Presentation to: The FIA Asia Derivatives Conference Beijing, China 10 August 2005 By: Donald L. Horwitz Director/Gener

1. Presentation to: The FIA Asia Derivatives Conference Beijing, China 10 August 2005 By: Donald L. Horwitz Director/General Counsel Global Futures ABN AMRO Incorporated Doing Business in the New China: The Legal and Regulatory Perspective

2. Doing Business in the New China • Why? • What? • Who? • How?

3. Confucius: Smart Investor The man has three different ways to act wise: • The first is to think, which is the noblest • The second is to imitate, which is the easiest • The third is by experience, which is the bitterest

4. Doing Business in the New China • Why do Business in China? • What is your Mission, Vision, and Value-Proposition? • Have you identified your: • Long-term Strategy • Shorter-term Goals • Risk/Reward Scenarios • Cost-Benefit Opportunities

5. Doing Business in the New China • Four False Assumptions • China is source of fast and easy profits • Chinese people are both hardworking and inexpensive workers • China has opened to “pure capitalism” and beginning to become Westernized or Americanized • Chinese and the West share the same economic views

6. Doing Business in the New China • Four False Assumptions • China is a Socialist Market Economy • Government sets both social and political quotas and targets • State mandated regulations • Investors Deal Primarily with: • SOE • State Agencies • State Institutions

7. Doing Business in the New China • Four False Assumptions • 5000 year-old civilization • US is 230 years • Chinese measure time differently • Nothing is instantaneous • Very focused • Relationships must be mutually beneficial • Chinese Culture is Paramount

8. Doing Business in the New China • What? • What type of business or service? • Products • Services • Technologies • Funding, Assets

9. Doing Business in the New China Foreign Investment Opportunities • Traditionally has been strongest in supplying equipment for Chinese infrastructure • As economy has developed, wider opportunities in China’s emerging consumer market • Foreign investments in banking and financial services have been key to China’s growth over the last twenty years.

10. Doing Business in the New China • Who? • Consider who are your • Customers • Competitors • Regulators

11. Doing Business in the New China • Government: Socialist Market Economy • Highly centralized political system • Increasingly decentralized economic system • State control over key industries • Services industries, home and cottage businesses and small retailers given relative freedom

12. Doing Business in the New China • China Securities Regulatory Commission • Established in 1992 by the State Council • Sole Regulator for Securities and Futures Markets • Combination of the US SEC and CFTC

13. Doing Business in the New China • China Securities Regulatory Commission • Regulates and Licenses • Securities and Futures Markets • Futures Clearing Organizations • Intermediaries • Investment/Trading Advisers • Supervises: • Securities and Futures Exchanges • Futures Association of China • Securities Association of China

14. Doing Business in the New China • Legal Framework • Three laws: • Company Law • Securities Law • Securities Investment Fund Law • Supplemented by 300+ • Rules, Regulations, Guidelines and Codes

15. Doing Business in the New China • Legal Framework • Regulations on Securities and Futures Trading: • General • Prohibited Behavior • The Measures on the Administration of Futures Exchanges • Amended by the CSRC effective 1 July 2002

16. Doing Business in the New China • How? • How are you going to get the venture started? • Partners • Investment form • Supply/distribution Networks

17. Doing Business in the New China • Four Forms of Investment • Representative Office (RO) • Contractual Joint Venture • Equity Joint Ventura • Wholly Foreign-Owned Enterprise

18. Doing Business in the New China • Regulatory Landscape • Presently, foreign parties not permitted to on China’s domestic futures exchanges. • In August 2004, PRC Ministry of Commerce issued Closer Economic Partnership Arrangement between Mainland China and Hong Kong (CEPA)

19. Doing Business in the New China • CEPA Approval Process • CEPA opens futures brokerage business to qualified Hong Kong Service Suppliers (HKSS) • CEPA is the only recognized route for foreign investors to qualify • Approved HKSS may own up to 49% in a PRC joint venture futures brokerage firm • Requirements • registered with the Securities and Futures Commission of Hong Kong • satisfies the requirements of the CSRC • No implementing rules so far from the PRC.

20. Doing Business in the New China • Legal Contacts • Legal contracts based on trust and confidence • Contracts are not absolute or unalterable: • Helping steps to create long-term relationships • Details and relationships are important in the negotiations

21. Doing Business in the New China • Legal Contracts • Prepare in both Chinese and English • Chinese version prevails in a later dispute • Use existing contracts as examples • Know the authority level of the counterparty • Choice of Law • PRC • Hong Kong

22. Doing Business in the New China • Contract Preparation • Use simple, clear phrases • Regulations spelled out • Assumptions stated • Define obligations as • Mutual • Reciprocal • Avoid Long Lists

23. Doing Business in the New China • Negotiating • Flexibility • Government changes • Laws and regulations change • Officials change • Be prepared to change

24. Doing Business in the New China • Conclusion • Lessons Learned • Patience • Nothing happens overnight • It takes time to find the proper partner • Patience is key in doing business in the New China • Leave arrogance home • Q/A