F-1

As filed with the Securities and Exchange Commission on October 4, 2006

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM F-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

HOME INNS & HOTELS MANAGEMENT INC.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Cayman Islands	7011	Not Applicable
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

No. 400 Tian Yao Qiao Road

Shanghai 200030, People’s Republic of China

+(8621) 6486-1818

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

CT Corporation System

111 Eighth Avenue

New York, New York 10011

(212) 664-1666

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David T. Zhang, Esq. Latham & Watkins LLP 41^st Floor, One Exchange Square 8 Connaught Place, Central Hong Kong +(852) 2522-7886 Leiming Chen, Esq.
Simpson Thacher & Bartlett LLP
7^th Floor, ICBC Tower
3 Garden Road, Central
Hong Kong
+(852) 2514-7600

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

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 the Securities Act of 1933, check the following box. ¨

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. ¨

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 effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed maximum aggregate offering price (1)		Amount of registration fee
Ordinary shares, par value US$0.005 per share (2)(3)	US$	80,000,000	US$	8,616

(1) Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(2) Includes 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 also includes ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These ordinary shares are not being registered for the purpose of sales outside the United States.

(3) American depositary shares issuable upon deposit of the ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No.333-            ). Each American depositary share represents              ordinary shares.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling shareholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus Dated             , 2006

             American Depositary Shares

Home Inns & Hotels Management Inc.

Representing              Ordinary Shares

This is an initial public offering of American depositary shares, or ADSs, of Home Inns & Hotels Management Inc., or Home Inns. Home Inns is offering              ADSs, and the selling shareholders disclosed in this prospectus are offering an additional              ADSs. Each ADS represents              ordinary share[s]. The ADSs are evidenced by American depositary receipts, or ADRs. Home Inns will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

Prior to this offering, there has been no public market for the ADSs or the shares. We anticipate the initial public offering price will be between US$             and US$             per ADS. We have applied to have the ADSs listed on the Nasdaq Global Market under the symbol “HMIN.”

The underwriters have an option to purchase up to an additional              ADSs from Home Inns and an additional              ADSs from the selling shareholders at the initial public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus.

See “Risk Factors” beginning on page 13 to read about risks you should consider before buying the ADSs.

	Initial public offering price	Underwriting discounts and commissions	Proceeds, before expenses, to Home Inns	Proceeds, before expenses, to the selling shareholders
Per ADS	US$	US$	US$	US$
Total	US$	US$	US$	US$

The underwriters expect to deliver the ADSs evidenced by the ADRs against payment in U.S. dollars in New York, New York on             , 2006.

Neither the United States Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Credit Suisse Merrill Lynch & Co.

Deutsche Bank Securities

The date of this prospectus is             , 2006

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
RISK FACTORS	13
FORWARD-LOOKING STATEMENTS	28
USE OF PROCEEDS	29
DIVIDEND POLICY	30
CAPITALIZATION	31
DILUTION	32
EXCHANGE RATE INFORMATION	34
ENFORCEABILITY OF CIVIL LIABILITIES	35
SELECTED CONSOLIDATED FINANCIAL DATA	36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	41
INDUSTRY BACKGROUND	67
BUSINESS	71
REGULATION	85
MANAGEMENT	89
PRINCIPAL AND SELLING SHAREHOLDERS	96
RELATED PARTY TRANSACTIONS	99
DESCRIPTION OF SHARE CAPITAL	102
DESCRIPTION OF AMERICAN DEPOSITARY SHARES	107
SHARES ELIGIBLE FOR FUTURE SALE	114
TAXATION	116
UNDERWRITING	121
NOTICE TO CANADIAN RESIDENTS	126
EXPENSES RELATING TO THIS OFFERING	128
LEGAL MATTERS	129
EXPERTS	129
WHERE YOU CAN FIND ADDITIONAL INFORMATION	129
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information in this prospectus is current only as of the date of this prospectus.

Through and including             , 2006 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to buy our ADSs.

Home Inns & Hotels Management Inc.

Our Company

We are a leading economy hotel chain in China based on the number of our hotels and the number of our hotel rooms as well as the geographic coverage of our hotel chain. We develop and operate economy hotels across China under our award-winning “Home Inn” brand. Since we commenced operations in 2002, we have become one of the best-known economy hotel brands in China. We offer a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging.

We have achieved our growth by utilizing two business models. We either lease real estate properties on which we develop and operate hotels or we franchise our brand to hotel owners and manage these hotel properties. We refer to the former type of hotels as “leased-and-operated hotels” and to the latter type of hotels as “franchised-and-managed hotels.” As of June 30, 2006, our Home Inns hotel chain consisted of 63 leased-and-operated hotels in operation with an additional 33 leased-and-operated hotels under development, and 19 franchised-and-managed hotels in operation with an additional 24 franchised-and-managed hotels under development, covering 40 cities in China. We have received many awards and accolades for our innovative, consistent and high-quality product and services across our hotel chain, including the “2006 Leading Brand in Economy Hotels in China” from the China Hotel Association and the “Golden Pillow Award” for best brand in economy hotels in China in 2006 from the 21^st Century Business Herald, a nationwide economic journal in China.

We have experienced substantial growth while maintaining profitability since 2003. Our Home Inns hotels in operation grew rapidly from 10 hotels in four cities as of the end of 2003 to 68 hotels in 22 cities as of the end of 2005, and our net income grew from RMB1.5 million in 2003 to RMB20.9 million (US$2.6 million) in 2005. In the six months ended June 30, 2006, we generated total revenues of RMB249.1 million (US$31.2 million) and net income of RMB27.2 million (US$3.4 million).

Industry Background

China’s lodging industry has expanded rapidly as a result of the substantial growth of the Chinese economy over the past several years. According to Euromonitor International, or Euromonitor, total sales in China’s lodging industry grew from RMB190 billion in 1999 to RMB264 billion in 2004.

While China’s lodging industry continues to grow, it remains highly fragmented. According to Euromonitor, hotels accounted for only approximately 5% of total lodging outlets in China in 2004, with the remainder being guesthouses and other privately owned lodging outlets. Within the hotel sector of the lodging industry, the top ten brands accounted for an approximate 6% market share in 2004 in terms of sales.

Economy hotel chains have emerged and expanded in China in recent years to primarily target value-conscious individual business and leisure travelers. The growth in demand for economy hotel chains in China is

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being driven by both general factors, such as the growth of the Chinese economy and the growth of China’s travel and lodging industry, as well as more specific factors, such as a rapid increase in the number of small-to medium-sized enterprises, or SMEs, the growth of domestic tourism, the expansion of urban business centers and the fragmentation of the lodging industry.

We believe the economy hotel market in China is still at an early stage of development. There are significant growth opportunities for economy hotel operators to develop new properties and convert existing lodging facilities. Competitiveness of an economy hotel chain is determined by the hotel chain’s ability to provide a consistent product, high-quality services, an efficient reservation system and effective sales channels, as well as the its brand-name recognition and geographic coverage. We believe economy hotel chains that have established a reputable brand and a nationwide network, such as our Home Inns hotel chain, are well-positioned to capture the opportunities presented by the continuing growth of the economy hotel market in China.

Our Strengths, Strategies and Challenges

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

• scale and leadership in the economy hotel market in China as measured by the number of our hotels and the number of our hotel rooms as well as the geographic coverage of our hotel chain;

• innovative, distinctive and consistent product;

• outstanding track record as evidenced by our ability to rapidly expand our hotel chain from ten hotels operating in four cities as of the end of 2003 to 82 hotels operating in 26 cities as of June 30, 2006 while having maintained profitability since 2003;

• efficient and integrated operational infrastructure and information systems; and

• experienced management team and motivated staff.

Our goal is to become the leading economy hotel chain in China. We intend to achieve our goal by pursuing the following growth strategies:

• expand geographical coverage to capitalize on our early-mover advantage;

• increase penetration in existing markets;

• continue to build brand awareness and customer loyalty;

• increase our revenue per available room, or RevPAR, by optimizing customer channel mix and maximizing room rate growth; and

• further enhance our information and operational systems and human resources management.

The successful execution of our strategies is subject to certain risks and uncertainties, including:

• risks associated with our limited operating history;

• uncertainties associated with our ability to continue our growth while maintaining our profitability;

• uncertainties associated with our ability to fund working capital needs as we have incurred a working capital deficit resulting primarily from payables relating to the cost of leasehold improvements;

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• uncertainties in our ability to expand our operations while maintaining the consistent quality of our product and enhancing profitability;

• uncertainties in our ability to respond to competitive pressures; and

• uncertainties associated with factors typically affecting the lodging industry, including changes in economic conditions, natural disasters or outbreaks of serious contagious diseases in markets where we have a presence.

Please see “Risk Factors” and other information included in this prospectus for a detailed discussion of these risks and uncertainties.

Corporate Information

We incorporated Home Inns & Hotels Management (Hong Kong) Limited, or Home Inns Hong Kong, in May 2001 and commenced operations in July 2002 through Home Inns & Hotels Management (Beijing) Co, Ltd., or Home Inns Beijing, a company established in China, and its subsidiaries and affiliates. In May 2006, we established a holding company, Home Inns & Hotels Management Inc., under the laws of the Cayman Islands in preparation for this offering.

Our principal executive offices are located at No. 400 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China. Our telephone number at this address is +(8621) 6486-1818. Our registered office in the Cayman Islands is located at the offices of M&C Corporate Services Limited, P.O Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. In addition, we have two branch offices in China. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011.

Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is http://www.homeinns.com. The information contained on our website is not a part of this prospectus.

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Corporate Structure and History

The following diagram illustrates our corporate structure, the place of formation and the ownership interests of our subsidiaries as of September 30, 2006.

* Home Inns Shanghai owns 75% of one joint venture, 70% of another joint venture and 51% of each of the other three joint ventures.

Home Inns Hong Kong was incorporated in Hong Kong in May 2001 by its individual founders and Ctrip.com International, Ltd., or Ctrip, a leading China-based travel consolidator. Through a series of transactions, Ctrip disposed of all of its ownership interest in Home Inns Hong Kong in August 2003 to focus on its core business of travel consolidation and to prepare for its initial public offering, which was completed in December 2003.

In April 2002, Home Inns Hong Kong and Beijing Capital Travel International Hotel Group Co., Ltd., or Beijing Capital Travel, entered into a joint venture agreement to form Home Inns Beijing to operate branded economy hotels in China. Beijing Capital Travel is a subsidiary of Beijing Tourism Group, or BTG. Home Inns Hong Kong and BTG owned 55% and 45%, respectively, of Home Inns Beijing when it commenced operations in July 2002. Subsequently, Home Inns Hong Kong gradually increased its ownership interest in Home Inns Beijing by contributing additional funds to the registered capital of Home Inns Beijing. Home Inns Hong Kong’s ownership interest in Home Inns Beijing was increased to 95.59% as of February 2005.

We have been actively managing Home Inns Beijing since its inception. Home Inns Hong Kong’s ownership in Home Inns Beijing was accounted for under the equity method since Home Inns Beijing’s inception until April 2004, because during this period of time, BTG had substantive participation rights that enabled it to veto significant decisions made by Home Inns Hong Kong. In April 2004, Home Inns Hong Kong and Beijing Capital Travel entered into a revised joint venture agreement, under which Home Inns Hong Kong obtained control of Home Inns Beijing. As a result, Home Inns Beijing has been our consolidated subsidiary since then.

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In May 2006, we incorporated Home Inns & Hotels Management Inc. in the Cayman Islands in preparation for this offering. In June 2006, all of the then-existing shareholders of Home Inns Hong Kong exchanged their respective shares of Home Inns Hong Kong for an equivalent number of shares of Home Inns & Hotels Management Inc. of equivalent classes. As a result, Home Inns Hong Kong became our wholly owned subsidiary in June 2006. Our consolidated financial statements reflect the share exchange in June 2006 and have been prepared as if our current corporate structure had been in existence throughout the relevant periods.

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Conventions Which Apply to this Prospectus

Unless we indicate otherwise, all information in this prospectus reflects the following:

• no exercise by the underwriters of their option to purchase up to              additional ADSs representing              ordinary shares; and

• conversion of all outstanding preferred shares to ordinary shares immediately prior to the closing of this offering.

Except where the context otherwise requires and for purposes of this prospectus only:

• “we,” “us,” “our company,” “our” and “Home Inns” refer to Home Inns & Hotels Management Inc., a Cayman Islands company, and its predecessor entities and subsidiaries, and in the context of discussing our consolidated financial data before April 2004, excluding Home Inns Beijing and its subsidiaries;

• “BTG” refers to Beijing Tourism Group, a state-owned enterprise established in the PRC, and its predecessors and subsidiaries, including Beijing Capital Travel International Hotel Group Co., Ltd.

• “China” or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau;

• “Home Inns Beijing” refers to Home Inns Hotel Management (Beijing) Co., Ltd., and its subsidiaries, which have been our consolidated subsidiaries since April 2004;

• “Home Inns Hong Kong” refers to Home Inns & Hotels Management (Hong Kong) Limited;

• “our hotels” refers, collectively, to our leased-and-operated and franchised-and-managed hotels;

• “average daily rate” refers to total hotel room revenues divided by the total number of occupied rooms in a given period;

• “occupancy rate” refers to the total number of occupied rooms divided by the total number of available rooms in a given period;

• “RevPAR” represents revenue per available room, which is calculated by dividing total hotel room revenues by the total number of available rooms in a given period or by multiplying average daily rates and occupancy rates in a given period;

• “shares” or “ordinary shares” refers to our ordinary shares; “preferred shares” refers to our Series A convertible preferred shares, Series B convertible preferred shares and Series C convertible preferred shares, collectively;

• “ADSs” refers to our American depositary shares, each of which represents              ordinary shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs; and

• “RMB” or “Renminbi” refers to the legal currency of China; “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States; and “HK$” refers to the legal currency of Hong Kong.

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THE OFFERING

The following information assumes that the underwriters will not exercise their option to purchase additional ADSs in the offering, unless otherwise indicated.

Offering price We currently estimate that the initial public offering price will be between US$             and US$             per ADS.

ADSs offered by us              ADSs

ADSs offered by the selling shareholders              ADSs

ADSs outstanding immediately after this offering              ADSs

Ordinary shares outstanding immediately after this offering              ordinary shares

ADSs to ordinary share ratio

The ADSs The ADSs will be evidenced by American depositary receipts, or ADRs.

• The depositary will hold the shares underlying your ADSs. You will have rights as provided in the deposit agreement.

• If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares, after deducting its fees and expenses.

• You may turn in your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any exchange.

• We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.

To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Over-allotment option We and the selling shareholders have granted to the underwriters an option, which is exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of              additional ADSs.

Use of proceeds Our net proceeds from this offering are expected to be approximately US$             million, assuming an initial public offering price per ADS of US$            , which is the midpoint of the estimated public offering price range. We plan to use the net proceeds we receive from this offering to fund capital expenditures, repay our outstanding indebtedness to a related party, and for general corporate purposes. See “Use of Proceeds” for additional information.

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We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

Lock-up We have agreed with the underwriters to a lock-up of shares for a period of 180 days after the date of this prospectus. In addition, our executive officers, directors and our existing shareholders have also agreed with the underwriters to a lock-up of shares for a period of 180 days after the date of this prospectus. See “Underwriting.”

Listing We have applied to have the ADSs listed on the Nasdaq Global Market under the symbol “HMIN.” Our ordinary shares will not be listed on any exchange or traded on any automated quotation system.

Risk factors See “Risk Factors” and other information included in this prospectus for a discussion of risks you should carefully consider before investing in our ADSs.

Depositary The Bank of New York.

The number of ordinary shares that will be outstanding immediately after this offering:

• assumes the conversion of all outstanding preferred shares into 22,924,886 ordinary shares immediately prior to the completion of this offering;

• excludes              ordinary shares issuable upon the exercise of options outstanding as of the date of this prospectus, at a weighted average exercise price of US$             per share; and

• excludes ordinary shares reserved for future issuances under our share incentive plans.

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Our Summary Consolidated Financial and Operating Data

You should read the following information in conjunction with our and Home Inns Beijing’s consolidated financial statements and related notes, “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following summary consolidated financial information has been derived from our consolidated financial statements included elsewhere in this prospectus. Our summary consolidated statement of operations data for the years ended December 31, 2003, 2004 and 2005 have been derived from our consolidated financial statements for the relevant periods which have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, and are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, and reflect our current corporate structure as if it had been in existence throughout the relevant periods. Our summary consolidated statement of operations data for the six months ended June 30, 2005 and 2006 and our consolidated balance sheet data as of June 30, 2006 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited consolidated financial statements on the same basis as our audited consolidated financial statements. The unaudited financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented.

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2003		2004		2005				2005		2006
	RMB		RMB		RMB		US$		RMB		RMB		US$
	(in thousands, except share, per share and per ADS data)
Consolidated Statement of Operations Data:
Total Revenues	—		96,000		285,861		35,758		109,406		249,059		31,154
Less: Business tax and related surcharges	—		(5,101	)	(16,830	)	(2,105	)	(6,669	)	(13,344	)	(1,669	)
Net revenues	—		90,899		269,031		33,653		102,737		235,715		29,485
Operating costs and expenses(1)	(365	)	(82,031	)	(238,435	)	(29,826	)	(91,795	)	(195,837	)	(24,497	)
Income (loss) from operations	(365	)	8,868		30,596		3,827		10,942		39,878		4,988
Income (loss) before income tax expense, minority interests and share of income of affiliated companies	(365	)	9,183		32,255		4,035		12,913		39,150		4,897
Minority interests	—		552		(4,797	)	(600	)	(2,016	)	(2,697	)	(337	)
Share of income of affiliated companies	1,879		1,972		—		—		—		—		—
Net income	1,514		5,969		20,933		2,618		8,305		27,249		3,409
Amount allocated to participating preference shareholders	(868	)	(2,960	)	(9,487	)	(1,187	)	(3,757	)	(12,413	)	(1,553	)
Net income available to ordinary shareholders	646		3,009		11,446		1,431		4,548		14,836		1,856
Earnings per share
Basic	0.06		0.15		0.42		0.05		0.17		0.54		0.07
Diluted	0.06		0.15		0.40		0.05		0.16		0.51		0.06
Earnings per ADS(2)
Basic
Diluted
Weighted average ordinary shares outstanding:
Basic	11,000,000		19,981,424		27,399,140		27,399,140		27,399,140		27,399,140		27,399,140
Diluted	11,000,000		20,315,681		28,713,188		28,713,188		28,560,208		29,235,149		29,235,149
(1)    Include share-based compensation expenses as follows:
	For the Year Ended December 31,								For the Six Months Ended June 30,
	2003		2004		2005				2005		2006
	RMB		RMB		RMB		US$		RMB		RMB		US$
	(in thousands)
Share-based compensation expenses	—		149		960		120		486		1,035		129

(2) Each ADS represents              ordinary shares.

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	As of June 30, 2006
	Actual		As adjusted (1)
	RMB	US$	RMB	US$
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	80,981	10,130
Total assets	502,780	62,892
Total current liabilities	190,903	23,880
Total shareholders’ equity	207,367	25,939

(1) Our consolidated balance sheet data as of June 30, 2006 are adjusted to give effect to (i) the automatic conversion of all of our outstanding preferred shares into 22,924,886 ordinary shares immediately prior to the closing of this offering and (ii) the issuance and sale of              ordinary shares in the form of ADSs by us in this offering, assuming an initial public offering price of US$             per ADS, the midpoint of the estimated range of the initial public offering price, after deducting estimated underwriting discounts, commissions and estimated offering expenses payable by us and assuming no exercise of the underwriters’ over-allotment option. A US$1.00 increase (decrease) in the assumed initial public offering price of US$             per ADS would increase (decrease) the amounts representing cash and cash equivalents, total assets and total shareholders’ equity by US$            .

The following table presents certain unaudited financial data and selected operating data as of and for the dates and periods indicated. We present operating data for 2003 and 2004 as if we had consolidated Home Inns Beijing throughout the relevant periods.

	As of and for the Year Ended December 31,			As of and for the Six Months Ended June 30,
	2003	2004	2005	2005	2006
Non-GAAP Financial Data:
EBITDA(1) (in thousands of RMB)	1,513	17,684	51,790	19,924	59,008
Operating Data(2):
Total hotels in operation:
Leased-and-operated hotels(3)	10	18	54	34	63
Franchised-and-managed hotels	0	8	14	10	19
Total rooms	1,131	2,991	8,197	5,372	9,707
Geographic coverage:
Number of cities	4	8	22	11	26
Occupancy rate (as a percentage)	72.4	86.8	89.8	86.6	93.8
Average daily rate (in RMB)	175	191	182	184	181
RevPAR (in RMB)	127	166	163	159	170

(1) We believe that earnings before interest, income tax expense, depreciation and amortization, or EBITDA, is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, we believe that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of our financial performance. Given the significant investments that we have made in the past in property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. We believe that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

The use of EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense and interest income, income tax expense, capital expenditures and other relevant items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA is not defined under U.S. GAAP, and EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S.

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GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.

A reconciliation of EBITDA to net income, which is the most directly comparable U.S. GAAP measure, is provided below.

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2003		2004		2005				2005		2006
	RMB		RMB		RMB		US$		RMB		RMB		US$
	(in thousands)
Net income	1,514		5,969		20,933		2,618		8,305		27,249		3,409
Interest income	(1	)	(88	)	(223	)	(28	)	(96	)	(291	)	(36	)
Interest expense	—		98		709		89		—		2,719		340
Income tax expense	—		5,738		6,526		817		2,593		9,204		1,151
Depreciation and amortization	—		5,967		23,845		2,983		9,122		20,127		2,518
EBITDA	1,513		17,684		51,790		6,479		19,924		59,008		7,382

(2) We have presented the operating data in 2003 and 2004 to include those of Home Inns Beijing since Home Inns Beijing was managed by us throughout these two years.

(3) Includes four hotels operated through separate joint ventures with third parties. We own 75% of one joint venture and 51% of each of the other three joint ventures.

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Home Inns Beijing’s Summary Consolidated Financial Data

You should read the following information in conjunction with Home Inns Beijing’s consolidated financial statements and related notes, “Home Inns Beijing’s Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following summary consolidated financial information has been derived from Home Inns Beijing’s consolidated financial statements included elsewhere in this prospectus. Home Inns Beijing’s consolidated statement of operations data for the years ended December 31, 2003 and 2004 has been derived from its consolidated financial statements for the relevant periods which have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, and is prepared and presented in accordance with U.S. GAAP.

In April 2002, Home Inns Hong Kong and BTG entered into a joint venture agreement to form Home Inns Beijing to operate branded economy hotels in China. Home Inns Hong Kong and BTG owned 55% and 45%, respectively, of Home Inns Beijing when it commenced operations in July 2002. Subsequently, Home Inns Hong Kong gradually increased its ownership interest in Home Inns Beijing by contributing additional funds to the registered capital of Home Inns Beijing. Home Inns Hong Kong’s ownership interest in Home Inns Beijing was increased to 95.59% as of February 2005.

We have been actively managing Home Inns Beijing since its inception. Home Inns Hong Kong’s ownership in Home Inns Beijing was accounted for under the equity method since Home Inns Beijing’s inception until April 2004, because during this period of time, BTG had substantive participation rights that enabled it to veto significant decisions made by Home Inns Hong Kong. In April 2004, Home Inns Hong Kong and BTG entered into a revised joint venture agreement, under which Home Inns Hong Kong obtained effective control of Home Inns Beijing. As a result, Home Inns Beijing has been our consolidated subsidiary since then.

	For the Year Ended December 31,
	2003		2004
	(in RMB thousands)
Revenues	43,842		115,278
Less: Business tax and related surcharges	(1,662	)	(6,150	)
Net revenues	42,180		109,128
Operating costs and expenses	(39,490	)	(96,139	)
Income from operations	2,690		12,989
Net income	2,488		7,735

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RISK FACTORS

You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Our operating results are subject to conditions typically affecting the lodging industry.

Our operating results are subject to conditions typically affecting the lodging industry, including the following:

• changes in the national, regional or local economic conditions;

• natural disasters or travelers’ fears of exposure to serious contagious diseases;

• the attractiveness of our hotels to customers and competition from other hotels;

• local market conditions such as an oversupply of, or a reduction in demand for, hotel rooms;

• the performance of managerial and other employees of our hotels; and

• increases in operating costs and expenses due to inflation and other factors.

Changes in any of these conditions could adversely affect our occupancy rates, average daily rates and RevPAR or otherwise adversely affect our results of operations and financial condition.

We may not be able to manage our expected growth, which could adversely affect our operating results.

Since our inception, we have experienced substantial growth. We have increased the number of our hotels in operation in China from five in 2002 to 82 as of June 30, 2006, and we intend to continue to develop and operate additional hotels in different geographic locations in China. This expansion has placed, and will continue to place, substantial demands on our managerial, operational, technological and other resources. Our planned expansion will also require us to maintain the consistency of our product and the quality of our services to ensure that our brand does not suffer as a result of any deviations, whether actual or perceived, in the consistency of our product and the quality of our services. In order to manage and support our growth, we must continue to improve our existing operational, administrative and technological systems and our financial and management controls, and recruit, train and retain qualified hotel management personnel as well as other administrative and sales and marketing personnel, particularly as we expand into new markets. We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations, recruit and retain qualified personnel and integrate new hotels into our operations. Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to capitalize on new business opportunities, which in turn may have a material adverse effect on our results of operation.

Expansion into new markets may present operating and marketing challenges that are different from those that we currently encounter in our existing markets. In addition, our expansion within existing markets may adversely affect the financial performance of our existing hotels in those markets and, as a result, negatively affect our overall results of operations. Our inability to anticipate the changing demands that expanding operations will impose on our management and information and operational systems, or our failure to quickly adapt our systems and procedures to the new markets could result in lost revenue and increased expenses and otherwise harm our results of operations and financial condition.

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If the value of our brand or image diminishes, it could have a material and adverse effect on our business and results of operations.

Our “Home Inn” brand is associated with a leading economy hotel chain offering cleanness, convenience and comfort with consistent, high-quality service among value-conscious individual business and leisure travelers in China. Our continued success in maintaining and enhancing our brand and image depends, to a large extent, on our ability to satisfy customer needs by further developing and maintaining our innovative and distinctive product and maintaining consistent quality of services across our hotel chain, as well as our ability to respond to competitive pressures. If we are unable to do so, our occupancy rates may decline, which could in turn adversely affect our results of operations. Our business may also be adversely affected if our public image or reputation were to be diminished by the operations of any of our hotels, whether due to unsatisfactory service, accidents or otherwise. Our brand is integral to our sales and marketing efforts. If the value of our brand or image is diminished or if our brand does not continue to be attractive to customers, our business and results of operations may be materially and adversely affected.

If we are not able to hire, train and retain qualified managerial and other employees, our brand and our business may be materially and adversely affected.

Our managerial and other employees manage our hotels and interact with our customers on a daily basis. They are critical to maintaining the quality and consistency of our services as well as our established brand and reputation. It is important for us to attract qualified managerial and other employees who have experience in lodging or other consumer-service industries and are committed to our “customer-first” approach. There may be a limited supply of such qualified individuals in some of the cities in China where we have operations and other cities into which we intend to expand. In addition, criteria such as dedication are difficult to ascertain during the recruitment process. We must hire and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth while maintaining consistent quality of services across our hotels in various geographic locations. We must also provide continuous training to our managerial and other employees so that they are equipped with up-to-date knowledge of various aspects of our hotel operations and can meet our demand for high-quality services. If we fail to do so, the quality of our services may decrease in one or more of the markets where we operate, which in turn, may have a material and adverse effect on our brand and our business.

We may not be able to successfully identify or secure additional hotel properties.

We plan to open more hotels in targeted markets to further grow our business. We may not be successful in identifying and leasing or franchising additional hotel properties at desirable locations and on commercially reasonable terms or at all. Some cities in China have undergone economic development and expansion for several decades while others are still at an early stage of development. In more developed cities, it may be difficult to increase the number of hotels because we or our competitors already have operations in such cities. In less developed cities, demand for our hotels may not increase as rapidly as we expect. Even if we are able to successfully identify and acquire new hotel properties via lease or franchise arrangements, new hotels may not generate the returns we expect. We also may incur costs in connection with evaluating hotel properties and negotiating with property owners, including ones that we are subsequently unable to lease or franchise. If we fail to successfully identify or compete for additional hotel properties, our ability to execute our growth strategy could be impaired and our business and prospects may be materially and adversely affected.

Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.

Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes, particularly in locations where we operate a large number of hotels. In early 2003, several economies in Asia, including China, were affected by the outbreak of severe acute respiratory syndrome, or SARS. During May and June of 2003, many businesses in China were closed by the PRC government to prevent

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transmission of SARS. Our business and results of operations were materially and adversely affected by the outbreak of SARS. In addition, some Asian countries, including China, have recently encountered incidents of the H5N1 strain of bird flu, or avian flu. This disease, which originally spread through poultry populations, is capable in some circumstances of being transmitted to humans and is often fatal. Losses caused by epidemics, natural disasters and other catastrophes, including SARS, avian flu, earthquakes or typhoons, are either uninsurable or too expensive to justify insuring against in China. In the event an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any financial obligations related to the hotel. Similarly, war (including the potential for war) and terrorist activity (including threats of terrorist activity), travel-related accidents, as well as geopolitical uncertainty and international conflict, will affect travel and may in turn have a material adverse effect on our business and results of operation. In addition, we may not be adequately prepared in contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely affected and our reputation may be harmed.

Our legal right to lease certain properties could be challenged by property owners or other third parties, which could prevent us from continuing to operate the affected hotels or increase the costs associated with operating these hotels.

We do not hold any land-use rights with respect to the land on which our hotels are located nor do we own any of the hotel properties we operate. Instead, our business model relies on leases with third parties who either own the properties or lease the properties from the ultimate property owner. As of June 30, 2006, four of our lessors had not obtained title certificates for the properties operated by us. We cannot assure you that titles to properties we currently lease or franchise will not be challenged. There may be challenges to the titles of the properties which, if successful, could impair the development or operations of our hotels on such properties. In addition, we are subject to the risk of potential disputes with property owners. Such disputes, whether resolved in our favor or not, may divert management attention, harm our reputation or otherwise disrupt our business.

Where our immediate lessors are not the ultimate owners of hotel properties, in several instances, no consent was obtained from the owners to sublease the hotel properties to us. A lessor’s failure to duly obtain the title to the property or to receive any necessary approvals from the ultimate owner or the primary lease holder, as applicable, could potentially invalidate our lease or result in the renegotiation of such lease leading to less favorable terms. Moreover, we cannot assure you that the building ownership or leasehold in connection with our franchised-and-managed hotels will not be subject to similar third-party challenges. Some of the properties we or our franchisees lease from third parties were subject to mortgages at the time the leases were signed. In such circumstances and where consent to the lease was not obtained from the mortgage holder, the lease may not be binding on the transferee of the property if the mortgage holders foreclose on the mortgage and transfer the property, which could in turn materially and adversely affect our ability to operate the hotel facility.

If we are unable to compete successfully, our financial condition and results of operations may be harmed.

The lodging industry in China is highly competitive. Competition in the industry is primarily based on room rates, quality of accommodations, brand name recognition, convenience of location, geographic coverage, service quality, range of services, and guest amenities. We compete primarily with other economy hotel chains as well as various regional and local economy hotels. We also compete with two- and three-star hotels, as we offer rooms with standards comparable to many of those hotels while maintaining competitive pricing. In addition, we may also face competition from new entrants in the economy hotel segment in China. As compared to developing four- or five-star hotels, developing economy hotels does not require significant capital commitments or human resources. This relatively low barrier to entry potentially allows new competitors to enter our markets quickly to compete with our business. Furthermore, we compete with all other hotels for guests in each market in which we operate, as our typical business and leisure traveler customers may change their travel, spending and consumption patterns and choose to stay in hotels in different segments. New and existing competitors may offer

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competitive rates, greater convenience, services or amenities or superior facilities, which could attract customers away from our hotels, resulting in a decrease in occupancy and average daily rates for our hotels. Any of these factors may have an adverse effect on our competitive position, results of operations and financial condition.

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

We believe that our future success depends on our ability to significantly increase revenue and profitability from our operations. We have a limited operating history. We commenced operations in 2002. Accordingly, you should consider our future prospects in light of the risks and challenges encountered by a company with a limited operating history. These risks and challenges include:

• the uncertainties associated with our ability to continue our growth while maintaining our profitability;

• preserving our competitive position in the economy hotel segment of the lodging industry in China;

• offering an innovative product to attract recurring and new customers;

• implementing our strategy and modifying it from time to time to respond effectively to competition and changes in customer preferences and needs;

• increasing awareness of our “Home Inn” brand and continuing to develop customer loyalty; and

• attracting, training, retaining and motivating qualified personnel.

If we are unsuccessful in addressing any of these risks or challenges, our business may be materially and adversely affected.

Failure to retain our senior management could harm our business.

We place substantial reliance on the lodging and other consumer-service industry experience and the institutional knowledge of members of our senior management team. Mr. David Jian Sun, our chief executive officer, Ms. May Wu, our chief financial officer, and Ms. Rixin Liang, our chief operating officer, are particularly important to our future success due to their substantial experience in the lodging and other consumer-service industries. We do not carry key person insurance on any of our senior management team. The loss of the services of one or more of these members of our senior management team due to their departure or otherwise could hinder our ability to effectively manage our business and implement our growth strategies. Finding suitable replacements for Mr. Sun, Ms. Wu and Ms. Liang could be difficult, and competition for such personnel of similar experience is intense. If we lose the services of any of them, our business may be adversely affected.

Interruption or failure of our information and operational systems could impair our ability to effectively provide our services, which could damage our reputation.

Our ability to provide consistent and high-quality services throughout our hotel chain depends on the continued operation of our proprietary information and operational systems, including our property management, central reservation, customer relationship management and management reporting systems. Any damage to or failure of our systems could interrupt our service. Our systems are vulnerable to damage or interruption as a result of power loss, telecommunications failures, computer viruses, fires, floods, earthquakes, interruptions in access to our toll-free numbers, hacking or other attempts to harm our systems, and similar events. Our servers, which are maintained in Shanghai, may also be vulnerable to break-ins, sabotage and vandalism. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios. In addition, our systems and technologies may become outdated and we may not be able to replace or introduce upgraded systems as quickly as our competitors or within budgeted costs for such upgrades. If we experience frequent or persistent system failures, our quality of services and our reputation could be harmed. The steps we need to take to increase the reliability and redundancy of our systems may be costly, which could reduce our operating margin, and may not be successful in reducing the frequency or duration of system failures and service interruptions.

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Any failure to protect our trademarks and other intellectual property rights could have a negative impact on our business.

We believe our brand, trade name, trademarks and other intellectual property are critical to our success. “Home Inn” is a highly recognized brand in the economy hotel segment of China’s lodging industry. The success of our business depends in part upon our continued ability to use our brand, trade names and trademarks to increase brand awareness and to further develop our brand. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill. In addition, our proprietary information and operational systems, which have not been patented or otherwise registered as our property, are a key component of our competitive advantage and our growth strategy.

Monitoring and preventing the unauthorized use of our intellectual property is difficult. The measures we take to protect our brand, trade names, trademarks and other intellectual property rights may not be adequate to prevent their unauthorized use by third parties. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequately protect our brand, trade names, trademarks and other intellectual property rights, we may lose these rights and our business may suffer materially.

Accidents or injuries in our hotels may adversely affect our reputation and subject us to liability.

There are inherent risks of accidents or injuries in hotels. One or more accidents or injuries at any of our hotels could adversely affect our safety reputation among customers and potential customers, decrease our overall occupancy rates and increase our costs by requiring us to take additional measures to make our safety precautions even more visible and effective. If accidents or injuries occur at any of our hotels, we may be held liable for costs related to the injuries. Our current property and liability insurance policies may not provide adequate coverage and we may be unable to renew our insurance policies or obtain new insurance policies without increases in cost or decreases in coverage levels.

We may not be able to develop hotel properties on a timely or cost-efficient basis, which may adversely affect our growth strategy and business.

We develop all of our leased-and-operated hotels directly. Our involvement in the development of properties presents a number of risks, including construction delays or cost overruns, which may result in increased project costs or forgone revenue. We may be unable to recover development costs we incur for projects that are not pursued to completion. Properties that we develop could become less attractive due to market saturation or oversupply, with the result that we may not be able to recover development costs at the expected rate, or at all. In addition, we may not have available cash to complete projects that have commenced, or we may be unable to obtain financings for development of future properties on favorable terms, if at all. If we are unable to successfully manage our hotel development to minimize these risks, our growth strategy and business prospects may be adversely affected.

Our costs and expenses may remain constant or increase even if our revenues decline.

A significant portion of our operating costs, including rent, is fixed. Accordingly, a decrease in our revenues could result in a disproportionately higher decrease in our earnings because our operating costs and expenses are unlikely to decrease proportionately. For example, the period during which China’s Spring Festival holiday falls generally account for a lower portion of our annual revenues than the other periods, but our expenses do not vary as significantly with changes in occupancy and revenues as we need to continue to pay rent and salary, make regular repairs, maintenance and renovations and invest in other capital improvements throughout the year to maintain the attractiveness of our hotels. Our property development and renovation costs may increase as a result of increasing costs of materials. However, we have a limited ability to pass increased costs to customers through room rate increases. Therefore, our costs and expenses may remain constant or increase even if our revenues decline.

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Our lessors’ failure to comply with lease registration and other compliance requirements under PRC law may subject these lessors or us to fines or other penalties that may negatively affect our ability to operate our hotels.

As an operator and manager of hotel properties, we, our franchisees and those from whom we lease properties, are subject to a number of land- and property-related legal requirements. For instance, under PRC law, all lease agreements are required to be registered with the local housing bureau. Our standard lease agreement generally requires the lessor to make such registrations. However, as of June 30, 2006, 35 lessors of the hotels we operate and manage had not obtained registrations of their leases from the relevant authorities as required and we continue to remind these lessors to obtain registrations under our lease agreements with them. In addition, based on the specific land use right certificates and property ownership certificates currently held by some of our lessors, certain hotel properties we lease are restricted to industrial and other uses, rather than for commercial service use. The failure of our lessors to register lease agreements as required by law or to ensure that the hotel properties are operated in compliance with their designated use may subject these lessors or us to fines or other penalties which may negatively affect our ability to operate the hotels covered under those leases.

We have limited insurance coverage.

We carry property insurance that covers the assets that we own at our hotels, but not the buildings or any other assets owned by our lessors. Although we require our lessors to purchase customary insurance policies, we cannot guarantee that they will adhere to such requirements. If we were held liable for amounts and claims exceeding the limits of our insurance coverage or outside the scope of our insurance coverage, our business, results of operations and financial condition may be materially and adversely affected. In addition, we do not have any business disruption insurance coverage for our operations to cover losses that may be caused by natural disasters or catastrophic events, such as SARS or avian flu. Any business disruption or natural disaster may result in our incurring substantial costs and diversion of our resources.

If we are unable to maintain our hotels’ good condition and attractive appearance, our hotel occupancy rates may decline.

In order to maintain our hotels’ good condition and attractive appearance, our hotels require ongoing renovations and other leasehold improvements, including periodic replacement of furniture, fixtures and equipment. If we and our franchisees do not make needed leasehold investments and improvements, we could lose our market share to our competitors and our hotel occupancy rates may decline.

The growth of on-line and other hotel reservation intermediaries and travel consolidators may adversely affect our margins and profitability.

Some of our hotel rooms are booked through travel intermediaries and consolidators to whom we pay commissions for such services. If these intermediaries and consolidators become the primary channel through which our customers make their bookings, they may be able to negotiate higher commissions, reduced room rates, or other significant contract concessions from us. We believe that the aim of such intermediaries and consolidators is to have consumers develop loyalties to their reservation systems rather than to our brand. The operations of these travel intermediaries and consolidators may adversely affect our ability to control the supply and price of our room inventory, which would in turn adversely affect our margins and profitability.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We will be subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. These requirements will first apply to our annual report on

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Form 20-F for the fiscal year ending on December 31, 2007. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting is effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Prior to this offering, we have been a young, private company with limited accounting and other resources with which to adequately address our internal controls and procedures. As a result, when our independent registered public accounting firm audited our consolidated financial statements for the three years ended December 31, 2003, 2004 and 2005 in connection with this offering, they identified certain control deficiencies including two material weaknesses in our internal control over financial reporting, as defined in Audit Standard No. 2 of the Public Company Accounting Standards Board. Specifically, the two material weaknesses identified by our independent registered public accounting firm consisted of (i) our lack of adequate review and monitoring over financial reporting and disclosure process, as well as our lack of sufficient control over the financial closing and reporting procedures; and (ii) the lack of sufficient U.S. GAAP knowledge of our accounting staff. We plan to remediate these material weaknesses and other control deficiencies in time to meet the deadline for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. If, however, we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our ADSs. Furthermore, we anticipate that we will incur considerable costs and devote significant management time and efforts and other resources to comply with Section 404 of the Sarbanes-Oxley Act.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and Nasdaq, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Changes in our accounting treatment for employee share options to the fair value method beginning from 2006, could significantly reduce our net income.

Beginning in 2006, we are required to account for share-based compensation in accordance with FASB Statement No. 123(R), Share-Based Payment, which requires a public company to recognize, as an expense, the fair value of share options and other share-based compensation to employees based on the vesting schedule of the share-based awards. Historically, we recorded share-based compensation to the extent that the fair value of the shares on the date of grant exceeded the exercise price of the option. Beginning in 2006, we could have ongoing accounting charges significantly greater than those we would have recorded under our past method of accounting for share options, which could significantly reduce our net income.

The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering under a recently adopted PRC regulation; any requirement to obtain prior CSRC approval could delay this offering and a failure to obtain this approval, if required, could have a material adverse effect on our business, operating results, reputation and trading price of our ADSs, and

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may also create uncertainties for this offering; the regulation also establishes more complex procedures for acquisitions conducted by foreign investors which could make it more difficult to pursue growth through acquisitions.

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006. This New M&A Rule purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. While the application of the New M&A Rule remains unclear, we believe, based on the advice of our PRC counsel, Commerce & Finance Law Offices, that CSRC approval is not required in the context of this offering because we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of PRC domestic companies. However, we cannot assure you that the relevant PRC government agency, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC’s approval for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from this offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ADSs offered by this prospectus.

The New M&A Rule also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In the future, we may grow our business in part by acquiring complementary businesses, although we do not have any plans to do so at this time. Complying with the requirements of the New M&A Rule to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

If the relevant PRC authorities take the position that this offering is subject to their approval because a shareholder of ours is controlled by a state-owned entity, we may be subject to administrative sanctions or penalties.

A notice issued by the State Council of China in June 1997, or the States Council notice, required certain PRC companies to receive approval from relevant PRC authorities prior to transferring assets out of China for purposes of effecting a public offering and listing. Specifically, the States Council notice provides that, if a non-public offshore company with “PRC funds,” or a PRC funded company, plans to issue and list shares outside the PRC, approval from the relevant government authorities at the provincial level or higher or the approval of the CSRC may be required. The ultimate owner of Poly Victory Investments Limited, or Poly Victory, one of our shareholders, is BTG, a PRC state-owned enterprise. Although Poly Victory currently holds 24.4% of our outstanding voting securities, it does not control or have significant influence on us as we have a controlling group that in the aggregate owns 32.5% of our outstanding voting securities. This group consists of seven individuals who are unrelated to Poly Victory or BTG and who have entered into an acting-in-concert agreement. Under the terms of the States Council notice, it is not clear whether Poly Victory’s investment in our company would cause us to be treated as a PRC funded company for purposes of the notice. Our PRC counsel, Commerce

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& Finance Law Offices, has advised us that the States Council notice does not apply to Poly Victory in the context of this offering because Poly Victory has no control over us, and no application for approval from any PRC government authority in connection with this offering has been made. However, if any relevant government authority subsequently determines that the States Council notice applies to this offering, we may be subject to administrative sanctions or penalties.

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

We conduct substantially all of our business operations in China. As the travel industry is highly sensitive to business and personal discretionary spending levels, it tends to decline during general economic downturns. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit the overall PRC economy, they may also have a negative effect on us. For example, our results of operations and financial condition may be adversely affected by government control over capital investments or changes in environmental, health, labor or tax regulations that are applicable to us.

The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government implemented a number of measures, such as increasing the People’s Bank of China’s statutory deposit reserve ratio and imposing commercial bank lending guidelines that had the effect of restricting loans to certain industries. These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.

Uncertainties with respect to the Chinese legal system could adversely affect us.

We conduct our business primarily through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published court decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current structure, our income will be primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions,

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can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, for most capital account items, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

Fluctuation in the value of the RMB may have a material adverse effect on your investment.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a managed band based on market supply and demand and by reference to a basket of certain foreign currencies. This change in policy has resulted in an approximately 3.4% appreciation of the RMB against the U.S. dollar between July 21, 2005 and June 30, 2006. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which may result in a further and more significant appreciation of the RMB against the U.S. dollar. Our revenues and costs are mostly denominated in the RMB, and a significant portion of our financial assets are also denominated in the RMB. We rely entirely on dividends paid to us by our subsidiaries in China. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, an appreciation of the RMB against the U.S. dollar would make any new RMB-denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into the RMB for such purposes. An appreciation of the RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into the RMB, as the RMB is our reporting currency. As of June 30, 2006, our U.S. dollar denominated financial assets consisted solely of a cash balance of approximately US$0.7 million. We expect to have additional U.S. dollar denominated assets from the net proceeds we will receive from this offering pending our application of such proceeds to the uses described in “Use of Proceeds.”

Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us, or otherwise adversely affect us.

SAFE issued a public notice in October 2005 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equity of PRC companies, referred to in the notice as an “offshore special purpose company.” Under this public notice, PRC residents who are shareholders and/or beneficial owners of such offshore special purpose companies were required to register with the local SAFE branch before March 31, 2006. We have requested our shareholders and/or beneficial owners who are subject to the registration requirements under the SAFE notice to register with the local SAFE branch. Failure of these shareholders and/or beneficial owners to register with the local SAFE branch as required by the SAFE notice or failure of future shareholders of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such shareholders and/or beneficial owners to fines and other government actions and may also limit our ability to fund our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.

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We rely principally on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries entities to make payments 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 from our subsidiaries in China for our cash requirements, including any debt we may incur. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China are required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves. These reserves are not distributable as cash dividends. As of December 31, 2005, a total of RMB113.3 million (US$14.2 million) were not distributable in the form of dividends to us due to these PRC regulations. Furthermore, if our subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our subsidiaries’ ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiaries to distribute dividends or other payments to us could materially and 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.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiaries.

In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries, we may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries are subject to PRC regulations. For example, loans by us to our subsidiaries in China, which are foreign-invested enterprises, to finance their activities cannot exceed statutory limits and must be registered with the SAFE.

We may also decide to finance our subsidiaries by means of capital contributions. These capital contributions must be approved by the PRC Ministry of Commerce or its local counterpart. We cannot assure you that we will be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our subsidiaries. If we fail to receive such approvals, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

We have benefited from certain financial subsidies and preferential tax treatments in China. Reduction or elimination of these subsidies or preferential tax treatments may have an adverse effect on our results of operations.

Various local tax authorities in China have provided financial subsidies in the form of certain tax refunds to us. However, these tax authorities may reduce or eliminate any or all of these financial subsidies at any time in the future. There is no assurance that we will continue to receive any financial subsidies in the form of tax refunds or otherwise as the grant of such subsidies is within the discretion of relevant local government authorities. In addition, some of our subsidiaries are subject to lower enterprise income tax rates or tax exemptions due to the preferential tax treatments granted by the local tax authorities. For example, our wholly owned subsidiary, Hemei Hotel Management Company, enjoys a 15% enterprise income tax rate due to its place of incorporation and operation in the Pudong New District of Shanghai. If such preferential tax treatments granted by local tax authorities are deemed to be in violation of national laws and regulations or are abolished or altered, our subsidiaries will be subject to the standard enterprise income tax rate, which currently is 33%. Under current PRC regulations, if it is determined that a taxpayer has underpaid tax due to prior advice from relevant tax authorities, the taxpayer may still be required to pay the full amount of unpaid tax within three years after such determination but the taxpayer will not be subject to any penalty or late payment fee. Reduction or elimination of the financial subsidies or preferential tax treatments we currently enjoy may have an adverse effect on our results of operations.

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Risks Related to Our ADSs and This Offering

There has been no public market for our ordinary shares or ADSs prior to this offering, and you may not be able to resell our ADSs at or above the price you paid, or at all.

Prior to this initial public offering, there has been no public market for our ordinary shares or ADSs. We have applied to have our ADSs listed on the Nasdaq Global Market. Our ordinary shares will not be listed or quoted for trading on any exchange. If an active trading market for our ADSs does not develop after this offering, the market price and liquidity of our ADSs will be materially and adversely affected.

The initial public offering price for our ADSs will be determined by negotiations between us and the representatives of the underwriters and may bear no relationship to the market price for our ADSs after the initial public offering. We cannot assure you that an active trading market for our ADSs will develop or that the market price of our ADSs will not decline below the initial public offering price.

The market price for our ADSs may be volatile.

The market price for our ADSs may be volatile and subject to wide fluctuations in response to factors including the following:

• actual or anticipated fluctuations in our quarterly operating results;

• changes in financial estimates by securities research analysts;

• conditions in the travel and lodging industries;

• changes in the economic performance or market valuations of other lodging companies;

• announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;

• addition or departure of key personnel;

• fluctuations of exchange rates between the RMB and U.S. dollar or other foreign currencies;

• potential litigation or administrative investigations;

• release of lock-up or other transfer restrictions on our outstanding ADSs or ordinary shares or sales of additional ADSs; and

• general economic or political conditions in China.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our ADSs.

You will experience immediate and substantial dilution in the net tangible book value of ADSs purchased.

The initial public offering price per ADSs will be substantially higher than the net tangible book value per ADS prior to the offering. Consequently, when you purchase ADSs in the offering at an assumed initial public offering price of US$            , you will incur immediate dilution of US$             per ADS. See “Dilution.” In addition, you may experience further dilution to the extent that additional ordinary shares are issued upon exercise of outstanding options and options we may grant from time to time.

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We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders.

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Substantial future sales of our ADSs in the public market, or the perception that these sales could occur, could cause the price of our ADSs to decline.

Additional sales of our ordinary shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have              ordinary shares outstanding. All shares sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933. The remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of the 180-day lock-up period beginning from the closing of this offering, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. Any or all of these shares may be released prior to expiration of the lock-up period at the discretion of the lead underwriters for this offering. To the extent shares are released before the expiration of the lock-up period and these shares are sold into the market, the market price of our ADSs could decline.

In addition, certain holders of our ordinary shares after the completion of this offering will have the right to cause us to register the sale of a total of 22,924,886 shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the public market could cause the price of our ADSs to decline.

Our corporate actions are substantially controlled by our officers, directors and principal shareholders.

After this offering, our executive officers, directors and principal shareholders will beneficially own approximately             % of our outstanding shares. Seven individual shareholders of our company, namely, Neil Nanpeng Shen, Qi Ji, Chung Lau, Min Fan, Rixin Liang, David Jian Sun and May Wu, have entered into an acting-in-concert agreement, under which they have agreed to act together on all matters requiring shareholder approval and to appoint one representative to vote on behalf of all of them at our shareholder meetings until July 2007. These shareholders, who currently hold a total of 17,769,037 ordinary shares, or 32.5% of our outstanding voting securities, could exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers or other business combination transactions. In addition, BTG, through its affiliate, Poly Victory, owns 24.5% of our outstanding voting securities and has the right to appoint, and has appointed, two directors of our company. Under the financing transaction agreement we entered into with BTG in June 2005, BTG agreed to provide financing in the form of loans to us and, in the event of our default, has the right to enforce its rights by, among other things, converting the total principal amount of the indebtedness into an equity interest in our company at a pre-determined price. The concentration of our share ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders, including those who purchase ADSs in this offering.

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You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this prospectus and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act of 1933, as amended, or exempt from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take advantage of any exemptions from registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs represented by the ADRs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we are incorporated under Cayman Islands law, conduct substantially all of our operations in China and the majority of our officers reside outside the United States.

We are incorporated in the Cayman Islands, and conduct substantially all of our operations in China through our wholly owned subsidiaries in China. Most of our officers reside outside the United States and some or all of the assets of those persons are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of Civil Liabilities.”

Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2004 Revision) and common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to

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us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Our management will have considerable discretion as to the use of the net proceeds from this offering.

We have not allocated the majority of the net proceeds of this offering to any particular purpose. Rather, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to maintain profitability or increase our share price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.

We may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences for U.S. Holders.

Based on the price of the ADSs in this offering and the expected price of our ADSs and ordinary shares following this offering, and the composition of our income and assets, we do not expect to be considered a “passive foreign investment company,” or PFIC, for United States federal income tax purposes for our current taxable year ending December 31, 2006. However, we must make a separate determination each year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year ending December 31, 2006 or any future taxable year. A non-U.S. corporation will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. The value of our assets generally will be determined by reference to the market price of our ADSs and ordinary shares, which may fluctuate considerably. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in any offering. If we were treated as a PFIC for any taxable year during which a U.S. Holder held an ADS or an ordinary share, certain adverse United States federal income tax consequences could apply to the U.S. Holder. For the definition of “U.S. Holder” and a more detailed discussion of United States federal income tax consequencies to U.S. Holders, see “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include:

• our anticipated growth strategies;

• our future business development, results of operations and financial condition;

• expected changes in our revenues and certain cost or expense items;

• our ability to attract customers and leverage our brand;

• trends and competition in the lodging industry; and

• our ability to develop new hotels at desirable locations in a timely and cost-effective manner.

You should read thoroughly this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately US$             million or approximately US$             million if the underwriters exercise their option to purchase additional ADSs in full, after deducting underwriting discounts and the estimated offering expenses payable by us. These estimates are based upon an assumed initial offering price of US$             per ADS, the midpoint of the range shown on the front cover page of this prospectus. We will not receive any of the proceeds from the sale of ADSs by the selling shareholders. A US$1.00 increase (decrease) in the assumed initial public offering price of US$             per ADS would increase (decrease) the net proceeds of this offering by US$             million, assuming the sale of              ADSs at US$             per ADS, the midpoint of the range shown on the front cover page of this prospectus and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

We intend to use the net proceeds from this offering as follows:

• approximately US$45 million to fund the expansion of our hotel chain and the improvement of existing hotel properties;

• approximately US$7.5 million to repay all of our outstanding indebtedness to BTG; and

• the balance to fund working capital and for other general corporate purposes, which may include strategic acquisitions of complementary businesses, although we are not currently negotiating any such transaction.

The following table sets forth a summary of our outstanding indebtedness to BTG as of September 30, 2006, which we intend to repay using part of the proceeds we will receive from this offering:

Lender	Date of Borrowing	Due Date	Principal (in RMB)	Principal (in US$)	Interest Rate
BTG	07/15/2005	07/14/2008	20,000,000	2,501,783	6.1747	%
BTG	09/07/2005	09/06/2008	10,000,000	1,250,891	6.1747	%
BTG	10/18/2005	10/17/2007	10,000,000	1,250,891	6.1747	%
BTG	01/11/2006	01/10/2008	20,000,000	2,501,783	6.1747	%

In utilizing the proceeds of this offering, as an offshore holding company, we are permitted, under PRC regulations, to provide funding to our PRC subsidiaries only through loans or capital contributions. Subject to satisfaction of applicable government registrations and approval requirements, we may extend inter-company loans or make additional capital contributions to our PRC subsidiaries to fund their capital expenditures or working capital. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiaries.”

The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

Pending use of the net proceeds, we intend to hold our net proceeds in demand deposits or invest them in interest-bearing government securities.

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DIVIDEND POLICY

We have no present plan to declare and pay any dividends on our shares or ADSs in the near future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a holding company incorporated in the Cayman Islands. We rely on dividends from our subsidiaries in China. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its accumulated after-tax profits each year, if any, to fund certain statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiaries in China incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

Our board of directors has complete discretion as to whether to distribute dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

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CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2006:

• on an actual basis;

• on an as adjusted basis to reflect the automatic conversion of all of our outstanding preferred shares into 22,924,886 ordinary shares upon the closing of this offering, and the sale of              ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of              per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	As of June 30, 2006
	Actual		As adjusted (1)
	RMB	US$	RMB	US$
	(in thousands)
Loans	126,000	15,761
Shareholders’ equity:
Ordinary shares, US$0.005 par value, 177,075,114 shares authorized, 27,399,140 shares issued and outstanding	1,134	142
Series A preferred shares, US$0.005 par value, 17,241,400 shares authorized, issued and outstanding on an actual basis	714	89
Series B preferred shares, US$0.005 par value, 2,417,645 shares authorized, issued and outstanding on an actual basis	100	13
Series C preferred shares, US$0.005 par value, 3,265,841 shares authorized, issued and outstanding on an actual basis	135	17
Additional paid-in capital	151,104	18,901
Statutory reserve	11,360	1,421
Retained earnings	42,820	5,356
Total shareholders’ equity(2)	207,367	25,939
Total capitalization(2)	333,367	41,700

(1) The “as adjusted” information discussed above is for illustrative purpose only. Our ordinary shares, additional paid-in capital, total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

(2) Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses payable by us, a US$1.00 increase (decrease) in the assumed initial public offering price of US$             per ADS would increase (decrease) each of total shareholders’ equity and total capitalization by US$             million.

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DILUTION

Our net tangible book value as of June 30, 2006 was approximately US$             per share, and US$             per ADS. Net tangible book value per share represents the amount of total tangible assets, minus the amount of total liabilities, divided by the total number of ordinary shares outstanding. Dilution is determined by subtracting net tangible book value per ordinary share from the assumed public offering price per ordinary share.

Without taking into account any other changes in such net tangible book value after June 30, 2006, other than to give effect to (i) the conversion of all of our preferred shares into ordinary shares, which will occur automatically upon the closing of this offering, and (ii) our sale of the              ADSs offered in this offering, at an assumed initial public offering price of US$             per ADS, the mid-point of the estimated public offering price range, and after deduction of underwriting discounts and commissions and estimated offering expenses (assuming the over-allotment option is not exercised), our pro forma net tangible book value at June 30, 2006 would have been US$             per outstanding ordinary share, including ordinary shares underlying our outstanding ADSs, or US$             per ADS. This represents an immediate increase in net tangible book value of US$             per ordinary share, or US$             per ADS, to existing shareholders and an immediate dilution in net tangible book value of US$             per ordinary share, or US$             per ADS, to purchasers of ADSs in this offering.

The following table illustrates the dilution on a per ordinary share basis assuming that the initial public offering price per ordinary share is US$             and all ADSs are exchanged for ordinary shares:

Assumed initial public offering price per ordinary share	US$
Net tangible book value per ordinary share	US$
Amount of dilution in net tangible book value per ordinary share to new investors in the offering	US$
Amount of dilution in net tangible book value per ADS to new investors in the offering	US$

A $1.00 increase (decrease) in the assumed public offering price of US$             per ADS would increase (decrease) our pro forma net tangible book value after giving effect to the offering by US$             million, the pro forma net tangible book value per ordinary share and per ADS after giving effect to this offering by US$             per ordinary share and per ADS and the dilution in pro forma net tangible book value per ordinary share and per ADS to new investors in this offering by US$             per ordinary share and per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and other offering expenses.

The following table summarizes, on a pro forma basis as of June 30, 2006, the differences between the shareholders as of June 30, 2006 and the new investors with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per ordinary share paid at an assumed initial public offering price of US$             per ADS before deducting estimated underwriting discounts and commissions and estimated offering expenses. The total number of ordinary shares does not include              ADSs issuable pursuant to the exercise of the over-allotment option granted to the underwriters. The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

	Ordinary Shares Purchased		Total Consideration		Average Price Per Ordinary Share	Average Price Per ADS
	Number	Percent	Amount	Percent
Existing shareholders	US$	%	US$	%	US$	US$
New investors
Total	US$	%	US$	%

32

The discussion and tables above also assume no exercise of any outstanding stock options. As of the date of this prospectus, there were              ordinary shares issuable upon exercise of outstanding stock options at a weighted average exercise price of US$             per share, and there were              ordinary shares available for future issuance upon the exercise of future grants under our share incentive plans. To the extent that any of these options are exercised, there will be further dilution to new investors.

33

EXCHANGE RATE INFORMATION

Our business is conducted in China and substantially all of our revenues are denominated in RMB. However, periodic reports made to shareholders will be expressed in U.S. dollars using the then current exchange rates. This prospectus contains translations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of RMB into U.S. dollars in this prospectus is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations of financial data from RMB to U.S. dollars in this prospectus were made at a rate of RMB7.9943 to US$1.00, the noon buying rate in effect as of June 30, 2006. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On October 3, 2006, the noon buying rate was RMB7.9040 to US$1.00.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York.

Period	Noon Buying Rate
	Period End	Average (1)	Low	High
	(RMB Per US$1.00)
2001	8.2766	8.2770	8.2786	8.2676
2002	8.2800	8.2770	8.2800	8.2669
2003	8.2767	8.2772	8.2800	8.2765
2004	8.2765	8.2768	8.2774	8.2764
2005	8.0702	8.1940	8.2765	8.0702
2006
April	8.0165	8.0143	8.0248	8.0040
May	8.0215	8.0131	8.0300	8.0005
June	7.9943	8.0042	8.0225	7.9943
July	7.9690	7.9897	8.0018	7.9690
August	7.9538	7.9722	8.0000	7.9538
September	7.9040	7.9334	7.9545	7.8965
October (through October 3)	7.9040	7.9040	7.9040	7.9040

(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

34

ENFORCEABILITY OF CIVIL LIABILITIES

We were incorporated in the Cayman Islands in order to enjoy the following benefits:

• political and economic stability;

• an effective judicial system;

• a favorable tax system;

• the absence of exchange control or currency restrictions; and

• the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:

• the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

• Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

All of our operations are conducted in China, and substantially all of our assets are located in China. A majority of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon 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.

We have appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Maples and Calder, our counsel as to Cayman Islands law, and Commerce & Finance Law Offices, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

• recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

• entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Maples and Calder has further advised us that a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under the common law doctrine of obligation.

Commerce & Finance Law Offices has further advised us that the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions.

35

SELECTED CONSOLIDATED FINANCIAL DATA

Our Selected Consolidated Financial Data

You should read the following information in conjunction with our and Home Inns Beijing’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following selected consolidated financial information has been derived from our consolidated financial statements included elsewhere in this prospectus. Our consolidated statement of operations data for the years ended December 31, 2003, 2004 and 2005 and our consolidated balance sheet data as of December 31, 2004 and 2005 have been derived from our consolidated financial statements for the relevant periods which have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, and are prepared and presented in accordance with U.S. GAAP, and reflect our current corporate structure as if it had been in existence throughout the relevant periods. Our selected consolidated statement of operations data for the six months ended June 30, 2005 and 2006 and our consolidated balance sheet data as of June 30, 2006 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our selected consolidated statement of operations data for the year ended December 31, 2002 and our consolidated balance sheet data as of December 31, 2002 and 2003 have been derived from our unaudited consolidated financial statements which are not included in this prospectus. We have prepared the unaudited consolidated financial information on the same basis as our audited consolidated financial statements. The unaudited consolidated financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented. Our historical results do not necessarily indicate results expected for any future periods. As Home Inns Beijing, our primary operating entity, was not established until April 2002, we do not believe our financial data for the year ended December 31, 2001 provide any meaningful information by which to evaluate our business, and thus have not included our selected financial data for 2001 in this section or elsewhere in this prospectus.

We have been actively managing Home Inns Beijing since its inception. Home Inns Hong Kong’s ownership in Home Inns Beijing was accounted for under the equity method since Home Inns Beijing’s inception until April 2004, because during this period of time, BTG had substantive participation rights that enabled it to veto significant decisions made by Home Inns Hong Kong. In April 2004, Home Inns Hong Kong and Beijing Capital Travel, a subsidiary of BTG, entered into a revised joint venture agreement, under which Home Inns Hong Kong obtained control of Home Inns Beijing. As a result, Home Inns Beijing has been our consolidated subsidiary since then.

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2002	2003	2004		2005				2005		2006
	RMB	RMB	RMB		RMB		US$		RMB		RMB		US$
	(in thousands, except share, per share and per ADS data)
Consolidated Statement of Operations Data
Revenues:
Leased-and-operated hotels	—	—	93,687		279,948		35,018		106,978		243,492		30,458
Franchised-and-managed hotels	—	—	2,313		5,913		740		2,428		5,567		696
Total revenues	—	—	96,000		285,861		35,758		109,406		249,059		31,154
Less: Business tax and related surcharges	—	—	(5,101	)	(16,830	)	(2,105	)	(6,669	)	(13,344	)	(1,669	)
Net revenues	—	—	90,899		269,031		33,653		102,737		235,715		29,485

36

	For the Year Ended December 31,										For the Six Months Ended June 30,
	2002		2003		2004		2005				2005		2006
	RMB		RMB		RMB		RMB		US$		RMB		RMB		US$
	(in thousands, except share, per share and per ADS data)
Consolidated Statement of Operations Data (continued)
Operating costs and expenses(1):
Leased-and-operated hotel costs:
Rents and utilities	—		—		(30,703	)	(94,784	)	(11,856	)	(36,701	)	(73,976	)	(9,254	)
Personnel costs	—		—		(12,949	)	(41,225	)	(5,157	)	(15,782	)	(36,502	)	(4,566	)
Depreciation and amortization	—		—		(5,681	)	(23,335	)	(2,919	)	(8,828	)	(19,730	)	(2,468	)
Consumables, food and beverage	—		—		(6,441	)	(20,765	)	(2,598	)	(7,609	)	(17,811	)	(2,228	)
Others	—		—		(8,162	)	(26,100	)	(3,265	)	(9,783	)	(23,022	)	(2,880	)
Total leased-and-operated hotel costs	—		—		(63,936	)	(206,209	)	(25,795	)	(78,703	)	(171,041	)	(21,396	)
Sales and marketing expenses	—		—		(2,113	)	(7,691	)	(962	)	(2,754	)	(3,898	)	(488	)
General and administrative expenses	(40	)	(365	)	(15,983	)	(24,535	)	(3,069	)	(10,338	)	(20,898	)	(2,613	)
Total operating costs and expenses	(40	)	(365	)	(82,032	)	(238,435	)	(29,826	)	(91,795	)	(195,837	)	(24,497	)
Income (loss) from operations	(40	)	(365	)	8,867		30,596		3,827		10,942		39,878		4,988
Interest income	2		1		89		222		28		96		291		36
Interest expense	—		—		(98	)	(709	)	(89	)	—		(2,719	)	(340	)
Other non-operating income	—		—		325		2,146		269		1,875		1,700		213
Income (loss) before income tax expense, minority interests and share of income of affiliated companies	(38	)	(364	)	9,183		32,255		4,035		12,913		39,150		4,897
Income tax expense	—		—		(5,738	)	(6,525	)	(817	)	(2,592	)	(9,204	)	(1,151	)
Minority interests	—		—		552		(4,797	)	(600	)	(2,016	)	(2,697	)	(337	)
Share of income of affiliated companies	(535	)	1,878		1,972		—		—		—		—		—
Net income (loss)	(573	)	1,514		5,969		20,933		2,618		8,305		27,249		3,409
Amount allocated to participating preference shareholders	—		(868	)	(2,960	)	(9,487	)	(1,187	)	(3,757	)	(12,413	)	(1,553	)
Net income available to ordinary shareholders	(573	)	646		3,009		11,446		1,431		4,548		14,836		1,856
Earnings (loss) per share:
Basic	(0.05	)	0.06		0.15		0.42		0.05		0.17		0.54		0.07
Diluted	(0.05	)	0.06		0.15		0.40		0.05		0.16		0.51		0.06
Earnings (loss) per ADS(2):
Basic
Diluted
Weighted average ordinary shares outstanding:
Basic	11,000,000		11,000,000		19,981,424		27,399,140		27,399,140		27,399,140		27,399,140		27,399,140
Diluted	11,000,000		11,000,000		20,315,681		28,713,188		28,713,188		28,560,208		29,235,149		29,235,149

37

(1) Share-based compensation expenses are included in the consolidated statement of operations data as follows:

	For the Year Ended December 31,					For the Six Months Ended June 30,
	2002	2003	2004	2005		2005	2006
	RMB	RMB	RMB	RMB	US$	RMB	RMB	US$
	(in thousands)
Leased-and-operated hotel costs—personnel costs	—	—	8	8	1	6	6	1
General and administrative expenses	—	—	141	952	119	480	1,029	128

(2) Each ADS represents              ordinary shares.

The following table presents a summary of our consolidated balance sheet data as of December 31, 2002, 2003, 2004 and 2005 and as of June 30, 2006:

	As of December 31,					As of June 30,
	2002	2003	2004	2005		2006
	RMB	RMB	RMB	RMB	US$	RMB	US$
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	1,797	11,342	26,292	37,727	4,719	80,981	10,130
Total assets	6,983	47,466	174,304	375,002	46,909	502,780	62,892
Total current liabilities	2,054	2,193	39,768	119,187	14,909	190,903	23,880
Deferred rental	—	—	11,890	26,534	3,319	33,103	4,141
Long-term loan from a related party	—	—	—	40,000	5,004	60,000	7,505
Convertible preferred shares	—	813	813	949	119	949	119
Ordinary shares	455	455	1,134	1,134	142	1,134	142
Additional paid-in capital	5,046	43,062	110,687	152,878	19,123	151,104	18,901
Total shareholders’ equity	4,929	45,273	116,861	179,083	22,401	207,367	25,939

38

Home Inns Beijing’s Selected Consolidated Financial Data

You should read the following information in conjunction with Home Inns Beijing’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following selected consolidated financial information has been derived from Home Inns Beijing’s consolidated financial statements included elsewhere in this prospectus. Home Inns Beijing’s consolidated statement of operations data and consolidated balance sheet data for the years ended December 31, 2003 and 2004 have been derived from its consolidated financial statements for the relevant periods which have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, and are prepared and presented in accordance with U.S. GAAP.

We have been actively managing Home Inns Beijing since its inception. Home Inns Hong Kong’s ownership in Home Inns Beijing was accounted for under the equity method since Home Inns Beijing’s inception until April 2004, because during this period of time, BTG had substantive participation rights that enabled it to veto significant decisions made by Home Inns Hong Kong. In April 2004, Home Inns Hong Kong and Beijing Capital Travel, a subsidiary of BTG, entered into a revised joint venture agreement, under which Home Inns Hong Kong obtained control of Home Inns Beijing. As a result, Home Inns Beijing has been our consolidated subsidiary since then.

	For the Year Ended December 31,
	2003		2004
	RMB		RMB
	(in thousands)
Consolidated Statement of Operations Data:
Revenues:
Leased-and-operated hotels	43,842		112,914
Franchised-and-managed hotels	—		2,364
Total revenues	43,842		115,278
Less: Business tax and related surcharges	(1,662	)	(6,150	)
Net revenues	42,180		109,128
Operating costs and expenses(1):
Leased-and-operated hotel costs:
Rents and utilities	(13,901	)	(36,463	)
Personnel costs	(6,677	)	(15,653	)
Consumables, food and beverage	(3,268	)	(8,149	)
Depreciation and amortization	(2,179	)	(6,685	)
Others	(5,720	)	(10,019	)
Total leased-and-operated hotel costs	(31,745	)	(76,969	)
Sales and marketing expenses	(2,141	)	(2,563	)
General and administrative expenses	(5,604	)	(16,607	)
Total operating costs and expenses	(39,490	)	(96,139	)
Income from operations	2,690		12,989
Interest income	86		110
Interest expense	—		(125	)
Other non-operating income	30		328
Income before income tax expense and minority interests	2,806		13,302
Income tax expense	(318	)	(6,861	)
Minority interests	—		1,294
Share of income of affiliated companies	—		—
Net income	2,488		7,735

39

(1)    Share-based compensation expenses are included in the statement of operations data as follows:
	For the Year Ended December 31,
	2003	2004
	RMB	RMB
	(in thousands)
Leased-and-operated hotel costs—personnel costs	—	8
General and administrative expenses	—	141

The following table presents a summary of Home Inns Beijing’s consolidated balance sheet data as of December 31, 2003 and 2004:

	As of December 31,
	2003	2004
	RMB	RMB
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	16,283	16,710
Total assets	56,985	130,562
Total current liabilities	13,843	39,900
Deferred rental	2,681	11,890
Paid-in capital	38,945	68,945
Additional paid-in capital	—	150
Total shareholders’ equity	40,461	78,346

40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

We are a leading economy hotel chain in China based on the number of our hotels and the number of our hotel rooms as well as the geographic coverage of our hotel chain. We develop and operate economy hotels across China under our award-winning Home Inn brand. We have experienced substantial growth while maintaining profitability since 2003. Our Home Inns hotels in operation grew rapidly from 10 hotels in four cities as of the end of 2003 to 68 hotels in 22 cities as of the end of 2005, and our net income grew from RMB1.5 million in 2003 to RMB20.9 million (US$2.6 million) in 2005. In the six months ended June 30, 2006, we generated total revenues of RMB249.1 million (US$31.2 million) and net income of RMB27.2 million (US$3.4 million). As of June 30, 2006, our Home Inns hotel chain consisted of 63 leased-and-operated hotels in operation with an additional 33 leased-and-operated hotels under development and 19 franchised-and-managed hotels in operation with an additional 24 franchised-and-managed hotels under development, covering 40 cities in China.

We have achieved our growth by utilizing two business models. We either lease properties on which we develop and operate hotels or we franchise our brand to hotel owners and manage these hotels. We refer to the former type of hotels as “leased-and-operated hotels” and to the latter type of hotels as “franchised-and-managed hotels.” Our recent growth has been primarily organic, through developing and operating additional hotels in existing markets and expanding the geographic reach of our hotel chain. We intend to develop and operate additional hotels under both business models to maintain or achieve a dominant position in every market covered by our Home Inns hotel chain.

Our operating results are subject to conditions typically affecting the lodging industry, including changes in the national, regional or local economic conditions in China; natural disasters or travelers’ fears of exposure to serious contagious diseases; the attractiveness of our hotels to customers and competition from other hotels; local market conditions such as an oversupply of, or a reduction in demand for, hotel rooms; and increases in operating costs and expenses due to inflation and other factors. Unfavorable changes in any of these conditions could negatively impact our occupancy rates, average daily rates and, as a result, RevPAR or otherwise adversely affect our results of operations. While our operating results are influenced by conditions typically affecting the lodging industry and also by conditions in each of the geographic markets we operate, they are more directly affected by company-specific key performance indicators as discussed below.

Key Performance Indicators

We utilize a set of non-financial and financial key performance indicators which our senior management reviews frequently. The review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key decisions, allowing our business to react promptly to changing customer demands and market conditions.

Our non-financial key performance indicators consist of the increase in the total number of hotels and hotel rooms in our Home Inns hotel chain as well as RevPAR achieved by our hotels. The increase in the number of hotels in our hotel chain is largely affected by the demand for our hotels in various cities and our ability to successfully identify and secure new properties and develop new hotels at desirable locations. RevPAR is a

41

commonly used operating measure in the hospitality industry and is defined as the product of average occupancy rates and average daily rates achieved. Occupancy rates of our hotels mainly depend on the locations of our hotels, the effectiveness of our sales and brand promotion efforts, our ability to maintain the consistency and quality of our facilities and service, the performance of managerial and other employees of our hotels, as well as our ability to respond to competitive pressure. We set room rates of our hotels primarily based on the location of a hotel and room rates charged by our competitors within the same locality. Changes in RevPAR primarily due to changes in average occupancy rates achieved have different implications on our total revenues and profitability than changes in RevPAR primarily due to changes in average daily rates achieved. For example, increases in occupancy at our hotels would generally lead to increases in room revenues as well as additional incremental costs, such as housekeeping services, utilities and room amenity costs. However, RevPAR increases due to higher room rates generally would not result in these additional room-related costs. As a result, RevPAR increases due to higher room rates would have a greater positive effect on our profitability.

Our financial key performance indicators consist of our revenue and cost structure, which are discussed in greater details in the following paragraphs. In addition, we use EBITDA, a non-GAAP financial measure, as a key financial performance indicator to assess our operating results before the impact of interest, income taxes, depreciation and amortization. Given the significant investments that we have made in leasehold improvements, depreciation and amortization expense comprises a significant portion of our cost structure. We believe that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of our financial performance.

Revenues. In 2005, we generated total revenues of RMB285.9 million (US$35.8 million). Our revenues are significantly affected by the following operating measures which are widely used in the hospitality industry and appear throughout this prospectus:

• the total number of hotels in our hotel chain;

• the total number of hotel rooms in our hotel chain;

• occupancy rates achieved by our hotels;

• average daily rates achieved by our hotels; and

• RevPAR achieved by our hotels, which represents the product of average daily rates and occupancy rates.

Our future revenue growth will depend significantly upon our ability to expand our hotel chain into new markets in China and maintain and further increase occupancy rates, average daily rates and RevPAR at existing hotels. As of June 30, 2006, we had entered into binding contracts with lessors of 33 properties for our leased-and-operated hotels which are currently under development. We expect to incur an additional RMB140.0 million (US$17.5 million) in capital expenditures in connection with the completion of the leasehold improvements of these hotels. To support this planned expansion, we currently expect to hire approximately 900 to 1,200 new employees for hotel operations and approximately 15 to 20 new employees for our corporate office. We intend to fund this planned expansion with our operating cash flow, existing cash balance and the remaining funds available under our credit facilities which amounted to approximately RMB20.0 million (US$2.5 million) as of June 30, 2006.

42

The following table sets forth the revenues generated by our leased-and-operated hotels and franchised-and-managed hotels, both in absolute amount and as a percentage of total revenues for the periods indicated.

	For the Year Ended December 31,										For the Six Months Ended June 30,
	2004				2005						2005				2006
	RMB		%		RMB		US$		%		RMB		%		RMB		US$		%
	(in thousands except percentages)
Revenues:
Leased-and-operated hotels	93,687		97.6		279,948		35,018		97.9		106,978		97.8		243,492		30,458		97.8
Franchised-and-managed hotels	2,313		2.4		5,913		740		2.1		2,428		2.2		5,567		696		2.2
Total revenues	96,000		100.0		285,861		35,758		100.0		109,406		100.0		249,059		31,154		100.0
Less: Business tax and related surcharges	(5,101	)	(5.3	)	(16,830	)	(2,105	)	(5.9	)	(6,669	)	(6.1	)	(13,344	)	(1,669	)	(5.4	)
Net revenues	90,899		94.7		269,031		33,653		94.1		102,737		93.9		235,715		29,485		94.6

Leased-and-operated Hotels. In 2005, we generated revenues of RMB279.9 million (US$35.0 million) from our leased-and-operated hotels, which accounted for 97.9% of our total revenues for the year. For the first half of 2006, we generated revenues of RMB243.5 million (US$30.5 million) from our leased-and-operated hotels, which accounted for 97.8% of our total revenues for the period. We expect that revenues from our leased-and-operated hotels will continue to constitute a substantial majority of our total revenues in the foreseeable future.

For our leased-and-operated hotels, we lease properties from real estate owners or lessors and we are responsible for hotel development and customization to conform to the standards of Home Inns, as well as for repairs and maintenance and operating costs and expenses of properties over the term of the lease. We are also responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate our hotels and purchasing supplies. We typically pay fixed rent on a quarterly basis for the first three or five years of the lease term, after which we are generally subject to a 3% to 5% increase every three to five years.

Revenues from our leased-and-operated hotels primarily consist of revenues from sales of room stays and, to a much lesser extent, revenues from sales of food and beverage at our hotels and other services. We recognize revenues from sales of room stays, food and beverage when our services are rendered.

Franchised-and-managed Hotels. In 2005, we generated revenues of RMB5.9 million (US$0.7 million) from our franchised-and-managed hotels, which accounted for 2.1% of our total revenues for the year. For the first half of 2006, we generated revenues of RMB5.6 million (US$0.7 million) from our franchised-and-managed hotels, which accounted for 2.2% of our total revenues for the period. We expect that revenues from our franchised-and-managed hotels will increase in the foreseeable future as we add more franchised-and-managed hotels in our hotel chain.

For our franchised-and-managed hotels, we franchise our “Home Inn” brand to franchisees who are property owners, lessors or existing hotel operators, and we are generally responsible for managing these hotels. Under a typical franchise agreement between us and a franchisee, the franchisee is generally required to pay us an initial franchise fee of RMB200,000 to RMB300,000, annual franchise fees of 3% of the revenues of the hotel, as well as an annual management fee of 3% of the revenues of the hotel. The franchisee is responsible for the costs of hotel development and customization to conform to the standards of Home Inns, as well as for repairs and maintenance and operating expenses of the hotel. We assist the franchisee in property design, construction, systems installation, and hotel personnel recruiting and training before the franchised-and-managed hotel commences operations. We allow our franchisees to utilize our integrated hotel information and operational systems, such as central reservation system, and charge them an annual fee for such use.

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We recognize the initial franchise fee as revenue when the franchised-and-managed hotel opens for business, the fee becomes non-refundable, and we have fulfilled all our commitments and obligations. We recognize ongoing franchise and management fees as revenues when the franchised-and-managed hotel recognizes revenues from which we derive the fees. We recognize fees received from franchisees for system usage, maintenance and support as revenues when our services are rendered.

Operating Costs and Expenses. Our operating costs and expenses consist of costs for our leased-and-operated hotels, sales and marketing expenses, general and administrative expenses and other operating expenses. The following table sets forth the components of our operating costs and expenses, both in absolute amount and as a percentage of total revenues for the periods indicated.

	For the Year Ended December 31,										For the Six Months Ended June 30,
	2004				2005						2005				2006
	RMB		%		RMB		US$		%		RMB		%		RMB		US$		%
	(in thousands except percentages)
Total revenues	96,000		100.0		285,861		35,758		100.0		109,406		100.0		249,059		31,154		100.0
Less: Business tax and related surcharges	(5,101	)	(5.3	)	(16,830	)	(2,105	)	(5.9	)	(6,669	)	(6.1	)	(13,344	)	(1,669	)	(5.4	)
Net revenues	90,899		94.7		269,031		33,653		94.1		102,737		93.9		235,715		29,485		94.6
Leased-and-operated hotel costs:
Rents and utilities	(30,703	)	(32.0	)	(94,784	)	(11,856	)	(33.1	)	(36,701	)	(33.5	)	(73,976	)	(9,254	)	(29.7	)
Personnel costs	(12,949	)	(13.5	)	(41,225	)	(5,157	)	(14.4	)	(15,782	)	(14.4	)	(36,502	)	(4,566	)	(14.7	)
Depreciation and amortization	(5,681	)	(5.9	)	(23,335	)	(2,919	)	(8.2	)	(8,828	)	(8.1	)	(19,730	)	(2,468	)	(7.9	)
Consumables, food and beverage	(6,441	)	(6.7	)	(20,765	)	(2,598	)	(7.3	)	(7,609	)	(7.0	)	(17,811	)	(2,228	)	(7.2	)
Others	(8,162	)	(8.5	)	(26,100	)	(3,265	)	(9.1	)	(9,783	)	(8.9	)	(23,022	)	(2,880	)	(9.2	)
Total leased-and-operated hotel costs	(63,936	)	(66.6	)	(206,209	)	(25,795	)	(72.1	)	(78,703	)	(71.9	)	(171,041	)	(21,396	)	(68.7	)
Sales and marketing expenses	(2,113	)	(2.2	)	(7,691	)	(962	)	(2.7	)	(2,754	)	(2.5	)	(3,898	)	(488	)	(1.6	)
General and administrative expenses	(15,983	)	(16.7	)	(24,535	)	(3,069	)	(8.6	)	(10,338	)	(9.4	)	(20,898	)	(2,613	)	(8.4	)
Total operating costs and expenses	(82,032	)	(85.5	)	(238,435	)	(29,826	)	(83.4	)	(91,795	)	(83.9	)	(195,837	)	(24,497	)	(78.6	)

Leased-and-operated Hotel Costs. Our leased-and-operated hotel costs consist of costs and expenses directly attributable to our operation of leased-and-operated hotels, primarily including rental payments and utility costs for hotel properties, compensation and benefits for our hotel-based employees, costs of hotel room consumable products, depreciation and amortization of leasehold improvements, and commissions to travel intermediaries and consolidators. We anticipate that our leased-and-operated hotel costs will increase as we continue to open new leased-and-operated hotels and hire additional hotel-based employees.

Sales and Marketing Expenses. Our sales and marketing expenses primarily consist of advertising expenses, production costs of marketing materials, expenses associated with our membership reward program, and compensation and benefits for our sales and marketing personnel, including personnel at our centralized reservation center. We expect that our sales and marketing expenses will increase as we further expand into new geographic locations and promote our brand.

General and Administrative Expenses. Our general and administrative expenses primarily consist of compensation and benefits for our corporate office employees and other employees who are not sales and marketing or hotel-based employees, costs of third-party professional services, and rental payments relating to office and administrative functions. We expect that our general and administrative expenses will increase in the near term as we hire additional personnel and incur additional costs in connection with the expansion of our business and with being a publicly traded company, including costs of enhancing our internal controls.

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Our leased-and-operated hotel costs and general and administrative expenses include share-based compensation expenses. The following table sets forth the allocation of our share-based compensation expenses both in absolute amount and as a percentage of total share-based compensation expenses, among the cost and expense items set forth below. Share-based compensation expenses are allocated among these items based on the nature of the work our employees were assigned to perform.

	For the Year Ended December 31,					For the Six Months Ended June 30,
	2004		2005			2005		2006
	RMB	%	RMB	US$	%	RMB	%	RMB	US$	%
	(in thousands except percentages)
Leased-and-operated hotel costs—personnel costs	8	5.4	8	1	0.8	6	1.2	6	1	0.6
General and administrative expenses	141	94.6	952	119	99.2	480	98.8	1,029	128	99.4
Total share-based compensation expenses	149	100.0	960	120	100.0	486	100.0	1,035	129	100.0

We adopted an Employee’s Stock Option Plan, or the Option Plan, in 2003 and have granted options and stock purchase rights under the Option Plan since 2003. Prior to January 1, 2006, we accounted for share-based compensation expenses in accordance with Accounting Principles Board Opinion No. 25, or APB No. 25, “Accounting for Stock Issued to Employees.” In general, share-based compensation expenses under APB No. 25 are recognized based on the difference, if any, between the estimated fair value of our ordinary shares and the exercise price of the options or other equity incentives on the date of grant. Share-based compensation expenses on each date of grant, if any, are recorded in our shareholders’ equity as additional paid-in capital with an offsetting entry recorded as deferred share-based compensation. Deferred share-based compensation is amortized on a straight-line basis and charged to expense over the vesting period of the underlying options.

We have adopted SFAS No. 123 (revised 2004), “Share-Based Payment,” or SFAS No. 123 (R), beginning on January 1, 2006, under which share-based compensation expenses will be recognized generally over the vesting period of the award based on the fair value of the award on the grant date. As a result, we expect that our share-based compensation expenses will increase significantly compared to what we would have recorded under APB No. 25.

Taxation

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.

Home Inns Hong Kong is subject to a profit tax at the rate of 17.5% on assessable profit determined under relevant Hong Kong tax regulations. To date, Home Inns Hong Kong has not been required to pay profit tax as it had no assessable profit.

Our subsidiaries and affiliated entities in China are subject to a business tax at a rate of approximately 5.5% on revenues generated from providing services and related surcharges by various local tax authorities. In addition, our subsidiaries and affiliated entities in China are generally subject to the standard enterprise income tax rate, which currently is 33%. However, some of our subsidiaries are subject to lower enterprise income tax rates due to the preferential tax treatments granted by the local tax authorities. For example, our wholly owned subsidiary, Hemei Hotel Management Company, enjoys a reduced 15% enterprise income tax rate due to its place of incorporation and operation in the Pudong New District of Shanghai.

Various local tax authorities in China have provided financial subsidies in the form of certain tax refunds to us. However, these tax authorities could reduce or eliminate any or all of these financial subsidies at any time in the future. Reduction or elimination of the financial subsidies we currently enjoy may have an adverse effect on our results of operations.

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Critical Accounting Policies

We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.

Basis of Consolidation

Our consolidated financial statements included elsewhere in this prospectus include the financial statements of Home Inns & Hotels Management Inc., its subsidiaries and variable interest entity, or VIE, subsidiaries.

We applied the provisions of Financial Accounting Standards Board, or FASB, Interpretation No. 46 (Revised 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” or FIN46(R), to account for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.

Under FIN46(R), a company is required to consolidate a VIE if that company has a variable interest that will absorb a majority of the expected losses, receives a majority of the entity’s expected residual returns, or both. The company that absorbs a majority of the VIE’s expected losses and receives a majority of the VIE’s expected residual returns is a primary beneficiary.

We are the primary beneficiary of four variable interest entities, Home Inns & Hotels Management (Xiamen) Co., Ltd, or Home Inns Xiamen, Home Inns & Hotels Management (Fuzhou) Co., Ltd, or Home Inns Fuzhou, Home Inns & Hotels Management (Caoxi) Co., Ltd, or Home Inns Caoxi, and Home Inns & Hotels Management (Caobao) Co., Ltd, or Home Inns Caobao, of which the principal activity generally relates to hotel management. The total registered capital of the four VIEs was RMB4.0 million (US$0.5 million) as of December 31, 2005. The entities were considered variable interest entities because the equity at risk of each entity was not sufficient to finance its intended activities without additional financial support. We have a 51% ownership interest in Home Inns Xiamen, Home Inns Fuzhou and Home Inns Caoxi and 75% ownership interest in Home Inns Caobao, and we are considered the primary beneficiary of these entities because we absorb a majority of the entities’ expected losses and receive a majority of the entities’ expected residual returns. As a result, the operations of the VIEs are included in our consolidated financial statements since their incorporation in 2004.

The entities that operate the franchised-and-managed hotels are considered variable interest entities as the franchisees do not have the ability to make decisions that have a significant impact on the success of the franchise arrangement. However, as the franchisees provide all necessary capital to finance the operation of the franchised properties and absorb a majority of the expected losses, we are not considered the primary beneficiary of those entities.

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Property and Equipment

We state property and equipment at cost less accumulated depreciation and accumulated impairment losses, if any. We depreciate property and equipment to write off their cost less expected residual value, on a straight line basis over their expected useful lives.

At each balance sheet date, we consider both internal and external sources of information to assess whether there is any indication that assets included in property and equipment are impaired. If any such indication exists, we estimate the recoverable amount of assets and, if less than carrying value, an impairment loss is recognized to reduce the carrying value of the assets to their recoverable amount. We recognize such impairment losses in the consolidated profit and loss account. The gain or loss on disposal of property and equipment is the difference between the net sales proceeds and the carrying amount of the underlying asset, and is recognized in the consolidated profit and loss account.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the appropriate share of the fair value of the identifiable assets, including separately identifiable intangible assets, and liabilities acquired. The provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” or SFAS 142, require that a two-step impairment test be performed annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The first step of the test for impairment compares the book value of our reporting unit under which goodwill is recorded to its estimated fair value. The second step of the goodwill impairment test, which is only required when the net book value of the reporting unit exceeds the fair value, measures impairment as the difference between the implied fair value of goodwill and its book value. Goodwill is not amortized. We recognized no impairment for the periods presented in this prospectus.

Intangible Assets

Intangible assets consist primarily of intangible assets acquired in business combinations. We apply the criteria specified in SFAS No. 141 “Business Combinations,” or SFAS 141, to determine whether an intangible asset should be recognized separately from goodwill. We recognize intangible assets acquired through business acquisitions as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. We recognize and measure intangible assets, including favorable lease agreements and certain franchise agreements existing as of the date of acquisition, at fair value upon acquisition. Intangible assets from such business combination transactions are amortized over the remaining operating lease term or the franchise agreement term, as appropriate. We state purchased software at cost, which comprises purchase price less accumulated amortization and impairment, if any.

Impairment of Long-lived Assets and Definite-lived Intangible Assets

We review long-lived assets and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” or SFAS 144. We assess the recoverability of the long-lived assets and definite-lived intangible assets (other than goodwill) by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. If the estimated future undiscounted cash flows are less than the carrying value, an indication of impairment is present and we recognize a loss for the difference between fair value, using the expected discounted cash flows, and the carrying value of the assets. We use estimates and judgments in these impairment tests, and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different. We recognised no impairment for the periods presented.

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Provisions for Customer Reward Program

We invite our customers to participate in a customer reward program. Prior to November 14, 2004, membership was free of charge. We commenced charging a one-time membership fee after that date for new members. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership points for their paid stays, which can be redeemed for membership upgrades, room night awards and other gifts. The estimated incremental costs to provide membership upgrades, room night awards and other gifts are accrued and recorded as a provision for customer reward program as members accumulate points and recognized as sales and marketing expense in the accompanying statement of operations. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2004 and 2005 and June 30, 2006, we made provisions of RMB68,275, RMB776,645 (US$97,150) and RMB1,667,335 (US$208,565), respectively, based on the estimated liabilities under the customer reward program.

Revenue Recognition

Revenue from leased-and-operated hotels represents primarily room rentals and food and beverage sales from the leased-and-operated hotels. We recognize such revenues when goods and services are delivered.

Revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay (i) an initial one-time franchise fee and (ii) on-going management and service fees based on a percentage of revenue, which approximate 5% to 6% of the room revenues of the franchised hotels. The one-time franchise fee is recognized when the franchise hotel opens for business, the fee becomes non-refundable, and we have fulfilled all of our commitments and obligations, including assisting the franchisees in property design, leasehold improvement construction project management, systems installation, personnel recruiting and training. On-going management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. Other revenues generated from franchise agreements, including system maintenance and support fee and central reservation system usage fee, are recognized when services are provided.

Given the limited history in operating Home Inn’s customer reward program, we recognize all one-time membership fees as deferred revenue when received. We will recognize revenues from the one-time membership fees when the customers are no longer entitled to the benefits of the membership card, or over the estimate average customer relationship period upon having sufficient history to reliably estimate the customer relationship period.

Share-based Compensation

Prior to December 31, 2005, we accounted for share-based compensation arrangements in accordance with Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees”, or APB No. 25, and complied with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, or SFAS No. 123. Under APB No. 25, compensation cost is recognized based on the difference, if any, between the estimated fair value of the ordinary shares and the amount an employee is required to pay to acquire the ordinary shares, as determined on the date the option is granted. Total compensation cost is recorded in shareholders’ equity as additional paid-in capital and deferred share-based compensation. Deferred share-based compensation is amortized on a straight-line basis and charged to expense over the vesting period of the underlying options.

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), “Share-Based Payment”, or SFAS No. 123(R), which revises SFAS No. 123, and supersedes APB No. 25. Under the fair value recognition provisions of SFAS No. 123(R), we applied the prospective transition method and measured share-based compensation at fair value on the awards’ grant date based on the estimated number of awards that are expected to vest. Under the prospective transition method, we continued to account for non-vested awards outstanding under the provisions of APB No. 25. Only awards granted (or modified,

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repurchased, or cancelled) after the adoption of SFAS No. 123(R) were accounted for under the provisions of SFAS No. 123(R).

We adopted an employee’s stock option plan in 2003 and granted options to our directors, officers and other employees under the option plan. The following table sets forth a summary of our option grants since the beginning of 2004.

Date of Grant	Number of Ordinary Shares Underlying Options Granted	Option Exercise Price (in US$)		Fair Value of Ordinary Shares (in US$)		Type of Valuation
03/01/2004	604,182	0.3309		0.1239		(1	)
09/01/2004	542,428	0.3309		0.7589		(1	)
01/01/2005	461,589	0.3309		0.9324		(1	)
07/01/2005	180,000	1.5310		1.3327		(1	)
12/01/2005	586,483	2.2500		1.9730		(1	)
03/01/2006	300,000	1.5310		2.7170		(2	)
03/17/2006	510,000	2.7170		2.7170		(2	)
07/04/2006	302,000	3.2020		3.2020		(2	)
10/02/2006	659,000	(3	)	(3	)	(4	)

(1) Retrospective valuation by the independent appraiser.

(2) Contemporaneous valuation by the independent appraiser.

(3) Midpoint of the estimated price range for this offering.

(4) Good faith determination by our board of directors.

Determination of the amount of share-based compensation expense to be recognized requires significant judgment, including, most importantly, the estimated fair value of our ordinary shares underlying the options as of each date of grant. We have engaged an independent appraiser, American Appraisal China Limited, or AA, to assist in the determination of the fair value of our ordinary shares underlying options as of each date of grant since January 1, 2004. Determining the fair value of ordinary shares requires making complex and subjective judgments regarding projected financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of grant.

In assessing the fair value of our ordinary shares, AA considered the following principal factors:

• the nature of our company since our inception;

• the global economic outlook in general and the specific economic and competitive elements affecting our business and market;

• the nature and prospects of the lodging industry in China;

• the market-derived investment returns of entities engaged in the hotel operation business;

• the growth of our operations; and

• our business risks.

AA believes the income approach, also known as the discounted cash flow, or DCF, approach, to be most relevant and reliable only if it is a contemporaneous valuation in which the key assumptions exist at the valuation date and are not biased by hindsight. As we were a young, start-up company prior to 2006 and did not prepare cash flow projections during the period, AA adopted the market approach to determine the fair values of our ordinary shares as of various dates in 2004 and 2005. Under this approach, financial ratios and market price data of comparable companies are analyzed. Ten comparable companies were selected primarily based on the nature of the business, the geographical location and the consideration of other market participants. The ten companies selected are primarily engaged in the hotel operation business. AA determined market multiples of the comparable companies based on the latest available financial information. The market multiples were then adjusted to take into account our growth and business risk. The market multiples so derived were applied to our performance indicators and discounted to reflect the lack of liquidity.

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AA used a combination of the income approach and the market approach to assess the fair value of our ordinary shares in 2006. The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. The major assumptions used in deriving the fair values are consistent with our business plan, including:

• opening schedule of new hotels;

• average occupancy rate;

• average daily room rate; and

• operating margins.

Other major assumptions used by AA in calculating the fair values of our ordinary share in 2006 include the following:

• Weight of DCF and market multiples: The independent appraiser assigned 60% weight to the DCF approach and 40% weight to the market multiples approach because we had achieved better visibility of future earnings at the time, which made the DCF approach more meaningful.

• Weighted average costs of capital, or WACC: WACC of between 15% and 16.5% were used. This was the combined result of the changes in risk-free rate, industry average beta, and the decrease in our company-specific risk as we continued to grow and meet important milestones.

• Capital market valuation multiples: The independent appraiser obtained and assessed updated capital market valuation data of ten comparable companies.

• Lack of marketability discount, or LOMD: The independent appraiser quantified the LOMD by the Black-Scholes option-pricing model. This method treats the right to sell our ordinary shares freely before a liquidity event as a put option. The farther the valuation date is from a liquidation event, the higher the option value and thus the higher the implied LOMD. The LOMD was determined to be 6.9%.

The above assumptions used by AA in deriving the fair values were consistent with our business plan and major milestones achieved by us. AA also used other general assumptions, including the following:

• no material changes in the existing political, legal, fiscal and economic conditions and travel industry in China;

• no major changes in tax law in China or the tax rates applicable to our subsidiaries and consolidated affiliated entities in China;

• exchange rates between the Renminbi and U.S. dollars will not differ materially from current rates;

• our future growth will not be constrained by the lack of funding;

• our ability to retain competent management and key personnel to support our ongoing operations; and

• industry trends and market conditions for hotel and related industries will not deviate significantly from economic forecasts.

These assumptions are inherently uncertain. The increase in the fair value of our ordinary shares from January 2004 to July 2006 was primarily attributable to the growth of our revenues and net income as well as the number of hotels in operation as indicated in the table below. In addition, the rapid and substantial expansion of Home Inns hotels during the period has proved the viability of our business strategy and execution capability and

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enhanced our credibility, as demonstrated by our successful financings through issuance of preferred shares to unrelated third-party investors and obtaining credit facilities from commercial banks.

As of and for the Quarter Ended	Revenues (in RMB thousands)	Net Income (in RMB thousands)	No. of Hotels in Operation	Other Major Milestones
03/31/2004	—	1,922	14
06/30/2004	25,580	1,648	17	Obtaining control of Home Inns Beijing
09/30/2004	32,769	1,864	24
12/31/2004	37,651	534	26
03/31/2005	45,275	3,126	36	Obtaining RMB40 million financing through issuance of Series C preferred shares to unrelated third-party investors
06/30/2005	64,131	5,179	44	Obtaining financing from BTG in the form of an RMB80 million credit facility provided by a commercial bank entrusted by BTG
09/30/2005	77,733	5,199	54
12/31/2005	98,722	7,431	68	Obtaining RMB20 million unsecured loans from a commercial bank in China
03/31/2006	110,672	7,885	75
06/30/2006	138,387	19,364	82	Obtaining RMB46 million unsecured loans from a commercial bank in China

Share-based compensation expense recognized for the years ended December 31, 2003, 2004 and 2005 amounted to nil, RMB149,705 and RMB959,826 (US$120,064), respectively, and for the six months ended June 30, 2006, amounted to RMB1,035,145 (US$129,485).

Although it is reasonable to expect that the completion of this offering may increase the value of our ordinary shares underlying outstanding options as a result of the increased liquidity and marketability of our shares, the amount of such additional value could not be measured with precision or certainty at the time of the appraisals. With respect to the options granted on October 2, 2006, our board of directors determined that the midpoint of the estimated price range for this offering would be a reasonable measure of the fair value of our ordinary shares as of that date as we had made significant progress in connection with this offering.

Taxation

Income tax expenses are recorded using the liability method. Deferred tax assets or liabilities are recognized for the estimated future tax effects attributable to temporary differences and tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the amount of deferred tax assets if it is considered more likely than not that such assets will not be realized. In doing so, management must make judgments and estimates as to whether we have future taxable income available to utilize the deferred tax assets. As of December 31, 2004 and 2005 and June 30, 2006, we had deferred tax assets of RMB5,166,186 and RMB15,295,113 (US$1,913,252) and RMB18,248,764 (US$2,282,722), respectively. No valuation allowance was made against the deferred tax assets as of December 31, 2004 and 2005 and as of June 30, 2006.

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Selected Operating Data

The following table presents certain selected operating data of our company as of and for the dates and periods indicated. We present operating data for 2003 and 2004 to include those of Home Inns Beijing since Home Inns Beijing was managed by us throughout these two years. Our revenues have been and will continue to be significantly affected by these operating measures which are widely used in the hospitality industry.

	As of and for the Year Ended December 31,			As of and for the Six Months Ended June 30,
	2003	2004	2005	2005	2006
Operating Data:
Total hotels in operation:
Leased-and-operated hotels(1)	10	18	54	34	63
Franchised-and-managed hotels	0	8	14	10	19
Total rooms	1,131	2,991	8,197	5,372	9,707
Geographic coverage:
Number of cities	4	8	22	11	26
Occupancy rate (as a percentage)	72.4	86.8	89.8	86.6	93.8
Average daily rate (in RMB)	175	191	182	184	181
RevPAR (in RMB)	127	166	163	159	170

(1) Include four hotels operated through separate joint ventures with third parties. We own 75% of one joint venture and 51% of each of the other three joint ventures.

Results of Operations

In April 2002, we and BTG formed Home Inns Beijing to operate economy hotels in China. We and BTG owned 55% and 45%, respectively, of Home Inns Beijing upon its formation. We have been actively managing Home Inns Beijing since it commenced operations in 2002. Subsequently, Home Inns Hong Kong gradually increased its ownership interest in Home Inns Beijing by contributing additional funds to the registered capital of Home Inns Beijing. Home Inns Hong Kong increased its ownership interest in Home Inns Beijing to 95.59% as of February 2005. In April 2004, we and Beijing Capital Travel, a subsidiary of BTG, entered into a revised joint venture agreement under which we gained control of Home Inns Beijing, which has been our consolidated subsidiary since then. For periods prior to April 2004, we accounted for our interest in Home Inns Beijing using the equity method as BTG had the participation rights in certain decisions in the ordinary course of business of Home Inns Beijing.

The following table sets forth certain unaudited financial data relating to our consolidated results of operations in 2003 and 2004 assuming we had held a 93.47% interest in Home Inns Beijing and consolidated Home Inns Beijing throughout 2003 and 2004. This information has been derived from Note 7 to our consolidated financial statements included elsewhere in this prospectus and is presented below for you to have a better understanding of the financial results of the Home Inns hotel chain in these two periods.

	For the Year Ended December 31,
	2003	2004
	RMB	RMB
	(in thousands)
Net revenues	42,180	109,128
Income from operations	2,180	12,550
Net income	1,842	6,820

52

Our Selected Quarterly Results of Operations

The following table presents our selected unaudited quarterly results of operations for the eight quarters in the period ended June 30, 2006. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. Our business has grown rapidly and substantially since we commenced operations in April 2002. Our limited operating history makes it difficult to predict future operating results. We believe that the quarter-to-quarter comparison of operating results should not be relied upon as being indicative of results for any future quarters or for a full year.

	For the Three Months Ended
	September 30, 2004		December 31, 2004		March 31, 2005		June 30, 2005		September 30, 2005		December 31, 2005		March 31, 2006		June 30, 2006
	(in RMB thousands)
Consolidated Statement of Operations Data:
Revenues:
Leased-and-operated hotels	31,451		36,757		44,203		62,775		75,939		97,031		108,681		134,811
Franchised-and-Managed hotels	1,318		894		1,072		1,356		1,794		1,691		1,991		3,576
Total revenues	32,769		37,651		45,275		64,131		77,733		98,722		110,672		138,387
Less: Business tax and related surcharges	(1,702	)	(2,030	)	(2,848	)	(3,821	)	(4,370	)	(5,792	)	(5,908	)	(7,436	)
Net revenues	31,067		35,621		42,427		60,310		73,363		92,930		104,764		130,951
Operating costs and expenses(1):
Leased-and-operated hotel costs:
Rents and utilities	(10,356	)	(13,094	)	(15,797	)	(20,904	)	(26,825	)	(31,257	)	(36,512	)	(37,464	)
Personnel costs	(4,347	)	(4,939	)	(6,435	)	(9,347	)	(10,542	)	(14,901	)	(17,711	)	(18,791	)
Consumables, food and beverage	(2,113	)	(2,640	)	(2,857	)	(4,752	)	(5,839	)	(7,317	)	(8,166	)	(9,645	)
Depreciation and amortization	(1,861	)	(2,104	)	(3,843	)	(4,985	)	(5,903	)	(8,603	)	(9,078	)	(10,652	)
Others	(3,016	)	(2,432	)	(3,913	)	(5,870	)	(7,713	)	(8,603	)	(11,642	)	(11,380	)
Total leased-and-operated hotel costs	(21,693	)	(25,209	)	(32,845	)	(45,858	)	(56,822	)	(70,681	)	(83,109	)	(87,932	)
Sales and marketing expenses	(606	)	(919	)	(971	)	(1,783	)	(2,046	)	(2,891	)	(1,683	)	(2,215	)
General and administrative expenses	(4,277	)	(7,957	)	(5,775	)	(4,563	)	(6,184	)	(8,014	)	(7,271	)	(13,627	)
Total operating costs and expenses	(26,576	)	(34,085	)	(39,591	)	(52,204	)	(65,052	)	(81,586	)	(92,063	)	(103,774	)
Income from operations	4,491		1,536		2,836		8,106		8,311		11,344		12,701		27,177
Interest income	12		57		28		68		47		80		68		223
Interest expense	(49	)	(8	)	—		—		(215	)	(494	)	(1,149	)	(1,570	)
Other non-operating income	—		67		1,813		62		117		154		50		1,650
Income before income tax expense, minority interests and share of income (loss) of affiliated companies	4,454		1,652		4,677		8,236		8,260		11,084		11,670		27,480
Income tax expense	(2,773	)	(1,015	)	(935	)	(1,657	)	(1,661	)	(2,272	)	(2,739	)	(6,465	)
Minority interests	183		(103	)	(616	)	(1,400	)	(1,400	)	(1,381	)	(1,046	)	(1,651	)
Net Income	1,864		534		3,126		5,179		5,199		7,431		7,885		19,364
(1) Share-based compensation expenses are included in our operating costs and expenses as follows:
Leased-and-operated hotel cost - personnel costs	2		2		2		2		2		2		3		3
General and administrative expenses	28		113		233		249		230		240		344		685

53

Our quarterly revenues, operating income and net income have experienced continued growth for the eight quarters in the period ended June 30, 2006, except that we experienced a sequential decrease in our operating income and net income in the quarter ended December 31, 2004. This decrease was primarily due to an increase in pre-operating expenses of the hotels under development. Our net income for the quarter ended June 30, 2006 increased substantially compared to the preceding quarter. This increase was mainly because the number of leased-and-operated hotels that had commenced operations for over six months increased significantly from 41 in the quarter ended March 31, 2006 to 54 in the quarter ended June 30, 2006.

The following table presents certain selected operating data of our company as of and for the eight quarters in the period ended June 30, 2006. We present operating data for 2003 and 2004 as if we had consolidated Home Inns Beijing throughout the relevant periods.

	For the Three Months Ended
	September 30, 2004	December 31, 2004	March 31, 2005	June 30, 2005	September 30, 2005	December 31, 2005	March 31, 2006	June 30, 2006
Operating Data:
Total hotels in operation:
Leased-and-operated hotels	17	18	26	34	41	54	60	63
Franchised-and-managed hotels	7	8	10	10	13	14	15	19
Total rooms	2,743	2,991	4,269	5,372	6,512	8,197	8,972	9,707
Geographic coverage:
Number of cities	7	8	10	11	13	22	23	26
Occupancy rate (as a percentage)	92.2	86.4	81.6	90.4	93.1	90.9	89.5	97.7
Average daily rate (in RMB)	192	193	183	184	181	181	175	186
RevPAR (in RMB)	177	167	149	166	169	165	157	182

54

Our Results of Operations

The following table sets forth a summary of our consolidated results of operations, both in absolute amount and as a percentage of total revenues for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. Our business has grown rapidly and substantially since we commenced operations in April 2002. Our limited operating history makes it difficult to predict future operating results. We believe that the period-to-period comparison of operating results should not be relied upon as being indicative of future performance.

	For the Year Ended December 31,													For the Six Months Ended June 30,
	2003			2004				2005						2005				2006
	RMB		%	RMB		%		RMB		US$		%		RMB		%		RMB		US$		%
														(unaudited)				(unaudited)		(unaudited)
	(in thousands except percentages)
Consolidated Statement of Operations Data:
Revenues:
Leased-and-operated hotels	—		—	93,687		97.6		279,948		35,018		97.9		106,978		97.8		243,492		30,458		97.8
Franchised-and-managed hotels	—		—	2,313		2.4		5,913		740		2.1		2,428		2.2		5,567		696		2.2
Total revenues	—		—	96,000		100.0		285,861		35,758		100.0		109,406		100.0		249,059		31,154		100.0
Less: Business tax and related surcharges	—		—	(5,101	)	(5.3	)	(16,830	)	(2,105	)	(5.9	)	(6,669	)	(6.1	)	(13,344	)	(1,669	)	(5.4	)
Net revenues	—		—	90,899		94.7		269,031		33,653		94.1		102,737		93.9		235,715		29,485		94.6
Operating costs and expenses:
Leased-and-operated hotel costs:
Rents and utilities	—		—	(30,703	)	(32.0	)	(94,784	)	(11,856	)	(33.2	)	(36,701	)	(33.5	)	(73,976	)	(9,254	)	(29.7	)
Personnel costs	—		—	(12,949	)	(13.5	)	(41,225	)	(5,157	)	(14.4	)	(15,782	)	(14.4	)	(36,502	)	(4,566	)	(14.7	)
Depreciation and amortization	—		—	(5,681	)	(5.9	)	(23,335	)	(2,919	)	(8.2	)	(8,828	)	(8.1	)	(19,730	)	(2,468	)	(7.9	)
Consumables, food and beverage	—		—	(6,441	)	(6.7	)	(20,765	)	(2,598	)	(7.3	)	(7,609	)	(7.0	)	(17,811	)	(2,228	)	(7.2	)
Others	—		—	(8,162	)	(8.5	)	(26,100	)	(3,265	)	(9.1	)	(9,783	)	(8.9	)	(23,022	)	(2,880	)	(9.2	)
Total leased-and-operated hotel costs	—		—	(63,936	)	(66.6	)	(206,209	)	(25,795	)	(72.2	)	(78,703	)	(71.9	)	(171,041	)	(21,396	)	(68.7	)
Sales and marketing expenses	—		—	(2,112	)	(2.2	)	(7,691	)	(962	)	(2.7	)	(2,754	)	(2.5	)	(3,898	)	(488	)	(1.6	)
General and administrative expenses	(365	)	—	(15,983	)	(16.6	)	(24,535	)	(3,069	)	(8.5	)	(10,338	)	(9.4	)	(20,898	)	(2,613	)	(8.4	)
Total operating costs and expenses	(365	)	—	(82,031	)	(85.4	)	(238,435	)	(29,826	)	(83.4	)	(91,795	)	(83.9	)	(195,837	)	(24,497	)	(78.6	)
Income (loss) from operations	(365	)	—	8,868		9.3		30,596		3,827		10.7		10,942		10.0		39,878		4,988		16.0
Interest income (expense), net	1		—	(9	)	(0.0	)	(486	)	(61	)	(0.2	)	96		0.1		(2,428	)	(304	)	(1.0	)
Other non-operating income	—		—	324		0.3		2,146		269		0.8		1,875		1.7		1,700		213		0.7
Income tax expense	—		—	(5,738	)	(6.0	)	(6,526	)	(817	)	(2.3	)	(2,592	)	(2.4	)	(9,204	)	(1,151	)	(3.7	)
Minority interests	—		—	552		0.6		(4,797	)	(600	)	(1.7	)	(2,016	)	(1.8	)	(2,697	)	(337	)	(1.1	)
Share of income of affiliated companies	1,878		—	1,972		2.1		—		—		—		—		—		—		—		—
Net income	1,514		—	5,969		6.3		20,933		2,618		7.3		8,305		7.6		27,249		3,409		10.9

55

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

Revenues. Our total revenues increased by 127.7% from RMB109.4 million for the first half of 2005 to RMB249.1 million (US$31.2 million) for the first half of 2006.

• Leased-and-Operated Hotels. Revenues from our leased-and-operated hotels increased by 127.6% from RMB107.0 million for the first half of 2005 to RMB243.5 million (US$30.5 million) for the first half of 2006. This increase was primarily due to our expansion of leased-and-operated hotels from 34 hotels and 4,124 rooms as of June 30, 2005 to 63 hotels and 7,579 rooms as of June 30, 2006.

• Franchised-and-Managed Hotels. Revenues from our franchised-and-managed hotels increased by 133.3% from RMB2.4 million for the first half of 2005 to RMB5.6 million (US$0.7 million) for the first half of 2006. This growth was primarily due to an increase in the number of franchised-and-managed hotels from ten hotels with 1,248 rooms as of June 30, 2005 to 19 hotels with 2,128 rooms as of June 30, 2006.

Operating Costs and Expenses. Our total operating costs and expenses increased substantially from RMB91.8 million for the first half of 2005 to RMB195.8 million (US$24.5 million) for the first half of 2006. This increase resulted from increases in all of our cost and expense line items as our hotel operations substantially expanded in the first half of 2006.

• Leased-and-Operated Hotel Costs. Our leased-and-operated hotel costs increased substantially from RMB78.7 million for the first half of 2005 to RMB171.0 million (US$21.4 million) for the first half of 2006. This increase was primarily because all items comprising our leased-and-operated hotel costs increased substantially as we expanded our leased-and-operated hotels from 34 hotels and 4,124 rooms as of June 30, 2005 to 63 hotels and 7,579 rooms as of June 30, 2006.

• Sales and Marketing Expenses. Our sales and marketing expenses increased from RMB2.8 million for the first half of 2005 to RMB3.9 million (US$0.5 million) for the first half of 2006. This increase was primarily due to increased marketing and promotional expenses in connection with 14 new hotels that opened during the first half of 2006.

• General and Administrative Expenses. Our general and administrative expenses increased by 102.9% from RMB10.3 million for the first half of 2005 to RMB20.9 million (US$2.6 million) for the first half of 2006, primarily due to an increase in the total compensation and benefits for our administrative staff as a result of our hiring of over 80 new employees in the areas of finance and accounting, technology infrastructure, human resources and general administration to support our expanded operations and the third-party professional fees we incurred during the first half of 2006.

Income from Operations. Our income from operations increased by 266.1% from RMB10.9 million for the first half of 2005 to RMB39.9 million (US$5.0 million) for the first half of 2006 as a cumulative result of the above factors.

Interest Income (Expense), Net. Our net interest expense was RMB2.4 million (US$0.3 million) for the first half of 2006, primarily due to the interest accrued on our loans during the first half of 2006. We had net interest income of RMB0.1 million in the first half of 2005 primarily due to the interest accrued on our proceeds from the issuance of series C preferred shares in January 2005.

Income Tax Expenses. Our income tax expenses increased by 253.8% from RMB2.6 million for the first half of 2005 to RMB9.2 million (US$1.2 million) for the first half of 2006, primarily because of the increased income of our operating subsidiaries in China.

Minority Interest. Minority interest represents BTG’s share of our net income based on its equity interest in Home Inns Beijing and our joint venture partners’ share of the net income of the four leased-and-operated hotels owned by the joint ventures. Minority interest increased from RMB2.0 million for the first half of 2005 to RMB2.7 million (US$0.3 million) for the first half of 2006, due to our increased net income for the first half of 2006.

56

Net Income. As a result of the foregoing, we had net income of RMB27.2 million (US$3.4 million) for the first half of 2006, an increase of 227.7% from net income of RMB8.3 million for the first half of 2005.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenues. Our total revenues increased by 197.8% from RMB96.0 million in 2004 to RMB285.9 million (US$35.8 million) in 2005. In addition to the reasons discussed below, the revenue increase was also due to the effect of our consolidation of Home Inns Beijing since April 2004.

• Leased-and-operated Hotels. Revenues from our leased-and-operated hotels increased by 198.7% from RMB93.7 million in 2004 to RMB279.9 million (US$35.0 million) in 2005. This increase was primarily due to our substantial expansion of leased-and-operated hotels from 18 hotels and 2,060 rooms as of December 31, 2004 to 54 hotels and 6,555 rooms as of December 31, 2005.

• Franchised-and-managed Hotels. Revenues from our franchised-and-managed hotels increased substantially from RMB2.3 million in 2004 to RMB5.9 million (US$0.7 million) in 2005. This growth was primarily due to an increase in the number of franchised-and-managed hotels from eight hotels with 931 rooms as of December 31, 2004 to 14 hotels with 1,642 rooms as of December 31, 2005.

Operating Costs and Expenses. Our total operating costs and expenses increased substantially from RMB82.0 million in 2004 to RMB238.4 million (US$29.8 million) in 2005. This increase resulted from increases in all of our cost and expense line items as we substantially expanded our operations in 2005 and consolidated Home Inns Beijing in April 2004.

• Leased-and-operated Hotel Costs. Our leased-and-operated hotel costs increased substantially from RMB63.9 million in 2004 to RMB206.2 million (US$25.8 million) in 2005. This increase was primarily because all items comprising our leased-and-operated hotel costs increased substantially as we expanded our leased-and-operated hotels from 18 hotels and 2,060 rooms as of December 31, 2004 to 54 hotels and 6,555 rooms as of December 31, 2005.

• Sales and Marketing Expenses. Our sales and marketing expenses increased substantially from RMB2.1 million in 2004 to RMB7.7 million (US$1.0 million) in 2005. This increase was primarily due to increased marketing and promotional expenses in connection with 42 new hotels that opened in 2005.

• General and Administrative Expenses. Our general and administrative expenses increased by 53.1% from RMB16.0 million in 2004 to RMB24.5 million (US$3.1 million) in 2005, primarily due to an increase in the total compensation and benefits for our administrative staff as a result of our hiring of over 60 new employees in the areas of finance and accounting, technology infrastructure, human resources and general administration to support our expanded operations in 2005.

Income from Operations. Our income from operations increased by 243.8% from RMB8.9 million in 2004 to RMB30.6 million (US$3.8 million) in 2005 as a cumulative result of the above factors.

Interest Income (Expense), Net. Our net interest expense increased substantially from RMB9.0 thousand in 2004 to RMB0.5 million (US$0.1 million) in 2005, primarily due to the interest accrued on our loans from BTG in 2005.

Share of Income of Affiliated Companies. Our share of income of affiliated companies decreased from RMB2.0 million in 2004 to nil in 2005 because we consolidated Home Inns Beijing in April 2004.

Income Tax Expenses. Our income tax expenses increased by 14.0% from RMB5.7 million in 2004 to RMB6.5 million (US$0.8 million) in 2005, primarily because of the increased income of our operating subsidiaries in China.

Minority Interest. Minority interest represents BTG’s share of our net income based on its equity interest in Home Inns Beijing and our joint venture partners’ share of the net income of the four leased-and-operated hotels owned by the joint ventures. Minority Interest increased substantially from RMB0.6 million in 2004 to RMB4.8

57

million (US$0.6 million) in 2005, due to our consolidation of Home Inns Beijing since April 2004 as well as our increased net income in 2005.

Net Income. As a result of the foregoing, we had net income of RMB20.9 million (US$2.6 million) in 2005, an increase of 248.3% from net income of RMB6.0 million in 2004.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Prior to April 2004, we accounted for our interest in Home Inns Beijing using the equity method. Home Inns Beijing was our material operating entity that recognized all of the revenues and incurred related operating costs and expenses for our hotels prior to April 2004. Consequently, we had no revenues, but only immaterial operating costs and expenses in 2003. Accordingly, we do not believe our consolidated results of operations for 2003 and 2004 provide a meaningful basis for comparison and discussion. However, the following discussion of the results of operations of Home Inns Beijing in 2003 and 2004 provides an indication of the financial performance of the Home Inns hotel chain, which was not consolidated into our results of operations prior to April 2004.

Home Inns Beijing’s Results of Operations in 2003 and 2004

The following table sets forth a summary of Home Inns Beijing’s consolidated results of operations both in absolute amount and as a percentage of total revenues for the periods indicated. This information should be read together with Home Inns Beijing’s consolidated financial statements and related notes included elsewhere in this prospectus.

	For the Year Ended December 31,
	2003		%		2004		%
	(in RMB thousands except percentages)
Consolidated Statement of Operations Data:
Revenues:
Leased-and-operated hotels	43,842		100.0		112,914		97.9
Franchised-and-managed hotels	—		—		2,364		2.1
Total revenues	43,842		100.0		115,278		100.0
Less: Business tax and related surcharges	(1,662	)	(3.8	)	(6,150	)	(5.3	)
Net revenues	42,180		96.2		109,128		94.7
Operating costs and expenses:
Leased-and-operated hotel costs:
Rents and utilities	(13,900	)	(31.7	)	(36,462	)	(31.6	)
Personnel costs	(6,677	)	(15.2	)	(15,653	)	(13.6	)
Consumables, food and beverage	(3,268	)	(7.5	)	(8,149	)	(7.1	)
Depreciation and amortization	(2,179	)	(5.0	)	(6,685	)	(5.8	)
Others	(5,720	)	(13.0	)	(10,019	)	(8.7	)
Total leased-and-operated hotel costs	(31,744	)	(72.4	)	(76,968	)	(66.8	)
Sales and marketing expenses	(2,142	)	(4.9	)	(2,564	)	(2.2	)
General and administrative expenses	(5,604	)	(12.8	)	(16,607	)	(14.4	)
Total operating costs and expenses	(39,490	)	(90.1	)	(96,139	)	(83.4	)
Income from operations	2,690		6.1		12,989		11.3
Interest income (expense), net	86		0.2		(15	)	0.0
Other non-operating income	30		0.1		328		0.3
Income tax expense	(318	)	(0.7	)	(6,861	)	(6.0	)
Minority interests	—		0.0		1,294		1.1
Net income	2,488		5.7		7,735		6.7

58

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003.

Revenues. Home Inns Beijing’s total revenues increased by 163.2% from RMB43.8 million in 2003 to RMB115.3 million in 2004.

• Leased-and-operated Hotels. Revenues from leased-and-operated hotels increased by 157.8% from RMB43.8 million in 2003 to RMB112.9 million in 2004. This increase was primarily due to Home Inns Beijing’s substantial expansion of leased-and-operated hotels from 10 hotels with 1,131 rooms as of December 31, 2003 to 18 hotels with 2,060 rooms as of December 31, 2004.

• Franchised-and-managed Hotels. Revenues from franchised-and-managed hotels increased from nil in 2003 to RMB2.4 million in 2004. This change was primarily because Home Inns Beijing had eight franchised-and-managed hotels in operation with 931 rooms as of December 31, 2004, compared to no such hotel in operation as of December 31, 2003.

Operating Costs and Expenses. Home Inns Beijing’s total operating costs and expenses increased by 143.3% from RMB39.5 million in 2003 to RMB96.1 million in 2004. This increase resulted from increases in all cost and expense line items due to the substantial expansion of the Home Inn hotel chain.

• Leased-and-operated Hotel Costs. Leased-and-operated hotel costs increased substantially from RMB31.7 million in 2003 to RMB77.0 million in 2004. This increase was primarily because all items comprising Home Inns Beijing’s leased-and-operated hotel costs increased substantially as it expanded its leased-and-operated hotels from 10 hotels with 1,131 rooms as of December 31, 2003 to 18 hotels with 2,060 rooms as of December 31, 2004.

• Sales and Marketing Expenses. Home Inns Beijing’s sales and marketing expenses increased substantially from RMB2.1 million in 2003 to RMB2.6 million in 2004. This increase was primarily due to increased marketing and promotional expenses in connection with 16 new hotels that opened in 2004.

• General and Administrative Expenses. Home Inns Beijing’s general and administrative expenses increased by 196.4% from RMB5.6 million in 2003 to RMB16.6 million in 2004, primarily due to an increase in the total compensation and benefits for its administrative staff as a result of Home Inns Beijing’s hiring of over 45 new employees in the areas of finance and accounting, technology infrastructure, human resources and general administration to support the expanded operations in 2004.

Income From Operations. Home Inns Beijing’s income from operations increased substantially from RMB2.7 million in 2003 to RMB13.0 million in 2004 as a cumulative result of the above factors.

Interest Income (Expense), Net. Home Inns Beijing had net interest income of RMB0.1 million in 2003 and had net interest expense of RMB0.02 million in 2004, primarily due to the interest earned on its bank deposits in 2003 and the interest accrued on the short-term borrowing in 2004.

Income Tax Expense. Home Inns Beijing’s income tax expenses increased substantially from RMB0.3 million in 2003 to RMB6.9 million in 2004, primarily due to the substantial increase in its income from operations.

Minority Interest. Minority interest represents our joint venture partners’ share of the net income of the four leased-and-operated hotels owned by the joint ventures. Home Inns Beijing did not have minority interest in 2003 because the joint ventures owning the four hotels were established in 2004.

Net Income. As a result of the foregoing, Home Inns Beijing had net income of RMB7.7 million in 2004, compared to net income of RMB2.5 million in 2003.

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Our Liquidity and Capital Resources

Our principal sources of liquidity have been cash generated from operating activities, our sale of ordinary shares and preferred shares through private placements, as well as borrowings from BTG and third-party lenders. Our cash and cash equivalents consist of cash on hand and liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less that are placed with banks and other financial institutions. As of June 30, 2006, we had entered into binding contracts with lessors of 33 properties for our leased-and-operated hotels under development. We expect to incur an additional RMB140.0 million (US$17.5 million) in capital expenditures in connection with the completion of the leasehold improvements of these hotels. To support this planned expansion, we currently expect to hire approximately 900 to 1,200 new employees for hotel operations and approximately 15 to 20 new employees for our corporate office and expect to incur additional personnel costs ranging from RMB80.0 million (US$10.0 million) to RMB110.0 million (US$13.8 million) per year in connection with this anticipated headcount increase. We intend to fund this planned expansion with our operating cash flow, existing cash balance and the remaining funds available under our credit facilities, the latter of which amounted to approximately RMB24.0 million (US$3.0 million) as of September 30, 2006.

We have incurred a working capital deficit resulting primarily from payables relating to the cost of leasehold improvements. Our current assets are insufficient to cover our current liabilities. As of December 31, 2004 and 2005 and June 30, 2006, our net current liabilities amounted to RMB5.5 million, RMB62.8 million and RMB83.6 million (US$10.5 million), respectively. We have been able to meet our working capital needs, and we believe that we will be able to meet our working capital needs in the foreseeable future, with our operating cash flow, existing cash balance and the remaining funds available under our credit facilities.

The following table sets forth a summary of our cash flows for the periods indicated:

	For the Year Ended December 31,								For the Six Months Ended June 30,
	2003		2004		2005				2005		2006
	RMB		RMB		RMB		US$		RMB		RMB		US$
									(unaudited)		(unaudited)		(unaudited)
	(in thousands)
Net cash (used in) provided by operating activities	(340	)	28,664		70,604		8,832		20,789		64,815		8,108
Net cash used in investing activities	(28,945	)	(42,319	)	(159,339	)	(19,932	)	(60,564	)	(88,024	)	(11,011	)
Net cash provided by financing activities	38,830		28,605		100,170		12,530		40,329		66,463		8,314
Net increase in cash and cash equivalents	9,545		14,950		11,435		1,430		554		43,254		5,411
Cash and cash equivalents at beginning of period	1,797		11,342		26,292		3,289		26,292		37,727		4,719
Cash and cash equivalents at end of the period	11,342		26,292		37,727		4,719		26,846		80,981		10,130

Operating Activities

We have financed our operating activities primarily through cash generated from operations. We currently anticipate that we will be able to meet our needs to fund operations beyond the next twelve months with operating cash flow, existing cash balances and the portion of the net proceeds from this offering remaining after repayment of part of our indebtedness.

Net cash provided by operating activities increased substantially to RMB64.8 million (US$8.1 million) for the first half of 2006. The increase resulted from our expanded operations in the first half of 2006 and was mainly attributable to several factors, including (i) our net income of RMB27.2 million (US$3.4 million) for the first half of 2006, (ii) an add-back of non-cash depreciation and amortization expenses of RMB20.1 million (US$2.5 million), (iii) an increase in deferred revenues of RMB7.3 million (US$0.9 million), and (iv) an increase in deferred rental of RMB6.6 million (US$0.8 million), offset in part by the increases in prepayments and other

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current assets. These changes were primarily attributable to the expansion of the Home Inns hotel chain from 44 hotels with 5,372 hotel rooms as of June 30, 2005 to 82 hotels with 9,707 hotel rooms as of June 30, 2006. Net cash provided by operating activities amounted to RMB70.6 million (US$8.8 million) in 2005. The increase was mainly attributable to several factors, including (i) our net income of RMB20.9 million (US$2.6 million), (ii) an add-back of non-cash depreciation and amortization expenses of RMB23.8 million (US$3.0 million), (iii) a substantial increase in deferred rental of RMB14.6 million (US$1.8 million), (iv) an increase in income tax payable of RMB7.6 million (US$1.0 million), and (v) an increase in deferred revenues of RMB5.9 million (US$0.7 million). These changes were primarily attributable to the expansion of the Home Inns hotel chain from 26 hotels with 2,991 hotel rooms as of December 31, 2004 to 68 hotels with 8,197 hotel rooms as of December 31, 2005. Net cash provided by operating activities amounted to RMB28.7 million in 2004. This was primarily due to a net income of RMB6.0 million, an add-back of non-cash expenses including depreciation and amortization, and an increase in other payables and accruals. These changes were primarily attributable to the expansion of the Home Inns hotel chain from 10 hotels with 1,131 hotel rooms as of December 31, 2003 to 26 hotels with 2,991 hotel rooms as of December 31, 2004, as well as our consolidation of Home Inns Beijing since April 2004.

Investing Activities

Our cash used in investing activities is primarily related to our leasehold improvements and purchase of equipment and fixtures used in leased-and-operated hotels. Net cash used in investing activities increased from RMB60.6 million during the first half of 2005 to RMB88.0 million (US$11.0 million) during the first half of 2006, primarily due to an increase in our leasehold improvements and purchase of furniture, fixture and equipment used in an increased number of leased-and-operated hotels in the first half of 2006. Net cash used in investing activities increased from RMB42.3 million in 2004 to RMB159.3 million (US$19.9 million) in 2005, primarily due to a substantial increase in our leasehold improvements and purchase of equipment and fixtures used in an increased number of leased-and-operated hotels in 2005. Net cash used in investing activities increased from RMB28.9 million in 2003 to RMB42.3 million in 2004, primarily due to our purchase of equipment and fixtures used in an increased number of leased-and-operated hotels in 2004, partially offset by net cash acquired in connection with our consolidation of Home Inns Beijing in 2004.

Financing Activities

Our financing activities consist of issuance and sale of our shares to investors and related parties and borrowings from a related party and other third-party lenders. The following table sets forth a summary of our outstanding indebtedness as of September 30, 2006:

Lender	Date of Loan Initiation	Due Date	Principal (in RMB)	Principal (in US$)	Interest Rate
BTG	07/15/2005	07/14/2008	20,000,000	2,501,783	6.1747	%
BTG	09/07/2005	09/06/2008	10,000,000	1,250,891	6.1747	%
BTG	10/18/2005	10/17/2007	10,000,000	1,250,891	6.1747	%
BTG	01/11/2006	01/10/2008	20,000,000	2,501,783	6.1747	%
China Merchants Bank	04/29/2006	10/28/2006	40,000,000	5,003,565	5.40	%
China Merchants Bank	05/30/2006	11/29/2006	6,000,000	750,535	5.40	%
China Merchants Bank	08/21/2006	02/20/2007	20,000,000	2,501,783	5.58	%
China Merchants Bank	09/11/2006	03/10/2007	20,000,000	2,501,783	5.022	%

We are required under each loan or financing transaction agreement to notify the lender in advance before we enter into a material merger and acquisition, spin-off, corporate reorganization, new joint venture or sale of material assets transaction. None of our lenders have the right to prevent us from entering into any of these transactions. In addition, under the financing transaction agreement between us and BTG, in the event of default by us under the agreement, BTG has the right to enforce its rights by choosing one of the following options: (i) requesting liquidation of Home Inns Hong Kong or Home Inns Beijing; (ii) converting the total principal amount

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of the loans into 11.15% of the equity interest in Home Inns Hong Kong if the net assets of Home Inns Hong Kong on the date of default exceeds its net assets as of June 2005; or (iii) converting the total principal amount of the loans into equity interest in Home Inns Beijing at a price determined based on the valuation of Home Inns Hong Kong at RMB663.5 million (US$83.0 million), if the value of the net assets of Home Inns Beijing exceeds RMB663.5 million (US$83.0 million) on the date of default.

As of September 30, 2006, the remaining funds available under our credit facilities in the aggregate amounted to approximately RMB24.0 million (US$3.0 million). Our loans from China Merchants Bank were drawn under a revolving credit facility which allows us to renew each loan for additional six-month terms at the same interest rate upon expiration of the initial term. We have renewed the loan from China Merchants Bank originally due on August 20, 2006 for an additional six-month term and plan to renew other loans from China Merchants Bank when they become due.

Net cash provided by financing activities increased from RMB40.3 million for the first half of 2005 to RMB66.5 million (US$8.3 million) for the first half of 2006. In the first half of 2006, we borrowed a total of RMB86.0 million (US$10.8 million) from a third-party lender and BTG to fund the rapid expansion of our hotel chain throughout China. Net cash provided by financing activities in the first half of 2005 consisted solely of the proceeds we received from issuance and sale of our Series C preferred shares to a group of third-party investors in January 2005. Net cash provided by financing activities increased substantially from RMB28.6 million in 2004 to RMB100.2 million (US$12.5 million) in 2005, and net cash provided by financing activities decreased from RMB38.8 million in 2003 to RMB28.6 million in 2004. Cash provided by financing activities in 2005 consisted of a total of RMB60.0 million (US$7.5 million) borrowings from a related party and third-party lenders and the RMB40.3 million (US$5.0 million) proceeds from our issuance and sale of preferred shares in the year. Net cash provided by financing activities in 2004 consisted of the RMB30.4 million proceeds from our issuance and sale of our ordinary shares, partially offset by the repayment of our RMB3.0 million short-term borrowings in the year. Cash provided by financing activities in 2003 consisted solely of the RMB38.8 million proceeds from our issuance and sale of preferred shares in 2003.

Home Inns Beijing’s Liquidity and Capital Resources

Home Inns Beijing’s principal sources of liquidity have been cash generated from operating activities and capital contributions from its shareholders. Home Inns Beijing’s cash and cash equivalents consist of cash on hand and liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less that are placed with banks and other financial institutions.

The following table sets forth a summary of Home Inns Beijing’s cash flows for the periods indicated:

	For the Year Ended December 31,
	2003		2004
	(in RMB thousands)
Net cash provided by operating activities	10,193		36,330
Net cash used in investing activities	(26,640	)	(67,623	)
Net cash provided by financing activities	28,945		31,720
Net increase in cash and cash equivalents	12,498		427
Cash and cash equivalents at beginning of period	3,785		16,283
Cash and cash equivalents at end of the period	16,283		16,710

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Operating Activities

Home Inns Beijing has financed its operating activities primarily through cash generated from operations. Net cash provided by operating activities amounted to RMB36.3 million in 2004, as compared to RMB10.2 million in 2003. The increase was mainly attributable to several factors, including (i) a substantial increase in net income from RMB2.5 million in 2003 to RMB7.7 million in 2004, (ii) an increase in non-cash depreciation and amortization of property and equipment expenses from RMB2.3 million in 2003 to RMB7.0 million in 2004, and (iii) an increase in other payables and accruals, including long-term payable for rental expenses in 2004. The increase was partially offset by an increase in accounts receivable and consumables, prepayments and other current assets in 2004. These changes were primarily attributable to the expansion of our Home Inns hotel chain from 10 hotels with 1,131 hotel rooms as of December 31, 2003 to 26 hotels with 2,991 hotel rooms as of December 31, 2004.

Investing Activities

Home Inns Beijing’s cash used in investing activities was primarily related to leasehold improvements and purchase of furniture, fixture and equipment used in leased-and-operated hotels. Net cash used in investing activities increased from RMB26.6 million in 2003 to RMB67.6 million in 2004, primarily due to a substantial increase in the leasehold improvements and purchase of equipment and fixtures used in an increased number of leased-and-operated hotels in 2004.

Financing Activities

Home Inns Beijing’s cash provided by financing activities was related to capital contributions from its shareholders. Net cash provided by financing activities increased from RMB28.9 million in 2003 to RMB31.7 million in 2004, due to an increase in capital contributions from Home Inns Beijing’s shareholders in 2004.

Capital Expenditures

Our and Home Inn Beijing’s capital expenditures were incurred primarily in connection with leasehold improvements, investments in furniture, fixtures and equipment and technology, information and operational software. Our capital expenditures totaled nil, RMB61.7 million and RMB193.2 million (US$24.2 million) in 2003, 2004 and 2005, respectively. Home Inns Beijing’s capital expenditures totaled RMB32.0 million and RMB70.5 million in 2003 and 2004, respectively. We will continue to make capital expenditures to meet the expected growth of our operations and expect cash generated from our operating activities and financing activities will meet our capital expenditure needs in the foreseeable future.

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2005:

	Payment Due by Period
	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
	(in RMB millions)
Long-term debt obligations	40	—	40	—	—
Operating lease obligations	1,276	94	194	198	790
Purchase obligations	103	103	—	—	—
Investment obligations	2	2	—	—	—
Total	1,421	199	234	198	790

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As of December 31, 2005, our long-term debt obligations consisted of the loans due to BTG in an aggregate principal amount of RMB40.0 million (US$5.0 million) with an interest rate of 6.1747% per annum. Each of the loans from BTG would be due in two or three years from the date on which the loan was extended. Our operating lease obligations related to our obligations under lease agreements with lessors of our leased-and-operated hotels. Our purchase obligations primarily consisted of our contractual commitments relating to leasehold improvements and installation of equipment for our leased-and-operated hotels. Our investment obligations consisted of our contractual commitments relating to our investments in two PRC entities which were expected to become our wholly owned subsidiaries upon our payment of the registered capital for these entities.

Off-Balance Sheet Commitments and Arrangements

Other than operating lease obligations set forth in the table above, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Inflation

Inflation in China has not materially impacted our results of operations in recent years. According to the National Bureau of Statistics of China, the change of consumer price index in China was 1.2%, 3.9% and 1.8% in 2003, 2004 and 2005, respectively.

Holding Company Structure

We are a holding company with no material operations of our own. We conduct our operations primarily through our subsidiaries in China. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our subsidiaries. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of Home Inns Beijing, a Sino-foreign enterprise, and Hemei, a wholly foreign owned enterprise, is required to set aside a portion of its after-tax profits each year to fund a statutory reserve and to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the board or the enterprise itself. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of these subsidiaries.

Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest rates for our outstanding debt and the interest income generated by excess cash invested in liquid investments with original maturities of three months or less. As of December 31, 2005, our total outstanding loans amounted to RMB60.0 million (US$7.5 million) with interest rates varying from 5.22% to 6.1747%. Assuming the principal amount of the outstanding loans remains the same as of December 31, 2006, a 1% increase in each applicable interest rate would add RMB0.6 million (US$0.07 million) to our interest expense in 2006. We intend to use a portion of the net proceeds from this offering to repay the outstanding loans. See “Use of Proceeds.” We have not used any derivative financial instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of interest rate risk.

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We have not been exposed to material risks due to changes in interest rates. However, our future interest income may be lower than expected due to changes in market interest rates.

Foreign Exchange Risk

Substantially all of our revenues and most of our expenses are denominated in RMB. Our exposure to foreign exchange risk primarily relates to cash and cash equivalent denominated in U.S. dollars as a result of our past issuances of preferred shares through a private placement and proceeds from this offering. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 3.4% appreciation of the RMB against the U.S. dollar by June 30, 2006. There remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. To the extent that we need to convert U.S. dollars we receive from this offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert our RMB denominated cash amounts into U.S. dollars amounts for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R), which replaces SFAS No. 123 and APB No. 25. Under SFAS No. 123(R), share-based compensation is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest. Pro forma disclosure is no longer an alternative. SFAS No. 123R is effective for nonpublic companies for fiscal years that begin after December 15, 2005 and we have implemented SFAS No. 123(R) effective January 1, 2006.

For any awards granted subsequent to the adoption of SFAS No. 123(R), compensation expense will be recognized generally over the vesting period of the award based on the fair value of the award on grant date.

On October 6, 2005, FASB Staff Position FAS 13-1 “Accounting for Rental Costs Incurred During a Construction Period,” or FSP FAS 13-1, addresses the accounting for rental costs associated with operating leases that are incurred during a construction period. The FSP reached a consensus that as there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, and that the rental costs associated with ground or building operating leases that are incurred during a construction period should be recognized as rental expenses. This guidance is to be applied to the first reporting period beginning after December 15, 2005. Our current accounting policy is consistent with guidance provided by FSP FAS 13-1.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” or SFAS No. 154, which replaces APB Opinion No. 20, “Accounting Changes,” or APB No. 20, and FASB Statement

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No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

In June 2005, the FASB ratified the Emerging Issues Task Forces Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements,” or EITF No. 05-06. EITF No. 05-06 provides that the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of a lease be the shorter of (a) the useful life of the assets or (b) a term that includes required lease periods and renewals that are reasonably assured upon the acquisition or the purchase. The provisions of EITF No. 05-06 should be applied to leasehold improvements (within the scope of this issue) that are purchased or acquired in reporting periods beginning after June 29, 2005. The adoption of EITF No. 05-06 will not have a significant impact on our consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”, or FIN 48, which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that we recognize in our financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for us on January 1, 2007, with the cumulative effect of the changes in accounting principle, if any, recorded as an adjustment to opening retained earnings. We do not believe the adoption of FIN 48 will have a material effect on our consolidated financial position, cash flows and results of operations.

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INDUSTRY BACKGROUND

Emergence and Expansion of Economy Hotel Chains in China

China’s lodging industry has expanded rapidly as a result of the substantial growth of the Chinese economy and travel industry over the past several years. According to Euromonitor, the total number of room-nights in China grew from 811 million in 1999 to 1.2 billion in 2004 and total sales grew from RMB190 billion in 1999 to RMB264 billion in 2004.

The lodging industry in China consists of hotels as well as other forms of accommodation such as guesthouses and privately-owned lodging outlets. Although hotels accounted for only approximately 2.5% and 5.0% of total lodging outlets in China in 1999 and 2004, respectively, the hotel sector represents an increasingly significant portion of the lodging market, accounting for approximately 44.5% and 60.2% of total sales in the lodging market in 1999 and 2004, respectively, according to Euromonitor.

Historically, hotel development projects in China generally focused on star-rated hotels that were primarily targeted at international tourists and corporate travelers. In recent years, economy hotel chains have emerged and expanded in China, gaining a growing customer base consisting primarily of individual domestic business and leisure travelers. According to the 2006 China Economy Hotel Survey published by China’s Ministry of Commerce and the China Hotel Association, or the 2006 Economy Hotel Report, since the concept of a branded economy hotel chain was first introduced in China in 1997, several branded economy hotel chains, including Jinjiang Star, Home Inns and Motel 168, have emerged primarily in China’s economically prosperous eastern coastal region. Since 2004, the growth of branded economy hotel chains in China has accelerated, as evidenced by the existing chains’ rapid expansion into new urban business centers in other regions of China.

Economy hotel chains in China mainly target value-conscious domestic business and leisure travelers who demand convenient lodging, a consistent product and high-quality services. According to the 2006 Economy Hotel Report, in 2005, 37% of economy hotel guests were individual business travelers, 23% were contract corporate customers and 20% were individual leisure travelers. Economy hotel chains aim to satisfy customers’ basic accommodation needs with affordable pricing, a comfortable lodging experience and a standardized product.

The following table sets forth a summary of certain data concerning economy hotel chains in China.

	Total Number of Hotels(2)	Total Number of Rooms(2)	Number of Rooms Per Hotel(2)	Average Daily Rate (in RMB) (3)	Average Occupancy Rate (%)(2)(3)
2004(1)	173	21,716	—	—	—
2005(1)	273	36,144	58 to 244	134 to 202	85 to 96

(1) Source: 2006 Economy Hotel Report.

(2) Calculated based only on the data of selected economy hotel chains in China as of the end of each year.

(3) The range represents differences across regional market, including the northern, eastern, southeastern, central, southwestern, northwestern, southern, Beijing and Shanghai markets.

According to the 2006 Economy Hotel Report, the top three economy hotel chains in China, namely, Jinjiang Star, Home Inns and Motel 168, had market shares of 20%, 18% and 10%, respectively, of the Chinese economy hotel market in 2005. Competition among economy hotel chains in China is primarily based on a hotel chain’s ability to provide a consistent product, high-quality services, an efficient reservation system and effective sales channels, as well as specific product features including the design, decoration and guest amenities of the hotels within the chain.

The economy hotel chain segment of China’s lodging industry is still at an early stage of development. However, it is expanding rapidly as a result of a number of factors. There are general factors such as the growth

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of the Chinese economy and the growth of the travel and lodging industries in China. In addition, there are more specific factors driving the growth of economy hotel chains in China, such as fast-growing small- to medium-sized enterprises, or SMEs, the growth of domestic tourism, the expansion of urban business centers and the fragmentation of the hotel industry.

General Factors Driving the Growth of Economy Hotel Chains in China

Growth of the Economy in China. China’s economy has grown and is expected to continue to grow rapidly. According to the Economist Intelligence Unit, the gross domestic product in real terms, or real GDP, of China grew from RMB5.4 trillion (US$677.9 billion) in 2001 to RMB7.9 trillion (US$988.2 billion) in 2005, representing a compound annual growth rate, or CAGR, of 9.8%, and is expected to reach RMB11.6 trillion (US$1.4 trillion) in 2010, representing a CAGR of 7.6% from 2006 to 2010.

The following table sets forth a summary of certain data regarding China’s economic growth for the years from 2001 to 2005.

	2001	2002	2003	2004	2005	CAGR (2001-2005)
Real GDP (in billions of RMB) (1)	5,419	5,911	6,504	7,160	7,869	9.8	%
Real GDP per capita (in RMB) (1)	4,246	4,602	5,033	5,508	6,018	9.1	%
Disposable income per capita (in US$)(1)	490	546	603	682	759	11.5	%

(1) Source: Economist Intelligence Unit.

The following table sets forth a summary of certain projections regarding China’s economic growth for the periods from 2006 to 2010.

	2006	2007	2008	2009	2010	CAGR (2006-2010)
Real GDP (in billions of RMB) (1)	8,619	9,306	10,034	10,787	11,570	7.6	%
Real GDP per capita (in RMB) (1)	6,554	7,034	7,538	8,070	8,618	7.1	%
Disposable income per capita (in US$)(1)	854	964	1,050	1,130	1,220	9.3	%

(1) Source: Economist Intelligence Unit.

Growth of the Travel Industry in China. Rapid economic growth in China has led to a significant increase in domestic travel activities. Domestic travel volume increased by 75% from approximately 629 million trips in 1995 to approximately 1.1 billion trips in 2004, according to Yearbook of China Tourism Statistics (2005). The substantial increase in domestic travel activities has in turn resulted in significant growth in spending on domestic travel from RMB352.2 billion (US$44.1 billion) in 2001 to RMB528.6 billion (US$66.1 billion) in 2005, representing a CAGR of 10.7%, according to Yearbook of China Tourism Statistics (2005).

The following table sets forth a summary of certain data regarding the growth of the travel industry in China for the years from 2001 to 2004.

	2001	2002	2003(3)	2004	CAGR (2001-2004)
Total spending on domestic travel (in billions of RMB) (1)	352.2	387.8	344.2	471.1	10.7	%
Number of domestic trips (in millions)(1)	784	878	870	1,102	12.0	%
Number of travelers (overnight visitors) (in millions)(2)	33.2	36.8	33.0	41.8	8.0	%
Number of domestic air passengers (in millions)(1)	68.3	77.6	80.8	110.5	17.4	%

(1) Source: China Statistics Yearbook (2005).

(2) Source: Yearbook of China Tourism Statistics (2005).

(3) In 2003, the travel industry in China was negatively affected by the SARS outbreak beginning in March of that year.

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Growth of the Lodging Industry in China. The substantial growth of the Chinese economy and travel industry has led to a rapid expansion of the lodging industry in China. According to Yearbook of China Tourism Statistics (2005), the number of star-rated hotels, as rated by China National Tourism Bureau, grew from 1,913 in 1995 to 10,888 in 2004, with the number of hotel rooms growing from 486,114 in 1995 to 1,237,851 in 2004.

The following table sets forth a summary of certain data concerning the lodging industry in China as of the dates indicated.

	As of December 31,
	2001	2002	2003	2004	CAGR (2001-2004)
Number of one- to three-star hotels(1)	6,788	8,070	8,826	9,675	12.5	%
Number of four- to five-star hotels(1)	570	810	925	1,213	28.6	%
Number of hotel rooms of star-rated hotels(1)	816,260	897,206	992,804	1,237,851	14.9	%
Number of occupied hotel room-nights (in millions)(2)	174	197	203	275	16.4	%

(1) Source: Yearbook of China Tourism Statistics (2005).

(2) Calculated by multiplying number of hotel rooms by average occupancy rate and 365 days, except for 2004, a leap year, in which there were 366 days.

While the supply of hotel rooms has continued to grow, China’s hotels sector has demonstrated its ability to absorb the increase in room supply due to the strong demand for hotel rooms and the overall economic growth, as evidenced by an increase of 22.5% in RevPAR from 2001 to 2004 and a 51.2% increase in the supply of rooms over the same period.

The following table sets forth a summary of certain operating data of star-rated hotels for the years from 2001 to 2004.

	2001	2002	2003	2004
Average occupancy rate (in percentage)(1)(2)	58.5	60.2	56.1	60.6
Average daily rate (in RMB)(1)	198.1	210.5	218.0	234.0
RevPAR (in RMB)(1)(2)	115.8	126.6	122.4	141.8

(1) Source: Yearbook of China Tourism Statistics (2005).

(2) Average occupancy rate and RevPAR in 2003 were negatively affected by the SARS outbreak beginning in March of that year.

Specific Factors Driving the Growth of Economy Hotel Chains in China

Fast Growing SMEs. As a result of PRC economy’s transition from a planned economy to a more market-oriented economy, the number of SMEs in China has increased substantially from 21.2 million in 2001 to 23.5 million in 2005, and is expected to reach 24.8 million by the end of 2006, according to iResearch. This growth has led to SMEs’ significant contribution to China’s GDP, which was estimated to be 60% of China’s GDP in 2003 according to the United Nations Conference on Trade and Development (Improving the Competitiveness of SMEs Through Enhancing Productive Capacity, UNCTAD/ITE/TEB/2005/1), as well as a substantial increase in business travel by employees of SMEs according to the 2006 Economy Hotel Report. Given their relatively modest budgets, SMEs are generally more value-oriented. As a result, SMEs’ travel policies are more likely to require their employees to stay in economy hotels that provide services tailored to their needs. According to the 2006 Economy Hotel Report, in 2005, 37% of economy hotel guests were individual business travelers, of whom we believe a substantial majority were SME travelers. We believe SME travelers will continue to comprise a substantial and growing portion of the customer base for economy hotels in China.

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Growth of Domestic Tourism. In conjunction with growing disposable income per capita in China, the central government and various levels of local governments in China have actively promoted the development of the leisure travel market. According to Euromonitor, domestic tourist expenditure increased by approximately 40% from RMB394 billion in 1999 to RMB551 billion in 2004 while tourism spending on accommodation increased by 39% from RMB190 billion in 1999 to RMB264 billion in 2004. As China’s economy and disposable income per capita continue to grow, leisure travel activities in China are expected to continue to increase, especially in conjunction with the 2008 Summer Olympics in Beijing and the 2010 World Expo in Shanghai.

Expansion of Urban Business Centers. Substantial economic growth in China during the past decades has resulted in the rapid expansion of urban business centers across China, each with a population of over four million people, GDP of over RMB80 billion (US$10.0 billion) or both. According to China City Statistics Yearbook (2005), China had over 100 cities each with a population of over four million and over 50 cities each with annual GDP of over RMB80 billion (US$10.0 billion) as of the end of 2004. We believe the expansion of urban business centers has fostered and will continue to support increasing business travel among different business centers across China, resulting in growing demand for economy hotel chains that have broad geographic coverage and strong brand recognition in China.

Fragmentation of the Hotel Industry. The hotel industry is still highly fragmented in China compared to other markets despite an increase of supply in recent years. As of 2004, the top ten hotel brands in China had an approximately 6% share of the Chinese hotel market in terms of sales while the top ten hotel brands in the United States had a 60% share of the U.S. hotel market according to Euromonitor. Most international hotel brands that have a presence in China focus primarily on the upscale segment while many one- to three-star hotels and unrated lodging outlets generally lag in utilizing professional management to deliver quality services. We believe such fragmentation has created opportunities for leading economy hotel chains to further grow and gain market share by focusing on domestic value-conscious customers who demand convenient lodging as well as a consistent product and high-quality services.

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BUSINESS

Overview

We are a leading economy hotel chain in China based on the number of our hotels, the number of our hotel rooms as well as the geographic coverage of our hotel chain. We develop and operate economy hotels across China under our award-winning “Home Inn” brand. Since we commenced operations in 2002, we have become one of the best-known economy hotel brands in China. We offer a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging.

We have achieved our growth by utilizing two business models. We either lease real estate properties on which we develop and operate hotels or we franchise our brand to hotel owners and manage these hotel properties. We refer to the former type of hotels as “leased-and-operated hotels” and to the latter type of hotels as “franchised-and-managed hotels.” As of June 30, 2006, our Home Inns hotel chain consisted of 63 leased-and-operated hotels in operation with an additional 33 leased-and-operated hotels under development and 19 franchised-and-managed hotels in operation with an additional 24 franchised-and-managed hotels under development, covering 40 cities in China. We expect to incur an additional RMB140.0 million (US$17.5 million) of capital expenditures in connection with the completion of the leasehold improvements of 33 leased-and-operated hotels under development as of June 30, 2006, of which approximately 85% are expected to be completed and commence operation by the end of 2006 and the remainder is expected to be completed and commence operation by the end of first quarter of 2007. This planned expansion will be funded with our operating cash flow, existing cash balance and the remaining funds available under our credit facilities. We have received many awards and accolades for our innovative, consistent and high-quality product and services across our hotel chain, including the “2006 Leading Brand in Economy Hotels in China” from the Chinese Hotel Industry Association and the “Golden Pillow Award” for best brand in economy hotels in China in 2006 from the 21^st Century Business Herald, a nationwide economic journal in China.

We have experienced substantial growth while maintaining profitability since 2003. Our Home Inns hotels in operation grew rapidly from 10 hotels in four cities as of the end of 2003 to 68 hotels in 22 cities as of the end of 2005, and our net income grew from RMB1.5 million in 2003 to RMB20.9 million (US$2.6 million) in 2005. In the six months ended June 30, 2006, we generated total revenues of RMB249.1 million (US$31.2 million) and net income of RMB27.2 million (US$3.4 million).

Our Strengths

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

Scale and Leadership in the Economy Hotel Market in China. Home Inns is a leading economy hotel chain in China with a nationwide network of 82 hotels operating in 26 cities with an additional 57 hotels under development as of June 30, 2006. We believe our broad hotel network, strong brand recognition and reputation have allowed us to attract customers and establish our leading market position. We have a loyal customer base, as evidenced by the extensive Home Inns membership network consisting of approximately 130,000 active members as of June 30, 2006. Members of our Home Inns membership network contributed approximately 34% of our total room-nights sold in 2005. We believe we are usually our customers’ first choice when they travel to different cities due to our extensive geographic coverage and consistent product and high-quality service.

Our early-mover status in many of our markets and established regional operational synergy have enabled us to develop and operate hotels efficiently and successfully in our targeted markets. As a leading national branded economy hotel chain in China, we have been able to establish credibility with property owners and secure desirable properties on favorable lease terms. In addition, our scale allows us to achieve efficiency in many aspects of our operations, including property development and design, purchasing, systems development and implementation, recruiting and training.

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Innovative, Distinctive and Consistent Product. We constantly evaluate the needs and preferences of our targeted customers and our cost structure in an effort to provide a product that caters to our customers’ needs and preferences while maintaining our profitability. While we offer a standardized product in all of our hotels to maintain the uniformity of our hotel chain, we have developed innovative and unique product features, consisting of the design, appearance, color scheme, decoration, lighting and amenities of Home Inns hotels. We believe this makes our hotels attractive to customers and differentiates us from our competitors. One of the most important goals of our operations is to provide consistent, high-quality service to customers across our hotel chain to enable them to enjoy the comforts of home while staying at different Home Inns hotels. To achieve this goal, we have created a comprehensive set of procedural manuals relating to all aspects of our hotel operations to guide our employees to follow the same standards, thereby ensuring the same high quality of services across our Home Inns chain. Our focus in these areas since our inception has allowed us to establish and maintain our Home Inns hotel chain as a leading economy hotel chain in China offering competitive pricing and consistent cleanness, convenience, comfort to value-conscious individual business and leisure travelers. As a result, our hotels enjoy consistently high occupancy rates, which were 72.4%, 86.8% and 89.8% in 2003, 2004 and 2005, respectively.

Outstanding Track Record. Since we commenced operations in 2002, we have developed a track record of expanding our business operations primarily through organic growth while maintaining a consistent and high-quality product and achieving strong financial performance. Our Home Inns hotels in operation grew rapidly from five hotels as of the end of 2002 to 82 hotels as of June 30, 2006, and the geographic coverage of our Home Inns hotels in operation increased from two cities as of the end of 2002 to 26 cities as of June 30, 2006. We have achieved and maintained profitability since 2003, even as we rapidly expanded our business operations and continued to upgrade our product. In addition, we have successfully maintained and enhanced our brand and image, as evidenced by numerous recognitions and awards received by us, including the “2006 Leading Brand in Economy Hotels in China” from the China Hotel Association and the “Golden Pillow Award” for best brand in economy hotels in China in 2006 from the 21^st Century Business Herald, a nationwide economic journal in China.

Efficient and Integrated Operational Infrastructure and Information Systems. To ensure that all of our hotels perform optimally, we have established an effective performance evaluation system based on a comprehensive set of clearly defined key performance indicators that are aligned with a corresponding compensation structure. In addition, we have adopted a company-wide best-practice proprietary information system developed in-house by our seasoned information technology team which has extensive operating knowledge of the hotel industry and is closely integrated with our business operations. Our management reporting system allows us to monitor each hotel’s performance and other aspects of our operations on a timely basis. By having current information readily available, we are able to better refine our resource allocation, respond to changes in each geographic market, adjust operational details, and set budgetary targets. Our centralized reservation system allows customers to book hotel rooms utilizing toll-free phone access to our centralized reservation center or through the Internet at any time. Our customer relationship management system tracks the consumption patterns and accumulated and redeemed points of members of our Home Inns membership reward program, allowing us to analyze customer data on a timely and company-wide basis and further improve our customer service accordingly. Our property management system synchronizes each hotel’s room inventory with our system, giving our reservation agents the capability to sell last rooms at every hotel.

Experienced Management Team and Motivated Staff. Our management team has extensive experience in the hospitality and other consumer product and service industries and a proven track record of identifying, developing, operating and managing hotel properties successfully. In addition, we have successfully recruited, trained and retained a team of skilled, committed and motivated managerial and other employees at each of our hotels. We believe our performance-linked compensation structure, career-oriented training and career advancement opportunities are the key drivers that motivate our employees. We provide capable and experienced employees with opportunities to be promoted to management positions. As a result, many of our hotels are managed by qualified employees who have achieved their current positions through internal promotion. Through our training facility, Home Inns Academy, we have implemented extensive training programs and conducted

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periodic tests to ensure our employees are equipped with up-to-date knowledge of various aspects of our hotel operations and our demand for high-quality services. We have experienced a low attrition rate among our managerial staff since our inception. We believe our employees are motivated and well-trained to deliver high-quality services to our customers. This has significantly contributed to our successful track record and loyal customer base.

Our Strategy

Our goal is to become the leading economy hotel chain in China. We intend to leverage our competitive strengths to replicate our business model consistently in both existing and new markets in China. We also intend to sustain our growth by developing additional Home Inns hotels under both the leased-and-operated and the franchised-and-managed business models to maintain or achieve a dominant position in markets that we decide to enter or expand. Our primary growth strategies include:

Expand Geographical Coverage to Capitalize on Early-Mover Advantage. Home Inns currently has one of the broadest geographical coverage in China among major domestic and international hotel chains, with 82 hotels in operation and an additional 57 hotels under development covering 40 cities as of June 30, 2006. We believe by capitalizing on our early-mover advantage when entering and developing a given geographical market, we can capture a significant market share ahead of our competitors. Our target markets include major metropolitan areas, regional centers demonstrating strong economic growth, and select resort/tourism destinations. We have based and intend to continue to base our expansion program to enter into new markets on a number of criteria, focusing on provincial capitals and cities that have strong GDP growth, a high population concentration or both. We have identified over 100 such cities that we intend to focus more on going forward. We intend to continue broadening our geographical coverage and to be a leading player in these markets.

Increase Penetration in Existing Markets. We intend to continue growing organically and increase our penetration in the existing cities in which we operate by selectively establishing more Home Inns hotels, focusing on locating our hotels near ground transportation hubs, business centers, shopping centers, industrial development zones, colleges and universities, and large residential neighborhood. We believe many of our existing markets are still under-served by hotels catering to individual business and leisure travelers who demand value as well as consistent high-quality service. Given the extensive awareness of and loyalty to our Home Inn brand, our growing Home Inns membership network, and our strong local market experience and expertise, we believe that we are well positioned to capture a larger market share in our existing markets.

Continue to Build Brand Awareness and Customer Loyalty. As a leader in the emerging economy hotel chain sector, Home Inns has already achieved significant brand recognition among our existing and target customers. Since word-of-mouth referrals have been, and will continue to be, a key factor in building awareness of our brand, we intend to continue enhancing the Home Inn brand by maintaining the consistency of the high quality products and services that we provide. We continually seek innovative ideas to achieve the best home-away-from-home experience for our customers. We have engaged outside design firms to review our current product and identify potential improvements. In order to continue improving the quality of our services and to meet our customers’ changing demands, we intend to proactively seek customer feedback through a variety of methods, including frequent interactions between our hotel managers and our customers. We also intend to continue improving our Home Inns membership reward program to attract and retain repeat customers and expand our membership network. In addition, we intend to leverage the experience of our dedicated marketing team to further enhance our brand through a variety of initiatives, including increased advertising and launching chain-wide and regional promotional programs and events.

Increase RevPAR by Optimizing Customer Channel Mix and Maximizing Room Rate Growth. We believe Home Inns’ leadership allows us to benefit from industry-wide growth. We intend to further increase RevPAR by optimizing customer channel mix. We receive room reservations from our customers through multiple channels, including our central reservation system, or CRS, our Home Inns membership network, walk-ins, corporate

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accounts, and travel agencies and consolidators. Different customer channels require different pricing strategies. Our proprietary information systems track information regarding the customer channel mix at the hotel- and company-level, thereby providing our hotel managers the information necessary to analyze and optimize the mixture of customer channels and pricing strategies through various sales and marketing programs to maximize our hotels’ occupancy and RevPAR. We intend to continue to improve and leverage our information and operational systems to increase RevPAR.

In addition, in markets where demand for hotel rooms exceeds supply, we intend to incrementally increase room rates as we believe any such room rate increases will have a minimal effect on our occupancy rates due to our superior products and services, customer loyalty and brand recognition. We expect room rate increases to result in increased RevPAR and enhanced profitability.

Further Enhance Our Information and Operational Systems and Human Resources Management. We believe our proprietary information and operational systems have given us a significant competitive advantage, and we intend to continue to upgrade our technology and systems and develop new, innovative features and applications to support our anticipated growth and further enhance the management and operational efficiency of our hotels. We also believe the ability to train and retain our employees is important to our growth strategy. We intend to further leverage Home Inns Academy to facilitate the sharing of best practices and to develop a management talent pool with sufficient capacity to meet the demands presented by our rapid growth. In addition, we will continue to refine our performance evaluation system, compensation schemes and career development initiatives for our employees. By closely and systematically monitoring our employees’ performance and aligning their interests with those of management and our shareholders, we believe that we can continue to attract, train and retain qualified managerial and other employees to maintain our consistent high-quality services across our hotel chain.

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Our Home Inns Hotel Chain

We are dedicated to providing a consistent and high-quality product to our customers, allowing them to enjoy the comforts of home while staying at any Home Inns hotel. Our Home Inns hotel chain is a leading economy hotel chain in China offering cleanness, convenience, comfort and value to individual business and leisure travelers.

As of June 30, 2006, our Home Inns hotel chain consisted of 82 hotels in operation and an additional 57 hotels under development, covering 40 cities in China. The following map sets forth the geographic coverage of our hotel chain as of June 30, 2006.

Our Home Inns hotel chain covers most major metropolitan areas in China. We intend to further penetrate the existing metropolitan markets where we have a presence and also expand into additional cities in China with a population of over four million, annual GDP of over RMB80 billion (US$10.0 billion) or both. We believe cities meeting these criteria generally have the potential for sustainable economic growth and increasing demand for hotel accommodation services.

A typical Home Inns hotel has 80 to 150 guest rooms. Each hotel has a standardized design, appearance, decor, color scheme, lighting scheme and set of guest amenities in each room, including a bedding package featuring mattresses meeting the standards of four-star hotels in China, free in-room broadband Internet access, a comfortable work space, air-conditioning and a supply of cold and hot drinking water. Home Inns hotels are strategically located to provide our guests with convenient access to major business districts, ground transportation hubs, major highways, shopping centers, industrial development zones, colleges and universities, and/or large residential neighborhood.

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The following table sets forth a complete listing of all of our hotels as of June 30, 2006.

City	Leased-and- Operated Hotels	Franchised-and- Managed Hotels	Contracted Leased-and- Operated Hotels(1)	Contracted Franchised-and- Managed Hotels(1)
Shanghai	12	2	3	5
Beijing	10	8	–	7
Tianjin	5	1	3	6
Suzhou	4	4	1	–
Changzhou	3	–	–	–
Chengdu	3	–	–	–
Shenzhen	3	–	–	–
Wuhan	3	–	–	–
Nanjing	2	–	3	–
Guangzhou	2	–	2	–
Wuxi	2	–	–	–
Hangzhou	1	2	1	2
Shaoxing	1	1	–	–
Qingdao	1	–	4	–
Dalian	1	–	1	–
Ningbo	1	–	–	1
Shenyang	1	–	–	1
Zhengzhou	1	–	–	1
Chongqing	1	–	–	–
Fuzhou	1	–	–	–
Hefei	1	–	–	–
Jiangyin	1	–	–	–
Nantong	1	–	–	–
Xiamen	1	–	–	–
Zhuhai	1	–	–	–
Shijiazhuang	–	1	1	–
Yantai	–	–	2	–
Baoding	–	–	1	–
Baotou	–	–	1	–
Bengbu	–	–	1	–
Dongguan	–	–	1	–
Harbin	–	–	1	–
Jilin	–	–	1	–
Luoyang	–	–	1	–
Nanchang	–	–	1	–
Xi’an	–	–	1	–
Yangzhou	–	–	1	–
Zhangjiajie	–	–	–	1
Zhongshan	–	–	1	–
Zibo	–	–	1	–
Total	63	19	33	24

(1) Contracted hotels include hotels which have not commenced operations but for which we have entered into binding leases or franchise agreements with the respective lessors or franchisees.

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Leased-and-Operated Hotels. For our leased-and-operated hotels, we lease properties from real estate owners or lessors and we are responsible for hotel development and customization to conform to the standards of Home Inns, as well as repairs and maintenance and operating expenses of properties over the term of the lease. We are also responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate our hotels and purchasing supplies. We typically pay fixed rent on a quarterly basis for the first three or five years of the lease term, after which we may be subject to a 3% to 5% increase every three to five years. We generally have a right of first refusal to extend the lease after the initial term expires. The annual rent for each of our leased-and-operated hotels ranges from RMB0.6 million (US$0.08 million) to RMB5.2 million (US$0.7 million), depending on the location, size and condition of each hotel property. The terms of our leases range from eight to 20 years, most of which are 15 years. In general, upon expiration of these leases, we may dispose of the removable facilities, equipment and appliances installed by us while leasehold improvements and fixtures may be kept by the lessor on the premises. In the case of early termination of a lease due to the lessor’s default, we are generally entitled to take all removable items installed by us and may also be compensated for the amount we spent in connection with the leasehold improvements. In the case of early termination of a lease due to our default, we are generally entitled to take all removable items installed by us and the lessor is entitled to the leasehold improvements which result from our investments.

Franchised-and-Managed Hotels. For our franchised-and-managed hotels, we franchise our Home Inn brand to franchisees who are property owners, lessors or existing hotel operators, and we are generally responsible for managing these hotels, typically including the hiring and appointing of the general managers of these hotels. Under a typical franchise agreement between us and a franchisee, the franchisee is generally required to pay us an initial franchise fee of RMB0.2 million (US$0.03 million) to RMB0.3 million (US$0.04 million), annual franchise fees of 3% of the revenues of the hotel, as well as an annual management fee of 3% of the revenues of the hotel. The franchisee is responsible for the costs of hotel development and customization to conform to the standards of Home Inns, as well as for repairs and maintenance and operating expenses of the hotel. In general, we enter into franchise arrangements in markets where we have established leased-and-operated hotels and are able to leverage our local knowledge and experience as well as marketing and administrative resources to better assist our franchised-and-managed hotels in these localities. The typical term for our franchise agreements is five years.

The following table sets forth the number of our hotels in operation as of June 30, 2006.

	Total Number of Hotels	Number of Hotels Opened for Over Six Months	Number of Hotels Opened for No More Than Six Months	Average Number of Rooms per Hotel	Typical Lease/Franchise Term
Leased-and-operated Hotels	63	54	9	120	15 years
Franchised-and-managed Hotels	19	14	5	112	5 years

We also operate four leased-and-operated hotels through separate joint ventures with third parties. Home Inns Shanghai owns 75% of one joint venture and 51% of each of the other three joint ventures.

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We set the room rates of our hotels based on local market conditions with reference to room rates set by our competitors. As we primarily target individual business and leisure travelers, January or February, the month during which the Chinese New Year falls, generally accounts for a lower portion of our annual revenues than other months. The following table presents certain selected operating data as of and for the dates and periods indicated. We present operating data for 2003 and 2004 as if we had consolidated Home Inns Beijing throughout the relevant periods. Our revenues have been and will continue to be significantly affected by these operating measures which are widely used in the hospitality industry.

	As of and for the Year Ended December 31,			As of and for the Six Months Ended June 30,
	2003	2004	2005	2005	2006
Operating Data:
Total hotels in operation(1):
Leased-and-operated hotels(2)	10	18	54	34	63
Franchised-and-managed hotels	0	8	14	10	19
Total rooms(1)	1,131	2,991	8,197	5,372	9,707
Geographic coverage(1):
Number of cities	4	8	22	11	26
Occupancy rate (as a percentage)	72.4	86.8	89.8	86.6	93.8
Average daily rate (in RMB)	175	191	182	184	181
RevPAR (in RMB)	127	166	163	159	170

(1) As of the end of each period.

(2) Includes four hotels operated through separate joint ventures with third parties.

Hotel Development

We follow a structured and systematic development and construction process with respect to new hotel properties. Our multi-step development process starts with planning and site identification. We have staff based in our head office in Shanghai focusing on identifying potential new markets and performing a comprehensive study of each new market by conducting site visits and gathering background information such as the regional economic conditions and availability of existing hotel accommodation services in the prospective new market. After the development team at our head office decides to pursue opportunities in a new market, we assign our regional development staff and the city general manager in each region to select ideal hotel locations in the chosen market. Once a site has been selected, we negotiate with the property owner while concurrently conducting due diligence investigations with respect to a number of major legal and regulatory aspects, including the owner’s land title and relevant zoning regulations. Our lease term negotiations are guided by a comprehensive set of criteria, including certain financial return requirements. All new hotels are subject to the final approval of four designated directors of Home Inns Beijing, including our chief executive officer, David Jian Sun. We commence constructing a standardized Home Inns hotel after definitive agreements with the owner have been executed. A majority of the construction materials and supplies for the new hotel are purchased through our centralized procurement system. Before completion of construction, we carry out a series of pre-opening activities, such as identifying and appointing the general manager and other members of the hotel management team, and hiring and training hotel staff in anticipation of the hotel opening. Our hotel development process, from planning and site identification to the hotel opening, typically takes four to six months.

For our leased-and-operated hotels, we lease properties from real estate owners or lessors and we convert the properties into standardized Home Inns hotels. For our franchised-and-managed hotels, we assist franchisees in refurbishing, renovating or constructing their properties after they join our branded hotel chain, and in meeting our brand specifications by providing technical expertise and cost-savings suggestions. As a leading branded economy hotel chain in China, we are generally able to establish credibility with property owners and secure desirable properties on reasonable terms.

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We have incurred capital expenditures primarily in connection with leasehold improvements and investments in furniture, fixtures and equipment, technology and information and operational systems. Our capital expenditures totaled nil, RMB61.7 million, RMB193.2 million (US$24.2 million) and RMB93.9 million (US$11.7 million) in 2003, 2004, 2005 and the six months ended June 30, 2006, respectively. We will continue to make capital expenditures to meet the expected growth of our operations. We expect to meet our capital expenditure needs in the foreseeable future with cash generated from our operating activities and financing activities. We have not had any material divestiture during the past three years.

We seek to lease or franchise properties that meet the following market- and hotel-specific criteria:

General Market Criteria

Economic Growth. We focus on cities that are approaching, or have already entered into, periods of significant economic growth. Such cities generally show growth in certain business activities as measured by employment opportunities, population growth rates, tourism and convention activities, air traffic volume, local commercial real estate occupancy, and retail sales volume. Markets that exhibit growth in these metrics typically have strong demand for hotel facilities and services. We have identified over 100 such cities in China, including cities each with a population of over four million, annual GDP of over RMB80 billion (US$10.0 billion) or both, and provincial capitals. We intend to focus more on these cities going forward.

Geographic Diversification. We seek to maintain a geographically diverse portfolio of hotels to offset the effects of regional economic cycles. We will continue to expand into new urban business centers as opportunities arise that meet our investment criteria.

Favorable Development Environment. We seek lodging markets with favorable hotel development environment, including an absence of or minimal zoning constraints, an absence of lengthy local development approval and registration processes, as well as the availability of suitable sites and construction contractors.

Specific Hotel Criteria

Location and Market Appeal. We seek to invest in hotels situated near both business and leisure centers that tend to generate a broad base of demand for hotel accommodations and facilities. These demand drivers include transportation hubs, convention centers, business parks, shopping centers and other retail areas, major highways, tourist destinations, major universities and cultural and entertainment centers. The confluence of nearby business and leisure centers will enable us to attract both weekday business travelers and weekend leisure guests.

Size and Facilities. We seek to develop and operate economy hotels with 80 to 150 guest rooms, which include amenities that are attractive to key demand segments such as individual business and leisure travelers. We believe operating economy hotels with 80 to 150 rooms allows us to best leverage our competitive strengths and maximize our profitability.

Financial Return Requirements. We require our development team, marketing team and city general managers to assess the potential financial return of every proposed new hotel. We will only develop hotels that exhibit a potential for meeting our internal financial return objectives both in the near term and over the term of the lease agreement.

Hotel Management

We believe that skilled management is a critical element in maximizing revenues and profitability of our hotel operations. A majority of our senior hotel management team has extensive experience in the hospitality and other consumer-services industries. Personnel at our corporate office perform strategic planning, finance, project development, sales and marketing, training and other functions and guide, support and monitor our on-site hotel

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operations and executives. Each of our departments, including hotel operations, sales and marketing, human resources, information technology, development, risk management, legal and accounting and finance, is staffed by an experienced team with significant expertise in their respective area. These departments support the senior management in each hotel and its day-to-day activities by providing operating statistics, accounting and budgeting services, sales and revenue management, marketing and promotion support, cost controls, property management tools and other resources that we develop, maintain and deliver efficiently and effectively using our centralized corporate office resources. Key elements of our centralized hotel management programs include the following:

Budgeting and Monitoring. Our corporate office personnel work with the general manager of each hotel to set a detailed annual budget for revenues and cost categories of the hotel. The annual budget is based on historical operating performance of the hotel, planned targeted marketing, planned renovations, operational efficiencies and local market conditions. Through the use of our online property management and management reporting systems, we are able to track each hotel’s daily occupancy, average daily rates, RevPAR and other operating data. As a result, we can effectively and timely monitor the actual performance of each hotel. By having current hotel operating information available on a timely basis, we can adjust sales efforts and other resources in time to take advantage of changes in the market and to maximize our profitability.

Quality Assurance and Training. We are dedicated to providing value and consistent quality standards to our customers. We have established quality standards for all aspects of our hotel operations that cover, among other areas, housekeeping, hotel maintenance and renovation, and service offering. To ensure compliance with our quality standards, we have developed a comprehensive set of procedural manuals relating to all aspects of our hotel operations to ensure that our employees follow the same standards. We have implemented comprehensive training programs to ensure the effectiveness and uniformity of our employee training through our centralized human resources department at our corporate office as well as through our dedicated training facility, Home Inns Academy.

The compliance of our hotels with quality standards is monitored through both scheduled and unannounced visits and reviews conducted periodically at each hotel. We require most of our employees to take periodic tests in order to monitor compliance with our quality standards. In addition, our practice of tracking customer comments through guest comment cards, and the direct solicitation of guest opinions regarding specific items, allows us to improve services and amenities at each hotel across our hotel chain.

Strategic Capital Improvements. To maintain our competitiveness and enhance our hotels’ appeal to targeted market segments, we require each of our hotels to allocate a fixed percentage of its revenue for periodic renovation and replacement of furnishings and equipment to maintain the quality and standards of our facilities. We base recommendations on capital spending decisions on customer feedback, strategic needs, and our targeted financial return on a given capital investment.

Centralized Procurement. We have implemented a centralized procurement system to allow us to obtain the best pricing available for the quality of goods sourced to our hotels in order to minimize the operating expenses of our hotels. As a leading branded economy hotel chain in China with nationwide scale, we are able to exert leverage over our suppliers of commodity goods and services.

Targeted Sales. We support each hotel’s local sales efforts with corporate office sales executives who develop and implement new marketing programs, and monitor and respond to specific market needs and preferences. We use a property management system, or PMS, to manage each property’s use of the various distribution channels in the lodging industry. Those channels include our central reservation system and toll-free numbers, third-party travel agents and other travel intermediaries, corporate travel offices and office managers. Based on market conditions, we adjust the number of rooms allocated to each of our sales channels on a daily basis in order to optimize our profitability.

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Hotel Information and Operational Systems

The principal objectives of our hotel operations are to generate higher RevPAR, control costs and increase the net operating income of our hotels, while providing our customers with high-quality services and value. Our integrated proprietary information and operational systems are designed to distinguish us in the marketplace, operate efficiently and cost-effectively and accommodate future growth. Our investment in our sophisticated system infrastructure has several key benefits: better customer service, simplification of the storage and processing of large amounts of data, facilitation of the large-scale operation and automation of the administration of our business and generating financial and operational information for each hotel to assist our corporate management in adjusting business strategies on a timely basis.

Our key hotel information and operational systems include the following:

Property Management System (PMS). Our proprietary PMS system is designed to help our hotels maximize profitability and compete more effectively by managing their room inventory, rates and reservations. The PMS system synchronizes each hotel’s room inventory with our reservation system, giving our reservation agents the capability to sell last rooms at our hotels. The PMS system also includes a revenue management feature that calculates and suggests optimum rates based on each hotel’s past performance and projected occupancy. These tools enhance our ability to effectively manage our hotel operations and maximize RevPAR.

Central Reservation System (CRS). Approximately 15% of our total hotel room nights are booked through our proprietary CRS system, which primarily consists of our toll-free telephone reservation system. As of June 30, 2006, we employed 30 reservation agents to serve customers who make hotel reservations by phone. Our trained reservation agents can match each caller with a Home Inns hotel that meets the caller’s needs. Our CRS provides a data link to all of our hotels so that confirmations are transmitted automatically to the hotel for which the reservations are made.

Customer Relationship Management System (CRM). Our proprietary CRM system tracks the consumption patterns and accumulated and redeemed points of the active members of our Home Inns membership rewards program. This information enables us to analyze customer data on a company-wide basis as well as to develop a more specific and targeted marketing strategy.

Management Reporting System. We have designed a proprietary web-based management reporting system at each of our hotels and at our corporate office to monitor the daily financial and operating performance of each of our hotels. This system allows us to track each hotel’s daily occupancy, average daily rates, RevPAR and other operating and financial data.

One of our ongoing primary objectives is to maintain reliable information, management and operational systems. We have implemented performance monitoring for all key systems to enable us to respond quickly to potential problems. Our computers and servers are hosted at a facility in Shanghai. This facility provides redundant utility systems, a backup electric generator and 24-hour server support. All servers have uninterrupted power supplies and redundant file systems to maximize system and data availability. We regularly back up our data to minimize the impact of data loss due to system failure.

Sales and Marketing

Our core targeted customers consist of value-oriented individual SME business travelers and leisure travelers seeking comfortable and convenient lodging at an affordable price. We review our hotel pricing twice a year and typically adjust room rates annually based on the local market conditions of the city and the specific location of each hotel. Our head office team and our city and hotel managers jointly develop tailored marketing plans to drive sales for each hotel and in each city. We use management and operational systems to manage each hotel’s use of the various distribution channels in the lodging industry. Those channels include our centralized

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reservation system and toll-free numbers, third-party travel agents and other travel intermediaries and corporate travel offices. Our access to these channels allows us to further enhance occupancy rates of our hotels on a day-to-day basis.

Our centralized reservation center is located in Shanghai, China and is operated daily from 9:00 A.M. to 9:30 P.M., seven days a week. Customers can call our nationwide toll free number to consult with our reservation agents, receive real-time hotel information and make hotel bookings. As of June 30, 2006, we employed 30 reservation agents, all of whom participated in a formal training program before commencing work. We believe we have sufficient capacity to meet the currently anticipated increases in call volume. Nevertheless, if we exceed this capacity, we believe we can add, within a reasonable time and at a reasonable cost, additional phone lines, computer systems and reservation agents to handle increasing call volumes without the need to undertake system redesign to our existing systems.

Our corporate marketing and advertising programs are designed to enhance consumer awareness and preference for the Home Inn brand as offering the greatest value, convenience and comfort in the economy hotel segment of the Chinese lodging industry, and to encourage customers’ use of our centralized reservation system. Marketing and advertising efforts include outdoor advertisements, distribution of flyers and other marketing materials on our hotel properties, television, internet and radio advertising, print advertising in consumer media and promotional events, special holiday promotions and joint promotional activities.

Since 2004, we have operated a Home Inns membership reward program to attract travelers by rewarding frequent stays with points towards free hotel stays, discounts on room rates, priority in hotel reservations and other rewards. As of June 30, 2006, our membership reward program had approximately 130,000 active members. This program allows us to build customer loyalty as well as conduct lower cost, more targeted marketing campaigns.

Employees and Training

We believe that developing and maintaining a team of capable and motivated managerial and other employees are critical to our success. Because our managerial and other employees manage our hotels and interact with our customers on a daily basis, they are critical to maintaining the quality and consistency of our services as well as our brand and reputation. We seek to hire managerial employees with background and experience in hotel and other consumer services industries with a customer-first mentality. We aim to recruit, train and retain the best talent through a multi-step recruiting and training process while offering competitive performance-linked compensation packages and career advancement opportunities.

We have implemented extensive training programs and periodic tests for managerial and other hotel-based staff primarily through our training facility, “Home Inns Academy.” New general managers of our hotels and executive assistants to general managers are required to undergo a two-month training period, during which they receive training in managing all core aspects of our hotel operations, as well as our company culture and philosophy. We also require our hotel general managers and city managers to participate in annual training programs so that they can stay abreast of changes in our hotel operations and consumer preferences and demands. In addition, all employees of a new hotel are required to undergo an approximately 25-day job training prior to commencing their duties. We also have trained on-site managers in many of our hotels to provide continuous training to our hotel staff. In addition to training, we have implemented periodic tests to assess the relevant knowledge and skills of our managerial and other employees.

To ensure that all of our hotels have optimal and satisfactory performance, we have established an effective and clearly-defined performance evaluation system based on a comprehensive set of key performance indicators that are aligned with a corresponding compensation structure. In addition, we provide capable and experienced hotel staff with opportunities to be promoted to management positions. We believe our performance-linked compensation structure, career-oriented training and career advancement opportunities are the key drivers that

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motivate our employees. As a result, we have experienced a very low attrition rate among our managerial staff since our inception.

We had 453, 1,183 and 2,792 employees as of December 31, 2003, 2004 and 2005, respectively. As of June 30, 2006, we had 3,857 employees, consisting of 3,601 hotel-based employees, 30 reservation agents at our centralized reservation center, and 226 corporate staff. None of our employees is represented by a labor union. We consider our relations with our employees to be good.

Competition

The lodging industry in China is highly fragmented and competitive, and we expect competition to persist and intensify. Hotels in China are not required to, but may, apply for star ratings as approved by tourism bureaus of local governments or the National Tourist Administration based on the star rating regulations in China. This standard defines five distinct star ratings, i.e., 1-Star, 2-Star, 3-Star, 4-Star and 5-Star, including Platinum 5-star. In order to obtain a particular star rating, a hotel must meet certain defined standards for the availability and quality of hotel facilities and public area, availability and quality of amenities in guest rooms, food and beverage facility, scope of guest services, and scope and quality of management infrastructure, etc. We have not applied for star ratings because we do not consider obtaining a star rating as necessary and our business has not been affected as we focus on meeting individual business and leisure travelers’ basic accommodation needs with affordable pricing, a comfortable lodging experience, high-quality services and standardized hotel rooms and amenities across our hotel chain.

We compete with other hotels for guests in each of the markets in which we operate. Competition in the industry is primarily based on room rates, quality of accommodations, brand name recognition, convenience of location, geographic coverage, service quality, range of services, and guest amenities. We compete primarily with other economy hotel chains, such as Jinjiang Star, Motel 168, Super 8 and Ibis, as well as various regional and local economy hotel chains. We also compete with two- and three-star hotels, as we offer rooms with standards comparable to many of those hotels and many of the amenities available at those hotels while maintaining competitive pricing and high-quality services tailored to individual business and leisure travelers. In addition, we may also face competition from new players in the economy hotel segment in China. As compared to four- or five-star hotels, developing an economy hotel requires a smaller commitment of capital and human resources. This relatively lower barrier of entry permits new competitors to enter our markets quickly and compete with our business. Furthermore, we may face competition from all other hotels for guests in each of our markets, as our typical business and leisure traveler customers may change their travel and spending patterns and choose to stay in hotels in different segments.

Intellectual Property

Our brand, trade names, trademarks, trade secrets and other intellectual property rights distinguish and protect our technology platforms, services and products from those of our competitors, and contribute to our competitive advantage in the economy hotel segment of the lodging industry in China. To protect our brand and other intellectual property, we rely on a combination of trademark, trade secret and copyright laws as well as imposing confidentiality obligations on our employees, contractors and others. We have a total of ten registered trademarks in China, including “ ”, and are applying for registration of two new trademarks in China. We have registered our domain name www.homeinns.com with the Internet Corporation for Assigned Names and Numbers.

We cannot assure you that our efforts to protect our intellectual property rights will be adequate or that third parties will not infringe or misappropriate these rights. If others are able to copy and use our proprietary information and operational system and other proprietary technology platform without spending time and resources to develop their own, we may not be able to maintain our competitive position. Furthermore, the application of laws governing intellectual property rights in China is uncertain and evolving and could involve substantial risks to us. If litigation is necessary to enforce our intellectual property rights or determine the scope

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of the proprietary rights of others, we may have to incur substantial costs or divert other resources, which could harm our business and prospects.

Insurance

We believe that our hotels are covered by adequate property and liability insurance policies with coverage features and insured limits that we believe are customary for similar companies in China. We carry property insurance that covers the assets that we own at our hotels, but not the buildings or any other assets owned by our lessors. Although we require our lessors to purchase customary insurance policies, we cannot guarantee that they will adhere to such requirements. If we were held liable for amounts and claims exceeding the limits of our insurance coverage or outside the scope of our insurance coverage, our business, results of operations and financial condition may be materially and adversely affected.

Facilities

Our headquarters are located in Shanghai, China, where we lease approximately 700 square meters of office space. As of June 30, 2006, we leased 63 out of our 82 hotel facilities with an aggregate size of 292,178 square meters. For detailed information about the locations of our hotels, see “—Our Home Inns Hotel Chain.”

Legal Proceedings

We are subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not currently a party to, nor are we aware of, any legal proceeding, investigation or claim which, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition or results of operations.

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REGULATION

The hotel industry in China is subject to a number of laws and regulations, including laws and regulations relating specifically to hotel operation and management and commercial franchising, as well as those relating to environmental and consumer protection. The principal regulation governing foreign ownership of hotel businesses in the PRC is the Foreign Investment Industrial Guidance Catalogue, which became effective as of January 1, 2005. Under the regulation, the hotel industry belongs to the category of permitted foreign investment industry and there is no restriction on foreign investment in hotel businesses in China, other than regular business license and other permits that must be possessed by every lodging business in China. There are no regulatory ceilings on room rates in China. The market-based pricing is permissible for the hotel industry and room rates may be determined at the sole discretion of hotel management. Relative to other industries in China, regulation of the hotel industry in China is still developing and evolving. As a result, most legislative action has consisted of general measures such as industry standards, rules or circulars issued by different ministries rather than detailed legislation. Many of these standards, rules and circulars date from the late 1990’s, and it is expected that they may be amended, revised or expanded in the coming years as the hotel industry in China matures. This section summarizes the principal PRC regulations currently relevant to our business and operations.

Regulations on Hotel Operation

In November 1987, the Ministry of Public Security issued the Measures for the Control of Security in the Hotel Industry, and in June 2004, the State Council promulgated Decision of the State Council on Establishing Administrative License for the Administrative Examination and Approval Items Really Necessary To Be Retained. Under these two regulations, anyone who applies to operate a hotel is subject to examination and approval by the local public security authority and must obtain a Special Industry License. The Measures for the Control of Security in the Hotel Industry impose certain security control obligations on the operators. For example, the hotel must examine the identification card of any guest to whom accommodation is provided and make an accurate registration. The hotel must also report to the local public security authority if it discovers anyone violating the law, behaving suspiciously or an offender wanted by the public security authority.

In April 1987, the State Council promulgated the Public Area Hygiene Administration Regulations, according to which, a hotel must obtain a public area hygiene license before opening for business. In October 1995, the Standing Committee of the National People’s Congress, or the SCNPC, enacted the PRC Law on Food Hygiene, according to which any hotel that provides food must obtain a food hygiene license. In April 1998, SCNPC enacted the Fire Prevention Law. The Fire Prevention Law requires that public gathering places such as hotels pass a fire prevention safety inspection by the local public security fire-fighting department prior to opening for business. In January 2006, the State Council promulgated the Regulations for Administration of Entertainment Places, In March 2006, the Ministry of Culture issued the Circular on Carrying out the Regulations for Administration of Entertainment Places, under these regulations, hotels that provide entertainment facilities, such as discos or ballrooms, are required to obtain a license for entertainment business operations. The above regulations also set forth obligations concerning public security, hygiene, fire prevention, and other standards relating to the operation of public facilities. The relevant administrative authorities may impose penalties and even shut down hotels that violate the provisions.

In 2003, the National Tourist Administration, or the NTA, promulgated the Regulations on the Assessment of the Star Rating 0f Tourist Hotels, or the Star Rating Regulations. Under the Star Rating Regulations, all hotels with operations of over one year are eligible to apply for a star rating assessment. There are five ratings from one star to five stars for tourist hotels, assessed based on the level of facilities, management standards and quality of service. A star rating, once granted, is valid for five years.

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Regulations on Consumer Protection

In October 1993, the SCNPC promulgated the Law on the Protection of the Rights and Interests of Consumers, or the Consumer Protection Law. Under the Consumer Protection Law, a business operator providing a commodity or service to a consumer is subject to a number of requirements, including the following:

(1) to ensure that commodities and services meet with certain safety requirements;

(2) to disclose serious defects of a commodity or a service and adopt preventive measures against damage occurrence;

(3) to provide consumers with true information and to refrain from conducting false advertising;

(4) not to set unreasonable or unfair terms for consumers or alleviate or release itself from civil liability for harming the legal rights and interests of consumers by means of standard contracts, circulars, announcements, shop notices or other means; and

(5) not to insult or slander consumers or to search the person of, or articles carried by, a consumer or to infringe upon the personal freedom of a consumer.

Business operators may be subject to civil liabilities for failing to fulfill the obligations discussed above. These liabilities include restoring the consumer’s reputation, eliminating the adverse effects suffered by the consumer, and offering an apology and compensation for any losses incurred. The following penalties may also be imposed upon business operators for the infraction of these obligations: issuance of a warning, confiscation of any illegal income, imposition of a fine, an order to cease business operation, revocation of its business license or imposition of criminal liabilities under circumstances that are specified in laws and statutory regulations.

In December 2003, the Supreme People’s Court enacted the Interpretation of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury, which further increases the liabilities of a business operator engaged in the operation of hotels, restaurants, or entertainment facilities and subjects such operators to compensatory liability for failing to fulfill their statutory obligation to a reasonable extent or to guarantee the personal safety of others.

Regulations on Environmental Protection

In June 2002, the SCNPC issued the Law on Promoting Clean Production which regulates service enterprises such as restaurants, entertainment establishments and hotels and requires them to use technologies and equipment that conserve energy and water, serve other environmental protection purposes, and reduce or stop the use of consumer goods that waste resources or pollute the environment.

Regulations on Commercial Franchising

Franchise operations are subject to the supervision and administration of the Ministry of Commerce, or the MOC, and its regional counterparts. The MOC promulgated the Administrative Measures on Commercial Franchise Operations or Commercial Franchise Measures on December 30, 2004.

Under the Commercial Franchise Measures, a franchiser must satisfy certain requirements including having: sufficient business resources such as relevant trademarks, trade names and business models which it has been duly authorized to use; the capability to provide long-term business guidance and training services to franchisees; and ownership of at least two self-operated shops that have been in operation for at least one year within China and which were set up by itself or its subsidiaries or holding company. In January of each year, franchisers are required to file franchise contracts executed the previous year with the local commerce administrative authorities with jurisdiction over the franchiser’s locale and the franchisee’s locale.

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The franchiser is also required to provide the franchisee with true and accurate basic information relating to the franchise 20 days prior to the execution of a franchise agreement, including:

(1) the name, domiciles, registered capital, scope of business and term of franchise of the franchiser, basic information relating to financial statements audited by an accounting firm and tax payments;

(2) the number, location, business status and investment budget for all franchise outlets of the franchisee, and the ratio of terminated franchisees to the total number of franchisees;

(3) information on the registration and license of trademarks and details of trade name, business model and other business resources, and details of any lawsuits relating to the trademarks or trade names;

(4) the type, amount and method of payment of franchise fees and the method of refund of deposit;

(5) information on any lawsuit in which the franchiser has been involved in the previous five years;

(6) goods or services that the franchiser can provide to the franchisee and any conditions or restrictions on their provision;

(7) a certification of its ability to provide training and guidance and specific details on training or guidance to be provided;

(8) basic information regarding the legal representative and other primary responsible persons, and whether they have any criminal record and whether they are personally liable for the bankruptcy of any enterprise; and

(9) other information and materials required to be disclosed by a franchiser upon the request of the franchisee.

Failure to disclose information in accordance with the provisions may result in the imposition of fines on the franchiser or the revocation of its business license. In addition, where a franchisee suffers any economic loss due to the provision of incomplete or false information by the franchiser, the franchiser shall be liable for compensatory damages.

The Commercial Franchising Measures also contain special provisions regarding franchising undertaken by foreign invested enterprises, or FIEs. Under the Commercial Franchising Measures, if an existing FIE wishes to operate a franchise in China it must apply to its original examination and approval authority to expand its business scope to include “engaging in commercial activities by way of franchise.” In addition, franchise contracts executed in the previous year are required to be filed with its original examination and approval authority and the commerce administrative authorities at the place where the franchisee is located.

Regulations on Trademarks

Both the PRC Trademark Law, adopted in 1982 and revised in 2001, and the Implementation Regulation of the PRC Trademark Law adopted by State Council in 2002, give protection to the holders of registered trademarks and trade names. The Trademark Office under the State Administration for Industry and Commerce handles trademark registrations and grants a term of ten years to registered trademarks. Trademark license agreement must be filed with the Trademark Office or its regional counterpart.

Regulations on Foreign Currency Exchange

Under the Foreign Currency Administration Rules promulgated in 1996 and revised in 1997 and various regulations issued by State Administration of Foreign Exchange, or SAFE, and other relevant PRC government authorities, the Renminbi is convertible for current account items, such as trade related receipts and payments, interest and dividend. Capital account items, such as direct equity investments, loans and repatriation of investment, require the prior approval from SAFE or its local counterpart for conversion of Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC.

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Payments for transactions that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies must repatriate foreign currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by SAFE or its local counterpart. Unless otherwise approved, domestic enterprises must convert all of their foreign currency receipts into RMB.

Regulations on Dividend Distribution

The principal regulations governing dividend distributions by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:

• the Wholly Foreign Owned Enterprise Law (1986), as amended;

• the Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;

• the Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and

• the Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.

Under these regulations, wholly foreign owned enterprises and Sino-foreign equity joint ventures in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.

Regulation on Overseas Listing

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006. This New M&A Rule purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings.

While the application of this new regulation remains unclear, we believe, based on the advice of our PRC counsel, Commerce & Finance Law Offices, that CSRC approval is not required in the context of this offering because we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of PRC domestic companies. See “Risk Factors—Risks Related to Our Business—The approval of China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering under a recently adopted PRC regulation; any requirement to obtain prior CSRC approval could delay this offering and a failure to obtain this approval, if required, could have a material adverse effect on our business, operating results, reputation and trading price of our ADSs, and may also create uncertainties for this offering.”

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MANAGEMENT

Executive Officers and Directors

The following table sets forth information regarding our executive officers and directors as of the date of this prospectus.

Name	Age	Position/Title
Yunxin Mei	57	Co-Chairman of the Board of Directors
Neil Nanpeng Shen	38	Co-Founder, Co-Chairman of the Board of Directors
David Jian Sun	41	Chief Executive Officer, Director
May Wu	38	Chief Financial Officer
Rixin Liang	51	Chief Operating Officer
Min Bao	46	Director
James Jianzhang Liang	37	Co-Founder, Director
Jerry Sze(1)	45	Director
Suyang Zhang(1)	47	Director
Kenneth Gaw (2)	35	Independent Director Appointee
Terry Yongmin Hu (2)	36	Independent Director Appointee

(1) Messrs. Sze and Zhang have resigned from our board of directors, effective upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part.

(2) Messrs. Gaw and Hu have been appointed as our independent directors, effective upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part.

Yunxin Mei has served as our director since May 2004. Since 2000, Mr. Mei has been the vice chairman and president of BTG responsible for the overall operations and management as well as executing BTG’s mid- and long-term development plans. He also serves on the boards of several other companies, including Poly Victory Investments Limited, Viobright International Investments Ltd. and Profit Act Investment Ltd., all of which are holding companies investing in the hotel business in China.

Neil Nanpeng Shen is one of the co-founders of our company and has been our company’s director since our inception. Mr. Shen is the founding managing partner of Sequoia Capital China. Mr. Shen co-founded Ctrip, the largest travel consolidator in China, and served as its chief financial officer from 2000 to October 2005 and as president from August 2003 to October 2005. Prior to founding Ctrip, Mr. Shen had worked for more than eight years in the investment banking industry in New York and Hong Kong. He was a director at Deutsche Bank Hong Kong where he worked from 1996 to 1999. Prior to 1996, he had worked at Chemical Bank, Lehman Brothers and Citibank in various investment banking areas. Currently, Mr. Shen is a director of Ctrip and also an independent director, the chairman of the audit committee and a member of the compensation and nominating committee of Focus Media Holding Limited, a Nasdaq-listed media advertising company based in China. Mr. Shen received his bachelor’s degree from Shanghai Jiao Tong University in China and his master’s degree from the School of Management at Yale University.

David Jian Sun has served as our director and chief executive officer since December 2004. Mr. Sun has over ten years of consumer industry experience. From 2003 to December 2004, Mr. Sun served as a vice president of operations for B&Q (China) Ltd., a subsidiary of Kingfisher plc, the third largest home improvement retail group in the world, overseeing the operation of 15 B&Q superstores in China. From 2000 to 2003, Mr. Sun served as a vice president of marketing for B&Q (China) Ltd., leading B&Q’s market positioning and branding efforts in China. Mr. Sun holds a bachelor’s degree from Shanghai Medical University in China.

May Wu has served as our chief financial officer since May 2006. She served as our senior vice president of finance from March 2006 to May 2006. Prior to joining Home Inns, Ms. Wu was a first vice president at Schroder Investment Management, North America Inc. from 2005 to March 2006, and a vice president from

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2003 to 2004. She was responsible for investment research and management for various funds, specializing in consumer and services sectors. From 1998 to 2002, Ms. Wu was an equity research analyst at JP Morgan Asset Management where she also served as a vice president from 2000 to 2002. Ms. Wu holds a bachelor’s degree from Fudan University in China, a master’s degree from Brooklyn College at the City University of New York and an MBA degree from the J.L. Kellogg Graduate School of Management at Northwestern University.

Rixin Liang has served as our chief operating officer since the formation of Home Inns Beijing in April 2002. Prior to joining Home Inns, Ms. Liang was the vice president of the International Hotel Group, a subsidiary of BTG, from 1999 to 2002, during which she co-founded Jian Guo Inns, one of the earliest economy hotel brands in China, in 2000, and served as the general manager of Jian Guo Inns Beijing Ltd. from 2000 to 2002. Ms. Liang has worked in the hotel industry in China since 1972. She is a member of the Expert Committee of the China Hotel Association. Ms. Liang holds a bachelor’s degree from Capital Economics and Business University in China. She also attended the MBA program at Tsing-Hua University in China.

Min Bao has served as our director since March 2006. Mr. Bao is the general manager of BTG Hotel & Resorts Co., Ltd., where he has worked since February 2006. From 2002 to February 2006, he was the general manager of Beijing Chang Fu Gong Center Co., Ltd., a holding company that owns a hotel and residential and commercial properties. Prior to that, he served as the general manager of Beijing Xin Qiao Hotel Co., Ltd. He currently serves on the boards of several companies, including BTG Hotel & Resorts Co., Ltd., Beijing Jian Guo Hotel Co., Ltd., Beijing Peace Hotel Co., Ltd. and Yue Xiu Hotel Co., Ltd, all of which are China-based hotel companies.

James Jianzhang Liang is one of the co-founders of our company. He has served as our director since our inception. Mr. Liang co-founded Ctrip and served as its chief executive officer from 2000 to January 2006. Mr. Liang has been chairman of Ctrip’s board of directors since August 2003 and has been a director of Ctrip since its inception. Prior to founding Ctrip, Mr. Liang held a number of technical and managerial positions with Oracle Corporation from 1991 to 1999 in the United States and China, including the head of the ERP consulting division of Oracle China from 1997 to 1999. Mr. Liang received his master’s and bachelor’s degrees from Georgia Institute of Technology. He also attended an undergraduate program at Fudan University in China.

Jerry Sze has served as our director since February 2003 and will resign from our board of directors, effective upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Mr. Sze is a managing partner of Sycamore Ventures, a venture capital firm. Prior to joining Sycamore Ventures in 1998, Mr. Sze was a vice president at GMY Investment Company, a large real estate investment partnership, where he was responsible for the full range of investment activities focusing on commercial real estate portfolio in Southern California. Before joining GMY Investment Company in 1991, Mr. Sze worked as design engineer at AKG Acountics USA and Hughes Aircraft Company. Mr. Sze currently serves on the boards of DVN Holdings, a provider of digital broadcasting technology, SourceByNet Pte Ltd., an independent global home furnishing sourcing network, RIM China Company Ltd., a management consulting company specializing in the mass retail market in China, Pacific Satellite Holding Ltd., a holding company focused on the electrical engineering, communications and satellite television industries, and Redgate Media, Inc., a holding company focused on Chinese media companies. Mr. Sze received a bachelor’s degree in electrical engineering from the University of Hawaii and attended the business management program at the University of California, Berkeley.

Suyang Zhang has served as our director since our inception and will resign from our board of directors, effective upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Mr. Zhang is the general partner of IDG Technology Venture Investment Inc., a venture capital firm, where he has worked since 1996, and general manager of Shanghai Pacific Technology Venture Fund Co., Ltd., a venture capital firm, where he has worked since 1994. In recent years, Mr. Zhang has led his firms’ investments in a number of high-tech companies in the areas of electronics, telecommunications and software. He currently serves on the boards of several companies, including Ctrip and Baud Data Communications Co., Ltd., a manufacturer of networking products. Mr. Zhang holds a bachelor’s degree in electronics engineering from Shanghai University and an Executive MBA from China European International Business School in China.

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Mr. Kenneth Gaw will serve as our independent director, commencing upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Since 1999, Mr. Gaw has been a managing director of Pioneer Global Group Limited, a company listed on the Hong Kong Stock Exchange that primarily focuses on real estate and hotel investments in Hong Kong, Macau, China and South East Asia. Mr. Gaw is also a co-founder and the managing director of Gateway Capital, a real estate investment and management company. Mr. Gaw currently serves on the boards of Dusit Thani Public Company Limited, a company that owns and operates hotels in Thailand, Siam Food Products Public Company Limited, a pineapple producer listed on the Stock Exchange of Thailand, and Japan Opportunities Fund II, a real estate fund investing in Japan. Mr. Gaw received a bachelor’s degree in applied mathematics and economics from Brown University in the United States.

Mr. Terry Yongmin Hu will serve as our independent director, commencing upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Mr. Hu is a managing director of Temasek Holdings (HK) Limited, an investment company that focuses on private equity investments in China. Prior to joining Temasek Holdings in May 2005, Mr. Hu was a director at Credit Suisse (HK) Limited where he was responsible for its technology, media and telecommunications investment banking efforts in China. Before joining Credit Suisse in August 2004, Mr. Hu worked for a number of years at Bear Stearns Asia Limited where he last served as a vice president of investment banking and the chief representative of its Shanghai office. Mr. Hu currently serves on the board of Hopson Development Holdings Limited, a company listed on the Hong Kong Stock Exchange that engages in property development business in China. Mr. Hu received a bachelor’s degree in English language and literature from Fudan University in China.

Employment Agreements

We have entered into an employment agreement with each of our senior executive officers. We may terminate a senior executive officer’s employment for cause, at any time, without notice or remuneration, for certain acts of the officer, including, but not limited to, a conviction or plea of guilty to a felony, willful misconduct to our detriment or a failure to perform agreed duties. A senior executive officer may terminate his or her employment at any time without penalty if there is a material reduction in his or her authority, duties and responsibilities or if there is a material breach by us, provided that we are allowed to correct or cure within 30 days upon receipt of his or her written notice of intent to terminate on such basis. Furthermore, either we or an executive officer may terminate employment at any time without cause upon advance written notice to the other party. Each senior executive officer is entitled to certain benefits upon termination, including a severance pay equal to three months’ salary, if he or she resigns for certain specified good reasons or if we terminate his or her employment due to his or her incapacitation. We will indemnify an executive officer for his losses based on or related to his or her acts and decisions made in the course of his or her performance of duties within the scope of his or her employment.

Each senior executive officer has agreed to hold in strict confidence any trade secrets or technical secrets of our company. Each officer also agrees to comply with all material applicable laws and regulations related to his or her responsibilities at our company as well as all material written corporate and business policies and procedures of our company.

Board of Directors

Our board of directors currently consists of seven directors. A director is not required to hold any shares in the company by way of qualification. A director may vote with respect to any contract, proposed contract or arrangement in which he is materially interested. A director may exercise all the powers of the company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.

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Committees of the Board of Directors

We have established two committees under the board of directors: the audit committee and the compensation committee. We currently do not plan to establish a nominating committee. After the completion of this offering, the independent directors of our company will select and recommend to the board for nomination by the board such candidates as the independent directors, in the exercise of their judgment, have found to be well qualified and willing and available to serve as our directors prior to each annual meeting of our shareholders at which meeting directors are to be elected or re-elected. In addition, our board of directors has resolved that director nomination at any time after the completion of this offering be approved by a majority of the board as well as a majority of the independent directors of the board. In compliance with Rule 4350 of the Nasdaq Stock Market, Marketplace Rules, a majority of the members of each of our board committees will be independent directors during the one-year transition period after our ADSs are listed on the Nasdaq Global Market and all of the committee members will be independent directors thereafter. We have adopted a charter for each of the board committees, which will become effective immediately upon the completion of this offering. Each committee’s members and functions are described below.

Audit Committee. Our audit committee will consist of Messrs. James Jianzhang Liang, Kenneth Gaw and Terry Yongmin Hu, commencing upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. We have determined that Messrs. Gaw and Hu satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Rule 4350 of Nasdaq Stock Market, Marketplace Rules. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among other things:

• selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

• reviewing with the independent auditors any audit problems or difficulties and management’s response;

• reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

• discussing the annual audited financial statements with management and the independent auditors;

• reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; and

• meeting separately and periodically with management and the independent auditors.

Compensation Committee. Our compensation committee will consist of Messrs. Neil Nanpeng Shen, Kenneth Gaw and Terry Yongmin Hu, commencing upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. We have determined that Messrs. Gaw and Hu satisfy the “independence” requirements of Rule 4350 of Nasdaq Stock Market, Marketplace Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:

• reviewing and approving the total compensation package for our three most senior executives;

• reviewing and recommending to the board with respect to the compensation of our directors; and

• reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

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Duties of Directors

Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder has the right to seek damages if a duty owed by our directors is breached.

Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and hold office until such time as they are removed from office by special resolution or the unanimous written resolution of all shareholders. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by our company to be or becomes of unsound mind.

Compensation of Directors and Executive Officers

For the fiscal year ended December 31, 2005, we paid an aggregate of approximately RMB1.2 million (US$0.2 million) in cash to our senior executive officers, and we did not pay any cash compensation to our non-executive directors.

Share Incentives

Employees’ Stock Option Plan. We have adopted an Employees’ Stock Option Plan, or the Option Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants, and promote the success of our business. Our board of directors has authorized the issuance of up to 4,784,226 ordinary shares upon exercise of awards granted under our Option Plan. We will not grant options or other awards under this Option Plan after the completion of this offering as we plan to grant options and/or other awards under our 2006 share incentive plan after the shareholders approve the new plan.

The following table summarizes the options granted to our directors and executive officers and other individuals as a group, without giving effect to options that were exercised or terminated.

Name	Options Awarded	Exercise Price (US$/Share)	Date of Grant	Date of Expiration
Yunxin Mei	150,000	2.72	3/17/2006	3/16/2011
	50,000	*	10/2/2006	10/2/2011
Neil Nanpeng Shen	100,000	0.3309	1/1/2005	12/31/2009
	150,000	2.72	3/17/2006	3/16/2011
	50,000	*	10/2/2006	10/2/2011
David Jian Sun	271,000	0.3309	1/1/2005	12/31/2009
	109,000	2.25	12/1/2005	11/30/2010
	70,000	2.72	3/17/2006	3/16/2011
	142,500	*	10/2/2006	10/2/2011
May Wu	300,000	1.53	3/1/2006	2/28/2011
	142,500	*	10/2/2006	10/2/2011
Rixin Liang	158,858	0.232	3/1/2003	2/28/2008
	105,844	0.3309	3/1/2004	2/28/2009
	75,298	2.25	12/1/2005	11/30/2010
James Jianzhang Liang	70,000	2.72	3/17/2006	3/16/2011
Min Bao	70,000	2.72	3/17/2006	3/16/2011
Other individuals as a group	2,760,816

* Midpoint of the estimated price range for this offering.

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Plan Administration. Our board of directors, or a committee designated by our board or directors, will administer the Option Plan. The committee or the full board of directors, as appropriate, will determine the provisions and terms and conditions of each option grant.

Stock Option and Stock Purchase Right Agreements. Options and stock purchase rights granted under our Option Plan are evidenced by a stock option agreement or a stock purchase right agreement, as applicable, that sets forth the terms, conditions and limitations for each grant. In addition, the stock option agreement and the stock purchase right agreement also provide that securities granted are subject to a 180-day lock-up period following the effective date of a registration statement filed by us under the Security Act, if so requested by us or any representative of the underwriters in connection with any registration of the offering of any of our securities.

Eligibility. We may grant awards to employees, directors and consultants of our company or any of our related entities, which include our subsidiaries or any entities in which we hold a substantial ownership interest.

Acceleration of Options upon Corporate Transactions. The outstanding options will terminate and accelerate upon occurrence of a change-of-control corporate transaction where the successor entity does not assume our outstanding options under the Option Plan. In such event, each outstanding option will become fully vested and immediately exercisable, and the transfer restrictions on the awards will be released and the repurchase or forfeiture rights will terminate immediately before the date of the change-of-control transaction provided that the grantee’s continuous service with us shall not be terminated before that date.

Term of the Options. The term of each option grant shall be stated in the stock option agreement, provided that the term shall not exceed 10 years from the date of the grant.

Vesting Schedule. In general, the plan administrator determines, or the stock option agreement specifies, the vesting schedule.

Transfer Restrictions. Options to purchase our ordinary shares may not be transferred in any manner by the optionee other than by will or the laws of succession and may be exercised during the lifetime of the optionee only by the optionee.

Termination of the Option Plan. Unless terminated earlier, the Option Plan will terminate automatically in 2013. Our board of directors has the authority to amend or terminate the Option Plan subject to shareholder approval to the extent necessary to comply with applicable law. However, no such action may (i) impair the rights of any optionee unless agreed by the optionee and the Option Plan administrator or (ii) affect the Option Plan administrator’s ability to exercise the powers granted to it under our Option Plan.

2006 Share Incentive Plan. Our board of directors recently adopted a 2006 share incentive plan, or the 2006 plan, subject to shareholder approval. The number of shares which may be issued upon exercise of awards granted under our 2006 plan equals the number of shares reserved but not issued or issuable as part of outstanding options, stock purchase rights or other awards granted under the Option Plan as of the date of completion of this offering. After the completion of this offering, such number of shares will be increased by that number of shares equal to 6% of our total outstanding shares (excluding shares issued upon exercise of options or otherwise pursuant to any of our share incentive plans) from time to time. Except for the foregoing, the total number of shares which may be issued under our 2006 plan will not be increased for a period of three years after the completion of this offering.

Types of Awards. The types of awards we may grant under our 2006 plan include the following:

• options to purchase our ordinary shares;

• restricted shares, which represent non-transferable ordinary shares, that may be subject to forfeiture;

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• restricted share units, which represent the right to receive our ordinary shares at a specified date in the future, which may be subject to forfeiture;

• share appreciation rights, which provide for payment to the grantee based upon increases in the price of our ordinary shares over a set base price; and

• dividend equivalent rights, which represent the value of the dividends per share that we pay.

Awards may be designated in the form of ADSs instead of ordinary shares. If we designate an award in the form of ADSs, the number of shares issuable under 2006 plan will be adjusted to reflect a ratio of one ADS to              ordinary shares.

Eligibility. We may grant awards to employees, directors and consultants of our company or any of our related entities, which include our subsidiaries or any entities in which we hold a substantial ownership interest. However, we may grant options that are intended to qualify as incentive stock options, or ISOs, only to our employees and employees of our majority-owned subsidiaries.

Plan Administration. The compensation committee of our board of directors, or a committee designated by the compensation committee, will administer the 2006 plan. However, with respect to awards made to our independent directors and executive officers, the entire board of directors will administer the 2006 plan. The compensation committee or the full board of directors, as appropriate, will determine the individuals who will receive grants, the types of awards to be granted and terms and conditions of each award grant, including any vesting or forfeiture restrictions.

Award Agreement. Awards granted under our 2006 plan will be evidenced by an award agreement that will set forth the terms, conditions and limitations for each award. In addition, in the case of options, the award agreement will also specify whether the option constitutes an ISO or a non-qualifying stock option.

Acceleration of Awards upon Corporate Transactions. The outstanding awards will accelerate upon occurrence of a change-of-control corporate transaction where the successor entity does not assume our outstanding awards under the 2006 plan. In such event, each outstanding award will become fully vested and immediately exercisable, and the transfer restrictions on the awards will be released and any forfeiture provisions will terminate immediately before the date of the change-of-control transaction. If the successor entity assumes our outstanding awards and later terminates the grantee’s service without cause within 12 months of the change-of-control transaction, the outstanding awards will automatically become fully vested and exercisable.

Exercise Price and Term of Awards. In general, the plan administrator determines the exercise price of an award and sets forth the price in the award agreement. The exercise price may be fixed or variable price related to the fair market value of our ordinary shares. However, ISOs may be granted to any individual if the fair market value of the shares underlying such ISOs that are exercisable in any calendar year exceeds US$100,000 or other limitations imposed by law. Also, if we grant an ISO to an employee, who, at the time of that grant, owns shares representing more than 10% of the voting power of all classes of our share capital, the exercise price cannot be less than 110% of the fair market value of our ordinary shares on the date of that grant.

The term of each award will be stated in the award agreement. The term of an award shall not exceed 10 years from the date of the grant, except that five years is maximum term of an ISO granted to an employee who holds more than 10% of the voting power of our share capital.

Amendment and Termination. Our board of directors may at any time amend, suspend or terminate the 2006 plan. Amendments to the 2006 plan are subject to shareholder approval to the extent required by law, or stock exchange rules or regulations. Additionally, shareholder approval will be specifically required to increase the number of shares available for issuance under the 2006 plan or to extend the term of an option beyond ten years. Unless terminated earlier, the 2006 plan will expire and no further awards may be granted after the tenth anniversary of the shareholder approval of the 2006 plan.

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PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information with respect to the beneficial ownership of our ordinary shares, assuming conversion of all of our preferred shares into ordinary shares, as of the date of this prospectus, by:

• each of our directors and executive officers;

• each person known to us to own beneficially more than 5% of our ordinary shares; and

• each selling shareholder.

	Ordinary Shares Beneficially Owned Prior to This Offering			Ordinary Shares Being Sold in This Offering			Shares Beneficially Owned After This Offering (1)
	Number (2)	% (3)		Number	%(3)		Number(2)	%(3)
Directors and Executive Officers:
Neil Nanpeng Shen(4)	5,380,389	9.83		—	—		5,380,389
James Jianzhang Liang(5)	4,033,342	7.37		—	—		4,033,342
David Jian Sun(6)	691,556	1.26		—	—		691,556
May Wu(7)	444,771	—	*	—	—		444,771
Rixin Liang(8)	790,543	1.45		—	—		790,543
Yunxin Mei(9)	—	—		—	—		—
Min Bao(10)	—	—		—	—		—
Jerry Sze(11)	—	—		—	—		—
Suyang Zhang(12)	—	—		—	—		—
All Directors and Executive Officers as a Group(13)	11,340,601	20.72		—	—		11,340,601
Principal and Selling Shareholders:
Poly Victory Investments Limited(14)	13,364,140	24.43		—	—		13,364,140
AsiaStar IT Fund L.P.(15).	12,286,828	22.46		3,686,048	6.74		8,600,780
IDG Technology Venture Investments, L.P.(16)	7,372,217	13.48		2,211,665	4.04		5,160,552
Qi Ji(17)	4,411,294	8.06		—	—		4,411,294
Chung Lau(18)	4,033,342	7.37		—	—		4,033,342
Susquehanna China Investment HI(19)	2,873,940	5.25		—	—		2,873,940
Kangaroo Investments LLC(20)	130,633	—	*	130,633	—	*	—	—

* Less than 1%.

(1) Assumes that the underwriters do not exercise the over-allotment option.

(2) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities.

(3) For each person and group included in this table, percentage ownership prior to this offering is calculated by dividing the number of shares beneficially owned by such person or group by the sum of 54,698,475, being the number of ordinary shares outstanding as of the date of this prospectus, and the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this prospectus. Percentage ownership after this offering is calculated by dividing the number of shares beneficially owned by such person or group by the sum of             , being the number of ordinary shares outstanding immediately after the completion of this offering, and the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this prospectus.

(4) Includes 5,355,389 ordinary shares held by Mr. Shen and 25,000 ordinary shares issuable upon exercise of options held by Mr. Shen that are exercisable within 60 days after the date of this prospectus. The business address of Mr. Shen is Rm. 3202a, The Centrium, 60 Wyndham Street, Central, Hong Kong.

(5) Includes 4,033,342 ordinary shares held by Chung Lau, Mr. Liang’s wife. Mr. Liang disclaims the beneficial ownership of all the shares held by his wife. The business address of Mr. Liang is No. 400 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

(6) Includes 311,556 ordinary shares held by Mr. Sun and 380,000 restricted shares held by Mr. Sun. The business address of Mr. Sun is No. 400 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

(7) Includes 144,771 ordinary shares held by Ms. Wu and 300,000 restricted shares held by Ms. Wu. The business address of Ms. Wu is No. 400 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

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(8) Includes 450,543 ordinary shares held by Ms. Liang and 340,000 restricted shares held by Ms. Liang. The business address of Ms. Liang is No. 400 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

(9) The business address of Mr. Mei is No.10 Yabao Road, Chaoyang District, Beijing 100020, People’s Republic of China.

(10) The business address of Mr. Bao is Novotel Peace Hotel, No.3 Jinyu Hutong, Wangfujing, Beijing 100006, People’s Republic of China.

(11) The business address of Mr. Sze is 1F, 284 Anfu Road Shanghai 200031, People’s Republic of China.

(12) The business address of Mr. Zhang is Room 1105, Aetna Tower, No.107, Zunyi Road, Shanghai 200051, People’s Republic of China.

(13) Includes ordinary shares, restricted shares and ordinary shares issuable upon exercise of all of the options that are exercisable within 60 days after the date of this prospectus held by all of our directors and senior executive officers as a group.

(14) Includes 13,364,140 ordinary shares. Poly Victory Investments Limited, a company incorporated in the British Virgin Islands, is beneficially owned by Beijing Tourism Group (HK) Holdings Co. Ltd., which in turn is wholly owned by BTG. BTG is a state-owned enterprise in China. Poly Victory Investment Limited’s registered office is at Palm Grove House, P.O. Box 432, Road Town, Tortola, British Virgin Islands.

(15) Includes 10,775,800 ordinary shares issuable upon the conversion of the same number of Series A preferred shares and 1,511,028 ordinary shares issuable upon the conversion of the same number of Series B preferred shares. AsiaStar IT Fund L.P., or AsiaStar, is a Cayman Islands limited partnership which is managed by its general partner, AsiaStar Partners, L.P., which is managed by Sycamore Management Corporation, which in turn is owned by Mr. Peter Gerry, Mr. Kilin To and Mr. John Whitman. The business address of AsiaStar is 3 Anson Road, #35-03 Springleaf Tower, Singapore 079909.

(16) Includes 6,465,600 ordinary shares issuable upon the conversion of the same number of Series A preferred shares and 906,617 ordinary shares issuable upon the conversion of the same number of Series B preferred shares. IDG Technology Venture Investments, L.P., or IDG, is a Delaware limited partnership with two partners. IDG’s limited partner is IDG Technology Venture Investment, Inc., which is wholly owned by International Data Group, Inc., which in turn is majority owned by Mr. Patrick J. McGovern. IDG’s general partner is IDG Technology Venture Investments, LLC, which is controlled and managed by its two managing members, Mr. Quan Zhou and Mr. Patrick J. McGovern. The business address of IDG is Room 1105, Aetna Tower, No. 107, Zunyi Road, Shanghai 200051, People’s Republic of China.

(17) Includes 4,411,294 ordinary shares held by Mr. Ji. The address of Mr. Ji is 3F, Building 63-64, No. 421, Hong Cao Road, Shanghai, People’s Republic of China.

(18) Includes 4,033,342 ordinary shares held by Ms. Lau. Ms. Lau is the wife of our director, James Jianzhang Liang. The address of Ms. Lau is c/o James Jianzhang Liang, 3F, Building 63-64, No. 421, Hong Cao Road, Shanghai, People’s Republic of China.

(19) Includes 2,873,940 ordinary shares issuable upon the conversion of the same number of Series C preferred shares. Susquehanna Asia Investment, LLLP, the authorized agent of Susquehanna China Investment HI, or Susquehanna, has discretionary authority to vote and dispose of the shares held by Susquehanna and may be deemed to be the beneficial owner of these shares. Arthur Dantchik, in his capacity as president of Susquehanna Asia Investment, LLLP, may also be deemed to have investment discretion and voting power over the shares held by Susquehanna. Mr. Dantchik disclaims any beneficial ownership of the shares. The business address of Susquehanna is Suite 5711, Plaza 66, 1266 Nanjing Road (W), Shanghai 200040, People’s Republic of China. The business address of Susquehanna International Group, LLP is 101 California Street, Suite 3250, San Francisco, CA 94111, USA.

(20) Includes 130,633 ordinary shares issuable upon the conversion of the same number of Series C preferred shares. The sole member of Kangaroo Investments LLC is TradeLink Securities LLC. The business address of Kangaroo Investments LLC is 200 W. Jackson, Chicago, Illinois 60606, USA.

As of the date of this prospectus, approximately 4.0% of our outstanding Series C preferred shares are held by one record shareholder in the United States, and none of our outstanding ordinary shares, Series A preferred shares and Series B preferred shares are held by record holders in the United States. Two of our shareholders, Susquehanna China Investment HI, or Susquehanna, and Kangaroo Investments LLC, or Kangaroo, have represented to us that they are affiliated with registered broker-dealers in the United States, but are not in the business of underwriting securities. Before Susquehanna and Kangaroo purchased our Series C preferred shares in January 2005, neither of them was affiliated or otherwise related to us. Susquehanna and Kangaroo purchased our Series C preferred shares directly from us in its ordinary course of business and, at the time of the purchase, neither Susquehanna nor Kangaroo had agreements or understandings, directly or indirectly, with any person to distribute our Series C preferred shares.

Seven shareholders of our company, namely, Neil Nanpeng Shen, James Jianzhang Liang, Chung Lau, Min Fan, David Jian Sun, May Wu and Rixin Liang have entered into an acting-in-concert agreement. These

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shareholders currently hold a total of 17,769,037 ordinary shares, or 32.5% of our outstanding voting securities. See “Related Party Transactions—Private Placements” for a description of the terms of this agreement. Each of these seven shareholders disclaims beneficial ownership of our shares except for the shares directly held by such shareholder.

None of our existing shareholders will have different voting rights from other shareholders after the closing of this offering. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

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RELATED PARTY TRANSACTIONS

Private Placements

In February 2003, Home Inns Hong Kong sold 86,207 shares of Series A convertible preferred shares in a private placement at a price of US$46.40 per share. The investors in the Series A preferred share private placement consisted of AsiaStar IT Fund L.P., which purchased 53,879 shares, and IDG Technology Venture Investments, L.P., which purchased 32,328 shares. In April 2003, Home Inns Hong Kong’s shareholders and board of directors authorized a 1:200 subdivision of its outstanding shares. Upon the effecting of the subdivision, AsiaStar IT Fund L.P. held 10,775,800 Series A preferred shares and IDG Technology Venture Investments, L.P. held 6,465,600 Series A preferred shares. Each of the purchasers of the Series A preferred shares was an unrelated third party prior to the issuance and sale of the Series A preferred shares. The value of the Series A preferred shares was determined based on arm’s-length negotiations between Home Inns Hong Kong and the purchasers and approved by Home Inns Hong Kong’s board of directors. Each Series A preferred share will automatically convert into one ordinary share upon the closing of this offering.

In November 2003, Home Inns Hong Kong sold 2,417,605 shares of Series B convertible preferred shares in a private placement at a price of US$0.3309 per share. The investors in the Series B preferred share private placement consisted of AsiaStar IT Fund L.P., which purchased 1,511,028 shares, and IDG Technology Venture Investments, L.P., which purchased 906,617 shares. Each Series B preferred share will automatically convert into one ordinary share upon the closing of this offering.

In May 2004, Home Inns Hong Kong sold 13,219,140 ordinary shares in a private placement at a price of HK$1.57 per share to Poly Victory Investments Limited. In addition, Poly Victory Investments Limited transferred a 12.45% interest in Home Inns Beijing to Home Inns Hong Kong. Poly Victory Investments Limited is a wholly owned subsidiary of BTG. This transaction was approved by Home Inns Hong Kong’s board of directors and shareholders.

In September 2004, Home Inns Hong Kong sold 3,035,000 ordinary shares in a private placement at a price of US$0.3425 per share to Top Sterling International Limited, which was then owned by four individuals, including two directors and the spouse of one other director of our company at that time. This transaction was approved by Home Inns Hong Kong’s board of directors and shareholders. In May 2006, Top Sterling International Limited dissolved and distributed to its shareholders on a pro rata basis its shares of Home Inns Hong Kong.

In September 2004, Home Inns Hong Kong issued an additional 145,000 ordinary shares to Poly Victory Investments Limited at par value. This transaction was approved by Home Inns Hong Kong’s board of directors and shareholders.

In January 2005, Home Inns Hong Kong sold 3,265,841 shares of Series C convertible preferred shares in a private placement at a price of US$1.531 per share. The investors in the Series C preferred share private placement consisted of Susquehanna China Investment HI, which purchased 2,873,940 shares; Kangaroo Investments LLC, which purchased 130,633 shares; Fortune Hero Limited, which purchased 65,317 shares; Soon Yan Seen, who purchased 65,317 shares; Hiroko Nishikawa, who purchased 65,317 shares; and Beihai Capital Limited, which purchased 65,317 shares. Each of the purchasers of the Series C preferred shares was an unrelated third party prior to the issuance and sale of the Series C preferred shares. The value of the Series C preferred shares was determined based on arm’s-length negotiations between Home Inns Hong Kong and the purchasers and approved by Home Inns Hong Kong’s shareholders and board of directors. Each Series C preferred share will automatically convert into one ordinary share upon the closing of this offering.

In June 2006, all of the then-existing shareholders of Home Inns Hong Kong exchanged their respective shares of Home Inns Hong Kong for an equivalent number of shares of Home Inns & Hotels Management Inc. of equivalent classes. As a result, Home Inns Hong Kong has become our wholly owned subsidiary.

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In July 2006, we sold 2,834,037 ordinary shares in a private placement at a price of US$2.77 per share. The purchasers consisted of the following individuals: Neil Nanpeng Shen, one of our directors, who purchased 1,444,095 shares; Chung Lau, the spouse of one of our directors, James Jianzhang Liang, who purchased 722,048 shares; Min Fan, who purchased 361,024 shares; David Jian Sun, our chief executive officer, who purchased 111,556 shares; May Wu, our chief financial officer, who purchased 144,771 shares; and Rixin Liang, our chief operating officer, who purchased 50,543 shares. The price of the ordinary shares was determined based on the price offered by an unrelated third party in May 2006 and the sale was approved by our board of directors and shareholders.

In conjunction with the transaction above, the purchasers entered into an acting-in-concert agreement in July 2006, whereby they have agreed to act together on all matters requiring shareholder approval and to appoint one representative to vote on behalf of all of them at our shareholder meetings. These shareholders currently hold a total of 17,769,037 ordinary shares, or 32.5% of our outstanding voting securities. The agreement will expire 364 days after the date of the agreement.

Shareholders’ Agreement

In connection with our reorganization in June 2006, we and our existing shareholders entered into a shareholders agreement, which incorporates the principal terms of the previous shareholders agreements between Home Inns Hong Kong and our shareholders. Under this shareholders agreement, our board of directors shall comprise of eight directors, including two directors designated by Neil Nanpeng Shen and Chung Lau; two directors designated by AsiaStar IT Fund L.P.; one director designated by IDG Technology Venture Investments, L.P.; two directors designated by Poly Victory Investments Limited; and one director designated by our chief executive officer from time to time. Our existing shareholders are prohibited from transferring more than 30% of their shares either in a single transaction or a series of transactions without the prior written consent of the holders of a majority of the then outstanding preferred shares. Certain existing shareholders have preemptive rights with respect to any issuance of securities by us, except with respect to this offering and certain other issuances. We and certain of our existing shareholders each have certain rights of first refusal and co-sale rights with respect to any proposed share transfers by any of our existing shareholders. Under this agreement, our preferred shareholders are also entitled to certain registration rights, including demand registration and Form F-3 or Form S-3 registration. See “Description of Share Capital—Registration Rights.” Except for the registration rights, all shareholders’ rights under the shareholders agreement will automatically terminate upon the completion of this offering.

Transactions with BTG

BTG is the parent company of Beijing Capital Travel, which is the minority equity interest holder of Home Inns Beijing. It is also the parent company of Poly Victory Investments Limited, which is a major shareholder of our company. In addition to the transactions with BTG involving shares of Home Inns Hong Kong and Hong Inns Beijing as described under “—Private Placements,” we have entered into the following transactions with BTG during the past three years.

Financing Transactions with BTG. In June 2005, Home Inns Hong Kong, Home Inns Beijing and BTG entered into a financing transaction agreement whereby BTG agreed to provide up to RMB80 million (US$10 million) financing to Home Inns Beijing in the form of loans through a third-party commercial bank to facilitate the anticipated rapid expansion of the Home Inns hotel chain throughout China. According to the financing transaction agreement, in the event of default by us under the agreement, BTG has the right to enforce its rights under this agreement by choosing one of the following options: (i) requesting liquidation of Home Inns Hong Kong or Home Inns Beijing; (ii) converting the total principal amount of the loans into 11.15% of the equity interest in Home Inns Hong Kong if the net assets of Home Inns Hong Kong on the date of default exceeds its net assets as of June 2005; or (iii) converting the total principal amount of the indebtedness into a percentage of equity interest in Home Inns Beijing determined by dividing the outstanding principal amount by RMB663.5 million (US$83.0 million), if the value of the net assets of Home Inns Beijing exceeds RMB663.5 million (US$83.0 million) on the date of default. The events of default under the agreement include our failure to repay

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the indebtedness on time and material breach of our representations, warranties and covenants in the agreement, such as our covenant to provide an advance notice to BTG before we enter into a material merger and acquisition, spin-off, corporate reorganization, new joint venture or sale of material assets transaction. As of June 30, 2006, Home Inns Beijing has drawn a total of RMB60 million (US$7.5 million) at an interest rate of 6.1747% per annum under the financing transaction agreement and has been in compliance with the terms of the agreement. We plan to repay this indebtedness and interest accrued thereon shortly after the completion of this offering.

Rental Payments to Jian Guo Inns. Jian Guo Inns Beijing Ltd., or Jian Guo Inns, is a subsidiary of BTG. Jian Guo Inns was the lessor of four leased-and-operated Home Inns hotels in 2003. Since 2004, Jian Guo Inns has been the lessor of three leased-and-operated Home Inns hotels. In 2003, Home Inns Beijing paid RMB3.5 million to Jian Guo Inns as rental payments. In 2004 and 2005 and the six months ended June 30, 2006, we paid RMB2.6 million and RMB3.5 million (US$0.4 million) and RMB1.8 million (US$0.2 million), respectively, to Jian Guo Inns as rental payments.

Transactions with Ctrip

Three of Ctrip’s directors, Neil Nanpeng Shen, James Jianzhang Liang and Suyang Zhang, are also our directors. In addition, one of Ctrip’s directors, Qi Ji, was our director and chief executive officer from 2002 to January 2005. Some of our customers book our hotel rooms through Ctrip and we pay sales commissions to Ctrip for such bookings. In 2003, Home Inns Beijing paid RMB0.4 million to Ctrip as sales commissions. In 2004 and 2005 and the six months ended June 30, 2006, we paid RMB0.2 million and RMB2.4 million (US$0.3 million) and RMB2.6 million (US$0.3 million), respectively, to Ctrip as sales commissions. In addition, Ctrip extended an interest-free loan in the amount of RMB6.0 million to Home Inns Beijing in 2003 and this loan was repaid in full in the same year.

Employment Agreements

See “Management—Employment Agreements” for a description of the employment agreements we have entered into with our senior executive officers.

Share Incentives

See “Management—Share Incentives” for a description of share options and stock purchase rights we have granted to our directors, officers and other individuals as a group.

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DESCRIPTION OF SHARE CAPITAL

We are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Law (2004 Revision) of the Cayman Islands, which is referred to as the Companies Law below.

As of the date hereof, our authorized share capital consists of 200,000,000 shares, comprised of (i) 177,075,114 ordinary shares with a par value of US$0.005 each, of which 31,773,589 shares are issued and outstanding; (ii) 17,241,400 Series A preferred shares authorized, issued and outstanding, with a par value of US$0.005 each; 2,417,645 Series B preferred shares authorized, issued and outstanding, with a par value of US$0.005 each; and 3,265,841 Series C preferred shares authorized, issued and outstanding, with a par value of US$0.005 each. All of our issued and outstanding preferred shares will automatically convert into 22,924,886 ordinary shares automatically upon the closing of this offering.

Upon the closing of this offering, we will adopt an amended and restated memorandum and articles of association, which will replace the current memorandum and articles of association in its entirety. The following are summaries of material provisions of our proposed amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares that we expect will become effective upon the closing of this offering.

Ordinary shares

General. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law.

Voting Rights. Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. A poll may be demanded by our chairman or any shareholder holding at least 10% of the shares given a right to vote at the meeting, present in person or by proxy.

A quorum required for a meeting of shareholders consists of at least two shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings are held annually and may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding in aggregate at least 10% of our voting share capital. Advance notice of at least seven days is required for the convening of our annual general meeting and other shareholders’ meetings.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the ordinary shares. A special resolution is required for important matters such as a change of name. Holders of the ordinary shares may effect certain changes by ordinary resolution, including alter the amount of our authorized share capital, consolidate and divide all or any of our share capital into shares of larger amount than our existing share capital, and cancel any shares.

Transfer of Shares. Subject to the restrictions of our memorandum and articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of

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any ordinary share unless (a) the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (b) the instrument of transfer is in respect of only one class of ordinary shares; (c) the instrument of transfer is properly stamped, if required; (d) in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; (e) the shares conceded are free of any lien in favor of us; or (f) a fee of such maximum sum as the Nasdaq Global Market may determine to be payable, or such lesser sum as our board of 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. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of 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.

Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

Redemption of Shares. Subject to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as may be determined by special resolution.

Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied either with the written consent of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You Can Find Additional Information.”

History of Securities Issuances

The following is a summary of securities issuances by us and share transfers among our existing shareholders during the past three years.

Ordinary Shares. In May 2004, Home Inns Hong Kong sold 13,219,140 ordinary shares in a private placement at a price of HK$1.57 per share to Poly Victory Investments Limited. In addition, Poly Victory Investments Limited transferred a 12.45% interest in Home Inns Beijing to Home Inns Hong Kong. In September 2004, Home Inns Hong Kong issued an additional 145,000 ordinary shares to Poly Victory Investments Limited at par value. In addition, in September 2004, Home Inns Hong Kong sold 3,035,000 ordinary shares in a private placement at a price of US$0.3425 per share to Top Sterling International Limited. In May 2006, Top Sterling International Limited dissolved and distributed its shares to its shareholders pro rata.

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In July 2006, we sold 2,834,037 ordinary shares in a private placement at a price of US$2.77 per share. The purchasers consisted of the following individuals: Neil Nanpeng Shen, one of our directors, who purchased 1,444,095 shares; Chung Lau, the spouse of one of our directors, James Jianzhang Liang, who purchased 722,048 shares; Min Fan, who purchased 361,024 shares; David Jian Sun, our chief executive officer, who purchased 111,556 shares; May Wu, our chief financial officer, who purchased 144,771 shares; and Rixin Liang, our chief operating officer, who purchased 50,543 shares.

Preferred Shares. In December 2003, Home Inns Hong Kong sold 2,417,645 shares of Series B convertible preferred shares in a private placement at a price of US$0.3309 per share. The investors in our Series B preferred share private placement consisted of AsiaStar IT Fund L.P., which purchased 1,511,028 shares, and IDG Technology Venture Investments, L.P., which purchased 906,617 shares. In January 2005, Home Inns Hong Kong sold 3,265,841 shares of Series C convertible preferred shares in a private placement at a price of US$1.531 per share. The investors in our Series C preferred share private placement consisted of Susquehanna China Investment HI, which purchased 2,873,940 shares; Kangaroo Investments LLC, which purchased 130,633 shares; Fortune Hero Limited, which purchased 65,317 shares; Soon Yan Seen, who purchased 65,317 shares; Hiroko Nishikawa, who purchased 65,317 shares; and Beihai Capital Limited, which purchased 65,317 shares. Each share of Series B and Series C preferred share will automatically convert into one ordinary share upon the closing of this offering.

Options and Stock Purchase Rights. As of the date of this prospectus, we have granted options and stock purchase rights to purchase a total of 4,775,816 ordinary shares to some of our directors, officers and employees, without giving effect to options that were exercised or terminated. See “Management—Share Incentives.”

Differences in Corporate Law

The Companies Law is modeled after that of the United Kingdom but does not follow recent United Kingdom statutory enactments. 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 United States and their shareholders.

Mergers and Similar Arrangements. Cayman Islands law does not provide for mergers as that expression is understood under United States corporate law. However, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

• the statutory provisions as to majority vote have been met;

• the shareholders have been fairly represented at the meeting in question;

• the arrangement is such that a businessman would reasonably approve; and

• the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

When a take-over offer is made and accepted by holders of 90.0% of the shares within four months, the offerer may, within a two month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

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If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. We are not aware of any reported class action or derivative action having been brought in a Cayman Islands court. 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:

• a company is acting or proposing to act illegally or ultra vires;

• the act complained of, although not ultra vires, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and

• those who control the company are perpetrating a “fraud on the minority.”

Indemnification. Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

We intend to adopt an amended and restated memorandum and articles of association upon the closing of this offering. Under our amended and restated memorandum and articles of association, we may indemnify our directors, officers, employees and agents against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such persons in connection with actions, suits or proceedings to which they are party or are threatened to be made a party by reason of their acting as our directors, officers, employees or agents. To be entitled to indemnification, these persons must have acted in good faith and in the best interest and not contrary to the interest of our company, and must not have acted in a manner willfully or grossly negligent and, with respect to any criminal action, they must have had no reasonable cause to believe their conduct was unlawful. Our amended and restated memorandum and articles of association may also provide for indemnification of such person in the case of a suit initiated by our company or in the right of our company.

We intend to enter into indemnification agreements with our directors and executive officers to indemnify them to the fullest extent permitted by applicable law and our articles of association, from and against all costs, charges, expenses, liabilities and losses incurred in connection with any litigation, suit or proceeding to which such director is or is threatened to be made a party, witness or other participant.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, or the SEC, such indemnification is against public policy as expressed in the Securities Act and therefore is unenforceable.

Registration Rights

Pursuant to our current shareholders agreement entered into in June 2006, we have granted certain registration rights to holders of our registrable securities, which include our preferred shares and ordinary shares as of the date of the agreement. Set forth below is a description of the registration rights granted under the agreement.

Demand Registration Rights. At any time commencing 6 months after this offering, holders of at least 50% of registrable securities have the right to demand that we file a registration statement covering the offer and sale

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of their securities with anticipated aggregate proceeds in excess of US$5 million. We, however, are not obligated to effect a demand registration if (1) we have already effected two demand registration, (2) during the period beginning on the 60th day prior to our good faith estimate of the filing date of, and ending on the 180th day after the effective date of, a public offering of our securities initiated by us, or (3) if the securities to be registered can be registered on Form F-3. We have the right to defer filing of a registration statement for up to 120 days if we provide the requesting holders a certificate signed by either our chief executive officer or chairman of the board of directors stating that in the good faith judgment of the board of directors that filing of a registration statement will be detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 24-month period.

Public Listing. In the event that holders of at least 50% of registrable securities requests that we effect a public listing on an internationally recognized stock exchange or over-the-counter market, we must use our best efforts to effect such public listing.

Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities other than, among other things, pursuant to an F-3 registration statement or other than relating to a stock option plan or a corporate reorganization, then we must offer holders of registrable securities an opportunity to include in the registration all or any part of their registrable securities. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement.

Form F-3 Registration Rights. When we are eligible for use of Form F-3 , holders of our registrable securities then outstanding have the right to request that we file a registration statement under Form F-3. We are not obligated to file a registration statement on Form F-3 if we have already effected one registration on Form F-3 in any six-month period or the holders propose to sell registrable securities and such other securities (if any) at an aggregate public price of less than US$500,000, net of any underwriters’ discounts or commissions.

Expenses of Registration. We will pay all expenses, other than underwriting discounts and commissions, relating to any demand, piggyback or F-3 registration.

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

American Depositary Shares

The Bank of New York, as depositary, will register and deliver American Depositary Shares, or ADSs. Each ADS will represent              ordinary shares (or a right to receive              ordinary shares) deposited with the office of The Hong Kong and Shanghai Banking Corporation Limited, 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 depositary’s corporate trust office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York’s 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, 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 ADR 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 American Depositary Shares, which ownership shall be evidenced by periodic statements issued 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 set 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 American Depositary Receipt. Directions on how to obtain copies of those documents are provided in the section of this prospectus headed “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.

• 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 ADR 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 the section of this prospectus headed “Taxation.” It 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

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time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.

• 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.

• 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 ADRs described in this section except for changes needed to put the necessary restrictions in place.

• 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 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.

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 turn in your ADSs at the depositary’s 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.

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How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?

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 won’t be able to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. We intend to ask the depositary to request voting instructions of holders of our ADSs in the future.

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 the Memorandum and Articles of Association, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct.

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.

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Fees and Expenses

Persons depositing or withdrawing shares must pay:	For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•      Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property •      Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
US$.02 (or less) per ADS	•      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	•      Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
US$.02 (or less) per ADSs per calendar year	•      Depositary services
Registration or transfer fees	•      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	•      Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars
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	•      As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	•      As necessary

The Bank of New York, 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 Nasdaq 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 linked to the amounts of fees the depositary collects from investors.

The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary also collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide 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 American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells

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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:

Then:

•      Change the nominal or par value of our shares •      Reclassify, split up or consolidate any of the deposited securities •      Distribute securities on the shares that are not distributed to you •      Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action

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. The depositary may, and will if we ask it to, 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?

We may agree with the depositary to amend the deposit agreement and the ADSs 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 ADS, 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 depositary’s 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.

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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:

• are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

• 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;

• are not liable if either of us exercises discretion permitted under the deposit agreement;

• 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 party;

• may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party.

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:

• 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;

• satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

• 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:

• 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.

• When you or other ADS holders seeking to withdraw shares owe money to pay fees, taxes and similar charges.

• 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.

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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 American Depositary Shares. 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 the Depository Trust Company. DRS is the system administered by DTC pursuant to which the depositary may register the ownership of uncertificated American Depositary Shares, which ownership shall be evidenced by periodic statements issued 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 DRS/Profile, 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 the Deposit Agreement, the parties agree that the depositary’s reliance on and compliance with instructions 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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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding              ADSs representing approximately             % of our ordinary shares in issue. All of the ADSs sold in this offering will be freely transferable by persons other than our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our ADSs in the public market could adversely affect prevailing market prices of our ADSs. Prior to this offering, there has been no public market for our ordinary shares or the ADSs, and while application has been made for the ADSs to be quoted on the Nasdaq Global Market, we cannot assure you that a regular trading market will develop in the ADSs. We do not expect that a trading market will develop for our ordinary shares not represented by the ADSs.

Lock-up Agreements

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any ADSs or shares of ordinary shares, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the representatives for a period of 180 days after the date of this prospectus, except issuances pursuant to the exercise of employee stock options outstanding on the date hereof or pursuant to our dividend reinvestment plan.

Our officers and directors and principal shareholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any ADSs or shares of ordinary shares or securities convertible into or exchangeable or exercisable for any ADSs or shares of ordinary shares, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our ADSs, whether any of these transactions are to be settled by delivery of our ADSs or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the representatives for a period of 180 days after the date of this prospectus. After the expiration of the 180-day period, the ordinary shares or ADSs held by our directors, executive officers or principal shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

The 180-day lock-up period is subject to adjustment under certain circumstances. If in the event that either (1) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, then in either case the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the representatives waive, in writing, such an extension.

Rule 144

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned our ordinary shares for at least one year, is entitled to sell within any three-month period a number of ordinary shares that does not exceed the greater of the following:

• 1% of the then outstanding ordinary shares, in the form of ADSs or otherwise, which will equal approximately              ordinary shares immediately after this offering; or

• the average weekly trading volume of our ordinary shares in the form of ADSs or otherwise, during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission.

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Sales under Rule 144 must be made through unsolicited brokers’ transactions. They are also subject to manner of sale provisions, notice requirements and the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not our affiliate at any time during the three months preceding a sale, and who has beneficially owned the ordinary shares, in the form of ADSs or otherwise, proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell those ordinary shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, “144(k) shares” may be sold at any time.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell such ordinary shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144.

Registration Rights

Upon completion of this offering, certain holders of our ordinary shares or their transferees will be entitled to request that we register their shares under the Securities Act, following the expiration of the lock-up agreements described above. See “Description of Share Capital—Registration Rights.”

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TAXATION

The following summary of the material Cayman Islands and United States federal income tax consequences of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this registration statement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Maples and Calder, our Cayman Islands counsel.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

United States Federal Income Taxation

The following discussion describes the material U.S. federal income tax consequences to U.S. Holders (defined below) under present law of an investment in the ADSs or ordinary shares. This summary applies only to investors that hold the ADSs or ordinary shares as capital assets and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as in effect on the date of this Prospectus and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this Prospectus, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion does not deal with the tax consequences to any particular investor or to persons in special tax situations such as:

• banks;

• certain financial institutions;

• insurance companies;

• broker dealers;

• U.S. expatriates;

• traders that elect to mark to market;

• tax-exempt entities;

• persons liable for alternative minimum tax;

• persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or integrated transaction;

• persons that actually or constructively own 10.0% or more of our voting stock;

• persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or

• persons holding ADSs or ordinary shares through partnerships or other pass-through entities.

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PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply if you are a beneficial owner of ADSs or ordinary shares and you are, for U.S. federal income tax purposes,

• an individual who is a citizen or resident of the United States;

• a corporation (or other entity taxable as a corporation) organized under the laws of the United States, any State or the District of Columbia;

• an estate whose income is subject to U.S. federal income taxation regardless of its source; or

• a trust that (1) is subject to the supervision of a court within the United States and the control of one or more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If you are a partner in partnership or other entity taxable as a partnership that holds ADSs or ordinary shares, your tax treatment generally will depend on your status and the activities of the partnership.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. If you hold ADSs, you should be treated as the holder of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.

The U.S. Treasury has expressed concerns that parties to whom ADSs are pre-released may be taking actions that are inconsistent with the claiming, by U.S. Holders of ADSs, of foreign tax credits for U.S. federal income tax purposes. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. Holders, as described below. Accordingly, the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders could be affected by future actions that may be taken by the U.S. Treasury or parties to whom ADSs are pre-released.

Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares

Subject to the passive foreign investment company rules discussed below, the gross amount of all our distributions to you with respect to the ADSs or ordinary shares generally will be included in your gross income as foreign source ordinary dividend income on the date of receipt by the depositary, in the case of ADSs, or by you, in the case of ordinary shares, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in your ADSs or ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders including individual U.S. Holders, for taxable years beginning before January 1, 2011, dividends may constitute “qualified dividend income” that is taxed at the lower applicable capital gains rate provided that (1) the ADSs or ordinary shares, as applicable, are readily tradable on an established securities market in the United States, (2) we are not a passive foreign investment company (as

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discussed below) for either our taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are met. Under Internal Revenue Service authority, ordinary shares, or ADSs representing such shares, are considered for the purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq National Market, as our ADSs are expected to be. You should consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our ADSs or ordinary shares.

Taxation of Disposition of ADSs or Ordinary Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or ordinary share equal to the difference between the amount realized for the ADS or ordinary share and your tax basis in the ADS or ordinary share. The gain or loss generally will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADS or ordinary share for more than one year, you will be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.

Passive Foreign Investment Company

We do not expect to be a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes for our current taxable year ending December 31, 2006. Our expectation for our current taxable year is based in part on our estimates of the value of our assets as determined based on the price of the ADSs and our ordinary shares in this offering and the expected price of the ADSs and our ordinary shares following the offering. Our actual PFIC status for the current taxable year will not be determinable until the close of such year, and, accordingly, there is no guarantee that we will not be a PFIC for the current taxable year. A non-U.S. corporation is considered to be a PFIC for any taxable year if either:

• at least 75% of its gross income is passive income (the “income test”), or

• at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the total value of our assets for purposes of the asset test generally will be calculated using the market price of our ADSs and ordinary shares, our PFIC status will depend in large part on the market price of our ADSs and ordinary shares, which may fluctuate considerably. Accordingly, fluctuations in the market price of the ADSs and ordinary shares may result in our being a PFIC for any year. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. If we are a PFIC for any year during which you hold ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which you hold ADSs or ordinary shares. However, if we cease to be a PFIC, provided that you have not made a mark-to-market election, as described below, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the ADSs or ordinary shares, as applicable.

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If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ADSs or ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:

• the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares,

• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income, and

• the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or ordinary shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets.

We do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.

Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such stock to elect out of the tax treatment discussed above. If you make a valid mark-to-market election for the ADSs or ordinary shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis in such ADSs or ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs or ordinary shares, as well as to any loss realized on the actual sale or disposition of the ADSs or ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amounts. If you make such an election, the tax rules that apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate discussed above under “—Taxation of Dividends and Other Distributions on the ADSs and Ordinary Shares” would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. The Nasdaq National Market is a qualified exchange. We expect that the ADSs will be listed on the Nasdaq National Market and, consequently, if you are a holder of ADSs and the ADSs are regularly traded, the mark-to-market election would be available to you were we to be a PFIC.

If you hold ADSs or ordinary shares in any year in which we are a PFIC, you will be required to file Internal Revenue Service Form 8621 regarding distributions received on the ADSs or ordinary shares and any gain realized on the disposition of the ADSs or ordinary shares.

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You are urged to consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or ordinary shares.

Information Reporting and Backup Withholding

Dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or redemption of ADSs or ordinary shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives, have severally agreed to purchase, and we and the selling shareholders have agreed to sell to them, the number of ADSs indicated in the table below. Credit Suisse Securities (USA) LLC’s address is Eleven Madison Avenue, New York, New York 10010-3629 U.S.A. Merrill Lynch, Pierce, Fenner & Smith Incorporated’s address is 4 World Financial Center, 250 Vesey Street, New York, New York 10080 U.S.A.

Underwriter	Number of ADSs
Credit Suisse Securities (USA) LLC
Merrill Lynch, Pierce, Fenner & Smith              Incorporated
Deutsche Bank Securities Inc.
Total

The underwriters are offering the ADSs subject to their acceptance of the ADSs from us and the selling shareholders and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken. However, the underwriters are not required to take or pay for the ADSs covered by the underwriters’ over-allotment option described below.

We and the selling shareholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The representatives have advised us and the selling shareholders that the underwriters propose initially to offer the ADSs to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of US$             per ADS. The underwriters may allow, and the dealers may re-allow, a discount not in excess of US$             per ADS to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

The following table shows the per ADS and total underwriting discounts and commissions to be paid by us and the selling shareholders in connection with this offering. The amounts in the following table are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

	Per ADS		Total
	Without Over-allotment	With Over-allotment	Without Over-allotment	With Over-allotment
Underwriting discounts and commissions paid by us	US$	US$	US$	US$
Expenses payable by us	US$	US$	US$	US$
Underwriting discounts and commissions paid by selling shareholders	US$	US$	US$	US$
Expenses payable by the selling shareholders	US$	US$	US$	US$

We and the selling shareholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of              additional ADSs at the initial public offering price listed on the cover page of this prospectus, less underwriters discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the

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offering of the ADSs offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase additional ADSs approximately proportionate to each underwriter’s initial amount reflected in the table above.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any of our ordinary shares or ADSs or securities convertible into or exchangeable or exercisable for any of our ordinary shares or ADSs, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the representatives for a period of 180 days after the date of this prospectus, except issuances pursuant to the exercise of employee share options outstanding on the date hereof. However, in the event that either (1) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, then in either case the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the representatives waive, in writing, such an extension.

Our shareholders, officers and directors have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our ordinary shares or ADSs or securities convertible into or exchangeable or exercisable for any of our ordinary shares or ADSs, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our ordinary shares or ADSs, whether any of these transactions are to be settled by delivery of our ordinary shares, ADSs or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the representatives for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, then in either case the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the representatives waive, in writing, such an extension.

We have applied to have our ADSs listed on the Nasdaq Global Market under the symbol “HMIN.”

Before this offering, there has been no public market for our ordinary shares or ADSs. The initial public offering price was determined through negotiations among us and the representatives. In addition to prevailing market conditions, the factors considered in determining the initial public offering price were:

• the valuation multiples of publicly traded companies that the representatives believe to be comparable to us,

• our financial information,

• the history of, and the prospects for, our company and the industry in which we compete,

• an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues,

• the present state of our development, and

• the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the ADSs may not develop. It is also possible that after the offering the ADSs will not trade in the public market at or above the initial public offering price.

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The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Until the distribution of the ADSs is completed, Securities and Exchange Commission rules may limit underwriters and selling group members from bidding for and purchasing our ADSs. However, the representatives, or any person acting for them, on behalf of the underwriters, may engage in transactions that stabilize the price of the ADSs, such as bids or purchases to peg, fix or maintain that price.

In connection with the offering, the underwriters may purchase and sell our ADSs in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of ADSs 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 ADSs in the offering. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing ADSs in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of ADSs available for purchase in the open market as compared to the price at which they may purchase ADSs through the over-allotment option. “Naked” short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our ADSs in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of ADSs made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased ADSs sold by or for the account of such underwriter in stabilizing or short covering transactions.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our ADSs or preventing or retarding a decline in the market price of our ADSs. As a result, the price of our ADSs may be higher than the price that might otherwise exist in the open market.

Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ADSs. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, the representatives will be facilitating Internet distribution for this offering to certain of their respective Internet subscription customers. An electronic prospectus may be made available on the Internet web site maintained by one or more of the representatives. Other than the prospectus in electronic format, the information contained on, or that may be accessed through, the web site of any of the representatives is not part of this prospectus.

Some of the underwriters and their affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and our affiliates.

Selling Restrictions

European Union

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “relevant member state”), with effect from and including the date on which the Prospectus

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Directive was implemented in that relevant member state (the “relevant implementation date”) no ADSs have been offered or will be offered in that relevant member state prior to the publication of a prospectus in relation to the ADSs which has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in the relevant member state, all in accordance with the Prospectus Directive, except that with effect from and including the relevant implementation date, offers of ADSs may be made to the public in that relevant member state at any time:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000; and (iii) an annual turnover of more than € 50,000,000, as shown in its last annual or consolidated accounts;

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the underwriters; or

(d) in any other circumstances which do not require the publication by the Corporation of a prospectus pursuant to Article 3 of the Prospectus Directive,

provided that no such offer of ADSs shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a relevant member state and each person who initially acquires any ADSs or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive.

For the purpose of the expression an “offer of any ADSs to the public” in relation to any securities in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer of any ADSs to be offered so as to enable an investor to decide to purchase any ADSs, as the same may be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state.

In the case of any ADSs being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the ADSs acquired by it have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a relevant member state to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale. The company, the selling shareholders, the underwriters and their affiliates, and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement, and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the underwriters of such fact in writing may, with the consent of the underwriters, be permitted to subscribe for or purchase ADSs.

This prospectus and any offer when made are only addressed to and directed at persons in member states of the European Economic Area who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/ EC) (“Qualified Investors”). In addition, in the United Kingdom, this prospectus is being distributed only to, and is directed only at, Qualified Investors (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and Qualified Investors falling within Article 49(2)(a) to (d) of the Order, and (ii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This prospectus must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or

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investment activity to which this prospectus relates is available only to (i) in the United Kingdom, relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons. This prospectus and its contents should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person.

United Kingdom

Each underwriter will represent, warrant and agree that (i) it has communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) received by it in connection with the issue or sale of the ADSs in circumstances in which section 21(1) of the FSMA does not apply to the company; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offering of the ADSs as contemplated by this prospectus in, from or otherwise involving the United Kingdom.

Japan

The ADSs have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each underwriter has agreed that it will not offer or sell any ADSs, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines in Japan.

Hong Kong

The ADSs may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the ADSs may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ADSs may not be circulated or distributed, nor may the ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the ADSs are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the

125

ADSs under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

General

No action may be taken in any jurisdiction other than the United States that would permit a public offering of the ADSs or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither the prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the ADSs in Canada is being made only on a private placement basis exempt from the requirement that we [and the selling shareholders] prepare and file a prospectus with the securities regulatory authorities in each province where trades of the ADSs are made. Any resale of the ADSs in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the ADSs.

Representations of Purchasers

By purchasing ADSs in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling shareholders and the dealer from whom the purchase confirmation is received that:

• the purchaser is entitled under applicable provincial securities laws to purchase the ADSs without the benefit of a prospectus qualified under those securities laws,

• where required by law, that the purchaser is purchasing as principal and not as agent,

• the purchaser has reviewed the text above under Resale Restrictions, and

• the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the ADSs to the regulatory authority that by law is entitled to collect the information.

Further details concerning the legal authority for this information is available on request.

Rights of Action—Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the ADSs, for rescission against us and the selling shareholders in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the ADSs. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the ADSs. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling shareholders. In no case will the amount recoverable in any action

126

exceed the price at which the ADSs were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling shareholders, will have no liability. In the case of an action for damages, we and the selling shareholders, will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the ADSs as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein [and the selling shareholders] may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of ADSs should consult their own legal and tax advisors with respect to the tax consequences of an investment in the ADSs in their particular circumstances and about the eligibility of the ADSs for investment by the purchaser under relevant Canadian legislation.

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EXPENSES RELATING TO THIS OFFERING

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the National Association of Securities Dealers, Inc. filing fee and the Nasdaq Global Market listing fee, all amounts are estimates.

SEC Registration Fee	US$
Nasdaq Global Market Listing Fee
National Association of Securities Dealers, Inc. Filing Fee
Printing Expenses
Legal Fees and Expenses
Accounting Fees and Expenses
Miscellaneous
Total	US$

128

LEGAL MATTERS

The validity of the ADSs and certain other legal matters as to United States federal law and New York law in connection with this offering will be passed upon for us by Latham & Watkins LLP. Certain legal matters as to United States federal law and New York law in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP. The validity of the ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Maples and Calder. Legal matters as to PRC law will be passed upon for us by Commerce & Finance Law Offices and for the underwriters by Haiwen and Partners. Latham & Watkins LLP may rely upon Maples and Calder with respect to matters governed by Cayman Islands law, Commerce & Finance Law Offices with respect to matters governed by PRC law and Boughton Peterson Yang Anderson with respect to matters governed by Hong Kong law. Simpson Thacher & Bartlett LLP may rely upon Maples & Calder and Haiwen and Partners with respect to matters governed by Cayman Islands law and PRC law, respectively, and Boughton Peterson Yang Anderson with respect to matters governed by Hong Kong law.

EXPERTS

Our consolidated financial statements as of December 31, 2004 and 2005, and for each of the three years in the period ended December 31, 2005, included in this prospectus have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, as set forth in their report appearing herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Home Inns Beijing as of December 31, 2003 and 2004, and for each of the years then ended, included in this prospectus have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, as set forth in their report appearing herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The offices of PricewaterhouseCoopers Zhong Tian CPAs Limited Company are located at 11^th Floor, PricewaterhouseCoopers Centre, 202 Hu Bin Road, Shanghai 200021, People’s Republic of China.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form F-1, including relevant exhibits and securities under the Securities Act with respect to underlying ordinary shares represented by the ADSs, to be sold in this offering. We have also filed with the SEC a related registration statement on F-6 to register the ADSs. This prospectus, which constitutes a part of the registration statement, does not contain all of the information contained in the registration statement. You should read the registration statement on Form F-1 and its exhibits and schedules for further information with respect to us and our ADSs.

Immediately upon completion of this offering we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders. All information filed with the SEC can be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. You may also obtain additional information over the Internet at the SEC’s website at www.sec.gov.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2003, 2004 and 2005	F-3
Consolidated Balance Sheets as of December 31, 2004 and 2005	F-4
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2003, 2004 and 2005	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005	F-7
Notes to the Consolidated Financial Statements	F-9

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-36
Consolidated Statements of Operations for the Years Ended December 31, 2003 and 2004	F-37
Consolidated Balance Sheets as of December 31, 2003 and 2004	F-38
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2003 and 2004	F-39
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003 and 2004	F-40
Notes to the Consolidated Financial Statements	F-41

HOME INNS & HOTELS MANAGEMENT INC.

	Page
Unaudited Interim Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2005 and 2006	F-55
Condensed Consolidated Balance Sheets as of December 31, 2005 and June 30, 2006	F-56
Condensed Consolidated Statements of Shareholders’ Equity for Six Months Ended June 30, 2005 and 2006	F-58
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2006	F-59
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	F-61

F-1

Report of Independent Registered Public Accounting Firm

To the board of directors and shareholders of

    Home Inns & Hotels Management Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows expressed in Renminbi present fairly, in all material respects, the financial position of Home Inns & Hotels Management Inc. (the “Company”) and its subsidiaries as of December 31, 2004 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Shanghai, People’s Republic of China

July 12, 2006, except for Note 18, which is as of September 18, 2006

F-2

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

	Note		2003		2004		2005		2005
			RMB		RMB		RMB		US$
									(Note 2(d))
Revenues:
Leased-and-operated hotels			—		93,686,931		279,948,268		35,018,484
Franchised-and-managed hotels			—		2,312,662		5,913,244		739,683
Total revenues					95,999,593		285,861,512		35,758,167
Less: Business tax and related surcharges			—		(5,101,080	)	(16,830,380	)	(2,105,298	)
Net revenues			—		90,898,513		269,031,132		33,652,869
Operating costs and expenses:
Leased-and-operated hotel costs –
Rents and utilities			—		(30,703,169	)	(94,783,918	)	(11,856,437	)
Personnel costs			—		(12,949,122	)	(41,225,106	)	(5,156,812	)
Depreciation and amortization			—		(5,680,743	)	(23,334,691	)	(2,918,916	)
Consumables, food and beverage			—		(6,440,709	)	(20,765,412	)	(2,597,527	)
Others			—		(8,162,003	)	(26,099,998	)	(3,264,826	)
Total leased-and-operated hotel costs			—		(63,935,746	)	(206,209,125	)	(25,794,518	)
Sales and marketing expenses			—		(2,113,140	)	(7,691,002	)	(962,061	)
General and administrative expenses			(365,229	)	(15,982,506	)	(24,535,130	)	(3,069,078	)
Total operating costs and expenses			(365,229	)	(82,031,392	)	(238,435,257	)	(29,825,657	)
Income (loss) from operations			(365,229	)	8,867,121		30,595,875		3,827,212
Interest income			649		88,453		223,208		27,921
Interest expense			—		(97,793	)	(709,455	)	(88,745	)
Other non-operating income	2	(z)	—		325,258		2,145,832		268,420
Income (loss) before income tax expense, minority interests and share of income of affiliated companies			(364,580	)	9,183,039		32,255,460		4,034,808
Income tax expense	8		—		(5,737,885	)	(6,525,978	)	(816,329	)
Minority interests			—		552,074		(4,796,810	)	(600,029	)
Share of income of affiliated companies	6		1,878,577		1,972,098		—		—
Net income			1,513,997		5,969,326		20,932,672		2,618,450
Amount allocated to participating preference shareholders			(867,492	)	(2,960,390	)	(9,486,945	)	(1,186,714	)
Net income available to ordinary shareholders			646,505		3,008,936		11,445,727		1,431,736
Earnings per share	14
— Basic			0.06		0.15		0.42		0.05
— Diluted			0.06		0.15		0.40		0.05
Weighted average ordinary shares outstanding
— Basic			11,000,000		19,981,424		27,399,140		27,399,140
— Diluted			11,000,000		20,315,681		28,713,188		28,713,188
Share-based compensation expense was included in the statement of operations as follows:
Leased-and-operated hotel costs – Personnel costs			—		8,332		8,124		1,016
General and administrative expenses			—		141,373		951,702		119,048

The accompanying notes are an integral part of these consolidated financial statements.

F-3

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2004 AND 2005

	Note		2004	2005	2005 (Unaudited pro forma – Note 15)	2005	2005 (Unaudited pro forma – Note 15)
			RMB	RMB	RMB	US$	US$
						(Note 2(d))	(Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents			26,291,567	37,727,231	37,727,231	4,719,266	4,719,266
Restricted cash			—	1,900,000	1,900,000	237,669	237,669
Accounts receivable			1,210,299	3,130,151	3,130,151	391,548	391,548
Receivables from related parties	13		9,696	15,729	15,729	1,968	1,968
Consumables			1,856,731	5,529,908	5,529,908	691,731	691,731
Prepayments and other current assets	3		4,722,378	5,484,080	5,484,080	686,000	686,000
Deferred tax assets, current	8		176,466	2,646,868	2,646,868	331,094	331,094
Total current assets			34,267,137	56,433,967	56,433,967	7,059,276	7,059,276
Property and equipment, net	4		99,169,661	267,675,576	267,675,576	33,483,304	33,483,304
Goodwill	7		32,906,112	32,906,112	32,906,112	4,116,197	4,116,197
Intangible assets, net	5		1,715,121	2,369,471	2,369,471	296,395	296,395
Other assets			1,256,429	2,968,829	2,968,829	371,368	371,368
Deferred tax assets, non-current	8		4,989,720	12,648,245	12,648,245	1,582,158	1,582,158
Total assets			174,304,180	375,002,200	375,002,200	46,908,698	46,908,698
LIABILITIES
Current liabilities:
Accounts payable			1,998,400	3,391,015	3,391,015	424,179	424,179
Payables to related parties	13		348,420	1,259,409	1,259,409	157,538	157,538
Short-term borrowings	9		—	20,000,000	20,000,000	2,501,783	2,501,783
Salaries and welfare payable			5,295,740	8,292,922	8,292,922	1,037,354	1,037,354
Income tax payable			3,769,592	11,389,738	11,389,738	1,424,732	1,424,732
Other taxes payable			728,530	2,016,325	2,016,325	252,220	252,220
Deferred revenues			553,820	6,442,135	6,442,135	805,841	805,841
Provisions for customer reward program	2	(o)	68,275	776,645	776,645	97,150	97,150
Other payables and accruals	12		26,737,754	65,109,611	65,109,611	8,144,504	8,144,504
Deferred tax liabilities, current	8		267,587	508,916	508,916	63,660	63,660
Total current liabilities			39,768,118	119,186,716	119,186,716	14,908,961	14,908,961

F-4

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED BALANCE SHEETS (Continued)

AS OF DECEMBER 31, 2004 AND 2005

	Note		2004		2005		2005 (Unaudited pro forma – Note 15)		2005		2005 (Unaudited pro forma – Note 15)
			RMB		RMB		RMB		US$		US$
									(Note 2(d))		(Note 2(d))
Deferred rental			11,890,081		26,533,548		26,533,548		3,319,058		3,319,058
Long-term loan from a related party	13		—		40,000,000		40,000,000		5,003,565		5,003,565
Deferred tax liability, non-current	8		245,136		205,101		205,101		25,656		25,656
Total liabilities			51,903,335		185,925,365		185,925,365		23,257,240		23,257,240
Minority interest			5,539,477		9,994,321		9,994,321		1,250,181		1,250,181
Commitments and contingencies	16
Shareholders’ equity
Convertible preferred shares	10
Series A preferred shares (US$0.005 par value; 17,241,400 shares authorized, issued and outstanding)			713,541		713,541		—		89,256		—
Series B preferred shares (US$0.005 par value; 2,417,645 shares authorized, issued and outstanding)			100,055		100,055		—		12,516		—
Series C preferred shares (US$0.005 par value; 3,265,841 shares authorized, issued and outstanding)			—		135,149		—		16,906		—
Ordinary shares (US$0.005 par value; 180,340,955 and 177,075,114 shares authorized, 27,399,140 and 27,399,140 shares issued and outstanding as of December 31, 2004 and 2005, respectively)	10		1,133,911		1,133,911		2,082,656		141,840		260,518
Additional paid-in capital			110,687,306		152,878,585		152,878,585		19,123,450		19,123,450
Statutory reserves	2	(aa)	3,323,064		11,360,020		11,360,020		1,421,015		1,421,015
Deferred share-based compensation	11		(1,771,759	)	(2,809,713	)	(2,809,713	)	(351,465	)	(351,465	)
Retained earnings			2,675,250		15,570,966		15,570,966		1,947,759		1,947,759
Total shareholders’ equity			116,861,368		179,082,514		179,082,514		22,401,277		22,401,277
Total liabilities and shareholders’ equity			174,304,180		375,002,200		375,002,200		46,908,698		46,908,698

The accompanying notes are an integral part of these consolidated financial statements.

F-5

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

	Preferred Shares						Ordinary shares		Additional paid-in capital	Statutory reserves	Deferred share-based compen- sation		Retained earnings (Accu- mulated deficit)		Total share- holders’ equity
	Series A		Series B		Series C
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount
Balance as of January 1, 2003	—	—	—	—	—	—	11,000,000	455,252	5,046,351	—	—		(572,697	)	4,928,906
Issuance of Series A preferred shares	17,241,400	713,541	—	—	—	—	—	—	31,527,108	—	—		—		32,240,649
Issuance of Series B preferred shares	—	—	2,417,645	100,055	—	—	—	—	6,488,916	—	—		—		6,588,971
Net income	—	—	—	—	—	—	—	—	—	—	—		1,513,997		1,513,997
Balance as of December 31, 2003	17,241,400	713,541	2,417,645	100,055	—	—	11,000,000	455,252	43,062,375	—	—		941,300		45,272,523
Issuance of ordinary shares to acquire additional shares of Home Inns Beijing (Note 7)	—	—	—	—	—	—	13,219,140	547,058	56,308,253	—	—		—		56,855,311
Issuance of ordinary shares to Top Sterling International Limited	—	—	—	—	—	—	3,035,000	125,600	8,488,903	—	—		—		8,614,503
Issuance of ordinary shares to Poly Investment	—	—	—	—	—	—	145,000	6,001	906,311	—	—		(912,312	)	—
Net income	—	—	—	—	—	—	—	—	—	—	—		5,969,326		5,969,326
Recognition of share compensation costs	—	—	—	—	—	—	—	—	1,921,464	—	(1,771,759	)	—		149,705
Appropriations to statutory reserves	—	—	—	—	—	—	—	—	—	3,323,064	—		(3,323,064	)	—
Balance as of December 31, 2004	17,241,400	713,541	2,417,645	100,055	—	—	27,399,140	1,133,911	110,687,306	3,323,064	(1,771,759	)	2,675,250		116,861,368
Issuance of Series C preferred shares	—	—	—	—	3,265,841	135,149	—	—	40,193,499	—	—		—		40,328,648
Net income	—	—	—	—	—	—	—	—	—	—	—		20,932,672		20,932,672
Recognition of share compensation costs	—	—	—	—	—	—	—	—	1,997,780	—	(1,037,954	)	—		959,826
Appropriations to statutory reserves	—	—	—	—	—	—	—	—	—	8,036,956	—		(8,036,956	)	—
Balance as of December 31, 2005	17,241,400	713,541	2,417,645	100,055	3,265,841	135,149	27,399,140	1,133,911	152,878,585	11,360,020	(2,809,713	)	15,570,966		179,082,514

The accompanying notes are an integral part of these consolidated financial statements

F-6

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

	2003		2004		2005		2005
	RMB		RMB		RMB		US$
							(Note 2(d))
Cash flows from operating activities:
Net income	1,513,997		5,969,326		20,932,672		2,618,450
Adjustments to reconcile net income to net cash (used in) provided by operating activities :
Share-based compensation	—		149,705		959,826		120,064
Depreciation and amortization	—		5,966,640		23,845,499		2,982,812
Minority interests	—		(552,074	)	4,796,810		600,029
Share of income of affiliated companies	(1,878,577	)	(1,972,098	)	—		—
Loss from disposal of property and equipment	—		—		126,326		15,802
Deferred income tax	—		(2,880,887	)	(9,927,633	)	(1,241,839	)
Change in assets and liabilities, excluding effects of consolidation of Home Inns Beijing in 2004 (Note 7):
Increase in restricted cash	—		—		(1,900,000	)	(237,669	)
Increase in accounts receivable	—		(734,068	)	(1,919,852	)	(240,153	)
(Increase) decrease in receivables from related parties	(113,895	)	460,847		(6,033	)	(755	)
Increase in consumables	—		(1,464,781	)	(3,673,177	)	(459,475	)
Increase in prepayments and other current assets	—		(2,558,722	)	(761,702	)	(95,281	)
Increase in other assets	—		(566,429	)	(1,712,400	)	(214,203	)
Increase in accounts payable	—		132,012		1,392,615		174,201
Increase (decrease) in payables to related parties	1,918,249		(2,274,873	)	910,989		113,955
Increase in salary and welfare payable	—		4,006,562		2,997,182		374,915
Increase in income tax payable	—		1,174,256		7,620,146		953,197
Increase in other taxes payable	—		728,530		1,287,795		161,089
Increase in provisions for customer reward program	—		68,275		708,370		88,609
Increase (decrease) in other payables and accruals	(1,779,437	)	15,116,138		4,394,738		549,734
Increase in deferred revenues	—		48,239		5,888,315		736,564
Increase in deferred rental	—		7,846,744		14,643,467		1,831,738
Net cash (used in) provided by operating activities	(339,663	)	28,663,342		70,603,953		8,831,784

The accompanying notes are an integral part of these consolidated financial statements.

F-7

HOME INNS & HOTELS MANAGEMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

	2003		2004		2005		2005
	RMB		RMB		RMB		US$
							(Note 2(d))
Cash flows from investing activities:
Proceeds from sale of fixed assets	—		—		112,069		14,019
Purchase of property and equipment	—		(57,018,136	)	(158,432,612	)	(19,818,197	)
Purchase of intangible assets	—		(216,573	)	(1,018,286	)	(127,377	)
Investments in Home Inns Beijing	(28,945,000	)	—		—		—
Net cash acquired from consolidation of Home Inns Beijing	—		14,915,910		—		—
Net cash used in investing activities	(28,945,000	)	(42,318,799	)	(159,338,829	)	(19,931,555	)
Cash flows from financing activities:
Proceeds from issuance of preferred shares	38,829,620		—		40,328,648		5,044,675
Proceeds from issuance of ordinary shares	—		30,374,711		—		—
Capital contribution from minority shareholders	—		1,230,000		—		—
Proceeds from short-term borrowings	—		—		20,000,000		2,501,783
Proceeds from long-term loans from a related party	—		—		40,000,000		5,003,565
Repayment of short-term borrowings	—		(3,000,000	)	—		—
Dividend paid by a VIE subsidiary to a minority shareholder	—		—		(158,108	)	(19,778	)
Net cash provided by financing activities	38,829,620		28,604,711		100,170,540		12,530,245
Net increase in cash	9,544,957		14,949,254		11,435,664		1,430,474
Cash, beginning of year	1,797,356		11,342,313		26,291,567		3,288,789
Cash, end of year	11,342,313		26,291,567		37,727,231		4,719,263
Supplemental disclosure of cash flow information
Cash paid during the year for income taxes	—		(4,849,180	)	(8,833,465	)	(1,104,970	)
Cash paid during the year for interest	—		(97,793	)	(709,455	)	(88,745	)
Supplemental schedule of non-cash investing and financing activities:
Acquisition of 12.45% ownership in Home Inns Beijing by issuance of ordinary shares	—		35,095,103		—		—
Increase in payables on construction costs of leasehold improvements	—		4,422,575		33,793,261		4,227,169

The accompanying notes are an integral part of these consolidated financial statements.

F-8

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in RMB unless otherwise stated)

1.    ORGANIZATION AND NATURE OF OPERATIONS

Home Inns & Hotels Management (Hong Kong) Limited (“Home Inns HK”) is a holding company incorporated in Hong Kong on May 28, 2001. Home Inns HK did not have any operations until April 2002 when Home Inns & Hotels Management (Beijing) Co. Ltd. (“Home Inns Beijing”), a hotel operation and management company, was established as a joint venture of Home Inns HK and Beijing Capital Travel International Hotel Group Co., Ltd. (“Beijing Capital Travel”), a subsidiary of Beijing Tourism Group (“BTG”). At inception, Home Inns HK and BTG owned 55% and 45% interest in Home Inns Beijing, respectively. Through a series of financing activities and acquisitions, Home Inns HK’s ownership in Home Inns Beijing increased to 95.588% as of February 1, 2005 (Note 7). Prior to April 8, 2004, Home Inns Beijing was an affiliated company of Home Inns HK, and was accounted for under the equity method. Pursuant to the revised Articles of Association of Home Inns Beijing dated April 8, 2004, Home Inns HK obtained control of Home Inns Beijing and its subsidiaries, and thus consolidated their results of operations with effect from April 2004.

Home Inns & Hotels Management Inc. (“the Company”) was established in Cayman Islands on May 30, 2006. On June 29, 2006, all the then existing shareholders of Home Inns HK exchanged their respective shares of Home Inns HK for an equivalent number of shares of the Company of equivalent classes. As a result, Home Inns HK has become a wholly-owned subsidiary of the Company since June 29, 2006. The rights of the preferred and ordinary shares issued by the Company are the same as those originally issued by Home Inns HK. The accompanying consolidated financial statements reflect the June 2006 reorganization and have been prepared as if the current corporate structure had been in existence throughout the relevant periods.

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary (“VIE subsidiary”). The Company and its consolidated subsidiaries and VIE subsidiaries are collectively referred to as the “Group”.

The principal activities of the Group are to develop, lease, operate, franchise, and manage economy hotels under the Home Inn brand in the People’s Republic of China (“PRC”). The Group either leases real estate properties on which it develops and operates hotels or it franchises the Home Inn brand to hotel owners and manages these hotels. The former type of hotels is referred to as “leased-and-operated hotels” and the latter type of hotels as “franchised-and-managed hotels.”

Leased-and-operated hotels

The Group leases hotel properties from property owners and is responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the Group is responsible for hotel development and customization to conform to the standards of Home Inns at the beginning of the lease, as well as repairs and maintenance, operating expenses and management of properties over the term of the lease. Under the lease arrangements, the Group typically pays fixed rent on a quarterly basis for the first three or five years of the lease term, after which the rental payments may be subject to an increase every three to five years.

As of December 31, 2003, the Company and its affiliated company, Home Inns Beijing, had 10 leased-and-operated hotels in operation. As of December 31, 2004 and 2005, the Group had 18 and 54 leased-and-operated hotels in operation.

Franchised-and-managed hotels

The Group enters into certain franchise arrangements with property owners for which the Group is responsible for managing the hotels, including hiring and appointment of the general manager of each

F-9

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

franchised-and-managed hotel. Under a typical franchise agreement, the franchisee is required to pay an initial franchise fee and ongoing management service fees equal to a certain percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel development and customization and the costs of its operations. The term of the franchise agreement is typically 5 years and is renewable only upon mutual agreement between the Group and the franchisee.

As of December 31, 2003, the Company and its affiliated company, Home Inns Beijing, had no franchised-and-managed hotels in operation. As of December 31, 2004 and 2005, the Group had 8 and 14 franchised-and-managed hotels in operation.

2.    ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below:

a. Basis of presentation and use of estimates

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

b. Basis of consolidation and accounting for investments

The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIE subsidiaries.

The Group applies the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46(R)”) to account for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.

Under FIN 46 (R), a company consolidates a VIE if that company has a variable interest that will absorb a majority of the expected losses, receives a majority of the entity’s expected residual returns, or both. The company that absorbs a majority of the VIE’s expected losses and receives a majority of the VIE’s expected residual returns is a primary beneficiary.

The Group is the primary beneficiary of four variable interest entities, Home Inns & Hotels Management (Xiamen) Co., Ltd (“Home Inns Xiamen”), Home Inns & Hotels Management (Fuzhou) Co., Ltd (“Home Inns Fuzhou”), Home Inns & Hotels Management (Caoxi) Co., Ltd (“Home Inns Caoxi”), and Home Inns & Hotels Management (Caobao) Co., Ltd (“Home Inns Caobao”), of which the principal activity generally relates to hotel management. The total registered capital of the four VIEs was RMB 4,000,000 as of December 31, 2005. The entities were considered variable interest entities because the equity at risk of each entity was not sufficient to finance its intended activities without additional financial support. The Company has 51% ownership interest in

F-10

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Home Inns Xiamen, Home Inns Fuzhou and Home Inns Caoxi and 75% ownership interest in Home Inns Caobao, and the Company is considered the primary beneficiary of these entities because it absorbs a majority of the entities’ expected losses and receives a majority of the entities’ expected residual returns. As a result, the operations of the VIEs are included in the consolidated financial statements since their incorporation in 2004.

The entities that operate the franchised-and-managed hotels (Note 1) are considered variable interest entities as the franchisees do not have the ability to make decisions that have a significant impact on the success of the franchise arrangement. However, as the franchisees provide all necessary capital to finance the operation of the franchised hotels and absorb a majority of any expected losses, the Company is not considered the primary beneficiary of those entities.

Subsidiaries are those consolidated entities in which the Company directly or indirectly controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; to cast majority of votes at the meetings of the board of directors; or to govern the financial and operating policies of the investee under a statue or agreement among the shareholders or equity holders.

All inter-company transactions and balances within the Group are eliminated on consolidation. Minority interests represent the interests of outside minority shareholders in the operating results and net assets of certain consolidated subsidiaries.

Investments in businesses that the Company does not control, but has the ability to exercise significant influence over operating and financial matters are accounted for using the equity method. Unrealized gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group’s interest in the unconsolidated affiliated companies.

c. Foreign currencies

The Group’s functional currency is Renminbi (“RMB”). Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”) prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. All such exchange gains and losses are included in general and administrative expenses in the consolidated statements of operations.

d. Convenience translation

Translations of balances in the statements of operations, balance sheet and statement of cash flows from RMB into United States dollars (“US$”) as of and for the year ended December 31, 2005 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB 7.9943, on June 30, 2006, representing the noon buying rate in The City of New York for cable transfers of RMB, as certified for customs purposes by the Federal Reserve Bank of New York. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2006, or at any other rate.

F-11

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

e. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits placed with banks or other financial institutions. Cash balance as of December 31, 2004 consists of RMB 16,082,896, US$1,126,003 and HK$843,955. Cash balance as of December 31, 2005 consists of RMB 33,033,051, US$552,043 and HK$231,798.

f. Restricted cash

Restricted cash primarily consists of deposits held in escrow.

g. Accounts receivable

Provision is made against accounts receivable to the extent collection is considered to be doubtful with accounts receivable in the balance sheet stated net of such provision, if any. As of December 31, 2004 and 2005, the Group has not recorded any allowance for doubtful accounts.

h. Consumables

The Group has purchased consumables mainly for the operation of leased-and-operated hotels. Consumables are amortized over their useful lives, generally one year or less, from the time they are put into use and are stated at purchase price less accumulated amortization.

i. Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization and impairment losses, if any. The cost of property and equipment comprises its purchase price and any directly attributable costs, including interest cost capitalized in accordance with SFAS No. 34, “Capitalization of Interest Costs” (“SFAS No. 34”), during the period the asset is brought to its working condition and location for its intended use.

Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows:

Leasehold improvements	Over the shorter of the economic useful life or the lease period
Machinery and equipment	5 to 10 years
Furniture, fixtures and office equipment	3 to 5 years

Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and amortization commences when the asset is ready for its intended use.

Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the statements of operations as the difference between the net sales proceeds and the carrying amount of the underlying asset.

j. Goodwill

Goodwill represents the excess of the cost of an acquired entity over the appropriate share of the fair value of the identifiable assets and liabilities acquired including separately identifiable intangible assets. The

F-12

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) require that a two-step impairment test be performed annually or whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. The first step of the test for impairment compares the book value of the Group’s reporting unit under which goodwill is recorded to its estimated fair value. The second step of the goodwill impairment test, which is only required when the net book value of the reporting unit exceeds the fair value, measures the impairment as the difference between the implied fair value of goodwill and its book value. Goodwill is not amortized. No impairment was recognized for the years ended December 31, 2003, 2004, and 2005.

k. Intangible assets

Intangible assets consist primarily of intangible assets acquired in business combinations. The Group applies the criteria specified in SFAS No. 141 “Business Combinations” (“SFAS No. 141”) to determine whether an intangible asset should be recognized separately from goodwill. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including favorable lease agreements and certain franchise agreements existing as of the date of acquisition, are recognized and measured at fair value upon acquisition. Intangible assets from such business combination transactions are amortized over the remaining operating lease term or the franchise agreement term, as appropriate.

Purchased software is stated at cost less accumulated amortization and impairment, if any.

l. Impairment of long-lived assets and definite-lived intangible assets

Long-lived assets and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may not be recoverable in accordance with SFAS No.144, “Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS No. 144”). If the total of the expected future undiscounted cash flows is less than the carrying value, an indication of impairment is present and a loss is recognized in the statements of operations for the difference between the fair value, using the expected future discounted cash flows, and the carrying value of the assets. No impairment was recognized for the years ended December 31, 2003, 2004, and 2005.

m. Financial instruments

Financial instruments of the Group primarily comprise of cash, accounts receivable, related party receivables and payables, accounts payable, other payables, short-term borrowing and a long-term loan from a related party. As of December 31, 2004 and 2005, carrying values of financial instruments approximated their fair values.

n. Employee benefits

The full-time employees of the Company’s PRC subsidiaries and VIE subsidiaries are entitled to staff welfare benefits including medical care, housing fund, unemployment insurance and pension benefits. These entities are required to accrue for these benefits based on certain percentages of the employees’ salaries, subject to certain ceilings, in accordance with the relevant PRC regulations and make contributions to the state-sponsored plans out of the amounts accrued. Amounts accrued and included in salaries and welfare payable in the accompanying balance sheets were RMB 251,501 and RMB 811,566 for the years ended December 31, 2004 and 2005, respectively.

F-13

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

o. Provisions for customer reward program

The Group invites its customers to participate in a customer reward program. Prior to November 14, 2004, membership was free of charge. A one-time membership fee was charged after that date for new members. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership points for their paid stays, which can be redeemed for membership upgrades, room night awards and other gifts. The estimated incremental costs to provide membership upgrades, room night awards and other gifts are accrued and recorded as a provision for customer reward program as members accumulate points and recognized as sales and marketing expense in the accompanying statements of operations. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2004 and 2005, the Company made provisions of RMB 68,275 and RMB 776,645, respectively, based on the estimated liabilities under the customer reward program.

p. Deferred Revenue

Deferred revenue generally consists of advances received from customers for room stays, initial franchise fees paid prior to the Group fulfilling its commitments to the franchisee, and cash received from sale of membership programs.

q. Revenue recognition

Revenues from leased-and-operated hotels represent primarily room rentals and food and beverage sales from the leased-and-operated hotels. Such revenues are recognized when goods and services are delivered.

Revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay (i) an initial one-time franchise fee and (ii) on-going management and service fees based on a percentage of revenue, which approximate 5% to 6% of the room revenues of the franchised hotels. The one-time franchise fee is recognized when the franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation, personnel recruiting and training. On-going management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. Other revenues generated from franchise agreements include system maintenance and support fee and central reservation system (“CRS”) usage fee, which are recognized when services are provided.

Given the limited history in operating the Group’s customer reward program (Note 2(o)), all one-time membership fees are recognized as deferred revenue when received. Revenues from the one-time membership fees will be recognized when the customers are no longer entitled to the benefits of the membership card, which occurs upon lack of activity over 2 years, or over the estimate average customer relationship period once upon the Company being able to reliably estimate such period.

r. Business tax and related surcharge

The Group is subject to business tax and related surcharges on the services provided in the PRC. Such tax is levied based on turnover at an applicable rate of approximately 5.5% and is recorded as a reduction of revenues. During the year ended December 31, 2003, the relevant tax bureau granted certain preferential treatment to

F-14

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

enterprises engaging in the travel-related industry, which was adversely impacted by “ Severe Acute Respiratory Syndrome”. As a result, business tax of certain months in 2003 was exempted or levied at a reduced rate.

s. Leased-and-operated hotel costs

Leased-and-operated hotel costs include all direct costs incurred in the operation of the leased-and-operated hotels and consist primarily of property rentals and related expenses, utility costs, personnel compensation, amortization of guest room consumables, amortization of leasehold improvements, depreciation of equipment, costs of consumables, food and beverage.

t. Sales and marketing

Sales and marketing expenses consist primarily of advertising related expenses, expenses associated with the Company’s membership reward program and payroll and related compensation for the Group’s sales and marketing personnel. Advertising related expenses, include promotion expenses and production costs of marketing materials, are charged to the statements of operations as incurred, and amounted to nil, RMB 1,263,499 and RMB 4,668,580 for the years ended December 31, 2003, 2004 and 2005, respectively.

u. Share-based compensation

The Company accounts for share-based compensation arrangements in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and complies with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). In general, compensation cost under APB No. 25 is recognized based on the difference, if any, between the estimated fair value of the Company’s ordinary shares and the amount an employee is required to pay to acquire the ordinary shares, as determined on the date the option is granted. Total compensation cost as determined at the grant date of option is recorded in shareholders’ equity as additional paid-in capital and deferred share-based compensation. Deferred share-based compensation is amortized on a straight-line basis and charged to expense over the vesting period of the underlying options.

If the compensation cost for the Company’s share-based compensation plan had been determined based on the minimum value at the grant dates for the share option awards as prescribed by SFAS No. 123, the Group’s net income attributable to ordinary shareholders and earnings per share would have resulted in the pro forma amounts disclosed below:

	2003		2004		2005
Net income, as reported	1,513,997		5,969,326		20,932,672
Add: Compensation expense under APB No. 25	—		149,705		959,826
Less: Compensation expense under SFAS No. 123	—		(164,115	)	(1,049,442	)
Pro forma net income	1,513,997		5,954,916		20,843,056
Less: Amount allocated to participating preference shareholders	(867,492	)	(2,953,244	)	(9,446,330	)
Pro forma net income attributable to ordinary shareholders	646,505		3,001,672		11,396,726
Basic earnings per share
— As reported	0.06		0.15		0.42
— Pro forma	0.06		0.15		0.42
Diluted earnings per share
— As reported	0.06		0.15		0.40
— Pro forma	0.06		0.15		0.40

F-15

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

The effects of applying SFAS No. 123 methodology in this pro forma disclosure are not indicative of future results. Effective from January 1, 2006, the Group will adopt SFAS No. 123(R) (Note 2(ae)).

v. Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over the terms of the underlying lease.

w. Borrowing costs

Interest costs are capitalized for qualifying assets in accordance with SFAS No. 34, “Capitalization of Interest Cost”. For the year ended December 31, 2003, 2004, and 2005, total interest capitalized was nil, nil and RMB 264,659, respectively.

x. Pre-operating expenditure

Pre-operating expenditure represents start-up costs, other than amounts capitalized as leasehold improvements, for leased-and-operated hotels and is recognized as general and administrative expense and charged to the consolidated statements of operations in the period in which it is incurred.

y. Taxation

Income tax expenses are recorded using the liability method. Deferred tax assets or liabilities are recognized for the estimated future tax effects attributable to temporary differences and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the amount of deferred tax assets if it is considered more likely than not that such assets will not be realized.

z. Other non-operating income

Other non-operating income primarily consists of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. During the year ended December 31, 2003, 2004 and 2005, the Group received financial subsidies of nil, RMB 258,055, and RMB 1,983,546, respectively, from various local PRC government authorities. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy are determined at the discretion of the relevant government authorities. Such amounts are recorded as other non-operating income when received.

aa. Statutory reserves

Based on the legal formation of the entities, appropriation of statutory reserves may be different. The Group’s PRC subsidiaries and VIE subsidiaries, except for Home Inns Beijing and Hemei Hotel Management (Shanghai) Limited (“Hemei”), are required to set aside 10% of its net income as reported in its statutory accounts on an annual basis to the Statutory Surplus Reserve Fund. Once the total Statutory Surplus Reserve

F-16

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

reaches 50% of the registered capital of the respective subsidiaries, further appropriations are discretionary. The Statutory Surplus Reserve can be used to increase the registered capital and eliminate future losses of the respective companies under PRC GAAP. The Group’s Statutory Surplus Reserve is not distributable to shareholders except in the event of liquidation. Before January 1, 2006, the above subsidiaries are also required on an annual basis to set aside at least 5% of after-tax profit, calculated in accordance with PRC accounting standards and regulations, to the Statutory Surplus Welfare Fund, which can be used for staff welfare of the Group. Effective from January 1, 2006, the appropriation to the Statutory Surplus Welfare Fund is no longer required.

Home Inns Beijing, a Sino-Foreign Enterprise, is required to set aside a portion of its net income as reported in its PRC statutory accounts on an annual basis to the Reserve Fund, Workers’ Bonus and Welfare Fund and Enterprise Expansion Fund. Such amounts shall be determined at the discretion of its board of directors.

The Reserve Fund can be used to increase the registered capital upon approval by relevant government authorities and eliminate future losses of the respective companies upon a resolution by the board of directors.

Hemei, the Company’s subsidiary, as a Foreign Invested Enterprise, is required to set aside at least a 10% of its net income as reported in its PRC statutory accounts on an annual basis to the Reserve Fund. Once the total Reserve Fund reaches 50% of the registered capital of Hemei, further appropriations are discretionary. Hemei is also required to set aside a portion of its net income as reported in its PRC statutory accounts, at the discretion of itself, on an annual basis to Workers’ Bonus and Welfare Fund.

Appropriations to the above statutory reserves are accounted for as a transfer from retained earnings to statutory reserves. During the years ended December 31, 2003, 2004, and 2005, the Group made total appropriations to these statutory reserves of nil, RMB 3,323,064, and RMB 8,036,956, respectively.

There are no legal requirements in the PRC to fund these statutory reserves by transfer of cash to any restricted accounts, and the Group does not do so. These reserves are not distributable as cash dividends.

ab. Dividends

Dividends are recognized when declared. The Company has not declared or paid any dividends.

The Company relies principally on dividends from its subsidiaries and VIE subsidiaries in the PRC for its cash requirements. Current PRC regulations permit PRC companies to pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s PRC subsidiaries and VIE subsidiaries can only distribute dividends after they have met the PRC requirements for appropriation to statutory reserves (Note 2aa). Aggregate net assets of the Company’s PRC subsidiaries and VIE subsidiaries not distributable in the form of dividends to the parent as a result of the aforesaid PRC regulations was RMB 113,360,020 as of December 31, 2005. However, the PRC subsidiaries and VIE subsidiaries may transfer such net assets to the Company by other means, including through royalty and trademark license agreements or certain other contractual arrangements, at the discretion of the Company without third party consent.

ac. Earnings per share

In accordance with SFAS No. 128, “Computation of Earnings Per Share” (“SFAS No. 128”) and EITF No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128” (“EITF No. 03-6”), basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two class method, net income is allocated between ordinary shares and other participating securities based on their respective participating rights. The Company’s Series A, B and C convertible preferred shares are participating securities. Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average

F-17

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the convertible preferred shares (using the if-converted method) and ordinary shares issuable upon the exercise of outstanding share options (using the treasury stock method).

ad. Segment reporting

The Company follows SFAS No. 131, “Disclosures about Segment of an Enterprise and Related Information” for its segment reporting.

The Company operates and manages its business as a single segment. The Company primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented.

ae. Recent accounting pronouncements

In December 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB No. 25, “Accounting for Stock Issued to Employees”. Under SFAS No. 123(R), share-based compensation is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest. Pro forma disclosure is no longer an alternative. The Company will apply the provisions of SFAS No. 123(R) effective January 1, 2006, the beginning of the Company’s next fiscal year.

The Company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method. As the Company currently applies SFAS No. 123 pro forma disclosure using the minimum value method of accounting, the Company is required to adopt SFAS No. 123(R) using the prospective transition method. Under the prospective transition method, non-public entities may continue to account for non-vested awards outstanding at the date of adoption of SFAS No. 123(R) in the same manner as they had been accounted for prior to adoption unless those awards are modified. For any awards granted subsequent to the adoption of SFAS No. 123(R), compensation expense will be recognized generally over the vesting period of the award based on the fair value of the award on grant date.

On October 6, 2005, FASB Staff Position FAS 13-1 “Accounting for Rental Costs Incurred During a Construction Period” (“FSP FAS 13-1”) addresses the accounting for rental costs associated with operating leases that are incurred during a construction period. The FSP reached a consensus that as there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, and that the rental costs associated with ground or building operating leases that are incurred during a construction period should be recognized as rental expenses. This guidance is to be applied to the first reporting period beginning after December 15, 2005. The Company’s current accounting policy is consistent with guidance provided by FSP FAS 13-1.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”), which replaces APB Opinion No. 20, “Accounting Changes” (“APB No. 20”), and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to

F-18

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

determine either the period- specific effects or the cumulative effect of the change. This statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 will not have a significant impact on the consolidated financial statements.

In June 2005, the FASB ratified the Emerging Issues Task Forces Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements” (“EITF No. 05-06”). EITF No. 05-06 provides that the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of a lease be the shorter of (a) the useful life of the assets or (b) a term that includes required lease periods and renewals that are reasonably assured upon the acquisition or the purchase. The provisions of EITF No. 05-06 should be applied to leasehold improvements (within the scope of this issue) that are purchased or acquired in reporting periods beginning after June 29, 2005. The adoption of EITF No. 05-06 will not have a significant impact on the consolidated financial statements.

af. Certain risks and concentration

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of December 31, 2004 and 2005, substantially all of the Company’s cash was held in major financial institutions located in the PRC and in Hong Kong, which management considers to be of high credit quality. Accounts receivable are typically not collateralized and are denominated in RMB, and are derived from revenues earned from operations arising in the PRC. No individual customer accounted for more than 10% of net revenues for the years ended December 31, 2003, 2004 and 2005. No individual customer accounted for more than 10% of accounts receivable as of December 31, 2004 and 2005.

The Group has been operating with a working capital deficit. As of December 31, 2004 and 2005, the Group’s net current liabilities amounted to RMB 5,500,981 and RMB 62,752,749, respectively. The management of Company believes that cash from operations and short-term bank borrowings will be sufficient to meet the Group’s operating cash flow in the foreseeable future.

3.    PREPAYMENTS AND OTHER CURRENT ASSETS

Components of prepayments and other current assets as of December 31 are as follows:

	2004	2005
Prepaid expenses	3,465,607	3,193,051
Rental and other deposits	158,440	483,436
Other current assets	1,098,331	1,807,593
Total	4,722,378	5,484,080

4.    PROPERTY AND EQUIPMENT

The components of property and equipment are as follows:

	2004		2005
Leasehold improvements	68,100,467		223,086,518
Machinery and equipment	5,644,493		16,058,849
Furniture, fixtures and office equipment	19,300,767		51,937,688
Construction in progress	15,339,962		9,191,030
	108,385,689		300,274,085
Less: Accumulated depreciation and amortization	(9,216,028	)	(32,598,509	)
Property and equipment, net	99,169,661		267,675,576

Depreciation and amortization expenses incurred for the years ended December 31, 2003, 2004 and 2005 are nil, RMB 5,767,391, and RMB 23,481,563, respectively.

F-19

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Included in leasehold improvements and construction in progress is accumulated interest capitalized of RMB 264,659 as of December 31, 2005.

5.    INTANGIBLE ASSETS

Intangible assets as of December 31 are as follows:

	2004		2005
Intangible assets –
Favorable lease agreements	803,683		803,683
Franchise agreements	730,548		730,548
Purchased software	395,886		1,414,172
	1,930,117		2,948,403
Less: accumulated amortization –
Favorable lease agreements	(100,346	)	(272,367	)
Franchise agreements	(33,106	)	(89,857	)
Purchased software	(81,544	)	(216,708	)
	(214,996	)	(578,932	)
Intangible assets, net	1,715,121		2,369,471

Franchise agreements and favorable leases agreements were acquired in the purchase of minority interests in Home Inns Beijing (Note 7). The values of favorable lease agreements were determined based on the estimated present value of the below market portion of net cash flows expected to be derived from the lease agreements over the remaining lease period. Franchise agreements were determined at the estimated present value of net cash flows expected to be received over the remaining terms of the franchise agreements. The value of favorable lease agreements is amortized using the straight-line method over the remaining lease term. The value of franchise agreements is amortized using the straight-line method over the remaining terms of the franchise agreements.

Amortization expense of intangible assets for the years ended December 31, 2003, 2004, and 2005 amounted to nil, 199,249, and 363,936, respectively.

The annual estimated amortization expense for the above intangible assets for the following years is as follows:

	Amortization
2006	511,607
2007	509,077
2008	494,582
2009	295,299
2010	201,968
Thereafter	356,938
	2,369,471

F-20

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

6.    INVESTMENTS IN AFFILIATED COMPANIES

Prior to April 8, 2004, Home Inns Beijing was an affiliated company accounted for under the equity method of accounting (Note 7). Home Inns Beijing was not consolidated as the minority shareholder had significant participating rights. The following tables summarize the consolidated balance sheet and income statement of Home Inns Beijing:

	As of December 31, 2003
Current assets	18,616,707
Non-current assets	38,367,977
Current liabilities	13,842,664
Non-current liabilities	2,681,281
Shareholders’ equity	40,460,739

	For the year ended December 31, 2003	For the year ended December 31, 2004
Net revenues	42,179,808	109,128,121
Operating income	2,689,981	12,989,386
Net income	2,488,237	7,735,352

7.    ACQUISITION OF HOME INNS BEIJING

In April 2002, Home Inns HK entered into a joint venture agreement with Beijing Capital Travel, a subsidiary of BTG, to establish Home Inns Beijing. Home Inns HK contributed RMB 5,500,000 and Beijing Capital Travel contributed RMB 4,500,000 for 55.00% and 45.00% ownership in Home Inns Beijing, respectively. According to the joint venture agreement, Beijing Capital Travel had substantial rights to effectively participate in significant decisions that were expected to be made in the ordinary course of Home Inns Beijing’s business operations, including decisions regarding the annual budget and hiring of senior management. In accordance with EITF No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights,” (“EITF No. 96-16”) the Group accounted for its 55.00% interest in Home Inn Beijing under the equity method of accounting, as prescribed by APB Opinion No. 18, “The Equity Method of Accounting for Investment in Common Stock (“APB No. 18”)”.

In April 2003, with the cash proceeds received from the issuance of Series A convertible preferred shares (Note 10), Home Inns HK and Beijing Capital Travel, a subsidiary of BTG, entered into a revised joint venture agreement and Home Inns HK purchased an additional 21% ownership interest in Home Inns Beijing through a capital contribution of RMB 28,945,000 to Home Inns Beijing and recognized goodwill of RMB 5,038,542.

In April 2004, Home Inns HK and Beijing Capital Travel, a subsidiary of BTG, entered into a second revised joint venture agreement, whereby Home Inns HK obtained control of Home Inns Beijing. From the date of this second revised joint venture agreement, Beijing Capital Travel no longer had substantive participating rights to block significant decisions proposed by Home Inns HK and accordingly, the results of Home Inns Beijing were consolidated. The second revised joint venture agreement also provided that Home Inns HK would

F-21

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

increase its ownership interest by an additional 5.02% in Home Inns Beijing, through a capital contribution of RMB 30,000,000, subject to the completion of the share subscription agreement dated May 24, 2004 described below.

On May 24, 2004, Home Inns HK entered into an agreement with Poly Victory Investment Limited (“Poly Investment”), a wholly owned subsidiary of BTG, whereby Home Inns HK issued 13,219,140 ordinary shares to Poly Investment in return for HK$20,754,050 (RMB 22,050,540) in cash and 12.45% voting shares of Home Inns Beijing owned by BTG. The transaction was consummated on the same date and increased the ownership of Home Inns HK in Home Inns Beijing from 76.00% to 88.45%. Subsequently, on July 28, 2004, pursuant to the second revised joint venture agreement, Home Inns HK contributed RMB 30,000,000 to Home Inns Beijing, increasing its ownership interest from 88.45% to 93.47%.

The transactions to acquire the additional 17.47% interest in Home Inns Beijing in May and July 2004 were accounted for in accordance with SFAS No. 141, “Business Combination” (“SFAS No. 141”). As the two transactions were contemplated as one transaction and the effect on purchase price allocation during the intervening period was not significant, the Company has accounted for the two transactions as one acquisition as of May 24, 2004. The cost of the acquisition of the 17.47% interest from 76.00% to 93.47% was RMB 37,053,205 based on the sum of (i) the estimated fair value of the 13,219,140 shares issued, less the HK$20,754,050 received from the May 24, 2004 share subscription agreement, and (ii) RMB 1,958,100, representing Beijing Capital Travel’s, a subsidiary of BTG, 6.53% share of the cash contributed by Home Inns HK to Home Inns Beijing as part of the July 28, 2004 capital contribution. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Allocation of purchase price (in RMB):

Fair value of net tangible assets acquired	7,919,895
Intangible assets	1,534,230
Goodwill	27,867,570
Deferred tax liability, non-current	(268,490	)
Total purchase price	37,053,205

The components of the intangible assets listed in the above table as of the acquisition date are as follows (in RMB) :

Franchise agreements	803,682
Favorable lease agreements	730,548
	1,534,230

F-22

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

The following unaudited consolidated pro forma information presents information of the Group as if the acquisition occurred on January 1, 2003, assuming (i) the acquisition of 17.47% interest in Home Inns Beijing, and (ii) the consolidation of Home Inns Beijing as the minority shareholder no longer had substantive participating rights:

	For the year ended December 31, 2003	For the year ended December 31, 2004
(in RMB)	(unaudited)	(unaudited)
Net revenues	42,179,808	109,128,121
Income from operations	2,180,188	12,549,754
Net income	1,841,985	6,820,117
Earnings per share:
Basic	0.05	0.15
Diluted	0.05	0.15

The unaudited pro forma financial information includes RMB 144,564 in each of 2003 and 2004 for the amortization of identifiable intangible assets. The information presented above is for illustrative purposes only and does not purport to be indicative of results that would have been achieved if the acquisition had occurred as of January 1, 2003.

On February 21, 2005, the Company further increased its ownership in Home Inns Beijing from 93.47% to 95.59% through a cash contribution of RMB 33,055,000 into Home Inns Beijing. The impact of this acquisition was not significant to the Company’s consolidated financial position or result of operations.

8.    INCOME TAXES

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

Hong Kong

Home Inns HK is subject to Hong Kong profit tax at a rate of 17.5% on its assessable profit. No Hong Kong profit tax has been provided as the Group does not have assessable profit that is earned in or derived from Hong Kong during the years presented.

PRC

The Company’s subsidiaries and its VIE subsidiaries incorporated in the PRC are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant PRC income tax laws. Normally, the applicable EIT rates of these entities, are 30% plus a local income tax of 3%.

Three of the Group’s subsidiaries and VIE subsidiaries enjoy a preferential income tax rate of 15%.

Certain subsidiaries of the Group are granted by local tax authorities a one-year to three-year EIT exemption on their taxable income, respectively, commencing from their establishment, which began in 2005. Total tax benefit recognized by these subsidiaries as a result of the tax exemption was RMB 4,227,738 in 2005.

F-23

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Composition of income tax expense

The current and deferred portion of income tax expense (benefit) included in the consolidated statements of operations for the years ended December 31 is as follows:

	2003	2004		2005
Current income tax expense	—	8,618,772		16,453,611
Deferred income tax benefit	—	(2,880,887	)	(9,927,633	)
Income tax expense	—	5,737,885		6,525,978

Reconciliation of the differences between statutory tax rate and the effective tax rate

A reconciliation between the statutory EIT rate and the Group’s effective tax rate for the years ended December 31 is as follows:

	2004	2005
Statutory EIT rate	33%	33%
Tax differential from statutory rate applicable to subsidiaries in the PRC	—	(30%	)
Non-deductible expenses under tax laws	29%	17%
Effective EIT rate	62%	20%

The reconciliation for the year ended December 31, 2003 is not presented, as the Group had neither accounting profits nor taxable income during the year.

Deferred tax assets and liabilities comprised:

	2004	2005
Deferred tax assets, current:
Tax loss carry forwards	60,963	1,672,189
Deductible temporary differences related to pre-operating expenses	115,503	444,886
Deductible temporary differences related to rental expenses	—	371,393
Deductible temporary differences related to management fee of subsidiaries	—	158,400
	176,466	2,646,868
Deferred tax assets, non-current:
Deductible temporary differences related to rental expenses	4,565,470	9,713,855
Deductible temporary differences related to pre-operating expenses	424,250	1,291,016
Deductible temporary differences related to deferred revenue	—	1,108,774
Deductible temporary differences related to management fee of subsidiaries	—	534,600
	4,989,720	12,648,245
Total deferred tax assets	5,166,186	15,295,113
Deferred tax liabilities, current:
Taxable temporary differences related to recognition of personnel costs	267,587	508,916
Deferred tax liabilities, non-current:
Taxable temporary differences related to intangible assets	245,136	205,101
Total deferred tax liabilities	512,723	714,017

F-24

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Deferred income tax assets are recognized for tax loss carry forwards to the extent that realization of the related tax benefit through future taxable profits is probable. The Group had tax losses of RMB 6,041,288 as of December 31, 2005 to be carried forward against future taxable income. No provision against the deferred tax assets has been made. These tax losses will expire in 2010.

9.    SHORT-TERM BORROWINGS

	2004	2005
Short-term bank loans	—	20,000,000

Short-term bank loans bear interests at a rate of 5.22% per annum and are repayable in 2006.

10.    SHARE CAPITAL

As of December 31, 2005, the authorized share capital of the Company is US$1,000,000, divided into 177,075,114 ordinary shares, 17,241,400 Series A preferred shares, 2,417,645 Series B preferred shares, and 3,265,841 Series C preferred shares at par value of US$0.005 each.

(a) Share split

In April 2003, the Company’s board of directors declared a 200 for one share split. As a result of the share split, the existing ordinary shares and Series A preferred shares increased, and par value decreased from US$1.00 each to US$0.005 each. Numbers of ordinary and convertible preferred shares in the accompanying financial statements have been adjusted to reflect the share split.

(b) Convertible preferred shares

On February 28, 2003, the Company entered into a Series A Preferred Share Subscription Agreement, whereby the Company authorized and issued 86,207 shares of the Company’s Series A convertible preferred shares at an issue price of US$46.40 per share. In April 2003, the number of Series A convertible preferred shares increased from 86,207 shares to 17,241,400 shares, and the par value decreased from US$1.00 each to US$0.005 each after a 200 for one share split.

On November 24, 2003, the Company entered into a Series B Preferred Share Subscription Agreement, whereby the Company authorized and issued 2,417,605 shares of the Company’s Series B convertible preferred shares at an issue price of US$0.3309 per share.

On January 24, 2005, the Company entered into a Series C Preferred Share Subscription Agreement, whereby the Company authorized and issued 3,265,841 shares of the Company’s Series C convertible preferred shares at an issue price of US$1.531 per share.

The rights, preferences and privileges with respect to the convertible preferred shares are as follows:

Voting

Holders of Series A, B and C convertible preferred shares have voting rights equal to the number of ordinary shares then issuable upon its conversion into ordinary shares. Each holder of Series A, B and C convertible preferred shares generally votes together with holders of the ordinary shares.

F-25

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Dividends

Holders of Series A, B and C convertible preferred shares are entitled to receive out of any funds legally available therefore, only if and when declared by the Board of Directors of the Company, dividends at a fixed rate or in the amounts as the Board of Directors of the Company considers appropriate. There have been no dividends declared to date.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series C and Series B convertible preferred shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Series A convertible preferred share and ordinary shares, by reason of their ownership thereof, the amount of two times the applicable original issue price per share for each Series C and Series B convertible preferred shares, plus declared and unpaid dividends. If the assets and funds distributed among the holders of the Series C and Series B convertible preferred shares are insufficient to permit the payment to such holders, then the entire assets and funds of the Group legally available for distribution shall be distributed ratably among the holders of Series C and Series B convertible preferred shares in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

After full payment has been made to the holders of Series C and Series B convertible preferred shares liquidation preference, the holders of the Series A convertible preferred shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the ordinary shares, by reason of their ownership thereof, the amount of two times the original issue price per share for each Series A convertible preferred share, plus all declared and unpaid dividends. If the assets and funds distributed among the holders of Series A convertible preferred shares are insufficient to permit the payment of the full preferential amount to such holders, then the remaining assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series A convertible preferred shares in proportion to the number of the Series A convertible preferred shares.

After full payment has been made to the holders of Series A, B and C convertible preferred shares to which they are entitled, holders of ordinary shares shall be entitled to receive all remaining assets or surplus funds of the Company.

Conversion

Each of Series A, B and C convertible preferred share is convertible into ordinary shares on a one-for-one basis, at the option of the holder. Each share of Series A, B and C convertible preferred share automatically converts into ordinary shares at the then applicable conversion price (Series A: US$0.232; Series B: US$0.3309; Series C: US$1.531) upon (i) the closing of a firm commitment underwritten public offering of the ordinary shares at a per-share price of no less than three times the original issue price of Series A convertible preferred shares of US$0.232, or, (ii) the consent of the holders of a majority of the then outstanding preferred shares.

No beneficial conversion feature charge was recognized for the issuance of Series A, B and C convertible preferred shares as the estimated fair value of the ordinary shares is equal to or less than the conversion price on the date of issuance.

(c) Ordinary shares

The Company’s Articles of Incorporation, as amended, authorized the Company to issue 177,075,114 shares of US$0.005 par value per ordinary share. Each ordinary share is entitled to one vote. The holders of ordinary

F-26

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

shares are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to prior rights of holders of all other classes of shares outstanding. The Company issued 11,000,000 ordinary shares (adjusted to reflect share splits) to the founders and certain employees at the Company’s incorporation in 2002. In May 2004, the Company issued 13,219,140 ordinary shares to Poly Investment as part of its share subscription plan and acquisition of 12.45% of Home Inns Beijing (Note 7). In September 2004, the Company issued an additional 145,000 ordinary shares to Poly Investment at par value. Fair value of the Company’s ordinary shares as of September 2004 was US$0.7589 per share. This ordinary share issuance to Poly Investment was accounted for as a distribution to a shareholder and the difference between fair value and par value of the ordinary shares issued was charged to retained earnings. In addition, in September 2004, the Company issued 3,035,000 ordinary shares to Top Sterling International Ltd., a principal shareholder of the Company, for RMB 8,614,503, or US$0.3425 per ordinary share, pursuant to a financing arrangement agreed amongst the shareholders and the Company’s board of directors in October 2003. The issuance price per ordinary share of US$0.3425 approximates the fair value of the Company’s ordinary shares as of the date the arrangement was agreed.

11.    SHARE OPTION PLAN

On February 28, 2003, the Company adopted a share option plan (“2003 Option Plan”) under which the directors of the Company may, at their discretion, grant options to acquire ordinary shares to any senior executives (including directors) and employees of the Company and/or its subsidiaries. Share options vest annually over a period of 4 years and once vested can be exercised within 5 years from the date of grant. The 2003 Option Plan provides for the issuance of options of the Company’s ordinary shares in the amount of up to 5% of total ordinary and preferred shares outstanding. On May 30, 2005, the Company adopted a board resolution to increase shares reserved under the share option plan to 6% of total ordinary and preferred shares outstanding. At the end of 2005, this represents 3,019,442 options based on the then outstanding ordinary and preferred shares outstanding. On March 30, 2006, the Company adopted a shareholders resolution to increase shares reserved for the share options plan to 9% of total ordinary and preferred shares outstanding. At the end of June 30, 2006, this represented 4,529,162 options based on the then outstanding ordinary and preferred shares.

In 2003, 630,135 (post split equivalent) options were issued at an exercise price of US$0.232 (post split equivalent). Of this, 10,590 options have been forfeited, 619,545 remain outstanding, of which 503,711 have been vested at the end of December 31, 2005. In 2004, 1,146,610 options were issued at an exercise price of US$0.3309. Of this, 162,340 options have been forfeited, 984,270 remain outstanding, of which 440,941 have been vested at the end of December 31, 2005. In 2005, 461,589 options were issued at an exercise price of US$0.3309, 180,000 options were issued at an exercise price of US$1.531, and 586,482 options were issued at an exercise price of US$2.25. Of the 1,228,071 options issued in 2005, none has been forfeited, 1,228,071 options remain outstanding, of which 149,282 options have been vested at the end of December 31, 2005.

F-27

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

The following summarizes the Company’s share option activity under the 2003 Option Plan as of and for the years ended December 31:

	2003	2004	2005
Outstanding at the beginning of the year	—	630,135	1,776,745
Granted	630,135	1,146,610	1,228,071
Exercised	—	—	—
Forfeited	—	—	(172,930	)
Outstanding at the end of the year	630,135	1,776,745	2,831,886
Vested and exercisable at the end of the year	131,278	456,944	1,093,934

The following is additional information relating to options outstanding as of December 31, 2005:

	Outstanding		Exercisable
Exercise price	Number of shares	Weighted- average remaining contractual life (years)	Number of shares	Weighted- average remaining contractual life (years)
US$ 0.232	619,545	2.17	503,711	2.17
US$ 0.3309	1,445,859	3.61	556,339	3.49
US$ 1.531	180,000	4.52	21,667	4.52
US$ 2.25	586,482	4.92	12,217	4.92
	2,831,886		1,093,934

In connection with the share options granted during the years ended December 31, 2003, 2004 and 2005, the Company recognized deferred share-based compensation of nil, RMB 1,921,464 and RMB 1,997,780, respectively, which is being amortized over the vesting period of the underlying options of four years. Share-based compensation expense recognized during the years ended December 31, 2003, 2004 and 2005, amounted to nil, RMB 149,705 and RMB 959,826, respectively.

The Company calculated the estimated fair value of share options on the date of grant using the Black-Scholes pricing model with the following assumptions:

	2004	2005
Risk-free interest rate	2.262% to 3.667%	2.51% to 4.788%
Expected life (years)	3 to 4.5	3 to 4.5
Expected dividend yield	—	—
Volatility	—	—
Fair value of options at grant date	from US$ nil to US$ 0.4692	from US$ nil to US$ 0.6423

If compensation cost for the Company’s share-based compensation plan had been determined based on the estimated fair value at the grant dates for the share option awards as prescribed by SFAS No. 123, the Company’s net income attributable to ordinary shareholders during the years ended December 31, 2003, 2004 and 2005 would have been RMB 646,505, RMB 2,994,526 and RMB 11,356,111, respectively.

F-28

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

12.    OTHER PAYABLES AND ACCRUALS

	December 31, 2004	December 31, 2005
Accrued expenses	2,533,596	5,632,397
Payables to minority shareholders	6,265,000	4,005,000
Payables on construction costs of leasehold improvements	13,970,494	48,091,737
Others	3,968,664	7,380,477
Total	26,737,754	65,109,611

13.    RELATED PARTY TRANSACTIONS

Related Party Transactions

Name of related parties	Relationships with the Company
Top Sterling International Limited	Principal shareholder of the Company
Poly Investment	Principal shareholder of the Company
BTG	Parent company of Poly Investments
Ctrip.com International, Ltd.	Common directors and common principal shareholders
Jian Guo Inns Beijing Ltd. (“Jian Guo Inns”)	Subsidiary of BTG
Ji Qi	Director of Home Inns HK

Other than the acquisition of minority interests in Home Inns Beijing from BTG disclosed in Note 7, related party transactions during the years ended December 31 are as follows:

	2003	2004	2005
Sales commissions paid to Ctrip.com International, Ltd.	—	190,460	2,381,554
Rental fees paid to Jian Guo Inns	—	2,625,000	3,500,000
Other income collected from Ctrip.com International, Ltd.	—	36,000	136,000
Long-term loan from BTG	—	—	40,000,000

As of December 31, significant balances with related parties are as follows:

Due from related parties:

	2004	2005
Top Sterling International Limited	4,256	15,729
BTG	5,440	—
	9,696	15,729

Due to related parties:

	2004	2005
Ji Qi	12,143	641,509
Ctrip.com International, Ltd.	95,134	617,900
Jian Guo Inns	241,143	—
	348,420	1,259,409

F-29

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

	2004	2005
Long-term loan from BTG (a)	—	40,000,000

(a) In June 2005, Home Inns Beijing and the Company entered into a financing transaction agreement to obtain financing from BTG. By this agreement, BTG agreed to extend a loan facility to Home Inns Beijing in an amount of RMB 80,000,000 for hotel development and operations. Each loan drawn down under the facility is repayable after 3 years and bears an interest rate at 6.1747%. According to the financing transaction agreement, if Home Inns Beijing defaults, and the parties of the agreement fail to reach consensus on an extension of the loan agreement, BTG can choose one of three options: 1) request liquidation of Home Inns Beijing or the Company and obtain repayment via legal proceedings; 2) if the net assets of the Company on such date exceed those on the agreement date, BTG may convert the loan principal amount into 11.15% of equity shares in the Company; or 3) if the net assets of Home Inns Beijing exceed RMB 663,477,155, BTG may convert the outstanding loan principal amount into a percentage of equity shares in Home Inns Beijing determined by dividing the outstanding loan principal amount by RMB 663,477,155.

The amounts due from and due to related parties as of December 31, 2004 and 2005 mainly arose from the above transactions and payments made by the Company and related parties on behalf of each other. Except for the long-term loan from BTG, these amounts are not collateralized, free of interest and receivable or payable on demand.

14.    EARNINGS PER SHARE

Basic earnings per share and diluted earnings per share have been calculated in accordance with SFAS No. 128 as follows:

	2003		2004		2005
Numerator:
Net income for the year	1,513,997		5,969,326		20,932,672
Amount allocated to participating preference shareholders	(867,492	)	(2,960,390	)	(9,486,945	)
Net income available to ordinary shareholders	646,505		3,008,936		11,445,727
Effect of dilutive securities	—		—		—
Numerator for diluted earnings per share	646,505		3,008,936		11,445,727
Denominator:
Denominator for basic earnings per share—weighted average ordinary shares outstanding	11,000,000		19,981,424		27,399,140
Dilutive effect of share options	—		334,257		1,314,048
Denominator for diluted earnings per share	11,000,000		20,315,681		28,713,188
Basic earnings per share	0.06		0.15		0.42
Diluted earnings per share	0.06		0.15		0.40

Net income for the year has been allocated to the common share and preference share based on their respective rights to share in dividends.

F-30

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

15.    PRO FORMA FOR CONVERSION OF PREFERRED SHARES

Each Series A, Series B and Series C convertible preferred share shall automatically be converted into ordinary shares at the then effective conversion price, upon the closing of an underwritten public offering of the ordinary shares of the Company in the United States with the gross proceeds to the Company in excess of US$25,000,000, or in a similar public offering of the ordinary shares of the Company in a jurisdiction and on a recognized securities exchange outside of the United States, provided that such public offering is reasonably equivalent to the aforementioned public offering in the United States in terms of price, offering proceeds and regulatory approval. The conversion price of Series A, Series B and Series C convertible preferred shares is US$0.232, US$0.3309 and US$1.531, respectively. The pro forma balance sheet as of December 31, 2005 presents an as adjusted financial position as if the conversion of the preferred shares into ordinary shares occurred on December 31, 2005.

16.    COMMITMENTS AND CONTINGENCIES

(a) Capital commitments

As of December 31, 2005, the Group’s commitments related to leasehold improvements, installation of machinery and equipment for the hotel operations amounting to RMB 102,880,161.

(b) Investment commitments

As of December 31, 2005, the Group’s investment commitments are related to investments in Home Inns & Hotels Management (Henan) Co., Ltd and Home Inns & Hotels Management (Shenyang) Co., Ltd, which will become the wholly owned subsidiaries of the Group upon establishment. These entities will be established with registered capitals of RMB 1,000,000 and RMB 500,000, respectively.

(c) Commitments under operating leases

The Group has entered into lease agreements relating to leased-and-operated hotels that are classified as operating leases.

Future minimum lease payments for non-cancelable operating leases at December 31 are as follows:

	Related-party	Non-related party	Total
	RMB	RMB	RMB
2006	3,500,000	90,780,572	94,280,572
2007	3,500,000	92,727,619	96,227,619
2008	3,500,000	93,940,912	97,440,912
2009	3,500,000	95,379,780	98,879,780
2010	3,500,000	96,015,555	99,515,555
Thereafter	26,791,667	763,624,822	790,416,489
Total	44,291,667	1,232,469,260	1,276,760,927

Rental expenses amounted to nil, RMB 25,230,507 and RMB 75,166,291 during the years ended December 31, 2003, 2004 and 2005, respectively.

F-31

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

(d) Contingencies

i. Lawsuit with a lessor

In September 2003, the Company entered into a long-term lease agreement with a lessor to lease a group of properties. However, in September 2005, the lessor accused the Company of violating lease requirements, and filed a complaint with the District Court of Jin An District, Shanghai, where the properties are located, seeking lease termination as well as punitive damages of RMB 216,668. In March 2006, the District Court of Jin An District ruled in favor of the Company, finding the Company to be in compliance with the lease agreement, and that the lessor’s complaint to have no merit.

17.    SUBSEQUENT EVENTS

In January 2006, the Company drew down an additional loan of RMB 20,000,000 on its loan facility from BTG, carrying the same terms as those described in Note 13(a).

In March 2006, 300,000 options were issued at an exercise price of US$1.531, and 510,000 options were issued at an exercise price representing the fair market value as of the grant date.

In July 2006, the Company, sold 2,834,037 ordinary shares in a private placement at a price of US$2.77 per share to certain individuals including certain executives and directors of the Company. This sale of ordinary shares was approved by the board of directors and shareholders.

F-32

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

18.    ADDITIONAL INFORMATION—CONDENSED FINANCIAL STATEMENTS OF THE COMPANY

The separate condensed financial statements of the Company as presented below have been prepared in accordance Securities and Exchange Commission Regulation S-X Rule 5-04 and Rule 12-04 and present the Company’s investments in its subsidiaries under the equity method of accounting as prescribed in APB No. 18. Such investment is presented on the separate condensed balance sheets of the Company as “Investments in subsidiaries.” The Company’s share of the Subsidiaries’ profit or loss as “Share of income from affiliated companies and subsidiaries” on the statement of operations. The subsidiaries did not pay any dividend to the Company for the periods presented.

The Company did not have any significant commitment, long term obligation, or guarantee as of December 31, 2004 and 2005.

Condensed statements of operations:

	2004		2005		2005
	RMB		RMB		US$
					(Note2(d))
Net revenues	—		—		—
Total operating expenses	(389,120	)	(1,834,455	)	(229,470	)
Loss from operations	(389,120	)	(1,834,455	)	(229,470	)
Share of income from affiliated companies and subsidiaries	6,410,113		22,439,715		2,806,964
Other (expense)/ income	(51,667	)	327,412		40,956
Income before income tax expenses	5,969,326		20,932,672		2,618,450
Income tax expenses	—		—		—
Net income for the year	5,969,326		20,932,672		2,618,450
Amount allocated to participating preference shareholders	(2,960,390	)	(9,486,945	)	(1,186,714	)
Net income available to ordinary shareholders	3,008,936		11,445,727		1,431,736

F-33

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Condensed balance sheets:

	2004		2005		2005
	RMB		RMB		US$
					(Note2(d))
Assets
Current assets:
Cash and cash equivalents	9,581,398		4,655,970		582,411
Due from a related party	349,895		343,010		42,907
Total current assets	9,931,293		4,998,980		625,318
Investments in subsidiaries	107,293,921		175,184,786		21,913,712
Total assets	117,225,214		180,183,766		22,539,030
Liabilities
Current liabilities:
Payables to related parties	157,887		775,780		97,042
Salaries and welfare payable	36,005		315,972		39,525
Other payables and accruals	169,954		9,500		1,187
Total current liabilities	363,846		1,101,252		137,754
Total liabilities	363,846		1,101,252		137,754
Shareholders’ equity
Convertible preferred shares
Series A preferred shares (US$0.005 par value; 17,241,400 shares authorized, issued and outstanding as of December 31, 2004 and 2005)	713,541		713,541		89,256
Series B preferred shares (US$0.005 par value; 2,417,645 shares authorized, issued and outstanding as of December 31, 2004 and 2005)	100,055		100,055		12,516
Series C preferred shares (US$0.005 par value; 3,265,841 shares authorized, issued and outstanding as of December 31, 2005)	—		135,149		16,906
Ordinary shares (US$0.005 par value; 180,340,955 shares authorized, 27,399,140 shares issued and outstanding as of December 31, 2004, and 177,075,114 shares authorized, 27,399,140 shares issued and outstanding as of December 31, 2005, respectively)	1,133,911		1,133,911		141,840
Additional paid-in capital	110,687,306		152,878,585		19,123,449
Deferred share-based compensation	(1,771,759	)	(2,809,713	)	(351,465	)
Retained earnings	5,998,314		26,930,986		3,368,774
Total shareholders’ equity	116,861,368		179,082,514		22,401,276
Total liabilities and shareholders’ equity	117,225,214		180,183,766		22,539,030

F-34

HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Condensed statements of cash flows:

	2004		2005		2005
	RMB		RMB		US$
					(Note2(d))
Cash flows from operating activities
Net income	5,969,326		20,932,672		2,618,450
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Share-based compensation	149,705		959,826		120,064
Share of income from affiliated companies and subsidiaries	(6,410,113	)	(22,439,715	)	(2,806,964	)
Change in assets and liabilities:
(Increase) decrease in receivables from related parties	(15,223	)	6,885		861
(Decrease) increase in payables to related parties	(1,760,362	)	617,893		77,292
Increase in salary and welfare payable	36,005		279,967		35,021
Decrease in other payables and accruals	(104,964	)	(160,454	)	(20,071	)
Net cash (used in) provided by operating activities	(2,135,626	)	197,074		24,653
Cash flows from investing activities
Investments in subsidiaries	(30,000,000	)	(45,451,150	)	(5,685,445	)
Net cash used in investing activities	(30,000,000	)	(45,451,150	)	(5,685,445	)
Cash flows from financing activities
Proceeds from issuance of preferred shares	—		40,328,648		5,044,675
Proceeds from issuance of ordinary shares	30,374,711		—		—
Net cash provided by financing activities	30,374,711		40,328,648		5,044,675
Net decrease in cash	(1,760,915	)	(4,925,428	)	(616,117	)
Cash, beginning of the year	11,342,313		9,581,398		1,198,529
Cash, end of the year	9,581,398		4,655,970		582,412

F-35

Report of Independent Registered Public Accounting Firm

To the board of directors and shareholders of

    Home Inns & Hotels Management (Beijing) Limited:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows expressed in Renminbi present fairly, in all material respects, the financial position of Home Inns & Hotels Management (Beijing) Co., Ltd (the “Company”) and its subsidiaries as of December 31, 2003 and 2004, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion

/s/ PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Shanghai, People’s Republic of China

July 12, 2006

F-36

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

	Note		2003		2004
			RMB		RMB
Revenues:
Leased-and-operated hotels			43,842,238		112,913,545
Franchised-and-managed hotels			—		2,364,266
Total revenues			43,842,238		115,277,811
Less: Business tax and related surcharges			(1,662,430	)	(6,149,690	)
Net revenues			42,179,808		109,128,121
Operating costs and expenses:
Leased-and-operated hotel costs—
Rents and utilities			(13,900,651	)	(36,462,914	)
Personnel costs			(6,676,575	)	(15,652,561	)
Consumables, food and beverage			(3,267,699	)	(8,149,037	)
Depreciation and amortization			(2,178,996	)	(6,685,122	)
Others			(5,719,885	)	(10,018,827	)
Total leased-and-operated hotel costs			(31,743,806	)	(76,968,461	)
Sales and marketing expenses			(2,142,451	)	(2,562,776	)
General and administrative expenses			(5,603,570	)	(16,607,498	)
Total operating costs and expenses			(39,489,827	)	(96,138,735	)
Income from operations			2,689,981		12,989,386
Interest income			86,194		109,852
Interest expense			—		(124,785	)
Other non-operating income	2	(w)	30,127		327,268
Income before income tax expense and minority interests			2,806,302		13,301,721
Income tax expense	6		(318,065	)	(6,860,523	)
Minority interests			—		1,294,154
Net income			2,488,237		7,735,352
Share-based compensation expense was included in the statement of operations as follows:
Leased-and-operated hotel costs—Personnel costs			—		8,332
General and administrative expenses			—		141,373

The accompanying notes are an integral part of these consolidated financial statements.

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HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2003 AND 2004

	Note		2003	2004
			RMB	RMB
ASSETS
Current assets:
Cash and cash equivalents			16,283,253	16,710,169
Accounts receivable			178,084	1,210,299
Receivables from related parties	9		150,000	155,440
Consumables			828,586	1,856,731
Prepayments and other current assets	3		1,116,440	4,722,378
Deferred tax assets, current	6		60,344	176,466
Total current assets			18,616,707	24,831,483
Property and equipment, net	4		35,803,373	99,169,661
Intangible assets, net	5		163,422	314,342
Other assets			690,000	1,256,429
Deferred tax assets, non-current	6		1,711,182	4,989,720
Total assets			56,984,684	130,561,635
LIABILITIES
Current liabilities:
Accounts payable			1,656,081	1,998,400
Payables to related parties	9		982,965	686,172
Salaries and welfare payable			1,369,701	5,259,735
Income tax payable			1,092,480	3,769,592
Other taxes payable			544,233	728,530
Deferred revenues			224,213	553,820
Provisions for customer reward program	2	(m)	—	68,275
Other payables and accruals	8		7,972,991	26,567,801
Deferred tax liabilities, current	6		—	267,587
Total current liabilities			13,842,664	39,899,912
Deferred rental			2,681,281	11,890,081
Total liabilities			16,523,945	51,789,993
Minority interest			—	425,846
Commitments and contingencies	10
Shareholders’ equity
Paid-in capital	7		38,945,000	68,945,000
Additional paid-in capital			—	149,705
Statutory reserves			453,646	4,008,752
Retained earnings			1,062,093	5,242,339
Total shareholders’ equity			40,460,739	78,345,796
Total liabilities and shareholders’ equity			56,984,684	130,561,635

The accompanying notes are an integral part of these consolidated financial statements.

F-38

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

	Paid-in capital	Additional paid-in capital	Statutory reserves	Retained earnings (accumulated deficit)		Total shareholders’ equity
Balance as of January 1, 2003	10,000,000	—	—	(972,498	)	9,027,502
Addition in paid-in capital	28,945,000	—	—	—		28,945,000
Net income	—	—	—	2,488,237		2,488,237
Appropriations to statutory reserves	—	—	453,646	(453,646	)	—
Balance as of December 31, 2003	38,945,000	—	453,646	1,062,093		40,460,739
Addition in paid-in capital	30,000,000	—	—	—		30,000,000
Net income	—	—	—	7,735,352		7,735,352
Recognition of share-based compensation expense (Note 9(a))	—	149,705	—	—		149,705
Appropriations to statutory reserves	—	—	3,555,106	(3,555,106	)	—
Balance as of December 31, 2004	68,945,000	149,705	4,008,752	5,242,339		78,345,796

The accompanying notes are an integral part of these consolidated financial statements.

F-39

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

	2003		2004
	RMB		RMB
Cash flows from operating activities:
Net income	2,488,237		7,735,352
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	—		149,705
Depreciation and amortization expenses	2,286,440		6,983,216
Minority interests	—		(1,294,154	)
Deferred income tax	(1,186,280	)	(3,127,073	)
Change in assets and liabilities:
Decrease (increase) in accounts receivable	196,484		(1,032,215	)
Increase in receivables from related parties	(150,000	)	(5,440	)
Increase in consumables	(675,696	)	(1,028,145	)
Decrease (increase) in prepayments and other current assets	2,026,695		(3,605,938	)
Increase in other assets	(570,000	)	(566,429	)
Increase in accounts payable	1,348,892		342,319
Increase (decrease) in payables to related parties	982,965		(296,793	)
Increase in salaries and welfare payable	1,069,380		3,890,034
Increase in income tax payable	1,023,616		2,677,112
Increase in other taxes payable	317,076		184,297
Increase in provisions for customer reward program	—		68,275
(Decrease) increase in other payables and accruals	(461,294	)	15,717,302
(Decrease) increase in deferred revenue	(112,896	)	329,607
Increase in deferred rental	1,609,210		9,208,800
Net cash provided by operating activities	10,192,829		36,329,832
Cash flows from investing activities:
Purchase of property and equipment	(26,502,579	)	(67,406,198	)
Purchase of intangible assets	(137,130	)	(216,718	)
Net cash used in investing activities	(26,639,709	)	(67,622,916	)
Cash flows from financing activities:
Proceeds from additions of paid-in capital	28,945,000		30,000,000
Capital contribution from minority shareholders	—		1,720,000
Loan from a related party	6,000,000		—
Repayment of loan from a related party	(6,000,000	)	—
Net cash provided by financing activities	28,945,000		31,720,000
Net increase in cash	12,498,120		426,916
Cash, beginning of year	3,785,133		16,283,253
Cash, end of year	16,283,253		16,710,169
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes	(480,729	)	(7,310,484	)
Cash paid during the year for interest	—		(124,785	)
Supplemental schedule of non-cash investing and financing activities:
Increase in payables on construction costs of leasehold improvements	5,313,594		2,877,508

The accompanying notes are an integral part of these consolidated financial statements.

F-40

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in RMB unless otherwise stated)

1.    ORGANIZATION AND NATURE OF OPERATIONS

Home Inns & Hotels Management (Beijing) Co., Ltd. (“the Company”), a hotel operation and management company, was established on April 12, 2002 as a joint venture of Home Inns & Hotels Management (Hong Kong) Limited (“Home Inns HK”) and Beijing Capital Travel International Hotel Group Co., Ltd. (“Beijing Capital Travel”), a subsidiary of Beijing Tourism Group (“BTG”). Upon inception of the Company, Home Inns HK and BTG owned 55% and 45% interest in the Company, respectively. Through a series of financing activities and acquisitions, Home Inns HK’s ownership in the Company increased to 95.59% as of February 1, 2005. The Company conducts its hotel operation and management business through directly leased-and-operated, or franchised-and-managed hotels, and through its subsidiaries and majority owned joint venture companies.

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary (“VIE subsidiary”). The Company and its consolidated subsidiaries and VIE subsidiaries are collectively referred to as the “Group”.

The principal activities of the Group are to develop, lease, operate, franchise, and manage economy hotels under the Home Inn brand in the People’s Republic of China (“PRC”). The Group either leases real estate properties on which it develops and operates hotels or franchises the Home Inn brand to hotel owners and manages these hotels. The former type of hotels is referred to as “leased-and-operated hotels” and the latter type of hotels as “franchised-and-managed hotels.”

Lease-and-operated hotels

The Group leases hotel properties from property owners and is responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the Group is responsible for hotel development and customization to conform to the standards at the beginning of the lease, as well as repairs and maintenance, operating expenses and management of properties over the term of the lease. Under the lease arrangements, the Group typically pays fixed rent on a quarterly basis for the first three or five years of the lease term, after which the rental payments may be subject to an increase every three to five years.

The Group had 10 and 18 leased-and-operated hotels in operation as of December 31, 2003 and 2004, respectively.

Franchised-and-managed hotels

The Group enters into certain franchise arrangements with property owners for which the Group is responsible for managing the hotels, including hiring and appointment of the general manager of each franchised-and-managed hotel. Under a typical franchise agreement, the franchisee is required to pay an initial franchise fee and ongoing management service fees equal to a certain percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel development and customization and the costs of its operations. The term of the franchise agreement is typically 5 years and is renewable only upon mutual agreement between the Group and the franchisee.

The Group had 0 and 8 franchised-and-managed hotels in operation as of December 31, 2003 and 2004, respectively.

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HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

2.    PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below:

a. Basis of presentation and use of estimates

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

b. Basis of consolidation and accounting for investments

The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIE subsidiaries.

The Group applies the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46(R)”) to account for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.

Under FIN 46(R), a company consolidates a VIE if that company has a variable interest that will absorb a majority of the expected losses, receives a majority of the entity’s expected residual returns, or both. The company that absorbs a majority of the VIE’s expected losses and receives a majority of the VIE’s expected residual returns is the primary beneficiary.

The Group is the primary beneficiary of four variable interest entities, Home Inns & Hotels Management (Xiamen) Co., Ltd (“Home Inns Xiamen”), Home Inns & Hotels Management (Fuzhou) Co., Ltd (“Home Inns Fuzhou”), Home Inns & Hotels Management (Caoxi) Co., Ltd (“Home Inns Caoxi”), and Home Inns & Hotels Management (Caobao) Co., Ltd (“Home Inns Caobao”), of which the principal activity generally relates to hotel management. The total registered capital of the four VIEs was RMB 4,000,000 as of December 31, 2004. The entities were considered variable interest entities because the equity at risk of each entity was not sufficient to finance its intended activities without additional financial support. The Company has 51% ownership interest in Home Inns Xiamen, Home Inns Fuzhou and Home Inns Caoxi and 75% ownership interest in Home Inns Caobao, and the Company is considered the primary beneficiary of these entities because it absorbs a majority of the entities’ expected losses and receives a majority of the entities’ expected residual returns. As a result, the operations of the VIEs are included in the consolidated financial statements since their incorporation in 2004.

The entities that operate the franchised-and-managed hotels (Note 1) are considered variable interest entities as the franchisees do not have the ability to make decisions that have a significant impact on the success of the franchise arrangement. However, as the franchisees provide all necessary capital to finance the operation of the franchised hotels and absorb a majority of any expected losses, the Group is not considered the primary beneficiary of those entities.

F-42

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Subsidiaries are those consolidated entities in which the Company directly or indirectly controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; to cast majority of votes at the meetings of the board of directors; or to govern the financial and operating policies of the investee under a statue or agreement among the shareholders or equity holders.

All inter-company transactions and balances within the Group are eliminated on consolidation. Minority interests represent the interests of outside minority shareholders in the operating results and net assets of certain consolidated subsidiaries.

c. Foreign currencies

The Group’s functional currency is Renminbi (“RMB”). Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”) prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of income. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. All such exchange gains and losses are included in general and administrative expenses in the consolidated statements of income.

d. Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost, which approximates fair value. Cash and cash equivalents comprise cash on hand and demand deposits placed with banks or other financial institutions. Cash balance as of December 31, 2003 consists of RMB 15,964,342 and US$ 38,531. Cash balance as of December 31, 2004 consists of RMB 16,082,896 and US$ 75,790.

e. Restricted cash

Restricted cash primarily consists of deposits held in escrow.

f. Accounts receivable

Provision is made against accounts receivable to the extent collection is considered to be doubtful with accounts receivable in the balance sheet stated net of such provision, if any. As of December 31, 2003 and 2004, the Group has not recorded any allowance for doubtful accounts.

g. Consumables

The Group has purchased consumables mainly for the operation of leased-and-operated hotels. Consumables are amortized over their useful lives, generally one year or less, from the time they are put into use, and they are stated at purchase price less accumulated amortization.

h. Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization and impairment losses, if any. The cost of property and equipment comprises its purchase price and any directly attributable

F-43

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

costs, including interest cost capitalized in accordance with SFAS No. 34, “Capitalization of Interest Costs” (“SFAS No. 34”), during the period the asset is brought to its working condition and location for its intended use.

Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows:

Leasehold improvements	Over the shorter of the economic useful life or the lease period
Machinery and equipment Furniture, fixtures and office equipment	5 to 10 years 3 to 5 years

Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and amortization commences when the asset is ready for its intended use.

Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statement of operation as the difference between the net sales proceeds and the carrying amount of the underlying asset.

i. Intangible assets

Intangible assets consist of purchased software, which is stated at cost less accumulated amortization and impairment, if any.

j. Impairment of long-lived assets and intangible assets

Long-lived assets and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS No. 144”). If the total of the expected future undiscounted cash flows is less than the carrying value, an indication of impairment is present and a loss is recognized in the statements of operations for the difference between the fair value, using the expected future discounted cash flows, and the carrying value of the assets. No impairment was recognized for the years ended December 31, 2003 and 2004.

k. Financial instruments

Financial instruments of the Group primarily comprise of cash, accounts receivable, related party receivables and payables, accounts payable, other payables and a long-term loan from a related party. As of December 31, 2003 and 2004, the carrying values of financial instruments approximated their fair values.

l. Employee benefits

The full-time employees of the Company’s PRC subsidiaries and VIE subsidiaries are entitled to staff welfare benefits including medical care, housing fund, unemployment insurance and pension benefits. These entities are required to accrue for these benefits based on certain percentages of the employees’ salaries, subject to certain ceilings, in accordance with the relevant PRC regulations and make contributions to the state-sponsored plans out of the amounts accrued. Amounts accrued and included in salaries and welfare payables in

F-44

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

the accompanying balance sheets were RMB 51,002 and RMB 251,501 for the years ended December 31, 2003 and 2004, respectively.

m. Provisions for customer reward program

The Group invites its customers to participate in a customer reward program. Prior to November 14, 2004, membership was free of charge. A one-time membership fee was charged after that date for new members. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership points for their paid stays, which can be redeemed for membership upgrades, room night awards and other gifts. The estimated incremental costs to provide membership upgrades, room night awards and other gifts are accrued and recorded as provision for customer reward program as members accumulate points and recognized as sales and marketing expense in the accompanying the statements of operations. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2003 and 2004, the Company made provisions of nil and RMB 68,275, based on the estimated liabilities under the customer reward program.

n. Deferred Revenue

Deferred revenue generally consists of advances received from customers for room stays, initial franchise fees paid prior to the Group fulfilling its commitments to the franchisee, and cash received from sale of membership programs.

o. Revenue recognition

Revenues from leased-and-operated hotels represent primarily room rentals and food and beverage sales from the leased-and-operated hotels. Such revenues are recognized when goods and services are delivered.

Revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay (i) an initial one-time franchise fee and (ii) on-going management and service fees based on a percentage of revenue, which approximate 5% to 6% of the room revenues of the franchised hotels. The one-time franchise fee is recognized when the franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation, personnel recruiting and training. On-going management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. Other revenues generated from franchise agreements include system maintenance and support fee and central reservation system (“CRS”) usage fee, which are recognized when services are provided.

Given the limited history in operating the Group’s customer reward program (Note 2(m)), all one-time membership fees are recognized as deferred revenue when received. Revenues from the one-time membership fees will be recognized when the customers are no longer entitled to the benefits of the membership card, which occurs upon lack of activity over 2 years, or over the estimate average customer relationship period once upon the Company being able to reliably estimate such period.

p. Business tax and related surcharges

The Group is subject to business tax and related surcharges on the services provided in the PRC. Such tax is levied based on turnover at an applicable rate of approximately 5.5% and is recorded as a reduction of revenues.

F-45

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

During the year ended December 31, 2003, the relevant tax bureau granted certain preferential treatment to enterprises engaging in the travel-related industry, which was adversely impacted by SARS. As a result, business tax of certain months in 2003 was exempted or levied at a reduced rate.

q. Leased-and-operated hotel costs

Leased-and-operated hotel costs include all direct costs incurred in the operation of the leased-and-operated hotels and consist primarily of property rentals and related expenses, utility costs, personnel compensation, amortization of guest room consumables, amortization of leasehold improvements, depreciation of equipment, cost of consumables, food and beverage.

r. Sales and marketing

Sales and marketing expenses consist primarily of advertising related expenses, expenses associated with the Company’s membership reward program and payroll and related compensation for the Group’s sales and marketing personnel. Advertising related expenses, include promotion expenses and production costs of marketing materials are charged to statement of operations as incurred, and amounted to RMB1,820,536 and RMB1,577,414 for the years ended December 31, 2003 and 2004, respectively.

s. Share-based compensation

The Company accounts for share-based compensation arrangements in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and complies with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Share options granted to employees by the principal shareholder, Home Inns HK, are accounted for as share-based compensation in accordance with APB No. 25. In general, compensation cost under APB No. 25 is recognized based on the difference, if any, between the estimated fair value of the ordinary shares and the amount an employee is required to pay to acquire the ordinary shares, as determined on the date the option is granted.

The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS No. 123 in all years presented.

	2003	2004
Net income	2,488,237	7,735,352
Add: Compensation expense under APB No. 25	—	149,705
Less: Compensation expense under SFAS No. 123	—	(164,115	)
Pro forma net income	2,488,237	7,720,942

t. Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lesser are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lesser are charged to the consolidated statements of income on a straight-line basis over the terms of the underlying lease.

F-46

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

u. Pre-operating expenditure

Pre-operating expenditure represents start-up costs, other than amounts capitalized as leasehold improvements, for leased-and-operated hotels and is recognized as general and administrative expense and is charged to the consolidated statement of operation in the period in which it is incurred.

v. Taxation

Income tax expenses are recorded using the liability method. Deferred tax assets or liabilities are recognized for the estimated future tax effects attributable to temporary differences and tax losses carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in statement of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the amount of deferred tax assets if it is considered more likely than not that such assets will not be realized.

w. Other non-operating income

Other non-operating income primarily consists of financial subsidy received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local government. During the year ended December 31, 2003 and 2004, the Group received financial subsidy of nil and RMB 258,055, respectively, from various local PRC government authorities. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy are determined at the discretion of the relevant government authority. Such amounts are recorded as other non-operating income when received.

x. Statutory reserves

Based on the legal formation of the entities, appropriation of statutory reserves may be different. The Company, as a Sino-Foreign Enterprise, is required to set the portion of its net income as reported in its PRC statutory accounts on an annual basis to the Reserve Fund and Enterprise Expansion Fund. Such amounts shall be determined at the discretion of its board of directors. The Reserve Fund and Enterprise Expansion Fund can be used to increase the registered capital and eliminate future losses of the respective companies upon board’s resolution.

The Company’s subsidiaries and VIE subsidiaries incorporated in the PRC are required to set aside 10% of its net income as reported in its statutory accounts on an annual basis to the Statutory Surplus Reserve Fund. Once the total Statutory Surplus Reserve reaches 50% of the registered capital of the respective companies, further appropriations are discretionary. The Statutory Surplus Reserve can be used to increase the registered capital and eliminate future losses of the respective subsidiaries under PRC GAAP. The Group’s Statutory Surplus Reserve is not distributable to shareholders except in the event of liquidation. Before January 1, 2006, the above subsidiaries are also required on an annual basis to set aside at least 5% of after-tax profit, calculated in accordance with PRC accounting standards and regulations, to the Statutory Surplus Welfare Fund, which can be used for staff welfare of the Group. Effective from January 1, 2006, the appropriation to the Statutory Surplus Welfare Fund is no longer required.

Appropriations to the above statutory reserves are accounted for as a transfer from retained earnings to statutory reserves. During the years ended December 31, 2003 and 2004, the Group made total appropriations to these statutory reserves of RMB 453,646 and RMB 3,555,106, respectively.

F-47

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

There are no legal requirements in the PRC to fund these statutory reserves by transfer of cash to any restricted accounts, and the Group does not do so. These reserves are not distributable as cash dividends.

y. Dividends

Dividends are recognized when declared. The Company has not declared or paid any dividends.

The Company relies principally on dividends from its subsidiaries and VIE subsidiaries in the PRC for its cash requirements. Current PRC regulations permit PRC companies to pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s subsidiaries and VIE subsidiaries can only distribute dividends after they have met the PRC requirements for appropriation to statutory reserves (Note 2aa). Aggregate net assets of the Company’s PRC subsidiaries and VIE subsidiaries not distributable in the form of dividends to the parent as a result of the aforesaid PRC regulations was RMB 72,953,752 as of December 31, 2004. However, the PRC subsidiaries and VIE subsidiaries may transfer such net assets to the Company by other means, including through royalty and trademark license agreements or certain other contractual arrangements, at the discretion of the Company without third party consent.

z. Segment reporting

The Company follows SFAS No. 131, “Disclosures about Segment of an Enterprise and Related Information” for its segment reporting.

The Company operates and manages its business as a single segment. The Company primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented.

aa. Recent accounting pronouncements

In December 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB No. 25, “Accounting for Stock Issued to Employees”. Under SFAS No. 123(R), share-based compensation is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest. Pro forma disclosure is no longer an alternative. The Company will apply the provisions of SFAS No. 123(R) effective January 1, 2006.

The Company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method. As the Company currently applies SFAS No. 123 pro forma disclosure using the minimum value method of accounting, the Company is required to adopt SFAS No. 123(R) using the prospective transition method. Under the prospective transition method, non-public entities may continue to account for non-vested awards outstanding at the date of adoption of SFAS No. 123(R) in the same manner as they had been accounted for prior to adoption unless those awards are modified.

For any awards granted subsequent to the adoption of SFAS No. 123(R), compensation expense will be recognized generally over the vesting period of the award based on the fair value of the award on grant date.

On October 6, 2005, FASB Staff Position FAS No. 13-1 “Accounting for Rental Costs Incurred during a construction period” (“FSP FAS No. 13-1”) addresses the accounting for rental costs associated with operating leases that are incurred during a construction period. The FSP reached a consensus that as there is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period, and that the rental costs associated with ground or building operating leases that are incurred during a construction period should be recognized as rental expenses. This guidance is to be applied to the first reporting period beginning after December 15, 2005. The Company’s current accounting policy is consistent with guidance provided by FSP FAS No. 13-1.

F-48

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”), which replaces APB Opinion No. 20, “Accounting Changes” (“APB No. 20”), and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements” (“SFAS No. 3”), and changes the requirements for the accounting for and reporting of a change in accounting principle. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 will not have a significant impact on the consolidated financial statements.

In June 2005, the FASB ratified the Emerging Issues Task Forces Issue No. 05-06, “Determining the Amortization Period for Leasehold Improvements” (“EITF No. 05-06”). EITF No. 05-06 provides that the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of a lease be the shorter of (a) the useful life of the assets or (b) a term that includes required lease periods and renewals that are reasonably assured upon the acquisition or the purchase. The provisions of EITF No. 05-06 should be applied to leasehold improvements (within the scope of this issue) that are purchased or acquired in reporting periods beginning after June 29, 2005. The adoption of EITF No. 05-06 will not have a significant impact on the consolidated financial statements.

ab. Certain risks and concentration

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of December 31, 2003 and 2004, substantially all of the Company’s cash was held in major financial institutions located in the PRC, which management considers to be of high credit quality. Accounts receivable are typically not collateralized and are denominated in RMB, and are derived from revenues earned from operations arising in the PRC. No individual customer accounted for more than 10% of net revenues for the years ended December 31, 2003 and 2004. No individual customer accounted for more than 10% of accounts receivable as of December 31, 2003 and 2004.

As of December 31, 2004, the Group has been operating with a working capital deficit, and its net current liabilities amounted to RMB 15,068,429. The management of Company believes that cash from operations and short-term bank borrowings will be sufficient to meet the Group’s operating cash flow in the foreseeable future.

3.    PREPAYMENTS AND OTHER CURRENT ASSETS

Components of prepayments and other current assets as of December 31 are as follows:

	2003	2004
Prepaid expenses	805,175	3,465,607
Other current assets	311,265	1,256,771
Total	1,116,440	4,722,378

F-49

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

4.    PROPERTY AND EQUIPMENT

The components of property and equipment are as follows:

	2003		2004
Leasehold improvements	26,735,813		68,100,467
Machinery and equipment	2,759,934		5,644,493
Furniture, fixtures and office equipment	7,069,086		19,300,767
Construction in progress	1,537,150		15,339,962
	38,101,983		108,385,689
Less: Accumulated depreciation and amortization	(2,298,610	)	(9,216,028	)
Property and equipment, net	35,803,373		99,169,661

Depreciation and amortization expenses incurred for the years ended December 31, 2003 and 2004 are RMB 2,270,694 and RMB 6,917,418, respectively.

5.    INTANGIBLE ASSETS:

Intangible assets as of December 31 are as follows:

	2003		2004
Intangible assets —
Purchased software	179,168		395,886
Less: accumulated amortization —
Purchased software	(15,746	)	(81,544	)
Intangible assets, net	163,422		314,342

Amortization expense of intangible assets for the years ended December 31, 2003 and 2004 amounted to RMB 15,746 and RMB 65,798, respectively.

The annual estimated amortization expense for the above intangible assets for the following years is as follows:

	Amortization
2005	78,076
2006	76,742
2007	72,930
2008	66,934
2009	19,660
	314,342

6.    INCOME TAXES

The Company’s subsidiaries and its VIE subsidiaries incorporated in the PRC are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant PRC income tax laws. Normally, the applicable EIT rates of these entities, are 30% plus a local income tax of 3%.

F-50

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

One of the VIE subsidiaries enjoys a preferential income tax rate of 15%.

One of the subsidiaries is granted by local tax authority a one-year EIT exemption on its taxable income in 2003. Total tax benefit recognized as a result of the tax exemption was RMB 801,333.

Composition of income tax expense

The current and deferred portion of income tax expense (benefit) included in the consolidated statements of income and comprehensive income for the years ended December 31 is as follows:

	2003		2004
Current income tax expense	1,504,345		9,987,596
Deferred income tax benefit	(1,186,280	)	(3,127,073	)
Income tax expense	318,065		6,860,523

Reconciliation of the differences between statutory tax rate and the effective tax rate

A reconciliation between the statutory EIT rate and the Group’s effective tax rate for the years ended December 31 is as follows:

	2003		2004
Statutory EIT rate	33	%	33	%
Tax differential from statutory rate applicable to subsidiaries in the PRC	(29	%)	—
Non-deductible expenses under tax laws	7	%	19	%
Effective EIT rate	11	%	52	%

Deferred tax assets and liabilities comprised:

	2003	2004
Deferred tax assets, current:
Tax loss carry forwards	—	60,963
Deductible temporary differences related to pre-operating expenses	60,344	115,503
	60,344	176,466
Deferred tax assets, non-current:
Deductible temporary differences related to rental expenses	1,563,062	4,565,470
Deductible temporary differences related to pre-operating expenses	148,120	424,250
	1,711,182	4,989,720
Total deferred tax assets	1,771,526	5,166,186
Deferred tax liabilities, current:
Taxable temporary differences related to recognition of personnel costs	—	267,587

Deferred income tax assets are recognized for tax loss carry forwards to the extent that realization of the related tax benefit through the future taxable profits is probable. The Group had tax losses of RMB 304,134 as of December 31, 2004 to be carried forward against future taxable income. No provision against the deferred tax assets has been made. These tax losses will expire in 2009.

F-51

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

7.    PAID-IN CAPITAL

As of December 31, 2003 and 2004, the registered and paid-up capital of the Company is RMB 38,945,000 and RMB 68,945,000, respectively.

8.    OTHER PAYABLES AND ACCRUALS

	2003	2004
Accrued expenses	1,244,558	2,533,596
Payables to minority shareholders	—	6,265,000
Payables on construction costs of leasehold improvements	5,477,745	13,970,494
Others	1,250,688	3,798,711
Total	7,972,991	26,567,801

9.    RELATED PARTY TRANSACTIONS

Name of related parties	Relationships with the Company
Home Inns & Management (Hong Kong) Ltd. (“Home Inns HK”)	Parent company
Top Sterling International Limited	Principal shareholder of Home Inns HK
BTG	Parent company of a principal shareholder of Home Inns HK
Ctrip.com International, Ltd.	Under certain common directors who are also shareholders and founders of each company
Jian Guo Inns Beijing Ltd. (“Jian Guo Inns”)	Subsidiary of BTG

Related party transactions during the years ended December 31 are as follows:

	2003	2004
Sales commissions paid to Ctrip.com International, Ltd.	433,198	354,901
Property rental fees paid to Jian Guo Inns	3,500,000	3,042,222
Other income collected from Ctrip.com International, Ltd.	160,000	36,000
Interest free borrowing from Ctrip.com International, Ltd. (fully repaid in 2003)	6,000,000	—
Share-based compensation expense (a)	—	149,705

(a) Home Inns HK issued share options to certain management and employees of the Company. Such share options were accounted for by the Company as share-based compensation in accordance with APB No. 25 and recognized as a capital contribution from Home Inns HK, with an offsetting charge to the statement of operations.

F-52

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

As of December 31, significant balances with related parties are as follows:

Due from related parties:

	2003	2004
BTG	—	5,440
Top Sterling International Limited	150,000	150,000
	150,000	155,440

Due to related parties:

	2003	2004
Home Inns HK	333,253	349,895
Ctrip.com International Ltd.	649,712	95,134
Jian Guo Inns	—	241,143
	982,965	686,172

The amounts due from and due to related parties as of December 31, 2003 and 2004 mainly arose from the above transactions and payments made on behalf of related parties. These amounts are not collateralized, free of interest and receivable or payable on demand.

10.    COMMITMENTS AND CONTINGENCIES

(a) Capital commitments

As of December 31, 2004, the Group’s commitments related to leasehold improvements, installation of machinery and equipment for the hotel operations amounting to RMB 85,211,695.

(b) Investment commitments

As of December 31, 2004, the Group’s investment commitments related to investments in Home Inns & Hotels Management (Shenzhen) Co., Ltd, Home Inns & Hotels Management (Ningbo) Co., Ltd, Shanghai Home Inns Hemei Changning Hotel Co., Ltd and Home Inns & Hotels Management (Songjiang) Co., Ltd, which will become wholly owned subsidiaries of the Group upon establishment. These entities will be established with registered capitals of RMB 500,000, RMB 1,500,000, RMB 1,000,000 and RMB 1,000,000, respectively.

(c) Commitments under operating leases

The Group has entered into lease agreements relating to lease–and-operated hotels that are classified as operating leases.

F-53

HOME INNS & HOTELS MANAGEMENT (BEIJING) CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Amounts expressed in RMB unless otherwise stated)

Future minimum lease payments for non-cancelable operating leases at December 31 are as follows:

	Related party	Non-related party	Total
	RMB	RMB	RMB
2005	3,500,000	30,533,451	34,033,451
2006	3,500,000	30,937,828	34,437,828
2007	3,500,000	31,528,770	35,028,770
2008	3,500,000	31,813,077	35,313,077
2009	3,500,000	32,408,105	35,908,105
Thereafter	30,291,667	276,353,448	306,645,115
Total	47,791,667	433,574,679	481,366,346

Rental expenses amounted to RMB 10,663,796 and RMB 29,483,420 during the years ended December 31, 2003 and 2004, respectively, and were charged to the statement of operations when incurred.

(d) Contingencies

The Group had no significant contingency as of December 31, 2004.

11.    SUBSEQUENT EVENTS

i. Financing transaction agreement with BTG

In June 2005, the Company and Home Inns HK entered into a financing transaction agreement to obtain financing from BTG. By this agreement, BTG agreed to extend a loan facility to the Company in an amount of RMB 80,000,000 for hotel development and operations. Each loan drawn down under the facility is repayable after 3 years and bears an interest rate at 6.1747%. According to the financing transaction agreement, if the Company defaults, and the parties of the agreement fail to reach consensus on an extension of the loan agreement, BTG can choose one of the three options: 1) request liquidation of Home Inns HK or the Company and obtain repayment via legal proceedings; 2) if the net assets of Home Inns HK on such date exceed those on the agreement date, BTG may convert the outstanding loan principal amount into 11.15% of equity shares in Home Inns HK; or 3) if the net assets of the Company exceed RMB 663,477,155, BTG may convert the loan principal amount into a percentage of equity shares in the Company determined by dividing the outstanding loan principal amount by RMB 663,477,155.

In July 2005, September 2005, October 2005 and January 2006, the Company drew down RMB 20,000,000, RMB 10,000,000, RMB 10,000,000, and RMB 20,000,000, respectively, on the loan facility from BTG.

ii. Lawsuit with a lessor

In September 2003, the Company entered into a long-term lease agreement with a lessor to lease a group of properties. However, in September 2005, the lessor accused the Company of violating sublease requirements, and filed a complaint with the District Court of Jin An District, Shanghai, where the properties are located, seeking lease termination as well as punitive damage of RMB 216,668. In March 2006, the District Court of Jin An District ruled in favor of the Company, finding the Company to be in compliance with the lease agreement, and that the lessor’s complaint to have no merit.

F-54

HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2006

(Unaudited)

	Note	Six Months Ended June 30, 2005		Six Months Ended June 30, 2006		Six Months Ended June 30, 2006
		RMB		RMB		US$
						(Note 2(d))
Revenues:
Leased-and-operated hotels		106,977,928		243,491,762		30,458,172
Franchised-and-managed hotels		2,427,560		5,566,782		696,344
Total revenues		109,405,488		249,058,544		31,154,516
Less: Business tax and related surcharges		(6,668,623	)	(13,343,378	)	(1,669,111	)
Net revenues		102,736,865		235,715,166		29,485,405
Operating costs and expenses:
Leased-and-operated hotel costs –
Rents and utilities		(36,701,223	)	(73,976,030	)	(9,253,597	)
Personnel costs		(15,781,854	)	(36,501,551	)	(4,565,947	)
Depreciation and amortization		(8,828,182	)	(19,729,738	)	(2,467,976	)
Consumables, food and beverage		(7,608,985	)	(17,810,584	)	(2,227,910	)
Others		(9,783,158	)	(23,021,591	)	(2,879,751	)
Total leased-and-operated hotel costs		(78,703,402	)	(171,039,494	)	(21,395,181	)
Sales and marketing expenses		(2,754,167	)	(3,897,957	)	(487,592	)
General and administrative expenses		(10,337,357	)	(20,900,062	)	(2,614,370	)
Total operating costs and expenses		(91,794,926	)	(195,837,513	)	(24,497,143	)
Income from operations		10,941,939		39,877,653		4,988,262
Interest income		95,835		291,415		36,453
Interest expense		(145	)	(2,719,228	)	(340,146	)
Other non-operating income		1,875,267		1,700,499		212,714
Income before income tax expense, minority interests and share of income of affiliated companies		12,912,896		39,150,339		4,897,283
Income tax expense	5	(2,592,540	)	(9,203,917	)	(1,151,310	)
Minority interests		(2,015,773	)	(2,697,359	)	(337,410	)
Net income		8,304,583		27,249,063		3,408,563
Amount allocated to participating preference shareholders		(3,757,172	)	(12,413,190	)	(1,552,755	)
Net income available to ordinary shareholders		4,547,411		14,835,873		1,855,808
Earnings per share	10
— Basic		0.17		0.54		0.07
— Diluted		0.16		0.51		0.06
Weighted average ordinary shares outstanding
— Basic		27,399,140		27,399,140		27,399,140
— Diluted		28,560,208		29,235,149		29,235,149
Share-based compensation expense was included in the statement of operations as follows:
Leased-and-operated hotel costs – Personnel costs		6,250		6,046		756
General and administrative expenses		479,515		1,029,099		128,729

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-55

HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2005 AND JUNE 30, 2006

(Unaudited)

	Note	December 31, 2005	June 30, 2006	June 30, 2006 (Pro forma – Note (11))	June 30, 2006	June 30, 2006 (Pro forma – Note (11))
		RMB	RMB	RMB	US$	US$
					(Note 2(d))	(Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents		37,727,231	80,981,315	80,981,315	10,129,882	10,129,882
Restricted cash		1,900,000	1,000,000	1,000,000	125,089	125,089
Accounts receivable		3,130,151	4,954,050	4,954,050	619,698	619,698
Receivables from related parties	9	15,729	17,135	17,135	2,143	2,143
Consumables		5,529,908	6,028,567	6,028,567	754,108	754,108
Prepayments and other current assets	3	5,484,080	11,705,422	11,705,422	1,464,220	1,464,220
Deferred tax assets, current		2,646,868	2,646,868	2,646,868	331,094	331,094
Total current assets		56,433,967	107,333,357	107,333,357	13,426,234	13,426,234
Property and equipment, net	4	267,675,576	341,251,313	341,251,313	42,686,828	42,686,828
Goodwill		32,906,112	32,906,112	32,906,112	4,116,197	4,116,197
Intangible assets, net		2,369,471	2,373,231	2,373,231	296,865	296,865
Other assets		2,968,829	3,314,139	3,314,139	414,563	414,563
Deferred tax assets, non-current		12,648,245	15,601,896	15,601,896	1,951,628	1,951,628
Total assets		375,002,200	502,780,048	502,780,048	62,892,315	62,892,315
LIABILITIES
Current liabilities:
Accounts payable		3,391,015	5,604,589	5,604,589	701,073	701,073
Payables to related parties	9	1,259,409	4,030,567	4,030,567	504,180	504,180
Short-term borrowings	6	20,000,000	66,000,000	66,000,000	8,255,882	8,255,882
Salaries and welfare payable		8,292,922	13,089,108	13,089,108	1,637,305	1,637,305
Income tax payable		11,389,738	9,284,376	9,284,376	1,161,374	1,161,374
Other taxes payable		2,016,325	2,775,102	2,775,102	347,135	347,135
Deferred revenues		6,442,135	13,711,624	13,711,624	1,715,175	1,715,175
Provisions for customer reward program		776,645	1,667,335	1,667,335	208,565	208,565
Other payables and accruals	7	65,109,611	74,231,955	74,231,955	9,285,610	9,285,610
Deferred tax liabilities, current		508,916	508,916	508,916	63,660	63,660
Total current liabilities		119,186,716	190,903,572	190,903,572	23,879,959	23,879,959

F-56

HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

AS OF DECEMBER 31, 2005 AND JUNE 30, 2006

(Unaudited)

	Note	December 31, 2005		June 30, 2006	June 30, 2006 (Pro forma – Note (11))	June 30, 2006	June 30, 2006 (Pro forma – Note (11))
		RMB		RMB	RMB	US$	US$
						(Note 2(d))	(Note 2(d))
Deferred rental		26,533,548		33,102,991	33,102,991	4,140,824	4,140,824
Long-term loan from a related party	9	40,000,000		60,000,000	60,000,000	7,505,348	7,505,348
Deferred tax liability, non-current		205,101		185,083	185,083	23,152	23,152
Total liabilities		185,925,365		284,191,646	284,191,646	35,549,283	35,549,283
Minority interest		9,994,321		11,221,680	11,221,680	1,403,710	1,403,710
Commitments and contingencies	12
Shareholders’ equity
Convertible preferred shares
Series A preferred shares (US$0.005 par value; 17,241,400 shares authorized, issued and outstanding)		713,541		713,541	—	89,256	—
Series B preferred shares (US$0.005 par value; 2,417,645 shares authorized, issued and outstanding)		100,055		100,055	—	12,516	—
Series C preferred shares (US$0.005 par value; 3,265,841 shares authorized, issued and outstanding)		135,149		135,149	—	16,906	—
Ordinary shares (US$0.005 par value; 177,075,114 shares authorized, 27,399,140 shares issued and outstanding)		1,133,911		1,133,911	2,082,656	141,840	260,518
Additional paid-in capital		152,878,585		151,104,017	151,104,017	18,901,469	18,901,469
Statutory reserves		11,360,020		11,360,020	11,360,020	1,421,015	1,421,015
Deferred share-based compensation	8	(2,809,713	)	—	—	—	—
Retained earnings		15,570,966		42,820,029	42,820,029	5,356,320	5,356,320
Total shareholders’ equity		179,082,514		207,366,722	207,366,722	25,939,322	25,939,322
Total liabilities and shareholders’ equity		375,002,200		502,780,048	502,780,048	62,892,315	62,892,315

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-57

HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR SIX MONTHS ENDED JUNE 30, 2005 AND 2006

(Unaudited)

	Preferred Shares								Additional paid-in capital		Statutory reserves	Deferred share-based compen- sation		Retained earnings	Total share- holders’ equity
	Series A		Series B		Series C		Ordinary shares
	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount
Balance as of December 31, 2004	17,241,400	713,541	2,417,645	100,055	—	—	27,399,140	1,133,911	110,687,306		3,323,064	(1,771,759	)	2,675,250	116,861,368
Issuance of Series C preferred shares	—	—	—	—	3,265,841	135,149	—	—	40,193,499		—	—		—	40,328,648
Net income	—	—	—	—	—	—	—	—	—		—	—		8,304,583	8,304,583
Recognition of share compensation costs	—	—	—	—	—	—	—	—	2,097,969		—	(1,612,204	)	—	485,765
Balance as of June 30, 2005	17,241,400	713,541	2,417,645	100,055	3,265,841	135,149	27,399,140	1,133,911	152,978,774		3,323,064	(3,383,963	)	10,979,833	165,980,364
Balance as of December 31, 2005	17,241,400	713,541	2,417,645	100,055	3,265,841	135,149	27,399,140	1,133,911	152,878,585		11,360,020	(2,809,713	)	15,570,966	179,082,514
Net income	—	—	—	—	—	—	—	—	—		—	—		27,249,063	27,249,063
Reversal as a result of adoption of SFAS No. 123(R) (Note 8)	—	—	—	—	—	—	—	—	(2,809,713	)	—	2,809,713		—	—
Recognition of share compensation costs	—	—	—	—	—	—	—	—	1,035,145		—			—	1,035,145
Balance as of June 30, 2006	17,241,400	713,541	2,417,645	100,055	3,265,841	135,149	27,399,140	1,133,911	151,104,017		11,360,020	—		42,820,029	207,366,722

The accompanying notes are an integral part of these unaudited consolidated financial statements

F-58

HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2006

(Unaudited)

	Six Months Ended June 30, 2005		Six Months Ended June 30, 2006		Six Months Ended June 30, 2006
	RMB		RMB		US$ (Note 2(d))
Cash flows from operating activities:
Net income	8,304,583		27,249,063		3,408,563
Adjustments to reconcile net income to net cash provided by operating activities :
Share-based compensation	485,765		1,035,145		129,485
Depreciation and amortization	9,121,605		20,126,854		2,517,651
Minority interests	2,015,773		2,697,359		337,410
Loss from disposal of property and equipment	6,275		118,342		14,803
Benefit from deferred income taxes	(2,168,513	)	(2,973,669	)	(371,974	)
Change in assets and liabilities:
Decrease in restricted cash	—		900,000		112,580
Increase in accounts receivable	(1,505,766	)	(1,823,899	)	(228,150	)
Decrease (Increase) in receivables from related parties	2,328		(1,406	)	(176	)
Increase in consumables	(1,619,287	)	(498,659	)	(62,377	)
Increase in prepayments and other current assets	(2,635,023	)	(6,221,342	)	(778,221	)
Increase in other assets	(1,352,400	)	(345,310	)	(43,195	)
Increase in accounts payable	680,409		2,213,574		276,894
Increase in payables to related parties	260,187		838,656		104,907
(Decrease) increase in salary and welfare payable	(151,261	)	4,796,186		599,951
Increase (decrease) in income tax payable	1,464,400		(2,105,362	)	(263,358	)
Increase in other taxes payable	153,301		758,777		94,915
Increase in provisions for customer reward program	283,025		890,690		111,416
Increase in other payables and accruals	812,488		3,320,651		415,375
Increase in deferred revenues	1,977,641		7,269,489		909,334
Increase in deferred rental	4,654,902		6,569,443		821,766
Net cash provided by operating activities	20,790,432		64,814,582		8,107,599

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HOME INNS & HOTELS MANAGEMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2006

(Unaudited)

	Six Months Ended June 30, 2005		Six Months Ended June 30, 2006		Six Months Ended June 30, 2006
	RMB		RMB		US$
					(Note 2(d))
Cash flows from investing activities:
Proceeds from sale of property and equipment	96,528		64,348		8,049
Purchase of property and equipment	(60,442,568	)	(87,889,744	)	(10,994,051	)
Purchase of intangible assets	(218,198	)	(197,604	)	(24,718	)
Net cash used in investing activities	(60,564,238	)	(88,023,000	)	(11,010,720	)
Cash flows from financing activities:
Proceeds from issuance of preferred shares	40,328,648		—		—
Proceeds from short-term borrowings	—		66,000,000		8,255,883
Proceeds from long-term loans from a related party	—		20,000,000		2,501,783
Advance from a related party	—		1,932,502		241,735
Repayment of short-term borrowings	—		(20,000,000	)	(2,501,783	)
Dividend paid by a VIE subsidiary to a minority shareholder	—		(1,470,000	)	(183,881	)
Net cash provided by financing activities	40,328,648		66,462,502		8,313,737
Net increase in cash	554,842		43,254,084		5,410,616
Cash, beginning of period	26,291,567		37,727,231		4,719,266
Cash, end of period	26,846,409		80,981,315		10,129,882
Supplemental schedule of non-cash investing and financing activities:
Increase in payables in construction costs of leasehold improvements	21,153,993		5,801,693		725,729

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts expressed in RMB unless otherwise stated)

1.    NATURE OF OPERATIONS

The consolidated financial statements include the financial statements of the Home Inns & Hotels Management Inc. (“the Company”), its subsidiaries, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary (“VIE subsidiary”). The Company and its consolidated subsidiaries and VIE subsidiaries are collectively referred to as the “Group”.

The principal activities of the Group are to develop, lease, operate, franchise, and manage economy hotels under the Home Inn brand in the People’s Republic of China (“PRC”). The Group either leases real estate properties on which it develops and operates hotels or it franchises the Home Inn brand to hotel owners and manages these hotels. The former type of hotels is referred to as “leased-and-operated hotels” and the latter type of hotels as “franchised-and-managed hotels.”

As of December 31, 2005 and June 30, 2006, the Group had 54 and 63 of leased-and-operated hotels and 14 and 19 franchised-and-managed hotels in operation, respectively.

2.    ACCOUNTING POLICIES

a. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with the generally accepted accounting principles in the United States of America (“US GAAP”), consistent in all material respects with those applied in the Company’s audited US GAAP financial statements for the year ended December 31, 2005. The December 31, 2005 balance sheet financial data was derived from such audited financial statements.

The interim financial information is unaudited but reflects all adjustments which are, in the opinion of management, necessary to provide fair condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of shareholders’equity and condensed consolidated statements of cash flows for the interim periods presented. Such adjustments are normal and recurring except as otherwise noted. The condensed financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. You should read these interim condensed consolidated financial statements in conjunction with the audited financial statements for the year ended December 31, 2005, including the notes thereto.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

b. Share-based compensation

Prior to December 31, 2005, the Group accounted for share-based compensation arrangements in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and complied with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Under APB No. 25, compensation cost is recognized based on

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

the difference, if any, between the estimated fair value of the Group’s ordinary shares and the amount an employee is required to pay to acquire the ordinary shares, as determined on the date the option is granted. Total compensation cost is recorded in shareholders’ equity as additional paid-in capital and deferred share-based compensation. Deferred share-based compensation is amortized on a straight-line basis and charged to expense over the vesting period of the underlying options.

Effective January 1, 2006, the Group adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which revises SFAS No. 123, and supersedes APB No. 25. Under the fair value recognition provisions of SFAS No. 123(R), the Group applied the prospective transition method and measured share-based compensation at fair value on the awards’ grant date based on the estimated number of awards that are expected to vest. Under the prospective transition method, the Group continued to account for non-vested awards outstanding under the provisions of APB No. 25. Only awards granted (or modified, repurchased, or cancelled) after the adoption of SFAS No. 123(R) were accounted for under the provisions of SFAS No. 123(R).

In conjunction with the adoption of SFAS No. 123(R), the Group was required to estimate forfeitures at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates. The “Deferred share-based compensation” line on the Condensed Consolidated Balance Sheet, a contra-equity line representing the amount of unrecognized share-based compensation costs, was eliminated as of June 30, 2006. Compensation expense was recognized on a straight-line basis over the requisite service period of the award based on the fair value of the award on grant date. The requisite service period is the vesting period, which is generally 4 years.

If the compensation cost for the six months ended June 30, 2005 had been determined based on the fair value at the grant dates for the share option awards as prescribed by SFAS No. 123, the Group’s net income attributable to ordinary shareholders and earnings per share would have resulted in the pro forma amounts disclosed below.

	Six Months Ended June 30, 2005
Net income, as reported	8,304,583
Add: Compensation expense under APB No. 25	485,765
Less: Compensation expense under SFAS No. 123	(524,359	)
Pro forma net income	8,265,989
Less: Amount allocated to participating preference shareholders	(3,739,711	)
Pro forma net income attributable to ordinary shareholders	4,526,278
Basic earnings per share
— As reported	0.17
— Pro forma	0.17
Diluted earnings per share
— As reported	0.16
— Pro forma	0.16

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

c. Recent accounting pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for the Company on January 1, 2007, with the cumulative effect of the change in accounting principle, if any, recorded as an adjustment to opening retained earnings. The Company does not believe the adoption of FIN 48 will have a material impact on its consolidated financial position, cash flows and results of operations.

d. Convenience translation

Translations of balances in the statements of operations, balance sheet and statement of cash flows from RMB into United States dollars (“US$”) as of and for the six months ended June 30, 2006 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB 7.9943, on June 30, 2006, representing the noon buying rate in The City of New York for cable transfers of RMB, as certified for customs purposes by the Federal Reserve Bank of New York. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2006, or at any other rate.

3.    PREPAYMENTS AND OTHER CURRENT ASSETS

Components of prepayments and other current assets are as follows:

	December 31, 2005	June 30, 2006
Prepaid expenses	3,193,051	8,646,791
Rental and other deposits	483,436	645,659
Other current assets	1,807,593	2,412,972
Total	5,484,080	11,705,422

4.    PROPERTY AND EQUIPMENT

The components of property and equipment are as follows:

	December 31, 2005		June 30, 2006
Leasehold improvements	223,086,518		268,691,393
Machinery and equipment	16,058,849		19,787,777
Furniture, fixtures and office equipment	51,937,688		64,945,663
Construction in progress	9,191,030		40,291,969
Less: Accumulated depreciation and amortization	(32,598,509	)	(52,465,489	)
Property and equipment, net	267,675,576		341,251,313

Depreciation and amortization expenses incurred for the six months ended June 30, 2005 and 2006 were RMB 8,965,170, and RMB 19,933,010, respectively.

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

Included in leasehold improvements and construction in progress is accumulated capitalized interest of RMB 264,659 and RMB 617,198 as of December 31, 2005 and June 30, 2006, respectively.

5.    INCOME TAXES

The Company is registered in Cayman Islands and has operations in PRC. The operation in PRC represents the Company’s subsidiaries and its VIE subsidiaries that are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant PRC income tax laws. Normally, the applicable EIT rates of these entities are 30% plus a local income tax of 3%. Three of the Group’s subsidiaries and VIE subsidiaries enjoy a preferential income tax rate of 15%. Certain subsidiaries of the Group are granted by local tax authorities a one-year to three-year EIT exemption on their taxable income, respectively, commencing from their establishment, which began in 2005. Total tax benefit recognized by these subsidiaries as a result of the tax exemption was RMB 3,206,362 for the six months ended June 30, 2006. The Company’s effective rate for the six months ended June 30, 2005 and 2006 were 20% and 24%, respectively. The effective tax rates for the PRC operations for the six months ended June 30, 2006 were higher than the same period of the prior year primarily because more profits were generated by subsidiaries with non-preferential tax rate.

The provisions for income taxes for the six months ended June 30, 2005 and 2006 differ from the amounts computed by applying the statutory EIT rates primarily due to the tax exemptions and the preferential tax rate enjoyed by certain of the Company’s subsidiaries in the PRC.

6.    BORROWINGS

	December 31, 2005	June 30, 2006
Short-term bank loans	20,000,000	66,000,000

Short-term bank loans bear interest at a rate of 5.31% (2005:5.22%) per annum and are repayable in 2006.

7.    OTHER PAYABLES AND ACCRUALS

	December 31, 2005	June 30, 2006
Accrued expenses	5,632,397	8,981,829
Payables to minority shareholders	4,005,000	2,410,000
Payables on construction costs of leasehold improvements	48,091,737	53,893,430
Others	7,380,477	8,946,696
Total	65,109,611	74,231,955

8.    SHARE OPTION PLAN

On February 28, 2003, the Company approved a share option plan (“2003 Option Plan”) under which the directors of the Company may, at their discretion, grant options to acquire ordinary shares to any senior executives (including directors) and employees of the Company and/or its subsidiaries. Share options vest

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

annually over a period of 4 years and once vested can be exercised within 5 years from the date of grant. The 2003 Option Plan provides for the issuance of options of the Company’s ordinary shares in the amount of up to 5% of total ordinary and preferred shares outstanding. On May 30, 2005, the Company adopted a board resolution to increase shares reserved under the share option plan to 6% of total ordinary and preferred shares outstanding. At the end of 2005, this represents 3,019,442 options based on the then outstanding ordinary and preferred shares outstanding. On March 30, 2006, the Company adopted a shareholders resolution to increase shares reserved for the share options plan to 9% of total ordinary and preferred shares outstanding. At the end of June 30, 2006, this represented 4,529,162 options based on the then outstanding ordinary and preferred shares.

The following summarizes the Company’s share option activity under the 2003 Option Plan as of and for the six months ended June 30, 2006.

	2005			2006
	Options		Weighted Average Exercise Price (US$)	Options		Weighted Average Exercise Price (US$)
Outstanding at the beginning of the period	1,776,745		0.2958	2,831,886		0.7830
Granted	461,589		0.3309	810,000		2.2919
Exercised	—		—	—		—
Forfeited	(172,930	)	0.3248	(19,586	)	1.7353
Outstanding at June 30	2,065,404		0.3012	3,622,300		1.1186
Vested and exercisable at June 30	842,022		0.2776	1,450,072		0.5059

The following is additional information relating to options outstanding as of June 30, 2006:

	Weighted- average grant date fair value of ordinary shares		Outstanding		Exercisable
Exercise price			Number of shares	Weighted- average remaining contractual life (years)	Number of shares	Weighted- average remaining contractual life (years)
US$ 0.232	US$	0.2320	619,545	1.67	553,354	1.67
US$ 0.3309	US$	0.5701	1,440,620	3.12	719,484	3.03
US$ 1.531	US$	1.3327	180,000	4.02	44,166	4.01
US$ 2.25	US$	1.9730	572,187	4.42	71,235	4.42
US$ 1.53	US$	2.720	300,000	4.67	25,000	4.67
US$ 2.72	US$	2.720	510,000	4.71	36,833	4.71
			3,622,352		1,450,072

Share-based compensation expense recognized during the six months ended June 30, 2005 an 2006 amounted to RMB 485,765 and RMB 1,035,145, respectively. As of June 30, 2006, there was RMB 8,934,379 of unrecognized share-based compensation cost related to unvested share options which is expected to be recognized over a weighted average period of 3 year.

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

The Company calculated the estimated fair value of share options on the date of grant using the Black-Scholes pricing model with the following assumptions for the six months ended June 30:

	2005	2006
Risk-free interest rate (1)	3.008% to 4.010%	4.983% to 5.204%
Expected life (years) (2)	3 to 4.5	3 to 4.5
Expected dividend yield (3)	—	—
Volatility (4)	—	30.8% to 34.3%
Fair value of options at grant date	from US$ 0.63 to US$ 0.66	from US$ 0.74 to US$ 1.59

(1) The risk-free interest rate is based on the Chinese Government Bond yield for a term consistent with the expected life of the awards in effect at the time of grant.

(2) The expected life of share options granted under the 2003 Option Plan is generally based on the average between the vesting period and the contractual term for each grant.

(3) The Company has no history or expectation of paying dividends on its ordinary share.

(4) For the six months ended June 30, 2006, the Company estimates the volatility of its share options at the date of grant based on the historical volatility of the comparable companies in the period equal to time from the grant date to the assumed exercised date of the respective options in accordance with the vesting schedule.

9.    RELATED PARTY TRANSACTIONS

Related Party Transactions

Name of related parties	Relationships with the Company
Top Sterling International Limited	Principal shareholder of the Company
Poly Investment	Principal shareholder of the Company
BTG	Parent company of Poly Investments
Ctrip.com International, Ltd.	Common directors and common principal shareholders
Jian Guo Inns Beijing Ltd. (“Jian Guo Inns”)	Subsidiary of BTG
Ji Qi	Director of Home Inns HK
Liang Rixin	Senior management of the Company

Related party transactions during the six months ended June 30 are as follows:

	2005	2006
Sales commissions paid to Ctrip.com International, Ltd.	306,400	2,568,651
Rental fees paid to Jian Guo Inns	1,750,000	1,750,000
Other income collected from Ctrip.com International, Ltd.	68,000	18,000
Long-term loan from BTG	—	20,000,000

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

As of December 31, 2005 and June 30, 2006, significant balances with related parties are as follows:

Due from related parties:

	December 31, 2005	June 30, 2006
Top Sterling International Limited	15,729	17,135

Due to related parties:

	December 31, 2005	June 30, 2006
Ji Qi	641,509	641,509
Ctrip.com International, Ltd.	617,900	1,242,965
Jian Guo Inns	—	213,591
Liang Rixin	—	1,932,502
	1,259,409	4,030,567

	December 31, 2005	June 30, 2006
Long-term loan from BTG (a)	40,000,000	60,000,000

(a) In June 2005, Home Inns Beijing and the Company entered into a financing transaction agreement to obtain financing from BTG. By this agreement, BTG agreed to extend a loan facility to Home Inns Beijing in an amount of RMB 80,000,000 for hotel development and operations. Each loan drawn down under the facility is repayable after 2 or 3 years and bears an interest rate at 6.1747%. According to the financing transaction agreement, if Home Inns Beijing defaults, and the parties of the agreement fail to reach consensus on an extension of the loan agreement, BTG can choose one of three options: 1) request liquidation of Home Inns Beijing or the Company and obtain repayment via legal proceedings; 2) if the net assets of the Company on such date exceed those on the agreement date, BTG may convert the loan principal amount into 11.15% of equity shares in the Company; or 3) if the net assets of Home Inns Beijing exceed RMB 663,477,155, BTG may convert the outstanding loan principal amount into a percentage of equity shares in Home Inns Beijing determined by dividing the outstanding loan principal amount by RMB 663,477,155.

The amounts due from and due to related parties as of June 30, 2005 and 2006 mainly arose from the above transactions and receipts and payments made by the Company and related parties on behalf of each other. Except for the long-term loan from BTG, these amounts are not collateralized, free of interest and receivable or payable on demand.

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

10.    EARNINGS PER SHARE

Basic earnings per share and diluted earnings per share have been calculated in accordance with SFAS No. 128 as follows:

	Six Months Ended June 30, 2005		Six Months Ended June 30, 2006
Numerator:
Net income for the period	8,304,583		27,249,063
Amount allocated to participating preference shareholders	(3,757,172	)	(12,413,190	)
Net income available to ordinary shareholders	4,547,411		14,835,873
Effect of dilutive securities	—		—
Numerator for diluted earnings per share	4,547,411		14,835,873
Denominator:
Denominator for basic earnings per share—weighted average ordinary shares outstanding	27,399,140		27,399,140
Dilutive effect of share options	1,161,068		1,836,009
Denominator for diluted earnings per share	28,560,208		29,235,149
Basic earnings per share	0.17		0.54
Diluted earnings per share	0.16		0.51

11.    PRO FORMA FOR CONVERSION OF PREFERRED SHARES

Each Series A, Series B and Series C convertible preferred share shall automatically be converted into ordinary shares at the then effective conversion price, upon the closing of an underwritten public offering of the ordinary shares of the Company in the United States with the gross proceeds to the Company in excess of US$25,000,000, or in a similar public offering of the ordinary shares of the Company in a jurisdiction and on a recognized securities exchange outside of the United States, provided that such public offering is reasonably equivalent to the aforementioned public offering in the United States in terms of price, offering proceeds and regulatory approval. The conversion price of Series A, Series B and Series C convertible preferred shares is US$0.232, US$0.3309 and US$1.531, respectively. The pro forma balance sheet as of June 30, 2006 presents an as adjusted financial position as if the conversion of the preferred shares into ordinary shares occurred on June 30, 2006.

12.    COMMITMENTS AND CONTINGENCIES

(a) Capital commitments

As of June 30, 2006, the Group had commitments related to leasehold improvements, installation of machinery and equipment for the hotel operations amounting to RMB 137,950,471.

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HOME INNS & HOTELS MANAGEMENT INC.

NOTES TO THE UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited, amounts expressed in RMB unless otherwise stated)

(b) Commitments under operating leases

The Group has entered into lease agreements relating to leased-and-operated hotels that are classified as operating leases.

Future minimum lease payments for non-cancelable operating leases at June 30 are as follows:

	Related-party	Non-related party	Total
	RMB	RMB	RMB
2007	3,500,000	126,182,119	129,682,119
2008	3,500,000	135,967,957	139,467,957
2009	3,500,000	137,914,106	141,414,106
2010	3,500,000	139,389,375	142,889,375
2011	3,500,000	139,968,781	143,468,781
Thereafter	25,041,667	1,163,191,037	1,188,232,704
Total	42,541,667	1,842,613,375	1,885,155,042

Rental expenses amounted to RMB 30,520,519 and RMB 56,118,801 during the six months ended June 30, 2005 and 2006, respectively.

(c) Contingencies

Lawsuit with a lessor

In September 2003, the Company entered into a long-term lease agreement with a lessor to lease a group of properties. However, in September 2005, the lessor accused the Company of violating lease requirements, and filed a complaint with the District Court of Jin An District, Shanghai, where the properties are located, seeking lease termination as well as punitive damages of RMB 216,668. In March 2006, the District Court of Jin An District ruled in favor of the Company, finding the Company to be in compliance with the lease agreement, and that the lessor’s complaint to have no merit. The lessor has since submitted an appeal to the Middle Level Court, and no ruling on the appeal has been made by the Court as of June 30, 2006.

The Company does not believe the lessor’s accusation has any merit, and no reserve has been made (i) against the un-depreciated un-removable equipment and leasehold improvements of RMB 3,513,429 remaining at the leased properties involved in this case, which the Company may not be able to recover should the lease agreement be terminated or (ii) the punitive damage sought by the lessor.

In August 2006, the Middle Level Court ruled that the original outcome was the most equitable to everyone and the contingency no long exists.

13.    SUBSEQUENT EVENTS

In July 2006, 302,000 options were issued at an exercise price of US$3.20 that would represent the fair market value as of the grant date as determined by the board of directors.

In July 2006, the Company sold 2,834,037 ordinary shares in a private placement at a price of US$2.77 per share to certain individuals including certain executives and directors of the Company. This sale of ordinary shares was approved by the board of directors and shareholders. As a result of this transaction, the number of shares reserved under the 2003 options plan, which was approved to be 9% of outstanding ordinary and preferred shares, was increased by 255,064 shares to 4,784,226 shares.

In October 2006, the Company granted 659,000 options at an exercise price equal to the midpoint of the estimated price range for its initial public offering, which was determined by the board of directors to represent the fair market value of the ordinary shares of the Company as of the grant date.

F-69

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences or committing a crime. Our Articles of Association provide for indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such, except through their own willful neglect or default.

Pursuant to the form of indemnification agreements filed as Exhibit 10.2 to this Registration Statement, we will agree to indemnify our directors and officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer.

The form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement will also provide for indemnification of us and our officers and directors.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.

During the past three years, we have issued and sold the following securities (including options to acquire our ordinary shares). We believe that each of the following issuances and sales was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act because they were offshore transactions involving non-U.S. persons and there were no directed selling efforts in the United States, with the exception of the issuance and sale to Susquehanna, which was exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act because the transaction was a private sale of securities to a sophisticated investor which was purchasing our shares for investment purpose and not with a view to distribution.

Purchaser	Date of Sale or Issuance	Number of Securities	Consideration (US$)	Underwriting Discount and Commission
AsiaStar IT Fund L.P.	November 24, 2003	1,511,028 Series B Preference Shares	500,000.00	N/A
IDG Technology Venture Investments, L.P.	November 24, 2003	906,617 Series B Preference Shares	300,000.00	N/A
Poly Victory Investments Limited	May 24, 2004	13,219,140 Ordinary Shares	2,667,615.50 plus a 12.45% interest of Home Inns Beijing	N/A
Poly Victory Investments Limited	September 15, 2004	145,000 Ordinary Shares	93.26	N/A
Top Sterling International Limited	September 15, 2004	3,035,000 Ordinary Shares	1,039,487.50	N/A
Susquehanna China Investment HI	January 24, 2005	2,873,940 Series C Preference Shares	4,400,000.00	N/A
Kangaroo Investments LLC	January 24, 2005	130,633 Series C Preference Shares	200,000.00	N/A
Fortune Hero Limited	January 24, 2005	65,317 Series C Preference Shares	100,000.00	N/A
Soon Yan Seen	January 24, 2005	65,317 Series C Preference Shares	100,000.00	N/A
Hiroko Nishikawa	January 24, 2005	65,317 Series C Preference Shares	100,000.00	N/A
Beihai Capital Limited	January 24, 2005	65,317 Series C Preference Shares	100,000.00	N/A
Neil Nanpeng Shen	July 4, 2006	1,441,095 Ordinary Shares	4,000,000.00	N/A
Chung Lau	July 4, 2006	722,048 Ordinary Shares	2,000,000.00	N/A
Min Fan	July 4, 2006	361,024 Ordinary Shares	1,000,000.00	N/A
David Jian Sun	July 4, 2006	111,556 Ordinary Shares	309,000.00	N/A
May Wu	July 4, 2006	144,771 Ordinary Shares	401,000.00	N/A
Rixin Liang	July 4, 2006	50,543 Ordinary Shares	140,000.00	N/A
Certain directors, employees and consultants of the Registrant	From February 28, 2003 to July 4, 2006	Options or stock purchase rights to purchase a total of 4,116,816 Ordinary Shares	Exercise prices ranging from $0.232 to $3.20 per share	N/A

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Purchaser	Date of Sale or Issuance	Number of Securities	Consideration (US$)	Underwriting Discount and Commission
	October 2, 2006	Options to purchase a total of 659,000 Ordinary Shares	*	N/A

* Midpoint of the estimated initial public offering price range.

In June 2006, all of the then-existing shareholders of Home Inns Hong Kong exchanged their respective shares of Home Inns Hong Kong for an equivalent number of shares of Home Inns & Hotels Management Inc. of equivalent classes. For the same reasons stated in the paragraph above, each issuance of shares of Home Inns & Hotels Management Inc. in connection with this share exchange was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act, with the exception of the issuance to Susquehanna, which was exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act.

ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

Exhibit Number	Description of Document
1.1**	Form of Underwriting Agreement.
3.1*	Memorandum and Articles of Association of the Registrant, as currently in effect.
3.2**	Amended and Restated Memorandum and Articles of Association of the Registrant.
4.1**	Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3).
4.2*	Registrant’s Specimen Certificate for Ordinary shares.
4.3**	Form of Deposit Agreement among the Registrant, the depositary and holder of the American Depositary Receipts.
4.4*	Share Purchase Agreement, dated November 24, 2003, in respect of the sale of Series B preferred shares of the Registrant.
4.5*	Share Subscription Agreement, dated May 24, 2004, in respect of the sale of ordinary shares of the Registrant.
4.6*	Share Subscription Agreement, dated September 15, 2004, in respect of the sale of ordinary shares of the Registrant.
4.7*	Share Purchase Agreement, dated January 24, 2005, in respect of the sale of Series C preferred shares of the Registrant.
4.8*	Shareholders Agreement, dated June 29, 2006, among the Registrant and its shareholders party thereto.
4.9*	Subscription Agreement, dated July 4, 2006, in respect of the sale of ordinary shares of the Registrant.
4.10*	Acting-in-Concert Agreement, dated July 6, 2006, among the shareholders of the Registrant party thereto.
4.11*	Financing Transaction Agreement, dated June 2005, between BTG and the Registrant
5.1*	Opinion of Maples and Calder regarding the validity of the ordinary shares being registered.
8.1**	Opinion of Latham & Watkins LLP regarding certain U.S. tax matters.
10.1*	Employees’ Stock Option Plan.
10.2*	Form of Indemnification Agreement with the Registrant’s directors.
10.3*	Employment Agreement between the Registrant and David Jian Sun.
10.4*	Employment Agreement between the Registrant and Rixin Liang.
10.5*	Employment Agreement between the Registrant and May Y. Wu.
10.6*	2006 Share Incentive Plan.

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Exhibit Number	Description of Document
21.1*	Subsidiaries of the Registrant.
23.1*	Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an Independent Registered Public Accounting Firm.
23.2*	Consent of Maples and Calder.
23.3**	Consent of Latham & Watkins LLP (included in Exhibit 8.1).
23.4*	Consent of Commerce and Finance Law Offices.
23.5*	Consent of Terry Yongmin Hu.
23.6*	Consent of Kenneth Gaw.
23.7*	Consent of American Appraisal China Limited.
24.1*	Powers of Attorney (included on signature page).
99.1*	Code of Business Conduct and Ethics of the Registrant.
99.2*	Opinion of Commerce & Finance Law Offices concerning certain PRC law matters.

* Filed herewith.

** To be filed by amendment.

(b) Financial Statement Schedules

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.

ITEM 9. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

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 provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission 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 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.

The undersigned registrant hereby undertakes that:

(1) 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 under 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.

(2) 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 shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Shanghai, People’s Republic of China, on October 4, 2006.

HOME INNS & HOTELS MANAGEMENT INC.
By:	/s/ David Jian Sun
	Name: David Jian Sun
	Title: Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints David Jian Sun and May Wu as attorneys-in-fact with full power of substitution, for him or her in any and all capacities, to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933, as amended (the “Securities Act”), and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant (the “Shares”), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1 (the “Registration Statement”) to be filed with the Securities and Exchange Commission with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ David Jian Sun Name: David Jian Sun	Chief Executive Officer, Director (principal executive officer)	October 4, 2006
/s/ May Wu Name: May Wu	Chief Financial Officer (principal financial and accounting officer)	October 4, 2006
/s/ Yunxin Mei Name: Yunxin Mei	Co-Chairman of the Board of Directors	October 4, 2006
/s/ Neil Nanpeng Shen Name: Neil Nanpeng Shen	Co-Chairman of the Board of Directors	October 4, 2006
/s/ Min Bao Name: Min Bao	Director	October 4, 2006

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Signature	Title	Date
/s/ James Jianzhang Liang Name: James Jianzhang Liang	Director	October 4, 2006
/s/ Jerry Sze Name: Jerry Sze	Director	October 4, 2006
/s/ Suyang Zhang Name: Suyang Zhang	Director	October 4, 2006
/s/ Donald J. Puglisi Name: Managing Director Title: Puglisi & Associates	Authorized U.S. Representative	October 4, 2006

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HOME INNS & HOTELS MANAGEMENT INC.

EXHIBIT INDEX

Exhibit Number	Description of Document
1.1**	Form of Underwriting Agreement.
3.1*	Memorandum and Articles of Association of the Registrant, as currently in effect.
3.2**	Amended and Restated Memorandum and Articles of Association of the Registrant.
4.1**	Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3).
4.2*	Registrant’s Specimen Certificate for Ordinary shares.
4.3**	Form of Deposit Agreement among the Registrant, the depositary and holder of the American Depositary Receipts.
4.4*	Share Purchase Agreement, dated November 24, 2003, in respect of the sale of Series B preferred shares of the Registrant.
4.5*	Share Subscription Agreement, dated May 24, 2004, in respect of the sale of ordinary shares of the Registrant.
4.6*	Share Subscription Agreement, dated September 15, 2004, in respect of the sale of ordinary shares of the Registrant.
4.7*	Share Purchase Agreement, dated January 24, 2005, in respect of the sale of Series C preferred shares of the Registrant.
4.8*	Shareholders Agreement, dated June 29, 2006, among the Registrant and its shareholders party thereto.
4.9*	Subscription Agreement, dated July 4, 2006, in respect of the sale of ordinary shares of the Registrant.
4.10*	Acting-in-Concert Agreement, dated July 6, 2006, among the shareholders of the Registrant party thereto.
4.11*	Financing Transaction Agreement, dated June 2005, between BTG and the Registrant
5.1*	Opinion of Maples and Calder regarding the validity of the ordinary shares being registered.
8.1**	Opinion of Latham & Watkins LLP regarding certain U.S. tax matters.
10.1*	Employees’ Stock Option Plan.
10.2*	Form of Indemnification Agreement with the Registrant’s directors.
10.3*	Employment Agreement between the Registrant and David Jian Sun.
10.4*	Employment Agreement between the Registrant and Rixin Liang.
10.5*	Employment Agreement between the Registrant and May Y. Wu.
10.6*	2006 Share Incentive Plan.
21.1*	Subsidiaries of the Registrant.
23.1*	Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an Independent Registered Public Accounting Firm.
23.2*	Consent of Maples and Calder.
23.3**	Consent of Latham & Watkins LLP (included in Exhibit 8.1).
23.4*	Consent of Commerce and Finance Law Offices.
23.5*	Consent of Terry Yongmin Hu.
23.6*	Consent of Kenneth Gaw.
23.7*	Consent of American Appraisal China Limited.
24.1*	Powers of Attorney (included on signature page).
99.1*	Code of Business Conduct and Ethics of the Registrant.

Exhibit Number	Description of Document
99.2*	Opinion of Commerce & Finance Law Offices concerning certain PRC law matters.

* Filed herewith.

** To be filed by amendment.

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

MEMORANDUM

AND

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT INC.

(as adopted by special resolution passed on 22 June 2006 and effective 29 June 2006)

THE COMPANIES LAW (2004 REVISION)

OF THE CAYMAN ISLANDS

Company Limited by Shares

AMENDED AND RESTATED

MEMORANDUM OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT INC.

(as adopted by special resolution passed on 22 June 2006 and effective 29 June 2006)

1. The name of the Company is Home Inns & Hotels Management Inc..

2. The registered office of the Company shall be at the offices of M&C Corporate Services Limited, P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, or at such other place as the Directors may from time to time decide.

3. The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law (2004 Revision) or as the same may be revised from time to time, or any other law of the Cayman Islands.

4. The liability of each member is limited to the amount from time to time upaid on such member’s shares.

5. The authorised share capital of the Company is US$1,000,000.00 divided into 200,000,000 shares of US$0.005 each, comprised of 177,075,114 ordinary shares of par value US$0.005 each, 17,241,400 Series A Preference Shares of par value US$0.005 each, 2,417,645 Series B Preference Shares of par value US$0.005 each and 3,265,841 Series C Preference Shares of par value US$0.005 each and each class of shares shall carry their respective rights, preferences, privileges and restrictions set forth in the Articles of Association of the Company.

6. The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

7. Capitalised terms that are not defined in this Memorandum of Association bear the same meaning as those given in the Articles of Association of the Company.

THE COMPANIES LAW (2004 REVISION)

OF THE CAYMAN ISLANDS

Company Limited by Shares

AMENDED AND RESTATED

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT INC.

(as adopted by special resolution passed on 22 June 2006 and effective 29 June 2006)

PRELIMINARY

1. The regulations in Table A in the First Schedule to the Law shall not apply to the Company.

INTERPRETATION

2. (a) In these Articles, save where the context otherwise requires: -

“Auditor”	means the person for the time being performing the duties of auditor of the Company (if any);
“the Company”	means the above named Company;
“the Board” and “the Directors”	means the Directors for the time being of the Company or the Director present at a duly convened meeting of Directors at which a quorum is present;
“Dividend”	includes bonuses, distributions in specie and in kind, capital distributions and capitalisation issues;
“Electronic Record”	has the same meaning as in the Electronic Transactions Law (2003 Revision) of the Cayman Islands;
“Group Company”	means each of Home Inns Beijing Home Inns Shanghai and the Relevant Subsidiary;
“Home Inns Beijing”	means Home Inns Hotel Management (Beijing) Limited;

“Home Inns Shanghai”	means Home Inns Hotel Management (Shanghai) Limited;
“Law”	means the Companies Law (2004 Revision) of the Cayman Islands;
“member”	has the same meaning as the Law;
“month”	means calendar month;
“ordinary resolution”	means a resolution passed by a simple majority of the members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting, and includes an unanimous written resolution. In computing the majority when a poll is demanded regard shall be had to the number of votes to which each member is entitled by these Articles;
“ordinary shares”	means the ordinary shares of par value of US$0.005 each in the capital of the Company;
“the Office”	means the registered office of the Company for the time being;
“Original Issue Date”	means the date of the first sale and issuance of Series C Preference Shares;
“paid up”	includes credited as paid up;
“Preference Shares”	means Series A Preference Shares, Series B Preference Shares and Series C Preference Shares;
“the Register”	means the register of members of the Company kept pursuant to the Law and includes any branch register kept pursuant to the Law;
“Relevant Subsidiary”	means any 75% owned subsidiary of the Company;
“the Secretary”	means the secretary for the time being of the Company, if any;
“the Seal”	means the common seal of the Company or any duplicate seal that the Company may have;

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“Series A Preference Shares”	means the series A preference shares of par value of US$0.005 each in the capital of the Company;
“Series B Preference Shares”	means the series B preference shares of par value of US$0.005 each in the capital of the Company;
“Series C Preference Shares”	means the series C preference shares of par value of US$0.005 each in the capital of the Company;
“Shares”	means ordinary shares, Series A Preference Shares, Series B Preference Shares and Series C Preference Shares;
“special resolution”	has the same meaning as in the Law, and includes a unanimous written resolution;
“these Articles”	means the Articles of Association in their present form or as amended from time to time;
“in writing” and “written”	includes all modes of representing or reproducing words in visible form, including in the form of an Electronic Record.

(b) In these Articles, if not inconsistent with the subject or context, words importing the singular number only shall include the plural number and vice versa, and words importing any gender shall include all genders and vice versa.

(c) Subject as aforesaid, any words defined in the Law or any statutory modification thereof in force at the date at which these Articles become binding on the Company shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.

(d) The headings are inserted for convenience only and shall not affect the construction of these Articles.

(e) In these Articles, Section 8 of the Electronic Transactions Law (2003 Revision) shall not apply.

COMMENCEMENT OF BUSINESS

3. (a) The business of the Company may be commenced as soon after incorporation as the Directors shall see fit.

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(b) The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company, including the expenses of registration.

THE OFFICE

4. Subject to the provisions of the Law, the Office shall be at such place in the Cayman Islands as the Directors shall from time to time appoint.

SHARES

5. (a) Subject to the provisions of the Law, and save as provided by contract, the Memorandum of Association of the Company or these Articles (or any direction that may be given by the Company in general meeting) to the contrary and without prejudice to any rights attached to any existing Shares, all unissued shares shall be at the disposal of the Directors who may allot, grant options over, or otherwise deal with or dispose of the same to such persons, at such times, for such consideration and generally upon such terms and conditions as they think proper, but so that no shares of any class shall be issued at a discount except in accordance with the Law.

(b) The Company may give such financial assistance for purposes of acquiring shares in the Company as is not prohibited by the Law.

(c) For purposes of Article 8(b) the Directors are authorised to make statutory declarations or take such other steps as may be required by the Law in relation to the giving of financial assistance to acquire shares in the Company.

6. The Company may make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and the time of payment of such calls.

7. If by the conditions of allotment of any shares the whole or part of the amount or issue price thereof shall be payable by instalments, every such instalment shall, when due, be paid to the Company by the person who for the time being is the registered holder of the shares, or his legal personal representative.

8. (a) Subject to the provisions of the Law, the Company may issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the member. The redemption of Shares may be effected upon such terms and in such manner as the Company before or upon issue of the shares shall by ordinary resolution determine.

(b) Subject to the provisions of the Law and Article 111A of these Articles, the Company may purchase its own shares (including redeemable shares) and without prejudice to the generality of the foregoing the Company may purchase its own shares (including any redeemable shares) in order to:

(i) settle or compromise a debt or claim;

4

(ii) eliminate a fractional share or fractional entitlement;

(iii) fulfil an agreement in which the Company has an option or is obliged to purchase shares under an employee share scheme which had previously been approved by the Company in general meeting;

(iv) comply with an order of court in accordance with the provisions of the Law.

(c) Subject to the Law and Article 111A of these Articles, the Company may make a payment in respect of the redemption or purchase its own shares otherwise than out of its distributable profits or the proceeds of a fresh issue of shares.

(d) For purposes of Article 8(c), the Directors are, subject to Article 111A of these Articles, authorised to make statutory declarations or take such other steps as may be required by the Law in relation to the redemption or purchase by the Company of its own shares out of capital.

9. Subject to the provisions of these Articles, the Company shall not, except as required by law, be bound by or required in any way to recognise any contingent, future, partial or equitable interest in any share or in any fractional part of a share, or any other right in respect of any share, or any other claim to or in respect of any such share on the part of any person (even when having notice thereof) except an absolute right to the entirety thereof in the registered holder.

10. The Company may in connection with the issue of any shares exercise all powers of paying interest out of capital and of paying commission and brokerage conferred or permitted by the Law.

11. No person shall become a member until his name shall have been entered into the Register.

JOINT HOLDERS OF SHARES

12. Where two or more persons are registered as the holders of any share they shall be deemed to hold the same as joint tenants with benefit of survivorship, subject to the following provisions:-

(a) the Company shall not be bound to register more than three persons as the holders of any shares except in the case of the legal personal representative of a deceased member;

5

(b) the joint holders of any shares shall be liable severally as well as jointly in respect of all payments which ought to be made in respect of such shares;

(c) on the death of any one of such joint holders the survivor or survivors shall be the only person or persons recognised by the Company as having any title to such shares, but the Directors may require such evidence of death as they may deem fit;

(d) any one of such joint holders may give effectual receipts for any dividend, return of capital or other payment in the share; and

(e) the Company shall be at liberty to treat the person whose name stands first in the Register as one of the joint holders of any shares as solely entitled to delivery of the certificate relating to such shares, or to receive notices from the Company, and to attend and vote at general meetings of the Company, and any notice given to such person shall be deemed notice to all the joint holders; but any one of such joint holders may be appointed the proxy of the persons entitled to vote on behalf of such joint holders, and as such proxy to attend and vote at general meetings of the Company, and if more than one of such joint holders be present at any meeting personally or by proxy that one so present whose name stands first in the Register in respect of such shares shall alone be entitled to vote in respect thereof.

SHARE CERTIFICATES

13. Every member shall, without payment, be entitled to receive within two months after allotment or lodgment of an instrument of transfer, or within such other period as the conditions of issue may provide, a certificate for all his shares of any particular class, or several certificates, each for one or more of his shares, upon payment of such fee, not exceeding two dollars for every certificate after the first, as the Directors shall from time to time determine, provided that in the event of a member transferring part of the shares represented by a certificate in his name a new certificate in respect of the balance thereof shall be issued in his name without payment and, in the case of joint holders, the Company shall not be bound to issue more than one certificate for all the shares of any particular class registered in their joint names.

14. Every share certificate shall be issued under the Seal and shall specify the number and class of shares, and, if required, the distinctive numbers thereof comprised therein, the amount paid up thereon and, if appropriate, whether such shares carry no voting rights. No certificate shall be issued in respect of more than one class of shares. If there shall be more than one class of shares then each certificate of every class shall state thereon that the share capital is divided into different classes and the par value of the voting rights attaching to each class.

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15. If any share certificate shall be worn out, defaced, destroyed or lost, it may be renewed on such evidence being produced as the Directors shall require, and in case of wearing out or defacement, on delivery up of the old certificate, and in case of destruction or loss, on the execution of such indemnity (if any), as the Directors may from time to time require. In case of destruction or loss, the person to whom such renewed certificate is given shall also bear and pay to the Company all expenses incidental to the investigation by the Company of the evidence of such destruction or loss and of such indemnity.

CONVERSION RIGHTS OF PREFERENCE SHARES

16. The holders of the Preference Shares shall have conversion rights as follows:

(a) Right to Convert Series A Preference Shares. Unless converted earlier pursuant to paragraph 16(e) below, each Series A Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series A Preference Shares, shall be convertible into such number of fully paid and nonassessable ordinary shares as is determined by dividing US$0.232 (the “Series A Original Issue Price”) for each Series A Preference Share by the Series A Conversion Price (as defined below) in effect at the time of the conversion. The initial Series A Conversion Price shall be US$0.232 per Series A Preference Share. Such initial Series A Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series A Preference Shares provided in this paragraph 16(a) and paragraphs 16(d)-(f) are referred hereinafter as “Series A Conversion Rights”.

(b) Right to Convert Series B Preference Shares. Unless converted earlier pursuant to paragraph 16(e) below, each Series B Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series B Preference Shares, shall be convertible into such number of fully paid and nonassessable ordinary shares as is determined by dividing US$0.3309 (the “Series B Original Issue Price”) for each Series B Preference Share by the Series B Conversion Price (as defined below) in effect at the time of the conversion. The initial Series B Conversion Price shall be US$0.3309 per Series B Preference Share. Such initial Series B Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series B Preference Shares provided in this paragraph 16(b) and paragraphs 16(d)-(f) are referred hereinafter as “Series B Conversion Rights”.

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(c) Right to Convert Series C Preference Shares. Unless converted earlier pursuant to paragraph 16(e) below, each Series C Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series C Preference Shares, shall be convertible into such number of fully paid and nonassessable ordinary shares as is determined by dividing US$1.531 (the “Series C Original Issue Price”) for each Series C Preference Share by the Series C Conversion Price (as defined below) in effect at the time of the conversion. The initial Series C Conversion Price shall be US$1.531 per Series C Preference Share. Such initial Series C Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series C Preference Shares provided in this paragraph 16(c) and paragraphs 16(d)-(f) are referred hereinafter as “Series C Conversion Rights”.

(d) Adjustment to Series A Conversion Price, Series B Conversion Price and Series C Conversion Price. Initial Series A Conversion Price, initial Series B Conversion Price and initial Series C Conversion Price shall be subject to adjustment as hereinafter provided. Nothing in paragraphs 16(a), (b) and (c) shall limit the automatic conversion rights of Preference Shares described in paragraph 16(e) below.

(e) Automatic Conversion. Each Preference Share shall automatically be converted into ordinary shares at the then applicable conversion price for such series of Preference Shares (each a “Conversion Price”), immediately upon (i) the closing of a firm commitment underwritten public offering of the ordinary shares on an internationally recognized stock exchange at a per-share price of no less than three (3) times the Series A Original Issue Price (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like); or (ii) the consent of the holders of a majority of the then outstanding Preference Shares.

(f) Mechanics of Conversion. The Company shall give effect to a conversion by means of the redemption of the Preference Shares to be converted and the immediate re-subscription of the redemption proceeds in paying up the new ordinary shares. No fractional ordinary shares shall be issued upon conversion of any Preference Shares. In lieu of any fractional share to which the holder would otherwise be entitled (after aggregating all shares into which the applicable series of Preference Shares held by such holder could be converted), the Company shall pay cash equal to such fraction multiplied by the then fair market value of the ordinary shares, as determined by the Board. Before any holder of the Preference Shares shall be entitled to convert the same into full ordinary shares, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for such Preference Shares to be converted, and shall give written notice to the Company at such office that he elects to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Preference Shares, a certificate or certificates for the number of ordinary shares to which such holder shall be entitled, together with a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional ordinary shares. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Preference Shares to be converted, or in the case of conversion pursuant to Article 16(e)(i), on the effective date of the offering as provided in Article 16(e)(i) above, and the person or persons entitled to receive the ordinary shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such ordinary shares on such date; provided, that if any such conversion is made in connection with any transaction that would, if completed, constitute a liquidation of the Company for purposes of Article 140 hereof, or in connection with any public offering of the Company’s securities, then such conversion may be made contingent upon, and effective only as of, the closing of such transaction or offering.

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(g) Adjustments to Conversion Price for Diluting Issues.:

(i) Special Definitions. For purposes of this Article 16(g), the following definitions shall apply:

(1) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either ordinary shares or Convertible Securities.

(2) “Convertible Securities” shall mean any evidences of indebtedness, shares (other than Series A Preference Shares, Series B Preference Shares, Series C Preference Shares or ordinary shares outstanding as at the Original Issue Date) or other securities convertible into or exchangeable for ordinary shares.

(3) “Additional Ordinary Shares” shall mean all ordinary shares issued (or, pursuant to Article 16(g)(iii), deemed to be issued) by the Company after the Original Issue Date, other than ordinary shares issued or issuable (or pursuant to Article 16(g)(iii), deemed to be issued).

(A) upon conversion of the Series A Preference Shares;

(B) upon conversion of the Series B Preference Shares;

(C) upon conversion of the Series C Preference Shares;

(D) to officers, directors or employees of, or consultants to, the Company pursuant to a share grant, option plan or purchase plan or other share incentive program or agreement approved by a majority of the Board;

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(E) to any bank, equipment lessor, creditor, landlord, supplier or customer pursuant to a transaction that is for primarily non-financing purposes and approved by a majority of the Board; or

(F) pursuant to acquisitions, licenses, joint ventures or transactions with strategic partners which are for primarily non-financing purposes and approved by a majority of the Board.

(ii) No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price of a Series A Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series A Conversion Price in effect on the date of, and immediately prior to such issue. No adjustment in the Series B Conversion Price of a Series B Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series B Conversion Price in effect on the date of, and immediately prior to such issue. No adjustment in the Series C Conversion Price of a Series C Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series C Conversion Price in effect on the date of, and immediately prior to such issue.

(iii) Deemed Issue of Additional Ordinary Shares.

(1) Options and Convertible Securities. In the event, at any time or from time to time after the Original Issue Date, the Company shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of ordinary shares issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Ordinary Shares issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Ordinary Shares shall not be deemed to have been issued unless the consideration per share (determined pursuant to Article 16 (g)(v) hereof) of such Additional Ordinary Shares would be less than the Conversion Price in effect on the date of, and immediately prior to, such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Ordinary Shares are deemed to be issued:

(A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or ordinary shares upon the exercise of such Options or conversion or exchange of such Convertible Securities; and

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(B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company, or in the number of ordinary shares issuable (including a change resulting from the expiration of such Options or the rights of conversion or exchange of such Convertible Securities) upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such change becoming effective, be recomputed to reflect such change insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities.

(2) Share Dividends. In the event the Company at any time or from time to time after the Original Issue Date shall declare or pay any dividend on the ordinary shares payable in ordinary shares, Options or Convertible Securities, Additional Ordinary Shares shall be deemed to have been issued immediately after the close of business on the record date for the determination of holders or any class of securities entitled to receive such dividend.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Ordinary Shares. In the event the Company shall issue Additional Ordinary Shares (including Additional Ordinary Shares deemed to be issued pursuant to Article 16(g)(iii)) without consideration or for a consideration per share less than the Conversion Price in effect on the date of, and immediately prior, to such issue, then, and in such event, the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) equal to the amount of consideration per share received by the Company as a result of such issuance of Additional Ordinary Shares.

(v) Determination of Consideration. For purposes of this Article 16(g), the consideration received by the Company for the issue of any Additional Ordinary Shares shall be computed as follows:

(1) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or accrued dividends, and provided further that no deduction shall be made for any reasonable and customary commissions or expenses paid or incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

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(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board provided that such fair market value shall not exceed the aggregate current market price of the ordinary shares being issued; and

(C) in the event Additional Ordinary Shares are issued together with other shares or securities or other assets of the Company for consideration which covers both, be computed as the portion of such consideration so received in respect of the Additional Ordinary Shares computed as provided in clauses (A) and (B) above, as determined in good faith by the Board.

(2) Options and Convertible Securities. The consideration per share received by the Company for Additional Ordinary Shares deemed to have been issued pursuant to Section 16(g)(iii), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of ordinary shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(3) Share Dividends. Any additional ordinary shares deemed to have been issued relating to a share dividend shall be deemed to have been issued for no consideration.

(h) Adjustment for Share Splits and Combinations. Any adjustment under this Section 16(h) shall become effective at the close of business on the date the subdivision or combination becomes effective and are as follows:

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(i) If the Company at any time or from time to time effects a subdivision of the outstanding ordinary shares, the Series A Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series A Preference Share as is undertaken with respect to the ordinary shares, then both the Series A Original Issue Price and the Series A Conversion Price shall be proportionately decreased;

(ii) Conversely, if the Company at any time or from time to time combines the outstanding ordinary shares, the Series A Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series A Preference Shares as is undertaken with respect to the ordinary shares, then both the Series A Original Issue Price and the Series A Conversion Price shall be proportionately increased;

(iii) If the Company at any time or from time to time effects a subdivision of the outstanding ordinary shares, the Series B Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series B Preference Share as is undertaken with respect to the ordinary shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately decreased; and

(iv) Conversely, if the Company at any time or from time to time combines the outstanding ordinary shares, the Series B Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series B Preference Shares as is undertaken with respect to the ordinary shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately increased.

(v) If the Company at any time or from time to time effects a subdivision of the outstanding ordinary shares, the Series C Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series C Preference Share as is undertaken with respect to the ordinary shares, then both the Series C Original Issue Price and the Series C Conversion Price shall be proportionately decreased; and

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(iv) Conversely, if the Company at any time or from time to time combines the outstanding ordinary shares, the Series C Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series C Preference Shares as is undertaken with respect to the ordinary shares, then both the Series C Original Issue Price and the Series C Conversion Price shall be proportionately increased.

(i) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time makes, or fixes a record date for the determination of holders of ordinary shares entitled to receive, a dividend or other distribution payable in additional ordinary shares, then and in each such event:

(i) the Series A Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction (1) the numerator of which is the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of ordinary shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this Article 16(i)(i) as of the time of actual payment of such dividends or distributions; and

(ii) the Series B Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series B Conversion Price then in effect by a fraction (1) the numerator of which is the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of ordinary shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series B Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series B Conversion Price shall be adjusted pursuant to this Article 16(i)(ii) as of the time of actual payment of such dividends or distributions.

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(iii) the Series C Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series C Conversion Price then in effect by a fraction (1) the numerator of which is the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of ordinary shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series C Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series C Conversion Price shall be adjusted pursuant to this Article 16(i)(iii) as of the time of actual payment of such dividends or distributions.

(j) Adjustments for Other Distributions. In the event the Company shall declare a distribution to holders of ordinary shares payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in Articles 16(h) and 16(i), then, in each such case for the purpose of this Article 16(j), the holders of the Preference Shares shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of ordinary shares of the Company into which their Preference Shares are convertible as of the record date fixed for the determination of the holders of ordinary shares of the Company entitled to receive such distribution.

(k) Adjustments for Reclassification. If the ordinary shares issuable upon the conversion of the Preference Shares is changed into the same or a different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or a share dividend, as provided for elsewhere in this Article 16), then and in any such event each holder of Preference Shares shall have the right thereafter to convert such shares into the kind and amount of shares and other securities and property receivable upon such reclassification or other change, by holders of the number of ordinary shares into which such Preference Shares might have been converted immediately prior to such reclassification or change, all subject to further adjustment as provided herein.

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(l) No Impairment. The Company will not, by amendment of its Articles of Association or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of these Articles and in the taking of all such action as may be necessary or appropriate in order to protect rights of the holders of Preference Shares against impairment.

(m) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article 16, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preference Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of the Preference Shares, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price and the Original Issue Price at the time in effect, and (iii) the number of ordinary shares and the amount, if any, of other property which at the time would be received upon the conversion of the applicable Preference Shares.

(n) Notices of Record Date. In the event that the Company shall propose at any time:

(i) to declare any dividend or distribution upon its ordinary shares, whether in cash, property, shares or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(ii) to offer for subscription pro rata to the holders of any class or series of its shares any additional shares of any class or series or other rights;

(iii) to effect any reclassification or recapitalization of its outstanding ordinary shares involving a change in the ordinary shares; or

(iv) to merge or consolidate with or into any other company, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Company shall send to the holders of the Preference Shares:

(1) at least twenty (20) days’ prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights and a description thereof (and specifying the date on which the holders of ordinary shares shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (iii) and (iv) above; and

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(2) in the case of the matters referred to in (iii) and (iv) above, at least twenty (20) days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of ordinary shares shall be entitled to exchange their ordinary shares for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be given by first class mail, postage prepaid, addressed to the holders of Preference Shares at the address for each such holder as shown on the books of the Company.

(o) Reservation of Shares Issuable. The Directors shall at all times reserve and keep available out of the Company’s authorized but unissued ordinary shares, solely for the purpose of effecting the conversion of the Preference Shares, such number of ordinary shares as shall from time to time be sufficient to effect the conversion of all outstanding Preference Shares; and if at any time the number of authorized but unissued ordinary shares shall not be sufficient to effect the conversion of all then outstanding Preference Shares, the Directors will recommend that the members take such action as may be necessary to increase the Company’s authorized but unissued ordinary shares to such number of shares as shall be sufficient for such purpose.

CALL ON SHARES

17. (a) The Directors may from time to time make calls upon the members in respect of all monies unpaid on their shares (whether on account of the par value of the shares or by way of premium) but subject always to the terms of issue of such shares, and any such call may be made payable by installments.

(b) Each member shall, subject to receiving at least fourteen days notice specifying the time or times and place for payment, pay to the Company the amount called on his shares and at the time or times and place so specified. The non-receipt of a notice of any call by, or the accidental omission to give notice of a call to, any of the members shall not invalidate the call.

18. A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. A call may be revoked, varied or postponed as the Directors may determine.

19. If any part of a sum called in respect of any shares or any installment of a call be not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall be liable to pay interest on the outstanding part thereof at such rate as the Directors shall determine from the day appointed for the payment of such call or installment to the time of discharge thereof in full; but the Directors may, if they shall think fit, waive the payment of such interest or any part thereof.

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20. If, by the terms of the issue of any shares or otherwise, any amount is made payable upon allotment or at any fixed time, whether on account of the nominal amount of the shares or by way of premium, every such amount shall be payable as if it were a call duly made and payable on the date on which by the terms of the issue the same becomes payable; and all the provisions thereof with respect to the payment of calls and interest thereon, or to the forfeiture of shares for non-payment of calls, shall apply to every such amount and the shares in respect of which it is payable in the case of non-payment thereof.

21. The Directors may, if they shall think fit, receive from any member willing to advance the same all or any part of the monies uncalled and unpaid upon any shares held by him; and upon all or any of the monies so paid in advance the Directors may (until the same would, but for such payment in advance, become presently payable) pay interest at such rate as may be agreed upon between the member paying the monies in advance and the Directors. The Directors may also at any time repay the amount so advanced upon giving to such member one month’s notice in writing.

22. On the trial or hearing of any action for the recovery of any money due for any call, it shall be sufficient to prove that the name of the member sued is entered in the Register as the holder, or one of the holders, of the shares in respect of which such debt accrued; that the resolution making the call is duly recorded in the Minute Book; and that notice of such call was duly given to the member sued in pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

23. No member shall, unless the Directors otherwise determine, be entitled to receive any dividend, or, subject to the Law, to receive notice of or to be present or vote at any general meeting, either personally or (save as proxy for another member) by proxy, or to exercise any privileges as a member, or be reckoned in a quorum, until he shall have paid all calls or other sums for the time being due and payable on every share held by him, whether alone or jointly with any other person, together with interest and expenses (if any).

FORFEITURE

24. If any member fails to pay in full any call or installment of a call on the day appointed for payment thereof, the Directors may at any time thereafter, during such time as any part of the call or installment remains unpaid, serve a notice on him requiring him to pay so much of the call or installment as is unpaid together with interest accrued and any expenses incurred by reason of such non-payment.

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25. The notice shall name a further day (not being less than fourteen days from the date of the notice) on or before which such call or installment or part thereof and all interest accrued and expenses incurred by reason of such non-payment are to be paid, and it shall also name the place where payment is to be made, such place being either the Office, or some other place at which calls of the Company are usually made payable. The notice shall also state that, in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call or installment is payable will be liable to be forfeited.

26. If the requirements of any such notice as aforesaid be not complied with, any shares in respect of which such notice has been given may, at any time thereafter before the payment required by the notice had been made, be forfeited by a resolution of the Directors to that effect, and any such forfeiture shall extend to all dividends declared in respect of the shares so forfeited but not actually paid before such forfeiture. The Directors may accept the surrender of any shares liable to be forfeited hereunder and in such case references in these Articles to forfeiture shall include surrender.

27. Any shares so forfeited shall be deemed for the purposes of this Article to be the property of the Company, and may be sold, re-allotted or otherwise disposed of either subject to or discharged from all calls made or installments due prior to the forfeiture, to any person, upon such terms and in such manner and at such time or times as the Directors think fit. For the purpose of giving effect to any such sale or other disposition the Directors may authorise some person to transfer the shares so sold or otherwise disposed of to the purchaser thereof or any other person becoming entitled thereto.

28. The Directors may, at any time before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit.

29. Any person whose shares have been forfeited shall thereupon cease to be the holder of any such shares but shall notwithstanding be and remain liable to pay to the Company all calls, installments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon from the time of forfeiture until payment at such rate as the Directors shall think fit and without any deduction or allowance for the value of the shares at the time of forfeiture, and the Directors may enforce the payment of such monies or any part thereof and may waive payment of such interest wholly or in part.

30. When any shares have been forfeited an entry shall be made in the Register recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of an entry shall also be made of the manner and date of the sale or disposal thereof.

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LIEN

31. The Company shall have a first and paramount lien on every share for all monies outstanding in respect of such share, whether presently payable or not, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the same shall have fallen due for payment or not, and notwithstanding that the same are joint debts or liabilities of such member or his estate and any other person, whether a member or not. The Directors may at any time either generally or in any particular case waive any lien that has arisen, or declare any share to be wholly or in part exempt from the provisions of this Article.

32. The Company may sell in such manner as the Directors think fit any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of intention to sell in default shall have been given to the holder for the time being of the share or the person entitled thereto by reason of his death, bankruptcy or winding up or otherwise by operation of law or court order.

33. The net proceeds of such sale after payment of the costs of such sale shall be applied in or towards payment or satisfaction of the debts or liabilities in respect whereof the lien existed so far as the same are presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the time of the sale. For giving effect to any such sale the Directors may authorise some person to transfer the shares so sold to the purchaser thereof.

34. A statutory declaration in writing that the declarant is a Director of the Company and that a share has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. Such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof together with the shares certificate delivered to a purchaser or allottee thereof shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, surrender, sale, reallotment or disposal of the share.

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TRANSFER OF SHARES

35. The instrument of transfer of any shares in the Company shall be in writing and shall be executed by or on behalf of the transferor and by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register in respect thereof.

36. Every instrument of transfer shall be lodged at the Office, or such other place as the Directors may determine, for registration accompanied by the certificate relating to the shares to be transferred and such other evidence as the Directors may require in relation thereto. All instruments of transfer which shall be registered shall be retained by the Company but, save where fraud is suspected, any instrument of transfer which the Directors may decline to register shall, on demand, be returned to the person depositing the same.

37. There shall be paid to the Company in respect of the registration of a transfer and of any Grant of Probate or Letters of Administration, Certificate of Marriage or Death, Power of Attorney or other document relating to or affecting the title to any share or the making of any entry in the Register affecting the title to any share such fee (if any) as the Directors may from time to time require or prescribe.

38. The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine and either generally or in respect of any class of shares provided always that such registration shall not be suspended for more than 30 days in any year.

39. (a) The Directors may at any time in their absolute discretion and without assigning any reason therefor, decline to register any transfer of any share whether or not it is a fully paid share.

(b) The Directors may also decline to register any transfer unless:-

(i) The instrument of transfer is in respect of only one class of shares;

(ii) in the case of a transfer to joint holders, the number of joint holders to whom the shares are to be transferred does not exceed three; and

(iii) the shares concerned are free of any lien in favour of the Company.

(c) If the Directors refuse to register a transfer they shall, within two months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.

TRANSMISSION OF SHARES

40. In case of the death of a member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the Company as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.

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41. (a) Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may from time to time properly be required by the Directors and, subject as hereinafter provided, elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof, but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that member before his death or bankruptcy, as the case may be.

(b) If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall execute a transfer of the share in favour of that person. All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by the member.

42. A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company:

PROVIDED always that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within 90 days the Directors may thereafter withhold payment of all dividends or other monies payable in respect of the share until the requirements of the notice have been complied with.

43. Any person to whom the right to any shares in the company has been transmitted by operation of law shall, if the Directors refuse to register the transfer, be entitled to call on the Directors to furnish within 28 days a statement of the reasons for the refusal.

STOCK

44. The Company may from time to time by ordinary resolution convert any fully paid up shares into stock and may reconvert any stock into fully paid up shares of any denomination. After the passing of any resolution converting all the fully paid up shares of any class in the capital of the Company into stock, any shares of that class which subsequently become fully paid up and rank pari passu in all other respects with such shares shall, by virtue of this Article and such resolution, be converted into stock transferable in the same units as the shares already converted.

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45. The holders of stock may transfer the same or any part thereof in the same manner and subject to the same regulations as the shares from which the stock arose might prior to conversion have been transferred or as near thereto as circumstances admit. The Directors may from time to time fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of such minimum, but the minimum shall not, without the sanction of an ordinary resolution of the Company, exceed the nominal amount of each of the shares from which the stock arose.

46. The holders of stock shall, according to the amount of the stock held by them, have the same rights as regards dividends, voting at general meetings of the Company and other matters as if they held the shares from which the stock arose, but no such right (except as to participation in dividends and profits of the Company and in assets on a reduction of capital or a winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such right.

47. Such of these Articles as are applicable to fully paid up shares shall apply mutatis mutandis to stock, and the words “share” and “shareholder” therein shall include “stock” and “stockholder”.

INCREASE OF CAPITAL

48. Subject to Articles 61A and 61B of these Articles, the Company may, from time to time, by ordinary resolution increase its authorised capital by such sum divided into shares of such amounts as the resolution shall prescribe.

49. Subject to Articles 61A and 61B of these Articles, without prejudice to any special rights, privileges or restrictions for the time being attaching to any class of shares then existing in the capital of the Company, any new shares created pursuant to Article 48 may be issued upon such terms and conditions, and with such rights, privileges and restrictions attached thereto as the general meeting resolving upon the creation thereof shall direct or, if no such direction be given, as the Directors shall determine, and in particular such shares may be issued with a preferential, qualified or deferred right to dividends and in the distribution of assets of the Company, and with a special, or without any, right of voting.

50. The general meeting resolving upon the creation of any new shares may direct that the same or any of them shall be offered in the first instance, and either at par or at a premium or (subject to the provisions of the Law) at a discount, to all the holders for the time being of any class of shares in the capital of the Company in proportion to the number of shares of such class held by them respectively, or make any other provisions as to the issue and allotment of the new shares.

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51. Subject to any direction or determination that may be given or made in accordance with the powers contained in these Articles all new shares created pursuant to Article 48 shall be subject to the same provisions herein contained with reference to the payment of calls, transfer, transmission, forfeiture, lien and otherwise as the shares in the capital of the Company existing at the date of creation of such new shares.

ALTERATIONS OF SHARE CAPITAL

52. Subject to Articles 61A and 61B of these Articles, the Company may by ordinary resolution:-

(a) subdivide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association of the Company, provided that in the subdivision of an existing share the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived, and so that the resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such subdivision one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any such restrictions as the Company has power to attach to unissued or new shares;

(b) consolidate and divide its capital or any part thereof into shares of larger amount than its existing shares; or

(c) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its authorised capital by the amount of the shares so cancelled.

53. Subject to Articles 61A and 61B of these Articles, the Company may by special resolution reduce its share capital and any capital redemption reserve fund or any share premium account in any manner allowed by law.

54. Where any difficulty arises in regard to any consolidation and division under paragraph (b) of Article 52, the Directors may settle the same as they think expedient and in particular may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the members who would have been entitled to the fractions, and for this purpose the Directors may authorise some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

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MODIFICATION OF RIGHTS

55. (a) Subject to Articles 61A and 61B of these Articles, all or any of the rights attached to the Series A Preference Shares, the Series B Preference Shares or the Series C Preference Shares may, at any time, as well as before as during liquidation, be altered or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of the applicable series of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the applicable series of the class, and all the provisions contained in these Articles relating to general meetings shall mutatis mutandis apply to every such meeting, but so that the quorum thereof shall be at least one person personally present and holding or representing by proxy a majority in par value of the issued shares of the applicable series of the class, and that any holder of shares of the applicable series of the class present in person or by proxy may demand a poll, and that each holder of shares of the applicable series of the class present in person or by proxy shall on a poll be entitled to one vote for each share of the applicable series of the class held by him.

(b) The foregoing provisions of this Article shall apply to the variation or abrogation of the rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class, the rights whereof are to be varied. 56. The special rights conferred upon the holders of any shares or such 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 altered by the creation or issue of further shares ranking pari passu therewith.

56. The special rights conferred upon the holders of any shares or such 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 altered by the creation or issue of further shares ranking pari passu therewith.

GENERAL MEETINGS

57. (a) The Company shall, if required by the Law, in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as the Directors shall appoint.

(b) All other general meetings shall be called extraordinary general meetings.

(c) The Company may hold an annual general meeting, but shall not (unless required by the Law) be obliged to hold an annual general meeting.

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58. The Directors may, whenever they think fit, and shall, on requisition by members in accordance with the Law, proceed to convene an extraordinary general meeting. The provisions of the Law shall apply to any requisition and to any failure by the Directors to convene an extraordinary general meeting when so requisitioned.

NOTICE OF GENERAL MEETINGS

59. An annual general meeting and a meeting called for the passing of a special resolution shall be called by 21 days notice in writing at the least, and a meeting of the Company other than an annual general meeting or a meeting for the passing of a special resolution shall be called by fourteen days notice in writing at the least. The notice shall specify the place, the day and the hour of meeting and, in case of special business, the general nature of that business, and shall be given in manner hereinafter mentioned or in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are, under the Articles of the Company, entitled to receive such notices from the Company:

PROVIDED that a meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in this Article, be deemed to have been duly called if it is so agreed: -

(a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent in par value of the shares giving that right.

60. The accidental omission to give notice of a meeting or (in cases where an instrument of proxy is sent out with the notice) the accidental omission to send such instrument of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meeting.

PROCEEDINGS AT GENERAL MEETINGS

61. Subject to Article 111A of these Articles, 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 with the exception of: -

(a) the declaration and sanction of dividends;

(b) the consideration of the accounts and balance sheets and the reports of the Directors and other documents required to be annexed to the accounts;

(c) the election of Directors in place of those retiring (if any);

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(d) the appointment of the Auditors of the Company and the fixing of, or the determination of the method of fixing, the remuneration of the Auditors.

61A. Except as may otherwise be permitted by Law, no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board, concerning any of the following matters with respect to the Company, Home Inns Beijing, Home Inns Shanghai or a Relevant Subsidiary without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company, and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of Home Inns Beijing, Home Inns Shanghai or a Relevant Subsidiary concerning any of the following matters without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company:

(i) the creation or adoption of any new employee stock option plan;

(ii) any consolidation, subdivision, conversion, increase or reduction of the share capital of each of the Company, Home Inns Beijing and Home Inns Shanghai or the alteration of any rights attaching thereto in any way;

(iii) any change to the Memorandum or Articles of Association, the Charter Documents, or the memorandum or articles of association (or other similar charter documents) that would directly or indirectly affect adversely the preference, rights or privileges of the holders of Preference Shares;

(iv) the acquisition of, or the provision of any direct or indirect financial assistance for the purpose of acquiring: (A) in the ordinary course of business and on an arm’s length basis, any (i) securities, or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$1,000,000 or (B) otherwise than in the ordinary course of business, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$400,000;

(v) the consolidation or merger which results in the shareholders immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity.

61B. For so long as at least 25% of the Series C Preference Shares issued and outstanding as at the Original Issue Date shall remain outstanding, the Company shall not, and the Company shall procure that Home Inns Beijing, Home Inns Shanghai and the Relevant Subsidiary (each a “Group Company”) shall not, and each of the members undertakes to the other members that it shall exercise all its powers in relation to the Company and its subsidiaries so as to procure that, subject to any applicable law, that a Group Company shall not, without the approval of the holders of at least two-thirds of the Series C Preference Shares then outstanding voting as a separate class, take or permit any action that:

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(i) increases or decreases, whether by merger, reclassification or otherwise, the authorized Series C Preference Shares or effect any combination, split, or reclassification of the outstanding Series C Preference Shares into a smaller or larger number of shares or exchange or convert any Series C Preference Shares or require the exchange or conversion of any Series C Preference Shares, except as provided in these Articles;

(ii) amends, alters or repeals, whether by merger, reclassification or otherwise, any provision of these Articles that alters or adversely affects the rights, preferences, conversion and other rights, voting powers or privileges of the Series C Preference Shares;

(iii) authorizes (whether by merger, reorganization, reclassification or otherwise) or issues any shares of capital stock that rank senior to, or on parity with, the Series C Preference Shares as to dividends, distributions or liquidation preference (“Series C Senior Shares”);

(iv) adopts any new stock option or other stock incentive plan or arrangement, increase the number of shares available for grant or issuance under any existing stock option or other stock incentive plan (collectively the “Option Plans”), or make any other material amendment to any such plan or arrangement; provided, however, that the Company may contemporaneously with the Original Issue Date increase the aggregate number of ordinary shares available for grant or issuance under its Option Plans to 9% of the enlarged issued share capital of the Company as of the Original Issue Date.

(v) redeems, or declares, set aside or pays a dividend on, the ordinary shares or any other class of Preference Shares of the Company, Home Inns Beijing or Home Inns Shanghai (as the case may be) or repurchases any outstanding securities of the Company, Home Inns Beijing or Home Inns Shanghai (as the case may be);

(vi) increases the authorized number of directors of the Board;

(vii) effects a voluntary liquidation, dissolution or winding up of a Group Company;

(viii) effects any consolidation, reorganization or merger of a Group Company with or into any other corporation or entity;

(ix) will result in a sale, license or disposition of all or substantially all of the assets (or of any material portion of the assets) of a Group Company or exclusively licenses all or substantially all of its property or business to a single entity or a group of entities, in any case in a single transaction or a series of transactions;

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(x) acquires any entity, business or assets by means of merger, consolidation, recapitalization, purchase of assets or otherwise, involving the issuance of consideration by a Group Company having a fair market value individually or in the aggregate in excess of US$5,000,000.00; or

(xi) effects a change in the primary nature of the Company’s business.

62. Subject to Articles 61A and 61B of these Articles, no business, save the election of a Chairman of the meeting, shall be transacted at any general meeting, unless a quorum is present when the meeting proceeds to business. Two members present in person or by proxy and holding between them at least 51per centum in par value of the issued shares of the Company for the time being shall be a quorum for all purposes.

63. The Chairman (if any) of the Board or, in his absence, a Deputy Chairman (if any) shall preside as Chairman at every general meeting. If there is no such Chairman or Deputy Chairman, or if at any meeting neither the Chairman nor a Deputy Chairman is present within fifteen minutes after the time appointed for holding the meeting, or if neither of them is willing to act as Chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside as Chairman if willing to act. If no Director is present, or if each of the Directors present declines to act as Chairman, the persons present and entitled to vote shall elect one of their number to be Chairman of the meeting.

64. If within fifteen minutes from the time appointed for the meeting a quorum be not present, the meeting, if convened upon a requisition as specified in Article 58, shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day, time and place as the Chairman of the meeting may determine. If at such adjourned meeting a quorum be not present within fifteen minutes from the time appointed for the meeting, the members present in person or by proxy shall be a quorum.

65. The Chairman of any general meeting at which a quorum is present may, with the consent of the meeting, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place or sine die; but no business shall be transacted at any adjourned meeting other than business which might have been transacted at the meeting from which the adjournment took place, unless due notice thereof is given or such notice is waived in the manner prescribed by these Articles. When a meeting is adjourned for 30 days or more, or sine die, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjourned meeting or the business to be transacted thereat. Where a meeting is adjourned sine die the time and place for the adjourned meeting shall be fixed by the Directors.

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66. Subject to the provisions of the Law, a resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at general meetings (or, being corporations, by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. A written notice of confirmation of such resolution in writing sent by or on behalf of a member shall be deemed to be his signature to such resolution in writing for the purposes of this Article. Such resolution in writing may consist of several documents, and each such document shall be certified by a Director or the Secretary to contain the correct version of the proposed resolution.

VOTING

67. (a) At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless, before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll, a poll is demanded by : -

(i) the Chairman of the meeting; or

(ii) at least two members present in person or by proxy and entitled to vote; or

(iii) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or

(iv) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

(b) Unless a poll is so demanded and the demand is not withdrawn, a declaration by the Chairman that a resolution has, on a show of hands, been carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive evidence of the fact without proof of the number of the votes recorded for or against such resolution.

(c) The holders of Preference Shares shall be entitled to vote together with the holders of the ordinary shares as a single class in a shareholders’ meeting. The holders of Preference Shares shall be entitled to such number of votes in a shareholders’ meeting as would be granted to such holders had they fully converted all of their Preference Shares held by them, at that point in time, into ordinary shares as provided herein. The holders of Preference Shares shall be entitled to notice of any shareholders’ meetings in accordance with these Articles.

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68. A demand for a poll may be withdrawn only with the approval of the meeting. If a poll be directed or demanded in the manner above mentioned it shall (subject to the provisions of Article 69 hereof) be taken at such time (being not later than seven days after the date of the demand) and in such manner as the Chairman of the meeting may appoint. No notice need be given of a poll not taken immediately. The result of such poll shall be deemed for all purposes to be the resolution of the meeting at which the poll was so directed or demanded.

69. In the case of an equality of votes at any general meeting, whether upon a show of hands or on a poll, the Chairman of the meeting shall be entitled to a second or casting vote.

70. A poll demanded upon the election of a Chairman or upon a question of adjournment shall be taken forthwith. Any business, other than that upon which a poll has been demanded, may be proceeded with pending the taking of the poll.

71. (a) No objection shall be made to the validity of any vote except at a meeting or poll at which such vote shall be tendered and every vote whether given personally or by proxy not disallowed at such meeting or poll shall be deemed valid for all purposes whatsoever of such meeting or poll.

(b) In case of any dispute as to voting the Chairman shall determine the same, and such determination shall be final and conclusive.

72. Subject to any special rights or restrictions for the time being attaching to any special class of shares in the capital of the Company, on a show of hands every member who is present in person or by proxy or by attorney shall be entitled to one vote only, and, in the case of a poll, every member present in person or by proxy or by attorney shall be entitled to one vote for each share held by him on an as-converted-to- Ordinary-Share basis.

73. On a poll, votes may be given either personally or by proxy and a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

74. A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, curator bonis or other person in the nature of a committee or curator bonis appointed by that court, and any such committee, curator bonis or other person may, on a poll, vote by proxy. If any member be a minor, he may vote by his guardian or one of his guardians who may give their votes personally or by proxy.

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PROXIES

75. (a)         A proxy need not be a member of the Company.

(b) An instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may accept, and shall be deemed, save where the contrary appears on the face of the instrument of proxy, to confer authority to demand or concur in demanding a poll and to include power to act generally at the meeting for the person giving the proxy and any adjournment thereof, and either to vote on any resolution (or amendment thereto) put to the meeting for which it is given as the proxy thinks fit. No instrument appointing a proxy shall be valid except for the meeting mentioned therein and any adjournment thereof.

76. The instrument appointing a proxy shall be signed by the appointor, or his duly authorised attorney in writing or, if such appointor be a corporation, under its common seal or signed by such officer, attorney or other person duly authorised in that behalf.

77. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be deposited at the Office, or such other place as may be notified in the notice of the meeting, at least 48 hours before the time fixed for holding the meeting at which the person named in such instrument proposes to vote or, in the case of a poll, not less than 24 hours before the time appointed for taking the poll; otherwise the person so named shall not be entitled to vote in respect thereof except with the approval of the Chairman of the meeting.

78. Any member may by power of attorney appoint any person to be his attorney for the purpose of voting at any meeting, and such power may be a special power limited to any particular meeting or a general power extending to all meetings at which such member is entitled to vote. Every such power shall be deposited at the Office, or such other place as may be notified in the notice of the meeting, at least 48 hours before being acted upon.

79. (a) An instrument of proxy may be revoked by forwarding to the Office, or such other place as may be notified in the notice of the meeting, written notification of such revocation signed by or on behalf of the person who issued or authorised the issue of the instrument of proxy.

(b) A vote given in accordance with the terms of an instrument of proxy or power of attorney shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the proxy or power of attorney, or transfer of the shares in respect of which the vote is given, provided that no intimation in writing of the death, insanity, revocation or transfer shall have been received at the Office, or such other place as may be notified in the notice of the meeting, 24 hours at least before the time fixed for holding the meeting, or adjourned meeting, or the taking of the poll, at which the instrument of proxy is to be used.

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CORPORATIONS ACTING BY REPRESENTATIVES

80. Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company.

DIRECTORS

81. The first Directors shall be appointed in writing by the subscribers to the Memorandum of Association of the Company or by the Company in general meeting.

82. The number of Directors shall be eight (8).

83. A Director need not hold any shares in the Company. A Director who is not a member of the Company shall nevertheless be entitled to attend and speak at general meetings.

DIRECTORS’ REMUNERATION

84. The remuneration of the Directors shall from time to time be determined by the Company in general meeting. Such remuneration shall be deemed to accrue from day to day. The Directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company.

POWERS OF DIRECTORS

85. Subject to the provisions of the Law, the Memorandum of Association of the Company, these Articles and any direction given by special resolution, the business of the Company shall be managed by the Directors, who shall pay all expenses incurred in the formation and registration of the Company, and who may exercise all such powers of the Company as are not by the Law or by these Articles required to be exercised by the Company in general meeting, subject to any provision in these Articles or the Law and to such regulations, not being inconsistent with any such provision, as may be prescribed by the Company in general meeting; but no such regulation shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article.

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86. The Directors may establish any local boards or agencies for managing any of the affairs of the Company, either in Hong Kong or elsewhere, and may appoint any persons to be members of such local boards, or any managers or agents for the Company, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the members of any local boards, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment and delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed, and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

87. The Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or person or any fluctuating body of persons, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

88. Subject to and to the extent permitted by the Law, the Company, or the Directors on behalf of the Company, may cause to be kept in any territory a Branch Register of members resident in such territory, and the Directors may make and vary such regulations as they may think fit respecting the keeping of any such Branch Register.

89. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments, and all receipts for monies paid to the Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

90. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures including, subject to the provisions of the Law, convertible debentures and convertible debenture stock, and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

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APPOINTMENT AND REMOVAL OF DIRECTORS

91. The Company may by special resolution remove any Director notwithstanding anything in these Articles or in any agreement between him and the Company (but without prejudice to any right to damages for termination of such agreement not in accordance with the terms thereof), and may, if thought fit, by ordinary resolution, appoint another person in his stead.

92. The Company may, without prejudice to the powers of the Directors under Article 93, from time to time, by ordinary resolution appoint new Directors to fill a casual vacancy and, subject to Article 61A of these Articles, change the number of Directors specified in Article 82.

93. The Directors shall have power, exercisable at any time and from time to time, to appoint any other person as a Director to fill a casual vacancy.

94. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as the number of Directors is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. If there shall be no Directors able or willing to act, then any member may summon a general meeting for the purpose of appointing Directors.

ALTERNATE DIRECTORS

95. Each Director may by written notification to the Company nominate any other person to act as alternate Director in his place and, at his discretion, in similar manner remove such alternate Director. A Director may appoint two or more persons in the alternative to act as Alternate Director and in the event of any dispute as to who is to represent the Director as his Alternate the first named of such alternative persons shall be the only person recognised as the Alternate Director and shall in any case be the only person entitled to receive notice of Directors’ meetings in the absence of his appointor. The alternate Director shall (except as regards the power to appoint an alternate) be subject in all respects to the terms and conditions existing with reference to the other Directors of the Company; and each alternate Director, whilst acting as such, shall exercise and discharge all the functions, powers and duties of the Director he represents, but shall look to such Director solely for his remuneration as alternate Director. Every person acting as an alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). The signature of an alternate Director to any resolution in writing of the Board or a committee of the Board shall, unless the notice of his appointment provides to the contrary, be as effective as the signature of his appointor. Any person appointed as an alternate Director shall vacate his office as such alternate Director as and when the Director by whom he has been appointed removes him or vacates office as Director. A Director shall not be liable for the acts or defaults of any alternate Director appointed by him.

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DISQUALIFICATION OF DIRECTORS

96. The office of a Director shall ipso facto be vacated:- (a) if he becomes prohibited by law or court order from being a Director; (b) if a receiving order or, in the case of a company, a winding up order is made against him or he makes any arrangement or composition with his creditors; (c) if he becomes of unsound mind; (d) if he gives the Company notice in writing that he resigns his office; (e) if he is removed by a special resolution of the Company in accordance with the provisions of these Articles; (f) if he is convicted of an arrestable offence.

DIRECTORS’ INTERESTS

97. A Director may hold any other office or place of profit under the Company (other than the office of Auditor), and he or any firm of which he is a member may act in a professional capacity for the Company in conjunction with his office of Director, for such period and on such terms (as to remuneration and otherwise) as the Directors may determine. No Director or intending Director shall be disqualified by his office from contracting with the Company, nor shall any contract or arrangement entered into by or on behalf of the Company in which any Director or intending Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit, remuneration or other benefits of such Director holding that office, or of any fiduciary relationship thereby established.

98. A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract (being a contract of significance in relation to the Company’s business) with the Company shall declare the nature of his interest in accordance with the provisions of the Law. A general notice given to the Directors by a Director to the effect that he is a member of a specified company or firm, and is to be regarded as interested in any contract, arrangement or dealing which may, after the date of the notice, be entered into or made with that company or firm, shall, for the purposes of this Article, be deemed to be a sufficient disclosure of interest in relation to any contract, arrangement or dealing so entered into or made.

99. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be taken into account in determining a quorum when any such contract or arrangement is under consideration.

100. A Director may hold office as a Director in or as manager of any other company in which the Company is a shareholder or is otherwise interested, and (subject to any agreement with the Company to the contrary) shall not be liable to account to the Company for any remuneration or other benefits receivable by him from such other company. The Board may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Board thinks fit (including the exercise thereof in favour of any resolution appointing the Directors or any of the Directors of such company or voting or providing for the payment of remuneration to the Directors of such company) and any Director of the Company may vote in favour of the exercise of such voting rights other than his own appointment or the arrangement of the terms thereof, in manner aforesaid.

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MANAGING DIRECTORS AND OTHER APPOINTMENTS

101. The Directors may, from time to time, appoint one or more of their number to be Managing Director or Joint Managing Director of the Company, or to hold such office in the management, administration or conduct of the business of the Company as they may decide, and for such period and upon such terms and for such remuneration as the Directors shall think fit, and the Directors may also, from time to time (subject to the provisions of any agreement between him or them and the Company) remove him or them from office, and appoint another or others in his or their place or places.

102. A Managing Director or a Joint Managing Director (subject to the provisions of any agreement between him as Managing Director or a Joint Managing Director and the Company) shall be subject to the same provisions as to resignation and removal as the other Directors of the Company, and shall ipso facto and immediately cease to be Managing Director or Joint Managing Director if he shall cease to hold the office of Director.

103. The Directors may, from time to time, entrust to and confer upon any Managing Director, Joint Managing Director or Director holding any other office in the management, administration or conduct of the business of the Company, such of the powers exercisable under these Articles by the Directors as they may think fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions and with such restrictions as they may consider expedient, and may confer such powers collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

PROCEEDINGS OF DIRECTORS

104. The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business. Unless otherwise determined by the Board or as otherwise provided in these Articles, three Directors shall constitute a quorum. Subject to Article 111A of these Articles, questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the Chairman of the meeting shall have a second or casting vote. A Director or the Secretary may, at any time, summon a meeting of the Directors.

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105. Notice of a meeting of Directors shall be deemed to be duly given to a Director if it is given to him personally in writing or by word of mouth or sent to him at his last known address or any other address given by him to the Company for this purpose. A Director may consent to short notice of and may waive notice of any meeting and any such waiver may be retrospective.

106. The Directors may elect a Chairman of the Board and determine the period for which he is to hold office; but if no such Chairman be elected, or if at any meeting the Chairman be not present within fifteen minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting.

107. (a) Subject to Article 111A of these Articles, a resolution in writing signed by a simple majority of the Directors for the time being shall be as effective for all purposes as a resolution of the Directors passed at a meeting duly convened, held and constituted. A written notification of confirmation of such resolution in writing sent by a Director shall be deemed to be his signature to such resolution in writing for the purposes of this Article. Such resolution in writing may consist of several documents, each signed by one or more Directors.

(b) Any Director or member of a committee of Directors may participate in a meeting of the Directors or such committee by means of telephone or other audio communications equipment whereby all persons attending or participating in the meeting can hear each other. The person or persons participating in the meeting in the aforesaid manner shall be deemed for all purposes to be present in person at such meeting.

108. Unless otherwise provided in these Articles, a meeting of the Directors at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Directors generally.

109. The Directors may, from time to time, appoint committees consisting of such persons as they think fit, and may delegate any of their powers to any such committee and, from time to time, revoke any such delegation and discharge any such committee wholly or in part. Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may, from time to time, be imposed upon it by the Directors. Any such committee shall be properly constituted even if it consists of one person.

110. The meetings and proceedings of any such committee consisting of two or more members shall be governed mutatis mutandis by the provisions of these Articles regulating the meetings and proceedings of the Directors insofar as the same are not superseded by any regulations made by the Directors under the last preceding Article.

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111. All acts done bona fide by any meeting of the Directors or of a committee of Directors, or by any persons acting as Directors, shall, notwithstanding that there was some defect in the appointment of any such Directors or persons acting as aforesaid, or that they or any of them were disqualified, or had vacated office, be as valid as if every such person had been duly appointed and was qualified and continued to be a Director.

111A. No resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of Home Inns Beijing, Home Inns Shanghai or the Relevant Subsidiary concerning any of the following matters with respect to Home Inns Beijing, Home Inns Shanghai or the Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board:

(i) the entering into of any contract or transaction outside the ordinary course of its business, in excess of US$200,000;

(ii) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in favor of any person other then a Group Company;

(iii) any significant change to its business to areas materially different from the current products and/or services offered;

(iv) declare, make, or pay any distribution of capital, income, and/or dividends to the member of the Company, Home Inns Beijing or Home Inns Shanghai, as applicable;

(v) repurchase or cancel any capital stock of the Company, Home Inns Beijing or Home Inns Shanghai;

(vi) enter into any material transaction with any member of the Board, officer, employee, or member of the Company or any company controlled, directly or indirectly, by a member of the Board, officer, employee or member of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(vii) the appointment of or change in the auditor of the Company, unless such auditor is a “Big 4” accounting firm; and

(viii) the sale, transfer, lease, assignment or other disposal of a material part of the its undertaking, property and/or assets with a book value (as reflected in its respective financial statements) in excess of US$400,000 or the entering into of any contract to do so.

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MINUTES

112. The Directors shall cause to be entered and kept in books provided for the purpose minutes of the following:-

(a) all appointments of officers;

(b) the names of the Directors and any alternate Director who is not also a Director present at each meeting of the Directors and of any committee of Directors;

(c) all orders made by the Directors and committees of Directors; and

(d) all resolutions and proceedings of general meetings and meetings of the Directors and committees. Any such minutes of any meeting of the Directors, or any committee, or of the Company, if purporting to be signed by the Chairman of such meeting, or by the Chairman of the next succeeding meeting shall be receivable as prima facie evidence of the matters stated in such minutes.

THE SEAL

113. The Directors shall forthwith procure a common seal to be made for the Company, and shall provide for the safe custody thereof. The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors or a committee of the Directors and every instrument to which the Seal shall be affixed shall be signed by one Director or some other person nominated by the Directors for the purpose.

114. (a) The Company may have for use in any place or places outside the Cayman Islands a duplicate Seal or Seals each of which shall be a facsimile of the common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used.

(b) A Director or office, representative or attorney of the Company may without further authority of the Directors affix the Seal over his signature alone to any document of the Company required to be authenticated by him under seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever.

SECRETARY

115. The Company may have a Secretary. The Secretary and any joint secretaries or deputy or assistant secretary or secretaries may be appointed by the Directors for such term, at such remuneration and upon such conditions as the Directors may think fit and the Secretary and any joint secretaries or deputy or assistant secretary so appointed may at any time be removed from office by the Directors. A Director may be the Secretary.

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DIVIDENDS AND RESERVES

116. (a) Subject to the Law and Article 111A of these Articles, the Company may by ordinary resolution declare dividends but no such dividend shall exceed the amount recommended by the Directors.

(b) No distribution shall be made save in accordance with the provisions of the Law and Article 111A of these Articles.

(c) The Series C Preference Shares shall rank pari passu with the Series B Preference Shares in any entitlement to dividends.

117. Subject to Article 111A of these Articles, the Directors may, if they think fit, from time to time, pay to the members such interim dividends as appear to the Directors to be justified by the profits of the Company. If at any time the share capital of the Company is divided into different classes the Directors may pay such interim dividends in respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferred rights as well as in respect of those shares which confer on the holders thereof preferential or special rights in regard to dividend, and provided that the Directors act bona fide they shall not incur any responsibility to the holders of shares conferring a preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or nonpreferred rights. The Directors may also pay at halfyearly or at other suitable intervals to be settled by them any dividend which may be payable at a fixed rate if they are of the opinion that the profits justify the payment.

118. Subject to Article 111A of these Articles, the Directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the company) as the Directors may from time to time think fit. The Directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

119. No dividend shall be payable except out of the profits of the Company, and no dividend shall bear interest as against the Company.

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120. The Directors may retain any dividend or other monies payable on or in respect of a share on which the Company has a lien, and may apply the same in or towards satisfaction of the debts and liabilities in respect of which the lien exists.

121. Any resolution declaring a dividend on shares of any class, whether a resolution of the Company in general meeting or a resolution of the Directors, may specify that the same shall be payable to the persons registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors and transferees of any such shares. The provisions of this Article shall mutatis mutandis apply to capitalisations to be effected in pursuance of these Articles.

122. Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. For the purposes of this Article no amount paid on a share in advance of calls shall be treated as paid on the share.

123. Unless otherwise directed, any dividend or other monies payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled, or, in the case of joint holders, to the registered address of that one whose name stands first on the register in respect of joint holding, or addressed to such person at such address as the holder or joint holders shall direct. The Company shall not be liable or responsible for any cheque or warrant lost in transmission nor for any dividend or other monies lost to the member or person entitled thereto by the forged endorsement of any cheque or warrant. Payment of the cheque or warrant by the banker on whom it is drawn shall be a good discharge to the Company.

124. Subject to Article 111A of these Articles, the Directors may, with the sanction of the Company in general meeting, distribute in specie or in kind among the members in satisfaction in whole or in part of any dividend any of the assets of the Company, and in particular any shares or securities of other companies to which the Company is entitled.

125. All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed, and all dividends unclaimed for two years after having been declared may be forfeited by the Directors and shall revert to the Company. The payment into a separate account of any monies payable in respect of a share shall not constitute the Company a trustee in respect thereof for any person.

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CAPITALISATION OF RESERVES ETC.

126. The Company in general meeting may upon the recommendation of the Directors resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sums be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions, on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures or other obligations of the Company to be allotted and distributed credited as fully paid up to and amongst such members in the proportions aforesaid, or partly in one way and partly in the other, and the Directors shall give effect to such resolution:

PROVIDED that a share premium account and a capital redemption reserve fund may, for the purposes of this Article, only be applied in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares.

127. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto.

128. For the purpose of giving effect to any resolution under Articles 124 and 126 hereof the Directors may settle any difficulty which may arise in regard to the distribution as they think expedient, and in particular may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed or that fractions of such value as the Directors may determine may be disregarded in order to adjust the rights of all parties, and may vest any such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalised fund as may seem expedient to the Directors. The Directors may appoint any person to sign contracts for allotment on behalf of the persons entitled to share in the appropriation and distribution, and such appointment shall be effective and binding upon all concerned, and the contract may provide for the acceptance by such persons of the shares or debentures to be allotted and distributed to them respectively in satisfaction of their claims in respect of the sum so capitalised.

ACCOUNTS AND AUDITORS

129. (a) The Directors shall cause proper and true books of account to be kept of all sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place; of all sales and purchases of goods by the Company; and of the assets and liabilities of the Company and of all other matters necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

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(b) The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by statute or authorised by the Directors or by the Company in general meeting.

130. The Directors shall from time to time, in accordance with the provisions of the Law, cause to be prepared and to be laid before the Company in general meeting such Profit and Loss Accounts, Balance Sheets, Group Accounts (if any) and Reports as are required by the Law.

131. A copy of every Balance Sheet (including every document required by law to be annexed thereto) which is to be laid before the Company in general meeting, together with a copy of the Directors’ Report and a copy of the Auditors’ Report, shall, not less than 21days before the date of the meeting, be sent to every member of, and every holder of debentures of, the Company and to all persons other than members or holders of debentures of the Company, being persons entitled to receive notices of general meetings of the Company:

PROVIDED that this Article shall not require a copy of those documents to be sent to any person of whose address the Company is not aware nor to more than one of the joint holders of any shares or debentures.

132. Subject to Article 111A of these Articles, auditors shall be appointed and their duties regulated in the manner provided by the Law.

NOTICES

133. Any notice or other document may be served by the Company upon any member either personally or by sending it through the post in a prepaid letter, envelope or wrapper addressed to such member at his registered address. Any notice, if posted from one country to another, is to be sent by prepaid airmail. The signature to any notice to be given by the Company may be written or printed.

134. Each member shall, from time to time, notify in writing to the Company some place which shall be deemed his registered address within the meaning of the last preceding Article.

135. Any notice sent by post shall be deemed to have been served on the fifth day after the day of posting. In proving such service it shall be sufficient to prove that the letter, envelope or wrapper containing the notice was properly addressed and put in the post as a prepaid letter.

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136. A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

137. Notice of every general meeting shall be given in any manner hereinbefore authorised to:-

(a) every member except those members who have not supplied to the Company an address for the giving of notices to them;

(b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and

(c) the Auditors for the time being of the Company. No other person shall be entitled to receive notices of general meetings.

138. Any summons, notice, order or other document required to be sent to or served upon the Company, or upon any officer of the Company, may be sent or served by leaving the same or sending it through the post in a prepaid letter, envelope or wrapper, addressed to the Company or to such officer at the Office.

139. In reckoning the period for any notice given under these Articles, the day on which notice is served, or deemed to be served and the day for which such notice is given shall be excluded.

WINDING UP

140. (a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Series C Preference Shares will rank pari passu with the Series B Preference Shares and the holders of Series C Preference Shares and Series B Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Series A Preference Shares and ordinary shares, by reason of their ownership thereof, the amount of two times the applicable Original Issue Price per share for each Series C Preference Shares and each Series B Preference Share (in each case adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of the Series C Preference Shares and Series B Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series C Preference Shares and Series B Preference Shares in proportion to the applicable original issue price paid by each such holder for such Preference Shares.

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(b) After full payment has been made to the holders of Series C Preference Shares and Series B Preference Shares of the foregoing amounts to which they shall be entitled, holders of Series A Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of ordinary shares, by reason of their ownership thereof, the amount of two times the Series A Original Issue Price per share for each Series A Preference Share (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Series A Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of Series A Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the remaining assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series A Preference Shares in proportion to the number of Series A Preference Shares held by each holder.

(c) After full payment has been made to the holders of Preference Shares of the foregoing amounts to which they shall be entitled, holders of the ordinary shares shall be entitled to receive all remaining assets (pro rata, based upon the number of ordinary shares held by each holder at the record date for such distribution of the Company).

(d) For purposes of this Article 140, a liquidation, dissolution or winding up of the Company shall be deemed to be occasioned by, or to include any of the following: (i) the Company’s sale of all or substantially all of its assets, or (ii) any merger, consolidation or other similar transaction involving the Company, unless upon the conclusion of such transaction, and after giving effect thereto, the members of the Company immediately prior to such transaction would continue to own, in substantially the same percentages, more than 50% of the shares of the surviving company following such transaction, or (iii) any transaction involving the transfer, directly or indirectly, of capital shares of the Company having 50% or more of the outstanding voting power of the Company.

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(e) For purposes of this Article 140, if the distributions or consideration received by the members of the Company is other than cash, its value will be deemed to be its fair market value. Whenever the distribution provided for in this Article 141 shall be payable in securities, such securities shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by (ii) below:

(1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing;

(2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a member’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding Preference Shares.

INDEMNITY

141. Every Director, Managing Director, Agent, Auditor, Secretary and other officer for the time being of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in relation to the Company in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Law in which relief is granted to him by the court.

TRANSFER BY WAY OF CONTINUATION

142. If the Company is exempted as defined in the Law, it shall, subject to the provisions of the Law and with the approval of a special resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

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EX-4.2

Exhibit 4.2

HOME INNS & HOTELS MANAGEMENT INC.

(Incorporated under the laws of the Cayman Islands)

Number

Specimen

Ordinary Shares

US$1,000,000.00 divided into 200,000,000 shares of US$0.005 each, comprised of

177,075,114 ordinary shares of par value US$0.005 each,

17,241,400 Series A Preference Shares of par value US$0.005 each,

2,417,645 Series B Preference Shares of par value US$0.005 each and

3,265,841 Series C Preference Shares of par value US$0.005 each

THIS IS TO CERTIFY THAT

is the registered

holder of

Ordinary Shares

in the above-named Company subject to the memorandum and articles of association thereof.

EXECUTED for and on behalf of the Company on 2006.

DIRECTOR

©GOES 740 All Rights Reserved LITHO. IN U.S.A

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH CERTAIN RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A SHAREHOLDERS AGREEMENT DATED JUNE 29, 2006 ENTERED INTO AMONG THE PARTIES THERETO (THE “SHAREHOLDERS AGREEMENT’). A COPY OF SUCH AGREEMENT IS ON FILE AT THE REGISTERED OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY MARKET STAND-OFF RESTRICTION AS SET FORTH IN THE SHAREHOLDERS AGREEMENT. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE ORDINARY SHARES OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.

TRANSFER

I		(the Transferor) for the value received
DO HEREBY transfer to		(the Transferee) the
		shares standing in my name in the

undertaking called HOME INNS & HOTELS MANAGEMENT INC.

To hold the same unto the Transferee

Dated

Signed by the Transferor

in the presence of:

Witness Transferor

EX-4.4

Exhibit 4.4

SERIES B PREFERENCE SHARES PURCHASE AGREEMENT

This Series B Preference Shares Purchase Agreement (this “Agreement”) is made and entered into as of the 24^th day of November, 2003, by and among Home Inns & Hotels Management (Hong Kong) Limited, a Hong Kong company (the “Company”), and the parties listed on the Schedule of Investors attached to this Agreement as Exhibit A (each hereinafter individually referred to as an “Investor” and collectively referred to as the “Investors”).

WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, the Company’s Series B Preference Shares on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, the parties hereby agree as follows:

1. AGREEMENT TO PURCHASE AND SELL SHARES.

1.1 Authorization. As of the Closing (as defined in Section 2 hereof), the Company will have authorized the issuance, pursuant to the terms and conditions of this Agreement, of up to Two Million Four Hundred and Seventeen Thousand Six Hundred Forty-Five (2,417,645) shares of the Company’s Series B Preference Shares (the “Purchased Shares”) having the rights, preferences, privileges and restrictions set forth in the Amended and Restated Articles of Association of the Company attached to this Agreement as Exhibit B (the “Restated Articles”), the Shareholders Agreement (as defined in Section 5.9).

1.2 Agreement to Purchase and Sell. The Company agrees to sell to each Investor at the Closing, and each Investor agrees, severally and not jointly, to purchase from the Company at the Closing, the number of Purchased Shares set forth opposite such Investor’s name on Exhibit A, at a price of US$0.3309 per share. The ordinary shares of the Company issuable upon conversion of the Purchased Shares will be collectively hereinafter referred to as the “Conversion Shares”.

2. CLOSING. The purchase and sale of the Purchased Shares will take place at the offices of Boughton Peterson Yang Anderson, 4009 Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong, at 3:00 p.m. local time, on the 1^st day of December, 2003, or at such other time and place as the Company and Investors who have agreed to purchase a majority of the Purchased Shares listed on Exhibit A mutually agree upon (which time and place are referred to in this Agreement as the “Closing”). At the Closing, the Company will deliver to each Investor a certificate representing the number of Purchased Shares that such Investor has agreed to purchase hereunder as shown on Exhibit A against delivery to the Company by such Investor of the full purchase price for such Purchased Shares, paid by wire transfer of funds to the Company.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Investor that, except as set forth in the Schedule of Exceptions (the “Schedule of Exceptions”) attached to this Agreement as Exhibit C (which Schedule of Exceptions shall be deemed to be representations and warranties to the Investors by the Company under this Section 3), the statements in this Section 3 are all true and complete immediately prior to the Closing. Except for subsections 3.1, 3.2, 3.3, 3.4, and 3.5 below, for purposes of this Section 3, all references to the “Company” shall include the Company and Home Inns Hotel Management (Beijing) Limited (the “China Sub”), a joint venture established under the laws of the People’s Republic of China (the “PRC”) by the Company and Capital Travel Resorts and Hotels Group Limited (“Capital Travel”).

3.1 Organization, Corporate Power and Qualification. The Company has been duly incorporated and organized, and is validly existing, under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”). The Company has the requisite corporate power and authority, to enter into and perform this Agreement, the Shareholders Agreement (the Agreement and the Shareholders Agreement are collectively referred to herein as the “Related Agreements”), to own and operate its properties and assets and to carry on its business as currently conducted and as presently proposed to be conducted. The Company is duly qualified to do business in all jurisdictions in which it is required to be so qualified as the Company’s business is currently conducted and as presently proposed to be conducted by the Company, except for jurisdictions in which failure to so qualify could not reasonably be expected to have a material adverse effect on the business, operations, affairs or condition (financial or otherwise) of the Company as currently conducted and as presently proposed to be conducted or in its properties or assets taken as a whole (a “Material Adverse Effect”). The China Sub has been duly incorporated and organized, and is validly existing, under the laws of the PRC. The China Sub has the requisite corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted and as presently proposed to be conducted. The China Sub is duly qualified to do business in all jurisdictions in which it is required to be so qualified as the China Sub’s business is currently conducted and as presently proposed to be conducted by the China Sub, except for jurisdictions in which failure to so qualify could not reasonably be expected to have a Material Adverse Effect.

3.2 Capitalization.

(a) Issued Share Capital. The capitalization of the Company immediately prior to Closing consists of an authorized share capital of HK$1,000,000.00 with the following issued share capital:

(i) Ordinary Shares. Eleven Million (11,000,000) issued and outstanding Ordinary Shares of par value of HK$0.005 each (the “Ordinary Shares”); and

(ii) Series A Preference Shares. Seventeen Million Two Hundred Forty-One Thousand Four Hundred (17,241,400) issued and outstanding Series A Preference Shares of par value of HK$0.005 each.

(b) Issue of Series B Preference Shares. Upon the Closing, Two Million Four Hundred and Seventeen Thousand Six Hundred Forty-Five (2,417,645) Series B Preference Shares of par value of HK$0.005 each will be issued. Upon the Closing, the rights, preferences and privileges of the Series A Preference Shares and Series B Preference Shares (collectively referred to as the “Preference Shares”) will be as stated in the Restated Articles and as provided by law.

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(c) Options, Warrants, Reserved Shares. Except for the conversion privileges of the Series A Preference Shares and Series B Preference Shares and the employee stock option plan of the Company whereby a maximum of 1,412,070 Ordinary Shares may be subject to options granted to employees (the “Stock Option Plan”), there are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreement for the purchase or acquisition from the Company of any of its capital shares or any securities convertible into or ultimately exchangeable or exercisable for any of the Company’s capital shares. Apart from the exceptions noted herein or in the Schedule of Exceptions, no shares of the Company’s outstanding capital shares, or shares issuable upon exercise or exchange of any outstanding options, warrants or rights, or other shares issuable by the Company, are subject to any preemptive rights, rights of first refusal or other rights to purchase such shares (whether in favor of the Company or any other person), pursuant to any agreement or commitment of the Company.

(d) The outstanding capital shares of the Company are duly authorized and validly issued, fully paid and nonassessable, and have been approved by all requisite shareholder action.

(e) Outstanding Security Holders. The Investors have a complete list of all outstanding shareholders, option holders under the Stock Option Plan and other security holders of the Company.

3.3 Subsidiaries. The Company owns directly 88.45% of the issued and outstanding equity interests, and holds 88.45% of the voting shares, of the China Sub. The approved total investment amount of the China Sub is RMB$60,000,000, of which the registered capital amount is RMB$38,945,000. The Company owns directly 88.45% of the total registered capital of the China Sub. There are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights, except for such rights which may be held by the Company) or agreements, orally or in writing, for the purchase or acquisition of any equity or other ownership interest of the China Sub. Subject to the exceptions stated in Schedule to Exceptions in Exhibit C hereof and other than the China Sub, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association, or other entity.

3.4 Due Authorization. All corporate action on the part of the Company’s directors and shareholders necessary for (i) the authorization, execution, delivery of, and the performance of all obligations of the Company under, the Related Agreements; (ii) the authorization, issuance, reservation for issuance and delivery of all of the Purchased Shares being sold under this Agreement and of the Conversion Shares; and (iii) the authorization of the Restated Articles has been taken or will be taken prior to the Closing. The Related Agreements, when executed and delivered, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Except in relation to the Series A Preference Shares of the Company, the Purchased Shares, when issued, sold and delivered in accordance with the terms of this Agreement, are not, and the Conversion Shares upon the conversion of the Purchased Shares will not be, subject to preemptive rights or other preferential rights in any present shareholders of the Company, will not be subject to any lien, and will not conflict with any provision of any agreement or instrument to which the Company is a party or by which it or its property is bound.

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3.5 Valid Issuance of Shares.

(a) The Purchased Shares, when paid for and then issued, as provided in this Agreement, will be duly authorized and validly issued, fully paid and nonassessable. The Conversion Shares have been duly and validly reserved for issuance upon conversion of the Purchased Shares and, when issued upon such conversion in accordance with the Restated Articles (assuming no change in the Restated Articles or in applicable law), will be duly authorized and validly issued, fully paid and nonassessable.

(b) Based in part on the representations made by the Investors in Section 4 hereof, the offer and sale of the Purchased Shares solely to the Investors in accordance with this Agreement are made in compliance with the laws of Hong Kong and all other applicable jurisdictions.

(c) The outstanding capital shares of the Company are duly authorized and validly issued, fully paid and nonassessable, and have been approved by all requisite shareholder action. Such capital shares, and all outstanding options, warrants, convertible notes and other securities of the Company, have been issued in full compliance with the laws of Hong Kong and all other applicable jurisdictions.

3.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any national, state or local governmental authority is required on the part of the Company in order to enable the Company to execute, deliver and perform its obligations under the Related Agreements except for such qualifications or filings under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement. All such qualifications and filings will, in the case of qualifications, be effective on the Closing and will, in the case of filings, be made within the time prescribed by law.

3.7 Litigation. There are no actions, suits, claims, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company or against any officer or holder of more than five percent (5%) of the capital shares of the Company (other than any Investor) relating to such person’s performance of duties for the Company or relating to his, her or its share ownership in the Company, or any reasonable basis therefor, which could reasonably be expected to result, either in any case or in the aggregate, in a Material Adverse Effect or which directly or indirectly challenge the validity of this Agreement, the issuance of any of the Purchased Shares, or any action taken or to be taken pursuant hereto or thereto. Neither the Company nor any officer or holder of more than five percent (5%) of the capital shares of the Company (other than any Investor) is named in, subject to or in default under, nor are any of its assets bound by, any order, writ, injunction, decree, ruling or decision of any court, commission, board or other governmental agency. There are no actions, suits, claims, investigations or proceedings by the Company currently pending or that the Company currently intends to initiate.

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3.8 Certain Agreements of Officers and Key Employees.

(a) There are no existing contracts or engagements to which the Company is a party and in which any of the directors of the Company are directly or indirectly interested (other than service contracts).

(b) To the knowledge of the Company, no officer of the Company or the Key Employees (for purposes of this Agreement, “Key Employees” shall mean Qi Ji, Hui Chen, and Ri Xin Liang) of the Company is in violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, or any other contract, agreement or understanding or any restrictive covenant relating to the right of any such officer or Key Employee to be employed by the Company because of the nature of the business conducted or presently proposed to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and the continued employment of the Company’s officers and Key Employees does not subject the Company to any liability to third parties. The Company has not received any communication from the former employer of an officer or Key Employee regarding such person’s existing or proposed role as a director, officer or employee of or consultant to the Company regarding or indicating the alleged violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, or any other contract, agreement or understanding or any restrictive covenant relating to the right of any such person to be employed by the Company because of the nature of the business conducted by the Company or relating to the use of trade secrets or proprietary information of others.

3.9 Status of Proprietary Assets.

(a) As used in this Section 3.9,

(i) “Business” means the business of the Company as presently conducted and as presently proposed to be conducted, including without limitation the hotel investment, management and franchising services.

(ii) “Intellectual Property Rights” means worldwide common law and statutory rights in, to or associated with (i) patents, patent applications and invention disclosures, (ii) copyrights, copyrights registrations and copyright applications and “moral” rights, (iii) the protection of trade and industrial secrets and confidential information, (iv) trademarks, trade names, service marks and other designators of origin, (v) analogous rights to those set forth above, (vi) divisionals, continuations, continuation-in-part, renewals, reissuances, reexaminations, and extensions of the foregoing (as applicable), and all other industrial and/or proprietary rights in, to or associated with Technology or intangible intellectual property.

(iii) “Necessary Intellectual Property” means all Technology and Intellectual Property Rights used in and/or necessary to the conduct of the Business, including without limitation that Technology and those Intellectual Property Rights listed in Exhibit D.

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(iv) “Technology” means all inventions, works of authorship, know-how, show-how, data, databases, information, processes, procedures, techniques, documents, diagrams, source code, software, hardware, circuits, maskworks, algorithms, documentation and flowcharts.

(b) The Company owns and has good and valid title to, unencumbered by any liens, all Necessary Intellectual Property.

(c) The Company has not infringed, violated or misappropriated any Intellectual Property Right of any third party. The conduct of the Business does not conflict with, infringe, violate or misappropriate any Intellectual Property Right of any third party.

(d) There are no outstanding options, licenses, or agreements of any kind relating to the Necessary Intellectual Property, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the Technology or Intellectual Property Rights of any other person or entity.

(e) The Company has not received any communications alleging that the Company (or any of its employees or consultants) has violated, infringed or misappropriated or, by conducting its business, would violate, infringe or misappropriate any Intellectual Property Rights of any other person or entity.

(f) To the Company’s knowledge, no Key Employee is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee’s best efforts to promote the interest of the Company or that would conflict with the Business. Furthermore, to the Company’s knowledge, the carrying on of the Business by the employees of the Company will not conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which such employee is now obligated.

(g) Neither the execution or delivery of this Agreement will conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which the Company is now obligated.

3.10 Compliance with Law and Documents. The Company is not in violation or default of any provisions of its Memorandum and Articles of Association (or other similar charter documents), as amended to date, and the Company is in compliance with all applicable statutes, laws, regulations and executive orders of Hong Kong and all foreign countries or other governmental bodies and agencies having jurisdiction over the Company’s business or properties where such violation would have a Material Adverse Effect. The Company has not received any notice of any violation of any such statute, law, regulation or order that has not been remedied prior to Closing. The execution, delivery and performance of the Related Agreements and the consummation of the transactions contemplated hereby or thereby will not result in any such violation or default, or be in conflict with or result in a violation or breach of, with or without the passage of time or the giving of notice or both, the Company’s Memorandum and Articles of Association (or other similar charter documents), any judgment, order or decree of any court or arbitrator to which the Company is a party, or is subject, any agreement or contract of the Company, or a violation of any statute, law, regulation or order, or an event which results in the creation of any lien, charge or encumbrance upon any material assets of the Company.

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3.11 Registration Rights. Except as provided in the Shareholders Agreement, the Company is not under any obligation, under contract or law, to (i) register under the 1933 Act any of its currently outstanding securities or any of its securities which may hereafter be issued or (ii) list for public trading such securities in any jurisdiction or on any stock exchange or over-the-counter market.

3.12 Title to Property and Assets. The Company owns its properties and assets free and clear of all mortgages, deeds of trust, liens, encumbrances and security interests except for statutory liens for the payment of current taxes that are not yet delinquent and liens, encumbrances and security interests which arise in the ordinary course of business and which do not affect material properties and assets of the Company. With respect to the property and assets it leases, the Company is in material compliance with such leases and the Company holds valid leasehold interests in such assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets.

3.13 Certain Actions. From the date of this Agreement until Closing, the Company has not: (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital shares; (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of Twenty Five Thousand U.S. Dollars (US$25,000) or in excess of One Hundred Thousand U.S. Dollars (US$100,000) in the aggregate; (iii) made any loans or advances to any person, other than ordinary advances for travel expenses and miscellaneous expenditures incurred in the ordinary course of business; (iv) sold, exchanged or otherwise disposed of any material assets or rights other than the sale of inventory in the ordinary course of its business; or (v) entered into any material transactions with any of its officers, directors or employees or any entity controlled by any of such individuals.

3.14 Activities Since Date of This Agreement. Since the date of this Agreement, there has not been:

(a) any damage, destruction or loss, whether or not covered by insurance, that has resulted in or could reasonably be expected to result in a Material Adverse Effect;

(b) any waiver by the Company of a valuable right or debt owed to it which has resulted in a Material Adverse Effect;

(c) any material change or amendment to a contract or arrangement by which the Company or any of its assets or properties is bound or subject;

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(d) any other event or condition of any character that could result in or could reasonably be expected to result in a Material Adverse Effect;

(e) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except such a satisfaction, discharge or payment made in the ordinary course of business that is not material to the assets, properties, financial condition, operating results or business of the Company;

(f) any material change in any compensation arrangement or agreement with any Key Employee or director;

(g) except for the licensing of software in the ordinary course of business, any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

(h) any resignation or termination of employment of any key officer of the Company;

(i) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;

(j) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its properties or assets, except liens for taxes not yet due or payable;

(k) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(l) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital shares, or any direct or indirect redemption, purchase or other acquisition of any of such shares by the Company; or

(m) any agreement or commitment by the Company to do any of the things described in this Section 3.14.

3.15 Insurance. The Company has in full force and effect such insurance policies, in such amounts (subject to reasonable deductibles) as are carried by similar companies, including casualty and liability insurance policies.

3.16 Tax Returns and Payments. The Company has timely filed all tax returns and reports required by law. All tax returns and reports of the Company are true and correct in all material respects. The Company has paid all taxes and other assessments due, except those, if any, currently being contested by it in good faith which are listed in the Schedule of Exceptions.

3.17 Minute Books. The minute books of the Company contain a complete record of all meetings, consents and actions of the board of directors and the shareholders of the Company since the time of its incorporation, accurately reflecting all transactions referred to in such minutes in all material respects.

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3.18 Labor Agreements and Actions. The Company is not bound by or subject to any contract, commitment or arrangement with any labor union, and to the Company’s knowledge, no labor union has requested, sought or attempted to represent any employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending nor, to the Company’s knowledge, threatened, nor is the Company aware of any labor organization activity involving its employees. The Company is not aware that any officer or Key Employee intends to terminate their employment with the Company, nor does the Company have any present intention to terminate the employment of any of its officers or employees.

3.19 Interested Party Transactions. To the knowledge of the Company, no officer or director of the Company or any “affiliate” or “associate” (as those terms are defined in Rule 405 promulgated under the 1933 Act) of any such person has had, either directly or indirectly, a material interest in: (i) any person or entity which purchases from or sells, licenses or furnishes to the Company any goods, property, technology, intellectual or other property rights or services; or (ii) any contract or agreement to which the Company is a party or by which it may be bound or affected.

3.20 Assumptions or Guaranties of Indebtedness of Other Persons. The Company has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any indebtedness of any other person.

3.21 Shares Restriction Agreements. Each person who, pursuant to any benefit, bonus or incentive plan of the Company, holds any currently outstanding shares or other securities of the Company or any option, warrant or right to acquire such shares or other securities, has entered into or is otherwise bound by, an agreement granting the Company a right of first refusal with respect to all such shares. The Company has furnished to the solicitors to the Investors true and complete copies of the forms of all such share restriction agreements.

3.22 Limitation. The provisions of this Section 3.22 shall operate to limit the liability of the Company in respect of any claim for breach of any of the representations, warranties and covenants of the Company under Section 3 of this Agreement. The parties hereto agree as follows:

(a) the maximum aggregate liability of the Company in respect of all such claims shall not exceed the aggregate total paid by the Investors for the Purchased Shares.

(b) No such claim shall be brought against the Company unless:

(i) written particulars thereof (stating in reasonable detail the specific matter in respect of which the claim is made) shall have been notified in writing to the Company before the expiration of three (3) years from the date of the Closing; and

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(ii) the amount of the claim is not less than Twenty-Five Thousand U.S. Dollars (US$25,000).

4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each Investor hereby represents and warrants to, and agrees with, the Company, severally and not jointly, that:

4.1 Authorization. The Related Agreements constitute such Investor’s valid and legally binding obligations, enforceable in accordance with its terms except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law, governing the availability of equitable remedies. Each Investor represents that such Investor has full power and authority to enter into the Related Agreements.

4.2 Purchase for Own Account. The Purchased Shares to be purchased by such Investor hereunder will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. If not an individual, such Investor also represents that such Investor has not been formed for the specific purpose of acquiring Purchased Shares.

4.3 Disclosure of Information. At no time was the Investor presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Purchased Shares. Such Investor has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Purchased Shares to be purchased by such Investor under this Agreement. Such Investor further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Purchased Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Investor or to which such Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.

4.4 Investment Experience. Such Investor understands that the purchase of the Purchased Shares involves substantial risk, has evaluated the risks of the purchase of the Purchased Shares and can afford a complete loss of his or her investment, and has no need for liquidity in connection with the purchase of the Purchased Shares. Such Investor: (i) has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor’s investment in the Purchased Shares and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting its own interests in connection with this investment and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Investor to be aware of the character, business acumen and financial circumstances of such persons. In formulating a decision to invest in the Company and evaluating the suitability of an investment in the Purchased Shares, such Investor has not relied or acted on the basis of any representations or other information (whether oral or written) purported to be given on behalf of the Company except as set forth herein and independent investigations made by the Investor or representative(s) of the Investor. Such Investor is aware and acknowledges that (i) the Purchased Shares involve a material degree of risk of diminution or loss of such Investor’s investment and there is no assurance of any income from such investment; and (ii) it may not be possible for the Investor to liquidate its investment readily in case of an emergency.

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4.5 Accredited Investor Status. Unless otherwise expressly indicated on Exhibit A to this Agreement, such Investor is an “accredited investor” within the meaning of Regulation D promulgated under the 1933 Act.

4.6 No Breach of Applicable Laws. In subscribing for the Purchased Shares, the Investor will not be in breach of any applicable laws, including those relating to money laundering or proceeds of crime in any applicable jurisdiction.

5. CONDITIONS TO INVESTORS’ OBLIGATIONS AT CLOSING. The obligations of each Investor under Section 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent to such waiver, which consent may be given by written, oral or telephone communication to the Company, its solicitors or to the solicitors to the Investors:

5.1 Representations and Warranties True. Each of the representations and warranties made by the Company in Section 3 hereof shall be true and complete on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

5.2 Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

5.3 Restated Articles Effective. The Restated Articles shall have been duly adopted by the Company by all necessary corporate action of its board of directors and shareholders and shall be in full force and effect, and shall have been duly filed with the Hong Kong Companies Registry within thirty (30) days of the Closing.

5.4 Compliance Certificate. The Company shall have delivered to each Investor at the Closing a certificate signed on its behalf by one of its directors certifying that the conditions specified in Sections 5.1, 5.2 and 5.3 hereof have been fulfilled and stating that there shall have been no Material Adverse Effect not previously disclosed to the Investors in writing.

5.5 Compliance with Securities Laws. The Company shall have obtained all necessary permits and qualifications, or have the availability of exemptions therefrom, required by any applicable jurisdiction for the offer and issuance of the Purchased Shares to the Investors.

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5.6 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Investor and to the Investors’ solicitors, and they shall each have received all such counterpart originals and certified or other copies of such documents as they may reasonably request.

5.7 Secretary’s Certificate. The Investors shall have received from the Company’s Secretary a certificate dated as of the Closing having attached thereto the following:

(a) Corporate Actions. A copy of the resolutions of the board of directors and the shareholders of the Company approving the Restated Articles and providing for the authorization of the Purchased Shares, the approval of the Related Agreements, the issuance of the Purchased Shares and the other matters contemplated hereby and thereby.

(b) Authorized Signatories. A list containing the names of the officers of the Company authorized to sign this Agreement, the certificates for the Purchased Shares and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, together with the true signatures of such officers.

5.8 Board of Directors. The Company’s board of directors shall be comprised of five (5) members being Qi Ji, Eric Ku Chun Lin, Nan Peng Shen, Jerry Sze, and Su Yang Zhang.

5.9 No Material Change. There shall have been no Material Adverse Effect in the business, financial condition, or assets of the Company, since the date of this Agreement.

5.10 Shareholders Agreement. The Shareholders Agreement in the form attached to this Agreement as Exhibit E (the “Shareholders Agreement”) shall have been executed by the Company and the Parties (as such term is defined in the Shareholders Agreement) and delivered to the Investors.

5.11 Minimum Shares Purchased. A minimum of Two Million Four Hundred and Seventeen Thousand Six Hundred Forty-Five (2,417,645) Purchased Shares shall be purchased by the Investors at the Closing for a minimum aggregate purchase price of Eight Hundred Thousand U.S. Dollars (US$800,000) in the individual amounts set forth on Exhibit A.

5.12 Banking Instructions. The Company shall have implemented into its official bank instructions the approval procedures set forth in Section 8.7 of the Shareholders Agreement.

6. CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING. The obligations of the Company to each Investor under this Agreement are subject to the fulfillment or waiver on or before the Closing of each of the following conditions by such Investor:

6.1 Representations and Warranties. The representations and warranties of such Investor contained in Section 4 shall be true and complete on the date of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

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6.2 Payment of Purchase Price. Each Investor shall have delivered to the Company the purchase price specified for such Investor on Exhibit A in accordance with the provisions of Section 2.

7. GENERAL PROVISIONS.

7.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of any of the Investors, their solicitors or the Company, as the case may be.

7.2 Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives.

7.3 Governing Law. This Agreement will be governed by and construed in accordance with the laws of Hong Kong.

7.4 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement.

7.5 Titles and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Agreement.

7.6 Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) at the time of transmission by facsimile, addressed to the other party at its facsimile number specified herein (or hereafter modified by subsequent notice to the parties hereto), with confirmation of receipt made by both telephone and printed confirmation sheet verifying successful transmission of the facsimile; or (iii) one (1) business day after deposit with an express overnight courier for deliveries within Asia, or two (2) business days after such deposit for deliveries outside of Asia, with proof of delivery from the courier requested.

All notices not delivered personally or by facsimile will be sent with charges prepaid and properly addressed to the party to be notified at the address or facsimile number as follows, or at such other address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows:

(a) if to an Investor, at such Investor’s respective address as set forth on Exhibit A hereto; and

13

(b) if to the Company, marked “Attention: President,” at Home Inns & Hotels Management (Hong Kong) Limited, Room 2001, The Centrium, 60 Wyndham Street, Central, Hong Kong.

7.7 No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’ or broker’s fee (and any asserted liability) for which the Investor or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

7.8 Costs, Expenses. Each party shall bear its own costs and expenses (including legal expenses) in respect of the negotiation, preparation, execution and carrying into effect of this Agreement, the Shareholders Agreement and other agreements and contracts incidental to this Agreement.

7.9 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and holders representing at least eighty percent (80%) of the aggregate number of voting shares of the Company then outstanding on an as-converted-to-Ordinary-Share basis (excluding any of such shares that have been sold to the public or pursuant to Rule 144 of the U.S. Securities and Exchange Commission). Any amendment or waiver effected in accordance with this Section 7.9 shall be binding upon each holder of any voting shares of the Company at the time outstanding, each future holder of such securities, and the Company. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. No waiver granted under this Agreement as to any one provision herein shall constitute a subsequent waiver of such provision or of any other provision herein, nor shall it constitute the waiver of any performance other than the actual performance specifically waived.

7.10 Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.

14

7.11 Entire Agreement. The Related Agreements and the documents referred to herein and therein, together with all the exhibits hereto and thereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede any and all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.

7.12 Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

7.13 Adjustments for Share Splits, Etc. Wherever in this Agreement there is a reference to a specific number of Ordinary Shares or Preference Shares of the Company of any class or series, then, upon the occurrence of any subdivision, combination or share dividend of such class or series of shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of shares by such subdivision, combination or share dividend.

7.14 Facsimile Signatures. This Agreement may be executed and delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party. The original signature copy shall be delivered to the other party by express overnight delivery. The failure to deliver the original signature copy and/or the nonreceipt of the original signature copy shall have no effect upon the binding and enforceable nature of this Agreement.

7.15 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

7.16 Costs And Attorneys’ Fees. In the event that any action, suit or other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party’s costs and attorneys’ fees reasonably incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom.

[Signature Page Follows]

15

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

COMPANY: HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED
By:	/s/
Name:
Title:
INVESTORS:
ASIASTAR IT FUND L.P.
By:	/s/
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
Name:	/s/
Title:

16

SERIES B PREFERENCE SHARES PURCHASE AGREEMENT

LIST OF EXHIBITS

Exhibit A	-	Schedule of Investors
Exhibit B	-	Form of Restated Articles
Exhibit C	-	Schedule of Exceptions
Exhibit D	-	List of Intellectual Property Rights
Exhibit E	-	Form of Shareholders Agreement

EXHIBIT A

Schedule of Investors

Investor	Number of Series B Preference Shares Purchased	Aggregate Purchase Price
AsiaStar IT Fund L.P. 44/F Citibank Tower Citibank Plaza 3 Garden Road, Central Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	1,511,028	US$	500,000.00
IDG Technology Venture Investments, LP Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China Attn: Mao Cheng Yu	906,617	US$	300,000.00
TOTALS:	2,417,645	US$	800,000.00

A-1

EXHIBIT B

Form of Restated Articles

B-1

Certificate of Incorporation No. 758133

NEW

MEMORANDUM

AND

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS

MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 1 December 2003)

Incorporated the 28th day of May 2001

INCORPORATED IN HONG KONG

(Reprinted in November 2003)

THE COMPANIES ORDINANCE (Chapter 32)

Company Limited by Shares

NEW

MEMORANDUM OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 1 December 2003)

1. The name of the Company is HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

2. The Registered Office of the Company will be situated in Hong Kong.

3. The Company has the capacity and the rights, powers and privileges of a natural person and the objects for which the Company is established are unrestricted and shall include, but without limitation, the following:

(1) To purchase or otherwise acquire and undertake the whole or any part of the business, goodwill, assets and liabilities of any person, firm or company; to acquire an Interest in, amalgamate with or enter into partnership, joint venture or profit-sharing arrangements with any person, firm or company, to promote, sponsor, establish, constitute, form, participate in, organise, manage, supervise and control any corporation, company, syndicate, fund, trust, business or institution.

(2) To import, export, buy, sell (wholesale and retail), exchange, barter, let on hire, distribute and otherwise deal in and turn to account goods, materials, commodities, produce and merchandise generally in their prepared, manufactured, semi-manufactured and raw state.

(3) To purchase or otherwise acquire and hold, in any manner and upon any terms, and to underwrite and deal in shares, stocks, debentures, debenture stock, annuities and foreign exchange, foreign currency deposits and commodities, and from time to time to vary any of the same, and to exercise and enforce all rights and powers incidental to the Company’s Interest therein, and to carry on business as an investment trust, and to invest or deal with the monies of the Company not immediately required for its operations in such manner as the Company may think fit.

(4) To enter into, carry on and participate in financial transactions and operations of all kinds.

(5) To manufacture, construct, assemble, design, repair, refine, develop, alter, convert, refit, prepare, treat, tender marketable, process and otherwise produce materials, fuels, chemicals, substances and industrial, commercial and consumer products of all kinds.

(6) To carry on business as insurance brokers and agents, and underwriting agents in all classes of insurance and as insurance advisers and consultants, pensions and investment advisers, consultant assessors, average adjusters and mortgage brokers; to carry on the business of an insurance and guarantee company in all its branches.

(7) To apply for, register, purchase or otherwise acquire and protect, prolong, and renew, in any part of the world, any intellectual and industrial property and technology of whatsoever kind or nature and licenses, protections and concessions therefor, and to use, turn to account, develop, manufacture, experiment upon, test, improve and licence the same.

(8) To purchase or otherwise acquire and to hold, own, license, maintain, work, exploit, farm, cultivate, use, develop, improve, sell, let, surrendor, exchange, hire, convey or otherwise deal in lands, mines, natural resources, and mineral, timber and water rights, wheresoever situate, and any interest, estate and rights in any real, personal or mixed property and any franchises, rights, licenses or privileges, and to collect, manage, invest, reinvent, adjust, and in any manner to dispose of the income, profits, and interest arising therefrom.

(9) To improve, manage, develop, sell, let, exchange, invest, reinvest, settle, grant licenses, easements, options, servitudes and other rights over, or otherwise deal with all or any part of the Company’s property, undertaking and assets (present and future) including uncalled capital, and any of the Company’s rights, interests and privileges.

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(10) To acquire, sell, own lease, let out on hire, administer, manage, control, operate, construct, repair, alter, equip, furnish, fit out, decorate, improve and otherwise undertake and deal in engineering and construction works, buildings, projects, offices and structures of all kinds.

(11) To carry on business as consulting engineers in all fields including without limitation civil, mechanical, chemical, structural, marine, mining, industrial, aeronautical, electronic and electrical engineering, and to provide architectural, design and other consultancy services of all kinds.

(12) To purchase or otherwise acquire, take in exchange, charter, hire, build, construct, own, work, manage, operate and otherwise deal with any ship, boat, barge or other waterborne vessel, hovercraft, balloon, aircraft, helicopter or other flying machine, coach, wagon, carriage (however powered) or other vehicle, or any share or interest therein.

(13) To establish, maintain, and operate sea, air, inland waterway and land transport enterprises (public and private) and all ancillary services.

(14) To carry on the business of advisers, consultants, researchers, analysis and brokers of whatsoever kind or nature in all branches of trade, commerce, industry and finance.

(15) To provide or procure the provision of every and any service or facility required by any person, firm or company.

(16) To provide agency, corporate, office, business and management consultancy services, and to act as consultants, analysts and advisors to any person, firm or company or any business, governmental or other undertaking in respect of management, administration, manufacture, marketing, sales, distribution, finance, costing, design, research, industrial relations and otherwise howsoever and to act as nominee, custodian, director, secretary, registrar, bookkeeper, manager, broker, agent or trustee, and to administer the estates of deceased persons and undertake and execute any trust in accordance with the terms of the deed or other instrument or law creating such trust.

(17) To carry on all or any of the businesses of shippers and ship owners, ship and boat builders, charterers, shipping and forwarding agents, ship managers, wharfingers, lightermen, stevedores, packers, storers, fishermen and trawlers.

(18) To carry on all or any of the businesses of hoteliers and restaurateurs and sponsors, managers and licencees of all kinds of sporting, competitive, social and leisure activities and of clubs, associations and social gatherings of all kinds and purposes.

(19) To carry on business as auctioneers, appraisers, valuers, surveyors, land and estate agents.

(20) To carry on business as farmers, graziers, dealers in and breeders of livestock, horticulturists and market gardeners.

(21) To carry on all or any of the businesses of printers, publishers, designers, draughtsmen, journalists, press and literary agents, tourist and travel agents, advertisers, advertising and marketing agents and contractors, personal and promotional representatives, artists, sculptors, decorators, illustrators, photographers, film makers, producers and distributors, publicity agents and display specialists.

(22) To establish and carry on institutions of education, instruction or research and to provide for the giving and holding of lectures, scholarships, awards, exhibitions, classes and meetings for the promotion and advancement of education or the dissemination of knowledge generally.

(23) To design, invent, develop, modify, adapt, alter, improve and apply any object, article, device, appliance, utensil or product for any use or purpose whatsoever.

(24) To develop, acquire, store, licence, apply, assign, exploit all and any forms of computer and other electronic software, programs and applications and information, databases and reference material and computer, digital and other electronic recording, retrieval, processing and storage media of whatsoever kind and nature.

(25) To engage in the provision or processing of communications and telecommunications services, information retrieval and delivery, electronic message, electronic commerce, internet and database services.

(26) To carry on business as jewellers, goldsmiths, silversmiths and bullion dealers and to import, export, buy, sell and deal in (wholesale and retail) jewellery, gold, silver and bullion, gold and silver plate, articles of value, objects of art and such other articles and goods as the Company thinks fit, and to establish factories for culturing, processing and manufacturing goods for the above business.

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(27) To carry on any other business or activity and do any act or thing which in the opinion of the Company is or may be capable of being conveniently carried on or done in connection with any of the above, or likely directly or indirectly to enhance the value of or render more profitable all or any part of the Company’s property or assets or otherwise to advance the interests of the Company or its Members.

(28) To enter into any commercial or other arrangements with any government, authority, corporation, company or person and to obtain or enter into any legislation, orders, charters, contracts, decrees, rights, privileges, licences, franchises, permits and concessions for any purpose and to carry out, exercise and comply with the same and to make, execute, enter into, commence, carry on, prosecute and defend all steps, contracts, agreements, negotiations, legal and other proceedings, compromises, arrangements, and schemes and to do all other acts, matters and things which shall at any time appear conducive or expedient for the advantage or protection of the Company.

(29) To take out insurance in respect of any and all insurable risks which may affect the Company or any other company or person and to effect insurance (and to pay the premiums therefor) in respect of the life of any person and to effect re- insurance and counter-insurance, but no business amounting to fire, life or marine insurance business may be undertaken.

(30) To lend and advance money and grant and provide credit and financial or other accommodation to any person, firm or company.

(31) To borrow or raise money in such manner as the Company shall think fit and in particular by the issue (whether at par or at a premium or discount and for such consideration as the Company may think fit) of bonds, debentures or debenture stock (payable to bearer or otherwise), mortgages or charges, perpetual or otherwise, and if the Company thinks fit charged upon all or any of the Company’s property (both present and future) and undertaking including its uncalled capital and further, if so thought fit, convertible into any stock or shares of the Company or any other company, and collaterally or further to secure any obligations of the Company by a trust deed or other assurance.

(32) To guarantee or otherwise support or secure, either with or without the Company receiving any consideration or advantage and whether by personal covenant or by mortgaging or charging all or part of the undertaking, property, assets and rights (present and future) and uncalled capital of the Company or by both such methods or by any other means whatsoever, the liabilities and obligations of and the payment of any monies whatsoever (including but not limited to capital, principal, premiums, interest, dividends, costs and expenses on any stocks, shares or securities) by any person, firm or company whatsoever including but not limited to any company which is for the time being the holding company or a subsidiary (both as defined by Section 2 of the Companies Ordinance (Cap. 32)) of the Company or of the Company’s holding company or is otherwise associated with the Company in its business, and to act as agents for the collection, receipt or payment of money, and to enter into any contract of indemnity or suretyship (but not in respect of fire, life and marine insurance business).

(33) To draw, make, accept, endorse, negotiate, discount, execute, issue, purchase or otherwise acquire, exchange, surrender, convert, make advances upon, hold, charge, sell and otherwise deal in bills of exchange, cheques, promissory notes, and other negotiable instruments and bills of lading, warrants, and other instruments relating to goods.

(34) To give any remuneration or other compensation or reward (in cash or securities or in any other manner the Directors may think fit) to any person for services rendered or to be rendered in the conduct or course of the Company’s business or in placing or procuring subscriptions of or otherwise assisting in the issue of any securities of the Company or any other company formed or promoted by the Company or in which the Company may be interested in or about the formation or promotion of the Company or any other company as aforesaid.

(35) To grant or procure pensions, allowances, gratuities and other payments and benefits of whatsoever nature to or for any person and to make payments towards insurances or other arrangements likely to benefit any person or advance the interests of the Company or of its Members, and to subscribe, guarantee or pay money for any purpose likely, directly or indirectly, to further the interests of the Company or of its Members or for any national, charitable, benevolent, educational, social, public, general or useful object.

(36) To pay all expenses preliminary or incidental to the formation and promotion of the Company or any other company and the conduct of the business of the Company or any other company.

(37) To procure the Company to be registered or recognised in any territory.

(38) To cease carrying on and wind up any business or activity of the Company, and to cancel any registration of and to wind up and procure the dissolution of the Company in any territory.

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(39) To distribute any part of the undertaking, property and assets of the Company among its creditors and Members in sposis or in kind but so that no distribution amounting to a reduction of capital may be made without the sanction (If any) for the time being required by law.

(40) To appoint agents, experts and attorneys to do any and all of the above matters and things on behalf of the Company or any thing or matter for which the Company act as agent or in any other way whatsoever interested or concerned in any part of the world.

(41) To do all and any of the above matters or things in any part of the world and either as principal, agent, contractor, trustees, or otherwise and by or through trustees, agents or otherwise and either alone or in conjunction with others, and generally upon such terms and in such manner and for such consideration and security (if any) as the Company shall think fit including the issue and allotment of securities of the Company in payment or part payment for any property acquired by the Company or any services rendered to the Company or as security for any obligation or amount (even if less than the nominal amount of such securities) or for any other purpose.

(42) To do all such acts or things as are incidental or conducive to the attainment of the above objects or any of them.

And it is hereby declared that the word “company” in this clause shall be deemed to include any partnership or other body of persons whether incorporated or not incorporated and whether dornielled in Hong Kong or elsewhere and the intention is that the objects specified in each paragraph of this Clause shall, except where otherwise expressed in such paragraph, be independent main objects and shall be in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company.

4. The Liability of the members is limited.

5. The Capital of the Company is HK$1,000,000.00 divided into 180,340,955 Ordinary Shares of HK$0.0005 each. 17,241,400 Series A Preference Shares of HK$0.005 each, and 2,417,645 Series B Preference Shares of HK$0.005 each and each class of shares shall carry their respective rights, preferences, privileges and restrictions set forth in Company’s new Articles of Association adopted on 1 December 2003. The Company shall have power to divide the original or any increased capital into several classes, and to attach thereto any preferential, deferred, qualified, or other special rights, privileges, restrictions or conditions.

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We, the several persons, whose names, addresses and descriptions are hereto subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital of the Company set opposite to our respective names: -

Names, Addresses and Descriptions of Subscribers	Number of Shares Taken by each Subscriber
For and on behalf of HAREFIELD LIMITED (Sd.) CHAN SHUK YI	ONE
CHAN SHUK YI, Authorised Representative     Offshore Chambers,     P.O. Box 217,     Apia, Samoa   Corporation For and on behalf of FERNSIDE LIMITED (Sd.) CHAN SHUK YI	ONE
CHAN SHUK YI, Authorised Representative     Offshore Chambers,     P.O. Box 217,     Apia, Samoa   Corporation
Total Number of Shares Taken	TWO

DATED 4th May 2001

WITNESS to the above signatures:

(Sd.) FANDY TSOI

9th Floor, Ruttonjee House,

11 Duddell Street,

Central, Hong Kong

Occupation: Operations Manager

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THE COMPANIES ORDINANCE (Chapter 32)

Company Limited by Shares

NEW

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 1 December 2003)

PRELIMINARY

1. The regulations in Table A in the First Schedule to the Ordinance shall not apply to the Company.

INTERPRETATION

2. (a) In these Articles, save where the context otherwise requires:-

“the Company”	means the above named Company;
“the Ordinance”	means the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), and includes every other Ordinance incorporated therewith or substituted therefor, and in the case of any such substitution the references in these Articles to the provisions of the Ordinance shall be read as references to the provisions substituted therefor in the new Ordinance;
“the Board” and “the Directors”	means the Directors for the time being of the Company or the Director present at a duly convened meeting of Directors at which a quorum is present;
“Dividend”	includes bonuses, distributions in specie and in kind, capital distributions and capitalisation issues;
“month”	means calendar month;
“Ordinary Shares”	means the ordinary shares of nominal value of HK$0.005 each in the capital of the Company;
“the Office”	means the registered office of the Company for the time being;
“paid up”	includes credited as paid up:
“Preference Shares”	means Series A Preference Shares and Series B Preference Shares;
“the Register”	means the register of members of the Company kept pursuant to the Ordinance and includes any branch register kept pursuant to the Ordinance;
“the Secretary”	means the secretary for the time being of the Company;
“the Seal”	means the common seal of the Company or any official seal that the Company may have as permitted by the Ordinance;
“Series A Original Issue Date”	means 28 February 2003, the date of the first sale and issuance of Series A Preference Shares;
‘Series B Original Issue Date”	means the date of the first sale and issuance of Series B Preference Shares;
“Series A Preference Shares”	means the series A preference shares of nominal value of HK$0.005 each in the capital of the Company
“Series B Preference Shares”	means the series B preference shares of nominal value of HK$0.005 each in the capital of the Company;
“Shares”	means Ordinary Shares, Series A Preference Shares and Series B Preference Shares.
“these Articles”	means the Articles of Association in their present form or as altered from time to time;
“in writing” and “written”	includes cable, telex, facsimile messages, electronic messages and any mode of reproducing words in a legible and non-transitory form.

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(b) In these Articles, if not inconsistent with the subject or context, words importing the singular number only shall include the plural number and vice versa, and words importing any gender shall include all genders and vice versa.

(c) Subject as aforesaid, any words defined in the Ordinance or any statutory modification thereof in force at the date at which these Articles become binding on the Company shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.

(d) The headings are inserted for convenience only and shall not affect the construction of these Articles.

PRIVATE COMPANY

3. The Company is a private company, and accordingly:-

(a) any invitation to the public to subscribe for any shares or debentures of the Company is prohibited;

(b) the number of the members of the Company (not including persons who are in the employment of the Company, and persons who, having been formerly in the employment of the Company, were, while in such employment, and have continued after the determination of such employment to be, members of the Company) shall be limited to 50 PROVIDED that where two or more persons hold one or more shares in the Company jointly they shall, for the purposes of this Article, be treated as a single member;

(c) the right to transfer the shares of the Company shall be restricted in manner hereinafter prescribed; and

(d) the Company shall not have power to issue share warrants to bearer.

THE OFFICE

4. The Office shall be at such place in Hong Kong as the Directors or Secretary shall from time to time appoint.

SHARES

5.       (a) Subject to the provisions of Section 57B of the Ordinance, and save as provided by contract or these Articles to the contrary, all unissued shares shall be at the disposal of the Directors who may allot, grant options over, or otherwise deal with or dispose of the same to such persons, at such times, for such consideration and generally upon such terms and conditions as they think proper, but so that no shares of any class shall be issued at a discount except in accordance with Section 50 of the Ordinance.

(b) The Company may give such financial assistance for purposes of acquiring shares in the Company as is not prohibited by the Ordinance.

(c) For purposes of Article 8(b) the Directors are authorised to make statutory declarations or take such other steps as may be required by the Ordinance in relation to the giving of financial assistance to acquire shares in the Company.

6. The Company may make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and the time of payment of such calls.

7. If by the conditions of allotment of any shares the whole or part of the amount or issue price thereof shall be payable by instalments, every such instalment shall, when due, be paid to the Company by the person who for the time being is the registered holder of the shares, or his legal personal representative.

8.       (a) Subject to sections 49 to 49S of the Ordinance, the Company may issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the shareholder. The redemption of shares may be effected upon such terms and in such manner as the Company before or upon issue of the shares shall by ordinary resolution determine.

(b) Subject to sections 49 to 49S of the Ordinance and Article 111(a) of these Articles, the Company may purchase its own shares (including redeemable shares) and without prejudice to the generality of the foregoing the Company may purchase its own shares (including any redeemable shares) in order to:

(i) settle or compromise a debt or claim;

(ii) eliminate a fractional share or fractional entitlement;

(iii) fulfil an agreement in which the Company has an option or is obliged to purchase shares under an employee share scheme which had previously been approved by the Company in general meeting;

(iv) comply with an order of court under section 8(4), 47G(6), or 168A(2) of the Ordinance.

(c) Subject to sections 49I to 49O of the Ordinance and Article 111(a) of these Articles, the Company may make a payment in respect of the redemption or purchase under section 49A or (as the case may be) section 49B of its own shares otherwise than out of its distributable profits or the proceeds of a fresh issue of shares.

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(d) For purposes of Article 8(c), the Directors are, subject to Article 111(a) of these Articles, authorised to make statutory declarations or take such other steps as may be required by the Ordinance in relation to the redemption or purchase by the Company of its own shares out of capital.

9. Subject to the provisions of these Articles, the Company shall not, except as required by law, be bound by or required in any way to recognise any contingent, future, partial or equitable interest in any share or in any fractional part of a share, or any other right in respect of any share, or any other claim to or in respect of any such share on the part of any person (even when having notice thereof) except an absolute right to the entirety thereof in the registered holder.

10. The Company may in connection with the issue of any shares exercise all powers of paying interest out of capital and of paying commission and brokerage conferred or permitted by the Ordinance.

11. No person shall become a member until his name shall have been entered into the Register.

JOINT HOLDERS OF SHARES

12. Where two or more persons are registered as the holders of any share they shall be deemed to hold the same as joint tenants with benefit of survivorship, subject to the following provisions:-

(a) the Company shall not be bound to register more than three persons as the holders of any shares except in the case of the legal personal representative of a deceased member;

(b) the joint holders of any shares shall be liable severally as well as jointly in respect of all payments which ought to be made in respect of such shares;

(c) on the death of any one of such joint holders the survivor or survivors shall be the only person or persons recognised by the Company as having any title to such shares, but the Directors may require such evidence of death as they may deem fit;

(d) any one of such joint holders may give effectual receipts for any dividend, return of capital or other payment in the share; and

(e) the Company shall be at liberty to treat the person whose name stands first in the Register as one of the joint holders of any shares as solely entitled to delivery of the certificate relating to such shares, or to receive notices from the Company, and to attend and vote at general meetings of the Company, and any notice given to such person shall be deemed notice to all the joint holders; but any one of such joint holders may be appointed the proxy of the persons entitled to vote on behalf of such joint holders, and as such proxy to attend and vote at general meetings of the Company, and if more than one of such joint holders be present at any meeting personally or by proxy that one so present whose name stands first in the Register in respect of such shares shall alone be entitled to vote in respect thereof.

SHARE CERTIFICATES

13. Every member shall, without payment, be entitled to receive within two months after allotment or lodgment of an instrument of transfer duly stamped, or within such other period as the conditions of issue may provide, a certificate for all his shares of any particular class, or several certificates, each for one or more of his shares, upon payment of such fee, not exceeding two dollars for every certificate after the first, as the Directors shall from time to time determine, provided that in the event of a member transferring part of the shares represented by a certificate in his name a new certificate in respect of the balance thereof shall be issued in his name without payment and, in the case of joint holders, the Company shall not be bound to issue more than one certificate for all the shares of any particular class registered in their joint names.

14. Every share certificate shall be issued under the Seal and shall specify the number and class of shares, and, if required, the distinctive numbers thereof comprised therein, the amount paid up thereon and, if appropriate, whether such shares carry no voting rights. No certificate shall be issued in respect of more than one class of shares. If there shall be more than one class of shares then each certificate of every class shall state thereon that the share capital is divided into different classes and the nominal value of the voting rights attaching to each class.

15. If any share certificate shall be worn out, defaced, destroyed or lost, it may be renewed on such evidence being produced as the Directors shall require, and in case of wearing out or defacement, on delivery up of the old certificate, and in case of destruction or loss, on the execution of such indemnity (if any), as the Directors may from time to time require. In case of destruction or loss, the person to whom such renewed certificate is given shall also bear and pay to the Company all expenses incidental to the investigation by the Company of the evidence of such destruction or loss and of such indemnity.

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CONVERSION RIGHTS OF PREFERENCE SHARES

16. The holders of the Preference Shares shall have conversion rights as follows:

(a) Right to Convert Series A Preference Shares. Unless converted earlier pursuant to paragraph

16(d) below, each Series A Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series A Preference Shares, at any time after the Series A Original Issue Date shall be convertible into such number of fully paid and nonassessable Ordinary Shares as is determined by dividing US$0.232 (the “Series A Original Issue Price”) for each Series A Preference Share by the Series A Conversion Price (as defined below) in effect at the time of the conversion. The initial Series A Conversion Price shall be US$0.232 per Series A Preference Share. Such initial Series A Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series A Preference Shares provided in this paragraph 16(a) and paragraphs 16(c)-(e) are referred hereinafter as “Series A Conversion Rights”.

(b) Right to Convert Series B Preference Shares. Unless converted earlier pursuant to paragraph 16(d) below, each Series B Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series B Preference Shares, at any time after the Series B Original Issue Date shall be convertible into such number of fully paid and nonassessable Ordinary Shares as if determined by dividing US$0.3309 (the “Series B Original Issue Price”) for each Series B Preference Share by the Series B Conversion Price (as defined below) in effect at the time of the conversion. The initial Series B Conversion Price shall be US$0.3309 per Series B Preference Share. Such initial Series B Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series B Preference Shares provided in this paragraph 16(b) and paragraphs 16(c)-(e) are referred hereinafter as “Series B Conversion Rights”.

(c) Adjustment to Series A Conversion Price and Series B Conversion Price. Initial Series A Conversion Price and initial Series B Conversion Price shall be subject to adjustment as hereinafter provided. Nothing in paragraphs 16(a) or (b) shall limit the automatic conversion rights of Series A Preference Shares and Series B Preference Shares described in paragraph 16 (d) below.

(d) Automatic Conversion. Each Series A Preference Share and Series B Preference Share shall automatically be converted into Ordinary Shares at the then effective Series A Conversion Price and Series B Conversion Price (each a “Conversion Price”), respectively, immediately upon (1) the closing of a firm commitment underwritten public offering of the Ordinary Shares on an internationally recognized stock exchange at a per-share price of no less than three (3) times the Series A Original Issue Price (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like made from the Series B Original Issue Date onwards); or (ii) the consent of the holders of a majority of the then outstanding Preference Shares.

(e) Mechanics of Conversion. No fractional shares of Ordinary Shares shall be issued upon conversion of any Preference Shares. In lieu of any fractional share to which the holder would otherwise be entitled (after aggregating all shares into which the applicable Series A Preference Shares or Series B Preference Shares held by such holder could be converted), the Company shall pay cash equal to such fraction multiplied by the then fair market value of the Ordinary Shares, as determined by the Board. Before any holder of the Preference Shares shall be entitled to convert the same into full Ordinary Shares, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for such Preference Shares to be converted, and shall give written notice to the Company at such office that he elects to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Preference Shares, a certificate or certificates for the number of Ordinary Shares to which such holder shall be entitled, together with a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional Ordinary Shares. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Preference Shares to be converted, or in the case of conversion pursuant to Article 16(d)(i), on the effective date of the offering as provided in Article 16(d) (i) above, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Ordinary Shares on such date; provided, that if any such conversion is made in connection with any transaction that would, if completed, constitute a liquidation of the Company for purposes of Article 142 hereof, or in connection with any public offering of the Company’s securities, then such conversion may be made contingent upon, and effective only as of, the closing of such transaction or offering.

(f) Adjustments to Conversion Price for Diluting Issues.

(i) Special Definitions. For purposes of this Article 16(f), the following definitions shall apply:

(1) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Ordinary Shares or Convertible Securities.

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(2) “Convertible Securities” shall mean any evidences of indebtedness, shares (other than Series A Preference Shares, Series B Preference Shares or Ordinary Shares) or other securities convertible into or exchangeable for Ordinary Shares.

(3) “Additional Ordinary Shares” shall mean all Ordinary Shares issued (or, pursuant to Article 16(f)(iii), deemed to be issued) by the Company after the Series B Original Issue Date, other than Ordinary Shares issued or issuable (or pursuant to Article 16(f)(iii), deemed to be issued):

(A) upon conversion of the Series A Preference Shares;

(B) upon conversion of the Series B Preference Shares;

(C) to officers, directors or employees of, or consultants to, the Company pursuant to a share grant, option plan or purchase plan or other share incentive program or agreement approved by a majority of the Board;

(D) to any bank, equipment lessor, creditor, landlord, supplier or customer pursuant to a transaction that is for primarily non-financing purposes and approved by a majority of the Board; or

(E) pursuant to acquisitions, licenses, joint ventures or transactions with strategic partners which are for primarily non-financing purposes and approved by a majority of the Board.

(ii) No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price of a particular Series A Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series A Conversion Price in effect on the date of, and immediately prior to such issue. No adjustment in the Series B Conversion Price of a particular Series B Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series B Conversion Price in effect on the date of, and immediately prior to such issue.

(iii) Deemed Issue of Additional Ordinary Shares.

(1) Options and Convertible Securities. In the event, at any time or from time to time after the Series B Original Issue Date, the Company shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of Ordinary Shares issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Ordinary Shares issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Ordinary Shares shall not be deemed to have been issued unless the consideration per share (determined pursuant to Article 16 (f)(v) hereof) of such Additional Ordinary Shares would be less than the Conversion Price in effect on the date of, and immediately prior to, such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Ordinary Shares are deemed to be issued:

(A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Ordinary Shares upon the exercise of such Options or conversion or exchange of such Convertible Securities; and

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(B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company, or in the number of Ordinary Shares issuable (including a change resulting from the expiration of such Options or the rights of conversion, or exchange of such Convertible Securities) upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such change becoming effective, be recomputed to reflect such change insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities.

(2) Share Dividends. In the event the Company at any time or from time to time after the Original Issue Date shall declare or pay any dividend on the Ordinary Shares payable in Ordinary Shares, Options or Convertible Securities, Additional Ordinary Shares shall be deemed to have been issued immediately after the close of business on the record date for the determination of holders or any class of securities entitled to receive such dividend.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Ordinary Shares. In the event the Company shall issue Additional Ordinary Shares (including Additional Ordinary Shares deemed to be issued pursuant to Article 16(f)(iii)) without consideration or for a consideration per share less than the Conversion Price in effect on the date of, and immediately prior, to such issue, then, and in such event, the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) equal to the amount of consideration per share received by the Company as a result of such issuance of Additional Ordinary Shares.

(v) Determination of Consideration. For purposes of this Article 16(f), the consideration received by the Company for the issue of any Additional Ordinary Shares shall be computed as follows:

(1) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or accrued dividends, and provided further that no deduction shall be made for any reasonable and customary commissions or expenses paid or incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board provided that such fair market value shall not exceed the aggregate current market price of the Ordinary Shares being issued; and

(C) in the event Additional Ordinary Shares are issued together with other shares or securities or other assets of the Company for consideration which covers both, be computed as the portion of such consideration so received in respect of the Additional Ordinary Shares computed as provided in clauses (A) and (B) above, as determined in good faith by the Board.

(2) Options and Convertible Securities. The consideration per share received by the Company for Additional Ordinary Shares deemed to have been issued pursuant to Section 16(f)(iii), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of Ordinary Shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

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(3) Share Dividends. Any additional shares of Ordinary Shares deemed to have been issued relating to a share dividend shall be deemed to have been issued for no consideration.

(g) Adjustment for Share Splits and Combinations. Any adjustment under this Section 16(g) shall become effective at the close of business on the date the subdivision or combination becomes effective and are as follows:

(i) If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the Series A Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series A Preference Share as is undertaken with respect to the Ordinary Shares, then both the Series A Original Issue Price and the Series A Conversion Price shall be proportionately decreased;

(ii) Conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the Series A Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series A Preference Shares as is undertaken with respect to the Ordinary Shares, then both the Series A Original Issue Price and the Series A Conversion Price shall be proportionately increased;

(iii) If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the Series B Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series B Preference Share as is undertaken with respect to the Ordinary Shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately decreased; and

(iv) Conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the Series B Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series B Preference Shares as is undertaken with respect to the Ordinary Shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately increased.

(h) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time makes, or fixes a record date for the determination of holders of Ordinary Shares entitled to receive, a dividend or other distribution payable in additional Ordinary Shares, then and in each such event:

(i) the Series A Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction (1) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of Ordinary Shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this Article 16(h)(i) as of the time of actual payment of such dividends or distributions; and

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(ii) the Series B Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series B Conversion Price then in effect by a fraction (1) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of Ordinary Shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series B Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series B Conversion Price shall be adjusted pursuant to this Article 16(h)(ii) as of the time of actual payment of such dividends or distributions.

(i) Adjustments for Other Distributions. In the event the Company shall declare a distribution to holders of Ordinary Shares payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in Articles 16(g) and 16(h), then, in each such case for the purpose of this Article 16(i), the holders of the Preference Shares shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of Ordinary Shares of the Company into which their Preference Shares are convertible as of the record date fixed for the determination of the holders of Ordinary Shares of the Company entitled to receive such distribution.

(j) Adjustments for Reclassification. If the Ordinary Shares issuable upon the conversion of the Preference Shares is changed into the same or a different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or a share dividend, as provided for elsewhere in this Article 16), then and in any such event each holder of Preference Shares shall have the right thereafter to convert such shares into the kind and amount of shares and other securities and property receivable upon such reclassification or other change, by holders of the number of Ordinary Shares into which such Preference Shares might have been converted immediately prior to such reclassification or change, all subject to further adjustment as provided herein.

(k) No Impairment. The Company will not, by amendment of its Articles of Association or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Article 16 and in the taking of all such action as may be necessary or appropriate in order to protect the Series A Conversion Rights and Series B Conversion Rights against impairment.

(l) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article 16, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preference Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of the Preference Shares, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price and the Original Issue Price at the time in effect, and (iii) the number of Ordinary Shares and the amount, if any, of other property which at the time would be received upon the conversion of the applicable Preference Shares.

(m) Notices of Record Date. In the event that the Company shall propose at any time:

(i) to declare any dividend or distribution upon its Ordinary Shares, whether in cash, property, shares or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(ii) to offer for subscription pro rata to the holders of any class or series of its shares any additional shares of any class or series or other rights;

(iii) to effect any reclassification or recapitalization of its outstanding Ordinary Shares involving a change in the Ordinary Shares; or

(iv) to merge or consolidate with or into any other company, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up;

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then, in connection with each such event, the Company shall send to the holders of the Preference Shares:

(1) at least twenty (20) days’ prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights and a description thereof (and specifying the date on which the holders of Ordinary Shares shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (iii) and (iv) above; and

(2) in the case of the matters referred to in (iii) and (iv) above, at least twenty (20) days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Ordinary Shares shall be entitled to exchange their Ordinary Shares for securities or other property deliverable upon the occurrence of such event).

Each such written notice shall be given by first class mail, postage prepaid, addressed to the holders of Preference Shares at the address for each such holder as shown on the books of the Company.

(n) Reservation of Shares Issuable. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares, solely for the purpose of effecting the conversion of the Preference Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preference Shares; and if at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then outstanding Preference Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Ordinary Shares to such number of shares as shall be sufficient for such purpose.

CALL ON SHARES

17.    (a) The Directors may from time to time make calls upon the members in respect of all monies unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) but subject always to the terms of issue of suc3h shares, and any such call may be made payable by instalments.

         (b) Each member shall, subject to receiving at least fourteen days notice specifying the time or times and place for payment, pay to the Company the amount called on his shares and at the time or times and place so specified. The non-receipt of a notice of any call by, or the accidental omission to give notice of a call to, any of the members shall not invalidate the call.

18. A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. A call may be revoked, varied or postponed as the Directors may determine.

19. If any part of a sum called in respect of any shares or any instalment of a call be not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall be liable to pay interest on the outstanding part thereof at such rate as the Directors shall determine from the day appointed for the payment of such call or instalment to the time of discharge thereof in full; but the Directors may, if they shall think fit, waive the payment of such interest or any part thereof.

20. If, by the terms of the issue of any shares or otherwise, any amount is made payable upon allotment or at any fixed time, whether on account of the nominal amount of the shares or by way of premium, every such amount shall be payable as if it were a call duly made and payable on the date on which by the terms of the issue the same becomes payable; and all the provisions thereof with respect to the payment of calls and interest thereon, or to the forfeiture of shares for non-payment of calls, shall apply to every such amount and the shares in respect of which it is payable in the case of non-payment thereof.

21. The Directors may, if they shall think fit, receive from any member willing to advance the same all or any part of the monies uncalled and unpaid upon any shares held by him; and upon all or any of the monies so paid in advance the Directors may (until the same would, but for such payment in advance, become presently payable) pay interest at such rate as may be agreed upon between the member paying the monies in advance and the Directors. The Directors may also at any time repay the amount so advanced upon giving to such member one month’s notice in writing.

22. On the trial or hearing of any action for the recovery of any money due for any call, it shall be sufficient to prove that the name of the member sued is entered in the Register as the holder, or one of the holders, of the shares in respect of which such debt accrued; that the resolution making the call is duly recorded in the Minute Book; and that notice of such call was duly given to the member sued in pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

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23. No member shall, unless the Directors otherwise determine, be entitled to receive any dividend, or, subject to the Ordinance, to receive notice of or to be present or vote at any general meeting, either personally or (save as proxy for another member) by proxy, or to exercise any privileges as a member, or be reckoned in a quorum, until he shall have paid all calls or other sums for the time being due and payable on every share held by him, whether alone or jointly with any other person, together with interest and expenses (if any).

FORFEITURE

24. If any member fails to pay in full any call or instalment of a call on the day appointed for payment thereof, the Directors may at any time thereafter, during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring him to pay so much of the call or instalment as is unpaid together with interest accrued and any expenses incurred by reason of such non-payment.

25. The notice shall name a further day (not being less than fourteen days from the date of the notice) on or before which such call or instalment or part thereof and all interest accrued and expenses incurred by reason of such non-payment are to be paid, and it shall also name the place where payment is to be made, such place being either the Office, or some other place at which calls of the Company are usually made payable. The notice shall also state that, in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call or instalment is payable will be liable to be forfeited.

26. If the requirements of any such notice as aforesaid be not complied with, any shares in respect of which such notice has been given may, at any time thereafter before the payment required by the notice had been made, be forfeited by a resolution of the Directors to that effect, and any such forfeiture shall extend to all dividends declared in respect of the shares so forfeited but not actually paid before such forfeiture. The Directors may accept the surrender of any shares liable to be forfeited hereunder and in such case references in these Articles to forfeiture shall include surrender.

27. Any shares so forfeited shall be deemed for the purposes of this Article to be the property of the Company, and may be sold, re-allotted or otherwise disposed of either subject to or discharged from all calls made or instalments due prior to the forfeiture, to any person, upon such terms and in such manner and at such time or times as the Directors think fit. For the purpose of giving effect to any such sale or other disposition the Directors may authorise some person to transfer the shares so sold or otherwise disposed of to the purchaser thereof or any other person becoming entitled thereto.

28. The Directors may, at any time before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit.

29. Any person whose shares have been forfeited shall thereupon cease to be the holder of any such shares but shall notwithstanding be and remain liable to pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon from the time of forfeiture until payment at such rate as the Directors shall think fit and without any deduction or allowance for the value of the shares at the time of forfeiture, and the Directors may enforce the payment of such monies or any part thereof and may waive payment of such interest wholly or in part.

30. When any shares have been forfeited an entry shall be made in the Register recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of an entry shall also be made of the manner and date of the sale or disposal thereof.

LIEN

31. The Company shall have a first and paramount lien on every share for all monies outstanding in respect of such share, whether presently payable or not, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the same shall have fallen due for payment or not, and notwithstanding that the same are joint debts or liabilities of such member or his estate and any other person, whether a member or not. The Directors may at any time either generally or in any particular case waive any lien that has arisen, or declare any share to be wholly or in part exempt from the provisions of this Article.

32. The Company may sell in such manner as the Directors think fit any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of intention to sell in default shall have been given to the holder for the time being of the share or the person entitled thereto by reason of his death, bankruptcy or winding up or otherwise by operation of law or court order.

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33. The net proceeds of such sale after payment of the costs of such sale shall be applied in or towards payment or satisfaction of the debts or liabilities in respect whereof the lien existed so far as the same are presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the time of the sale. For giving effect to any such sale the Directors may authorise some person to transfer the shares so sold to the purchaser thereof.

34. A statutory declaration in writing that the declarant is a Director or the Secretary of the Company and that a share has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. Such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof together with the shares certificate delivered to a purchaser or allottee thereof shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, surrender, sale, reallotment or disposal of the share.

TRANSFER OF SHARES

35. The instrument of transfer of any shares in the Company shall be in writing and shall be executed by or on behalf of the transferor and by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register in respect thereof.

36. Every instrument of transfer shall be lodged at the Office for registration accompanied by the certificate relating to the shares to be transferred and such other evidence as the Directors may require in relation thereto. All instruments of transfer which shall be registered shall be retained by the Company but, save where fraud is suspected, any instrument of transfer which the Directors may decline to register shall, on demand, be returned to the person depositing the same.

37. There shall be paid to the Company in respect of the registration of a transfer and of any Grant of Probate or Letters of Administration, Certificate of Marriage or Death, Power of Attorney or other document relating to or affecting the title to any share or the making of any entry in the Register affecting the title to any share such fee (if any) as the Directors may from time to time require or prescribe.

38. The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine and either generally or in respect of any class of shares provided always that such registration shall not be suspended for more than 30 days in any year.

39.	(a)   The Directors may at any time in their absolute discretion and without assigning any reason therefor, decline to register any transfer of any share whether or not it is a fully paid share.
	(b)   The Directors may also decline to register any transfer unless:-
	(i)       The instrument of transfer is in respect of only one class of shares;
	(ii)      in the case of a transfer to joint holders, the number of joint holders to whom the shares are to be transferred does not exceed three; and
	(iii)     the shares concerned are free of any lien in favour of the Company.
	(c)   If the Directors refuse to register a transfer they shall, within two months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.

TRANSMISSION OF SHARES

40. In case of the death of a member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the Company as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.

41. (a)       Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may from time to time properly be required by the Directors and, subject as hereinafter provided, elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof, but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that member before his death or bankruptcy, as the case may be.

(b) If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall execute a transfer of the share in favour of that person. All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by the member.

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42. A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company:

PROVIDED always that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within 90 days the Directors may thereafter withhold payment of all dividends or other monies payable in respect of the share until the requirements of the notice have been complied with.

43. Any person to whom the right to any shares in the company has been transmitted by operation of law shall, if the Directors refuse to register the transfer, be entitled to call on the Directors to furnish within 28 days a statement of the reasons for the refusal.

STOCK

44. The Company may from time to time by ordinary resolution convert any fully paid up shares into stock and may reconvert any stock into fully paid up shares of any denomination. After the passing of any resolution converting all the fully paid up shares of any class in the capital of the Company into stock, any shares of that class which subsequently become fully paid up and rank pari passu in all other respects with such shares shall, by virtue of this Article and such resolution, be converted into stock transferable in the same units as the shares already converted.

45. The holders of stock may transfer the same or any part thereof in the same manner and subject to the same regulations as the shares from which the stock arose might prior to conversion have been transferred or as near thereto as circumstances admit. The Directors may from time to time fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of such minimum, but the minimum shall not, without the sanction of an ordinary resolution of the Company, exceed the nominal amount of each of the shares from which the stock arose.

46. The holders of stock shall, according to the amount of the stock held by them, have the same rights as regards dividends, voting at general meetings of the Company and other matters as if they held the shares from which the stock arose, but no such right (except as to participation in dividends and profits of the Company and in assets on a reduction of capital or a winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such right.

47. Such of these Articles as are applicable to fully paid up shares shall apply mutatis mutandis to stock, and the words “share” and “shareholder” therein shall include “stock” and “stockholder”.

INCREASE OF CAPITAL

48. Subject to Article 61A of these Articles, the Company may, from time to time, by ordinary resolution increase its authorised capital by such sum divided into shares of such amounts as the resolution shall prescribe.

49. Subject to Article 61A of these Articles, without prejudice to any special rights, privileges or restrictions for the time being attaching to any class of shares then existing in the capital of the Company, any new shares created pursuant to Article 48 may be issued upon such terms and conditions, and with such rights, privileges and restrictions attached thereto as the general meeting resolving upon the creation thereof shall direct or, if no such direction be given, as the Directors shall determine, and in particular such shares may be issued with a preferential, qualified or deferred right to dividends and in the distribution of assets of the Company, and with a special, or without any, right of voting.

50. The general meeting resolving upon the creation of any new shares may direct that the same or any of them shall be offered in the first instance, and either at par or at a premium or (subject to the provisions of the Ordinance) at a discount, to all the holders for the time being of any class of shares in the capital of the Company in proportion to the number of shares of such class held by them respectively, or make any other provisions as to the issue and allotment of the new shares.

51. Subject to any direction or determination that may be given or made in accordance with the powers contained in these Articles all new shares created pursuant to Article 48 shall be subject to the same provisions herein contained with reference to the payment of calls, transfer, transmission, forfeiture, lien and otherwise as the shares in the capital of the Company existing at the date of creation of such new shares.

ALTERATIONS OF SHARE CAPITAL

52. Subject to Article 61A of these Articles, the Company may by ordinary resolution:-

(a) subdivide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association of the Company, provided that in the subdivision of an existing share the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived, and so that the resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such subdivision one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any such restrictions as the Company has power to attach to unissued or new shares;

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(b) consolidate and divide its capital or any part thereof into shares of larger amount than its existing shares; or

(c) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its authorised capital by the amount of the shares so cancelled.

53. Subject to Article 61A of these Articles, the Company may by special resolution reduce its share capital and any capital redemption reserve fund or any share premium account in any manner allowed by law.

54. Where any difficulty arises in regard to any consolidation and division under paragraph (b) of Article 52, the Directors may settle the same as they think expedient and in particular may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the members who would have been entitled to the fractions, and for this purpose the Directors may authorise some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

MODIFICATION OF RIGHTS

55.      (a) Subject to Article 61A of these Articles, all or any of the rights attached to the Series A Preference Shares or Series B Preference Shares may, at any time, as well as before or during liquidation, be altered or abrogated either with the consent in writing of the holders of not less than three-fourths of the issue shares of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the class, and all the provisions contained in these Articles relating to general meetings shall mutatis mutandis apply to every such meeting, but so that the quorum thereof shall be not less than two persons personally present and holding or representing by proxy a majority in nominal value of the issued shares of the class, and that any holder of shares of the class present in person or by proxy may demand a poll, and that each holder of shares of the class present in person or by proxy shall on a poll be entitled to one vote for each share of the class held by him.

(b) The foregoing provisions of this Article shall apply to the variation or abrogation of the rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class, the rights whereof are to be varied.

56. The special rights conferred upon the holders of any shares or such 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 altered by the creation or issue of further shares ranking pari passu therewith.

GENERAL MEETINGS

57.      (a) The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of the Company and that of the next, PROVIDED that so long as the Company holds its first annual general meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year. The annual general meeting shall be held at such time and place as the Directors shall appoint.

(b) All other general meetings shall be called extraordinary general meetings.

58. The Directors may, whenever they think fit, and shall, on requisition by Members in accordance with the Ordinance, proceed to convene an extraordinary general meeting. The provisions of the Ordinance shall apply to any requisition and to any failure by the Directors to convene an extraordinary general meeting when so requisitioned.

NOTICE OF GENERAL MEETINGS

59. An annual general meeting and a meeting called for the passing of a special resolution shall be called by 21 days notice in writing at the least, and a meeting of the Company other than an annual general meeting or a meeting for the passing of a special resolution shall be called by fourteen days notice in writing at the least. The notice shall specify the place, the day and the hour of meeting and, in case of special business, the general nature of that business, and shall be given in manner hereinafter mentioned or in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are, under the Articles of the Company, entitled to receive such notices from the Company:

PROVIDED that a meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in this Article, be deemed to have been duly called if it is so agreed: -

(a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right.

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60. The accidental omission to give notice of a meeting or (in cases where an instrument of proxy is sent out with the notice) the accidental omission to send such instrument of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meeting.

PROCEEDINGS AT GENERAL MEETINGS

61. Subject to Article III(a) of those Articles, 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 with the exception of:-

(a) the declaration and sanction of dividends;

(b) the consideration of the accounts and balance sheets and the reports of the Directors and other documents required to be annexed to the accounts;

(c) the election of Directors in place of those retiring (if any);

(d) the appointment of the Auditors of the Company and the fixing of, or the determination of the method of fixing, the remuneration of the Auditors.

61A. The Company shall not effect, without the affirmative vote or written consent of holders of at least 80% of its outstanding voting shares, voting as a single class on an as-converted-to-Ordinary-Share basis:

(i) the creation or adoption by the Company of any employee stock option plan;

(ii) any consolidation, subdivision, conversion, increase or reduction of the share capital of the Company or the alteration of any rights attaching thereto in any way;

(iii) any change to the Company’s Memorandum of Association or these Articles;

(iv) the acquisition by the Company of any other entity or assets with a value in excess of US$200,000;

(v) the consolidation or merger of the Company which results in the shareholders of the Company immediately prior to such transaction falling to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity; and

(vi) the adoption of a resolution for the voluntary liquidation or winding up of the Company or scheme of arrangement or appointment of a liquidator; provided, however, that this subsection (vi) shall be of no force and effect after the expiration of the one (1) year period after the Closing (as such term is defined in that certain Series B Preference Shares Purchase Agreement entered into by the Company as of 24 November, 2003 (the “Purchase Agreement”)).

62. Subject to Article 61A of those Articles, no business, save the election of a Chairman of the meeting, shall be transacted at any general meeting, unless a quorum is present when the meeting proceeds to business. Two members present in person or by proxy and holding between them at least 51 per centum in nominal value of the issued shares of the Company for the time being shall be a quorum for all purposes.

63. The Chairman (if any) of the Board or, in his absence, a Deputy Chairman (if any) shall provide as Chairman at every general meeting. If there is no such Chairman or Deputy Chairman, or if at any meeting neither the Chairman nor a Deputy Chairman is present within fifteen minutes after the time appointed for holding the meeting, or if neither of them is willing to act as Chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall proside as Chairman if willing to act. If no Director is present, or if each of the Directors present declines to act as Chairman, the persons present and entitled to vote shall elect one of their number to be Chairman of the meeting.

64. If within fifteen minutes from the time appointed for the meeting a quorum be not present, the meeting, if convened upon a requisition as specified in Article 58, shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day, time and place as the Chairman of the meeting may determine. If at such adjourned meeting a quorum be not present within fifteen minutes from the time appointed for the meeting, the members present in person or by proxy shall be a quorum.

65. The Chairman of any general meeting at which a quorum is present may, with the consent of the meeting, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place or sine die; but no business shall be transacted at any adjourned meeting other than business which might have been transacted at the meeting from which the adjournment took place, unless due notice thereof is given or such notice is waived in the manner prescribed by these Articles. When a meeting is adjourned for 30 days or more, or sine die, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjourned meeting or the business to be transacted thereat. Where a meeting is adjourned sine die the time and place for the adjourned meeting shall be fixed by the Directors.

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66. Subject to the provisions of the Ordinance, a resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at general meetings (or, being corporations, by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. A written notice of confirmation of such resolution in writing sent by or on behalf of a member shall be deemed to be his signature to such resolution in writing for the purposes of this Article. Such resolution in writing may consist of several documents, and each such document shall be certified by the Secretary to contain the correct version of the proposed resolution.

VOTING

67.      (a) At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless, before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll, a poll is demanded by:-

(i) the Chairman of the meeting; or

(ii) at least two members present in person or by proxy and entitled to vote; or

(iii) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or

(iv) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

(b) Unless a poll is so demanded and the demand is not withdrawn, a declaration by the Chairman that a resolution has, on a show of hands, been carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive evidence of the fact without proof of the number of the votes recorded for or against such resolution.

68. A demand for a poll may be withdrawn only with the approval of the meeting. If a poll be directed or demanded in the manner above mentioned it shall (subject to the provisions of Article 69 hereof) be taken at such time (being not later than seven days after the date of the demand) and in such manner as the Chairman of the meeting may appoint. No notice need be given of a poll not taken immediately. The result of such poll shall be deemed for all purposes to be the resolution of the meeting at which the poll was so directed or demanded.

69. In the case of an equality of votes at any general meeting, whether upon a show of hands or on a poll, the Chairman of the meeting shall be entitled to a second or casting vote.

70. A poll demanded upon the election of a Chairman or upon a question of adjournment shall be taken forthwith. Any business, other than that upon which a poll has been demanded, may be proceeded with pending the taking of the poll.

71.      (a) No objection shall be made to the validity of any vote except at a meeting or poll at which such vote shall be tendered and every vote whether given personally or by proxy not disallowed at such meeting or poll shall be deemed valid for all purposes whatsoever of such meeting or poll.

(b) In case of any dispute as to voting the Chairman shall determine the same, and such determination shall be final and conclusive.

72. Subject to any special rights or restrictions for the time being attaching to any special class of shares in the capital of the Company, on a show of hands every member who is present in person or by proxy or by attorney shall be entitled to one vote only, and, in the case of a poll, every member present in person or by proxy or by attorney shall be entitled to one vote for each share held by him on an as-converted-to- Ordinary-Share basis.

73. On a poll, votes may be given either personally or by proxy and a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

74. A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, curator bonis or other person in the nature of a committee or curator bonis appointed by that court, and any such committee, curator bonis or other person may, on a poll, vote by proxy. If any member be a minor, he may vote by his guardian or one of his guardians who may give their votes personally or by proxy.

PROXIES

75.      (a) A proxy need not be a member of the Company.

(b) An instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may accept, and shall be deemed, save where the contrary appears on the face of the instrument of proxy, to confer authority to demand or concur in demanding a poll and to include power to act generally at the meeting for the person giving the proxy and any adjournment thereof, and either to vote on any resolution (or amendment thereto) put to the meeting for which it is given as the proxy thinks fit. No instrument appointing a proxy shall be valid except for the meeting mentioned therein and any adjournment thereof.

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76. The instrument appointing a proxy shall be signed by the appointor, or his duly authorised attorney in writing or, if such appointor be a corporation, under its common seat or signed by such officer, attorney or other person duly authorised in that behalf.

77. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be deposited at the Office at least 48 hours before the time fixed for holding the meeting at which the person named in such instrument proposes to vote or, in the case of a poll, not less than 24 hours before the time appointed for taking the poll; otherwise the person so named shall not be entitled to vote in respect thereof except with the approval of the Chairman of the meeting.

78. Any member may by power of attorney appoint any person to be his attorney for the purpose of voting at any meeting, and such power may be a special power limited to any particular meeting or a general power extending to all meetings at which such member is entitled to vote. Every such power shall be deposited at the Office at least 48 hours before being acted upon.

79.     (a) An instrument of proxy may be revoked by forwarding to the Office written notification of such revocation signed by or on behalf of the person who issued or authorised the issue of the instrument of proxy.

(b) A vote given in accordance with the terms of an instrument of proxy or power of attorney shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the proxy or power of attorney, or transfer of the shares in respect of which the vote is given, provided that no intimation in writing of the death, insanity, revocation or transfer shall have been received at the Office 24 hours at least before the time fixed for holding the meeting, or adjourned meeting, or the taking of the poll, at which the instrument of proxy is to be used.

CORPORATIONS ACTING BY REPRESENTATIVES

80. Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company.

DIRECTORS

81. The first Directors shall be appointed in writing by the subscribers to the Memorandum of Association of the Company or by the Company in general meeting.

82. The number of Directors shall be five (5).

83. A Director need not hold any shares in the Company. A Director who is not a member of the Company shall nevertheless be entitled to attend and speak at general meetings.

DIRECTORS’ REMUNERATION

84. The remuneration of the Directors shall from time to time be determined by the Company in general meeting. Such remuneration shall be deemed to accrue from day to day. The Directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company.

POWERS OF DIRECTORS

85. The business of the Company shall be managed by the Directors, who shall pay all expenses incurred in the formation and registration of the Company, and who may exercise all such powers of the Company as are not by the Ordinance or by these Articles required to be exercised by the Company in general meeting, subject to any provision in these Articles or the Ordinance and to such regulations, not being inconsistent with any such provision, as may be prescribed by the Company in general meeting; but no such regulation shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article.

86. The Directors may establish any local boards or agencies for managing any of the affairs of the Company, either in Hong Kong or elsewhere, and may appoint any persons to be members of such local boards, or any managers or agents for the Company, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the members of any local boards, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment and delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed, and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

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87. The Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or person or any fluctuating body of persons, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

88. Subject to and to the extent permitted by the Ordinance, the Company, or the Directors on behalf of the Company, may cause to be kept in any territory a Branch Register of members resident in such territory, and the Directors may make and vary such regulations as they may think fit respecting the keeping of any such Branch Register.

89. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments, and all receipts for monies paid to the Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

90. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures including, subject to Section 57B of the Ordinance, convertible debentures and convertible debenture stock, and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

APPOINTMENT AND REMOVAL OF DIRECTORS

91. The Company may by special resolution remove any Director notwithstanding anything in these Articles or in any agreement between him and the Company (but without prejudice to any right to damages for termination of such agreement not in accordance with the terms thereof), and may, if thought fit, by ordinary resolution, appoint another person in his stead.

92. The Company may, without prejudice to the powers of the Directors under Article 93, from time to time, by ordinary resolution appoint new Directors to fill a casual vacancy and, subject to Article 61A of these Articles, change the number of Directors specified in Article 82.

93. The Directors shall have power, exercisable at any time and from time to time, to appoint any other person as a Director to fill a casual vacancy.

94. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as the number of Directors is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. If there shall be no Directors able or willing to act, then any member may summon a general meeting for the purpose of appointing Directors.

ALTERNATE DIRECTORS

95. Each Director may by written notification to the Company nominate any other person to act as alternate Director in his place and, at his discretion, in similar manner remove such alternate Director. A Director may appoint two or more persons in the alternative to act as Alternate Director and in the event of any dispute as to who is to represent the Director as his Alternate the first named of such alternative persons shall be the only person recognised as the Alternate Director and shall in any case, if in Hong Kong, be the only person entitled to receive notice of Directors’ meetings in the absence from Hong Kong of his appointor. The alternate Director shall (except as regards the power to appoint an alternate) be subject in all respects to the terms and conditions existing with reference to the other Directors of the Company; and each alternate Director, whilst acting as such, shall exercise and discharge all the functions, powers and duties of the Director he represents, but shall look to such Director solely for his remuneration as alternate Director. Every person acting as an alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). The signature of an alternate Director to any resolution in writing of the Board or a committee of the Board shall, unless the notice of his appointment provides to the contrary, be as effective as the signature of his appointor. Any person appointed as an alternate Director shall vacate his office as such alternate Director as and when the Director by whom he has been appointed removes him or vacates office as Director. A Director shall not be liable for the acts or defaults of any alternate Director appointed by him.

DISQUALIFICATION OF DIRECTORS

96. The office of a Director shall ipso facto be vacated:-

(a) if he becomes prohibited by law or court order from being a Director;

(b) if a receiving order or, in the case of a company, a winding up order is made against him or he makes any arrangement or composition with his creditors;

(c) if he becomes of unsound mind;

(d) if he gives the Company notice in writing that he resigns his office;

(e) if he is removed by a special resolution of the Company in accordance with the provisions of these Articles;

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(f) if he is convicted of an arrestable offence.

DIRECTORS’ INTERESTS

97. A Director may hold any other office or place of profit under the Company (other than the office of Auditor), and he or any firm of which he is a member may act in a professional capacity for the Company in conjunction with his office of Director, for such period and on such terms (as to remuneration and otherwise) as the Directors may determine. No Director or intending Director shall be disqualified by his office from contracting with the Company, nor shall any contract or arrangement entered into by or on behalf of the Company in which any Director or intending Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit, remuneration or other benefits of such Director holding that office, or of any fiduciary relationship thereby established.

98. A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract (being a contract of significance in relation to the Company’s business) with the Company shall declare the nature of his interest accordance with the provisions of the Ordinance. A general notice given to the Directors by a Director to the effect that he is a member of a specified company or firm, and is to be regarded as interested in any contract, arrangement or dealing which may, after the date of the notice, be entered into or made with that company or firm, shall, for the purposes of this Article, be deemed to be a sufficient disclosure of interest in relation to any contract, arrangement or dealing so entered into or made.

99. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be taken into account in determining a quorum when any such contract or arrangement is under consideration.

100. A Director may hold office as a Director in or as manager of any other company in which the Company is a shareholder or is otherwise interested, and (subject to any agreement with the Company to the contrary) shall not be liable to account to the Company for any remuneration or other benefits receivable by him from such other company. The Board may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Board thinks fit (including the exercise thereof in favour of any resolution appointing the Directors or any of the Directors of such company or voting or providing for the payment of remuneration to the Directors of such company) and any Director of the Company may vote in favour of the exercise of such voting rights other than his own appointment or the arrangement of the terms thereof, in manner aforesaid.

MANAGING DIRECTORS AND OTHER APPOINTMENTS

101. The Directors may, from time to time, appoint one or more of their number to be Managing Director or Joint Managing Director of the Company, or to hold such office in the management, administration or conduct of the business of the Company as they may decide, and for such period and upon such terms and for such remuneration as the Directors shall think fit, and the Directors may also, from time to time (subject to the provisions of any agreement between him or them and the Company) remove him or them from office, and appoint another or others in his or their place or places.

102. A Managing Director or a Joint Managing Director (subject to the provisions of any agreement between him as Managing Director or a Joint Managing Director and the Company) shall be subject to the same provisions as to resignation and removal as the other Directors of the Company, and shall ipso facto and immediately cease to be Managing Director or Joint Managing Director if he shall cease to hold the office of Director.

103. The Directors may, from time to time, entrust to and confer upon any Managing Director, Joint Managing Director or Director holding any other office in the management, administration or conduct of the business of the Company, such of the powers exercisable under these Articles by the Directors as they may think fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions and with such restrictions as they may consider expedient, and may confer such powers collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

PROCEEDINGS OF DIRECTORS

104. The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business. Unless otherwise determined by the Board or as otherwise provided in these Articles, two Directors shall constitute a quorum. Subject to Article 111(a) of these Articles, questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the Chairman of the meeting shall have a second or casting vote. A Director or the Secretary may, at any time, summon a meeting of the Directors.

105. Notice of a meeting of Directors shall be deemed to be duly given to a Director if it is given to him personally in writing or by word of mouth or sent to him at his last known address or any other address given by him to the Company for this purpose. A Director may consent to short notice of and may waive notice of any meeting and any such waiver may be retrospective.

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106. The Directors may elect a Chairman of the Board and determines the period for which he is to hold office; but if no such Chairman be elected, or if at any meeting the Chairman be not present within fifteen minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting.

107.     (a) Subject to Article 111(a) of these Articles, & resolution in writing signed by a simple majority of the Directors for the time being shall be as effective for all purposes as a resolution of the Directors passed at a meeting duly convened, held and constituted. A written notification of confirmation of such resolution in writing sent by a Director shall be deemed to be his signature to such resolution in writing for the purposes of this Article, Such resolution in writing may consist of several documents, each signed by one or more Directors.

(b) Any Director or member of a committee of Directors may participate in a meeting of the Directors or such committee by means of telephone or other audio communications equipment whereby all persons attending or participating in the meeting can hear each other. The person or persons participating in the meeting in the aforesaid manner shall be deemed for all purposes to be present in person at such meeting.

108. Unless otherwise provided in these Articles, & meeting of the Directors at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Directors generally.

109. The Directors may, from time to time, appoint committees consisting of such persons as they think fit, and may delogate any of their powers to any such committee and, from time to time, revoke any such delegation and discharge any such committee wholly or in part. Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations, that may, from time to time, be imposed upon it by the Directors. Any such committee shall be properly constituted even if it consists of one person.

110. The meetings and proceedings of say such committee consisting of two or more members shall be governed mutatis mutandis by the provisions of these Articles regulating the meetings and proceedings of the Directors insofar as the same are not superseded by any regulations made by the Directors under the last proceeding Article.

111. All acts done been hide by any meeting of the Directors or of a committee of Directors, or by any persons acting as Directors, shall, notwithstanding that there was some defect in the appointment of any such Directors or persons acting as aforesaid, or that they or any of them were disqualified, or had vacated officer, be as valid as if every such person had been duly appointed and was qualified and continued to be a Director.

111. (a)       The Company shall not undertake, without the affirmative vote or written consent of at least 81% of the number of Directors authorized pursuant to Article 82 of those Articles:

(i) the entering into of any contract of transaction outside the ordinary course of business of the Company in excess of US$200,000;

(ii) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in respect of any part of the assets or undertaking of the Company in excess of US$200,000;

(iii) any significant change to the business of the Company to areas materially different from the current products and/or services offered;

(iv) declare, make, or pay any distribution of capital, income, and/or dividends to the security holders of the Company;

(v) repurchase or cancel any capital stock of the Company;

(vi) enter into any material transaction with any Director, officer, employee, or shareholder of the Company or any company controlled, directly or indirectly, by a Director, officer, employee or shareholder of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(vii) the appointment of or change in the auditor of the Company, unless such auditor is a “Big 4” accounting firm; and

(viii) the sale, transfer, lease, assignment or other disposal of a material part of the undertaking, property and/or assets of the Company with a book value (as reflected in its financial statements) in excess of US$200,000 or the entering into of any contract to do so.

MINUTES

112. The Directors shall cause to be entered and kept in books provided for the purpose minutes of the following:-

(a) all appointments of officers;

(b) the names of the Directors and any alternate Director who is not also a Director present at each meeting of the Directors and of any committee of Directors;

(c) all orders made by the Directors and committees of Directors; and

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(d) all resolutions and proceedings of general meetings and meetings of the Directors and committees.

Any such minutes of any meeting of the Directors, or any committee, or of the Company, if purporting to be signed by the Chairman of such meeting, or by the Chairman of the next succeeding meeting shall be receivable as prima facie evidence of the matters stated in such minutes.

THE SEAL

113. The Directors shall forthwith procure a common seal to be made for the Company, and shall provide for the safe custody thereof. The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors or a committee of the Directors and every instrument to which the Seal shall be affixed shall be signed by one Director or some other person nominated by the Directors for the purpose.

114. The Company may exercise all the powers of having official seals conferred by the Ordinance and such powers shall be vested in the Directors.

SECRETARY

115. The Company shall have a Secretary. The Secretary and any joint secretaries or deputy or assistant secretary or secretaries may be appointed by the Directors for such term, at such remuneration and upon such conditions as the Directors may think fit and the Secretary and any joint secretaries or deputy or assistant secretary so appointed may at any time be removed from office by the Directors. A Director may be the Secretary.

116. A provision of the Ordinance or these regulations requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in place of, the Secretary.

DIVIDENDS AND RESERVES

117.    (a) Subject to Article 11l(a) of these Articles, the Company may by ordinary resolution declare dividends but no such dividend shall exceed the amount recommended by the Directors.

(b) No distribution (as defined in Section 79 A of the Ordinance) shall be made save in accordance with the provisions of Part IIA of the Ordinance and Article 111(a) of these Articles.

118. Subject to Article 111(a) of these Articles, the Directors may, if they think fit, from time to time, pay to the members such interim dividends as appear to the Directors to be justified by the profits of the Company. If at any time the share capital of the Company is divided into different classes the Directors may pay such interim dividends in respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferred rights as well as in respect of those shares which confer on the holders thereof preferential or special rights in regard to dividend, and provided that the Directors act bona fide they shall not incur any responsibility to the holders of shares conferring a preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non-preferred rights. The Directors may also pay at half-yearly or at other suitable intervals to be settled by them any dividend which may be payable at a fixed rate if they are of the opinion that the profits justify the payment.

119. Subject to Article 111(a) of these Articles, the Directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the company) as the Directors may from time to time think fit. The Directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

120. No dividend shall be payable except out of the profits of the Company, and no dividend shall bear interest as against the Company.

121. The Directors may retain any dividend or other monies payable on or in respect of a share on which the Company has a lien, and may apply the same in or towards satisfaction of the debts and liabilities in respect of which the lien exists.

122. Any resolution declaring a dividend on shares of any class, whether a resolution of the Company in general meeting or a resolution of the Directors, may specify that the same shall be payable to the persons registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors and transferees of any such shares. The provisions of this Article shall mutatis mutandis apply to capitalisations to be effected in pursuance of these Articles.

123. Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. For the purposes of this Article no amount paid on a share in advance of calls shall be treated as paid on the share.

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124. Unless otherwise directed, any dividend or other monies payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled, or, in the case of joint holders, to the registered address of that one whose name stands first on the register in respect of joint holding, or addressed to such person at such address as the holder or joint holders shall direct. The Company shall not be liable or responsible for any cheque or warrant lost in transmission nor for any dividend or other monies lost to the member or person entitled thereto by the forged endorsement of any cheque or warrant. Payment of the cheque or warrant by the banker on whom it is drawn shall be a good discharge to the Company.

125. Subject to Article 111(a) of these Articles, the Directors may, with the sanction of the Company in general meeting, distribute in specie or in kind among the members in satisfaction in whole or in part of any dividend any of the assets of the Company, and in particular any shares or securities of other companies to which the Company is entitled.

126. All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed, and all dividends unclaimed for two years after having been declared may be forfeited by the Directors and shall revert to the Company. The payment into a separate account of any monies payable in respect of a share shall not constitute the Company a trustee in respect thereof for any person.

CAPITALISATION OF RESERVES ETC.

127. The Company in general meeting may upon the recommendation of the Directors resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sums be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions, on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures or other obligations of the Company to be allotted and distributed credited as fully paid up to and amongst such members in the proportions aforesaid, or partly in one way and partly in the other, and the Directors shall give effect to such resolution:

PROVIDED that a share premium account and a capital redemption reserve fund may, for the purposes of this Article, only be applied in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares.

128. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto.

129. For the purpose of giving effect to any resolution under Articles 125 and 127 hereof the Directors may settle any difficulty which may arise in regard to the distribution as they think expedient, and in particular may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed or that fractions of such value as the Directors may determine may be disregarded in order to adjust the rights of all parties, and may vest any such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalised fund as may seem expedient to the Directors. The provisions of the Ordinance in relation to the filing of contracts for allotment shall be observed, and the Directors may appoint any person to sign such contract on behalf of the persons entitled to share in the appropriation and distribution, and such appointment shall be effective and binding upon all concerned, and the contract may provide for the acceptance by such persons of the shares or debentures to be allotted and distributed to them respectively in satisfaction of their claims in respect of the sum so capitalised.

ACCOUNTS AND AUDITORS

130.     (a) The Directors shall cause proper and true books of account to be kept of all sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place; of all sales and purchases of goods by the Company; and of the assets and liabilities of the Company and of all other matters necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

(b) The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by statute or authorised by the Directors or by the Company in general meeting.

131. The Directors shall from time to time, in accordance with the provisions of the Ordinance, cause to be prepared and to be laid before the Company in general meeting such Profit and Loss Accounts, Balance Sheets, Group Accounts (if any) and Reports as are required by the Ordinance.

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132. A copy of every Balance Sheet (including every document required by law to be annexed thereto) which is to be laid before the Company in general meeting, together with a copy of the Directors’ Report and a copy of the Auditors’ Report, shall, not less than 21 days before the date of the meeting, be sent to every member of, and every holder of debentures of, the Company and to all persons other than members or holders of debentures of the Company, being persons entitled to receive notices of general meetings of the Company:

PROVIDED that this Article shall not require a copy of those documents to be sent to any person of whose address the Company is not aware nor to more than one of the joint holders of any shares or debentures.

133. Subject to Article 111 (a) of these Articles, auditors shall be appointed and their duties regulated in the manner provided by the Ordinance.

NOTICES

134. Any notice or other document may be served by the Company upon any member either personally or by sending it through the post in a prepaid letter, envelope or wrapper addressed to such member at his registered address, and, in any case where the registered address of a member is outside Hong Kong, by prepaid airmail. The signature to any notice to be given by the Company may be written or printed.

135. Each member shall, from time to time, notify in writing to the Company some place which shall be deemed his registered address within the meaning of the last preceding Article.

136. Any notice sent by post shall be deemed to have been served in the case where the member’s registered address is in Hong Kong at the expiration of 48 hours after the letter, envelope or wrapper containing the same was posted in Hong Kong and in any other case on the fifth day after the day of posting. In proving such service it shall be sufficient to prove that the letter, envelope or wrapper containing the notice was properly addressed and put in the post as a prepaid letter.

137. A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, within Hong Kong supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

138. Notice of every general meeting shall be given in any manner hereinbefore authorised to:-

(a) every member except those members who (having no registered address within Hong Kong) have not supplied to the Company an address within Hong Kong for the giving of notices to them;

(b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and

(c) the Auditors for the time being of the Company.

No other person shall be entitled to receive notices of general meetings.

139. Any summons, notice, order or other document required to be sent to or served upon the Company, or upon any officer of the Company, may be sent or served by leaving the same or sending it through the post in a prepaid letter, envelope or wrapper, addressed to the Company or to such officer at the Office.

140. Subject to any special provisions contained in these Articles or in the Ordinance, all notices required to be given by advertisement shall be advertised in at least one daily Chinese and one daily English newspaper in Hong Kong.

141. In reckoning the period for any notice given under these Articles, the day on which notice is served, or deemed to be served and the day for which such notice is given shall be excluded.

WINDING UP

142.    (a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Series A Preference Shares and Ordinary Shares, by reason of their ownership thereof, the amount of two times the Series B Original Issue Price per share for each Series B Preference Share (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like made from the Series B Original Issue Date onwards) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Series B Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of Series B Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series B Preference Shares in proportion to the number of Series B Preference Shares held by each holder.

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(b) After full payment has been made to the holders of Series B Preference Shares of the foregoing amounts to which they shall be entitled, holders of Series A Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Ordinary Shares, by reason of their ownership thereof, the amount of two times the Series A Original Issue Price per share for each Series A Preference Share (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like made from the Series B Original Issues Date onwards) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Series A Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of Series A Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series A Preference Shares in proportion to the number of Series A Preference Shares held by each holder.

(c) After full payment has been made to the holders of Preference Shares of the foregoing amounts to which they shall be entiled, holders of the Ordinary Shares shall be entitled to receive all remaining assets (pro rata, based upon the number of Ordinary Shares held by each holder at the record date for such distribution of the Company).

(d) For purposes of this Article 142, a liquidation, dissolution or winding up of the Company shall be deemed to be occasioned by, or to include any of the following: (i) the Company’s sale of all or substantially all of its assets, or (ii) any merger, consolidation or other similar transaction involving the Company, unless upon the conclusion of such transaction, and after giving effect thereto, the members of the Company immediately prior to such transaction would continue to own, in substantially the same percentages, more than 50% of the shares of the surviving company following such transaction, or (iii) any transaction involving the transfer, directly or indirectly, of capital shares of the Company having 50% or more of the outstanding voting power of the Company.

(e) For purposes of this Article 142, if the distributions or consideration received by the members of the Company is other than cash, its value will be deemed to be its fair market value. Whenever the distribution provided for in this Article 142 shall be payable in securities, such securities shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by (ii) below:

(1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing;

(2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and

(3) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a member’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding Preference Shares.

142A. Commencing upon the expiration of the one-year period after the Closing (as such term is defined in the Purchase Agreement), the Company shall not adopt a resolution for, or otherwise effect, the voluntary liquidation or winding up of the Company or scheme of arrangement or appointment of a liquidator without (i) the affirmative vote or written consent of the three Series A Directors (as such term is defined in that certain Shareholders Agreement entered into by the Company as of 28 February 2003) or (ii) the affirmative vote or consent recorded in writing of holders of all of the then outstanding Series A Preference Shares.

INDEMNITY

143. Every Director, Managing Director, Agent, Auditor, Secretary and other officer for the time being of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in relation to the Company in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under Section 358 of the Ordinance in which relief is granted to him by the court.

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Names, Addresses and Descriptions of Subscribers

For and on behalf of

HAREFIELD LIMITED

(Sd.) CHAN SHUK YI

CHAN SHUK YI, Authorised Representative

    Offshore Chambers,

    P.O. Box 217,

    Apia, Samoa

      Corporation

For and on behalf of

FERNSIDE LIMITED

(Sd.) CHAN SHUK YI

CHAN SHUK YI, Authorised Representative

    Offshore Chambers,

    P.O. Box 217,

    Apia, Samoa

      Corporation

DATED 4th May 2001

WITNESS to the above signatures:	(Sd.) FANDY TSOI
	9th Floor, Ruttonjee House, 11 Duddell Street, Central, Hong Kong Occupation: Operations Manager

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EXHIBIT C

Schedule of Exceptions

This is the Schedule of Exceptions set forth as Exhibit C (the “Schedule of Exceptions”) to that certain Series B Preference Shares Purchase Agreement of even date (the “Agreement”) by and among Home Inns & Hotels Management (Hong Kong) Limited (the “Company”) and the parties listed on the Schedule of Investors attached to the Agreement as Exhibit A (the “Investors”). Any disclosures made under the heading of one section of this Schedule of Exceptions may apply to and/or qualify disclosures made under one or more other sections. Section headings are provided for convenience only. Unless otherwise defined, any capitalized terms in this Schedule of Exceptions shall have the same meanings assigned to such terms in the Agreement. Nothing in this Schedule of Exceptions constitutes an admission of any liability or obligation of the Company to any third party, nor an admission against the Company’s interests.

Exceptions to Section

1. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that pursuant to the Joint Venture Agreement between Capital Travel Resorts and Hotels Group Limited (“Capital”) and the Company dated April 12, 2002, Capital has a right of first refusal on the transfer of any interest in the China Sub by the Company.

2. ,zIn respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that (“Home Inns Shanghai”) is a subsidiary of the China Sub with a 90% interest held by the China Sub and a 10% interest held on trust by Qi Ji through a Loan and Undertaking Agreement.

3. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that out of 88.45% of the voting shares of China Sub held by the Company, 76% beneficial interest of China Sub is owned by the Company and 12.45% is currently held by the Company on trust for Capital Travel Resorts and Hotels Group Limited.

4. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that the China Sub and Home Inns Shanghai have established two companies in China named Home Inns Suzhou and Home Inns Hangzhou .

C-1

5. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that it is contemplated that the China Sub and Home Inns Shanghai are in the process of establishing two companies in China to be named “Home Inns Wuxi” and “Home Inns Changzhou” or with similar names.

6. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.13, 3.14 (k) and 3.20, it is noted that Home Inns Shanghai is in the process of negotiating certain bank loan from Industrial and Commercial Bank of China, Shanghai (the “Bank”). It is condition for the grant of the loan that Capital Travel will provide corporate guarantee to the Bank. As a result thereof, it has been agreed that the China Sub should provide counter-guarantee to Capital Travel to enable the said bank loan to be granted.

C-2

EXHIBIT D

List of Intellectual Property Rights

The China Sub has filed the following trademark applications in the PRC with respect to the trademark

Application Number	Class
3312862	36
3312863	36
3312864	41
3312865	41
3312866	41
3312875	35
3312876	35

D-1

EXHIBIT E

Form of Shareholders Agreement

E-1

SHAREHOLDERS AGREEMENT

This Shareholders Agreement (the “Agreement”) is made as of 1 December, 2003, by and among Home Inns & Hotels Management (Hong Kong) Limited, a Hong Kong company (the “Company”), with its registered office at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central Hong Kong and the entities and individuals set forth on Exhibit A hereto (collectively, the “Shareholders”, and each individually, a “Shareholder”).

RECITALS

A. The Company and certain Shareholders entered into a shareholders agreement dated the 28^th day of February, 2003 (the “February Agreement”) for the purposes of regulating their relationship with each other and certain aspects of the affairs of and their dealings with the Company.

B. On the 8^th day of April, 2003, the existing 827,586 issued and unissued ordinary shares of HK$1.00 each in the capital of the Company were sub-divided into 200 ordinary shares of HK$0.005 each and the existing 172,414 issued and unissued series A preference shares of HK$1.00 each in the capital of the Company were sub-divided into 200 series A preference shares of HK$0.005 each.

C. Pursuant to certain reorganizations, Top Sterling International Limited (“Top Sterling”) is the registered holder of 9,000,000 Ordinary Shares (as hereinafter defined) and none of Ctrip.com International Limited, Ctrip.com Limited or Zhao Li own any Ordinary Shares in the Company.

D. Top Sterling International Limited and the Company executed a Deed of Adherence to the February Agreement dated the 24^th day of November, 2003.

E. Pursuant to a Series A Preference Shares Purchase Agreement dated the 28^th day of February, 2003, (the “Series A Purchase Agreement”) the Shareholders set forth on Exhibit B hereto (collectively, the “Investors”, and each individually, an “Investor”) own the respective number of Series A Shares (as hereinafter defined) as set forth opposite each such Shareholder’s name on Exhibit A.

F. The Company and the Investors have entered into a Series B Preference Shares Purchase Agreement (the “Series B Purchase Agreement”) pursuant to which the Investors will purchase shares of the Company’s Series B Preference Shares of par value HK$0.005 per share (the “Series B Shares”), as set forth opposite each such Investors’ name on Exhibit A.

G. The Shareholders currently or may in the future own Ordinary Shares issued by the Company and the Shareholders shall own, as of the Closing (as such term is defined in the Series B Purchase Agreement), the respective number of Ordinary Shares as set forth opposite each such Shareholder’s name on Exhibit A.

H. The Company and the Shareholders have agreed and it is a condition to the closing of the transactions contemplated by the Series B Purchase Agreement that forthwith upon the termination of the February Agreement under a deed of cancellation to be entered into between the Company and the Shareholders (the “Cancellation Agreement”), the Company and the Shareholders enter into this new Agreement on the terms and conditions hereinafter set out.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and contained (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

1. Certain Definitions.

For purposes of this Agreement, the following terms have the following meanings:

1.1 “Articles of Association” means the Articles of Association of the Company as the same may be amended from time to time.

1.2 “Commission” shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

1.3 “Conversion Shares” means the Ordinary Shares issued or issuable pursuant to conversion of the Series A Shares or the Series B Shares.

1.4 “Holder” shall mean any person or entity holding Registrable Securities (including Preference Shares).

1.5 “Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.

1.6 “Initiating Holders” shall mean any Holders who in the aggregate hold at least fifty percent (50%) of the outstanding Registrable Securities held by the Holders.

1.7 “IPO” means (i) the Company’s sale or listing of its Ordinary Shares in a firm commitment underwritten public offering at a price per Ordinary Share of not less than three (3) times the per-share purchase price of each Series A Share as set forth in Section 1.2 of the Series A Purchase Agreement (as adjusted to reflect share dividends, share splits and similar adjustments made from 28 February 2003 onwards including without limitation the sub-division of each Series A Shares of HK$1.00 in the capital of the Company into 200 Series A Shares of HK$0.005 pursuant to the resolutions of the shareholders of the Company dated 8 April 2003) on an internationally recognized stock exchange or (ii) the merger of the Company with and into a company whose shares are listed on an internationally recognized stock exchange, the average closing price of which shares on such exchange over the thirty (30) day period following the effectiveness of such merger being no less than either three (3) times the per-share purchase price of each Series A Share as set forth in Section 1.2 of the Series A Purchase Agreement (as adjusted to reflect share dividends, share splits and similar adjustments made from 28 February 2003 onwards including without limitation the sub-division of each Series A Shares of HK$1.00 in the capital of the Company into 200 Series A Shares of HK$0.005 pursuant to the resolutions of the shareholders of the Company dated 8 April 2003).

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1.8 “Key Shareholders” means the following: AsiaStar IT Fund L.P. (“AsiaStar”), IDG Technology Venture Investments, LP (“IDG”), Top Sterling, Qi Ji, and Nan Peng Shen.

1.9 “Memorandum” means the Memorandum of Association of the Company as the same may be amended from time to time.

1.10 “Ordinary Shares” means the ordinary shares of the Company of par value HK$0.005 per share.

1.11 “Pro-Rata Share” means, as to each Key Shareholder’s Right of Co-Sale, the percentage determined by dividing (i) the number of shares of Stock held by the Key Shareholder by (ii) the total number of shares of Stock held by all the Key Shareholders and the Seller.

1.12 “Preference Shares” means the Series A Shares and the Series B Shares.

1.13 “Public Listing Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Section 9.4 hereof, including, without limitation, all qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, the expense of any special audits incident to or required by any such listing (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

1.14 “Registrable Securities” means the Conversion Shares and the Ordinary Shares of the Company issued and outstanding immediately after the Closing (as such term is defined in the Series B Purchase Agreement)(including any Ordinary Shares of the Company issued after the Closing (as such term is defined in the Series B Purchase Agreement) in respect of such Conversion Shares or Ordinary Shares upon any share split, share dividend, recapitalization, or similar event); provided, however, that the Ordinary Shares or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or are available for sale in a single sale in the opinion of counsel for the Company in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

1.15 The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

1.16 “Registration Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Sections 9.1, 9.2 and 9.3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

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1.17 “Right of Co-Sale” means the right of co-sale provided to the Key Shareholders in Section 4 of this Agreement.

1.18 “Right of First Refusal” means the right of first refusal provided to the Company and the Key Shareholders in Section 3 of this Agreement.

1.19 “Securities Act” means the U.S. Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

1.20 “Seller” means any Party proposing to Transfer Stock.

1.21 “Selling Expenses” shall mean all underwriting discounts, selling commissions and share transfer taxes applicable to the securities registered by the Holders and, except as set forth above, all reasonable fees and disbursements of counsel for any Holder.

1.22 “Series A Shares” means the Company’s Series A Preference Shares of par value HK$0.005 per share.

1.23 “Stock” means and includes all Ordinary Shares issued and outstanding at the relevant time plus all Ordinary Shares issuable upon conversion or exchange of any convertible securities, including, without limitation, preference shares and debt securities then outstanding, which are by their own terms then convertible into or exchangeable for Ordinary Shares.

1.24 “subsidiary” shall have the meaning ascribed thereto in Section 2 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong).

1.25 “Transfer” means and includes any sale, transfer or other disposition, whether voluntary or involuntary, except:

(a) any transfers of Stock by a Seller to the Seller’s spouse, siblings, parents, lineal descendants or antecedents or trusts for the benefit of the Seller or the Seller’s spouse, siblings, parents or lineal descendants or antecedents or transfers of Stock by the Seller by devise or descent; provided, that, in all cases, the transferee or other recipient executes a counterpart copy of this Agreement and becomes bound thereby in the same manner as the Seller;

(b) by operation of law;

(c) any transfer to the Company pursuant to the terms of this Agreement or such other agreement entered into between the Company and a Shareholder; or

(d) any transfers of Stock by an Investor to (i) a shareholder, partner, retired partner, member, or beneficiary of such Investor or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Investor or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Investor, or (iv) an entity that is controlled by, controls, or is under common control with the Investor.

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2. Restrictions on Transfer.

2.1 General. Top Sterling, Qi Ji, Nan Peng Shen, Hui Chen, and Ri Xin Liang shall not, without the prior written consent of the holders of a majority of the then outstanding Preference Shares, sell, assign, transfer, pledge or otherwise dispose of such person’s interest in any number of shares of Stock exceeding thirty percent (30%) of the total number of shares of Stock as set forth on Exhibit A for such person, in a transaction or series of transactions; provided, however, that, after the requisite approval by the holders of the outstanding Preference Shares, such a proposed transfer would continue to be subject to the Right of First Refusal and Right of Co-Sale.

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2.2 Notice of Proposed Transfer. Prior to the Seller Transferring any of his or her Stock, the Seller shall deliver to the Company and the Key Shareholders a written notice (the “Transfer Notice”) stating: (i) the Seller’s bona fide intention to sell or otherwise Transfer such shares of Stock (such Stock, the “Offered Stock”); (ii) the name, address and phone number of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the aggregate number of shares of Offered Stock to be Transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Seller proposes to Transfer the Offered Stock (the “Offered Price”).

3. Right of First Refusal.

3.1 Exercise by the Company. The Company has the Right of First Refusal to purchase all or any part of the Offered Stock, if the Company gives written notice of the exercise of such right to the Seller within fifteen (15) days (the “Notice Period”) after the last date on which the Transfer Notice is, pursuant to Section 12.5 hereof, deemed to be effective as to the Company or a Key Shareholder, as the case may be. In the event that the Company elects not to purchase all of the Offered Stock, the remaining shares of Offered Stock may be purchased by the Key Shareholders as set forth in Section 3.2 below. Within five (5) days after expiration of the Notice Period, the Company will give written notice (the “Company’s Expiration Notice”) to the Seller and the Key Shareholders specifying either (A) that all of the Offered Stock was purchased by the Company exercising its Right of First Refusal or (B) that the Company waived its right to purchase the specified number of Offered Stock.

3.2 Exercise by the Key Shareholders. In the event the Company does not purchase all of the Offered Stock, each Key Shareholder (excluding the Seller) shall have the Right of First Refusal to purchase its pro rata share of the remaining Offered Stock. For purposes of this Section 3.2, a Key Shareholder’s pro rata share shall be determined by dividing (i) the number of Stock held by such Key Shareholder, exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time, by (ii) the total number of Stock held by all the Key Shareholders (excluding the Seller and exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time). If any Key Shareholder (excluding the Seller) desires to exercise its Right of First Refusal pursuant to this Section 3.2, such Key Shareholder must, within a fifteen (15) day period after the Company’s Expiration Notice, give written notice (the “Shareholder’s Notice Period”) to the Seller and to the Company of such Key Shareholder’s election to purchase the Offered Stock.

3.3 Purchase Price. The purchase price for the Offered Stock to be purchased by the Company or by a Key Shareholder exercising its Right of First Refusal under this Agreement will be the Offered Price, and will be payable as set forth in Section 3.4 hereof. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration will be determined by the board of directors of the Company (the “Board of Directors”) in good faith, which determination will be binding upon the Company, each Key Shareholder and the Seller, absent fraud or error.

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3.4 Payment. Payment of the purchase price for the Offered Stock purchased by the Company will be made within fifteen (15) days after the end of the Notice Period. Payment of the purchase price for the Offered Stock purchased by the Key Shareholders will be made within fifteen (15) days after the end of the Shareholder’s Notice Period. Payment of the purchase price will be made, at the option of the Company or the Key Shareholder (excluding the Seller), as the case may be, (i) in cash, (ii) by cancellation of all or a portion of any outstanding indebtedness of the Seller to the Company or the Key Shareholders, as the case may be, or (iii) by any combination of the foregoing.

3.5 Rights as a Shareholder. If the Company or a Key Shareholder exercises its respective Right of First Refusal to purchase all or any part of the Offered Stock, then, upon the date that the notice of such exercise by the Company or Key Shareholder is deemed to be effective as to the Seller pursuant to Section 12.5 hereof (the “Transfer Date”), the Seller will have no further rights as a holder with respect to such shares of the Offered Stock except the right to receive payment for such shares of the Offered Stock from the Company or Key Shareholder in accordance with the terms of this Agreement. The Seller will forthwith cause all certificate(s) evidencing such Offered Stock to be surrendered to the Company for Transfer to the Company or Key Shareholder, as the case may be.

3.6 Seller’s Right To Transfer. If the Company or Key Shareholders have not elected to purchase all or any portion of the Offered Stock, then, with respect to that portion of Offered Stock that will not be purchased by the Company or Key Shareholders pursuant to Section 3 hereof, the Seller may Transfer such portion of the Offered Stock, which the Company and Key Shareholders have not elected to purchase, to any Proposed Transferee named in the Transfer Notice, at the Offered Price or at a higher price; provided that such Transfer shall still be subject to the Right of Co-Sale as defined in Section 4 hereof; provided further that such Transfer (i) is consummated within ninety (90) days after the end of the Notice Period, (ii) is on terms no more favorable than the terms proposed in the Transfer Notice and (iii) is in accordance with all the terms of this Agreement. If the Offered Stock is not so Transferred during such ninety (90) day period, then the Seller may not Transfer any of such Offered Stock without complying again in full with the provisions of this Agreement.

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4. Right of Co-Sale.

4.1 Exercise by the Key Shareholders. To the extent that the Company and the Key Shareholders do not exercise their respective Right of First Refusal with respect to all the Offered Stock pursuant to Section 3 hereof, then each Key Shareholder that notifies Seller in writing within fifteen (15) days after the end of the Shareholder’s Notice Period (the “Co–Sale Period”) shall have the right to participate in such sale of shares on the same terms and conditions as specified in the Transfer Notice subject to the terms of this Section 4. Each Key Shareholder who delivers a notice pursuant to the preceding sentence (a “Selling Key Shareholder”) may sell, pursuant to the Selling Key Shareholder’s Right of Co-Sale, up to that number of shares of Stock held by such Selling Key Shareholder equal to the product obtained by multiplying the number of shares of the remaining Offered Stock by such Selling Key Shareholder’s Pro-Rata Share. The Selling Key Shareholder shall indicate on such notice the number of shares of Stock it then holds that it wishes to sell pursuant to this Section 4 (the “Selling Key Shareholder Shares”). The sale of the Selling Key Shareholder Shares shall occur within twenty-five (25) days from the beginning of the Co–Sale Period (the “Closing”). This Right of Co–Sale shall not apply with respect to Offered Stock sold to the Company or a Key Shareholder pursuant to the Right of First Refusal.

4.2 Consummation of Co-Sale. A Selling Key Shareholder may exercise the Right of Co-Sale by delivering to the Seller at or before the Closing, one or more certificates, properly endorsed for Transfer, representing a number of shares not to exceed the number of shares to which Selling Key Shareholder is entitled in Section 4.1, representing such Stock to be Transferred by the Seller on behalf of the Selling Key Shareholder. If the Selling Key Shareholder does not hold a certificate in that series, class or type of stock representing the number of securities to be sold by such Selling Key Shareholder pursuant to this Section 4, then the Company shall promptly issue a certificate representing the proper number of shares to be sold pursuant to this Right of Co-Sale. Following the Closing, the Company shall deliver a certificate for the remaining balance of the securities held by the Selling Key Shareholder, if any, to such Selling Key Shareholder. At the Closing, such certificates or other instruments will be Transferred and delivered to the Proposed Transferee as set forth in the Transfer Notice in consummation of the Transfer of the Offered Stock pursuant to the terms and conditions specified in the Transfer Notice, and the Seller will remit, or will cause to be remitted, to each Selling Key Shareholder, within ten (10) days after such Closing, that portion of the proceeds of the Transfer to which each Selling Key Shareholder is entitled by reason of each Selling Key Shareholder’s participation in such Transfer pursuant to the Right of Co-Sale.

5. Multiple Series, Class or Type of Stock.

If the Offered Stock consists of more than one series, class or type of Stock, the Seller has the right to Transfer hereunder each such series, class or type; provided that if, as to the Right of Co-Sale, a Selling Key Shareholder does not hold any of such series, class or type, and the Proposed Transferee is not willing, at the Closing, to purchase some other series, class or type of Stock from such Selling Key Shareholder, or is unwilling to purchase any Stock from such Selling Key Shareholder at the Closing, then such Selling Key Shareholder will have the put right (the “Put Right”) set forth in Section 6.2 hereof.

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6. Refusal to Transfer; Put Right.

6.1 Refusal to Transfer. Any attempt by any Seller to Transfer any Stock in violation of any provision of this Agreement will be void. The Company will not be required (i) to transfer on its books any Stock that has been sold, gifted or otherwise Transferred in violation of this Agreement, or (ii) to treat as owner of such Stock, or to accord the right to vote or pay dividends to any purchaser, donee or other transferee to whom such Stock may have been so Transferred.

6.2 Put Right. If a Seller Transfers any Stock in contravention of a Key Shareholder’s Right of Co-Sale under this Agreement (a “Prohibited Transfer”), or if the Proposed Transferee of Offered Stock desires to purchase a class, series or type of stock offered by the Seller but not held by a Key Shareholder or the Proposed Transferee is unwilling to purchase any Stock from a Key Shareholder, such Key Shareholder may, by delivery of written notice to such Seller (a “Put Notice”) within ten (10) days after the later of (i) the Closing as defined in subsection 4.1 above, or (ii) the date on which such Key Shareholder becomes aware of the Prohibited Transfer or the terms thereof, and in addition to such other remedies as may be available at law, require such Seller to purchase from such Key Shareholder, for cash or such other consideration as the Seller received in the Prohibited Transfer or at the Closing, a number of shares of Stock (of the same class or type as Transferred in the Prohibited Transfer or at the Closing if such Key Shareholder then owns Stock of such class or type; otherwise Series A Shares, Series B Shares or Ordinary Shares) having a purchase price equal to the aggregate purchase price that the Key Shareholder would have received in the closing of such Prohibited Transfer if such Key Shareholder had elected to exercise its Right of Co-Sale with respect thereto or in the Closing if the Proposed Transferee had been willing to purchase the Stock of the Key Shareholder. The closing of such sale to the Seller will occur within ten (10) days after the date of such Key Shareholder’s Put Notice to such Seller.

7. Restrictive Legend and Stop-Transfer Orders.

7.1 Legends. Each Party understands and agrees that the Company will cause the legends set forth below, or legends substantially equivalent thereto, to be placed upon any certificate(s) or other documents or instruments evidencing ownership of Stock by the Party issued after the date of this Agreement:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH CERTAIN RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A CERTAIN AGREEMENT DATED 24 NOVEMBER, 2003 ENTERED INTO BY THE HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE REGISTERED OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY MARKET STAND-OFF RESTRICTION AS SET FORTH IN A CERTAIN AGREEMENT DATED 24 NOVEMBER, 2003 BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE REGISTERED OFFICE OF THE ISSUER. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE ORDINARY SHARES OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.

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7.2 Stop Transfer Instructions. In order to ensure compliance with the restrictions referred to herein, each Party agrees that the Company may issue appropriate “stop transfer” certificates or instructions.

7.3 Transfers. No securities shall be Transferred unless (i) such Transfer is made in compliance with applicable securities laws and (ii) prior to such Transfer, the transferee or transferees, who prior to such Transfer are not already parties to this Agreement, sign a counterpart to this Agreement pursuant to which such transferee(s) agrees to be bound by the terms of this Agreement. The Company shall not be required (a) to transfer on its books any shares that shall have been Transferred in violation of any of the provisions of this Agreement or (b) to treat as the owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so Transferred.

8. Affirmative Covenants.Financial Information.

(a) So long as a Party, or an entity that is controlled by, controls, or is under common control with the Party, holds two percent (2%) or more of the outstanding capital shares of the Company on an as-converted basis, the Company will provide the following reports to each such Party:

(i) As soon as practicable after the end of each fiscal year, and in any event within ninety (90) days thereafter, audited financial statements of Home Inns Hotel Management (Beijing) Limited (the “China Sub”) as of the end of such fiscal year prepared in reasonable detail, in accordance with generally accepted accounting principles in China (“China GAAP”), and audited by an internationally recognized public accountant.

(ii) As soon as practicable after the end of each month, and in any event no later than twenty (20) days thereafter, a balance sheet of the China Sub as of the end of each such month, and statements of income and cash flows of the China Sub for such month and for the current fiscal year to date, prepared in reasonable detail in accordance with China GAAP, with the exception that no notes need be attached to such statements.

(b) The rights granted pursuant to this Section 8.1 may not be assigned or otherwise conveyed by the Parties or by any subsequent transferee of any such rights without the prior written consent of the Company except for transfers to (i) a shareholder, partner, retired partner, member, or beneficiary of such Party or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Party or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Party, or (iv) an entity that is controlled by, controls, or is under common control with the Party.

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8.2 Reservation of Ordinary Shares. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preference Shares, all Ordinary Shares issuable from time to time upon such conversion.

8.3 Quarterly Board Meetings. The Board of Directors shall hold meetings at least once every three (3) months.

8.4 Director Insurance. If not already entered into, the Company shall enter into standard indemnification agreements with the members of the Board of Directors in the form attached to this Agreement as Exhibit C.

8.5 Director Expenses. The Company shall reimburse each member of the Board of Directors for his/her expenses incurred directly in relation to such member’s services on the Board of Directors.

8.6 Restriction on Bank Account. The proceeds from the sale of the Series B Shares pursuant to the Series B Purchase Agreement shall be deposited into a fixed account of the Company on which AsiaStar and IDG shall be designated a co-signatory (the “Main Account”). The Company shall be entitled to individual draw-downs from the Main Account upon the consent of both AsiaStar and IDG to each such draw-down. Funds drawn down from the Main Account pursuant to the foregoing procedure shall be deposited in an account of the Company separate from the Main Account and shall be utilized by the Company in its discretion.

8.7 Termination of Covenants. The covenants set forth in Sections 8.1 through 8.6 shall terminate and be of no further force or effect on the earlier of: (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company.

9. Registration Rights.

9.1 Requested Registration.

(a) Request for Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with respect to all or a part of the Registrable Securities, the aggregate proceeds of which, net of underwriting discounts and selling commissions, equal or exceed US$5,000,000, the Company will:

(i) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and

(ii) as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company;

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Provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 9.1:

(1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or other applicable securities laws;

(2) Prior to six (6) months after the effective date of the Company’s first registered public offering of its equity securities;

(3) During the period starting with the date sixty (60) days prior to the Company’s estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a transaction under Rule 145 promulgated under the Securities Act (“Rule 145”) or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;

(4) After the Company has effected two (2) such registrations pursuant to this subparagraph 9.1(a), and such registrations have been declared or ordered effective; or

(5) If the Initiating Holders may dispose of shares of Registrable Securities pursuant to a registration statement on Form F-3 pursuant to a request made under Section 9.3 hereof.

(b) Underwriting. In the event that a registration pursuant to Section 9.1 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 9.1(a)(i). In such event, the right of any Holder to registration pursuant to Section 9.1 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 9.1, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company, but subject to reasonable approval of a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 9.1, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated, among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement; provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder or other person to the nearest 100 shares.

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If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration, and such Registrable Securities shall not be transferred in a public distribution prior to ninety (90) days after the effective date of such registration, or such other shorter period of time as the underwriters may require.

9.2 Company Registration.

(a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Rule 145 transaction, the Company will:

(i) promptly give to each Holder written notice thereof; and

(ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 9.2(a)(i). In such event the right of any Holder to registration pursuant to Section 9.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 9.2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in such registration and underwriting. No such reduction shall reduce the amount of securities of the selling Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is the initial public offering and such registration does not include shares of any other selling shareholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding sentence. The Company shall so advise all Holders and other holders distributing their securities through such underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holder at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or other person to the nearest 100 shares. If any Holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require.

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(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 9.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. Selling Expenses of such withdrawn registration shall be borne by the Company.

9.3 Registration on Form F-3. If any Holder or Holders request that the Company file a registration statement on Form F-3 (or any successor form to Form F-3) for a public offering of shares of the Registrable Securities the reasonably anticipated aggregate price to the public of which, net of underwriting discounts and commissions, would equal or exceed US$500,000, and the Company is a registrant entitled to use Form F-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as such Holder or Holders may reasonably request; provided, however, that the Company shall not be required to effect more than one registration pursuant to this Section 9.3 in any six (6) month period. The Company shall inform other Holders of the proposed registration and offer them the opportunity to participate. The substantive provisions of Section 9.1(b) shall be applicable to each registration initiated under this Section 9.3.

9.4 Public Listing. In the event the Company shall receive from Initiating Holders a written request that the Company effect a listing (other than a request pursuant to Section 9.1 hereof) of the Company and its shares on an internationally recognized stock exchange or over-the-counter market (a “Public Listing”), the Company shall use its best efforts to effect such Public Listing (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations).

9.5 Expenses. All Registration Expenses incurred in connection with all registrations pursuant to Sections 9.1, 9.2 and 9.3 shall be borne by the Company. All Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. All Public Listing Expenses shall be borne by the Company.

9.6 Procedures. In the case of each registration, qualification, compliance or Public Listing effected by the Company pursuant to this Section 9, the Company will keep each Holder advised in writing as to the initiation of each such registration, qualification, compliance, and Public Listing and as to the completion thereof. With respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the Company will, at its expense:

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(a) Prepare and file with the governmental agencies with proper jurisdiction a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least one hundred eighty (180) days or until the distribution described in the registration statement has been completed; and

(b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities.

9.7 Indemnification.

(a) The Company will indemnify each Holder, each of its officers, directors, trustees and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, compliance or Public Listing has been effected pursuant to this Section 9, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification, compliance or Public Listing, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or any other national, federal or state securities law or any rule or regulation promulgated thereunder applicable to the Company in connection with any such registration, qualification, compliance or Public Listing, and the Company will reimburse each such Holder, each of its officers, trustees and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by any Holder, controlling person or underwriter and stated to be specifically for use therein; provided, however, that with respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or the amended prospectus filed with the Commission pursuant to Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act, unless such Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage as a result of the Company’s failure to provide the Final Prospectus pursuant to Section 9.6(b) above.

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(b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance pursuant to Section 9.1, 9.2 or 9.3 is being effected, indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, trustees and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such other Holders, such directors, officers, trustees, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or in the Final Prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. Notwithstanding the foregoing, the liability of each Holder under this subsection (b) shall be limited to an amount equal to the proceeds to such Holder from the sale of Registrable Securities as contemplated herein, less any applicable underwriting discounts and commissions; provided, however, such limitation shall not apply in the case of willful fraud by such Holder.

(c) Each party entitled to indemnification under this Section 9.7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnifying Party shall have the option to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 9 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses. No claim may be settled without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

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(d) If the indemnification provided for in this Section 9.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this Subsection 9.7(d) exceed an amount equal to the proceeds to such Holder from the sale of Registrable Securities as contemplated herein, less any applicable underwriting discounts and commissions, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) The obligations of the Company and the Holders under this Section 9.7 shall survive the completion of any offering of Registrable Securities in a registration statement or Public Listing under this Section 9, and otherwise.

9.8 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 9.

9.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of restricted securities to the public without registration, after such time as a public market exists for the Ordinary Shares of the Company in the United States, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act (“Rule 144”), at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act.

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(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

(c) So long as the Investor owns any restricted securities, to furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any such securities without registration.

9.10 Transfer of Rights. The rights to cause the Company to effectuate a Public Listing and the rights to cause the Company to register securities granted to the Investors under Sections 9.1, 9.2, 9.3 and 9.4 may be assigned to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by the Investor provided that: (i) such transfer may otherwise be effected in accordance with applicable securities laws, (ii) the Company is given prompt notice of the transfer, (iii) such assignee or transferee agrees to be bound by the terms of this Agreement, and (iv) such assignee or transferee is 1) any partner, retired partner, affiliated partnership of any holder which is a partnership, or any member of any holder which is a limited liability company, 2) any immediate family member or trust for the benefit of any individual holder, or 3) any transferee who acquires at least two hundred thousand (200,000) shares of the Company’s Registrable Securities (as adjusted for any share split, recapitalization or the like).

9.11 Standoff Agreement. Each Holder hereby agrees, in connection with the Company’s initial public offering of its equity securities pursuant to a registration statement filed under the Securities Act or a Public Listing, upon request of the Company or the underwriters managing such initial public offering of the Company’s securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration or Public Listing as may be requested by the Company or such underwriters; provided that all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities enter into similar agreements.

9.12 Delay. If the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed, or a Public Listing to be effectuated, in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under Section 9.1 or 9.4, as applicable, shall be deferred for a period not to exceed one hundred twenty (120) days from the date of receipt of written request from the Initiating Holders.

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9.13 Termination. The rights to cause the Company to register securities granted to Holders under Sections 9.1, 9.2, and 9.3 shall expire on the earlier of (i) such time as such Holder is able to dispose of all its shares in a three (3) month period pursuant to Rule 144, or (ii) five (5) years after the IPO.

10. Board of Directors and Articles of Association.

10.1 Agreement to Vote. For so long as each of AsiaStar, IDG, and Top Sterling continues to hold Series A Shares, Series B Shares, Conversion Shares, or Ordinary Shares, each time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of electing directors, each of the aforementioned shareholders agrees to vote such shares then held by each such shareholder for the election of the following individuals to the Board of Directors: (i) the two (2) individuals nominated by Top Sterling, who initially shall be Nan Peng Shen and Qi Ji (the “Top Sterling Directors”); (ii) the two (2) individuals nominated by AsiaStar (the “AsiaStar Directors”), who initially shall be Eric Ku Chun Lin and Jerry Sze; and (iii) the one (1) individual nominated by IDG (the “IDG Director”), who initially shall be Su Yang Zhang. The AsiaStar Directors and the IDG Directors shall be referred to herein collectively as the “Preference Shares Directors”.

10.2 Control of Certain Board Actions. In the event that the China Sub fails to meet the respective financial targets for either fiscal year 2003 or fiscal year 2004 as set forth in Exhibit D attached hereto (the “Trigger Event”), Top Sterling shall cause the Top Sterling Directors, as members of the Board of Directors, to cast their votes in favor of, or to affirmatively consent to, any and all actions, as approved by the Preference Shares Directors, with respect to the business operations of the Company and/or the employment, retention, or dismissal of any member of the Company’s management staff; provided, however, that should the Trigger Event occur by virtue of the China Sub’s failure to meet the said financial targets for fiscal year 2003, the Trigger Event shall not be deemed to occur by virtue of China Sub’s failure to meet the said financial targets for fiscal year 2004. Top Sterling’s obligation under this Section 10.2 shall expire upon the first anniversary of the Trigger Event.

10.3 Alternate Directors. Pursuant to Article 94 of the Articles of Association, each member of the Board of Directors shall be entitled to appoint and remove, from time to time and without the consent of any other member of the Board of Directors, any person to act as his/her alternate on the Board of Directors.

10.4 Articles of Association. The Company shall abide by all of its obligations under the Memorandum and Articles of Association, as amended to date; provided, however, the Articles of Association shall be consistent with this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Articles of Association, the terms of this Agreement shall prevail as among the parties hereto so as to regulate the way in which they exercise their rights as shareholders of the Company. The parties hereto further agree that, in case of such conflict, the Articles of Association shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

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10.5 Charter Documents of China Sub. The joint venture contract and the articles of association (along with any other charter documents) of the China Sub (collectively, the “Charter Documents”) shall share the essence of this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Charter Documents, the terms of this Agreement shall supercede the terms of the Charter Documents as among the parties hereto so as to regulate the way in which they exercise any power of decision with respect to the affairs of the China Sub. The parties hereto further agree that, in case of such conflict, the Charter Documents shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

11. Matters Requiring Special Approval.

11.1 Matters of the Company Requiring the Approval of the Shareholders. Notwithstanding any provisions of this Agreement or of the Articles of Association, no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of its outstanding voting shares, and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the China Sub or any subsidiary of the Company (the “Relevant Subsidiary”) concerning any of the following matters with respect to the China Sub or Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company:

(a) the creation or adoption by the Company, the China Sub, or the Relevant Subsidiary of any employee stock option plan;

(b) any consolidation, subdivision, conversion, increase or reduction of the share capital of the Company, the China Sub, or the Relevant Subsidiary or the alteration of any rights attaching thereto in any way;

(c) any change to the Memorandum or Articles of Association, the Charter Documents, or the memorandum or articles of association (or other similar charter documents) of the Relevant Subsidiary;

(d) the acquisition by the Company, the China Sub, or the Relevant Subsidiary, of any other entity or assets with a value in excess of US$200,000;

(e) the consolidation or merger of the Company, the China Sub, or the Relevant Subsidiary which results in the shareholders of the Company, the China Sub, or the Relevant Subsidiary, as applicable, immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity; and

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(f) the adoption of a resolution for the voluntary liquidation or winding up of the Company, the China Sub, or the Relevant Subsidiary or scheme of arrangement or appointment of a liquidator; provided, however, that this subsection (f) shall be of no force and effect after the expiration of the one (1) year period after the Closing (as such term is defined in the Series B Purchase Agreement).

11.2 Matters of the Company Requiring the Approval of the Board of Directors. Notwithstanding any provisions of this Agreement or of the Articles of Association, no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the China Sub or the Relevant Subsidiary concerning any of the following matters with respect to the China Sub or Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors:

(a) the entering into of any contract or transaction outside the ordinary course of business of the Company, the China Sub, or the Relevant Subsidiary, as applicable, in excess of US$200,000;

(b) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in respect of any part of the assets or undertaking of the Company, the China Sub, or the Relevant Subsidiary in excess of US$200,000;

(c) any significant change to the business of the Company, the China Sub, or the Relevant Subsidiary to areas materially different from the current products and/or services offered;

(d) declare, make, or pay any distribution of capital, income, and/or dividends to the security holders of the Company, the China Sub, or the Relevant Subsidiary, as applicable;

(e) repurchase or cancel any capital stock of the Company, the China Sub, or the Relevant Subsidiary;

(f) enter into any material transaction with any member of the Board of Directors, officer, employee, or shareholder of the Company or any company controlled, directly or indirectly, by a member of the Board of Directors, officer, employee or shareholder of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(g) the appointment of or change in the auditor of the Company, the China Sub, or the Relevant Subsidiary, unless such auditor is a “Big 4” accounting firm; and

(h) the sale, transfer, lease, assignment or other disposal of a material part of the undertaking, property and/or assets of the Company, the China Sub, or the Relevant Subsidiary with a book value (as reflected in its respective financial statements) in excess of US$200,000 or the entering into of any contract to do so.

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11.3 Liquidation or Winding Up After One Year. Notwithstanding any provisions of this Agreement or of the Articles of Association and commencing upon the expiration of the one (1) year period after the Closing (as such term is defined in the Series B Purchase Agreement), no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the China Sub or the Relevant Subsidiary concerning any of the following matters with respect to the China Sub or Relevant Subsidiary, as applicable, without (i) the affirmative vote or consent recorded in writing of all three of the Preference Shares Directors or (ii) the affirmative vote or consent recorded in writing of holders of all of the then outstanding Preference Shares:

(a) the adoption of a resolution for the voluntary liquidation or winding up of the Company, the China Sub, or the Relevant Subsidiary or scheme of arrangement or appointment of a liquidator.

12. Miscellaneous.

12.1 Term and Termination. This Agreement shall become effective upon the Closing (as such term is defined in the Series B Purchase Agreement). The restriction on transfer set forth in Section 2.1 hereof, the covenants set forth in Sections 10.2 and 11 hereof, the Right of First Refusal, and the Right of Co-Sale will terminate upon the earliest to occur of (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company. This Agreement shall terminate in respect of any Shareholder (but shall continue between the other parties to this Agreement (if more than one) but not otherwise) if at any time as a result of a transfer of Ordinary Shares or Preference Shares made in accordance with this Agreement that Shareholder holds no Ordinary Shares and Preference Shares in the capital of the Company but without prejudice to any rights which any party may have against any other party arising prior to such termination.

12.2 Waivers and Amendments. Except as otherwise set forth herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by holders of at least 80% of the Preference Shares and Ordinary Shares held by the Parties immediately after the Closing (as such term is defined in the Series B Purchase Agreement). Upon the effectuation of each such waiver, consent, amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Preference Shares and the Ordinary Shares who have not previously consented thereto in writing.

12.3 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of Hong Kong. The parties hereto submit to the non-exclusive jurisdiction of the courts of Hong Kong.

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12.4 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.

12.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid or by overnight courier, or otherwise delivered by hand or by messenger, addressed (i) if to an Investor, at the Investor’s address, as shown on Exhibit B hereto, or at such other address as the Investors shall have furnished to the Company in writing, or (ii) if to a Shareholder, at the Shareholder’s address, as shown on Exhibit A hereto, or at such other address as the Shareholders shall have furnished to the Company in writing, or (iii) if to the Company, to its address set forth on the cover page of this Agreement and addressed to the attention of the President, or at such other address as the Company shall have furnished to the Investors.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally or by overnight courier, or, if sent by mail, at the earlier of its receipt or five (5) calendar days after the same has been deposited in a regularly maintained receptacle for the deposit of mail, addressed and mailed as aforesaid.

12.6 Severability of this Agreement. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

12.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Investor, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Investor of any breach or default under this Agreement, or any waiver by the Investor of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Investor, shall be cumulative and not alternative.

12.10 Share Splits. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the Company’s capital which may be made by the Company after the Closing (as such term is defined in the Series B Purchase Agreement).

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12.11 Further Assurances. The Parties and the Company will execute such further assurances and other documents and instruments and do such further acts and other things as may be necessary to implement and carry out the intent of this Agreement.

12.12 Assignment. This Agreement shall be binding on the parties hereto and their respective successors and shall inure to the benefit of each of them and their respective successors and permitted assigns. The benefit of this Agreement may not, except as otherwise herein provided, be assigned or transferred in whole or in part by any Party without the prior consent of the other Parties.

12.13 Interpretation. References in this Agreement to:

(a) words importing the singular include the plural and vice versa;

(b) words importing one gender include all other genders;

(c) Sections and Exhibits are references to sections and exhibits to this Agreement unless otherwise specified;

(d) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(e) any legislation shall include any legislation which amends, consolidates or replaces the same or which has been amended, consolidated or replaced by the same and shall include any subsidiary and subordinate legislation made under the relevant legislation;

(f) “including” or similar expressions are not words of limitation; and

(g) words and expressions defined in the body of this Agreement (including its exhibits) shall have the meanings thereby attributed to them whenever the context requires.

12.14 Confidentiality. The Parties undertake to each other and the Company that they will not at any time hereafter use or divulge or communicate to any person other than to officers or employees of the Company whose province it is to know the same or on the instructions of the Board of Directors any confidential information concerning the business, accounts, finance or contractual arrangements or other dealings, transactions or affairs of the Company which may come to their knowledge and they shall use their best endeavors to prevent the publication or disclosure of any confidential information concerning such matters by themselves, their respective employees and officers; provided, however, that AsiaStar and IDG may disclose such information to its respective partners, principals, employees, and legal and financial advisors. The obligations of each of the Parties contained in this Section 12.14 shall continue without limit in point in time but shall cease to apply to any information coming into the public domain otherwise than by breach by any such Party of its said obligations; provided that nothing contained in this Section 12.14 shall prevent any Party from disclosing such information to the extent required in or in connection with legal proceedings arising out of this Agreement or any matter relating to or in connection with the Company. All notes and memoranda (whether in the form of originals, reproductions or electronically stored data) of any trade secrets or confidential information concerning the business of the Company or any of its suppliers, agents, distributors or customers which shall be acquired, received or made by a Party during the continuance of this Agreement shall be the property of the Company and shall be surrendered by the Party to someone duly authorized by the Company in that behalf at the termination of this Agreement or at the request of the Board of Directors at any time during the continuance of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Shareholders Agreement as of the date first written above.

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

By:

Name:

Title:

TOP STERLING INTERNATIONAL LIMITED

By:

Name:

Title:

QI JI

(Signature)

NAN PENG SHEN

(Signature)

HUI CHEN

(Signature)

SIGNATURE PAGE ONE TO SHAREHOLDERS AGREEMENT

RI XIN LIANG

(Signature)

Series A Preference Shares Holders

ASIASTAR IT FUND L.P.

By:

Name:

Title:

IDG TECHNOLOGY VENTURE INVESTMENTS, LP

By: IDG Technology Venture Investments, LLC, its General Partner

Name:

Title:

Series B Preference Shares Holders

ASIASTAR IT FUND L.P.

By:

Name:

Title:

IDG TECHNOLOGY VENTURE INVESTMENTS, LP

By: IDG Technology Venture Investments, LLC, its General Partner

Name:

Title:

SIGNATURE PAGE TWO TO SHAREHOLDERS AGREEMENT

EXHIBIT A

SHAREHOLDERS

Name	Address	Ordinary Shares		Series A Shares	Series B Shares
Top Sterling International Limited	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	9,000,000	*	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	800,000		Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	600,000		Nil	Nil
Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000		Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000		Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil		10,775,800	1,511,028
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil		6,465,600	906,617

* Top Sterling International Limited is holding 200,000 Ordinary Shares on trust for Home Inns & Hotels Management (Hong Kong) Limited.

EXHIBIT B

INVESTORS

Name of Investor	Address
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China

EXHIBIT C

FORM OF INDEMNIFICATION AGREEMENT

INDEMNIFICATION AGREEMENT

THIS AGREEMENT made as of the              day of                     , 2003

BETWEEN:

[Director] (Hong Kong IdentityCard No.             )

(hereinafter called the “Director”)

OF THE FIRST PART

AND:	HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED, a company duly incorporated under the laws of Hong Kong with its registered office at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong.
	(hereinafter called the “Company”)

OF THE SECOND PART

NOW THEREFORE that in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties hereto (the “Parties”) agree, each with the other, as follows:

ARTICLE 1

INDEMNIFICATION PROVISIONS

1.1 Indemnity

Subject to Clause 1.3 hereof, the Company hereby agrees to indemnify and save harmless the Director against all liabilities, suits, damages, costs, charges and expenses including any amount paid to settle an action or satisfy a judgement, actually and reasonably incurred by the Director (collectively, the “Expenses”) and without limiting the foregoing, such indemnity shall be in respect of any Expenses relating to a civil, criminal, or administrative action or proceeding to which the Director is made a party, witness, or other participant by reason of being or having been a director of the Company including an action brought by the Company if:

(a) the Director acted honestly and in good faith with a view to the best interests of the Company; and

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(b) in the case of a criminal or administrative action or proceeding, the Director had no reasonable grounds for believing that its conduct was unlawful.

1.2 No Presumption

The determination of any action, suit or proceeding by judgment, order, settlement, conviction or otherwise shall not, of itself, create a presumption that the Director did not act honestly and in good faith and in the best interests of the Company, and that the Director did not exercise the care, diligence and skill of a reasonably prudent party and, with respect to any criminal action or proceeding, did not have reasonable grounds to believe that his conduct was unlawful.

1.3 Scope of Indemnity

The Company hereby agrees to indemnify Director to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Memorandum and Articles of Association, or statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of the Company to indemnify the Director, it is the intent of the Parties that Director shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of the Company to indemnify the Director, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the Parties’ rights and obligations hereunder.

1.4 Nonexclusivity

The indemnification provided by this Agreement shall be in addition to any rights to which Director may be entitled under the Company’s Memorandum and Articles of Association, any agreement, any vote of shareholders or disinterested directors, the Hong Kong Companies Ordinance, or otherwise. The indemnification provided under this Agreement shall continue as to Director for any action Director took or did not take while serving as a director of the Company even though Director may have ceased to serve in such capacity.

1.5 Partial Indemnification

If Director is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Director for the portion of such Expenses to which Director is entitled.

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ARTICLE 2

GENERAL PROVISIONS

2.1 Further Assurances

The Parties shall execute such further assurances and other documents and instruments and do such further and other things as may be necessary to implement and carry out the intent of this Agreement.

2.2 Entire Agreement

The provisions herein constitute the entire agreement between the Parties, and supersede all previous expectations, understandings, communications, representations and agreements, whether verbal or written, between the Parties with respect to the subject matter hereof.

2.3 Severability

If any provision of this Agreement is unenforceable or invalid for any reason whatsoever, such unenforceable or invalid provisions of this Agreement shall be severable from this Agreement and the remaining provisions shall remain enforceable to the fullest extent permitted by law.

2.4 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of Hong Kong.

2.5 Gender

Wherever the singular and masculine are used throughout this Agreement, the same shall be construed as meaning the plural or feminine, or a body corporate, where the context or the Parties hereto so require.

2.6 Headings

The headings in this Agreement form no part of this Agreement and shall be deemed to have been inserted for convenience only.

2.7 Counterparts

This Agreement may be executed in one or more counterparts, each of which may be executed by less than all of the Parties, each of which shall be enforceable against the Parties actually executing such counterparts, and all of which together shall constitute one instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF the Parties have executed these presents under his hand and seal in case of the Director and in the presence of the duly authorized signatories in the case of the Company as of the day and year first above written.

SIGNED, SEALED AND DELIVERED	)
BY	)
in the presence of:	)
	)
	)
Name	)
	)
	)
Address	)
	) )
Occupation	)
SIGNED BY FOR AND ON BEHALF OF HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED in the presence of	) ) ) ) ) ) ) ) )

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EXHIBIT D

FINANCIAL TARGETS

	Fiscal Year 2003	Fiscal Year 2004
Number of Conversions Bearing the “Home Inns” Name Directly Managed and Operated by China Sub	12	20
Revenue	US$4,500,000	US$9,900,000
Net Income	US$320,000	US$1,250,000

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HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

SHAREHOLDERS AGREEMENT

Date: 1 December 2003

EX-4.5

Exhibit 4.5

SHARE SUBSCRIPTION AGREEMENT

concerning

13,219,140 Ordinary Shares in

HOME INNS AND HOTELS MANAGEMENT

(HONG KONG) LIMITED

Boughton Peterson Yang Anderson

4009 Gloucester Tower, The Landmark

11 Pedder Street, Central

Hong Kong

Tel: 2877 3088

Fax: 2525 1099

Our Ref.: 801800-4

INDEX

CLAUSE		PAGE
PARTIES		1
WHEREAS		1
1.	INTERPRETATION	1
2.	AGREEMENT TO SUBSCRIBE AND CONDITION PRECEDENT	4
3.	COMPLETION	4
4.	REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY	6
5.	REPRESENTATIONS AND WARRANTIES BY THE SUBSCRIBER	6
6.	REPRESENTATIONS AND WARRANTIES BY BOTH PARTIES	7
7.	SEVERABILITY	8
8.	ENTIRE AGREEMENT	8
9.	TIME OF ESSENCE, REMEDIES AND WAIVERS	8
10.	PUBLIC ANNOUNCEMENTS	8
11.	ASSIGNMENT AND COUNTERPARTS	9
12.	NOTICES AND OTHER COMMUNICATION	9
13.	FURTHER ASSURANCE	10
14.	COSTS AND EXPENSES	10
15.	GOVERNING LAW AND JURISDICTION	10

SCHEDULE 1	PARTICULARS OF THE COMPANY
SCHEDULE 2	FORM OF APPLICATION FOR SHARES
SCHEDULE 3	REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY
EXHIBIT A	DEED OF RELEASE AND WAIVER
EXHIBIT B	SUPPLEMENTAL AGREEMENT
ANNEX 1	AUDITED ACCOUNTS

THIS AGREEMENT is made on the 24^th day of May 2004

BETWEEN

(1) POLY VICTORY INVESTMENTS LIMITED, a company incorporated in the British Virgin Islands with its registered office at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands (the “Subscriber”); and

(2) HOME INNS AND HOTELS MANAGEMENT (HONG KONG) LIMITED, a company incorporated in Hong Kong with its registered office at Room 2001, 20^th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong (the “Company”).

WHEREAS

(A) The Company is a company incorporated in Hong Kong with limited liability. As at the date of this Agreement, the Company has an authorised capital of HK$1,000,000.00 divided into 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each. Particulars of the Company as at the date hereof are set out in Part A of Schedule 1.

(B) The Subscriber has agreed to subscribe for 13,219,140 Ordinary Shares of the Company (the “Subscription Shares”), and the Company has agreed to the allotment and issue of the Subscription Shares to the Subscriber upon and subject to the terms and conditions hereof. Particulars of the Company immediately after the subscription of the Subscription Shares are set out in Part B of Schedule 1.

NOW IT IS HEREBY AGREED as follows:-

1. INTERPRETATION

1.1 In this Agreement, including the Recitals and the Schedules, the following expressions shall, except where the context otherwise requires, have the following meanings:

“Audited Accounts”	The audited accounts of the Company comprising its balance sheet as at 31 December 2002 and its profit and loss account for the year ended 31 December 2002, a copy of which is annexed hereto as Annex 1;
“Business Day”	a day, excluding Saturdays, on which banks in Hong Kong are open for business throughout their normal business hours;
“Company’s Warranties”	the representations and warranties as set out in Clause 4 of this Agreement and in Schedule 3;
“Completion”	completion of the subscription, allotment and issuance of the Subscription Shares in accordance with the provisions in Clause 3;

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“Completion Date”	24 May 2004 or such other date as may be agreed by the parties in writing;
“Confidential Information”	has the meaning specified in Clause 10.1
“Deed of Release and Waiver”	the Deed of Release and Waiver attached hereto as Exhibit B to be entered into between the Company, the holders of the Preference Shares and the Subscriber;
“Disclosing Party”	has the meaning specified in Clause 10.2
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC;
“Management Accounts”	The unaudited management accounts of the Company comprising its balance sheet as at the Management Account Date and its profit and loss account for the period commencing from 1st January 2003 and ending on the Management Account Date;
“Management Account Date”	29th February 2004;
“Memorandum and Articles”	the memorandum and articles of association of the Company as amended from time to time;
“Non-Disclosing Party”	Has the meaning specified in Clause 8.2
“Ordinary Shares”	the ordinary shares of par value HK$0.005 each in the capital of the Company;
“PRC”	the People’s Republic of China;
“Preference Shares”	the Series A Preference Shares and the Series B Preference Shares;
“Series A Conversion Price”	has the meaning specified in the Memorandum and Articles;
“Series B Conversion Price”	has the meaning specified in the Memorandum and Articles;
“Series A Preference Shares”	the series A preference shares of par value of HK$0.005 each in the capital of the Company;
“Series B Preference Shares”	the series B preference shares of par value of HK$0.005 each in the capital of the Company;

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“Share Purchase Agreement”	the Series B Preference Shares Purchase Agreement dated 24th November 2003 between the Company and Asiastar IT Fund L.P. and IDG Technology Venture Investment LP;
“Shareholders”	the shareholders of the Company;
“Shareholders Agreement”	The Shareholders Agreement dated 1st December 2003 entered into between the Company and the Shareholders;
“Subscription Price”	HK$1.57, being the subscription price for each of the Subscription Shares;
“Subscription Shares”	13,219,140 Ordinary Shares of the Company to be issued and allotted to the Subscriber pursuant to the terms and conditions of this Agreement;
“Subscriber’s Warranties”	the representations and warranties as set out in Clause 5 of this Agreement;
“Supplemental Agreement”	the Supplemental Agreement attached hereto as Exhibit A to be entered into between the Company, the Shareholders and the Subscriber; and
“Total Subscription Price”	HK$20,754,050, being the total Subscription Price for all Subscription Shares.

1.2 In this Agreement:

(a) references to Recitals, Clauses, Sub-clauses, Schedules and Exhibits are to the clauses and sub-clauses of, and the recitals, schedules and exhibits to, this Agreement;

(b) references to any statutory provision or any rule or regulation (whether or not having the force of law) shall be construed as references to the same as amended, varied, modified, consolidated or re-enacted from time to time and to any subordinate legislation made under such statutory provision;

(c) references to parties are to parties of this Agreement;

(d) words importing the singular include the plural and vice versa, words importing one gender include every gender, and references to persons include bodies corporate and unincorporated; and

(e) headings are for ease of reference only and shall not affect the interpretation of this Agreement.

1.3 The Recitals, the Schedules and the Exhibits form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement and any reference to this Agreement shall include the Recitals, the Schedules and the Exhibits.

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2. AGREEMENT TO SUBSCRIBE

2.1 On and subject to the terms of this Agreement, the Subscriber shall subscribe for the Subscription Shares in cash at the Subscription Price, totalling Twenty Million Seven Hundred and Fifty Four Thousand and Fifty Dollars Hong Kong Currency (HK$20,754,050), and the Company shall validly allot and issue the Subscription Shares to the Subscriber on Completion, which shall be issued and allotted as fully paid and shall rank pari passu in all respects with the existing Ordinary Shares in issue as at the Completion Date with the rights and obligations as set out in the Memorandum and Articles.

2.2 The Total Subscription Price for the Subscription Shares shall be paid by the Subscriber in full at Completion in the manner as set out in Clause 3.

2.3 The Company shall on or before completion obtain the written agreement of the shareholders holding Preference Shares to waive their respective rights to an adjustment to the Series A Conversion Price or Series B Conversion Price as specified in Clause 16(f)(iv) of the Memorandum and Articles.

3. COMPLETION

3.1 Completion shall take place on the Completion Date at office of Boughton Peterson Yang Anderson of 4009 Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong or at such other place and time as the Company and the Subscriber may agree in writing when all of the following matters shall be transacted:

(a) The Subscriber shall deliver to the Company a letter applying for the Subscription Shares at the Subscription Price signed by the Subscriber substantially in the form of Schedule 2;

(b) The Subscriber shall execute and deliver to the Company the Deed of Release and Waiver and the Supplemental Agreement;

(c) The Subscriber shall pay the Total Subscription Price for the Subscription Shares to the Company in accordance with the provisions herein by depositing the Total Subscription Price in immediately available funds to the bank account designated by the Company or by banker’s draft on or prior to the Completion Date;

(d) Subject to the Subscriber having paid the Total Subscription Price, the Company shall:

(i) allot and issue to the Subscriber, as fully paid, the Subscription Shares free from all charges, liens, encumbrances, equities or other third party rights, claims or interests, and shall procure the registration of the Subscriber as holder of the Subscription Shares in the register of members of the Company; and

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(ii) deliver to the Subscriber share certificate(s) issued in the name of the Subscriber for the Subscription Shares.

(e) The Company shall deliver to the Subscriber:

(i) a copy of the board resolutions of the Company approving and authorising the execution and performance of this Agreement, the allotment and issue of the Subscription Shares to the Subscriber in accordance with the terms of this Agreement and the delivery of share certificate(s) of the Subscription Shares to the Subscriber;

(ii) a copy of the resolutions of the shareholders of the Company approving the subscription of the Subscription Shares and the appointment of LIANG Jian Zhang, MEI Yun Xin and YANG Jian Min as directors of the Company and the holders of the Preference Shares waiving their right to adjust the conversion price in respect of the issue of the Subscription Shares;

(iii) the Supplemental Agreement duly executed by the Company and all the Shareholders;

(iv) the Deed of Release and Waiver duly executed by the Company and by the Shareholders holding Preference Shares; and

(v) indemnification agreement in favour of MEI Yun Xin and YANG Jian Min, the nominee directors of the Subscriber in the form set out in the Shareholders Agreement.

(f) The Subscriber shall deliver to the Company a certified true copy of its board resolutions for the approval and authorisation of the execution and performance of this Agreement, the Supplemental Agreement and the Deed of Release and Waiver.

3.2 The Company shall not be obliged to complete this Agreement unless the Subscriber shall have fully complied with all of its requirements in Clause 3.1(a), (b), (c) and (f).

3.3 In the event that Completion has not taken place on the Completion Date (or at such later date as may be agreed in writing by the Company and the Subscriber) as a result of the sole default on the part of the Subscriber, the Company shall by written notice to the Subscriber terminate this Agreement provided that any right or obligation of any party against or towards any of the other parties accrued or arising under this Agreement prior to or as a result of such termination shall survive such termination.

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4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY

4.1 In consideration of the Subscriber entering into this Agreement, the Company hereby agrees to provide the warranties, covenants, and undertakings as hereinafter stated.

4.2 Notwithstanding any investigations or enquiries by or on behalf of the Subscriber and notwithstanding anything which is or which ought to be within the knowledge of the Subscriber, the Company represents, warrants and undertakes to the Subscriber (to the intent that the provisions of this Clause shall continue to have full force and effect notwithstanding Completion) in the terms set out in Schedule 3 and acknowledges that the Subscriber in entering into this Agreement is relying on such representations, warranties and undertakings.

4.3 The Company undertakes with the Subscriber to ensure that the Company’s Warranties will not be breached and will at all times be true, complete and accurate in all material respects on the basis that they were deemed to be repeated at any time up to and including Completion and on the basis that a reference to such time is substituted for any express or implied reference to the date of this Agreement and the Company’s Warranties shall be deemed to be given by the Company at such time as well as at the time of this Agreement accordingly.

4.4 The Company shall forthwith notify the Subscriber upon becoming aware of any event which may cause any of the Company’s Warranties to be incorrect, misleading or breached in a material respect or which may have any material adverse effect on the assets or liabilities of the Company.

4.5 The rights conferred upon the Subscriber by the provisions of this Clause 4 are additional to and do not prejudice any other rights the Subscriber may have, and failure to exercise any of the rights herein conferred shall not constitute a waiver of any such rights.

4.6 Each of the Company’s Warranties shall be construed as a separate warranty and shall not be limited or restricted by reference to or inference from the terms of any other of the Company’s Warranties.

4.7 The exceptions as set fourth in the Schedule of Exceptions in the Share Purchase Agreement shall be exceptions to the Company’s Warranties as if the same is repeated herein.

4.8 The Subscriber shall not be entitled to any remedy or compensation in respect of the breach of any of the Company’s Warranties which should have been revealed, known or discovered by proper due diligence review or investigation made by or on behalf or the Subscriber into the affairs of the Company.

5. REPESENTATIONS AND WARRANTIES BY THE SUBSCRIBER

5.1 The Subscriber hereby represents and warrants to the Company that:

(a) The Subscriber is a corporation duly incorporated, validly existing and in good standing under the laws of British Virgin Islands and has legal capacity to execute, deliver and perform this Agreement, the Supplemental Agreement and the Deed of Release and Waiver;

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(b) The Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement, the Supplemental Agreement, the Deed of Release and Waiver and to carry out its provisions. All action on its part required for the lawful execution and delivery of this Agreement, the Supplemental Agreement and the Deed of Release and Waiver has been or will be effectively taken prior to Completion. Upon execution and delivery, this Agreement, the Supplemental Agreement and the Deed of Release and Waiver will be a valid and binding obligation of the Subscriber, enforceable in accordance with their respective terms;

(c) In subscribing for the Subscription Shares, the Subscriber will not be in breach of any applicable laws, including those relating to money laundering or proceeds of crime in any applicable jurisdiction;

(d) In formulating a decision to invest in the Company and evaluating the suitability of an investment in the Subscription Shares, the Subscriber has not relied or acted on the basis of any representations or other information (whether oral or written) purported to be given on behalf of the Company except as set forth herein;

(e) The Subscription Shares being subscribed by it are being acquired for its own account for the purpose of investment and not for speculation; and

(f) The representations, warranties, agreements, understandings and acknowledgments made by the Subscriber in this Agreement shall survive the subscription of the Subscription Shares by the Subscriber.

5.2 Each of the Subscriber’s Warranties is without prejudice to any other of the Subscriber’s Warranties and no provision contained in this Agreement shall govern or limit the extent or application of any other of the Subscriber’s Warranties.

6. REPRESENTATIONS AND WARRANTIES BY BOTH PARTIES

6.1 Each party (a) represents and warrants to the other parties hereto that it has retained no finder or broker in connection with the transactions contemplated by this Agreement, and (b) hereby agrees to indemnify and to hold harmless the other parties hereto from and against any liability for any commission or compensation in the nature of a finder’s fee of any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the indemnifying party or any of its employees or representatives are responsible.

6.2 The Company shall not be liable for any breach of the Company’s Warranties:

(a) to the extent it arises as a result of legislation which comes into force after the Completion Date and which is retrospective in effect; or

(b) which, being a liability in respect of taxation, arises by reason of an increase in the rates of taxation made after the Completion Date with retrospective effect.

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7. SEVERABILITY

7.1 If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired.

8. ENTIRE AGREEMENT

8.1 This Agreement constitutes the entire agreement and understanding between the parties in connection with the subject matter of this Agreement and supersedes all previous term sheets, proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and no party has relied or is entitled to rely on any such term sheets, proposals, representations, warranties, agreements or undertakings.

9. TIME OF ESSENCE, REMEDIES AND WAIVERS

9.1 Time shall be of the essence of this Agreement.

9.2 No delay or omission by any party in exercising any right, power or remedy provided by law or under this Agreement shall affect that right, power or remedy, or operate as a waiver of it.

9.3 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

9.4 The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

10. PUBLIC ANNOUNCEMENTS

10.1 This Agreement, the Deed of Release and Waiver, the Supplemental Agreement and the other agreements and contracts executed disclosed incidental to this Agreement, including their existence, and the identity, details and particulars of the other shareholders of the Company (collectively, the “Confidential Information”), shall be considered confidential information and shall not be disclosed by any party hereto to any person not being a party hereto except with the prior written consent of the other party or otherwise in accordance with the provisions of this Clause 10.

10.2 In the event that any party becomes legally compelled (including without limitation, pursuant to securities laws and regulations) to disclose the existence of the Confidential Information or any part thereof in contravention of the provisions of this Clause 10, such party (the “Disclosing Party”) shall provide the other parties (the “Non-Disclosing Party”) with prompt written notice of that fact so that the appropriate party may seek (with the co-operation and reasonable efforts of the other parties) a protective order, confidential treatment or other appropriate remedies. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such information to the extent reasonably requested by any Non-Disclosing Party.

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10.3 Nothing in this Clause 10 shall apply to any part of the Confidential Information which comes into the public domain for any reason except the failure of any party to comply with this Clause 10.

10.4 The provisions of this Clause 10 shall be in addition to, and not in substitution for, the provisions of any separate non-disclosure agreement executed by any of the parties hereto with respect to the transactions contemplated hereby.

10.5 Nothing in this Clause 10 shall prevent the parties from disclosing the Confidential Information to its professional advisors for the purpose of obtaining or seeking professional advise or services provided that such advisors shall observe the duty of confidentiality herein.

11. ASSIGNMENT AND COUNTERPARTS

11.1 This Agreement shall be binding on and enure to the benefit of the parties hereto and their respective successors.

11.2 No party hereto may assign or transfer any of its rights or obligations under this Agreement.

11.3 This Agreement may be entered into by any party by executing a counterpart hereof. All such counterparts when taken together shall constitute one and the same instrument and this Agreement shall only take effect upon the execution by each of the parties hereto.

12. NOTICES AND OTHER COMMUNICATION

12.1 Any notice or other communication to be given under this Agreement shall be in writing and may be sent by post or delivered by hand or given by facsimile or by courier to the address or fax number from time to time designated, the initial address and fax number so designated by each party are set out in Clause 12.2 10.2 against their respective names. Any such notice or communication shall be sent to the party to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject matter of this Agreement. If so delivered by hand or given by facsimile such notice or communication shall be deemed received on the date of despatch and if so sent by post or delivered by courier, shall be deemed received three (3) Business Days after the date of despatch (in the case of local mail or delivery by courier) and five (5) Business Days after the date of despatch (in the case of overseas mail).

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12.2    Subscriber:	Poly Victory Investments Limited
	Room 3406, Bank of America Tower,
	12 Gloucester Road,
	Central, Hong Kong.
	Fax Number : (852) 2891-3110
	Attn.: Ricky Leung
Company:	Home Inns & Hotels Management (Hong Kong) Limited
	Room 2001, 20th Floor,
	The Centrium, 60 Wyndham Street,
	Central,
	Hong Kong
	Fax Number: (852) 2169 0919
	Attn.: Neil Shen

13. FURTHER ASSURANCE

13.1 Each of the parties shall at its own costs, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form satisfactory to the other parties which the other parties may reasonably request for giving full effect to this Agreement and securing to the other parties the full benefit of the rights, powers and remedies conferred upon the other parties in this Agreement.

14. COSTS AND EXPENSES

14.1 Each party shall bear its own costs and expenses (including legal expenses) in respect of the negotiation, preparation, execution and carrying into effect of this Agreement, the Deed of Release and Waiver and other agreements and contracts incidental to this Agreement.

15. GOVERNING LAW AND JURISDICTION

15.1 This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties agree to submit to the non-exclusive jurisdiction of the Hong Kong courts in respect of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS whereof the parties executed this Agreement the day and year first above written.

SUBSCRIBER Poly Victory Investments Limited

SIGNED by		)
Print name	:	)                                         /s/
		)
In the presence of:-	:	)
Witness’ signature	:
Witness’ name	:
Witness’ address	:
Witness’ occupation	:

SIGNED by	)
Print Name	)
	)                                         /s/
for and on behalf of	)
HOME INNS & MANAGEMENTS	)
(HONG KONG) LIMITED	)
in the presence of:-	)

Witness’ signature	:
Witness’ name	:
Witness’ address	:
Witness’ occupation	:

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SCHEDULE 1

PART A

PARTICULARS OF THE COMPANY

(as at the date hereof)

1.      Registered Office	:	Room 2001, 20th Floor,
		The Centrium, 60 Wyndham Street,
		Central, Hong Kong.
2.      Date of Incorporation	:	28 May 2001
3.      Company Number	:	758133
4.      Place of Incorporation	:	Hong Kong
5.      Directors	:	(1) SHEN Nan Peng
		(2) JI Qi
		(3) ZHANG Su Yang
		(4) LIN Eric Ku-Chun
		(5) SZE Jerry
6.      Authorized Share Capital	:	HK$1,000,000.00 consisting of 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each
7.      Issued Share Capital at the date hereof is held as follows:

Name of Shareholders	No. of Ordinary Shares	No. of Series A Preference Shares	No. of Series B Preference Shares
Shen Nan Peng	600,000
Chen Hui	200,000
Ji Qi	800,000
Liang Rixin	400,000
Top Sterling International Limited	9,000,000
Asiastar IT Fund L.P.		10,775,800	1,511,028
IDG Technology Venture Investments L.P.		6,465,600	906,617
Total	11,000,000	17,241,400	2,417,645

12

PART B

PARTICULARS OF THE COMPANY

(after the subscription)

1.      Registered Office	:	Room 2001, 20th Floor,
		The Centrium, 60 Wyndham Street,
		Central, Hong Kong.
2.      Date of Incorporation	:	28 May 2001
3.      Company Number	:	758133
4.      Place of Incorporation	:	Hong Kong
5.      Directors	:	(1) SHEN Nan Peng
		(2) JI Qi
		(3) ZHANG Su Yang
		(4) LIN Eric Ku-Chun
		(5) SZE Jerry
		(6) MEI YUN XIN
		(7) YANG JIAN MIN
		(8) LIANG JIAN ZHANG
6.      Authorized Share Capital	:	HK$1,000,000.00 consisting of 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each
7.      Issued Share Capital after the subscription heein is held as follows:

Name of Shareholders	No. of Ordinary Shares	No. of Series A Preference Shares	No. of Series B Preference Shares
Shen Nan Peng	600,000
Chen Hui	200,000
Ji Qi	800,000
Liang Rixin	400,000
Top Sterling International Limited	9,000,000
Poly Victory Investments Ltd.	13,219,140
Asiastar IT Fund L.P.		10,775,800	1,511,028
IDG Technology Venture Investments L.P.		6,465,600	906,617
Total	24,219,140	17,241,400	2,417,645

13

SCHEDULE 2

FORM OF APPLICATION FOR SHARES

To :     Home Inns and Hotels Management (Hong Kong) Limited

From :     Poly Victory Investments Limited

Date :     [            ]

Dear Sirs,

Application for shares

We hereby apply for the allotment and issue of 13,219,140 ordinary shares (the “Subscription Shares”) of Home Inns and Hotels Management (Hong Kong) Limited (the “Company”) at the subscription price of HK$1.57 each.

We agree to take the above Subscription Shares subject to the Memorandum and Articles of Association of your Company and we authorise you to enter our name and the following particulars in the register of members of the Company as holder of the above Subscription Shares:

Address:

Yours faithfully,

For and on behalf of

POLY VICTORY INVESTMENTS LIMITED

Authorised signatory

14

EXHIBIT A

SUPPLEMENTAL AGREEMENT

This Supplemental Agreement (the “Supplemental Agreement”) is made as of                      2004, by and among Home Inns & Hotels Management (Hong Kong) Limited, a Hong Kong company (the “Company”), with its registered office at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central Hong Kong and the entities and individuals set forth on Exhibit A hereto (collectively, the “Shareholders”, and each individually, a “Shareholder”).

R E C I T A L S

A. The Company and the Shareholders (with the exception of the Subscriber as hereinafter defined) entered into a shareholders agreement dated the 1^st day of December, 2003 (the “December Agreement”) for the purposes of regulating their relationship with each other and certain aspects of the affairs of and their dealings with the Company.

B. Poly Victory Investments Limited, a company incorporated in the British Virgin Islands with its registered office at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands (the “Subscriber”) entered into a Share Subscription Agreement on the      day of             , 2004 to subscribe for 13,219,140 ordinary shares in the Company (the “Subscription Agreement”).

C. The Company and the Shareholders have agreed and it is a condition to the closing of the transactions contemplated by the Subscription Agreement, the Company and the Shareholders enter into this Supplemental Agreement on the terms and conditions hereinafter set out.

NOW THEREFORE IN CONSIDERATION of the mutual covenants and agreements hereinafter set forth and contained (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

1. INTERPRETATION

1.1 The headings in this Supplemental Agreement are inserted for convenience only and shall not affect its construction. Reference in this Supplemental Agreement to Clauses and Schedule are to clauses and schedules of this Supplemental Agreement. Unless the context otherwise requires, in this Supplemental Agreement the singular shall include the plural and vice versa, words importing a gender include every gender and references to persons include bodies corporate or unincorporated.

15

1.2 Unless otherwise stipulated herein, words and expressions defined in the December Agreement shall have the same meanings in this Supplemental Agreement.

2. BOARD OF DIRECTORS

2.1 The Shareholders agree that they shall vote such shares as may be held by each of them for the election of the following individuals to the Board of Directors (if not already elected):

(a) two (2) individuals nominated by Top Sterling International Limited, who initially shall be SHEN Nan Peng and LIANG Jian Zhang;

(b) two (2) individuals nominated by AsiaStar IT Fund L.P., who initially shall be Eric Ku Chun Lin and Jerry Sze; and

(c) one (1) individual nominated by IDG Technology Venture Investments, LP, who initially shall be Su Yang Zhang;

(d) two (2) individuals nominated by the Subscriber, who initially shall be MEI Yun Xin and YANG Jian Min; and

(e) one (1) individual appointed as the chief executive officer of the Company, who initially shall be Qi Ji.

2.2 Each Shareholder shall vote or cause to be voted the shares held by each of them as may be necessary so as to cause the Articles of Association of the Company and the December Agreement, and in particular Article 82 of the Articles of Association of the Company and Clause 10.1 of the December Agreement, to be amended to allow for the number of directors to be changed from five (5) to eight (8) and for the election of the directors as set out above in Clause 2.1 of this Supplemental Agreement.

3. ADHERENCE

3.1 The Subscriber hereby confirms that it has been supplied with a copy of the December Agreement and the Subscriber hereby acknowledges, undertakes and covenants with each of the other parties to this Agreement with effect from the date on which its name shall be entered in the Register of Members of the Company as a member of the Company (the “Effective Date”) to observe, perform, and be bound by all the terms and conditions and obligations to be observed, performed, and bound by after the Effective Date and included in the December Agreement as if the Subscriber had been a party thereto and had been referred to therein as one of the Shareholders.

16

3.2 The parties hereto agree acknowledge and confirm that the Subscriber shall be deemed as at the Effective Date to be a party to the December Agreement as if the Subscriber had been an original signatory thereto and the Subscriber shall be entitled to all the rights and remedies available to any original shareholders of the December Agreement, including but not limited to the right to enforce the December Agreement against the Shareholders and the Company or any of them, as if the Subscriber had been an original signatory to the December Agreement.

3.3 The parties hereto hereby further agree with each other that the definition of “Key Shareholders” in the December Agreement shall for all purposes and intent include the Subscriber.

4. QUORUM

4.1 Without prejudice to and subject to article 111(a) of the Articles of Association of the Company, the Shareholders agree that the quorum of meetings of the Board should not be less than three (3) directors Provided always that where a quorum is not present for a meeting duly convened within half an hour from the time appointed for the meeting, such meeting shall be stand adjourned to the same day in the following week at the same time and place, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the Directors or Shareholders (as the case may be) present shall constitute a quorum and the meeting shall proceed as if a quorum has been duly constituted.

5. GENERAL

5.1 The December Agreement shall henceforth be read and construed in conjunction with this Supplemental Agreement. In the event of conflict or inconsistencies between the provisions of the December Agreement and this Supplemental Agreement, the provisions of this Supplemental Agreement shall prevail.

17

5.2 Each of the Shareholders and the Company hereby declares and acknowledges that all the terms and conditions of the December Agreement shall remain in full force and effect save as supplemented herein.

5.3 This Supplemental Agreement shall be considered as supplemental to, and not in any circumstances as subject to, the Memorandum & Articles (as may be amended from time to time) and in the event of any conflict arising between this Supplemental Agreement and the Memorandum & Articles or in the interpretation of any provisions of the Memorandum & Articles, the provisions of this Supplemental Agreement shall prevail and this Supplemental Agreement shall be considered as conclusive evidence of the intentions of all parties and the interpretation resulting from this Supplemental Agreement shall be considered as final and binding on all parties. For the avoidance of doubt, the Shareholders agree that this Supplemental Agreement shall control the actions of the parties and they agree to cause the Company promptly to amend her Memorandum & Articles or adopt new Memorandum & Articles to reflect any material changes if necessary.

5.4 No amendments of or additions to this Supplemental Agreement shall be effective unless in writing and signed by or on behalf of the parties hereto.

5.5 This Supplemental Agreement may be executed in several counterparts, all or any of which shall be treated for all purposes as one original and shall be and constitute one and the same instrument. This instrument may be executed by the parties in original or telecopy produced by fax machine or other means of electronic communication producing a printed copy.

5.6 This Supplemental Agreement shall be governed by and construed in accordance with the laws of Hong Kong Special Administrative Region and the parties hereto shall submit to the non-exclusive jurisdiction of the courts of Hong Kong Special Administrative Region.

[SIGNATURE PAGE FOLLOWS]

18

IN WITNESS whereof this Supplemental Agreement has been entered into by the parties hereto the day and year first above written.

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

By:

Name:

Title:

TOP STERLING INTERNATIONAL LIMITED

By:

Name:

Title:

QI JI

        (Signature)

NAN PENG SHEN

        (Signature)

HUI CHEN

        (Signature)

SIGNATURE PAGE ONE TO THE SUPPLEMENTAL AGREEMENT

19

RI XIN LIANG
(Signature)
Poly Victory Investments Limited
By:
Name:
Title:
Series A Preference Shares Holders
ASIASTAR IT FUND L.P.
By:
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
Name:
Title:

SIGNATURE PAGE TWO TO THE SUPPLEMENTAL AGREEMENT

20

Series B Preference Shares Holders
ASIASTAR IT FUND L.P.
By:
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
Name:
Title:

SIGNATURE PAGE THREE TO THE SUPPLEMENTAL AGREEMENT

21

EXHIBIT A

SHAREHOLDERS

Name	Address	Ordinary Shares		Series A Shares	Series B Shares
Top Sterling International Limited	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	9,000,000	*	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	800,000		Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	600,000		Nil	Nil
Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000		Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000		Nil	Nil
Poly Victory Investments Limited	Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.	13,219,140		Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil		10,775,800	1,511,028
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil		6,465,600	906,617

* Top Sterling International Limited is holding 200,000 Ordinary Shares on trust for Home Inns & Hotels Management (Hong Kong) Limited.

22

EXHIBIT B

DEED OF RELEASE & WAIVER

THIS DEED OF RELEASE AND WAIVER is made the      day of Two thousand and four

BY	ASIASTAR IT FUND L.P. of 44th Floor Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong and IDG Technology Venture Investments LP of Room 1105, Aetna Tower, No. 107 Zunyi Road, Shanghai 200051, China (hereinafter called the “Preference Shareholders”);
AND	HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED, company registered under the laws of Hong Kong which registered office is situate at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong (hereinafter called “the Company”);
AND	POLY VICTORY INVESTMENTS LIMITED, a company registered under the laws of the British Virgin Islands whose registered office is situate Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands (hereinafter called “the Subscriber”).

WHEREAS

(A) The Subscriber intends to subscribe for 13,219,140 ordinary shares of the company (the “Subscription”) and the Company desires to allot and issue the Shares to the Subscriber upon and subject to the terms and conditions of the Share Subscription Agreement of even date (the “Subscription Agreement”);

(B) The subscription price per ordinary share in respect of the Subscription is HK$1.57;

(C) It is condition to the completion of the Subscription Agreement that the Company obtain the waiver by the Preference Shareholders of their respective rights to an adjustment to the Series A Conversion Price and Series B Conversion Price (as specified in the Memorandum and Articles of Association of the Company) (the “Adjustment Rights”) in respect of and notwithstanding that the Subscription is at a price per ordinary share which is lower than the initial Series A Conversion Price and initial Series B Conversion Price (as defined in the Memorandum and Articles of Association of the Company); and

(D) The Preference Shareholders acknowledge that the Subscription is in the commercial interest of the Company and in consideration of the Subscriber agreeing to enter into the Subscription Agreement and to be bound by and to observe the terms and provisions therein they have agreed to enter into this Deed.

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NOW THIS DEED WITNESSETH

(1) That the Preference Shareholders hereby declare that they shall respectively waive their rights to an adjustment to the Series A Conversion Price and Series B Conversion Price as stipulated in Clause 16 (f) (iv) of the Company’s Memorandum and Articles of Association in respect of the Subscription.

(2) The waiver hereinbefore contained shall apply to the Subscription alone and shall not affect or prejudice the rights of the Preference Shareholders in respect of any future issuance of ordinary share(s) of the Company.

(3) For sake of clarity, the Series A Conversion Price and Series B Conversion Price shall remain at US$0.232 per Series A and US$0.3309 per Series B immediately after the Subscription.

IN WITNESS whereof the parties hereto set their hands and seals the day and year first above written.

SIGNED SEALED and DELIVERED by	)
ASIASTAR IT FUND L.P. and SIGNED	)
by	)
its director, in the presence of :-	)
SIGNED SEALED and DELIVERED by	)
IDG Technology Venture Investments LP	)
and SIGNED by	)
in the presence of :-	)

24

SIGNED SEALED and DELIVERED by	)
the Company and SIGNED by	)
its director, in the presence of :-	)
SIGNED SEALED and DELIVERED by	)
the Subscriber and SIGNED by	)
its director, in the presence of :-	)

25

SCHEDULE 3

Representations, Warranties and Undertakings of the Company

Save as disclosed :-

1. Accounts and business of the Company

1.1 The accounts

(1) The Audited Accounts and the Management Accounts have been prepared in accordance with generally accepted accounting principles and practices consistently applied and are accurate in all material respects and give a true and fair view of the state of affairs of the Company and of its results for the relevant accounting period.

(2) The Management Accounts have made full provision or reserve for all Taxation (including deferred taxation) to which the Company is liable or could be assessed on or for which it may be accountable, in respect of the period ended on the Management Accounts Date.

1.2 Books and records

All the accounts, books, ledgers, financial and other records (including but not limited to statutory and accounting records), of whatsoever kind, of the Company :-

(1) are in its possession or access;

(2) have been fully properly and accurately kept, completed and brought up to date;

(3) do not contain any material inaccuracies or discrepancies of any kind;

(4) give and reflect a true and fair view of its trading transactions, and its financial, contractual and trading position; and

(5) have been properly kept and maintained in accordance with relevant laws applicable thereto,

and no notice or allegation that any of them is materially incorrect or should be rectified has been received.

2. Corporate matters

2.1 Directors

None of the directors of the Company who have resigned from their respective directorships or other offices in the Company prior to the execution of this Agreement have or shall have any claim against the Company for compensation for loss of office or otherwise.

26

2.2 Options over the Company’s capital

Save as disclosed in the Memorandum and Articles of Association and Clause 3.2(c) of the Share Purchase Agreement, there are no agreements or arrangements in force which provide for the present or future issue, allotment or transfer of or grant to any person the right (whether conditional or otherwise) to call for the issue, allotment or transfer of any share, interest or loan capital of the Company (including any option or right of pre-emption or conversion).

2.3 New issues of capital

Save and except for this Agreement, no share or loan capital has been issued or allotted, or agreed to be issued or allotted, by the Company since the Management Accounts Date.

2.4 Memorandum and articles of association, statutory books and resolutions

(1) The Vendor has delivered to the Purchaser (i) complete copies of the Management Accounts and (ii) a true and complete copy of the memorandum and articles of association or such other similar constitutional documents of Company containing full details of the rights and restrictions attached to the share capital of the Company.

(2) The register of members and other statutory books of the Company have been properly kept and maintained in accordance with all laws applicable thereto and contain an accurate and complete record of the matters which they should contain.

(3) No notice or allegation that any of the foregoing is incorrect or should be rectified has been received.

2.4 Documents filed

(1) all returns, particulars, resolutions and documents required by the Companies Ordinance or any other legislations to be filed with the Registrar of Companies or any other authority in Hong Kong, the PRC or elsewhere in respect of the Company have been duly filed and were correct; and due compliance has been made with all the provisions of the Companies Ordinance and other legal requirements in Hong Kong, the PRC or elsewhere in connection with the formation of the Company, the allotment or issue of shares, debentures and other securities, the payment of dividends and the conduct of its business.

27

(2) No charges have been created by the Company.

2.5 Possession of documents

All title deeds (if any) relating to the assets of the Company and an executed copy of all agreements to which the Company is a party, and the original copies of all other documents which are owned by or which ought to be in the possession of the Company are in its possession or available to its access.

2.6 Investigation

To the best of their knowledge, the directors of the Company are not aware of there being any investigations or enquiries by, or on behalf of, any governmental or other body in respect of the affairs of the Company.

2.7 Information disclosed to the Subscribers correct

(1) All information as disclosed by the Company to the Subscribers and/or the Subscriber’s solicitors, Messrs. Kitty So and Tong, or the Subscriber’s auditors relating to the business, activities, affairs, or assets or liabilities of the Company was, when given, and is now true, accurate and complete in material respects.

(2) There are no material facts or circumstances, in relation to the assets, business or financial condition of the Company which have not been fully and fairly disclosed in writing by the directors of the Company to the Subscribers or their its solicitors or auditors, and which, if disclosed, might reasonably have been expected to affect the decision of the Subscribers to enter into this Agreement.

2.8 The Shares

The subscription Shares are and will at Completion be, free from all liens, charges, encumbrances and third party rights whatsoever and the Company are and will at Completion be entitled to and able to procure the allotment of the Shares on the terms of this Agreement without the consent of any third party. The Company has not exercised any lien over any of its shares and there is outstanding no call on any of its shares.

28

2.9 Other corporate matters

(1) The Company is duly incorporated or established and validly existing under the laws of its place of incorporation or establishment, and the amount and particulars of its share capital and other particulars set out in recital are be true and accurate.

(2) The Company has full power, authority and legal right to own its assets and carry on its business and is not in receivership or liquidation, its has taken no steps to enter into liquidation and no petition has been presented for winding up of the Company and there are no grounds on which a petition or application could be based for the winding up or appointment of a receiver of the Company.

(3) This Agreement constitutes legally valid and binding obligations on the Company enforceable against it in accordance with the terms of this Agreement.

(4) The Company has applied for/been granted all licences, permits, consents to carry out its business in the relevant jurisdiction and all licences and consents are valid and subsisting and the Directors are not aware of any circumstances which may lead to a revocation or suspension (on temporary or permanent basis) of such licences and consents.

3. Taxation

3.1 Administration

(1) All returns, computations and payments which should be or should have been made by the Company for any Taxation purpose have been made within the requisite periods and are up-to-date, correct and on a proper basis and none of them is or is likely to be the subject of any dispute with the Inland Revenue Department or other Taxation authorities whether in Hong Kong, the PRC or elsewhere.

(2) All particulars furnished to the Inland Revenue Department or other Taxation authorities whether in Hong Kong, the PRC or elsewhere, in connection with the application for any consent or clearance on behalf of the Company or affecting the Company, fully and accurately disclosed all facts and circumstances material for the decision of those authorities; and all such consents or clearances are valid and effective; and any transaction, for which consent or clearance has previously been obtained, has been carried into effect (if at all) only in accordance with the terms of the relative application and consent or clearance.

29

4. Finance

4.1 Dividends and distributions

All dividends or distributions (if any) declared, made or paid by the Company have been declared, made or paid in accordance with its articles of association or other corresponding constituent documents and the applicable provisions of the Companies Ordinance or other relevant legislations in Hong Kong. Save as disclosed, no dividend or other distribution has been, or is treated as having been, declared, paid or made by the Company.

4.2 Bank and other borrowings

(1) The total amount borrowed by the Company (as determined in accordance with the provisions of the relevant instrument) does not exceed any limitation on its borrowing powers contained in its articles of association, or in any debenture or other deed or document binding upon it.

(2) The Company has not received notice (whether formal or informal) from any lenders of money to it, requiring repayment or intimating the enforcement of any security the lender may hold over any of its assets, and there are no circumstances likely to give rise to any such notice.

(3) There are no loans made to the Company outstanding except as shown in the Management Accounts.

(4) The Company has not factored any of its debts or engaged in any financing of a type which would not require to be shown or reflected in its accounts.

(5) The Company has no outstanding mortgages, charges, debentures or other loan capital or bank overdrafts, loans or other similar indebtedness, financial facilities, finance leases or hire purchase commitments or any guarantees or other material contingent liabilities.

30

(6) No material outstanding indebtedness of the Company has become payable by reason of default by the Company and no event of default has occurred or is pending which with the lapse of time or the fulfilment of any condition or the giving of notice may result in any such indebtedness becoming so payable prior to maturity.

4.3 Liabilities

(1) There are no liabilities (including contingent Liabilities) which are outstanding on the part of the Company other than those liabilities incurred in the ordinary and proper course of trading since the Management Accounts Date.

(2) There has been no exercise, purported exercise or claim for any charge, lien, encumbrance or equity over any of the assets of the Company and there is no dispute directly or indirectly relating to any of its assets.

(3) there have not been nor are there any circumstances whereby the continuation of any of the facilities might be prejudiced, or which might give rise to any alteration in the terms and conditions of any of the facilities;

5. Trading

5.1 Since the Management Accounts Date, the business of the Company has been continued in the ordinary and normal course and that :-

(1)   (a) full and proper records and books of accounts of the transactions dealings and affairs of the Company have been and will be kept, and full and proper entries have been and will be made;

        (b) the business of the Company has been continued in the ordinary and normal course both as regards the nature, scope and manner of conducting the business;

        (c) the Company has not given nor agreed to give any guarantee putting it under a prospective or contingent liability that may remain after the date hereof other than guarantees given in respect of liabilities and obligations of the Company; and

31

(d) the business of the Company taken as a whole have not been adversely affected as a result of any event or circumstances arising since the Management Accounts Date.

5.2 Effect of allotment of Shares

Neither the execution of this Agreement nor the compliance with the terms of this Agreement does and/or will conflict with, or result in the breach of, or constitute a default under, any of the terms, conditions or provisions of any agreement or instrument to which the Company is a party, or any provision of the memorandum or articles of association or other corresponding constitutional documents of the Company or any encumbrances, lease, contract, order, judgment, award, injunction, regulation or other restriction or obligation of any kind or character by which or to which any asset of the Company is bound or subject.

5.3 Litigation, disputes and winding up

The Company is not engaged in any litigation or arbitration proceedings as plaintiff or defendant; there are no proceedings pending or threatened either by or against of the Company; and there are no circumstances which are likely to give arise to any litigation or arbitration.

6. Assets

6.1 Ownership of assets

(1) The Company owned and had good and marketable title to and (except for current assets subsequently sold or realised in the ordinary course of business) still owns and has good and marketable title to all assets included in the Management Accounts and to all assets acquired since the Management Accounts Date and not subsequently sold or realised as aforesaid.

(2) The Company has not created or granted or agreed to create or grant any security interest or other encumbrance in respect of any of its assets included in the Management Accounts.

32

(3) None of the properties, assets, undertaking, goodwill or uncalled capital of the Company is subject to and none of the Company has agreed to grant in respect of such property any option, charge, lien, encumbrance or right of pre-emption.

(4) Save as otherwise disclosed, the Company has no other assets in Hong Kong, the PRC or elsewhere.

7. General

The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in any breach or cancellation or termination of any of the terms or conditions of or constitute a default under any agreement, commitment or other instrument to which the Company is a party or by which the Company or its property or assets may be bound or affected or violate any law or any rule or regulation of any administrative agency or governmental body or any order, writ injunction or decree of any court, administrative agency or governmental body affecting the Company.

33

ANNEX 1

AUDITED ACCOUNTS

HOME INNS & HOTELS MANAGEMENT

(HONG KONG) LIMITED

DIRECTORS REPORT AND AUDITED FINANCIAL STATEMENTS

31ST DECEMBER 2002

For and on behalf of

(Authorized Signatures)

34

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

REPORT OF THE DIRECTORS

The directors submit their report together with the audited financial statements of Home Inns & Hotels Management (Hong Kong) Limited (the “Company”) for the period from 28th May 2001 (date of incorporation) to 31st December 2002.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of the Company’s joint venture companies are set out in Note 6 to the financial statements.

INCORPORATION AND CHANGE OF NAME

The Company was incorporated on 28th May 2001 as Success Formula Limited. By a members’ special resolution passed on 16th July 2001, the Company changed its name to Tangs Hotels Management (Hong Kong) Limited. By another members’ special resolution passed on 22nd February 2002, the Company changed its name to Home Inns & Hotels Management (Hong Kong) Limited.

RESULTS AND APPROPRIATIONS

The results of the Company for the period are set out in the income statement on page 6.

The directors do not recommend the payment of a dividend.

RESERVES

Movements in the reserves of the Company during the period are set out in Note 8 to the financial statements.

SHARE CAPITAL

The Company was incorporated with an authorised share capital of HK$10,000, divided into 10,000 ordinary shares of HK$1 each. By a members’ resolution on 16th July 2001, the authorised share capital was increased to HK$1,000,000 by creation of 990,000 shares of HK$1 each. These shares rank pari passu with the original shares. During the period ended 31st December 2002, 55,000 shares were issued. These shares were issued to provide working capital for the Company.

35

DIRECTORS

The directors who held office during the period and up to the date of this report are:

Nanpeng Shen	(Appointed on 28th May 2001)
Jianzhang Liang	(Appointed on 28th May 2001)
Qi Ji	(Appointed on 28th May 2001)
Suyang Zhang	(Appointed on 28th May 2001)
Junichi Goto	(Appointed on 28th May 2001)
Yufei Hu	(Appointed on 1st March 2002)
JP Gan	(Appointed on 16th April 2002)
Jiaqi Ni	(Appointed on 28th May 2001 and resigned on 29th March 2002)
Gabriel Li	(Appointed on 28th May 2001 and resigned on 16th April 2002)
Eric Jay Levin	(Appointed on 28th May 2001 and resigned on 5th December 2002)

There being no provision in the Company’s Articles of Association for retirement by rotation, all directors continue in office.

RELATED PARTY TRANSACTIONS

Except for the transactions with related parties disclosed in Note 9 to the financial statements, no contract, commitment or agreement of significance in relation to the Company’s business, to which the Company, its fellow subsidiary companies, joint venture companies or holding company was a party and in which any of the Company’s directors or members of its management had a material interest, either directly or indirectly, subsisted at the end of the period or at any time during the period.

Certain of the directors of the Company receive share options from the holding company, pursuant to the share option scheme of the holding company, which is designed to reward the executives for their performance. These share options do not enable the relevant directors to acquire any benefit from the Company by means of the acquisition of shares in or debentures of the Company, and do not have any significant commercial, financial or operational impact on the Company.

Except for the above, at no time from 28th May 2001 (date of incorporation) to 31st December 2002 was the Company, its fellow subsidiary companies, joint venture companies or holding company a party to any arrangements to enable the Company’s directors or members of its management to acquire benefits by means of the acquisition of shares in, or debt securities (including debentures) of, the Company or any other body corporate.

MANAGEMENT CONTRACTS

No substantial contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the period.

36

AUDITORS

The financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment.

On behalf of the board

Nanpeng Shen

Director

Hong Kong,

17th January 2003

37

	PricewaterhouseCoopers 33rd Floor Cheung Kong Center 2 Queen’s Road Central Hong Kong
	Telephone (852) 2289 8888 Facsimile (852) 2810 9888

AUDITORS’ REPORT

TO THE SHAREHOLDERS OF

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

(Incorporated in Hong Kong with limited liability)

We have audited the financial statements of Home Inns & Hotels Management (Hong Kong) Limited (the “Company”) on pages 6 to 14 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective responsibilities of directors and auditors

The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you.

Basis of opinion

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provided a reasonable basis for our opinion.

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Opinion

In our opinion the financial statements give a true and fair view of the state of affairs of the Company as at 31st December 2002 and of the loss of the Company for the period from 28th May 2001 (date of incorporation) to 31st December 2002 and have been properly prepared in accordance with the Companies Ordinance.

Certified Public Accountants

Hong Kong,

17th January 2003

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HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

INCOME STATEMENT

FOR THE PERIOD FROM 28TH MAY 2001 (DATE OF INCORPORATION) TO 31ST DECEMBER 2002

(Amounts expressed in Hong Kong Dollars)

	Note
Share of losses of joint venture companies		$	(112,790	)
Operating costs			(37,430	)
Other revenue			2,254
Loss before taxation	3		(147,966	)
Taxation - overseas	5		(117,879	)
Net loss for the period		$	(265,845	)

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HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 28TH May 2001 (DATE OF INCORPORATION) TO 31ST DECEMBER 2002

(Amounts expressed in Hong Kong Dollars)

Increase of share capital	$	5,184,811
Net loss for the period		(265,845	)
Total equity as at 31st December 2002	$	4,918,966

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HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

BALANCE SHEET

AS AT 31ST DECEMBER 2002

(Amounts expressed in Hong Kong Dollars)

	Note
ASSETS
Non-current asset
Investments in joint venture companies	6	$	4,952,953
Current assets
Receivables from related parties	9		207,166
Cash and bank balances			1,686,550
			1,893,716
Total assets		$	6,846,669
EQUITY AND LIABILITIES
Capital and reserves
Share capital	7	$	55,000
Reserves	8		4,863,966
Total shareholders’ equity			4,918,966
Current liabilities
Payable to ultimate parent company	9		1,927,703
Total equity and liabilities		$	6,846,669

Approved by the Board of Directors on 17th January 2003 and signed on behalf of the Board by

Director	Director

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HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

NOTES TO THE FINANCIAL STATEMENTS

(Amounts expressed in Hong Kong Dollars unless otherwise stated)

1. ORGANISATION AND PRINCIPAL ACTIVITIES

Home Inns & Hotels Management (Hong Kong) Limited was incorporated in Hong Kong on 28th May 2001 as a company with limited liability under the Companies Ordinance. The Company has commenced operations during 2002.

The principal activity of the Company is investment holding. The principal activities of the Company’s joint venture companies are hotel management and franchise.

The Company is a subsidiary of Ctrip.com International Ltd., a company incorporated in the Cayman Island. The directors also consider Ctrip.com International Ltd. to be the ultimate parent company.

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below:

(a) Basis of presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants. They have been prepared under the historical cost convention.

A statement of cash flows has not been prepared because the Company has no turnover. Such exemption is granted under the provisions of Statement of Standard Accounting Practice Number 15 “Cash Flow Statements” issued by the Hong Kong Society of Accountants.

(b) Joint venture companies

A joint venture company is a contractual arrangement whereby the Company and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity.

The income statement includes the Company’s share of the results of the joint venture companies for the period; and the balance sheet includes the Company’s share of the net assets of the joint venture companies.

43

(c) Revenue recognition

Provided it is probable that the economic benefits associated with a transaction will flow to the Company and the revenue and costs, if applicable, can be measured reliably, interest income is recognised on a time proportion basis on the principal outstanding and at the rate applicable.

(d) Taxation

The Company provides for taxation on the basis of their profits for financial reporting purposes, adjusted for income and expenses items which are not assessable or deductible for income tax purpose.

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

(e) Foreign currencies

Transactions in foreign currencies are translated at exchange rate ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the income statement.

(f) Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

(g) Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

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(h) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an economic outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company.

Contingent assets are not recognised but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When an economic inflow is virtually certain, an asset is recognised.

3. LOSS BEFORE TAXATION

Loss before taxation is determined after charging and crediting the following:

After charging:
Staff (including directors) costs	$	—
Contribution to staff retirement benefits		—
Auditors’ emoluments		20,000
After crediting:
Interest income on bank deposits	$	2,254

4. DIRECTORS’ EMOLUMENTS

Directors’ emoluments disclosed in accordance with Section 161(1) of the Companies Ordinance are:

Fees	$	—
Other emoluments		—

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5. TAXATION

No Hong Kong profit tax has been provided as the Company did not have assessable profit that was earned in or derived from Hong Kong during the period.

The Company’s joint venture companies registered in Mainland China is subject to Mainland China Enterprise Income Tax (“EIT”) on the taxable income as reported in their statutory financial statements adjusted in accordance with relevant income tax laws. The applicable EIT rate is 33%.

There was no significant unprovided deferred taxation as at 31st December 2002.

6. INVESTMENTS IN JOINT VENTURE COMPANIES

Share of net assets	$	4,952,953
Unlisted equity interest, at cost	$	5,183,628

As at 31st December 2002, the particulars of the joint venture companies are as follows:

Name	Place and date of incorporation	Percentage of equity interest attributable to the Company	Principal activities
Home Inns & Hotels Management (Beijing) Limited	Mainland China	55% (directly)	Hotel management and franchise
(“Home Inns BJ”)	28th June
	2002
Home Inns & Hotels Management (Shanghai) Limited	Mainland China	55% (indirectly)	Hotel management and franchise
(“Home Inns SH”)	29th November 2002

Supplementary financial information, prepared under accounting principles generally accepted in Hong Kong, of Home Inns BJ and Home Inns SH is as follows:

Balance sheet

Non-current assets	$	5,805,398
Current assets		5,368,717
Less: current liabilities		(2,168,746	)
Net assets	$	9,005,369
Income statement
Turnover	$	4,191,877
Net loss after taxation		(419,398	)

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7. SHARE CAPITAL

	Number of shares	Share capital
Authorised:
Ordinary shares with a par value of $1 each	1,000,000	$	1,000,000
Issued:
Ordinary shares with a par value of $1 each	55,000	$	55,000

The Company was incorporated with an authorised share capital of $10,000, divided into 10,000 ordinary shares of $1 each. By a members’ resolution on 16th July 2001, the authorised share capital was increased to $1,000,000 by creation of 990,000 shares of $1 each. These shares rank pari passu with the original shares. During the period ended 31st December 2002, 55,000 shares were issued.

8. RESERVES

	Share Premium		Accumulated deficit			Total
Premium on issuance of ordinary shares	$	5,129,811	$	—		$	5,129,811
Net loss for the period		—		(265,845	)		(265,845	)
End of period	$	5,129,811	$	(265,845	)	$	4,863,966

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9. RELATED PARTY TRANSACTIONS

(a) Name and relationship of related parties

Name	Nature of relationship
Ctrip.com International Ltd. (“Ctrip International”)	Ultimate parent company
Ctrip.com (Hong Kong) Limited (“Ctrip Hong Kong”)	Subsidiary of Ctrip International
Ctrip.com Computer Technology (Shanghai) Co., Ltd. (“Ctrip Shanghai”)	Subsidiary of Ctrip Hong Kong

(b) During the period, certain expenses of the Company of approximately $2,130,000 were borne by the ultimate parent company.

(c) As at 31st December 2002, balances with related parties are as follows:

Receivables from related parties
- Ctrip Hong Kong	$	133,660
- Ctrip Shanghai		73,506
	$	207,166
Payables to ultimate parent company	$	1,927,703

The amounts due from and due to related parties as at 31st December 2002 mainly arose from arose from the transactions disclosed in 9(b) above and the expenses paid on behalf of each other. They are unsecured, interest-free and have no fixed repayment.

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EX-4.6

Exhibit 4.6

SHARE SUBSCRIPTION AGREEMENT

concerning

3,035,000 Ordinary Shares in

HOME INNS AND HOTELS MANAGEMENT

(HONG KONG) LIMITED

Boughton Peterson Yang Anderson

4009 Gloucester Tower, The Landmark

11 Pedder Street, Central

Hong Kong

Tel: 2877 3088

Fax: 2525 1099

Our Ref.: 801800-5

INDEX

CLAUSE		PAGE
PARTIES		1
WHEREAS		1
1.	INTERPRETATION	1
2.	AGREEMENT TO SUBSCRIBE	3
3.	COMPLETION	3
4.	REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY	5
5.	REPESENTATIONS AND WARRANTIES BY THE SUBSCRIBER	6
6.	REPRESENTATIONS AND WARRANTIES BY BOTH PARTIES	6
7.	SEVERABILITY	7
8.	ENTIRE AGREEMENT	7
9.	TIME OF ESSENCE, REMEDIES AND WAIVERS	7
10.	PUBLIC ANNOUNCEMENTS	7
11.	ASSIGNMENT AND COUNTERPARTS	8
12.	NOTICES AND OTHER COMMUNICATION	8
13.	FURTHER ASSURANCE	9
14.	COSTS AND EXPENSES	9
15.	GOVERNING LAW AND JURISDICTION	9

SCHEDULE 1	PARTICULARS OF THE COMPANY
SCHEDULE 2	FORM OF APPLICATION FOR SHARES
SCHEDULE 3	REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY

THIS AGREEMENT is made on the 15^th day of September 2004

BETWEEN

(1) TOP STERLING INTERNATIONAL LIMITED, a company incorporated in the British Virgin Islands with its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (the “Subscriber”); and

(2) HOME INNS AND HOTELS MANAGEMENT (HONG KONG) LIMITED, a company incorporated in Hong Kong with its registered office at Room 2001, 20^th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong (the “Company”).

WHEREAS

(A) The Company is a company incorporated in Hong Kong with limited liability. As at the date of this Agreement, the Company has an authorised capital of HK$1,000,000.00 divided into 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each. Particulars of the Company as at the date hereof are set out in Part A of Schedule 1.

(B) The Subscriber, a shareholder of the Company, has agreed to subscribe for an additional 3,035,000 Ordinary Shares of the Company (the “Subscription Shares”) and the Company has agreed to the allotment and issue of the Subscription Shares to the Subscriber upon and subject to the terms and conditions hereof. Particulars of the Company immediately after the subscription of the Subscription Shares are set out in Part B of Schedule 1.

NOW IT IS HEREBY AGREED as follows:-

1. INTERPRETATION

1.1 In this Agreement, including the Recitals and the Schedules, the following expressions shall, except where the context otherwise requires, have the following meanings:

“Business Day”	a day, excluding Saturdays, on which banks in Hong Kong are open for business throughout their normal business hours;
“Company’s Warranties”	the representations and warranties as set out in Clause 4 of this Agreement and in Schedule 3;
“Completion”	completion of the subscription, allotment and issuance of the Subscription Shares in accordance with the provisions in Clause 3;

1

“Completion Date”	15 September 2004, or such other date as may be agreed by the parties in writing;
“Confidential Information”	has the meaning specified in Clause 10.1;
“Disclosing Party”	has the meaning specified in Clause 10.2;
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC;
“Memorandum and Articles”	the memorandum and articles of association of the Company as amended from time to time;
“Non-Disclosing Party”	has the meaning specified in Clause 8.2;
“Ordinary Shares”	the ordinary shares of par value HK$0.005 each in the capital of the Company;
“PRC”	the People’s Republic of China;
“Preference Shares”	the Series A Preference Shares and the Series B Preference Shares;
“Series A Conversion Price”	has the meaning specified in the Memorandum and Articles;
“Series B Conversion Price”	has the meaning specified in the Memorandum and Articles;
“Series A Preference Shares”	the series A preference shares of par value of HK$0.005 each in the capital of the Company;
“Series B Preference Shares”	the series B preference shares of par value of HK$0.005 each in the capital of the Company;
“Shareholders”	the shareholders of the Company;
“Shareholders Agreement”	The Shareholders Agreement dated 1st December 2003 entered into between the Company and the Shareholders;
“Subscription Price”	US$0.3425, being the subscription price for each of the Subscription Shares;
“Subscription Shares”	3,035,000 Ordinary Shares of the Company to be issued and allotted to the Subscriber pursuant to the terms and conditions of this Agreement;
“Subscriber’s Warranties”	the representations and warranties as set out in Clause 5 of this Agreement;

2

“Total Subscription Price”	US$1,039,487.50, being the total Subscription Price for all Subscription Shares; and
“US$”	United States dollars, the lawful currency of the United States of America.

1.2 In this Agreement:

(a) references to Recitals, Clauses, Sub-clauses, Schedules and Exhibits are to the clauses and sub-clauses of, and the recitals, schedules and exhibits to, this Agreement;

(b) references to any statutory provision or any rule or regulation (whether or not having the force of law) shall be construed as references to the same as amended, varied, modified, consolidated or re-enacted from time to time and to any subordinate legislation made under such statutory provision;

(c) references to parties are to parties of this Agreement;

(d) words importing the singular include the plural and vice versa, words importing one gender include every gender, and references to persons include bodies corporate and unincorporated; and

(e) headings are for ease of reference only and shall not affect the interpretation of this Agreement.

1.3 The Recitals and the Schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement and any reference to this Agreement shall include the Recitals and the Schedules.

2. AGREEMENT TO SUBSCRIBE

2.1 On and subject to the terms of this Agreement, the Subscriber shall subscribe for the Subscription Shares in cash at the Subscription Price, totalling One Million Thirty Nine Thousand Four Hundred Eighty-Seven United States Dollars and Fifty Cents (US$1,039,487.50), and the Company shall validly allot and issue the Subscription Shares to the Subscriber on Completion, which shall be issued and allotted as fully paid and shall rank pari passu in all respects with the existing Ordinary Shares in issue as at the Completion Date with the rights and obligations as set out in the Memorandum and Articles.

2.2 The Total Subscription Price for the Subscription Shares shall be paid by the Subscriber in full at Completion in the manner as set out in Clause 3.

3. COMPLETION

3.1 Completion shall take place on the Completion Date at office of Boughton Peterson Yang Anderson of 4009 Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong or at such other place and time as the Company and the Subscriber may agree in writing when all of the following matters shall be transacted:

3

(a) The Subscriber shall deliver to the Company a letter applying for the Subscription Shares at the Subscription Price signed by the Subscriber substantially in the form of Schedule 2;

(b) The Subscriber shall pay the Total Subscription Price for the Subscription Shares to the Company in accordance with the provisions herein by depositing the Total Subscription Price in immediately available funds to the bank account designated by the Company or by banker’s draft on or prior to the Completion Date;

(c) Subject to the Subscriber having paid the Total Subscription Price, the Company shall:

(i) allot and issue to the Subscriber, as fully paid, the Subscription Shares free from all charges, liens, encumbrances, equities or other third party rights, claims or interests, and shall procure the registration of the Subscriber as holder of the Subscription Shares in the register of members of the Company; and

(ii) deliver to the Subscriber share certificate(s) issued in the name of the Subscriber for the Subscription Shares;

(d) The Company shall deliver to the Subscriber:

(i) a copy of the board resolutions of the Company approving and authorising the execution and performance of this Agreement, the allotment and issue of the Subscription Shares to the Subscriber in accordance with the terms of this Agreement and the delivery of share certificate(s) of the Subscription Shares to the Subscriber; and

(ii) a copy of the shareholders resolutions of the Company approving the subscription of the Subscription Shares and waiver by the holders of the Preference Shares to an adjustment to the applicable Series A Conversion Price or Series B Conversion Price (as specified in the Memorandum and Articles); and

(e) The Subscriber shall deliver to the Company a certified true copy of its board resolutions for the approval and authorisation of the execution and performance of this Agreement.

3.2 The Company shall not be obliged to complete this Agreement unless the Subscriber shall have fully complied with all of its requirements in Clause 3.1(a), (b) and (e).

3.3 In the event that Completion has not taken place on the Completion Date (or at such later date as may be agreed in writing by the Company and the Subscriber) as a result of the sole default on the part of the Subscriber, the Company shall by written notice to the Subscriber terminate this Agreement provided that any right or obligation of any party against or towards any of the other parties accrued or arising under this Agreement prior to or as a result of such termination shall survive such termination.

4

4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF THE COMPANY

4.1 In consideration of the Subscriber entering into this Agreement, the Company hereby agrees to provide the warranties, covenants, and undertakings as hereinafter stated.

4.2 Notwithstanding any investigations or enquiries by or on behalf of the Subscriber and notwithstanding anything which is or which ought to be within the knowledge of the Subscriber, the Company represents, warrants and undertakes to the Subscriber (to the intent that the provisions of this Clause shall continue to have full force and effect notwithstanding Completion) in the terms set out in Schedule 3 and acknowledges that the Subscriber in entering into this Agreement is relying on such representations, warranties and undertakings.

4.3 The Company undertakes with the Subscriber to ensure that the Company’s Warranties will not be breached and will at all times be true, complete and accurate in all material respects on the basis that they were deemed to be repeated at any time up to and including Completion and on the basis that a reference to such time is substituted for any express or implied reference to the date of this Agreement and the Company’s Warranties shall be deemed to be given by the Company at such time as well as at the time of this Agreement accordingly.

4.4 The Company shall forthwith notify the Subscriber upon becoming aware of any event which may cause any of the Company’s Warranties to be incorrect, misleading or breached in a material respect or which may have any material adverse effect on the assets or liabilities of the Company.

4.5 The rights conferred upon the Subscriber by the provisions of this Clause 4 are additional to and do not prejudice any other rights the Subscriber may have, and failure to exercise any of the rights herein conferred shall not constitute a waiver of any such rights.

4.6 Each of the Company’s Warranties shall be construed as a separate warranty and shall not be limited or restricted by reference to or inference from the terms of any other of the Company’s Warranties.

4.7 The exceptions as set fourth in the Schedule of Exceptions in the Share Purchase Agreement shall be exceptions to the Company’s Warranties as if the same is repeated herein.

4.8 The Subscriber shall not be entitled to any remedy or compensation in respect of the breach of any of the Company’s Warranties which should have been revealed, known or discovered by proper due diligence review or investigation made by or on behalf or the Subscriber into the affairs of the Company.

5

5. REPESENTATIONS AND WARRANTIES BY THE SUBSCRIBER

5.1 The Subscriber hereby represents and warrants to the Company that:

(a) The Subscriber is a corporation duly incorporated, validly existing and in good standing under the laws of British Virgin Islands and has legal capacity to execute, deliver and perform this Agreement;

(b) The Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and to carry out its provisions. All action on its part required for the lawful execution and delivery of this Agreement has been or will be effectively taken prior to Completion. Upon execution and delivery, this Agreement will be a valid and binding obligation of the Subscriber, enforceable in accordance with their respective terms;

(c) In subscribing for the Subscription Shares, the Subscriber will not be in breach of any applicable laws, including those relating to money laundering or proceeds of crime in any applicable jurisdiction;

(d) In formulating a decision to invest in the Company and evaluating the suitability of an investment in the Subscription Shares, the Subscriber has not relied or acted on the basis of any representations or other information (whether oral or written) purported to be given on behalf of the Company except as set forth herein;

(e) The Subscription Shares being subscribed by it are being acquired for its own account for the purpose of investment and not for speculation; and

(f) The representations, warranties, agreements, understandings and acknowledgments made by the Subscriber in this Agreement shall survive the subscription of the Subscription Shares by the Subscriber.

5.2 Each of the Subscriber’s Warranties is without prejudice to any other of the Subscriber’s Warranties and no provision contained in this Agreement shall govern or limit the extent or application of any other of the Subscriber’s Warranties.

6. REPRESENTATIONS AND WARRANTIES BY BOTH PARTIES

6.1 Each party (a) represents and warrants to the other parties hereto that it has retained no finder or broker in connection with the transactions contemplated by this Agreement, and (b) hereby agrees to indemnify and to hold harmless the other parties hereto from and against any liability for any commission or compensation in the nature of a finder’s fee of any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the indemnifying party or any of its employees or representatives are responsible.

6

6.2 The Company shall not be liable for any breach of the Company’s Warranties:

(a) to the extent it arises as a result of legislation which comes into force after the Completion Date and which is retrospective in effect; or

(b) which, being a liability in respect of taxation, arises by reason of an increase in the rates of taxation made after the Completion Date with retrospective effect.

7. SEVERABILITY

7.1 If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired.

8. ENTIRE AGREEMENT

8.1 This Agreement constitutes the entire agreement and understanding between the parties in connection with the subject matter of this Agreement and supersedes all previous term sheets, proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and no party has relied or is entitled to rely on any such term sheets, proposals, representations, warranties, agreements or undertakings.

9. TIME OF ESSENCE, REMEDIES AND WAIVERS

9.1 Time shall be of the essence of this Agreement.

9.2 No delay or omission by any party in exercising any right, power or remedy provided by law or under this Agreement shall affect that right, power or remedy, or operate as a waiver of it.

9.3 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

9.4 The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

10. PUBLIC ANNOUNCEMENTS

10.1 This Agreement, the Deed of Release and Waiver, the Supplemental Agreement and the other agreements and contracts executed disclosed incidental to this Agreement, including their existence, and the identity, details and particulars of the other shareholders of the Company (collectively, the “Confidential Information”), shall be considered confidential information and shall not be disclosed by any party hereto to any person not being a party hereto except with the prior written consent of the other party or otherwise in accordance with the provisions of this Clause 10.

7

10.2 In the event that any party becomes legally compelled (including without limitation, pursuant to securities laws and regulations) to disclose the existence of the Confidential Information or any part thereof in contravention of the provisions of this Clause 10, such party (the “Disclosing Party”) shall provide the other parties (the “Non-Disclosing Party”) with prompt written notice of that fact so that the appropriate party may seek (with the co-operation and reasonable efforts of the other parties) a protective order, confidential treatment or other appropriate remedies. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such information to the extent reasonably requested by any Non-Disclosing Party.

10.3 Nothing in this Clause 10 shall apply to any part of the Confidential Information which comes into the public domain for any reason except the failure of any party to comply with this Clause 10.

10.4 The provisions of this Clause 10 shall be in addition to, and not in substitution for, the provisions of any separate non-disclosure agreement executed by any of the parties hereto with respect to the transactions contemplated hereby.

10.5 Nothing in this Clause 10 shall prevent the parties from disclosing the Confidential Information to its professional advisors for the purpose of obtaining or seeking professional advise or services provided that such advisors shall observe the duty of confidentiality herein.

11. ASSIGNMENT AND COUNTERPARTS

11.1 This Agreement shall be binding on and enure to the benefit of the parties hereto and their respective successors.

11.2 No party hereto may assign or transfer any of its rights or obligations under this Agreement.

11.3 This Agreement may be entered into by any party by executing a counterpart hereof. All such counterparts when taken together shall constitute one and the same instrument and this Agreement shall only take effect upon the execution by each of the parties hereto.

12. NOTICES AND OTHER COMMUNICATION

12.1 Any notice or other communication to be given under this Agreement shall be in writing and may be sent by post or delivered by hand or given by facsimile or by courier to the address or fax number from time to time designated, the initial address and fax number so designated by each party are set out in Clause 12.2 against their respective names. Any such notice or communication shall be sent to the party to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject matter of this Agreement. If so delivered by hand or given by facsimile such notice or communication shall be deemed received on the date of despatch and if so sent by post or delivered by courier, shall be deemed received three (3) Business Days after the date of despatch (in the case of local mail or delivery by courier) and five (5) Business Days after the date of despatch (in the case of overseas mail).

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12.2 Subscriber: Top Sterling International Limited

 Room 2001, 20^th Floor,

 The Centrium, 60 Wyndham Street,

 Central,

 Hong Kong

 Fax Number: (852) 2169 0919

 Attn.: Neil Shen

Company: Home Inns & Hotels Management (Hong Kong) Limited

      Room 2001, 20^th Floor,

      The Centrium, 60 Wyndham Street,

      Central,

      Hong Kong

      Fax Number: (852) 2169 0919

      Attn.: Neil Shen

13. FURTHER ASSURANCE

13.1 Each of the parties shall at its own costs, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form satisfactory to the other parties which the other parties may reasonably request for giving full effect to this Agreement and securing to the other parties the full benefit of the rights, powers and remedies conferred upon the other parties in this Agreement.

14. COSTS AND EXPENSES

14.1 Each party shall bear its own costs and expenses (including legal expenses) in respect of the negotiation, preparation, execution and carrying into effect of this Agreement, the Deed of Release and Waiver and other agreements and contracts incidental to this Agreement.

15. GOVERNING LAW AND JURISDICTION

15.1 This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties agree to submit to the non-exclusive jurisdiction of the Hong Kong courts in respect of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS whereof the parties executed this Agreement the day and year first above written.

SUBSCRIBER

SIGNED by		)
Print Name		)
		)
for and on behalf of		)
TOP STERLING		)
INTERNATIONAL LIMITED		)	/s/
in the presence of:-		)
		)
Witness’ signature	:	)
		)
Witness’ name	:	)
		)
Witness’ address	:	)
		)
Witness’ occupation	:	)
SIGNED by		)
Print Name		)
		)
for and on behalf of		)
HOME INNS & MANAGEMENTS		)
(HONG KONG) LIMITED		)	/s/
in the presence of:-		)
		)
Witness’ signature	:	)
		)
Witness’ name	:	)
		)
Witness’ address	:	)
		)
Witness’ occupation	:	)

10

SCHEDULE 1

PART A

PARTICULARS OF THE COMPANY

(as at the date hereof)

1.	Registered Office	:	Room 2001, 20th Floor,
			The Centrium, 60 Wyndham Street,
			Central, Hong Kong.
2.	Date of Incorporation	:	28 May 2001
3.	Company Number	:	758133
4.	Place of Incorporation	:	Hong Kong
5.	Directors	:	(1) SHEN Nan Peng
			(2) JI Qi
			(3) ZHANG Su Yang
			(4) LIN Eric Ku-Chun
			(5) SZE Jerry
			(6) MEI Yun Xin
			(7) YANG Jian Min
			(8) LIANG Jian Zhang
6.	Authorized Share Capital	:	HK$1,000,000.00 consisting of 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each
7.	Issued Share Capital at the date hereof is held as follows:

Name of Shareholders	No. of Ordinary Shares	No. of Series A Preference Shares	No. of Series B Preference Shares
Shen Nan Peng	600,000
Chen Hui	200,000
Ji Qi	800,000
Liang Rixin	400,000
Top Sterling International Limited	9,000,000
Poly Victory Investments Limited	13,219,140
Asiastar IT Fund L.P.		10,775,800	1,511,028
IDG Technology Venture Investments L.P.		6,465,600	906,617
Total	24,219,140	17,241,400	2,417,645

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PART B

PARTICULARS OF THE COMPANY

(after the subscription)

1.	Registered Office	:	Room 2001, 20th Floor,
			The Centrium, 60 Wyndham Street,
			Central, Hong Kong.
2.	Date of Incorporation	:	28 May 2001
3.	Company Number	:	758133
4.	Place of Incorporation	:	Hong Kong
5.	Directors	:	(1) SHEN Nan Peng
			(2) JI Qi
			(3) ZHANG Su Yang
			(4) LIN Eric Ku-Chun
			(5) SZE Jerry
			(9) MEI YUN XIN
			(10) YANG JIAN MIN
			(11) LIANG JIAN ZHANG
6.	Authorized Share Capital	:	HK$1,000,000.00 consisting of 180,340,955 Ordinary Shares of HK$0.005 par value each; 17,241,400 Series A Preference Shares of HK$0.005 par value each and 2,417,645 Series B Preference Shares of HK$0.005 par value each
7.	Issued Share Capital after the subscription heein is held as follows:

Name of Shareholders	No. of Ordinary Shares	No. of Series A Preference Shares	No. of Series B Preference Shares
Shen Nan Peng	600,000
Chen Hui	200,000
Ji Qi	800,000
Liang Rixin	400,000
Top Sterling International Limited	12,035,000
Poly Victory Investments Ltd.	13,219,140
Asiastar IT Fund L.P.		10,775,800	1,511,028
IDG Technology Venture Investments L.P.		6,465,600	906,617
Total	27,254,140	17,241,400	2,417,645

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SCHEDULE 2

FORM OF APPLICATION FOR SHARES

Company No. : 758133

Date :

The Directors

Home Inns & Hotels Management (Hong Kong) Limited

Room 2001, 20^th Floor, The Centrium,

60 Wyndham Street,

Central,

Hong Kong

Dear Sir/Madam,

APPLICATION FOR ORDINARY SHARES

We, Top Sterling International Limited of P.O. Box 957, Offshoure Incorporations Centre, Road Town, Tortola, British Virgin Islands hereby apply for and request you to allot the following shares in the capital of your Company to us.

We understand that the shares will be allotted and issued to us at a consideration of US$0.3425 per share.

Class of Shares	No. of Shares Applied for
Ordinary Shares	3,035,000

If our application is accepted, we agree to take the said shares subject to the New Memorandum & Articles of Association of the Company and the Shareholders Agreement dated as of 1 December 2003 and we authorise you to enter our name in the Register of Members as the holder of the said shares.

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Yours faithfully,

TOP STERLING INTERNATIONAL LIMITED

By:

Name:

Title:

14

SCHEDULE 3

Representations, Warranties and Undertakings of the Company

Save as disclosed :-

1. Corporate matters

1.1 Directors

None of the directors of the Company who have resigned from their respective directorships or other offices in the Company prior to the execution of this Agreement have or shall have any claim against the Company for compensation for loss of office or otherwise.

1.2 Options over the Company’s capital

Save as disclosed in the Memorandum and Articles of Association and Clause 3.2(c) of the Share Purchase Agreement, there are no agreements or arrangements in force which provide for the present or future issue, allotment or transfer of or grant to any person the right (whether conditional or otherwise) to call for the issue, allotment or transfer of any share, interest or loan capital of the Company (including any option or right of pre-emption or conversion).

1.3 New issues of capital

Save and except for this Agreement, no share or loan capital has been issued or allotted, or agreed to be issued or allotted, by the Company since the Management Accounts Date.

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1.4 Documents filed

(1) all returns, particulars, resolutions and documents required by the Companies Ordinance or any other legislations to be filed with the Registrar of Companies or any other authority in Hong Kong, the PRC or elsewhere in respect of the Company have been duly filed and were correct; and due compliance has been made with all the provisions of the Companies Ordinance and other legal requirements in Hong Kong, the PRC or elsewhere in connection with the formation of the Company, the allotment or issue of shares, debentures and other securities, the payment of dividends and the conduct of its business.

(2) No charges have been created by the Company.

1.5 The Shares

The Subscription Shares are and will at Completion be, free from all liens, charges, encumbrances and third party rights whatsoever and the Company are and will at Completion be entitled to and able to procure the allotment of the Shares on the terms of this Agreement without the consent of any third party. The Company has not exercised any lien over any of its shares and there is outstanding no call on any of its shares.

1.6 Other corporate matters

(1) The Company is duly incorporated or established and validly existing under the laws of its place of incorporation or establishment, and the amount and particulars of its share capital and other particulars set out in recital are be true and accurate.

(2) The Company has full power, authority and legal right to own its assets and carry on its business and is not in receivership or liquidation, its has taken no steps to enter into liquidation and no petition has been presented for winding up of the Company and there are no grounds on which a petition or application could be based for the winding up or appointment of a receiver of the Company.

(3) This Agreement constitutes legally valid and binding obligations on the Company enforceable against it in accordance with the terms of this Agreement.

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(4) The Company has applied for/been granted all licences, permits, consents to carry out its business in the relevant jurisdiction and all licences and consents are valid and subsisting and the Directors are not aware of any circumstances which may lead to a revocation or suspension (on temporary or permanent basis) of such licences and consents.

1.7 Effect of allotment of Shares

Neither the execution of this Agreement nor the compliance with the terms of this Agreement does and/or will conflict with, or result in the breach of, or constitute a default under, any of the terms, conditions or provisions of any agreement or instrument to which the Company is a party, or any provision of the memorandum or articles of association or other corresponding constitutional documents of the Company or any encumbrances, lease, contract, order, judgment, award, injunction, regulation or other restriction or obligation of any kind or character by which or to which any asset of the Company is bound or subject.

1.8 General

The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in any breach or cancellation or termination of any of the terms or conditions of or constitute a default under any agreement, commitment or other instrument to which the Company is a party or by which the Company or its property or assets may be bound or affected or violate any law or any rule or regulation of any administrative agency or governmental body or any order, writ injunction or decree of any court, administrative agency or governmental body affecting the Company.

17

EX-4.7

Exhibit 4.7

SERIES C PREFERENCE SHARES PURCHASE AGREEMENT

This Series C Preference Shares Purchase Agreement (this “Agreement”) is made and entered into as of the 24^th day of January, 2005, by and among Home Inns & Hotels Management (Hong Kong) Limited, a Hong Kong company (the “Company”), and the parties listed on the Schedule of Investors attached to this Agreement as Exhibit A (each hereinafter individually referred to as an “Investor” and collectively referred to as the “Investors”).

WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, the Company’s Series C Preference Shares on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties hereby agree as follows:

1. AGREEMENT TO PURCHASE AND SELL SHARES.

1.1 Authorization. On or prior to the Closing (as defined in Section 2 hereof), the Company will have duly authorized the (i) issuance, pursuant to the terms and conditions of this Agreement, of up to Three Million Two Hundred Sixty-Five Thousand Eight Hundred and Forty-One (3,265,841) Series C Preference Shares, of par value HK$0.005, (the “Purchased Shares”) having the rights, preferences, privileges and restrictions set forth in the Second Amended and Restated Articles of Association of the Company attached to this Agreement as Exhibit B (the “Second Restated Articles”), and the Amended and Restated Shareholders Agreement in the form attached to this Agreement as Exhibit E (the “Amended and Restated Shareholders Agreement”); and (ii) issuance of the ordinary shares of the Company to be issued upon conversion of the Purchased Shares (collectively hereinafter referred to as the “Conversion Shares”).

1.2 Agreement to Purchase and Sell. The Company agrees to sell to each Investor at the Closing, and each Investor agrees, severally and not jointly, to purchase from the Company at the Closing, the number of Purchased Shares set forth opposite such Investor’s name on Exhibit A, at a price of US$1.531 per share.

2. CLOSING. The purchase and sale of the Purchased Shares will take place at the offices of Boughton Peterson Yang Anderson, 4009 Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong, at 3:00 p.m. local time, on January 27, 2005, or at such other time and place as the Company and the Investor who has agreed to purchase a majority of the Purchased Shares listed on Exhibit A mutually agree upon (which time and place are referred to in this Agreement as the “Closing”). At the Closing, the Company will deliver to each Investor a certificate representing the number of Purchased Shares that such Investor has agreed to purchase hereunder as shown on Exhibit A against delivery to the Company by such Investor of the full purchase price for such Purchased Shares, paid by wire transfer of funds to the Company.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Investor that, except as set forth in the Schedule of Exceptions (the “Schedule of Exceptions”) attached to this Agreement as Exhibit C (which Schedule of Exceptions shall be deemed to be representations and warranties to the Investors by the Company under this Section 3), the statements in this Section 3 are all true and complete immediately prior to the Closing. For purposes of this Agreement, “Group Companies” shall mean the Company, Home Inns Hotel Management (Beijing) Limited (the “Beijing Sub”), a joint venture established under the laws of the People’s Republic of China (the “PRC”) by the Company and Capital Travel Resorts and Hotels Group Limited, and the respective subsidiaries and affiliates of and any enterprise or other entity which is directly or indirectly subordinate to, controlled by, or under common control with the Company and/or the Beijing Sub (each a “Group Company”, and together, the “Group”).

3.1 Organization, Corporate Power and Qualification. The Company has been duly incorporated and organized, and is validly existing, under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”). Subject to the Schedule of Exceptions, each Group Company has been duly incorporated and organized, and is validly existing, under the laws of its place of incorporation and establishment. The Company has the requisite corporate power and authority, to enter into and perform this Agreement, the Amended and Restated Shareholders Agreement (this Agreement and the Amended and Restated Shareholders Agreement are collectively referred to herein as the “Related Agreements”), to own and operate its properties and assets and to carry on its business as currently conducted and as presently proposed to be conducted. Each Group Company is duly qualified to do business in all jurisdictions in which it is required to be so qualified by virtue of the business of such Group Company as currently conducted and as presently proposed to be conducted by such Group Company, except for jurisdictions in which failure to so qualify would not have a material adverse effect on the business, operations, affairs or condition (financial or otherwise) of such Group Company as currently conducted and as presently proposed to be conducted or with respect to its properties or assets taken as a whole (a “Material Adverse Effect”).

3.2 Capitalization.

(a) Issued Share Capital. The capitalization of the Company immediately prior to Closing consists of an authorized share capital of HK$1,000,000.00 with the following issued share capital:

(i) Ordinary Shares. One Hundred Seventy-Seven Million Seventy-Five Thousand One Hundred Fourteen (177,075,114) Ordinary Shares of par value of HK$0.005 are authorized for issue of which Twenty-Seven Million Three Hundred Ninety-Nine Thousand One Hundred and Forty (27,399,140) Ordinary Shares of par value of HK$0.005 each are issued and outstanding (the “Ordinary Shares”);

(ii) Series A Preference Shares. Seventeen Million Two Hundred Forty-One Thousand Four Hundred (17,241,400) Series A Preference Shares of par value of HK$0.005 are authorized for issue all of which Series A Preference Shares of par value of HK$0.005 are issued and outstanding; and

(iii) Series B Preference Shares. Two Million Four Hundred and Seventeen Thousand Six Hundred Forty-Five (2,417,645) Series B Preference Shares of par value of HK$0.005 are authorized for issue all of which Series B Preference Shares of par value of HK$0.005 are issued and outstanding.

(b) Issue of Series C Preference Shares. As of Closing, Three Million Two Hundred Sixty-Five Thousand Eight Hundred and Forty-One (3,265,841) Series C Preference Shares of par value of HK$0.005 each will be issued which represents 6.2014% of the entire issued share capital of the Company on a fully-diluted as-converted basis. Upon the Closing, the respective rights, preferences and privileges of the Series A Preference Shares, Series B Preference Shares and Series C Preference Shares (collectively referred to as the “Preference Shares”) will be as stated in the Second Restated Articles and as provided by law.

2

(c) Options, Warrants, Reserved Shares. Except for the conversion privileges of the Preference Shares and the employee stock option plan of the Company whereby a maximum of 2,352,909 Ordinary Shares may be subject to options granted to employees (the “Stock Option Plan”), there are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreement for the purchase or acquisition from the Company of any of its capital shares or any securities convertible into or ultimately exchangeable or exercisable for any of the Company’s capital shares. Except under the Second Restated Articles and the Related Agreements and apart from the exceptions noted in the Schedule of Exceptions, no shares of the Company’s outstanding capital shares, or shares issuable upon exercise or exchange of any outstanding options, warrants or rights, or other shares issuable by the Company, are subject to any preemptive rights, rights of first refusal or other rights to purchase such shares (whether in favor of the Company or any other person), pursuant to any agreement or commitment of the Company.

(d) Capitalization Tables and Outstanding Security Holders. The Schedule of Exceptions sets forth an accurate and complete list of the Company’s shareholders, warrants and convertible notes (if any), and their respective holdings prior to and after the Closing.

3.3 Subsidiaries.

(a) The Company is the direct legal and beneficial owner of 93.473% of the issued and outstanding equity interests, and legally and beneficially holds 93.473% of the voting shares, of the Beijing Sub. The approved total investment amount of the Beijing Sub is RMB98,000,000, of which the registered capital amount is RMB68,945,000. The Company is the direct legal and beneficial owner of 93.473% of the total registered capital of the Beijing Sub. Except as set out in Schedule of Exceptions, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights, except for such rights which may be held by the Company) or agreements, orally or in writing, for the purchase or acquisition of any equity or other ownership interest of the Beijing Sub or any other Group Company. Other than those direct and indirect subsidiaries of the Company set forth in the Group’s organization chart on the Schedule of Exceptions in Exhibit C hereof, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association, or other entity. Save as disclosed in the Schedule of Exceptions, no Group Company is a participant in any joint venture, partnership, or similar arrangement. The approved total investment amount and the registered capital amount of each such subsidiary directly or indirectly owned by the Beijing Sub (where applicable) is as set forth on the Schedule of Exceptions.

(b) Except as disclosed in the Schedule of Exceptions:

(i) The registered capital of each subsidiary of Beijing Sub is fully paid and 100% directly or indirectly duly vested in the Beijing Sub.

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(ii) The incorporation and operation documents relating to each Group Company incorporated and established in the PRC (a “PRC Subsidiary”) are valid and have been duly approved or issued (as applicable) by competent PRC authorities.

(iii) All consents, approvals, authorizations or licenses requisite under PRC law for the due and proper establishment and operation of each PRC Subsidiary as presently operated have been duly obtained from the relevant and competent PRC authorities and are in full force and effect.

(iv) All filings and registrations with the PRC authorities required in respect of such PRC Subsidiary and its operations, including but not limited to the registrations with the Ministry of Commerce, the State Administration of Industry and Commerce, the State Administration for Foreign Exchange and tax bureau have been duly completed in accordance with the relevant rules and regulations.

(v) No PRC Subsidiary has received any letter or notice from any relevant authority notifying revocation of any permits or licenses issued to it for non-compliance or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by such PRC Subsidiary.

(vi) With respect to the land use rights, building property and investments held by each PRC Subsidiary, such PRC Subsidiary has exclusive, full and unimpaired legal and beneficial ownership of its respective rights, property and investments and has obtained all necessary approvals and effected all necessary registrations with government authorities with respect thereto.

(vii) Each PRC Subsidiary has been conducting and will conduct its business activities within the permitted scope of business and is operating its business in full compliance with all relevant legal requirements.

(viii) The Company is not aware of, nor has any reason to believe, that any approvals, licenses or permits requisite for the conduct of any part of a PRC Subsidiary’s businesses which are subject to periodic renewal will not be granted or renewed by the relevant PRC authorities.

(ix) All applicable laws and regulations with respect to the opening and operation of foreign exchange accounts and foreign exchange activities of each PRC Subsidiary, including, where applicable, the registration of foreign exchange laws, have been and will continue to be fully complied with, and all requisite approvals from the State Administration of Foreign Exchange in relation thereto have been duly obtained.

(x) With regard to employment and staff or labour management, each PRC Subsidiary has complied with all applicable PRC laws and regulations, including without limitation, laws and regulations pertaining to welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or the like.

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3.4 Due Authorization. All corporate action on the part of the Company’s directors and shareholders necessary for (i) the authorization, execution, delivery of, and the performance of all obligations of the Company under, the Related Agreements; (ii) the authorization, issuance, reservation for issuance and delivery of all of the Purchased Shares being sold under this Agreement and of the Conversion Shares; and (iii) the authorization and adoption of the Second Restated Articles has been taken or will be taken prior to the Closing. The Related Agreements, when executed and delivered, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Except under the Second Restated Articles and the Related Agreements and in relation to the Series A Preference Shares and Series B Preference Shares of the Company, the Purchased Shares, when issued, sold and delivered in accordance with the terms of this Agreement, are not, and the Conversion Shares upon the conversion of the Purchased Shares will not be, subject to preemptive rights or other preferential rights of any of the present shareholders of the Company, will not be subject to any lien, and will not conflict with any provision of any agreement or instrument to which a Group Company is a party or by which it or its property is bound.

3.5 Valid Issuance of Shares.

(a) The Purchased Shares, when paid for and then issued, as provided in this Agreement, will be duly authorized and validly issued, fully paid and nonassessable. The Conversion Shares have been duly and validly reserved for issuance upon conversion of the Purchased Shares and, when issued upon such conversion in accordance with the Second Restated Articles (assuming no change in the Second Restated Articles or in applicable law), will be duly authorized and validly issued, fully paid and nonassessable.

(b) Based in part on the representations made by the Investors in Section 4 hereof, the offer and sale of the Purchased Shares solely to the Investors in accordance with this Agreement are made in full compliance with the laws and regulations of Hong Kong and all other applicable jurisdictions.

(c) The outstanding capital shares of the Company are duly authorized and validly issued, fully paid and nonassessable, and have been approved by all requisite shareholder action. Such capital shares, and all outstanding options, warrants, convertible notes and other securities of the Company, have been issued in full compliance with the laws and regulations of Hong Kong and all other applicable jurisdictions.

3.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any national, state or local governmental authority is required on the part of the Company in order to enable the Company to execute, deliver and perform its obligations under the Related Agreements except for such qualifications or filings under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement. All such qualifications and filings will, in the case of qualifications, be effective on the Closing and will, in the case of filings, be made within the time prescribed by law.

5

3.7 Litigation. There are no actions, suits, claims, investigations or proceedings pending or threatened against the Company or against any officer or holder of more than five percent (5%) of the capital shares of the Company (other than any Investor) relating to such person’s performance of duties for the Company or relating to his, her or its share ownership in the Company, or any reasonable basis therefor, which could reasonably be expected to result, either in any case or in the aggregate, in a Material Adverse Effect or which directly or indirectly challenge the validity of this Agreement, the issuance of any of the Purchased Shares, or any action taken or to be taken pursuant hereto or thereto. Neither the Company nor any officer or holder of more than five percent (5%) of the capital shares of the Company (other than any Investor) is named in, subject to or in default under, nor are any of its assets bound by, any order, writ, injunction, decree, ruling or decision of any court, commission, board or other governmental agency. There are no actions, suits, claims, investigations or proceedings by the Company currently pending or that the Company currently intends to initiate.

3.8 Certain Agreements of Officers and Key Employees.

No officer of the Company or any of the Key Employees (for purposes of this Agreement, “Key Employees” shall mean Jian Sun, Hui Chen and Ri Xin Liang) of the Company is in violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, or any other contract, agreement or understanding or any restrictive covenant relating to the right of any such officer or Key Employee to be employed by the Company because of the nature of the business conducted or presently proposed to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and the continued employment of the Company’s officers and Key Employees does not subject the Company to any liability to third parties. The Company has not received any communication from the former employer of an officer or Key Employee regarding such person’s existing or proposed role as a director, officer or employee of or consultant to the Company regarding or indicating the alleged violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, or any other contract, agreement or understanding or any restrictive covenant relating to the right of any such person to be employed by the Company because of the nature of the business conducted by the Company or relating to the use of trade secrets or proprietary information of others.

3.9 Status of Proprietary Assets.

(a) As used in this Section 3.9,

(i) “Business” means the business of each Group Company as presently conducted and as presently proposed to be conducted, including without limitation the hotel investment, management and franchising services.

(ii) “Intellectual Property Rights” means worldwide common law and statutory rights in, to or associated with (i) patents, patent applications and invention disclosures, (ii) copyrights, copyrights registrations and copyright applications and “moral” rights, (iii) the protection of trade and industrial secrets and confidential information, (iv) trademarks, trade names, service marks and other designators of origin, (v) analogous rights to those set forth above, (vi) divisionals, continuations, continuation-in-part, renewals, reissuances, reexaminations, and extensions of the foregoing (as applicable), and all other industrial and/or proprietary rights in, to or associated with Technology or intangible intellectual property.

6

(iii) “Necessary Intellectual Property” means all Technology and Intellectual Property Rights used in and/or necessary to the conduct of the Business, including without limitation that Technology and those Intellectual Property Rights listed in Exhibit D.

(iv) “Technology” means all inventions, works of authorship, know-how, show-how, data, databases, information, processes, procedures, techniques, documents, diagrams, source code, software, hardware, circuits, maskworks, algorithms, documentation and flowcharts.

(b) The Company (or the relevant Group Company, as the case may be) owns and has good and valid title to, unencumbered by any liens, all Necessary Intellectual Property. No third party has any ownership right, title, interest, claim in or lien on any Necessary Intellectual Property owned by any Group Company and each Group Company has taken all steps reasonably necessary to preserve its legal rights in, and the confidentiality and proprietary value of, all its Necessary Intellectual Property, except those for which disclosure is required for legitimate business or legal reasons.

(c) No Group Company has infringed, violated or misappropriated any Intellectual Property Right of any third party. The conduct of the Business does not conflict with, infringe, violate or misappropriate any Intellectual Property Right of any third party.

(d) There are no outstanding options, licenses, or agreements of any kind relating to the Necessary Intellectual Property, nor is a Group Company bound by or a party to any options, licenses or agreements of any kind with respect to the Technology or Intellectual Property Rights of any other person or entity.

(e) No Group Company has received any communications alleging that a Group Company (or any of its employees or consultants) has violated, infringed or misappropriated or, by conducting its business, would violate, infringe or misappropriate any Intellectual Property Rights of any other person or entity.

(f) No Key Employee is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee’s best efforts to promote the interest of such Group Company or that would conflict with the Business. Furthermore, the carrying on of the Business by the employees of each Group Company will not conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which such employee is now obligated.

(g) Neither the execution or delivery of this Agreement will conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which each Group Company is now obligated.

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3.10 Compliance with Law and Documents. No Group Company is in violation or default of any provisions of its Memorandum and Articles of Association (or other similar charter documents), as amended to date, and each Group Company is in compliance with all applicable statutes, laws, regulations and executive orders of Hong Kong and all foreign countries or other governmental bodies and agencies having jurisdiction over such Group Company’s business or properties where such violation would have a Material Adverse Effect. No Group Company has received any notice of any violation of any such statute, law, regulation or order that has not been remedied prior to Closing. The execution, delivery and performance of the Related Agreements and the consummation of the transactions contemplated hereby or thereby will not result in any such violation or default, or be in conflict with or result in a violation or breach of, with or without the passage of time or the giving of notice or both, such Group Company’s Memorandum and Articles of Association (or other similar charter documents), any judgment, order or decree of any court or arbitrator to which such Group Company is a party, or is subject, any agreement or contract of such Group Company, or a violation of any statute, law, regulation or order, or an event which results in the creation of any lien, charge or encumbrance upon any material assets of such Group Company.

3.11 Registration Rights. Except as provided in the Shareholders Agreement, no Group Company is under any obligation, under contract or law, to (i) register under the U.S. Securities Act of 1933, as amended and interpreted from time to time (the “1933 Act”) any of its currently outstanding securities or any of its securities which may hereafter be issued or (ii) list for public trading such securities in any jurisdiction or on any stock exchange or over-the-counter market.

3.12 Title to Property and Assets. Each Group Company owns its assets free and clear of all mortgages, deeds of trust, liens, encumbrances and security interests except for statutory liens for the payment of current taxes that are not yet delinquent and liens, encumbrances and security interests which arise in the ordinary course of business and which do not affect material assets of such Group Company. With respect to the property and assets it leases, each Group Company is in material compliance with such leases and each Group Company holds valid leasehold interests in such property and assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets.

3.13 Certain Actions. Since November 30, 2004 (the “Accounts Date”) until Closing, no Group Company has: (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital shares; (ii) incurred any indebtedness for money borrowed or incurred, other than in the ordinary course of business, any other liabilities individually in excess of Fifty Thousand U.S. Dollars (US$50,000) or in excess of two Hundred Thousand U.S. Dollars (US$200,000) in the aggregate; (iii) made any loans or advances to any person, other than ordinary advances for travel expenses and miscellaneous expenditures incurred in the ordinary course of business; (iv) sold, exchanged or otherwise disposed of any material assets or rights other than the sale of inventory in the ordinary course of its business; or (v) entered into any material transactions with any of its officers, directors or employees or any entity controlled by any of such individuals.

3.14 Activities Since the Accounts Date. Since the Accounts Date, there has not been:

(a) any damage, destruction or loss, whether or not covered by insurance, that has resulted in or could reasonably be expected to result in a Material Adverse Effect on a Group Company;

8

(b) any waiver by a Group Company of a valuable right or debt owed to it which has resulted in a Material Adverse Effect;

(c) any material change or amendment to a contract or arrangement by which a Group Company or any of its assets or properties is bound or subject;

(d) any other event or condition of any character that could result in or could reasonably be expected to result in a Material Adverse Effect on a Group Company;

(e) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by a Group Company, except such a satisfaction, discharge or payment made in the ordinary course of business that is not material to the assets, properties, financial condition, operating results or business of such Group Company;

(f) any material change in any compensation arrangement or agreement with any Key Employee or director of a Group Company;

(g) except for the licensing of software in the ordinary course of business, any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets by a Group Company;

(h) any resignation or termination of employment of any Key Employees;

(i) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of a Group Company;

(j) any mortgage, pledge, transfer of a security interest in, or lien, created by a Group Company, with respect to any of its properties or assets, except liens for taxes not yet due or payable;

(k) any loans or guarantees made by a Group Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(l) any declaration, setting aside or payment or other distribution in respect of any of a Group Company’s capital shares, or any direct or indirect redemption, purchase or other acquisition of any of such shares by a Group Company; or

(m) any agreement or commitment by a Group Company to do any of the things described in this Section 3.14 or any other event or condition of any character which would materially and adversely affect its ownership, assets, properties, financial condition, operating results or business of such Group Company.

3.15 Insurance. Each Group Company has in full force and effect such insurance policies, in such amounts (subject to reasonable deductibles) as are carried by similar companies, including casualty and liability insurance policies.

3.16 Tax Returns and Payments. Each Group Company has timely filed all tax returns and reports required by law. All tax returns and reports of each Group Company are true and correct in all material respects. Each Group Company has paid all taxes and other assessments due, except those, if any, currently being contested by it in good faith which are listed in the Schedule of Exceptions.

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3.17 Minute Books and Records. The minute books of each Group Company contain a complete record of all meetings, consents and actions of the board of directors and the shareholders of such Group Company since the time of its incorporation, accurately reflecting all transactions referred to in such minutes in all material respects; to the extent deficient, there is no material information contained in such minutes which has not been conveyed to Investors in other written form. All accounts, books, ledgers and other records of whatsoever kind material to a Group Company’s businesses have been fully, properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein, and, collectively, they fairly present the financial position of the Company and its subsidiaries.

3.18 Labor Agreements and Actions. No Group Company is bound by or subject to any contract, commitment or arrangement with any labor union, and no labor union has requested, sought or attempted to represent any employees, representatives or agents of any Group Company. There is no strike or other labor dispute involving a Group Company pending nor threatened, nor are there any labor organization activity involving employees of any Group Company. No Key Employee intends to terminate their employment with a Group Company, nor does any Group Company have any present intention to terminate the employment of any of its Key Employees.

3.19 Interested Party Transactions. No officer or director of the Company or any “affiliate” or “associate” (as those terms are defined in Rule 405 promulgated under the 1933 Act) of any such person has had, either directly or indirectly, a material interest in: (i) any person or entity which purchases from or sells, licenses or furnishes to the Company any goods, property, technology, intellectual or other property rights or services; or (ii) any contract or agreement to which the Company is a party or by which it may be bound or affected.

3.20 Assumptions or Guaranties of Indebtedness of Other Persons. No Group Company has assumed, guaranteed, endorsed or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any indebtedness of any other person except inter-company loans within the Group Companies.

3.21 Shares Restriction Agreements. Each person who, pursuant to any benefit, bonus or incentive plan of the Company, holds any currently outstanding shares or other securities of a Group Company or any option, warrant or right to acquire such shares or other securities, has entered into or is otherwise bound by, an agreement granting the respective Group Company a right of first refusal with respect to all such shares. The Company has furnished to the solicitors to the Investors true and complete copies of the forms of all such share restriction agreements and the Schedule of Exceptions sets forth a complete list of all such share restriction agreements.

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3.22 Financial Statements. The Company has delivered to the Investors on or prior to Closing (i) an audited balance sheet of the Company and an audited consolidated balance sheet of the Beijing Sub each dated December 31, 2003, (ii) an audited income statement and statement of changes in cash flows of the Company and an audited consolidated income statement and statement of changes in cash flows of the Beijing Sub each for the twelve month period then ended, (iii) an unaudited balance sheet of the Company and an unaudited consolidated balance sheet of the Beijing Sub each dated November 30, 2004, and (iv) an unaudited income statement of the Company and an unaudited consolidated income statement of the Beijing Sub each for the eleven month period then ended (all such financial statements being collectively referred to herein as the “Financial Statements”). Such Financial Statements (a) accord with the books and records of the respective Group Company(ies), (b) are true, correct and complete and present fairly the financial condition of the Group Company(ies) at the date or dates therein indicated and the results of operations for the period or periods therein specified, (c) have been prepared in accordance with generally accepted accounting principles in Hong Kong (“Hong Kong GAAP”) in respect of the Company’s audited and unaudited financial statements and the Beijing Sub’s audited financial statements, and (d) have been prepared in accordance with generally accepted accounting principles in China (“China GAAP”) in respect of the Beijing Sub’s unaudited financials statements, except, as to the unaudited financial statements of the Company and the Beijing Sub, for the omission of notes thereto, and normal year-end audit adjustments. Specifically, but not by way of limitation, the respective balance sheets included in the Financial Statements disclose all of the respective Group Company’s material debts, liabilities and obligations of any nature, whether due or to become due, as of their respective dates (including, without limitation, absolute liabilities, accrued liabilities, and contingent liabilities) to the extent such debts, liabilities and obligations are required to be disclosed in accordance with Hong Kong GAAP or China GAAP, as applicable, and each Group Company has good and marketable title to all assets set forth on the balance sheets of the respective Financial Statements, except for such assets as have been spent, sold or transferred in the ordinary course of business since their respective dates.

3.23 Real Property. No Group Company owns any real property.

3.24 Fair Disclosure. No representation or warranty by the Company in this Agreement or in any written statement or certificate furnished or to be furnished to the Investors pursuant to this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading.

3.25 Limitation. The provisions of this Section 3.25 shall operate to limit the liability of the Company in respect of any claim for breach of any of the representations, warranties and covenants of the Company under Section 3 of this Agreement. The parties hereto agree as follows:

(a) the maximum aggregate liability of the Company in respect of all such claims shall not exceed the aggregate total paid by the Investors for the Purchased Shares.

(b) No such claim shall be brought against the Company unless:

(i) written particulars thereof (stating in reasonable detail the specific matter in respect of which the claim is made) shall have been notified in writing to the Company before the expiration of three (3) years from the date of the Closing; and

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(ii) the amount of claims in the aggregate is not less than One Hundred Thousand U.S. Dollars (US$100,000).

4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each Investor hereby represents and warrants to, and agrees with, the Company, severally and not jointly, that:

4.1 Authorization. The Related Agreements constitute such Investor’s valid and legally binding obligations, enforceable in accordance with its terms except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law, governing the availability of equitable remedies. Each Investor represents that such Investor has full power and authority to enter into the Related Agreements.

4.2 Purchase for Own Account. The Purchased Shares to be purchased by such Investor hereunder will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. If not an individual, such Investor also represents that such Investor has not been formed for the specific purpose of acquiring Purchased Shares.

4.3 Disclosure of Information. At no time was the Investor presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Purchased Shares. Such Investor acknowledges that it has had an opportunity to discuss the business, affairs and current prospects of the Company with its officers, and that it has had access to information about the Company that it has requested. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.

4.4 Investment Experience. Such Investor understands that the purchase of the Purchased Shares involves substantial risk, has evaluated the risks of the purchase of the Purchased Shares and can afford a complete loss of his or her investment, and has no need for liquidity in connection with the purchase of the Purchased Shares. Such Investor has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor’s investment in the Purchased Shares and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting its own interests in connection with this investment. In formulating a decision to invest in the Company and evaluating the suitability of an investment in the Purchased Shares, such Investor has not relied or acted on the basis of any representations or other information (whether oral or written) purported to be given on behalf of the Company except as set forth herein and independent investigations made by the Investor or representative(s) of the Investor. Such Investor is aware and acknowledges that (i) the Purchased Shares involve a material degree of risk of diminution or loss of such Investor’s investment and there is no assurance of any income from such investment; and (ii) it may not be possible for the Investor to liquidate its investment readily in case of an emergency.

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4.5 Accredited Investor Status. Unless otherwise expressly indicated on Exhibit A to this Agreement, such Investor is an “accredited investor” within the meaning of Regulation D promulgated under the 1933 Act.

4.6 No Breach of Applicable Laws. In subscribing for the Purchased Shares, the Investor will not be in breach of any applicable laws, including those relating to money laundering or proceeds of crime in any applicable jurisdiction.

5. CONDITIONS TO INVESTORS’ OBLIGATIONS AT CLOSING. The obligations of each Investor under Section 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent to such waiver, which consent may be given by written, oral or telephone communication to the Company, its solicitors or to the solicitors to the Investors:

5.1 Representations and Warranties True. Each of the representations and warranties made by the Company in Section 3 hereof shall be true and complete on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

5.2 Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

5.3 Second Restated Articles Effective. The Second Restated Articles shall have been duly approved and adopted by the Company by all necessary corporate action of its board of directors and shareholders and shall be in full force and effect as of the date of Closing, and shall have been duly filed with the Hong Kong Companies Registry within seven (7) working days from the Closing.

5.4 Compliance Certificate. The Company shall have delivered to each Investor at the Closing a certificate signed on its behalf by one of its directors certifying that the conditions specified in Sections 5.1, 5.2 and 5.3 hereof have been fulfilled and stating that there shall have been no Material Adverse Effect not previously disclosed to the Investors in writing.

5.5 Compliance with Securities Laws. The Company shall have obtained all necessary permits and qualifications, or have the availability of exemptions therefrom, required by any applicable jurisdiction for the offer and issuance of the Purchased Shares to the Investors.

5.6 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Investor and to the Investors’ solicitors, and they shall each have received all such counterpart originals and certified or other copies of such documents as they may reasonably request.

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5.7 Secretary’s Certificate. The Investors shall have received from the Company’s Secretary a certificate dated as of the Closing having attached thereto the following:

(a) Corporate Actions. A copy of the resolutions of the board of directors and the shareholders of the Company approving the Second Restated Articles and providing for the authorization of the Purchased Shares, the approval of the Related Agreements, the issuance of the Purchased Shares and the other matters contemplated hereby and thereby.

(b) Authorized Signatories. A list containing the names of the officers of the Company authorized to sign this Agreement, the certificates for the Purchased Shares and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, together with the true signatures of such officers.

5.8 Board of Directors and Board Observer. The Company’s board of directors shall be comprised of eight (8) members being Qi Ji, Eric Ku Chun Lin, Nan Peng Shen, Jerry Sze, Su Yang Zhang, Jianzhang Liang, Yunxin Mei and Jianmin Yang. The Company’s board of directors shall have approved the appointment of a non-voting board observer nominated by the Investors with effect from Closing.

5.9 No Material Change. There shall have been no Material Adverse Effect in the business, financial condition, or assets of any Group Company, since the date of this Agreement.

5.10 Amended and Restated Shareholders Agreement. The Amended and Restated Shareholders Agreement shall have been executed by the Company and the Parties (as such term is defined in the Amended and Restated Shareholders Agreement) and delivered to the Investors.

5.11 Legal Opinions. The Investors shall have received legal opinions of each of Hong Kong and PRC counsel to the Company in form and substance satisfactory to the Investors as set forth in Exhibit F, dated as of the Closing and addressed to the Investors.

5.12 Due Diligence. The Investors shall have completed their due diligence investigation of the Group Companies and any corrective items reasonably identified by any Investor shall have been corrected to Investors’ satisfaction.

6. CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING. The obligations of the Company to each Investor under this Agreement are subject to the fulfillment or waiver on or before the Closing of each of the following conditions by such Investor:

6.1 Representations and Warranties. The representations and warranties of such Investor contained in Section 4 shall be true and complete on the date of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

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6.2 Payment of Purchase Price. Each Investor shall have delivered to the Company the purchase price specified for such Investor on Exhibit A in accordance with the provisions of Section 2.

7. COVENANTS OF THE COMPANY.

Use of Proceeds. Save for USD1,000,000 which will be retained in the bank account of the Company for general working capital and operational expenses for the Business, the Company shall cause the entire proceeds from the sale of the Purchased Shares to be applied to capital investment directly in the PRC Subsidiaries for business expansion, capital expenditures, marketing and general working capital for the sole and primary purpose of the Business, except for reasonable expenses incurred in connection with the Related Agreements. The proceeds from the sale of the Purchase Shares shall not be used in any way to cancel, repay or reduce any outstanding indebtedness or repurchase, redeem or cancel any securities or to make any payments to shareholders or affiliates of any Group Company.

8. GENERAL PROVISIONS.

8.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of any of the Investors, their solicitors or the Company, as the case may be.

8.2 Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives.

8.3 Governing Law. This Agreement will be governed by and construed in accordance with the laws of Hong Kong.

8.4 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement.

8.5 Titles and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Agreement.

8.6 Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) at the time of transmission by facsimile, addressed to the other party at its facsimile number specified herein (or hereafter modified by subsequent notice to the parties hereto), with confirmation of receipt made by both telephone and printed confirmation sheet verifying successful transmission of the facsimile; or (iii) one (1) business day after deposit with an express overnight courier for deliveries within Asia, or two (2) business days after such deposit for deliveries outside of Asia, with proof of delivery from the courier requested.

15

All notices not delivered personally or by facsimile will be sent with charges prepaid and properly addressed to the party to be notified at the address or facsimile number as follows, or at such other address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows:

(a) if to an Investor, at such Investor’s respective address as set forth on Exhibit A hereto; and

(b) if to the Company, marked “Attention: President,” at Home Inns & Hotels Management (Hong Kong) Limited, Room 2001, The Centrium, 60 Wyndham Street, Central, Hong Kong.

8.7 Costs, Expenses. Each party shall bear its own costs and expenses (including legal expenses) in respect of the negotiation, preparation, execution and carrying into effect of this Agreement, the Amended and Restated Shareholders Agreement and other agreements and contracts incidental to this Agreement, provided, however, if Closing is effected, the Company shall, at the Closing, pay the Investors the amount of US$40,000 as reimbursement for their respective legal and administrative expenses relating to the Related Agreements.

8.8 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and holders representing at least eighty percent (80%) of the aggregate number of the Purchased Shares then outstanding. Any amendment or waiver effected in accordance with this Section 8.8 shall be binding upon each holder of any voting shares of the Company at the time outstanding, each future holder of such securities, and the Company. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. No waiver granted under this Agreement as to any one provision herein shall constitute a subsequent waiver of such provision or of any other provision herein, nor shall it constitute the waiver of any performance other than the actual performance specifically waived.

8.9 Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.

8.10 Entire Agreement. The Related Agreements and the documents referred to herein and therein, together with all the exhibits hereto and thereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede any and all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.

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8.11 Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

8.12 Adjustments for Share Splits, Etc. Wherever in this Agreement there is a reference to a specific number of Ordinary Shares or Preference Shares of the Company of any class or series, then, upon the occurrence of any subdivision, combination or share dividend of such class or series of shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of shares by such subdivision, combination or share dividend.

8.13 Facsimile Signatures. This Agreement may be executed and delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party. The original signature copy shall be delivered to the other party by express overnight delivery. The failure to deliver the original signature copy and/or the nonreceipt of the original signature copy shall have no effect upon the binding and enforceable nature of this Agreement.

8.14 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

COMPANY:
HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED
By:	/s/
Name:
Title:
INVESTORS:
SUSQUEHANNA CHINA INVESTMENT HI
By:	/s/
Name:
Title:
BEIHAI CAPITAL LIMITED
By:	/s/
Name:
Title:
FORTUNE HERO LIMITED
By:	/s/
Name:
Title:

[SIGNATURE PAGE TO HOME INNS SERIES C PREFERENCE SHARES PURCHASE AGREEMENT]

KANGAROO INVESTMENTS LLC
By:	/s/
Name:
Title:
/s/
HIROKO NISHIKAWA
/s/
SOON YAN SEEN

[SIGNATURE PAGE TO HOME INNS SERIES C PREFERENCE SHARES PURCHASE AGREEMENT]

2

SERIES C PREFERENCE SHARES PURCHASE AGREEMENT

LIST OF EXHIBITS

Exhibit A	-	Schedule of Investors
Exhibit B	-	Form of Second Restated Articles
Exhibit C	-	Schedule of Exceptions
Exhibit D	-	List of Intellectual Property Rights
Exhibit E	-	Form of Amended and Restated Shareholders Agreement
Exhibit F	-	Form of Legal Opinion of Hong Kong and PRC Counsel

EXHIBIT A

Schedule of Investors

Investor	Number of Series C Preference Shares Purchased	Aggregate Purchase Price
SUSQUEHANNA CHINA INVESTMENT HI c/o Susquehanna Asia Investment, LLLP 401 City Avenue, Suite 220 Bala Cynwyd, PA 19004-1188 U.S.A. Fax: (610) 747-2014	2,873,940	US$	4,400,000
KANGAROO INVESTMENTS LLC 200 W. Jackson Chicago, Illinois 60606 U.S.A. Fax: (312) 264-2001	130,633	US$	200,000
FORTUNE HERO LIMITED Suite 3001-03 30/F Convention Plaza Office Tower 1 Harbour Road Wanchai, Hong Kong c/o Kenneth Gaw Fax: (852) 2810-1813	65,317	US$	100,000
SOON YAN SEEN Flat 2401, Blk A Villa Lotto 18 Broadwood Road Happy Valley, Hong Kong Fax: (852) 2169-3885	65,317	US$	100,000

A-1

HIROKO NISHIKAWA 4C Somerset 67 Repulse Bay Road Hong Kong Fax: (852) 2517-6671	65,317	US$	100,000
BEIHAI CAPITAL LIMITED 2103 Futian Garden Building A Fu Qiang Road Shenzhen China 518031 Fax: (86-755) 2583-8382	65,317	US$	100,000
TOTAL:	3,265,841	US$	5,000,000.00

A-2

EXHIBIT B

Form of Second Restated Articles

B-1

Certificate of Incorporation No. 758133

SECOND RESTATED

MEMORANDUM

AND

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS

MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 27 January 2005)

Incorporated the 28th day of May 2001

INCORPORATED IN HONG KONG

(Reprinted in January 2005)

THE COMPANIES ORDINANCE (Chapter 32)

Company Limited by Shares

SECOND RESTATED

MEMORANDUM OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 27 January 2005)

1. The name of the Company is HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED .

2. The Registered Office of the Company will be situated in Hong Kong.

3. The Company has the capacity and the rights, powers and privileges of a natural person and the objects for which the Company is established are unrestricted and shall include, but without limitation, the following:-

(1) To purchase or otherwise acquire and undertake the whole or any part of the business, goodwill, assets and liabilities of any person, firm or company; to acquire an interest in, amalgamate with or enter into partnership, joint venture or profit-sharing arrangements with any person, firm or company, to promote, sponsor, establish, constitute form, participate in, organise, manage, supervise and control any corporation, company, syndicate, fund, trust, business of institution.

(2) To import, export, buy, sell (wholesale and retail), exchange, barter, let on hire, distribute and otherwise deal in and turn to account goods, materials, commodities, produce and merchandise generally in their prepared, manufactured, semi-manufactured and raw state.

(3) To purchase or otherwise acquire and hold, in any manner and upon any terms, and to underwrite and deal in shares, stocks, debentures, debenture stock, annuities and foreign exchange, foreign currency deposits and commodities, and from time to time to vary any of the same, and to exercise and enforce all rights and powers incidental to the Company’s interest therein, and to carry on business as an investment trust, and to invest or deal with the monies of the Company not immediately required for its operations in such manner as the Company may think fit.

(4) To enter into, carry on and participate in financial transactions and operations of all kinds.

(5) To manufacture, construct, assemble, design, repair, refine, develop, alter, convert, refit, prepare, treat, render marketable process and otherwise produce materials, fuels, chemicals, substances and industrial, commercial and consumer products of all kinds.

(6) To carry on business as insurance brokers and agents, and underwriting agents in all classes of insurance and as insurance advisers and consultants, pensions and investment advisers, consultant assessors, average adjusters and mortgage brokers; to carry on the business of an insurance and guarantee company in all its branches.

(7) To apply for, register, purchase or otherwise acquire and protect, prolong, and renew, in any part of the world, any intellectual and industrial property and technology of whatsoever kind or nature and licenses, protections and concessions therefor, and to use, turn to account, develop, manufacture, experiment upon, test, improve and licence the same.

(8) To purchase or otherwise acquire and to hold, own, licence, maintain, work, exploit, farm, cultivate, use, develop, improve, sell, let, surrender, exchange, hire, convey or otherwise deal in lands, mines, natural resources, and mineral, timber and water rights, wheresoever situate, and any interest, estate and rights in any real, personal or mixed property and any franchises, rights, licenses or privileges, and to collect, manage, invest, reinvest, adjust, and in any manner to dispose of the income, profits, and interest arising therefrom.

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(9) To improve, manage, develop, sell, let, exchange, invest, reinvest, settle, grant licences, casements, options, servitudes and other rights over, or otherwise deal with all or any part of the Company’s property, undertaking and assets (present and future) including uncalled capital, and any of the Company’s rights, interests and privileges.

(10) To acquire, sell, own lease, let out on hire, administer, manage, control, operate, construct, repair, alter, equip, furnish, fit our, decorate, improve and otherwise undertake and deal in engineering and construction works, buildings, projects, offices and structures of all kinds.

(11) To carry on business as consulting engineers in all fields including without limitation civil, mechanical, chemical, structural, marine, mining, industrial, aeronautical, electronic and electrical engineering, and to provide architectural, design and other consultancy services of all kinds.

(12) To purchase or otherwise acquire, take in exchange, charter, hire, build, construct, own, work, manage, operate and otherwise deal with any ship, boat, barge or other waterborne vessel, hovercraft, balloon, aircraft, helicopter or other flying machine, coach, wagon, carriage (however powered) or other vehicle, or any share or interest therein.

(13) To establish, maintain, and operate sea, air, inland waterway and land transport enterprises (public and private) and all ancillary services.

(14) To carry on the business of advisers, consultants, researchers, analysts and brokers of whatsoever kind or nature in all branches of trade, commerce, industry and finance.

(15) To provide or procure the provision of every and any service or facility required by any person, firm or company.

(16) To provide agency, corporate, office, business and management consultancy services, and to act as consultants, analysts and advisors to any person, firm or company or any business, governmental or other undertaking in respect of management, administration, manufacture, marketing, sales, distribution, finance, costing, design, research, industrial relations and otherwise howsoever and to act as nominee, custodian, director, secretary, registrar, book-keeper, manager, broker, agent or trustee, and to administer the estates of deceased persons and undertake and execute any trust in accordance with the terms of the deed or other instrument or law creating such trust.

(17) To carry on all or any of the businesses of shippers and ship owners, ship and boat builders, charterers, shipping and forwarding agents, ship managers, wharfingers, lightermen, stevedores, packers, storers, fishermen and trawlers.

(18) To carry on all or any of the businesses of hoteliers and restaurateurs and sponsors, managers and licencees of all kinds of sporting, competitive, social and leisure activities and of clubs, associations and social gatherings of all kinds and purposes.

(19) To carry on business as auctioneers, appraisers, valuers, surveyors, land and estate agents.

(20) To carry on business as farmers, graziers, dealers in and breeders of livestock, horticulturists and market gardeners.

(21) To carry on all or any of the businesses of printers, publishers, designers, draughtsmen, journalists, press and literary agents, tourist and travel agents, advertisers, advertising and marketing agents and contractors, personal and promotional representative, artists, sculptors, decorators, illustrators, photographers, film makers, producers and distributors, publicity agents and display specialists.

(22) To establish and carry on institutions of education, instruction or research and to provide for the giving and holding of lectures, scholarships, awards, exhibitions, classes and meetings for the promotion and advancement of education or the dissemination of knowledge generally.

(23) To design, invent, develop, modify, adapt, alter, improve and apply any object, article, device, appliance, utensil or product for any use or purpose whatsoever.

(24) To develop, acquire, store, licence, apply, assign, exploit all and any forms of computer and other electronic software, programs and applications and information, databases and reference material and computer, digital and other electronic recording, retrieval, processing and storage media of whatsoever kind and nature.

(25) To engage in the provision or processing of communications and telecommunications services, information retrieval and delivery, electronic message, electronic commerce, internet and database services.

(26) To carry on business as jewellers, goldsmiths, silversmiths and bullion dealers and to import, export, buy, sell and deal in (wholesale and retail) jewellery, gold, silver and bullion, gold and silver plate, articles of value, objects of art and such other articles and goods as the Company thinks fit, and to establish factories for culturing, processing and manufacturing goods for the above business.

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(27) To carry on any other business or activity and do any act or thing which in the opinion of the Company is or may be capable of being conveniently carried on or done in connection with any of the above, or likely directly or indirectly to enhance the value of or render more profitable all or any part of the Company’s property or assets or otherwise to advance the interests of the Company or its Members.

(28) To enter into any commercial or other arrangements with any government, authority, corporation, company or person and to obtain or enter into any legislation, orders, charters, contracts, decrees, rights, privileges, licences, franchises, permits and concessions for any purpose and to carry out, exercise and comply with the same and to make, execute, enter into, commence, carry on, prosecute and defend all steps, contracts, agreements, negotiations, legal and other proceedings, compromises, arrangements, and schemes and to do all other acts, matters and things which shall at any time appear conducive or expedient for the advantage or protection of the Company.

(29) To take out insurance in respect of any and all insurable risks which may affect the Company or any other company or person and to effect insurance (and to pay the premiums therefor) in respect of the life of any person and to effect re-insurance and counter-insurance, but no business amounting to fire, life or marine insurance business may be undertaken.

(30) To lend and advance money and grant and provide credit and financial or other accommodation to any person, firm or company.

(31) To borrow or raise money in such manner as the Company shall think fit and in particular by the issue (whether at par or at a premium or discount and for such consideration as the Company may think fit) of bonds, debentures or debenture stock (payable to bearer or otherwise), mortgages or charges, perpetual or otherwise, and if the Company thinks fit charged upon all or any of the Company’s property (both present and future) and undertaking including its uncalled capital and further, if so thought fit, convertible into any stock or shares of the Company or any other company, and collaterally or further to secure any obligations of the Company by a trust deed or other assurance.

(32) To guarantee or otherwise support or secure, either with or without the Company receiving any consideration or advantage and whether by personal covenant or by mortgaging or charging all or part of the undertaking, property, assets and rights (present and future) and uncalled capital of the Company or by both such methods or by any other means whatsoever, the liabilities and obligations of and the payment of any monies whatsoever (including but not limited to capital, principal, premiums, interest, dividends, costs and expenses on any stocks, shares or securities) by any person, firm or company whatsoever including but not limited to any company which is for the time being the holding company or a subsidiary (both as defined by Section 2 of the Companies Ordinance (Cap. 32)) of the Company or of the Company’s holding company or is otherwise associated with the Company in its business, and to act as agents for the collection, receipt or payment of money, and to enter into any contract of indemnity or suretyship (but not in respect of fire, life and marine insurance business).

(33) To draw, make, accept, endorse, negotiate, discount, execute, issue, purchase or otherwise acquire, exchange, surrender, convert, make advances upon, hold, charge, sell and otherwise deal in bills of exchange, cheques, promissory notes, and other negotiable instruments and bills of lading, warrants, and other instruments relating to goods.

(34) To give any remuneration or other compensation or reward (in cash or securities or in any other manner the Directors may think fit) to any person for services rendered or to be rendered in the conduct or course of the Company’s business or in placing or procuring subscriptions of or otherwise assisting in the issue of any securities of the Company or any other company formed or promoted by the Company or in which the Company may be interested in or about the formation or promotion of the Company or any other company as aforesaid.

(35) To grant or procure pensions, allowances, gratuities and other payments and benefits of whatsoever nature to or for any person and to make payments towards insurances or other arrangements likely to benefit any person or advance the interests of the Company or of its Members, and to subscribe, guarantee or pay money for any purpose likely, directly or indirectly, to further the interests of the Company or of its Members or for any national, charitable, benevolent, educational, social, public, general or useful object.

(36) To pay all expenses preliminary or incidental to the formation and promotion of the Company or any other company and the conduct of the business of the Company or any other company.

(37) To procure the Company to be registered or recognised in any territory.

(38) To cease carrying on and wind up any business or activity of the Company, and to cancel any registration of and to wind up and procure the dissolution of the Company in any territory.

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(39) To distribute any part of the undertaking, property and assets of the Company among its creditors and Members in specie or in kind but so that no distribution amounting to a reduction of capital may be made without the sanction (if any) for the time being required by law.

(40) To appoint agents, experts and attorneys to do any and all of the above matters and things on behalf of the Company or any thing or matter for which the Company act as agent or in any other way whatsoever interested or concerned in any part of the world.

(41) To do all any of the above matters or things in any part of the world and either as principal, agent, contractor, trustee, or otherwise and by or through trustees, agents or otherwise and either alone or in conjunction with others, and generally upon such terms and in such manner and for such consideration and security (if any) as the Company shall think fit including the issue and allotment of securities of the Company in payment or part payment for any property acquired by the Company or any services rendered to the Company or as security for any obligation or amount (even if less than the nominal amount of such securities) or for any other purpose.

(42) To do all such acts or things as are incidental or conducive to the attainment of the above objects or any of them.

And it is hereby declared that the word “company” in this clause shall be deemed to include any partnership or other body of persons whether incorporated or not incorporated and whether domiciled in Hong Kong or elsewhere and the intention is that the objects specified in each paragraph of this Clause shall, except where otherwise expressed in such paragraph, be independent main objects and shall be in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company.

4. The liability of the members is limited.

5. The Capital of the Company is HK$1,000,000.00 divided into 200,000,000 shares of HK$0.005 each.

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We, the several persons, whose names, addresses and descriptions are hereto subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital of the Company act opposite to our respective names:-

Names, Addresses and Descriptions of Subscribers	Number of Shares Taken by each Subscriber
For and on behalf of HAREFIELD LIMITED (Sd.) CHAN SHUK YI
	ONE
CHAN SHUK YI, Authorised Representative Offshore Chambers, P.O. Box. 217, Apia, Samoa Corporation
For and on behalf of FERNSIDE LIMITED (Sd.) CHAN SHUK YI
	ONE
CHAN SHUK YI, Authorised Representative Offshore Chambers, P.O. Box 217, Apia, Samoa Corporation
Total Number of Shares Taken	TWO

DATED 4th May 2001

WITNESS to the above signatures:

(Sd.) FANDY TSOI

9th Floor, Ruttonjee House,

11 Duddell Street,

Central, Hong Kong

Occupation: Operations Manager

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THE COMPANIES ORDINANCE (Chapter 32)

Company Limited by Shares

SECOND RESTATED

ARTICLES OF ASSOCIATION

OF

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

(As adopted by special resolution passed on 27 January 2005)

PRELIMINARY

1. The regulations in Table A in the First Schedule to the Ordinance shall not apply to the Company.

INTERPRETATION

2. (a) In these Articles, save where the context otherwise requires:

“the Company”	means the above named Company;
“the Ordinance”	means the Companies Ordinance (Chapter 32 of the laws of Honk Kong), and includes every other Ordinance incorporated therewith or substituted therefor; and in the case of any such substitution the references in these Articles to the provisions of the Ordinance shall be read as references to the provisions substituted therefor in the new Ordinance;
“the Board” and “the Directors”	means the Directors for the time being of the Company or the Director present at a duly convened meeting of Directors at which a quorum is present;
“Dividend”	includes bonuses, distributions in specie and in kind, capital distributions and capitalisation issues;
“Group Company”	means each of Home Inns Beijing Home Inns Shanghai and the Relevant Subsidiary;
“Home Inns Beijing”	means Home Inns Hotel Management (Beijing) Limited;
“Home Inns Shanghai”	means Home Inns Hotel Management (Shanghai) Limited;
“month”	means calendar month;
“Ordinary Shares”	means the ordinary shares of nominal value of Hk$0.005 each in the capital of the Company;
“the Office”	means the registered office of the Company for the time being;
“paid up”	includes credited as paid up;
“Preference Shares”	means Series A Preference Shares, Series B Preference Shares and Series C Preference Shares;
“the Register”	means the register of members of the Company kept pursuant to the Ordinance and includes any branch register kept pursuant to the Ordinance;
“Relevant Subsidiary”	means any 75% owned subsidiary of the Company;
“the Secretary”	means the secretary for the time being of the Company;
“the Seal”	means the common seal of the Company or any official seal that the Company may have as permitted by the Ordinance;
“Series A Original Issue Date”	means 28 February 2003, the date of the first sale and issuance of Series A Preference Shares;
“Series B Original Issue Date”	means the date of the first sale and issuance of Series B Preference Shares;
“Series C Original Issue Date”	means 27 January, 2005, the date of the first sale and issuance of Series C Preference Shares;

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“Series A Preference Shares”	means the series A preference shares of nominal value of HK$0.005 each in the capital of the Company
“Series B Preference Shares”	means the series B preference shares of nominal value of HK$0.005 each in the capital of the Company;
“Series C Preference Shares”	means the series C preference shares of nominal value of HK$0.005 each in the capital of the Company;
“Shares”	means Ordinary Shares, Series A Preference Shares, Series B Preference Shares and Series C Preference Shares;
“these Articles”	means the Articles of Association in their present form or as altered from time to time;
“in writing” and “written”	includes cable, telex, facsimile messages, electronic messages and any mode of reproducing words in a legible and non-transitory form.

(b) In these Articles, if not inconsistent with the subject or context, words importing the singular number only shall include the plural number and vice versa, and words importing any gender shall include all genders and vice versa.

(c) Subject as aforesaid, any words defined in the Ordinance or any statutory modification thereof in force at the date at which these Articles become binding on the Company shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.

(d) The headings are inserted for convenience only and shall not affect the construction of these Articles.

PRIVATE COMPANY

3. The Company is a private company, and accordingly:-

(a) any invitation to the public to subscribe for any shares or debentures of the Company is prohibited;

(b) the number of the members of the Company (not including persons who are in the employment of the Company, and persons who, having been formerly in the employment of the Company, were, while in such employment, and have continued after the determination of such employment to be, members of the Company) shall be limited to 50 PROVIDED that where two or more persons hold one or more shares in the Company jointly they shall, for the purposes of this Article, be treated as a single member;

(c) the right to transfer the shares of the Company shall be restricted in manner hereinafter prescribed; and

(d) the Company shall not have power to issue share warrants to bearer.

THE OFFICE

4. The Office shall be at such place in Hong Kong as the Directors or Secretary shall from time to time appoint.

SHARES

5.     (a) Subject to the provisions of Section 57B of the Ordinance, and save as provided by contract or these Articles to the contrary, all unissued shares shall be at the disposal of the Directors who may allot, grant options over, or otherwise deal with or dispose of the same to such persons, at such times, for such consideration and generally upon such terms and conditions as they think proper, but so that no shares of any class shall be issued at a discount except in accordance with Section 50 of the Ordinance

(b) The Company may give such financial assistance for purposes of acquiring shares in the Company as is not probibited by the Ordinance.

(c) For purposes of Article 8(b) the Directors are authorized to make statutory declarations or take such other steps as may be required by the Ordinance in relation to the giving of financial assistance to acquire shares in the Company.

6. The Company may make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and the time of payment of such calls.

7. If by the conditions of allotment of any shares the whole or part of the amount or issue price thereof shall be payable by instalments, every such instalment shall, when due, be paid to the Company by the person who for the time being is the registered holder of the shares, or his legal personal representative.

8.     (a) Subject to sections 49 to 49S of the Ordinance, the Company may issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the shareholder. The redemption of shares, may be effected upon such terms and in such manner as the Company before or upon issue of the shares shall by ordinary resolution determine.

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(b) Subject to sections 49 to 49S of the Ordinance and Article 111(a) of these Articles, the Company may purchase its own shares (including redeemable shares) and without Prejudice to the generality of the foregoing the Company may purchase its own shares (including any redeemable shares) in order to:

(i) settle or compromise a debt or claim;

(ii) eliminate a fractional share or fractional entitlement;

(iii) fulfil an agreement in which the Company has an option or is obliged to purchase shares under an employee share scheme which had previously been approved by the company in general meeting;

(iv) Comply with an order of court under section 8(4), 47G(6) or 168A(2) of the Ordinance.

(c) Subject to sections 49l to 49O of the Ordinance and Article 111A of these Articles, the Company may make an payment in respect of the redemption or purchase under section 49A or (as the case may be) section 49B of its own shares otherwise than out of its distributable profits or the proceeds of a fresh issue of shares.

(d) For purposes of Article 8(c), the Directors are, subject to Article 111A of these Articles, authorised to make statutory declarations or take such other steps as may be required by the Ordinance in relation to the redemption or purchase by the Company of its own shares out of capital.

9. Subject to the provision of these Articles, the Company shall not, except as required by law, be bound by a or required in any way to recognise any contingent, future, partial or equitable interest in any share or in an any fractional part of a share, or any other right in respect of any share, or any other claim to or in respect of any such shares on the part of any person (even when having notice thereof) except an absolute right to the entirety thereof in the registered holder.

10. The Company may in connection with the issue of any shares exercise all powers of paying interest out of capital and of paying commission and brokerage conferred or permitted by the Ordinance.

11. No person shall become a member until his name shall have been entered into the Register.

JOINT HOLDERS OF SHARES

12. Where two or more persons are registered as the holders of any share they shall be deemed to hold the same as joint tenants with benefit of survivorship, subject to the following provisions:-

(a) the Company shall not be bound to register more than three persons as the holders of any shares except in the case of the legal personal representative of a deceased member;

(b) the joint holders of any shares shall be liable severally as well as jointly in respect of all payments which ought to be made in respect of such shares;

(c) on the death of any one of such join holders the survivor or survivors shall be the only person or persons recognised by the Company as having any title to such shares, but Directors may require such evidence of death as they may deem fit;

(d) any one of such joint holders may give effectual receipts for any dividend, return of capital or other payment in the share; and

(e) the Company shall be at liberty to treat the person whose name stands first in the Register as one of the joint holders of any shares as solely entitled to delivery of the certificate relating to such shares, or to receive notices from the Company, and to attend and vote at general meetings of the Company, and any notice given to such person shall be deemed notice to all the joint holders; but any of such joint holders may be appointed the proxy of the persons entitled to vote on behalf of such joint holders, and as such proxy to attend and vote at general meetings of the Company, and if more than one of such joint holders be present at any meeting personally or by proxy that one so present whose name stands first in the Register in respect of such shares shall alone be entitled to vote in respect thereof.

SHARE CERTIFICATES

13. Every member shall, without payment, be entitled to receive within two months after allotment or lodgment of an instrument of transfer duly stamped, or within such other period as the conditions of issue may provide, a certificate for all his shares of any particular class, or several certificates, each for one or more of his shares, upon payment of such fee, not exceeding two dollars for every certificate after the first, as the Directors shall from time to time determine, provided that in the event of a member transferring part of the shares represented by a certificate in his name a new certificate in respect of the balance thereof shall be issued in his name without payment and, in the case of joint holders, the Company shall not be bound to issue more than one certificate for all the shares of any particular class registered in their joint names.

14. Every share certificate shall be issued under the Seal and shall specify the number and class of shares, and, if required, the distinctive members thereof comprised therein, the amount paid up thereon and, if appropriate, whether such shares carry no voting rights. No certificate shall be issued in respect of more than one class of shares. If there shall be more than one class of shares then each certificate of every class shall state thereon that the share capital is divided into different classes and the nominal value of the voting rights attaching to each class.

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15. If any share certificate shall be worn out, defaced, destroyed or lost, it may be renewed on such evidence being produced as the Directors shall require, and in case of wearing out or defacement, on delivery up of the old certificate, and in case of destruction or loss, on the execution of such indemnity (if any), as the Directors may from time to time require. In case of destruction or loss, the person to whom such renewed certificate is given shall also bear and pay to the Company all expenses incidental to the investigation by the Company of the evidence of such destruction or loss and of such indemnity.

CONVERSION RIGHTS OF

PREFERENCE SHARES

16. The holders of the Preference Shares shall have conversion rights as follows:

(a) Right to Convert Series A Preference Shares. Unless converted earlier pursuant to paragraph 16(c) below, each Series A Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series A Preference Shares, at any time after the Series A Original Issue Date shall be convertible into such number of fully paid and nonassessable Ordinary Shares as is determined by dividing US$0.232 (the “Series A Original Issue Price”) for each Series A Preference Share by the Series A Conversion Price (as defined below) in effect at the time of the conversion. The initial Series A Conversion Price shall be US$0.232 per Series A Preference Share. Such initial Series A Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series A Preference Shares provided in this paragraph 16(a) and paragraphs 16(d)-(f) are referred hereinafter as “Series A Conversion Rights”.

(b) Right to Convert Series B Preference Shares. Unless converted earlier pursuant to paragraph 16(e) below, each Series B Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series B Preference Shares, at any time after the Series B Preference Shares, at any time after the Series B Original Issue Date shall be convertible into such number of fully paid and nonassessable Ordinary Shares as is determined by dividing US$0.3309 (the “Series B Original Issue Price”) for each Series B Preference Share by the Series B Conversion Price (as defined below) in effect at the time of the conversion. The initial Series B Conversion Price shall be US$0.3309 per Series B Preference Share. Such initial Series B Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series B Preference. Shares provided in this paragraph 16(b) and paragraphs 16(d)-(f) are referred hereinafter as “Series B Conversion Rights”.

(c) Right to Convert Series C Preference Shares. Unless converted earlier pursuant to paragraph 16(e) below, each Series C Preference Share, at the option of its holder thereof, at the office of the Company or any transfer agent for the Series C Preference Shares, at any time after the Series C Original Issue Date shall be convertible into such number of fully paid and nonassessable Ordinary Shares as is determined by dividing US$1.531 (the “Series C Original Issue Price”) for each Series C Preference Share by the Series C Conversion Price (as defined below) in effect at the time of the conversion. The initial Series C Conversion Price shall be US$1.531 per Series C Preference Share. Such initial Series C Conversion Price shall be subject to adjustment as hereinafter provided. Rights of holders of Series C Preference Shares provided in this paragraph 16(c) and paragraphs 16(d)-(f) are referred hereinafter as “Series C Conversion Rights”.

(d) Adjustment to Series A Conversion Price, Series B Conversion Price and Series C Conversion Price. Initial Series A Conversion Price, initial Series B Conversion Price and initial Series C Conversion Price shall be subject to adjustment as hereinafter provided. Nothing in paragraph 16(a), (b) and (c) shall limit the automatic conversion rights of Preference Shares described in paragraph 16(e) below.

(e) Automatic Conversion. Each Preference Share shall automatically be converted into Ordinary Shares at the then applicable conversion price for such series of Preference Shares (each a “Conversion Price”), immediately upon (i) the closing of a firm commitment underwritten public offering of the Ordinary Shares on an internationally recognized stock exchange at a per-share price of no less than three (3) times the Series A Original Issue Price (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like); or (ii) the consent of the holders of a majority of the then outstanding Preference Shares.

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(f) Mechanics of Conversion. No fractional shares of Ordinary Shares shall be issued upon conversion of any Preference Shares. In lieu of any fractional share to which the holder would otherwise be entitled (after aggregating all shares into which the applicable series of Preference Shares held by the such holder could be converted), and Company shall pay cash equal in such fraction multiplied by the then fair market value of the Ordinary Shares, as determined by the Board. Before any holder of the Preference Shares shall be entitled to convert the same into full Ordinary Shares, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for such Preference Shares to be converted, and shall give written notice to the Company at such office that he elects to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Preference Shares, a certificate or certificates for the number of Ordinary Shares to which such holder shall be entitled, together with a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional Ordinary Shares. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Preference Shares to be converted, or in the case of conversion pursuant to Article 16(e)(i), on the effective date of the offering as provided in Article 16(e)(i) above, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Ordinary Shares on such date; provided, that if any such conversion is made in connection with any transaction that would, if completed, constitute a liquidation of the Company for purposes of Article 142 hereof, or in connection with any public offering of the Company’s securities, then such conversion may be made contingent upon, and effective only as of, the closing of such transaction or offering.

(g) Adjustments to Conversion Price for Diluting Issues.:

(i) Special Definitions. For purposes of this Article 16(g), the following definitions shall apply:

(1) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Ordinary Shares or Convertible Securities.

(2) “Convertible Securities” shall mean any evidences of indebtedness, shares (other than Series A Preference Shares, Series B Preference Shares, Series C Preference Shares or Ordinary Shares outstanding as at the Series C Original Issue Date) or other securities convertible into or exchangeable for Ordinary Shares.

(3) “Additional Ordinary Shares” shall mean all Ordinary Shares issued (or, pursuant to Article 16(g)(iii), deemed to be issued) by the Company after the Series C Original Issue Date, other than Ordinary Shares issued or issuable (or pursuant to Article 16(g)(iii), deemed to be issued).

(A) upon conversion of the Series A Preference Shares;

(B) upon conversion of the Series B Preference Shares;

(C) upon conversion of the Series C Preference Shares;

(D) to officers, directors or employees of, or consultants to, the Company pursuant to a share grant, option plan or purchase plan or other share incentive program or agreement approved by a majority of the Board;

(E) to any bank, equipment lessor, creditor, landlord, supplier or customer pursuant to a transaction that is for primarily non-financing purposes and approved by a majority of the Board; or

(F) pursuant to acquisitions, licenses, joint ventures or transactions with strategic partners which are for primarily non-financing purposes and approved by a majority of the Board.

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(ii) No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price of a Series A Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series A Conversion Price in effect on the date of, and immediately prior to such issue. No adjustment in the Series B Conversion Price of a Series B Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the Consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series B conversion Price in effect on the date of, and immediately prior to such issue. No adjustment in the Series C Conversion Price of a series C Preference Share shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the Series C Conversion Price in effect on the date of, and immediately prior to such issue.

(iii) Deemed Issue of Additional Ordinary Shares.

(1) Options and Convertible Securities. In the event, at any time or from time to time after the Series C Original Issue Date, the Company shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of Ordinary Shares issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Ordinary Shares issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Ordinary Shares shall not be deemed to have been issued unless the consideration per share (determined pursuant to Article 16(g)(v) hereof) of such Additional Ordinary Shares would be less than the Conversion Price in effect on the date of, and immediately prior to, such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Ordinary Shares are deemed to be issued:

(A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Ordinary Shares upon the exercise of such Options or conversion or exchange of such Convertible Securities; and

(B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company, or in the number of Ordinary Shares issuable (including a change resulting from the expiration of such Options or the rights of conversion or exchange of such Convertible Securities) upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such change becoming effective, be recomputed to reflect such change insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities.

(2) Share Dividends. In the event the Company at any time or from time to time after the Series C Original Issue Date shall declare or pay any dividend on the Ordinary Shares payable in Ordinary Shares, Options or Convertible Securities, Additional Ordinary Shares shall be deemed to have been issued immediately after the close of business on the record date for the determination of holders or any class of securities entitled to receive such dividend.

(iv) Adjustment of Conversion Price Upon Issuance of Additions Ordinary Shares. In the event the Company shall issue Additional Ordinary Shares (including Additional Ordinary Shares deemed to be issued pursuant to Article 16(g)(iii)) without consideration or for a consideration per share less than the Conversion Price in effect on the date of, and immediately prior, to such issue, then, and in such event, the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) equal to the amount of consideration per share received by the Company as a result of such issuance of Additional Ordinary Shares.

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(v) Determination of Consideration. For purposes of this Article 16(g), the consideration received by the Company for the issue of any Additional Ordinary Shares shall be computed as follows:

(1) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or accrued dividends, and provided further that no deduction shall be made for any reasonable and customary commissions or expenses paid or incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board provided that such fair market value shall not exceed the aggregate current market price of the Ordinary Shares being issued; and

(C) in the event Additional Ordinary Shares are issued together with other shares or securities or other assets of the Company for consideration which covers both, be computed as the portion of such consideration so received in respect of the Additional Ordinary Shares computed as provided in clauses (A) and (B) above, as determined in good faith by the Board.

(2) Options and Convertible Securities. The consideration per share received by the Company for Additional Ordinary Shares deemed to have been issued pursuant to Section 16(g)(iii), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of Ordinary Shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(3) Share Dividends. Any additional shares of Ordinary Shares deemed to have been issued relating to a share dividend shall be deemed to have been issued for no consideration.

(h) Adjustment for Share Splits and Combinations. Any adjustment under this Section 16(h) shall become effective at the close of business on the date the subdivision or combination becomes effective and are as follows:

(i) If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the Series A Conversion Price then in effect immediately before that subdivision shall be proportionately decreased: provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series A Preference Share as is undertaken with respect to the Ordinary Shares, then both the Series A Original issue Price and the Series A Conversion Price shall be proportionately decreased;

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(ii) Conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the Series A Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series A Preference Shares as is undertaken with respect to the Ordinary Shares, then both the Series A Original Issue Price and the Series A Conversion Price shall be proportionately increased;

(iii) If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the Series B Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series B Preference Share as is undertaken with respect to the Ordinary Shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately decreased; and

(iv) Conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the Series B Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series B Preference Shares as is undertaken with respect to the Ordinary Shares, then both the Series B Original Issue Price and the Series B Conversion Price shall be proportionately increased.

(v) If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the Series C Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; provided, however, that if the Company simultaneously effects the same subdivision of the outstanding Series C Preference Share as is undertaken with respect to the Ordinary Shares, then both the Series C Original Issue Price and the Series C Conversion Price shall be proportionately decreased; and

(iv) Conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the Series C Conversion Price then in effect immediately before the combination shall be proportionately increased; provided, however, that if the Company simultaneously effects the same combination of the outstanding Series C Preference Shares as is undertaken with respect to the Ordinary Shares, then both the Series C Original Issue Price and the Series C Conversion Price shall be proportionately increased.

(i) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time makes, or fixes, a record date for the determination of holders of Ordinary Shares entitled to receive, a dividend or other distribution payable in additional Ordinary Shares, then and in each such event:

(i) the Series A Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction (1) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such record date, and (2) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the mumber of Ordinary Shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this Article 16(i)(i) as of the time of actual payment of such dividends or distributions; and

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(ii) the Series B Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series B Conversion Price then in effect by a fraction (1) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of Ordinary shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series B Conversion Price shall be adjusted pursuant to this Article 16(i)(ii) as of the time of actual payment of such dividends or distributions.

(iii) the series C Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series C Conversion Price then in effect by a fraction (1) the numerator of which is the total number of Ordinary shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, and (2) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance on the close of business on such record date, plus the number of Ordinary Shares issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series C Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series C Conversion Price shall be adjusted pursuant to this Article 16(i)(ii) as of the time of actual payment of such dividends or distributions.

(j) Adjustments for Other Distributions. In the event the Company shall declare a distribution to holders of Ordinary Shares payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in Articles 16(h) and 16(i), then, in each such case for the purpose of this Article 16(j), the holders of the Preference Shares shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of Ordinary Shares of the Company into which their Preference Shares are convertible as of the holders of Ordinary Shares of the Company entitled to receive such distribution.

(k) Adjustments for Reclassification. If the Ordinary Shares issuable upon the conversion of the Preference Shares is changed into the same or a different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination or shares or a share dividend, as provided for elsewhere in this Article 16), then and in any such event each holder of Preference Shares shall have the right thereafter to convert such shares into the kind and amount of shares and other securities and property receivable upon such reclassification or other change, by holders of the number of Ordinary Shares into which such Preference Shares might have been converted immediately prior to such reclassification or change, all subject to further adjustment as provided herein.

(l) No Impairment. The Company will not, by amendment of its Articles of Association or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of these Articles and in the taking of all such action as may be necessary or appropriate in order to protect rights of the holders of Preference Shares against impairment.

(m) Certificate as to Adjustments. Upon the occurrence of each adjustment of readjustment of the Conversion Price pursuant to this Article 16, the Company at its expense shall promptly compute such adjustment or readjustment in accordane with the terms hereof and furnish to each holder of Preference Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of the Preference Shares, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price and the Original Issue Price of the time in effect, and (iii) the number of Ordinary Shares and the amount, if any, of other property which at the time would be received upon the conversion of the applicable Preference Shares.

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(n) Notices of Record Date. In the event that the Company shall propose at any time:

(i) to declare any dividend or distribution upon its Ordinary Shares, whether in cash, property, shares or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(ii) to offer for subscription pro rate to the holders of any class or series of its shares any additional shares of any class or series or other rights;

(iii) to effect any reclassification or recapitalization of its outstanding Ordinary Shares involving a change in the Ordinary Shares; or

(iv) to merge or consolidate with or into any other company, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up;

then, in connection with each such event, the Company shall send to the holders of the Preference Shares:

(1) at least twenty (20) days’ prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights and a description thereof (and specifying the date on which the holders of Ordinary Shares shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (iii) and (iv) above; and

(2) in the case of the matters referred to in (iii) and (iv) above, at least twenty (20) days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Ordinary Shares shall be entitled to exchange their Ordinary Shares for securities or other property deliverable upon the occurrence of such event).

Each such written notice shall be given by first class mail, postage prepaid, addressed to the holders of Preference Shares at the address for each such holder as shown on the books of the Company.

(o) Reservation of Shares Issuable. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares, solely for the purpose of effecting the conversion of the Preference Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preference Shares: and if at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then outstanding Preference Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Ordinary Shares to such number of shares as shall be sufficient for such purpose.

CALL ON SHARES

17.    (a) The Directors may from time to time make calls upon the members in respect of all monies unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) but subject always to the terms of issue of such shares, and any such call may be made payable by instalments.

(b) Each member shall, subject to receiving at least fourteen days notice specifying the time or times and place for payment, pay to the Company the amount called on his shares and at the time or times and place so specified. The non-receipt of a notice of any call by, or the accidental omission to give notice of a call to, any of the members shall not invalidate the call.

18. A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. A call may be revoked, varied or postponed as the Directors may determine.

19. If any part of a sum called in respect of any shares or any instalment of a call be not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall be liable to pay interest on the outstanding part thereof at such rate as the Directors shall determine from the day appointed for the payment of such call or instalment to the time of discharge thereof in full; but the Directors may, if they shall think fit, waive the payment of such interest or any part thereof.

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20. If, by the terms of the issue of any shares or otherwise, any amount is made payable upon allotment or at any fixed time, whether on account of the nominal amount of the shares or by way of premium, every such amount shall be payable as if it were a call duly made and payable on the date on which by the terms of the issue the same becomes payable; and all the provisions thereof with respect to the payment of calls and interest thereon, or to the forfeiture of shares, for non-payment of calls, shall apply to every such amount and the shares in respect of which it is payable in the case of non-payment thereof.

21. The Directors may, if they shall think fit, receive from any member willing to advance the same all or any part of the monies uncalled and unpaid upon any shares held by him; and upon all or any of the monies so paid in advance the Directors may (until the same would, but for such payment in advance, become presently payable) pay interest at such rate as may be agreed upon between the member paying the monies in advance and the Directors. The Directors may also at any time repay the amount so advanced upon giving to such member one month’s notice in writing.

22. On the trial or hearing of any action for the recovery of any money due for any call, it shall be sufficient to prove that the name of the member sued is entered in the Register as the holder, or one of the holders, of the shares in respect of which such debt accrued; that the resolution making the call is duly recorded in the Minute Book; and that notice of such call was duly given to the member sued in pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

23. No member shall, unless the Directors otherwise determine, be entitled to receive any dividend, or, subject to the Ordinance, to receive notice of or to be present or vote at any general meeting, either personally or (save as proxy for another member) by proxy, or to exercise any privileges as a member, or be reckoned in a quorum, until be shall have paid all calls or other sums for the time being due and payable on every share held by him, whether alone or jointly with any other person, together with interest and expenses (if any).

FORFEITURE

24. If any member fails to pay in full any call or instalment of a call on the day appointed for payment thereof, the Directors may at any time thereafter, during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring him to pay so much of the call or instalment as is unpaid together with interest accrued and any expenses incurred by reason of such non-payment.

25. The notice shall name a further day (not being less than fourteen days from the date of the notice) on or before which such call or instalment or part thereof and all interest accrued and expenses incurred by reason of such non-payment are to be paid, and it shall also name the place where payment is to be made, such place being either the Office, or some other place at which calls of the Company are usually made payable. The notice shall also state that, in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call or instalment is payable will be liable to be forfeited.

26. If the requirements of any such notice as aforesaid be not complied with, any shares in respect of which such notice has been given may, at any time thereafter before the payment required by the notice had been made, be forfeited by a resolution of the Directors to than effect, and any such forfeiture shall extend to all dividends declared in respect of the shares so forfeited but not actually paid before such forfeiture. The Directors may accept the surrender of any shares liable to be forfeited hereunder and in such case references in these Articles to forfeiture shall include surrender.

27. Any shares so forfeited shall be deemed for the purposes of this Article to be the property of the Company, and may be sold, re-allotted or otherwise disposed of either subject to or discharged from all calls made or instalments due prior to the forfeiture, to any person, upon such terms and in such manner and at such time or times as the Directors think fit. For the purpose of giving effect to any such sale or other disposition the Directors may authorise some person to transfer the shares so sold or otherwise disposed of to the purchaser thereof or any other person becoming entitled thereto.

28. The Directors may, at any time before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit.

29. Any person whose shares have been forfeited shall thereupon cease to be the holder of any such shares but shall notwithstanding be and remain liable to pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon form the time of forfeiture until payment at such rate as the Directors shall think fit and without any deduction or allowance for the value of the shares at the time of forfeiture, and the Directors may enforce the payment of such monies or any part thereof and may waive payment of such interest wholly or in part.

30. When any shares have been forfeited an entry shall be made in the Register recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of an entry shall also be made of the manner and date of the sale or disposal thereof.

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LIEN

31. The Company shall have a first and paramount lien on every share for all monies outstanding in respect of such share, whether presently payable or not, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the same shall have fallen due for payment or not, and notwithstanding that the same are joint debts or liabilities of such member or his estate and any other person, whether a member or not. The Directors may at any time either generally or in any particular case waive any lien that has arisen, or declare any share to be wholly or in part exempt from the provisions of this Article.

32. The Company may sell in such manner as the Directors think fit any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of intention to sell in default shall have been given to the holder for the time being of the share or the person entitled thereto by reason of his death, bankruptcy or winding up or otherwise by operation of law or court order.

33. The net proceeds of such sale after payment of the costs of such sale shall be applied in or towards payment or satisfaction of the debts or liabilities in respect whereof the lien existed so far as the same are presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the time of the sale. For giving effect to any such sale the Directors may authorise some person to transfer the shares so sold to the purchaser thereof.

34. A statutory declaration in writing that the declarant is a Director or the Secretary of the Company and that a share has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. Such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof together with the shares certificate delivered to a purchaser or allottee thereof shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, surrender, sale, reallotment or disposal of the share.

TRANSFER OF SHARES

35. The instrument of transfer of any shares in the Company shall be in writing and shall be executed by or on behalf of the transferor and by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register in respect thereof.

36. Every instrument of transfer shall be lodged at the Office for registration accompanied by the certificate relating to the shares to be transferred and such other evidence as the Directors may require in relation thereto. All instruments of transfer which shall be registered shall be retained by the Company but, save where fraud is suspected, any instrument of transfer which the Directors may decline to register shall, on demand, be returned to the person depositing the same.

37. There shall be paid to the Company in respect of the registration of a transfer and of any Grant of Probate or Letters of Administration, Certificate of Marriage or Death. Power of Attorney or other document relating to or affecting the title to any share or the making of any entry in the Register affecting the title to any share such fee (if any) as the Directors may from time to time require or prescribe.

38. The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine and either generally or in respect of any class of shares provided always that such registration shall not be suspended for more than 30 days in any year.

39.    (a) The Directors may at any time in their absolute discretion and without assigning any reason therefor, decline to register any transfer of any share whether or not it is a fully paid share.

(b) The Directors may also decline to register any transfer unless:-

(i) The instrument of transfer is in respect of only one class of shares;

(ii) in the case of a transfer to joint holders, the number of joint holders to whom the shares are to be transferred does not exceed three; and

(iii) the shares concerned are free of any lien in favour of the Company.

(c) If the Directors refuse to register a transfer they shall, within two months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.

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TRANSMISSION OF SHARES

40. In case of the death of a member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the Company as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.

41.    (a) Any person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such evidence being produced as may , upon such evidence being produced as may from time to time properly be required by the Directors and , subject as hereinafter provided elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof, but the directors shall in either case have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that number before his death or bankruptcy, as the case may be.

         (b) If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall execute a transfer of the share in favour of that person. All the limitations restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by the member.

42. A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share except that he shall not before being registered as a member in respect of the share be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.

PROVIDED always that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within 90 days the Directors may thereafter withhold payment of all dividends or other monies payable in respect of the share until the requirements of the notice have been complied with.

43. Any person to whom the right to any shares in the company has been transmitted by operation of law shall if the Directors refuse to register the transfer be entitled to call on the Directors to furnish within 28 days a statement of the reasons for the refusal.

STOCK

44. The Company may from time to time by ordinary resolution convert any fully paid up shares into stock and may reconvert any stock into fully paid up shares of any denomination. After the passing of any resolution converting all the fully paid up shares of any class in the capital of the Company into stock, any shares of that class which subsequently become fully paid up and rank pari passu in all other respects with such shares shall , by virtue of this Article and such resolution be converted into stock transferable in the same units as the shares already converted.

45. The holders of stock may transfer the same or any part thereof in the same manner and subject to the some regulations as the shares from which the stock arose might prior to conversion have been transferred or as near thereto as circumstances admit . The Directors may from time to time fix the minimum amount of the stock transferable and restrict or forbid the transfer of fractions of such minimum, but the minimum shall not, without the sanction of an ordinary resolution of the Company, exceed the nominal amount of each of the shares from which the stock arose.

46. The holders of stock shall , according to the amount of the stock held by them have the same rights as regards dividends , voting at general meeting of the Company and other matters as if they held the shares from which the stock arose, but no such right (except as to participation in dividends and profits of the Company and in assets on a reduction of the capital or a winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such right.

47. Such of these Articles as are applicable to fully paid up shares shall apply mutatis mutandis to stock and the words “share” and “shareholder” therein shall include “stock” and “stockholder”.

INCREASE OF CAPITAL

48. Subject to Articles 61A and 61B of these Articles, the Company may, from time to time, by ordinary resolution increase its authorised capital by such sum divided into shares of such amounts as the resolution shall prescribe.

49. Subject to Articles 61A and 61B of these Articles. Without prejudice to any special rights, privileges or restrictions for the time being attaching to any class of shares then existing in the capital of the Company, any new shares created pursuant to Article 48 may be issued upon such terms and conditions, and with such rights, privileges and restrictions attached thereto as the general meeting resolving upon the creation thereof shall director, if no such direction be given, as the Directors shall determine, and in particular such shares may be issued with a preferential, qualified or deferred right to dividends and in the distribution of assets of the Company, and with a special, or without any, right or voting.

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50. The general meeting resolving upon the creation of any new shares may direct that the same or any of them shall be offered in the first instance, and either at par or at a premium or (subject to the provisions of the Ordinance) at a discount, to all the holders for the time being of any class of shares in the capital of the Company in proportion to the number of shares of such class held by them respectively, or make any other provisions as to the issue and allotment of the new shares.

51. Subject to any direction or determination that may be given or made in accordance with the powers contained in these Articles all new shares created pursuant to Article 48 shall be subject to the same provisions herein contained with reference to the payment of calls, transfer, transmission, forfeiture, lien and otherwise as the shares in the capital of the Company existing at the date of creation of such new shares.

ALTERATIONS OF SHARE CAPITAL

52. Subject to Articles 61A and 61B of these Articles, the Company may by ordinary resolution;-

(a) subdivide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association of the Company, provided that in the subdivision of an existing share the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived, and so that the resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such subdivision one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any such restrictions as the Company has power to attach to unissued or new shares;

(b) consolidate and divide its capital or any part thereof into shares of larger amount than its existing shares; or

(c) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its authorised capital by the amount of the shares so cancelled.

53. Subject to Articles 61A and 61B of these Articles, the Company may by special resolution reduce its share capital and any capital redemption reserve fund or any share premium account in any manner allowed by law.

54. Where any difficulty arises in regard to any consolidation and division under paragraph (b) of Article 52. the Directors may settle the same as they think expedient and in particular may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the members who would have been entitled to the fractions, and for this purpose the Directors may authorise some person to transfer the share representing fractions to the purchaser thereof. Who shall not be bound to see to the application of the purchase money not shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

MODIFICATION OF RIGHTS

55	(a)	Subject to Articles 61A and 61B of these Articles, all or any of the rights attached to the Series A Preference Shares, the Series B Preference Share or the Series C Preference Shares may, at any time, as well as before as during liquidation, be altered or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of the applicable series of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the applicable series of the class, and all the provisions contained in these Articles relating to general meetings shall mutatis mutandis apply to every such meeting, but so that the quorum thereof shall be at least one person personally present and holding or representing by proxy a majority in nominal value of the issued shares of the applicable series of the class, and that any holder of shares of the applicable series of the class present in person or by proxy may demand a poll, and that each holder of shares of the applicable series of the class present in person or by proxy shall on R poll be entitlThe foregoing provisions of this Article shall apply to the variation or abrogation of the rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class, the rights whereof are to be varied. ed to one vote for each share of the applicable series of the class held by him.
	(b)	The foregoing provisions of this Article shall apply to the variation or abrogation of the rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class, the rights whereof are to be varied.

56. The special rights conferred upon the holders of any shares of such 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 altered by the creation or issue of further shares ranking pari passu therewith.

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GENERAL MEETINGS

57.        (a) The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting in that year, and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall clapse between the date of one annual general meeting

of the Company and that of the next. PROVIDED that so long as the Company holds its first annual general meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year. The annual general meeting shall be held at such time and place as the Directors shall appoint.

(b) All other general meetings shall be called extraordinary general meetings.

58. The Directors may, whenever they think fit, and shall, on requisition by Members in accordance with the Ordinance, proceed to convene an extraordinary general meeting. The provisions of the Ordinance shall apply to any requisition and to any failure by the Directors to convene an extraordinary general meeting when so requisitioned.

NOTICE OF GENERAL MEETINGS

59. An annual general meeting and a meeting called for the passing of a special resolution shall be called by 21 days notice in writing at the least, and a meeting of the Company other than an annual general meeting or a meeting for the passing of a special resolution shall be called by fourteen days notice in writing at the least. The notice shall specify the place, the day and the hour of meeting and, in case of special business, the general nature of that business, and shall be given in manner hereinafter mentioned of in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are, under the Articles of the Company, entitled to receive such notices from the Company:

PROVIDED that a meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in this Article, be deemed to have been duly called if it is so agreed:-

(a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right.

60. The accidental omission to give notice of a meeting or (in cases where an instrument of proxy is sent out with the notice) the accidental omission to send such instrument of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meetings.

PROCEEDINGS AT GENERAL MEETINGS

61. Subject to Article 111A of these Articles, 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 with the exception of:-

(a) the declaration and sanction of dividends;

(b) the consideration of the accounts and balance sheets and the reports of the Directors and other documents required to be annexed to the accounts;

(c) the election of Directors in place of those retiring (if any);

(d) the appointment of the Auditors of the Company and the fixing of, or the determination of the method of fixing, the remuneration of the Auditors.

61A. No resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board, concerning any of the following matters with respect to the Company, Home Inns Beijing, Home Inns Shanghai a Relevant Subsidiary without the affirmative vote or consent recorded in writting of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company, and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of Home Inns Beijing, Home Inns Shanghai or a Relevant Subsidiary concerning any of the following matters without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80)% of the outstanding voting shares of the Company:

(i) the creation or adoption of any employee stock option plan;

(ii) any consolidation, subdivision, conversion, increase or reduction of the share capital of each of the Company, Home Inns Beijing, Home Inns Shanghai or the alteration of any rights attaching thereto in any way;

(iii) any change to the Memorandum or Articles of Association, the Charter Documents, or the memorandum or articles of association (or other similar charter documents) the would directly or indirectly affect adversely the preference, rights or privileges of the holders of Preference Shares;

(iv) the acquisition of, or the provision of any direct or indirect financial assistance for the purpose of acquiring: (A) in the ordinary course of business and on an arm’s length basis, any (i) securities, or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$1,000,000 or (B) otherwise than in the ordinary course of business, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$400,00;

(v) the consolidation or merger which results in the shareholders immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity.

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61B. For so long as at least 25% of the Series C Preference Shares issued and outstanding as at the Series C Original Issue Date shall remain outstanding, the Company shall not, and the Company shall procure that Home Inns Beijing, Home Inns Shanghai and the Relevant Subsidiary (each a “Group Company”) shall not, and each of the members undertakes to the other members that it shall exercise all its powers in relation to the Company and its subsidiaries so as to procure that, subject to any applicable law, that a Group Company shall not, without the approval of the holders of at least two-thirds of the Series C Preference Shares then outstanding voting as a separate class, take or permit any action that:

(i) increase or decreases, whether by merger, reclassification or otherwise, the authorized Series C Preference Shares or effect any combination, split, or reclassification of the outstanding Series C Preference Shares into a smaller or larger number of shares or exchange or convert any Series C Preference Shares or require the exchange or conversion of any Series C Preference Shares, except as provided in these Articles:

(ii) amends, alters or repeals, whether by merger, reclassification or otherwise, any provision of these Articles that alters or adversely affects the rights, preferences, conversion and other rights, voting powers or privileges of the Series C Preference Shares;

(iii) authorizes (whether by merger, reorganization, reclassification or otherwise) or issues any shares of capital stock that rank senior to,or on partly with, the Series C Preference Shares as to dividends, distributions or liquidation preference (“Series C Senior Shares”);

(iv) adopts any new stock option or other stock incentive plan or arrangement, increase the number of shares available for grant or issuance under any existing stock option or other stock incentive plan (collectively the “Option Plans”), or make any other material amendment to any such plan or arrangement; provided, however, that the Company may contemporareously with the Series C Original Issue Date increase the aggregate number of Ordinary Shares available for grant or issuance under its Option Plans to 5% of the enlarged issued share capital of the Company as of the Series C Original Issue Date.

(v) redeems, or declares, set aside or pays a dividend on, the Ordinary Shares or any other class of Preference Shares of the Company. Home Inns Beijing or Home Inns Shanghai (as the case may be) or repurchased any outstanding securities of the Company. Home Inns Beijing or Home Inns Shanghai (as the case may be):

(vi) increases the authorized number of directors of the Board;

(vii) affects a voluntary liquidation, dissolution or winding up of a Group Company;

(viii) affects any consolidation, reorganization or merger of a Group Company with or into any other corporation or entity;

(ix) will result to a sale, license or disposition of all or substantially all of the assets (or of any material portion of the assets) of a Group Company or exclusively licenses all or substantially all of its property or business to a single entity or a group of entities, in any case in a single transaction or a series of transactions;

(x) acquires any entity, business or assets by means of merger, consolidation, recapitalization, purchase of assets or otherwise, involving the issuance of consideration by a Group Company having a fair market value individually or in the aggregate in excess of US$5,000,000.00; or

(xi) effects a change in the primary nature of the Company’s business.

62. Subject to Articles 61A and 61B of these Articles, no business, have the election of a Chairman of the meeting, shall be transacted at any general meeting, unless a quorum is present when the meeting proceeds to business. Two members present in person or by proxy and holding between them at least 51 per centum in nominal value of the issued shares of the Company for the time being shall be a quorum for all purposes.

63. The Chairman (if any) of the Board or, in his absence, a Deputy Chairman (if any) shall preside as Chairman at every general meeting. If there is no such Chairman or Deputy Chairman, or if at any meeting neither the Chairman nor a Deputy Chairman is present within fifteen minutes after the time appointed for holding the meeting, or if neither of them is willing to act as Chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside as Chairman if willing to act. If no Director is present, or if each of the Directors present declines to act as Chairman, the persons present and entitled to vote shall elect one of their number to be Chairman of the meeting.

64. If within fifteen minutes from the time appointed for the meeting a quorum be not present, the meeting if convened upon a requisition as specified in Article 58, shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day, time and place as the Chairman of the meeting may determine. If as such adjourned meeting a quorum be not present within fifteen minutes from the time appointed for the meeting, the members present in person or by proxy shall be a quorum.

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65. The Chairman of any general meeting at which a quorum is present may, with the consent of the meeting, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place or sine die; but no business shall be transacted at any adjourned meeting other than business which might have been transacted at the meeting from which the adjournment took place, unless due notice thereof is given or such notice is waived in the manner prescribed by these Articles. When a meeting is adjourned for 30 days or more, or sine die, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjourned meeting or the business to be transacted thereat. Where a meeting is adjourned sine die the time and place for the adjourned meeting shall be fixed by the Directors.

66. Subject to the provisions of the Ordinance, a resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at general meetings (or, being corporations, by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. A written notice of confirmation of such resolution in writing sent by or on behalf of a member shall be deemed to be his signature to such resolution in writing for the purposes of this Article. Such resolution in writing may consist of several documents, and each such document shall be certified by the Secretary to contain the correct version of the proposed resolution.

VOTING

67.    (a) At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless, before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll, a poll is demanded by:-

(i) the Chairman of the meeting; or

(ii) at least two members present in person or by proxy and entitled to vote; or

(iii) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or

(iv) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

(b) Unless a poll is so demanded and the demand, is not withdrawn, a declaration by the Chairman that a resolution has, on a show of hands, been carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive evidence of the fact without proof of the number of the votes recorded for or against such resolution.

(c) The holders of Preference Shares shall be entitled to vote together with the holders of the Ordinary Shares as a single class in a shareholders’ meeting. The holders of Preference Shares shall be entitled to such number of votes in a shareholders’ meeting as would be granted to such holders had they fully converted all of their Preference Shares held by them, at that point in time, into Ordinary Shares as provided herein. The holders of Preference Shares shall be entitled to notice of any shareholders’ meetings in accordance with these Articles.

68. A demand for a poll may be withdrawn only with the approval of the meeting. If a poll be directed or demanded in the manner above mentioned it shall (subject to the provisions of Article 69 hereof) be taken at such time (being not later than seven days after the date of the demand) and in such manner as the Chairman of the meeting may appoint. No notice need be given of a poll not taken immediately. The result of such poll shall be deemed for all purposes to be the resolution of the meeting at which the poll was so directed or demanded.

69. In the case of an equality of votes at any general meeting, whether upon a show of hands or on a poll, the Chairman of the meeting shall be entitled to a second or casting vote.

70. A poll demanded upon the election of a Chairman or upon a question of adjournment shall be taken forthwith. Any business, other than that upon which a poll has been demanded, may be proceeded with pending the taking of the poll.

71.    (a) No objection shall be made to the validity of any vote except at a meeting or poll at which such vote shall be tendered and every vote whether given personally or by proxy not disallowed at such meeting or poll shall be deemed valid for all purposes whatsoever of such meeting or poll.

(b) In case of any dispute as to voting the Chairman shall determine the same and such determination shall be final and conclusive.

72. Subject to any special rights or restrictions for the time being attaching to any special class of shares in the capital of the Company, on a show of hands every member who is present in person or by proxy or by attorney shall be entitled to one vote only, and, in the case of a poll, every member present in person or by proxy or by attorney shall be entitled to one vote for each share held by him on an as-converted-to-Ordinary-Share basis.

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73. On a poll, votes may be given either personally or by proxy and a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

74. A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, curator bonis or other person in the nature of a committee or curator bonis appointed by that court, and any such committee, curator bonis or other person may, on a poll, vote by proxy. If any member be a minor, he may vote by his guardian or one of his guardians who may give their votes personally or by proxy.

PROXIES

75.    (a) A proxy need not be a member of the Company.

(b) An instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may accept, and shall be deemed, save where the contrary appears on the face of the instrument of proxy, to confer authority to demand or concur in demanding a poll and to include power to act generally at the meeting for the person giving the proxy and any adjournment thereof, and either to vote on any resolution (or amendment thereto) put to the meeting for which it is given as the proxy thinks fit. No instrument appointing a proxy shall be valid except for the meeting mentioned therein and any adjournment thereof.

76. The instrument appointing a proxy shall be signed by the appointor, or his duly authorised attorney in writing or, if such appointor be a corporation, under its common seal or signed by such officer, attorney or other person duly authorised in that behalf.

77. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be deposited at the Office at least 48 hours before the time fixed for holding the meeting at which the person named in such instrument proposes to vote or, in the case of a poll, not less than 24 hours before the time appointed for taking the poll; otherwise the person so named shall not be entitled to vote in respect thereof except with the approval of the Chairman of the meeting.

78. Any member may by power of attorney appoint any person to be his attorney for the purpose of voting at any meeting, and such power may be a special power limited to any particular meeting or a general power extending to all meetings at which such member is entitled to vote. Every such power shall be deposited at the Office at least 48 hours before being acted upon.

79.    (a) An instrument of proxy may be revoked by forwarding to the Office written notification of such revocation signed by or on behalf of the person who issued or authorised the issue of the instrument of proxy.

(b) A vote given in accordance with the terms of an instrument of proxy or power of attorney shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the proxy or power of attorney, or transfer of the shares in respect of which the vote is given, provided that no intimation in writing of the death, insanity, revocation or transfer shall have been received at the Office 24 hours at least before the time fixed for holding the meeting, or adjourned meeting, or the taking of the poll, at which the instrument of proxy is to be used.

CORPORATIONS ACTING BY

REPRESENTATIVES

80. Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company.

DIRECTORS

81. The first Directors shall be appointed in writing by the subscribers to the Memorandum of Association of the Company or by the Company in general meeting.

82. The number of Directors shall be eight (8).

83. A Director need not hold any shares in the Company. A Director who is not a member of the Company shall nevertheless be entitled to attend and speak at general meetings.

DIRECTORS’ REMUNERATION

84. The remuneration of the Directors shall from time to time be determined by the Company in general meeting. Such remuneration shall be deemed to accrue from day to day. The Directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company.

POWERS OF DIRECTORS

85. The business of the Company shall be managed by the Directors, who shall pay all expenses incurred in the formation and registration of the Company, and who may exercise all such powers of the Company as are not by the Ordinance or by these Articles required to be exercised by the Company in general meeting, subject to any provision in these Articles or the Ordinance and to such regulations, not being inconsistent with any such provision, as may be prescribed by the Company in general meeting; but no such regulation shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article.

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86. The Directors may establish any local boards or agencies for managing any of the affairs of the Company, either in Hong Kong or elsewhere, and may appoint any persons to be members of such local boards, or any managers or agents for the Company, and may fix their remuneration, and may delegate to any local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with power to sub-delegate, and may authorise the members of any local boards, or any of them, to fill any vacancies therein, and to act notwithstanding vacancies, and any such appointment and delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed, and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

87. The Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or person or any fluctuating body of persons, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

88. Subject to and to the extent permitted by the Ordinance, the Company, or the Directors on behalf of the Company, may cause to be kept in any territory a Branch Register of members resident in such territory, and the Directors may make and vary such regulations as they may think fit respecting the keeping of any such Branch Register.

89. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments, and all receipts for monies paid to the Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

90. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures including, subject to Section 57B of the Ordinance, convertible debentures and convertible debenture stock, and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

APPOINTMENT AND REMOVAL

OF DIRECTORS

91. The Company may by special resolution remove any Director not withstanding anything in these Articles or in any agreement between him and the Company (but without prejudice to any right to damages for termination of such agreement not in accordance with the terms thereof), and may, if thought fit, by ordinary resolution, appoint another person in his stead.

92. The Company may, without prejudice to the powers of the Directors under Article 93, from time to time, by ordinary resolution appoint new Directors to fill a casual vacancy and, subject to Article 61A of these Articles, change the number of Directors specified in Article 82.

93. The Directors shall have power, exercisable at any time and from time to time, to appoint any other person as a Director to fill a casual vacancy.

94. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as the number of Directors is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. If there shall be no Directors able or willing to act, then any member may summon a general meeting for the purpose of appointing Directors.

ALTERNATE DIRECTORS

95. Each Director may by written notification to the Company nominate any other person to act as alternate Director in his place and, at his discretion, in similar manner remove such alternate Director. A Director may appoint two or more persons in the alternative to act as Alternate Director and in the event of any dispute as to who is to represent the Director as his Alternate the first named of such alternative persons shall be the only person recognised as the Alternate Director and shall in any case, if in Hong Kong, be the only person entitled to receive notice of Directors’ meetings in the absence from Hong Kong of his appointer. The alternate Director shall (except as regards the power to appoint an alternate) be subject in all respects to the terms and conditions existing with reference to the other Directors of the Company; and each alternate Director, whilst acting as such, shall exercise and discharge all the functions, powers and duties of the Director he represents, but shall look to such Director solely for his remuneration as alternate Director. Every person acting as an alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). The signature of an alternate Director to any resolution in writing of the Board or a committee of the Board shall, unless the notice of his appointment provides to the contrary, be as effective as the signature of his appointor. Any person appointed as an alternate Director shall vacate his office as such alternate Director as and when the Director by whom he has been appointed removes him or vacates office as Director. A Director shall not be liable for the acts or defaults of any alternate Director appointed by him.

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DISQUALIFICATION OF DIRECTORS

96. The office of a Director shall ipso facto be vacated:-

(a) if he becomes prohibited by law or court order from being a Director;

(b) if a receiving order or, in the case of a company, a winding up order is made against him or he makes any arrangement or composition with his creditors;

(c) if he becomes of unsound mind;

(d) if he gives the Company notice in writing that he resigns his office;

(e) if he is removed by a special resolution of the Company in accordance with the provisions of these Articles;

(f) if he is convicted of an arrestable offence.

DIRECTORS’ INTERESTS

97. A Director may hold any other office or place of profit under the Company (other than the office of Auditor), and he or any firm of which he is a member may act in a professional capacity for the Company in conjunction with his office of Director, for such period and on such terms (as to remuneration and otherwise) as the Directors may determine. No Director or intending Director shall be disqualified by his office from contracting with the Company, nor shall any contract or arrangement entered into by or on behalf of the Company in which any Director or intending Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit, remuneration or other benefits of such Director holding that office, or of any fiduciary relationship thereby established.

98. A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract (being a contract of significance in relation to the Company’s business) with the Company shall declare the nature of his interest in accordance with the provisions of the Ordinance. A general notice given to the Directors by a Director to the effect that he is a member of a specified company or firm, and is to be regarded as interested in any contract, arrangement or dealing which may, after the date of the notice, be entered into or made with that company or firm, shall, for the purposes of this Article, be deemed to be a sufficient disclosure of interest in relation to any contract, arrangement or dealing so entered into or made.

99. A Director may vote as a Director in regard to any contract or arrangement in which he is interested or upon any matter arising thereout, and if he shall so vote his vote shall be counted and he shall be taken into account in determining a quorum when any such contract or arrangement is under consideration.

100. A Director may hold office as a Director in or as manager of any other company in which the Company is a shareholder or is otherwise interested, and (subject to any agreement with the Company to the contrary) shall not be liable to account to the Company for any remuneration or other benefits receivable by him from such other company. The Board may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Board thinks fit (including the exercise thereof in favour of any resolution appointing the Directors or any of the Directors of such company or voting or providing for the payment of remuneration to the Directors of such company) and any Director of the Company may vote in favour of the exercise of such voting rights other than his own appointment or the arrangement of the terms thereof, in manner aforesaid.

MANAGING DIRECTORS AND

OTHER APPOINTMENTS

101. The Directors may, from time to time, appoint one or more of their number to be Managing Director or Joint Managing Director of the Company, or to hold such office in the management, administration or conduct of the business of the Company as they may decide, and for such period and upon such terms and for such remuneration as the Directors shall think fit, and the Directors may also, from time to time (subject to the provisions of any agreement between him or them and the Company) remove him or them from office, and appoint another or others in his or their place or places.

102. A Managing Director or a Joint Managing Director (subject to the provisions of any agreement between him as Managing Director or a Joint Managing Director and the Company) shall be subject to the same provisions as to resignation and removal as the other Directors of the Company, and shall ipso facto and immediately cease to be Managing Director or Joint Managing Director if he shall cease to hold the office of Director.

103. The Directors may, from time to time, entrust to and confer upon any Managing Director, Joint Managing Director or Director holding any other office in the management, administration or conduct of the business of the Company, such of the powers exercisable under these Articles by the Directors, as they may think fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions and with such restrictions as they may consider expedient, and may confer such powers collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

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PROCEEDINGS OF DIRECTORS

104. The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business. Unless otherwise determined by the Board or as otherwise provided in those Articles, three Directors shall constitute a quorum. Subject to Article 111A of these Articles, questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the Chairman of the meeting shall have a second or casting vote. A Director or the Secretary may, at any time, summon a meeting of the Directors.

105. Notice of a meeting of Directors shall be deemed to be duly given to a Director if it is given to him personally in writing or by word of mouth or sent to him at his last known address or any other address given by him to the Company for this purpose. A Director may consent to short notice of and may waive notice of any meeting and any such waiver may be retrospective.

106. The Directors may elect a Chairman of the Board and determine the period for which he is to hold office; but if no such Chairman be elected, or if at any meeting the Chairman be not present within fifteen minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting

107.	(a)		Subject to Article 111A of these Articles, a resolution in writing signed by a simple majority of the Directors for the time being shall be as effective for all purposes as a resolution of the Directors passed at a meeting duly convened, held and constituted. A written notification of confirmation of such resolution in writing sent by a director shall be deemed to be his signature to such resolution in writing for the purposes of this Article. Such resolution in writing may consist of several documents, each signed by one or more Directors.
	(b	)	Any Director or member of a committee of Directors may participate in a meeting of the Directors or such committee by means of telephone or other audio communications equipment whereby all persons attending or participating in the meeting can hear each other. The person or persons participating in the meeting in the aforesaid manner shall be deemed for all purposes to be present in person at much meeting.

108. Unless otherwise provided in these Articles, a meeting of the Directors at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Directors generally.

109. The Directors may, from time to time, appoint committees consisting of such persons as they think fit, and may delegate any of their powers to any such committee and, from time to time, revoke any such delegation and discharge any such committee wholly or in part. Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may, from time to time, be imposed upon it by the Directors. Any such committee shall be properly constituted even if it consists of one person.

110. The meetings and proceedings of any such committee consisting of two or more members shall be governed mutatis mutandis by the provisions of those Articles regulating the meetings and proceedings of the Directors insofar as the same are not superseded by any regulations made by the Directors under the last preceding Article.

111. All acts done bona fide by any meeting of the Directors or of a committee of Directors, of by any persons acting as Directors, shall, notwithstanding that there was some defect in the appointment of any such Directors or persons acting as aforesaid, or that they or any of them were disqualified, or had vacated office, be as valid as if every such person had been duly appointed and was qualified and continued to be a Director.

111A. No resolution shall be passed or other decision or action taken by or on behalf of the company, or the Board, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of Home Inns Beijing, Home Inns Shanghai or the Relevant Subsidiary concerning any of the following matters with respect to Home Inns Beijing, Home Inns Shanghai or the Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board:

(i) the entering into of any contract or transaction outside the ordinary course of its business, in excess of US$200,000;

(ii) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in favor of any person other than a Group Company;

(iii) any significant change to the business to areas materially different from the current products and/or services offered;

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(iv) declare, make, or pay any distribution of capital, income, and/or dividends to the member of the Company. Home Inns Beijing or Home Inns Shanghai as applicable;

(v) repurchase or cancel any capital stock of the Company, Home Inns Beijing or Home Inns Shanghai;

(vi) enter into any material transaction with any member of the Board, officer, employee, or member of the Company or any company controlled, directly or indirectly, by a member of the Board, officer, employee or member of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(vii) the appointment of or change in the auditor of the Company, unless such auditor is a “Big 4” accounting firm; and

(viii) the sale, transfer, lease, assignment or other disposal of a material part of the its undertaking-property and/or assets with a book value (as reflected in its respective financial statements) in excess of US$400,000 or the entering into of any contract to do so.

MINUTES

112. The Directors shall cause to be entered and kept in books provided for the purpose minutes of the following:-

(a) all appointments of officers;

(b) the names of the Directors and any alternate Director who is not also a Director present at each meeting of the Directors and of any committee of Directors;

(c) all orders made by the Directors and committees of Directors; and

(d) all resolutions and proceedings of general meetings and meetings of the Directors and committees.

Any such minutes of any meeting of the Directors, or any committee, or of the Company, if purporting to be signed by the Chairman of such meeting, or by the Chairman of the next succeeding meeting shall be receivable as prima facie evidence of the matters stated in such minutes.

THE SEAL

113. The Directors shall forthwith procures common seal to be made for the Company, and shall provide for the safe custody thereof. The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors or a committee of the Directors and every instrument to which the Seal shall be affixed shall be signed by one Director or some other person nominated by the Directors for the purpose.

114. The Company may exercise all the powers of having official seals conferred by the Ordinance and such powers shall be vested in the Directors.

SECRETARY

115. The Company shall have a Secretary. The Secretary and any joint secretaries or deputy or assistant secretary or secretaries may be appointed by the Directors for such term, at such remuneration and upon such conditions as the Directors may think fit and the Secretary and any joint secretaries or deputy or assistant secretary so appointed may at any time be removed from office by the Directors. A Director may be the Secretary.

116. A provision of the Ordinance or these regulations requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in place of, the Secretary.

DIVIDENDS AND RESERVES

117.	(a)	Subject to Article 111A of these Articles, the Company may by ordinary resolution declare dividends but no such dividend shall exceed the amount recommended by the Directors.
	(b)	No distribution (as defined in Section 79A of the Ordinance) shall be made save in accordance with the provisions of Part IIA of the Ordinance and Article 111A of these Articles.
	(c)	The Series C Preference Shares shall rank pari passu with the Series B Preference Shares in any entitlement to dividends.

118. Subject to Article 111A of these Articles, the Directors may, if they think fit, from time to time, pay to the members such interim dividends as appear to the Directors to be justified by the profits of the Company. If at any time the share capital of the Company is divided into different classes the Directors may pay such interim dividends in respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferred rights as well as in respect of those shares which confer on the holders thereof preferential or special rights in regard to dividend, and provided that the Directors act bona fide they shall not incur any responsibility to the holders of shares conferring a preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non-preferred rights. The Directors may also pay at half-Yearly or at other suitable intervals to be settled by them any dividend which may be payable at a fixed rate if they are of the opinion that the profits justify the payment.

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119. Subject to Article 111A of these Articles, the Directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the company) as the Directors may from time to time think fit. The Directors may also without placing the same to reserve carry forward any profits which they may think prudent not to divide.

120. No dividend shall be payable except out of the profits of the Company, and no dividend shall bear interest as against the Company.

121. The Directors may retain any dividend or other monies payable on or in respect of a share on which the Company has a lien, and may apply the same in or towards satisfaction of the debts and liabilities in respect of which the lien exists.

122. Any resolution declaring a dividend on shares of any class, whether a resolution of the Company in general meeting or a resolution of the Directors, may specify that the same shall be payable to the persons registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable to them in accordance with their respective holdings so registered, but without prejudice to the rights issuer se in respect of such dividend of transferors and transferees of any such shares. The provisions of this Article shall muraris murandis apply to capitalisations to be effected in pursuance of these Articles.

123. Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. For the purposes of this Article no amount paid on a share in advance of calls shall be treated as paid on the share.

124. Unless otherwise directed, any dividend or other monies payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled, or, in the case of joint holders, to the registered address of that one whose name stands first on the register in respect of joint holding, or addressed to such person at such address as the holder or joint holders shall direct. The Company shall not be liable or responsible for any cheque or warrant lost in transmission nor for any dividend or other monies lost to the member or person entitled thereto by the forged endorsement of any cheque or warrant. Payment of the cheque or warrant by the banker on whom it is drawn shall be a good discharge to the Company.

125. Subject to Article 111A of these Articles, the Directors may, with the sanction of the Company in general meeting, distribute in specie or in kind among the members in satisfaction in whole or in part of any dividend any of the assets of the Company, and in particular any shares or securities of other companies to which the Company is entitled.

126. All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed, and all dividends unclaimed for two years after having been declared may be forfeited by the Directors and shall revert to the Company. The payment into a separate account of any monies payable in respect of a share shall not constitute the Company a trustee in respect thereof for any person.

CAPITALISATION OF RESERVES ETC.

127. The Company in general meeting may upon the recommendation of the Directors resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sums be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportions, on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares or debentures or other obligations of the Company to be allotted and distributed credited as fully paid up to and amongst such members in the proportions aforesaid, or partly in one way and partly in the other, and the Directors shall give effect to such resolution:

PROVIDED that a share premium account and a capital redemption reserve fund may, for the purposes of this Article, only be applied in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares.

128. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any, and generally shall do all acts and things required to give effect thereto.

129. For the purpose of giving effect to any resolution under Articles 125 and 127 hereof the Directors may settle any difficulty which may arise in regard to the distribution as they think expedient, and in particular may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that each payments shall be made to any members upon the footing of the value so fixed or that fractions of such value as the Directors may determine may be disregarded in order to adjust the rights of all parties, and may vest any such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalised fund as may seem expedient to the Directors. The provisions of the Ordinance in relation to the filing of contracts for allotment shall be observed, and the Directors may appoint any person to sign such contract on behalf of the persons entitled to share in the appropriation and distribution and such appointment shall be effective and binding upon all concerned, and the contract may provide for the acceptance by such persons of the shares or debentures to be allotted and distributed to them respectively in satisfaction of their claims in respect of the sum so capitalised.

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ACCOUNTS AND AUDITORS

130.    (a) The Directors shall cause proper and true books of account to be kept of all sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place; of all sales and purchases of goods by the Company; and of the assets and liabilities of the Company and of all other matters necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

(b) The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by stature or authorised by the Directors or by the Company in general meeting.

131. The Directors shall from time to time, in accordance with the provisions of the Ordinance, cause to be prepared and to be laid before the Company in general meeting such Profit and Loss Accounts, Balance Sheets, Group Accounts (if any) and Reports as are required by the Ordinance.

132. A copy of every Balance Sheet (including every document required by law to be annexed thereto) which is to be laid before the Company in general meeting, together with a copy of the Directors’ Report and a copy of the Auditors’ Report, shall, not less than 21 days before the date of the meeting, be sent to every member of, and every holder of debentures of, the Company and to all persons other than members or holders of debentures of the Company, being persons entitled to receive notices of general meetings of the Company:

PROVIDED that this Article shall not require a copy of those documents to be sent to any person of whose address the Company is not aware nor to more than one of the joint holders of any shares or debentures.

133. Subject to Article 111A of these Articles, auditors shall be appointed and their duties regulated in the manner provided by the Ordinance.

NOTICES

134. Any notice or other document may be served by the Company upon any member either personally or by sending it through the post in a prepaid letter, envelope or wrapper addressed to such member at his registered address, and, in any case where the registered address of a member is outside Hong Kong, by prepaid airmail. The signature to any notice to be given by the Company may be written or printed.

135. Each member shall, from time to time, notify in writing to the Company some place which shall be deemed his registered address within the meaning of the last preceding Article.

136. Any notice sent by post shall be deemed to have been served in the case where the member’s registered address is in Hong Kong at the expiration of 48 hours after the letter, envelope or wrapper containing the same was posted in Hong Kong and in any other case on the fifth day after the day of posting. In proving such service it shall be sufficient to prove that the letter, envelope or wrapper containing the notice was properly addressed and put in the post as a prepaid letter.

137. A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, within Honk Kong supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

138. Notice of every general meeting shall be given in any manner hereinbefore authorized to:-

(a) every member except those members who (having no registered address within Hong Kong) have not supplied to the Company an address within Hong Kong for the giving of notices to them;

(b) every person entitled to a share in consequence of the death or bankruptcy of a member who, but for his death or bankruptcy, would be entitled to receive notice of the meeting; and

(c) the Auditors for the time being of the Company, No other person shall be entitled to receive notices of general meetings.

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139. Any summons, notice, order or other document required to be sent to or served upon the Company, or upon any officer of the Company, may be sent or served by leaving the same or sending it through the post in a prepaid letter, envelope or wrapper, addressed to the Company or to such officer at the Office.

140. Subject to any special provisions contained in these Articles or in the Ordinance, all notices required to be given by advertisement shall be advertised in at least one daily Chinese and one daily English newspaper in Hong Kong.

141. In reckoning the period for any notice given under these Articles, the day on which notice is served, or deemed to be served and the day for which such notice is given shall be excluded.

WINDING UP

142.        (a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Series C Preference Shares will rank pari passu with the Series B Preference Shares and the holders of Series C Preference Shares and Series B Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Series A Preference Shares and Ordinary Shares, by reason of their ownership thereof, the amount of two times the applicable Original Issue Price per share for each Series C Preference Shares and each Series B Preference Share (in each case adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of the Series C Preference Shares and Series B Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series C Preference Shares and Series B Preference Shares in proportion to the applicable original issue price paid by each such holder for such Preference Shares.

(b) After full payment has been made to the holders of Series C Preference Shares and Series B Preference Shares of the foregoing amounts to which they shall be entitled, holders of Series A Preference Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of Ordinary Shares, by reason of their ownership thereof, the amount of two times the Series A Original Issue Price per share for each Series A Preference Share (adjusted to reflect share splits, share dividends, combinations, consolidations, recapitalizations and the like) then held by them, and in addition, an amount equal to all declared but unpaid dividends on such Series A Preference Shares. If, upon the occurrence of such event, the assets and funds distributed among the holders of Series A Preference Shares are insufficient to permit the payment of the full preferential amount to such holders, then the remaining assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Series A Preference Shares in proportion to the number of Series A Preference Shares held by each holder.

(c) After full payment has been made to the holders of Preference Shares of the foregoing amounts to which they shall be entitled, holders of the Ordinary Shares shall be entitled to receive all remaining assets (pro rata, based upon the number of Ordinary Shares held by each holder at the record date for such distribution of the Company).

(d) For purposes of this Article 142, a liquidation, dissolution or winding up of the Company shall be deemed to be occasioned by, or to include any of the following: (i) the Company’s sale of all or substantially all of its assets, or (ii) any merger, consolidation or other similar transaction involving the Company, unless upon the conclusion of such transaction, and after giving effect thereto, the members of the Company immediately prior to such transaction would continue to own, in substantially the same percentages, more than 50% of the shares of the surviving company following such transaction, or (iii) any transaction involving the transfer, directly or indirectly, of capital shares of the Company having 50% or more of the outstanding voting power of the Company.

(e) For purposes of this Article 142, if the distributions or consideration received by the members of the Company is other than cash, its value will be deemed to be its fair market value. Whenever the distribution provided for in this Article 142 shall be payable in securities, such securities shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by (ii) below:

(1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing;

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(2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and

(3) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a member’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding Preference Shares.

INDEMNITY

143. Every Director, Managing Director, Agent, Auditor, Secretary and other officer for the time being of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in relation to the Company in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquired in connection with any application under Section 358 of the Ordinance in which relief is granted to him by the court.

144. The authorized Capital of the Company is HK$1,000,000.00 divided into 200,000,000 shares of HK$0.005 each comprised of 177,075,144 Ordinary Shares of par value HK$0.005 each, 17,241,400 Series A Preference Shares of par value HK$0.005 each, 2,417,645 Series B Preference Shares of par value HK$0.005 each and 3,265,841 Series C Preference Shares of par value HK$0.005 each and each class of shares shall carry their respective rights, preferences, privileges and restrictions set forth hereinabove.

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Names, Addresses and Descriptions of Subscribers
	For and on behalf of HAREFIELD LIMITED (Sd.) CHAN SHUK YI CHAN SHUK YI, Authorised Representative       Offshore Chambers,       P.O. Box 217,       Apia, Samoa Corporation For and on behalf of FERNSIDE LIMITED (Sd.) CHAN SHUK YI CHAN SHUK YI, Authorised Representative       Offshore Chambers,       P.O. Box 217,       Apia, Samoa Corporation

DATED 4th May 2001

WITNESS to the above signatures:	(Sd.) FANDY TSOI
	9th Floor, Rullonjee House,
	11 Duddell Street,
	Central, Hong Kong
	Occupation: Operations Manager

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EXHIBIT C

Schedule of Exceptions

This is the Schedule of Exceptions set forth as Exhibit C (the “Schedule of Exceptions”) to that certain Series C Preference Shares Purchase Agreement of even date (the “Agreement”) by and among Home Inns & Hotels Management (Hong Kong) Limited (the “Company”) and the parties listed on the Schedule of Investors attached to the Agreement as Exhibit A (the “Investors”). Any disclosures made under the heading of one section of this Schedule of Exceptions may apply to and/or qualify disclosures made under one or more other sections. Section headings are provided for convenience only. Unless otherwise defined, any capitalized terms in this Schedule of Exceptions shall have the same meanings assigned to such terms in the Agreement. Nothing in this Schedule of Exceptions constitutes an admission of any liability or obligation of the Company to any third party, nor an admission against the Company’s interests.

Exceptions to Section

1. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.2(d), the following are accurate and complete lists of the Company’s shareholders and their respective holdings prior to and after the Closing

Prior to Closing:

Name	Address	Ordinary Shares	Series A Shares	Series B Shares	Series C Shares
Top Sterling International Limited	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	11,835,000	Nil	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	800,000	Nil	Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	600,000	Nil	Nil	Nil
Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000	Nil	Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000	Nil	Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil	10,775,800	1,511,028	Nil

C-1

IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil	6,465,600	906,617	Nil
Poly Victory Investments Limited	Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands	13,364,140	Nil	Nil	Nil
Jian Sun	Room 502 #19 Lane 666, Jinxiu Road, Shanghai, China	200,000	Nil	Nil	Nil
Susquehanna China Investment HI Limited	c/o Susquehanna Asia Investment, LLLP 401 City Avenue, Suite 220, Bala Cynwyd, PA 19004-1188, U.S.A.	Nil	Nil	Nil	Nil
Beihai Capital Limited	2103 Futian Garden Building A, Fu Qiang Road, Shenzhen, China 518031	Nil	Nil	Nil	Nil
Kangaroo Investments LLC	200 W. Jackson Chicago, Illinois 60606 U.S.A.	Nil	Nil	Nil	Nil
Fortune Hero Limited	Suite 3001-03 30/F Convention Plaza Office Tower 1 Harbour Road Wanchai, Hong Kong C/o Kenneth Gaw	Nil	Nil	Nil	Nil
Soon Yan Seen	Flat 2401, Blk A Villa Lotto 18 Broadwood Road Happy Valley, Hong Kong	Nil	Nil	Nil	Nil
Hiroko Nishikawa	4C Somerset 67 Repulse Bay Road Hong Kong	Nil	Nil	Nil	Nil

After Closing:

Name	Address	Ordinary Shares	Series A Shares	Series B Shares	Series C Shares
Top Sterling International Limited	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	11,835,000	Nil	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	800,000	Nil	Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	600,000	Nil	Nil	Nil

C-2

Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000	Nil	Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000	Nil	Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil	10,775,800	1,511,028	Nil
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil	6,465,600	906,617	Nil
Poly Victory Investments Limited	Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands	13,364,140	Nil	Nil	Nil
Jian Sun	Room 502 #19 Lane 666, Jinxiu Road, Shanghai, China	200,000	Nil	Nil	Nil
Susquehanna China Investment HI Limited	c/o Susquehanna Asia Investment, LLLP 401 City Avenue, Suite 220, Bala Cynwyd, PA 19004-1188, U.S.A.	Nil	Nil	Nil	2,873,940
Kangaroo Investments LLC	200 W. Jackson Chicago, Illinois 60606 U.S.A.	Nil	Nil	Nil	130,633
Fortune Hero Limited	Suite 3001-03 30/F Convention Plaza Office Tower 1 Harbour Road Wanchai, Hong Kong C/o Kenneth Gaw	Nil	Nil	Nil	65,317
Soon Yan Seen	Flat 2401, Blk A Villa Lotto 18 Broadwood Road Happy Valley, Hong Kong	Nil	Nil	Nil	65,317
Hiroko Nishikawa	4C Somerset 67 Repulse Bay Road Hong Kong	Nil	Nil	Nil	65,317
Beihai Capital Limited	2103 Futian Garden Building A, Fu Qiang Road, Shenzhen, China 518031	Nil	Nil	Nil	65,317

C-3

2. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that pursuant to the Joint Venture Agreement between Capital Travel Resorts and Hotels Group Limited (“Capital”) and the Company dated April 12, 2002, Capital has a right of first refusal on the transfer of any interest in the Beijing Sub by the Company.

3. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3(a), it is noted that the Group organizational chart and the chart showing the approved total investment amount and registered capital amount of each subsidiary attached hereto to the Schedule of Exceptions sets out certain details of the relationship between the Company and its various subsidiaries and joint ventures.

4. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that (“Home Inns Shanghai”) is a subsidiary of the Beijing Sub with a 95% interest held by the Beijing Sub and a 5% interest held on trust by Qi Ji through a Loan and Undertaking Agreement.

5. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that:

(a) the Beijing Sub and Home Inns Shanghai have established five (5) companies in China named (“Home Inns Suzhou”), (“Home Inns Hangzhou”), (“Home Inns Wuxi”), (“Home Inns Changzhou”), and (“Home Inns Tianjin”); and

(b) Home Inns Shanghai has entered into four (4) joint ventures (the “Joint Ventures”) with various investors in China named (“Home Inns Fuzhou”), (“Home Inns Xiamen”), (“Home Inns Caoxi Road”) and (“Home Inns Caobao Road”).

6. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3, it is noted that the Company has established a wholly owned subsidiary company in China named (“Hemei Home Inns”) and that the registered capital for Hemei Home Inns has not been fully paid.

7. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.23, it is noted that: (i) there is a call option granted by Sun Jian to the Company in respect of the purchase by the Company from Sun Jian of some or all of the 200,000 shares held by Sun Jian over a period of four (4) years in the event Sun Jian ceases to be an employee of the Company during such four (4) year period; and (ii) shares of the Company granted under the Company’s employee stock option plan are subject to a vesting period of four years.

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8. Furthermore, in respect of the representations and warranties given by the Company to each Investor pursuant ot Secion 3 of this Agreement and in particular with respect to Section 3.21 and the Joint Ventures:

(a) Home Inns Shanghai has been granted a right of first refusal under certain circumstances to purchase from the respective joint venture partner(s) (the “Joint Venture Partners”) their interest in such Joint Ventures;

(b) The Joint Venture Partners have been granted a right of first refusal under certain circumstances to purchase from Home Inns Shanghai (the “Joint Venture Partners”) its interest in such Joint Ventures; and

(c) Home Inns Shanghai has been granted the right to acquire from the respective joint venture partners in their interest in Home Inns Caobao Road in the event of a public offering by the Company and is currently holding 5% interest of Home Inns Caobao Road on trust for Home Inns Shanghai.

9. In respect of the representations and warranties given by the Company to each Investor pursuant to Section 3 of this Agreement and in particular with respect to Section 3.3(b)(iii), Home Inns Fuzhou, Home Inns Caobao Road and Home Inns Xiamen are in the process of applying for special industries permit and hygiene permit as required under PRC law for hotel operation.

10. It is anticipated that the Beijing Sub and Home Inns Shanghai will establish additional companies in China including four (4) companies to be named (“Home Inns Ningbo”), (“Home Inns Nantong”), (“Home Inns Shenzhen”) and (“Home Inns Guangzhou”) or with similar names.

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EXHIBIT C

Schedule of Exceptions

ORGANIZATIONAL CHART

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EXHIBIT C

SCHEDULE OF EXCEPTIONS

LIST OF SHARE RESTRICTION AGREEMENTS

1. Joint venture agreement (in Chinese) dated 12 February 2004 signed between Home Inns Shanghai and in respect of Home Inns Caobao Road.

2. Articles of Association (in Chinese) of Home Inns Caobao Road.

3. Joint venture agreement (in Chinese) dated 13 September 2004 signed among Home Inns Shanghai, , and in respect of Home Inns Caoxi Road.

4. Articles of Association (in Chinese) of Home Inns Caoxi Road.

5. Joint venture agreement (in Chinese) signed between Home Inns Shanghai and in respect of Home Inns Fuzhou.

6. Articles of Association (in Chinese) of Home Inns Fuzhou.

7. Joint venture agreement (in Chinese) dated 29 March 2004 signed between Home Inns Shanghai and in respect of Home Inns Xiamen.

8. Articles of Association (in Chinese) of Home Inns Xiamen.

9. Articles of Association (in Chinese) of Home Inns Shzhou.

10. Articles of Association (in Chinese) of Home Inns Hangzhou.

11. Articles of Association (in Chinese) of Home Inns Wuxi.

12. Articles of Association (in Chinese) of Home Inns Changzhou.

13. Articles of Association (in Chinese) of Home Inns Tianjin.

14. Articles of Association (in Chinese) of Home Inns Shanghai.

15. Articles of Association (in Chinese) of Home Inns Beijing.

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EXHIBIT C

Schedule of Exceptions

Investment Amount and Registered Capital of certain subsidiaries and Joint Ventures

	Investment Amount	Registered Capital	Remarks
		(Currency: RMB)
Beijing Sub	98,000,000	68,945,000	*Homeinn HK 93.473%, Capital Travel 6.527%
Home Inns Shanghai	NA	35,000,000	Beijing Sub 95%, JiQi 5% on deed of trust
Home Inns Fully owned Subsidiaries
Home Inns Suzhou	NA	1,000,000	Home Inns Shanghai 90%, Beijing Sub 10%
Home Inns Hangzhou	NA	1,000,000	Home Inns Shanghai 90%, Beijing Sub 10%
Home Inns Changzhou	NA	1,000,000	Home Inns Shanghai 90%, Beijing Sub 10%
Home Inns Wuxi	NA	1,000,000	Home Inns Shanghai 90%, Beijing Sub 10%
Home Inns Tianjin	NA	1,000,000	Home Inns Shanghai 10%, Beijing Sub 90%
Joint Ventures Homeinns
Home Inns Fuzhou	NA	1,000,000	Home Inns Shanghai 51%, Fuzhou Yuntong 49%
Home Inns Xiamen	NA	1,000,000	Home Inns Shanghai 51%, Xiamen Water-works 49%
Home Inns Caoxi Road	NA	1,000,000	Home Inns Shanghai 51%, Shanghai Xinzhi 49%
Home Inns Caobao Road	NA	1,000,000	Home Inns Shanghai 75%, Shanghai Dinuo 15%, Sun Yan 10%
WOFE of Homeinn HK (temporary business licence acquired, payment undone)
Hemei Home Inns	NA	USD 1,000,000	100% held by *Homeinn HK

* Homeinn HK means Home Inns & Hotels Management (Hong Kong ) Limited

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EXHIBIT D

List of Intellectual Property Rights

The Beijing Sub has filed the following trademark applications in the PRC with respect to the trademark

Application Number	Class
3312862	36
3312863	36
3312864	41
3312865	41
3312866	41
3312875	35
3312876	35

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EXHIBIT E

Form of Amended and Restated Shareholders Agreement

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AMENDED AND RESTATED SHAREHOLDERS AGREEMENT

This Amended and Restated Shareholders Agreement (the “Agreement”) is made as of the                      day of January, 2005, by and among Home Inns & Hotels Management (Hong Kong) Limited, a Hong Kong company (the “Company”), with its registered office at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central Hong Kong and the entities and individuals set forth on Exhibit A hereto (collectively, the “Shareholders”, and each individually, a “Shareholder”).

R E C I T A L S

A. Pursuant to a Series A Preference Shares Purchase Agreement dated the 28^th day of February, 2003, (the “Series A Purchase Agreement”) certain Shareholders set forth on Exhibit A hereto own the Company’s Series A Preference Shares of par value HK$0.005 per share (“Series A Shares”). Concurrently therewith, the Company and certain Shareholders entered into a shareholders agreement dated the 28^th day of February, 2003 (the “February Agreement”) for the purposes of regulating their relationship with each other and certain aspects of the affairs of and their dealings with the Company.

B. Pursuant to a Series B Preference Shares Purchase Agreement (the “Series B Purchase Agreement”) certain Shareholders set forth on Exhibit A hereto own the Company’s Series B Preference Shares of par value HK$0.005 per share (the “Series B Shares”). The Company and certain Shareholders have terminated the February Agreement under a deed of cancellation dated the 1^st day of December, 2003 between the Company and the Shareholders named therein and have entered into a new shareholders’ agreement dated the 1^st day of December, 2003 (the “December Agreement”), as amended by a Supplemental Agreement dated the 24^th day of May 2004 among the Shareholders named therein (the “Supplemental Agreement”).

C. Concurrently herewith, certain Shareholders set forth on Exhibit B hereto (collectively, the “Investors”, and each individually, an “Investor”) have entered into a Series C Preference Shares Purchase Agreement of even date herewith (the “Series C Purchase Agreement”), pursuant to which each Investor is purchasing from the Company its Series C Preference Shares of par value HK$0.005 per share (“Series C Shares”).

D. The execution of this Agreement by the parties hereto is a condition to the closing of the transactions contemplated by the Series C Purchase Agreement.

E. The parties hereto desire to enter into this Agreement in order to amend, restate and replace their rights and obligations under the December Agreement with the rights and obligations set forth in this Agreement.

F. Section 12.2 of the December Agreement provides that the December Agreement may be amended by the written consent of holders of at least 80% of the Preference Shares and Ordinary Shares held by the parties thereto, and the undersigned Shareholders hold at least 80% of the Preference Shares and Ordinary Shares.

G. As of the Closing (as such term is defined in the Series C Purchase Agreement), each of the Shareholders shall own the respective number of Ordinary Shares and/or Preference Shares as set forth opposite each such Shareholder’s name on Exhibit A.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and contained (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

1. Certain Definitions.

For purposes of this Agreement, the following terms have the following meanings:

1.1 “Articles of Association” means the Articles of Association of the Company as the same may be amended from time to time.

1.2 “Commission” shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

1.3 “Conversion Shares” means the Ordinary Shares issued or issuable pursuant to conversion of the Preference Shares.

1.4 “Existing Ordinary Shareholders” shall mean each of Top Sterling International Limited (“Top Sterling”), Qi Ji, Nan Peng Shen, Hui Chen, Ri Xin Liang, Poly Victory Investments Limited (“Poly Victory”) and Sun Jian.

1.5 “Holder” shall mean any person or entity holding Registrable Securities (including Preference Shares).

1.6 “Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.

1.7 “Initiating Holders” shall mean any Holder(s) who in the aggregate hold at least fifty percent (50%) of the outstanding Registrable Securities.

1.8 “IPO” means (i) a public offering by the Company of its Ordinary Shares pursuant to a firm commitment underwritten public offering at a price per Ordinary Share of not less than three (3) times the per-share purchase price of each Series A Share of US$0.232 (as adjusted to reflect share dividends, share splits and similar adjustments made after 28 February, 2003 including without limitation the sub-division of each Series A Shares of HK$1.00 in the capital of the Company into 200 Series A Shares of HK$0.005 pursuant to the resolutions of the shareholders of the Company dated 8 April, 2003) on an internationally recognized stock exchange or (ii) the merger of the Company with and into a company whose shares are listed on an internationally recognized stock exchange, the average closing price of which shares on such exchange over the thirty (30) day period following the effectiveness of such merger being no less than either three (3) times US$0.232 (as adjusted to reflect share dividends, share splits and similar adjustments made after 28 February 2003).

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1.9 “Key Shareholders” means the following: AsiaStar IT Fund L.P. (“AsiaStar”), IDG Technology Venture Investments, LP (“IDG”), Top Sterling, Poly Victory, Qi Ji, Nan Peng Shen and Susquehanna China Investment HI (“Susquehanna”).

1.10 “Memorandum” means the Memorandum of Association of the Company as the same may be amended from time to time.

1.11 “Ordinary Shares” means the ordinary shares of the Company of par value HK$0.005 per share.

1.12 “Party” means a party to this Agreement.

1.13 “Pro-Rata Share” means, as to each Key Shareholder’s Right of Co-Sale, the percentage determined by dividing (i) the number of shares of Stock held by a Key Shareholder by (ii) the total number of shares of Stock held by all the Key Shareholders and the Seller.

1.14 “Preference Shares” means the Series A Shares, the Series B Shares and the Series C Shares.

1.15 “Public Listing Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Section 9.4 hereof, including, without limitation, all qualification and filing fees, printing expenses, transfer agent fees, escrow, custodian or depositary fees, fees and disbursements of counsel for the Company, the expense of any special audits incident to or required by any such listing (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

1.16 “Registrable Securities” means the Conversion Shares and the Ordinary Shares of the Company issued and outstanding immediately after the Closing (including any Ordinary Shares of the Company issued after the Closing in respect of such Conversion Shares or Ordinary Shares upon any share split, share dividend, recapitalization, or similar event); provided, however, that the Ordinary Shares or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or are available for sale in a single sale in the opinion of counsel for the Company in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

1.17 The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

1.18 “Registration Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Sections 9.1, 9.2 and 9.3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, transfer agent fees, escrow, custodian or depositary fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

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1.19 “Right of Co-Sale” means the right of co-sale provided to the Key Shareholders in Section 4 of this Agreement.

1.20 “Right of First Refusal” means the right of first refusal provided to the Company and the Key Shareholders in Section 3 of this Agreement.

1.21 “Securities Act” means the U.S. Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

1.22 “Seller” means any Existing Ordinary Shareholder proposing to Transfer Stock.

1.23 “Selling Expenses” shall mean all underwriting discounts, selling commissions and share transfer taxes applicable to the securities registered by the Holders and, except as borne by the Company as part of the Registration Expenses, all reasonable fees and disbursements of any such counsel for a Holder not contemplated by the Registration Expenses.

1.24 “Stock” means and includes all Ordinary Shares issued and outstanding at the relevant time plus all Ordinary Shares issuable upon conversion or exchange of any convertible securities, including, without limitation, preference shares and debt securities then outstanding, which are by their own terms then convertible into or exchangeable for Ordinary Shares.

1.25 “subsidiary” shall have the meaning ascribed thereto in Section 2 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong).

1.26 “Transfer” means and includes any sale, transfer or other disposition, whether voluntary or involuntary, except:

(a) any transfers of Stock by a Seller to the Seller’s spouse, siblings, parents, lineal descendants or antecedents or trusts for the benefit of the Seller or the Seller’s spouse, siblings, parents or lineal descendants or antecedents or transfers of Stock by the Seller by devise or descent; provided, that, in all cases, the transferee or other recipient executes a deed of adherence in form and substance satisfactory to the Company and becomes bound thereby in the same manner as the Seller;

(b) by operation of law;

(c) any transfer to the Company pursuant to the terms of this Agreement or such other agreement entered into between the Company and a Shareholder; or

(d) any transfers of Stock or Preference Shares by an Investor to (i) a shareholder, partner, retired partner, member, or beneficiary of such Investor or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Investor or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Investor, or (iv) an entity that is controlled by, controls, or is under common control with the Investor.

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2. Restrictions on Transfer.

2.1 General. A Seller shall not, without the prior written consent of the holders of a majority of the then outstanding Preference Shares and subject to compliance with this Section 2, sell, assign, transfer, pledge or otherwise encumber or dispose of in any way such Seller’s interest in any number of shares of Stock now or hereafter owned or held by such Seller exceeding thirty percent (30%) of the total number of shares of Stock held by such Seller from time to time, in a transaction or series of transactions.

2.2 Notice of Proposed Transfer. Prior to the Seller Transferring any Stock, the Seller shall deliver to the Company and the Key Shareholders a written notice (the “Transfer Notice”) stating: (i) the Seller’s bona fide intention to sell or otherwise Transfer such shares of Stock (such Stock, the “Offered Stock”); (ii) the name, address and phone number of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the aggregate number of shares of Offered Stock to be Transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for and the material terms and conditions upon which the Seller proposes to Transfer the Offered Stock (the “Offered Price”). The Transfer Notice shall certify that such Seller has received a bona fide offer from the Proposed Transferee(s) or has given a bona fide offer to the Proposed Transferee(s) and in good faith believes a binding agreement for the Transfer is obtainable substantially on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer.

3. Right of First Refusal.

3.1 Exercise by the Company. The Company has the Right of First Refusal to purchase all or any part of the Offered Stock, if the Company gives written notice of the exercise of such right to the Seller within fifteen (15) days (the “Notice Period”) after the last date on which the Transfer Notice is, pursuant to Section 12.5 hereof, deemed to be effective as to the Company or a Key Shareholder, as the case may be. In the event that the Company elects not to purchase all of the Offered Stock, the remaining shares of Offered Stock may be purchased by the Key Shareholders as set forth in Section 3.2 below. Within five (5) days after expiration of the Notice Period, the Company will give written notice (the “Company’s Expiration Notice”) to the Seller and the Key Shareholders specifying either (A) that all or a part of the Offered Stock was purchased by the Company exercising its Right of First Refusal or (B) that the Company waived its right to purchase the specified number of Offered Stock.

3.2 Exercise by the Key Shareholders. In the event the Company does not purchase all of the Offered Stock, each Key Shareholder (excluding the Seller) shall have a Right of First Refusal to purchase its pro rata share of the remaining Offered Stock. For purposes of this Section 3.2, a Key Shareholder’s pro rata share shall be determined by dividing (i) the number of shares of Stock held by such Key Shareholder, exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time, by (ii) the total number of shares of Stock held by all the Key Shareholders (excluding the Seller and exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time). If any Key Shareholder (excluding the Seller) desires to exercise its Right of First Refusal pursuant to this Section 3.2, such Key Shareholder must, within a fifteen (15) day period after the Company’s Expiration Notice, give written notice (the “Shareholder’s Notice Period”) to the Seller and to the Company of such Key Shareholder’s election to purchase the Offered Stock.

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3.3 Purchase Price. The purchase price for the Offered Stock to be purchased by the Company or by a Key Shareholder exercising its Right of First Refusal under this Agreement will be the Offered Price, and will be payable as set forth in Section 3.4 hereof. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration will be determined by the board of directors of the Company (the “Board of Directors”) in good faith, which determination will be binding upon the Company, each Key Shareholder and the Seller, absent fraud or error.

3.4 Payment. Payment of the purchase price for the Offered Stock purchased by the Company will be made within fifteen (15) days after the end of the Notice Period. Payment of the purchase price for the Offered Stock purchased by the Key Shareholders will be made within fifteen (15) days after the end of the Shareholder’s Notice Period. Payment of the purchase price will be made, at the option of the Company or the Key Shareholder (excluding the Seller), as the case may be, (i) in cash, (ii) by cancellation of all or a portion of any outstanding indebtedness of the Seller to the Company or the Key Shareholders, as the case may be, or (iii) by any combination of the foregoing. The Company or the Key Shareholder may, pursuant to a purchase of the Offered Stock hereunder, request that such Seller Transferring the Offered Stock shall enter into a sale and purchase agreement in customary form which shall contain representations and warranties by such Seller to the effect that such Seller is the legal and beneficial owner of the Offered Stock free from any liens, security interests, third party rights or encumbrances whatsoever.

3.5 Rights as a Shareholder. If the Company or a Key Shareholder exercises its respective Right of First Refusal to purchase all or any part of the Offered Stock, then, upon the date that the notice of such exercise by the Company or Key Shareholder is deemed to be effective as to the Seller pursuant to Section 12.5 hereof (the “Transfer Date”), the Seller will have no further rights as a holder with respect to such shares of the Offered Stock except the right to receive payment for such shares of the Offered Stock from the Company or Key Shareholder in accordance with the terms of this Agreement. The Seller will forthwith cause all certificate(s) evidencing such Offered Stock to be surrendered to the Company for Transfer to the Company or Key Shareholder, as the case may be.

3.6 Seller’s Right To Transfer. If the Company or Key Shareholders have not elected to purchase all or any portion of the Offered Stock, then, with respect to that portion of Offered Stock that will not be purchased by the Company or Key Shareholders pursuant to Section 3 hereof, the Seller may Transfer such portion of the Offered Stock, which the Company and Key Shareholders have not elected to purchase, to any Proposed Transferee named in the Transfer Notice, at the Offered Price or at a higher price; provided that such Transfer shall still be subject to the Right of Co-Sale as defined in Section 4 hereof; provided further that such Transfer (i) is consummated within ninety (90) days after the end of the Notice Period, (ii) is on terms no more favorable to such Proposed Transferee than the terms proposed in the Transfer Notice and (iii) is in accordance with all the terms of this Agreement. If the Offered Stock is not so Transferred during such ninety (90) day period, then the Seller may not Transfer any of such Offered Stock without complying again in full with the provisions of this Agreement.

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4. Right of Co-Sale.

4.1 Exercise by the Key Shareholders. To the extent that the Company and the Key Shareholders do not exercise their respective Right of First Refusal with respect to all the Offered Stock pursuant to Section 3 hereof, then each Key Shareholder that notifies Seller in writing within fifteen (15) days after the end of the Shareholder’s Notice Period (the “Co-Sale Period”) shall have the right to participate in such sale of shares on the same terms and conditions as specified in the Transfer Notice subject to the terms of this Section 4. Each Key Shareholder who delivers a notice pursuant to the preceding sentence (a “Selling Key Shareholder”) may sell, pursuant to the Selling Key Shareholder’s Right of Co-Sale, up to that number of shares of Stock held by such Selling Key Shareholder equal to the product obtained by multiplying the number of shares of the remaining Offered Stock by such Selling Key Shareholder’s Pro-Rata Share. The Selling Key Shareholder shall indicate on such notice the number of shares of Stock it then holds that it wishes to sell pursuant to this Section 4 (the “Selling Key Shareholder Shares”). The sale of the Selling Key Shareholder Shares shall occur within twenty-five (25) days from the beginning of the Co-Sale Period (the “Closing”). This Right of Co-Sale shall not apply with respect to Offered Stock sold to the Company or a Key Shareholder pursuant to the Right of First Refusal.

4.2 Consummation of Co-Sale. A Selling Key Shareholder may exercise the Right of Co-Sale by delivering to the Seller at or before the Closing, one or more certificates, properly endorsed for Transfer, representing a number of shares not to exceed the number of shares to which the Selling Key Shareholder is entitled in Section 4.1, representing such Stock to be Transferred by the Seller on behalf of the Selling Key Shareholder. If the Selling Key Shareholder does not hold a certificate in that series, class or type of stock representing the number of securities to be sold by such Selling Key Shareholder pursuant to this Section 4, then the Company shall promptly issue a certificate representing the proper number of shares to be sold pursuant to this Right of Co-Sale. Following the Closing, the Company shall deliver a certificate for the remaining balance of the securities held by the Selling Key Shareholder, if any, to such Selling Key Shareholder. At the Closing, such certificates or other instruments will be Transferred and delivered to the Proposed Transferee as set forth in the Transfer Notice in consummation of the Transfer of the Offered Stock pursuant to the terms and conditions specified in the Transfer Notice, and the Proposed Transferee shall, and the Seller shall procure that the Proposed Transferee will, remit, or will cause to be remitted, to each Selling Key Shareholder against receipt of such certificates and transfer documents at such Closing, that portion of the proceeds of the Transfer to which each Selling Key Shareholder is entitled by reason of each Selling Key Shareholder’s participation in such Transfer pursuant to the Right of Co-Sale.

5. Right of First Offer.

5.1 If at anytime, the Company proposes to issue any Stock, any rights, options or warrants to acquire Stock or any notes, debentures, preferred shares or other securities or rights, which are ultimately convertible or exercisable into, or exchangeable for, Ordinary Shares (collectively, “Equity Securities”) (after obtaining any requisite approval required under Section 11.3), the Company shall first offer such Equity Securities to each Shareholder in a written notice (an “Issuance Notice”) setting forth:

(a) a description of the Equity Securities to be issued, including the rights and powers associated therewith;

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(b) the number of such Equity Securities to be offered (the “New Securities”); and

(c) the price and terms upon which it proposes to offer the New Securities.

5.2 Each Shareholder who wishes to purchase any New Securities (a “Pre-emptive Shareholder”) shall provide the Company with a written notice (the “Exercise Notice”) specifying the maximum number of New Securities which it irrevocably commits to purchase (the “Pre-emptive Amount”) within thirty (30) days of the receipt by such Pre-emptive Shareholder of the Issuance Notice. For the avoidance of doubt, each Pre-emptive Shareholder may specify in its Exercise Notice a Pre-emptive Amount higher or lower than its Pro-rata Amount. The New Securities shall be allocated among each Pre-emptive Shareholder (with rounding to avoid fractional shares) in proportion to its respective Pro-rata Amount provided that in no event shall an amount greater than such Pre-emptive Shareholder’s Pre-emptive Amount be allocated to such Pre-emptive Shareholder.

5.3 Any excess New Securities (the “Excess New Securities”) not yet allocated after employing the procedures set out in Section 5.2 shall be allocated among all the Pre-emptive Shareholders whose Pre-emptive Amounts have not yet been satisfied in proportion to each such Pre-emptive Shareholder’s respective Excess Pro-rata Amount (with rounding to avoid fractional shares) PROVIDED THAT in no event shall a Pre-emptive Shareholder be required to purchase more New Securities pursuant to this Section 5.3 than as specified in the Exercise Notice of such Pre-emptive Shareholder, and the procedures set out in this Section 5.3 shall be repeatedly employed until the Pre-emptive Amounts of all Pre-emptive Shareholders shall have been satisfied or until the total number of the New Securities have been fully allocated to all the Pre-emptive Shareholders after employing the procedures set out in this Section 5.3, whichever is to occur first.

A Pre-emptive Shareholder’s “Pro-rata Amount” is equal to the product obtainable by multiplying (x) the total number of New Securities, by (y) a fraction, the numerator of which shall be the number of Ordinary Shares Equivalents owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all Ordinary Shares Equivalents owned by all the Pre-emptive Shareholders on the date of the Issuance Notice.

A Pre-emptive Shareholder’s “Excess Pro-rata Amount” is equal to the product obtainable by multiplying (x) the total number of Excess New Securities, by (y) a fraction, the numerator of which shall be the number of Ordinary Shares Equivalents owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all Ordinary Shares Equivalents owned by all the Pre-emptive Shareholders on the date of the Issuance Notice whose Pre-emptive Amounts have not yet been satisfied after employing the procedures set out in this Section 5.

5.4 If any Shareholder fails to exercise its right under this Section 5 to purchase its pro rata share of New Securities within thirty (30) days following the receipt by such Shareholder of the Issuance Notice, the unsubscribed New Securities may be offered by the Company within sixty (60) days thereafter to any Person at a price not less, and upon terms no more favourable, than specified in the Issuance Notice. If the Company does not enter into an agreement for the sale of the unsubscribed New Securities within such sixty (60) day period or, if such agreement is not consummated within thirty (30) days after the execution thereof, the Company shall not thereafter issue or sell any such unsubscribed New Securities without again first offering such unsubscribed securities in the manner provided in this Section 5.

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5.5 Notwithstanding anything stated to the contrary herein, the pre-emptive rights described in this Section 5 shall not apply to:

(a) the issuance of Ordinary Shares in connection with an IPO or pursuant to the conversion of the Preference Shares;

(b) the issuance of options convertible or exercisable into Ordinary Shares pursuant to any Option Plans (as defined below) and the issuance of Ordinary Shares pursuant to the exercise of such options;

(c) the issuance of Equity Securities by the Company as consideration to acquire businesses, shares or other assets which shall have been approved in accordance with Section 11.3;

(d) the issuance of Equity Securities in connection with a share split, scrip dividend, recapitalisation or reorganization of the Company which shall have been approved in accordance with Section 11.3;

(e) the issuance of Equity Securities pursuant to the conversion, exercise or exchange of options, warrants, notes, debentures or preferred shares PROVIDED THAT the initial issuance of such Convertible Securities shall have complied with the terms set out in this Section 5 and have been approved in accordance with or exempted pursuant to Section 11.3; or

(f) the issuance of Ordinary Shares pursuant to the conversion, exercise or exchange of options, warrants, notes, debentures or preferred shares outstanding prior to the date of this Agreement.

6. Refusal to Transfer; Put Right.

6.1 Refusal to Transfer. Subject to Section 6.2 below, any attempt by any Seller to Transfer any Stock in violation of any provision of this Agreement will be void. The Company will not be required (i) to transfer on its books any Stock that has been sold, gifted or otherwise Transferred in violation of this Agreement, or (ii) to treat as owner of such Stock, or to accord the right to vote or pay dividends to any purchaser, donee or other transferee to whom such Stock may have been so Transferred.

6.2 Put Right. If a Seller Transfers any Stock in contravention of a Key Shareholder’s Right of Co-Sale under this Agreement (a “Prohibited Transfer”) provided, however, all the Key Shareholders have consented to such Transfer notwithstanding Section 6.1 above by delivery of a joint written notice to the Company to permit and validate such Transfer subject to any conditions set forth in such notice, or if the Proposed Transferee of Offered Stock desires to purchase a class, series or type of stock offered by the Seller but not held by a Key Shareholder or the Proposed Transferee is unwilling to purchase any Stock from a Key Shareholder, such Key Shareholder may, by delivery of written notice to such Seller (a “Put Notice”) within ten (10) days after the later of (i) the Closing as defined in subsection 4.1 above, or (ii) the date on which such Key Shareholder becomes aware of the Prohibited Transfer or the terms thereof, and in addition to such other remedies as may be available at law, require such Seller to purchase from such Key Shareholder, for cash or such other consideration as the Seller received in the Prohibited Transfer or at the Closing, a number of shares of Stock (of the same class or type as Transferred in the Prohibited Transfer or at the Closing if such Key Shareholder then owns Stock of such class or type; otherwise Series A Shares, Series B Shares or Ordinary Shares) having a purchase price equal to the aggregate purchase price that the Key Shareholder would have received in the closing of such Prohibited Transfer if such Key Shareholder had elected to exercise its Right of Co-Sale with respect thereto or in the Closing if the Proposed Transferee had been willing to purchase the Stock of the Key Shareholder. The closing of such sale to the Seller will occur within ten (10) days after the date of such Key Shareholder’s Put Notice to such Seller.

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6.3 Multiple Series, Class or Type of Stock. If the Offered Stock consists of more than one series, class or type of Stock, the Seller has the right to Transfer hereunder each such series, class or type; provided that if, as to the Right of Co-Sale, a Selling Key Shareholder does not hold any of such series, class or type, and the Proposed Transferee is not willing, at the Closing, to purchase some other series, class or type of Stock from such Selling Key Shareholder, or is unwilling to purchase any Stock from such Selling Key Shareholder at the Closing, then such Selling Key Shareholder will have the put right set forth in Section 6.2 above.

7. Restrictive Legend and Stop-Transfer Orders.

7.1 Legends. Each Party understands and agrees that the Company will cause the legends set forth below, or legends substantially equivalent thereto, to be placed upon any certificate(s) or other documents or instruments evidencing ownership of Stock by the Party issued after the date of this Agreement:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH CERTAIN RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A CERTAIN AGREEMENT DATED                  JANUARY,        2005 ENTERED INTO BY THE HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE REGISTERED OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY MARKET STAND-OFF RESTRICTION AS SET FORTH IN A CERTAIN AGREEMENT DATED                  JANUARY, 2005 BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE REGISTERED OFFICE OF THE ISSUER. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE ORDINARY SHARES OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.

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7.2 Stop Transfer Instructions. In order to ensure compliance with the restrictions referred to herein, each Party agrees that the Company may issue appropriate “stop transfer” certificates or instructions.

7.3 Transfers. No securities shall be Transferred unless (i) such Transfer is made in compliance with applicable securities laws and (ii) prior to such Transfer, the transferee or transferees, who prior to such Transfer are not already parties to this Agreement, sign a deed of adherence to this Agreement in form and substance satisfactory to the Company pursuant to which such transferee(s) agrees to be bound by the terms of this Agreement. The Company shall not be required (a) to transfer on its books any shares that shall have been Transferred in violation of any of the provisions of this Agreement or (b) to treat as the owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so Transferred.

8. Affirmative Covenants.Financial Information.

8.1 (a) So long as a Party, or an entity that is controlled by, controls, or is under common control with the Party, holds two percent (2%) or more of the outstanding capital shares of the Company on an as-converted basis and in the case of the Investor only, so long as it holds at least twenty-five (25%) of the Series C Shares outstanding as at Closing, the Company will provide the following reports to each such Party:

(i) As soon as practicable after the end of each fiscal year, and in any event within ninety (90) days thereafter, audited consolidated financial statements of the Company as of the end of such fiscal year prepared in reasonable detail, in accordance with generally accepted accounting principles in Hong Kong (“Hong Kong GAAP”) and the audited consolidated financial statements of (Home Inns Hotel Management (Beijing) Limited) (the “Beijing Sub”) as of the end of their fiscal years prepared in reasonable detail, in accordance with generally accepted accounting principles in China (“China GAAP”).

(ii) As soon as practicable after the end of each month, and in any event no later than twenty (20) days thereafter, financial statements of the Company and consolidated financial statements of the Beijing Sub as of the end of each such month for such month and for the current fiscal year to date, prepared in reasonable detail in accordance with Hong Kong GAAP or China GAAP, respectively, with the exception that no notes need be attached to such statements.

(b) The rights granted pursuant to this Section 8.1 may not be assigned or otherwise conveyed by the Parties or by any subsequent transferee of any such rights without the prior written consent of the Company except for transfers to (i) a shareholder, partner, retired partner, member, or beneficiary of such Party or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Party or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Party, or (iv) an entity that is controlled by, controls, or is under common control with the Party.

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(c) The Company shall permit each Investor, at such Investor’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Investor.

8.2 Reservation of Ordinary Shares. The Company will at all times reserve and keep available out of its authorized but unissued share capital, solely for issuance and delivery upon the conversion of the Preference Shares, such number of Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preference Shares; and if at any time the number of authorized but unissued share capital shall not be sufficient to effect the conversion of all the then outstanding Preference Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued share capital to such number of Ordinary Shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholders’ approval of any necessary amendment to the Articles..

8.3 Quarterly Board Meetings. The Board of Directors shall hold meetings at least once every three (3) months.

8.4 Director Insurance. If not already entered into, the Company shall enter into standard indemnification agreements with the members of the Board of Directors in the form attached to this Agreement as Exhibit C.

8.5 Director Expenses. The Company shall reimburse each member of the Board of Directors for his/her expenses incurred directly in relation to such member’s services on the Board of Directors.

8.6 Termination of Covenants. The covenants set forth in Sections 8.1 through 8.5 shall terminate and be of no further force or effect on the earlier of: (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company.

9. Registration Rights.

9.1 Requested Registration.

(a) Request for Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with respect to all or a part of the Registrable Securities, the aggregate proceeds of which, net of underwriting discounts and selling commissions, equal or exceed US$5,000,000, the Company will:

(i) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and

(ii) as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company, and to use all best efforts to cause such registration statement to become effective within one hundred twenty (120) days of the initial request by the Initiating Holders;

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Provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 9.1:

(1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or other applicable securities laws;

(2) Prior to six (6) months after the effective date of the Company’s first registered public offering of its equity securities;

(3) During the period starting with the date sixty (60) days prior to the Company’s estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a transaction under Rule 145 promulgated under the Securities Act (“Rule 145”) or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; provided, however, that the Company shall not utilize this right more than once in any twenty-four (24) month period;

(4) After the Company has effected two (2) such registrations pursuant to this subparagraph 9.1(a), and such registrations have been declared or ordered effective; or

(5) If the Initiating Holders may dispose of shares of Registrable Securities pursuant to a registration statement on Form F-3 pursuant to a request made under Section 9.3 hereof.

(b) Underwriting. In the event that a registration pursuant to Section 9.1 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 9.1(a)(i). In such event, the right of any Holder to registration pursuant to Section 9.1 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 9.1, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company, but subject to reasonable approval of a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 9.1, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated, among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement; provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder or other person to the nearest 100 shares.

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If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration, and such Registrable Securities shall not be transferred in a public distribution prior to ninety (90) days after the effective date of such registration, or such other shorter period of time as the underwriters may require.

9.2 Company Registration.

(a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Rule 145 transaction, the Company will:

(i) promptly give to each Holder written notice thereof; and

(ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 9.2(a)(i). In such event the right of any Holder to registration pursuant to Section 9.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 9.2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in such registration and underwriting. No such reduction shall reduce the amount of securities of the selling Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is the initial public offering and such registration does not include shares of any other selling shareholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding sentence. The Company shall so advise all Holders and other holders distributing their securities through such underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holder at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or other person to the nearest 100 shares. If any Holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require.

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(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 9.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. Selling Expenses of such withdrawn registration shall be borne by the Company.

(d) Not Demand Registration. Registration pursuant to this Section 9.2 shall not be deemed to be a demand registration as described in Section 9.1 above.

9.3 Registration on Form F-3. If any Holder or Holders request that the Company file a registration statement on Form F-3 (or any successor form to Form F-3) for a public offering of shares of the Registrable Securities the reasonably anticipated aggregate price to the public of which, net of underwriting discounts and commissions, would equal or exceed US$500,000, and the Company is a registrant entitled to use Form F-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as such Holder or Holders may reasonably request; provided, however, that the Company shall not be required to effect more than one registration pursuant to this Section 9.3 in any six (6) month period. The Company shall inform other Holders of the proposed registration and offer them the opportunity to participate. The substantive provisions of Section 9.1(b) shall be applicable to each registration initiated under this Section 9.3.

9.4 Public Listing. In the event the Company shall receive from Initiating Holders a written request that the Company effect a listing (other than a request pursuant to Section 9.1 hereof) of the Company and its shares on an internationally recognized stock exchange or over-the-counter market (a “Public Listing”), the Company shall use its best efforts to effect such Public Listing (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations).

9.5 Expenses. All Registration Expenses incurred in connection with all registrations pursuant to Sections 9.1, 9.2 and 9.3 shall be borne by the Company. All Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. All Public Listing Expenses shall be borne by the Company.

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9.6 Procedures. In the case of each registration, qualification, compliance or Public Listing effected by the Company pursuant to this Section 9, the Company will keep each Holder advised in writing as to the initiation of each such registration, qualification, compliance, and Public Listing and as to the completion thereof. With respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the Company will, at its expense:

(a) Prepare and file with the governmental agencies with proper jurisdiction a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least one hundred eighty (180) days or until the distribution described in the registration statement has been completed;

(b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such Holders and underwriters may reasonably request in order to facilitate the public offering of such securities;

(c) Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(d) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(e) Use best efforts to cause all such Registrable Securities registered pursuant hereunder to be listed on a national exchange or an internationally recognized stock exchange or over-the-counter market and each securities exchange on which similar securities issued by the Company are then listed; and

(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

9.7 Indemnification.

(a) The Company will indemnify each Holder, each of its officers, directors, trustees and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, compliance or Public Listing has been effected pursuant to this Section 9, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification, compliance or Public Listing, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or any other national, federal or state securities law or any rule or regulation promulgated thereunder applicable to the Company in connection with any such registration, qualification, compliance or Public Listing, and the Company will reimburse each such Holder, each of its officers, trustees and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by any Holder, controlling person or underwriter and stated to be specifically for use therein; provided, however, that with respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or the amended prospectus filed with the Commission pursuant to Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act, unless such Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage as a result of the Company’s failure to provide the Final Prospectus pursuant to Section 9.6(b) above.

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(b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance pursuant to Section 9.1, 9.2 or 9.3 is being effected, severally but not jointly indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, trustees and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such other Holders, such directors, officers, trustees, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or in the Final Prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act and provided further, that such indemnity agreement shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, the liability of each Holder under this subsection (b) shall be limited to an amount equal to the proceeds to such Holder from the sale of Registrable Securities pursuant to such registration statement as contemplated herein, less any applicable underwriting discounts and commissions; provided, however, such limitation shall not apply in the case of willful fraud by such Holder.

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(c) Each party entitled to indemnification under this Section 9.7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnifying Party shall have the option to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 9 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses. No claim may be settled without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(d) If the indemnification provided for in this Section 9.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this Subsection 9.7(d) exceed an amount equal to the proceeds to such Holder from the sale of Registrable Securities pursuant to such registration statement as contemplated herein, less any applicable underwriting discounts and commissions, except in the case of willful fraud by such Holder. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) The obligations of the Company and the Holders under this Section 9.7 shall survive the completion of any offering of Registrable Securities in a registration statement or Public Listing under this Section 9, and otherwise.

9.8 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 9.

9.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of restricted securities to the public without registration, after such time as a public market exists for the Ordinary Shares of the Company in the United States, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act (“Rule 144”), at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act.

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

(c) So long as the Investor owns any restricted securities, to furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any such securities without registration.

9.10 Transfer of Rights. The rights to cause the Company to effectuate a Public Listing and the rights to cause the Company to register securities granted to the Investors under Sections 9.1, 9.2, 9.3 and 9.4 (the “Registration Rights”) may be assigned to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by the Investor provided that: (i) such transfer may otherwise be effected in accordance with applicable securities laws, (ii) the Company is given prompt notice of the transfer, (iii) such assignee or transferee agrees to be bound by the terms of this Agreement, and (iv) such assignee or transferee who acquires at least two hundred thousand (200,000) shares of the Company’s Registrable Securities (as adjusted for any share split, recapitalization or the like), provided, however, upon the consummation of a Public Listing, the Registration Rights shall no longer be assignable to any transferee or assignee unaffiliated with such Investor in connection with any transfer or assignment of Registrable Securities to such transferee or assignee by such Investor.

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9.11 Standoff Agreement. Each Holder hereby agrees, in connection with the Company’s initial public offering of its equity securities pursuant to a registration statement filed under the Securities Act or a Public Listing, upon request of the Company or the underwriters managing such initial public offering of the Company’s securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration or Public Listing as may be requested by the Company or such underwriters; provided that all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities enter into similar agreements.

9.12 Delay. If the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed, or a Public Listing to be effectuated, in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under Section 9.1 or 9.4, as applicable, shall be deferred for a period not to exceed one hundred twenty (120) days from the date of receipt of written request from the Initiating Holders, provided that such right to delay a request shall be exercised by the Company not more than once in any twenty-four (24) month period.

9.13 Termination. The rights to cause the Company to register securities granted to Holders under Sections 9.1, 9.2, and 9.3 shall expire on the earlier of (i) such time as such Holder is able to dispose of all its shares in a three (3) month period pursuant to Rule 144, or (ii) five (5) years after the IPO.

10. Board of Directors and Articles of Association.

10.1 Agreement to Vote. For so long as each of AsiaStar, IDG, and Top Sterling continues to hold Series A Shares, Series B Shares, Conversion Shares, or Ordinary Shares, each time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of electing directors, each of the aforementioned shareholders agrees to vote such shares then held by each such shareholder for the election of the following individuals to the Board of Directors: (i) the two (2) individuals nominated by Top Sterling, who initially shall be Nan Peng Shen and Jianzhang Liang (the “Top Sterling Directors”); (ii) the two (2) individuals nominated by AsiaStar (the “AsiaStar Directors”), who initially shall be Eric Ku Chun Lin and Jerry Sze; (iii) the one (1) individual nominated by IDG (the “IDG Director”), who initially shall be Su Yang Zhang; (iv) two (2) individuals nominated by Poly Victory, who initially shall be, Yunxin Mei and Jianmin Yang; and one (1) individual nominated by the Chief Executive Officer of the Company from time to time, who initially shall be Qi Ji. The AsiaStar Directors and the IDG Directors shall be referred to herein collectively as the “Preference Shares Directors”.

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10.2 Alternate Directors. Pursuant to Article 94 of the Articles of Association, each member of the Board of Directors shall be entitled to appoint and remove, from time to time and without the consent of any other member of the Board of Directors, any person to act as his/her alternate on the Board of Directors.

10.3 Observer Rights. As long as Susquehanna owns no less than 50% of the Series C Shares outstanding as at the date hereof (or any Ordinary Shares issued upon conversion thereof), the Company shall invite a representative designated by Susquehanna from time to time to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust with respect to all information so provided.

10.4 Articles of Association. The Company shall abide by all of its obligations under the Memorandum and Articles of Association, as amended to date; provided, however, the Articles of Association shall be consistent with this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Articles of Association, the terms of this Agreement shall prevail as among the parties hereto so as to regulate the way in which they exercise their rights as shareholders of the Company. The parties hereto further agree that, in case of such conflict, the Articles of Association shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

10.5 Charter Documents of Major Subsidiaries. The joint venture contract and the articles of association (along with any other charter documents) of each of the Beijing Sub and (Home Inns & Hotels Management (Shanghai) Co. Ltd.) (the “Shanghai Sub”) (collectively, the “Charter Documents”) shall share the essence of this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Charter Documents, the terms of this Agreement shall supercede the terms of the Charter Documents as among the parties hereto so as to regulate the way in which they exercise any power of decision with respect to the affairs of the Beijing Sub or the Shanghai Sub (as the case may be). The parties hereto further agree that, in case of such conflict, the Charter Documents shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

11. Matters Requiring Special Approval.

11.1 Matters of the Company Requiring the Approval of the Shareholders. Notwithstanding any provisions of this Agreement or of the Articles of Association, the Company undertakes to the Shareholders, and each of the Shareholders undertakes to the other Shareholders, that it shall exercise all its powers in relation to the Company and its Subsidiaries so as to procure that, subject to any applicable law, that no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company, the Beijing Sub, the Shanghai Sub or any 75% owned subsidiary of the Company (the “Relevant Subsidiary”) without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company, and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the Beijing Sub, the Shanghai Sub or a Relevant Subsidiary concerning any of the following matters without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company:

(a) the creation or adoption of any new employee stock option plan;

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(b) any consolidation, subdivision, conversion, increase or reduction of the share capital of each of the Company, the Beijing Sub and the Shanghai Sub or the alteration of any rights attaching thereto in any way;

(c) any change to the Memorandum or Articles of Association, the Charter Documents, or the memorandum or articles of association (or other similar charter documents) that would directly or indirectly affect adversely the preferences, rights or privileges of the holders of Preference Shares;

(d) the acquisition of, or the provision of any direct or indirect financial assistance for the purpose of acquiring: (A) in the ordinary course of business and on an arm’s length basis, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$1,000,000; or (B) otherwise than in the ordinary course of business, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$400,000; and

(e) the consolidation or merger which results in the shareholders immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity.

11.2 Matters of the Company Requiring the Approval of the Board of Directors. Notwithstanding any provisions of this Agreement or of the Articles of Association, the Company undertakes to the Shareholders that no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the Beijing Sub, the Shanghai Sub or the Relevant Subsidiary concerning any of the following matters with respect to the Beijing Sub, the Shanghai Sub or Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors:

(a) the entering into of any contract or transaction outside the ordinary course of its business, in excess of US$200,000;

(b) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in favor of any person other than a Group Company (as defined below);

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(c) any significant change to its business to areas materially different from the current products and/or services offered;

(d) declare, make, or pay any distribution of capital, income, and/or dividends to the security holders of the Company, the Beijing Sub or the Shanghai Sub, as applicable;

(e) repurchase or cancel any capital stock of the Company, the Beijing Sub or the Shanghai Sub;

(f) enter into any material transaction with any member of the Board of Directors, officer, employee, or shareholder of the Company or any company controlled, directly or indirectly, by a member of the Board of Directors, officer, employee or shareholder of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(g) the appointment of or change in the auditor of the Company, unless such auditor is a “Big 4” accounting firm; and

(h) the sale, transfer, lease, assignment or other disposal of a material part of its undertaking, property and/or assets with a book value (as reflected in its respective financial statements) in excess of US$400,000 or the entering into of any contract to do so.

11.3 Series C Protective Provisions. For so long as at least 25% of the Series C Shares issued and outstanding as at Closing shall remain outstanding, the Company shall not, and the Company shall procure that the Beijing Sub, the Shanghai Sub and the Relevant Subsidiary (each a “Group Company”) shall not, and each of the Shareholders undertakes to the other Shareholders that it shall exercise all its powers in relation to the Company and its Subsidiaries so as to procure that, subject to any applicable law, that a Group Company shall not, without the approval of the holders of at least two-thirds of the Series C Shares then outstanding voting as a separate class, take or permit any action that:

(a) increases or decreases, whether by merger, reclassification or otherwise, the authorized Series C Shares or effect any combination, split, or reclassification of the outstanding Series C Shares into a smaller or larger number of shares or exchange or convert any Series C Shares or require the exchange or conversion of any Series C Shares, except as provided in the Articles;

(b) amends, alters or repeals, whether by merger, reclassification or otherwise, any provision of the Articles that alters or adversely affects the rights, preferences, conversion and other rights, voting powers or privileges of the Series C Shares;

(c) authorizes (whether by merger, reorganization, reclassification or otherwise) or issues any shares of capital stock that rank senior to, or on parity with, the Series C Shares as to dividends, distributions or liquidation preference (“Series C Senior Shares”);

(d) adopts any new stock option or other stock incentive plan or arrangement, increase the number of shares available for grant or issuance under any existing stock option or other stock incentive plan (collectively the “Option Plans”), or make any other material amendment to any such plan or arrangement; provided, however, that the Company may contemporaneously with the Closing increase the aggregate number of Ordinary Shares available for grant or issuance under its Option Plans to 5% of the enlarged issued share capital of the Company as of Closing.

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(e) redeems, or declares, sets aside or pays a dividend on, the Ordinary Shares or any other class of Preference Shares of the Company, the Beijing Sub or the Shanghai Sub (as the case may be) or repurchases any outstanding securities of the Company, the Beijing Sub or the Shanghai Sub (as the case may be);

(f) increases the authorized number of directors of the Board of Directors of the Company;

(g) effects a voluntary liquidation, dissolution or winding up of a Group Company;

(h) effects any consolidation, reorganization or merger of a Group Company with or into any other corporation or entity;

(i) will result in a sale, license or disposition of all or substantially all of the assets (or of any material portion of the assets) of a Group Company or exclusively licenses all or substantially all of its property or business to a single entity or a group of entities, in any case in a single transaction or a series of transactions;

(j) acquires any entity, business or assets by means of merger, consolidation, recapitalization, purchase of assets or otherwise, involving the issuance of consideration by a Group Company having a fair market value individually or in the aggregate in excess of US$5,000,000; or

(k) effects a change in the primary nature of the Company’s business.

11.4 Notwithstanding anything stated herein to the contrary, the Company is excluded from any obligation contained in this Agreement to the extent that such obligation (the “Excluded Obligation”) would constitute an unlawful fetter on the Company’s statutory powers. For the avoidance of doubt, to the extent any Shareholder is under an obligation under this Agreement to procure (including, without limitation, by exercising its voting rights and powers if necessary) the Company to perform any Excluded Obligation, the fact that the Company itself is excluded from such obligation by virtue of this Section 11.4 shall not exclude such Shareholder from its own obligation.

12. Miscellaneous.

12.1 Term and Termination. This Agreement shall become effective upon the Closing. The restriction on transfer set forth in Section 2.1 hereof, the covenants set forth in Section 11 hereof, the Right of First Refusal, Right of First Offer and the Right of Co-Sale will terminate upon the earliest to occur of (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company. This Agreement shall terminate in respect of any Shareholder (but shall continue between the other parties to this Agreement (if more than one) but not otherwise) if at any time as a result of a transfer of Ordinary Shares or Preference Shares made in accordance with this Agreement that Shareholder holds no Ordinary Shares and Preference Shares in the capital of the Company but without prejudice to any rights which any party may have against any other party arising prior to such termination.

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12.2 Waivers and Amendments. Except as otherwise set forth herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by holders of at least 80%, in aggregate, of each of the Series A Shares, the Series B Shares and the Series C Shares and the Ordinary Shares held by the Parties immediately after the Closing. Upon the effectuation of each such waiver, consent, amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Preference Shares and the Ordinary Shares who have not previously consented thereto in writing.

12.3 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of Hong Kong. The parties hereto submit to the non-exclusive jurisdiction of the courts of Hong Kong.

12.4 Entire Agreement. This Agreement terminates the December Agreement and the Supplemental Agreement in its entirety and this Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.

12.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid or by overnight courier, or otherwise delivered by hand or by messenger, addressed (i) if to an Investor, at the Investor’s address, as shown on Exhibit B hereto, or at such other address as the Investors shall have furnished to the Company in writing, or (ii) if to a Shareholder, at the Shareholder’s address, as shown on Exhibit A hereto, or at such other address as the Shareholders shall have furnished to the Company in writing, or (iii) if to the Company, to its address set forth on the cover page of this Agreement and addressed to the attention of the President, or at such other address as the Company shall have furnished to the Investors.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally or by overnight courier, or, if sent by mail, at the earlier of its receipt or five (5) calendar days after the same has been deposited in a regularly maintained receptacle for the deposit of mail, addressed and mailed as aforesaid.

12.6 Severability of this Agreement. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

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12.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Investor, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Investor of any breach or default under this Agreement, or any waiver by the Investor of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Investor, shall be cumulative and not alternative.

12.10 Share Splits. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the Company’s capital which may be made by the Company after the Closing.

12.11 Further Assurances. The Parties and the Company will execute such further assurances and other documents and instruments and do such further acts and other things as may be necessary to implement and carry out the intent of this Agreement.

12.12 Assignment. This Agreement shall be binding on the parties hereto and their respective successors and shall inure to the benefit of each of them and their respective successors and permitted assigns. The benefit of this Agreement may not, except as otherwise herein provided, be assigned or transferred in whole or in part by any Party without the prior consent of the other Parties.

12.13 Interpretation. References in this Agreement to:

(a) words importing the singular include the plural and vice versa;

(b) words importing one gender include all other genders;

(c) Sections and Exhibits are references to sections and exhibits to this Agreement unless otherwise specified;

(d) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(e) any legislation shall include any legislation which amends, consolidates or replaces the same or which has been amended, consolidated or replaced by the same and shall include any subsidiary and subordinate legislation made under the relevant legislation;

(f) “including” or similar expressions are not words of limitation; and

(g) words and expressions defined in the body of this Agreement (including its exhibits) shall have the meanings thereby attributed to them whenever the context requires.

12.14 Confidentiality. The Parties undertake to each other and the Company that they will not at any time hereafter use or divulge or communicate to any person other than to officers or employees of the Company whose province it is to know the same or on the instructions of the Board of Directors any confidential information concerning the business, accounts, finance or contractual arrangements or other dealings, transactions or affairs of the Company which may come to their knowledge and they shall use their best endeavors to prevent the publication or disclosure of any confidential information concerning such matters by themselves, their respective employees and officers; provided, however, that AsiaStar, IDG and Susquehanna may disclose such information to its respective partners, principals, employees, and legal and financial advisors. The obligations of each of the Parties contained in this Section 12.14 shall continue without limit in point in time but shall cease to apply to any information coming into the public domain otherwise than by breach by any such Party of its said obligations; provided that nothing contained in this Section 12.14 shall prevent any Party from disclosing such information to the extent required in or in connection with legal proceedings arising out of this Agreement or any matter relating to or in connection with the Company. All notes and memoranda (whether in the form of originals, reproductions or electronically stored data) of any trade secrets or confidential information concerning the business of the Company or any of its suppliers, agents, distributors or customers which shall be acquired, received or made by a Party during the continuance of this Agreement shall be the property of the Company and shall be surrendered by the Party to someone duly authorized by the Company in that behalf at the termination of this Agreement or at the request of the Board of Directors at any time during the continuance of this Agreement.

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12.15 Susquehanna Rights. Any rights of Susquehanna under this Agreement may, without prejudice to the rights of Susquehanna to exercise any such rights, be exercised by Susquehanna Asia Investment LLLP or any other fund manager of Susquehanna or their nominees (“Susquehanna Manager”), unless Susquehanna has (a) given notice to the other parties that any such rights cannot be exercised by Susquehanna or a Susquehanna Manager; and (b) not given notice to the other parties that such notice which is given under this Section 12.15 has been revoked.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Shareholders Agreement as of the date first written above.

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

By:

Name:

Title:

POLY VICTORY INVESTMENTS LIMITED

By:

Name:

Title:

TOP STERLING INTERNATIONAL LIMITED

By:

Name:

Title:

QI JI

            (Signature)

NAN PENG SHEN

            (Signature)

[SIGNATURE PAGE TO HOME INNS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

HUI CHEN
(Signature)
RI XIN LIANG
(Signature)
SUN JIAN
(Signature)
Series A Preference Shareholders:
ASIASTAR IT FUND L.P.
By:
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
Name:
Title:

[SIGNATURE PAGE TO HOME INNS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

Series B Preference Shareholders:
ASIASTAR IT FUND L.P.
By:
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
Name:
Title:

[SIGNATURE PAGE TO HOME INNS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

Series C Preference Shareholders:

SUSQUEHANNA CHINA INVESTMENT HI,

By: Susquehanna Asia Investment, LLLP, its

Authorized agent

Name:

Title:

BEIHAI CAPITAL LIMITED

By:

Name:

Title:

KANGAROO INVESTMENTS LLC

By:

Name:

Title:

FORTUNE HERO LIMITED

By:

Name:

Title:

SOON YAN SEEN

By:

Name:

Title:

HIROKO NISHIKAWA

By:

Name:

Title:

[SIGNATURE PAGE TO HOME INNS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

EXHIBIT A

SHAREHOLDERS

Name	Address	Ordinary Shares	Series A Shares	Series B Shares
Top Sterling International Limited	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	11,835,000	Nil	Nil
Poly Victory Investments Limited	Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands	13,364,140	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	800,000	Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	600,000	Nil	Nil
Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000	Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000	Nil	Nil
Sun Jian	Room 502, #19 Lane 666, Jinxiu Road, Shanghai, China	200,000	Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil	10,775,800	1,511,028
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil	6,465,600	906,617

EXHIBIT B

INVESTORS

Name of Investor	Address
Susquehanna China Investment HI	c/o Susquehanna Asia Investment, LLLP 401 City Avenue, Suite 220 Bala Cynwyd, PA 19004-1188 U.S.A. Fax: (610) 747-2014
Beihai Capital Limited	2103 Futian Garden Building A Fu Qiang Road Shenzhen China 518031 Fax: (86-755) 2583-8382
Kangaroo Investments LLC	200 W. Jackson Chicago, Illinois 60606 U.S.A. Fax: (312) 264 2001
Fortune Hero Limited	Suite 3001-03 30/F Convention Plaza Office Tower 1 Harbour Road Wanchai, Hong Kong c/o Kenneth Gaw Fax: (852) 2810 1813

Soon Yan Seen	Flat 2401, Blk A Villa Lotto 18 Broadwood Road Happy Valley, Hong Kong Fax: (852) 2169 3885
Hiroko Nishikawa	4C Somerset 67 Repulse Bay Road Hong Kong Fax: (852) 2517 6671

EXHIBIT C

FORM OF INDEMNIFICATION AGREEMENT

INDEMNIFICATION AGREEMENT

THIS AGREEMENT made as of the          day of                          , 2005

BETWEEN:

(hereinafter called the “Director”)

OF THE FIRST PART

AND:	HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED, a company duly incorporated under the laws of Hong Kong with its registered office at Room 2001, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong.
	(hereinafter called the “Company”)

OF THE SECOND PART

NOW THEREFORE that in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties hereto (the “Parties”) agree, each with the other, as follows:

ARTICLE 1

INDEMNIFICATION PROVISIONS

1.1 Indemnity

Subject to Clause 1.3 hereof, the Company hereby agrees to indemnify and save harmless the Director against all liabilities, suits, damages, costs, charges and expenses including any amount paid to settle an action or satisfy a judgement, actually and reasonably incurred by the Director (collectively, the “Expenses”) and without limiting the foregoing, such indemnity shall be in respect of any Expenses relating to a civil, criminal, or administrative action or proceeding to which the Director is made a party, witness, or other participant by reason of being or having been a director of the Company including an action brought by the Company if:

(a) the Director acted honestly and in good faith with a view to the best interests of the Company; and

1

(b) in the case of a criminal or administrative action or proceeding, the Director had no reasonable grounds for believing that its conduct was unlawful.

1.2 No Presumption

The determination of any action, suit or proceeding by judgment, order, settlement, conviction or otherwise shall not, of itself, create a presumption that the Director did not act honestly and in good faith and in the best interests of the Company, and that the Director did not exercise the care, diligence and skill of a reasonably prudent party and, with respect to any criminal action or proceeding, did not have reasonable grounds to believe that his conduct was unlawful.

1.3 Scope of Indemnity

The Company hereby agrees to indemnify Director to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Memorandum and Articles of Association, or statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of the Company to indemnify the Director, it is the intent of the Parties that Director shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of the Company to indemnify the Director, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the Parties’ rights and obligations hereunder.

1.4 Nonexclusivity

The indemnification provided by this Agreement shall be in addition to any rights to which Director may be entitled under the Company’s Memorandum and Articles of Association, any agreement, any vote of shareholders or disinterested directors, the Hong Kong Companies Ordinance, or otherwise. The indemnification provided under this Agreement shall continue as to Director for any action Director took or did not take while serving as a director of the Company even though Director may have ceased to serve in such capacity.

1.5 Partial Indemnification

If Director is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Director for the portion of such Expenses to which Director is entitled.

2

ARTICLE 2

GENERAL PROVISIONS

2.1 Further Assurances

The Parties shall execute such further assurances and other documents and instruments and do such further and other things as may be necessary to implement and carry out the intent of this Agreement.

2.2 Entire Agreement

The provisions herein constitute the entire agreement between the Parties, and supersede all previous expectations, understandings, communications, representations and agreements, whether verbal or written, between the Parties with respect to the subject matter hereof.

2.3 Severability

If any provision of this Agreement is unenforceable or invalid for any reason whatsoever, such unenforceable or invalid provisions of this Agreement shall be severable from this Agreement and the remaining provisions shall remain enforceable to the fullest extent permitted by law.

2.4 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region of the People’s Republic of China.

2.5 Gender

Wherever the singular and masculine are used throughout this Agreement, the same shall be construed as meaning the plural or feminine, or a body corporate, where the context or the Parties hereto so require.

2.6 Headings

The headings in this Agreement form no part of this Agreement and shall be deemed to have been inserted for convenience only.

2.7 Counterparts

This Agreement may be executed in one or more counterparts, each of which may be executed by less than all of the Parties, each of which shall be enforceable against the Parties actually executing such counterparts, and all of which together shall constitute one instrument.

3

IN WITNESS WHEREOF the Parties have executed these presents under his hand and seal in case of the Director and in the presence of the duly authorized signatories in the case of the Company as of the day and year first above written.

SIGNED, SEALED AND DELIVERED	)
BY	)
in the presence of:	)
	)
	)
Name	)
	)
	)
Address	)
	)
	)
Occupation	)

SIGNED BY	)
FOR AND ON BEHALF OF HOME INNS	)
& HOTELS MANAGEMENT (HONG	)
KONG) LIMITED in the presence of	)
	)
	)
	)
	)
	)

4

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

AMENDED AND RESTATED SHAREHOLDERS AGREEMENT

Date:                 January 2005

EXHIBIT F

Form of Legal Opinion of Hong Kong and PRC Counsel

F-1

Our Ref:         801800-6 Date: 27 January 2005

White & Case

9/F, Gloucester Tower

The Landmark

11 Pedder Street

Central, Hong Kong

Attention: Peter Tan

Susquehanna China Investment HI

c/o Susquehanna Asia Investment, LLLP

401 City Avenue, Suite 220

Bala Cynwyd, PA 19004-1188

U.S.A.

Beihai Capital Limited

2103 Futian Garden Building A

Fu Qiang Road

Shenzhen

China 518031

Soon Yan Seen

Flat 2401, Blk A

Villa Lotto

18 Broadwood Road

Happy Valley, Hong Kong

Fortune Hero Limited

Suite 3001-03

30/F Convention Plaza Office Tower

1 Harbour Road

Wanchai, Hong Kong

c/o Kenneth Gaw

Kangaroo Investments LLC

200 W. Jackson

Chicago, Illinois 60606

U.S.A.

Hiroko Nishikawa

4C Somerset

67 Repulse Bay Road

Hong Kong

White & Case and certain other parties	Page 2
	27 January 2005

Dear Sirs,

Re: Home Inns & Hotels Management (Hong Kong) Limited (the “Company”)

We are a firm of solicitors qualified to practise the law of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) and have been instructed by the Company to give certain opinions in respect of the transactions contemplated in the following documents (collectively the “Transaction Documents”):

(a) Series C Preference Shares Purchase Agreement (“Share Purchase Agreement”) dated 24 January 2005 and executed by the Company and the persons and entities listed in Schedule A hereof in respect of the Series C Preference Shares, each having a par value of HK$0.005, of the capital of the Company (the “Series C Shares”); and

(b) Amended and Restated Shareholders Agreement (“Shareholders Agreement”) to be executed between the Company and the persons and entities listed in Schedule B hereof.

The opinions expressed herein are confined to and given on the basis of the laws of Hong Kong currently in force as applied by the courts of Hong Kong at the date hereof and our understanding of public policy in Hong Kong as at the date hereof. We have not made any investigation or enquiry of, and we do not express or imply any opinion as to, the laws of any jurisdiction other than Hong Kong. These opinions are to be governed by and construed in accordance with the laws of Hong Kong.

A. DOCUMENTS

In rendering these opinions, we have examined originals or copies, certified or otherwise, of the following documents:

(a) the Transaction Documents;

(b) the Certificate of Incorporation of the Company dated 28 May 2001;

(c) the Certificate of Incorporation on Change of Name of the Company dated 10 September 2001;

(d) the Certificate of Incorporation on Change of Name of the Company dated 13 March 2002;

(e) a Certificate of Continuing Registration for the Company issued by the Companies Registry and dated 18 January 2005 (the “Certificate of Continuing Registration”);

White & Case and certain other parties	Page 3
	27 January 2005

(f) the Memorandum and Articles of Association of the Company, as amended through the date hereof, a copy of which is attached as Schedule C (the “Memorandum and Articles”);

(g) the Business Registration Certificate of the Company;

(h) a copy of the Directors Resolutions signed by all of the directors of the Company dated 24 January 2005 and copies of two Shareholders Resolutions signed by all of the shareholders of the Company dated 24 January 2005 (collectively the “Resolutions”);

(i) a Certificate of Director dated 27 January 2005 executed by Mr. Nanpeng SHEN as a director of the Company (the “Director’s Certificate”);

(j) the Register of Members of the Company; and

(k) the Register of Directors of the Company.

We have also examined such other laws, regulations, records, documents, certificates and instruments as we have deemed relevant or necessary for the purpose of giving these opinions.

B. SEARCHES

We have conducted or arranged to conduct the following searches in respect of the Company:

(a) company search at the Companies Registry made on 27 January 2005;

(b) winding up search at the Official Receiver’s Office made on 27 January 2005; and

(c) court search at the High Court Registry made on 27 January 2005.

C. ASSUMPTIONS

In giving these opinions, we have assumed the following without verification:

(a) All signatures on all documents (whether originals or copies) reviewed by us are genuine;

(b) All documents submitted to us as originals are authentic and all documents submitted to us as copies conform with the originals of such documents;

White & Case and certain other parties	Page 4
	27 January 2005

(c) All factual representations contained in all documents (including without limitation the Certificates) submitted to us are accurate and complete, and, save in respect of the Transaction Documents, all such documents are valid and subsisting;

(d) The Shareholders Agreement has been executed and delivered by the relevant officer of the Company on 27 January 2005 in the manner authorised by the Company in the Resolutions;

(e) All parties to the Transaction Documents (other than the Company) have the power and authority to enter into, execute, deliver and perform the Transaction Documents in accordance with their respective terms and the Transaction Documents have been duly authorized, executed and delivered by or on behalf of such parties and are binding on and constitute legal, valid and enforceable obligations of such parties; moreover, the rights and obligations expressed in or implied by the Transaction Documents to be conferred on and assumed by such parties are within their statutory powers and authorities;

(f) There is no contractual or other prohibition (other than as may arise by virtue of the laws of Hong Kong) binding on the Company or on any other party to the Transaction Documents prohibiting the Company or any such party from entering into and performing its obligations under the Transaction Documents;

(g) All governmental approvals, licences and consents required otherwise than under the laws of Hong Kong to permit each party (other than the Company) to the Transaction Documents to enter into, execute its rights under and perform the obligations expressed to be assumed by it in the relevant Transaction Documents have been obtained and remain in full force and effect, or where the same can only be obtained at the time of exercise of such rights or the performance of such obligations that the same will be duly obtained;

(h) The information disclosed by the searches at the Companies Registry, the Official Receiver’s Office, and the High Court Registry described in Part B of this letter is true, complete and up to date and such information has not since the dates and times of the respective searches been altered and such searches disclosed all information which had been delivered or sent electronically for registration or filing (as the case may be) up to the date of the searches;

(i) The information contained in the Company’s statutory books and records and disclosed to us for review is true, complete and up to date as at the date hereof;

(j) The Resolutions have not been fully or partially revoked, modified or superseded by subsequent resolutions of the Company in respect of the relevant subject matter;

White & Case and certain other parties	Page 5
	27 January 2005

(k) No change has been made to the Memorandum and Articles provided to us for inspection; and

(l) Insofar as any obligation under the Transaction Documents is to be performed in any jurisdiction outside Hong Kong, its performance will not be illegal or ineffective by virtue of the laws of any such jurisdiction (as to which we do not express an opinion).

D. OPINIONS

Based upon and relying upon the foregoing, and subject to the comments, reservations and qualifications stated below, we are of the following opinions:

(a) According to the Certificate of Continuing Registration, the Company has been duly incorporated as a company with limited liability under the Companies Ordinance (Cap. 32 of the Laws of Hong Kong) on and, as at 18 January 2005, the Company remains on the Register of Companies maintained by the Companies Registry.

(b) The Company has full corporate power and authority to own its property and assets and to carry on its business in accordance with its Memorandum and Articles; and the Company has full corporate power and authority to enter into and perform its obligations under the Transaction Documents.

(c) The Memorandum and Articles do not violate, conflict with or result in a breach of any law, public rule or regulation applicable to the Company in Hong Kong currently in force and do not violate, conflict with or result in a breach of any existing order or decree of any governmental authority or agency or any official body in Hong Kong. Under Hong Kong law, the Articles bind the Company and its members to the same extent as if each member had subscribed his name and affixed his seal thereto. The Memorandum and Articles have been duly adopted by the Company and are in full force and effect.

(d) The execution, delivery and performance by the Company of the Transaction Documents have been duly authorised by all necessary corporate action of the Company and no such approval has been revoked or amended, and the Transaction Documents have been duly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company enforceable in Hong Kong in accordance with its terms (taken both individually and together as a whole).

(e) The authorised share capital of the Company is HK$1,000,000.00 divided into 200,000,000 shares of HK$0.005 each comprised of 177,075,114 Ordinary Shares of par value HK$0.005 each, of which 27,399,140 are in issue; 17,241,400 Series A Preference Shares of par value HK$0.005 each of which 17,241,400 are in issue; 2,417,645 Series B Preference Shares of par value HK$0.005 each of which 2,417,645 are in issue; and 3,265,841 Series C Shares of which none will be in issue prior to the subscription by the person and entities listed in Schedule A hereof.

White & Case and certain other parties	Page 6
	27 January 2005

(f) All of the issued shares in the capital of the Company have been duly and validly authorized and issued and are fully paid and non-assessable (meaning that no further sums are payable to the Company by a holder in respect of such shares registered in his name). No issued shares in the capital of the Company are subject to any pre-emptive or similar rights under Hong Kong law or the Memorandum and Articles except as may be set out in the Transaction Documents.

(g) The creation and the issue and allotment of the Series C Shares has been duly and validly authorised, and, when issued and allotted against full payment therefor pursuant to the Share Purchase Agreement, will be validly issued, fully paid and non-assessable, and, except as specifically disclosed in the Memorandum and Articles and the Shareholders Agreement, shall at the time of issuance be free of any liens, encumbrances, rights of first offer and preemptive rights. Assuming the conversion in full of the Series C Shares into Ordinary Shares (the “Conversion Shares”), the number of the authorised but unissued Ordinary Shares of the Company is now sufficient for the Company to satisfy in full the issue and allotment of all of the Conversion Shares and 3,265,841 Ordinary Shares have been reserved by the Company for such issuance.

(h) Except for Form SC1 and other documents to be filed at the Companies Registry as may be required on the issue and allotment of the Series C Shares, the Company does not require any governmental licenses, permits, consents, orders, approvals or other authorisations under the laws of Hong Kong to enable the Company to consummate the transactions provided for in the Share Purchase Agreement and it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents that any document be filed, recorded or enrolled with any governmental department, agency or other authority in Hong Kong.

(i) The execution and delivery of the Transaction Documents by the Company, and the consummation by the Company of the transactions contemplated by the Transaction Documents to occur on the date hereof do not constitute:

(i) a breach of the provisions of the Memorandum and Articles; or

(ii) a breach of any ordinance, rule or regulation of Hong Kong applicable to the Company.

(j) The choice of the laws of Hong Kong as the governing law of the Transaction Documents has been made by all parties in good faith and would be regarded as a valid and binding selection which will be upheld by the courts in Hong Kong as a matter of the laws of the Hong Kong.

White & Case and certain other parties	Page 7
	27 January 2005

E. RESERVATIONS

Our opinions herein are subject to the following comments, reservations and qualifications:

(a) Notice of a winding up order made or resolution passed or a receiver appointed may not be filed at the Companies Registry or the Official Receiver’s Office immediately and there may therefore be a delay in the relevant notice appearing in the records in respect of the Company kept by the said registry and office.

(b) The term “enforceable” as used above means that the obligations assumed by the Company under the Transaction Documents are of a type which the Hong Kong courts enforce. It does not mean that these obligations will necessarily be enforced in all circumstances in accordance with their terms. In particular:

(i) enforcement may be limited by general principles of equity, and in particular the remedies of injunction and specific performance are discretionary and will not be normally ordered by the court in respect of an obligation where damages would be an adequate remedy;

(ii) enforcement may be limited by laws from time to time in effect relating to insolvency, bankruptcy, liquidation, receivership, re-organisation, moratoria, court schemes or other similar laws affecting generally the enforcement of creditors rights;

(iii) claims may be time-barred or become subject to defences of set-off or counterclaim;

(iv) upon a future application by any party to enforce any of the Transaction Documents, a Hong Kong court may consider the then prevailing public policy of Hong Kong in determining the enforceability of such Transaction Documents at such time;

(v) where obligations are to be performed in a jurisdiction outside Hong Kong, they may not be enforceable in Hong Kong to the extent that performance would be illegal or contrary to public policy under that jurisdiction; and

(vi) the enforceability of the Transaction Documents may be limited by the provisions of Hong Kong law applicable to contracts held to have been frustrated by events happening after their execution.

Moreover, for the purposes of our opinions in paragraphs D(d) and D(j) above, the term “binding” is used in the context of a theoretical future action or proceeding and, in such context, has a meaning similar to “enforceable” and accordingly our above qualifications as to the term “enforceable” also apply to the term “binding” as used in the said opinions.

White & Case and certain other parties	Page 8
	27 January 2005

(c) Under subsection 6(6) of the Business Registration Ordinance (Cap. 310 of the Laws of Hong Kong), the issue of a business registration certificate in respect of any business does not deem to imply that the requirements in any law in relation to such business or to persons carrying on the same or employed therein have been complied with.

(d) The effectiveness of terms exculpating a party from a liability or duty otherwise owed are limited by law.

(e) Failure to exercise a right may operate as a waiver of that right notwithstanding any “no waiver” provisions contained in any of the Transaction Documents and a court will determine in its discretion whether or not an illegal, invalid or unenforceable provision may be severed notwithstanding any “severability” provisions contained in any of the Transaction Documents.

(f) The freedom of parties to choose the governing law of a contract is subject to the following limitations:

(i) the choice of law must be legal, bona fide and must bear some objective relation to the contract and must not be contrary to public policy;

(ii) when the parties choose the laws of a jurisdiction to evade the application of a legal system with which the contract is objectively connected, the choice of law may be disregarded; and

(iii) claims based on tort (e.g. fraud), as opposed to contract, will be governed by the law of the place where the tort was committed, rather than by the law of the place designated in the contract.

(g) The courts in Hong Kong may stay proceedings if concurrent proceedings are being brought elsewhere.

(h) To the extent that interest may be charged under the Transaction Documents, enforcement may be limited if the effective rate of interest charged is usurious or if the transaction is considered extortionate under the Money Lenders Ordinance (Cap.163 of the Laws of Hong Kong).

(i) On July 1, 1997, Hong Kong became the Hong Kong Special Administrative Region of the PRC. On April 4, 1990, the National People’s Congress (the “NPC”) of the PRC adopted the Basic Law of Hong Kong (the “Basic Law”). Under Article 8 of the Basic Law, the laws of Hong Kong in force at June 30, 1997 (including the common law, rules of equity, ordinances, subordinate legislation and customary law) shall be maintained, except for any that contravene the Basic Law and subject to any amendment by the legislature of Hong Kong. Under Article 160 of the Basic Law, the laws of Hong Kong in force at June 30, 1997 shall be adopted as laws of Hong Kong unless they are declared by the Standing Committee of the NPC (the “Standing Committee”) to be in contravention of the Basic Law, and if any such laws are later discovered to be in contravention of the Basic Law, they shall be amended or cease to have force in accordance with the procedure prescribed by the Basic Law.

White & Case and certain other parties	Page 9
	27 January 2005

(j) On February 23, 1997, the Standing Committee adopted a decision (the “Decision”) on the treatment of laws previously in force in Hong Kong. Under paragraph 1 of the Decision, the Standing Committee decided that the laws previously in force in Hong Kong which include the common law, rules of equity, ordinances, subsidiary legislation and customary law, except for those which contravene the Basic Law are to be adopted as the laws of Hong Kong. Under paragraph 2 of the Decision, the Standing Committee decided that the ordinances and subsidiary legislation set out in Annex 1 to the Decision which are in contravention of the Basic Law are not to be adopted as the laws of Hong Kong. One of the ordinances set out in that Annex is the Application of English Law Ordinance (Cap.88 of the Laws of Hong Kong) (the “English Law Ordinance”). The English Law Ordinance applied the common law and rules of equity of England to Hong Kong. We have assumed in giving these opinions that the effect of paragraph 2 of the Decision, insofar as it relates to the English Law Ordinance, is to repeal the English Law Ordinance prospectively and that the common law and rules of equity of England which applied in Hong Kong on June 30, 1997, continue to apply, subject to their subsequent independent development which will rest primarily with the courts of Hong Kong which are empowered by the Basic Law to refer to precedents of other common law jurisdictions when adjudicating cases. Such assumption is consistent with the approach taken by the Court of Appeal of Hong Kong in HKSAR v. Ma Wai-Kwan and others on 29 July 1997.

These opinions are strictly limited to the matters stated herein and no inference or conclusion to the contrary should be drawn by any person or entity to whom these opinions are given or revealed whether as permitted herein or otherwise and these opinions may not be disclosed to or relied upon by any person or entity except the addressees hereof.

Yours faithfully,

BOUGHTON PETERSON YANG ANDERSON

White & Case and certain other parties	Page 10
	27 January 2005

Schedule A

Investors

1. Susquehanna China Investment HI

2. Beihai Capital Limited

3. Soon Yan Seen

4. Fortune Hero Limited

5. Kangaroo Investments LLC

6. Hiroko Nishikawa

White & Case and certain other parties	Page 11
	27 January 2005

Schedule B

Shareholders

1. Poly Victory Investments Limited

2. Top Sterling International Limited

3. Qi Ji

4. Nan Peng Shen

5. Hui Chen

6. Ri Xin Liang

7. Sun Jian

8. Asiastar IT Fund L.P.

9. IDG Technology Venture Investments, L.P.

10. Susquehanna China Investment HI

11. Beihai Capital Limited

12. Soon Yan Seen

13. Fortune Hero Limited

14. Kangaroo Investments LLC

15. Hiroko Nishikawa

White & Case and certain other parties	Page 12
	27 January 2005

Schedule C

Memorandum and Articles of Association of the Company

Legal Opinion

Date: 27 January 2005

To: Home Inns & Hotels Management (Shanghai) Co. Ltd.

Home Inns Hotel Management (Beijing) Limited

Susquehanna China Investment HI

Beihai Capital Limited

Soon Yan Seen

Fortune Hero Limited

Kangaroo Investments LLC

Hiroko Nishikawa

RE: Home Inns & Hotels Management (Shanghai) Co. Ltd. ,

Home Inns Hotel Management (Beijing) Limited

and the Loan and Undertaking Agreement

We have acted as special Chinese counsel to Home Inns & Hotels Management (Shanghai) Co. Ltd. (the “Shanghai Company”) and Home Inns Hotel Management (Beijing) Limited (the “Beijing Company”), two companies organized in the People’s Republic of China (the PRC), and Qi Ji (the “Borrower”) in connection with the transactions contemplated by two “Loan and Undertaking Agreement” signed in 2002 and one “Loan and Undertaking Agreement” dated September 30 2004 (the “Agreements”), between the Beijing Company and the Borrower.

This legal opinion is confined to and is given based on the published and publicly available laws and regulations of the PRC (excluding the laws of Hong Kong, Macau and Taiwan for the purpose of this opinion) effective as of the date hereof. We do not guarantee that any change in such laws or in their interpretation after the date hereof will not affect any of the opinions expressed below. We have not investigated, and we do not express or imply any opinion on the laws of any other jurisdiction, and we have assumed that no such other laws would affect the opinions expressed below.

Concord & Partners

All terms used herein and which are defined or construed in the documents shall have the same meanings as so defined or construed in the Agreements unless otherwise defined herein.

1. Document Examined

In connection with this opinion, we have examined copies, certified or otherwise, identified to our satisfaction, of such instruments, certificates, records and other documents provided by the Beijing Company and the Shanghai Company, including the following:

(A) Corporate Documents of the Beijing Company:

(a) Current Articles of Association;

(b) Copy of Current Business License issued by the Beijing Industry and Commerce Administrative Bureau on September 15, 2004 with an operation term from June 28, 2002 through June 27, 2032;

(c) Copy of the Joint Venture Contract for the Beijing Company;

(d) Certificate of Approval for Establishment of Enterprises with Investment of Taiwan, Hong Kong, Macao and overseas Chinese in the People’s Republic of China granted by the Beijing Municipal Government dated June 21, 2002;

(e) Copy of Tax Registration Certificate (for state tax) issued by the State Tax Bureau of Chaoyang District, Beijing on June 28, 2002;

(f) Copy of Tax Registration Certificate (for local tax) issued by the Local Tax Bureau of Chaoyang District, Beijing on November 24, 2002;

(g) Copy of Capital Payment Verification Report issued by the Beijing Hua Long Certified Public Accountants Co. Ltd dated August 13, 2004;

(h) Organization Code Certificate issued by the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China;

(i) Notice of Approval for Opening Bank Account issued by the People’s Bank of China dated July 10, 2002.

(B) Corporate Documents of the Shanghai Company:

(a) Current Articles of Association;

(b) Copy of Current Business License issued by the Shanghai Industry and Commerce Administrative Bureau on November 25, 2004 with an operation term from November 29, 2002 through November 28, 2022;

	(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:    (010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

Concord & Partners

(c) Copy of Tax Registration Certificate (for local tax) issued by the Local Tax Bureau of Shanghai on January 14, 2003;

(d) Copy of Capital Payment Verification Report issued by Shanghai Tian Cheng Certified Public Accountants Co., Ltd dated October 13, 2004;

(e) Organization Code Certificate issued by the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China;

(f) Notice of Approval for Opening Bank Account issued by the People’s Bank of China dated March 11, 2003.

(C) Operational Contracts of the Beijing Company:

(a) Contracts of lease.

(D) Operational Contracts of the Shanghai Company:

(a) Contract of Management;

(b) Franchise Agreement;

(c) Agreement on PMS System.

(E) Transaction Documents

(a) The Agreements;

2. Based on the foregoing examination and assumptions, and subject to the qualifications below, we are of the opinion that:

(a) All copies of the documents set out in paragraphs 1(A) and 1(B) are assumed to be authentic.

(b) Each of the contracts set out in paragraphs 1(C) and 1(D) is governed by PRC laws and the terms and conditions of such contracts are legal, valid and binding on the parties thereto enforceable under PRC laws.

	(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:    (010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

Concord & Partners

(c) The Beijing Company has been properly established in accordance with the PRC laws, and been validly existing thereunder. The documents relating to the establishment and operation of the Beijing Company are valid and have been duly approved or issued (as applicable) by competent Governmental or Regulatory Authorities of the PRC. All such approvals are in full force and effect, have not been revoked, withdrawn, suspended or cancelled and are not subject to any condition. The Beijing Company has complied with all applicable registration and filing requirements under PRC law for its establishment and the maintenance of its status and existence as an enterprise legal person.

(d) The Shanghai Company has been properly established in accordance with the PRC laws, and been validly existing thereunder. The documents relating to the establishment and operation of the Shanghai Company are valid and have been duly approved or issued (as applicable) by competent Governmental or Regulatory Authorities of the PRC. All such approvals are in full force and effect, have not been revoked, withdrawn, suspended or cancelled and are not subject to any condition. The Shanghai Company has complied with all applicable registration and filing requirements under PRC law for its establishment and the maintenance of its status and existence as an enterprise legal person.

(e) The registered capital of RMB 68,945,000 of the Beijing Company has been paid in full. 93.473% of the equity interest of the Beijing Company is owned by Home Inns and Hotels Management (HK) Limited, and 6.527% by Beijing Capital travel Resorts and Hotels Group Limited.

(f) The registered capital of RMB 35,000,000 of the Shanghai Company has been paid in full. 95% of the equity interest in the registered capital is owned by Home Inns Hotel Management (Beijing) Limited, and 5% by Qi Ji .

(g) The Beijing Company has full corporate power and authority and has satisfied all conditions and done all things required by the laws of the PRC (including the making and obtaining of all necessary approvals, if any) in order for it to own, use, lease and operate its assets and to conduct its existing and proposed business as set out in its business license. The business operation of the Beijing Company is in compliance with all applicable PRC laws and regulations.

(h) The Shanghai Company has full corporate power and authority and has satisfied all conditions and done all things required by the laws of the PRC (including the making and obtaining of all necessary approvals, if any) in order for it to own, use, lease and operate its assets and to conduct its existing and proposed business as set out in its business license. The business operation of the Shanghai Company is in compliance with all applicable PRC laws and regulations.

	(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:    (010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

Concord & Partners

(i) To our best knowledge, no action the Beijing Company has taken nor have any steps been taken or legal or administrative proceedings been commenced or threatened for the winding up, dissolution or liquidation of the Beijing Company, or for the suspension, withdrawal, revocation or cancellation of the Beijing Company’s business license.

(j) To our best knowledge, no action the Shanghai Company has taken nor have any steps been taken or legal or administrative proceedings been commenced or threatened for the winding up, dissolution or liquidation of the Shanghai Company, or for the suspension, withdrawal, revocation or cancellation of the Shanghai Company’s business license.

(k) The approvals, authorizations or licenses set out in Paragraphs 1(A) contain a true and complete list of all Government Licenses used in and material to the business or operations of the Beijing Company. All Government Licenses required under PRC law for the due and proper establishment and operations of businesses of the Beijing Company and for the conduct of the Beijing Company have been duly obtained from the relevant Governmental and Regulatory Authorities of the PRC and are in full force and effect.

(l) The approvals, authorizations or licenses set out in Paragraphs 1(B) contain a true and complete list of all Government Licenses used in and material to the business or operations of the Shanghai Company. All Government Licenses required under PRC law for the due and proper establishment and operations of businesses of the Shanghai Company and for the conduct of the Shanghai Company have been duly obtained from the relevant Governmental and Regulatory Authorities of the PRC and are in full force and effect.

(m) All filings and registrations with the relevant Governmental or Regulatory Authorities of the PRC required in respect of the Beijing Company and its operations have been duly completed in accordance with the requirement of the relevant Governmental or Regulatory Authorities of the PRC.

(n) All filings and registrations with the relevant Governmental or Regulatory Authorities of the PRC required in respect of the Shanghai Company and its operations have been duly completed in accordance with the requirement of the relevant Governmental or Regulatory Authorities of the PRC.

	(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:    (010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

Concord & Partners

(o) The Beijing Company is not in breach of the terms and conditions of any approvals and none thereof is subject to suspension, revocation or withdrawal and to the best of our knowledge, having made all due and reasonable enquiries, there are no circumstance, existing which might lead to suspension, revocation or withdrawal of any such approvals or any conditions attached thereto being adversely altered.

(p) The Shanghai Company is not in breach of the terms and conditions of any approvals and none thereof is subject to suspension, revocation or withdrawal and to the best of our knowledge, having made all due and reasonable enquiries, there are no circumstance, existing which might lead to suspension, revocation or withdrawal of any such approvals or any conditions attached thereto being adversely altered.

(q) The Beijing Company is not in breach of or in default under its articles of association or any contract to which it is a party.

(r) The Shanghai Company is not in breach of or in default under its articles of association or any contract to which it is a party.

(s) After due inquiry and to our best knowledge, there is no action, suit, inquiry, or claim either before or brought by or before any PRC governmental or public body, authority or regulatory body against the Beijing Company.

(t) After due inquiry and to our best knowledge, there is no action, suit, inquiry, or claim either before or brought by or before any PRC governmental or public body, authority or regulatory body against the Shanghai Company.

(u) Both of the Beijing Company and the Borrower have full legal capacity, power and authority to enter into, execute and deliver the Agreements and to perform each of their obligations thereunder. The Agreements constitute legal, valid and binding obligations of the Beijing Company and the Borrower enforceable in accordance with their terms under PRC laws. No provision in the Agreements (taken both individually and together as a whole) contravenes in any way any applicable PRC law or public policy.

(v) No third party approvals are required for the implementation of the Agreements.

(w) The obligations undertaken by and the rights granted to each party to the Agreements are not legally prohibited under PRC laws and regulations.

		(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:	(010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

Concord & Partners

3. This letter is subject to the following qualifications:

(i) Rights and obligations under the contracts set out in paragraphs 1(C) and 1(D) may be limited or affected by applicable bankruptcy, insolvency, liquidation, reorganization or similar laws affecting creditors’ rights generally;

(ii) Our opinion that an obligation or a document is enforceable means that the obligation or document is of a type and form which a PRC court will usually give effect to. It is not to be taken as meaning or implying that the obligation or document can necessarily be enforced in accordance with its terms in all circumstances by or against a particular party or that any particular remedy will be;

(iii) Rights of action under or in relation to the contracts set out in paragraphs 1(C) and 1(D) are limited to the relevant period provided by the General Principles of Civil Law of the PRC and the Contract Law of the PRC;

(iv) The enforceability of the contracts set out in paragraphs 1(C) and 1(D) may be limited by the laws of the PRC held to have been frustrated by events of force majeure happening after their execution;

(v) The courts of the PRC will determine in its discretion whether a discretion contained in the Contracts is exercised objectively and reasonably;

4. This letter is addressed to you in connection with the Documents provided to us and may be relied upon by you. It may not be relied upon for any other purpose and may not be disclosed to any other person without our prior written consent. You may, however, provide a copy to your legal adviser. This opinion is limited to the matters addressed herein and is not to be used as opinion with respect to any other matter.

Yours faithfully,

Concord & Partners

	(010)  85276468         (010)  85275084
Suite 1930, Beijing Sunflower Tower, 37 Maizidian Street,	Tel:    (010)  85276468      Fax:    (010)  85275084
Chaoyang District, Beijing, China

HOME INNS & HOTELS MANAGEMENT (HONG KONG) LIMITED

SERIES C PREFERENCE SHARES PURCHASE AGREEMENT

Date: 24 January 2005

EX-4.8

Exhibit 4.8

SHAREHOLDERS AGREEMENT

This Shareholders Agreement (the “Agreement”) is made as of June 29, 2006, by and among Home Inns & Hotels Management Inc., a Cayman Islands company (the “Company”), with its registered office at M&C Corporate Services Limited, P.O. Box 309GT, Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies; the entities and individuals set forth on Exhibit A hereto (collectively, the “Shareholders”, and each individually, a “Shareholder”); and the entities and individuals set forth on Exhibit B hereto (collectively, the “Investors”, and each individually, an “Investor”).

R E C I T A L S

A. The Shareholders and the Investors and Home Inns & Hotels Management (Hong Kong) Limited (the “Hong Kong Sub”) have entered into an Amended and Restated Shareholders’ Agreement dated as of January 27, 2005 (the “Old Shareholders’ Agreement”).

B. Pursuant to the unanimous board resolutions and the shareholder resolutions of the Hong Kong Sub dated as of June 29, 2006, the Shareholders and Investors have agreed, and the Board of Directors of the Hong Kong Sub has permitted the Shareholders and the Investors, to exchange their respective shares in the Hong Kong Sub for shares of equivalent classes in the Company (the “Share Exchange”).

C. The Company has issued shares to the Shareholders and the Investors pursuant to the board resolutions and the shareholder resolutions of the Company dated as of June 29, 2006 immediately upon the Share Exchange.

D. As of the date of this Agreement, each of the Shareholders owns the respective number of the Company’s Ordinary Shares, the Company’s Series A Preference Shares (“Series A Shares”) and/or the Company’s Series B Preference Shares (“Series B Shares”) as set forth opposite each such Shareholder’s name on Exhibit A, and each of the Investors owns the respective number of the Company’s Series C Preference Shares (“Series C Shares”) as set forth opposite each Investor’s name on Exhibit B.

E. The parties hereto desire to enter into this Agreement to reflect the principal terms of the Old Shareholders’ Agreement regarding the rights and obligations of the parties hereto.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and contained (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:

1. Certain Definitions.

For purposes of this Agreement, the following terms have the following meanings:

1.1 “Articles of Association” means the Articles of Association of the Company as the same may be amended from time to time.

1.2 “Commission” shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

1.3 “Conversion Shares” means the Ordinary Shares issued or issuable pursuant to conversion of the Preference Shares.

1.4 “Existing Ordinary Shareholders” shall mean each of Nan Peng Shen, Chung Lau, Qi Ji, Min Fan, Jian Sun, Hui Chen, Ri Xin Liang, and Poly Victory Investments Limited (“Poly Victory”).

1.5 “Holder” shall mean any person or entity holding Registrable Securities (including Preference Shares).

1.6 [Intentionally Omitted.]

1.7 “Initiating Holders” shall mean any Holder(s) who in the aggregate hold at least fifty percent (50%) of the outstanding Registrable Securities.

1.8 “IPO” means (i) a public offering by the Company of its Ordinary Shares pursuant to a firm commitment underwritten public offering at a price per Ordinary Share of not less than three (3) times the per-share purchase price of each Series A Share of US$0.232 (as adjusted to reflect share dividends, share splits and similar adjustments made after 28 February, 2003 including without limitation the sub-division of each Series A Shares of HK$1.00 in the capital of the Company into 200 Series A Shares of HK$0.005 pursuant to the resolutions of the shareholders of the Company dated 8 April, 2003) on an internationally recognized stock exchange or (ii) the merger of the Company with and into a company whose shares are listed on an internationally recognized stock exchange, the average closing price of which shares on such exchange over the thirty (30) day period following the effectiveness of such merger being no less than either three (3) times US$0.232 (as adjusted to reflect share dividends, share splits and similar adjustments made after 28 February 2003).

1.9 “Key Shareholders” means the following: AsiaStar IT Fund L.P. (“AsiaStar”), IDG Technology Venture Investments, LP (“IDG”), Poly Victory, Qi Ji, Nan Peng Shen, Chung Lau, Min Fan and Susquehanna China Investment HI (“Susquehanna”).

1.10 “Memorandum” means the Memorandum of Association of the Company as the same may be amended from time to time.

1.11 “Ordinary Shares” means the ordinary shares of the Company of par value US$0.005 per share.

1.12 “Party” means a party to this Agreement.

1.13 “Pro-Rata Share” means, as to each Key Shareholder’s Right of Co-Sale, the percentage determined by dividing (i) the number of shares of Stock held by a Key Shareholder by (ii) the total number of shares of Stock held by all the Key Shareholders and the Seller.

1.14 “Preference Shares” means the Series A Shares, the Series B Shares and the Series C Shares.

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1.15 “Public Listing Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Section 9.4 hereof, including, without limitation, all qualification and filing fees, printing expenses, transfer agent fees, escrow, custodian or depositary fees, fees and disbursements of counsel for the Company, the expense of any special audits incident to or required by any such listing (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

1.16 “Registrable Securities” means the Conversion Shares and the Ordinary Shares of the Company issued and outstanding immediately after the Share Exchange (including any Ordinary Shares of the Company issued after the Share Exchange in respect of such Conversion Shares or Ordinary Shares upon any share split, share dividend, recapitalization, or similar event); provided, however, that the Ordinary Shares or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or are available for sale in a single sale in the opinion of counsel for the Company in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

1.17 The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

1.18 “Registration Expenses” shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Sections 9.1, 9.2 and 9.3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, transfer agent fees, escrow, custodian or depositary fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders.

1.19 “Right of Co-Sale” means the right of co-sale provided to the Key Shareholders in Section 4 of this Agreement.

1.20 “Right of First Refusal” means the right of first refusal provided to the Company and the Key Shareholders in Section 3 of this Agreement.

1.21 “Securities Act” means the U.S. Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

1.22 “Seller” means any Existing Ordinary Shareholder proposing to Transfer Stock.

1.23 “Selling Expenses” shall mean all underwriting discounts, selling commissions and share transfer taxes applicable to the securities registered by the Holders and, except as borne by the Company as part of the Registration Expenses, all reasonable fees and disbursements of any such counsel for a Holder not contemplated by the Registration Expenses.

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1.24 “Stock” means and includes all Ordinary Shares issued and outstanding at the relevant time plus all Ordinary Shares issuable upon conversion or exchange of any convertible securities, including, without limitation, preference shares and debt securities then outstanding, which are by their own terms then convertible into or exchangeable for Ordinary Shares.

1.25 “subsidiary” shall mean an entity consolidated into the Company’s consolidated financial statement pursuant to the generally accepted accounting principles in the U.S.

1.26 “Transfer” means and includes any sale, transfer or other disposition, whether voluntary or involuntary, except:

(a) any transfers of Stock by a Seller to the Seller’s spouse, siblings, parents, lineal descendants or antecedents or trusts for the benefit of the Seller or the Seller’s spouse, siblings, parents or lineal descendants or antecedents or transfers of Stock by the Seller by devise or descent; provided, that, in all cases, the transferee or other recipient executes a deed of adherence in form and substance satisfactory to the Company and becomes bound thereby in the same manner as the Seller;

(b) by operation of law;

(c) any transfer to the Company pursuant to the terms of this Agreement or such other agreement entered into between the Company and a Shareholder; or

(d) any transfers of Stock or Preference Shares by an Investor to (i) a shareholder, partner, retired partner, member, or beneficiary of such Investor or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Investor or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Investor, or (iv) an entity that is controlled by, controls, or is under common control with the Investor.

2. Restrictions on Transfer.

2.1 General. A Seller shall not, without the prior written consent of the holders of a majority of the then outstanding Preference Shares and subject to compliance with this Section 2, sell, assign, transfer, pledge or otherwise encumber or dispose of in any way such Seller’s interest in any number of shares of Stock now or hereafter owned or held by such Seller exceeding thirty percent (30%) of the total number of shares of Stock held by such Seller from time to time, in a transaction or series of transactions.

2.2 Notice of Proposed Transfer. Prior to the Seller Transferring any Stock, the Seller shall deliver to the Company and the Key Shareholders a written notice (the “Transfer Notice”) stating: (i) the Seller’s bona fide intention to sell or otherwise Transfer such shares of Stock (such Stock, the “Offered Stock”); (ii) the name, address and phone number of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the aggregate number of shares of Offered Stock to be Transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for and the material terms and conditions upon which the Seller proposes to Transfer the Offered Stock (the “Offered Price”). The Transfer Notice shall certify that such Seller has received a bona fide offer from the Proposed Transferee(s) or has given a bona fide offer to the Proposed Transferee(s) and in good faith believes a binding agreement for the Transfer is obtainable substantially on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer.

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3. Right of First Refusal.

3.1 Exercise by the Company. The Company has the Right of First Refusal to purchase all or any part of the Offered Stock, if the Company gives written notice of the exercise of such right to the Seller within fifteen (15) days (the “Notice Period”) after the last date on which the Transfer Notice is, pursuant to Section 12.5 hereof, deemed to be effective as to the Company or a Key Shareholder, as the case may be. In the event that the Company elects not to purchase all of the Offered Stock, the remaining shares of Offered Stock may be purchased by the Key Shareholders as set forth in Section 3.2 below. Within five (5) days after expiration of the Notice Period, the Company will give written notice (the “Company’s Expiration Notice”) to the Seller and the Key Shareholders specifying either (A) that all or a part of the Offered Stock was purchased by the Company exercising its Right of First Refusal or (B) that the Company waived its right to purchase the specified number of Offered Stock.

3.2 Exercise by the Key Shareholders. In the event the Company does not purchase all of the Offered Stock, each Key Shareholder (excluding the Seller) shall have a Right of First Refusal to purchase its pro rata share of the remaining Offered Stock. For purposes of this Section 3.2, a Key Shareholder’s pro rata share shall be determined by dividing (i) the number of shares of Stock held by such Key Shareholder, exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time, by (ii) the total number of shares of Stock held by all the Key Shareholders (excluding the Seller and exclusive of the Ordinary Shares issued in connection with any stock option plan that may be implemented by the Company from time to time). If any Key Shareholder (excluding the Seller) desires to exercise its Right of First Refusal pursuant to this Section 3.2, such Key Shareholder must, within a fifteen (15) day period after the Company’s Expiration Notice, give written notice (the “Shareholder’s Notice Period”) to the Seller and to the Company of such Key Shareholder’s election to purchase the Offered Stock.

3.3 Purchase Price. The purchase price for the Offered Stock to be purchased by the Company or by a Key Shareholder exercising its Right of First Refusal under this Agreement will be the Offered Price, and will be payable as set forth in Section 3.4 hereof. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration will be determined by the board of directors of the Company (the “Board of Directors”) in good faith, which determination will be binding upon the Company, each Key Shareholder and the Seller, absent fraud or error.

3.4 Payment. Payment of the purchase price for the Offered Stock purchased by the Company will be made within fifteen (15) days after the end of the Notice Period. Payment of the purchase price for the Offered Stock purchased by the Key Shareholders will be made within fifteen (15) days after the end of the Shareholder’s Notice Period. Payment of the purchase price will be made, at the option of the Company or the Key Shareholder (excluding the Seller), as the case may be, (i) in cash, (ii) by cancellation of all or a portion of any outstanding indebtedness of the Seller to the Company or the Key Shareholders, as the case may be, or (iii) by any combination of the foregoing. The Company or the Key Shareholder may, pursuant to a purchase of the Offered Stock hereunder, request that such Seller Transferring the Offered Stock shall enter into a sale and purchase agreement in customary form which shall contain representations and warranties by such Seller to the effect that such Seller is the legal and beneficial owner of the Offered Stock free from any liens, security interests, third party rights or encumbrances whatsoever.

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3.5 Rights as a Shareholder. If the Company or a Key Shareholder exercises its respective Right of First Refusal to purchase all or any part of the Offered Stock, then, upon the date that the notice of such exercise by the Company or Key Shareholder is deemed to be effective as to the Seller pursuant to Section 12.5 hereof (the “Transfer Date”), the Seller will have no further rights as a holder with respect to such shares of the Offered Stock except the right to receive payment for such shares of the Offered Stock from the Company or Key Shareholder in accordance with the terms of this Agreement. The Seller will forthwith cause all certificate(s) evidencing such Offered Stock to be surrendered to the Company for Transfer to the Company or Key Shareholder, as the case may be.

3.6 Seller’s Right To Transfer. If the Company or Key Shareholders have not elected to purchase all or any portion of the Offered Stock, then, with respect to that portion of Offered Stock that will not be purchased by the Company or Key Shareholders pursuant to Section 3 hereof, the Seller may Transfer such portion of the Offered Stock, which the Company and Key Shareholders have not elected to purchase, to any Proposed Transferee named in the Transfer Notice, at the Offered Price or at a higher price; provided that such Transfer shall still be subject to the Right of Co-Sale as defined in Section 4 hereof; provided further that such Transfer (i) is consummated within ninety (90) days after the end of the Notice Period, (ii) is on terms no more favorable to such Proposed Transferee than the terms proposed in the Transfer Notice and (iii) is in accordance with all the terms of this Agreement. If the Offered Stock is not so Transferred during such ninety (90) day period, then the Seller may not Transfer any of such Offered Stock without complying again in full with the provisions of this Agreement.

4. Right of Co-Sale.

4.1 Exercise by the Key Shareholders. To the extent that the Company and the Key Shareholders do not exercise their respective Right of First Refusal with respect to all the Offered Stock pursuant to Section 3 hereof, then each Key Shareholder that notifies Seller in writing within fifteen (15) days after the end of the Shareholder’s Notice Period (the “Co–Sale Period”) shall have the right to participate in such sale of shares on the same terms and conditions as specified in the Transfer Notice subject to the terms of this Section 4. Each Key Shareholder who delivers a notice pursuant to the preceding sentence (a “Selling Key Shareholder”) may sell, pursuant to the Selling Key Shareholder’s Right of Co-Sale, up to that number of shares of Stock held by such Selling Key Shareholder equal to the product obtained by multiplying the number of shares of the remaining Offered Stock by such Selling Key Shareholder’s Pro-Rata Share. The Selling Key Shareholder shall indicate on such notice the number of shares of Stock it then holds that it wishes to sell pursuant to this Section 4 (the “Selling Key Shareholder Shares”). The sale of the Selling Key Shareholder Shares shall occur within twenty-five (25) days from the beginning of the Co–Sale Period (the “Closing”). This Right of Co–Sale shall not apply with respect to Offered Stock sold to the Company or a Key Shareholder pursuant to the Right of First Refusal.

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4.2 Consummation of Co-Sale. A Selling Key Shareholder may exercise the Right of Co-Sale by delivering to the Seller at or before the Closing, one or more certificates, properly endorsed for Transfer, representing a number of shares not to exceed the number of shares to which the Selling Key Shareholder is entitled in Section 4.1, representing such Stock to be Transferred by the Seller on behalf of the Selling Key Shareholder. If the Selling Key Shareholder does not hold a certificate in that series, class or type of stock representing the number of securities to be sold by such Selling Key Shareholder pursuant to this Section 4, then the Company shall promptly issue a certificate representing the proper number of shares to be sold pursuant to this Right of Co-Sale. Following the Closing, the Company shall deliver a certificate for the remaining balance of the securities held by the Selling Key Shareholder, if any, to such Selling Key Shareholder. At the Closing, such certificates or other instruments will be Transferred and delivered to the Proposed Transferee as set forth in the Transfer Notice in consummation of the Transfer of the Offered Stock pursuant to the terms and conditions specified in the Transfer Notice, and the Proposed Transferee shall, and the Seller shall procure that the Proposed Transferee will, remit, or will cause to be remitted, to each Selling Key Shareholder against receipt of such certificates and transfer documents at such Closing, that portion of the proceeds of the Transfer to which each Selling Key Shareholder is entitled by reason of each Selling Key Shareholder’s participation in such Transfer pursuant to the Right of Co-Sale.

5. Right of First Offer.

5.1 If at anytime, the Company proposes to issue any Stock, any rights, options or warrants to acquire Stock or any notes, debentures, preferred shares or other securities or rights, which are ultimately convertible or exercisable into, or exchangeable for, Ordinary Shares (collectively, “Equity Securities”) (after obtaining any requisite approval required under Section 11.3), the Company shall first offer such Equity Securities to each Shareholder in a written notice (an “Issuance Notice”) setting forth:

(a) a description of the Equity Securities to be issued, including the rights and powers associated therewith;

(b) the number of such Equity Securities to be offered (the “New Securities”); and

(c) the price and terms upon which it proposes to offer the New Securities.

5.2 Each Shareholder who wishes to purchase any New Securities (a “Pre-emptive Shareholder”) shall provide the Company with a written notice (the “Exercise Notice”) specifying the maximum number of New Securities which it irrevocably commits to purchase (the “Pre-emptive Amount”) within thirty (30) days of the receipt by such Pre-emptive Shareholder of the Issuance Notice. For the avoidance of doubt, each Pre-emptive Shareholder may specify in its Exercise Notice a Pre-emptive Amount higher or lower than its Pro-rata Amount. The New Securities shall be allocated among each Pre-emptive Shareholder (with rounding to avoid fractional shares) in proportion to its respective Pro-rata Amount provided that in no event shall an amount greater than such Pre-emptive Shareholder’s Pre-emptive Amount be allocated to such Pre-emptive Shareholder.

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5.3 Any excess New Securities (the “Excess New Securities”) not yet allocated after employing the procedures set out in Section 5.2 shall be allocated among all the Pre-emptive Shareholders whose Pre-emptive Amounts have not yet been satisfied in proportion to each such Pre-emptive Shareholder’s respective Excess Pro-rata Amount (with rounding to avoid fractional shares) PROVIDED THAT in no event shall a Pre-emptive Shareholder be required to purchase more New Securities pursuant to this Section 5.3 than as specified in the Exercise Notice of such Pre-emptive Shareholder, and the procedures set out in this Section 5.3 shall be repeatedly employed until the Pre-emptive Amounts of all Pre-emptive Shareholders shall have been satisfied or until the total number of the New Securities have been fully allocated to all the Pre-emptive Shareholders after employing the procedures set out in this Section 5.3, whichever is to occur first.

A Pre-emptive Shareholder’s “Pro-rata Amount” is equal to the product obtainable by multiplying (x) the total number of New Securities, by (y) a fraction, the numerator of which shall be the number of Ordinary Shares Equivalents owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all Ordinary Shares Equivalents owned by all the Pre-emptive Shareholders on the date of the Issuance Notice.

A Pre-emptive Shareholder’s “Excess Pro-rata Amount” is equal to the product obtainable by multiplying (x) the total number of Excess New Securities, by (y) a fraction, the numerator of which shall be the number of Ordinary Shares Equivalents owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all Ordinary Shares Equivalents owned by all the Pre-emptive Shareholders on the date of the Issuance Notice whose Pre-emptive Amounts have not yet been satisfied after employing the procedures set out in this Section 5.

5.4 If any Shareholder fails to exercise its right under this Section 5 to purchase its pro rata share of New Securities within thirty (30) days following the receipt by such Shareholder of the Issuance Notice, the unsubscribed New Securities may be offered by the Company within sixty (60) days thereafter to any Person at a price not less, and upon terms no more favourable, than specified in the Issuance Notice. If the Company does not enter into an agreement for the sale of the unsubscribed New Securities within such sixty (60) day period or, if such agreement is not consummated within thirty (30) days after the execution thereof, the Company shall not thereafter issue or sell any such unsubscribed New Securities without again first offering such unsubscribed securities in the manner provided in this Section 5.

5.5 Notwithstanding anything stated to the contrary herein, the pre-emptive rights described in this Section 5 shall not apply to:

(a) the issuance of Ordinary Shares in connection with an IPO or pursuant to the conversion of the Preference Shares;

(b) the issuance of options convertible or exercisable into Ordinary Shares pursuant to any Option Plans (as defined below) and the issuance of Ordinary Shares pursuant to the exercise of such options;

(c) the issuance of Equity Securities by the Company as consideration to acquire businesses, shares or other assets which shall have been approved in accordance with Section 11.3;

(d) the issuance of Equity Securities in connection with a share split, scrip dividend, recapitalisation or reorganization of the Company which shall have been approved in accordance with Section 11.3;

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(e) the issuance of Equity Securities pursuant to the conversion, exercise or exchange of options, warrants, notes, debentures or preferred shares PROVIDED THAT the initial issuance of such Convertible Securities shall have complied with the terms set out in this Section 5 and have been approved in accordance with or exempted pursuant to Section 11.3; or

(f) the issuance of Ordinary Shares pursuant to the conversion, exercise or exchange of options, warrants, notes, debentures or preferred shares outstanding prior to the date of this Agreement.

6. Refusal to Transfer; Put Right.

6.1 Refusal to Transfer. Subject to Section 6.2 below, any attempt by any Seller to Transfer any Stock in violation of any provision of this Agreement will be void. The Company will not be required (i) to transfer on its books any Stock that has been sold, gifted or otherwise Transferred in violation of this Agreement, or (ii) to treat as owner of such Stock, or to accord the right to vote or pay dividends to any purchaser, donee or other transferee to whom such Stock may have been so Transferred.

6.2 Put Right. If a Seller Transfers any Stock in contravention of a Key Shareholder’s Right of Co-Sale under this Agreement (a “Prohibited Transfer”) provided, however, all the Key Shareholders have consented to such Transfer notwithstanding Section 6.1 above by delivery of a joint written notice to the Company to permit and validate such Transfer subject to any conditions set forth in such notice, or if the Proposed Transferee of Offered Stock desires to purchase a class, series or type of stock offered by the Seller but not held by a Key Shareholder or the Proposed Transferee is unwilling to purchase any Stock from a Key Shareholder, such Key Shareholder may, by delivery of written notice to such Seller (a “Put Notice”) within ten (10) days after the later of (i) the Closing as defined in subsection 4.1 above, or (ii) the date on which such Key Shareholder becomes aware of the Prohibited Transfer or the terms thereof, and in addition to such other remedies as may be available at law, require such Seller to purchase from such Key Shareholder, for cash or such other consideration as the Seller received in the Prohibited Transfer or at the Closing, a number of shares of Stock (of the same class or type as Transferred in the Prohibited Transfer or at the Closing if such Key Shareholder then owns Stock of such class or type; otherwise Series A Shares, Series B Shares or Ordinary Shares) having a purchase price equal to the aggregate purchase price that the Key Shareholder would have received in the closing of such Prohibited Transfer if such Key Shareholder had elected to exercise its Right of Co-Sale with respect thereto or in the Closing if the Proposed Transferee had been willing to purchase the Stock of the Key Shareholder. The closing of such sale to the Seller will occur within ten (10) days after the date of such Key Shareholder’s Put Notice to such Seller.

6.3 Multiple Series, Class or Type of Stock. If the Offered Stock consists of more than one series, class or type of Stock, the Seller has the right to Transfer hereunder each such series, class or type; provided that if, as to the Right of Co-Sale, a Selling Key Shareholder does not hold any of such series, class or type, and the Proposed Transferee is not willing, at the Closing, to purchase some other series, class or type of Stock from such Selling Key Shareholder, or is unwilling to purchase any Stock from such Selling Key Shareholder at the Closing, then such Selling Key Shareholder will have the put right set forth in Section 6.2 above.

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7. Restrictive Legend and Stop-Transfer Orders.

7.1 Legends. Each Party understands and agrees that the Company will cause the legends set forth below, or legends substantially equivalent thereto, to be placed upon any certificate(s) or other documents or instruments evidencing ownership of Stock by the Party issued after the date of this Agreement:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH CERTAIN RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A SHAREHOLDERS AGREEMENT DATED JUNE             , 2006 ENTERED INTO AMONG THE PARTIES THERETO (THE “SHAREHOLDERS AGREEMENT”). A COPY OF SUCH AGREEMENT IS ON FILE AT THE REGISTERED OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180-DAY MARKET STAND-OFF RESTRICTION AS SET FORTH IN THE SHAREHOLDERS AGREEMENT. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE ORDINARY SHARES OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.

7.2 Stop Transfer Instructions. In order to ensure compliance with the restrictions referred to herein, each Party agrees that the Company may issue appropriate “stop transfer” certificates or instructions.

7.3 Transfers. No securities shall be Transferred unless (i) such Transfer is made in compliance with applicable securities laws and (ii) prior to such Transfer, the transferee or transferees, who prior to such Transfer are not already parties to this Agreement, sign a deed of adherence to this Agreement in form and substance satisfactory to the Company pursuant to which such transferee(s) agrees to be bound by the terms of this Agreement. The Company shall not be required (a) to transfer on its books any shares that shall have been Transferred in violation of any of the provisions of this Agreement or (b) to treat as the owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so Transferred.

8. Affirmative Covenants.Financial Information.

8.1 (a) So long as a Party, or an entity that is controlled by, controls, or is under common control with the Party, holds two percent (2%) or more of the outstanding capital shares of the Company on an as-converted basis and in the case of the Investor only, so long as it holds at least twenty-five (25%) of the Series C Shares outstanding as at the date hereof, the Company will provide the following reports to each such Party:

(i) As soon as practicable after the end of each fiscal year, and in any event within ninety (90) days thereafter, audited consolidated financial statements of the Company as of the end of such fiscal year prepared in reasonable detail, in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

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(ii) As soon as practicable after the end of each month, and in any event no later than twenty (20) days thereafter, financial statements of the Company as of the end of each such month for such month and for the current fiscal year to date, prepared in reasonable detail in accordance with U.S. GAAP, with the exception that no notes need be attached to such statements.

(b) The rights granted pursuant to this Section 8.1 may not be assigned or otherwise conveyed by the Parties or by any subsequent transferee of any such rights without the prior written consent of the Company except for transfers to (i) a shareholder, partner, retired partner, member, or beneficiary of such Party or subsequent transferee, (ii) any immediate family member, trust or beneficiary of the estate of such Party or subsequent transferee, (iii) any affiliated fund within the same fund management group as such Party, or (iv) an entity that is controlled by, controls, or is under common control with the Party.

(c) The Company shall permit each Investor, at such Investor’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Investor.

8.2 Reservation of Ordinary Shares. The Company will at all times reserve and keep available out of its authorized but unissued share capital, solely for issuance and delivery upon the conversion of the Preference Shares, such number of Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preference Shares; and if at any time the number of authorized but unissued share capital shall not be sufficient to effect the conversion of all the then outstanding Preference Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued share capital to such number of Ordinary Shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholders’ approval of any necessary amendment to the Articles..

8.3 Quarterly Board Meetings. The Board of Directors shall hold meetings at least once every three (3) months.

8.4 Director Indemnification. If not already entered into, the Company shall enter into standard indemnification agreements with the members of the Board of Directors in the form attached to this Agreement as Exhibit C.

8.5 Director Expenses. The Company shall reimburse each member of the Board of Directors for his/her expenses incurred directly in relation to such member’s services on the Board of Directors.

8.6 Termination of Covenants. The covenants set forth in Sections 8.1 through 8.5 shall terminate and be of no further force or effect on the earlier of: (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company.

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9. Registration Rights.

9.1 Requested Registration.

(a) Request for Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with respect to all or a part of the Registrable Securities, the aggregate proceeds of which, net of underwriting discounts and selling commissions, equal or exceed US$5,000,000, the Company will:

(i) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and

(ii) as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company, and to use all best efforts to cause such registration statement to become effective within one hundred twenty (120) days of the initial request by the Initiating Holders;

Provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 9.1:

(1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or other applicable securities laws;

(2) Prior to six (6) months after the effective date of the Company’s first registered public offering of its equity securities;

(3) During the period starting with the date sixty (60) days prior to the Company’s estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a transaction under Rule 145 promulgated under the Securities Act (“Rule 145”) or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; provided, however, that the Company shall not utilize this right more than once in any twenty-four (24) month period;

(4) After the Company has effected two (2) such registrations pursuant to this subparagraph 9.1(a), and such registrations have been declared or ordered effective; or

(5) If the Initiating Holders may dispose of shares of Registrable Securities pursuant to a registration statement on Form F-3 pursuant to a request made under Section 9.3 hereof.

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(b) Underwriting. In the event that a registration pursuant to Section 9.1 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 9.1(a)(i). In such event, the right of any Holder to registration pursuant to Section 9.1 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 9.1, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company, but subject to reasonable approval of a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 9.1, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated, among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement; provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder or other person to the nearest 100 shares.

If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration, and such Registrable Securities shall not be transferred in a public distribution prior to ninety (90) days after the effective date of such registration, or such other shorter period of time as the underwriters may require.

9.2 Company Registration.

(a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Rule 145 transaction, the Company will:

(i) promptly give to each Holder written notice thereof; and

(ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder.

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(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 9.2(a)(i). In such event the right of any Holder to registration pursuant to Section 9.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 9.2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in such registration and underwriting. No such reduction shall reduce the amount of securities of the selling Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is the initial public offering and such registration does not include shares of any other selling shareholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding sentence. The Company shall so advise all Holders and other holders distributing their securities through such underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holder at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or other person to the nearest 100 shares. If any Holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require.

(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 9.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. Selling Expenses of such withdrawn registration shall be borne by the Company.

(d) Not Demand Registration. Registration pursuant to this Section 9.2 shall not be deemed to be a demand registration as described in Section 9.1 above.

9.3 Registration on Form F-3. If any Holder or Holders request that the Company file a registration statement on Form F-3 (or any successor form to Form F-3) for a public offering of shares of the Registrable Securities the reasonably anticipated aggregate price to the public of which, net of underwriting discounts and commissions, would equal or exceed US$500,000, and the Company is a registrant entitled to use Form F-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as such Holder or Holders may reasonably request; provided, however, that the Company shall not be required to effect more than one registration pursuant to this Section 9.3 in any six (6) month period. The Company shall inform other Holders of the proposed registration and offer them the opportunity to participate. The substantive provisions of Section 9.1(b) shall be applicable to each registration initiated under this Section 9.3.

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9.4 Public Listing. In the event the Company shall receive from Initiating Holders a written request that the Company effect a listing (other than a request pursuant to Section 9.1 hereof) of the Company and its shares on an internationally recognized stock exchange or over-the-counter market (a “Public Listing”), the Company shall use its best efforts to effect such Public Listing (including, without limitation, appropriate qualification under securities laws of applicable jurisdictions and appropriate compliance with applicable governmental requirements or regulations).

9.5 Expenses. All Registration Expenses incurred in connection with all registrations pursuant to Sections 9.1, 9.2 and 9.3 shall be borne by the Company. All Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. All Public Listing Expenses shall be borne by the Company.

9.6 Procedures. In the case of each registration, qualification, compliance or Public Listing effected by the Company pursuant to this Section 9, the Company will keep each Holder advised in writing as to the initiation of each such registration, qualification, compliance, and Public Listing and as to the completion thereof. With respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the Company will, at its expense:

(a) Prepare and file with the governmental agencies with proper jurisdiction a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least one hundred eighty (180) days or until the distribution described in the registration statement has been completed;

(b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such Holders and underwriters may reasonably request in order to facilitate the public offering of such securities;

(c) Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(d) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(e) Use best efforts to cause all such Registrable Securities registered pursuant hereunder to be listed on a national exchange or an internationally recognized stock exchange or over-the-counter market and each securities exchange on which similar securities issued by the Company are then listed; and

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(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

9.7 Indemnification.

(a) The Company will indemnify each Holder, each of its officers, directors, trustees and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, compliance or Public Listing has been effected pursuant to this Section 9, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification, compliance or Public Listing, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or any other national, federal or state securities law or any rule or regulation promulgated thereunder applicable to the Company in connection with any such registration, qualification, compliance or Public Listing, and the Company will reimburse each such Holder, each of its officers, trustees and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by any Holder, controlling person or underwriter and stated to be specifically for use therein; provided, however, that with respect to a registration effected pursuant to Section 9.1, 9.2 or 9.3, the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or the amended prospectus filed with the Commission pursuant to Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act, unless such Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage as a result of the Company’s failure to provide the Final Prospectus pursuant to Section 9.6(b) above.

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(b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance pursuant to Section 9.1, 9.2 or 9.3 is being effected, severally but not jointly indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, trustees and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such other Holders, such directors, officers, trustees, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus on file with the Commission at the time the registration statement becomes effective or in the Final Prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or any Holder, if there is no underwriter, if a copy of the Final Prospectus was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act and provided further, that such indemnity agreement shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, the liability of each Holder under this subsection (b) shall be limited to an amount equal to the proceeds to such Holder from the sale of Registrable Securities pursuant to such registration statement as contemplated herein, less any applicable underwriting discounts and commissions; provided, however, such limitation shall not apply in the case of willful fraud by such Holder.

(c) Each party entitled to indemnification under this Section 9.7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnifying Party shall have the option to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 9 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses. No claim may be settled without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

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(d) If the indemnification provided for in this Section 9.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this Subsection 9.7(d) exceed an amount equal to the proceeds to such Holder from the sale of Registrable Securities pursuant to such registration statement as contemplated herein, less any applicable underwriting discounts and commissions, except in the case of willful fraud by such Holder. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) The obligations of the Company and the Holders under this Section 9.7 shall survive the completion of any offering of Registrable Securities in a registration statement or Public Listing under this Section 9, and otherwise.

9.8 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 9.

9.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of restricted securities to the public without registration, after such time as a public market exists for the Ordinary Shares of the Company in the United States, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act (“Rule 144”), at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act.

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

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(c) So long as the Investor owns any restricted securities, to furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any such securities without registration.

9.10 Transfer of Rights. The rights to cause the Company to effectuate a Public Listing and the rights to cause the Company to register securities granted to the Investors under Sections 9.1, 9.2, 9.3 and 9.4 (the “Registration Rights”) may be assigned to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by the Investor provided that: (i) such transfer may otherwise be effected in accordance with applicable securities laws, (ii) the Company is given prompt notice of the transfer, (iii) such assignee or transferee agrees to be bound by the terms of this Agreement, and (iv) such assignee or transferee who acquires at least two hundred thousand (200,000) shares of the Company’s Registrable Securities (as adjusted for any share split, recapitalization or the like), provided, however, upon the consummation of a Public Listing, the Registration Rights shall no longer be assignable to any transferee or assignee unaffiliated with such Investor in connection with any transfer or assignment of Registrable Securities to such transferee or assignee by such Investor.

9.11 Standoff Agreement. Each Holder hereby agrees, in connection with the Company’s initial public offering of its equity securities pursuant to a registration statement filed under the Securities Act or a Public Listing, upon request of the Company or the underwriters managing such initial public offering of the Company’s securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration or Public Listing as may be requested by the Company or such underwriters; provided that all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities enter into similar agreements.

9.12 Delay. If the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed, or a Public Listing to be effectuated, in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under Section 9.1 or 9.4, as applicable, shall be deferred for a period not to exceed one hundred twenty (120) days from the date of receipt of written request from the Initiating Holders, provided that such right to delay a request shall be exercised by the Company not more than once in any twenty-four (24) month period.

9.13 Termination. The rights to cause the Company to register securities granted to Holders under Sections 9.1, 9.2, and 9.3 shall expire on the earlier of (i) such time as such Holder is able to dispose of all its shares in a three (3) month period pursuant to Rule 144, or (ii) five (5) years after the IPO.

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10. Board of Directors and Articles of Association.

10.1 Agreement to Vote. For so long as each of AsiaStar, IDG, Nan Peng Shen and Chung Lau continues to hold Series A Shares, Series B Shares, Conversion Shares, or Ordinary Shares, each time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of electing directors, each of the aforementioned shareholders agrees to vote such shares then held by each such shareholder for the election of the following individuals to the Board of Directors: (i) the two (2) individuals nominated by Nan Peng Shen and Chung Lau, who initially shall be Nan Peng Shen and Jian Zhang Liang; (ii) the two (2) individuals nominated by AsiaStar (the “AsiaStar Directors”), who initially shall include Jerry Sze; (iii) the one (1) individual nominated by IDG (the “IDG Director”), who initially shall be Su Yang Zhang; (iv) two (2) individuals nominated by Poly Victory, who initially shall be, Yunxin Mei and Min Bao; and one (1) individual nominated by the Chief Executive Officer of the Company from time to time, who initially shall be Jian Sun. The AsiaStar Directors and the IDG Directors shall be referred to herein collectively as the “Preference Shares Directors”.

10.2 Alternate Directors. Pursuant to Article 95 of the Articles of Association, each member of the Board of Directors shall be entitled to appoint and remove, from time to time and without the consent of any other member of the Board of Directors, any person to act as his/her alternate on the Board of Directors.

10.3 Observer Rights. As long as Susquehanna owns no less than 50% of the Series C Shares outstanding as at the date hereof (or any Ordinary Shares issued upon conversion thereof), the Company shall invite a representative designated by Susquehanna from time to time to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust with respect to all information so provided.

10.4 Articles of Association. The Company shall abide by all of its obligations under the Memorandum and Articles of Association, as amended to date; provided, however, the Articles of Association shall be consistent with this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Articles of Association, the terms of this Agreement shall prevail as among the parties hereto so as to regulate the way in which they exercise their rights as shareholders of the Company. The parties hereto further agree that, in case of such conflict, the Articles of Association shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

10.5 Charter Documents of Major Subsidiaries. The joint venture contract and the articles of association (along with any other charter documents) of each of (Home Inns Hotel Management (Beijing) Limited) (the “Beijing Sub”) and (Home Inns & Hotels Management (Shanghai) Co. Ltd.) (the “Shanghai Sub”) (collectively, the “Charter Documents”) shall share the essence of this Agreement as far as practicable and in the event of any conflict between the provisions of this Agreement and the Charter Documents, the terms of this Agreement shall supercede the terms of the Charter Documents as among the parties hereto so as to regulate the way in which they exercise any power of decision with respect to the affairs of the Beijing Sub or the Shanghai Sub (as the case may be). The parties hereto further agree that, in case of such conflict, the Charter Documents shall be amended, to the extent permitted by relevant law, to reflect the agreement of the parties hereunder.

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11. Matters Requiring Special Approval.

11.1 Matters of the Company Requiring the Approval of the Shareholders. Notwithstanding any provisions of this Agreement or of the Articles of Association, the Company undertakes to the Shareholders, and each of the Shareholders undertakes to the other Shareholders, that it shall exercise all its powers in relation to the Company and its Subsidiaries so as to procure that, subject to any applicable law, that no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company, the Beijing Sub, the Shanghai Sub or any 75% or more owned subsidiary of the Company (the “Relevant Subsidiary”) without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company, and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the Beijing Sub, the Shanghai Sub or a Relevant Subsidiary concerning any of the following matters without the affirmative vote or consent recorded in writing of the holders of at least eighty percent (80%) of the outstanding voting shares of the Company:

(a) the creation or adoption of any new employee stock option plan;

(b) any consolidation, subdivision, conversion, increase or reduction of the share capital of each of the Company, the Beijing Sub and the Shanghai Sub or the alteration of any rights attaching thereto in any way;

(c) any change to the Memorandum or Articles of Association, the Charter Documents, or the memorandum or articles of association (or other similar charter documents) that would directly or indirectly affect adversely the preferences, rights or privileges of the holders of Preference Shares;

(d) the acquisition of, or the provision of any direct or indirect financial assistance for the purpose of acquiring: (A) in the ordinary course of business and on an arm’s length basis, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$1,000,000; or (B) otherwise than in the ordinary course of business, any (i) securities; or (ii) other entity or assets (in one transaction or a series of related transactions) with a value in excess of US$400,000; and

(e) the consolidation or merger which results in the shareholders immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving entity.

11.2 Matters of the Company Requiring the Approval of the Board of Directors. Notwithstanding any provisions of this Agreement or of the Articles of Association, the Company undertakes to the Shareholders that no resolution shall be passed or other decision or action taken by or on behalf of the Company, or the Board of Directors, concerning any of the following matters with respect to the Company without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors and the Company shall procure, as applicable, that no resolution shall be passed or other decision of action taken by or on behalf of the Beijing Sub, the Shanghai Sub or the Relevant Subsidiary concerning any of the following matters with respect to the Beijing Sub, the Shanghai Sub or Relevant Subsidiary, as applicable, without the affirmative vote or consent recorded in writing of at least eighty-one percent (81%) of the members of the Board of Directors:

(a) the entering into of any contract or transaction outside the ordinary course of its business, in excess of US$200,000;

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(b) the granting of any guarantee, indemnity or security or the creation of any mortgage, charge or encumbrance in favor of any person other than a Group Company (as defined below);

(c) any significant change to its business to areas materially different from the current products and/ or services offered;

(d) declare, make, or pay any distribution of capital, income, and/or dividends to the security holders of the Company, the Beijing Sub or the Shanghai Sub, as applicable;

(e) repurchase or cancel any capital stock of the Company, the Beijing Sub or the Shanghai Sub;

(f) enter into any material transaction with any member of the Board of Directors, officer, employee, or shareholder of the Company or any company controlled, directly or indirectly, by a member of the Board of Directors, officer, employee or shareholder of the Company not in the ordinary course of business or on terms more favorable than those provided to unrelated third parties under similar circumstances;

(g) the appointment of or change in the auditor of the Company, unless such auditor is a “Big 4” accounting firm; and

(h) the sale, transfer, lease, assignment or other disposal of a material part of its undertaking, property and/or assets with a book value (as reflected in its respective financial statements) in excess of US$400,000 or the entering into of any contract to do so.

11.3 Series C Protective Provisions. For so long as at least 25% of the Series C Shares issued and outstanding as at the date hereof shall remain outstanding, the Company shall not, and the Company shall procure that the Beijing Sub, the Shanghai Sub and the Relevant Subsidiary (each a “Group Company”) shall not, and each of the Shareholders undertakes to the other Shareholders that it shall exercise all its powers in relation to the Company and its Subsidiaries so as to procure that, subject to any applicable law, that a Group Company shall not, without the approval of the holders of at least two-thirds of the Series C Shares then outstanding voting as a separate class, take or permit any action that:

(a) increases or decreases, whether by merger, reclassification or otherwise, the authorized Series C Shares or effect any combination, split, or reclassification of the outstanding Series C Shares into a smaller or larger number of shares or exchange or convert any Series C Shares or require the exchange or conversion of any Series C Shares, except as provided in the Articles;

(b) amends, alters or repeals, whether by merger, reclassification or otherwise, any provision of the Articles that alters or adversely affects the rights, preferences, conversion and other rights, voting powers or privileges of the Series C Shares;

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(c) authorizes (whether by merger, reorganization, reclassification or otherwise) or issues any shares of capital stock that rank senior to, or on parity with, the Series C Shares as to dividends, distributions or liquidation preference (“Series C Senior Shares”);

(d) adopts any new stock option or other stock incentive plan or arrangement, increase the number of shares available for grant or issuance under any existing stock option or other stock incentive plan (collectively the “Option Plans”);

(e) redeems, or declares, sets aside or pays a dividend on, the Ordinary Shares or any other class of Preference Shares of the Company, the Beijing Sub or the Shanghai Sub (as the case may be) or repurchases any outstanding securities of the Company, the Beijing Sub or the Shanghai Sub (as the case may be);

(f) increases the authorized number of directors of the Board of Directors of the Company;

(g) effects a voluntary liquidation, dissolution or winding up of a Group Company;

(h) effects any consolidation, reorganization or merger of a Group Company with or into any other corporation or entity;

(i) will result in a sale, license or disposition of all or substantially all of the assets (or of any material portion of the assets) of a Group Company or exclusively licenses all or substantially all of its property or business to a single entity or a group of entities, in any case in a single transaction or a series of transactions;

(j) acquires any entity, business or assets by means of merger, consolidation, recapitalization, purchase of assets or otherwise, involving the issuance of consideration by a Group Company having a fair market value individually or in the aggregate in excess of US$5,000,000; or

(k) effects a change in the primary nature of the Company’s business.

11.4 Notwithstanding anything stated herein to the contrary, the Company is excluded from any obligation contained in this Agreement to the extent that such obligation (the “Excluded Obligation”) would constitute an unlawful fetter on the Company’s statutory powers. For the avoidance of doubt, to the extent any Shareholder is under an obligation under this Agreement to procure (including, without limitation, by exercising its voting rights and powers if necessary) the Company to perform any Excluded Obligation, the fact that the Company itself is excluded from such obligation by virtue of this Section 11.4 shall not exclude such Shareholder from its own obligation.

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12. Miscellaneous.

12.1 Term and Termination. This Agreement shall become effective upon the date hereof. The restriction on transfer set forth in Section 2.1 hereof, the covenants set forth in Section 11 hereof, the Right of First Refusal, Right of First Offer and the Right of Co-Sale, and the provisions set forth in Section 10 hereof will terminate upon the earliest to occur of (i) an IPO, (ii) any consolidation or merger involving the Company which results in the shareholders of the Company immediately prior to such transaction failing to own (in substantially the same percentages) more than 50% of the voting power of the surviving corporation, or (iii) the sale of all or substantially all assets of the Company. This Agreement shall terminate in respect of any Shareholder (but shall continue between the other parties to this Agreement (if more than one) but not otherwise) if at any time as a result of a transfer of Ordinary Shares or Preference Shares made in accordance with this Agreement that Shareholder holds no Ordinary Shares and Preference Shares in the capital of the Company but without prejudice to any rights which any party may have against any other party arising prior to such termination.

12.2 Waivers and Amendments. Except as otherwise set forth herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by holders of at least 80%, in aggregate, of each of the Series A Shares, the Series B Shares and the Series C Shares and the Ordinary Shares held by the Parties immediately after the Share Exchange. Upon the effectuation of each such waiver, consent, amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Preference Shares and the Ordinary Shares who have not previously consented thereto in writing.

12.3 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of State of New York, USA.

12.4 Entire Agreement. This Agreement terminates the Old Shareholders’ Agreement in its entirety and this Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.

12.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid or by overnight courier, or otherwise delivered by hand or by messenger, addressed (i) if to an Investor, at the Investor’s address, as shown on Exhibit B hereto, or at such other address as the Investors shall have furnished to the Company in writing, or (ii) if to a Shareholder, at the Shareholder’s address, as shown on Exhibit A hereto, or at such other address as the Shareholders shall have furnished to the Company in writing, or (iii) if to the Company, to its address set forth on the cover page of this Agreement and addressed to the attention of the Chief Executive Officer, or at such other address as the Company shall have furnished to the Investors.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally or by overnight courier, or, if sent by mail, at the earlier of its receipt or five (5) calendar days after the same has been deposited in a regularly maintained receptacle for the deposit of mail, addressed and mailed as aforesaid.

12.6 Severability of this Agreement. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

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12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

12.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Investor, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Investor of any breach or default under this Agreement, or any waiver by the Investor of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Investor, shall be cumulative and not alternative.

12.10 Share Splits. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the Company’s capital which may be made by the Company after the Share Exchange.

12.11 Further Assurances. The Parties and the Company will execute such further assurances and other documents and instruments and do such further acts and other things as may be necessary to implement and carry out the intent of this Agreement.

12.12 Assignment. This Agreement shall be binding on the parties hereto and their respective successors and shall inure to the benefit of each of them and their respective successors and permitted assigns. The benefit of this Agreement may not, except as otherwise herein provided, be assigned or transferred in whole or in part by any Party without the prior consent of the other Parties.

12.13 Interpretation. References in this Agreement to:

(a) words importing the singular include the plural and vice versa;

(b) words importing one gender include all other genders;

(c) Sections and Exhibits are references to sections and exhibits to this Agreement unless otherwise specified;

(d) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(e) any legislation shall include any legislation which amends, consolidates or replaces the same or which has been amended, consolidated or replaced by the same and shall include any subsidiary and subordinate legislation made under the relevant legislation;

(f) “including” or similar expressions are not words of limitation; and

(g) words and expressions defined in the body of this Agreement (including its exhibits) shall have the meanings thereby attributed to them whenever the context requires.

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12.14 Confidentiality. The Parties undertake to each other and the Company that they will not at any time hereafter use or divulge or communicate to any person other than to officers or employees of the Company whose province it is to know the same or on the instructions of the Board of Directors any confidential information concerning the business, accounts, finance or contractual arrangements or other dealings, transactions or affairs of the Company which may come to their knowledge and they shall use their best endeavors to prevent the publication or disclosure of any confidential information concerning such matters by themselves, their respective employees and officers; provided, however, that AsiaStar, IDG and Susquehanna may disclose such information to its respective partners, principals, employees, and legal and financial advisors. The obligations of each of the Parties contained in this Section 12.14 shall continue without limit in point in time but shall cease to apply to any information coming into the public domain otherwise than by breach by any such Party of its said obligations; provided that nothing contained in this Section 12.14 shall prevent any Party from disclosing such information to the extent required in or in connection with legal proceedings arising out of this Agreement or any matter relating to or in connection with the Company. All notes and memoranda (whether in the form of originals, reproductions or electronically stored data) of any trade secrets or confidential information concerning the business of the Company or any of its suppliers, agents, distributors or customers which shall be acquired, received or made by a Party during the continuance of this Agreement shall be the property of the Company and shall be surrendered by the Party to someone duly authorized by the Company in that behalf at the termination of this Agreement or at the request of the Board of Directors at any time during the continuance of this Agreement.

12.15 Susquehanna Rights. Any rights of Susquehanna under this Agreement may, without prejudice to the rights of Susquehanna to exercise any such rights, be exercised by Susquehanna Asia Investment LLLP or any other fund manager of Susquehanna or their nominees (“Susquehanna Manager”), unless Susquehanna has (a) given notice to the other parties that any such rights cannot be exercised by Susquehanna or a Susquehanna Manager; and (b) not given notice to the other parties that such notice which is given under this Section 12.15 has been revoked.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Shareholders Agreement as of the date first written above.

HOME INNS & HOTELS MANAGEMENT INC.
By:	/s/
Name:
Title:
POLY VICTORY INVESTMENTS LIMITED
By:	/s/
Name:
Title:
QI JI
/s/
(Signature)
NAN PENG SHEN
/s/
(Signature)
CHUNG LAU
/s/
(Signature)
MIN FAN
/s/
(Signature)
SUN JIAN
/s/
(Signature)

[SIGNATURE PAGE TO HOME INNS SHAREHOLDERS AGREEMENT]

RI XIN LIANG

/s/

(Signature)

HUI CHEN

/s/

(Signature)

[SIGNATURE PAGE TO HOME INNS SHAREHOLDERS AGREEMENT]

Series A Preference Shareholders:

ASIASTAR IT FUND L.P.
By:	/s/
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
/s/
Name:
Title:
Series B Preference Shareholders:
ASIASTAR IT FUND L.P.
By:	/s/
Name:
Title:
IDG TECHNOLOGY VENTURE INVESTMENTS, LP
By:	IDG Technology Venture Investments, LLC, its General Partner
/s/
Name:
Title:

[SIGNATURE PAGE TO HOME INNS SHAREHOLDERS AGREEMENT]

Series C Preference Shareholders:

SUSQUEHANNA CHINA INVESTMENT HI,
By:	Susquehanna Asia Investment, LLLP, its Authorized agent
/s/
Name:
Title:
BEIHAI CAPITAL LIMITED
By:	/s/
Name:
Title:
KANGAROO INVESTMENTS LLC
By:	/s/
Name:
Title:
FORTUNE HERO LIMITED
By:	/s/
Name:
Title:
SOON YAN SEEN
/s/
(Signature)
HIROKO NISHIKAWA
/s/
(Signature)

[SIGNATURE PAGE TO HOME INNS SHAREHOLDERS AGREEMENT]

EXHIBIT A

SHAREHOLDERS

Name	Address	Ordinary Shares	Series A Shares	Series B Shares
Poly Victory Investments Limited	Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands	13,364,140	Nil	Nil
Nan Peng Shen	Room 2001, 20th Floor, The Centrium 60 Wyndham Street, Central Hong Kong	4,718,580	Nil	Nil
Qi Ji	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	3,877,100	Nil	Nil
Chung Lau	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	3,077,100	Nil	Nil
Min Fan	3F, Building 63-64 No. 421, Hong Cao Road Shanghai, China	1,562,220	Nil	Nil
Hui Chen	No. 158 Old Hu Qing Ping Road No. 65 Hong Kong Villa Shanghai, China	200,000	Nil	Nil
Ri Xin Liang	No. 501, 1st Men, 6th Floor No.12, San Hu Road South, Hai Dian District Beijing, China	400,000	Nil	Nil
Sun Jian	Room 502, #19 Lane 666, Jinxiu Road, Shanghai, China	200,000	Nil	Nil
AsiaStar IT Fund L.P.	44/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong with copy to: Sycamore Ventures 1903A, Marine Tower, 1 Pudong Avenue Shanghai 200120, China	Nil	10,775,800	1,511,028
IDG Technology Venture Investments, LP	Room 1105, Aetna Tower No. 107, Zunyi Road Shanghai 200051, China	Nil	6,465,600	906,617

EXHIBIT B

INVESTORS

Name	Address	Series C Shares
Susquehanna China Investment HI	c/o Susquehanna Asia Investment, LLLP 401 City Avenue, Suite 220 Bala Cynwyd, PA 19004-1188 U.S.A. Fax: (610) 747-2014	2,873,940
Kangaroo Investments LLC	200 W. Jackson Chicago, Illinois 60606 U.S.A. Fax: (312) 264 2001	130,633
Beihai Capital Limited	2103 Futian Garden Building A Fu Qiang Road Shenzhen China 518031 Fax: (86-755) 2583-8382	65,317
Fortune Hero Limited	Suite 3001-03 30/F Convention Plaza Office Tower 1 Harbour Road Wanchai, Hong Kong c/o Kenneth Gaw Fax: (852) 2810 1813	65,317
Soon Yan Seen	Flat 2401, Blk A Villa Lotto 18 Broadwood Road Happy Valley, Hong Kong Fax: (852) 2169 3885	65,317
Hiroko Nishikawa	4C Somerset 67 Repulse Bay Road Hong Kong Fax: (852) 2517 6671	65,317

EXHIBIT C

FORM OF INDEMNIFICATION AGREEMENT

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (the “Agreement”) is entered into as of [            ], 200[__] by and between Home Inns & Hotels Management Inc., a Cayman Islands company (the “Company”) and the undersigned, a director and/or officer of the Company (“Indemnitee”).

RECITALS

1. The Company recognizes that highly competent persons are becoming more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their services to the corporation.

2. The Board of Directors of the Company (the “Board”) has determined that the inability to attract and retain highly competent persons to serve the Company is detrimental to the best interests of the Company and its shareholders and that it is reasonable and necessary for the Company to provide adequate protection to such persons against risks of claims and actions against them arising out of their services to the corporation.

3. The Company is willing to indemnify Indemnitee to the fullest extent permitted by applicable law, and Indemnitee is willing to serve and continue to serve the Company on the condition that he be so indemnified.

AGREEMENT

In consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

A. DEFINITIONS

The following terms shall have the meanings defined below:

Expenses shall include damages, judgments, fines, penalties, settlements and costs, attorneys’ fees and disbursements and costs of attachment or similar bond, investigations, and any expenses paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding.

Indemnifiable Event means any event or occurrence that takes place either before or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture or other entity, or was a director or officer of an entity that was a predecessor of the Company or another entity at the request of such predecessor entity, or related to anything done or not done by Indemnitee in any such capacity.

Participant means a person who is a party to, or witness or participant (including on appeal) in, a Proceeding.

Proceeding means any threatened, pending, or completed action, suit or proceeding, or any inquiry, hearing or investigation, whether civil, criminal, administrative, investigative or other, in which Indemnitee may be or may have been involved as a party or otherwise by reason of an Indemnifiable Event, including, without limitation, any threatened, pending, or completed action, suit or proceeding by or in the right of the Company.

B. AGREEMENT TO INDEMNIFY

1. General Agreement. In the event Indemnitee was, is, or becomes a Participant in, or is threatened to be made a Participant in, a Proceeding, the Company shall indemnify the Indemnitee from and against any and all Expenses which Indemnitee incurs or becomes obligated to incur in connection with such Proceeding, to the fullest extent permitted by applicable law.

2. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits in defense of any Proceeding or in defense of any claim, issue or matter in such Proceeding, Indemnitee shall be indemnified against all Expenses incurred in connection with such Proceeding or such claim, issue or matter, as the case may be.

3. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of Expenses, but not for the total amount of Expenses, the Company shall indemnify the Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

4. Exclusions. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification under this Agreement:

(a) to the extent that payment is actually made to Indemnitee under a valid, enforceable and collectible insurance policy;

(b) in connection with a judicial action by or in the right of the Company, in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudicated by final judgment in a court of law to be liable for gross negligence or willful misconduct in the performance of his duty to the Company unless and only to the extent that any court in which such action was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as such court shall deem proper;

(c) in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company, and not by way of defense, unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding; or (ii) the Proceeding is one to enforce indemnification rights under this Agreement or any applicable law;

(d) for a disgorgement of profits made from the purchase and sale by the Indemnitee of securities pursuant to Section 16(b) of the Exchange Act or similar provisions of any applicable U.S. state statutory law or common law;

2

(e) brought about by the dishonesty or fraud of the Indemnitee seeking payment hereunder; provided, however, that the Indemnitee shall be protected under this Agreement as to any claims upon which suit may be brought against him by reason of any alleged dishonesty on his part, unless a judgment or other final adjudication thereof adverse to the Indemnitee establishes that he committed (i) acts of active and deliberate dishonesty, (ii) with actual dishonest purpose and intent, and (iii) which acts were material to the cause of action so adjudicated;

(f) for any judgment, fine or penalty which the Company is prohibited by applicable law from paying as indemnity; or

(g) arising out of Indemnitee’s breach of an employment agreement with the Company (if any) or any other agreement with the Company or any of its subsidiaries.

5. No Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to continued employment with the Company.

6. Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for any reason other than those set forth in Section 4, then the Company shall contribute to the amount of Expenses paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and by the Indemnitee on the other hand from the transaction from which such Proceeding arose, and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such Expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

C. INDEMNIFICATION PROCESS

1. Notice and Cooperation By Indemnitee. Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement, provided that the delay of Indemnitee to give notice hereunder shall not prejudice any of Indemnitee’s rights hereunder, unless such delay results in the Company’s forfeiture of substantive rights or defenses. Notice to the Company shall be given in accordance with Section F.7 below. In addition, Indemnitee shall give the Company such information and cooperation as the Company may reasonably request.

2. Indemnification Payment.

(a) Advancement of Expenses. Indemnitee may submit a written request to the Company requesting that the Company advance to Indemnitee all Expenses that may be reasonably incurred by Indemnitee in connection with a Proceeding as such Expenses are

3

incurred. The Company shall, within ten business days of receiving such a written request by Indemnitee, advance all requested Expenses to Indemnitee.

(b) Reimbursement of Expenses. To the extent Indemnitee has not requested any advanced payment of Expenses from the Company, Indemnitee shall be entitled to receive reimbursement for the Expenses incurred in connection with a Proceeding from the Company immediately after Indemnitee makes a written request to the Company for reimbursement.

(c) Determination by the Reviewing Party. Notwithstanding anything foregoing to the contrary, in the event the Reviewing Party informs the Company that Indemnitee is not entitled to indemnification in connection with a Proceeding under this Agreement or applicable law, the Company shall be entitled to be reimbursed by Indemnitee for all the Expenses previously advanced or otherwise paid to Indemnitee in connection with such Proceeding; provided, however, that Indemnitee may bring a suit to enforce his indemnification right in accordance with Section C.3 below.

3. Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within 30 days after making a written demand in accordance with Section C.2 above, Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court of competent jurisdiction seeking a determination by the court or challenging any determination by the Reviewing Party or any aspect of the Agreement. Any determination by the Reviewing Party not challenged by Indemnitee and any judgment entered by the court shall be binding on the Company and Indemnitee.

4. Assumption of Defense. In the event the Company is obligated under this Agreement to advance any Expenses for any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, upon delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, unless (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded, based on written advice of counsel, that there may be a conflict of interest of such counsel retained by the Company between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company ceases or terminates the employment of such counsel with respect to the defense of such Proceeding, in any of which events the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. At all times, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s expense.

5. Defense to Indemnification, Burden of Proof and Presumptions. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement that it is not permissible under this Agreement or applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified under this Agreement, the burden of proving such a defense or determination shall be on the Company. Neither the failure of the Reviewing Party or the Company to have made a determination prior to the commencement of such action by Indemnitee that indemnification is proper under the circumstances because Indemnitee has met the standard

4

of conduct set forth in applicable law, nor an actual determination by the Reviewing Party or the Company that Indemnitee had not met such applicable standard of conduct shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

6. No Settlement Without Consent. The Company shall not settle any Proceeding in any manner that would impose any damage, loss, penalty or limitation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement, provided that Indemnitee may withhold his consent if any proposed settlement imposes any damage, loss, penalty or limitation on Indemnitee.

7. Company Participation. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial action if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action, unless such lack of opportunity does not result in the Company’s forfeiture of substantive rights or defenses.

8. Reviewing Party.

(a) For purposes of this Agreement, the Reviewing Party with respect to each indemnification request of Indemnitee shall by (A) the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, said Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; and, if it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board of Directors shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee’s entitlement to indemnification. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(b) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as provided in this Section 8(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be,

5

a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 8(d) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting under this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(b), regardless of the manner in which such Independent Counsel was selected or appointed.

(c) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company and any other corporation, partnership, joint venture or other entity of which Indemnitee is or was serving at the written request of the Company as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers and directors of the Company or such other corporation, partnership, joint venture or other entity in the course of their duties, or on the advice of legal counsel for the Company or such other corporation, partnership, joint venture or other entity or on information or records given or reports made to the Company or such other corporation, partnership, joint venture or other entity by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or such other corporation, partnership, joint venture or other entity. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or such other corporation, partnership, joint venture or other entity shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. The provisions of this Section 8(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the

6

Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(d) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

D. DIRECTOR AND OFFICER LIABILITY INSURANCE

1. Good Faith Determination. The Company shall from time to time make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses incurred in connection with their services to the Company or to ensure the Company’s performance of its indemnification obligations under this Agreement.

2. Coverage of Indemnitee. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

3. No Obligation. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain any director and officer insurance policy if the Company determines in good faith that such insurance is not reasonably available in the case that (i) premium costs for such insurance are disproportionate to the amount of coverage provided, or (ii) the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit.

E. NON-EXCLUSIVITY; FEDERAL PREEMPTION; TERM

1. Non-Exclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s current memorandum and articles of association, applicable law or any written agreement between Indemnitee and the Company (including its subsidiaries and affiliates). The indemnification provided under this Agreement shall continue to be available to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he may have ceased to serve in any such capacity at the time of any Proceeding.

2. Federal Preemption. Notwithstanding the foregoing, both the Company and Indemnitee acknowledge that in certain instances, U.S. federal law or public policy may

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override applicable law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Such instances include, but are not limited to, the U.S. Securities and Exchange Commission’s prohibition on indemnification for liabilities arising under certain U.S. federal securities laws. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

3. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer and/or a director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding by reason of his former or current capacity at the Company, whether or not he is acting or serving in any such capacity at the time any expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer and/or a director of the Company or any other enterprise at the Company’s request.

F. MISCELLANEOUS

1. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided in this Agreement, no failure to exercise or any delay in exercising any right or remedy shall constitute a waiver.

2. Subrogation. In the event of payment to Indemnitee by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company to bring suit to enforce such rights.

3. Assignment; Binding Effect. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party; except that the Company may, without such consent, assign all such rights and obligations to a successor in interest to the Company which assumes all obligations of the Company under this Agreement. Notwithstanding the foregoing, this Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and the Company’s successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company) and assigns, as well as Indemnitee’s spouses, heirs, and personal and legal representatives. As a condition to any purchase, merger, consolidation or other business combination transaction involving the Company, the Company’s successor shall expressly assume the obligations under this Agreement.

4. Severability and Construction. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to a court order, to perform its

8

obligations under this Agreement shall not constitute a breach of this Agreement. In addition, if any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. The parties hereto acknowledge that they each have opportunities to have their respective counsels review this Agreement. Accordingly, this Agreement shall be deemed to be the product of both of the parties hereto, and no ambiguity shall be construed in favor of or against either of the parties hereto.

5. Counterparts. This Agreement may be executed in two counterparts, both of which taken together shall constitute one instrument.

6. Governing Law. This agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, U.S.A., without giving effect to conflicts of law provisions thereof.

7. Notices. All notices, demands, and other communications required or permitted under this Agreement shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:

Home Inns

No. 400 Tianyaoqiao Road

Shanghai 200030, People’s Republic of China

Attention: Chief Financial Officer

and to Indemnitee at its last address notified to the Company.

8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

(Signature page follows)

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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.

COMPANY

Home Inns & Hotels Management Inc.

Name:

Title:

INDEMNITEE

Name:

EX-4.9

Exhibit 4.9

Dated the 4th day of July 2006

HOME INNS & HOTELS MANAGEMENT INC.

THE PERSONS NAMED IN SCHEDULE 1 TO THIS

AGREEMENT

(THE “INVESTORS”)

SUBSCRIPTION AGREEMENT

for the subscription of ordinary shares in

HOME INNS & HOTELS MANAGEMENT INC.

CONTENTS

	Clause	Page
1.	INTERPRETATION	1
2.	SUBSCRIPTION AND CLOSING	4
3.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY	5
4.	REPRESENTATIONS AND WARRANTIES OF THE INVESTOR	6
5.	CONDITIONS OF INVESTOR’S OBLIGATIONS AT CLOSING	8
6.	CONDITIONS OF THE COMPANY’S OBLIGATIONS AT CLOSING	8
7.	MISCELLANEOUS	8

i

THIS SUBSCRIPTION AGREEMENT is made on the 4th day of July 2006

BETWEEN:

(1) HOME INNS & HOTELS MANAGEMENT INC., a company incorporated under the laws of the Cayman Islands, whose registered office is at M&C Corporate Services Limited, P.O. Box 309GT, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies (the “Company”); and

(2) THE PERSONS NAMED IN SCHEDULE 1 (each an “Investor” and collectively the “Investors”);

WHEREAS:

(A) The Company is a company incorporated under the laws of the Cayman Islands, and as at the date hereof has an authorized share capital of US$1,000,000.00 divided into 200,000,000 shares of US$0.005 each, comprised of 177,075,144 Ordinary Shares, 17,241,400 Series A Preference Shares, 2,417,645 Series B Preference Shares and 3,265,841 Series C Preference Shares.

(B) Each Investor has agreed to subscribe for the number of Ordinary Shares set opposite his name in Schedule 1 and the Company has agreed to issue such Ordinary Shares to each such Investor upon Closing subject to and on the terms and conditions set out in this Agreement.

THE PARTIES AGREE AS FOLLOWS:

1. INTERPRETATION

1.1 In this Agreement (including the Recitals and the Schedule), unless the context otherwise requires, the following expressions shall have the following meanings:

“Affiliate” of any Person means any individual, partnership, corporation, trust or other entity that directly or indirectly controls, or is controlled or employed by, or is under common control with, such person, where control means the direct or indirect ownership of more than 50% of the outstanding shares or other ownership interests having voting power to elect directors or the equivalent, and for the purpose of calculating such 50%, the shares or other ownership interests having voting power to elect directors or the equivalent held by the spouse or immediate family member of such person or held by the trustee of any trust of which such person or his spouse or immediate family member is a beneficiary or a discretionary object shall be included;

“Amended Shareholders Agreement” means the Shareholders Agreement, dated June 29, 2006 by and among the Company and the shareholders of the Company who were signatories thereto, as amended by the First Amendment to the Shareholders Agreement, dated July 4, 2006 by and among the Company and the shareholders who were signatories thereto;

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“Business Day” means any day (excluding Saturdays, Sundays and public holidays in the PRC) on which banks generally are open for business in the PRC;

“Contractual Obligations” means, as to any Investor, any provision of any security or financial instrument issued by such Investor or of any agreement, undertaking, contract, license, engagement, lease, indenture, mortgage, deed of trust, purchase order, commitment or other instrument or contractual arrangement to which such Investor is a party or by which it or any of its property is bound.

“Closing” means completion of the subscription for the Subscription Shares pursuant to Clause 2.2;

“Closing Date” means the date falling not less than two (2) but not more than five (5) Business Days following the date of satisfaction or waiver of the Conditions, or such later date as may be agreed in writing between all parties to this Agreement;

“Conditions” means the conditions precedent for the Closing as set out in Clauses 5.1 and 6.1;

“Director” means any director of the Company from time to time;

“Governmental Authority” means the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Memorandum and Articles” means the memorandum and articles of association of the Company as amended from time to time;

“Ordinary Shares” means ordinary shares with a par value of US$0.005 each in the capital of the Company;

“Person” means any individual, partnership, corporation, trust or any legal entity;

“PRC” means the People’s Republic of China, including Hong Kong and Macau;

“Preference Shares” means the Series A Preference Shares, Series B Preference Shares and Series C Preference Shares;

“Securities Act” means the US Securities Act of 1933, as amended, and the rules and regulations of the US Securities and Exchange Commission promulgated thereunder, all as the same shall be in effect at the relevant time;

“Series A Preference Shares” means Series A Preference Shares with a par value of US$0.005 each in the capital of the Company, having the rights and obligations set out in the Memorandum and Articles;

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“Series B Preference Shares” means Series B Preference Shares with a par value of US$0.005 each in the capital of the Company, having the rights and obligations set out in the Memorandum and Articles;

“Series C Preference Shares” means Series C Preference Shares with a par value of US$0.005 each in the capital of the Company, having the rights and obligations set out in the Memorandum and Articles;

“Shares” means Ordinary Shares, Series A Preference Shares, Series B Preference Shares and Series C Preference Shares, whether now owned or hereafter acquired;

“Subscription Price” means herein this Agreement, in relation to an Investor, the aggregate price payable by that Investor for the Subscription Shares to be subscribed by it as set out in Column (C) of Schedule 1 at US$ [•] per Subscription Share;

“Subscription Shares” means, in relation to an Investor, the number of Ordinary Shares set opposite its name in Column (B) of Schedule 1;

“US$” means the lawful currency of the United States; and

“United States” or “US” means the United States of America, its territories and possessions, any state of the US and the District of Columbia.

1.2 In this Agreement:

(a) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(b) references to statutory provisions shall be construed as references to those provisions as amended or re-enacted or as their application is modified by other statutory provisions (whether before or after the date hereof) from time to time and shall include any provisions of which they are re-enactments (whether with or without modification);

(c) all time and dates in this Agreement shall be [Hong Kong] time and dates except where otherwise stated;

(d) unless the context requires otherwise, words incorporating the singular shall include the plural and vice versa and words importing a gender shall include every gender;

(e) references herein to Clauses, Recitals, and the Schedule are to clauses and recitals of and the schedule to this Agreement;

(f) any reference to this Agreement shall include the Recitals and the Schedule; and

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(g) any reference in this Agreement to the knowledge, information, belief or awareness (as applicable) of any party to this Agreement means the actual knowledge of a director or executive officer of such party.

2. SUBSCRIPTION AND CLOSING

2.1 Subscription of Ordinary Shares

(a) Subject to the fulfillment of the Conditions, the Company and the Investors shall proceed to the Closing whereupon the Company shall allot and issue the Subscription Shares to each Investor and the Investors shall subscribe for the Subscription Shares at the Subscription Price payable in accordance with Clause 2.2(c).

(b) The subscription by each of the Investors of the Subscription Shares as set forth in this Clause 2 shall be a separate and severally enforceable and terminable transaction in accordance with the terms of this Agreement. Each Investor’s rights and obligations in respect of its respective subscription as provided herein shall be several and independent. Each Investor may, at its sole election, exercise or enforce its rights against the Company, either severally, or jointly with any other Investors. Any reference to the Investors in this Agreement shall, where the context permits, mean each of the Investors severally.

2.2 Closing

(a) Closing shall take place at the offices of Latham & Waktins LLP, 41^st Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong at 11:00 a.m. or such other agreed time on the Closing Date.

(b) At the Closing, the Company shall, against performance by the Investor of its obligations under Clause 2.2(c),

(i) allot and issue to each Investor the Subscription Shares credited as fully paid;

(ii) deliver to each Investor a duly executed share certificate of the Company in respect of the Subscription Shares issued in its name as soon as practicable after the Closing Date; and

(iii) enter the name of each Investor into the register of members of the Company as the holder of its respective number of Subscription Shares as soon as practicable.

(c) At the Closing, the Investor shall pay the Subscription Price in immediately available funds against the Subscription Price by telegraphic transfer to the Company’s bank account as notified to the Investor by reasonable prior notice from the Company in writing.

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2.3 Default

If any of the parties hereto shall not have complied with any of its respective obligations under Clause 2.2 on the Closing Date, then as between the party(ies) in default and the party(ies) not in default and without prejudice to the rights and obligations of the other Investor(s) and the Company to proceed with completion of the subscription of the relevant Subscription Shares by such Investor(s), the non-defaulting party(ies) may at its or their discretion (and without obligation):

(a) defer Closing with the party(ies) in default to a date not more than 30 days after the said date (and so that the provisions of this Clause 2.3 shall apply to the Closing as so deferred); or

(b) proceed to Closing with the party(ies) in default so far as practicable but without prejudice to the non-defaulting party’s or parties’ rights (whether under this Agreement generally or under this Clause 2) and remedies against the party(ies) in default; or

(c) rescind this Agreement with the party(ies) in default without prejudice to any rights it or they may have against it or them.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY

3.1 The Company represents and warrants to each Investor that each of the representations and warranties set out in this Section 3 is true, complete and accurate as at the date of this Agreement and at the Closing Date. The Company will be deemed to have knowledge or awareness of a particular fact or other matter if any individual who is serving as a director or executive officer (or in any similar capacity) of the Company has actual knowledge or awareness of such fact or other matter.

(a) Organization, Standing and Qualification

(1) The Company is duly organized, validly existing and in good standing (or equivalent status in the relevant jurisdiction) under, and by virtue of, the laws of the place of its incorporation or establishment and has all requisite power and authority to own its properties and assets and to carry on its business. The Company is qualified to do business in each jurisdiction where failure to be so qualified would have a material adverse effect on its assets, properties or business.

(2) The constitutional documents of the Company are in compliance with all applicable laws and regulations and are valid and enforceable among the relevant parties.

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(b) Capitalization

(1) Share Capital

The capitalization of the Company immediately prior to Closing consists of an authorized share capital of US$1,000,000.00 comprised of the following: a total of 177,075,144 authorized Ordinary Shares of which 27,399,139 Ordinary Shares are issued and outstanding; a total of 17,241,400 Series A Preference Shares authorized, issued and outstanding; a total of 2,417,645 Series B Preference Shares authorized, issued and outstanding; and a total of 3,265,841 Series C Preference Shares authorized, issued and outstanding.

(2) Issue of Ordinary Shares

All Subscription Shares will, when issued, be duly and validly authorized and fully paid, in accordance with all applicable laws, the Memorandum and Articles and any relevant securities laws or pursuant to valid exemptions therefrom.

(c) Due Authorization

All corporate action on the part of the Company and its officers and directors necessary for the authorization, execution and delivery of, and the performance of all obligations of the Company under this Agreement, and the authorization, issuance, availability for issuance and delivery of all of the Subscription Shares being issued under this Agreement have been taken or will be taken prior to the Closing. This Agreement is a valid and binding obligation of the Company enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

(d) Valid Issuance of Subscription Shares

The Subscription Shares, when allotted, issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and fully paid.

3.2 The Company acknowledges that each of the Investors has entered into this Agreement in reliance upon the representations and warranties given by them and that they are given with the intention of inducing the Investor to enter into this Agreement.

4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

Each Investor represents and warrants to the Company, severally but not jointly, that each of the representations and warranties of the Investor set out in this Section 4 is true, complete and accurate as at the date of this Agreement and at the Closing Date. Each Investor hereby represents and warrants to the Company that:

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4.1 Such Investor has full power and authority to enter into and perform its obligations under this Agreement, and this Agreement constitutes its valid and legally binding obligation, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

4.2 The execution, delivery and performance by the Investor of this Agreement will not (i) violate any provision of the organizational documents of the Investor, to the extent such Investor is an entity; (ii) require the Investor to obtain any consent, approval or action of, or make any filing with or give any notice to, any Governmental Authority or any other third party pursuant to any agreement to which the Investor is a party or by which the Investor is bound; (iii) conflict with or result in any material breach or violation of any of the terms and conditions of, or constitute (or with notice or lapse of time or both constitute) a default under, any Contractual Obligation to which the Investor is a party or by which the Investor is bound; (iv) violate any court order, judgment, injunction, award, decree or writ against, or binding upon, the Investor or upon its securities, properties or business; or (v) violate any law or regulation of the country where the Investor is incorporated or any other jurisdiction in which the Investor maintains a business presence, to the extent the Investor is a an entity.

4.3 (i) the Subscription Shares are acquired for the account of itself and its Affiliates for investment purposes and not as a nominee or agent for any other party and not with a view to or in connection with the immediate sale or distribution of any part thereof in any transaction that would be in violation of the Securities Act or the securities laws of any state of the United States or any other jurisdiction; and (ii) the Investor understands that the Subscription Shares proposed to be issued under this Agreement will not be registered under the Securities Act, on the ground that the offer of such Subscription Shares provided for in this Agreement is exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company is relying on the Investor’s representations herein in respect of such exemption.

4.4 There are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Investor in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Investor or any action taken by the Investor. The Company has not, and will not, incur, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage or finders’ fees or agents’ commissions in connection with the transactions contemplated under this Agreement.

4.5 The Investor has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Ordinary Shares with the Company’s management. The Investor understands that such discussions, as well as any written information issued by the Company, were intended to describe certain aspects of the Company’s business and prospects but were not a thorough or exhaustive description.

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4.6 The Investor has knowledge and experience in business and financial matters so that he is capable of evaluating the merits and risks of its investment in the Company.

4.7 The Investor has performed and complied in all respects with all of its agreements set forth in the Agreement that are required to be performed by him on or before the Closing Date.

4.8 There is no Governmental Authority or other Person that has instituted or threatened any action or investigation to restrain, prohibit or otherwise challenge the acquisition of the Ordinary Shares by the Investor or any of the transactions contemplated in connection with this Agreement.

5. CONDITIONS OF INVESTOR’S OBLIGATIONS AT CLOSING

5.1 The obligations of each Investor to subscribe for the Subscription Shares shall be subject to the fulfillment of each of the following conditions, except as waived in writing by the Investor:

(a) there is no material breach of any of the representations and warranties contained in Section 3 hereof by the Company prior to and at the Closing.

6. CONDITIONS OF THE COMPANY’S OBLIGATIONS AT CLOSING

6.1 The obligations of the Company to complete the subscription of the Subscription Shares with each Investor are subject to the following conditions precedent:

(a) there is no material breach of any of such Investor’s representations and warranties contained in Section 4 prior to and at the Closing.

6.2 The Company may, at its own absolute discretion, waive any condition set out in Clause 6.1.

7. MISCELLANEOUS

7.1 Successors And Assigns

Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.2 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America, without regard to the principles of conflicts of laws thereof.

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7.3 Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The counterparts to this Agreement may be executed by way of exchange of facsimile transmission and delivery of a counterpart by facsimile shall be as effective as delivery of a manually executed counterpart.

7.4 Notices

Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the relevant post office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days’ advance written notice to the other parties.

7.5 Fees and Expenses

Each of the parties shall bear its own costs and expenses (including legal costs and all administrative and out-of-pocket expenses) incurred in connection with the transactions contemplated under this Agreement.

7.6 Waivers

(a) No failure on the part of any party to exercise, and no delay on its part in exercising, any right or remedy under this Agreement will operate as a waiver thereof nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

(b) Any waiver of any provision of this Agreement, and any consent by a party under any provision of this Agreement, must be in writing. Any waiver or consent shall be effective only for that instance and for the purpose for which it is given.

7.7 Confidentiality

Except as may be required by law, none of the parties shall disclose to any third party the terms and conditions of this Agreement or the transactions contemplated hereby without prior approval by the other parties hereto, provided, however, that the Company may disclose the pricing or other terms and conditions of this Agreement or the transactions contemplated hereby to the Company’s lenders, investors and advisors and to bona fide prospective lenders, investors and advisors, in each case only after such persons or entities have undertaken appropriate nondisclosure obligations.

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7.8 Severability

If one or more provisions of this Agreement are held to be unenforceable under any applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

7.9 Further Assurance

Each party shall do or procure to be done all such further acts and things, and execute or procure the execution of all such other documents, as the other parties may from time to time reasonably require, whether on or after completion of the transactions contemplated herein, for the purpose of giving to the other parties the full benefit of all of the provisions of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

The Company:
HOME INNS & HOTELS MANAGEMENT INC.
By:	/s/
Name:
Title:
The Investors:
SHEN Nan Peng
/s/
(Signature)
LAU Chung
/s/
(Signature)
FAN Min
/s/
(Signature)
WU May Yihong
/s/
(Signature)
SUN Jian
/s/
(Signature)
LIANG Ri Xin
/s/
(Signature)

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SCHEDULE 1

THE INVESTORS

(A)	(B)	(C)
Name of Investor	No. of Subscription Shares	Total Subscription Price
SHEN Nan Peng	1,444,095 Ordinary Shares	US$	4,000,000
LAU Chung	722,048 Ordinary Shares	US$	2,000,000
FAN Min	361,024 Ordinary Shares	US$	1,000,000
SUN Jian	111,556 Ordinary Shares	US$	309,000
LIANG Ri Xin	50,543 Ordinary Shares	US$	140,000
WU May Yihong	144,771 Ordinary Shares	US$	401,000
Total	2,834,037 Ordinary Shares	US$	7,850,000

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EX-4.10

Exhibit 4.10

ACTING-IN-CONCERT AGREEMENT

This Acting-in-Concert Agreement is executed by the following parties:

Party A: SHEN, Nan Peng

Address:

Party B: JI, Qi

Address:

Party C: LAU, Chung

Address:

Party D: FAN, Min

Address:

Party E: LIANG, Ri Xin

Address:

Party F: SUN, Jian

Address:

Party G: WU, May

Address:

Whereas:

1. Parties A, B, C and D jointly hold 11,835,000 ordinary shares of Home Inns & Hotels Management Inc. (including its predecessors, hereinafter referred to as the “Company”) through Top Sterling International Limited (hereinafter referred to as “Top Sterling”), which represent 23.52% of the total shares that have been issued by the Company. Top Sterling was dissolved on May 23, 2006, and the shares that it held in the Company were distributed to Parties A, B, C and D, who agreed at the time of the dissolution of Top Sterling to continue to act in concert.

2. Parties B, E, F and G executed their share purchase options on July 4, 2006, and the Company also issued new shares to Parties A, B, C, D, E, F and G on July 4, 2006, and currently Parties A, B, C, D, E, F and G (hereinafter referred to as the “Parties”) jointly hold 17,769,037 ordinary shares of the Company, which represent 32.49% of the total shares that have been issued by the Company. The Parties’ shareholding amount and proportion in the Company can be seen in the attached Table 1.

In order to maximize the profits for the Parties, and to maintain the control of the Parties over a certain proportion of the voting rights and shareholdings of the Company, the Parties agree unanimously to the following arrangements:

1. During the effective period of this agreement, the Parties shall be deemed as actors in concert, and shall act in concert in relation to all matters that require the decisions of the shareholders of the Company, including but not limited to voting unanimously to approve, reject, or to abstain from voting in relation to motions that need to be resolved at Shareholders Meetings, and to jointly sign all necessary documents.

2. Before the Parties act in concert, they shall vote on the matters that require action in concert, and joint action shall be taken based on the results of the voting. Each of the Parties agree and confirm that, if the Parties are unable to reach a unanimous opinion in relation to the matters that require action in concert, a decision that is made by a total of more than 50% of voting rights of the Parties shall be deemed as a decision that is unanimously passed by the Parties and shall be binding on all the Parties. Each of the Parties shall act in concert with other Parties based on the contents of the aforesaid decision.

3. The Parties may, prior to the convening of a Company Shareholder Meeting, appoint one of the Parties as a proxy, and issue an authorization letter to such a proxy to authorize the proxy to exercise voting rights on behalf of the Parties at the Company Shareholder Meeting based on the contents of the unanimous decision that has been reached.

4. This agreement shall come into force from the date that the Parties sign the agreement, and the agreement shall remain effective for a period of 364 calendar days.

5. During the effective period of this agreement, if any of the Parties transfers its shares of the Company, as a prerequisite it shall ensure that the transferee is bound by the provisions of this agreement, and the transferee upon receiving the transfer of the shares shall be deemed as having agreed to the provisions of this agreement and having agreed to be bound by the provisions of this agreement.

6. This agreement shall be governed by the legal jurisdiction of New York, USA and shall be interpreted in accordance with the laws of New York.

7. This agreement is executed by the Parties on the July 6, 2006.

Party A: SHEN Nan Peng	Party B: JI Qi
/s/	/s/
Party C: LAU Chung	Party D: FAN Min
/s/	/s/
Party E: LIANG Ri Xin	Party F: SUN Jian
/s/	/s/
Party G: WU May
/s/

Table 1

List of the Parties who agree to act in concert

	Name of Shareholder	Number of Shares Held	Shareholding Proportion (%)
Party A	SHEN Nan Peng	5,355,389	9.79%
Party B	JI Qi	4,411,294	8.06%
Party C	LAU Chung	4,033,342	7.37%
Party D	FAN Min	2,042,142	3.73%
Party E	LIANG Ri Xin	790,543	1.45%
Party F	SUN Jian	691,526	1.26%
Party G	WU May	444,771	0.81%
Total		17,769,037	32.49%

EX-4.11

Exhibit 4.11

FINANCING TRANSACTION AGREEMENT

THIS AGREEMENT is made on June     , 2005 in the Beijing Municipality among the three parties below.

Party A: Beijing Capital Tourism Group Limited Liability Company

Registered address: No. 10, Yabao Road, Chaoyang District, Beijing Municipality

Party B: Home Inns Hotel Management (Beijing) Limited

Registered address: No. 3, Yongxiang Lane, Xizhimennei, Beijing

Party C: Home Inns & Hotels Management (Hong Kong) Limited

Registered address: Unit 2001, The Centrium, No. 60, Wyndham Street, Hong Kong

WHEREAS:

1. Party A is a body corporate that engages in the principal business of hotels and tourism; Party B is a sino-foreign joint venture that engages in the principal business of hotel management; Party C is the foreign shareholder of Party B, and it lawfully and effectively holds 95.5% of the equity interests of Party B.

2. Party B plans to accelerate the construction of its Home Inns hotel chain within the entire country, and hopes that Party A can provide financial support for the construction of Party B’s Home Inns hotel chain.

In order to clearly define the rights and obligations of Parties A, B and C, pursuant to the current laws and regulations that are in force, and based on the principle of voluntariness, the parties have entered into friendly negotiations and hereby enter into an agreement as follows:

1. Amount and Method of Contribution

Party A agrees to contribute an amount of Eighty Million Yuan (RMB 80 million) as financial support towards the construction of Party B’s Home Inns hotel chain. Form of financial support: entrusted loan.

2. Term

The term of the financial support shall be 3 years, starting from the date the amount of contribution referred to in Article 1 herein reaches Party B’s bank account.

3. Expenses

The interest and other relevant expenses of the financial support shall be borne by Party B in accordance with the “Entrusted Loan Agreement”.

4. Representations, Warranties and Undertakings by Party A

(1) Party A is a body corporate that was lawfully incorporated and has the right to undertake the relevant items in this agreement. It has a full legal right to sign and perform this agreement.

(2) Within 30 days of this agreement coming into force, Party A shall sign an “Entrusted Loan Agreement” with Party B and the bank for an entrusted loan, and shall release the funding contributions in full to Party B according to the timing and amount that are stipulated in the “Entrusted Loan Agreement”.

5. Representations, Warranties and Undertakings by Party B and Party C

(1) Party B is a body corporate that has been lawfully incorporated and has the right to engage in the relevant items in this agreement. It has a full legal right to sign and perform this agreement.

(2) Party C is a lawful shareholder of Party B, and has the right to engage in the relevant items in this agreement. Party C has a full legal right to sign and perform this agreement.

(3) Party C is willing to undertake a joint and several liability for Party B’s repayment obligations under this agreement.

(4) If Party B is unable to repay the principal and interest and other relevant expenses timely and in full for the funding contributions stipulated under the “Entrusted Loan Agreement”, the various parties to this agreement may enter into negotiations to extend the repayment period under this agreement and correspondingly arrange for an extension of term under the “Entrusted Loan Agreement”. If an agreement for an extension of term cannot be reached or if Party B is unable to repay the money in full after the expiration of the extended period, Party A shall have the right to select one of the following methods to enforce its creditor rights:

a) Demand the enforcement of its creditor rights against Party B and/or Party C by means of judicial proceedings.

b) Provided that the laws of People’s Republic of China allow, and provided that the appraised and audited value of the net assets of Party C is higher than the net book value of the assets under this agreement, Party A shall have the right to regard the principal of the funding contributions as a direct investment in Party C by a third party that it designates according to a debt-to-shares conversion scheme. At that time, Party C shall issue an additional 11.15% of its shares (based on April 31, 2005, equivalent to 6,318,431 shares) to the third party that is designated by Party A, thus making the third party that is designated by Party A a lawful shareholder of Party C.

- 2 -

c) If the appraised and audited value of the net assets of Party B is higher than the assessed value of Party B of RMB 663,477,155 under this agreement, Party A shall have the right to regard the principal of the funding contributions as the amount that it itself or the third party it designates uses to increase the capital and capitalization of Party B, and the shares that Party A or the third party that it designates enjoys under the increase in capital and capitalization shall be computed based on the assessed value of Party B, which is RMB 663,477,155.

(5) No matter whether option (b) or (c) in the aforesaid item (4) is chosen, Party B and Party C shall guarantee that the shares that are received by Party A or the third party that Party A designates shall represent their corresponding values.

(6) Party B and Party C shall have obtained all the internal approvals from Party A and/or the third party that Party A designates in relation to its increase in capital and capitalization, and when Party A submits a written request for an increase in capital and capitalization of Party B or Party C, Party B and Party C shall take all proactive and lawful measures to assist Party A and/or the third party that Party A designates in completing the procedures for the increase in capital and capitalization of Party B or Party C.

(7) During the effective period of this agreement, if there are any mergers, splits, dissolutions or termination of business of Party B and/or Party C, Party B and/or Party C shall notify Party A 30 days in advance. If there are changes to the address, name, legal representative or directors of Party B and/or Party C, Party B and/or Party C shall notify Party A within 7 days of the changes.

(8) Prior to the execution of this agreement, no disposals have been made and no pledges have been encumbered regarding the equity interests of Party B and Party C, and there are no third-party interests that exist in the aforesaid equity interests; furthermore, during the effective period of this agreement, prior to the written consent of Party A, Party B and Party C shall not issue any additional new shares, transfer shares or reduce its capital under any conditions except the following circumstances:

A) Party C increases its capital and capitalization with regard to any ordinary or preferred shares based on a value that is higher than its C-series value after increase of capital, i.e., at the par value higher than USD 1.5 per share (corresponding to any issue of additional new shares by Party B at a price higher than RMB 663,477,155), including the issue of shares and listing at a price of more than USD 1.5 per share in overseas securities markets other than in the A-share market in China.

B) Share transfer arrangements whereby the shares that is held by Party C’s current shareholder Top Sterling International Limited in Party C is not lower than the current proportion (at the time of execution of this agreement).

Even if there are changes as mentioned above to the equity interests as set out above, they shall not affect Party A’s rights to increase its capital in Party B or Party C in the event that Party B is unable to repay the principal and interest and other relevant expenses timely and in full for the funding contributions stipulated under the “Entrusted Loan Agreement”.

- 3 -

(9) If any of the aforesaid representations, warranties and undertakings are false, inaccurate or incomplete, and causes economic loss to Party A, Party B and/or Party C shall undertake joint and several liability to Party A.

6. Liabilities for Breach of Agreement

After this agreement comes into effect, the various parties in this agreement shall perform their obligations that are stipulated in this agreement. Any party that fails to perform its obligations stipulated in this agreement shall bear the corresponding liabilities for breach of agreement, and shall compensate the other party for any losses that are consequently suffered. If there are any defects in the aforesaid representations, warranties and undertakings that are made by Party B and/or Party C, regardless of whether such defects result in any losses to Party A, they shall constitute a fundamental breach of this agreement. Apart from the corresponding obligations to make compensation and/or liabilities for breach of Agreement for Party B and/or Party C, Party B shall repay the entire funding contributions in full to Party A within 15 working days of receiving the written notice of repayment from Party A.

7. Confidentiality

The various parties to this agreement acknowledge and confirm that any oral or written information that are exchanged between one another in relation to this agreement shall be treated as confidential information. The various parties shall uphold the confidentiality of all such information, and prior to obtaining the written consent of the other party, such party shall not disclose any of the relevant information to any third party, except in the following circumstances: (1) Information that is already made known to the public or will be made known to the public (not being information that is made known to the public due to disclosure by a party that has received the information); (2) the information is required to be disclosed pursuant to applicable laws and regulations and other relevant supervisory rules and regulations. If the employees of any one of the parties disclose the information, it shall be deemed as a disclosure by the party itself, and such party shall bear the liabilities for breach of agreement pursuant to this agreement. This article shall remain effective even when this agreement is terminated for any reasons.

8. Applicable Laws and Resolution of Disputes

(1) The laws of PRC shall be applicable to the execution, effectiveness, interpretation, performance, modification, termination and dispute resolution for this agreement.

(2) In the event that any disputes arise in the course of interpreting and performing this agreement, the various parties to this agreement shall seek first to resolve the matter through amicable negotiations. If a resolution cannot be reached after negotiations, any one of the parties may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration. The arbitration decision shall be final, and shall be binding upon all the parties.

(3) In the course of any disputes arising from the interpretation and performance of this agreement and when arbitration is in progress for any of the disputes, apart from the matter that is in dispute, the various parties to this agreement shall continue to exercise their other rights under this agreement and shall continue to perform their other obligations under this agreement.

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9. Effectiveness and Other Matters

(1) This agreement shall come into effect upon signature by all three parties, Parties A, B and C.

(2) If there are any unresolved matters in this agreement, Parties A, B and C may make written supplementary agreements which shall be annexed to this agreement. The annex to this agreement shall form an indivisible part of this agreement, and shall have the same legal effectiveness as this agreement.

(3) There shall be three counterparts of this agreement, and Parties A, B and C shall each hold one counterpart, and each of the counterparts shall have the same legal effectiveness.

[There is no main text below.]

- 5 -

Signature page for the Financial Support Agreement between Beijing Capital Tourism Group Limited Liability Company and Home Inns Hotel Management (Beijing) Limited together with Home Inns & Hotels Management (Hong Kong) Limited.

Party A: Beijing Capital Tourism Group Limited Liability Company

[seal: Beijing Capital Tourism Group Limited Liability Company]

Delegated Representative (Signature): /s/

Party B: Home Inns Hotel Management (Beijing) Limited

[seal: Home Inns Hotel Management (Beijing)]

Delegated Representative (Signature): /s/

Party C: Home Inns & Hotels Management (Hong Kong) Limited

[stamp: Home Inns & Hotels Management (Hong Kong) Limited]

Delegated Representative (Signature): /s/

- 6 -

EX-5.1

Exhibit 5.1

Our ref        RJT/620456/473706/v5

Your ref

Home Inns & Hotel Management Inc. No. 400 Tianyaoqiao Road Shanghai 200030 People’s Republic of China	Direct:	+852 2971 3007
	Mobile:	+852 9020 8007
	E-mail:	richard.thorp@maplesandcalder.com

4 October 2006

Dear Sirs

Home Inns & Hotel Management Inc.

We have acted as Cayman Islands legal advisers to Home Inns & Hotel Management Inc. (the “Company”) in connection with the Company’s registration statement on Form F-1, including all amendments or supplements thereto (the “Registration Statement”), originally filed on 4 October 2006 with the Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended to date relating to the offering by the Company and the sale by the selling shareholders (the “Selling Shareholders”) of certain American Depositary Shares representing the Company’s Ordinary Shares of par value US$0.005 each (the “Ordinary Shares”). We are furnishing this opinion as Exhibit 5.1 to the Registration Statement.

1 DOCUMENTS REVIEWED

For the purposes of this opinion, we have reviewed only originals, copies or final drafts of the following documents:

1.1 the Certificate of Incorporation dated 30 May 2006, and the Memorandum and Articles of Association of the Company as conditionally adopted by special resolution on 22 June 2006 (the “Memorandum and Articles of Association”);

1.2 the register of members of the Company;

1.3 the written resolutions of the board of Directors dated 2 October 2006;

1.4 the written resolutions of the subscriber of the Company dated 22 June 2006;

2

1.5 a certificate from a Director of the Company addressed to this firm dated 4 October 2006, a copy of which is attached hereto (the “Director’s Certificate”); and

1.6 the Registration Statement.

2 ASSUMPTIONS

Save as aforesaid we have not been instructed to undertake and have not undertaken any further enquiry or due diligence in relation to the transaction the subject of this opinion. The following opinions are given only as to and based on circumstances and matters of fact existing at the date hereof and of which we are aware consequent upon the instructions we have received in relation to the matter the subject of this opinion and as to the laws of the Cayman Islands as the same are in force at the date hereof. In giving this opinion, we have relied upon the completeness and accuracy (and assumed the continuing completeness and accuracy as at the date hereof) of the Director’s Certificate as to matters of fact and the Certificate of Good Standing without further verification and have relied upon the following assumptions, which we have not independently verified:

(i) Copy documents or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals.

(ii) The genuineness of all signatures and seals.

(iii) There is no contractual or other prohibition (other than as may arise by virtue of the laws of the Cayman Islands) binding on the Company or on any other party prohibiting it from entering into and performing its obligations.

3 OPINION

The following opinions are given only as to matters of Cayman Islands law and we have assumed that there is nothing under any other law that would affect or vary the following opinions.

Based upon the foregoing and subject to the qualifications set out below and having regard to such legal considerations as we deem relevant, we are of the opinion that:

3.1 The Company has been duly incorporated as an exempted company with limited liability for an unlimited duration and is validly existing under the laws of the Cayman Islands.

3.2 The authorised share capital of the Company is US$1,000,000 divided into 177,075,114 ordinary shares, 17,241,400 Series A Preference Shares, 2,417,645 Series B Preference Shares and 3,265,841 Series C Preference Shares, all with par value US$0.005 each.

3.3 The issue and allotment of the Ordinary Shares has been duly authorised. When allotted, issued and paid for as contemplated in the Registration Statement and registered in the register of members (shareholders), the Ordinary Shares will be legally issued and allotted, fully paid and non-assessable.

3.4 Ordinary Shares to be sold by the Selling Shareholders have been legally and validly issued as fully paid and non-assessable.

4 QUALIFICATIONS

Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in the Registration Statement or otherwise with respect to the commercial terms of the transactions the subject of this opinion.

3

We hereby consent to the use of this opinion in, and the filing hereof as an Exhibit to, the Registration Statement and to the reference to our name under the headings “Enforceability of Civil Liabilities”, “Taxation” and “Legal Matters” and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.

Yours faithfully

/s/ MAPLES and CALDER

HOME INNS & HOTELS MANAGEMENT INC.

PO Box 309GT

Ugland House

South Church Street

George Town

Grand Cayman

Cayman Islands

4 October 2006

Maples and Calder

1504 One International Finance Centre

1 Harbour View Street

Hong Kong

Dear Sirs

Home Inns & Hotels Management Inc. (the “Company”)

I, Neil Nanpeng Shen, being a director of the Company, am aware that you are being asked to provide a legal opinion (the “Opinion”) in relation to certain aspects of Cayman Islands law. Capitalised terms used in this certificate have the meaning given to them in the Opinion. I hereby certify that:

1 The Memorandum and Articles of Association of the Company as conditionally adopted by special resolution passed on 22 June 2006 remain in full force and effect and are unamended.

2 The written resolutions (the “Resolutions”) of the board of directors dated 2 October 2006 were signed by all the directors in the manner prescribed in the Articles of Association of the Company.

3 The authorised share capital of the Company is US$1,000,000 divided into 177,075,114 ordinary shares, 17,241,400 Series A Preference Shares, 2,417,645 Series B Preference Shares and 3,265,841 Series C Preference Shares, all with par value US$0.005 each.

4 The shareholders of the Company have not restricted or limited the powers of the directors in any way. There is no contractual or other prohibition (other than as arising under Cayman Islands law) binding on the Company prohibiting it from issuing and allotting the Ordinary Shares and entering into and performing its obligations under the Agreements.

5 The Resolutions were duly adopted, are in full force and effect at the date hereof and have not been amended, varied or revoked in any respect.

6 The directors of the Company at the date of Resolutions and at the date hereof was and are as follows:

Neil Nanpeng Shen

David Jian Sun

Yunxin Mei

James Jian Zhang Liang

Min Bao

Jerry Sze

Suyang Zhang

7 You have been provided with complete and accurate copies of all minutes of meetings or written resolutions or consents of the shareholders and directors (or any committee thereof) of the Company (which were duly convened, passed or (as the case may be) signed and delivered in accordance with the Articles and Association of the Company) and the Certificate of Incorporation, Memorandum and Articles of Association and statutory registers of the Company.

8 The entry by the Company into the transactions contemplated by the resolutions set forth in the Resolutions does not and will not infringe the terms of, or constitute a default under, any trust deed, agreement or other instrument or obligation to which the Company is a party or by which the Company or any part of its undertaking, assets, property or revenues is bound.

9 There is no contractual or other prohibition (other than as may arise by virtue of the laws of the Cayman Islands) binding on the Company prohibiting it from entering into and performing its obligations.

10 To the best of my knowledge and belief, having made due inquiry, the Company is not the subject of legal, arbitral, administrative or other proceedings in any jurisdiction. Nor have the directors or shareholders taken any steps to have the Company struck off or placed in liquidation, nor have any steps been taken to wind up the Company. Nor has any receiver been appointed over any of the Company’s property or assets.

I confirm that you may continue to rely on this Certificate as being true and correct on the day that you issue the Opinion unless I shall have previously notified you personally (Attn: Mr. Richard Thorp) to the contrary.

Signature:	/s/
	Director

EX-10.1

Exhibit 10.1

Home Inns & Hotels Management (Hong Kong) Limited

EMPLOYEES’ STOCK OPTION PLAN

1. Purposes of the Plan

The purposes of this Plan are:

(a) to attract and retain the best available personnel for positions of substantial responsibility,

(b) to provide additional incentive to Employees, Directors and Consultants, and

(c) to promote the success of the Company’s business.

Stock Purchase Rights may also be granted under the Plan.

2. Definitions

“Administrative Committee”	the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 below.
“Applicable Laws”	the requirements relating to the administration of stock option plans under any stock exchange or quotation system on which the Ordinary Shares are listed or quoted and the applicable laws of any country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan.
“Board”	the Board of Directors of the Company.
“Committee”	a committee of Directors appointed by the Board in accordance with Section 4 below.
“Company”	Home Inns & Hotels Management (Hong Kong) Limited, a company incorporated under the laws of Hong Kong Special Administration Region of China.

“Consultant”	any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity.
“Director”	a member of the Board.
“Disability”	any total and permanent disability which prevents the Service Provider to continue in such capacity.
“Employee”	any person, including but not limited to Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case:
	(i)      any leave of absence approved by the Company; or
	(ii)     transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.
“Fair Market Value”	as of any date, the value of Ordinary Shares is determined as follows:
	(i)      if the Ordinary Shares are listed or publicly traded on any established stock exchange or a national market system, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other resource as the Administrative Committee deems reliable.

Page 2

	(ii)     if the Ordinary Shares are regularly quoted by a principal recognised securities dealer but selling prices are not reported, its Fair Market Value shall be the average between the high bid and low asked prices for the Ordinary Shares on the last market trading day prior to the day of determination; or
	(iii)    in the absence of an established market for the Ordinary Shares, the Fair Market Value thereof shall be determined in good faith by the Administrative Committee after consultation with legal and accounting experts as the Administrative Committee may deem advisable.
“Option”	a stock option granted pursuant to the Plan.
“Option Agreement”	a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
“Option Exchange Program”	a program whereby outstanding Options are exchanged for Options with a lower exercise price.
“Optioned Stock”	the Ordinary Shares subject to an Option or a Stock Purchase Right.
“Optionee”	The holder of an outstanding Option or Stock Purchase Right granted under the Plan.
“Ordinary Shares”	The ordinary shares of the Company.
“Parent”	Any entity which holds directly or indirectly at least fifty point one percent (50.1%) of the voting equity of the Company.

Page 3

“Plan”	This Employees’ Stock Option Plan.
“Restricted Stock”	Shares of Ordinary Shares acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.
“Securities Act”	the _securities exchange legislation of any applicable jurisdiction together with its amendments.
“Service Provider”	an Employee, Director or Consultant.
“Share” or “Shares”	a share or shares of the Ordinary Shares, as adjusted in accordance with Section 12 below.
“Stock Purchase Right”	a right to purchase Ordinary Shares pursuant to Section 11 below.
“Subsidiary”	any entity in which the Company holds directly or indirectly fifty point one percent (50.1%) or more of the voting equity.
“Tax Law”	The relevant tax legislation of the applicable jurisdiction , as amended.

Except where otherwise indicated by the context, the masculine gender also shall include the feminine gender, and the definition of any term herein in the singular also shall include the plural.

3. Stock Subject to the Plan

Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be subject to option and sold under the Plan is 4,784,226 Shares and actual aggregate number of shares granted are subject to the benchmark performance being achieved. At all times during the term of the Plan and while any Option(s) or Stock Purchase Right(s) are outstanding, the Company

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shall retain as authorized and unissued stock, or as treasury stock, at least the number of Shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

If an Option or Stock Purchase Right expires or terminates for any reason or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price and cancelled, such Shares (which will then be authorised but unissued Shares) shall become available for future grant under the Plan.

4. Administration of the Plan

(a) Administrative Committee

The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with the Applicable Laws.

(b) Powers of the Administrative Committee

Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrative Committee shall have the authority in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder;

(iii) to determine the number of Shares to be covered by each such award granted hereunder;

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(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Option or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Ordinary Shares relating thereto, based in each case on such factors as the Administrative Committee, in its sole discretion, shall determine;

(vi) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(e) below instead of Ordinary Shares;

(vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Ordinary Shares covered by such Option has declined since the date the Option was granted;

(viii) to initiate an Option Exchange Program;

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax law;

(x) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrative Committee may deem necessary or advisable; and

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(xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan.

(c) Effect of Administrative Committee’s Decision

All decisions, determinations and interpretations of the Administrative Committee pursuant to the provisions of the Plan shall be final conclusive and binding on all Optionees.

5. Eligibility

(a) Stock Purchase Rights may be granted to Service Providers.

(b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause.

6. Term of Plan

The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 below.

7. Term of Option

The term of each Option shall be stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof.

8. Option Exercise Price and Consideration

(a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrative Committee, but may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

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(b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrative Committee. Such consideration may consist of:

(i) cash,

(ii) check payable to the order of the Company,

(iii) promissory note,

(iv) other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised,

(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or

(vi) any combination of the foregoing methods of payment.

In making its determination as to the type of consideration to accept, the Administrative Committee shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

9. Exercise of Option

(a) Procedure for Exercise; Rights as a Shareholder

Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrative Committee and set forth in the Option Agreement. Except in the case of Options granted to Directors and Consultants, Options shall become exercisable at a rate of no less than twenty percent (20%) per year over five (5) years from the date the Options are granted. Unless the Administrative Committee provides otherwise, vesting of Options granted hereunder to Directors shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

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An Option shall be deemed exercised when the Company receives:

(i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and

(ii) full payment for the Shares with respect to which the Option is exercised.

Full payment may consist of any consideration and method of payment authorised by the Administrative Committee and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorised transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 below.

Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as Service Provider

If an Optionee ceases to be a Service Provider, such Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the

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Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrative Committee, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee

If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee

If an Optionee dies while being a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

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(e) Buyout Provisions

The Administrative Committee may at any time offer to buy out an Option previously granted for a payment in cash or Shares, based on such terms and conditions as the Administrative Committee shall establish and communicate to the Optionee at the time that such offer is made.

10. Non-Transferability of Options and Stock Purchase Rights

The Option and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of succession and may be exercised, during the lifetime of the Optionee, only by the Optionee.

11. Stock Purchase Rights

(a) Rights to Purchase

Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrative Committee determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer.

(b) Repurchase Option

Unless the Administrative Committee determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrative Committee may determine. Except with respect to Shares purchased Directors

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and Consultants, the repurchase option shall in no case lapse at a rate of less than 20% per year over five (5) years from the date of purchase.

(c) Other Provisions

The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrative Committee in its sole discretion.

(d) Rights as a Shareholder

Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorised transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 below.

12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale

(a) (i) Changes in Capitalization

Subject to any required action by the shareholders of the Company, the number of shares of Ordinary Shares covered by each outstanding Option or Stock Purchase Right, and the number of shares of Ordinary Shares which have been authorised for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Ordinary Shares covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Ordinary Shares resulting from a reclassification of the Ordinary Shares, or any other increase or decrease in the number of issued shares of Ordinary Shares effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration”. Such adjustment shall be made by the Board,

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whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Ordinary Shares subject to an Option or Stock Purchase Right.

(ii) Adjustments for Stock Split, Stock Dividend, Etc.

For avoidance of doubt, it is further stated if the Company shall at any time increase or decrease the number of its outstanding Shares of Ordinary Shares, or change in any way the rights and privileges of such Shares by means of the payment of a stock dividend or any other distribution upon such Shares, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the stock, then in relation to the Ordinary Shares that is affected by one or more of the above events, the numbers, rights and privileges of the following shall be increased, decreased or changed in like manner as if such Shares had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (I) the number of shares of Ordinary Shares as to which Options may be granted under the Plan: and (ii) the Shares included in each outstanding Option granted hereunder.

(b) Dissolution or Liquidation

In the event of the proposed dissolution or liquidation of the Company, the Administrative Committee shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrative Committee in its discretion may provide for an Optionee to have the right to exercise his or her Option or Stock Purchase Right until fifteen (15) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the Administrative Committee may provide that any Company repurchase option applicable to any Shares purchased upon exercise of any Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.

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(c) Merger or Asset Sale

In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrative Committee shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger of sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Ordinary Shares for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrative Committee may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Ordinary Shares in the merger or sale of assets.

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(d) General Adjustment Rules

If any adjustment or substitution provided for in this Section 12 shall result in the creation of a fractional Share under any Option, the Company shall, in lieu of issuing such fractional Share, pay to the Optionee a cash sum in the amount equal to the product of such fraction multiplied by the Fair Market Value of a Share on the date the fractional Share otherwise would have been issued.

(e) Determination by Incentive Plan Committee

Adjustments under this Section 12 shall be made by the Administrative Committee whose determinations with regard thereto shall be final and binding upon all parties.

13. Time of Granting Options and Stock Purchase Rights

The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrative Committee makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrative Committee. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant.

14. Amendment and Termination of the Plan

(a) Amendment and Termination

The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval

The Board shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

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(c) Effect of Amendment or Termination

No amendment, alternation, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise in meeting between the Optionee and the Administrative Committee. Termination of the Plan shall not affect the Administrative Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

15. Conditions Upon Issuance of Shares

(a) Legal Compliance

Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) The payment of cash pursuant to the Plan shall be subject to all Applicable laws, rules and regulations.

(c) Investment Representations

As a condition to the exercise of an Option, the Administrative Committee may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares.

16. Inability to Obtain Authority

The inability of the Company to obtain authority from any regulatory body having jurisdiction shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

17. General Reservations

(a) The Company may require any person to whom an Option is granted, as a condition of exercising such Option or receiving Shares pursuant to the Plan, to give written assurances, in the substance and form satisfactory to the Company and its

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counsel, to the effect that such person is acquiring the Shares subject to the Option for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with applicable securities laws.

(b) The Administrative Committee may provide that Shares issuable upon the exercise of an Option shall, under certain conditions, be subject to restrictions whereby the Company has a right of first refusal with respect to such shares, which restrictions may survive an Optionee’s term of employment with the Company.

18. Shareholder Approval

The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws.

19. Information to Optionees and Purchasers

The Company shall provide to each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information.

20. Withholding

The Company’s obligations to deliver Shares upon the exercise of an Option or Stock Purchase Right shall be subject to the Optionee’s satisfaction of all applicable federal, state and local income and other tax withholding requirements of applicable jurisdiction.

At the time an Option is exercised by the Optionee, the Administrative Committee in its sole discretion, may permit the Optionee to pay all such amounts of tax withholding, or any part thereof, by transferring to the Company, or directing the Company to withhold from Shares

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otherwise issuable to such Optionee, Shares having a value equal Administrative Committee at such time. The value of Shares to be withheld shall be based on the Fair Market Value of the Administrative Committee on the date that the amount of tax to be withheld is to be determined.

21. Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to stockholders of the Company for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other or additional incentive or other compensation arrangements of whatever nature as the Board may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or arrangement for the payment of compensation or fringe benefits to the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Company or any Parent or Subsidiary now has lawfully put into effect, including, without limitation, any retirement, pension, savings and stock purchase plan, insurance, death and disability benefits and executive short-term incentive plans.

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EX-10.2

Exhibit 10.2

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (the “Agreement”) is entered into as of [                    ], 200[    ] by and between Home Inns & Hotels Management Inc., a Cayman Islands company (the “Company”) and the undersigned, a director and/or officer of the Company (“Indemnitee”).

RECITALS

1. The Company recognizes that highly competent persons are becoming more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their services to the corporation.

2. The Board of Directors of the Company (the “Board”) has determined that the inability to attract and retain highly competent persons to serve the Company is detrimental to the best interests of the Company and its shareholders and that it is reasonable and necessary for the Company to provide adequate protection to such persons against risks of claims and actions against them arising out of their services to the corporation.

3. The Company is willing to indemnify Indemnitee to the fullest extent permitted by applicable law, and Indemnitee is willing to serve and continue to serve the Company on the condition that he be so indemnified.

AGREEMENT

In consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

A. DEFINITIONS

The following terms shall have the meanings defined below:

Expenses shall include damages, judgments, fines, penalties, settlements and costs, attorneys’ fees and disbursements and costs of attachment or similar bond, investigations, and any expenses paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding.

Indemnifiable Event means any event or occurrence that takes place either before or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture or other entity, or was a director or officer of an entity that was a predecessor of the Company or another entity at the request of such predecessor entity, or related to anything done or not done by Indemnitee in any such capacity.

Participant means a person who is a party to, or witness or participant (including on appeal) in, a Proceeding.

Proceeding means any threatened, pending, or completed action, suit or proceeding, or any inquiry, hearing or investigation, whether civil, criminal, administrative, investigative or other, in which Indemnitee may be or may have been involved as a party or otherwise by reason of an Indemnifiable Event, including, without limitation, any threatened, pending, or completed action, suit or proceeding by or in the right of the Company.

B. AGREEMENT TO INDEMNIFY

1. General Agreement. In the event Indemnitee was, is, or becomes a Participant in, or is threatened to be made a Participant in, a Proceeding, the Company shall indemnify the Indemnitee from and against any and all Expenses which Indemnitee incurs or becomes obligated to incur in connection with such Proceeding, to the fullest extent permitted by applicable law.

2. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits in defense of any Proceeding or in defense of any claim, issue or matter in such Proceeding, Indemnitee shall be indemnified against all Expenses incurred in connection with such Proceeding or such claim, issue or matter, as the case may be.

3. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of Expenses, but not for the total amount of Expenses, the Company shall indemnify the Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

4. Exclusions. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification under this Agreement:

(a) to the extent that payment is actually made to Indemnitee under a valid, enforceable and collectible insurance policy;

(b) in connection with a judicial action by or in the right of the Company, in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudicated by final judgment in a court of law to be liable for gross negligence or willful misconduct in the performance of his duty to the Company unless and only to the extent that any court in which such action was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as such court shall deem proper;

(c) in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company, and not by way of defense, unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding; or (ii) the Proceeding is one to enforce indemnification rights under this Agreement or any applicable law;

(d) for a disgorgement of profits made from the purchase and sale by the Indemnitee of securities pursuant to Section 16(b) of the Exchange Act or similar provisions of any applicable U.S. state statutory law or common law;

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(e) brought about by the dishonesty or fraud of the Indemnitee seeking payment hereunder; provided, however, that the Indemnitee shall be protected under this Agreement as to any claims upon which suit may be brought against him by reason of any alleged dishonesty on his part, unless a judgment or other final adjudication thereof adverse to the Indemnitee establishes that he committed (i) acts of active and deliberate dishonesty, (ii) with actual dishonest purpose and intent, and (iii) which acts were material to the cause of action so adjudicated;

(f) for any judgment, fine or penalty which the Company is prohibited by applicable law from paying as indemnity; or

(g) arising out of Indemnitee’s breach of an employment agreement with the Company (if any) or any other agreement with the Company or any of its subsidiaries.

5. No Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to continued employment with the Company.

6. Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for any reason other than those set forth in Section 4, then the Company shall contribute to the amount of Expenses paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and by the Indemnitee on the other hand from the transaction from which such Proceeding arose, and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such Expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

C. INDEMNIFICATION PROCESS

1. Notice and Cooperation By Indemnitee. Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement, provided that the delay of Indemnitee to give notice hereunder shall not prejudice any of Indemnitee’s rights hereunder, unless such delay results in the Company’s forfeiture of substantive rights or defenses. Notice to the Company shall be given in accordance with Section F.7 below. In addition, Indemnitee shall give the Company such information and cooperation as the Company may reasonably request.

2. Indemnification Payment.

(a) Advancement of Expenses. Indemnitee may submit a written request to the Company requesting that the Company advance to Indemnitee all Expenses that may be reasonably incurred by Indemnitee in connection with a Proceeding as such Expenses are incurred. The Company shall, within ten business days of receiving such a written request by Indemnitee, advance all requested Expenses to Indemnitee.

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(b) Reimbursement of Expenses. To the extent Indemnitee has not requested any advanced payment of Expenses from the Company, Indemnitee shall be entitled to receive reimbursement for the Expenses incurred in connection with a Proceeding from the Company immediately after Indemnitee makes a written request to the Company for reimbursement.

(c) Determination by the Reviewing Party. Notwithstanding anything foregoing to the contrary, in the event the Reviewing Party informs the Company that Indemnitee is not entitled to indemnification in connection with a Proceeding under this Agreement or applicable law, the Company shall be entitled to be reimbursed by Indemnitee for all the Expenses previously advanced or otherwise paid to Indemnitee in connection with such Proceeding; provided, however, that Indemnitee may bring a suit to enforce his indemnification right in accordance with Section C.3 below.

3. Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within 30 days after making a written demand in accordance with Section C.2 above, Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court of competent jurisdiction seeking a determination by the court or challenging any determination by the Reviewing Party or any aspect of the Agreement. Any determination by the Reviewing Party not challenged by Indemnitee and any judgment entered by the court shall be binding on the Company and Indemnitee.

4. Assumption of Defense. In the event the Company is obligated under this Agreement to advance any Expenses for any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, upon delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, unless (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded, based on written advice of counsel, that there may be a conflict of interest of such counsel retained by the Company between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company ceases or terminates the employment of such counsel with respect to the defense of such Proceeding, in any of which events the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. At all times, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s expense.

5. Defense to Indemnification, Burden of Proof and Presumptions. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement that it is not permissible under this Agreement or applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified under this Agreement, the burden of proving such a defense or determination shall be on the Company. Neither the failure of the Reviewing Party or the Company to have made a determination prior to the commencement of such action by Indemnitee that indemnification is proper under the circumstances because Indemnitee has met the standard

4

of conduct set forth in applicable law, nor an actual determination by the Reviewing Party or the Company that Indemnitee had not met such applicable standard of conduct shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

6. No Settlement Without Consent. The Company shall not settle any Proceeding in any manner that would impose any damage, loss, penalty or limitation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement, provided that Indemnitee may withhold his consent if any proposed settlement imposes any damage, loss, penalty or limitation on Indemnitee.

7. Company Participation. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial action if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action, unless such lack of opportunity does not result in the Company’s forfeiture of substantive rights or defenses.

8. Reviewing Party.

(a) For purposes of this Agreement, the Reviewing Party with respect to each indemnification request of Indemnitee shall by (A) the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, said Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; and, if it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board of Directors shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee’s entitlement to indemnification. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(b) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as provided in this Section 8(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be,

5

a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 8(d) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting under this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(b), regardless of the manner in which such Independent Counsel was selected or appointed.

(c) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company and any other corporation, partnership, joint venture or other entity of which Indemnitee is or was serving at the written request of the Company as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers and directors of the Company or such other corporation, partnership, joint venture or other entity in the course of their duties, or on the advice of legal counsel for the Company or such other corporation, partnership, joint venture or other entity or on information or records given or reports made to the Company or such other corporation, partnership, joint venture or other entity by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or such other corporation, partnership, joint venture or other entity. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or such other corporation, partnership, joint venture or other entity shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. The provisions of this Section 8(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

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(d) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

D. DIRECTOR AND OFFICER LIABILITY INSURANCE

1. Good Faith Determination. The Company shall from time to time make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses incurred in connection with their services to the Company or to ensure the Company’s performance of its indemnification obligations under this Agreement.

2. Coverage of Indemnitee. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.

3. No Obligation. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain any director and officer insurance policy if the Company determines in good faith that such insurance is not reasonably available in the case that (i) premium costs for such insurance are disproportionate to the amount of coverage provided, or (ii) the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit.

E. NON-EXCLUSIVITY; FEDERAL PREEMPTION; TERM

1. Non-Exclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s current memorandum and articles of association, applicable law or any written agreement between Indemnitee and the Company (including its subsidiaries and affiliates). The indemnification provided under this Agreement shall continue to be available to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he may have ceased to serve in any such capacity at the time of any Proceeding.

2. Federal Preemption. Notwithstanding the foregoing, both the Company and Indemnitee acknowledge that in certain instances, U.S. federal law or public policy may

7

override applicable law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Such instances include, but are not limited to, the U.S. Securities and Exchange Commission’s prohibition on indemnification for liabilities arising under certain U.S. federal securities laws. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

3. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer and/or a director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding by reason of his former or current capacity at the Company, whether or not he is acting or serving in any such capacity at the time any expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer and/or a director of the Company or any other enterprise at the Company’s request.

F. MISCELLANEOUS

1. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided in this Agreement, no failure to exercise or any delay in exercising any right or remedy shall constitute a waiver.

2. Subrogation. In the event of payment to Indemnitee by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company to bring suit to enforce such rights.

3. Assignment; Binding Effect. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party; except that the Company may, without such consent, assign all such rights and obligations to a successor in interest to the Company which assumes all obligations of the Company under this Agreement. Notwithstanding the foregoing, this Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and the Company’s successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company) and assigns, as well as Indemnitee’s spouses, heirs, and personal and legal representatives. As a condition to any purchase, merger, consolidation or other business combination transaction involving the Company, the Company’s successor shall expressly assume the obligations under this Agreement.

4. Severability and Construction. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to a court order, to perform its

8

obligations under this Agreement shall not constitute a breach of this Agreement. In addition, if any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. The parties hereto acknowledge that they each have opportunities to have their respective counsels review this Agreement. Accordingly, this Agreement shall be deemed to be the product of both of the parties hereto, and no ambiguity shall be construed in favor of or against either of the parties hereto.

5. Counterparts. This Agreement may be executed in two counterparts, both of which taken together shall constitute one instrument.

6. Governing Law. This agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, U.S.A., without giving effect to conflicts of law provisions thereof.

7. Notices. All notices, demands, and other communications required or permitted under this Agreement shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:

Home Inns

No. 400 Tianyaoqiao Road

Shanghai 200030, People’s Republic of China

Attention: Chief Financial Officer

and to Indemnitee at its last address notified to the Company.

8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

(Signature page follows)

9

IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.

COMPANY

Home Inns & Hotels Management Inc.

Name:

Title:

INDEMNITEE

Name:

EX-10.3

Exhibit 10.3

Labor Contract

Shanghai Home Inns Hotels Management Limited

Party A: Home Inns Hotels Management (Shanghai) Limited

Signature of Legal Representative:

Or Signature of Appointed Proxy:

Address of Party A: Number 400, [illegible]

Party B: Sun Jian

Educational Level: Undergraduate

Sex: Male

Date of birth: August 7, 1964

ID Number: 310104640807281

Postal Code: 200135

Residential Address: [illegible] Jinxiu Road, Pudong

Street Office: [illegible] Pudong

I) Term of the Labor Agreement

Article 1

The term of this agreement is 2 years. This agreement shall come into effect on December 14, 2004, and the date of termination is December 13, 2006. The term for this agreement includes (excludes) the probation period and the internship period, where the probation period is _ month.

II) Job Scope

Article 2

Party B shall assume the role of a Chief Executive Officer in the Chief Executive Office department. Party B shall, as requested by Party A, complete the specified job responsibilities based on the required quantity and the required quality within the specified time.

Article 3

If work requires, Party A shall have the right to change the department and job position of Party B.

III) Working Hours

Article 4

Party A shall arrange Party B to work under an integrated work system.

Party B shall work at fixed hours, and work for 8 hours a day, 40 hours a week (excluding lunch hours and rest periods).

Party B shall hold a job whose working hours is computed on an integrated basis, and within an approved working hours cycle, the average number of working hours shall not exceed that allowed by the law.

If Party B will work without fixed hours, he/she may organize his/her work and rest hours on his/her own discretion as long as he/she can guarantee that the work assigned by Party A can be completed.

Article 5

If Party A arranges Party B to work overtime, it shall make time for Party B to take breaks with corresponding lengths.

IV) Job Remuneration

Article 6

Based on Party A’s current salary system, Party B’s monthly salary during the probation period shall be 15,000 Yuan, which shall be adjusted to                         Yuan after the probation period based on the actual work performance of Party B.

(where     % is the performance bonus, which shall be issued according to the stipulated procedures of the company).

Article 7

Party A shall pay job remuneration in accrual, where salary for the previous month shall be paid to Party B on the 10^th day of each month in cash. Payment shall be made in advance or postponed if it falls on a public holiday.

V) Labor Protection

Article 8

Party A shall provide Party B with a working environment and labor tools that comply with the State regulations, and provide for labor protection equipment that are safe, suitable and effective.

Article 9

Party A is responsible for the education and training of Party B with regard to political ideologies, work ethics, business technologies, labor health and safety, and relevant rules and regulations.

VI) Insurance and Benefits

Article 10

Party A and Party B shall make various social insurance payments for care of the elderly, unemployment and basic medical treatment in accordance with the relevant regulations of the State and the Beijing Municipality.

VII) Labor Discipline

Article 11

Party B shall comply with the State laws and regulations, the “Staff Handbook” and various items in the rules and regulations that are stipulated by Party A in accordance with the law, and shall take good care of Party A’s property, comply with the work ethics, and uphold Party A’s business confidentiality.

VIII) Modifications, Discharge, Termination and Renewal of Labor Agreement

Article 12

If there are changes to the laws, administrative rules and regulations that are relied upon when this agreement is executed, both Parties A and B shall modify the relevant contents through negotiation.

Article 13

If there are material changes to the business conditions, business scope and business scale from those at the time of execution of this agreement, both Parties A and B may modify the relevant contents through negotiation.

Article 14

This agreement may be discharged in the event that both Parties A and B come to a unanimous agreement after negotiations.

Article 15

In the event that any one of the following circumstances occurs to Party B, Party A may discharge this agreement:

1. It is proven during the probation period that Party B does not satisfy the conditions of employment;

2. Party B violates labor disciplines or the rules and regulations of Party A;

3. Party B is involved in breach of duties or malpractices for selfish ends, thereby causing significant damages to the economic interests or reputation of Party A;

4. Party B is investigated by a judicial unit for his criminal act in accordance with the law;

Article 16

In the event that any one of the following circumstances occurs vis-à-vis Party B, Party A may discharge this agreement provided that Party A informs Party B in writing 30 days in advance:

1. Party B suffers from sickness or non-work-related injuries, and after completion of medical treatment is unable to take up his original job nor any other kind of job reassigned by Party A;

2. Party B is incompetent at his job, even after training or after readjusting the job position;

3. There are significant changes to the objective circumstances that are relied upon when this contract is executed, resulting in the failure of execution of this contract. In addition, an agreement cannot be reached in relation to the modification of this Labor Agreement after negotiation between Parties A and B.

Article 17

In the event that any one of the following circumstances occurs vis-à-vis Party B, Party A cannot discharge this agreement:

1. Party B suffers from sickness or non-work-related injuries, and is within the prescribed period for receiving medical treatment;

2. Party B is in pregnancy, delivery or breast-feeding period;

3. Party B has completed his/her active period of military service or has been reallocated new job in the industrial field due to rural land requisition, and has joined the work force for no more than three years;

4. Party B is serving his/her period of military service obligations.

Article 18

If Party B is desirous of discharging this agreement, he/she shall give a written notification to Party A 30 days in advance, and only upon the consent of Party A shall he/she be able to go through the procedures of resigning from his/her job position in accordance with the terms in this Labor Agreement, and the agreement shall be terminated immediately. If, prior to obtaining Party A’s consent, Party B leaves his/her job position on his/her own discretion, the leave shall be deemed as a strike and handled accordingly, and for any economic loss that is caused to Party A consequently, Party A shall have the right to request economic compensation from Party B and the work unit that employs Party B.

Article 19

In the event that any one of the following circumstances occurs, Party B can at any time notify Party A and discharge this agreement:

1. During the probation period;

2. Party A forces Party B to work by way of violence, threats, or illegal restriction of personal liberty;

3. Party A fails to pay the labor remuneration or provide the labor conditions in accordance to the provisions in this agreement.

Article 20

Upon expiration of this agreement, this Labor Agreement shall terminate immediately, and the Labor Agreement may be renewed by negotiations between Parties A and B. Upon the retirement or resignation of Party B, or upon the occurrence of a condition for discharge as stipulated in this agreement, this agreement shall be terminated immediately.

IX) Liabilities for Breach of the Labor Agreement

Article 21

If Party A or B breaches this agreement and thereby causes economic loss to the other party, it shall make compensation to the other party in accordance with the magnitude of the consequences and responsibilities involved.

Article 22

During the term of this agreement, Party A shall sponsor the job and technical training of Party B, and if Party B discharges the agreement prior to the expiration of the term of service, Party B shall compensate Party A based on the actual amount of the training expenses less a 5% reduction of the actual training expenses for each month of service.

Article 23

If Party B breaches the stipulations relating to business and technology confidentiality of the company, and thereby causes damages to Party A, he/she shall bear all the legal responsibilities.

Article 24

In the event that this agreement cannot be performed due to reasons of force majeure, the parties herein shall not bear any legal responsibilities.

X) Resolution of Labor Disputes

Article 25

In the event that any dispute occurs during the performance of this agreement, both Parties A and B may seek mediation at the Labor Dispute Mediation Committee of this company. If the mediation is unsuccessful, either party may apply for arbitration, and shall apply for an arbitration from the local Labor Dispute Arbitration Committee within 60 days from the date the dispute arises. The parties may also directly apply for arbitration without going through the Labor Dispute Mediation Committee of the company. If there is any dissatisfaction with the arbitration award, an appeal can be made to the People’s Court within 15 days after receiving the arbitration award.

XI) Miscellaneous

Article 26

The aforesaid agreements of Party A, the current regulations that have been discussed and passed by the Board of Directors of the company, and future regulations that may be established shall be attached to this agreement and shall have the same legal binding force as this agreement.

Article 27

If there are any changes to the legal representative of Party A or the appointed proxy of the legal representative, this agreement shall continue to be effective.

Article 28

If there are any unresolved matters in this agreement, this agreement may be modified or supplemented with a unanimous consent of both Parties A and B after negotiations. If there is any conflict between this agreement and the relevant stipulations of the State and the Beijing Municipality, the relevant stipulations of the State and the Beijing Municipality shall prevail.

Article 29

This agreement shall have two counterparts, and Parties A and B shall each hold one counterpart.

Party A(Seal):

Signature of Legal Representative: /s/

Date of signature: December 14, 2004

Signature of Party B: /s/ Sun Jian

Date of signature: December 14, 2004

Notice of Negotiations for Labor Agreement

Dear Mr/Ms Sun Jian,

In order to enable you to have a more complete understanding of the “Labor Agreement” of our company before you sign the “Labor Agreement”, we hereby provide you with the “Labor Agreement” of Home Inns Hotels Management Limited for your perusal. If you have any objections to this agreement, please contact the human resources department of our company for negotiation; if there are no doubts, please sign at the area next to the words “Notified Party” below, and legal effectiveness shall commence from the date of signature.

Notifying Party: Human Resource Department, Shanghai Home Inns Hotels Management Limited

Notified Party: /s/ Sun Jian

December 14, 2004

EX-10.4

Exhibit 10.4

Labor Contract

Home Inns Hotel Management (Beijing Limited)

Shanghai Home Inns Hotels Management Limited

Party A: Home Inns Hotels Management (Beijing) Limited

Signature of Legal Representative: [seal]

Or Signature of Appointed Proxy:

Address of Party A: Number 3, Yongxiang Lane, Xizhimennei, Beijing

Party B: Liang Ri Xin

Educational Level: Postgraduate

Sex: Female

Date of birth: March 1, 1955

ID Number: 110102195503012764

Postal Code:

Residential Address: No. 6-2-502, 240, Xie Street, Gao Liang Bridge, [illegible] District, Beijing

Street Office: Zhanlan Road Office

I) Term of the Labor Agreement

Article 1

The term of this agreement is 2 years. This agreement shall come into effect on June 1, 2006, and shall expire on December 31, 2008. The term for this agreement includes (excludes) a probation period and an internship period, where the probation period is 1 month.

II) Job Content

Article 2

Party B shall take up the role of a COO in the Company Head Office department. Party B shall, as requested by Party A, complete the specified job responsibilities based on the required quantity and the required quality within the specified time.

Article 3

If work requires, Party A shall have the right to change the department and job position of Party B.

III) Working Hours

Article 4

Party A shall arrange Party B to work under an integrated work system.

Party B shall work at fixed hours, and work for 8 hours a day, 40 hours a week (excluding lunch hours and rest periods).

Party B shall hold a job whose working hours is computed on an integrated basis, and within an approved working hours cycle, the average number of working hours shall not exceed that allowed by the law.

If Party B will work without fixed hours, he/she may organize his/her work and rest hours on his/her own discretion as long as he/she can guarantee that the work assigned by Party A can be completed.

Article 5

If Party A arranges Party B to work overtime, it shall make time for Party B to take breaks with corresponding lengths.

IV) Job Remuneration

Article 6

Party A shall pay job remuneration in accrual, where salary shall be paid to Party B on the 10^th day of each month in cash or through bank transfer. The salary standard shall strictly comply with the “Regulations for Salary Management” and the “Regulations for the Management of Work Attendance” that are formulated by Party A.

Article 7

Other provisions that are made between Party A and Party B regarding salary.

V) Labor Protection

Article 8

Party A shall provide Party B with a working environment and labor tools that comply with the State regulations, and provide for labor protection equipment that are safe, suitable and effective.

Article 9

Party A is responsible for the education and training of Party B with regard to political ideologies, work ethics, business technologies, labor health and safety, and relevant rules and regulations.

VI) Insurance and Benefits

Article 10

Party A and Party B shall make various social insurance payments for care of the elderly, unemployment and basic medical treatment in accordance with the relevant regulations of the State and the Beijing Municipality.

VII) Labor Discipline

Article 11

Party B shall comply with the State laws and regulations, the “Staff Handbook” and various items in the rules and regulations that are stipulated by Party A in accordance with the law, and shall take good care of Party A’s property, comply with the work ethics, and uphold Party A’s business confidentiality.

VIII) Modifications, Discharge, Termination and Renewal of Labor Agreement

Article 12

If there are changes to the laws, administrative rules and regulations that are relied upon when this agreement is executed, both Parties A and B shall modify the relevant contents through negotiation.

Article 13

If there are material changes to the business conditions, business scope and business scale from those at the time of execution of this agreement, both Parties A and B may modify the relevant contents through negotiation.

Article 14

This agreement may be discharged in the event that both Parties A and B come to a unanimous agreement after negotiations.

Article 15

In the event that any one of the following circumstances occurs to Party B, Party A may discharge this agreement:

1. It is proven during the probation period that Party B does not satisfy the conditions of employment;

2. Party B violates labor disciplines or the rules and regulations of Party A;

3. Party B is involved in breach of duties or malpractices for selfish ends, thereby causing significant damages to the economic interests or reputation of Party A;

4. Party B is investigated by a judicial unit for his criminal act in accordance with the law;

Article 16

In the event that any one of the following circumstances occurs vis-à-vis Party B, Party A may discharge this agreement provided that Party A informs Party B in writing 30 days in advance:

1. Party B suffers from sickness or non-work-related injuries, and after completion of medical treatment is unable to take up his original job nor any other kind of job reassigned by Party A;

2. Party B is incompetent at his job, even after training or after readjusting the job position;

3. There are significant changes to the objective circumstances that are relied upon when this contract is executed, resulting in the failure of execution of this contract. In addition, an agreement cannot be reached in relation to the modification of this Labor Agreement after negotiation between Parties A and B.

Article 17

In the event that any one of the following circumstances occurs vis-à-vis Party B, Party A cannot discharge this agreement:

1. Party B suffers from sickness or non-work-related injuries, and is within the prescribed period for receiving medical treatment;

2. Party B is in pregnancy, delivery or breast-feeding period;

3. Party B has completed his/her active period of military service or has been reallocated new job in the industrial field due to rural land requisition, and has joined the work force for no more than three years;

4. Party B is serving his/her period of military service obligations.

Article 18

If Party B is desirous of discharging this agreement, he/she shall give a written notification to Party A 30 days in advance, and only upon the consent of Party A shall he/she be able to go through the procedures of resigning from his/her job position in accordance with the provisions in this Labor Agreement, and the agreement shall be terminated immediately. If, prior to obtaining Party A’s consent, Party B leaves his/her job position on his/her own discretion, the leave shall be deemed as a strike and handled accordingly, and for any economic loss that is caused to Party A consequently, Party A shall have the right to request economic compensation from Party B and the work unit that employs Party B.

Article 19

In the event that any one of the following circumstances occurs, Party B can at any time notify Party A and discharge this agreement:

1. During the probation period;

2. Party A forces Party B to work by way of violence, threats, or illegal restriction of personal liberty;

3. Party A fails to pay the labor remuneration or provide the labor conditions in accordance to the provisions in this agreement.

Article 20

Upon expiration of this agreement, this Labor Agreement shall terminate immediately, and the Labor Agreement may be renewed by negotiations between Parties A and B. Upon the retirement or resignation of Party B, or upon the occurrence of a condition for discharge as stipulated in this agreement, this agreement shall be terminated immediately.

IX) Liabilities for Breach of the Labor Agreement

Article 21

If Party A or B breaches this agreement and thereby causes economic loss to the other party, it shall make compensation to the other party in accordance with the magnitude of the consequences and responsibilities involved.

Article 22

If Party B breaches the stipulations relating to business and technology confidentiality of the company, and thereby causes damages to Party A, it shall bear all the legal responsibilities.

Article 23

In the event that this agreement cannot be performed due to reasons of force majeure, the parties herein shall not bear any legal responsibilities.

X) Resolution of Labor Disputes

Article 24

In the event that any dispute occurs during the performance of this agreement, both Parties A and B may seek mediation at the Labor Dispute Mediation Committee of this company. If the mediation is unsuccessful, either party may apply for arbitration, and shall apply for an arbitration from the local Labor Dispute Arbitration Committee within 60 days from the date the dispute arises. The parties may also directly apply for arbitration without going through the Labor Dispute Mediation Committee of the company. If there is any dissatisfaction with the arbitration award, an appeal can be made to the People’s Court within 15 days after receiving the arbitration award.

XI) Miscellaneous

Article 25

The aforesaid agreements of Party A, the current regulations that have been discussed and passed by the Board of Directors of the company, and future regulations that may be established shall be attached to this agreement and have the same legal binding force as this agreement.

Article 26

If there are any changes to the legal representative of Party A or the appointed proxy of the legal representative, this agreement shall continue to be effective.

Article 27

If there are any unresolved matters in this agreement, this agreement may be modified or supplemented with a unanimous consent of both Parties A and B after negotiations. If there is any conflict between this agreement and the relevant stipulations of the State and the Beijing Municipality, the relevant stipulations of the State and the Beijing Municipality shall prevail.

Article 28

This agreement shall have two counterparts, and Parties A and B shall each hold one counterpart.

Party A (Seal): [seal: Home Inns Hotels Management (Beijing) Limited]

Signature of Legal Representative: /s/

Date of signature: January 1, 2006

Signature of Party B: /s/ Liang Ri Xin

Date of signature: January 1, 2006

EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between Home Inns and Hotels Management (Hong Kong) Limited, a Hong Kong incorporated company (the “Employer”), and May Yihong Wu (the “Employee”), effective as of March 1 2006 (“Effective Date”).

RECITALS

A. Employer desires to employ Employee on the terms and conditions set forth herein; and

B. Employee desires to be employed by Employer in such capacity on such terms and conditions.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1 Employment. Employer agrees to employ Employee, and Employee hereby accepts such employment, on the terms and conditions set forth herein commencing on March 1, 2006 (the “Commencement Date”).

2 Duties.

a. Employee shall initially have the title of Senior Vice President of Finance and be appointed as Chief Financial Officer [6] months from the starting date of employment. Employee shall concentrate on her duties; and such other responsibilities, consistent with Employee’s position, as may reasonably be assigned to her from time to time by Employer while being employed.

b. Employee shall at all times comply, to the best of Employee’s knowledge, with (i) all material applicable laws, rules and regulations that are related to Employee’s responsibilities assumed hereunder, and (ii) all material written corporate and business policies and procedures of Employer whether generally applicable to all of Employer’s employees or made specifically applicable to Employee as advised in advance by Employer to Employee in writing but only to the extent such policies and procedures are not inconsistent with the other provisions of this Agreement.

c. Employee shall not, without the prior written approval of Employer, receive compensation or any direct or indirect financial benefit for services rendered while being employed to any Person other than the Employer. As used herein, the term “Person” shall include all natural persons, corporations, business trusts, associations, companies, partnerships, joint ventures and other entities and governments and agencies and political subdivisions.

3 Location. Employee’s office shall be located at Employer’s offices in Shanghai, provided that Employee is expected to travel to the extent reasonably necessary.

4 Compensation. As compensation for Employee’s services, Employee shall be paid the following compensation, subject to Section 6 below:

a. Employee shall be paid a base salary (“Base Salary”) of USD 92,750 per calendar year (payable in accordance with Employer’s payroll policies, but in no event less frequently than once every month).

b. In addition to the Base Salary, Employee will be eligible to receive discretionary bonuses from time to time as determined by Employer at its discretion.

c. Employee shall be granted 300,000 options with strike price of US$1.53 per share as part of Employee Stock Option Program (“ESOP”)

d. Employee shall be reimbursed for all reasonable expenses for travel, lodging, entertainment, and other business expenses in connection with Employer’s business to the extent such expenses are consistent with Employer’s internal reimbursement guidelines.

e. Employee shall be afforded health insurance-and retirement benefits in accordance with the prevailing market practice in Shanghai and the applicable laws and regulations.

f. Employee shall be entitled to up to 20 days of vacation days in any given calendar year provided that Employee remains a full time employee during such period of time. If Employee’s employment falls short of twelve months in any given calendar year, Employee’s entitlement to 20 days of vacation days shall be reduced on a pro rata basis.

5 Termination. Notwithstanding Section 1 above, Employee’s employment with Employer shall be terminable at any time (“Early Termination”) as follows:

a. by Employer, subject only to such notification requirements as are required by this Section 5a:

(i) upon Employee’s incapacitation by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the duties and services required of him hereunder for a period of at least 180 days during any 12-month period;

(ii) for “Cause,” which for purposes of this Agreement shall mean Employee has (A) engaged in gross negligence or willful misconduct in the performance of the duties required of him hereunder, (B) materially failed or refused to perform his duties, (C) willfully engaged in conduct that he knows or, based on facts known to him, should know is materially injurious to Employer or any of its affiliates, (D) materially breached any material provision of this Agreement, (E) been convicted of, or entered a plea bargain or settlement admitting guilt for, any felony under the applicable laws (other than a traffic violation); or (F) been the subject of any order, judicial or administrative, obtained or issued by the relevant securities regulators for any securities violation including, for example, any such order consented to by Employee in which findings of facts or any legal conclusions establishing liability are admitted; or

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(iii) for any other reason whatsoever, upon 90 days written notice to Employee; and

b. by Employee, subject only to such notification requirements as are required by this Section 5b:

(i) for “Good Reason,” which for purposes of this Agreement shall mean (A) a material breach of this Agreement by Employer, or (B) a significant, sustained reduction in or adverse modification of the nature and scope of Employee’s authority, duties and privileges while being employed (whether or not accompanied by a change in title), but in each case only if such Good Reason has not been corrected or cured by Employer within 30 days after Employer has received written notice from Employee of Employee’s intent to terminate Employee’s employment for Good Reason and specifying in detail the basis for such termination; or

(ii) for any other reason whatsoever, upon 90 days written notice to Employer.

6 Effect of Early Termination. Upon the Early Termination of Employee’s employment, Employee shall be entitled to the following compensation:

a. In the event (i) Employee terminates his employment pursuant to Section 5b(i) and Employer could not have terminated Employee’s employment for Cause pursuant to Section 5a(ii), or (ii) Employee is terminated pursuant to Section 5a(i) or 5a(iii), Employee shall be entitled to a severance pay equal to 3 months salary calculated based on the Base Salary–In the case of an Early Termination for any reason other than a termination pursuant to Section 5b(i) or 5a(iii), Employer shall pay to Employee within 30 days after the effective date of the Early Termination (to the extent not previously paid), the Base Salary compensation at the rate then in effect under Section 4a above, but only to the extent such compensation has accrued through the effective date of such Early Termination.

7 Indemnification. Employer will indemnify, defend and hold Employee harmless for all losses, costs, expenses or liabilities based upon or related to acts, decisions or omissions made by Employee in good faith while performing services within the scope of his employment for Employer. Employer’s obligation under this Section 8 shall survive any termination of the Employee’s employment.

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8 Complete Agreement. Except as provided below, this Agreement contains the complete agreement and understanding concerning the employment arrangement between the parties and shall supersede all other agreements, understandings or commitments between the parties as to such subject matter. The parties stipulate that neither of them has made any representations concerning the subject matter hereof except such representations as are specifically set forth herein.

9 Governing Law. The validity of this Agreement and any of the terms or provisions as well as the rights and duties of the parties hereunder shall be governed by the laws of Hong Kong Special Administrative Region of PRC, without reference to any conflict of law or choice of law principles thereof.

10 Counterparts. This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.

11 Arbitration.

a. Except as provided in Section 12b, any dispute, claim or controversy arising in connection with this Agreement shall be settled by arbitration in [Hong Kong] in accordance with [Hong Kong International Arbitration Institute] (except as modified herein). Arbitration shall be the sole method of resolving disputes not settled by mutual agreement. The determination of the arbitrators shall be final, not subject to appeal, and binding on all parties and may be enforced by appropriate judicial order of any court of competent jurisdiction.

b. Notwithstanding the foregoing, in the event of any claim or controversy arising in connection with this Agreement for which the remedy is equitable or injunctive relief, the aggrieved party shall be entitled to seek injunctive or other equitable relief from any court of competent jurisdiction.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

EMPLOYER:	By:	/s/
		Neil Nanpeng Shen
EMPLOYEE:	By:	/s/
		May Y. Wu

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EX-10.6

Exhibit 10.6

HOME INNS & HOTELS MANAGEMENT INC.

2006 SHARE INCENTIVE PLAN

ARTICLE 1

PURPOSE

The purpose of this 2006 Share Incentive Plan (the “Plan”) is to promote the success and enhance the value of Home Inns & Hotels Management Inc., an exempted company formed under the laws of the Cayman Islands (the “Company”) by linking the personal interests of the members of the Board, Employees, and Consultants to those of Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company shareholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

2.1 “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate and securities laws of the Cayman Islands, the Code, the PRC tax laws, rules, regulations and government orders, the rules of any applicable Share exchange or national market system, and the laws and the rules of any jurisdiction applicable to Awards granted to residents therein.

2.2 “Award” means an Option, a Restricted Share award, a Share Appreciation Right award, a Dividend Equivalents award, a Share Payment award, a Deferred Share award, or a Restricted Share Unit award granted to a Participant pursuant to the Plan.

2.3 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium.

2.4 “Board” means the Board of Directors of the Company.

2.5 “Board Adoption Date” shall have the meaning set forth in Section 12.1.

2.6 “Change in Control” means a change in ownership or control of the Company after the Registration Date effected through either of the following transactions:

(a) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Incumbent Board (as defined below) who are not affiliates or associates of the offeror under Rule 12b-2 promulgated under the Exchange Act do not recommend such shareholders accept, or

(b) the individuals who, as of the Effective Date, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least fifty percent (50%) of the Board; provided that if the election, or nomination for election by the Company’s shareholders, of any new member of the Board is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new member of the Board shall be considered as a member of the Incumbent Board.

2.7 “Code” means the Internal Revenue Code of 1986 of the United States, as amended.

2.8 “Committee” means the committee of the Board described in Article 11.

2.9 “Consultant” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to a Service Recipient; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c) the consultant or adviser is a natural person who has contracted directly with the Service Recipient to render such services.

2.10 “Corporate Transaction” means any of the following transactions, provided, however, that the Committee shall determine under (d) and (e) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

(a) an amalgamation, arrangement or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated;

(b) the sale, transfer or other disposition of all or substantially all of the assets of the Company;

(c) the complete liquidation or dissolution of the Company;

(d) any reverse takeover or series of related transactions culminating in a reverse takeover (including, but not limited to, a tender offer followed by a reverse takeover) in which the Company is the surviving entity but (A) the Ordinary Shares outstanding immediately prior to such takeover are converted or exchanged by virtue of the takeover into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such takeover or the initial transaction culminating in such takeover, but excluding any such transaction or series of related transactions that the Committee determines shall not be a Corporate Transaction; or

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(e) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Committee determines shall not be a Corporate Transaction.

2.11 “Deferred Share” means a right to receive a specified number of Shares during specified time periods pursuant to Article 8.

2.12 “Disability” means that the Participant qualifies to receive long-term disability payments under the Service Recipient’s long-term disability insurance program, as it may be amended from time to time, to which the Participant provides services regardless of whether the Participant is covered by such policy. If the Service Recipient to which the Participant provides service does not have a long-term disability plan in place, “Disability” means that a Participant is unable to carry out the responsibilities and functions of the position held by the Participant by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Participant will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Committee in its discretion.

2.13 “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Share) of dividends paid on Share.

2.14 “Effective Date” shall have the meaning set forth in Section 12.1.

2.15 “Employee” means any person, including an officer or member of the Board of the Company, any Parent or Subsidiary of the Company, who is in the employ of a Service Recipient, subject to the control and direction of the Service Recipient as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by a Service Recipient shall not be sufficient to constitute “employment” by the Service Recipient.

2.16 “Employee’s Stock Option Plan” means the Employees’ Stock Option Plan adopted by the Company in 2003, pursuant to which a maximum of 4,784,226 Shares have been reserved for issuance upon exercise of awards granted thereunder.

2.17 “Exchange Act” means the Securities Exchange Act of 1934 of the United States, as amended.

2.18 “Fair Market Value” means, as of any date, the value of Shares determined as follows:

(a) If the Shares are listed on one or more established Share exchanges or national market systems, including without limitation, The Nasdaq Global Market or The Nasdaq SmallCap Market of The Nasdaq Share Market, its Fair Market Value shall be the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Shares are listed (as determined by the Committee) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable;

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(b) If the Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such shares as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of an Ordinary Share shall be the mean between the high bid and low asked prices for the Ordinary Shares on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(c) In the absence of an established market for the Shares of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Committee in good faith by reference to the placing price of the latest private placement of the Shares and the development of the Company’s business operations and the general economic and market conditions since such latest private placement.

2.19 “Incentive Share Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

2.20 “Independent Director” means a member of the Board who is not an Employee of the Company.

2.21 “Non-Employee Director” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor definition adopted by the Board.

2.22 “Non-Qualified Share Option” means an Option that is not intended to be an Incentive Share Option.

2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of Shares at a specified price during specified time periods. An Option may be either an Incentive Share Option or a Non-Qualified Share Option.

2.24 “Participant” means a person who, as a member of the Board, Consultant or Employee, has been granted an Award pursuant to the Plan.

2.25 “Parent” means a parent corporation under Section 424(e) of the Code.

2.26 “Plan” means this 2006 Share Incentive Plan, as amended from time to time.

2.27 “PRC” means the People’s Republic of China

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2.28 “Related Entity” means any business, corporation, partnership, limited liability company or other entity which is not a Subsidiary but is consolidated in the Company’s consolidated financial statements prepared under the United States generally accepted accounting principles.

2.29 “Restricted Share” means a Share awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture.

2.30 “Restricted Share Unit” means an Award granted pursuant to Section 8.6.

2.31 “Securities Act” means the Securities Act of 1933 of the United States, as amended.

2.32 “Service Recipient” means the Company, any Parent or Subsidiary of the Company and any Related Entity to which a Participant provides services as an Employee, Consultant or as a Director.

2.33 “Share” means the ordinary share of the Company, par value $0.005 per share, and such other securities that may be substituted for Shares pursuant to Article 10.

2.34 “Share Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.

2.35 “Share Payment” means (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

2.36 “Subsidiary” means any corporation or other entity of which a majority of the outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company.

2.37 “Trading Date” means the closing of the first sale to the general public of the Shares pursuant to a registration statement filed with and declared effective by the U.S. Securities and Exchange Commission under the Securities Act.

ARTICLE 3

SHARES SUBJECT TO THE PLAN

3.1 Number of Shares.

(a) Subject to the provisions of Article 10 and Section 3.1(b), the maximum aggregate number of Shares (the “Award Pool”) which may be issued pursuant to all Awards (including Incentive Share Options) shall equal to the number of Shares reserved but not issued or issuable pursuant to outstanding options, stock purchase rights or other awards granted under the Employee’s Stock Option Plan as of the date of completion of the Company’s initial public offering of Shares in the U.S. (the “IPO”). After the IPO, the Award Pool shall be increased by that number of Shares equal to 6% of the total outstanding Shares (excluding Shares issued upon exercise of options or otherwise pursuant to any of the Company’s option or other share incentive plan) from time to time. Except for the foregoing, the Award Pool shall not be increased for a period of three years commencing from the date of the IPO.

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(b) To the extent that an Award terminates, expires, or lapses for any reason, any Shares subject to the Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by Applicable Law or any exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form or combination by the Company or any Parent or Subsidiary of the Company shall not be counted against Shares available for grant pursuant to the Plan. Shares delivered by the Participant or withheld by the Company upon the exercise of any Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of Section 3.1(a), If any Restricted Shares are forfeited by the Participant or repurchased by the Company, such Shares may again be optioned, granted or awarded hereunder, subject to the limitations of Section 3.1(a). Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Share Option to fail to qualify as an incentive Share option under Section 422 of the Code.

3.2 Shares Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury or Shares purchased on the open market. Additionally, in the discretion of the Committee, American Depository Shares in an amount equal to the number of Shares which otherwise would be distributed pursuant to an Award may be distributed in lieu of Shares in settlement of any Award. If the number of Shares represented by an American Depository Share is other than on a one-to-one basis, the limitations of Section 3.1 shall be adjusted to reflect the distribution of American Depository Shares in lieu of Shares.

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility. Persons eligible to participate in this Plan include Employees and Consultants, as determined by the Committee.

4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to this Plan.

4.3 Jurisdictions. In order to assure the viability of Awards granted to Participants employed in various jurisdictions, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom applicable in the jurisdiction in which the Participant resides or is employed. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Section 3.1 of the Plan. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate any Applicable Laws.

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ARTICLE 5

OPTIONS

5.1 General. The Committee is authorized to grant Options to Participants on the following terms and conditions:

(a) Exercise Price. The exercise price per Share subject to an Option shall be determined by the Committee and set forth in the Award Agreement which may be a fixed or variable price related to the Fair Market Value of the Shares.

(b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, including exercise prior to vesting; provided that the term of any Option granted under the Plan shall not exceed ten years, except as provided in Section 11.2. The Committee shall also determine any conditions, if any, that must be satisfied before all or part of an Option may be exercised.

(c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation (i) cash or check denominated in U.S. Dollars, (ii) Shares held for such period of time as may be required by the Committee in order to avoid adverse financial accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, (iii) after the Trading Date the delivery of a notice that the Participant has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which Shares shall be delivered or deemed to be delivered to Participants, (iv) other property acceptable to the Committee with a Fair Market Value equal to the exercise price, or (v) any combination of the foregoing. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k) of the Exchange Act.

(d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.

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5.2 Incentive Share Options. Incentive Share Options shall be granted only to Employees of the Company, a Parent or Subsidiary of the Company. Incentive Share Options may not be granted to Employees of a Related Entity. The terms of any Incentive Share Options granted pursuant to the Plan, in addition to the requirements of Section 5.1, must comply with the following additional provisions of this Section 5.2:

(a) Expiration of Option. An Incentive Share Option may not be exercised to any extent by anyone after the first to occur of the following events:

(i) Ten years from the date it is granted, unless an earlier time is set in the Award Agreement;

(ii) Three months after the Participant’s termination of employment as an Employee; and

(iii) One year after the date of the Participant’s termination of employment or service on account of Disability or death. Upon the Participant’s Disability or death, any Incentive Share Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant fails to make testamentary disposition of such Incentive Share Option or dies intestate, by the person or persons entitled to receive the Incentive Share Option pursuant to the applicable laws of descent and distribution.

(b) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Share Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Share Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Share Options.

(c) Ten Percent Owners. An Incentive Share Option shall be granted to any individual who, at the date of grant, owns Shares possessing more than ten percent of the total combined voting power of all classes of shares of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant.

(d) Transfer Restriction. The Participant shall give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Share Option within (i) two years from the date of grant of such Incentive Share Option or (ii) one year after the transfer of such Shares to the Participant.

(e) Expiration of Incentive Share Options. No Award of an Incentive Share Option may be made pursuant to this Plan after the tenth anniversary of the Effective Date.

(f) Right to Exercise. During a Participant’s lifetime, an Incentive Share Option may be exercised only by the Participant.

5.3 Substitution of Share Appreciation Rights. The Committee may provide in the Award Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have to right to substitute a Share Appreciation Right for such Option at any time prior to or upon exercise of such Option, provided that such Share Appreciation Right shall be exercisable for the same number of shares of Share as such substituted Option would have been exercisable for.

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ARTICLE 6

RESTRICTED SHARES

6.1 Grant of Restricted Shares. The Committee is authorized to make Awards of Restricted Shares to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Shares shall be evidenced by an Award Agreement.

6.2 Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Shares or the right to receive dividends on the Restricted Share). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Shares that are at that time subject to restrictions shall be forfeited; provided, however, that the Committee may (a) provide in any Restricted Share Award Agreement that restrictions or forfeiture conditions relating to Restricted Shares will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Shares.

6.4 Certificates for Restricted Shares. Restricted Shares granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Shares are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

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ARTICLE 7

SHARE APPRECIATION RIGHTS

7.1 Grant of Share Appreciation Rights.

(a) A Share Appreciation Right may be granted to any Participant selected by the Committee. A Share Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

(b) A Share Appreciation Right shall entitle the Participant (or other person entitled to exercise the Share Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Share Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the Share Appreciation Right from the Fair Market Value of a Share on the date of exercise of the Share Appreciation Right by the number of Shares with respect to which the Share Appreciation Right shall have been exercised, subject to any limitations the Committee may impose.

7.2 Payment and Limitations on Exercise.

(a) Payment of the amounts determined under Section 7.1(b) above shall be in cash, in Shares (based on its Fair Market Value as of the date the Share Appreciation Right is exercised) or a combination of both, as determined by the Committee in the Award Agreement.

(b) To the extent payment for a Share Appreciation Right is to be made in cash the Award Agreements shall to the extent necessary to comply with the requirements to Section 409A of the Code, specify the date of payment which may be different than the date of exercise of the Share Appreciation right. If the date of payment for a Share Appreciation Right is later than the date of exercise, the Award Agreement may specify that the Participant be entitled to earnings on such amount until paid.

(c) To the extent any payment under Section 7.1(b) is effected in Shares it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.

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ARTICLE 8

OTHER TYPES OF AWARDS

8.1 Dividend Equivalents. Any Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee.

8.2 Share Payments. Any Participant selected by the Committee may receive Share Payments in the manner determined from time to time by the Committee; provided, that unless otherwise determined by the Committee such Share Payments shall be made in lieu of base salary, bonus, or other cash compensation otherwise payable to such Participant. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific criteria determined appropriate by the Committee, determined on the date such Share Payment is made or on any date thereafter.

8.3 Deferred Shares. Any Participant selected by the Committee may be granted an award of Deferred Shares in the manner determined from time to time by the Committee. The number of shares of Deferred Shares shall be determined by the Committee and may be linked to such specific criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Shares underlying a Deferred Share award will not be issued until the Deferred Share award has vested, pursuant to a vesting schedule or criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Shares shall have no rights as a Company shareholder with respect to such Deferred Shares until such time as the Deferred Share Award has vested and the Shares underlying the Deferred Share Award has been issued.

8.4 Restricted Share Units. The Committee is authorized to make Awards of Restricted Share Units to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Share Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Share Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall transfer to the Participant one unrestricted, fully transferable Share for each Restricted Share Unit scheduled to be paid out on such date and not previously forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company for such Shares.

8.5 Term. Except as otherwise provided herein, the term of any Award of Dividend Equivalents, Share Payments, Deferred Share, or Restricted Share Units shall be set by the Committee in its discretion.

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8.6 Exercise or Purchase Price. The Committee may establish the exercise or purchase price, if any, of any Award of Deferred Share, Share Payments or Restricted Share Units; provided, however, that such price shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.

8.7 Exercise Upon Termination of Employment or Service. An Award of Dividend Equivalents, Deferred Share, Share Payments, and Restricted Share Units shall only be exercisable or payable while the Participant is an Employee, Consultant or a member of the Board, as applicable; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Dividend Equivalents, Share Payments, Deferred Share, or Restricted Share Units may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change of Control of the Company, or because of the Participant’s retirement, death or Disability, or otherwise.

8.8 Form of Payment. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Shares or a combination of both, as determined by the Committee.

8.9 Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by an Award Agreement.

ARTICLE 9

PROVISIONS APPLICABLE TO AWARDS

9.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

9.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

9.3 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution. The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Share Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including but not limited to members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.

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9.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

9.5 Share Certificates. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Share pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all Applicable Laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded. All Share certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The Committee may place legends on any Share certificate to reference restrictions applicable to the Share. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

9.6 Paperless Administration. Subject to Applicable Laws, the Committee may make Awards, provide applicable disclosure and procedures for exercise of Awards by an internet website or interactive voice response system for the paperless administration of Awards.

9.7 Foreign Currency. A Participant may be required to provide evidence that any U.S. dollars used to pay the exercise price of any Award were acquired and taken out of the jurisdiction in which the Participant resides in accordance with Applicable Laws, including foreign exchange control laws and regulations.

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ARTICLE 10

CHANGES IN CAPITAL STRUCTURE

10.1 Adjustments. In the event of any dividend, share split, combination or exchange of Shares, amalgamation, arrangement or consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to its shareholders, or any other change affecting the shares of Shares or the share price of a Share, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan.

10.2 Acceleration upon a Change of Control. Except as may otherwise be provided in any Award Agreement or any other written agreement entered into by and between the Company and a Participant, if a Change of Control occurs and a Participant’s Options, Restricted Share or Share Appreciation Rights settled in Shares are not converted, assumed, or replaced by a successor, such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse; and provided such Change of Control is a change in the ownership or effective control of the Company or in the ownership of or a substantial portion of the assets of the Company within the meaning of Section 409A of the Code, then all Restricted Share Units, Deferred Share and Performance Share shall become deliverable upon the Change of Control. Upon, or in anticipation of, a Change of Control, the Committee may in its sole discretion provide for (i) any and all Awards outstanding hereunder to terminate at a specific time in the future and shall give each Participant the right to exercise such Awards during a period of time as the Committee shall determine, (ii) either the purchase of any Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested (and, for the avoidance of doubt, if as of such date the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’ s rights, then such Award may be terminated by the Company without payment), (iii) the replacement of such Award with other rights or property selected by the Committee in its sole discretion the assumption of or substitution of such Award by the successor or surviving corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of Shares and prices, or (iv) provide for payment of Awards in cash based on the value of Shares on the date of the Change of Control plus reasonable interest on the Award through the date such Award would otherwise be vested or have been paid in accordance with its original terms, if necessary to comply with Section 409A of the Code.

10.3 Outstanding Awards – Corporate Transactions. In the event of a Corporate Transaction, each Award will terminate upon the consummation of the Corporate Transaction, unless the Award is assumed by the successor entity or Parent thereof in connection with the Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction and:

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(a) the Award either is (x) assumed by the successor entity or Parent thereof or replaced with a comparable Award (as determined by the Committee) with respect to shares of the capital stock of the successor entity or Parent thereof or (y) replaced with a cash incentive program of the successor entity which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award, then such Award (if assumed), the replacement Award (if replaced), or the cash incentive program automatically shall become fully vested, exercisable and payable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights, immediately upon termination of the Participant’s employment or service with all Service Recipient within twelve (12) months of the Corporate Transaction without cause; and

(b) For each Award that is neither assumed nor replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Participant remains an Employee, Consultant or Director on the effective date of the Corporate Transaction.

10.4 Outstanding Awards – Other Changes. In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 10, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

10.5 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of Shares of any class, the payment of any dividend, any increase or decrease in the number of shares of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares subject to an Award or the grant or exercise price of any Award.

ARTICLE 11

ADMINISTRATION

11.1 Committee. The Plan shall be administered by the Compensation Committee of the Board; provided, however that the Compensation Committee may delegate to a committee the authority to grant or amend Awards to Participants other than Independent Directors and executive officers of the Company (such committee being the “Committee”). The Committee shall consist of two or more individuals who are officers and/or directors of the Company. Reference to the Committee shall refer to the Board if the Compensation Committee ceases to exist and the Board does not appoint a successor Committee. Notwithstanding the foregoing, the full Board, acting by majority of its members in office shall conduct the general administration of the Plan if required by Applicable Law, and with respect to Awards granted to Independent Directors and executive officers of the Company and for purposes of such Awards the term “Committee” as used in the Plan shall be deemed to refer to the Board.

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11.2 Action by the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

11.3 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

(a) Designate Participants to receive Awards;

(b) Determine the type or types of Awards to be granted to each Participant;

(c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

(g) Decide all other matters that must be determined in connection with an Award;

(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

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(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

11.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 12

EFFECTIVE AND EXPIRATION DATE

12.1 Effective Date. The Plan is effective as of the date the Plan is approved by the Company’s shareholders (the “Effective Date”). The Plan will be deemed to be approved by the shareholders if it receives the affirmative vote of the holders of a majority of the share capital of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Memorandum of Association and Articles of Association. Notwithstanding the foregoing, the Effective Date shall not be later than the first anniversary of the date on which the Board adopts the Plan (the “Board Adoption Date”). Between the Board Adoption Date and the Effective Date, the Committee may grant Options to any persons pursuant to the terms of the Plan, provided that none of such persons shall be allowed to exercise the Options prior to the Effective Date.

12.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.

ARTICLE 13

AMENDMENT, MODIFICATION, AND TERMINATION

13.1 Amendment, Modification, And Termination. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the Plan that (i) increases the number of Shares available under the Plan (other than any adjustment as provided by Article 10), (ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant, (iii) permits the Committee to extend the exercise period for an Option beyond ten years from the date of grant, or (iv) results in a material increase in benefits or a change in eligibility requirements.

13.2 Awards Previously Granted. Except with respect to amendments made pursuant to Section 14.14, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

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ARTICLE 14

GENERAL PROVISIONS

14.1 No Rights to Awards. No Participant, employee, or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.

14.2 No Shareholders Rights. No Award gives the Participant any of the rights of a Shareholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

14.3 Taxes. No Shares shall be delivered under the Plan to any Participant until such Participant has made arrangements acceptable to the Committee for the satisfaction of any income and employment tax withholding obligations under Applicable Laws, including without limitation the PRC tax laws, rules, regulations and government orders or the U.S. Federal, state or local tax laws, as applicable. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s payroll tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the return of Shares) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of Shares which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award after such Shares were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall, unless specifically approved by the Committee, be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

14.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Service Recipient to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of any Service Recipient.

14.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

14.6 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Memorandum of Association and Articles of Association,, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

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14.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

14.8 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

14.9 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

14.10 Fractional Shares. No fractional shares of Share shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

14.11 Government and Other Regulations. The obligation of the Company to make payment of awards in Share or otherwise shall be subject to all Applicable Laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register any of the Shares paid pursuant to the Plan under the Securities Act or any other similar law in any applicable jurisdiction. If the Shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act or other Applicable Laws the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.

14.12 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the Cayman Islands.

14.13 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is or may become subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and the Award Agreements shall be interpreted in accordance with Section 409A of the Code and the U.S. Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulation r or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines is necessary or appropriate to (a) exempt the Award from Section 409A of the Code and /or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance.

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14.14 Appendices. The Committee may approve such supplements, amendments or appendices to the Plan as it may consider necessary or appropriate for purposes of compliance with applicable laws or otherwise and such supplements, amendments or appendices shall be considered a part of the Plan; provided, however, that no such supplements shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan.

* * * * *

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Home Inns & Hotels Management Inc. on                     , 2006.

* * * * *

I hereby certify that the foregoing Plan was approved by the shareholders of Home Inns & Hotels Management Inc. on                     , 2006.

Executed on                     , 2006.

Corporate Secretary

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EX-21.1

Exhibit 21.1

List of Subsidiaries

Significant Subsidiaries:

Home Inns & Hotels Management (Hong Kong) Limited

Hemei Hotel Management Company

Home Inns Hotel Management (Beijing) Co., Ltd.

Home Inns Hotel Management (Shanghai) Co., Ltd.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form F-1 of our report dated July 12, 2006, except for Note 18, which is dated September 18, 2006, relating to the consolidated financial statements of Home Inns & Hotels Management Inc. and our report dated July 12, 2006, relating to the consolidated financial statements of Home Inns Hotel Management (Beijing) Co., Ltd, which appear in such Registration Statement. We also consent to the references to us under the headings “Our Summary Consolidated Financial and Operating Data,” “Home Inns Beijing’s Summary Consolidated Financial Data,” “Our Selected Consolidated Financial Data,” “Home Inns Beijing’s Selected Consolidated Financial Data,” and “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers Zhong Tian CPAs Limited Company

PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Shanghai, People’s Republic of China

October 4, 2006

EX-23.2

Exhibit 23.2

Our ref	AAL/620456/492640/v2
Your ref

Home Inns & Hotels Management Inc. No. 400 Tian Yao Qiao Road Shanghai 200030 People’s Republic of China Direct:     +852 2971 3007 Mobile:    +852 9020 8007 E-mail:       richard.thorp@maplesandcalder.com

4 October 2006

Dear Sir

Home Inns & Hotels Management Inc.

We hereby consent to the reference to our firm under the captions “Enforceability of Civil Liabilities”, “Taxation” and “Legal Matters” in the prospectus included in the Registration Statement of Home Inns & Hotels Management Inc. on Form F-1 initially filed on 4 October 2006 with the Securities and Exchange Commission under the Securities Act of 1933, as amended. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the regulations promulgated thereunder.

Yours faithfully

MAPLES and CALDER

Maples and Calder 1504 One International Finance Centre, 1 Harbour View Street, Hong Kong

Tel: +852 2522 9333 Fax: +852 2537 2955 www.maplesandcalder.com

Resident Hong Kong Partners: Christine Chang (England and Wales), Spencer Privett (England and Wales), Richard Thorp (England and Wales), Anne Walker (England and Wales), Anthony Webster (England and Wales), Greg Knowles (England and Wales), Harriet Unger (England and Wales) I Cayman Islands and British Virgin Islands Attorneys at Law Offices: BVI, Cayman, Dubai, Dublin, Hong Kong, Jersey, London

EX-23.4

Exhibit 23.4

Commerce & Finance Law Offices

6F NCI Tower, A12 Jianguomenwai Avenue,

Chaoyang District, Beijing, PRC; Postcode: 100022

Tel: (8610) 65693399 Fax: (8610) 65693838, 65693836, 65693837, 65693839

E-mail Add: beijing@tongshang.com Website: www.tongshang.com.cn

October 4, 2006

Home Inns & Hotels Management Inc.

No.400 Tian Yao Qiao Road

Shanghai 200030

People’s Republic of China

Ladies and Gentlemen:

We hereby consent to the use of our name under the captions “Risk Factors,” “Enforceability of Civil Liabilities,” “Regulation” and “Legal Matters” in the prospectus included in the registration statement on Form F-1, originally filed by Home Inns & Hotels Management Inc. on October 4, 2006, with the Securities and Exchange Commission under the Securities Act of 1933, as amended. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the regulations promulgated thereunder.

Sincerely yours,

/s/ Commerce & Finance Law Offices

EX-23.5

Exhibit 23.5

October 4, 2006

Home Inns & Hotels Management Inc.

No. 400 Tian Tao Qiao Road

Shanghai 200030, People’s Republic of China

Ladies and Gentlemen:

Pursuant to Rule 438 under the Securities Act of 1933, as amended, I hereby consent to the reference of my name as a director of Home Inns & Hotels Management Inc. (the “Company”), effective immediately upon the effectiveness of the Company’s registration statement on Form F-1 originally filed by the Company on October 4, 2006 with the Securities and Exchange Commission.

Sincerely yours,

/s/ Terry Yongmin Hu

EX-23.6

Exhibit 23.6

October 4, 2006

Home Inns & Hotels Management Inc.

No. 400 Tian Tao Qiao Road

Shanghai 200030, People’s Republic of China

Ladies and Gentlemen:

Pursuant to Rule 438 under the Securities Act of 1933, as amended, I hereby consent to the reference of my name as a director of Home Inns & Hotels Management Inc. (the “Company”), effective immediately upon the effectiveness of the Company’s registration statement on Form F-1 originally filed by the Company on October 4, 2006 with the Securities and Exchange Commission.

Sincerely yours,

/s/ Kenneth Gaw

EX-23.7

Exhibit 23.7

October 4, 2006

Home Inns & Hotels Management Inc.

No. 400 Tian Yao Qiao Road

Shanghai 200030

People’s Republic of China

CONSENT OF INDEPENDENT APPRAISER

American Appraisal China Limited (“AAC”) hereby consents to the references to AAC’s name and value conclusions for accounting purposes, with respect to its appraisal reports addressed to the board of Home Inns & Hotels Management Inc. (the “Company”) dated July 12, 2006 and August 25, 2006, in the Company’s Registration Statement on Form F-1 (together with any amendments thereto, the “Registration Statement”) to be filed with the U.S. Securities and Exchange Commission. AAC also hereby consents to the filing of this letter as an exhibit to the Registration Statement.

AMERICAN APPRAISAL CHINA LIMITED
Name:	James Kwok
Title:	Vice President

EX-99.1

Exhibit 99.1

HOME INNS & HOTELS MANAGEMENT INC.

CODE OF BUSINESS CONDUCT AND ETHICS

Purpose

This Code of Business Conduct and Ethics (the “Code”) contains general guidelines for conducting the business of Home Inns & Hotels Management Inc. (the “Company”) consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. To the extent this Code requires a higher standard than required by commercial practice or applicable laws, rules or regulations, we adhere to these higher standards.

This Code is designed to deter wrongdoing and to promote:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company will file with, or submit to, the U.S. Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company;

• compliance with applicable governmental laws, rules and regulations;

• prompt internal reporting of violations of the Code; and

• accountability for adherence to the Code.

Applicability

This Code applies to all of the directors, officers, employees and consultants of the Company, whether they work for the Company on a full-time, part-time, consultative, or temporary basis (each an “employee” and collectively, the “employees”). Certain provisions of the Code apply specifically to our chief executive officer, chief financial officer and any other persons who perform similar functions for the Company (each, a “senior officer,” and collectively, “senior officers”).

The Board of Directors of the Company (the “Board”) has appointed May Wu as the Compliance Officer for the Company. If you have any questions regarding the Code or would like to report any violation of the Code, please call the Compliance Officer at +(8621) 6468-1818 or e-mail her at may_wu@homeinns.com.

This Code was adopted by the Board on October 2, 2006 and will become effective immediately upon the completion of the Company’s initial public offering of its ordinary shares in the form of American Depositary Shares in the U.S. and elsewhere (the “IPO”).

Conflicts of Interest

Identifying Conflicts of Interest

A conflict of interest occurs when an employee’s private interest interferes, or appears to interfere, in any way with the interests of the Company as a whole. You should actively avoid any private interest that may influence your ability to act in the interests of the Company or that may make it difficult to perform your work objectively and effectively. In general, the following should be considered conflicts of interest:

• Competing Business. No employee may be concurrently employed by a business that competes with the Company or deprives it of any business.

• Corporate Opportunity. No employee should use corporate property, information or his or her position with the Company to secure a business opportunity that would otherwise be available to the Company. If you discover a business opportunity that is in the Company’s line of business, through the use of the Company’s property, information or position, you must first present the business opportunity to the Company before pursuing the opportunity in your individual capacity.

• Financial Interests.

(i) No employee may have any financial interest (ownership or otherwise), either directly or indirectly through a spouse or other family member, in any other business entity if such financial interest adversely affects the employee’s performance of duties or responsibilities to the Company, or requires the employee to devote certain time during such employee’s working hours at the Company;

(ii) No employee may hold any ownership interest in a privately-held company that is in competition with the Company;

(iii) An employee may hold up to but no more than 5% ownership interest in a publicly traded company that is in competition with the Company;

(iv) No employee may hold any ownership interest in a company that has a business relationship with the Company if such employee’s duties at the Company include managing or supervising the Company’s business relations with that company

If an employee’s ownership interest in a business entity described in clause (iii) above increases to more than 5%, the employee must immediately report such ownership to the Compliance Officer.

• Loans or Other Financial Transactions. No employee may obtain loans or guarantees of personal obligations from, or enter into any other personal financial transaction with, any company that is a material customer, supplier or competitor of the Company. This guideline does not prohibit arms-length transactions with recognized banks or other financial institutions.

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• Service on Boards and Committees. No employee should serve on a board of directors or trustees or on a committee of any entity (whether profit or not-for-profit) whose interests reasonably could be expected to conflict with those of the Company. Employees must obtain prior approval from the Board before accepting any such board or committee position. The Company may revisit its approval of any such position at any time to determine whether service in such position is still appropriate.

It is difficult to list all of the ways in which a conflict of interest may arise, and we have provided only a few, limited examples. If you are faced with a difficult business decision that is not addressed above, ask yourself the following questions:

• Is it legal?

• Is it honest and fair?

• Is it in the best interests of the Company?

Disclosure of Conflicts of Interest

The Company requires that employees fully disclose any situations that reasonably could be expected to give rise to a conflict of interest. If you suspect that you have a conflict of interest, or something that others could reasonably perceive as a conflict of interest, you must report it immediately to the Compliance Officer. Conflicts of interest may only be waived by the Board, or the appropriate committee of the Board, and will be promptly disclosed to the public to the extent required by law.

Family Members and Work

The actions of family members outside the workplace may also give rise to conflicts of interest because they may influence an employee’s objectivity in making decisions on behalf of the Company. If a member of an employee’s family is interested in doing business with the Company, the criteria as to whether to enter into or continue the business relationship, and the terms and conditions of the relationship, must be no less favorable to the Company compared with those that would apply to a non-relative seeking to do business with the Company under similar circumstances.

Employees should report any situation involving family members that could reasonably be expected to give rise to a conflict of interest to their supervisor or the Compliance Officer. For purposes of this Code, “family members” or “members of your family” include your spouse, brothers, sisters and parents, in-laws and children.

Gifts and Entertainment

The giving and receiving of gifts is common business practice. Appropriate business gifts and entertainment are welcome courtesies designed to build relationships and understanding among business partners. However, gifts and entertainment should never compromise, or appear to compromise, your ability to make objective and fair business decisions.

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It is the responsibility of employees to use good judgment in this area. As a general rule, employees may give or receive gifts or entertainment to or from customers or suppliers only if the gift or entertainment could not be viewed as an inducement to any particular business decision. All gifts and entertainment expenses made on behalf of the Company must be properly accounted for on expense reports.

Employees may only accept appropriate gifts. We encourage employees to submit gifts received to the Company. While it is not mandatory to submit small gifts, gifts of over RMB200 must be submitted immediately to the administration department of the Company.

The Company’s business conduct is founded on the principle of “fair transaction.” Therefore, no employee may receive kickbacks, bribe others, or secretly receive commissions or any other personal benefits.

Protection and Use of Company Assets

Employees should protect the Company’s assets and ensure their efficient use for legitimate business purposes only. Theft, carelessness and waste have a direct impact on the Company’s profitability. The use of the funds or assets of the Company, whether for personal gain or not, for any unlawful or improper purpose is strictly prohibited.

To ensure the protection and proper use of the Company’s assets, each employee should:

• Exercise reasonable care to prevent theft, damage or misuse of Company property;

• Promptly report the actual or suspected theft, damage or misuse of Company property;

• Safeguard all electronic programs, data, communications and written materials from inadvertent access by others; and

• Use Company property only for legitimate business purposes.

Intellectual Property and Confidentiality

• All inventions, creative works, computer software, and technical or trade secrets developed by an employee in the course of performing the employee’s duties or primarily through the use of the Company’s materials and technical resources while working at the Company, shall be the property of the Company.

• The Company maintains a strict confidentiality policy. During an employee’s term of employment, the employee shall comply with any and all written or unwritten rules and policies concerning confidentiality and shall fulfill the duties and responsibilities concerning confidentiality applicable to the employee.

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• In addition to fulfilling the responsibilities associated with his position in the Company, an employee shall not, without first obtaining approval from the Company, disclose, announce or publish trade secrets or other confidential business information of the Company, nor shall an employee use such confidential information outside the course of his duties to the Company.

• Even outside the work environment, an employee must maintain vigilance and refrain from disclosing important information regarding the Company or its business, customers or employees.

• An employee’s duty of confidentiality with respect to the confidential information of the Company survives the termination of such employee’s employment with the Company for any reason until such time as the Company discloses such information publicly or the information otherwise becomes available in the public sphere through no fault of the employee.

• Upon termination of employment, or at such time as the Company requests, an employee must return to the Company all of its property without exception, including all forms of medium containing confidential information, and may not retain duplicate materials.

Accuracy of Financial Reports and Other Public Communications

Upon the completion of the IPO, the Company will be a public company which is required to report its financial results and other material information about its business to the public and the SEC. It is the Company’s policy to promptly disclose accurate and complete information regarding its business, financial condition and results of operations. Employees must strictly comply with all applicable standards, laws, regulations and policies for accounting and financial reporting of transactions, estimates and forecasts. Inaccurate, incomplete or untimely reporting will not be tolerated and can severely damage the Company and result in legal liability.

Employees should be on guard for, and promptly report, any possibility of inaccurate or incomplete financial reporting. Particular attention should be paid to:

• Financial results that seem inconsistent with the performance of the underlying business;

• Transactions that do not seem to have an obvious business purpose; and

• Requests to circumvent ordinary review and approval procedures.

The Company’s senior financial officers and other employees working in the Finance Department have a special responsibility to ensure that all of the Company’s financial disclosures are full, fair, accurate, timely and understandable. Any practice or situation that might undermine this objective should be reported to the Compliance Officer.

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Company Records

Accurate and reliable records are crucial to the Company’s business and form the basis of its earnings statements, financial reports and other disclosures to the public. The Company’s records are the source of essential data that guides business decision-making and strategic planning. Company records include, but are not limited to, booking information, payroll, timecards, travel and expense reports, e-mails, accounting and financial data, measurement and performance records, electronic data files and all other records maintained in the ordinary course of our business.

All Company records must be complete, accurate and reliable in all material respects. There is never an acceptable reason to make false or misleading entries. Undisclosed or unrecorded funds, payments or receipts are strictly prohibited. You are responsible for understanding and complying with the Company’s record keeping policy. Contact the Compliance Officer if you have any questions regarding the record keeping policy.

Compliance with Laws and Regulations

Each employee has an obligation to comply with the laws of the cities, provinces, regions and countries in which the Company operates. This includes, without limitation, laws covering commercial bribery and kickbacks, copyrights, trademarks and trade secrets, information privacy, insider trading, offering or receiving gratuities, employment harassment, occupational health and safety, false or misleading financial information or misuse of corporate assets. Employees are expected to understand and comply with all laws, rules and regulations that apply to your position at the Company. If any doubt exists about whether a course of action is lawful, you should seek advice immediately from the Compliance Officer.

Violations of the Code

All employees have a duty to report any known or suspected violation of this Code, including any violation of laws, rules, regulations or policies that apply to the Company. Reporting a known or suspected violation of this Code by others will not be considered an act of disloyalty, but an action to safeguard the reputation and integrity of the Company and its employees.

If you know of or suspect a violation of this Code, it is your responsibility to immediately report the violation to the Compliance Officer, who will work with you to investigate your concern. All questions and reports of known or suspected violations of this Code will be treated with sensitivity and discretion. The Compliance Officer and the Company will protect your confidentiality to the extent possible, consistent with the law and the Company’s need to investigate your concern.

It is the Company’s policy that any employee who violates this Code will be subject to appropriate discipline, including termination of employment, based upon the facts and circumstances of each particular situation. Your conduct as an employee of the Company, if it does not comply with the law or with this Code, can result in serious consequences for both you and the Company.

The Company strictly prohibits retaliation against an employee who, in good faith, seeks help or reports known or suspected violations. An employee inflicting reprisal or retaliation against another employee for reporting a known or suspected violation, will be subject to disciplinary action up to and including termination of employment.

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Waivers of the Code

Waivers of this Code will be granted on a case-by-case basis and only in extraordinary circumstances. Waivers of this Code may be made only by the Board, or the appropriate committee of the Board, and will be promptly disclosed to the public.

Conclusion

This Code of Business Conduct and Ethics contains general guidelines for conducting the business of the Company consistent with the highest standards of business ethics. If you have any questions about these guidelines, please contact the Compliance Officer. We expect all employees to adhere to these standards. Each employee is separately responsible for his or her actions. Conduct that violates the law or this Code cannot be justified by claiming that it was ordered by a supervisor or someone in higher management. If you engage in conduct prohibited by the law or this Code, you will be deemed to have acted outside the scope of your employment. Such conduct will subject you to disciplinary action, including termination of employment.

* * * * * * * * * * * * *

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CERTIFICATION OF COMPLIANCE

TO:	Compliance Officer
FROM:	__________________________________________________________
RE:	Code of Business Conduct and Ethics of Home Inns & Hotels Management Inc. (Adopted on [•], 2006)

I have received, reviewed, and understand the above-referenced Code of Business Conduct and Ethics (the “Code”) and hereby undertake, as a condition to my present and continued employment at or association with Home Inns & Hotels Management Inc. and/or any of its affiliated entities (collectively, “Home Inns”), to comply fully with the Code.

I hereby certify that I have adhered to the Code during the time period that I have been associated with Home Inns.

I agree to adhere to the Code in the future.

Name:

                                          , 200    

Date

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EX-99.2

Exhibit 99.2

October 4, 2006

Home Inns & Hotels Management Inc.

No. 400 Tian Yao Qiao Road

Shanghai 200030

People’s Republic of China

Dear Sirs:

We are qualified lawyers of the People’s Republic of China (“PRC”) and are qualified to issue an opinion on the laws and regulations of the PRC.

We have acted as PRC counsel for Home Inns & Hotels Management Inc. (the “Company”), a company incorporated under the laws of the Cayman Islands, in connection with (i) the Company’s Registration Statement on Form F-1, including all amendments or supplements thereto (the “Registration Statement”), filed with Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended, relating to the offering (“Offering”) by the Company and certain selling shareholders of the Company of American Depositary Shares (“ADSs”), and (ii) the Company’s proposed listing of its ADSs on the Nasdaq Global Market. We have been requested to give this opinion as to the matters set forth below.

In so acting, we have examined the originals or copies certified or otherwise identified to our satisfaction, of documents provided to us by the Company and such other documents, corporate records, certificates issued by governmental authorities in the PRC and officers of the Company and other instruments as we have deemed necessary or advisable for the purposes of rendering this opinion.

In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents submitted to us as copies. We have also assumed the documents as they were presented to us up to the date of this legal opinion. We have further assumed the accuracy and completeness of all factual statements in the documents. Where important facts were not independently established to us, we have relied upon certificates issued by governmental agents and representatives of the Company with proper authority and upon representations, made in or pursuant to the Agreements.

In rendering this opinion, we have relied with your permission (A) with respect to all matters of United States federal and New York law, upon the opinions of Latham & Watkins LLP, United States counsel for the Company, (B) with respect to all matters of Cayman Islands law, upon the opinions of Maples and Calder, Cayman Islands counsel for the Company.

The following terms as used in this opinion are defined as follows:

“Governmental Agencies” means any governmental or regulatory agency or any court in the PRC.

“Governmental Authorizations” means all necessary licenses, consents, authorizations, approvals, orders, certificates and permits.

“PRC Laws” means all laws, regulations, statutes, orders, decrees, guidelines, notices, judicial interpretations, subordinary legislations of the PRC (other than the laws of the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan);

Based on the foregoing, we are of the opinion that:

(i) On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission (“SASAC”), the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission (“CSRC”), and the State Administration of Foreign Exchange (“SAFE”), jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A Rule”), which became effective on September 8, 2006. The New M&A Rule purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, pursuant to the New M&A Rule and other PRC laws and regulations, the CSRC, in its official website, promulgated relevant guidance with respect to the issues of listing and trading of domestic enterprises’ securities on overseas stock exchanges (the “Administrative Permits”), including a list of application materials with respect to the listing on overseas stock exchanges by SPVs.

(ii) Based on our understanding of current PRC Laws, we believe that the New M&A Rule does not require any entity such as the Company, which established PRC subsidiaries by means of direct investment in the registered capital of such subsidiaries other than by merger or acquisition of PRC domestic companies, to obtain the CSRC approval in connection with its overseas listing, and the CSRC approval is not required in the context of this Offering.

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(iii) The issuance, sale and delivery of the ADSs by the Company in the Offering will not conflict with or result in a breach or violation of, the provisions of any applicable PRC Laws.

This opinion relates to the PRC Laws in effect on the date hereof.

We hereby consent to the use of this opinion in, and the filing hereof as an exhibit to, the above-mentioned Registration Statement and to the reference to our firm’s name under the captions “Risk Factors,” “Enforceability of Civil Liabilities,” “Regulation” and “Legal Matters” in the prospectus included in the registration statement on Form F-1, originally filed by Home Inns & Hotels Management Inc. with the Securities and Exchange Commission under the Securities Act of 1933, as amended. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the regulations promulgated thereunder.

Yours sincerely,

/s/ Commerce & Finance Law Offices

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