offices with respect to matters governed by PRC law.
EXPERTS
The financial statements, and the related financial statement
schedule, incorporated in this prospectus supplement by
reference from our annual report on
Form 20-F
for the year ended December 31, 2009, and the effectiveness
of our companys internal control over financial reporting
have been audited by Deloitte Touche Tohmatsu, an independent
registered public accounting firm, as stated in their reports,
which are incorporated herein by reference. Such financial
statements and financial statement schedule have been so
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The offices of Deloitte Touche Tohmatsu are located at
35th Floor, One Pacific Place, 88 Queensway, Hong Kong.
S-31
PROSPECTUS
American
Depositary Shares
Each
Representing 20 Ordinary Shares
CNINSURE
INC.
We may offer and sell our ordinary shares in the form of ADSs
from time to time in one or more offerings. Each ADS represents
20 of our ordinary shares. In addition, this prospectus may be
used to offer securities for the account of persons other than
us. Our ADSs are listed on the Nasdaq Global Select Market under
the symbol CISG.
Each time we or any selling shareholder sells our ADSs, we will
provide a supplement to this prospectus that contains specific
information about the offering. The supplement may also add,
update or change information contained in this prospectus. You
should carefully read this prospectus and any supplement before
you invest in any of our securities.
Investing in our ADSs involves risks. See the Risk
Factors section contained in the applicable prospectus
supplement and in the documents we incorporate by reference in
this prospectus to read about factors you should consider before
investing in the ADSs.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or completeness of this
prospectus. Any representation to the contrary is a criminal
offense.
We or any selling shareholder may offer the ADSs directly to
purchasers or through underwriters, dealers or agents to be
designated at a future date. See Plan of
Distribution. If any underwriters, dealers or agents are
involved in the sale of any of the ADSs, their names, and any
applicable purchase price, fee, commission or discount
arrangements between or among them, will be set forth, or will
be calculable from the information set forth, in the applicable
prospectus supplement.
The date of this prospectus is July 7, 2010.
TABLE OF
CONTENTS
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31
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ABOUT
THIS PROSPECTUS
You should read this prospectus and any prospectus supplement,
together with the additional information described under the
heading Where You Can Find More Information About Us
and Incorporation of Documents by Reference.
In this prospectus, unless otherwise indicated or unless the
context otherwise requires,
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we, us, our company,
our or CNinsure refer to CNinsure Inc.,
its predecessor entities and its subsidiaries;
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China or PRC refers to the Peoples
Republic of China, excluding Taiwan, Hong Kong and Macau;
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provinces of China refers to the 22 provinces, the
four municipalities directly administered by the central
government (Beijing, Shanghai, Tianjin and Chongqing) and the
five autonomous regions (Xinjiang, Tibet, Inner Mongolia,
Ningxia and Guangxi);
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shares or ordinary shares refers to our
ordinary shares, par value US$0.001 per share;
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ADSs refers to the American depositary shares, each
of which represents 20 of our ordinary shares;
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all references to RMB or Renminbi are to
the legal currency of China and all references to $,
dollars, US$ and
U.S. dollars are to the legal currency of the
United States; and
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all discrepancies in any table between the amounts identified as
total amounts and the sum of the amounts listed therein are due
to rounding.
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This prospectus is part of an automatic shelf
registration statement that we filed with the SEC as a
well-known seasoned issuer as defined in
Rule 405 under the Securities Act of 1933 using a
shelf registration process. By using a shelf
registration statement, we or any selling shareholder may sell
the ADSs from time to time and in one or more offerings. This
prospectus only provides you with a summary description of the
ADSs and our ordinary shares they represent. Each time we or any
selling shareholder sells the ADSs, we will provide a supplement
to this prospectus that contains specific information about the
specific terms of that offering. The supplement may also add,
update or change information contained in this prospectus. If
there is any inconsistency between the information in this
prospectus and any prospectus supplement, you should rely on the
prospectus supplement.
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
prospectus supplement. Neither we nor any selling shareholder
has authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We will not
make an offer to sell these securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the
information appearing in this prospectus and the applicable
supplement to this prospectus is accurate as of the date on its
respective cover, and that any information incorporated by
reference is accurate only as of the date of the document
incorporated by reference, unless we indicate otherwise. Our
business, financial condition, results of operations and
prospects may have changed since those dates.
1
WHERE YOU
CAN FIND MORE INFORMATION ABOUT US
We file reports and other information with the SEC. Information
we file with the SEC can be inspected and copied at the Public
Reference Room maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549. You may also obtain copies of
this information by mail from the Public Reference Section of
the SEC at prescribed rates. Further information on the
operation of the SECs Public Reference Room in
Washington, D.C. can be obtained by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a web site that contains reports, proxy
and information statements and other information about issuers,
such as us, who file electronically with the SEC. The address of
that site is
http://www.sec.gov.
Our website address is
http://www.cninsure.net.
The information contained in, or that can be accessed through,
our website, however, is not, and should not be deemed to be, a
part of this prospectus or any accompanying prospectus
supplement.
2
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC. This means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is
considered to be a part of this prospectus and should be read
with the same care.
Any reports we file with the SEC after the date of this
prospectus and before the date that the offering of securities
by means of this prospectus is terminated will automatically
update and, where applicable, supersede any information
contained in this prospectus or incorporated by reference in
this prospectus. This means that you must look at all of the SEC
filings that we incorporate by reference to determine if any of
the statements in this prospectus or in any documents previously
incorporated by reference have been modified or superseded.
We incorporate by reference into this prospectus the following
documents:
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our annual report on
Form 20-F
for the fiscal year ended December 31, 2009 filed on
May 7, 2010;
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our current report on
Form 6-K
filed on May 25, 2010;
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the description of our securities contained in our registration
statement on
Form 8-A
(File
No. 001-33768),
filed with the SEC on October 25, 2007 pursuant to
Section 12(g) of the Exchange Act, including all amendments
and reports subsequently filed for the purpose of updating that
description; and
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all subsequent annual reports on
Form 20-F
and any amendment thereto and any report on
Form 6-K
that so indicates it is being incorporated by reference, that we
file with the SEC on or after the date hereof and until the
termination or completion of the offering by means of this
prospectus.
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Our annual report on
Form 20-F
for the fiscal year ended December 31, 2009 filed on
May 7, 2010 contains a description of our business and
audited consolidated financial statements with a report by our
independent registered accounting firm. These financial
statements are prepared in accordance with United States
generally accepted accounting principles.
We will provide at no cost to each person, including any
beneficial owner, to whom this prospectus is delivered, upon
oral or written request of such person, a copy of any or all of
the reports or documents that have been incorporated by
reference in this prospectus, but not delivered with the
prospectus. Requests for such copies should be directed to:
22/F, Yinhai Building
No. 299 Yanjiang Zhong Road
Guangzhou, Guangdong 510110
Peoples Republic of China
+86-20-6122-2777
Attention: Investor Relations Department
Exhibits to the filings will not be sent, however, unless those
exhibits have specifically been incorporated by reference into
this prospectus and any accompanying prospectus supplement.
These documents may also be accessed through our website at
http://www.cninsure.net
or as described under the heading Where You Can Find More
Information About Us above. The information contained in,
or that can be accessed through, our website is not a part of
this prospectus or any accompanying prospectus supplement.
3
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any accompanying prospectus supplement and the
information incorporated herein and therein by reference may
contain forward-looking statements intended to
qualify for the safe harbor from liability
established by the U.S. Private Securities Litigation
Reform Act of 1995. These statements, which are not statements
of historical fact, may contain estimates, assumptions,
projections
and/or
expectations regarding future events, which may or may not
occur. You can identify these forward-looking statements by
terminology such as may, will,
expect, anticipate,
forecast, intend, plan,
predict, propose, potential,
continue, believe, estimate,
is/are likely to, or the negative of these terms,
and other similar expressions. We have based these
forward-looking statements largely on our current expectations
and projections about future events and financial trends that we
believe may affect our financial condition, results of
operations, business strategy and financial needs. We do not
guarantee that the transactions and events described in this
prospectus or in any prospectus supplement will happen as
described or at all. You should read this prospectus and any
accompanying prospectus supplement completely and with the
understanding that actual future results may be materially
different from what we expect.
Whether actual results will conform with our expectations and
predictions is subject to a number of risks and uncertainties,
many of which are beyond our control, and reflect future
business decisions subject to change. Some of the assumptions,
future results and levels of performance expressed or implied in
the forward-looking statements we make inevitably will not
materialize, and unanticipated events may occur that will affect
our results.
We would like to caution you not to place undue reliance on the
forward-looking statements we make, and you should read these
statements in conjunction with the risk factors set forth under
the heading Risk Factors in this prospectus for a
more complete discussion of the risks of an investment in our
securities. These risks are not exhaustive. We operate in an
emerging and evolving environment. New risk factors emerge from
time to time and it is impossible for our management to predict
all risk factors, nor can we assess the impact of all risk
factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
The forward-looking statements made in this prospectus and the
accompanying prospectus supplement relate only to events as of
the date on which the statements are made. We undertake no
obligation, beyond that required by law, to update any
forward-looking statement to reflect events or circumstances
after the date on which the statement is made, even though our
situation may change in the future.
4
OUR
COMPANY
We are a leading independent insurance intermediary company
operating in China. With 48,693 sales professionals, 1,421
claims adjustors and 571 sales and service outlets operating in
23 out of 31 provinces as of April 15, 2010. Our
distribution and service network reaches some of Chinas
most economically developed regions and some of the most
affluent cities in China, such as Beijing, Shanghai, Guangzhou
and Shenzhen.
As an insurance intermediary company, we do not assume
underwriting risks. Instead, we distribute to customers in China
a wide variety of property, casualty and life insurance products
underwritten by domestic and foreign insurance companies
operating in China and provide insurance claims adjusting
services, such as damage assessment, survey, authentication and
loss estimation. We also provide certain value-added services,
such as
24-hour
emergency services in select cities and assistance with claim
settlement, to our customers individuals and
institutions that purchase insurance products through us. In
addition, we provide information about potential customers to
insurance companies, which then sell insurance products to them,
either directly or through our affiliated insurance
intermediaries. Furthermore, in November 2009, we started to
offer certain consumer financial products and services through a
consumer credit brokerage company in which we hold
noncontrolling interests. We are compensated for our services
primarily by commissions and fees paid by insurance companies,
typically based on a percentage of the premium paid by the
insured or a percentage of the amount recovered from insurance
companies. Commission and fee rates generally depend on the type
of insurance products, the particular insurance company and the
region in which the insurance products are sold.
As of April 15, 2010, we had 56 affiliated insurance
intermediary companies in the PRC, of which 49 are insurance
agencies, three are insurance brokerages and four are insurance
adjusting firms. According to the Insurance Intermediary Market
Development Report for 2009 published by the China Insurance
Regulatory Commission, our affiliates included:
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eight of Chinas top 20 insurance agencies, accounting for
approximately 11.5% of total insurance agency revenue in China
in 2009; and
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three of Chinas top 20 insurance claims adjusting firms,
accounting for approximately 13.2% of total claims adjusting
firm revenue in China in 2009.
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The professional insurance intermediary sector in China is at an
early stage of development and highly fragmented. We believe
this offers substantial opportunities for further growth and
consolidation. We intend to take advantage of these
opportunities to increase our market share by aggressively
expanding our distribution network through selective
acquisitions, recruitment of experienced and entrepreneurial
sales agents and franchising. In particular, we intend to devote
significant resources to distributing life insurance products in
order to benefit from the recurring fee income they generate and
to better capture the significant opportunities presented by
Chinas rapidly growing life insurance market. We will also
continue to grow our claims adjusting business to capture the
substantial growth in this sector. We have developed and refined
our unified operating platform through more than ten years of
operations and have successfully implemented it across our
company. We believe our scalable unified operating platform has
been key in our ability to expand our distribution network and
launch new products and services rapidly and efficiently while
maintaining the quality of our products and services.
5
RISK
FACTORS
Please see the factors set forth under the heading
Item 3. Key Information D. Risk
Factors in our most recently filed annual report on
Form 20-F,
which is incorporated in this prospectus by reference, as
updated by our subsequent filings under the Securities Exchange
Act of 1934, and, if applicable, in any accompanying prospectus
supplement before investing in any securities that may be
offered pursuant to this prospectus.
6
USE OF
PROCEEDS
We intend to use the net proceeds from the sale of the ADSs as
set forth in the applicable prospectus supplement. We will not
receive any of the proceeds from the sale of the ADSs by any
selling shareholder.
7
ENFORCEABILITY
OF CIVIL LIABILITIES
We are incorporated in the Cayman Islands in order to take
advantage of certain benefits associated with being a Cayman
Islands exempted company, such as:
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political and economic stability;
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an effective judicial system;
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a favorable tax system;
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the absence of exchange control or currency
restrictions; and
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the availability of professional and support services.
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However, certain disadvantages accompany incorporation in the
Cayman Islands. These disadvantages include:
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the Cayman Islands has a less developed body of securities laws
as compared to the United States and these securities laws
provide significantly less protection to investors; and
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Cayman Islands companies may not have standing to sue before the
federal courts of the United States.
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Our constituent documents do not contain provisions requiring
that disputes be submitted to arbitration, including those
arising under the securities laws of the United States, among
us, our officers, directors and shareholders.
All of our current operations are conducted in China, and
substantially all of our assets are located in China. A majority
of our directors and officers are nationals or residents of
jurisdictions other than the United States and a substantial
portion of their assets are located outside of the United
States. As a result, it may be difficult for a shareholder to
effect service of process within the United States upon us or
such persons, or to enforce against us or them judgments
obtained in United States courts, including judgments predicated
upon the civil liability provisions of the securities laws of
the United States or any state in the United States.
We have appointed CT Corporation System, 111 Eighth Avenue, New
York, New York 10011, as our agent upon whom process may be
served in any action brought against us under the securities
laws of the United States.
Maples and Calder, our counsel as to Cayman Islands law, and
Commerce & Finance Law Offices, our counsel as to PRC
law, have advised us, respectively, that it is uncertain whether
the courts of the Cayman Islands and China, respectively, would:
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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
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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.
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Maples and Calder has further advised us that a final and
conclusive judgment in the federal or state courts of the United
States under which a sum of money is payable, other than a sum
payable in respect of taxes, fines, penalties or similar
charges, and which was neither obtained in a manner nor is of a
kind of enforcement of which is contrary to natural practice or
the public policy of the Cayman Islands, may be subject to
enforcement proceedings as a debt in the courts of the Cayman
Islands under the common law doctrine of obligation. Civil
liability provisions of the U.S. federal and state
securities law permit punitive damages against us; however,
according to Maples and Calder, Cayman Island courts would not
recognize or enforce judgments against us to the extent the
judgment is punitive or penal. It is uncertain as to whether a
judgment obtained from the U.S. courts under civil
liability
8
provisions of the securities law would be determined by the
Cayman Islands courts as penal or punitive in nature. Such a
determination has yet to be made by any Cayman Islands court.
Commerce & Finance Law Offices has further advised us
that the recognition and enforcement of foreign judgments are
provided for under PRC Civil Procedures Law. PRC courts may
recognize and enforce foreign judgments in accordance with the
requirements of PRC Civil Procedures Law based either on
treaties between China and the country where the judgment is
made or on reciprocity between jurisdictions. As there is
currently no treaty or other agreement of reciprocity between
China and the United States governing the recognition of a
judgment, it is uncertain whether a PRC court would enforce a
judgment rendered by a court in the United States.
9
TAXATION
The following summary of the material Cayman Islands, PRC and
United States federal income tax consequences of an investment
in our ADSs or ordinary shares is based upon laws and relevant
interpretations thereof in effect as of the date of this
prospectus, all of which are subject to change. This summary
does not deal with all possible tax consequences relating to an
investment in our ADSs or ordinary shares, such as the tax
consequences under state, local and other tax laws.
Cayman
Islands Taxation
According to Maples and Calder, our Cayman Islands counsel, the
Cayman Islands currently levies no taxes on individuals or
corporations based upon profits, income, gains or appreciation
and there is no taxation in the nature of inheritance tax or
estate duty. There are no other taxes likely to be material to
us levied by the government of the Cayman Islands except for
stamp duty which may be applicable on instruments executed in,
or brought within the jurisdiction of the Cayman Islands, or
produced before a court of the Cayman Islands. The Cayman
Islands is not party to any double tax treaties that are
applicable to any payments made to or by CNinsure. There are no
exchange control regulations or currency restrictions in the
Cayman Islands.
PRC
Taxation
Under the former PRC Income Tax Law for Enterprises with Foreign
Investment and Foreign Enterprises, any dividends payable by
foreign-invested enterprises to non-PRC investors were exempt
from any PRC withholding tax. In addition, any interest or
dividends payable, or distributions made, by us to holders or
beneficial owners of our ADSs or ordinary shares would not have
been subject to any PRC tax, provided that such holders or
beneficial owners, including individuals and enterprises, were
not deemed to be PRC residents under the PRC tax law and had not
become subject to PRC tax.
Under the new Enterprise Income Tax Law, which took effect as of
January 1, 2008, enterprises established under the laws of
non-PRC jurisdictions but whose de facto management
body is located in China are considered resident
enterprises for PRC tax purposes. Under the implementation
regulations issued by the State Council relating to the new law,
de facto management bodies are defined as the bodies
that have material and overall management control over the
business, personnel, accounts and properties of an enterprise.
Substantially all of our management are currently based in
China, and may remain in China in the future. If we were treated
as a resident enterprise for PRC tax purposes, we
would be subject to PRC income tax on our worldwide income at a
uniform tax rate of 25%, but dividends received by us from our
PRC subsidiaries may be exempt from the income tax.
Under the new law and its implementation regulations, dividends
paid to a non-PRC investor are generally subject to a 10% PRC
withholding tax, if such dividends are derived from sources
within China and the non-PRC investor is considered to be a
non-resident enterprise without any establishment or place of
business within China or if the dividends paid have no
connection with the non-PRC investors establishment or
place of business within China, unless such tax is eliminated or
reduced under an applicable tax treaty. Similarly, any gain
realized on the transfer of ADSs or shares by such investor is
also subject to a 10% PRC withholding tax if such gain is
regarded as income derived from sources within China, unless
such tax is eliminated or reduced under an applicable tax treaty.
If we were considered a PRC resident enterprise, it
is possible that the dividends we pay with respect to our ADSs
or ordinary shares, or the gain you may realize from the
transfer of our ADSs or ordinary shares, would be treated as
income derived from sources within China and be subject to the
10% PRC withholding tax.
United
States Federal Income Taxation
The following discussion describes the material
U.S. federal income tax consequences to U.S. Holders
(as defined below) under current law of an investment in our
ADSs or ordinary shares. This discussion applies only to
U.S. Holders that hold the ADSs or ordinary shares as
capital assets (generally, property held for investment) and
that have the U.S. dollar as their functional currency.
This discussion is based on the tax laws of the United States as
in effect on the date of this prospectus and on
U.S. Treasury regulations in effect or, in some cases,
proposed as of the date of this prospectus, as well as judicial
and administrative interpretations thereof available on or
before such
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date. All of the foregoing authorities are subject to change,
which change could apply retroactively and could affect the tax
consequences described below.
The following discussion does not deal with the tax consequences
to any particular investor or to persons in special tax
situations such as:
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banks and other financial institutions;
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insurance companies;
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broker-dealers;
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traders that elect to use a mark-to-market method of accounting;
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tax-exempt entities;
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persons liable for alternative minimum tax;
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U.S. expatriates;
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regulated investment companies or real estate investment trusts;
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persons holding an ADS or ordinary share as part of a straddle,
hedging, conversion or integrated transaction;
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persons who acquired ADSs or ordinary shares pursuant to the
exercise of any employee stock options or otherwise as
compensation;
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persons that actually or constructively own 10% or more of the
total combined voting power of all classes of our voting
stock; or
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partnerships or other pass-through entities, or persons holding
ADSs or ordinary shares through such entities.
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INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR
PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF OUR ADSs OR ORDINARY SHARES.
The discussion below of the U.S. federal income tax
consequences to U.S. Holders will apply to you
if you are a beneficial owner of our ADSs or ordinary shares and
you are, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) organized under the laws
of the United States, any state thereof or the District of
Columbia;
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust that (i) is subject to the primary supervision of a
court within the United States and the control of one or more
U.S. persons for all substantial decisions; or
(ii) has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a
U.S. person.
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If you are a partner in a partnership (or other entity treated
as a partnership for U.S. federal income tax purposes) that
holds our ADSs or ordinary shares, your tax treatment will
generally depend on your status and the activities of the
partnership.
The discussion below assumes that the representations contained
in the deposit agreement are true and that the obligations in
the deposit agreement and any related agreement have been and
will be complied with in accordance with their terms. If you
hold our ADSs, you should be treated as the beneficial owner of
the underlying ordinary shares represented by those ADSs for
U.S. federal income tax purposes.
The U.S. Treasury has expressed concerns that
U.S. holders of ADSs may be claiming foreign tax credits in
situations where an intermediary in the chain of ownership
between the holder of an ADS and the issuer of the
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security underlying the ADS has taken actions inconsistent with
the ownership of the underlying security by the person claiming
the credit. Such actions (for example, a pre-release of an ADS
by a depositary) may also be inconsistent with the claiming of
the reduced rate of tax applicable to dividends received by
certain non-corporate U.S. holders of ADSs, including
individual U.S. holders (discussed below). Accordingly, the
availability of foreign tax credits or the reduced tax rate for
dividends received by certain non-corporate U.S. Holders,
including individual U.S. Holders, could be affected by
actions taken by the U.S. Treasury or the depositary.
Taxation
of Dividends and Other Distributions on the ADSs or Ordinary
Shares
Subject to the passive foreign investment company rules
discussed below, the gross amount of any distributions we make
to you with respect to our ADSs or ordinary shares (including
the amount of any taxes withheld therefrom) will generally be
included in your gross income as dividend income on the date of
actual or constructive receipt by the depositary, in the case of
ADSs, or by you, in the case of ordinary shares, but only to the
extent that the distribution is paid out of our current or
accumulated earnings and profits (as determined under
U.S. federal income tax principles). To the extent the
amount of the distribution exceeds our current and accumulated
earnings and profits (as determined under U.S. federal
income tax principles), such excess amount will be treated first
as a tax-free return of your tax basis in your ADSs or ordinary
shares, and then, to the extent such excess amount exceeds your
tax basis, as capital gain. We currently do not, and we do not
intend to, calculate our earnings and profits under
U.S. federal income tax principles. Therefore, a
U.S. Holder should expect that a distribution will
generally be treated as a dividend even if that distribution
would otherwise be treated as a non-taxable return of capital or
as capital gain under the rules described above. Any dividends
we pay will not be eligible for the dividends-received deduction
allowed to corporations in respect of dividends received from
other U.S. corporations.
With respect to certain non-corporate U.S. Holders,
including individual U.S. Holders, for taxable years
beginning before January 1, 2011, dividends will be
qualified dividend income that is taxed at the lower
applicable capital gains rate, provided that certain conditions
are satisfied, including (1) our ADSs or ordinary shares
are readily tradable on an established securities market in the
United States, or we are eligible for the benefits of a
qualifying income tax treaty with the United States that
includes an exchange of information program, (2) we are
neither a passive foreign investment company nor treated as such
with respect to you for our taxable year in which the dividend
is paid and the preceding taxable year, and (3) certain
holding period requirements are met. Based on U.S. Treasury
guidance, we expect that the ADSs, but not our ordinary shares,
will be considered readily tradable on an established securities
market in the United States for purposes of clause (1)
above so long as they remain listed on the Nasdaq Global Select
Market. There can be no assurance, however, that our ADSs will
be considered readily tradable on an established securities
market in later years. If we are deemed to be a resident
enterprise under PRC tax law (see
Taxation PRC Taxation), we may be
eligible for the benefits of the income tax treaty between the
United States and the PRC. You should consult your tax advisors
regarding the availability of the lower capital gains rate
applicable to qualified dividend income for any dividends paid
with respect to the ADSs or ordinary shares and any possible
change in law relating to the availability of such lower rate
for dividends paid by us.
Newly enacted legislation requires certain U.S. Holders
that are individuals, estates or trusts to pay an additional
3.8% tax on, among other things, dividends on our ADSs or
ordinary shares for taxable years beginning after
December 31, 2012. You should consult your tax advisors
regarding the effect, if any, of this legislation on an
investment in the ADSs or ordinary shares.
Dividends will constitute foreign source income for foreign tax
credit limitation purposes. If the dividends are qualified
dividend income (as discussed above), the amount of the dividend
taken into account for purposes of calculating the foreign tax
credit limitation will generally be limited to the gross amount
of the dividend, multiplied by the reduced tax rate applicable
to qualified dividend income and divided by the highest tax rate
normally applicable to dividends. The limitation on foreign
taxes eligible for credit is calculated separately with respect
to specific classes of income. For this purpose, any dividends
distributed by us with respect to our ADSs or ordinary shares
will be passive category income or, in the case of
certain U.S. Holders, general category income.
In addition, if PRC withholding taxes apply to dividends paid to
you with respect to the ADSs or ordinary shares (see
Taxation PRC Taxation), subject to
certain conditions and limitations, such PRC withholding taxes
may be treated as foreign taxes eligible for credit against your
U.S. federal income tax liability. The rules relating to
the
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determination of the foreign tax credit are complex, and you
should consult your tax advisors regarding the availability of a
foreign tax credit in your particular circumstances.
Taxation
of Disposition of the ADSs or Ordinary Shares
Subject to the passive foreign investment company rules
discussed below, you will recognize taxable gain or loss on any
sale, exchange or other taxable disposition of an ADS or
ordinary share equal to the difference between the amount
realized (in U.S. dollars) for the ADS or ordinary share
and your tax basis (in U.S. dollars) in the ADS or ordinary
share. The gain or loss will be capital gain or loss. If you are
a non-corporate U.S. Holder, including an individual
U.S. Holder, who has held the ADS or ordinary share for
more than one year, you will be eligible for reduced tax rates.
The deductibility of capital losses is subject to limitations.
Newly enacted legislation requires certain U.S. Holders
that are individuals, estates or trusts to pay an additional
3.8% tax on, among other things, capital gains from the sale or
other disposition of our ADSs or ordinary shares for taxable
years beginning after December 31, 2012. You should consult
your tax advisors regarding the effect, if any, of this
legislation on an investment in the ADSs or ordinary shares.
Any gain or loss that you recognize on a disposition of our ADSs
or ordinary shares will generally be treated as U.S. source
income or loss for foreign tax credit limitation purposes.
However, if we are deemed to be a resident
enterprise under PRC tax law, we may be eligible for the
benefits of the income tax treaty between the United States and
the PRC. In such event, if PRC tax were to be imposed on any
gain from the disposition of the ADSs or ordinary shares (see
Taxation PRC Taxation), a
U.S. Holder that is eligible for the benefits of the treaty
may elect to treat such gain as PRC source income. You should
consult your tax advisors regarding the proper treatment of gain
or loss in your particular circumstances.
Passive
Foreign Investment Company
Based on the market price of our ADSs, the value of our assets,
and the composition of our income and assets, we do not expect
to be a passive foreign investment company, or PFIC,
for U.S. federal income tax purposes for our current
taxable year ending December 31, 2010. We must make a
separate determination after the close of each taxable year as
to whether we were a PFIC for that year. Accordingly, we cannot
assure you that we will not be a PFIC for our current taxable
year or any future taxable year. Because PFIC status is a
factual determination for each taxable year that cannot be made
until after the close of each such year, Latham & Watkins
LLP, our special U.S. counsel, expresses no opinion with respect
to our PFIC status or our beliefs or expectations relating to
such status set forth in this discussion. A
non-U.S. corporation
will be a PFIC for any taxable year if either:
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at least 75% of its gross income for such year is passive
income; or
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at least 50% of the value of its assets (based on an average of
the quarterly values of the assets) during such year is
attributable to assets that produce passive income or are held
for the production of passive income (the asset
test).
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For this purpose, we will be treated as owning our proportionate
share of the assets and earning our proportionate share of the
income of any other corporation in which we own, directly or
indirectly, at least 25% (by value) of the stock. In applying
this rule, however, it is not clear whether the contractual
arrangements between us and our affiliated entities will be
treated as ownership of stock.
The composition of our income and assets will be affected by
how, and how quickly, we use the cash we generate from our
operations and raise in this or any subsequent offering. Because
the value of our assets for purposes of the asset test will
generally be determined by reference to the market price of our
ADSs or ordinary shares, fluctuations in the market price of the
ADSs or ordinary shares may cause us to become a PFIC. If we are
a PFIC for any taxable year during which you hold ADSs or
ordinary shares, we will generally continue to be treated as a
PFIC with respect to you for all succeeding years during which
you hold the ADSs or ordinary shares, unless we cease to be a
PFIC and you make a deemed sale election with
respect to the ADSs or ordinary shares, as applicable. If such
election is made, you will be deemed to have sold the ADSs or
ordinary shares you hold at their fair market value and any gain
from such deemed sale would be subject to the rules described in
the following two
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paragraphs. After the deemed sale election, your ADSs or
ordinary shares with respect to which such election was made
will not be treated as shares in a PFIC unless we subsequently
become a PFIC.
For each taxable year that we are treated as a PFIC with respect
to you, you will be subject to special tax rules with respect to
any excess distribution you receive and any gain you
recognize from a sale or other disposition (including a pledge)
of the ADSs or ordinary shares, unless you make a
mark-to-market election as discussed below.
Distributions you receive in a taxable year that are greater
than 125% of the average annual distributions you received
during the shorter of the three preceding taxable years or your
holding period for the ADSs or ordinary shares will be treated
as an excess distribution. Under these special tax rules:
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the excess distribution or recognized gain will be allocated
ratably over your holding period for the ADSs or ordinary shares;
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the amount allocated to the current taxable year, and any
taxable years in your holding period prior to the first taxable
year in which we were a PFIC, will be treated as ordinary
income; and
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the amount allocated to each other year will be subject to the
highest tax rate in effect for individuals or corporations, as
applicable, for each such year, and the interest charge
generally applicable to underpayments of tax will be imposed on
the resulting tax attributable to each such year.
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The tax liability for amounts allocated to years prior to the
year of disposition or excess distribution cannot be offset by
any net operating losses for such years, and gains (but not
losses) from a sale or other disposition of the ADSs or ordinary
shares cannot be treated as capital, even if you hold the ADSs
or ordinary shares as capital assets. In addition, non-corporate
U.S. Holders will not be eligible for reduced rates of taxation
on any dividends received from us in taxable years beginning
prior to January 1, 2011, if we are treated as a PFIC with
respect to you in the taxable year in which such dividends are
paid or in the preceding taxable year.
If we are treated as a PFIC with respect to you for any taxable
year, to the extent any of our subsidiaries are also PFICs or we
make direct or indirect equity investments in other entities
that are PFICs, you will be deemed to own shares in such
lower-tier PFICs that are directly or indirectly owned by us in
that proportion that the value of the ADSs or ordinary shares
you own bears to the value of all of our ADSs and ordinary
shares, and you may be subject to the rules described in the
preceding two paragraphs with respect to the shares of such
lower-tier PFICs that you would be deemed to own. You
should consult your tax advisors regarding the application of
the PFIC rules to any of our subsidiaries.
A U.S. Holder of marketable stock (as defined
below) of a PFIC may make a mark-to-market election for such
stock to elect out of the PFIC rules described above regarding
excess distributions and recognized gains. If you make a
mark-to-market election for our ADSs or ordinary shares, you
will include in income for each year that we are a PFIC an
amount equal to the excess, if any, of the fair market value of
the ADSs or ordinary shares you hold as of the close of your
taxable year over your adjusted basis in such ADSs or ordinary
shares. You will be allowed a deduction for the excess, if any,
of the adjusted basis of the ADSs or ordinary shares over their
fair market value as of the close of the taxable year. However,
deductions will be allowable only to the extent of any net
mark-to-market gains on the ADSs or ordinary shares included in
your income for prior taxable years. Amounts included in your
income under a mark-to-market election, as well as any gain from
the actual sale or other disposition of the ADSs or ordinary
shares, will be treated as ordinary income. Ordinary loss
treatment will apply to the deductible portion of any
mark-to-market loss on the ADSs or ordinary shares, as well as
to any loss from the actual sale or other disposition of the
ADSs or ordinary shares, to the extent that the amount of such
loss does not exceed the net mark-to-market gains previously
included for such ADSs or ordinary shares. Your basis in the
ADSs or ordinary shares will be adjusted to reflect any such
income or loss amounts. If you make a valid mark-to-market
election, the tax rules that apply to distributions by
corporations that are not PFICs would apply to distributions by
us, except that the lower capital gains rate applicable to
qualified dividend income (discussed above under
Taxation of Dividends and Other Distributions
on the ADSs or Ordinary Shares) would not apply.
The mark-to-market election is available only for
marketable stock, which is stock that is traded in
greater than de minimis quantities on at least 15 days
during each calendar quarter (regularly traded) on a
qualified exchange or other market, as defined in applicable
U.S. Treasury regulations. Our ADSs are listed on the
Nasdaq Global Select Market, which is a qualified exchange or
other market for these purposes. Consequently, if the ADSs
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continue to be listed on the Nasdaq Global Select Market and are
regularly traded, and you are a holder of ADSs, we expect that
the mark-to-market election would be available to you if we
become a PFIC. Because a mark-to-market election cannot be made
for equity interests in any lower-tier PFICs that we own, a
U.S. Holder may continue to be subject to the PFIC rules
described above regarding excess distributions and recognized
gains with respect to its indirect interest in any investments
held by us that are treated as an equity interest in a PFIC for
U.S. federal income tax purposes.
Alternatively, a U.S. Holder of stock of a PFIC may make a
qualified electing fund election with respect to
such corporation to elect out of the PFIC rules described above
regarding excess distributions and recognized gains. A
U.S. Holder that makes a valid qualified electing fund
election with respect to a PFIC will generally include in income
for a taxable year such holders pro rata share of the
corporations income for the taxable year. However, the
qualified electing fund election is available only if the PFIC
provides such U.S. Holder with certain tax information as
required under applicable U.S. Treasury regulations. We do
not intend to prepare or provide the information that would
enable you to make a qualified electing fund election.
Under newly enacted legislation, unless otherwise provided by
the U.S. Treasury, each U.S. shareholder of a PFIC is
required to file an annual report containing such information as
the U.S. Treasury may require. Prior to such legislation, a
U.S. shareholder of a PFIC was required to file Internal
Revenue Service Form 8621 only for each taxable year in
which such shareholder received distributions from the PFIC,
recognized gain on a disposition of the PFIC stock, or made a
reportable election. If we are or become a PFIC, you
should consult your tax advisors regarding any reporting
requirements that may apply to you.
You should consult your tax advisors regarding the
application of the PFIC rules to your investment in our ADSs or
ordinary shares.
Information
Reporting and Backup Withholding
Dividend payments with respect to ADSs or ordinary shares and
proceeds from the sale, exchange or other disposition of ADSs or
ordinary shares may be subject to information reporting to the
Internal Revenue Service and possible U.S. backup
withholding at a current rate of 28%, unless the conditions of
an applicable exception are satisfied. Backup withholding will
not apply to a U.S. Holder that furnishes a correct
taxpayer identification number and makes any other required
certification or that is otherwise exempt from backup
withholding. U.S. Holders that are required to establish
their exempt status generally must provide such certification on
Internal Revenue Service
Form W-9.
Under newly enacted legislation, certain individuals holding the
ADSs or ordinary shares other than in an account at a financial
institution may be subject to additional information reporting
requirements. U.S. Holders should consult their tax
advisors regarding the application of the U.S. information
reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding may be credited against your
U.S. federal income tax liability, and you may obtain a
refund of any excess amounts withheld under the backup
withholding rules by filing the appropriate claim for refund
with the Internal Revenue Service and furnishing any required
information in a timely manner.
15
DESCRIPTION
OF SHARE CAPITAL
We are a Cayman Islands company and our affairs are governed by
our memorandum and articles of association and the Companies
Law, Cap. 22 (2009 Revision) of the Cayman Islands, which is
referred to as the Companies Law below.
As of the date hereof, our authorized share capital consists of
10,000,000,000 ordinary shares, with a par value of $0.001 each.
As of the date hereof, 916,997,726 ordinary shares are issues
and outstanding (including the 3,218,900 ordinary shares that we
reserved for issuance upon the exercise of our outstanding
options).
The following is a summary of the material provisions of our
amended and restated memorandum and articles of association and
the Companies Law insofar as they relate to the material terms
of our ordinary shares.
Ordinary
Shares
General. All of our outstanding ordinary
shares are fully paid and non-assessable. Certificates
representing the ordinary shares are issued in registered form.
Our shareholders who are nonresidents of the Cayman Islands may
freely hold and vote their shares.
Dividend Rights. The holders of our ordinary
shares are entitled to such dividends as may be declared by our
board of directors subject to the Companies Law.
Voting Rights. Each ordinary share is entitled
to one vote on all matters upon which the ordinary shares are
entitled to vote. Voting at any meeting of shareholders is by
show of hands unless a poll is demanded. A poll may be demanded
by the chairman of the meeting or by any one or more
shareholders together holding at least ten percent of our paid
up voting share capital, present in person or by proxy.
A quorum required for a meeting of shareholders consists of
shareholders holding in aggregate not less than one-third of our
issued voting share capital present in person or by proxy or, if
a corporation or other non-natural person, by its duly
authorized representative. We may, but are not obliged, to hold
an annual general meeting of shareholders. General meetings may
be convened by our board of directors on its own initiative or
upon a request to the directors by shareholders holding in
aggregate not less than one-third of our voting share capital.
Advance notice of at least 14 days is required for the
convening of our annual general meeting and other shareholders
meetings.
An ordinary resolution to be passed by the shareholders requires
the affirmative vote of a simple majority of the votes attaching
to the ordinary shares cast in a general meeting, while a
special resolution requires the affirmative vote of no less than
two-thirds of the votes cast attaching to the ordinary shares. A
special resolution is required for important matters such as a
change of name. Holders of the ordinary shares may effect
certain changes by ordinary resolution, including consolidating
and dividing all or any of our share capital into shares of
larger amount than our existing share capital, and canceling any
shares which have not been taken or agreed to be taken.
Transfer of Shares. Subject to the
restrictions of our articles of association, as applicable, any
of our shareholders may transfer all or any of his or her
ordinary shares by an instrument of transfer in the usual or
common form or any other form approved by our board.
Liquidation. On a return of capital on winding
up or otherwise (other than on conversion, redemption or
purchase of shares), assets available for distribution among the
holders of ordinary shares may be distributed among the holders
of the ordinary shares as determined by the liquidator, subject
to sanction of an ordinary resolution of our company.
Calls on Shares and Forfeiture of Shares. Our
board of directors may from time to time make calls upon
shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least 14 days prior to the
specified time of payment. The shares that have been called upon
and remain unpaid on the specified time are subject to
forfeiture.
Redemption and Repurchase of Shares. Subject
to the provisions of the Companies Law and our articles of
association, we may issue shares on terms that they are subject
to redemption, at our option or at the option of the holders, on
such terms and in such manner as our board of directors may
determine before the issue of such shares. We also may purchase
our own shares, provided that our shareholders have approved the
manner of purchase by
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ordinary resolution or the manner of purchase is in accordance
with that specified in our articles of association. The manner
of purchase specified in our articles of association, which
cover purchases of shares listed on an internationally
recognized stock exchange and shares not so listed, is in
accordance with Section 37(2) of the Companies Law or any
modification or reenactment thereof for the time being in force.
Variations of Rights of Shares. All or any of
the special rights attached to any class of shares may, subject
to the provisions of the Companies Law, be varied either with
the written consent of the holders of a majority of the issued
shares of that class or with the sanction of a special
resolution passed at a general meeting of the holders of the
shares of that class.
Inspection of Books and Records. Holders of
our ordinary shares have no general right under Cayman Islands
law to inspect or obtain copies of our list of shareholders or
our corporate records. However, we make our annual reports,
which contains our audited financial statements, available to
our shareholders.
Differences
in Corporate Law
The Companies Law differs from laws applicable to United States
corporations and their shareholders. Set forth below is a
summary of the significant differences between the provisions of
the Companies Law applicable to us and the laws applicable to
companies incorporated in the United States and their
shareholders.
Mergers and Similar Arrangements. The
Companies Law permits mergers and consolidations between Cayman
Islands companies and between Cayman Islands companies and
non-Cayman Islands companies.
For these purposes, (a) merger means the
merging of two or more constituent companies and the vesting of
their undertaking, property and liabilities in one of such
companies as the surviving company and (b) a
consolidation means the combination of two or more
constituent companies into a consolidated company and the
vesting of the undertaking, property and liabilities of such
companies to the consolidated company.
In order to effect such a merger or consolidation, the directors
of each constituent company must approve a written plan of
merger or consolidation, or the Plan, which must then be
authorised by either (a) a special resolution of the
shareholders of each constituent company voting together as one
class if the shares to be issued to each shareholder in the
consolidated or surviving company will have the same rights and
economic value as the shares held in the relevant constituent
company or (b) a shareholder resolution of each constituent
company passed by a majority in number representing 75% in value
of the shareholders voting together as one class. The Plan must
be filed with the Registrar of Companies together with a
declaration as to the solvency of the consolidated or surviving
company, a list of the assets and liabilities of each
constituent company and an undertaking that a copy of the
certificate of merger or consolidation will be given to the
members and creditors of each constituent company and published
in the Cayman Islands Gazette.
Dissenting shareholders have the right to be paid the fair value
of their shares (which, if not agreed between the parties, will
be determined by the Cayman Islands court) if they follow the
required procedures, subject to certain exceptions. Court
approval is not required for a merger or consolidation which is
effected in compliance with these statutory procedures.
In addition, there are statutory provisions that facilitate the
reconstruction and amalgamation of companies, provided that the
arrangement is approved by a majority in number of each class of
shareholders and creditors with whom the arrangement is to be
made, and who must in addition represent three-fourths in value
of each such class of shareholders or creditors, as the case may
be, that are present and voting either in person or by proxy at
a meeting, or meetings, convened for that purpose. The convening
of the meetings and subsequently the arrangement must be
sanctioned by the Grand Court of the Cayman Islands. While a
dissenting shareholder has the right to express to the court the
view that the transaction ought not to be approved, the court
can be expected to approve the arrangement if it determines that:
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the company is not proposing to act illegally or beyond the
scope of its authority and the statutory provisions as to
majority vote have been complied with;
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the shareholders have been fairly represented at the meeting in
question;
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the arrangement is such that a businessman would reasonably
approve; and
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the arrangement is not one that would more properly be
sanctioned under some other provision of the Companies Law, or
would amount to a fraud on the minority.
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When a take-over offer is made and accepted by holders of 90.0%
of the shares within four months, the offerer may, within a
two-month period, require the holders of the remaining shares to
transfer such shares according to the terms of the offer. An
objection can be made to the Grand Court of the Cayman Islands
but this is unlikely to succeed unless there is evidence of
fraud, bad faith or collusion.
If the arrangement and reconstruction is thus approved, the
dissenting shareholder would have no rights comparable to
appraisal rights, which would otherwise ordinarily be available
to dissenting shareholders of United States corporations,
providing rights to receive payment in cash for the judicially
determined value of the shares.
Shareholders Suits. The Cayman Islands
courts can be expected to follow English case law precedents.
The common law principles (namely the rule in Foss v.
Harbottle and the exceptions thereto) which permit a minority
shareholder to commence a class action against or derivative
actions in the name of the Company to challenge (a) an act
which is ultra vires the Company or illegal, (b) an act
which constitutes a fraud against the minority where the
wrongdoers are themselves in control of the Company, and
(c) an action which requires a resolution with a qualified
(or special) majority which has not been obtained) have been
applied and followed by the courts in the Cayman Islands.
Indemnification. Cayman Islands law does not
limit the extent to which a companys articles of
association may provide for indemnification of officers and
directors, except to the extent any such provision may be held
by the Cayman Islands courts to be contrary to public policy,
such as to provide indemnification against civil fraud or the
consequences of committing a crime.
Our amended and restated memorandum and articles of association
provide for indemnification of officers and directors for
losses, damages, costs and expenses incurred in their capacity
as such, except through their own willful neglect or default.
We have entered into indemnification agreements with our
directors and executive officers to indemnify them to the
fullest extent permitted by applicable law and our articles of
association, from and against all costs, charges, expenses,
liabilities and losses incurred in connection with any
litigation, suit or proceeding to which such director is or is
threatened to be made a party, witness or other participant.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling us under the foregoing provisions, we have
been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and
therefore is unenforceable.
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DESCRIPTION
OF AMERICAN DEPOSITARY SHARES
American
Depositary Shares
JPMorgan Chase Bank, N.A., as depositary, will issue the ADSs
which you will be entitled to receive in the offering. Each ADS
will represent an ownership interest in ordinary shares which we
will deposit with the custodian, as agent of the depositary,
under the deposit agreement among ourselves, the depositary and
yourself as an ADR holder. In the future, each ADS will also
represent any securities, cash or other property deposited with
the depositary but which have not been distributed directly to
you. Unless specifically requested by you, all ADSs will be
issued on the books of our depositary in book-entry form and
periodic statements will be mailed to you which reflect your
ownership interest in such ADSs. In our description, references
to American depositary receipts or ADRs shall include the
statements you will receive which reflect your ownership of ADSs.
The depositarys office is located at 1 Chase
Manhattan Plaza, Floor 58, New York, New York 10005.
You may hold ADSs either directly or indirectly through your
broker or other financial institution. If you hold ADSs
directly, by having an ADS registered in your name on the books
of the depositary, you are an ADR holder. This description
assumes you hold your ADSs directly. If you hold the ADSs
through your broker or financial institution nominee, you must
rely on the procedures of such broker or financial institution
to assert the rights of an ADR holder described in this section.
You should consult with your broker or financial institution to
find out what those procedures are.
Because the depositarys nominee will actually be the
registered owner of the shares, you must rely on it to exercise
the rights of a shareholder on your behalf. The obligations of
the depositary and its agents are set out in the deposit
agreement. The deposit agreement and the ADSs are governed by
New York law.
The following is a summary of the material terms of the deposit
agreement. Because it is a summary, it does not contain all the
information that may be important to you. For more complete
information, you should read the entire deposit agreement and
the form of ADR which contains the terms of your ADSs. You can
read a copy of the deposit agreement which is filed as an
exhibit to the registration statement of which this prospectus
forms a part. You may also obtain a copy of the deposit
agreement at the SECs Public Reference Room which is
located at 100 F Street, NE, Washington, D.C.
20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at
1-800-SEC-0330.
You may also find the registration statement and the attached
deposit agreement from the SECs website at
http://www.sec.gov.
Share
Dividends and Other Distributions
How
will you Receive Dividends and Other Distributions on the Shares
Underlying your ADSs?
We may make various types of distributions with respect to our
shares. The depositary has agreed to pay to you the cash
dividends or other distributions it or the custodian receives on
shares or other deposited securities, after converting any cash
received into U.S. dollars and, in all cases, making any
necessary deductions provided for in the deposit agreement. You
will receive these distributions in proportion to the number of
underlying securities that your ADSs represent.
Except as stated below, to the extent the depositary is legally
permitted it will deliver such distributions to ADR holders in
proportion to their interests in the following manner:
Cash. The depositary will distribute any
U.S. dollars available to it resulting from a cash dividend
or other cash distribution or the net proceeds of sales of any
other distribution or portion thereof (to the extent
applicable), on an averaged or other practicable basis, subject
to (a) appropriate adjustments for taxes withheld,
(b) such distribution being impermissible or impracticable
with respect to certain registered holders, and
(c) deduction of the depositarys expenses in
(1) converting any foreign currency to U.S. dollars to
the extent that it determines that such conversion may be made
on a reasonable basis, (2) transferring foreign currency or
U.S. dollars to the United States by such means as the
depositary may determine to the extent that it determines that
such transfer may be made on a reasonable basis,
(3) obtaining any approval or license of any governmental
authority required for such conversion or transfer, which is
obtainable at a reasonable cost and within a reasonable time and
(4) making any sale
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by public or private means in any commercially reasonable
manner. If exchange rates fluctuate during a time when the
depositary cannot convert a foreign currency, you may lose some
or all of the value of the distribution.
Shares. In the case of a distribution in
shares, the depositary will issue additional ADRs to evidence
the number of ADSs representing such shares. Only whole ADSs
will be issued. Any shares which would result in fractional ADSs
will be sold and the net proceeds will be distributed in the
same manner as cash to the ADR holders entitled thereto.
Rights to receive Additional Shares. In the
case of a distribution of rights to subscribe for additional
shares or other rights, if we provide satisfactory evidence that
the depositary may lawfully distribute such rights, the
depositary will distribute warrants or other instruments
representing such rights. However, if we do not furnish such
evidence, the depositary may:
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sell such rights if practicable and distribute the net proceeds
as cash; or
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if it is not practicable to sell such rights, do nothing and
allow such rights to lapse, in which case ADR holders will
receive nothing.
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We have no obligation to file a registration statement under the
Securities Act in order to make any rights available to ADR
holders.
Other Distributions. In the case of a
distribution of securities or property other than those
described above, the depositary may either (a) distribute
such securities or property in any manner it deems equitable and
practicable or (b) to the extent the depositary deems
distribution of such securities or property not to be equitable
and practicable, sell such securities or property and distribute
any net proceeds in the same way it distributes cash.
If the depositary determines that any distribution described
above is not practicable with respect to any specific ADR
holder, the depositary may choose any practicable method of
distribution for such ADR holder, including the distribution of
foreign currency, securities or property, or it may retain such
items, without paying interest on or investing them, on behalf
of the ADR holder as deposited securities, in which case the
ADSs will also represent the retained items.
Any U.S. dollars will be distributed by checks drawn on a
bank in the United States for whole dollars and cents.
Fractional cents will be withheld without liability for interest
thereon and dealt with by the depositary in accordance with its
then current practices.
The depositary is not responsible if it decides that it is
unlawful or impractical to make a distribution available to any
ADR holders.
There can be no assurance that the depositary will be able to
convert any currency at a specified exchange rate or sell any
property, rights, shares or other securities at a specified
price, nor that any of such transactions can be completed within
a specified time period.
Deposit,
Withdrawal and Cancellation
How
does the Depositary Issue ADSs?
The depositary will issue ADSs if you or your broker deposit
shares or evidence of rights to receive shares with the
custodian. In the case of the ADSs to be issued under this
prospectus, we will arrange with the underwriters named herein
to deposit such shares.
Shares deposited in the future with the custodian must be
accompanied by certain delivery documentation, including
instruments showing that such shares have been properly
transferred or endorsed to the person on whose behalf the
deposit is being made.
The custodian will hold all deposited shares (including those
being deposited by or on our behalf in connection with the
offering to which this prospectus relates) for the account of
the depositary. ADR holders thus have no direct ownership
interest in the shares and only have such rights as are
contained in the deposit agreement. The custodian will also hold
any additional securities, property and cash received on or in
substitution for the deposited shares. The deposited shares and
any such additional items are referred to as deposited
securities.
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Upon each deposit of shares, receipt of related delivery
documentation and compliance with the other provisions of the
deposit agreement, including the payment of the fees and charges
of the depositary and any taxes or other fees or charges owing,
the depositary will issue an ADR or ADRs in the name or upon the
order of the person entitled thereto evidencing the number of
ADSs to which such person is entitled. All of the ADSs issued
will, unless specifically requested to the contrary, be part of
the depositarys direct registration system, and a
registered holder will receive periodic statements from the
depositary which will show the number of ADSs registered in such
holders name. An ADR holder can request that the ADSs not
be held through the depositarys direct registration system
and that a certificated ADR be issued.
How do
ADR Holders Cancel an ADS and Obtain Deposited
Securities?
When you turn in your ADSs at the depositarys office, or
when you provide proper instructions and documentation in the
case of direct registration ADSs, the depositary will, upon
payment of certain applicable fees, charges and taxes, deliver
the underlying shares at the custodians office or effect
delivery by such other means as the depositary deems
practicable, including transfer to an account of an accredited
financial institution on your behalf. At your risk, expense and
request, the depositary may deliver deposited securities at such
other place as you may request.
The depositary may only restrict the withdrawal of deposited
securities in connection with:
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temporary delays caused by closing our transfer books or those
of the depositary or the deposit of shares in connection with
voting at a shareholders meeting, or the payment of
dividends;
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the payment of fees, taxes and similar charges; or
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compliance with any U.S. or foreign laws or governmental
regulations relating to the ADRs or to the withdrawal of
deposited securities.
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This right of withdrawal may not be limited by any other
provision of the deposit agreement.
Record
Dates
The depositary may fix record dates for the determination of the
ADR holders who will be entitled (or obligated, as the case may
be):
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to receive a dividend, distribution or rights;
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to give instructions for the exercise of voting rights at a
meeting of holders of ordinary shares or other deposited
securities;
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for the determination of the registered holders who shall be
responsible for the fee assessed by the depositary for
administration of the ADR program and for any expenses as
provided for in the ADR; or
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to receive any notice or to act in respect of other matters all
subject to the provisions of the deposit agreement.
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Voting
Rights
How do
you Vote?
If you are an ADR holder and the depositary asks you to provide
it with voting instructions, you may instruct the depositary how
to exercise the voting rights for the shares which underlie your
ADSs. After receiving voting materials from us, the depositary
will notify the ADR holders of any shareholder meeting or
solicitation of consents or proxies. This notice will state such
information as its contained in the voting materials and
describe how you may instruct the depositary to exercise the
voting rights for the shares which underlie your ADSs and will
include instructions for giving a discretionary proxy to a
person designated by us. For instructions to be valid, the
depositary must receive them in the manner and on or before the
date specified. The depositary will try, as far as is practical,
subject to the provisions of and governing the underlying shares
or other deposited securities, to vote or to have its agents
vote the shares or other deposited securities as you instruct.
The depositary will only vote or attempt to vote
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as you instruct. The depositary will not itself exercise any
voting discretion. Furthermore, neither the depositary nor its
agents are responsible for any failure to carry out any voting
instructions, for the manner in which any vote is cast or for
the effect of any vote.
There is no guarantee that you will receive voting materials in
time to instruct the depositary to vote and it is possible that
you, or persons who hold their ADSs through brokers, dealers or
other third parties, will not have the opportunity to exercise a
right to vote.
Reports
and Other Communications
Will
you be Able to View our Reports?
The depositary will make available for inspection by ADR holders
any written communications from us which are both received by
the custodian or its nominee as a holder of deposited securities
and made generally available to the holders of deposited
securities. We will furnish these communications in English when
so required by any rules or regulations of the Securities and
Exchange Commission.
Additionally, if we make any written communications generally
available to holders of our shares, including the depositary or
the custodian, and we request the depositary to provide them to
ADR holders, the depositary will mail copies of them, or, at its
option, English translations or summaries of them to ADR holders.
Fees and
Expenses
What
Fees and Expenses Will you be Responsible for
Paying?
ADR holders will be charged a fee for each issuance of ADSs,
including issuances resulting from distributions of shares,
rights and other property, and for each surrender of ADSs in
exchange for deposited securities. The fee in each case is $5.00
for each 100 ADSs (or any portion thereof) issued or surrendered.
The following additional charges shall be incurred by the ADR
holders, by any party depositing or withdrawing shares or by any
party surrendering ADRs or to whom ADRs are issued (including,
without limitation, issuance pursuant to a stock dividend or
stock split declared by the Company or an exchange of stock
regarding the ADRs or the deposited securities or a distribution
of ADRs), whichever is applicable:
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to the extent not prohibited by the rules of any stock exchange
or interdealer quotation system upon which the ADSs are traded,
a fee of US$1.50 per ADR or ADRs for transfers of certificated
or direct registration ADRs;
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a fee of US$0.02 or less per ADS (or portion thereof) for any
cash distribution made pursuant to the deposit agreement;
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a fee of up to US$0.05 per ADS per calendar year for services
performed by the depositary in administering our ADR program
(which fee shall be assessed against holders of ADRs as of the
record date set by the depositary not more than once each
calendar year and shall be payable in the manner described in
the next succeeding provision);
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any other charge payable by any of the depositary, any of the
depositarys agents, including, without limitation, the
custodian, or the agents of the depositarys agents in
connection with the servicing of our shares or other deposited
securities (which charge shall be assessed against registered
holders of our ADRs as of the record date or dates set by the
depositary and shall be payable at the sole discretion of the
depositary by billing such registered holders or by deducting
such charge from one or more cash dividends or other cash
distributions);
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a fee for the distribution of securities (or the sale of
securities in connection with a distribution), such fee being in
an amount equal to the fee for the execution and delivery of
ADSs which would have been charged as a result of the deposit of
such securities (treating all such securities as if they were
shares) but which securities or the net cash proceeds from the
sale thereof are instead distributed by the depositary to those
holders entitled thereto;
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stock transfer or other taxes and other governmental charges;
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cable, telex and facsimile transmission and delivery charges
incurred at your request;
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transfer or registration fees for the registration of transfer
of deposited securities on any applicable register in connection
with the deposit or withdrawal of deposited securities;
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expenses of the depositary in connection with the conversion of
foreign currency into U.S. dollars; and
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such fees and expenses as are incurred by the depositary
(including without limitation expenses incurred in connection
with compliance with foreign exchange control regulations or any
law or regulation relating to foreign investment) in delivery of
deposited securities or otherwise in connection with the
depositarys or its custodians compliance with
applicable laws, rules or regulations.
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We will pay all other charges and expenses of the depositary and
any agent of the depositary (except the custodian) pursuant to
agreements from time to time between us and the depositary. The
fees described above may be amended from time to time.
Our depositary has agreed to reimburse us for certain expenses
we incur that are related to establishment and maintenance of
the ADR program, including investor relations expenses and
exchange application and listing fees. There are limits on the
amount of expenses for which the depositary will reimburse us,
but the amount of reimbursement available to us is not related
to the amounts of fees the depositary collects from investors.
The depositary collects its fees for issuance and cancellation
of ADSs directly from investors depositing shares or
surrendering ADSs for the purpose of withdrawal or from
intermediaries acting for them. The depositary collects fees for
making distributions to investors by deducting those fees from
the amounts distributed or by selling a portion of distributable
property to pay the fees. The depositary may collect its annual
fee for depositary services by deduction from cash
distributions, or by directly billing investors, or by charging
the book-entry system accounts of participants acting for them.
The depositary may generally refuse to provide services until
its fees for those services and any other unpaid fees are paid.
Payment
of Taxes
ADR holders must pay any tax or other governmental charge
payable by the custodian or the depositary on any ADS or ADR,
deposited security or distribution. If an ADR holder owes any
tax or other governmental charge, the depositary may
(a) deduct the amount thereof from any cash distributions,
or (b) sell deposited securities and deduct the amount
owing from the net proceeds of such sale. In either case the ADR
holder remains liable for any shortfall. Additionally, if any
tax or governmental charge is unpaid, the depositary may also
refuse to effect any registration, registration of transfer,
split-up or
combination of deposited securities or withdrawal of deposited
securities (except under limited circumstances mandated by
securities regulations). If any tax or governmental charge is
required to be withheld on any non-cash distribution, the
depositary may sell the distributed property or securities to
pay such taxes and distribute any remaining net proceeds to the
ADR holders entitled thereto.
By holding an ADR or an interest therein, you will be agreeing
to indemnify us, the depositary, its custodian and any of our or
their respective directors, employees, agents and affiliates
against, and hold each of them harmless from, any claims with
respect to taxes, additions to tax, penalties or interest
arising out of any refund of taxes, reduced rate of withholding
at source or other tax benefit. None of the depositary, the
custodian or our company shall be liable for the failure by any
holder or beneficial owner of ADSs or ordinary shares to obtain
the benefits of credits on the basis of
non-U.S. tax
paid against such holders or beneficial owners
income tax liability. The depositary and our company shall not
incur any liability for any tax consequences that may be
incurred by holders and beneficial owners of ADSs or ordinary
shares on account of their ownership of ordinary shares, ADRs or
ADSs.
Reclassifications,
Recapitalizations and Mergers
If we take certain actions that affect the deposited securities,
including (i) any change in par value,
split-up,
consolidation, cancellation or other reclassification of
deposited securities or (ii) any recapitalization,
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reorganization, merger, consolidation, liquidation,
receivership, bankruptcy or sale of all or substantially all of
our assets, then the depositary may choose to:
(1) amend the form of ADR;
(2) distribute additional or amended ADRs;
(3) distribute cash, securities or other property it has
received in connection with such actions;
(4) sell any securities or property received and distribute
the proceeds as cash; or
(5) none of the above.
If the depositary does not choose any of the above options, any
of the cash, securities or other property it receives will
constitute part of the deposited securities and each ADS will
then represent a proportionate interest in such property.
Amendment
and Termination
How
may the Deposit Agreement be Amended?
We may agree with the depositary to amend the deposit agreement
and the ADSs without your consent for any reason. ADR holders
must be given at least 30 days notice of any amendment that
imposes or increases any fees or charges (other than stock
transfer or other taxes and other governmental charges, transfer
or registration fees, cable, telex or facsimile transmission
costs, delivery costs or other such expenses), or prejudices any
substantial existing right of ADR holders. If an ADR holder
continues to hold an ADR or ADRs after being so notified, such
ADR holder is deemed to agree to such amendment. Notwithstanding
the foregoing, if any governmental body or regulatory body
should adopt new laws, rules or regulations which would require
amendment or supplement of the deposit agreement or the form of
ADR to ensure compliance therewith, we and the depositary may
amend or supplement the deposit agreement and the ADR at any
time in accordance with such changed laws, rules or regulations,
which amendment or supplement may take effect before a notice is
given or you otherwise receive notice. No amendment, however,
will impair your right to surrender your ADSs and receive the
underlying securities.
How
may the Deposit Agreement be Terminated?
The depositary may, and shall at our written direction,
terminate the deposit agreement and the ADR by mailing notice of
such termination to the registered holders of ADRs at least
30 days prior to the date fixed in such notice for such
termination; provided, however, if the depositary shall have
(i) resigned as depositary under the deposit agreement,
notice of such termination by the depositary shall not be
provided to registered holders unless a successor depositary
shall not be operating hereunder within 45 days of the date
of such resignation, and (ii) been removed as depositary
under the deposit agreement, notice of such termination by the
depositary shall not be provided to registered holders of ADRs
unless a successor depositary shall not be operating hereunder
on the 90th day after our notice of removal was first
provided to the depositary. After termination, the
depositarys only responsibility will be (i) to
deliver deposited securities to ADR holders who surrender their
ADRs, and (ii) to hold or sell distributions received on
deposited securities. As soon as practicable after the
expiration of six months from the termination date, the
depositary will sell the deposited securities which remain and
hold the net proceeds of such sales, without liability for
interest, in trust for the ADR holders who have not yet
surrendered their ADRs. After making such sale, the depositary
shall have no obligations except to account for such proceeds
and other cash. The depositary will not be required to invest
such proceeds or pay interest on them.
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Limitations
on Obligations and Liability to ADR holders
Limits
on our Obligations and the Obligations of the Depositary; Limits
on Liability to ADR Holders and Holders of ADSs
Prior to the issue, registration, registration of transfer,
split-up,
combination, or cancellation of any ADRs, or the delivery of any
distribution in respect thereof, the depositary and its
custodian may require you to pay, provide or deliver:
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payment with respect thereto of (a) any stock transfer or
other tax or other governmental charge, (b) any stock
transfer or registration fees in effect for the registration of
transfers of shares or other deposited securities upon any
applicable register, and (c) any applicable fees and
expenses described in the deposit agreement;
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the production of proof satisfactory to the depositary
and/or its
custodian of (a) the identity of any signatory and
genuineness of any signature and (b) such other
information, including without limitation, information as to
citizenship, residence, exchange control approval, beneficial
ownership of any securities, payment of applicable taxes or
governmental charges, or legal or beneficial ownership and the
nature of such interest, information relating to the
registration of the shares on the books maintained by or on our
behalf for the transfer and registration of shares, compliance
with applicable laws, regulations, provisions of or governing
deposited securities and terms of the deposit agreement and the
ADR, as it may deem necessary or proper; and
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compliance with such regulations as the depositary may establish
consistent with the deposit agreement.
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The deposit agreement expressly limits the obligations and
liability of the depositary, ourselves and our respective
agents. Neither we nor the depositary nor any such agent will be
liable if:
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present or future law, rule or regulation of the United States,
the Cayman Islands, the Peoples Republic of China or any
other country, or of any governmental or regulatory authority or
securities exchange or market or automated quotation system, the
provisions of or governing any deposited securities, any present
or future provision of our charter, any act of God, war,
terrorism or other circumstance beyond our, the
depositarys or our respective agents control shall
prevent, delay or subject to any civil or criminal penalty any
act which the deposit agreement or the ADRs provide shall be
done or performed by us, the depositary or our respective agents
(including, without limitation, voting);
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it exercises or fails to exercise discretion under the deposit
agreement or the ADR;
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it performs its obligations without gross negligence or bad
faith;
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it takes any action or refrains from taking any action in
reliance upon the advice of or information from legal counsel,
accountants, any person presenting shares for deposit, any
registered holder of ADRs, or any other person believed by it to
be competent to give such advice or information; or
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it relies upon any written notice, request, direction or other
document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
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Neither the depositary nor its agents have any obligation to
appear in, prosecute or defend any action, suit or other
proceeding in respect of any deposited securities or the ADRs.
We and our agents shall only be obligated to appear in,
prosecute or defend any action, suit or other proceeding in
respect of any deposited securities or the ADRs, which in our
opinion may involve us in expense or liability, if indemnity
satisfactory to us against all expense (including fees and
disbursements of counsel) and liability is furnished as often as
may be required. The depositary and its agents may fully respond
to any and all demands or requests for information maintained by
or on its behalf in connection with the deposit agreement, any
registered holder or holders of ADRs, any ADSs or otherwise to
the extent such information is requested or required by or
pursuant to any lawful authority, including without limitation
laws, rules, regulations, administrative or judicial process,
banking, securities or other regulators.
The depositary will not be responsible for failing to carry out
instructions to vote the deposited securities or for the manner
in which the deposited securities are voted or the effect of the
vote. In no event shall we, the depositary or
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any of our respective agents be liable to holders of ADSs or
interests therein for any indirect, special, punitive or
consequential damages.
The depositary may own and deal in deposited securities and in
ADSs.
Disclosure
of Interest in ADSs
To the extent that the provisions of or governing any deposited
securities may require disclosure of or impose limits on
beneficial or other ownership of deposited securities, other
shares and other securities and may provide for blocking
transfer, voting or other rights to enforce such disclosure or
limits, you agree to comply with all such disclosure
requirements and ownership limitations and to comply with any
reasonable instructions we may provide in respect thereof. We
reserve the right to request you to deliver your ADSs for
cancellation and withdrawal of the deposited securities so as to
permit us to deal with you directly as a holder of deposited
securities and, by holding an ADS or an interest therein, you
will be agreeing to comply with such instructions.
Requirements
for Depositary Actions
We, the depositary or the custodian may refuse to:
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issue, register or transfer an ADR or ADRs;
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effect a
split-up or
combination of ADRs;
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deliver distributions on any such ADRs; or
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permit the withdrawal of deposited securities (unless the
deposit agreement provides otherwise), until the following
conditions have been met:
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the holder has paid all taxes, governmental charges, and fees
and expenses as required in the deposit agreement;
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the holder has provided the depositary with any information it
may deem necessary or proper, including, without limitation,
proof of identity and the genuineness of any signature; and
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the holder has complied with such regulations as the depositary
may establish under the deposit agreement.
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The depositary may also suspend the issuance of ADSs, the
deposit of shares, the registration, transfer,
split-up or
combination of ADRs, or the withdrawal of deposited securities
(unless the deposit agreement provides otherwise), if the
register for ADRs or any deposited securities is closed or the
depositary decides it is advisable to do so.
Books of
Depositary
The depositary or its agent will maintain a register for the
registration, registration of transfer, combination and
split-up of
ADRs, which register shall include the depositarys direct
registration system. You may inspect such records at such office
during regular business hours, but solely for the purpose of
communicating with other holders in the interest of business
matters relating to the deposit agreement. Such register may be
closed from time to time, when deemed expedient by the
depositary.
The depositary will maintain facilities to record and process
the issuance, cancellation, combination,
split-up and
transfer of ADRs. These facilities may be closed from time to
time, to the extent not prohibited by law.
Pre-Release
of ADSs
The depositary may issue ADSs prior to the deposit with the
custodian of shares (or rights to receive shares). This is
called a pre-release of the ADS. A pre-release is closed out as
soon as the underlying shares (or rights to
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receive shares from us or from any registrar, transfer agent or
other entity recording share ownership or transactions) are
delivered to the depositary. The depositary may pre-release ADSs
only if:
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the depositary has received collateral for the full market value
of the pre-released ADSs (marked to market daily); and
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each recipient of pre-released ADSs agrees in writing that he or
she:
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owns the underlying shares;
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assigns all rights in such shares to the depositary;
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holds such shares for the account of the depositary; and
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will deliver such shares to the custodian as soon as
practicable, and promptly if the depositary so demands (but in
any event within five business days of the depositarys
demand therefor).
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In general, the number of pre-released ADSs will not evidence
more than 30% of all ADSs outstanding at any given time
(excluding those evidenced by pre-released ADSs). However, the
depositary may change or disregard such limit from time to time
as it deems appropriate. The depositary may retain for its own
account any earnings on collateral for pre-released ADSs and its
charges for issuance thereof.
Appointment
In the deposit agreement, each holder and each person holding an
interest in ADSs, upon acceptance of any ADSs (or any interest
therein) issued in accordance with the terms and conditions of
the deposit agreement will be deemed for all purposes to:
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be a party to and bound by the terms of the deposit agreement
and the applicable ADR or ADRs; and
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appoint the depositary its attorney-in-fact, with full power to
delegate, to act on its behalf and to take any and all actions
contemplated in the deposit agreement and the applicable ADR or
ADRs, to adopt any and all procedures necessary to comply with
applicable laws and to take such action as the depositary in its
sole discretion may deem necessary or appropriate to carry out
the purposes of the deposit agreement and the applicable ADR and
ADRs, the taking of such actions to be the conclusive
determinant of the necessity and appropriateness thereof.
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PLAN OF
DISTRIBUTION
We or any selling shareholder may sell or distribute the ADSs
offered by this prospectus, from time to time, in one or more
offerings, as follows:
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through agents;
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to dealers or underwriters for resale;
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directly to purchasers; or
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through a combination of any of these methods of sale.
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The ADSs distributed by any of these methods may be sold to the
public, in one or more transactions, either:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to prevailing market prices; or
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at negotiated prices.
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Sale
through Underwriters or Dealers
If underwriters are used in the sale, the underwriters will
acquire the ADSs for their own account, including through
underwriting, purchase, security lending or repurchase
agreements with us or any selling shareholder. The underwriters
may resell the securities from time to time in one or more
transactions, including negotiated transactions. Underwriters
may offer securities to the public either through underwriting
syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. Unless
otherwise indicated in the applicable prospectus supplement, the
obligations of the underwriters to purchase the ADSs will be
subject to certain conditions, and the underwriters will be
obligated to purchase all the offered securities if they
purchase any of them. The underwriters may change from time to
time any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers.
If dealers are used in the sale of ADSs offered through this
prospectus, we or any selling shareholder will sell the
securities to them as principals. They may then resell those
ADSs to the public at varying prices determined by the dealers
at the time of resale. The applicable prospectus supplement will
include the names of the dealers and the terms of the
transaction.
Direct
Sales and Sales through Agents
We or any selling shareholder may sell the ADSs offered through
this prospectus directly. In this case, no underwriters or
agents would be involved. Such ADSs may also be sold through
agents designated from time to time. The applicable prospectus
supplement will name any agent involved in the offer or sale of
the offered securities and will describe any commissions payable
to the agent. Unless otherwise indicated in the applicable
prospectus supplement, any agent will agree to use its commonly
reasonable efforts to solicit purchases for the period of its
appointment.
We or any selling shareholder may sell the ADSs directly to
institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act with
respect to any sale of those ADSs. The terms of any such sales
will be described in the applicable prospectus supplement.
Delayed
Delivery Contracts
If the applicable prospectus supplement indicates, we or any
selling shareholder may authorize agents, underwriters or
dealers to solicit offers from certain types of institutions to
purchase ADSs at the public offering price under delayed
delivery contracts. These contracts would provide for payment
and delivery on a specified date in the future. The contracts
would be subject only to those conditions described in the
prospectus supplement. The applicable prospectus supplement will
describe the commission payable for solicitation of those
contracts.
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Stabilization
and Other Transactions
Any underwriter may engage in stabilizing transactions,
syndicate covering transactions and penalty bids in accordance
with Rule 104 under the Exchange Act. Stabilizing
transactions involve bids to purchase the underlying security in
the open market for the purpose of pegging, fixing or
maintaining the price of the ADSs. Syndicate covering
transactions involve purchases of the ADSs in the open market
after the distribution has been completed in order to cover
syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the ADSs originally sold
by the syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Stabilizing
transactions, syndicate covering transactions and penalty bids
may cause the price of the ADSs to be higher than it would be in
the absence of the transactions. The underwriters may, if they
commence these transactions, discontinue them at any time.
General
Information
Agents, underwriters and dealers may be entitled, under
agreements entered into with us, to indemnification by us,
against certain liabilities, including liabilities under the
Securities Act. Our agents, underwriters and dealers, or their
respective affiliates, may be customers of, engage in
transactions with or perform services for us or our affiliates,
in the ordinary course of business for which they may receive
customary compensation.
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LEGAL
MATTERS
We are being represented by Latham & Watkins with
respect to certain legal matters as to United States federal
securities and New York state law. The validity of the ordinary
shares and legal matters as to Cayman Islands law will be passed
upon for us by Maples and Calder. We are being represented by
Commerce & Finance Law Offices with respect to legal
matters as to PRC law. Latham & Watkins may rely upon
Maples and Calder with respect to matters governed by Cayman
Islands law and Commerce & Finance Law Offices with
respect to matters governed by PRC law.
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EXPERTS
The financial statements, and the related financial statement
schedule, incorporated in this prospectus by reference from our
annual report on
Form 20-F
for the year ended December 31, 2009, and the effectiveness
of our companys internal control over financial reporting
have been audited by Deloitte Touche Tohmatsu, an independent
registered public accounting firm, as stated in their reports,
which are incorporated herein by reference. Such financial
statements and financial statement schedule have been so
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The offices of Deloitte Touche Tohmatsu are located at
35th Floor, One Pacific Place, 88 Queensway, Hong Kong.
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