1. ©2006 LOEB & LOEB LLP Chinese Issuers in the US Capital Markets Alternatives to the IPO Norwood P. Beveridge, Jr. Loeb & Loeb LLP

2. ©2006 LOEB & LOEB LLP PRC Companies Issue Equity  For the vast majority of the Chinese companies coming to the US markets, their preference for issuing equity continues to guide their choice  Factors that drive financing alternatives apply here: ―Holders of non-tradeable shares still present or WFOE structure, so dilution concerns not present ―Cost is relatively cheap as compared to debt

3. ©2006 LOEB & LOEB LLP Size Matters  Amount of capital being raised is primary driver in form an equity offering will take ―Large (over $50 million) offerings are usually SEC-registered and marketed through a book-built syndicate ―SPAC alternative more attractive due to lack of reliance on “IPO Window” ―Smaller offerings are more dependent on maturity of a company in the US market  Debut issuers – RTO’s (Reverse Takeover Offering)

4. ©2006 LOEB & LOEB LLP The BIG Deals  Among SEC-registered, higher profile transactions, several recent examples are ― Industrial and Commercial Bank of China ($21.6 billion dual listing in 2006 – largest IPO in history) ― Home Inns & Hotel Management Inc. ($100m in 2006) ― Fuwei Films (Holdings) Ltd. ($35m in 12/06) ― Xinhua Finance Media Limited ($299m 3/8/07 – ADS offering)

5. ©2006 LOEB & LOEB LLP The Middle Market  China has many companies in the $20-$50 million market cap range ― Expenses and regulatory delays would render SEC-registered offering unworkable ― “Back-door listings” perfect for companies seeking a US presence with minimal up-front costs ― Less of a need for new capital than for an IR footprint and LIQUIDITY

6. ©2006 LOEB & LOEB LLP RTO’s  Identifying the form of transaction – New PRC rules regarding overseas listings (2006 M&A Rule Revisions)  The new SEC rules on Shell Company mergers ― 4 business day deadline for Form 8-K (or 20-F for foreign private issuer shell companies) ― Complete Form 10 disclosure for acquired (operating) business ― Accounting issues  Accounting acquiror v. legal acquiror ― Registration Rights

7. ©2006 LOEB & LOEB LLP SPAC’s  SPAC’s (Blank Check Offerings) offer access to capital to be used in consummating a business combination with a business to be located by the management team after the closing of the IPO.  Chinese SPAC’s have figured strongly in the market: ― Great Wall Acquisition Corp. ($24 million - 3/04) ― Shanghai Century ($100 million – 4/06) ― Shine Media ($36 million – 12/06) ― China Discovery ($30 million – in registration) ― Nagao Group Holdings ($75 million – in registration)

8. ©2006 LOEB & LOEB LLP SPAC’s (continued)  As of February 2007, 74 SPACs had raised $5.6 billion and 56 more were in registration with the SEC  American Stock Exchange has 23 listed SPACs and 25 more pending  Completion of the business combination: --Jamba Juice acquired by Services Acquisition Corp. ($265m) -- American Apparel being acquired by Endeavor Acquisition Corp. ($244m) -- ChinaCast Communications acquired by Great Wall Acquisition Corp. ($40m, involving tender offer in Singapore)

9. ©2006 LOEB & LOEB LLP SPAC’s (continued)  Technically not subject to SEC rules (419) regarding blank check offerings due to absence of “penny stock”  Many of same precautions still observed due to market forces: ― Escrow of proceeds until business combination ― Stockholder vote on business combination, 80% approval required ― Size of business acquired must equal 80% of net assets ― Redemption rights available for non-approving stockholders (up to 19.99% of shares) ― Underwriter escrow of discount

10. ©2006 LOEB & LOEB LLP SPAC’s (continued)  SEC Issues ―Although not a favorite form of financing for the Commission, most disclosure issues in the current generation of SPAC’s have been worked through with the Staff and the Staff announced at the 2007 “SEC Speaks” its views on the SPAC structure.

11. ©2006 LOEB & LOEB LLP SPAC’s (continued)  The variables ―Delaware vs. Cayman Is vs. Marshall Is (PFIC) ―% of funds in trust/management promote ―Golden Shoe ―Use of interest on trust funds prior to merger ―Lockup of founder promote shares/after-acquired shares ―Warrant market making

12. ©2006 LOEB & LOEB LLP SPAC’s (continued)  SEC Hot Buttons ― Unit offering of stapled stock and warrant – SEC requires a current prospectus to be delivered upon exercise of warrant, raising EITF 00-19 issues on equity treatment (see Loeb handout) ― Liquidation procedures not well understood or described to IPO investors (less of an issue now) ― Industry research conducted pre-IPO ― Conflicts with other obligations (private equity involvement) ― Resume inflation of principals ― Qualification as a foreign private issuer

13. ©2006 LOEB & LOEB LLP Chinese Issuers in the US Capital Markets Alternatives to the IPO Norwood P. Beveridge, Jr. Loeb & Loeb LLP