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filed with the Securities and Exchange Commission on March 3, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MINDRAY MEDICAL INTERNATIONAL LIMITED
(Exact name of Registrant as specified in its charter)
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Cayman Islands
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3841
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Not Applicable |
(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number) |
Mindray Building
Keji 12th Road South
Hi-tech Industrial Park, Nanshan
Shenzhen 518057
Peoples Republic of China
(86-755) 2658-2888
(Address and telephone number
of Registrants principal executive offices)
CT Corporation System
111 Eighth Avenue, 13th Floor
New York, New York 10011
(212) 894-8940
(Name, address and telephone number of agent for service)
COPY TO:
Kurt J. Berney, Esq.
OMelveny & Myers LLP
37th Floor, Plaza 66
1266 Nanjing Road West
Shanghai 200040, P.R.C.
86-21-2307-7007
Approximate date of commencement of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans, check the following
box. þ
If this Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.C. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) of the Securities Act, check the following box þ
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.C. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) of the Securities Act, check the following box o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company (as defined in Exchange Act Rule
12b-2).
CALCULATION OF REGISTRATION FEE
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Amount to be Registered / Proposed |
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Maximum Aggregate Price Per Unit / |
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Title of Each Class of |
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Proposed Maximum Aggregate Offering |
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Amount of |
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Securities to be Registered |
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Price(3) |
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Registration Fee(3) |
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Class A ordinary
shares, par value
HK$0.001 per
share(1)(2) |
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Preferred shares |
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Debt Securities |
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Warrants |
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Rights |
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Units |
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(1) |
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American depositary shares issuable upon deposit of the Class A ordinary shares registered
hereby have been registered under a separate registration statement on Form F-6 filed with the
Commission on September 15, 2006 (Registration No. 333-137373). Each American depositary share
represents one Class A ordinary share. |
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Includes (i) Class A ordinary shares initially offered and sold outside the United States
that may be resold from time to time in the United States either as part of their distribution
or within 40 days after the later of the effective date of this registration statement and the
date the shares are first bona fide offered to the public and (ii) Class A ordinary shares
that may be purchased by the underwriters pursuant to an over-allotment option. These Class A
ordinary shares are not being registered for the purposes of sales outside of the United
States. |
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This registration statement registers an indeterminate number of securities of each
class that may be offered from time to time in amounts and at offering prices to be
determined. It also includes securities that may be issued on conversion of other securities
or on exercise of warrants with regard to which additional consideration may or may not be
required. Any securities registered hereunder may be sold separately or as units with other
securities registered hereunder. In accordance with Rules 456(b) and 457(r) promulgated under
the Securities Act of 1933, the Registrant is deferring payment of all of the registration
fee. |
PROSPECTUS
American Depositary Shares
Ordinary Shares
Preferred Shares
Debt Securities
Warrants
Rights
Units
We, or any selling securityholders to be identified in the future, may offer from time to
time, in one or more series:
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American depositary shares; |
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ordinary shares; |
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preferred shares; |
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senior and/or subordinated debt securities; |
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warrants to purchase American depositary shares, ordinary shares, preferred shares
and/or debt securities; |
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rights to purchase American depositary shares, ordinary shares, preferred shares and/or
debt securities; and |
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units consisting of two or more of these classes or series of securities. |
We, or any selling securityholders to be identified in the future, may offer these securities
in amounts, at prices and on terms determined at the time of offering. The specific plan of
distribution for any securities to be offered will be provided in a prospectus supplement. If we
use agents, underwriters or dealers to sell these securities, a prospectus supplement will name
them and describe their compensation.
The specific terms of any securities to be offered will be described in a supplement to this
prospectus. The prospectus supplement may also add, update or change information contained in this
prospectus. You should read this prospectus and any prospectus supplement, together with
additional information described under the heading Where You Can Find More Information, before
you make an investment decision.
Our American depositary shares are listed on the New York Stock Exchange under the symbol
MR.
Investing in our securities 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 our securities.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
March 3, 2010
ABOUT THIS PROSPECTUS
This prospectus is part of an automatic shelf registration statement that we filed with the
United States Securities and Exchange Commission, or the SEC, as a well-known seasoned issuer as
defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act, using a
shelf registration process. By using a shelf registration statement, we may sell any combination
of our American depositary shares, or ADSs, ordinary shares, preferred shares, debt securities,
warrants, rights and units from time to time and in one or more offerings. Each time we sell
securities, we will provide a supplement to this prospectus that contains specific information
about the securities being offered (if other than ordinary shares and ADSs) and 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. Before purchasing any
securities, you should carefully read both this prospectus and any prospectus supplement, together
with the additional information described under the heading Where You Can Find More Information
and Incorporation of Certain Documents by Reference.
You should rely only on the information contained or incorporated by reference in this
prospectus and in any prospectus supplement. We have not 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 any prospectus supplement 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.
Unless otherwise stated, or the context otherwise requires, for purposes of this prospectus
only:
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we, us, our company, our, Mindray International and Mindray refer
to Mindray Medical International Limited, and its consolidated subsidiaries, including
Shenzhen Mindray Bio-Medical Electronics Co., Ltd., or Shenzhen Mindray, and Shenzhen
Mindrays predecessor entities; |
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China or PRC refers to the Peoples Republic of China, excluding, for
purposes of this prospectus only, Taiwan and the Special Administrative Regions of Hong
Kong and Macau; |
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All references to Renminbi or RMB are to the legal currency of China, all
references to US dollars, dollars, $ or US$ are to the legal currency of the
United States, and all references to HK$ are to the legal currency of the Hong Kong
Special Administrative Region of China; |
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ordinary shares refers to our Class A and Class B ordinary shares, par value
HK$0.001 per share; |
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ADSs refers to our American depositary shares, each of which represents one
Class A ordinary share; |
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ADRs refers to American depositary receipts, which, if issued, evidence our
ADSs; and |
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US GAAP refers to generally accepted accounting principles in the United
States. |
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WHERE YOU CAN FIND MORE INFORMATION
We have filed our registration statement on Form F-3 with the SEC under the Securities Act. We
also file annual, quarterly and current reports and other information with the SEC. You may read
and copy any document that we file with the SEC, including the registration statement and the
exhibits to the registration statement, at the SECs public reference facility at:
Securities and Exchange Commission
Room 1500
100 F Street, N.E.
Washington, D.C. 20549
You may call the SEC at 1-800-SEC-0330 for further information. Our SEC filings are also
available to the public at the SECs website at www.sec.gov. In addition, you may inspect and
copy reports, proxy statements and other information about us at the offices of the New York Stock
Exchange, Inc. at 20 Broad Street, New York, New York 10005.
This prospectus and any prospectus supplement are part of a registration statement that we
filed with the SEC and do not contain all of the information in the registration statement. The
full registration statement may be obtained from the SEC or us as indicated above. Forms of the
indenture and other documents establishing the terms of the offered securities are filed as
exhibits to the registration statement or will be filed through an amendment to our registration
statement on Form F-3 or under cover of a Current Report on Form 6-K and incorporated in this
prospectus by reference. Statements in this prospectus or any prospectus supplement about these
documents are summaries and each statement is qualified in all respects by reference to the
document to which it refers. You should refer to the actual documents for a more complete
description of the relevant matters.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference in this prospectus the information we file
with it, which means that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of this prospectus,
unless it has been superseded by more updated information included herein, and later information
filed with the SEC will update and supersede the information included or incorporated by reference
in this prospectus. We incorporate by reference in this prospectus the following information:
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our Annual Report on Form 20-F for the year ended December 31, 2008 (File No.
001-33036), filed with the SEC on May 8, 2009; |
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our Reports on Forms 6-K furnished to the SEC on March 3, 2010; |
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the Description of Share Capital and
Description of American Depositary Shares contained in
our registration statement on Form 8-A (File No. 001-33036), filed
with the SEC on September 20, 2006; and |
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with respect to each offering of securities under this prospectus, all reports
on Form 20-F and any report on Form 6-K that so indicates it is being incorporated by
reference, in each case, that we file with the SEC on or after the date on which this
registration statement is first filed with the SEC and until the termination or
completion of that offering under this prospectus. |
You may request a copy of these filings, at no cost, by writing or telephoning us at the
following address:
Corporate Secretary
Mindray Building
Keji 12th Road South
Hi-tech Industrial Park, Nanshan
Shenzhen 518057
Peoples Republic of China
(86-755) 2658-2888
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FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference, and any prospectus supplement will
contain or incorporate by reference, statements that constitute forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended. Any statements that do not relate to historical or current facts or matters are
forward-looking statements. You can identify some of the forward-looking statements by the use of
forward-looking words, such as may, will, could, should, expects, anticipates,
intends, projects, predicts, plans, believes, seeks, and estimates and variations of
these words and similar expressions. Statements concerning current conditions may also be
forward-looking if they imply a continuation of current conditions. Forward-looking statements
include statements regarding, among other matters:
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our goals and strategies; |
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our future business development, financial condition and results of operations; |
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the projected growth of the medical device industry in China and internationally; |
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the effects of the current global economic crisis and global macroeconomic conditions on
our business; |
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the effects of our acquisition of and integration of Datascopes patient monitoring device
business; |
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our expansion plans; |
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relevant government policies and regulations relating to the medical device industry; |
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market acceptance of our products; |
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our expectations regarding demand for our products; |
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our ability to expand our production, our sales and distribution network and other aspects
of our operations, including our sales and service offices, our manufacturing facilities in
Shenzhen, and our research and development and manufacturing facility in Nanjing; |
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our ability to stay abreast of market trends and technological advances; |
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our ability to effectively protect our intellectual property rights and not infringe on
the intellectual property rights of others; |
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our plan to launch new products in the future; |
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our intention to pay annual cash dividends to our shareholders; |
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competition in the medical device industry in China and internationally; and |
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general economic and business conditions in the countries where our products are sold. |
We caution you that any such forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and other factors that may cause our actual results,
performance or achievements or the industry to differ materially from our future results,
performance or achievements, or those of the industry, expressed or implied in such forward-looking
statements. We urge you to carefully review the disclosures we make concerning risks and other
factors that may affect our business and operating results, including those made in this
prospectus, and as such risk factors may be updated in subsequent SEC filings, as well as our other
reports filed with the SEC and in any prospectus supplement. We caution you not to place undue
reliance on these forward-looking statements, which speak only as of the date of this prospectus or
any prospectus supplement. We do not intend, and we undertake no obligation, to update any
forward-looking information to reflect events or circumstances after the date of this prospectus or
any prospectus supplement or to reflect the occurrence of unanticipated events, unless required by
law to do so.
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RISK FACTORS
Risks Relating to Our Business and Industry
We may fail to effectively develop and commercialize new products, which would materially and
adversely affect our business, financial condition, results of operations and prospects.
The medical device market is developing rapidly and related technology trends are constantly
evolving. This results in frequent introduction of new products, short product life cycles and
significant price competition. Consequently, our success substantially depends on our ability to
anticipate technology development trends and identify, develop and commercialize in a timely and
cost-effective manner new and advanced products that our customers demand. New products contribute
significantly to our net revenues. We expect the medical device market to continue evolving toward newer
and more advanced products, many of which we do not currently produce. Commercialization of any new
product requires relevant government approval, the timing of which may not be under our control,
and is subject to change from time to time. Moreover, it may take an extended period of time for
our new products to gain market acceptance, if at all. Furthermore, as the life cycle for a product
matures, the average selling price generally decreases. Although we have previously offset the
effects of declining average sales prices with sales volume increases and manufacturing cost
reductions, we may be unable to continue doing so. Lastly, during a products life cycle, problems
may arise regarding regulatory, intellectual property, product liability or other issues which may
affect its continued commercial viability.
Our success in developing and commercializing new products is determined by our ability to:
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accurately assess technology trends and customer needs and meet market demands; |
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optimize our manufacturing and procurement processes to predict and control costs; |
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manufacture and deliver products in a timely manner; |
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increase customer awareness and acceptance of our products; |
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effectively manage our brands; |
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minimize the time and costs required to obtain required regulatory clearances or approvals; |
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anticipate and compete effectively with other medical device developers, manufacturers and
marketers; |
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price our products competitively; and |
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effectively integrate customer feedback into our research and development planning. |
We maintain direct operations in the United States and Europe that is costly and the maintenance of
which could have a material adverse effect on our business.
We maintain direct operations in the United States and Europe and rely on direct sales for a
significant portion of our revenues from these areas. Maintaining a direct sales force is costly.
We typically provide our direct operations personnel with payroll and other benefits that we do not
provide independent distributors. Many of these benefits are fixed costs that do not depend on
revenue generation. Maintaining these direct operations is costly and the maintenance of which
could have a material adverse effect on our business.
Maintaining a direct sales force and independent distribution network in the United States and
Europe could result in potential sales conflicts that would negatively impact our revenue and
results of operations.
Prior to our acquisition of Datascopes patient monitoring device business, we maintained
independent distributor relationships in the United States and Europe. With the addition of a
direct sales force in these areas, we are currently directly selling Datascope-branded products,
Mindray-branded ultrasound systems and DPM-branded patient monitoring devices. This creates the
potential for conflict between our independent distributors and direct sales force. If our
independent distributors and direct sales force compete with each other, our independent
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distributors could reduce their selling prices for our products to make sales. Because we
generate higher revenues from direct sales, this would negatively impact our revenue. Further,
independent existing and potential distributors may decide not to sell our products or cease
selling our products because of this potential conflict. Moreover, sales conflicts could negatively
impact the morale of our direct sales force.
We
depend on distributors for a substantial portion of our revenues and a significant portion of
our revenue growth. Failure to maintain relationships with our distributors would materially and
adversely affect our business.
We
depended on distributors for a substantial portion of our revenues. We typically do not have long-term distribution
agreements. As our existing distribution agreements expire, we may be unable to renew with our
desired distributors on favorable terms or at all. In addition, we seek to limit our dependence on
any single distributor by limiting and periodically redefining the scope of each distributors
territory and the range of our products that it sells, which may make us less attractive to some
distributors. Furthermore, competition for distributors is intense. We compete for distributors
domestically and internationally with other leading medical equipment and device companies that may
have higher visibility, greater name recognition and financial resources, and a broader product
selection than we do. Our competitors also often enter into long-term distribution agreements that
effectively prevent their distributors from selling our products. Consequently, maintaining
relationships with existing distributors and replacing distributors may be difficult and time
consuming. Any disruption of our distribution network, including our failure to renew our existing
distribution agreements with our desired distributors, could negatively affect our ability to
effectively sell our products and would materially and adversely affect our business, financial
condition and results of operations.
We may be unable to effectively structure and manage our distribution network, and our business,
prospects and brand may be materially and adversely affected by actions taken by our distributors.
We have limited ability to manage the activities of our distributors, who are independent from us.
Our distributors could take one or more of the following actions, some of which we have previously
experienced, any of which could have a material adverse effect on our business, prospects and
brand:
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sell products that compete with our products that they have contracted to sell for us; |
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sell our products outside their designated territory, possibly in violation of the
exclusive distribution rights of other distributors; |
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fail to adequately promote our products; or |
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fail to provide proper training, repair and service to our end-users. |
Furthermore, our distributors may focus selling efforts only on those products that provide them
with the largest margins at the expense of products that offer them smaller margins.
Failure to adequately manage our distribution network, or non-compliance by distributors with
our distribution agreements could harm our corporate image among end users of our products and
disrupt our sales, resulting in a failure to meet our sales goals. Furthermore, we could be liable
for actions taken by our distributors, including any violations of applicable law in connection
with the marketing or sale of our products, including Chinas anti-corruption laws and the
U.S. Foreign Corrupt Practices Act, or FCPA. In particular, we may be held liable for actions taken
by our distributors even though almost all of our distributors are non-U.S. companies that are not
subject to the FCPA. Our distributors may violate these laws or otherwise engage in illegal
practices with respect to their sales or marketing of our products. If our distributors violate
these laws, we could be required to pay damages or fines, which could materially and adversely
affect our financial condition and results of operations. In addition, our brand and reputation,
our sales activities or the price of our ADSs could be adversely affected if our company becomes
the target of any negative publicity as a result of actions taken by our distributors.
We may undertake acquisitions, which may have a material adverse effect on our ability to manage
our business, and may end up being unsuccessful.
Our growth strategy may involve acquisitions of new technologies, businesses, products or
services or the
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creation of strategic alliances in areas in which we do not currently operate. Future
acquisitions could require that our management develop expertise in new areas, manage new business
relationships and attract new types of customers. The diversion of our managements attention and
any difficulties encountered in the integration of acquired businesses could have an adverse effect
on the ability to effectively manage our business.
International expansion may be costly, time-consuming and difficult. If we do not successfully
expand internationally, our profitability and prospects would be materially and adversely affected.
Our success significantly depends upon our ability to expand in our existing international
markets and enter into new international markets. In expanding our business internationally, we
have entered and intend to continue to enter markets in which we have limited or no experience and
in which our brand may be less recognized. To further promote our brand and generate demand for our
products so as to attract distributors in international markets, we expect to spend more on
marketing and promotion than we do in our existing markets. We may be unable to attract a
sufficient number of distributors, and our selected distributors may not be suitable for selling
our products. Furthermore, in new markets we may fail to anticipate competitive conditions that are
different from those in our existing markets. These competitive conditions may make it difficult or
impossible for us to effectively operate in these markets. If our expansion efforts in existing and
new markets are unsuccessful, our profitability and prospects would be materially and adversely
affected.
We are exposed to other risks associated with international operations, including:
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political instability; |
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economic instability and recessions; |
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changes in tariffs; |
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difficulties of administering foreign operations generally; |
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limited protection for intellectual property rights; |
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obligations to comply with a wide variety of foreign laws and other regulatory requirements; |
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increased risk of exposure to terrorist activities; |
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financial condition, expertise and performance of our international distributors; |
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export license requirements; |
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unauthorized re-export of our products; |
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potentially adverse tax consequences; and |
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inability to effectively enforce contractual or legal rights. |
Consolidation of our customer base and the formation of group purchasing organizations could
adversely affect our revenues.
In recent years, consolidation among health care providers and the formation of purchasing groups
has imposed pricing pressures. Our success in areas of health care provider consolidation and where
purchasing organizations have been formed depends partly on our ability to enter into contracts
with group purchasing organizations and integrated health networks. If we are unable to enter into
contracts with group purchasing organizations and integrated health networks on satisfactory terms
or at all, our revenues would be adversely affected.
We depend on our key personnel, and our business and growth may be severely disrupted if we lose
their services.
Our success significantly depends upon the continued service of our key executives and other key
employees. In particular, we are highly dependent on our co-chief executive officers, Mr. Xu Hang
and Mr. Li Xiting, to manage our business and operations, and on our other key senior management
for the operation of our business. If we lose
the services of any key senior management, we may not be able to locate suitable or qualified
replacements, and may incur additional expenses to recruit and train new personnel, which could
severely disrupt our business and growth. Furthermore, as we expect to continue to expand our
operations and develop new products, we will need to continue attracting and retaining experienced
management, key research and development personnel, and salespeople.
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Competition for personnel in the medical technology field is intense, and the availability of
suitable and qualified candidates in China, particularly Shenzhen, is limited. We compete to
attract and retain qualified research and development personnel with other medical device
companies, universities and research institutions. Competition for these individuals could cause us
to offer higher compensation and other benefits in order to attract and retain them, which could
materially and adversely affect our financial condition and results of operations. We previously
awarded share-based compensation in connection with our initial public offering, some of which is
still subject to vesting. We additionally awarded one-time retention bonuses in connection with our
acquisition of Datascopes patient monitoring device business, which will be paid out subject to
certain minimum employment conditions. Such retention awards may cease to be effective to retain
our current employees once the shares are vested and bonus amounts are paid out. We may need to
increase our total compensation costs to attract and retain experienced personnel required to
achieve our business objectives and failure to do so could severely disrupt our business and
growth.
Our business is subject to intense competition, which may reduce demand for our products and
materially and adversely affect our business, financial condition, results of operations and
prospects.
The medical device market is highly competitive, and we expect competition to intensify. In
particular, competition in the government tender arena has continued to intensify in recent years,
creating significant pricing pressure. We face direct competition in China, the U.S. and globally
across all product lines and price points. Our competitors also vary significantly according to
business segments. Our competitors include publicly traded and privately held multinational
companies, as well as local companies in the markets where we sell our products. We face
competition from companies that have local operations in the markets in which we sell our products
who may have lower cost structures, domestic support, or local protect through tariff and
non-tariff barriers. In the U.S., where we compete with a direct sales force and services team, we
face competition from companies that have or may have:
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greater financial and other resources; |
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larger variety of products; |
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more products that have received regulatory approvals; |
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greater pricing flexibility; |
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more extensive research and development and technical capabilities; |
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patent portfolios that may present an obstacle to our conduct of business; |
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greater knowledge of local market conditions where we seek to increase
our international sales; |
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capability to offer vendor financing or leasing arrangements; |
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stronger brand recognition; and |
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larger sales and distribution networks. |
As a result, we may be unable to offer products similar to, or more desirable than, those
offered by our competitors, market our products as effectively as our competitors or otherwise
respond successfully to competitive pressures. In addition, our competitors may be able to offer
discounts on competing products as part of a bundle of non-competing products, systems and
services that they sell to our customers, and we may not be able to profitably match those
discounts. Furthermore, our competitors may develop technologies and products that are more
effective than those we currently offer or that render our products obsolete or uncompetitive. In
addition, the timing of the introduction of competing products into the market could affect the
market acceptance and market share of our products. Our failure to compete successfully could
materially and adversely affect our business, financial condition, results of operation and
prospects.
8
Moreover, some of our competitors based outside China have established or are in the process
of establishing production and research and development facilities in China, while others have
entered into cooperative business arrangements with Chinese manufacturers. If we are unable to
develop competitive products, obtain regulatory approval or clearance and supply sufficient
quantities to the market as quickly and effectively as our competitors, market acceptance of our
products may be limited, which could result in decreased sales. In addition, we may not be able to
maintain our manufacturing cost advantage. In other emerging markets, we have also seen larger
competitors setting up sizable local businesses or acquiring local competitors or distributors,
which allow them to be more competitive in their pricing and distribution infrastructure.
In addition, we believe that corrupt practices in the medical device industry in China and
certain emerging markets still occur. To increase sales, certain manufacturers or distributors of
medical devices may pay kickbacks or provide other benefits to hospital personnel who make
procurement decisions. Our company policy prohibits these practices by our direct sales personnel
and our distribution agreements require our distributors to comply with applicable law. As a
result, as competition intensifies in the medical device industry in these markets, we may lose
sales, customers or contracts to competitors.
If we fail to accurately project demand for our products, we may encounter problems of inadequate
supply or oversupply, especially with respect to our international markets, which would materially
and adversely affect our financial condition and results of operations, as well as damage our
reputation and brand.
Our distributors typically order our products on a purchase order basis. We project demand for
our products based on rolling projections from our distributors, our understanding of anticipated
hospital procurement spending, and distributor inventory levels. Lack of significant order backlog
and the varying sales and purchasing cycles of our distributors and other customers, however, make
it difficult for us to forecast future demand accurately.
Our projections of market demand for our products in countries where we lack a direct sales
force are generally less reliable than in countries where we do have a direct sales force because
we have less information available on which to base our projections. Specifically, we do not have
consistently reliable information regarding international distributor inventory levels in these
markets, and we sometimes lack extensive knowledge of local market conditions or about distributor
purchasing patterns, preferences, or cycles. Furthermore, because shipping finished products to
international distributors typically takes longer than shipping to domestic distributors,
inaccurate demand projections can result more quickly in unmet demand. We additionally may have
unpredictably large tender sales orders for which we may have insufficient inventory to fill along
with the additional orders in our pipeline.
If we overestimate demand, we may purchase more raw materials or components than required. If
we underestimate demand, our third party suppliers may have inadequate raw material or product
component inventories, which could interrupt our manufacturing and delay shipments, and could
result in lost sales. In particular, we are seeking to manage our procurement and inventory costs
by matching our inventories closely with our projected manufacturing needs and by, from time to
time, deferring our purchase of raw materials and components in anticipation of supplier price
reductions. As we seek to balance reduced inventory costs and production flexibility, we may fail
to accurately forecast demand and coordinate our procurement and production to meet demand on a
timely basis. Our underestimation of demand in early 2009, coupled with our decision to defer our
purchase of new raw materials and components in anticipation of a reduction in pricing for certain
raw materials and components at the beginning of a new calendar year, resulted in up to three-week
delays in our product deliveries internationally. Our inability to accurately predict our demand
and to timely meet our demand could materially and adversely affect our financial conditions and
results of operations as well as damage our reputation and corporate brand.
We currently principally rely on three manufacturing, assembly and storage
facilities for our products and are developing two additional facilities. Any disruption to our
current manufacturing facilities or in the development of these new facilities could reduce or
restrict our sales and harm our reputation.
9
We manufacture, assemble and store a substantial majority of our products, as well as conduct
some of our research and development activities at our two facilities located in Shenzhen, China.
We also manufacture, assemble and store a significant number of products at our Mahwah, New Jersey
facility. We conduct some of our primary research and development activities at our headquarters.
We do not maintain other back-up facilities, so we depend on these facilities for the continued
operation of our business. A natural disaster or other unanticipated catastrophic events, including
power interruptions, water shortage, storms, fires, earthquakes, terrorist attacks and wars, could
significantly impair our ability to manufacture our products and operate our business, as well as
delay our research and development activities. Our facilities and certain equipment located in
these facilities would be difficult to replace and could require substantial replacement lead-time.
Catastrophic events may also destroy any inventory located in our facilities. The occurrence of
such an event could materially and adversely affect our business.
We are developing a new research and development center adjacent to our headquarters in
Shenzhen. We may experience difficulties that disrupt our manufacturing activities, management and
administration, or research and development as we migrate to this facility. Moreover, we may not
realize its anticipated benefits. Any of these factors could reduce or restrict our sales and harm
our reputation and have a material adverse effect on our business, financial condition, results of
operations and prospects.
If we are unable to obtain adequate supplies of required materials and components that meet our
production standards at acceptable costs or at all, our ability to accept and fulfill product
orders with the required quality and at the required time could be restricted, which could
materially and adversely affect our business, financial condition and results of operations.
We purchase raw materials and components from third party suppliers and manufacture and assemble
our products at our facility. Our purchases are generally made on a purchase order basis and we do
not have long-term supply contracts. As a result, our suppliers may cease to provide components to
us with little or no advance notice. In addition, to optimize our cost structure, we rely on single
source suppliers to provide approximately 36% by value of our raw materials and components,
primarily for proprietary integrated circuits for products across our business segments. No single
source supplier accounted for more than 5% of our total supply purchases in 2009. Interruptions
in certain material or component supplies could delay our manufacturing and assembly processes. We
also may be unable to secure alternative supply sources in a timely and cost-effective manner. If
we are unable to obtain adequate supplies of required materials and components that meet our
production standards at acceptable costs or at all, our ability to accept and fulfill product
orders with the required quality, and at the required time could be restricted. This could harm our
reputation, reduce our sales or gross margins, and cause us to lose market share, each of which
could materially and adversely affect our business, financial condition and results of operations.
Failure to successfully manage our growth could strain our management, operational and other
resources, which could materially and adversely affect our business and prospects.
Our growth strategy includes building our brand, increasing market penetration of our existing
products, developing new products, increasing our targeting of large-sized hospitals in China, and
increasing our exports. Pursuing these strategies has resulted in, and will continue to result in
substantial demands on management resources. In particular, the management of our growth will
require, among other things:
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continued enhancement of our research and development capabilities; |
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hiring and training of new personnel; |
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information technology system enhancement; |
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stringent cost controls and sufficient liquidity; |
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strengthening of financial and management controls and information
technology systems; and |
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increased marketing, sales and sales support activities. |
If we are unable to successfully manage our growth, our business and prospects would be
materially and adversely affected.
We may need additional capital, and we may be unable to obtain such capital in a timely manner or
on acceptable terms, or at all.
10
For us to grow, remain competitive, develop new products, and expand our distribution network,
we may require additional capital. Our ability to obtain additional capital is subject to a variety
of uncertainties, including:
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our future financial condition, results of operations and cash flows; |
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general market conditions for capital raising activities by medical
device and related companies; and |
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economic, political and other conditions in China and internationally. |
We may be unable to obtain additional capital in a timely manner or on acceptable terms or at
all. Furthermore, the terms and amount of any additional capital raised through issuances of equity
securities may result in significant shareholder dilution.
The
global economic downturn adversely affected, and could
continue adversely affecting, our business and could materially affect our, financial condition and
results of operations.
We
experienced a global economic downturn affecting all areas of business,
including health care. Disruptions in orderly financial markets resulting from, among other
factors, diminished liquidity and credit availability plus volatile valuations of securities and
other investments caused business and consumer confidence to ebb, business activities to slow
down, and unemployment to increase.
We
are unable to predict global economic conditions. The economic downturn
adversely affected and could continue adversely affecting our business in several ways, including:
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Reduced demand for our products. Customers may adopt a
strategy of deferring purchases to upgrade existing
equipment or deploy new equipment until later periods
when visibility of their cash flows becomes more
assured. In addition, customers who must finance their
capital expenditures through various forms of debt may
find financing unavailable to them. |
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Increased pricing pressure and lower margins. Our
competitors include several global enterprises with
relatively greater size in terms of revenues, working
capital, financial resources and number of employees,
and some of our end-users are healthcare service
providers who are typically owned, controlled, or
sponsored by governments. Competition for available
sales may become more intense, which could require us to
offer or accept pricing, payment, or local content terms
which are less favorable to remain competitive. In some
cases we might be unwilling or unable to compete for
business where competitive pressures make a potential
opportunity unprofitable to us. |
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Greater difficulty in collecting accounts
receivable. Many of our end-users are either owned or
controlled by governments; any changes in such
governments policies concerning the authorization or
funding of payments for capital expenditures could
lengthen the cash collection cycle of our distributors,
which may thereby cause our liquidity to deteriorate if
our distributors are unable to pay us on time.
Additionally, sales made to our distributors or other
customers whose financial resources may be subject to
rapid decline, has exposed and could continue to expose
us to losing sales, delaying revenue recognition or
accepting greater collection risks due to credit quality
issues. |
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Greater difficulty in obtaining supplies, components and
related services. Some suppliers or vendors could
choose to provide supplies or services to us on more
stringent payment terms than those currently in place,
such as by requiring advance payment or payment upon
delivery of such supplies or services. Additionally,
some suppliers might experience a worsening financial
condition causing them to either withdraw from the
market or be unable to meet our expected timing for the
receipt of goods ordered from them, either of which
condition could adversely affect our ability to serve
our customers and lengthen the cycle time for
transforming customer orders into cash receipts.
Additionally, if it is necessary to seek alternative
sources of supply, the effects on our costs, cycle time
for cash collections, and customer satisfaction with us
are uncertain. |
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Additional restructuring and impairment charges. If we
are unable to generate the level of revenues, profits,
and cash flow contemplated by our business plan,
management may be forced to take further action to focus
our business activities and align our cost structure
with anticipated revenues. These actions, if necessary
could result in additional restructuring charges and/or
asset impairment charges being recognized in 2010 and
beyond. |
The
economic downturn has been particularly focused on the U.S. and
Europe, which we believe has affected medical product purchasing in
these regions. The economic downturn could continue adversely affecting our business and could materially affect our
financial condition and results of operations.
We depend on information technology, or IT, to support our business operations, the failure of
which would materially and adversely affect our business, results of operations and prospects.
We are currently in the process of implementing an SAP ERP system to replace the existing
system of our U.S. and European operations. When we acquired the patient monitoring device
business of Datascope, it shared many hardware and software resources with the business of
Datascope that we did not acquire and was subsequently acquired by another company. This shared
architecture significantly complicates the task of migrating hardware and software to a standalone
IT system. The migration may lead to unforeseen complications and expenses, and our failure to
efficiently migrate the IT system could substantially disrupt our business. Once the
migration is complete, we intend to build a single, globally integrated IT infrastructure
consistent across our China, U.S. and European operations. This integration is complicated by broad
geographies, differing languages and business models between historic Mindray and our acquired
operations. Our failure to successfully integrate our IT systems across our China, U.S. and
European operations could result in substantial costs and diversion of resources and management
attention, which could harm our business and competitive position.
The lessors of some of our leased properties may have lacked authority to enter into the
leases. If we are forced to vacate these premises, it could materially disrupt our operations.
Shenzhen Mindray and Nanjing Mindray lease some real properties
for manufacturing purposes. The lessors failed to provide us with the ownership certificates for the leased properties. If the lessors entering into the
lease agreements with Shenzhen Mindray and Nanjing Mindray are not the de facto owners of the leased properties and lacked the authority to enter
into these lease agreements, the validity of these lease agreements
may be contested and we may be forced to vacate these premises, which could materially
disrupt our operations.
If
we fail to protect our intellectual property rights, it could harm our business and competitive
position.
We rely on a combination of patent, copyright, trademark and trade secret laws and
non-disclosure agreements and other methods to protect our intellectual property rights. We have
patents and patent applications pending in China covering various products and aspects of our
products. We have patents and have also filed patent applications in the U.S. and Europe, which
cover some of the more commercially significant aspects of our products and technologies.
Due to the different regulatory bodies and varying requirements in the U.S., China and
elsewhere, we may be unable to obtain patent protection for certain aspects of our products or
technologies in either or both of these countries. The process of seeking patent protection can be
lengthy and expensive, our patent applications may fail to result in patents being issued, and our
existing and future patents may be insufficient to provide us with meaningful protection or
commercial advantage. Our patents and patent applications may also be challenged, invalidated or
circumvented.
We also rely on trade secret rights to protect our business through non-disclosure provisions
in employment agreements with employees. If our China-based employees breach their non-disclosure
obligations, we may not have adequate remedies in China, and our trade secrets may become known to
our competitors.
Implementation of PRC intellectual property-related laws has historically been lacking,
primarily because of ambiguities in the PRC laws and enforcement difficulties. Accordingly,
intellectual property rights and confidentiality protections in China may not be as effective as in
the United States or other western countries. Furthermore, policing unauthorized use of proprietary
technology is difficult and expensive, and we may need to resort to litigation to enforce or defend
patents issued to us or to determine the enforceability, scope and validity of our proprietary
rights or those of others. Such litigation and an adverse determination in any such litigation, if
any, could result in substantial costs and diversion of resources and management attention, which
could harm our business and competitive position.
We may be exposed to intellectual property infringement and other claims by third parties which, if
successful, could disrupt our business and have a material adverse effect on our financial
condition and results of operations.
Our success depends, in large part, on our ability to use and develop our technology and
know-how without
12
infringing third party intellectual property rights. We periodically receive written
correspondence regarding alleged intellectual property or other
claims by third parties. As we
increase our product sales internationally, and as litigation becomes more common in China, we face
a higher risk of being the subject of claims for intellectual property infringement, invalidity or
indemnification relating to other parties proprietary rights. Our current or potential
competitors, many of which have substantial resources and have made substantial investments in
competing technologies, may have or may obtain patents that will prevent, limit or interfere with
our ability to make, use or sell our products in China, the U.S. or Europe. The validity and scope
of claims relating to medical device technology patents involve complex scientific, legal and
factual questions and analysis and, as a result, may be highly uncertain. In addition, the defense
of intellectual property suits, including patent infringement suits, and related legal and
administrative proceedings can be both costly and time consuming and may significantly divert the
efforts and resources of our technical and management personnel. Furthermore, an adverse
determination in any such litigation or proceedings to which we may become a party could cause us
to:
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pay damage awards; |
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seek licenses from third parties; |
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pay ongoing royalties; |
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redesign our products; or |
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be restricted by injunctions, |
each of which could effectively prevent us from pursuing some or all of our business and result in
our customers or potential customers deferring or limiting their purchase or use of our products,
which could have a material adverse effect on our financial condition and results of operations.
Unauthorized use of our brand names by third parties, and the expenses incurred in developing and
preserving the value of our brand name, may adversely affect our business.
We regard our brand names as critical to our success. Unauthorized use of our brand names by
third parties may adversely affect our business and reputation, including the perceived quality and
reliability of our products. We rely on trademark law, company brand name protection policies, and
agreements with our employees, customers, business partners and others to protect the value of our
brand names. Despite our precautions, we may be unable to prevent third parties from using our
brand names without authorization. In the past, we have experienced unauthorized use of our brand
names in China and have expended resources and the attention and time of our management to
successfully prosecute those who used our brand names without authorization. Moreover, litigation
may be necessary to protect our brand names. However, because the validity, enforceability and
scope of protection of trademarks in the PRC are uncertain and still evolving, we may not be
successful in prosecuting these cases. Future litigation could also result in substantial costs and
diversion of our resources, and could disrupt our business, as well as have a material adverse
effect on our financial condition and results of operations. In addition, we are in the process of
registering our brand names and logos as trademarks in countries outside of China. Our registration
applications may not be successful in certain countries, which could weaken the protection of our
brand names in those countries or may require that we market our products under different names in
those countries.
If we fail to obtain or maintain applicable regulatory clearances or approvals for our products, or
if such clearances or approvals are delayed, we will be unable to commercially distribute and
market our products at all or in a timely manner, which could significantly disrupt our business
and materially and adversely affect our sales and profitability.
The sale and marketing of the medical device products we offer in China are subject to
regulation in China and in most other countries where we conduct business. For a significant
portion of our sales, we need to obtain and renew licenses and registrations with the PRC State
Food and Drug Administration, or SFDA, the United States FDA, and the European regulators
administering CE marks in the European Union. The processes for obtaining regulatory clearances or
approvals can be lengthy and expensive, and the results are unpredictable. In addition, the
relevant regulatory authorities may introduce additional requirements or procedures that have the
effect of delaying or prolonging the regulatory clearance or approval for our existing or new
products. For example, personnel and policy changes at SFDA has slowed the approval process and
delayed some of our planned product launches in 2008. If we are unable to obtain clearances or
approvals needed to market existing or new products, or obtain such clearances or approvals in a
timely fashion, our business would be significantly disrupted, and
our sales and profitability could be materially and adversely affected.
13
We are subject to product liability exposure and have limited insurance coverage. Any product
liability claims or potential safety-related regulatory actions could damage our reputation and
materially and adversely affect our business, financial condition and results of operations.
Our main products are medical devices used in the diagnosis and monitoring of patients,
exposing us to potential product liability claims if their use causes or results in, or is alleged
to have caused or resulted in, in each case either directly or indirectly, personal injuries or
other adverse effects. Any product liability claim or regulatory action could be costly and
time-consuming to defend. If successful, product liability claims may require us to pay substantial
damages. We maintain limited product liability insurance to cover potential product liability
arising from the use of our products. As a result, future liability claims could be excluded or
could exceed the coverage limits of our policy. As we expand our sales internationally and increase
our exposure to these risks in many countries, we may be unable to maintain sufficient product
liability insurance coverage on commercially reasonable terms, or at all. A product liability claim
or potential safety-related regulatory action, with or without merit, could result in significant
negative publicity and materially and adversely affect the marketability of our products and our
reputation, as well as our business, financial condition and results of operations.
Moreover, a material design, manufacturing or quality failure or defect in our products, other
safety issues or heightened regulatory scrutiny could each warrant a product recall by us and
result in increased product liability claims. If authorities in the countries where we sell our
products decide that these products failed to conform to applicable quality and safety
requirements, we could be subject to regulatory action. In China, violation of PRC product quality
and safety requirements may subject us to confiscation of related earnings, penalties, an order to
cease sales of the violating product or to cease operations pending rectification. Furthermore, if
the violation is determined to be serious, our business license to manufacture or sell violating
and other products could be suspended or revoked.
Our quarterly revenues and operating results are difficult to predict and could fall below investor
expectations, which could cause the trading price of our ADSs to decline.
Our quarterly revenues and operating results have fluctuated in the past and may continue to
fluctuate significantly depending upon numerous factors. In particular, the first and third
quarters of each year historically have lower, and the fourth quarter historically has higher,
revenues and operating results than the other quarters of the year. We believe that our weaker
first quarter performance has been largely due to the Chinese Lunar New Year holiday and that our
weaker third quarter performance has largely been due to summer holidays. We believe our stronger
fourth quarter performance has been largely due to our customers spending their remaining annual
budget amounts. Other factors that may affect our quarterly results include:
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global economic conditions; |
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our ability to attract and retain distributors and key customers; |
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changes in pricing policies by us or our competitors; |
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variations in customer purchasing cycles; |
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our sales and delivery cycle length; |
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the timing and market acceptance of new product introductions by us or our competitors; |
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our ability to expand into and further penetrate international markets; |
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the timing of receipt of government incentives; |
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inventory value readjustments due to yearend supplier pricing renegotiation; |
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changes in the industry operating environment; and |
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changes in government policies or regulations, including new product approval
procedures, or their enforcement. |
14
Many of these factors are beyond our control, making our quarterly results difficult to
predict, which could cause the trading price of our ADSs to decline below investor expectations.
You should not rely on our results of operations for prior quarters as an indication of our future
results.
Fluctuations in exchange rates could result in foreign currency exchange losses.
As of December 31, 2009, our cash and cash equivalents were denominated in Renminbi,
U.S. dollars, euros and the British pound. In 2007, we began requiring
payment in euros from
customers located in jurisdictions where the euro is the official currency. As a result,
fluctuations in exchange rates between the Renminbi, the U.S. dollar, the euro and the pound affect
our relative purchasing power, revenue, expenses and earnings per share in U.S. dollars. In
addition, appreciation or depreciation in the value of the Renminbi, euro and the pound relative to
the U.S. dollar could affect our financial results prepared and reported in U.S. dollar terms
without giving effect to any underlying change in our business, financial condition or results of
operations. The Renminbi is pegged against a basket of currencies, determined by the Peoples Bank
of China, against which it can rise or fall by as much as 0.5% each day. The Renminbi may
appreciate or depreciate significantly in value against the U.S. dollar, the euro or the pound in
the long term, depending on the fluctuation of the basket of currencies against which it is
currently valued, or it may be permitted to enter into a full float, which may also result in a
significant appreciation or depreciation of the Renminbi against the U.S. dollar, the euro or the
pound. Fluctuations in exchange rates will also affect the relative value of any dividends we
issue, which will be exchanged into U.S. dollars and earnings from and the value of any
U.S. dollar-denominated investments we make. Appreciation of the Renminbi relative to other foreign
currencies could decrease the per unit revenues generated from international sales. If we increased
our international pricing to compensate for the reduced purchasing power of foreign currencies, we
would decrease the market competitiveness, on a price basis, of our products. This could result in
a decrease in our international sales volumes. Very limited hedging instruments are available in
China to reduce our exposure to Renminbi exchange rate fluctuations. While we may decide to enter
into Renminbi hedging transactions, the effectiveness of these hedges may be limited and we may not
be able to successfully hedge our exposure at all. In addition, PRC exchange control regulations
that restrict our ability to convert Renminbi into foreign currencies could magnify our currency
exchange risks. While we may enter into hedging transactions in an effort to reduce our exposure to
other foreign currency exchange risks, the effectiveness of these hedges may be limited and we may
not be able to successfully hedge our exposure at all.
Our revenues and profitability could be materially and adversely affected if there is a disruption
in our existing arrangements with our original design manufacturing and original equipment
manufacturing customers.
In
2008 and 2009, ODM and OEM customers together accounted for 1.1%
and 0.9%, respectively,
of our net revenues. We have invested significant time and resources in cultivating these
relationships. In particular, we are typically required to undergo lengthy product approval
processes with these customers, which in some cases can take more than one year. The length of the
approval process may vary and is affected by a number of factors, including customer priorities,
customer budgets and regulatory issues. Delays in the product approval process could materially and
adversely affect our business, financial condition and results of operations. Moreover, our ODM and
OEM customers may develop their own solutions or adopt a competitors solution for products that
they currently purchase from us. We may be unable to maintain our existing arrangements with our
ODM and OEM customers. In particular, any failure in generating orders from these customers or
decrease in sales to these customers, as well as any adoption by these customers of their own or
our competitors product solutions, could have a material adverse effect on our revenues and
profitability.
If we experience a significant number of warranty claims, our costs could substantially
increase and our reputation and brand could suffer.
We typically sell our products against technical defects with warranty terms covering 12 to
24 months after purchase. Our product warranty requires us to repair all mechanical malfunctions
and, if necessary, replace defective components. We accrue liability for potential warranty claims
at the time of sale. If we experience an increase in warranty claims or if our repair and
replacement costs associated with warranty claims increase significantly, we may have to accrue a
greater liability for potential warranty claims. Moreover, an increase in the frequency of warranty
claims could substantially increase our costs and harm our reputation and brand. Our business,
financial condition, results of operations and prospects may suffer materially if we experience a
significant increase in warranty claims on our products.
Our corporate actions are substantially controlled by our principal shareholders. Our dual-class ordinary share
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structure with different voting rights could discourage others from pursuing any change of
control transactions that our shareholders may view as beneficial.
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares.
Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B
ordinary shares are entitled to five votes per share.
As
of January 29, 2010, three of our shareholders and their affiliated entities
owned approximately 27.5% of our outstanding ordinary shares,
representing approximately 65.1%
of our voting power due to our dual-class ordinary share structure. Our co-chief executive
officers, Mr. Xu Hang and Mr. Li Xiting, and our executive vice president of strategic development,
Mr. Cheng Minghe, through their respective affiliates, hold all of our Class B ordinary shares.
These shareholders will continue to exert control over all matters subject to shareholder vote
until they collectively own less than 20% of our outstanding ordinary shares. This concentration of
voting power may discourage, delay or prevent a change in control or other business combination,
which could deprive you of an opportunity to receive a premium for your ADSs as part of a sale of
our company and might reduce the trading price of our ADSs. The interests of Mr. Xu, Mr. Li, and
Mr. Cheng as officers and employees of our company may differ from their interests as shareholders
of our company or from your interests as a shareholder.
Anti-takeover provisions in our charter documents may discourage our acquisition by a third party,
which could limit our shareholders opportunity to sell their shares, including Class A ordinary
shares represented by our ADSs, at a premium.
Our amended and restated memorandum and articles of association include provisions that could
limit the ability of others to acquire control of us, modify our structure or cause us to engage in
change of control transactions. These provisions could have the effect of depriving our
shareholders of an opportunity to sell their shares, including Class A ordinary shares represented
by ADSs, at a premium over prevailing market prices by discouraging third parties from seeking to
obtain control of us in a tender offer or similar transaction.
For example, our board of directors has the authority, without further action by our
shareholders, to issue preferred shares in one or more series and to fix the powers and rights of
these shares, including dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than the rights associated with our
Class A ordinary shares. Preferred shares could be issued quickly with terms calculated to delay or
prevent a change in control or make removal of management more difficult. In addition, if our board
of directors authorizes the issuance of preferred shares, the trading price of our ADSs may fall
and the voting and other rights of the holders of our Class A ordinary shares may be materially and
adversely affected.
Certain
actions require the approval of at least two-thirds of our board of
directors present at the relevant board meeting which,
among other things, would allow our non-independent directors to block a variety of actions or
transactions, such as a merger, asset sale or other change of control, even if our independent
directors unanimously voted in favor of such action, thereby further depriving our shareholders of
an opportunity to sell their shares at a premium. In addition, our directors serve staggered terms
of three years each, which means that shareholders can elect or remove only a limited number of our
directors in any given year. The length of these terms could present an additional obstacle against
the taking of action, such as a merger or other change of control, which could be in the interest
of our shareholders.
We may become a passive foreign investment company, or PFIC, which could result in
adverse U.S. federal income tax consequences to U.S. holders.
Depending upon the value of our ordinary shares and ADSs and the nature of our assets and income
over time, we could be classified as a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes.
We will be
classified as a PFIC in any taxable year if either: (1) at least
50% of the value of our assets, based on an average of the quarterly
values of the assets during a taxable year, is attributable to assets
that produce passive income or are held for the production
of passive income or (2) at least 75% of our
gross income for the taxable year is passive income. According to these technical rules, we would
likely become a PFIC if the value of our outstanding ordinary shares and ADSs were to decrease
significantly while we hold substantial cash and cash equivalents.
16
We believe we were not a PFIC for U.S. federal income tax purposes for our taxable year ended
December 31, 2009. Although we intend to conduct our business activities in a manner to reduce the
risk of our classification as a PFIC in the future, we currently hold, and expect to continue to
hold, a substantial amount of cash and other passive
assets, and, because the value of our assets is likely to be determined in large part by reference
to the market prices of our ADSs and ordinary shares, which are likely to fluctuate, there can no
assurance that we will not be classified as a PFIC for 2010 or any future taxable year. If we are a
PFIC for any taxable year during which a U.S. investor holds our ADSs or ordinary shares, certain
adverse U.S. federal income tax consequences would apply to the U.S. investor.
We may be unable to ensure compliance with United States economic sanctions laws, especially when
we sell our products to distributors over which we have limited control.
The U.S. Department of the Treasurys Office of Foreign Assets Control, or OFAC, administers
certain laws and regulations that impose penalties upon U.S. persons and, in some instances,
foreign entities owned or controlled by U.S. persons, for conducting activities or transacting
business with certain countries, governments, entities or individuals subject to U.S. economic
sanctions, or U.S. Economic Sanctions Laws. We will not use any proceeds, directly or indirectly,
from sales of our ADSs, to fund any activities or business with any country, government, entity or
individual with respect to which U.S. persons or, as appropriate, foreign entities owned or
controlled by U.S. persons, are prohibited by U.S. Economic Sanctions Laws from conducting such
activities or transacting such business. However, we sell our products in international markets
through independent non-U.S. distributors which are responsible for interacting with the end-users
of our products. Some of these independent non-U.S. distributors are located in or conduct business
with countries subject to U.S. economic sanctions such as Cuba, Sudan, Iran, Syria and Myanmar, and
we may not be able to ensure that such non-U.S. distributors comply with any applicable U.S.
Economic Sanctions Laws.
Moreover, if a U.S. distributor or one of our United States subsidiaries, Mindray USA Corp. or
Mindray DS USA Inc., conducts activities or transacts business with a country, government, entity
or individual subject to U.S. economic sanctions, such actions may violate U.S. Economic Sanctions
Laws. As a result of the foregoing, actions could be taken against us that could materially and
adversely affect our reputation and have a material and adverse effect on our business, financial
condition, results of operations and prospects.
We may be unable to maintain an effective system of internal control over financial reporting, and
as a result we may be unable to accurately report our financial results or prevent fraud.
We are subject to provisions of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act,
or Section 404, requires that we include a report from management on our internal control over
financial reporting in our annual reports on Form 20-F. In addition, our independent registered
public accounting firm must attest to and report on the operating effectiveness of our internal
control over financial reporting. While our management concluded that our internal control over
financial reporting is effective as of December 31, 2008, and our independent registered public
accounting firm reported on our internal controls over financial reporting, our management may
conclude in the future that our internal controls are not effective. Our or our independent public
accounting firms failure to conclude that our internal control over financial reporting is
effective could result in a loss of investor confidence in the reliability of our reporting
processes, which could materially and adversely affect the trading price of our ADSs.
Our reporting obligations as a public company will continue to place a significant strain on
our management, operational and financial resources and systems for the foreseeable future. Our
failure to maintain effective internal control over financial reporting could result in the loss of
investor confidence in the reliability of our financial reporting processes, which in turn could
harm our business and negatively impact the trading price of our ADSs.
Risks Related To Doing Business In China
Changes in Chinas economic, political and social condition could adversely affect our financial
condition and results of operations.
We
conduct a much of our business operations in China and derived over 45%
of our 2009 revenues from sales in China. Accordingly, our business, financial condition, results
of operations and prospects are affected to a significant degree by economic, political and social
conditions in China. The PRC economy differs from the economies of most developed countries in many
respects, including the amount of government involvement, level of development, growth rate,
control of foreign exchange and allocation of resources. The PRC government has implemented various
measures to encourage, but also to control, economic growth and guide the allocation of resources.
Some of these measures benefit the overall PRC economy, but may also have a negative
effect on us.
For example, our financial condition and results of operations may be adversely affected by changes
in
tax regulations applicable to us.
17
The PRC legal system embodies uncertainties that could limit the legal protections available to you
and us.
The PRC legal system is a civil law system based on written statutes. Unlike common law
systems, it is a system in which decided legal cases have limited precedential value. In 1979, the
PRC government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. The overall effect of legislation over the past three decades has
significantly increased the protections afforded to various forms of foreign investment in China.
Our PRC operating subsidiaries, Shenzhen Mindray and Nanjiang
Mindray, are foreign-invested enterprises and are subject to
laws and regulations applicable to foreign investment in China as well as laws and regulations
applicable to foreign-invested enterprises. These laws and regulations change frequently, and their
interpretation and enforcement involve uncertainties. For example, we may have to resort to
administrative and court proceedings to enforce the legal protections that we enjoy either by law
or contract. However, since PRC administrative and court authorities have significant discretion in
interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate
the outcome of administrative and court proceedings and the level of legal protection we enjoy than
in more developed legal systems. These uncertainties may also impede our ability to enforce the
contracts we have entered into. As a result, these uncertainties could materially and adversely
affect our business and operations.
Recent PRC regulations relating to offshore investment activities by PRC residents may increase the
administrative burden we face and create regulatory uncertainties that could restrict our overseas
and cross-border investment activity, and a failure by our shareholders who are PRC residents to
make any required applications and filings pursuant to such regulations may prevent us from being
able to distribute profits and could expose us and our PRC resident shareholders to liability under
PRC law.
In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, promulgated
regulations that require PRC residents and PRC corporate entities to register with and obtain
approvals from relevant PRC government authorities in connection with their direct or indirect
offshore investment activities. These regulations apply to our shareholders who are PRC residents
in connection with our prior and any future offshore acquisitions.
The SAFE regulation required registration by March 31, 2006 of direct or indirect investments
previously made by PRC residents in offshore companies prior to the implementation of the Notice on
Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment
Activities of Domestic Residents Conducted via Offshore Special Purpose Companies on November 1,
2005. In addition, the SAFE regulation required subsequent change
registration for any change of shareholder structure of offshore
companies held by PRC residents. If a PRC shareholder with a direct or indirect stake in an offshore parent company fails to
make the required SAFE registration, including the change
registration, the PRC subsidiaries of such offshore parent company may be
prohibited from making distributions of profit to the offshore parent and from paying the offshore
parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC
subsidiaries. Furthermore, failure to comply with the various SAFE registration requirements
described above could result in liability under PRC law for foreign exchange evasion.
We previously notified and urged our shareholders, and the shareholders of the offshore
entities in our corporate group, who are PRC residents to make the necessary applications and
filings, including the change registration, as required under this
regulation for our initial public offering in September
2006 and our secondary
offering in February 2007. However, as these regulations are relatively new and
there is uncertainty concerning their reconciliation with other approval requirements, it is
unclear how they, and any future legislation concerning offshore or cross-border transactions, will
be interpreted, amended and implemented by the relevant government authorities. While we believe
that these shareholders submitted applications with local SAFE offices, some of our shareholders
may not comply with our request to make or obtain any applicable registrations or approvals
required by the regulation or other related legislation. The failure or inability of our PRC
resident shareholders to obtain any required approvals or make any required registrations may
subject us to fines and legal sanctions, prevent us from being able to make distributions or pay
dividends, as a result of which our business operations and our ability to distribute profits to
you could be materially and adversely affected.
We rely principally on dividends and other distributions on equity paid by our operating subsidiary
to fund cash and financing requirements, and limitations on the ability of our operating subsidiary
to pay dividends to us could have a material adverse effect on our ability to conduct our business.
We are a holding company, and we rely principally on dividends and other distributions on
equity paid by our operating subsidiary Shenzhen Mindray for our cash and financing requirements,
including the funds necessary to
18
pay dividends and other cash distributions to our shareholders,
service any debt we may incur and pay our operating expenses. If Shenzhen Mindray incurs debt on its own behalf, the instruments governing the
debt may restrict its ability to pay dividends or make other distributions to us. Furthermore,
relevant PRC laws and regulations permit payments of dividends by Shenzhen Mindray and Nanjing Mindray only out of their respective
retained earnings, if any, determined in accordance with PRC accounting standards and regulations.
Under PRC laws and regulations, Shenzhen Mindray, Nanjing Mindray and Beijing Mindray are required to set aside a portion of their respective net
income each year to fund certain statutory reserves. These reserves, together with the registered
equity, are not distributable as cash dividends. As of December 31, 2009, the amount of these
restricted portions of Shenzhen Mindray was approximately
RMB525 million. As a result of these PRC laws and
regulations, Shenzhen Mindray and Nanjing Mindray are restricted in their abilities to transfer a portion of their respective net assets
to us whether in the form of dividends, loans or advances. Limitations on the ability of Shenzhen
Mindray and Nanjing Mindray to pay dividends to us could adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and
conduct our business.
Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
A significant portion of our revenues and a majority of our operating expenses are denominated
in Renminbi. The Renminbi is currently convertible under the current account, which includes
dividends, trade and service-related foreign exchange transactions, but not under the capital
account, which includes foreign direct investment and loans. Currently, Shenzhen Mindray and Nanjing Mindray may
purchase foreign exchange for settlement of current account transactions, including payment of
dividends to us, without the approval of SAFE. However, the relevant PRC governmental authorities
may limit or eliminate our ability to purchase foreign currencies. Since a significant portion of
our future revenues will be denominated in Renminbi, any existing and future restrictions on
currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our
business activities outside of China denominated in foreign currencies. Foreign exchange
transactions under the capital account are still subject to limitations and require approvals from,
or registration with, SAFE and other relevant PRC governmental authorities. This could affect the
ability of Shenzhen Mindray and Nanjing Mindray to obtain foreign exchange through debt or equity financing, including
by means of loans or capital contributions from us.
The discontinuation of any of the preferential tax treatments or the financial
incentives currently available to us in the PRC could adversely affect our financial condition and
results of operations.
The China Enterprise Income Tax Law, or the New EIT Law, and its implementing rules
became effective on January 1, 2008. The New EIT Law significantly curtails tax incentives granted
to foreign-invested enterprises, or FIEs, under the previous tax law. Shenzhen Mindray and Beijing
Mindray are FIEs. The New EIT Law, however, (i) reduces the top EIT rate from
33% to 25%, (ii) permits companies to continue to enjoy their existing tax incentives, subject to
certain transitional phase-out rules, and (iii) introduces new tax incentives, subject to various
qualification criteria. The New EIT Law and its implementing rules permit qualified New and
Hi-Tech Enterprises to enjoy a reduced 15% EIT rate. The published qualification criteria
are more difficult to meet than those prescribed by the old tax rules under which we had been
granted preferential treatment. Shenzhen Mindray had obtained a
qualification certificate of New and Hi-Tech Enterprise status on December 16, 2008, with a valid period of three years starting
from 2008 to 2010, and Beijing Mindray had obtained a qualification
certificate of New and Hi-Tech Enterprises status on
December 24, 2008, with a valid period of three years starting
from 2008 to 2010. However, the continued qualification for New
and Hi-Tech Enterprise Status
for calendar year 2010 and beyond will be subject to annual evaluation by the relevant government
authority in China. In addition, Shenzhen Mindray and Beijing Mindray will need to apply for an
additional three-year extension upon the expiration of the current
qualification if
they desire to continue to enjoy the 15% reduced rate. Shenzhen Mindray and Beijing Mindray may not
continue to qualify as New and Hi-Tech Enterprises under the New EIT Law, or local tax authorities
may change their position and revoke any of our past preferential tax treatments. The
discontinuation of any of our preferential tax treatments could materially increase our tax
obligations.
Shenzhen
Mindray was also recently awarded Nationwide Key Software
Enterprise status for calendar year 2009. Under the current tax
policies for software and integrated circuit industries, the status will allow Shenzhen Mindray to enjoy a single unified 10% EIT rate applicable for the 2009
calendar year. We anticipate this status will reduce our overall 2009
income taxes by approximately $8.6 million, which we will record in the first quarter of 2010. Nationwide Key Software Enterprise status is granted on an annual basis and is subject to annual review by the relevant government anthority in China. Shenzhen Mindray may not
be granted this status for 2010 or in any future year.
Under the phase-out rules of New EIT Law, enterprises established before the
promulgation date of the New EIT Law and which were granted preferential EIT treatment under the
then effective tax laws or regulations may continue to enjoy their preferential tax treatments
until their expiration. Accordingly, Beijing Mindray, an enterprise established before the
promulgation date of the New EIT Law, will continue to enjoy its preferential treatment under the
phase-out rules, under which it will continue to enjoy the 50% reduction of the EIT for the taxable
years of 2008 to 2010.
Another
PRC subsidiary, Nanjing Mindray, was entitled to an
EIT exemption for two years from 2008 to 2009 and is currently
entitled to a 50% tax reduction
from 2010 to 2012.
19
Pursuant to a PRC tax policy intended to encourage the development of software and integrated
circuit industries, our primary operating subsidiary in the PRC, Shenzhen Mindray, has been
entitled to a refund of VAT paid at a rate of 14% of the sale value of self-developed
software that is embedded in our products since 2001. The
amount of VAT refunds included in revenue in 2008 and 2009 was $21.8 million and $24.8 million,
respectively. This VAT refund policy is scheduled to end on December
31, 2010. If the PRC tax authority does not issue a new preferential treatment for the software and integrated circuit industries for the
refund of VAT after December 31, 2010, it could significantly reduce or eliminate our prefrential tax treatment.
Any increase in the EIT rate applicable to us or discontinuation or
reduction of any of the preferential tax treatments or financial incentives currently enjoyed by
our PRC subsidiaries and affiliated entity could adversely affect our business, operating results
and financial condition.
We may be classified as a resident enterprise for PRC enterprise income tax purposes. This
classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
The New EIT Law provides that enterprises established outside of China whose de facto
management bodies are located in China are considered resident enterprises and are generally
subject to the uniform 25% EIT rate on their worldwide income. A recent circular
issued by the PRC State Administration of Taxation regarding the standards used to classify certain
Chinese-invested enterprises established outside of China as resident enterprises states that
dividends paid by such resident enterprises and other income paid by such resident enterprises
will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of
10%, when received or recognized by non-PRC resident enterprise shareholders. This recent circular
also subjects such resident enterprises to various reporting requirements with the PRC tax
authorities. Under the implementation regulations to the New EIT Law, a de facto management body
is defined as a body that has material and overall management and control over the manufacturing
and business operations, personnel and human resources, finances and assets of an enterprise. In
addition, the recent circular mentioned above specifies that certain Chinese-invested enterprises
will be classified as resident enterprises if the following are located or resident in China:
senior management personnel and departments that are responsible for daily production, operation
and management; financial and personnel decision-making bodies; key properties, accounting books,
company seal, and minutes of board meetings and shareholders meetings; and half or more of senior
management or directors having voting rights.
If the PRC tax authorities determine that we are a resident enterprise, a number of
unfavorable PRC tax consequences could follow. First, we will be subject to income tax at the rate
of 25% on our worldwide income. Second, although under the New EIT Law and its implementing rules,
dividends paid to our Hong Kong company and ultimately to our Cayman Islands company from our PRC
subsidiaries would qualify as tax-exempted income, we cannot assure you that such dividends will
not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which
enforce the withholding tax, have not yet issued guidance with respect to the processing of
outbound remittances to entities that are treated as resident enterprises for PRC EIT purposes. Finally, dividends payable by us to our investors and gain on the sale of our shares
may become subject to PRC withholding tax as described below. This could have the effect of
increasing our and our shareholders effective income tax rate and could also have an adverse effect on our net income
and results of operations, and may require us to deduct withholding tax amounts from any dividends
we pay to our non-PRC shareholders.
Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary
shares may become subject to withholding taxes under PRC tax laws.
20
Under the New EIT Law and its implementation rules, to the extent that we are considered a
resident enterprise which is domiciled in China, PRC withholding income tax at the rate of 10%
is applicable to dividends payable by us to investors that are non-resident enterprises so long
as such non-resident enterprise investors do not have an establishment or place of business in
China or, despite the existence of such establishment or place of business in China, the relevant
income is not effectively connected with such establishment or place of business in China.
Similarly, any gain realized on the transfer of our shares or ADSs by such investors is also
subject to a 10% PRC withholding income tax if such gain is regarded as income derived from sources
within China and we are
considered a resident enterprise which is domiciled in China for PRC
enterprise income tax purposes. Additionally, there is a possibility
that the relevant PRC tax authorities may take the view that our purpose is a holding company, and the capital gain derived by
our overseas shareholders or ADS holders from the share transfer is
deemed China-sourced income, in which case such capital gain may be
subject to PRC withholding tax. It is possible that future guidance issued with respect
to the new resident enterprise classification could result in a situation in which a withholding
tax of 10% for our non-PRC enterprise investors or a
individual income tax of 20% for
individual investors is imposed on dividends we pay to them and with respect to gains derived by
such investors from transferring our shares or ADSs. In addition to the uncertainty in how the new
resident enterprise classification could apply, it is also possible that the rules may change in
the future, possibly with retroactive effect. If we are required under the new New EIT Law to
withhold PRC income tax on our dividends payable to our foreign shareholders and ADS holders who
are non-resident enterprises, or if you are required to pay PRC income tax on the transfer of our
shares or ADSs under the circumstances mentioned above, the value of your investment in our shares
or ADSs may be materially and adversely affected. It is unclear whether, if we are considered a PRC
resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income
tax treaties or agreements entered into between China and other countries or areas.
We may be unable to enjoy the favorable 5% treaty-based rate of income tax withholding for any
dividends our PRC subsidiaries pay to us through our Hong Kong holding companies.
The PRC State Administration of Taxation promulgated a tax notice on October 27, 2009, or
Circular 601, which provides that tax treaty benefits will be denied to conduit or shell
companies without business substance, and a beneficial ownership analysis will be used based on a
substance-over-form principle to determine whether or not to grant tax treaty benefits. It is
unclear at this early stage whether Circular 601 applies to dividends from our PRC subsidiaries
paid to us through our Hong Kong subsidiaries. It is possible, however, that under Circular 601 our
Hong Kong subsidiaries would not be considered to be the beneficial owners of any such dividends,
and that such dividends would as a result be subject to income tax withholding at the rate of 10%
rather than the favorable 5% rate applicable under the tax treaty between mainland China and Hong
Kong.
21
BUSINESS
Overview
We are a leading developer, manufacturer and marketer of medical devices worldwide. We
maintain our global headquarters in Shenzhen, China, U.S. headquarters in Mahwah, New Jersey and
multiple sales offices in major international markets. From our main manufacturing and engineering
base in China and through our worldwide distribution network, we supply internationally a broad
range of products across three primary business segments, comprising patient monitoring and life
support products, in-vitro diagnostic products and medical imaging systems. We provide after-sales
services to distributors and hospitals in China through 30 local offices based in provincial
capital cities. We also provide after-sales services to hospitals in the U.S., the United Kingdom
and France where we have direct sales.
We sell our products through different distribution channels in different geographies. In
China, we sell our products primarily to third-party distributors. We believe we have one of the largest
distribution, sales and service networks for medical devices in China with more than 2,400
distributors and approximately 1,200 sales and sales support personnel as of December 31, 2009.
In China, we also sell our products directly to hospitals, clinics, government health bureaus, and
to ODM and OEM customers. Outside of China, we sell our products through more than 1,500
third-party distributors and through our sales force of approximately 150 based in the
U.S., the United Kingdom, and France, as of December 31, 2009.
We employ a vertically integrated operating model that enables us to efficiently develop,
manufacture and market quality products at competitive prices. Our research and development team
and our manufacturing department work closely together to optimize manufacturing processes and
develop commercially viable products. In addition, they incorporate regular feedback from our sales
and marketing personnel, enabling us to timely and cost-effectively introduce products tailored to
end-user needs. Furthermore, our research and development and manufacturing operations, which are
based primarily in China, provide us with a distinct competitive advantage in international markets
by enabling us to leverage low-cost technical expertise, labor, raw materials, and facilities.
We have made and expect to continue making substantial investments in research and development
activities, investing approximately 10% of our net revenues in research and development in 2007,
2008, and 2009. We currently have research and development centers located in Shenzhen, Beijing,
and Nanjing, China. We also maintain research and development centers in Seattle, Washington,
Mahwah, New Jersey, and Stockholm, Sweden. We believe that our emphasis on research and
development investment is the most important core competency we have to achieve our historic growth
and maintain growth possibilities going forward. We maintain what we believe is the largest
research and development team of any medical device manufacturer based in China. As of December
31, 2009, we had more than 1,400 engineers in multiple research and development centers in both
China and the U.S. Our research and development headquarters in Shenzhen coordinates our global
research and development efforts, leveraging the core competencies of each of our centers.
We commenced operations in 1991 through our predecessor entity. We were incorporated as
Mindray International Holdings Limited in the Cayman Islands on June 10, 2005, an exempted company
with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and
revised) of the Cayman Islands, or the Companies Law. In March 2006, we changed our name to Mindray
Medical International Limited.
Our principal executive offices are located at Mindray Building, Keji 12th Road South, Hi-tech
Industrial Park, Nanshan, Shenzhen, 518057, Peoples Republic of China, and our telephone number is
(86-755) 2658-2888. Our website address is http://www.mindray.com. Information on our website does
not constitute part of this prospectus.
Products
We have three primary product business segments patient monitoring and life support
products, in-vitro diagnostic products and medical imaging systems and produce a range of
medical devices across these business segments.
22
Over the past three years, we have significantly expanded our geographic scope and increased
the percentage of our revenues generated by international sales. Our products have been sold in
more than 160 countries, and international sales accounted for 53.9% of our net revenues in 2009.
We typically obtain a CE mark and FDA 510(k) clearance for the products we intend to market
internationally. A CE mark certifies full compliance with the Medical Device Directives of the
European Union and enables us to market the products in any member state of the European Union. We
declare the CE mark ourselves for our in-vitro diagnostic products pursuant to the relevant
regulation of European Union, and the remaining are issued by TUV. The CE mark issued by TUV
demonstrates that not only has a representative sample of the product been evaluated, tested, and
approved for safety, but also that the production line has been inspected on an annual basis. FDA
510(k) clearance from the U.S. Food and Drug Administration, or FDA, is required to market any of
the medical devices in our current product portfolio in the United States.
The chart below provides selected summary information about the products that we introduced in
2009:
|
|
|
|
|
Business Segment |
|
Products |
|
Description |
Patient Monitoring and Life
support products
|
|
WATO EX20/30
|
|
A basic version of anesthesia
machine |
|
|
Hylite 6700/6500 and Hybase 6100
|
|
First generation of surgical
light and surgical bed |
|
|
Hypart 3000/6000/8000
|
|
Surgical suite
equipment to be used along with
our surgical light, surgical
bed, patient monitors and
anesthesia machines |
|
|
|
|
|
|
|
Beneheart D6
|
|
Defibrilator |
|
|
|
|
|
|
|
Netguard |
|
Clinical Alert System |
|
|
|
|
|
Medical Imaging Systems
|
|
DC-7
|
|
Higher end cart-based color
ultrasound system |
|
|
DP-6900
|
|
Portable B/W ultrasound system |
|
|
DigiEye 760
|
|
Digital radiography system |
|
|
|
|
|
In-Vitro Diagnostic Products
|
|
BC5800
|
|
More advanced 5-part hematology
analyzer |
23
Patient Monitoring and Life Support Products
Patient monitoring devices. Our patient monitoring devices track the physiological parameters
of patients, such as heart rate, blood pressure, respiration and temperature. We currently offer
patient monitoring devices that are suitable for adult, pediatric and neonatal
patients and are used principally in hospital intensive care units, operating rooms and emergency
rooms. Our product line offers customers a broad range of functionality, such as single- and
multiple-parameter monitors, mobile and portable multifunction monitors, central stations that can
collect and display multiple patient data on a single screen, and an electro-cardiogram monitoring
device. Our multi-parameter monitoring devices can be networked, allowing hospitals to remotely
gather patient data from patient rooms and centralize that data in a single location. Our patient
monitoring devices also have built-in recorders and have batteries for portability in most models,
as well as power backup in the event of power failure in mobile models. We also offer a line of
veterinary monitoring devices.
Life support products. We are also actively expanding the range of our life support products.
We currently offer anesthesia machines and a
defibrillator, which we introduced in 2009. We also introduced surgical beds and surgical lights in
2009.
Sales of our patient monitoring and life support products accounted for 36.2%, 44.5%, and
43.9% of our total net revenues in 2007, 2008, and 2009, respectively.
In-vitro Diagnostic Products
Our in-vitro diagnostic products provide data and analysis on blood, urine and other bodily
fluid samples for clinical diagnosis and treatment. We offer a range of semi-automated and
fully-automated in-vitro diagnostic products for laboratories, clinics and hospitals to perform
analysis to detect and quantify various substances in the patient samples. Our current product
portfolio consists of in-vitro diagnostic products in two primary product categories:
hematology analyzers and biochemistry analyzers.
Hematology analyzers. Our hematology analyzers test blood samples to detect abnormalities or
foreign substances. For example, our hematology analyzers can be used to detect blood diseases,
such as anemia, and to screen to differentiate between illnesses caused by viruses from those
caused by bacteria. We currently offer semi-automated and fully-automated three-part differential
analyzers and fully-automated five-part differential analyzers (analyzers of three or five
different types of white blood cells) with the ability to analyze a broad range of parameters
through the use of reagents.
Biochemistry analyzers. Our biochemistry analyzers measure the concentration or activity of
substances such as enzymes, proteins and substrates. These analyzers may be used as therapeutic
drug monitors or to check for drug abuse. Our leading biochemistry analyzer, the BS-200 automated
analyzer, can hold up to 40 samples at a time with up to 40 reagents, allowing for up to 200 tests per hour.
We also offer reagents for use with our in-vitro diagnostic products. A reagent is a substance
used in the chemical reactions analyzed by our in-vitro diagnostic products. We offer more than
70 reagents for hematology analyzers and 45 reagents for biochemistry analyzers. We
also offer reagents that can be used in diagnostic laboratory instruments produced by other
international and China-based manufacturers. This ongoing consumption and resulting need to order
additional reagents creates a recurring revenue stream for us. As we expand our line of reagents
available for sale in China and continue to grow our installed base of in-vitro diagnostic products
and offer products with the ability to run more tests per hour, we anticipate that the recurring
revenue stream from domestic reagent sales will likewise grow. Reagent sales accounted for 12.6%,
15.3%, and 19.9% of our in-vitro diagnostic products segment revenues in 2007, 2008, and 2009,
respectively.
24
Sales of our in-vitro diagnostic products, including sales of reagents, accounted for 31.2%,
25.1%, and 24.5% of our total net revenues in 2007, 2008 and 2009, respectively.
Medical Imaging Systems
Our medical imaging systems segment includes both ultrasound systems and digital radiography
systems. Our ultrasound systems use computer-managed sound waves to produce real time images of
anatomical movement and blood flow. Ultrasound systems are commonly employed in medical fields such
as urology, gynecology, obstetrics and cardiology. We currently sell black and white and color portable and mobile
ultrasound systems, and offer a broad range of transducers to enhance the adaptability of these
products for a variety of applications. We believe this variety and adaptability increases customer
appeal and broadens our potential client base.
Our digital radiography systems use flat-panel detectors to capture images. Digital
radiography systems shorten X-ray exposure time compared to traditional film-based
radiography systems. The detector design eliminates manual activities, hastens treatment, improves
patient comfort and provides greater cost efficiency. In 2008, we introduced our first digital
radiography system, the DigiEye560T. In 2009, we introduced an additional digital radiography
system, the DigiEye760.
Our medical imaging systems segment accounted for 31.1%, 25.4%, and 25.6% of our total net
revenues in 2007, 2008, and 2009, respectively.
Distribution, Direct Sales
Third Party Distributor Network in China
As of December 31, 2009, our nationwide distribution and sales network in China consisted of
more than 2,400 distributors and 1,200 sales and sales support personnel located in
30 offices in almost every province in China. Our distribution network broadens our customer reach and enhances
our ability to further penetrate the market in China within a short period of time. Exclusive
distributors have the exclusive right to sell one or more of our products in a defined territory.
In a given territory we may have several distributors selling different products on an exclusive
basis if their customers or use-fields are specified differently. We often select exclusive
distributors from our pool of non-exclusive distributors based on their prior sales performance for
us. We also make selections based on factors such as sales experience, knowledge of medical
equipment, contacts in the medical community, reputation and market coverage. We grant the majority
of our distributors in China an exclusive right to sell a particular product or set of products
within a specified territory or country. We actively manage our distribution network, regularly
reviewing distributor performance and terminating distributors due to underperformance. Our
distribution agreements are typically negotiated and renewed on an annual basis. None of our
distributors accounted for more than 2% of our net revenues in each of the past three years.
Prior to shipment, our exclusive distributors in China typically pay between 30% and 100% of the
purchase price for products.
Tender Sales in China
We make tender sales in China through government-run tender sale processes. When we make
tender sales to central or provincial level medical equipment purchasing agents, we enter into a
binding contract for each sale. The payment terms for these contracts vary widely and are dictated
by non-negotiable, standard government bidding contracts, which often provide for a smaller
percentage of the total purchase price paid at the time of delivery. China-based tender sales and
after-sales services provided to government agency customers accounted for 24.8%, 15.3%, and 17.4%
of our net domestic revenues, in 2007, 2008, and 2009, respectively.
Our International Third Party Distribution Network
25
As of December 31, 2009, our international distribution and sales network consisted of more
than 1,500 distributors covering more than 160 countries. We grant a minority of our
international distributors an exclusive right to sell a particular product or set of products
within a specified territory or country.
Our international distributors typically pay the entire purchase price or provide a letter of
credit for the products they order. We also extend credit to selected distributors in the United
States and Europe. As we expand our international sales to distributors in developed countries, we
sometimes provide credit terms to qualified distributors that we believe are consistent with
prevailing market practices in their distribution areas. The majority of our credit extended to
international distributors is covered by our export credit insurance. To those distributors who
meet their sales targets and pay their receivables, we provide a predetermined amount of credit
which can be exchanged for our products. Over the last three years, we have not recognized any
significant losses relating to payment terms provided to our distributors.
International Direct Sales
We have direct sales channels in the U.S., United Kingdom and France. As of December 31, 2009,
we employed a sales team in these regions of approximately 150 sales agents, who have
relationships with hospitals, medical clinics and doctors throughout their sales regions. Typical
credit terms to direct sales customers are 90 to 100 days, which we believe range below the
industry average.
Marketing
We focus our marketing efforts on establishing business relationships and growing our brand
recognition, which primarily involve attending and sponsoring exhibitions and seminars pertaining
to our product offerings. In 2009, we attended or sponsored more than 800 medical exhibitions and
seminars. We also conduct on-site demonstrations of our products at hospitals on a regular basis,
and we often offer new customers one of our products at a discounted rate. We also advertise in
industry publications that cater to distributors of medical devices, industry experts or doctors.
Customers
We have three categories of customers: (i) distributors, (ii) original design manufacturers,
or ODM customers, and original equipment manufacturers, or OEM customers, and (iii) hospitals and
government agencies to whom we sell directly. Our customer base is widely dispersed both on a
geographic and a revenues basis. Our largest customer in each of the past three years was an ODM
customer that accounted for 1.7%, 0.9%, and 0.7% of our net revenues in 2007, 2008, and 2009,
respectively. Our ten largest customers based on net revenues collectively accounted for 10.0%,
6.4%, and 5.5% of our net revenues in 2007, 2008, and 2009, respectively.
Our distributors. Sales to our distributors make up the substantial majority of our revenues,
both on a segment by segment basis and in the aggregate. As of December
31, 2009, we had more than 2,400 distributors in China and more than 1,500 additional
distributors internationally.
ODM and OEM customers. We manufacture products for ODM customers based on our own designs and
employing our own intellectual property, while we manufacture products for OEM customers based on
their product designs. Although ODM and OEM products gross margins tend to be lower than those of
our own branded products, ODM and OEM products provide us with an additional source of income
generally generated through bulk orders. Our ODM customers also pay us a fee to help offset the
research and development costs of developing the technologies associated with the ODM products they
purchase from us. ODM and OEM clients accounted for 5.9%, 1.1%, and 0.9% of our net revenues in
2007, 2008, and 2009, respectively.
Hospital and government agency customers. In China, our hospital and government agency
customers primarily include hospitals, as well as central and provincial level public health
bureaus and population and family planning bureaus. These customers typically place large volume
orders that are awarded based on bids submitted by competing medical equipment companies through a
state-owned bidding agent, and we count them as government tender sales. In some cases, these
customers do not engage a bidding agent to solicit competitive bids from several vendors, and we
are allowed to negotiate directly with them, in which case we count these sales as direct sales.
26
Internationally, our direct sales force in the U.S., United Kingdom and France sells primarily
to hospitals with 300 or fewer beds, as well as surgery centers, private clinics, and veterinary
clinics.
Customer Support and Service
China
We believe that we have the largest customer support and service team for medical devices in
China, with more than 250 employees located in our headquarters in Shenzhen and our 30 offices
in China as of December 31, 2009. This enables us to provide domestic training, technical support,
and warranty, maintenance and repair services to end-users of our products, as well as distributor
support and service.
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End-User Support and Service. In 2009, we conducted more than 100 training sessions in hospitals throughout China and almost 200
training sessions at our headquarters in Shenzhen and our offices in
China. We also maintain a customer service center in Shenzhen for
channeling customer needs for preliminary technical support and repair
for products sold. For support issues that require a site visit or for
maintenance and repair requests, we maintain maintenance and repair
personnel as well as supplies of parts and components at our China
offices. We believe our domestic support and service capabilities give
us a significant advantage over our competitors, as they enable us to
respond timely to requests for support, maintenance, and repair, which
in turn creates and reinforces positive impressions of our brand. |
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Distributor Support and Service. In addition to ensuring that our
brand is associated with high quality products and responsive service,
our customer support and service employees work with our distributors
in a wide range of areas to help them become more effective. In
particular, we can assist our distributors in establishing a series of
best practices in their approach to sales and marketing management,
helping them identify market opportunities, and providing feedback on
their sales performance and customer relations. |
We also provide our distributors with technical support, including training in the basic
technologies of the products they sell, participating in presentations to potential customers, and
assisting in preparing bidding documents for large volume purchase contracts awarded through
competitive bidding and tenders. By working closely with our domestic distributors, our customer
support and service employees are able to provide us valuable insights into the operations of each
local distributor, which help us ensure that each distributor is able to operate effectively for
us.
International
In several of the countries where we have direct sales, particularly the U.S., United Kingdom
and France, we also provide substantial after-sales services. Our service solutions business
provides support with an array of integrated solutions, from project management and network
installations, to comprehensive technology maintenance programs. The dedicated service offers
clinical engineering partnership programs and rapid emergency service response, optimizing product
performance and clinical results.
In our other international markets, we rely on our distributors to provide after-sales
services. We provide technical support and training to our international distributors on an ongoing
basis. When we conduct our training and technical support visits to the locations of our
international distributors, we also take the opportunity to meet with a sample of end-users in that
market to gather feedback on our products as well as market information such as levels of
satisfaction, price information and specific functions desired from end-users serviced by our
distributors.
We also maintain international sales and service offices. As our international markets
mature, we will consider adding additional offices to assist with sales and support.
27
Manufacturing and Assembly
We currently have two principal manufacturing facilities in China and a final assembly and
testing facility in Mahwah, New Jersey for some of our products.
Both of our China-based facilities are ISO 9001 and ISO 13485 certified. We continue to
manufacture and assemble our in-vitro diagnostic products in our older China-based facility, which
is approximately 280,000 square feet in size. We manufacture and assemble patient monitoring and
life support products and medical imaging systems in our new China-based facility, which is
approximately 820,000 square feet in size.
As part of our overall strategy to lower production costs through our vertically integrated
operating model, we have made substantial investments in our in-house manufacturing infrastructure
to complement our research and development and product design activities. In particular, we seek to
achieve the following objectives:
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Increase use of common resources within and across products. By
identifying resources that can be commonly applied within and across
products, we are able to purchase raw materials and components in
greater quantities, which often results in reduced material and
component costs. As we improve existing products and develop new
products, we look to carry over common resources. The cost of the new
or improved product can be reduced as a result of the lower costs
already in place from volume purchases. As more products utilize
common resources, the resulting increased purchases of common
resources further reduce costs, with benefits across a range of
products. |
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|
Increase use of in-house manufactured components. To better optimize
the benefit of our use of common resources across business segments
and increasing sales levels, we produce the majority of the components
that go into our products. As we continue to refine our use of common
resources and grow our revenues, we anticipate creating additional
economies of scale, allowing us to move additional component
production in-house, thereby lowering our production costs. |
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|
Increase use of common manufacturing and assembly practices within and
across business segments. We continually seek to identify common
manufacturing and assembly practices both within and across business
segments. By identifying common manufacturing and assembly practices
for new products, we seek to reduce capital outlays for new
manufacturing equipment. This also allows us to spread our
manufacturing team across fewer manufacturing and assembly stations,
creating a streamlined manufacturing and assembly workflow. We believe
this increases employee efficiency, with employees required to learn
to manufacture or assemble fewer components, and reduces our training
costs. |
We believe that by increasingly using common resources, manufacturing components in-house and
using common manufacturing and assembly practices, we will be able to maintain or improve our
competitive cost structure.
Our manufacturing strategy also incorporates strategic outsourcing. In particular, we
outsource components that we believe can more efficiently and cost-effectively be produced by third
party providers. Major outsourced components include integrated circuits, electronic components,
raw materials and chemicals for reagents, and valves. Other components outsourced in the
manufacturing process include various types of other electrical and plastic parts that are
generally readily available in sufficient quantities from our local suppliers.
Consistent to our overall strategy of maintaining a China-based manufacturing infrastructure
and leveraging our vertically integrated operating model, we have taken steps to transfer
traditionally outsourced manufacturing contracts by our acquired U.S. operations to our in-house
manufacturing infrastructure in China. The ongoing process to transfer our manufacturing from
outsourcing to in-house production in China is part of our effort to realize cost synergies in
relation to our acquisition of Datascopes patient monitoring device business.
We purchase components for our products from more than 500 suppliers, most of whom have
long-term business relationships with us. No single supplier accounted for more than 3% of our
supply purchases in 2008 or 2009. Since we have multiple suppliers for most of our components, we
believe it is beneficial not to have
long-term supply contracts with our suppliers; accordingly we generally enter into annual
contracts. In particular, having the ability to negotiate price reductions on a periodic basis has
allowed us to reduce our component costs and to maintain our profit margins.
28
We have our own independent quality control system, and devote significant attention to
quality control for the designing, manufacturing, assembly, and testing of our products. In
particular, we have established a quality control system in accordance with SFDA regulations. In
addition, we obtained ISO 9001 certification and ISO 13485 certification issued by both TUV and
Beijing Hua Guang. We have received international certifications for various products including FDA
clearance letters, Canadian Medical Device Licenses and CE marks. We inspect components prior to
assembly, and inspect and test our products both during and after their manufacture and assembly.
Each of our products is typically sold with a 12 to 24-month warranty against technical
defects. If necessary, we will exchange a defective product. However, we do not accept any returns
for a refund of the purchase price. The costs associated with our warranty claims have historically
been low though we do accrue a liability for potential warranty costs at the time of sale based on
historical default rates and estimated associated costs.
Intellectual Property
We believe we have developed a valuable portfolio of intellectual property rights to protect
the technologies, inventions and improvements that we believe are significant to our business,
which includes issued patents in China and pending patent applications in China, the U.S. and
Europe. Moreover, we possess proprietary technology and know-how in manufacturing processes,
design, and engineering. We plan to expand our portfolio of intellectual property rights in
overseas markets as we increase our sales in those markets.
We have not filed for patent protection in Asian countries other than China based on our
assessment of risks of third party infringement of our intellectual property in those markets and
the costs of obtaining patent protection there. In general, while we seek patent protection for our
proprietary technologies in major markets such as China, the U.S. and Europe, we do not rely solely
on our patents to maintain our competitive position, and we believe that development of new
products and improvements of existing products at competitive costs has been and will continue to
be important to maintaining our competitive position. We will continue to evaluate our patent
filing decisions based on cost/benefit analyses. See Risk Factors Risks Relating to Our
Business and Industry Unauthorized use of our brand name by third parties, and the expenses in
developing and preserving the value of our brand name, may adversely affect our business.
Our success in the medical equipment industry depends in substantial part on effective
management of both intellectual property assets and infringement risks. In particular, we must be
able to protect our own intellectual property as well as minimize the risk that any of our products
infringes on the intellectual property rights of others.
We perform intellectual property due diligence studies on trademarks and patents, using both
in-house and third-party intellectual property resources. Our intellectual property department and
program are led by an experienced, licensed in-house U.S. patent attorney. However, due to the
complex nature of medical equipment technology patents and the uncertainty in construing the scope
of these patents, as well as the limitations inherent in freedom-to-operate searches, the risk of
infringing on third party intellectual properties cannot be eliminated. See Risk Factors Risks
Relating to Our Business and Industry We may be exposed to intellectual property infringement
and other claims by third parties which, if successful, could disrupt our business and have a
material adverse effect on our consolidated financial condition and results of operations.
We enter into agreements with all our employees involved in research and development,
under which all intellectual property during their employment belongs to us, and they waive all
relevant rights or claims to such intellectual property. All our employees involved in research and
development are also bound by a confidentiality obligation, and have agreed to disclose and assign
to us all inventions conceived by them during their term of employment. Despite measures we take to
protect our intellectual property, unauthorized parties may attempt to copy aspects of our products
or our proprietary technology or to obtain and use information that we regard as proprietary. See
Risk Factors Risks Relating to Our Business and Industry If we fail to protect our
intellectual property rights, it could harm our business and competitive
position.
29
We have no material license arrangements with any third party. We often purchase
components that incorporate the suppliers intellectual property, especially with respect to
components with advanced technologies that we are currently not capable of producing ourselves.
We believe that we have successfully established our brand in China. We have registered
trademarks in China and in the U.S. and in other countries for the Mindray name and associated
marks used on our own-brand products and we have trademark license rights for the use of the
Datascope trademarks used in our patient monitoring devices through the year 2015. We have also
filed for trademark protection for the Mindray name and associated marks in additional North
American, European and Asian countries where we market our products, and will continue to follow
our brand management policy to build brand name recognition of Mindray and associated marks in
these countries. As part of our overall strategy to protect and enhance the value of our brand, we
actively enforce our registered trademarks against any unauthorized use by a third party. In a
court case in 2005, where we brought suit against another medical device company for its
unauthorized use of the Mindray name, the court determined our Mindray trademark to be a
well-known mark. Based on part on this finding, and also on evidence of the widespread awareness
of our products in China, we are also applying to the relevant governmental administrative
authority to have our Mindray name designated a well-known mark. Since such marks in
China enjoy stronger protections than the other marks without such designation, this court ruling
helps strengthen our ability to protect the value of our brand in China.
Competition
The medical equipment and healthcare industries are characterized by rapid product
development, technological advances, intense competition and a strong emphasis on proprietary
products. Across all product lines and product tiers, we face direct competition both domestically
in China and internationally. We compete based on factors such as price, value, customer support,
brand recognition, reputation, and product functionality, reliability and compatibility.
For domestic sales, our competitors include publicly traded and privately held multinational
companies and domestic Chinese companies. We believe that we can continue to compete successfully
in China because our established domestic distribution network and customer support and service
network allows us significantly better access to Chinas small- and medium-sized hospitals. In
addition, our strong investment in research and development, coupled with our low-cost operating
model, allows us to compete effectively for our sales to large-sized hospitals.
In international markets, our competitors include publicly traded and privately held
multinational companies. These companies typically focus on the premium segments of the market. We
believe we can successfully penetrate certain international markets by offering products of
comparable quality at substantially lower prices. We also face competition in international sales
from companies that have local operations in the markets in which we sell our products. We believe
that we can compete successfully with these companies by offering products of substantially better
quality at comparable prices.
Set forth below is a summary of our primary competitors by business segment. We expect to
increasingly compete against multinational companies, both domestically and internationally, as we
continue to manufacture more advanced products.
Patient Monitoring and Life support products. For domestic sales of patient monitoring and
life support products, our primary competitors are Draeger Medical, GE Healthcare, Biolight,
Koninklijke Philips Electronics, Spacelabs and Nihon Kohden. For international sales of patient
monitoring devices, our primary competitors are GE Healthcare, Koninklijke Philips Electronics,
Siemens Medical and Nihon Kohden.
In-Vitro Diagnostic Products. For domestic sales of hematology analyzers, our primary
competitors are Abbott Laboratories, Beckman Coulter, ABX, Urit Medical, Baxter, Tecom Science
Corporation Nihon Kohden, and Sysmex Corporation. For international sales of hematology analyzers,
our primary competitors are Beckman Coulter, Abbott Laboratories and Sysmex Corporation.
For domestic sales of biochemistry analyzers, our primary competitors are Biotecnica
Instruments, Beckman Coulter, Hitachi, Sysmex Corporation, Abbott and Roche Diagnostics. For
international sales of biochemistry analyzers, our primary competitors are Beckman Coulter and
Roche Diagnostics.
30
Medical Imaging Systems. For domestic sales of medical imaging systems, our primary
competitors are GE Healthcare, Siemens Medical, Philips Electronics, Aloka, Toshiba, Hitachi,
Esaote Group and Medison. For international sales of medical imaging systems, our primary
competitors are Siemens Medical, GE Healthcare, Koninklijke Philips Electronics, Esaote and Toshiba
Medical Systems.
These and other of our existing and potential competitors may have substantially greater
financial, research and development, sales and marketing, personnel and other resources than we do
and may have more experience in developing, manufacturing, marketing and supporting new products.
See Risk Factors Risks Relating to Our Business and Industry Our business is subject to
intense competition, which_may reduce demand for our products and materially and adversely
affect our business, financial conditions, results of operations and prospects.
We must also compete for distributors, particularly international distributors, with other
medical equipment companies. Our competitors will often prohibit their distributors from selling
products that compete with their own. These and other potential competitors may have higher
visibility, greater name recognition and greater financial resources than we do. See Risk Factors
Risks Relating to Our Business and Industry We depend on distributors for a significant
majority of our revenues; we typically do not have long-term distribution agreements, and
competition for suitable distributors is intense. Failure to maintain relationships with our
distributors or to otherwise expand our distribution network would materially and adversely affect
our business.
Employees
We
had approximately 3,700, 5,500 and 5,800 employees worldwide as of December 31, 2007,
2008, and 2009, respectively. The following table sets forth the number of employees categorized by
function as of December 31, 2009:
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As of |
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|
December 31, |
|
|
2009 |
Manufacturing |
|
2,030 |
Research and development |
|
1,330 |
General and administration |
|
314 |
Marketing and sales (including customer support and service) |
|
1,594 |
Mindray Medical USA Corp. (Seattle) |
|
12 |
Mindray, Nanjing, China |
|
125 |
Mindray DS USA |
|
358 |
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Total |
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5,763 |
As required by PRC regulations, we participate in various employee benefit plans that are
organized by municipal and provincial governments, including pension, work-related injury benefits,
maternity insurance, medical and unemployment benefit plans. We are required under PRC law to make
contributions to the employee benefit plans at specified percentages of the salaries, bonuses,
housing funds and certain allowances of our employees, up to a maximum amount specified by the
local government from time to time. Members of the retirement plan are entitled to a pension equal
to a fixed proportion of the salary prevailing at the members retirement date. The contributions
we made to employee benefit plans in 2007, 2008, and 2009 were $2.0 million, $5.7 million, and
$7.0 million, respectively.
We did not pay housing funds for our Shenzhen Mindray employees or
Nanjing Mindray employees.
Generally, we enter into a three-year standard employment contract with our officers and
managers and a three-year standard employment contract with other employees. According to these
contracts, all of our employees are prohibited from engaging in any activities that compete with
our business during the period of their employment with us. Furthermore, the employment contracts
with officers or managers generally include a covenant that prohibits officers or managers from
engaging in any activities that compete with our business for two years after the period of their
employment with us. It may be difficult or expensive for us to seek to enforce the provisions of
these agreements.
Executive Officer and Director Compensation
In
2009, we paid aggregate cash compensation of approximately
$1.6 million to our directors
and executive officers as a group. We do not pay or set aside any amounts for pension, retirement
or other benefits for our officers and directors.
31
Legal Proceedings
We are currently not a party to any material legal proceeding. From time to time, we may bring
against others or be subject to various claims and legal actions arising in the ordinary course of
business.
32
ENFORCEMENT OF CIVIL LIABILITIES
We
are incorporated in the Cayman Islands as an exempted company with limited
liability. We are incorporated in the Cayman Islands because of certain benefits associated with
being a Cayman Islands corporation, such as political and economic stability, an effective judicial
system, a favorable tax system, the absence of foreign exchange control or currency restrictions
and the availability of professional and support services. However, the Cayman Islands has a less
developed body of securities laws as compared to the United States and provides protections for
investors to a significantly lesser extent. In addition, Cayman Islands companies may not have
standing to sue before the federal courts of the United States.
A majority of our assets are located outside the United States. In addition, a majority of our
directors and officers are nationals or residents of jurisdictions other than the United States,
and all or a substantial portion of their assets are located outside the United States. As a
result, it may be difficult for investors to effect service of process within the United States
upon us or these 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. It may also be difficult for you to enforce
in US courts judgments obtained in US courts based on the civil liability provisions of the US
federal securities laws against us, our officers and directors.
We have appointed CT Corporation System as our agent to receive service of process with
respect to any action brought against us in the United States District Court for the Southern
District of New York under the federal securities laws of the United States or of any State of the
United States or any action brought against us in the Supreme Court of the State of New York in the
County of New York under the securities laws of the State of New York.
Conyers Dill & Pearman, our counsel as to Cayman Islands law, and Jun He Law Offices, our
counsel as to PRC law, have advised us that there is uncertainty as to whether the courts of the
Cayman Islands or the PRC would, respectively, (1) 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 (2)
entertain original actions brought in the Cayman Islands or the PRC against us or our directors or
officers predicated upon the securities laws of the United States or any state in the United
States.
Conyers Dill & Pearman has further advised us that the courts of the Cayman Islands would
recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal
or state courts in the United States under which a sum of money is payable (other than a sum of
money payable in respect of multiple damages, taxes or other charges of a like nature or in respect
of a fine or other penalty) and would give a judgment based thereon provided that (i) such courts
had proper jurisdiction over the parties subject to such judgment, (ii) such courts did not
contravene the rules of natural justice of the Cayman Islands, (iii) such judgment was not obtained
by fraud, (iv) the enforcement of the judgment would not be contrary to the public policy of the
Cayman Islands, (v) no new admissible evidence relevant to the action is submitted prior to the
rendering of the judgment by the courts of the Cayman Islands, and (vi) there is due compliance
with the correct procedures under the laws of the Cayman Islands.
Jun He Law Offices has advised us that the recognition and enforcement of foreign judgments
are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce foreign
judgments in accordance with the requirements of the PRC Civil Procedure Law based either on
treaties between China and the country where the judgment is made or on reciprocity between
jurisdictions. Jun He Law Offices has further advised us that under PRC law, a foreign judgment
that does not otherwise violate basic legal principles, state sovereignty, safety or social public
interest, may be recognized and enforced by a PRC court, based either on treaties between China and
the country where the judgment is made or on reciprocity between jurisdictions. As there currently
exists no treaty or other form of reciprocity between China and the United States governing the
recognition of judgments, including those predicated upon the liability provisions of the US
federal securities laws, there is uncertainty whether and on what basis a PRC court would enforce
judgments rendered by US courts.
33
RATIO OF EARNINGS TO FIXED CHARGES
The table below presents our consolidated ratios of earnings to fixed charges for each of the
periods indicated. We computed these ratios by dividing earnings by fixed charges. For this
purpose, earnings consist of earnings before income taxes and
non-controlling interests plus fixed charges. Fixed charges
consist of interest expense, whether capitalized or expensed.
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|
|
|
|
Year Ended December 31, |
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
32.7x
|
|
23.2x
|
|
8372.5x
|
|
850.9x
|
|
115.9x |
34
USE OF PROCEEDS
When we offer particular securities, we will describe in a prospectus supplement relating to
the securities offered how we intend to use the proceeds from their sale. We may invest funds not
required immediately for such purposes in short-term investment grade securities. We will not
receive any proceeds from the sale of securities by selling security holders.
35
DESCRIPTION OF SHARE CAPITAL
Our authorized share capital consists of 4,000,000,000 Class A ordinary shares, par value of
HK$0.001 per share, 1,000,000,000 Class B ordinary shares, par value of HK$0.001 per share, and
1,000,000,000 shares of such class or designation as the board may
determine. As of February 26, 2010, there were 30,430,456 Class A ordinary shares
issued and outstanding and 26,619,907 Class B ordinary shares issued and
outstanding.
We were incorporated as Mindray International Holdings Limited in the Cayman Islands on June
10, 2005, an exempted company with limited liability under the Companies Law. In March 2006, we
changed our name to Mindray Medical International Limited. Our shareholders who are non-residents
of the Cayman Islands may freely hold and vote their shares. A Cayman Islands exempted company:
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is a company that conducts its business outside of the Cayman Islands; |
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is exempted from certain requirements of the Companies Law, including a
filing of an annual return of its shareholders with the Registrar of
Companies; |
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does not have to make its register of shareholders open to inspection; and |
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may obtain an undertaking against the imposition of any future taxation. |
Our amended and restated memorandum and articles of association provides for two classes of
ordinary shares: Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary
shares and Class B ordinary shares have the same rights except for voting and conversion rights, as
described in the following paragraphs. 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 non-residents of the Cayman Islands may freely hold and vote their shares.
The following discussion primarily concerns ordinary shares and the rights of holders of
ordinary shares. The holders of ADSs will not be treated as our shareholders and will be required
to surrender their ADSs for cancellation and withdrawal from the depositary facility in which the
ordinary shares are held in order to exercise shareholders rights in respect of the ordinary
shares. The depositary will agree, so far as it is practical, to vote or cause to be voted the
amount of ordinary shares represented by ADSs in accordance with the non-discretionary written
instructions of the holders of such ADSs.
Meetings
Subject to our regulatory requirements, an annual general meeting and any extraordinary
general meeting shall be called by not less than 10 days notice in writing. Notice of every
general meeting will be given to all of our shareholders other than those that, under the
provisions of our amended and restated articles of association or the terms of issue of the
ordinary shares they hold, are not entitled to receive such notices from us, and also to our
principal external auditors. Extraordinary general meetings may be called only by the chairman of
our board of directors or a majority of our board of directors, and may not be called by any other
person. All business shall be deemed special that is transacted at an extraordinary general
meeting, and also all business that is transacted at an annual general meeting other than with
respect to: (a) the declaration and sanctioning of dividends; (b) consideration and adoption of the
accounts and balance sheet and the reports of the directors and auditors and other documents
required to be annexed to the balance sheet; (c) the election of directors; (d) appointment of
auditors (where special notice of the intention for such appointment is not required by applicable
law) and other officers; (e) the fixing of the remuneration of the auditors, and the voting of
remuneration or extra remuneration to our directors; (f) the granting of any mandate or authority
to our directors to offer, allot, grant options over or otherwise dispose of the unissued shares in
the capital representing not more than 20% in nominal value of our existing issued share capital;
and (g) the granting of any mandate or authority to our directors to repurchase our securities.
Notwithstanding that a meeting is called by shorter
notice than that mentioned above, but, subject to applicable regulatory requirements, it will be
deemed to have been duly called, if it is so agreed by a majority in number of our shareholders
having a right to attend and vote at the meeting, being a majority together holding not less than
75% in nominal value of the ordinary shares giving that right.
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At any general meeting, two shareholders entitled to vote and present in person or by proxy
that represent not less than one-third of our issued and outstanding voting shares will constitute
a quorum. No business other than the appointment of a chairman may be transacted at any general
meeting unless a quorum is present at the commencement of business. However, the absence of a
quorum will not preclude the appointment of a chairman. If present, the chairman of our board of
directors shall be the chairman presiding at any shareholders meetings.
A corporation being a shareholder shall be deemed for the purpose of our amended and restated
articles of association to be present in person if represented by its duly authorized
representative at the relevant general meeting or at any relevant general meeting of any class of
our shareholders. Such duly authorized representative shall be entitled to exercise the same powers
on behalf of the corporation which he represents as that corporation could exercise if it were our
individual shareholder.
The quorum for a separate general meeting of the holders of a separate class of shares is
described in Modification of Rights.
Voting Rights Attaching to the Shares
All of our shareholders have the right to receive notice of shareholder meetings and to
attend, speak and vote at such meetings. In respect of matters requiring shareholder vote, each
Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five
votes. A shareholder may participate at a shareholders meeting
in person or by proxy. A resolution put to the vote of a meeting shall be
decided on a poll.
No shareholder shall be entitled to vote or be counted in a quorum, in respect of any share,
unless such shareholder is registered as our shareholder at the applicable record date for that
meeting and all calls or installments due by such shareholder to us have been paid.
If a clearing house or depositary (or its nominee(s)) is our shareholder, it may authorize
such person or persons as it thinks fit to act as its representative(s) at any meeting or at any
meeting of any class of shareholders, provided that, if more than one person is so authorized, the
authorization shall specify the number and class of shares in respect of which each such person is
so authorized. A person authorized pursuant to this provision is entitled to exercise the same
powers on behalf of the clearing house or depositary (or its nominee(s)) as if such person was the
registered holder of our shares held by that clearing house or depositary (or its nominee(s)).
While there is nothing under the laws of the Cayman Islands which specifically prohibits or
restricts the creation of cumulative voting rights for the election of our directors, unlike the
requirement under Delaware General Corporation Law where cumulative voting for the election of
directors is permitted only if expressly authorized in the certificate of incorporation, it is not
a concept that is accepted as a common practice in the Cayman Islands, and we have made no
provisions in our amended and restated memorandum and articles of association to allow cumulative
voting for such elections.
Protection of Minority Shareholders
The Grand Court of the Cayman Islands may, on the application of shareholders holding not less
than one-fifth of our shares in issue, appoint an inspector to examine our affairs and report
thereon in a manner as the Grand Court shall direct.
Any shareholder may petition the Grand Court of the Cayman Islands which may make a winding up
order, if the court is of the opinion that it is just and equitable
that we should be wound up or, as an alternative to a winding up
order, (1) an order regulating the conduct of the companys
affairs in the future, (2) an order requiring the company to refrain from doing or continuing an
act complained of by the shareholder petitioner or to do an act which the shareholder petitioner
has complained it has omitted to do, (3) an order authorising civil proceedings to be brought in
the name and on behalf of the company by the shareholder petitioner on such terms as the Court may
direct, or (4) an order providing for the purchase of the shares of any shareholders of the company
by other shareholders or by the company itself and, in the case of a purchase by the company
itself, a reduction of the companys capital accordingly.
Claims against us by our shareholders must, as a general rule, be based on the general laws of
contract or tort applicable in the Cayman Islands or their individual rights as shareholders as
established by our amended and restated memorandum and articles of association.
The Cayman Islands courts ordinarily would be expected to follow English case law precedents
which permit a minority shareholder to commence a representative action against, or derivative
actions in our name to challenge (1) an act which is ultra vires or illegal, (2) an act which
constitutes a fraud against the minority and the wrongdoers
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are themselves in control of us, and (3) an irregularity in the passing of a resolution which
requires a qualified (or special) majority.
Pre-emption Rights
There are no pre-emption rights applicable to the issue of new shares under either Cayman
Islands law or our amended and restated memorandum and articles of association.
Liquidation Rights
Subject to any special rights, privileges or restrictions as to the distribution of available
surplus assets on liquidation for the time being attached to any class or classes of shares (1) if
we are wound up and the assets available for distribution among our shareholders are more than
sufficient to repay the whole of the capital paid up at the commencement of the winding up, the
excess shall be distributed pari passu among those shareholders in proportion to the amount paid
up at the commencement of the winding up on the shares held by them, respectively, and (2) if we
are wound up and the assets available for distribution among the shareholders as such are
insufficient to repay the whole of the paid-up capital, those assets shall be distributed so that,
as nearly as may be, the losses shall be borne by the shareholders in proportion to the capital
paid up at the commencement of the liquidation.
If we are wound up, the liquidator may with the sanction of our special resolution and any
other sanction required by the Companies Law, divide among our shareholders in specie or kind the
whole or any part of our assets (whether they shall consist of property of the same kind or not)
and may, for such purpose, set such value as the liquidator deems fair upon any property to be
divided and may determine how such division shall be carried out as between the shareholders or
different classes of shareholders. The liquidator may also vest any part of these assets in
trustees upon such trusts for the benefit of the shareholders as the liquidator shall think fit,
but so that no shareholder will be compelled to accept any assets, shares or other securities upon
which there is a liability.
Modification of Rights
Except with respect to share capital (as described below), alterations to our amended and
restated memorandum and articles of association may only be made by special resolution of no less
than two-thirds of votes cast at a meeting of the shareholders.
Subject to the Companies Law, all or any of the special rights attached to shares of any class
(unless otherwise provided for by the terms of issue of the shares of that class) may be varied,
modified or abrogated with the sanction of a special resolution passed at a separate general
meeting of the holders of the shares of that class. The provisions of our amended and restated
articles of association relating to general meetings shall apply similarly to every such separate
general meeting, but so that the quorum for the purposes of any such separate general meeting or at
its adjourned meeting shall be a person or persons together holding (or represented by proxy) not
less than one-third in nominal value of the issued shares of that class. Every holder of shares of
the class shall be entitled on a poll to one vote for every such share held by such holder and any
holder of shares of that class present in person or by proxy may demand a poll.
The special rights conferred upon the holders of any class of shares shall not, unless
otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be
deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
Alteration of Capital
We may from time to time by ordinary resolution:
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increase our capital by such sum, to be divided into shares of
such amounts, as the resolution shall prescribe; |
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consolidate and divide all or any of our share capital into shares of larger amount than our existing shares; |
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cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any
person, and diminish the amount of our share capital by the
amount of the shares so cancelled subject to the provisions of
the Companies Law; |
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sub-divide our shares or any of them into shares of smaller
amount than is fixed by our amended and restated memorandum and
articles of association, subject nevertheless to the Companies
Law, and so that the resolution whereby any share is sub-divided
may determine that, as between the holders of the shares
resulting from such subdivision, one or more of the shares may
have any such preferred or other special rights, over, or may
have such deferred rights or be subject to any such restrictions
as compared with the others as we have power to attach to
unissued or new shares; and |
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divide shares into several classes and without prejudice to any
special rights previously conferred on the holders of existing shares, attach to the shares respectively as preferential,
deferred, qualified or special rights, privileges, conditions or
such restrictions which in the absence of any such determination
in general meeting may be determined by our directors. |
We may, by special resolution, subject to any confirmation or consent required by the
Companies Law, reduce our share capital or any capital redemption reserve in any manner authorized
by law.
Conversion
Each Class B ordinary share is convertible into one Class A ordinary share at any time by the
holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any
circumstances. Upon any transfer or foreclosure in connection with a pledge of Class B ordinary
shares by a holder thereof to any person or entity which is not an affiliate of such holder (as
defined in our amended and restated articles of association), such Class B ordinary shares shall be
automatically and immediately converted into the equal number of Class A ordinary shares. In
addition, if the aggregate number of Class B ordinary shares is less than 20% of the total number
of our issued and outstanding ordinary shares, each issued and outstanding Class B ordinary share
shall automatically and immediately convert into one Class A ordinary share, and we shall not issue
any Class B ordinary shares thereafter.
Transfer of Shares
Subject to any applicable restrictions set forth in our amended and restated memorandum and
articles of association, any of our shareholders may transfer all or any of his or her shares by an
instrument of transfer in the usual or common form or in a form prescribed by the New York Stock
Exchange or in any other form which our directors may approve.
Our directors may decline to register any transfer of any share which is not paid up or on
which we have a lien. Our directors may also decline to register any transfer of any share unless:
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the instrument of transfer is lodged with us accompanied by the certificate for the shares
to which it relates and such other evidence as our directors may reasonably require to show
the right of the transferor to make the transfer; |
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the instrument of transfer is in respect of only one class of share; |
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the instrument of transfer is properly stamped (in circumstances where stamping is required); |
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in the case of a transfer to joint holders, the number of joint holders to whom the share is
to be transferred does not exceed four; and |
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a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such
lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer, they shall, within two months after the date
on which the instrument of transfer was lodged, send to each of the transferor and the transferee
notice of such refusal.
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The registration of transfers may, on notice being given by advertisement in such one or more
newspapers or by any other means in accordance with the requirements of the New York Stock
Exchange, be suspended and the register closed at such times and for such periods as our directors
may from time to time determine; provided, however, that the registration of transfers shall not be
suspended nor the register closed for more than 30 days in any year as our directors may determine.
Share Repurchase
We are empowered by the Companies Law and our amended and restated memorandum and articles of
association to purchase our own shares only when our board of directors determines that there is
sufficient profit and surplus capital in our share premium account to fund a repurchase. Our
directors may only exercise this power on our behalf, subject to the Companies Law, our amended and
restated memorandum and articles of association and to any applicable requirements imposed from
time to time by the US Securities and Exchange Commission, or SEC, the New York Stock Exchange, or
by any recognized stock exchange on which our securities are listed. Our ability to repurchase
shares will be subject to our ability to receive dividends from our PRC subsidiaries.
Dividends
Subject to the Companies Law, we may declare dividends in any currency to be paid to our
shareholders but no dividend shall be declared in excess of the amount recommended by our
directors. Dividends may be declared and paid out of our profits, realized or unrealized, or from
any reserve set aside from profits which our directors determine is no longer needed. Our board of
directors may also declare and pay dividends out of the share premium account or any other fund or
account which can be authorized for this purpose in accordance with the Companies Law.
Except in so far as the rights attaching to, or the terms of issue of, any share otherwise
provides (1) all dividends shall be declared and paid according to the amounts paid up on the
shares in respect of which the dividend is paid, but no amount paid up on a share in advance of
calls shall be treated for this purpose as paid up on that share and (2) all dividends shall be
apportioned and paid pro rata according to the amounts paid upon the shares during any portion or
portions of the period in respect of which the dividend is paid.
Our directors may also pay any fixed dividend that is payable on any shares semi-annually or
on any other dates, whenever our financial position, in the opinion of our directors, justifies
such payment.
Our directors may deduct from any dividend or other moneys payable to any shareholder all sums
of money (if any) presently payable by such shareholder to us on account of calls or otherwise.
No dividend or other moneys payable by us on or in respect of any share shall bear interest
against us.
In respect of any dividend proposed to be paid or declared on our share capital, our directors
may resolve and direct that (1) such dividend be satisfied wholly or in part in the form of an
allotment of shares credited as fully paid up, provided that our members entitled thereto will be
entitled to elect to receive such dividend (or part thereof if our directors so determine) in cash
in lieu of such allotment or (2) the shareholders entitled to such dividend will be entitled to
elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part
of the dividend as our directors may think fit. We may also, on the recommendation of our
directors, resolve in respect of any particular dividend that, notwithstanding the foregoing, it
may be satisfied wholly in the form of an allotment of shares credited as fully paid up without
offering any right of shareholders to elect to receive such dividend in cash in lieu of such
allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be paid by
check or warrant sent by mail addressed to the holder at his registered address, or addressed to
such person and at such addresses as the holder may direct. Every check or warrant shall, unless
the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the
case of joint holders, to the order of the holder whose name stands first on the register in
respect of such shares, and shall be sent at his or their risk and payment of the check or warrant
by the bank on which it is drawn shall constitute a good discharge to us.
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All dividends unclaimed for one year after having been declared may be invested or otherwise
made use of by our board of directors for the benefit of our company until claimed. Any dividend
unclaimed after a period of six years from the date of declaration of such dividend may be
forfeited and, if so forfeited, shall revert to us.
Whenever our directors or our members in general meeting have resolved that a dividend be paid
or declared, our directors may further resolve that such dividend be satisfied wholly or in part by
the distribution of specific assets of any kind, and in particular of paid up shares, debentures or
warrants to subscribe for our securities or securities of any other company. Where any difficulty
arises with regard to such distribution, our directors may settle it as they think expedient. In
particular, our directors may issue fractional certificates, ignore fractions altogether or round
the same up or down, fix the value for distribution purposes of any such specific assets, determine
that cash payments shall be made to any of our shareholders upon the footing of the value so fixed
in order to adjust the rights of the parties, vest any such specific assets in trustees as may seem
expedient to our directors, and appoint any person to sign any requisite instruments of transfer
and other documents on behalf of a person entitled to the dividend, which appointment shall be
effective and binding on our shareholders.
Untraceable Shareholders
We are entitled to sell any shares of a shareholder who is untraceable, provided that:
(1) all checks or warrants in respect of dividends of such shares, not being
less than three in number, for any sums payable in cash to the holder of such
shares have remained uncashed for a period of twelve years prior to the
publication of the advertisement and during the three months referred to in
paragraph (3) below;
(2) we have not during that time received any indication of the whereabouts or
existence of the shareholder or person entitled to such shares by death,
bankruptcy or operation of law; and
(3) we have caused an advertisement to be published in newspapers in the manner
stipulated by our amended and restated memorandum and articles of association,
giving notice of our intention to sell these shares, and a period of three
months has elapsed since such advertisement and the New York Stock Exchange has
been notified of such intention.
The net proceeds of any such sale shall belong to us, and when we receive these net proceeds
we shall become indebted to the former shareholder for an amount equal to such net proceeds.
Differences in Corporate Law
The Companies Law is modeled after similar laws in the United Kingdom but does not follow
recent changes in English law. In addition, 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 State of Delaware.
Mergers and Similar Arrangements. A merger of two or more constituent companies under Cayman Islands law requires a plan of
merger or consolidation to be approved by the directors of each constituent company and
authorization by (a) a majority in number representing seventy-five percent (75%) in value of the
shareholders voting together as one class and (b) if the shares to be issued to each shareholder in
the surviving company are to have the same rights and economic value as the shares held in the
constituent company, a special resolution of the shareholders voting together as one class.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not
require authorization by a resolution of shareholders. For this purpose a subsidiary is a company
of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the
parent company.
The consent of each holder of a fixed or floating security interest over a constituent company
is required unless this requirement is waived by a court in the Cayman Islands.
Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is
entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation.
The exercise of appraisal rights will preclude the exercise of any other rights save for the right
to seek relief on the grounds that the merger or consolidation is void or unlawful.
In
addition, there are statutory
provisions that facilitate the reconstruction and amalgamation of companies, provided that the
arrangement in question 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 would have the right to express to the court the
view that the transaction should not be approved, the court can be expected to approve the
arrangement if it satisfies itself that:
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Company is not proposing to act illegally or ultra vires 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 as 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 that would amount to a
fraud on the minority. |
When a takeover offer is made and accepted by holders of 90% 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 on the terms of the offer. An objection may be made to the Grand Court of the Cayman
Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.
If the arrangement and reconstruction are thus approved, any dissenting shareholders would
have no rights comparable to appraisal rights, which would otherwise ordinarily be available to
dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for
the judicially determined value of the shares.
Shareholders Suits. In principle, we will normally be the proper plaintiff and
a derivative action may not be brought by a minority shareholder. However, based on English
authorities, which would in all likelihood be of persuasive authority in the Cayman Islands,
exceptions to the foregoing principle apply in circumstances in which:
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a company is acting or proposing to act illegally or beyond the scope of its authority; |
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the act complained of, although not beyond the scope of its authority, could be
effected duly if authorized by more than a simple majority vote which has not been
obtained; and |
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those who control our company are perpetrating a fraud on the minority. |
Corporate Governance. Cayman Islands laws do not restrict transactions with directors,
requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for
which they serve. Under our amended and restated memorandum and articles of association, subject to
any separate requirement for audit committee approval under the applicable rules of the New York
Stock Exchange or unless disqualified by the chairman of the relevant board meeting, so long as a
director discloses the nature of his interest in any contract or arrangement which he is interested
in, such a director may vote in respect of any contract or proposed contract or arrangement in
which such director is interested and may be counted in the quorum at such meeting.
Inspection of Corporate Records. Shareholders of a Cayman Islands company have no general
right under the Companies Law to inspect or obtain copies of a list of shareholders or other
corporate records of the company. In comparison, under Delaware law, shareholders have the right to
inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and
records of the corporation and any subsidiaries to the extent the books and records of such
subsidiaries are available to the corporation.
Calling of Special Shareholders Meetings. The Companies Law does not provide shareholders with
any right to requisition a general meeting and does not have provisions governing the proceedings
of shareholders meetings. In comparison, under Delaware law a special meeting may be called by the
board of directors or any other person authorized to do so in the governing documents, but
shareholders may be precluded from calling special meetings.
Bringing Business Before a Meeting. The Companies Law does not provide shareholders with any
right to bring business before a meeting or requisition a general meeting. In comparison, under
Delaware law a shareholder has the right to put any proposal before the annual meeting of
shareholders, provided that it complies with the notice provisions in the governing documents.
Board of Directors
We are managed by our board of directors. Our amended and restated memorandum and
articles of association provide that the number of our directors will be not less than five or
greater than nine. Any director on our board may be removed by way of an ordinary resolution of
shareholders. Any vacancies on our board of directors or additions to the existing board of
directors can be filled by way of an ordinary resolution of shareholders. The directors may at any time appoint any person as a director to fill a vacancy or as
an addition to the existing board, but any director
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so appointed by the board of directors shall hold office only until our next following
annual general meeting and shall then be eligible for re-election. Our directors shall serve a
three year term from their appointment date and shall retire from office (unless he vacates his
office sooner) at the expiry of such term provided their successors are elected or appointed. Such
directors who retire at the expiry of their term are eligible for re-election. Our directors are
not required to hold any of our shares to be qualified to serve on our board of directors.
Meetings of our board of directors may be convened at any time deemed necessary by our
secretary on request of a director or by any director. Advance notice of a meeting is not required
if each director entitled to attend consents to the holding of such meeting.
A meeting of our board of directors shall be competent to make lawful and binding decisions if
at least two of the members of our board of directors are present or represented unless the board
has fixed any other number. At any meeting of our directors, each director is entitled to one vote.
Questions arising at a meeting of our board of directors are required to be decided by simple
majority votes of the members of our board of directors present or represented at the meeting. In
the case of a tie vote, the chairman of the meeting shall have a second or deciding vote. Our board
of directors may also pass resolutions without a meeting by unanimous written consent.
Our board of directors is divided into different classes, Class A Directors, Class B Directors
and Class C Directors. At the first annual general meeting after this offering, all Class A
Directors shall retire from office and be eligible for re-election. At the second annual general
meeting after this offering all Class B Directors shall retire from office and be eligible for
re-election. At the third annual general meeting after this offering, all Class C Directors shall
retire from office and be eligible for re-election. At each subsequent annual general meeting after
the third annual general meeting after this offering, one-third of our directors for the time being
(or, if their number is not a multiple of three, the number nearest to but not greater than
one-third) shall retire from office by rotation. A retiring director shall be eligible for
re-election. The directors to retire by rotation shall include (so far as necessary to ascertain
the number of directors to retire by rotation) any director who wishes to retire and not to offer
himself for re-election. Any further directors so to retire shall be those of the other directors
subject to retirement by rotation who have been longest in office since their last re-election or
appointment and so that as between persons who became or were last re-elected directors on the same
day those to retire shall (unless they otherwise agree among themselves) be determined by lot.
Certain actions require the approval of a supermajority of at least two-thirds of our board of
directors, including:
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the appointment or removal of either of our co-chief executive
officers, chief financial officer and our other executive
officers; |
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any anti-takeover action in response to a takeover attempt; |
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any merger resulting in our shareholders immediately prior to such
merger holding less than a majority of the voting power of the
outstanding share capital of the surviving business entity; |
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the sale or transfer of all or substantially all of our assets; and |
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any change in the number of our board of directors. |
Committees of Board of Directors
Pursuant to our amended and restated articles of association, our board of directors has
established an audit committee, a compensation committee and a nominations committee.
Issuance of Additional Ordinary Shares
Our amended and restated memorandum of association authorizes our board of directors to issue
additional ordinary shares from time to time as our board of directors shall determine, to the
extent of available authorized but unissued shares.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Shares
The Bank of New York Mellon, as depositary, registers and delivers American Depositary Shares,
or ADSs. Each ADS represents one Class A ordinary share (or a right to receive shares) deposited
with the principal Hong Kong office of The Hongkong and Shanghai Banking Corporation, as custodian
for the depositary. Each ADS will also represent any other securities, cash or other property which
may be held by the depositary. The depositarys corporate trust office at which the ADSs are
administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York
Mellons principal executive office is located at One Wall Street, New York, New York 10286.
You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also
referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in
your name, or (ii) by holding ADSs in the Direct Registration System, or (B) indirectly through
your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This
description assumes you hold your ADSs directly. If you hold the ADSs indirectly, you must rely on
the procedures of your broker or other financial institution to assert the rights of ADS holders
described in this section. You should consult with your broker or financial institution to find out
what those procedures are.
The Direct Registration System, or DRS, is a system administered by DTC pursuant to which the
depositary may register the ownership of uncertificated ADSs, which ownership shall be confirmed by
periodic statements sent by the depositary to the ADS holders entitled thereto.
As an ADS holder, we will not treat you as one of our shareholders and you will not have
shareholder rights. Cayman Islands law governs shareholder rights. The depositary will be the
holder of the shares underlying your ADSs. As a holder of ADSs, you will have ADS holder rights. A
deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners of
ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York
law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more
complete information, you should read the entire deposit agreement and the form of ADR. For
directions on how to obtain copies of those documents see Where You Can Find Additional
Information.
Dividends and Other Distributions
How will you receive dividends and other distributions on the 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 deducting its fees and expenses.
You will receive these distributions in proportion to the number of Shares your ADSs represent.
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Cash. The depositary will convert any cash dividend or other cash
distribution we pay on the shares into U.S. dollars, if it can do
so on a reasonable basis and can transfer the U.S. dollars to the
United States. If that is not possible or if any government
approval is needed and can not be obtained, the deposit agreement
allows the depositary to distribute the foreign currency only to
those ADS holders to whom it is possible to do so. It will hold
the foreign currency it cannot convert for the account of the ADS
holders who have not been paid. It will not invest the foreign
currency and it will not be liable for any interest. Before
making a distribution, any withholding taxes, or other
governmental charges that must be paid will be deducted. See
Taxation. The depositary will distribute only whole U.S.
dollars and cents and will round fractional cents to the nearest
whole cent. If the exchange rates fluctuate during a time when
the depositary cannot convert the foreign currency, you may lose
some or all of the value of the distribution. |
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Shares. The depositary may distribute additional ADSs
representing any shares we distribute as a dividend or free
distribution. The depositary will only distribute whole ADSs. It
will sell shares which would require it to deliver a fractional
ADS and distribute the net proceeds in the same way as it does
with cash. If the depositary does not distribute additional ADSs,
the outstanding ADSs will also represent the new shares. The
depositary may sell a portion of the distributed shares
sufficient to pay its fees and expenses in connection with that
distribution. |
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Rights to purchase additional shares. If we offer holders of our
securities any rights to subscribe for additional shares or any
other rights, the depositary may make these rights available to
you. If the depositary decides it is not legal and practical to
make the rights available but that it is practical to sell the
rights, the depositary will use reasonable efforts to sell the
rights and distribute the proceeds in the same way as it does
with cash. The depositary will allow rights that are not
distributed or sold to lapse. In that case, you will receive no
value for them. If the depositary makes rights available to you,
it will exercise the rights and purchase the shares on your
behalf. The depositary will then deposit the shares and deliver
ADSs to you. It will only exercise rights if you pay it the
exercise price and any other charges the rights require you to
pay. U.S. securities laws may restrict transfers and cancellation
of the ADSs represented by shares purchased upon exercise of
rights. For example, you may not be able to trade these ADSs
freely in the United States. In this case, the depositary may
deliver restricted depositary shares that have the same terms as
the ADSs described in this section except for changes needed to
put the necessary restrictions in place. |
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Other Distributions. The depositary will send to you anything
else we distribute on deposited securities by any means it thinks
is legal, fair and practical. If it cannot make the distribution
in that way, the depositary has a choice. It may decide to sell
what we distributed and distribute the net proceeds, in the same
way as it does with cash. Or, it may decide to hold what we
distributed, in which case ADSs will also represent the newly
distributed property. However, the depositary is not required to
distribute any securities (other than ADSs) to you unless it
receives satisfactory evidence from us that it is legal to make
that distribution. The depositary may sell a portion of the
distributed property sufficient to pay its fees and expenses in
connection with that distribution. |
The depositary is not responsible if it decides that it is unlawful or impractical to make a
distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights
or other securities under the Securities Act. We also have no obligation to take any other action
to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means
that you may not receive the distributions we make on our shares or any value for them if it is
illegal or impractical for us to make them available to you.
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Deposit, Withdrawal and Cancellation |
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposit shares or evidence of rights to
receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or
charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the
appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order
of the person or persons entitled thereto.
How do ADS holders cancel an American Depositary Share?
You may surrender your ADSs at the depositarys corporate trust office. Upon payment of its
fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,
the depositary will deliver
the shares and any other deposited securities underlying the ADSs to you or a person you
designate at the office of the custodian. Or, at your request, risk and expense, the depositary
will deliver the deposited securities at its corporate trust office, if feasible.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
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You may surrender your ADR to the depositary for the purpose of exchanging your ADR for
uncertificated ADSs. The depositary will cancel that ADR and will send you a statement confirming
that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a
proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated
ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those
ADSs.
Voting Rights
How do you vote?
You may instruct the depositary to vote the deposited securities, but only if we ask the
depositary to ask for your instructions. Otherwise, you will not be able to exercise your right to
vote unless you withdraw the shares. However, you may receive notice of the meeting without
sufficient time to effect withdrawal of your shares.
If we ask for your instructions, the depositary will notify you of the upcoming vote and
arrange to deliver our voting materials to you. The materials will (1) describe the matters to be
voted on and (2) explain how you may instruct the depositary to vote the shares or other deposited
securities underlying your ADSs as you direct. For instructions to be valid, the depositary must
receive them on or before the date specified. The depositary will try, as far as practical, subject
to the laws of the Cayman Islands and of our Memorandum and Articles of Association, to vote or to
have its agents vote the shares or other deposited securities as you instruct. If the depositary
does not receive voting instructions from you by the specified date, it will consider you to have
authorized and directed it to give a discretionary proxy to a person designated by us to vote the
number of deposited securities represented by your ADSs. The depositary will give a discretionary
proxy in those circumstances to vote on all questions at to be voted upon unless we notify the
depositary that (i) we do not wish to receive a discretionary proxy (ii) we think there is
substantial shareholder opposition to the particular question, or (iii) we think the particular
question would have an adverse impact on our shareholders. The depositary will only vote or attempt
to vote as you instruct or as described in the preceding sentence.
We can not assure you that you will receive the voting materials in time to ensure that you
can instruct the depositary to vote your shares. In addition, the depositary and its agents are not
responsible for failing to carry out voting instructions or for the manner of carrying out voting
instructions. This means that you may not be able to exercise your right to vote and there may be
nothing you can do if your shares are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of
voting rights relating to Deposited Securities, if we request the depositary to act, we will try to
give the depositary notice of any such meeting and details concerning the matters to be voted upon
sufficiently in advance of the meeting date.
Fees and Expenses
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Persons depositing or withdrawing shares must pay:
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For: |
US$5.00 (or less) per 100 ADSs (or portion of
100 ADSs)
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Issuance of ADSs, including issuances resulting
from a distribution of shares or rights or other
property |
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Cancellation of ADSs for the purpose of
withdrawal, including if the deposit agreement
terminates |
US$0.02 (or less) per ADS
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Any cash distribution to you |
A fee equivalent to the fee that would be
payable if securities distributed to you had been
shares and the shares had been deposited for
issuance of ADSs
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Distribution of securities distributed to holders
of deposited securities which are distributed by
the depositary to ADS holders |
US$0.02 (or less) per ADS per calendar year
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Depositary services |
Registration or transfer fees
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Transfer and registration of shares on our share
register to or from the name of the depositary or
its agent when you deposit or withdraw shares |
Expenses of the depositary
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Cable, telex and facsimile transmissions (when
expressly provided in the deposit agreement) |
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converting foreign currency to U.S. dollars |
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Taxes and other governmental charges the
depositary or the custodian have to pay on any
ADS or share underlying an ADS, for example,
stock transfer taxes, stamp duty or withholding
taxes
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As necessary |
Any charges incurred by the depositary or its
agents for servicing the deposited securities
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As necessary |
The Bank of New York Mellon, as depositary, has agreed to reimburse us for expenses we incur
that are related to the establishment and maintenance of the ADR program, including investor
relations expenses and the New York Stock 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 under the ADS program.
The depositary collects its fees for issuance and cancellation of ADSs directly from investors
depositing ordinary shares or surrendering ADSs 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 deducting 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 fee-attracting services until its
fees for those services are paid.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on
the deposited securities represented by any of your ADSs. The depositary may refuse to register any
transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs
until such taxes or other charges are paid. It may apply payments owed to you or sell deposited
securities represented by your ADSs to pay any taxes owed and you will remain liable for any
deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the
number of ADSs to reflect the sale and pay to you any proceeds, or send to you any property,
remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If we:
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Change the nominal or par value of our shares |
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Reclassify, split up or consolidate any of the deposited securities |
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Distribute securities on the shares that are not distributed to you |
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Recapitalize, reorganize, merge, liquidate, sell all or
substantially all of our assets, or take any similar action |
Then:
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The cash, shares or other securities received by the depositary
will become deposited securities. Each ADS will automatically
represent its equal share of the new deposited securities, |
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The depositary may distribute some or all of the cash, shares or
other securities it received. It may also deliver new ADSs or ask
you to surrender your outstanding ADSs in exchange for new ADSs
identifying the new deposited securities |
Amendment and Termination
How may the deposit agreement be amended?
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We may agree with the depositary to amend the deposit agreement and the form of ADR without
your consent for any reason. If an amendment adds or increases fees or charges, except for taxes
and other governmental charges or expenses of the depositary for registration fees, facsimile
costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will
not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders
of the amendment. At the time an amendment becomes effective, you are considered, by continuing to
hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as
amended.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement at our direction by mailing notice of
termination to the ADS holders then outstanding at least 60 days prior to the date fixed in such
notice for such termination. The depositary may also terminate the deposit agreement by mailing
notice of termination to us and the ADS holders then outstanding if at any time 30 days shall have
expired after the depositary shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have been appointed and accepted its appointment.
After termination, the depositary and its agents will do the following under the deposit
agreement but nothing else: collect distributions on the deposited securities, sell rights and
other property, and deliver shares and other deposited securities upon cancellation of ADSs. Four
months after termination, the depositary may sell any remaining deposited securities by public or
private sale. After that, the depositary will hold the money it received on the sale, as well as
any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS
holders that have not surrendered their ADSs. It will not invest the money and has no liability for
interest. The depositarys only obligations will be to account for the money and other cash. After
termination, our only obligations will be to indemnify the depositary and to pay fees and expenses
of the depositary that we agreed to pay.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary.
It also limits our liability and the liability of the depositary. We and the depositary:
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are only obligated to take the actions specifically set forth in the deposit agreement
without negligence or bad faith; |
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are not liable if either of us is prevented or delayed by law or circumstances beyond our
control from performing our obligations under the deposit agreement; |
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are not liable if either of us exercises discretion permitted under the deposit agreement; |
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have no obligation to become involved in a lawsuit or other proceeding related to the
ADSs or the deposit agreement on your behalf or on behalf of any other person; |
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may rely upon any documents we believe in good faith to be genuine and to have been
signed or presented by the proper person. |
In the deposit agreement, we and the depositary agree to indemnify each other under certain
circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of an ADS, make a distribution on an
ADS, or permit withdrawal of shares, the depositary may require:
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payment of stock transfer or other taxes or other governmental
charges and transfer or registration fees charged by third
parties for the transfer of any shares or other deposited
securities; |
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satisfactory proof of the identity and genuineness of any
signature or other information it deems necessary; and |
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compliance with regulations it may establish, from time to time,
consistent with the deposit agreement, including presentation of
transfer documents. |
The depositary may refuse to deliver ADSs or register transfers of ADSs generally when the
transfer books of the depositary or our transfer books are closed or at any time if the depositary
or we think it advisable to do so.
Your Right to Receive the Shares Underlying your ADRs
You have the right to cancel your ADSs and withdraw the underlying shares at any time except:
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When temporary delays arise because: (i) the depositary has
closed its transfer books or we have closed our transfer books;
(ii) the transfer of shares is blocked to permit voting at a
shareholders meeting; or (iii) we are paying a dividend on our
shares. |
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When you or other ADS holders seeking to withdraw shares owe
money to pay fees, taxes and similar charges. |
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When it is necessary to prohibit withdrawals in order to comply
with any laws or governmental regulations that apply to ADSs or
to the withdrawal of shares or other deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying
shares. This is called a pre-release of the ADSs. The depositary may also deliver shares upon
cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to
the depositary. The depositary may receive ADSs instead of shares to close out a pre-release. The
depositary may pre-release ADSs only under the following conditions: (1) before or at the time of
the pre-release, the person to whom the pre-release is being made represents to the depositary in
writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is
fully collateralized with cash or other collateral that the depositary considers appropriate; and
(3) the depositary must be able to close out the pre-release on not more than five business days
notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any
time as a result of pre-release, although the depositary may disregard the limit from time to time,
if it thinks it is appropriate to do so.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and
Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof
to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register
the ownership of uncertificated ADSs, which ownership shall be confirmed by periodic statements
sent by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS
which allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the
depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to
the DTC account of that DTC participant without receipt by the depositary of prior authorization
from the ADS holder to register such transfer.
In connection with and in accordance with the arrangements and procedures relating to the DRS/
Profile system, the parties to the deposit agreement understand that the depositary will not
verify, determine or otherwise
ascertain that the DTC participant which is claiming to be acting on behalf of an ADS holder
in requesting registration of transfer and delivery described in the paragraph above has the actual
authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform
Commercial Code in effect in the State of New York). In the deposit agreement, the parties agree
that the depositarys reliance on and compliance with instructions
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received by the depositary
through the DRS/ Profile system and in accordance with the deposit agreement, shall not constitute
negligence or bad faith on the part of the depositary.
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DESCRIPTION OF PREFERRED SHARES
Our
amended and restated articles of association authorizes our board of directors to
establish from time to time one or more series of preferred shares and to determine, with respect
to any series of preferred shares, the terms and rights of that series, including:
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the designation of the series; |
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the number of shares of the series; |
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the dividend rights, dividend rates, conversion rights, voting rights; and |
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the rights and terms of redemption and liquidation preferences. |
Our board of directors may issue series of preferred shares without action by our shareholders
to the extent authorized but unissued. Accordingly, the issuance of preferred shares may adversely
affect the rights of the holders of the ordinary shares. In addition, the issuance of preferred
shares may be used as an anti-takeover device without further action on the part of the
shareholders. The issuance of preferred shares may dilute the voting power of holders of ordinary
shares.
The prospectus supplement relating to the series of preferred shares offered by that
supplement will describe the specific terms of those securities.
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DESCRIPTION OF DEBT SECURITIES
The following description, together with the additional information we include in any
applicable prospectus supplements, summarizes the material terms and provisions of the debt
securities that we may offer under this prospectus. While the terms we have summarized below will
generally apply to any future debt securities we may offer under this prospectus, we will describe
the particular terms of any debt securities that we may offer in more detail in the applicable
prospectus supplement. The terms of any debt securities we offer under a prospectus supplement may
differ from the terms we describe below.
We will issue any senior notes under the senior indenture which we will enter into with the
trustee named in the senior indenture. We will issue any subordinated notes under the subordinated
indenture which we will enter into with the trustee named in the subordinated indenture. We have
filed forms of these documents as exhibits to the registration statement of which this prospectus
is a part. We use the term indentures to refer to both the senior indenture and the subordinated
indenture.
The indentures will be qualified under the Trust Indenture Act of 1939. We use the term
trustee to refer to either the senior trustee or the subordinated trustee, as applicable.
The following summaries of material provisions of the senior notes, the subordinated notes and
the indentures are subject to, and qualified in their entirety by reference to, all the provisions
of the indenture applicable to a particular series of debt securities. We urge you to read the
applicable prospectus supplements related to the debt securities that we sell under this
prospectus, as well as the complete indentures that contain the terms of the debt securities.
Except as we may otherwise indicate, the terms of the senior indenture and the subordinated
indenture are identical.
General
The indentures do not limit the aggregate principal amount of debt securities that may be
issued thereunder. The debt securities may be issued from time to time in one or more series. We
will describe in the applicable prospectus supplement the terms relating to a series of debt
securities, including:
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the title; |
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the principal amount being offered, and, if a series, the total amount authorized
and the total amount outstanding; |
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any limit on the amount that may be issued; |
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whether or not we will issue the series of debt securities in global form and, if
so, the terms and who the depositary will be; |
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the maturity date(s); |
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the principal amount due at maturity, and whether the debt securities will be issued
with any original issue discount; |
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whether and under what circumstances, if any, we will pay additional amounts on any
debt securities, and whether we can redeem the debt securities if we have to pay such
additional amounts; |
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the interest rate(s), which may be fixed or variable, or the method for determining
the rate, the date interest will begin to accrue, the dates interest will be payable
and the regular record dates for interest payment dates or the method for determining
such dates; |
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whether or not the debt securities will be secured or unsecured, and the terms of
any secured debt; |
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the terms of the subordination of any series of subordinated debt; |
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the place where payments will be payable; |
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restrictions on transfer, sale or other assignment, if any; |
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our right, if any, to defer payment of interest and the maximum length of any such
deferral period; |
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the date, if any, after which, the conditions upon which, and the price at which we
may, at our option, redeem the series of debt securities pursuant to any optional or
provisional redemption provisions, and any other applicable terms of those redemption
provisions; |
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provisions for a sinking fund, purchase or other analogous fund, if any; |
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the date, if any, on which, and the price at which we are obligated, pursuant to any
mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the
holders option to purchase, the series of debt securities; |
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a discussion of any material or special U.S. federal income tax considerations
applicable to the debt securities; |
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information describing any book-entry features; |
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the procedures for any auction and remarketing, if any; |
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the denominations in which we will issue the series of debt securities, if other
than denominations of $1,000 and any integral multiple thereof; |
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if other than U.S. dollars, the currency in which the series of debt securities will
be denominated; and |
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any other specific terms, preferences, rights or limitations of, or restrictions on,
the debt securities, including any events of default that are in addition to those
described in this prospectus or any covenants, including restrictive covenants,
provided with respect to the debt securities, and any terms which may be required by us
or advisable under applicable laws or regulations or advisable in connection with the
marketing of the debt securities. |
One or more series of the debt securities may be issued as discounted debt securities (bearing
no interest or interest at a rate which at the time of issuance is below market rates) to be sold
at a substantial discount below their stated principal amount. Material U.S. federal income tax
consequences and other special considerations applicable to any such discounted debt securities
will be described in the prospectus supplement relating thereto.
Conversion or Exchange Rights
We will set forth in the prospectus supplement the terms on which a series of debt securities
may be convertible into or exchangeable for our ordinary shares or other securities, including the
conversion or exchange rate, as applicable, or how it will be calculated, and the applicable
conversion or exchange period. We will include provisions as to whether conversion or exchange is
mandatory, at the option of the holder or at our option. We may include provisions pursuant to
which the number of our securities that the holders of the series of debt securities receive upon
conversion or exchange would, under the circumstances described in those provisions, be subject to
adjustment, or pursuant to which those holders would, under those circumstances, receive other
property upon conversion or exchange, for example in the event of our merger or consolidation with
another entity.
Consolidation, Merger or Sale
The indentures in the forms initially filed as exhibits to the registration statement of which
this prospectus is a part do not contain any covenant that restricts our ability to merge or
consolidate, or sell, convey, transfer or otherwise dispose of all or substantially all of our
assets. However, any successor of ours or acquiror of such assets must assume all of our
obligations under the indentures and the debt securities.
If the debt securities are convertible into our other securities, the person with whom we
consolidate or merge or to whom we sell all of our property must make provisions for the conversion
of the debt securities into securities similar to the debt securities which the holders of the debt
securities would have received if they had converted the debt securities before the consolidation,
merger or sale.
Events of Default Under the Indentures
The following are events of default under the indentures with respect to any series of debt
securities that we may issue:
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if we fail to pay interest when due and payable and our failure continues for 30
days and the time for payment has not been extended or deferred; |
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if we fail to pay the principal, or premium, if any, when due and payable and the
time for payment has not been extended or delayed; |
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if we fail to observe or perform any other covenant contained in the debt securities
or the indentures, other than a covenant solely for the benefit of another series of
debt securities, and our failure continues for 90 days after we receive notice from the
trustee or holders of at least 25% in aggregate principal amount of the outstanding
debt securities of the applicable series; and |
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if specified events of bankruptcy, insolvency or reorganization occur. |
If an event of default with respect to debt securities of any series occurs and is continuing,
other than an event of default specified in the last bullet point above, the trustee or the holders
of at least 25% in aggregate principal amount of the outstanding debt securities of that series, by
notice to us in writing, and to the trustee if notice is given by such holders, may declare the
unpaid principal or, premium, if any, and accrued interest, if any, due and payable immediately.
If an event of default specified in the last bullet point above occurs with respect to us, the
principal amount of and accrued interest, if any, of each series of debt securities then
outstanding shall be due and payable without any notice or other action on the part of the trustee
or any holder.
The holders of a majority in principal amount of the outstanding debt securities of an
affected series may waive any default or event of default with respect to the series and its
consequences, except defaults or events of default regarding payment of principal, premium, if any,
or interest, unless we have cured the default or event of default in accordance with the applicable
indenture.
Subject to the terms of the indentures, if an event of default under an indenture shall occur
and be continuing, the trustee will be under no obligation to exercise any of its rights or powers
under such indenture at the request or direction of any of the holders of the applicable series of
debt securities, unless such holders have offered the trustee reasonable indemnity. The holders of
a majority in principal amount of the outstanding debt securities of any series will have the right
to direct the time, method and place of conducting any proceeding for any remedy available to the
trustee, or exercising any trust or power conferred on the trustee, with respect to the debt
securities of that series, provided that:
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the direction so given by the holder is not in conflict with any law or the
applicable indenture; and |
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subject to its duties under the Trust Indenture Act of 1939, the trustee need not
take any action that might involve it in personal liability or might be unduly
prejudicial to the holders not involved in the proceeding. |
A holder of the debt securities of any series will only have the right to institute a
proceeding under the indentures or to appoint a receiver or trustee, or to seek other remedies if:
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the holder has given written notice to the trustee of a continuing event of default
with respect to that series; |
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the holders of at least 25% in aggregate principal amount of the outstanding debt
securities of that series have made written request, and such holders have offered
reasonable indemnity to the trustee, to institute the proceeding as trustee; and |
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the trustee does not institute the proceeding, and does not receive from the holders
of a majority in aggregate principal amount of the outstanding debt securities of that
series other conflicting directions, within 90 days after the notice, request and
offer. |
These limitations do not apply to a suit instituted by a holder of debt securities if we
default in the payment of the principal, premium, if any, or interest on, the debt securities.
We will periodically file statements with the trustee regarding our compliance with the
covenants in the indentures.
Modification of Indentures; Waiver
We and the trustee may change an indenture without the consent of any holders with respect to
specific matters, including:
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to fix any ambiguity, omission, defect or inconsistency in the indenture; |
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to comply with the provisions described above under Consolidation, Merger or
Sale; |
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to comply with any requirements of the SEC in connection with the qualification of
any indenture under the Trust Indenture Act of 1939; |
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to evidence and provide for the acceptance of appointment by a successor trustee; |
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to provide for uncertificated debt securities; |
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to add to, delete from, or revise the conditions, limitations and restrictions on
the authorized amount, terms or purposes of issuance, authorization and delivery of
debt securities of any unissued series; |
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to add any additional events of default; |
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to provide for the issuance of and establish the form and terms and conditions of
any series of debt securities as provided in an indenture, to establish the form of any
certifications required to be furnished pursuant to an indenture or any series of debt
securities, or to add to the rights of the holders of any series of debt securities; |
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to add to our covenants such new covenants, restrictions, conditions or provisions
for the protection of the holders, to make the occurrence, or the occurrence and the
continuance, of a default in any such additional covenants, restrictions, conditions or
provisions an event of default, or to surrender any of our rights or powers under the
indenture; or |
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to make any other provisions with respect to matters or questions arising under an
indenture, provided that such action shall not adversely affect the interests of
holders or any related coupons in any material respect; provided further, that any
change to an indenture to conform it to this prospectus or the applicable prospectus
supplement shall be deemed not to adversely affect the interests of holders in any
material respect. |
In addition, under the indentures, the rights of holders of a series of debt securities may be
changed by us and the trustee with the written consent of the holders of at least a majority in
aggregate principal amount of the outstanding debt securities of each series that is affected.
However, we and the trustee may make the following changes only with the consent of each holder of
any outstanding debt securities affected:
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changing the stated fixed maturity of, or any payment date of any installment of
interest on, the debt securities; |
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reducing the principal amount, reducing the rate of interest on, or reducing any
premium payable upon the redemption of any debt securities; or |
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reducing the percentage of debt securities, the holders of which are required to
consent to any supplemental indenture. |
Defeasance and Discharge
The indentures provide that we may elect, with respect to the debt securities of any series to
terminate (and be deemed to have satisfied) any and all obligations in respect of such debt
securities (except for certain obligations to register the transfer or exchange of debt securities,
to replace stolen, lost or mutilated debt securities, to maintain paying agencies and hold monies
for payment in trust and, if so specified with respect to the debt securities of a certain series,
to pay the principal of (and premium, if any) and interest, if any, on such specified debt
securities) on the 91st day after the deposit with the trustee, in trust, of money and/or U.S.
government obligations which through the payment of interest and principal thereof in accordance
with their terms will provide money in an amount sufficient to pay any installment of principal
(and premium, if any (and interest, if any)), on and any mandatory sinking fund payments in respect
of such debt securities on the stated maturity of such payments in accordance with the terms of the
Indenture and such debt securities.
Such a trust may be established only if, among other things, we have delivered to the trustee
an opinion of counsel (who may be counsel to us) to the effect that, based upon applicable U.S.
federal income tax law or a ruling published by the U.S. Internal Revenue Service (which opinion
must be based on a change in applicable U.S. federal income tax law after the date of the indenture
or a ruling published by the U.S. Internal Revenue Service after the date of the indenture), such a
defeasance and discharge will not be deemed, or result in, a taxable event with respect to holders
of such debt securities. The designation of such provisions, U.S. federal income tax consequences
and other considerations applicable thereto will be described in the prospectus supplement relating
thereto. If so specified with respect to the debt securities of a series, such a trust may be
established only if establishment of the
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trust would not cause the debt securities of any such series listed on any nationally
recognized securities exchange to be de-listed as a result thereof.
Form, Exchange and Transfer
We will issue the debt securities of each series only in fully registered form without coupons
and, unless we otherwise specify in the applicable prospectus supplement, in denominations of
$1,000 and any integral multiple thereof. The indentures provide that we may issue debt securities
of a series in temporary or permanent global form and as book-entry securities that will be
deposited with, or on behalf of, The Depository Trust Company or another depositary named by us and
identified in a prospectus supplement with respect to that series.
At the option of the holder, subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus supplement, the holder of
the debt securities of any series can exchange the debt securities for other debt securities of the
same series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject to the terms of the indentures and the limitations applicable to global securities set
forth in the applicable prospectus supplement, holders of the debt securities may present the debt
securities for exchange or for registration of transfer, duly endorsed or with the form of transfer
endorsed thereon duly executed if so required by us or the security registrar, at the office of the
security registrar or at the office of any transfer agent designated by us for this purpose.
Unless otherwise provided in the debt securities that the holder presents for transfer or exchange,
we will make no service charge for any registration of transfer or exchange, but we may require
payment of any taxes or other governmental charges.
We will name in the applicable prospectus supplement the security registrar, and any transfer
agent in addition to the security registrar, that we initially designate for any debt securities.
We may at any time designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the debt securities of each
series.
If we elect to redeem the debt securities of any series, we will not be required to:
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issue, register the transfer of, or exchange any debt securities of any series being
redeemed in part during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of any debt securities that may be
selected for redemption and ending at the close of business on the day of the mailing;
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register the transfer of or exchange any debt securities so selected for redemption,
in whole or in part, except the unredeemed portion of any debt securities we are
redeeming in part. |
Information Concerning the Trustee
The trustee, other than during the occurrence and continuance of an event of default under an
indenture, undertakes to perform only those duties as are specifically set forth in the applicable
indenture. Upon an event of default under an indenture, the trustee must use the same degree of
care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the trustee is under no obligation to exercise any of the powers given it by the
indentures at the request of any holder of debt securities unless it is offered reasonable security
and indemnity against the costs, expenses and liabilities that it might incur.
Payment and Paying Agents
Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of
the interest on any debt securities on any interest payment date to the person in whose name the
debt securities, or one or more predecessor securities, are registered at the close of business on
the regular record date for the interest.
We will pay principal of, and any premium and interest on, the debt securities of a particular
series at the office of the paying agents designated by us, except that, unless we otherwise
indicate in the applicable prospectus supplement, we may make payments of principal or interest by
check which we will mail to the holder or by wire transfer to certain holders. Unless we otherwise
indicate in a prospectus supplement, we will designate an office or agency of the trustee in the
City of New York as our paying agent for payments with respect to debt securities of each series.
We will name in the applicable prospectus supplement any other paying agents that we initially
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designate for the debt securities of a particular series. We will maintain a paying agent in
each place of payment for the debt securities of a particular series.
All money we pay to a paying agent or the trustee for the payment of the principal of or any
premium or interest on any debt securities which remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable will be repaid to us, and the holder
of the debt security thereafter may look only to us for payment thereof.
Governing Law
The indentures and the debt securities will be governed by and construed in accordance with
the laws of the State of New York, except to the extent that the Trust Indenture Act of 1939 is
applicable.
Subordination of Subordinated Debt Securities
The subordinated debt securities will be subordinate and junior in priority of payment to
certain of our other indebtedness to the extent described in a prospectus supplement.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of our ordinary shares, including ordinary shares
represented by ADSs, or debt securities. We may issue warrants independently of or together with
ordinary shares (including ordinary shares represented by ADSs) or debt securities offered by any
prospectus supplement, and we may attach the warrants to, or issue them separately from, ordinary
shares (including ordinary shares represented by ADSs) or debt securities. Each series of warrants
will be issued under a separate warrant agreement to be entered into between us and a bank or trust
company, as warrant agent, all as set forth in the prospectus supplement relating to the particular
issue of offered warrants. The warrant agent will act solely as our agent in connection with the
warrant certificates relating to the warrants and will not assume any obligation or relationship of
agency or trust with any holders of warrant certificates or beneficial owners of warrants. The
following summaries of certain provisions of the warrant agreements and warrants do not purport to
be complete and are subject to, and are qualified in their entirety by reference to, all the
provisions of the warrant agreement and the warrant certificates relating to each series of
warrants which we will file with the SEC and incorporate by reference as an exhibit to the
registration statement of which this prospectus is a part at or prior to the time of the issuance
of any series of warrants.
General
The applicable prospectus supplement will describe the terms of the warrants, including as
applicable:
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the offering price; |
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the aggregate number or amount of underlying securities purchasable upon exercise of
the warrants and the exercise price; |
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the number of warrants being offered; |
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the date, if any, after which the warrants and the underlying securities will be
transferable separately; |
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the date on which the right to exercise the warrants will commence, and the date on
which the right will expire (the Expiration Date); |
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the number of warrants outstanding, if any; |
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any material U.S. federal income tax consequences; |
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the terms, if any, on which we may accelerate the date by which the warrants must be
exercised; and |
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any other terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the warrants. |
Warrants will be offered and exercisable for US dollars only and will be in registered form
only.
Holders of warrants will be able to exchange warrant certificates for new warrant certificates
of different denominations, present warrants for registration of transfer, and exercise warrants at
the corporate trust office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of any warrants, holders of the warrants to purchase
ordinary shares will not have any rights of holders of ordinary shares, including the right to
receive payments of dividends, if any, or to exercise any applicable right to vote.
Certain Risk Considerations
Any warrants we issue will involve a degree of risk, including risks arising from fluctuations
in the price of the underlying ordinary shares or debt securities and general risks applicable to
the securities market (or markets) on which the underlying securities trade, as applicable.
Prospective purchasers of the warrants will need to recognize that the warrants may expire
worthless and, thus, purchasers should be prepared to sustain a total loss of the purchase price of
their warrants. This risk reflects the nature of a warrant as an asset which, other factors held
constant, tends to decline in value over time and which may, depending on the price of the
underlying securities, become worthless when it expires. The trading price of a warrant at any time
is expected to increase if the price of or, if applicable, dividend rate on, the underlying
securities increases. Conversely, the trading price of a warrant is expected to decrease as the
time remaining to expiration of the warrant decreases and as the price of or, if applicable,
dividend rate on, the underlying securities, decreases. Assuming all other factors are held
constant, the more a warrant is out-of-the-money (i.e., the more the exercise
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price exceeds the price of the underlying securities and the shorter its remaining term to
expiration), the greater the risk that a purchaser of the warrant will lose all or part of his or
her investment. If the price of the underlying securities does not rise before the warrant expires
to an extent sufficient to cover a purchasers cost of the warrant, the purchaser will lose all or
part of his or her investment in the warrant upon expiration.
In addition, prospective purchasers of the warrants should be experienced with respect to
options and option transactions, should understand the risks associated with options and should
reach an investment decision only after careful consideration, with their financial advisers, of
the suitability of the warrants in light of their particular financial circumstances and the
information discussed in this prospectus and, if applicable, the prospectus supplement. Before
purchasing, exercising or selling any warrants, prospective purchasers and holders of warrants
should carefully consider, among other things:
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the trading price of the warrants; |
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the price of the underlying securities at that time; |
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the time remaining to expiration; and |
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any related transaction costs. |
Some of the factors referred to above are in turn influenced by various political, economic
and other factors that can affect the trading price of the underlying securities and should be
carefully considered prior to making any investment decisions.
Purchasers of the warrants should further consider that the initial offering price of the
warrants may be in excess of the price that a purchaser of options might pay for a comparable
option in a private, less liquid transaction. In addition, it is not possible to predict the price
at which the warrants will trade in the secondary market or whether any such market will be liquid.
We may, but will not be obligated to, file an application to list any warrants on a United States
national securities exchange. To the extent that any warrants are exercised, the number of warrants
outstanding will decrease, which may result in a lessening of the liquidity of the warrants.
Finally, the warrants will constitute our direct, unconditional and unsecured obligations, and as
such will be subject to any changes in our perceived creditworthiness.
Exercise of Warrants
Each holder of a warrant will be entitled to purchase that number or amount of underlying
securities, at the exercise price, as will in each case be described in the prospectus supplement
relating to the offered warrants. After the close of business on the Expiration Date (which may be
extended by us), unexercised warrants will become void.
Holders may exercise warrants by delivering to the warrant agent payment as provided in the
applicable prospectus supplement of the amount required to purchase the underlying securities
purchasable upon exercise, together with the information set forth on the reverse side of the
warrant certificate. Warrants will be deemed to have been exercised upon receipt of payment of the
exercise price, subject to the receipt within five business days of the warrant certificate
evidencing the exercised warrants. Upon receipt of payment and the warrant certificate properly
completed and duly executed at the corporate trust office of the warrant agent or any other office
indicated in the applicable prospectus supplement, we will, as soon as practicable, issue and
deliver the underlying securities purchasable upon such exercise. If fewer than all of the warrants
represented by a warrant certificate are exercised, we will issue a new warrant certificate for the
remaining amount of warrants.
Amendments and Supplements to Warrant Agreements
We may amend or supplement the warrant agreement without the consent of the holders of the
warrants issued under the agreement to effect changes that are not inconsistent with the provisions
of the warrants and that do not adversely affect the interests of the holders.
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DESCRIPTION OF RIGHTS
We may issue rights for the purchase of our ordinary shares, including ordinary shares
represented by ADSs, or debt securities. Each series of rights will be issued under a separate
rights agreement which we will enter into with a bank or trust company, as rights agent, all as set
forth in the applicable prospectus supplement. The rights agent will act solely as our agent in
connection with the certificates relating to the rights and will not assume any obligation or
relationship of agency or trust with any holders of rights certificates or beneficial owners of
rights. We will file the rights agreement and the rights certificates relating to each series of
rights with the SEC, and incorporate them by reference as an exhibit to the registration statement
of which this prospectus is a part on or before the time we issue a series of rights.
The applicable prospectus supplement will describe the terms of any rights we issue, including
as applicable:
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the date for determining the persons entitled to participate in the rights
distribution; |
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the aggregate number or amount of underlying securities purchasable upon exercise of
the rights and the exercise price; |
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the aggregate number of rights being issued; |
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the date, if any, on and after which the rights may be transferable separately; |
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the date on which the right to exercise the rights commences and the date on which
the right expires; |
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the number of rights outstanding, if any; |
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any material U.S. federal income tax consequences; and |
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any other terms of the rights, including the terms, procedures and limitations
relating to the distribution, exchange and exercise of the rights. |
Rights will be exercisable for US dollars only and will be in registered form only.
DESCRIPTION OF UNITS
We may issue securities in units, each consisting of two or more types of securities. For
example, we might issue units consisting of a combination of debt securities and warrants to
purchase ordinary shares. If we issue units, the prospectus supplement relating to the units will
contain the information described above with regard to each of the securities that is a component
of the units. In addition, the prospectus supplement relating to units will describe the terms of
any units we issue, including as applicable:
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the date, if any, on and after which the units may be transferable separately; |
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whether we will apply to have the units traded on a securities exchange or
securities quotation system; |
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any material U.S. federal income tax consequences; and |
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how, for U.S. federal income tax purposes, the purchase price paid for the units is
to be allocated among the component securities. |
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SELLING SECURITYHOLDERS
Information about selling securityholders, where applicable, will be set forth in a prospectus
supplement, in a post-effective amendment, or in filings we make with the SEC that are incorporated
into this prospectus by reference.
PLAN OF DISTRIBUTION
We and any selling securityholders may sell the securities under this prospectus in one or
more of the following ways (or in any combination) from time to time:
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to or through one or more underwriters or dealers; |
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in short or long transactions; |
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directly to investors; or |
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through agents. |
If underwriters or dealers are used in the sale, the securities will be acquired by the
underwriters or dealers for their own account and may be resold from time to time in one or more
transactions, including:
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in privately negotiated transactions; |
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in one or more transactions at a fixed price or prices, which may be changed from
time to time; |
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in at the market offerings, within the meaning of Rule 415(a)(4) of the Securities
Act, to or through a market maker or into an existing trading market, on an exchange or
otherwise; |
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at prices related to those prevailing market prices; or |
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at negotiated prices. |
As applicable, we, any selling securityholders, and our respective underwriters, dealers or
agents, reserve the right to accept or reject all or part of any proposed purchase of the
securities. We will set forth in a prospectus supplement the terms and offering of securities by
us, including:
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the names of any underwriters, dealers or agents; |
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any agency fees or underwriting discounts or commissions and other items
constituting agents or underwriters compensation; |
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any discounts or concessions allowed or reallowed or paid to dealers; |
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details regarding over-allotment options under which underwriters may purchase
additional securities from us, if any; |
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the purchase price of the securities being offered and the proceeds we will receive
from the sale; |
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the public offering price; and |
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the securities exchanges on which such securities may be listed, if any. |
We and any selling securityholders may enter into derivative transactions with third parties
or sell securities not covered by this prospectus to third parties in privately negotiated
transactions from time to time. If the applicable prospectus supplement indicates, in connection
with those derivative transactions, such third parties (or affiliates of such third parties) may
sell securities covered by this prospectus and the applicable prospectus supplement, including in
short sale transactions. If so, such third parties (or affiliates of such third parties) may use
securities pledged by us or any selling securityholders, as the case may be, or borrowed from us or
any selling securityholders, as the case may be, or others to settle those sales or to close out
any related open borrowings of securities, and may use securities received from us or any selling
securityholders, as the case may be, in settlement of those derivative transactions to close out
any related open borrowings of securities. The third parties (or affiliates of such third parties)
in such sale transactions by us will be underwriters and will be identified in an applicable
prospectus supplement (or a post-effective amendment). We may also sell securities under this
prospectus upon the exercise of rights that may be issued to our securityholders.
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We may loan or pledge securities to a financial institution or other third party that in turn
may sell the securities using this prospectus and an applicable prospectus supplement. Such
financial institution or third party may transfer its economic short position to investors in our
securities or in connection with a simultaneous offering of other securities offered by this
prospectus.
Underwriters, Agents and Dealers. If underwriters are used in the sale of our securities, the
securities will be acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions described above. The securities may be offered to the public
either through underwriting syndicates represented by managing underwriters or directly by
underwriters. Generally, the underwriters obligations to purchase the securities will be subject
to conditions precedent and the underwriters will be obligated to purchase all of the securities if
they purchase any of the securities. We may use underwriters with which we have a material
relationship and will describe in the prospectus supplement, naming the underwriter, the nature of
any such relationship.
We and any selling securityholders may sell the securities through agents from time to time.
When we sell securities through agents, the prospectus supplement will name any agent involved in
the offer or sale of securities and any commissions we pay to them. Generally, any agent will be
acting on a best efforts basis for the period of its appointment.
We may authorize underwriters, dealers or agents to solicit offers by certain purchasers to
purchase our securities from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a specified date in
the future. The contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth any commissions we pay for solicitation of
these contracts.
Underwriters, dealers and agents may contract for or otherwise be entitled to indemnification
by us against certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments made by the underwriters, dealers or agents, under agreements
between us and the underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of our securities an option to
purchase additional securities to cover over-allotments, if any, in connection with the
distribution.
Underwriters, dealers or agents may receive compensation in the form of discounts, concessions
or commissions from us or our purchasers, as their agents in connection with the sale of our
securities. These underwriters, dealers or agents may be considered to be underwriters under the
Securities Act. As a result, discounts, commissions or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and commissions. The
prospectus supplement for any securities offered by us will identify any such underwriter, dealer
or agent and describe any compensation received by them from us. Any public offering price and any
discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time.
Any underwriter may engage in over-allotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M under the Exchange
Act. Over-allotment involves sales in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Short-covering transactions involve purchases of our
securities in the open market after the distribution is completed to cover short positions. Penalty
bids permit the underwriters to reclaim a selling concession from a dealer when the securities
originally sold by the dealer are purchased in a transaction to cover short positions. Those
activities may cause the price of the securities to be higher than it would otherwise be. If
commenced, the underwriters may discontinue any of the activities at any time. We make no
representation or prediction as to the direction or magnitude of any effect these transactions may
have on the price of our securities. For a description of these activities, see the information
under the heading Underwriting in the applicable prospectus supplement.
Underwriters, broker-dealers or agents who may become involved in the sale of our securities
may engage in transactions with and perform other services for us for which they receive
compensation.
Stabilization Activities. In connection with an offering through underwriters, an underwriter
may, to the extent permitted by applicable rules and regulations, purchase and sell securities in
the open market. These transactions, to the extent permitted by applicable rules and regulations,
may include short sales, stabilizing transactions and
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purchases to cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of securities than they are required to purchase in the offering.
Covered short sales are sales made in an amount not greater than the underwriters option to
purchase additional securities from us in the offering, if any. If the underwriters have an
over-allotment option to purchase additional securities from us, the underwriters may consider,
among other things, the price of securities available for purchase in the open market as compared
to the price at which they may purchase securities through the over-allotment option. Naked short
sales, which may be prohibited or restricted by applicable rules and regulations, are any sales in
excess of such option or where the underwriters do not have an over-allotment option. The
underwriters must close out any naked short position by purchasing securities 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 securities in the open market after pricing that could
adversely affect investors who purchase in the offering.
Accordingly, to cover these short sales positions or to otherwise stabilize or maintain the
price of the securities, the underwriters may bid for or purchase securities in the open market and
may impose penalty bids. If penalty bids are imposed, selling concessions allowed to syndicate
members or other broker-dealers participating in the offering are reclaimed if securities
previously distributed in the offering are repurchased, whether in connection with stabilization
transactions or otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the securities at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the securities to the extent
that it discourages resale of the securities. The magnitude or effect of any stabilization or other
transactions is uncertain.
Direct Sales. We and any selling securityholders may also sell securities directly to one or
more purchasers without using underwriters or agents. In this case, no agents, underwriters or
dealers would be involved. We may sell securities upon the exercise of rights that we may issue to
our securityholders. We and any selling securityholders may also sell securities 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 securities.
Trading Market. It is possible that one or more underwriters may make a market in a class or
series of securities, but the underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. We cannot give any assurance as to the liquidity of the
trading market for any of the securities.
63
LEGAL MATTERS
Certain legal matters will be passed upon for us by OMelveny & Myers LLP with respect to
matters of United States federal securities and New York State law. Certain legal matters as to
Cayman Islands law will be passed upon for us by Conyers Dill & Pearman. Certain legal matters as
to PRC law will be passed upon for us by Jun He Law Offices.
EXPERTS
The consolidated financial statements of Mindray Medical International Limited and its
subsidiaries, or MMIL, as of and for the six months ended June 30, 2009, incorporated in this
prospectus supplement by reference from MMILs Report on Form 6-K dated March 3, 2010, and the
consolidated financial statements of MMIL as of and for the year ended December 31, 2008 and
managements assessment of the effectiveness of MMILs internal control over financial reporting as
of December 31, 2008 (which is included in Managements Annual Report on Internal Control over
Financial Reporting) incorporated in this prospectus by reference to MMILs Annual
Report on Form 20-F for the year ended December 31, 2008 have been so incorporated in reliance on
the reports of PricewaterhouseCoopers, an independent registered public accounting firm, given on
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Mindray Medical International Limited and its
subsidiaries as of December 31, 2007 and for the two years ended December 31, 2007,
incorporated in this prospectus by reference from our Annual Report on Form 20-F have been audited
by Deloitte Touche Tohmatsu CPA Ltd., an independent registered public accounting firm, as stated
in their report, which is incorporated herein by reference. Such consolidated financial statements
have been so incorporated in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The statements included in this prospectus under the caption Enforcement of Civil
Liabilities, to the extent they constitute matters of PRC law, have been reviewed and confirmed by
Jun He Law Offices, our PRC counsel, as experts in such matters, and are included herein in
reliance upon such review and confirmation. The offices of Jun He Law Offices are located at
Shenzhen Development Bank Tower, 15-C, 5047 East Shenan Road, Shenzhen 518001, China.
64
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 8. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Registrants articles of association provide that, subject to
Companies Law, Cap. 22 of the Cayman Islands (the Companies Law), every director or other officer of the Registrant shall
be indemnified against any liability incurred by him in his capacity as such. However, directors
and officers of the Registrant are not indemnified against any liability to the Registrant or a
related company of fraud or dishonesty which may attach to such
director or officer.
Pursuant to indemnification agreements, the Registrant has agreed to indemnify its directors
and officers, to the extent permitted by Cayman law, against certain liabilities and expenses
incurred by such persons in connection with claims by reason of their being such a director or
officer.
ITEM 9. EXHIBITS
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Number |
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Description |
1.1* |
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Form of Underwriting Agreement. |
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4.1** |
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Specimen of American Depositary Receipt. |
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4.2** |
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Specimen Certificate for Class A Ordinary Shares. |
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4.3** |
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Deposit Agreement among the Registrant, the Depositary and owners and holders of |
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the American Depositary Shares issued thereunder. |
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4.4 |
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Form of Indenture. |
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4.5* |
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Form of Note. |
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4.6* |
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Form of Warrant. |
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4.7* |
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Form of Warrant Agreement. |
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5.1 |
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Opinion of Conyers Dill & Pearman. |
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5.2 |
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Opinion of OMelveny & Myers LLP. |
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10.1** |
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Form of Indemnification Agreement with the officers and directors of the Registrant. |
II-1
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Number |
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Description |
23.1 |
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Consent of Deloitte Touche Tohmatsu CPA Ltd. |
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23.2 |
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Consent of PricewaterhouseCoopers. |
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23.3 |
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Consent of Pricewaterhouse Coopers. |
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23.4 |
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Consent of Conyers Dill & Pearman (included in Exhibit 5.1). |
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23.5 |
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Consent of OMelveny &
Myers LLP (included in Exhibit 5.2). |
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24.1 |
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Powers of Attorney (included on signature page of Part II of this Registration |
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Statement). |
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25.1* |
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Statement of eligibility of trustee on form T-1 of the Trustee under the Indenture. |
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* |
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To be filed as an exhibit to a post-effective amendment to this registration statement or as an
exhibit to a report filed under the Securities Exchange Act of 1934, as amended, and incorporated
herein by reference. |
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** |
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Previously filed with the Registrants registration statement on Form F-1 (File No. 333-137140). |
ITEM 10. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus filed with the
SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do
not apply if the information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement, or is contained in a form of prospectus filed pursuant to
Rule 424(b) that is part of this registration statement;
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(2) That, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering;
(4) That, for purposes of determining any liability under the Securities Act to any purchaser,
each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of
the registration statement as of the date the filed prospectus was deemed part of and included in
the registration statement; and each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the
information required by section 10(a) of the Securities Act shall be deemed to be part of and
included in the registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; provided, however, that no statement made
in a registration statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration statement and or made in
any such document immediately prior to such effective date; and
(5) That, for the purpose of determining liability of the registrant under the Securities Act
to any purchaser in the initial distribution of the securities, the undersigned registrant
undertakes that in a primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of
the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
The undersigned registrant hereby further undertakes:
(1) That for purposes of determining any liability under the Securities Act, each filing of
the registrants annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide offering thereof;
II-3
(2) To file an application for the purpose for determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the SEC under Section 302(b)(2) of the Trust Indenture Act;
(3) Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue;
(4) That, for purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective; and
(5) That, for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time will be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Shenzhen, China on March 3, 2010.
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Mindray Medical International Limited
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|
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By: |
/s/ XU HANG
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Name: |
Xu Hang |
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Title: |
Chairman of the Board and
Co-Chief Executive Officer |
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|
Powers of Attorney
Each of the undersigned officers and directors of Mindray Medical International Limited hereby
severally constitutes and appoints Ronald Ede the true and lawful attorney with full power for him
to sign for the undersigned and in his or her name in the capacities indicated below, any and all
amendments, including the post-effective amendments, to this registration statement, and generally
to do all such things in the undersigneds name and behalf in such capacities to enable Mindray
Medical International Limited to comply with the applicable provisions of the Securities Act of
1933, as amended, and all rules and regulation thereunder, and all requirements of the Securities
and Exchange Commission, and each of the undersigned hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities
indicated on March 3,
2010.
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|
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Signature |
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Capacity |
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/s/ XU HANG
|
|
Chairman of the Board |
|
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and Co-Chief Executive Officer |
|
|
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/s/ LI XITING
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|
Director and Co-Chief Executive Officer |
|
|
(principal executive officer) |
|
|
|
/s/ RONALD EDE
|
|
Director and Chief Financial Officer (principal |
|
|
financial and accounting officer) |
|
|
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/s/ WU QIYAO
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Director |
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|
|
/s/ JOYCE I-YIN HSU
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Director |
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II-5
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|
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Signature |
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Capacity |
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/s/ JIXUN LIN
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Director |
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|
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/s/ PETER WAN
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Director |
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/s/ KERN LIM
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Director |
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|
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|
|
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/s/ CHEN QINGTAI
|
|
Director |
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|
|
Signature of authorized representative in the United States
Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized
representative in the United States of Mindray Medical International Limited, has signed this
registration statement or amendment thereto in Newark, Delaware, on March 3, 2010.
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Puglisi & Associates
|
|
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By: |
/s/ DONALD J. PUGLISI
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|
|
Name: |
Donald J. Puglisi |
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|
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Title: |
Managing Director |
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II-6