20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                       to                       ..

Commission file number: 001-36731

eHi Car Services Limited

(Exact name of Registrant as specified in its charter)

Not applicable

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road

Shanghai, 200062

The People’s Republic of China

(Address of principal executive offices)

Ray Ruiping Zhang, Chief Executive Officer

Telephone: +86 21 6468 7000

Facsimile: +86 21 5489 1121

Email: ir@ehic.com.cn

Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road

Shanghai, 200062

The People’s Republic of China

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing two Class A common shares, par value $0.001 per share	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

139,917,575 common shares, par value US$0.001 per share, being the sum of 74,279,018 Class A common shares (including 1,027,288 Class A common shares, represented by 513,644 American depositary shares, issued and reserved for the future exercise of options or the vesting of other awards under the 2010 Plan and the 2014 Plan) and 65,638,557 Class B common shares as of December 31, 2017

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes x No

If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨
		Emerging growth company x

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. x

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP x International Financial Reporting Standards as issued
by the International Accounting Standards Board ¨ Other ¨

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17 ¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

¨ Yes ¨ No

EHI CAR SERVICES LIMITED

TABLE OF CONTENTS

		Page
INTRODUCTION		3
FORWARD-LOOKING STATEMENTS		3
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	4
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	4
ITEM 3.	KEY INFORMATION	4
ITEM 4.	INFORMATION ON THE COMPANY	38
ITEM 4A.	UNRESOLVED STAFF COMMENTS	63
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	63
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	83
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	94
ITEM 8.	FINANCIAL INFORMATION	96
ITEM 9.	THE OFFER AND LISTING	97
ITEM 10.	ADDITIONAL INFORMATION	98
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	106
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	107
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	108
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	108
ITEM 15.	CONTROLS AND PROCEDURES	108
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	110
ITEM 16B.	CODE OF ETHICS	110
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	110
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	110
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	110
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	110
ITEM 16G.	CORPORATE GOVERNANCE	111
ITEM 16H.	MINE SAFETY DISCLOSURE	111
PART III
ITEM 17.	FINANCIAL STATEMENTS	111
ITEM 18.	FINANCIAL STATEMENTS	111
ITEM 19.	EXHIBITS	111
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

2

INTRODUCTION

Except where the context otherwise requires and for purposes of this annual report on Form 20-F only, references to:

· “ADSs” are to our American depositary shares, each of which represents two Class A common shares;

· “ADRs” are to American depositary receipts, which, if issued, evidence our ADSs;

· “$”, “US$”, “USD” and “U.S. dollars” are to the legal currency of the United States;

· “China” and the “PRC” are to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan and the special administrative regions of Hong Kong and Macau;

· “RMB” and “Renminbi” are to the legal currency of China; and

· “we”, “us”, “our”, “our company” and “our Group” refer to eHi Car Services Limited, its predecessor entities, subsidiaries and variable interest entities.

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements based on our current expectations, assumptions, estimates and projections about us and our industry. 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. In some cases, these forward-looking statements can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intend”, “is/are likely to”, “is projected to”, “may”, “plan”, “potential”, “will” or other similar expressions. The forward-looking statements included in this annual report relate to, among others:

· our growth strategies and initiatives and our business plans;

· the anticipated growth of our business;

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

· factors that may affect our future revenues and expenses;

· the future growth of our industry as a whole;

· trends and competition in our industry; and

· economic, regulatory, operating conditions and demographic trends in China.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

3

PART I

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.KEY INFORMATION

A. Selected Financial Data

The following selected consolidated statements of comprehensive income (loss) data for each of the three years ended December 31, 2015, 2016 and 2017, and the selected consolidated balance sheet data as of December 31, 2016 and 2017, have been derived from our audited consolidated financial statements included elsewhere in this annual report. The selected consolidated statements of comprehensive income (loss) data for each of the two years ended December 31, 2013 and 2014, and the selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015 have been derived from our audited consolidated financial statements for these periods, which are not included in this annual report. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our consolidated financial statements and related notes and Item 5, “Operating and Financial Review and Prospects” in this annual report. Our historical results do not necessarily indicate results expected for any future period. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

Selected Consolidated Statements of Comprehensive Income (Loss) Data:

	For the Years Ended December 31,
	2013						2014						2015						2016						2017
	RMB			% of Net Revenues			RMB			% of Net Revenues			RMB			% of Net Revenues			RMB			% of Net Revenues			RMB			US$			% of Net Revenues
	(in thousands, except percentages, shares, per share and per ADS data)
Summary consolidated statements of comprehensive income (loss) data
Net revenues		566,394			100	%		851,165			100.0	%		1,450,630			100.0	%		2,108,944			100.0	%		2,739,522			421,057			100.0	%
Cost of revenues(1)(3)		(526,446	)		(92.9	)		(718,699	)		(84.4	)		(1,137,978	)		(78.4	)		(1,515,281	)		(71.9	)		(1,880,349	)		(289,004	)		(68.6	)
Gross profit(2)		39,948			7.1			132,466			15.6			312,652			21.6			593,663			28.1			859,173			132,053			31.4
Selling and marketing expenses:
Third party		(40,439	)		(7.1	)		(33,721	)		(4.0	)		(48,869	)		(3.4	)		(67,789	)		(3.2	)		(122,768	)		(18,869	)		(4.5	)
Related party		—			—			(1,595	)		(0.2	)		(16,190	)		(1.1	)		(29,399	)		(1.4	)		(16,264	)		(2,500	)		(0.6	)
Total selling and marketing expenses(3)		(40,439	)		(7.1	)		(35,316	)		(4.2	)		(65,059	)		(4.5	)		(97,188	)		(4.6	)		(139,032	)		(21,369	)		(5.1	)
General and administrative expenses(3)		(112,416	)		(19.8	)		(132,125	)		(15.5	)		(183,549	)		(12.7	)		(251,938	)		(11.9	)		(270,670	)		(41,601	)		(9.9	)
Other operating income		13,549			2.3			17,122			2.0			10,764			0.7			10,310			0.5			3,763			578			0.1
Total operating expenses		(139,306	)		(24.6	)		(150,319	)		(17.7	)		(237,844	)		(16.5	)		(338,816	)		(16.1	)		(405,939	)		(62,392	)		(14.8	)
Income / (loss) from operations		(99,358	)		(17.5	)		(17,853	)		(2.1	)		74,808			5.1			254,847			12.1			453,234			69,661			16.5
Interest income		360			0.1			4,397			0.5			2,653			0.2			8,414			0.4			14,962			2,300			0.5
Interest expense:
Third party		(50,880	)		(9.0	)		(76,938	)		(9.0	)		(109,566	)		(7.6	)		(206,425	)		(9.8	)		(273,589	)		(42,050	)		(10.0	)
Related party		—			—			—			—			(14,203	)		(1.0	)		(18,534	)		(0.9	)		(6,996	)		(1,075	)		(0.3	)
Total interest expense		(50,880	)		(9.0	)		(76,938	)		(9.0	)		(123,769	)		(8.6	)		(224,959	)		(10.7	)		(280,585	)		(43,125	)		(10.2	)
Gain from waiver of warrants		—			—			—			—			16,870			1.2			—			—			—			—			—
Gain from sale of cost method investment		—			—			—			—			803,060			55.4			—			—			—			—			—
Other income (expense), net		(1,108	)		(0.3	)		(840	)		(0.1	)		10,205			0.7			1,444			0.1			1,957			301			0.1
Early extinguishment of debt costs		—			—			—			—			—			—			—			—			(19,977	)		(3,070	)		(0.7	)
Income / (loss) before income taxes		(150,986	)		(26.7	)		(91,234	)		(10.7	)		783,827			54.0			39,746			1.9			169,591			26,066			6.2
Provision for income taxes		(1,228	)		(0.2	)		(1,912	)		(0.2	)		(87,488	)		(6.0	)		(6,611	)		(0.3	)		(47,375	)		(7,281	)		(1.7	)
Net income / (loss)		(152,214	)		(26.9	)		(93,145	)		(10.9	)		696,339			48.0			33,135			1.6			122,216			18,784			4.5
Net income / (loss) attributable to common shareholders		(371,783	)		(65.6	)		(343,920	)		(40.4	)		696,339			48.0			33,135			1.6			122,216			18,784			4.5
Weighted average number of common shares used in computing net income / (loss) per share
Basic		6,096,842						19,198,145						126,758,363						137,621,702						138,794,624			138,794,624
Diluted		6,096,842						19,198,145						128,403,877						138,552,031						139,593,917			139,593,917
Net income / (loss) per common share attributable to common shareholders
Basic		(60.98	)					(17.91	)					5.49						0.24						0.88			0.14
Diluted		(60.98	)					(17.91	)					5.42						0.24						0.88			0.13
Net income / (loss) per ADS*
Basic		(121.96	)					(35.82	)					10.99						0.48						1.76			0.27
Diluted		(121.96	)					(35.82	)					10.85						0.48						1.75			0.27

* Each ADS represents two Class A common shares.

4

(1) We previously reported the caption “vehicle operating expenses”.  Commencing in 2015, we evaluated the presentation of results of operations and concluded all relevant costs of revenues are included in “vehicle operating expenses”.  Accordingly, “vehicle operating expenses” have been re-titled “cost of revenues” for the current period and all historical periods.

(2) Commencing in 2015, we began reporting gross profit as a GAAP measure included in our results of operations. This measure is defined, consistent with generally accepted accounting principles, as net revenues reduced by cost of revenues. Gross profit has been presented for the current period and all historical periods.

(3) Includes share-based compensation charges of RMB6.2 million, RMB12.7 million, RMB14.0 million, RMB16.0 million and RMB13.6 million (US$2.1 million) in 2013, 2014, 2015,2016 and 2017, respectively, allocated as follows:

	For the Years Ended December 31,
	2013			2014			2015			2016			2017
	RMB			RMB			RMB			RMB			RMB			US$
	(in thousands)
Cost of revenues		(29	)		(134	)		(362	)		(840	)		(844	)		(130	)
Selling and marketing expenses		(9	)		(490	)		(894	)		(401	)		(336	)		(52	)
General and administrative expenses		(6,168	)		(12,057	)		(12,727	)		(14,800	)		(12,409	)		(1,907	)
Total share-based compensation expenses		(6,206	)		(12,681	)		(13,983	)		(16,041	)		(13,589	)		(2,089	)

Selected Consolidated Balance Sheets Data:

	As of December 31,
	2013			2014		2015		2016		2017
	RMB			RMB		RMB		RMB		RMB		US$
	(in thousands, except share data)
Summary consolidated balance sheets data
Cash and cash equivalents		630,733			926,208		2,610,088		529,519		671,350		103,185
Restricted cash		30,247			192,758		206,944		257,059		612,122		94,081
Total current assets		803,742			1,426,458		3,427,263		1,941,705		3,364,457		517,108
Property and equipment, net		1,062,331			1,940,048		4,096,618		5,723,569		7,057,045		1,084,648
Vehicle purchase deposits		119,173			174,185		216,728		420,923		367,840		56,536
Total assets		2,026,422			3,755,640		7,800,920		8,160,959		10,928,462		1,679,674
Accounts payable		6,554			5,487		785,899		179,878		617,870		94,965
Short-term debt due to third parties		219,640			540,519		803,132		926,219		2,557,446		393,072
Short-term debt due to a related party		—			—		—		—		100,000		15,370
Total current liabilities		333,475			676,015		1,881,994		1,396,109		3,727,594		572,921
Long-term debt due to third parties		375,726			713,233		1,669,453		2,667,823		2,957,056		454,491
Long-term debt due to a related party		—			—		300,000		100,000		—		—
Total liabilities		709,552			1,389,248		3,852,847		4,169,830		6,721,915		1,033,139
Total shareholders’ equity (deficit)		(956,651	)		2,366,392		3,948,073		3,991,130		4,206,547		646,534
Common share capital		40			728		867		878		879		135
Common shares outstanding		6,096,842			114,379,243		137,133,413		138,860,287		138,890,287		138,890,287

5

Exchange Rate Information

Our business is primarily conducted in China and substantially all of our revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then current exchange rates, for the convenience of the readers. The conversion of RMB into U.S. dollars in this annual report is based on the noon buying rate in New York City for cable transfers in RMB as certified for customs purposes by the Federal Reserve Board. Unless the amounts were from transactions originally denominated in U.S. dollars or otherwise noted in this annual report, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.5063 to US$1.00, the noon buying rate in effect as of December 29, 2017. 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, 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 April 20, 2018, the noon buying rate was RMB6.2945 to US$1.00.

The following table sets forth various information concerning exchange rates between the Renminbi 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 annual report or will use in the preparation of our periodic reports or any other information to be provided to you.

	Noon Buying Rate
Period	Period End		Average(1)		Low		High
	(RMB per U.S. Dollar)
2013		6.0537		6.1412		6.2438		6.0537
2014		6.2046		6.1704		6.2591		6.0402
2015		6.4778		6.2827		6.4896		6.1870
2016		6.9430		6.6549		6.9580		6.4480
2017		6.5063		6.7350		6.9575		6.4773
October		6.6328		6.6254		6.6533		6.5712
November		6.6090		6.6200		6.6385		6.5967
December		6.5063		6.5932		6.6210		6.5063
2018
January		6.2841		6.4233		6.5263		6.2841
February		6.3280		6.3183		6.3471		6.2649
March		6.2726		6.3174		6.3565		6.2685
April (through April 20, 2018)		6.2945		6.2859		6.3045		6.2655

Source: Federal Reserve Statistic Release.

(1) Annual average for any given year is calculated by using the average of the exchange rates on the end of each month during such year. Monthly average for any given month is calculated by using the average of the daily rates during such month.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks related to our business and industry

We may not be able to sustain our growth rates or manage our expansion plan, which could adversely affect our operating results.

We have experienced significant growth in recent years. Our total net revenues increased from RMB1,450.6 million in 2015 to RMB2,108.9 million in 2016, and further to RMB2,739.5 million (US$421.1 million) in 2017. We increased the total fleet size from 38,070 vehicles as of December 31, 2015 to 56,916 vehicles as of December 31, 2016, and further to 64,946 vehicles as of December 31, 2017, and we expanded our geographic coverage from 1,861 service locations in 151 cities as of December 31, 2015 to 3,249 service locations in 216 cities across China as of December 31, 2016, and further to 4,463 service locations in 303 cities across China as of December 31, 2017. We may not be able to sustain these high growth rates in future periods and you should not rely on the growth in our revenue or fleet size in any prior period as an indication of our future performance.

We plan to continue to expand our fleet size and geographic coverage. We believe geographical expansion is particularly important for us to acquire more customers and enhance our brand recognition. Nonetheless, expanding into new geographical markets imposes additional burdens on our managerial, financial, operational, information technology and general administrative resources. Our planned expansion will also require us to maintain consistent and high-quality services to ensure our brand does not suffer as a result of any deviations, whether actual or perceived, in our service quality. As China is a large and diverse market, business travel or leisure travel demands may vary significantly by region. As a result, we may not be able to leverage our experience in the markets in which we currently operate to expand into other parts of China, and we cannot assure you that we will be able to effectively manage the growth of our operations or maintain our service quality. If we are unable to expand our operations in a timely and cost effective manner, our results of operations may be materially adversely affected.

6

We have a history of operating and net losses, and we may not be able to achieve or sustain profitability.

Historically, we had certain operating and net losses primarily due to significant upfront investments in connection with the expansion of our nationwide service network and infrastructure, which expose us to significant fixed costs and expenses. Starting from 2015, we have recorded operating income of RMB74.8 million, RMB254.8 million, and RMB453.2 (US$69.7 million) respectively, and net income of RMB696.3 million, RMB33.1 million and RMB122.2 (US$18.8 million), respectively, in 2015, 2016 and 2017. Although we generated net income in 2015, 2016 and 2017, our net income in 2015 was the result of a net gain of RMB736.8 million related to sales of our investment assets (after transaction costs and tax provision). If market demand for our car rentals and car services does not continue to increase as quickly as we have anticipated, or if there is a rapid and unexpected decline in such demand, we may be unable to generate sufficient revenues to offset fixed costs and achieve economies of scale, our operating results may be materially adversely affected as a result of high operating expenses and underutilized capacity, and we may incur operating or net losses in the future.

In addition, our ability to achieve profitability is affected by various factors, many of which are beyond our control. For example, our revenues and profitability depend on the continuous growth of the car rental and car service industry in China and customer demands for such services. We cannot assure you that car rentals and car services, as relatively new alternatives to car ownership, will become widely accepted in China. Furthermore, vehicle purchases have historically accounted for the majority of our capital expenditures. We expect to continue to incur significant costs and expenses to increase the scale of our operations, which may make it difficult for us to achieve and sustain profitability.

Furthermore, our historical and future results of operations in a specific period may be subject to the impact of various factors and events, which may make our results of operations in different periods less comparable with each other and may not be necessarily indicative of future trends. While we intend to implement various measures to control the increases in our cost of revenues as we ramp up our business rapidly, we cannot assure you that these measures will be as effective as we currently expect, or at all. If we cannot significantly increase our net revenues to offset our continuously increasing operating and other expenses, we will incur losses and our business, financial condition and results of operations will be materially and adversely affected. We may also incur significant losses in the future for a number of other reasons, including changes in the macroeconomic and regulatory environment, competitive dynamics, our inability to respond to these changes in a timely and effective manner and the other risks described in this annual report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events.

We face intense competition, and if we fail to compete effectively, we may lose market share, our revenues and margin may decrease and our results of operations may be adversely affected.

The car rental and car service industry in China is competitive and fragmented. We expect competition in China’s car rental and car service industry to persist and intensify.

As we provide comprehensive service offerings, we compete with different market participants in different market sectors at different levels. For car rentals, we compete with both national and regional players, such as CAR Inc., or Shenzhou, Xiaoju Kuaizhi, Inc., or Didi, and Shouqi Car Rental Co., Ltd., or Shouqi. For business-to-business car services, we primarily compete with Avis China and China Yongda Automobiles Services Holdings Limited, or Yongda. In late 2014, we started to expand our car services to a business-to-consumer model, primarily through Ctrip’s website, mobile applications and offline channels. Although it is only complementary to our business-to-business oriented car services, we may face competition from business-to-consumer car services providers such as Didi, UCAR (an affiliate company of Shenzhou), Yidao and Shouqi, all of which are GPS-based mobile taxi and car hailing service providers. In April 2017, we launched car sharing business initiative in Shanghai, which continues to grow as complementary to our car rental business. However, our car sharing business may compete with other national and regional car sharing players, such as EVCARD (operated by Shanghai International Automobile City EV Operation and Service Co., Ltd.), Car2Go (operated by Daimler Mobility Services), GoFun (operated by Shouqi) and ToGo (operated by Beijing Tuge Technology Co., Ltd.). In 2017, the revenue related to car sharing business was insignificant.

For car rentals, we compete primarily on the basis of rental price, value-added services, user experience, brand recognition, convenience of service locations, geographic coverage and service quality. For car services, we compete primarily on the basis of quality and convenience of services, ability to provide tailored solutions and timely response to ad-hoc situations, brand recognition, network coverage, and, to a lesser extent, service charge. For car sharing, we compete primarily on the basis of rental price, geographic coverage, accessibility and the technology to monitor and optimize utilization. Our competitors, some of which may have access to greater financial resources, often seek to compete aggressively on the basis of pricing. If we do not price our services competitively, we may lose rental volume, or if we do, our revenue and margins will suffer, either of which could have a material adverse impact on our results of operations.

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In addition, technological advances may materially impact the competitive landscape of China’s car rental and car service industry and our competitiveness in the evolving industry. For example, an increasing number of customers in China have chosen to reserve car rental services through websites or mobile applications due to the convenience of these channels. As a result, it is critical for us to continue to enhance and improve the responsiveness, functionality and features of our websites and mobile applications to remain competitive. The development of websites, mobile applications and other proprietary technology requires substantial expenditures and resources, and entails significant technical and business risks. Our competitors may use new technologies more effectively, develop more appealing and popular websites and mobile applications, or adapt more quickly than us to evolving industry trends or changing market requirements. Some of our competitors may form closer relationships with, or be acquired by, major Internet companies in China. Furthermore, the proliferation of the Internet has increased the price transparency among car rental companies by enabling cost-conscious customers to more easily obtain the lowest rates available among car rental companies for any given trip. Such increased price transparency may further contribute to the prevalence and intensity of price competition in the future.

Our competitors may also compete against us in the selection of new service locations, or offer better terms for our existing leased properties, thereby slowing down our anticipated expansion. Furthermore, some competitors may initiate negative publicity campaigns against us, which may harm our brand and reputation. If we fail to effectively compete with large players on scale or small players on cost and flexibility, we may not be able to compete successfully against our current and future competitors.

We face risks arising from our heavy reliance on our proprietary technology platform.

We rely heavily on our proprietary technology platform with various features specifically designed to improve and streamline our operations in accepting reservations, processing payments, managing our fleet, accounting for our various business activities and otherwise conducting our business. The satisfactory performance, reliability and availability of our proprietary technology platform are critical to our reputation, our ability to attract and retain customers and maintain adequate service levels. Any system interruption that results in the unavailability of our website or a disruption in our proprietary technology platform could result in negative publicity, damage our reputation and brand and cause our business and operating results to suffer. We may experience temporary system interruptions for a variety of causes, including network failures, power failures, cyber attacks, software errors or overwhelming user traffic to our website during periods of strong demand. In addition, we are dependent in part on third parties for the implementation and maintenance of certain aspects of our systems and because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all. Although we regularly back up our data on servers in different locations or on hard drives stored in our offices, there can be no assurance that our systems back-up will successfully mitigate or eliminate these risks. Any disruption, termination, or provision of substandard services could adversely affect our brand, customer relationships, operating results and financial condition.

Our historical outstanding accounts receivable have been relatively high. Inability to collect our accounts receivable on a timely basis, if at all, could materially and adversely affect our financial condition, liquidity and results of operations.

As of December 31, 2015, 2016 and 2017, our outstanding billed and unbilled accounts receivable were RMB179.6 million, RMB231.0 million and RMB362.9 million (US$55.8 million), respectively. Although we conduct credit evaluations of our customers, we generally do not require collateral or other security from our customers. In addition, we have had a relatively high customer concentration. As a result, an extended delay or default in payment relating to a significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable. Our inability to collect our accounts receivable on a timely basis, if at all, could materially and adversely affect our financial condition, liquidity and results of operations.

If we are unable to dispose of our used vehicles at desirable prices or timing or through appropriate channels, the residual value of our fleet may drop significantly and we may incur significant financial losses.

We generally hold vehicles in our fleet for a term of three to four years, except for program cars as described below which typically have a holding period of 12 to 24 months. Depending on the conditions of our vehicles, our actual vehicle holding period may vary. As our fleet grows and matures, we expect vehicle dispositions to become a significant part of our operations. We have developed an internal rating system to assess the general conditions of our vehicles, and dispose of our used vehicles through a variety of disposition channels according to the rating results, including auctions, brokered sales, dealers and online used car marketplace. We also maintain a well-managed and disciplined vehicle disposition process which takes into consideration market timing, disposal price and seasonality. Given that China’s used vehicle market is still at its early stage and lacks a well-established credit system, we face uncertainties in our ability to dispose of our used vehicles at reasonable prices, in a timely manner or through appropriate channels.

As China’s car dealers tapped into used car sales market, in late 2014, we started to have some program car arrangements with car dealers, and in some cases with used car sales brokers and online platforms. Program cars refer to vehicles of which disposal price and holding period have been predetermined and fixed by agreements. Pursuant to program car agreements, we have the option to sell, and car dealers have the obligation to repurchase, or in some cases, used car sales brokers/online platforms have the obligation to purchase, our vehicles at a specified repurchase price and after a specified holding period (typically 12 to 24 months), subject to certain vehicle condition, mileage and holding period requirements. Repurchase prices of program cars are generally based on a predetermined percentage of original vehicle cost and the month in which the vehicle is repurchased. We calculate the depreciation costs of such vehicles separately, based on their respective contractual repurchase prices and holding periods, and adjust the depreciation costs if the repurchase conditions of such vehicles are not met or we elect not to sell such vehicles as program cars. We believe program car arrangements could hedge certain risk from fluctuations in used car prices in the secondary market and offer additional alternatives of our vehicle acquisition and disposal channels. However, car dealers, used car sales brokers and online platforms may discontinue to offer program car arrangements to us on terms or at prices consistent with the current agreements, or at all. In addition, failure by a car dealer, used car sales broker or online platform to fulfill its obligations under any program car agreement may impact our results of operations if we are unable to dispose of such vehicles at prices estimated at the time of purchase.

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We carry substantial risk that the market value of a used vehicle at the time of its disposition may be less than its estimated residual value at such time. If we are unable to dispose of our used vehicles at prices that are equal to or greater than their estimated residual value, our depreciation costs will increase and we will incur losses resulting from the disposal, which may have material and adverse impact on our financial results. As our fleet size continues to grow, inability to dispose of our used vehicles at desirable prices or timing or through appropriate channels could have significant impact on our business.

Our limited operating history in an emerging and rapidly evolving industry may not provide an adequate basis on which to evaluate our business and future prospects.

We have a limited operating history. We began to provide chauffeured car services and car rental services in 2006 and 2008, respectively. We believe our future success depends on our ability to significantly increase revenues as well as maintain profitability from our operations. Our limited operating history makes it difficult to evaluate our business and future prospects. You should consider our future prospects in light of the risks and challenges encountered by a company with a limited operating history in an emerging and rapidly evolving industry. These risks and challenges include, among other things,

· our ability to continue our growth as well as maintain profitability;

· preservation of our competitive position in the car rental and car service industry in China;

· providing consistent and high-quality services to attract and retain individual customers as well as corporate and institutional clients;

· our ability to implement our strategies and make timely and effectively respond to competition and changes in customer preferences;

· our ability to increase awareness of our “eHi” brand and continue to develop customer loyalty; and

· recruitment, training and retaining of qualified managerial and other personnel.

Our failure to raise sufficient capital to fund and expand our operations at a reasonable cost could reduce our ability to compete successfully.

Our business requires a significant amount of capital in large part because we are prompted to continue to grow our fleet and expand our business in existing markets and to additional markets where we currently do not have operations. Our capital expenditures totaled RMB2,183.4 million, RMB3,687.8 million and RMB3,252.5 million (US$499.9 million) in 2015, 2016 and 2017, respectively, which were primarily used for vehicle purchases. We may require additional funding to implement our expansion strategy by offering additional equity or debt securities or obtaining additional credit facilities in the future. The sales of additional equity or equity linked securities could result in dilution of your shareholding. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

· economic, political and other conditions in China and elsewhere;

· our future results of operations, financial condition and cash flows; and

· general market conditions for capital raising activities in our industry.

In addition, pursuant to the documents governing our US$200 million senior unsecured notes issued in 2015 and our US$400 million senior unsecured notes issued in 2017 as well as other financing indebtedness, we are subject to various restrictive covenants including, among other things, limitations on our ability to incur additional indebtedness or liens, various financial covenants and limitations on our ability to sell or dispose of certain assets, pay or distribute dividend, redeem or repurchase share capital, make certain capital contributions or investments, merger or consolidate with or acquire other companies, change the nature of our business, enter into derivative transactions, amend our charter documents and make loans. As a result of the covenants, our ability to pay dividends or other distributions on our common shares, including those represented by ADSs, may be limited. These covenants could also restrict our ability to operate our business, raise additional capital in the future through bank borrowings and debt and equity issuances and may restrict our ability to engage in some transactions that we expect to be of benefit to us.

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If we fail to raise sufficient capital to fund and expand our operations at a reasonable cost, we may not be able to, among others:

· increase our fleet size;

· expand our operations in current or additional cities in China;

· enhance our sales and marketing and strengthen our general and administrative teams;

· continue to improve our proprietary technology platform;

· acquire businesses complementary to ours;

· hire, train and retain qualified employees;

· develop and introduce service enhancements to our clients; or

· respond to competitive pressures or unanticipated working capital requirements.

Uncertainties regarding the growth and profitability of the car rental and car service industry in China could adversely affect our revenues and business prospects.

Substantially all of our revenues are generated from our car rentals and car services. While car rentals and car services have existed in China since the 1990s, the long-term prospects of the car rental and car service industry in China remain relatively untested. Our future operating results will depend on numerous factors affecting the development of the car services industry in China, some of which may be beyond our control. These factors include:

· the growth of demand for car rentals and car services in China, and the rate of any such growth;

· the trust and confidence level of customers in car rentals and car services providers in China, as well as changes in customer demographics and preferences;

· the selection, price and popularity of vehicles that we and our competitors offer;

· the emergence of alternative transportation service models such as car-hailing, car-sharing, ride-sharing business and innovation of driver-less vehicles services;

· general economic conditions, particularly economic conditions affecting discretionary consumer spending; and

· the legal environment that may impact our business operations or expansions.

A decline in the popularity of driving, car rentals or car services in general, or any failure by us to adapt our business model and improve customer experience in response to trends and customer needs and preferences, will adversely affect our revenues and prospects.

Various government policies on automobile control and management, such as vehicle plate control and restrictions on automobile purchases and ownership, may increase our operating costs, limit our future expansion or otherwise adversely affect our business, results of operations and prospects.

The significant increase in the number of vehicles in China, primarily in major cities, and the traffic and pollution resulting from this increase have drawn the attention of both the government and the public. To address this issue, local governments in China have promulgated various policies to limit the increase in the number of vehicles, such as restricting the number of new local vehicle plates issued. For example, Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin, Hangzhou and Guiyang city governments have adopted policies regarding issuing a limited number of local vehicle plates and/or restricting the entrance of vehicles with non-local vehicle plates into certain areas of the city. In addition, some cities in China, such as Beijing, Shanghai, Guangzhou, Tianjin, Shijiazhuang, Nanjing, Wuhan, Lanzhou, Harbin, Changchun, Nanchang, Chengdu, Hangzhou, Guiyang, Shenzhen, Chongqing and so on also implemented traffic control measures banning vehicles with certain license plate numbers from being on the road in or entering into certain areas of the city during certain hours in a workday or certain days in a given week. If more cities adopt vehicle plate control policies, our costs to obtain new vehicle plates in such cities may significantly increase and our future expansion in these cities may be limited, which may materially and adversely affect our business, results of operations and prospects. In addition, if a large number of our rental cars are found in violation of these traffic control measures, we may be subject to fines for such violations which may increase our operating costs and expenses.

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Other government policies on automobile purchases, ownership, related taxes and other charges may also have a material effect on our business. In the past years the PRC government has provided some tax reductions or government subsidies on certain types of automobile purchases. We are not in a position to predict whether any tax reduction or government subsidy for automobile purchases will be granted or continued in the future. In the event that any adverse changes of existing government policies on automobile purchases, ownership, related taxes and other charges are adopted by the PRC government, it may materially and adversely affect our results of operations and limit our further expansion.

Our business is seasonal, and a disruption in our operations during our peak or off peak seasons could materially adversely affect our results of operations.

We generally experience some effects of seasonality due to increases in leisure travel and decreases in business travel activities during the summer season and public holidays in China such as Chinese New Year, Labor Day and National Day, although the seasonal impacts on our car rentals and car services may, to some extent, offset each other. In addition, we typically launch promotions for certain car rentals and car services in selected cities after major holidays in China. Seasonal changes in our revenues do not alter certain of our expenses, such as depreciation, store expenses and insurance, that are fixed in the short run, typically resulting in higher profitability in periods when our revenues are higher and lower profitability in periods when our revenues are lower. Our revenues may also fluctuate due to inclement weather conditions, such as snow or rain storms. In addition, other seasonality trends may develop and the existing seasonality that we experience may change.

Unidentified individuals claiming to be company employees with information about the operations of our company previously alleged that we publicly misrepresented financial information and key operating metrics. Our company investigated these allegations and determined they were without merit. However the public dissemination of these allegations or similar allegations could affect our reputation, our business and the market for our securities and the price of our ADSs.

We have been, and in the future may be, the target of anti-competitive, harassing, or other detrimental conduct by third parties. Such conduct includes malicious allegations, anonymous or otherwise, regarding our personnel, business, operations, accounting, prospects or business ethics. Additionally, allegations, directly or indirectly against us, may be posted in internet chat-rooms or on blogs, social networks websites or any other websites by anyone on an anonymous basis. We have been, and in the future may be, required to expend significant time and incur substantial costs to address such malicious allegations or other detrimental conduct.

In October 2014, our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, or PwC, received a letter from one or more unidentified individuals claiming to be a group of company employees and alleging that we had misrepresented our financial performance and key operating metrics in the registration statement and prospectus that we had filed with the SEC earlier that month. The underwriters whose names appeared on the cover of the registration statement we filed in October 2014 also received a similar letter. The unidentified author or authors of the letter appeared to have had access to information about our company not in the public domain. They alleged that we had: (i) misrepresented the size of our fleet by including certain cars that were lost or otherwise no longer in our possession; (ii) misrepresented the size of our fleet by including certain cars, even though those cars were allegedly no longer suitable for rental or otherwise no longer operating, and accounted for those cars on our balance sheet at a high residual value, above their actual residual value, because we allegedly set a low depreciation rate; (iii) exaggerated fleet utilization rates by counting lost and idle cars as if they were still operating rental cars, and thus inflated our rental transaction volume; (iv) fabricated contracts to generate phony rental revenue from lost and idle cars, and increasingly so during the period leading up to this offering; (v) set up or acquired several sham companies for the purpose of engaging in fake transactions with us in the first two quarters of 2014; (vi) misrepresented our costs by delaying payments to a large number of third-party service providers in the first two quarters of 2014; and (vii) inflated the amount of traffic to our website (as measured by Alexa, an internet data provider) by hiring a traffic-generating service provider (collectively, the “Allegations”). In support of the Allegations, the unidentified author or authors provided lists of allegedly lost or idle vehicles identified by license plate and vehicle identification number, screen shots of our internal system data, charts providing financial information and operating metrics, and tables comparing our web traffic to that of other companies. The unidentified author or authors of the letter, however, declined to provide additional information including contact details when asked. They have also refused requests to identify themselves or to speak with our company or the lead underwriters.

Promptly after receiving a copy of the letter, the law firm of O’Melveny & Myers LLP, or OMM, was instructed to conduct an investigation into the Allegations at the direction of our audit committee. OMM then retained Kroll Associates (Asia) Limited, or Kroll, an international investigations and forensic accounting firm to assist with its investigation. OMM undertook an extensive investigation with the assistance of Kroll. Based on their investigation, OMM concluded that the Allegations were without merit. We also concluded that the Allegations were without merit. PwC considered the results of OMM’s work and also performed additional audit procedures. It did not qualify or modify its audit report on our consolidated financial statements for the years or periods affected by the Allegations, including the 2014 financial statements.

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On November 12, 2014, PwC received a communication from a non-employee who allegedly obtained information from one of our employees, alleging that (i) certain cars in our fleet were not suitable for rental and were accounted for at a high residual value above their actual residual value, and (ii) we had misrepresented the size of our fleet by including certain cars that were lost. These allegations mirror those made in the letters received in October 2014 by PwC and the underwriters whose names appeared on the cover of the registration statement. With respect to the allegation that certain cars in our fleet were not suitable for rental and were accounted for at a high residual value above their actual residual value, the majority of the cars identified in the November 12, 2014 communication were included in the October 2014 communication. With respect to the allegation that we had misrepresented the size of our fleet by including certain cars that were lost, all of the cars identified in the November 12, 2014 communication were included in the October 2014 communication. We instructed OMM to conduct a supplemental investigation into the allegations contained in the November 12, 2014 communication. Based on that supplemental investigation, OMM concluded that the allegations in the November 12, 2014 communication were without merit. After conducting further procedures to evaluate the vehicles identified in the November 12, 2014 communication, as well as the source of the allegations contained therein, we have concluded that the allegations in the November 12, 2014 communication were without merit and that the accounting treatment of the additional identified cars is consistent with our policies as described in the registration statement.

Although we concluded that these allegations were without merit, there may be additional future allegations that similarly are without merit, either in the press or on the internet, and it is possible that those allegations would then result in adverse publicity for our company. That publicity could have a materially adverse effect on our business and our reputation, and as a result, could adversely affect the market for our securities or the price of our ADSs. Even though the allegations were without merit, they may lead to one or more investors to file securities class action or other lawsuits against us, which could harm our reputation and business, and could distract our management from day-to-day operations of our business. We cannot assure you that we will be able to obtain the dismissal of any such lawsuits, even if they were without merit. We will also incur costs in managing and defending any such litigation and may incur related indemnity obligations. We may need to pay damages or settle any such litigation with a substantial amount of cash. These costs could have a material adverse impact on our business, our reputation, our results of operation and cash flow.

If we are unable to enhance our brand recognition and maintain a high level of customer satisfaction, we may not be able to attract or retain customers, and our brand and results of operations may be adversely affected.

We believe our “eHi” brand is integral to our success, including the success of our sales and marketing efforts and our efforts to grow our car rentals and car services business. Our continued success in enhancing our brand depends, to a large extent, on our ability to consistently provide quality services and customer experience across our service network and introduce new services and vehicle models to meet customer demands, and to respond to competitive pressures and changing regulatory environment. Failure to provide customers with high-quality services and experiences could harm our reputation and adversely affect our efforts to develop “eHi” as a trusted brand. From time to time, our customers express dissatisfaction with our services, including those related to the availability, condition and reservation time of our vehicles, and our response time to customers’ questions or vehicle incidents. To the extent dissatisfaction with our services is widespread or not adequately addressed, our reputation could be harmed, our efforts to develop “eHi” as a trusted brand and to provide enhanced customer experience would be adversely impacted, which may in turn adversely affect our operating results and our ability to attract new customers and retain existing customers.

In addition, any negative publicity, regardless of its veracity, could harm our brand image and reputation. Furthermore, pursuant to the global affiliation agreement we entered into with Enterprise China, our signage and logo are displayed alongside the signage and logos of certain subsidiaries of Enterprise, including “Enterprise,” “Enterprise Rent-A-Car,” “Alamo,” “Alamo Rent A Car,” “National” and “National Rent A Car,” in several cities in China and certain locations where Enterprise has operations. Any negative publicity involving such brands or deterioration in the quality of services provided by these subsidiaries of Enterprise may also harm our brand image.

Customer violation of traffic rules could result in suspension of some of our vehicles from operation and we may not be able to fully recover the fines arising from our customers’ violations.

China operates a “traffic points” system under which each driver is allotted 12 points for each calendar year. Traffic violations are penalized through, among other things, fines and deduction of the traffic points. For traffic violations caught by law enforcement officers, the point deduction is imposed on the driver. For traffic violations caught by automated traffic enforcement systems, for example, running a red light that was recorded by a traffic camera, the point deduction is imposed on the vehicle.

Vehicles in use for less than five years in China used to be subject to mandatory biennial inspection by transportation authorities. Such rules were changed by the Opinion regarding Strengthening and Improving the Inspection Work of Automobile Vehicles, or the Inspection Work Opinion, issued in April 2014. According to the Inspection Work Opinion, starting from September 1, 2014, non-operational cars and other small-size, mini-type passenger vehicles which are registered for less than six years are exempted for vehicle inspections, and such vehicles which are registered for more than six years (including six years) are still subject to vehicle inspections. For a vehicle to pass the inspection, all point deductions recorded on the vehicle must be offset by applying the drivers’ available points.

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Some of our vehicles have point deductions recorded on them due to customer traffic violations caught by automated traffic enforcement systems. For our vehicles to pass their mandatory biennial inspection, we coordinate with our customers who committed the traffic violations to offset the point deductions recorded on our vehicles by applying their available points. However, sometimes certain customers who committed the traffic violations refused or were unwilling to offset the point deductions by themselves. For example, if a customer travelled long way from Beijing to Hainan and committed a traffic violation when renting car in Hainan, he may be unwilling to flight back to Hainan for the sole purpose of offsetting his point deduction. In such cases, we may charge the customer a penalty fee according to the rental agreement, and may also need to engage a third-party agent to coordinate with the customer for settling the point deduction. Depending on the volume of vehicles due for inspection and the time required to coordinate with our customers, we sometimes have been unable to timely offset all the point deductions on our vehicles before their inspection dates, and may be unable to do so in the future. If we fail to promptly offset the point deductions recorded on our vehicles, our vehicles will not be able to pass the inspection and will be suspended from road use and disposition until all points deductions are offset, which may materially and adversely affect our business, results of operation and financial condition. Historically, the number of our vehicles that did not pass the mandatory vehicle inspection was minimal.

In addition, while we obtain pre-authorized credit card payments when our car rental customers pick up or return the rental vehicles, such pre-authorized payments may not be sufficient to cover fines arising from such customers’ traffic violations. In the event that traffic fines exceed the pre-authorized payment amount, we may not be able to fully recover outstanding balances from such customers in time or at all, which may materially and adversely affect our business, results of operations and financial condition.

If we fail to protect our customers’ confidential information stored in our systems, our reputation or brand may be harmed, and we may be exposed to liability and loss of customers.

Our reservation system stores, processes and transmits our customers’ confidential information, including identity information, driver’s license numbers, contact information and other sensitive data. We rely on encryption, authentication and other technologies, as well as administrative and physical safeguards, to secure such confidential information. Any compromise of our information security could damage our reputation and brand and expose us to risks of costly litigation and liability that could materially harm our business and operating results. We and our third-party data center facilities may not have adequately assessed the internal and external risks posed to the security of our systems and information and may not have implemented adequate preventative safeguards or take adequate reactionary measures in the event of a security incident. Any failure to protect such confidential information could harm our reputation and brand and expose us to liability and loss of customers.

We rely on third-party service providers for certain aspects of our business.

We depend on third-party service providers for certain aspects of our business. For example, we rely on third parties to complement our coverage for chauffeured car services in certain cities, implement and maintain certain aspects of our technology system, and supplement our vehicle repair and maintenance capabilities. Although we actively monitor the operations of these third- party service providers, and under certain circumstances have the ability to terminate their services for failure to adhere to contracted operational standards, we are unlikely to detect all the problems. If these third-party service providers do not provide adequate services to our customers or us, we have to seek to replace such service providers or remedy the inadequate services, and our reputation, brand image and our business could be materially adversely affected. We may also be held responsible for actions or non- actions of such third parties, which may expose us to possible liabilities.

Restrictive covenants contained in the agreements governing our indebtedness may impose restrictions on our business, and failure to comply with these restrictions may adversely affect our liquidity, financial condition and result of operations.

We are subject to financial and other restrictive covenants in our various debt related documents, including agreements governing our arrangements with various financing companies and entered into connection with our US$200 million senior unsecured notes due 2018 and our US$400 million senior unsecured notes due 2022. Financial covenants, include limitations on our ability to incur additional indebtedness with the other restrictive covenant including limitation on our ability to grant additional security interests, sell or dispose of certain assets, pay or distribute dividend, redeem or repurchase share capital, make certain capital contributions or investments, merger or consolidate with or acquire other companies, change the nature of our business, enter into derivative transactions, amend our charter documents and make loans.

Failure to meet any financial covenants or to comply with any other restrictive covenants in our current or future debt agreements may lead to a default by us under the terms of these agreements and entitle lenders to terminate their commitments to lend to us, where applicable, declare all outstanding indebtedness thereunder to be immediately due and payable and requires us to pay accrued and unpaid interest at higher interest rates, as the case may be. Furthermore, any event or default or acceleration of payment under any of such debt agreements may trigger cross-default or cross acceleration provisions in other agreements governing our indebtedness. If lenders accelerate the repayment of our borrowings, we may not have sufficient cash to timely repay the borrowings we may not be able to find alternative financing, and any repayment may disrupt our cash flow and liquidity plans. Even if we could obtain alternative financing, we cannot assure you that it would be on terms that are favorable or acceptable to us. Additionally, we have provided collateral under certain credit facilities. If we cannot repay these borrowings, lenders may take ownership of such collateral granted to them or choose to enforce their security rights thereunder. As a result, we may lose access to our assets pledged as collateral and be unable to engage in certain business activities or finance future operations or capital needs, and our business, financial condition and results of operations would be materially and adversely affected.

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Shortage in vehicle supply or failure to pass on increased vehicle acquisition costs to customers may adversely affect our business and results of operations.

As of December 31, 2017, approximately 78% of our period-end fleet size were purchased through dealers of Volkswagen, SAIC Motor, Peugeot, Hyundai and General Motors vehicles located in China. We may experience a shortage in the supply of certain vehicle models in the future. For example, if any supplier is unwilling or unable to provide us with vehicles in required quantities or to deliver vehicles on time, we may not be able to find alternative sources on satisfactory terms in a timely manner, or at all. If any shortage in vehicle supply occurs, our business and results of operations may be materially adversely affected.

In addition, we may face risks of increased vehicle acquisition costs, which may correlate with rising commodity and structural costs. Our average vehicle acquisition cost is also affected by other factors such as vehicle purchase tax and the mix of economy and premium vehicle models that we purchase. We generally do not enter into long-term contracts with our vehicle suppliers. If our suppliers do not offer us competitive prices and we are not able to purchase sufficient quantities of vehicles from alternative sources at commercially reasonable prices, or at all, we may be forced to purchase vehicles at higher prices and our vehicle acquisition costs may increase significantly. We cannot assure you that we will be able to pass on increased vehicle acquisition costs to our customers. Failure to pass on significant cost increases to our customers may have a material adverse effect on our business, results of operations and financial condition.

If any of our major vehicle suppliers encounter serious vehicle recall problems, our fleet size may be reduced for a certain period and our clients’ trust in the quality and safety of our fleet may be adversely affected.

Our vehicles may be subject to safety recalls by their manufacturers. Under certain circumstances, the recalls may cause retrieval of rented vehicles or temporary decline of reservations. If a large number of vehicles are the subject of simultaneous recalls, or if replacement parts needed are not in adequate supply, we may not be able to use the recalled vehicles for an extended period of time. Those types of disruptions could jeopardize our ability to fulfill existing contractual commitments and/or satisfy demand for our cars and car services, and result in the loss of business to our competitors. We could also face liability claims from our customers related to our vehicles subject to a safety recall. Depending on the severity of the recall, it could materially adversely affect our results of operations and adversely impair our customers’ trust in the quality and safety of our fleet.

If property rental costs, including rentals for parking spaces, increase significantly in the cities we currently have operations or we are unable to find suitable locations to expand our service network at a reasonable cost, our results of operations will be materially adversely impacted.

We plan to open more service locations in markets where we have a presence and to expand into additional cities in China to further grow our business. To operate our business, we need to rent offices, service locations and parking spaces for our staff and vehicles at convenient locations. We may not be successful in identifying and leasing additional properties and parking spaces at desirable locations and on commercially reasonable terms, or at all. In addition, we may not be able to renew our current lease agreements after expiration or secure replacement properties or parking spaces with reasonably commercial terms, or at all. In such cases, our ability to execute our growth strategy could be impaired and our business, results of operations and prospects may be materially adversely affected. Furthermore, if property rental costs increase significantly, in particular for parking spaces, our results of operations may be materially adversely affected.

We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel or hire additional personnel compatible to our expansion size, our ability to successfully develop and market our business could be harmed.

Our managerial and other employees operate our service locations and interact with our customers on a daily basis and are critical to maintaining our consistent and high-quality services, as well as our established brand and reputation. We aim to recruit, train and retain skilled and motivated customer oriented managerial and other employees. We need to recruit and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth. There may be a limited supply of such qualified individuals in some markets in China where we have operations and cities into which we intend to expand. We also need to provide continuous training to our managerial and other employees so that they can stay abreast of changes in our operations and consumer preferences and demands, and meet and implement our quality standards. If we fail to recruit, train and retain qualified managerial and other employees, our service quality may decrease, which in turn may have a material and adverse effect on our brand, our business, and our financial condition and results of operations.

Our success significantly depends upon the continuing service of our senior management team, including Mr. Ray Ruiping Zhang, our founder, chairman and chief executive officer, Mr. Leo Lihong Cai, our executive vice president of sales and marketing, Mr. Colin Chitnim Sung, our chief financial officer and Mr. Chun Xie, our chief information officer. We rely on our management team’s experience in business operations, their business vision, management skills and working relationships with our employees, customers, suppliers, third-party service providers and other business partners to execute our business strategies and to achieve our business objectives. In addition, our ability to attract and retain key personnel is a critical aspect of our competitiveness. If one or more members of our senior management team or other key employees are unable or unwilling to continue in their present position, we may not be able to replace them easily, or at all. As a result, our business could be severely disrupted and our financial condition and results of operations could be materially adversely affected.

14

If the average salary or statutory welfare expenses of our employees increase significantly, our profitability may be materially adversely impacted.

As of December 31, 2017, we had 7,195 full-time and 585 part-time employees. We believe we will continue to hire additional employees to keep in line with our expansion.

China has recently experienced a significant increase in employment compensation levels. If the average salary of our employees increases significantly, our profitability may be materially adversely impacted. In addition, under various PRC labor-related laws, rules and regulations, employers are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, work-related injury insurance, maternity leave insurance, and housing accumulation funds. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. If the relevant PRC authorities determine that we must make supplemental social insurance and housing fund contributions and/or that we are subject to fines and legal sanctions, our business, financial condition and results of operations may be adversely affected.

Significant increases in fuel costs or limitations in fuel supplies could seriously harm our business.

We are generally responsible for fuel costs and supplies when providing chauffeured car services. While customers using our car rental services are typically responsible for the costs of fuel during the rental term, any increase in fuel costs or limitation in fuel supplies may discourage them from renting vehicles from us. Fuel prices in China increased significantly in 2012 and 2013, which has increased our cost of revenues. Future significant increases in fuel prices or a severe or protracted disruption of fuel supplies could have a material adverse effect on our financial condition and results of operations.

We face risks related to liabilities resulting from the use of our vehicles by our customers.

We are exposed to claims for personal injury or death and property damage as a result of automobile accidents involving vehicles driven by our customers or chauffeured car services provided by our drivers or third party service providers outsourced by us. We depend on our staff, customers and, in some cases, third party operators, for pre-rental inspections in order to identify any apparent or potential damage or safety concerns with the vehicles. However, if a customer uses a car that has worn tires or some mechanical or other problem, including a manufacturing defect, which contributed to a motor vehicle accident that results in a death or property damage, we may still be a defendant of the claims for the alleged liabilities of the accident and the damage resulting from it. Furthermore, according to the PRC Torts Law, when the driver of a rental car who is not the owner of the vehicle is held liable for a traffic accident, liability will first be covered by the insurance company providing the compulsory traffic accident insurance of the vehicle, and the driver shall be responsible for the portion not covered by the compulsory traffic accident insurance. However, since judicial proceedings determining the cause of a motor vehicle accident can be lengthy and costly, and the results of such proceedings may be uncertain, we may not be successful in defending ourselves each time such an incident occurs. If a significant number of such claims cannot be resolved, our reputation could suffer.

We could be negatively affected if our insurance coverage proves to be limited or inadequate.

We may suffer from insufficient insurance coverage for our vehicles or liabilities resulting from our operations. We bear the risk of damage to or losses of our vehicles, including those caused by accident, theft or natural disaster. We are also exposed to claims for personal injury or death and property damage as a result of automobile accidents involving vehicles driven by our customers or chauffeured car services provided by our drivers or third party service providers outsourced by us. We maintain motor vehicle damage insurance, third-party liability insurance, compulsory traffic accident insurance and other insurance coverage, although there can be no assurance that such coverage will be sufficient or adequate. Furthermore, due to the large volume and broad geographic coverage and rapid growth of our fleet, we may fail to renew our insurance policies on a timely basis. A successful claim against us beyond the scope or limit of our or our third party service providers’ insurance coverage may have a material adverse effect on our business, financial condition and results of operations. In addition, uninsured claims filed against us or the inability of our insurers to pay otherwise-insured claims would have an adverse effect on our financial condition. Moreover, if the insurance premiums we pay to the insurance companies increases significantly, our results of operations would be materially adversely affected.

In addition, we face risks and contingent losses resulting from car theft. We equip all of our vehicles with GPS-based tracking devices that monitor the precise location of the vehicles at all times, and a significant majority of such devices are covered by GPS product liability insurance. However, sophisticated thieves could locate and disable such devices, which may lead to an increase in our lost vehicles from car theft. Since our inception in 2006, we had written off a total of 183 vehicles as of December 31, 2017 as a result of car theft and other reasons. As we have not maintained any robbery or theft insurance for our vehicles, such losses may not be sufficiently covered by the GPS product liability insurance, which may adversely affect our results of operations.

15

Future investments and acquisitions could prove difficult to integrate or disrupt our business and lower our operating results.

Our growth strategy may involve the investment in or acquisition of businesses and/or entities, or entering into strategic partnerships or alliances in areas in which we do not currently operate or have sufficient capacity to operate. For example, we previously invested in Travice Inc., the company operating the Kuaidi mobile taxi and car hailing app (which investment was profitably sold in 2015). In January 2016, through entrusted bank loan arrangements we facilitated RMB50 million in credit to a local car rentals and car services provider with an initial one-year term, which was extended to a two-year term. As of the date of this annual report, the entire principal amount of the loan has been repaid by the borrower in full. Our future strategic investments and acquisitions may expose us to potential risks, including risks associated with:

· potential loss of all or a portion of our investment;

· fluctuations in our future financial results, such as potential decrease in our margins and profitability;

· integration of new operations, services and personnel;

· exposure to unforeseen or hidden liabilities;

· diversion of resources from our existing businesses and technologies;

· our failure to generate sufficient revenues to offset the costs of acquisitions; and

· potential loss of, or harm to, relationships with suppliers, clients or employees.

If any of these happens, it may have a material adverse effect on our ability to manage our business or otherwise have a material adverse effect on our business, financial condition or results of operations.

We may be exposed to intellectual property infringement and other claims, which could be time-consuming or costly to defend and may result in substantial damages.

Our success depends on our ability to use and develop our proprietary, comprehensive suite of technology systems, and our other intellectual property rights. We may face challenges to our intellectual property rights and be subject to claims that we have infringed on third parties’ intellectual property rights. The validity and scope of claims relating to our proprietary technologies or other intellectual property rights may involve complex scientific, legal and factual questions and analysis, and therefore the outcomes may be highly uncertain. The defense and prosecution of intellectual property suits and related legal and administrative proceedings may be costly and may significantly divert the attention and resources of our personnel. An adverse determination in any such litigation or proceedings to which we may become a party may subject us to significant liability, require us to seek licenses from third parties, pay royalties or subject us to injunctions prohibiting the use of the relevant intellectual property rights.

We have entered into a global affiliation agreement with Enterprise China in connection with our Series D private placement with The Crawford Group, Inc., or Crawford, the parent company of Enterprise Holdings. Under this agreement which Enterprise China, its affiliate, Enterprise Holdings and their affiliates, or collectively Enterprise, have granted us, in certain designated region, a royalty free license with the right to sublicense certain of their trademarks, service marks, trade names, signage and logos, symbols and designs associated with the names “Enterprise,” “Enterprise Rent-A-Car,” “Alamo,” “Alamo Rent A Car,” “National” and “National Rent A Car” for the purpose of pursuing business referrals between Enterprise and us, processing such referrals and servicing business referred to us by Enterprise. If we or any of our sublicensees use these licensed intellectual properties improperly or outside the scope of the license granted to us, we may be subject to claims of trademark or other intellectual property infringement by Enterprise. In the case that Enterprise does not have all the requisite rights to grant us an exclusive license to use such marks, we may be subject to claims of trademark or other intellectual property infringement by the rightful owners of these marks for using these intellectual property rights for unauthorized using these intellectual property rights. Any resulting litigation may be time-consuming and costly, with inherent uncertainty as to the outcome. If these owners successfully assert a claim for intellectual property infringement against us, the liability may adversely impact our business, financial condition and results of operations.

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Failure to adequately protect our intellectual property rights could substantially harm our brand, our business and results of operations.

We believe our brand, trademarks, software copyrights, trade secrets and other intellectual property rights are critical to our success. Any unauthorized use of our intellectual property rights could harm our competitive advantage and business. We have granted Enterprise, in certain designated region, a royalty free license with the right to sublicense certain of our trademarks, service marks, trade names, signage and logos, symbols and designs associated with the name “eHi” for the purpose of pursuing business referrals between Enterprise and us, processing such referrals and servicing business referred to Enterprise by us. If Enterprise or any of its sublicensees uses these licensed intellectual properties improperly or outside the scope of our license, our brand and intellectual property rights may be harmed. Our efforts in protecting our brand and intellectual property rights may not always be effective. We regularly file applications to register our trademarks in China, but may not be able to register such trademarks, or register them within the categories we seek. Similar trademarks registered under other different categories may dilute our brand and image. Historically, China has not protected intellectual property rights to the same extent as the United States, and infringement of intellectual property rights continues to pose a serious risk in doing business in China. Monitoring and preventing unauthorized use is difficult. The measures we take to protect our intellectual property rights may not be adequate or sufficient. As the right to use Internet domain names is not rigorously regulated in China, other companies may have incorporated in their domain names elements similar in writing or pronunciation to our trademarks and domain names. We have also entered into confidentiality and non-compete agreements with our key employees that prohibit them from disclosing confidential information. However, these agreements may not effectively prevent unauthorized disclosure of confidential information and it may be difficult or expensive for us to enforce these agreements. Our business may be materially adversely affected if we fail to adequately or sufficiently protect our brand, trademarks, copyrights, trade secrets and our other intellectual property rights.

We may be subject to litigation and regulatory proceedings.

We may be involved in litigation in China and litigation outside China to matters in the ordinary course of our business. We are subject to laws and regulations in China and the other jurisdictions. These laws, rules and regulations may vary in their scope and impose requirements which are more stringent than, or which conflict with, those in China. As publicly-listed companies, we and certain of our subsidiaries may face additional exposure to claims and lawsuits inside and outside China.

On May 8, 2017, a company named Shanghai Zhongqi Anhua Car Services Co., Ltd., (“Zhongqi Anhua”), filed a tort liability suit in People’s Court of Jingan District, Shanghai (the “District Court”), against eHi Rental, and involved Shanghai Municipal Transportation Commission (“SMTC), as a third party to the suit. Zhongqi Anhua claimed in their complaint that eHi Rental shall (i) admit the tort (ii) stop using the car rental operation certificate No.3516 issued by SMTC (the “Car Rental Certificate”), alleging the Car Rental Certificate and relevant vehicle operation certificates are possessed by Zhongqi Anhua, (iii) compensate the damages suffered by Zhongqi Anhua in connection with the alleged infringement totaling RMB30 million, and (iv) apologize to Zhongqi Anhua. On July 3, 2017, the District Court rendered a judgment rejecting all the claims raised by Zhongqi Anhua for absence of proof of the claims. On July 19, 2017, Zhongqi Anhua submitted a petition for appeal to Shanghai No.2 Intermediate People’s Court (the “Appellate Court”), and the Appellate Court ruled on September 1, 2017 that the judgment rendered by the District Court be remanded for re-trial as certain facts should be further clarified by the District Court.

As of the date of this annual report, the above lawsuit is still pending for judgement, and the Company is actively defending the case. Considering the facts that eHi Rental obtained the Car Rental Certificate through regulated procedures set forth by SMTC, which consists of no infringement behavior by eHi Rental, and that eHi Rental has been compliant with all relevant SMTC annual inspection/certificate renewal requirement, the Company believes such claims are without merit.

On April 13, 2018, Ctrip Investment Holding Ltd. (“Ctrip”), one of our registered shareholders, filed a petition in the Grand Court of The Cayman Islands (the “Court”) seeking alternative relief, including, among other things, requesting that the Court to enjoin the Company from relying upon the board resolutions adopted on April 6, 2018 and April 10, 2018, respectively, in connection with the Merger and requesting that the board and the special committee of the Company review the preliminary non-binding offer from Ocean Link Partners Limited for the purchase of all of the outstanding Shares (including Shares represented by ADSs) for US$14.50 in cash per ADS, or US$7.25 in cash per Share, subject to due diligence and negotiation of the definitive agreement. The Company believes Ctrip’s allegations and the basis for which it is seeking relief in its petition are without merit and intends to vigorously refute the petition.

The existence of litigation, claims, investigations and proceedings may harm our reputation and adversely affect the trading price of our ADSs. The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any litigation, investigation or proceeding could cause us to pay damages as well as legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate.

We have granted, and may continue to grant, employee share options, restricted shares, restricted share units or other equity incentives in the future, which may result in increased share-based compensation expenses and adversely affect our results of operations.

We adopted the 2010 Performance Incentive Plan, or the 2010 Plan, in April 2010, which was amended and restated in December 2010 and August 2014. In October 2014, we adopted the 2014 Performance Incentive Plan, or the 2014 Plan, which became effective immediately after the completion of our initial public offering in November 2014. We are required to account for share-based compensation as an expense based on the grant date fair value of share options, restricted shares, restricted share units or other equity incentives to employees with the compensation expense recognized over the period in which the recipient is required to provide service in exchange for the equity award. As of the date of this annual report, a total of 3,192,000 options and 1,500 unvested restricted share units granted under the 2010 Plan and the 2014 Plan were outstanding. If we grant more options, restricted shares, restricted share units or other equity incentives, we could incur significant compensation charges and our results of operations could be adversely affected.

An economic downturn could result in a decline in business and leisure travel activities, which could materially adversely affect our business.

Our results of operations are affected by many economic factors, including the level of economic activity in the car rental and car service industry in China. Any actual or perceived threat of a financial crisis in China could have an adverse impact on the car rental and car service industry, including a tightening of the credit markets, reduced business and leisure travels, reduced customer spending and volatile fuel prices. Any slowdown in China’s economy might lead to tightened credit market, increased market volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors. In response to their perceived uncertainty in economic conditions, our customers may also delay, reduce or cancel their travel activities. To the extent any fluctuations in the Chinese economy significantly affect our customers’ demand for our services or change their spending habits, our results of operations may be materially adversely affected.

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Disputes with our strategic partners may arise during our cooperation with such partners, which may result in indemnification or other claims against us and/or termination of the cooperation and have an adverse impact on our business, results of operations and prospects.

We have established strategic partnerships with two leading travel service providers, Enterprise and Ctrip. We are the designated and preferred business partner of Ctrip in providing car rental services and Ctrip integrated access to our online reservation system in its Ctrip Travel mobile application in June 2014 as part of our cooperation. In December 2014, we started to expand our chauffeured car services to a business-to-consumer model through Ctrip’s website, mobile applications and offline channels. In addition, our global affiliation agreement with Enterprise China, entered into in March 2012, provides a wide range of arrangements, including rental referrals and trademark licensing. In performing the obligations under these cooperation, disputes may arise with respect to matters such as the improper use of the relevant licensed intellectual property rights, non-compliance of performance standards, non-competition, resolutions of customer complaints, and reimbursement of expenses relating to rental referrals. We and our strategic partners may have different interpretations of certain contractual provisions in relevant agreement, in particular, the various provisions in these agreements that require, for instance, “reasonable efforts” in rental referrals and “commercially reasonable efforts” to facilitate and support the other party’s marketing activities. Our failure to resolve these disputes may subject us to indemnification or other claims from our strategic partners. In addition, our strategic partners may terminate these cooperation if we commit a material breach of relevant agreements. Such claims and/or termination of these agreements may adversely affect our business, results of operations and prospects.

We face risks related to natural disasters and health epidemics in China, which may materially adversely affect our business and results of operations.

Our business may be materially adversely affected by natural disasters or the outbreak of health epidemics in China. For example, in May 2008, Sichuan Province suffered a strong earthquake measuring approximately 8.0 on the Richter scale, and in April 14, 2010, another severe earthquake measuring approximately 7.1 hit part of Qinghai province in western China, each of which caused widespread damage and casualties. In addition, in the last decade, China has suffered health epidemics related to the outbreak of avian influenza (including H1N1 and H7N9 subtypes) and severe acute respiratory syndrome. If such health epidemics become widespread in China or increase in severity, it may have an adverse effect on economic activities in China, with the potential to severely disrupt our business operations and harm our results of operations. Any future natural disasters or health epidemics in the PRC may also materially adversely affect our business and results of operations. In addition, unfavorable developments in domestic and international politics, including military conflicts, political turmoil and social instability, may also adversely affect consumer confidence and reduce customer spending, which could in turn materially and adversely affect our growth and profitability.

If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses over financial reporting, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.

We are subject to reporting obligations under the U.S. securities laws. Among other things, the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring every public company, including us, to include a report from management on the effectiveness of its internal control over financial reporting in its second annual report on Form 20-F. We began to be subject to these requirements since the annual report for the year ended December 31, 2015.

In connection with management’s assessment of the effectiveness of our internal control over financial reporting for the year ended December 31, 2017, our management identified three material weaknesses and other control deficiencies in our internal control over financial reporting, and determined that as of December 31, 2017, our disclosure controls and procedures and our internal control over financial reporting were ineffective. See “Item 15 — Controls and Procedures.” Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting, as we are not required to comply with the auditor attestation requirements of Section 404 for as long as we are an emerging growth company, a status which prevails until the earlier of the fifth anniversary from the date of our initial public offering or until certain other specific criteria are met, pursuant to the JOBS Act. However, in connection with the audits of our consolidated financial statements as of and for the three years ended December 31, 2017, our independent registered public accounting firm identified the same material weaknesses and control deficiencies in our internal control over financial reporting as of December 31, 2017. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, or the PCAOB, a “material weakness” is a significant deficiency, or combination of significant deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with U.S. GAAP such that there is more than a remote likelihood that a misstatement of our financial statements that is more than inconsequential will not be prevented or detected by our employees.

18

The material weaknesses identified related to (i) insufficient accounting resources and expertise necessary to comply with U.S. GAAP, (ii) lack of sufficient and documented financial closing policies and procedures, specifically those related to period end cut-off, accounts classification and presentation, and (iii) lack of effective risk assessment on acceptance of new type of corporate customers, and lack of effective control over approval and monitoring of credit limit and credit term granted to these corporate customers and collectability assessment on their receivable balances. Although we have taken measures and plan to continue to take measures to remedy these deficiencies, the implementation of these measures may not fully address the deficiencies in our internal control over financial reporting, and we may not conclude that they have been fully remedied. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that satisfies our reporting obligations. In addition, during the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other material weaknesses and deficiencies in our internal control over financial reporting. In addition, our independent registered public accounting firm has not undertaken a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting. In light of the material weaknesses and control deficiencies that were identified as a result of the limited procedures performed, we believe it is possible that, had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional material weaknesses and control deficiencies may have been identified.

Our failure to correct these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud. We may also incur additional costs and use management and other resources in order to comply with Section 404 and remediate the material weaknesses and control deficiencies.

Registered public accounting firms in China, including our independent registered public accounting firm, are not inspected by the U.S. Public Company Accounting Oversight Board, which deprives us and our investors of the benefits of such inspection.

Auditors of companies whose shares are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards applicable to auditors. Our independent registered public accounting firm is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB, notwithstanding the requirements of U.S. law, is currently unable to conduct inspections without the approval of the Chinese authorities. In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the MOF, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB, the CSRC or the MOF in the United States and the PRC, respectively. The PCAOB continues to be in discussions with the CSRC and the MOF to permit joint inspections in the PRC of audit firms that are registered with the PCAOB and audit Chinese companies that trade on U.S. exchanges.

This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, which could cause investors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

In December 2012, the SEC instituted administrative proceedings against the Big Four PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ audit work papers with respect to certain PRC-based companies that are publicly traded in the United States. On January 22, 2014, the Administrative Law Judge, or ALJ, presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of practice by failing to produce audit work papers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. The Big Four PRC-based accounting firms appealed the ALJ’s initial decision to the SEC. The ALJ’s decision does not take effect unless and until it is endorsed by the SEC. In February 2015, each of the Big Four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If future document productions fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. While we cannot predict if the SEC will further review the Big Four PRC-based accounting firms’ compliance with specified criteria or if the results of such a review would result in the SEC imposing penalties such as suspensions or restarting the administrative proceedings, if the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or the termination of the registration of our ADSs under the Exchange Act, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

19

We are an “emerging growth company” within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, and are not required to comply with certain periodic disclosure and current reporting requirements of the Exchange Act. In addition, we are an “emerging growth company,” pursuant to the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company until the earlier of the fifth anniversary from the date of our initial public offering or until certain other specific criteria are met. We intend to rely on the exemption from the auditor attestation requirement under Section 404.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We incur increased costs as a result of being a public company, and may incur additional costs after we cease to qualify as an “emerging growth company.”

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the NYSE, impose various requirements on the corporate governance practices of public companies.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. In particular, as an emerging growth company, we intend to rely on certain exemptions from various reporting requirements that are applicable generally to public companies. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. In addition, we have incurred, and will continue to incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

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 materially and adversely affect our business.

Substantially all of our business operations are conducted in China. As the car rental and car service industry is highly sensitive to business and personal discretionary spending levels, it tends to decline during periods of general economic downturn. If China’s car rental and car service industry fails to grow as fast as it is forecasted, our focused car rentals and car services business will also be adversely affected. Accordingly, our business, results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. Although the Chinese economy is no longer a planned economy, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between Renminbi and foreign currencies, and regulate the growth of the general or a specific market. This government involvement has been instrumental in China’s significant growth in the past 30 years. The PRC government has adopted policies aimed at stimulating the economic growth in China. If the PRC government’s current or future policies fail to help the Chinese economy achieve further growth or if any aspect of the PRC government’s policies, such as measures related to the car rental and car service industry or on interest rate and tax regulations, limits the growth of the car rental and car service industry in China, our business, growth rate, strategies or results of operations could be materially and adversely affected.

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

We conduct our business primarily through our subsidiaries in China. Our operations in China are governed by the PRC laws and regulations. The PRC legal system is based on 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 decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. Furthermore, intellectual property rights, trade mark and confidentiality protections in China may not be as effective as in the United States or other countries. We cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

Failure in obtaining all of the requisite permits, licenses or making all of the requisite filings or registrations or meeting other regulatory requirements for operating car rentals and car services business in China by us or any third-party service provider who cooperates with us may subject us to fines or other administrative actions.

As a car rentals and car services provider in China, we are subject to a number of permit, license, filing and other regulatory requirements for the car rentals and car services business. As the car rental and car service industry is at an early stage of development in China, the legislations continue to evolve and there are currently no national laws or regulations specifically regulating the car rental and car service industry except for the Notice on Promoting the Healthy Development of Car Rental Industry, or the 2011 MOT Notice, promulgated in April 2011 by the Ministry of Transport, or the MOT, which only sets forth certain general guidelines for the emerging car rental industry in China. The car rental and car service industry is mainly regulated by government authorities at local levels, which impose various regulatory requirements on the operating entities, vehicles or drivers, and such regulatory requirements vary from one place to another. The practice of local authorities may also deviate from the existing local rules. Some local authorities do not accept or process applications for certain permits, licenses or filings as required under the local rules. Furthermore, due to the unclear regulatory boundaries between car rentals or car services business and road transportation businesses or taxi businesses, although we do not believe any of our operating subsidiaries is a road passenger transportation service provider or a taxi service provider as our services are characterized by distinctive features, we cannot assure you that the government authorities take the same view as ours or will not change their views in the future.

According to the 2011 MOT Notice, a car rental company must obtain appropriate approval before it may conduct road passenger transportation business. However, the 2011 MOT Notice does not define the term “road passenger transportation business.” Furthermore, some local rules explicitly restrict a car rental company from concurrently providing chauffeur services and car rental services through the same entity. In August 2011, Shanghai Municipal Transport and Port Authority issued Certain Opinions on Standardizing the Regulation of Car Rental Industry, which provides that car rental companies shall not provide drivers for the vehicles they rent but may at the requests of their customers sign service agent contracts on behalf of their customers with third-party labor service companies, under which the labor service companies may provide drivers to car rental customers. We currently provide chauffeured car services primarily to our corporate and institutional clients and generally enter into long-term framework agreements with these clients, pursuant to which our vehicles and chauffeur services are provided by different subsidiaries. Our PRC counsel, Grandall Law Firm (Shanghai), has advised us that such business arrangements are not in violation of any existing applicable laws, regulations at national level or local rules of cities where we currently provide chauffeured car services in China. However, we cannot assure you that relevant local government authorities will not interpret the laws and regulations differently, find our activities in violation of relevant laws and regulations and impose penalties on us. If the relevant local government authorities is of the view that our business arrangements of chauffeured car services are not in compliance with applicable laws and regulations, we may be subject to fines and other administrative actions in some cities where we have provided such services. Furthermore, a company that sets up a branch to conduct business in a location outside its domicile must have such the branch registered with the local counterpart of the State Administration for Industry and Commerce, or the SAIC.

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As a result of the inconsistency in local rules and their interpretation and implementation, as well as fast expansion of our business, we have not obtained, made or timely renewed all of the requisite permits, licenses, filings or registrations for our business operations or fully complied with all other regulatory requirements applicable in the cities in which we currently operate our car rentals and car services business. We cannot assure you that we will obtain or successfully renew all of the requisite permits and/or licenses, make all of the requisite filings or registrations or set up all necessary branches in a timely manner, or comply with all other regulatory requirements in the future. Moreover, we cannot assure you that all the third-party service providers engaged by us have met all such regulatory requirements either, which may subject us to fines and other administrative actions. Government authorities at various levels may promulgate new regulations or rules, or change their interpretation or implementation of existing regulations and rules, which may subject us to new regulatory requirements that we may not be able to meet in a timely manner, or at all.

In July 2016, MOT, together with other six governmental authorities, issued the Interim Measures for the Administration of Online Car Hailing Business Operations and Services which came into effect on November 1, 2016, or the Car Hailing Measures. The Car Hailing Measures require online car-hailing platform operators to obtain licenses from governmental authorities, be capable of providing online and offline services and meet certain conditions. The vehicles and drivers shall also meet certain conditions and obtain the online car hailing vehicle licenses and driver licenses respectively issued by the relevant governmental authorities to engage in online car hailing business. Following the Car Hailing Measures, some local governmental authorities in cities of Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Qingdao, Chongqing and many other cities further adopted policies regarding the online car-hailing business operations and services in their administrative regions. In addition to the conditions set out in the Car Hailing Measures, almost all these local governments require that the vehicles engage in online car hailing business operations must be registered in the city administrative regions and meet certain vehicle conditions such as minimum wheel base, installment of GPS system and emergency alarm system. Beijing and Shanghai city governments specially require the drivers who engage in online car hailing business operations to have the city census register. We expect more cities may adopt similar local policies regarding the online car-hailing business operations and services. The Car Hailing Measures and those new local rules may materially increase our compliance costs.

As the car rental and car service industry is mainly regulated by government authorities at local levels, penalties arising from the failure to obtain or renew any required permits, licenses or filings in a timely manner or at all or to comply with any existing or future laws and regulations may be different in different locations, which generally include a fine up to RMB100,000 or up to ten times of the amount of illegal income per violation (depending on the amount of illegal income, if any), confiscation of illegal income, suspension of operations, detention of cars and revocation of the licenses or permits required for business operations. In addition, any business operation by a branch without a valid business license may subject to a fine of up to RMB100,000.

Government control over currency conversion may limit our ability to issue dividends to our shareholders in foreign currencies, and may therefore adversely affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Our PRC subsidiaries in China generally pay the dividends or other distributions to us through following methods: (i) repaying shareholder loans to offshore holding companies, (ii) paying dividends to offshore holding companies, (iii) extending foreign loans through offshore holding companies while providing security interests for such loans through PRC operating subsidiaries, and (iv) transferring cash through cross-border “cash pooling”, a permitted method for cross-border cash transfer upon certain conditions within our group companies. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, 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. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE by complying with certain procedural requirements. However, approval from or registration with the appropriate government authorities is required where Renminbi are to be converted into foreign currencies and remitted out of China to pay capital expenses such as the repayment of 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. In January 2017, the SAFE issued the Notice on Further Promoting the Reform of Foreign Exchange Administration and Improving the Examination of Authenticity and Compliance, which continues to implement and improve the policies for the administration of outward remittance of foreign exchange profits from direct investment. A bank that handles outward remittance of profits equivalent to more than US$50,000 for a domestic institution shall, under the principle of true transactions, review the resolution of the board of directors on distribution of profits (or resolution of partners on distribution of profits), original tax recordation form, and audited financial statements, relating to the outward remittance, and stamp and endorse the relevant original tax recordation form with the actual remittance amount and remittance date of the profits. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

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Fluctuations in exchange rate may have a material adverse effect on our results of operations and the value of your investment.

The value of Renminbi against U.S. dollars and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. In July 2005, the PRC government changed its decade-old policy of pegging the value of Renminbi to U.S. dollars, and Renminbi appreciated more than 20% against U.S. dollars over the following three years. However, the People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates to achieve policy goals. During the period between July 2008 and June 2010, the exchange rates between Renminbi and the U.S. dollars had been stable and traded within a narrow range. However, Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with U.S. dollars. On June 20, 2010, the People’s Bank of China announced that the PRC government would further reform the Renminbi exchange rate regime and increase the flexibility of the exchange rate. On March 15, 2014, the People’s Bank of China announced that it further expanded the daily RMB against U.S. dollar trading band of the inter-bank spot foreign exchange market from 1% to 2% as of March 17, 2014, to allow Renminbi to move more freely and better reflect market supply and demand. On August 11, 12 and 13, 2015, the People’s Bank of China significantly devalued the Renminbi by fixing its price against the U.S. dollar 1.9%, 1.6%, and 1.1% lower than the previous day’s value, respectively. The value of the Renminbi depreciated approximately 5.8% and 6.2% against the U.S. dollar in 2015 and 2016. Renminbi was added to its group of global reserve currencies by The International Monetary Fund on November 30, 2015, which makes Renminbi to some extent more susceptible to market forces. It is difficult to predict how long the current situation may last and when and how the relationship between Renminbi and U.S. dollars may change again.

There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. Substantially all of our revenues and costs are denominated in Renminbi, while a portion of our cash and cash equivalents from offshore financing activities are denominated in U.S. dollars. An appreciation of the Renminbi against the U.S. dollar would make any new RMB-denominated expenditures more costly to us, to the extent that we need to convert U.S. dollars into Renminbi for such purposes; and it would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar-denominated financial assets into Renminbi, our reporting currency. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ADSs or make repayments for our debt denominated in U.S. Dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currencies. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

PRC regulations regarding mergers and acquisitions may make it more difficult for us to make future acquisitions or dispositions of our business operations or assets in China.

In 2006, six PRC regulatory agencies, including the CSRC, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009. The M&A Rules established additional procedures and requirements that could make merger and acquisition activities by foreign investors more complex and time-consuming. For example, the Ministry of Commerce, or MOFCOM, shall be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or a foreign company with substantial PRC operations if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council on August 3, 2008 are triggered. Furthermore, MOFCOM promulgated the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors in August 2011, or the MOFCOM Security Review Rules, which came into effect on September 1, 2011, to implement the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated on February 3, 2011, or Circular No. 6. According to Circular No. 6, a security review is required for mergers and acquisitions of PRC domestic enterprises by foreign investors (i) having “national defense and security” concerns, and (ii) where the foreign investors may acquire the “de facto control” of the PRC domestic enterprises having national security concerns such as key farm products, key energy and resources, and key infrastructure, transportation, technology and major equipment manufacturing industries. Circular No. 6, however, does not define the term of “key” or “major,” nor has it exhausted all the industries that may be deemed as sensitive industries subject to the security review. According to the MOFCOM Security Review Rules, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to the security review by MOFCOM, the principle of “substance over form” should be applied and foreign investors are prohibited from bypassing the security review requirement by structuring transactions through nominee holding structure, trusts, indirect investments, leases, loans, control through contractual arrangements, offshore transactions, or other means. On January 19, 2015, MOFCOM published the draft Foreign Investment Law which sets forth more specific rules regarding the procedures of national security review. The application and interpretation of the MOFCOM Security Review Rules remain unclear. PRC Anti-trust Law also requires certain merger and acquisition transactions be subject to merger control review by MOFCOM, and we may not be able to obtain the necessary approval in the case of our future mergers and acquisitions.

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If we do not seek the necessary approval, we could be subject to administrative fines or other penalties imposed by the relevant PRC authorities. However, because there are not always specific provisions of the fines or penalties for such violations under current PRC laws and regulations, it is uncertain what penalties we may face. In the future, we may grow our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rules, the MOFCOM Security Review Rules, PRC Anti- trust Law and other related regulations to complete such transactions could be time-consuming and any approval procedures, including obtaining approval from MOFCOM or its local counterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. In addition, such additional procedures and requirements could make it more difficult or time-consuming for us to dispose of any of our business operations or assets in China.

We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the PRC Enterprise Income Tax Law, or the EIT Law, and its Implementing Rules, an enterprise established outside of China whose “de facto management bodies” is located within the PRC is considered a PRC “resident enterprise” and will be subject to the uniform 25% PRC enterprise income tax rate on their global income. Under the Implementing Rules of the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and other assets of an enterprise. In addition, a tax circular issued by the State Administration of Taxation, or the SAT, on April 22, 2009, referred to as Circular 82, provides that certain Chinese-invested enterprises controlled by PRC enterprises or PRC enterprise groups and established outside of China will be classified as resident enterprises only if all the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors with voting rights. Circular 82 also clarified that dividends and other income paid by such resident enterprises will be considered to be PRC sourced income and subject to PRC enterprise income tax. The SAT issued an amendment to SAT Circular 82 delegating the authority to its provincial branches to determine whether a Chinese-invested entity which is established outside of China should be considered a PRC resident enterprise, in January 2014.

However, as Circular 82 and its amendment only applies to enterprises established outside of China that are controlled by PRC enterprises or PRC enterprise groups, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprises controlled by foreign individuals and entities like us or our offshore subsidiaries. We believe that neither our company nor any of offshore subsidiaries meets all the criteria set forth in Circular 82, because as holding companies, their key assets and records, including board and shareholders resolutions and minutes of board meetings and shareholders meetings, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding company with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax authorities. Therefore, we believe neither our company nor any of our offshore subsidiaries should be deemed as a “resident enterprise” for PRC tax purposes. However, the tax resident status of our offshore entities is subject to determination by relevant PRC tax authorities and uncertainties remain with respect to their interpretation of the term “de facto management body” as applicable to our offshore entities. We will continue to monitor our tax status.

If our company or any of our offshore subsidiaries is considered a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our company or any of our offshore subsidiaries will be subject to the uniform 25% enterprise income tax rate on our global income and will have PRC enterprise income tax reporting obligations. Second, although under the EIT Law and its Implementing Rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempted income”, we cannot assure you that such dividends paid to our company or our Hong Kong subsidiaries will not be subject to enterprise income tax because the relevant PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to overseas incorporated enterprises controlled by foreign individuals and entities like us that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, dividends payable by us to our non-PRC investors or gains from the transfer of our common shares or ADSs may become subject to PRC withholding tax. Failure or delay in fulfilling such tax obligations may cause penalties imposed by PRC tax authorities.

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The EIT Law will affect tax exemptions on the dividends we receive and we may not be able to obtain certain treaty benefits on such dividends.

We are a holding company incorporated under the laws of the Cayman Islands. We conduct substantially all of our business through our PRC subsidiaries and we derive all of our income from these subsidiaries. Prior to January 1, 2008, dividends received by foreign investors from foreign-invested enterprises in China were exempted from withholding tax. However, such tax exemption ceased after January 1, 2008 with the effectiveness of the EIT Law and its Implementing Rules, and a withholding tax rate of 10% applies to such dividends (subject to reductions by the relevant tax treaties or similar tax arrangements, if applicable) except for accumulated and undistributed profit generated by foreign-invested enterprises before January 1, 2008 and distributed to foreign investors after the year of 2008.

According to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, signed on August 21, 2006, or the Hong Kong Tax Treaty, a company incorporated in Hong Kong, such as eHi Auto Services (Hong Kong) Holding Limited, or eHi Hong Kong, and L&L Financial Leasing Holding Limited, or L&L, is subject to withholding income tax at a rate of 5% on dividends it receives from its PRC subsidiaries if it holds a 25% or more interest in such PRC subsidiaries, or at a rate of 10% if it holds less than a 25% interest in such subsidiaries. In addition, the State Administration of Taxation, or the SAT, promulgated a tax circular on October 27, 2009, or Circular 601, which provides that tax treaty benefits will be denied to “conduit” or shell companies without business substance, and a beneficial ownership analysis will be used based on a “substance over form” principle to determine whether or not to grant tax treaty benefits. On June 29, 2012, the SAT issued the Announcement of the SAT regarding Recognition of “Beneficial Owner” under Tax Treaties, or Announcement 30, which provides that a comprehensive analysis should be made when determining the beneficial owner status based on various factors that are supported by various types of documents, including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. On February 3, 2018, the SAT issued the Announcement of Relevant Issues on “Beneficial Owner” under Tax Treaties, or Announcement 9, which replaced Circular 601 and Announcement 30. Announcement 9 further clarified certain standards for the determination of “Beneficial Owner” mainly relating to the factors that whether an entity has business substance and meanwhile Announcement 9 continuously adopted part of rules under Circular 601 and Announcement 30, such as that a comprehensive analysis should still be made when determining the beneficial owner status based on various factors that are supported by various types of documents. As a result, although each of Hong Kong subsidiaries eHi Hong Kong and L&L holds an interest of more than 25% in the PRC subsidiaries, it is more likely than not that eHi Hong Kong and L&L, as holding companies without other business substance, would not be entitled to tax treaty benefits and enjoy the favorable 5% rate applicable under the Hong Kong Tax Treaty on dividends. If eHi Hong Kong and L&L cannot be recognized as the beneficial owners of any dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a withholding tax of 10% as provided by the EIT Law. As of the date of this annual report, our PRC subsidiaries have not paid any dividends, and do not currently plan to pay dividends in the foreseeable future, to our company and Hong Kong subsidiaries.

The PRC government’s replacement of the business tax with a VAT may require us to pay more taxes.

Prior to January 1, 2012, pursuant to the Provisional Regulation of China on Business Tax and its Implementing Rules, an entity or individual rendering services in China was generally subject to a business tax at the rate of 5% on revenues generated from the provision of such services. In November 2011, the Ministry of Finance and the SAT promulgated relevant rules for a VAT Pilot Program, which imposed value-added tax, or VAT, in lieu of business tax, for certain industries and certain regions at the initial stage. The VAT Pilot Program was implemented for certain industries in Shanghai in January 2012, and was expanded to Beijing, Tianjing, Jiangsu, Zhejiang, Guangdong and other regions in August 2012. Since August 2013, the VAT Pilot Program has been expanded nationwide. On March 23, 2016, the Ministry of Finance and the SAT jointly issued the Notice on Comprehensive Implementation of the Pilot Program for Imposition of Value-Added Tax to Replace Business Tax, or the Notice. Pursuant to the Notice, the VAT became effective on May 1, 2016 and was implemented comprehensively across the country and extended to all industries. According to the VAT, entities and individuals engaging in the sale of services, intangible assets or fixed assets within the territory of the PRC are required to pay VAT instead of business tax.

Most of our key operating subsidiaries are located in Shanghai, Beijing, Guangzhou and other major cities in China, and since the implementation of VAT Pilot Program, we have been in general subject to a 17% VAT for car rental services, a 11% VAT for designated driving services and a 6% VAT for qualified management services, respectively, which have the effect of reducing our net revenues. With the nationwide implementation of VAT in May 2016, we may be required to pay more taxes on our revenues. In addition, despite our decrease in net revenues resulted from the implementation of VAT, we were able to benefit from certain financial subsidies provided by local government authorities to offset the increased tax payments. However, such financial subsidies ceased to apply after the nationwide implementation of VAT. If we are unable to obtain sufficient qualified VAT invoices from our suppliers to offset the increased tax payments, the VAT will have a material adverse effect on our financial condition and results of operations.

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We and our investors might face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises where non-PRC resident holding companies are involved .

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the SAT on December 10, 2009 with retroactive effect from January 1, 2008 and Several Issues Related to Administration of Enterprise Income Tax for Non-Resident Enterprises, or Bulletin 24, issued by the SAT on March 28, 2011 and came into effect as of April 1, 2011, where a non-PRC resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposing of the equity interests of an overseas holding company, or an Indirect Transfer, under certain circumstances the PRC tax authority may disregard the existence of the overseas holding company if the Indirect Transfer lacks a reasonable commercial purpose and is arranged for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax at a rate of up to 10%.

On February 3, 2015, the SAT issued the Bulletin on Certain Issues Concerning the Enterprise Income Tax on the Indirect Transfer of Properties by Non-resident Enterprises, or Circular 7, which comes into effect upon issuance and abolishes certain provisions in Circular 698 and Bulletin 24 and also provides more guidance on a number of issues under Circular 698. Circular 7 stipulates that when a non-resident enterprise transfers the assets (including equity interests) in an overseas holding company, which directly or indirectly owns PRC taxable properties, including equity interests in a PRC company, or the PRC Taxable Assets, for the purposes of avoiding PRC enterprise income taxes through an arrangement without reasonable commercial purpose, such an indirect transfer should be re-characterized as a direct transfer of PRC Taxable Assets in accordance with the Enterprise Income Tax Law, unless the overall arrangements relating to an indirect transfer of PRC Taxable Assets satisfies either of the safe harbor rules: (i) where a non-resident enterprise derives income from the indirect transfer of PRC Taxable Assets by acquiring and selling equity interests of a same listed overseas company on a public market; or (ii) where the non-resident enterprise had directly held and transferred such PRC Taxable Assets, the income from the transfer of such PRC Taxable Assets would have been exempted from enterprise income tax in the PRC under an applicable tax treaty or arrangement. On October 17, 2017, the State Administration of Taxation, or the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Pursuant to Circular 7 and SAT Bulletin 37, both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

As Circular 7 and SAT Bulletin 37 were newly implemented, there might be limited precedents regarding the application and enforcement of Circular 7 and SAT Bulletin 37 and it remains uncertain whether such exemptions or relevant provisions of Circular 7 and SAT Bulletin 37 will be applicable to the transactions such as our future disposal of subsidiaries, acquisitions of complementary businesses, or restructuring of our organizational structure where non-PRC resident investors and PRC Taxable Assets are involved. In addition, our transfer of a 100% equity interest in Elite Plus in June 2015 was subject to relevant provisions under Circular 7. Elite Plus is a British Virgin Islands company and currently holds a stake in Xiaoju Kuaizhi Inc., a Cayman Islands company with PRC operations. We have completed the tax filing and payment with the relevant PRC tax authorities for this transaction.

In addition, our company and our non-PRC resident investors, other than those both acquiring and selling shares on a public exchange, may, as a result of the above-mentioned transactions, become at risk of being taxed under Circular 7 and may be required to undergo burdensome procedural formalities to comply with Circular 7 and SAT Bulletin 37 or to establish that we or our non-PRC resident shareholders should not be taxed under Circular 7 and SAT Bulletin 37, which may have a material adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investments in us.

Limitations on the ability of our operating subsidiaries to pay dividends or other distributions to us could have a material adverse effect on our ability to conduct our business.

As a holding company, we rely principally on dividends and other distributions on equity paid by our PRC subsidiaries for our cash requirements, including funds necessary to service any debt we may incur. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Furthermore, relevant PRC laws and regulations permit payments of dividends by our PRC subsidiaries only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, our PRC subsidiaries are required to set aside a portion of their net income each year to fund a statutory reserve or reserve fund. This reserve is not distributable as dividends. As a result, our PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends, loans or advances.

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Our PRC subsidiaries in China generally pay the dividends or other distributions to us through following methods: (i) repaying shareholder loans to offshore holding companies, (ii) paying dividends to offshore holding companies, (iii) extending foreign loans through offshore holding companies while providing security interests for such loans through PRC operating subsidiaries, and (iv) transferring cash through cross-border “cash pooling”, a permitted method for cross-border cash transfer upon certain conditions within our group companies. Under existing PRC foreign exchange regulation, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. In January 2017, the SAFE issued the Notice on Further Promoting the Reform of Foreign Exchange Administration and Improving the Examination of Authenticity and Compliance, which continues to implement and improve the policies for the administration of outward remittance of foreign exchange profits from direct investment and a bank that handles outward remittance of profits equivalent to more than US$50,000 for a domestic institution shall, under the principle of true transactions, review the resolution of the board of directors on distribution of profits (or resolution of partners on distribution of profits), original tax recordation form, and audited financial statements, relating to the outward remittance, and stamp and endorse the relevant original tax recordation form with the actual remittance amount and remittance date of the profits. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders. Further, there is no assurance that new regulations will not be promulgated in the future that would have the effect of further restricting the ability of our operating subsidiaries to pay dividends or other distributions out of PRC.

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

In 2015, 2016 and 2017, we raised gross proceeds of approximately US$134.0 million from a private placement of common shares, US$200 million in aggregate principal amount from issuing senior unsecured notes due 2018 and US$400 million in aggregate principal amount from issuing senior unsecured notes due 2022. As an offshore holding company, our ability to make loans or additional capital contributions to our PRC operating subsidiaries is subject to PRC regulations and approvals and there are restrictions for us to make loans to our affiliated Chinese entities. These regulations and approvals may delay or prevent us from using the proceeds we received in the past or will receive in the future from the offerings of securities to make loans or additional capital contributions to our PRC operating subsidiaries and our affiliated Chinese entities, and impair our ability to fund and expand our business which may adversely affect our business, financial condition and result of operations.

For example, SAFE promulgated the Circular on the Relevant Operating Issues concerning Administration Improvement of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or Circular 142, on August 29, 2008. Under Circular 142, registered capital of a foreign-invested company settled in RMB converted from foreign currencies may only be used within the business scope approved by the applicable governmental authority and may not be used for equity investments in the PRC. In addition, foreign-invested companies may not change how they use such capital without SAFE’s approval, and may not in any case use such capital to repay RMB loans if they have not used the proceeds of such loans. In addition, to strengthen Circular 142, on November 9, 2011 the SAFE promulgated the Circular on Further Clarifying and Regulating Relevant Issues Concerning the Administration of Foreign Exchange under Capital Account, or Circular 45, which prohibits a foreign invested company from converting its registered capital in foreign exchange currency into RMB for the purpose of making domestic equity investments, granting entrusted loans, repaying inter-company loans, and repaying bank loans that have been transferred to a third party. Circular 142 and Circular 45 may significantly limit our ability to transfer the net proceeds from offerings of our securities or any future offering to our PRC subsidiaries and convert the net proceeds into RMB, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC. On March 30, 2015, the SAFE promulgated a Circular on Reforming of Administrative Methods Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Companies, or Circular 19, which became effective on June 1, 2015, superseding Circular 142. According to Circular 19, although it restates certain restrictions on use of investment capital in foreign currency by foreign invested company, it specifies that the registered capital of a foreign-invested company in foreign currency can be converted into RMB voluntarily and be allowed to use for equity investment in the PRC subject to certain reinvestment registration with local SAFE made by the invested company. In June 2016, SAFE promulgated SAFE Circular 16, which removed certain restrictions previously provided under several SAFE circulars, including SAFE Circular 19, in respect of conversion by a foreign-invested enterprise of foreign currency registered capital into RMB and use of such RMB capital. However, SAFE Circular 16 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, and providing loans to non-affiliated enterprises except as permitted in the business scope.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including SAFE Circular 16 and Circular 19, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our offshore financing activities and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

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PRC regulations relating to the establishment of offshore special purpose vehicles by PRC residents may subject our PRC resident shareholders or us to penalties and limit our ability to acquire PRC companies or inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or otherwise adversely affect us.

On July 4, 2014, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange for Overseas Investment and Financing and Reverse Investment by Domestic Residents via Special Purpose Vehicles, or Circular 37, which replaced the Notice on Issues Relating to the Administration of Foreign Exchange for the Financing and Reverse Investment by Domestic Residents via Offshore Special Purpose Vehicles issued by SAFE in October 2005, or Circular 75. Pursuant to Circular 37, any PRC residents, including both PRC institutions and individual residents, are required to register with the local SAFE branch before making contribution to a company set up or controlled by the PRC residents outside of the PRC for the purpose of overseas investment or financing with their legally owned domestic or offshore assets or interests, referred to in this circular as a “special purpose vehicle.” Under Circular 37, the term “PRC institutions” refers to entities with legal person status or other economic organizations established within the territory of the PRC. The term “PRC individual residents” includes all PRC citizens (also including PRC citizens abroad) and foreigners who habitually reside in the PRC for economic benefits. A registered special purpose vehicle is required to amend its SAFE registration in the event of any change of basic information including PRC individual resident shareholder, name, term of operation, or PRC individual resident’s increase or decrease of capital, transfer or exchange of shares, merger, division or other material changes. In addition, if a non-listed special purpose vehicle grants any equity incentives to directors, supervisors or employees of domestic companies under its direct or indirect control, the relevant PRC individual residents could register with the local SAFE branch before exercising such options. The SAFE simultaneously issued a series of guidances to its local branches with respect to the implementation of Circular 37. Circular 37 modified certain defined terms under Circular 75 to clarify the SAFE registration scope. For example, Circular 37 broadened the definition of special purpose vehicle to offshore entities that were (i) established for the purpose of overseas investments by PRC residents (in addition to for the purpose of financing as defined under Circular 75) and (ii) established by PRC residents with their legally owned offshore assets or interests (in addition to domestic assets or interests as defined under Circular 75); and it also broadened the definition of reverse investment to include establishing new foreign invested entities or projects as a way of domestic direct investment by PRC residents, directly or indirectly, through special purpose vehicle, which was excluded by Circular 75. Furthermore, Circular 37 modified certain SAFE registration procedures and requirements for special purpose vehicles and clarified the SAFE registration procedures for equity incentive awards granted by non-listed special purpose vehicles to directors, supervisors or employees of their controlled domestic companies. We have requested our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of the SAFE notice and urge those who are PRC residents to register with the local SAFE branch as required under the SAFE notice. As Circular 37 was newly promulgated, there is uncertainty as to its application and interpretation. We cannot assure you that our shareholders and/or beneficial owners have fully complied with registration requirement under Circular 37. The failure of these shareholders and/or beneficial owners to timely register or amend their SAFE registrations pursuant to the SAFE notice or the failure of future shareholders and/or beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such shareholders, beneficial owners and/or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.

It is unclear how SAFE Circular 37 and any future regulation concerning offshore or cross-border transactions will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. We may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations.

If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could be subject to penalties or be forced to relinquish our interests in the variable interest entities.

Foreign ownership of certain types of Internet and mobile services is subject to restrictions under applicable PRC laws, rules and regulations. For example, a commercial operator of Internet content services must obtain a value-added telecommunication business operating license, an ICP license, issued by the appropriate telecommunications authorities. Our current major operations are not subject to ICP license requirements. To further expand our Internet and mobile services, in March 2014, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Information, and its shareholders. eHi Information obtained the ICP license from the relevant telecommunication authorities on September 24, 2014. In January 2015, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Car Sharing and its shareholders. eHi Car Sharing is currently not yet in operation.

These contractual arrangements provide us with effective control over the variable interest entities and provide us the right to obtain substantially all of the economic benefits from the variable interest entities. Although this structure is commonly adopted by many Internet companies in China, the relevant PRC regulatory authorities have broad discretion in determining whether a particular contractual structure is in violation of the law. For example, on July 13, 2006, the Ministry of Information Industry, the predecessor of the Ministry of Industry and Information Technology, or the MIIT publicly released the Notice on Strengthening the Administration of Foreign Investment in Operating Value-added Telecommunications Business, or the MIIT Notice, which reiterates certain provisions under the Administrative Rules for Foreign Investments in Telecommunications Enterprises promulgated by the State Council in 2001, amended in 2008 and 2016 prohibiting a domestic company that holds an ICP license, from renting, transferring or selling a telecommunications license to foreign investors in any form, or providing any resources, sites or facilities to foreign investors that intend to conduct value-added telecommunication business illegally in China. Trademarks and domain names that are used in the provision of Internet content services must be owned by the ICP license holder. There is currently no official interpretation or implementation practice under the MIIT Notice. Due to a lack of interpretative materials from the authorities, it is uncertain whether the MIIT would consider our corporate structure and the contractual arrangements as a kind of foreign investment in telecommunication services. Therefore, it is unclear what impact the MIIT Notice might have on us. The PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future.

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In the opinion of Grandall Law Firm (Shanghai), our PRC counsel, the ownership structures of our wholly foreign owned enterprise and our variable interest entity in China do not violate any applicable PRC law, regulation or rule currently in effect; and the contractual arrangements between our wholly foreign owned enterprise, our variable interest entity and its equity holders governed by PRC law are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect and do not violate any applicable PRC law, rule or regulation currently in effect. However, our PRC counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current PRC laws, rules and regulations. Accordingly, the PRC regulatory authorities and PRC courts may in the future take a view that is contrary to the opinion of our PRC legal counsel.

It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entities structures will be adopted or if adopted, what they would provide. If we, our PRC subsidiaries or our variable interest entities are found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including revoking the business and operating licenses of our PRC subsidiaries or the variable interest entities, requiring us to discontinue or restrict certain Internet operations, requiring us to restructure or taking other regulatory or enforcement actions against us. If we are not able to restructure our ownership structure and operations in a satisfactory manner, our ability to expand our Internet and mobile services may be limited.

Our contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership.

We entered into contractual arrangements with our variable interest entities. These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entities.

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If we had direct ownership of the variable interest entities, we would be able to exercise our rights as an equity holder directly to effect changes in the boards of directors of the entity, which could effect changes at the management and operational level. Under our contractual arrangements, we rely on the variable interest entities and the variable interest entities equity holders to perform their obligations in order to exercise our control over the variable interest entities. The variable interest entities equity holders may have conflicts of interest with us or our shareholders, and they may not act in the best interests of our company or may not perform their obligations under these contracts. We may replace the equity holders of the variable interest entities at any time pursuant to the contractual arrangements. However, if any dispute relating to these contracts remains unresolved, we will have to enforce our rights under the contractual arrangements through the operations of PRC law and courts, which will be subject to uncertainties in the PRC legal system. Consequently, the contractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership.

The draft PRC Foreign Investment Law, if enacted as proposed, may impact the viability of our current corporate structure, corporate governance and business operations.

MOFCOM published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. While MOFCOM solicited public comments on this draft in January and February 2015, substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the entire legal framework regulating the foreign investments in China and may impact viability of our current corporate structure, corporate governance and business operations.

Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or a FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by MOFCOM or its local branches, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “control” is broadly defined in the draft law to cover, among others, having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be a FIE and its investment amount exceeds certain thresholds or its business operation falls within a “negative list”, to be separately issued by the State Council in the future, market entry clearance by MOFCOM or its local braches would be required. Otherwise, all foreign investors may make investments on the same terms as Chinese investors without being subject to additional approval from the government authorities as mandated by the existing foreign investment legal regime.

The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. We set up the VIE structure to address the uncertainties for securing licenses and permits which may be required for our business operation if the local authorities deem our business operation as value-added telecommunication business. See “—If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could be subject to penalties or be forced to relinquish our interests in the variable interest entities.’’ Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately ‘‘controlled’’ by foreign investors.

Therefore, for any companies with a VIE structure in an industry category that is on the ‘‘negative list,’’ the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC individual, or PRC government and its branches or agencies). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the ‘‘negative list’’ without market entry clearance may be considered as illegal.

The draft Foreign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, although a few possible options were proffered in the draft. Under these options, a company with VIE structures and in the business on the ‘‘negative list’’ at the time of enactment of the new Foreign Investment Law has either the option or obligation to disclose its corporate structure to the authorities, while the authorities, after reviewing the ultimate control structure of the company, may either permit the company to continue its business by maintaining the VIE structure (when the company is deemed ultimately controlled by PRC citizens), or require the company to dispose of its businesses and/or VIE structure based on circumstantial considerations. Moreover, it is uncertain whether the business, which our eHi Information and eHi Car Sharing operate, will be subject to the foreign investment restrictions or prohibitions set forth in the ‘‘negative list’’ to be issued. If the enacted version of the Foreign Investment Law and the final ‘‘negative list’’ mandate further actions, such as MOFCOM market entry clearance, to be completed by companies with existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all. If it is likely that we would not be considered as ultimately controlled by PRC domestic investors, further actions required to be taken by us, if any, under the enacted Foreign Investment Law may adversely affect our business.

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

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It may be difficult to effect service of process upon, or to enforce judgments against us, our directors or our senior management members who reside in the PRC.

Because most of our officers and directors will reside outside of the United States, it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event a lawsuit is initiated by shareholders in the United States against us and/or our officers and directors. It is also unclear if the Treaty of People’s Republic of China and United States of America on Criminal Judicial Assistance currently in effect between the United States and the PRC would permit effective enforcement of criminal penalties under United States federal securities laws. Furthermore, because substantially all of our assets are located in the PRC, it would also be extremely difficult to access those assets to satisfy an award entered against us in a United States court. Moreover, we have been advised that the PRC does not have treaties with the United States providing for the reciprocal recognition and enforcement of judgments of courts. As a result, it may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under federal securities laws.

We may be subject to fines and legal sanctions imposed by the SAFE or other Chinese government authorities if we or our employees fail to comply with PRC regulations relating to employee share incentive plans adopted by overseas-listed companies for PRC domestic individuals.

On December 25, 2006, the PBOC issued the Administration Measures on Individual Foreign Exchange Control, or the PBOC Regulation. On January 5, 2007, the SAFE issued the Implementing Rules for the PBOC Regulation. Both of these regulations became effective on February 1, 2007. According to these regulations, all foreign exchange matters relating to employee stock holding plans, share option plans or similar plans of overseas-listed companies with domestic individuals’ participation require approval from the SAFE or its local branch. In February 2012, the SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plan of Overseas-Listed Company, or the Share Option Rule, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Share Holding Plan or Share Option Plan of Overseas-Listed Company issued by the SAFE on March 28, 2007. Under the Share Option Rule, PRC domestic individuals who participate in any share incentive plan including employee shareholding plan, share option plan or similar plan in an overseas-listed company are required to register with the relevant local SAFE branch and complete certain other procedures related to the share incentive plan through a PRC agent. Under the Share Option Rule, PRC domestic individuals include PRC citizens (including Hong Kong, Macau and Taiwan nationals) and foreign nationals who have continuously resided in China for at least a year, and a PRC agent may be a domestic company participating in the share incentive plan or a domestic institution that is qualified to engage in assets custodian business and has been duly designated by a domestic company.

We and our employees who are PRC domestic individuals and have participated in our 2010 Plan and 2014 Plan have been subject to the Share Option Rule since the listing of our ADSs on the NYSE. If we or our employees fail to comply with these regulations, we or our employees may be subject to fines or other legal sanctions imposed by the SAFE or other Chinese government authorities. See “Regulations—Regulations on employee share options.” In addition, the SAT has issued several circulars concerning employee share options. Under these circulars, our employees working in China who exercise our share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to make filings with relevant tax authorities related to employee share options and withhold individual income taxes resulting from the exercise of their share options. If our employees fail to pay and we fail to withhold their income taxes, we may face sanctions imposed by tax authorities or other PRC government authorities.

Our current employment practices may be restricted under the Labor Contract Law and other labor-related laws of the PRC and our labor costs may increase as a result.

On June 29, 2007, the PRC National People’s Congress enacted the Labor Contract Law, which became effective on January 1, 2008, as amended on December 28, 2012 and effective on July 1, 2013. On September 18, 2008, the PRC State Council issued the Implementing Rules for the PRC Labor Contract Law. The Labor Contract Law and its Implementing Rules impose requirements concerning, among other things, the types of contracts to be executed between an employer and its employees, time limits for probationary periods and for how long an employee can be placed in a fixed-term employment contract. As the interpretation and implementation of the Labor Contract Law and other labor-related laws are still evolving, and PRC government has continued to introduce various new labor-related regulations, our employment policies and practice may not be deemed in compliance at all time. For example, in accordance with the Labor Contract Law and its Implementing Rules, the Ministry of Human Resources and Social Security promulgated Interim Provisions on Labor Dispatching, or Circular 22, effective from March 1, 2014, which provides that an employer shall strictly control the number of employees under labor dispatching arrangements and dispatched employees can only be used in temporary, ancillary and replaceable positions. The number of dispatched workers shall be reduced to no more than 10% of the total number of employees within two years after March 1, 2014. In the past we outsourced substantially all of our employees from Qian Jin Network Information Technology (Shanghai) Co., Ltd., or Qian Jin, an independent third-party professional human resources company. We are in the process of adjusting our employment arrangements gradually to comply with the requirements under Circular 22. If we fail to reduce the number of our dispatched employees as required by Circular 22 and could not correct our practice after receiving warnings from government authority, we may be subject to a fine ranging from RMB1,000 to RMB5,000 per dispatched employee. In addition, under the Labor Contract Law, a human resources company shall perform an employer’s obligations, including payment of remuneration to the dispatched employees and contribution of social insurance premiums. Under the labor dispatch service agreements between us and Qian Jin, we, as the entity receiving labor dispatch services, shall make a monthly payment in an amount that includes the dispatched employees’ salaries, social insurance contributions and our service fees to Qian Jin. However, we cannot assure you that Qian Jin has fully performed or will consistently fulfill its obligations, including any social insurance or housing fund contributions. We may also be held jointly and severally liable with Qian Jin for damages any violation caused to dispatched employees. If we are held liable for any shortage in the social insurance or housing fund contribution for the dispatched employees or other penalties or fees related to our employment practice, our results of operations and financial condition may be adversely affected.

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In addition, according to the Labor Contract Law and its implementing rules, if we intend to enforce the non-compete provision with our employees in the employment contracts or confidentiality agreements, we have to compensate our employees on a monthly basis during the term of the restriction period after the termination or ending of the employment contract, which may cause extra expenses to us.

The discontinuation of any tax incentives and government subsidies available to us could, in each case, decrease our net income and materially and adversely affect our financial condition and results of operations.

Our PRC subsidiaries are incorporated in the PRC and are governed by applicable PRC income tax laws and regulations. Under the EIT Law and its Implementing Rules, both of which became effective on January 1, 2008, the PRC has adopted a uniform statutory enterprise income tax rate of 25% for all PRC enterprises (including foreign-invested enterprises). The EIT Law and its Implementing Rules also permit qualified small-scaled enterprises with low profit margins to enjoy a reduced 20% enterprise income tax rate. On April 8, 2014, March 13, 2015, and September 2, 2015, the SAT and the MOF jointly issued three circulars, which further provided that, during the period between January 1, 2014 and December 31, 2016, between January 1, 2015 and December 31, 2017, and between October 1,2015 and December 31, 2017 respectively, if a qualified small-scaled enterprise with low profit margins has an annual taxable income of not more than RMB100,000, RMB200,000 and RMB300,000, respectively, then 50% of its taxable income can be exempted from enterprise income tax, reducing the effective enterprise income tax rate to 10%. Twelve of our PRC subsidiaries, Jiangyin eHi Car Rental Co., Ltd., Dali eHi Car Rental Co., Ltd. and so on were eligible for this tax incentive and paid enterprise income tax at a reduced rate of 10% for the taxable year of 2017.

In addition, some local governments allowed certain enterprises registered in their jurisdictions to receive certain government subsidies according to local policies. According to the agreements between a local government agency in Shanghai and eHi Rental and Shanghai Smart Brand, respectively, such local government agency agreed to grant to eHi Rental and Shanghai Smart Brand, at its own discretion, certain subsidies which are calculated based on a certain portion of the business taxes and VAT paid by eHi Rental and Shanghai Smart Brand based on their revenues. In 2015, 2016 and 2017, eHi Rental received government subsidies of RMB4.4 million, RMB8.4 million and RMB5.5 million (US$0.8 million), and Shanghai Smart Brand received government subsidies of RMB0.9 million, RMB1.8 million and RMB1.9 million (US$0.3 million), respectively. In 2015 and 2016, Shanghai Taihao Financial Leasing Co., Ltd., or Shanghai Taihao, received government subsidies of RMB2.6 million, and RMB1.8 million respectively.

Furthermore, the PRC government recently adopted the Business Tax to VAT Transformation Pilot Program, which was initiated in Shanghai and now is rolled out nationwide. Pursuant to this program, starting from January 1, 2012, our subsidiaries in Shanghai, including eHi Rental, are required to pay VAT instead of business tax. In February 2012, Shanghai Bureau of Finance and Bureau of Taxation jointly released the Notice [2012] No. 5 which provided a temporary financial subsidy in connection with the VAT Pilot Program, pursuant to which we received financial subsidies from various levels of local governments in relation to the VAT Pilot Program. In 2015, the government cancelled the temporary financial subsidy as the Notice [2012] No. 5 expired and the VAT has been applicable to all taxpayers from May 1, 2016. We also received government subsidies for the purchase of certain vehicle models approved by the local government as well as government grants for our technology achievements from the Scientific and Technological Commission of Shanghai. However, preferential tax treatments and government subsidies are subject to review and may be adjusted or revoked at any time in the future. The discontinuation of any preferential tax treatments or government subsidies available to us will cause our effective tax rate to increase, which will decrease our net income and our financial condition and result of operations may be materially and adversely affected.

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Our legal rights to lease certain properties could be challenged, which could prevent us from continuing to operate the affected service locations or increase the costs associated with operating these service locations.

We rely on leases with third parties who either own the properties or lease the properties from the ultimate property owner. As of December 31, 2017, 231 of our service locations were leased from lessors who were unable to provide us with copies of title certificates or documents evidencing the authorization or consent of the owners of such properties. Where the lessors do not have the proper legal right to lease the properties, the corresponding lease agreements may be deemed invalid. Furthermore, some properties may not be designated for commercial use. If we are not adequately indemnified by the lessors for our related losses, our business may be adversely affected. Some of the properties we lease from the third parties have been mortgaged by the owners prior to leasing to us. We may not be able to continue using such properties if the mortgage is foreclosed. In addition, under the PRC law, failure to register a lease agreement with the local housing bureau may result in the risk that we may not be able to continue to occupy the relevant properties if the lease is challenged by third parties. Our standard lease agreement generally requires the lessor to make such registrations, however, as of December 31, 2017, the lease agreements relating to a number of our service locations had not been duly registered by the relevant lessors. Accordingly, if these lessors do not have the appropriate titles to the properties or necessary approvals from the ultimate owners or fail to make the requisite registrations, or if the mortgage over the leased properties is foreclosed, we may be unable to continue to operate the affected properties or incur additional costs associated with operating these service locations.

Risks related to our ADSs

There can be no assurance that the agreement and plan of merger entered into with various parties on April 6, 2018 and the going private transaction contemplated thereby will be approved by our shareholders or successfully consummated. Potential uncertainty involving the going private transaction may adversely affect our business and the market price of our ADSs.

On April 6, 2018, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Teamsport Parent Limited (“Parent”) and Teamsport Bidco Limited (“Merger Sub”), a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, Parent will acquire our company for cash consideration equal to US$6.75 per common share of our company or US$13.50 in cash per ADS, each of which represents two Class A common shares of our company, other than Rollover Shares (as defined below) and ADSs representing Rollover Shares, as applicable. Immediately following the consummation of the transactions contemplated under the Merger Agreement, Parent will be beneficially owned by a consortium (the “Consortium”) comprising new investors, including certain affiliates of MBK Partners Fund IV, L.P., Baring Private Equity Asia Limited and Redstone Capital Management (Cayman) Limited, and certain existing shareholders of the Company, including L&L Horizon, LLC, an affiliate of Mr. Zhang, The Crawford Group, Inc. (“Crawford”) and Dongfeng Asset Management Co. Ltd. (collectively, the “Rollover Shareholders”). Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company surviving the merger as the surviving company (the “Surviving Company”) under Cayman Islands law (the “Merger”).

On April 16, 2018, the Company and one of its shareholders commenced proceedings in the High Court of Hong Kong against CDH Car Rental Service Limited (“CDH Car”), another shareholder of the Company, to enforce the terms of the Company’s Third Amended and Restated Investor Rights Agreement dated December 11, 2013 (the “IRA”) with certain of its shareholders. The proceedings are to seek interim relief, including an order that CDH Car not dispose of, deal with or otherwise encumber its shareholding in the Company and an order that it not take any step to vote its shares in the Company, pending the resolution of claims under the IRA.

Our company’s board of directors, acting upon the unanimous recommendation of the special committee formed by the board of directors (the “Special Committee”), approved the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Transactions”), including the Merger, and resolved to recommend that our company’s shareholders authorize and approve the Merger Agreement and the Transactions, including the Merger. The Special Committee, which is comprised solely of independent directors of our company who are unaffiliated with Parent, Merger Sub or any member of the Consortium or management of our company, exclusively negotiated the terms of the Merger Agreement with the Consortium with the assistance of its independent financial and legal advisors.

The closing of the Merger is currently expected to occur during the second or third quarter of 2018, and is subject to the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including the requisite approval of the shareholders of our company and the consent of requisite holders of the senior unsecured notes issued by our company in 2015 and 2017, if applicable, as well as certain other customary closing conditions. The Merger Agreement and the Merger must be authorized and approved by (i) a shareholders’ special resolution passed by the affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of our company’s shareholders, (ii) a shareholders’ resolution passed by the affirmative vote of holders of Shares representing a majority of the aggregate voting power of the Shares and (iii) a shareholders’ resolution passed by the affirmative vote of holders of a majority of the total outstanding Class A common shares of our company.

The Merger, whether or not consummated, presents a risk of diverting management focus, employee attention and resources from other strategic opportunities and from operational matters. In addition, we are subject to various restrictions under the Merger Agreement on the conduct of our business prior to the completion of the Merger, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the Merger. Also, any development of the transaction, such as entering into or termination of any definitive agreement, may increase volatility of the trading price of our ADSs. In addition, the Merger Agreement restricts our ability, until the effective time of the Merger or, if earlier, the termination of the Merger Agreement, to solicit or, subject to certain exceptions, engage in discussions or negotiations with third parties regarding certain competing proposals or transactions as described in the Merger Agreement. If the Merger Agreement is terminated under the following circumstances: (i) if the Company accepts a competing proposal within 12 months after the termination, (ii) if our Board or Special Committee changes its recommendation in favor of the Merger, (iii) if there is a material breach of our representations, warranties and covenants under the Merger Agreement or (iv) if we enter into an agreement with respect to a superior proposal, we may be required to pay Parent a termination fee of $14,062,642.

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On April 26, 2018, we filed a going private transaction statement on Schedule 13E-3 which attaches as an exhibit a preliminary proxy statement that, subject to completion, will be used in connection with the extraordinary general meeting of our shareholders. Please refer to the preliminary proxy statement for more information about the Merger including the effects of the Merger on our company and the effects on our company if the Merger is not completed.

The trading price for our ADSs has fluctuated and may be volatile, which could result in substantial losses to investors.

The trading price for our ADSs has fluctuated since we listed our ADSs. In 2017, the trading price of our ADSs ranged from US$8.91 to US$12.20 per ADS, and the last reported trading price on April 27, 2018 was US$13.05 per ADS. The trading price for our ADSs may be volatile and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other car rentals and car services providers, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations of exchange rates between the Renminbi and the U.S. dollar, announcements regarding litigation or administrative proceedings involving us, release or expiry of lock-up or other transfer restrictions on our outstanding shares or ADSs, sales or perceived sales of additional common shares or ADSs and economic or political conditions in China. In addition, the performance, and fluctuation in market prices, of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price of and trading volumes of our ADSs. The securities of some China-based companies that have listed their securities in the United States have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of these China-based companies’ securities after their offerings may affect the attitudes of investors toward China-based companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other China-based companies may also negatively affect the attitudes of investors towards China- based companies in general, including us, regardless of whether we have engaged in any inappropriate activities. Volatility in global capital markets, such as the recent global financial services and economic crises, could also have an adverse effect on the trading price of our ADSs. Furthermore, 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 trading price of our ADSs.

The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. As of December 31, 2017, we had an aggregate of 139,917,575 common shares issued and outstanding based on our Cayman Islands registrar, of which 74,279,018 Class A common shares were represented by 37,139,509 ADSs (including 513,644 ADSs issued and reserved for the future exercise of options or the vesting of other awards under the 2010 Plan and the 2014 Plan). All our common shares represented by ADSs were freely transferable by persons other than our “affiliates” without restriction or additional registration under the Securities Act of 1933, or the Securities Act. The remaining common shares will be available for sale subject to volume and other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements. In addition, certain holders of our common shares have the right to cause us to register the sale of those 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 the ADSs to decline. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs.

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Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A common shares and ADSs may view as beneficial.

Our common shares are divided into Class A common shares and Class B common shares. Holders of Class A common shares are entitled to one vote per share, while holders of Class B common shares are entitled to ten votes per share. In addition, certain matters including those related to the change of control of our company require an additional approval by the holders of a majority of Class A common shares voting as a separate class. Each Class B common share is convertible into one Class A common share at any time by the holder thereof. Class A common shares are not convertible into Class B common shares under any circumstances. Class B common shares will be automatically converted into the same number of Class A common shares under certain circumstances, including any transfer of Class B common shares by a holder thereof to any person or entity which is not an affiliate of such holder.

Due to the disparate voting powers attached to these two classes of common shares, Class B common shares issued and outstanding as of December 31, 2017, represented 46.9% of our total issued and outstanding shares and 90.0% of the then total voting power. Therefore, our Class B common shareholders will have decisive influence over matters requiring shareholders’ approval, including election of directors and significant corporate transactions, and their interest may not be aligned with us or other shareholders of our company. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A common shares and ADSs may view as beneficial, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs.

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.

Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying Class A common shares in accordance with the provisions of the deposit agreement. Under our ninth amended and restated memorandum and articles of association, the minimum notice period required to convene a general meeting is seven days. When a general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw your Class A common shares to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you request. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders’ meeting.

You may not receive distributions on our common shares or any value for them if such distribution is illegal or if any required government approval cannot be obtained in order to make such distribution available to you.

The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A common shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A common shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, common shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, common shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our common shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

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 registered under the Securities Act, or the distribution of them to ADS holders is exempted 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 rely on an exemption from registration under the Securities Act to distribute such rights and securities. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

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

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, subject to the limitations and requirements under Form F-6 of the SEC, 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 in accordance with the terms of the deposit agreement.

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 organized under Cayman Islands law, conduct substantially all of our operations in China and a majority of our directors and 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. A majority of our directors and 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 United States in the event that you believe that your rights have been infringed under the U.S. securities laws or otherwise. Even if you are successful in bringing an action of this kind, the respective laws of the Cayman Islands and China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state, and it is uncertain whether such Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any state. 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.

Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2018 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 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 some jurisdictions in the United States. In particular, because the Cayman Islands law has no legislation specifically dedicated to the rights of investors in securities, and thus no statutorily defined private causes of action to investors in securities such as those found under the Securities Act or the Exchange Act in the United States, it 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 organized in a jurisdiction in the United States.

Our memorandum and articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including Class A common shares represented by our ADSs, at a premium.

Our ninth amended and restated memorandum and articles of association contain provisions that may limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. For example, we have adopted a dual-class voting structure that gives disproportionate voting power to Class B common shares. In addition, change of control event requires an additional approval by the holders of a majority of Class A common shares voting as a separate class. We also have a staggered board. These provisions may have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.

We may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or common shares.

Depending upon the value of our common shares and ADSs and the nature of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes.

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We will be classified as a PFIC for any taxable year if either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on the average quarterly value of the assets during the taxable year) is attributable to assets that produce or are held for the production of passive income. In determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (determined by the sum of the aggregate value of our outstanding equity) plus our liabilities. Therefore, a drop in the market price of our ADSs or common shares would cause a reduction in the value of our non-passive assets for purposes of the asset test. Accordingly, we would likely become a PFIC if our market capitalization were to decrease significantly while we hold substantial cash.

We believe we were not a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2017. Although we intend to conduct our business activities in a manner to reduce the risk of our classification as a PFIC in the future, we currently hold, and expect to continue to hold, a substantial amount of cash and other passive assets, and, because the value of our assets is likely to be determined in large part by reference to the market prices of our common shares and ADSs, which are likely to fluctuate, there can no assurance that we will not be classified as a PFIC in 2018 or any future taxable year. If we are a PFIC for any taxable year during which a U.S. investor holds our common shares or ADSs, certain adverse U.S. federal income tax consequences would apply to the U.S. investor. For details, please refer to Item 10.E, “Additional Information — Taxation.”

We are exempt from certain corporate governance requirements of the NYSE. This may afford less protection to the holders of our ADSs.

We are exempt from certain corporate governance requirements of the NYSE by virtue of being a foreign private issuer. As a foreign private issuer, we are permitted to, and plan to, follow home country practice in lieu of certain corporate governance requirements of the NYSE. We are required to provide a brief description of the significant differences between the corporate governance practices of our home country, the Cayman Islands and the corporate governance practices required to be followed by

U.S. domestic companies under the NYSE rules. The standards applicable to us are considerably different than the standards applied to U.S. domestic issuers. The significantly different standards applicable to us do not require us to:

· have a majority of the board be independent (other than due to the requirements for the audit committee under the Exchange Act);

· have a minimum of three members on our audit committee;

· have a compensation committee, a nominating or corporate governance committee;

· provide annual certification by our chief executive officer that he or she is not aware of any noncompliance with any corporate governance rules of the NYSE;

· have regularly scheduled executive sessions with only non-management directors;

· have at least one executive session of solely independent directors each year;

· seek shareholder approval for (i) the implementation and material revisions of the terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding common shares or 1% of the voting power outstanding to a related party, (iii) the issuance of more than 20% of our outstanding common shares, and (iv) an issuance that would result in a change of control;

· adopt and disclose corporate governance guidelines; or

· adopt and disclose a code of business conduct and ethics for directors, officers and employees.

We intend to rely on all such exemptions provided by the NYSE to a foreign private issuer, except that we have a compensation committee and a corporate governance and nominating committee, an audit committee consisting of three members, and we have adopted and disclosed corporate governance guidelines and a code of business conduct and ethics for directors, officers and employees. As a result, you may not be provided with the benefits of certain corporate governance requirements of the NYSE.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

We commenced our business in 2006, which was initially focused on providing car services to premium corporate clients. In 2008, we began to provide car rentals to individual customers. Our company, eHi Car Services Limited (previously known as Prudent Choice International Limited or eHi Auto Services Limited), was incorporated in the Cayman Islands on August 3, 2007. eHi Car Services Limited is a holding company. Currently we operate our car rental and car services business through our PRC subsidiaries.

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For our car rental business, we provide vehicles through our PRC subsidiaries Shanghai eHi Car Rental Co., Ltd., or eHi Rental, and eHi Auto Services (Jiangsu) Co., Ltd., or eHi Jiangsu, and their subsidiaries and branches in different cities; and we provide fleet management, information technology support and other car rental related services through eHi Car Rental Management Services (Shanghai) Co. Ltd., or eHi Management, which is a subsidiary of eHi Rental.

For our car services business, we provide vehicles through eHi Rental, eHi Jiangsu and their subsidiaries and branches, and provide chauffeur services through our PRC subsidiary Shanghai Smart Brand Auto Driving Services Co., Ltd., or Shanghai Smart Brand, and its subsidiaries and branches.

Our current major operations are not subject to the ICP license requirements. To further expand our Internet and mobile services, in March 2014, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity Shanghai eHi Information Technology Service Co., Ltd., or eHi Information, and its shareholders. eHi Information obtained an ICP license from the relevant telecommunication authorities on September 24, 2014. eHi Information currently does not have any material operation. In January 2015, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity Shanghai eHi Car Sharing Information Technology Co., Ltd., or eHi Car Sharing, and its shareholders. eHi Car Sharing is currently not yet in operation. For additional information on our organizational structure, see Item 4.C, “Information on the Company— Organizational Structure”.

In November 2014, we completed an initial public offering of 10,000,000 ADSs at the price of US$12.00 per ADS. Each ADS represents two Class A common shares. On November 18, 2014, our ADSs were listed on the New York Stock Exchange under the symbol “EHIC”. In November 2014 we also issued 5,000,000, 1,666,666 and 1,666,666 Class A common shares to Dongfeng Asset Management Co. Ltd., China Universal Asset Management Co., Ltd. and Ctrip, respectively, at the price of US$6.00 per share (equivalent to US$12.00 per ADS), in a private placement concurrent with the initial public offering.

In May, 2015, we entered into definitive securities purchase agreements with Tiger Global Mauritius Fund, or Tiger Fund, and SRS Partners I Mauritius Limited and SRS Partners II Mauritius Limited, or collectively SRS Funds, pursuant to which we agreed to issue a total of 22,337,924 of our Class A common shares to the buyers at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS). We raised gross proceeds of approximately US$134.0 million from this private placement transaction. In addition, two of our shareholders, Ctrip and Crawford, also entered into definitive agreements with the buyers for the sale of an aggregate of 2,666,666 Class A common shares (including certain shares represented by ADSs) at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS). On June 30, 2015, in connection with the private placement, we also entered into a registration rights agreement with Tiger Fund and SRS Funds, or the Registration Rights Agreement, pursuant to which, at any time after the later of (i) November 22, 2015 and (ii) we have become eligible to register the Purchased Securities for resale on Form F-3, the holders of at least a majority of the Purchased Securities may request us to file no more than two shelf registration statements in any 12 month period to register the Purchased Securities and their relevant equity rights. The Registration Rights Agreement also contains obligations, indemnities, contribution, assignment and amendment that are customary for private placements by public companies, and the registration rights set forth therein shall terminate on November 18, 2017.

In December 2015, we completed an offering of US$200 million in aggregate principal amount of senior unsecured notes due 2018, or the 2018 Senior Notes. The 2018 Senior Notes were offered by our Cayman holding company, and all of our offshore subsidiaries jointly and severally provided guarantees. The 2018 Senior Notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. The 2018 Senior Notes bear a fixed interest rate at 7.5% per annum, payable semiannually in arrears, and will mature on December 8, 2018, unless previously repurchased in accordance with their terms prior to such date.

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In August, 2016, we entered into a facility agreement of US$150 million in principal amount with a syndicate of banks, or the 2016 Facility. Pursuant to the 2016 Facility, 50% of the proceeds has been used to repay our existing indebtedness, and remaining proceeds will be used for fund capital expenditures and other general corporate purposes. The 2016 Facility is jointly and severally guaranteed by our existing and future-established offshore subsidiaries, subject to certain exceptions according to terms therein. The 2016 Facility bears a floating interest rate of LIBOR plus 3.50% margin per annum. The 2016 Facility was repaid in full in August 2017.

In August 2017, we completed an offering of US$400 million in aggregate principal amount of senior unsecured notes due 2022, or the 2022 Senior Notes. The 2022 Senior Notes were offered by our Cayman holding company, and all of our offshore subsidiaries jointly and severally provided guarantees. The 2022 Senior Notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. The 2022 Senior Notes bear a fixed interest rate at 5.875% per annum, payable semiannually in arrears, and will mature on August 14, 2022, unless previously repurchased in accordance with their terms prior to such date.

On April 6, 2018, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Teamsport Parent Limited (“Parent”) and Teamsport Bidco Limited (“Merger Sub”), a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, Parent will acquire our company for cash consideration equal to US$6.75 per common share of our company or US$13.50 in cash per ADS, each of which represents two Class A common shares of our company, other than Rollover Shares (as defined below) and ADSs representing Rollover Shares, as applicable. Immediately following the consummation of the transactions contemplated under the Merger Agreement, Parent will be beneficially owned by a consortium (the “Consortium”) comprising new investors, including certain affiliates of MBK Partners Fund IV, L.P., Baring Private Equity Asia Limited and Redstone Capital Management (Cayman) Limited, and certain existing shareholders of the Company, including L&L Horizon, LLC, an affiliate of Mr. Zhang, The Crawford Group, Inc. (“Crawford”) and Dongfeng Asset Management Co. Ltd. (collectively, the “Rollover Shareholders”). Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company surviving the merger as the surviving company (the “Surviving Company”) under Cayman Islands law (the “Merger”).

On April 16, 2018, the Company and one of its shareholders commenced proceedings in the High Court of Hong Kong against CDH Car Rental Service Limited (“CDH Car”), another shareholder of the Company, to enforce the terms of the Company’s Third Amended and Restated Investor Rights Agreement dated December 11, 2013 (the “IRA”) with certain of its shareholders. The proceedings are to seek interim relief, including an order that CDH Car not dispose of, deal with or otherwise encumber its shareholding in the Company and an order that it not take any step to vote its shares in the Company, pending the resolution of claims under the IRA.

Our company’s board of directors, acting upon the unanimous recommendation of the special committee formed by the board of directors (the “Special Committee”), approved the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Transactions”), including the Merger, and resolved to recommend that our company’s shareholders authorize and approve the Merger Agreement and the Transactions, including the Merger. The Special Committee, which is comprised solely of independent directors of our company who are unaffiliated with Parent, Merger Sub or any member of the Consortium or management of our company, exclusively negotiated the terms of the Merger Agreement with the Consortium with the assistance of its independent financial and legal advisors.

The closing of the Merger is currently expected to occur during the second or third quarter of 2018, and is subject to the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including the requisite approval of the shareholders of our company and the consent of requisite holders of the senior unsecured notes issued by our company in 2015 and 2017, if applicable, as well as certain other customary closing conditions. The Merger Agreement and the Merger must be authorized and approved by (i) a shareholders’ special resolution passed by the affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of our company’s shareholders, (ii) a shareholders’ resolution passed by the affirmative vote of holders of Shares representing a majority of the aggregate voting power of the Shares and (iii) a shareholders’ resolution passed by the affirmative vote of holders of a majority of the total outstanding Class A common shares of our company.

On April 26, 2018, we filed a going private transaction statement on Schedule 13E-3 which attaches as an exhibit a preliminary proxy statement that, subject to completion, will be used in connection with the extraordinary general meeting of our shareholders. Please refer to the preliminary proxy statement for more information about the Merger including the effects of the Merger on our company and the effects on our company if the Merger is not completed.

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Our principal executive offices are located at Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road, Shanghai, 200062, the People’s Republic of China, and our telephone number is +86-21-6468-7000. Our principal website address is http:// www.1hai.cn. The information on our website does not form a part of this annual report. Our agent for service of process in the United States is Law Debenture Corporate Services Inc. located at 400 Madison Avenue, 4th Floor, New York, New York 10017.

B. Business Overview

We provide car rentals and car services to both individual customers as well as corporate and institutional clients. Since our establishment, we have focused on investing in our infrastructure and technology, which enables us to benefit from increasing economies of scale.

Our services

Car rentals

We provide self-drive car rental services to both individual customers as well as corporate and institutional clients to meet their travel, leisure, business and ground transportation needs. Our short-term car rentals have a term of less than one year and are primarily provided to individual customers on an hourly, daily, weekly or monthly basis. Our long-term car rentals have a term of one year or longer and are primarily provided to corporate and institutional clients. In 2017, we derived approximately 80.2% of our net revenues from car rentals.

As of December 31, 2017, our car rentals were offered in 303 cities, 415 train stations and 119 airports across China through our extensive service network of 4,463 directly operated service locations. Our extensive service network enables our customers to pick up and return cars at any of our service locations. To better serve our customers, we also provide vehicle delivery and pickup services to customer-designated locations. To ensure the consistency of our service quality and customer experience, we directly operate all of our service locations rather than franchising or outsourcing them to third parties. In addition to our service network in China, we cooperate with Enterprise and provide our customers access to Enterprise’s car rental services outside China.

As of December 31, 2017, our car rental fleet included 62,101 vehicles of over 300 models primarily from major automobile manufacturers such as Volkswagen, SAIC Motor, Peugeot, Hyundai and General Motors. Based on our operating experience, we observe that Chinese customers are generally more sensitive to rental vehicle models than western customers. The variety of our car classes and models enables our customers to choose the vehicles they prefer to. In the event that the vehicle model requested by a customer is not available, our proprietary technology platform will automatically advise the customer when such particular model will become available or if similar models are available at the selected time. The customer also has an option to choose to be put on a waiting list for the particular model requested. Through our user interface, our technology platform also provides information to customers about discounts, special offers and other promotions to encourage them to rent for a longer period or upgrade to a more premium vehicle model.

We provide convenient and efficient reservation channels to our customers, which primarily include our user-friendly website and dedicated mobile applications. We believe we were the first car services provider in China to introduce mobile applications for customers to make reservations. In 2017, approximately 13% and 81% of our car rentals were derived from reservations made through website and mobile applications, respectively. The remainder were derived from reservations made through offline channels such as our call center or walk-in customers. As social media gain popularity, we are also exploring ways for our customers to make car rental reservation though social networking platforms such as Tencent WeChat.

First-time users of our car rental services are required to register as members before making a reservation. After a customer chooses the start and end dates of the rental period, the type and model of vehicle and the location of vehicle pickup or delivery, our technology platform confirms the reservation on a real-time basis and sends an email and/or text message to the customer. Before handing over the vehicle to the customer, we perform checks on the customer’s driver’s license, identity card and credit card information. We only accept credit card payments for our car rental services and can trace the credit records of our car rental customers for risk management purposes. As of December 31, 2017, over 2.2 million registered members had used our car rental services. Approximately 68%, 66% and 66% of our short-term car rental transactions in 2015, 2016 and 2017, respectively, were generated from customers that used our services more than once.

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A majority of our revenues derived from short-term car rental services are from our basic car rental service package, the charges for which include an hourly or daily rental fee, a transaction-based handling fee and a basic insurance charge. We also provide value-added services for customers to choose, such as increased insurance coverage. We have adopted a dynamic pricing mechanism to determine our rental rates. This mechanism determines a specific vehicle model’s rental rate based on its purchase price taking into consideration other variables such as pickup/drop-off time and location, the availability of our vehicles during such period at the location, prevailing prices, demand for such vehicle model and the length of rental period. Our management reviews the dynamic pricing system on a regular basis. Our customers typically bear the cost of gasoline consumed during the rental period.

For long-term car rentals, we typically enter into individually negotiated contracts with our corporate and institutional clients to address the specific needs and requirements of such clients, and the rental rate is typically negotiated in such contracts. In addition, vehicles deployed for our long-term car rentals are supported by all our service locations across China, thereby ensuring our vehicles are in good condition. We regularly provide repair and maintenance services to long-term car rental clients and provide free substitute vehicles during the repair and maintenance period.

In April 2017, we launched car sharing business initiative in Shanghai and Guangzhou. Car sharing business provides time sharing car rentals, with free floating to customers and a fully automated rental and payment process. Car sharing fee is calculated based on both rental time and driving distance by customers. Our car sharing business is currently at a very early and small-scale stage and only complementary to our car rental business.

Car services

We provide chauffeured car services primarily to corporate and institutional clients. Our car services include routine services such as airport pickup and drop-off, inter-office transfers and other business transportation needs, as well as event-driven activities such as conventions, promotional tours and special events. We generally enter into long-term framework agreements with our corporate and institutional clients pursuant to which our vehicles and chauffeur services are provided by different subsidiaries. In 2017, we derived approximately 19.8% of net revenues from our car services operations.

As of December 31, 2017, car services were offered by us and our contracted service providers in 200 cities across China, with a focus on first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen. To accommodate occasional demands from some corporate and institutional clients, we retain contracted service providers to provide car services to our clients in cities where we currently do not provide such services or the demand for such services exceeds our existing capacity. During the peak time of our car services, we also deploy vehicles from our car rental fleet for cross-usage to meet the needs of our corporate and institutional clients.

As of December 31, 2017, our car services fleet consisted of 2,845 vehicles, which included a higher percentage of premium vehicle models compared to our car rental fleet, and we had 3,211well-trained drivers. Our sizable car services fleet and our flexibility to cross-use our car rental fleet for car services enable us to serve the diverse needs of corporate and institutional clients for a large number of chauffeured vehicles. Leveraging our established service network, infrastructure and technology platform, we believe we are well- positioned to capture and address the evolving demands for car services.

We systematically screen and assess each driver on a regular basis to ensure they meet our standards of safety, courtesy and experience. We generally require our drivers to have at least five years of driving experience. The compensation of our drivers includes a base salary and a performance based compensation, which incentivizes our drivers to provide quality services. We constantly seek to improve the service quality of our drivers by strengthening our screening procedures, conducting background checks and offering training programs, such as regular safety trainings. Our car services clients can place or modify their orders and locate the vehicles and drivers they book on a real-time basis via our proprietary mobile application and fleet management system.

Our sizable fleet, broad geographic coverage and well-trained drivers enable us to provide tailored services to meet our corporate and institutional clients’ needs. As of December 31, 2017, we had over 41,000 corporate and institutional clients that used our car services. Our corporate accounts include many Global Fortune 500 companies in China. No single corporate or institutional client accounted for more than 5% of our net revenues in 2015, 2016 or 2017, respectively.

We determine the rates for our car services based on a number of factors, including vehicle model, service type, length of rental period, time and location of pickup and drop-off, and prevailing prices. Our management reviews these rates on a regular basis. Our framework agreements with our corporate and institutional clients provide for predetermined price ranges and, as a result, our rates for car services are generally more stable.

In December 2014, we started to expand our car services to business-to-consumer model through Ctrip’s website, mobile applications and offline channels, which is expected to complement our existing business-to-business car services. In July 2015, we began to cooperate with certain mobile car hailing service providers and increased our transaction volume through Ctrip platform to provide car services to individual customers.

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Our nationwide service network

Customers of our car rental services can pick up cars at any of our service locations in China after they make reservations through our website, mobile application or other channels. As of December 31, 2017, our car rental services were offered in 303 cities, 415 train stations and 119 airports in China through an extensive network of 4,463directly operated service locations, which included 449 stores and 4,014pick-up points. As of December 31, 2017, car services were offered by us and our contracted service providers in 200 cities across China, with a focus on first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen. Our extensive network enables us to consistently provide quality service nationwide and offer flexibility and convenience to our customers.

The following map and table set forth the geographic locations where we operated our car rentals and car services as of December 31, 2017:

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	Car rentals						Car services
Cities or provinces	Cities		Stores		Pick-up points		Cities (1)
Key cities and provinces
Shanghai		1		47		237		1
Jiangsu		19		43		507		20
Guangdong (excluding Guangzhou and Shenzhen)		22		43		258		17
Shenzhen		1		29		85		1
Guangzhou		1		28		230		1
Zhejiang		13		28		117		11
Beijing		1		16		104		1
Other cities and provinces
Sichuan		23		18		489		8
Shandong		17		17		217		14
Hunan		16		13		182		14
Fujian		11		12		41		5
Hubei		15		12		109		16
Liaoning		11		11		118		4
Hebei		9		11		88		7
Anhui		13		10		39		7
Henan		14		10		41		13
Yunnan		14		10		42		3
Chongqing		1		9		126		1
Guangxi		12		8		74		6
Hainan		13		8		108		5
Tianjin		1		8		62		1
Jiangxi		12		7		191		9
Shaanxi		9		7		58		8
Shanxi		9		7		57		5
Gansu		6		6		31		2
Heilongjiang		7		6		101		3
Inner Mongolia		9		6		24		4
Guizhou		8		5		25		4
Jilin		6		5		77		2
Ningxia		1		3		26		2
Qinghai		2		3		135		2
Xinjiang		4		2		14		2
Xizang		2		1		1		1
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Total		303		449		4,014		200

(1) Include cities where car services are provided by our contracted service providers.

Marketing and promotion

We believe that our leading position is in large part due to our strong brand recognition. We position our brand to be associated with convenience, reliability, innovation and satisfaction. We promote our business primarily through our principal website, www.1hai.cn. Furthermore, we believe we were the first car services provider in China to introduce mobile applications to make reservations in 2011. In addition to our website and mobile applications, our sales and marketing strategies utilize many other channels, such as third party websites and mobile applications, word-of-mouth referrals, keyword search, outdoor advertising, local sponsorships, public relations and digital and social media. As of December 31, 2017, our marketing staff consisted of 35 employees, primarily based in our Shanghai headquarters.

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Car rentals

As of December 31, 2017, we had over 2.2 million registered members that used our car rental services. As mobile social media applications gain popularity, we shifted the focus of our marketing activities from traditional ways to social networking platforms such as Tencent WeChat, a popular mobile instant messaging application, and Weibo, a popular microblog platform website similar to Twitter. Our employees regularly follow the messages on these social media platforms to gain customer insights to improve the quality of our services. Our website also offers a customer sharing and discussion platform. “eHi Club”, our online club where our registered customers, mostly driving and travel enthusiasts, can organize group excursions, has been very helpful in increasing the stickiness of our existing customers.

In 2017, approximately 13% and 81% of our car rentals were derived from reservations made through website and mobile applications, respectively. In particular, the total number of our mobile application downloads increased from over 3.2 million in 2015 to over 18.4 million in 2016 and further to over 31.7 million in 2017. Aside from the social networking platforms and mobile applications, our quality of service also played an important role in our brand promotion. Based on our internal survey and feedbacks from our car rental service customers, word-of-mouth referrals have become important channels for attracting new customers. In addition, to fully utilize our cross-selling opportunities, we have entered into promotion contracts with some of our corporate and institutional clients, pursuant to which we provide discounts on car rentals, test drive of specified car models or other add-on services and benefits to their employees or designated participants, which incentivizes them to use our services and further expands our customer base.

We established our eHi loyalty program in 2008 which allows our customers to earn loyalty membership points by using our services or through promotional activities we offer from time to time. The loyalty membership points can be redeemed for numerous types of rewards, such as free GPS-based navigation device rental, waiver of additional mileage charges or free car rentals. We believe that our eHi loyalty program enhances customer loyalty, expands our brand recognition through member referrals, promotes our various reservation channels and improves the overall quality of our services. In addition, we employ a customer creditability system for each customer, which tracks credit history, driving record and other factors, and provides a quantitative rating for each customer based on this information. A customer with a high credibility rating can, among other benefits, have more choices of vehicle models, and more favorable discounts on rental and insurance fees.

We also have an outdoor advertising program promoting the benefits of car rental. We place many of these advertisements in busy areas such as high speed railway stations, subways, elevators of office and residential buildings and bus stops. These advertisements are designed both to educate and entertain our potential customers. In addition, we cooperate with leading global travel service providers and e-commerce platforms to promote our services.

In December 2016, we entered into a multiyear marketing partnership with the NBA China and an endorsement agreement with NBA star Stephen Curry, which made the NBA China our official marketing partner and Stephen Curry our brand ambassador. We expect to promote our car rental services featuring our NBA China and Stephen Curry connections through various channels, such as placing virtual logo and advertisements during NBA games when they are broadcasted on China Central Television and Tencent Video.

Car services

We provide car services mainly to corporate and institutional clients that entered into long-term framework agreements with us. As such, we have a dedicated corporate sales team targeting corporate and institutional clients across various industries. As of December 31, 2017, our corporate sales team included 152 sales persons across China.

For our car services, we have focused on creating a unique brand positioning and conveying our core values to our corporate and institutional clients through advertising and sponsorship activities, such as commercial fairs, business magazines and newspapers, as well as sales force coverage. In addition, we further strengthen our service quality and enhance brand recognition by providing tailored services according to specific corporate and institutional client’s needs, such as safety, equipment or procedural requirements. As of December 31, 2017, we had over 41,000 corporate and institutional clients that used our car services. We analyze our current and potential clients’ available data in our centralized database and design a unique, integrated corporate vehicle services plan for each client, which helps differentiate us from our competitors.

Customer service

The success of our business hinges on our customer satisfaction level, which in turn depends on a variety of factors. These factors include, among others, our ability to (i) consistently provide high-quality customer experience, (ii) continue to offer comprehensive and complementary services tailored to our customers’ needs, (iii) maintain good vehicle condition, and (iv) provide timely and satisfactory after-sales services.

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We have a dedicated service quality management team which constantly monitors our services and proactively seeks feedback from our customers. We encourage our customers to share their experience with us and provide feedbacks through our website, hotline or forums on major social media or messaging applications. We follow up on specific suggestions or complaints with both the customers and the relevant in-house teams. In certain cases, we offer loyalty membership points, refunds, coupons or other complimentary services to customers depending on the nature of their complaints and the extent of the loss or inconvenience suffered. We also incorporate frequently received complaints as case studies in our internal training programs to prevent repeat occurrences of the same complaint. We are dedicated to providing prompt solutions to customers’ complaints and actively learning from the experience of Enterprise in car rental services to further enhance the quality of our services.

Strategic cooperation

Enterprise

We entered into a global affiliation agreement with Enterprise China in March 2012, pursuant to which we are the exclusive partner of Enterprise in China (including Hong Kong and Macau) for a term of ten years. Enterprise China is an affiliate of Enterprise Holdings, and through its operating subsidiaries owns and operates the “National Car Rental” and “Alamo Rent A Car” brands, as well as its flagship “Enterprise Rent-A-Car” brand in North America. This agreement aims to develop an effective global affiliation, enabling customers of Enterprise China, Enterprise and their affiliates to access certain of our services in China, and enabling our customers to access certain of Enterprise’s car rental services outside of China.

Pursuant to this agreement, we and Enterprise agree to direct rental referrals to each other in different countries and jointly pursue sales and marketing and other collaborative opportunities to enhance our respective service offerings for the benefit of each other’s customers. Pursuant to this agreement, we have granted Enterprise in certain designated territories a royalty-free license with the right to sublicense certain of our trademarks, service marks, trade names, signages, logos, symbols and designs associated with the name “eHi”, and Enterprise has granted us in certain designated territories a royalty-free license with the right to sublicense certain of its trademarks, service marks, trade names, signages, logos, symbols and designs associated with the names “Enterprise,” “Enterprise Rent-A-Car,” “Alamo,” “Alamo Rent A Car,” “National” and “National Rent A Car”.

Furthermore, we and Enterprise established a steering committee and three subcommittees, namely, a finance subcommittee, an IT subcommittee and a sales and marketing subcommittee, which consist of senior officers assigned by both companies, to guide our future cooperation. In particular, both of us are required to use reasonable efforts to facilitate and support each other’s marketing activities in the relevant territories in the manner determined by the sales and marketing subcommittee. In addition, we regularly send our mid-level management to Enterprise for various training programs, through which Enterprise shares their in-depth knowledge and know-how to the car rental industry with our management. Enterprise has also appointed one of its senior management on our board to facilitate better coordination between the two companies.

Ctrip

Ctrip is a dominant player in the online travel agency business and a well-known travel brand in China. We believe that there are significant synergies for Ctrip and us to cooperate and offer more competitive travel products to individual customers as well as corporate and institutional clients in China. We are the designated and preferred business partner of Ctrip in providing car rental services. Ctrip has integrated access to our car rental reservation system on its website and mobile applications since May 2012 and June 2014 respectively. In addition, in December 2014, we started to expand and promote our chauffeured car services to business-to-consumer model through Ctrip’s website, mobile applications and offline channels. While we maintain cooperation with Ctrip in various aspects, we have not entered into any written partnership agreement with Ctrip.

Others

In April 2016 and February 2017, we entered into memorandums of understanding to establish a strategic cooperation with SAIC Motor Corporation Limited, or SAIC, a leading automobile manufacturer listed on China’s A-share market, and China Yongda Automobiles Services Holdings Limited, or Yongda Auto, a leading passenger vehicle retailer and comprehensive services provider listed on the Hong Kong Stock Exchange, respectively. We expect that these memorandums of understanding will enable us to cooperate closely with automobile manufacturers and retailers in various areas such as vehicle procurement and used car sales.

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We currently cooperate with other leading e-commerce platforms and online travel agencies in China, as well as offline travel service providers and professional association, to promote our services. Our strategic partners include, among others, Alipay, Tuniu Corporation, Ctrip and Tongcheng.

In addition, we maintain a network of online advertising partners under “eHi Alliance”, pursuant to which our advertising partners display our ads on blogs, forums, emails and chat windows maintained or operated by them, in return for commissions based on the revenues generated from these properties. We believe such cooperation will further expand our service coverage and enhance our brand name. We are selectively pursuing these opportunities to capitalize on this broader distribution network, thereby further enhancing our strong brand recognition and increasing our revenue and market share.

In January 2016, we entered into agreements with Shanghai Chenghuan Car Rental Company Limited, or Shanghai Chenghuan, pursuant to which we agreed to extend, through entrusted bank loans, an aggregate amount of RMB50 million to Shanghai Chenghuan. Shanghai Chenghuan is a middle-to-high-end car rentals and car services provider in the local market, and is an independent third party. Shanghai Chenghuan’s shareholders and affiliated companies provided certain security interests. The entrusted bank loans shall have a term of one year and bear an interest rate of 7.75% per annum. Pursuant to these agreements, in January 2016, through entrusted bank loan arrangements we facilitated RMB50 million in credit to Shanghaia Chenghuan with an initial one-year term, which was extended to a two-year term. As of the date of this annual report, the entire principal amount of the loan has been repaid by the borrower in full.

In September 2017, we signed a Memorandum of Understanding with Volkswagen Group China (“Volkswagen”) to jointly explore luxury mobility-on-demand services in China. We believe such cooperation will leverage innovative technologies, rapidly developing mobile Internet and car connectivity to provide luxury mobile services to Chinese consumers. Entirely new on-demand services will satisfy diverse needs, and make luxury mobility more convenient and accessible.

Our technology platform

Our proprietary technology platform incorporates various features specifically designed to improve customer experience and streamline our operations. These include the integration of our various reservation channels, automatic rental price adjustments, automatic vehicle recommendations, GPS vehicle location system, vehicle management system and online discussion and display forums. Our website and mobile applications feature user-friendly interfaces designed to allow our customers to easily browse and access our services, register as members, search for specific vehicle models or services and complete reservations. This centralized e- commerce platform, supported by our integrated systems, allows us to easily process our membership applications, manage reservations, manage and monitor customers’ vehicle use and other credit data, manage billing and payment, remotely manage our fleet, and monitor and analyze key metrics of each vehicle such as utilization rate, mileage and maintenance requirements.

The primary components of our technology platform include the following:

· Online and mobile reservation system. Our online and mobile reservation system allows our customers to reserve vehicles through our website, mobile applications and various other reservation channels such as our call center or local stores, by email, text message and instant messengers, or through our sales channel partners. We have designed our website as a reliable, secure, user-friendly and convenient online reservation platform for our customers. We introduced mobile applications to make reservations in 2011 and believe we were the first car rental service provider in China to do so. The total number of our mobile application downloads increased from over 3.2 million in 2015 to over 18.4 million in 2016 and further to over 31.7 million in 2017. In 2017, approximately 13% and 81% of our car rental services were derived from reservations made through website and mobile applications, respectively. Once our customers book our services online, they have around-the-clock access to the complete, real-time inventory of our fleet through our nationwide service network. Because all of our reservation and customer service data is fed back into our centralized databases on a real-time basis, we are able to track and analyze aggregated customer usage data to better allocate vehicles among different locations for the convenience of our customers.

· Fleet management system. Our fleet management system manages and monitors our widely dispersed fleet, which comprised 64,946 vehicles as of December 31, 2017, with a comprehensive suite of tools focused on real time vehicle tracking, vehicle repair and maintenance, mileage and fuel consumption, insurance and dispatch. Each of our vehicles is equipped with a control unit, including a mobile data device, geographic positioning information system, wireless antennae and vehicle interface modules. This hardware system allows us to monitor our vehicles from our data centers on a real-time basis, provides us with a comprehensive set of fleet management data that is stored in our centralized databases, and improves fleet management efficiency and customer service quality.

· Dynamic pricing mechanism. We have adopted a dynamic pricing mechanism to determine our rental rates. Our rental rates are automatically adjusted by our proprietary technology platform, which determines a specific vehicle model’s rental rate based on its purchase price, taking into consideration other variables, such as pickup/drop-off time and location, the availability of our vehicles during such period at such location, prevailing prices, demand of that specific vehicle model, and the length of rental period. Our management reviews our rental rates on a regular basis.

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· Service location management system. Our service location management system manages our reservations, inventory level and accounting functions at each of our stores. This system also monitors the key operating metrics and other operating data of each service location on a real-time basis.

· Data analysis and operational metrics system. Our data analysis and operational metrics system enables us to conduct a thorough analysis of the vast amount of data received from our daily operations, including utilization rate, mileage, length of rental period, time interval from reservation to pick-up, and maintenance requirements of each of our vehicles. Through this system, we are able to efficiently adjust our operational strategies and policies to be in line with the availability of our vehicles and market demand as the quantitative analysis serve as key assessment instrument for management’s strategic decisions.

· Payment and financial system. Our integrated payment and financial system enables our customers to recharge their accounts online and to make payments from their accounts. This system gives us real-time access to customer payment information, thereby improving the accuracy and efficiency of our financial reporting and allowing greater flexibility to scale our operations efficiently. Our financial system software also allows us to provide detailed and itemized bills for our corporate and institutional clients to accommodate their various internal financial reporting requirements.

· Customer relationship management system. Our customer relationship management system improves our overall customer experience and manages our interactions with customers. This system enables us to track our customers’ rental history and preferences and conduct big data analysis, thereby allowing us to selectively offer tailored rental packages and other targeted marketing efforts.

Our data centers store the information contained in our centralized databases and host our website, web-based applications and mobile applications that we have developed to manage our integrated technology platform. Our data centers and reservation system software maintain real-time communication with encrypted message protocols and credit card data. We use industry-standard commercial antivirus, firewall and patch-management technology to protect and maintain the systems and data located at our data centers. Our website is designed to be fault-tolerant, with a collection of identical web servers, providing us with the flexibility to scale up our operations without compromising customer experience.

We continue to invest in improving our technology platform to better secure the information of our customers and optimize our systems to meet the needs of our growing business. We also continue to maintain reliable information, management and operational systems, and we have implemented performance monitoring for all key systems to enable us to respond quickly to potential problems. For example, at our headquarters in Shanghai, we provide redundant utility systems, a backup electric generator and 24-hour server support. All servers have multiple, uninterrupted power supplies and redundant file systems to maximize system and data availability. Furthermore, we regularly back up our data to minimize the impact of data loss due to system failure.

Our fleet management

Leveraging on our integrated technology platform, we believe we are able to maximize our fleet utilization and control costs via “better acquisition”, “better deployment” and “better disposition”.

Vehicle acquisition

As of December 31, 2017, our total period-end fleet size was 64,946 vehicles. We have a wide variety of vehicles, which include over 300 models primarily from major automobile manufacturers such as Volkswagen, SAIC Motor, Peugeot, Hyundai and General Motors. As of December 31, 2017, approximately 30%, 15%, 13%, 13% and 7% of our vehicles were acquired from these major brands, respectively. We take into account customer preferences in fleet acquisition as we observed that customers in China are generally more sensitive to vehicle models compared to western customers. We also select vehicle models that have a liquid secondary market and seek to control fleet size of each vehicle model, thereby mitigating the pricing impact when we retire such vehicle model. In addition, in anticipation of the growing environmental awareness in Chinese market, we were the first car service provider in China to add alternative energy vehicles to our fleet to capitalize on a growing demand for such vehicles. The acquisition decision is made based on disciplined and systematic analysis, assisted by our proprietary demand forecast model and database. In addition, leveraging our large fleet size and procurement needs, we are able to directly negotiate with vehicle manufacturers and benefit from economies of scale through our centralized vehicle procurement. We also maintain good relationships with car dealers as an alternative channel for our vehicle procurement. As China’s car dealers tapped into used car sales market, in late 2014, we started to have some program car arrangements with car dealers, and in some cases with used car sales brokers and online platforms. Program cars refer to vehicles of which disposal price and holding period have been predetermined and fixed by agreements. Pursuant to program car agreements, we have the option to sell, and car dealers have the obligation to repurchase, or in some cases, used car sales brokers/online platforms have the obligation to purchase, our vehicles at a specified repurchase price and after a specified holding period (typically 12 to 24 months), subject to certain vehicle condition, mileage and holding period requirements. In 2015, 2016 and 2017, approximately 29%, 49% and 60% of the respective period-end fleet size were subject to such program car arrangements. The percentage of our newly purchased vehicles subject to such program car arrangements in future periods depends on a number of factors, including our expectations for future used car prices, our seasonal needs and the availability and attractiveness of car dealers’ program car arrangements.

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We have financed our vehicle purchases through a variety of sources including our share issuances, note offering, sales of our strategic investments, bank borrowings and loans from third-party financing companies.

After purchasing a vehicle, we apply to the relevant government authority to obtain a license plate, purchase insurance for the vehicle and install a GPS-based tracking device to enable our proprietary fleet management system to monitor the vehicle before deploying the vehicle to our car rentals or car services fleet. Upon completion of these steps, we consider the vehicle fully operational and available for service. The price of a license plate, if any, varies greatly depending on the city in which we intend to obtain a license for the vehicle, as well as by local market conditions.

Vehicle deployment

Based on our operating experience, the peak time of our car rentals typically falls on weekends and public holidays, while peak time of our car services typically falls on weekdays. We are able to optimize fleet utilization by efficiently allocating our fleet resource to capture the complementing demand cycles of different services we offer. Our dynamic pricing system allows us to better leverage supply-demand trends in local markets.

In addition, GPS tracking devices and our proprietary fleet management system enable us to monitor our fleet on a real-time basis to optimize the geographic allocation of our fleet. We also conduct personal identity verification and credit check procedures on each of our customers before the vehicles are handed over to them. These measures help minimize our risk of car-theft.

Repair and maintenance

As of December 31, 2017, we maintained 29 in-house vehicle repair and maintenance centers in 19 major cities in China, such as Shanghai and Beijing, which provide basic routine repair and maintenance functions for our local fleet. As of December 31, 2017, our repair and maintenance team consisted of 552 employees. We also engage qualified third-party contractors to perform major repair functions in other cities where we do not have such in-house centers. We expect to open additional in-house vehicle repair and maintenance centers in cities where our management determines that the size of our local fleet has justified the costs of such an in- house center. We expect such additional centers to bring benefits of economies of scale as we continue to expand our fleet size and geographical footprint.

Vehicle dispositions

We generally hold vehicles in our fleet for a term of three to four years, except for program cars which typically have a holding period of 12 to 24 months. We have developed an internal rating system to assess the general conditions of our vehicles, and dispose of our used vehicles through a variety of disposition channels, including auctions, brokered sales, dealers and online used car marketplaces, according to the rating results. We also maintain a well-managed vehicle disposition system with a deliberated decision making process taking into consideration market timing, disposal price and seasonality, pursuant to which we would adjust the holding period of our vehicles. For vehicles subject to program car arrangements, we have the option to sell, and car dealers have the obligation to repurchase, or in some cases, used car sales brokers/online platforms have the obligation to purchase, our vehicles at a specified repurchase price and after a specified holding period (typically 12 to 24 months), subject to certain vehicle condition, mileage and holding period requirements. Repurchase prices of program cars are generally based on a predetermined percentage of original vehicle cost and the month in which the vehicle is repurchased. We calculate the depreciation costs of such vehicles separately, based on their respective contractual repurchase prices and holding periods, and adjust the depreciation costs if the repurchase conditions of such vehicles are not met or we elect not to sell such vehicles as program cars. We believe program car arrangements could hedge certain risk from fluctuations in used car prices in the secondary market and offer additional alternatives of our vehicle acquisition and disposal channels.

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Competition

The car rental and car service industry in China is competitive and fragmented. For car rentals, we compete primarily on the basis of rental price, user experience, brand recognition, convenience of service locations, geographic coverage and service quality. For car services, we compete primarily on the basis of service quality, ability to provide tailored services, and, to a lesser extent, service charge. We believe that the prominence and reputation of our brand, the quality of our services, our nationwide service network and our advanced, proprietary technology platform differentiate us from our competitors.

As we provide comprehensive service offerings, we compete with different market participants in different market sectors at different levels. For car rentals, we compete with both national and regional players, such as Shenzhou, Didi and Shouqi. For business-to-business car services, we primarily compete with Avis China and Yongda. In late 2014, we started to expand our car services to a business-to-consumer model, primarily through Ctrip’s website, mobile applications and offline channels. Although it is only complementary to our business-to-business oriented car services, we may face competition from business-to-consumer car services providers such as Didi, UCAR (an affiliate company of Shenzhou), Yidao and Shouqi, all of which are GPS-based mobile taxi and car hailing service providers. In April 2017, we launched car sharing business initiative in Shanghai and Guangzhou. However, our car sharing business may compete with other national and regional car sharing players, such as EVCARD (operated by Shanghai International Automobile City EV Operation and Service Co., Ltd.), Car2Go (operated by Daimler Mobility Services), GoFun (operated by Shouqi) and ToGo (operated by Beijing Tuge Technology Co., Ltd.).

Insurance

For car rentals, we charge customers for basic insurance coverage on an hourly or daily basis, and we encourage our customers to purchase through us supplementary coverage in addition to the basic insurance. If the damages caused by our customers exceed the insurance coverage, our customers bear the exceeding liability.

For car services, we bear higher risks and liabilities and typically purchase insurance coverage with higher limits. We are exposed to claims for personal injury or death and property damage as a result of automobile accidents involving vehicles operated by our drivers or our contracted service providers. We purchase motor vehicle damage insurance, third-party liability insurance, compulsory traffic accident insurance, passenger injury insurance, and other insurance coverage that our management considers adequate to protect our assets and operations under different situations. If we have a low accident rate of our fleet, we may benefit from the “no-claim discount” and enjoy lower insurance premium when purchasing relevant insurance for our fleet. We believe that the amount and nature of our insurance coverage are adequate and in line with the market practice in China.

Any successful claim against us beyond the scope or limits of the insurance coverage of us or our contracted service providers may have a material adverse effect on our business, financial condition and results of operations.

Intellectual Property and Trademark

We believe our proprietary technology platform is critical to our business in China. As of December 31, 2017, we registered 30 software copyright in China.

We believe brand recognition is key to our success. As of December 31, 2017, we registered 321 trademarks, of which 302 trademarks were registered in the PRC and 19 trademarks were registered in other countries. Our registered trademarks include “eHi Car Rental” and , , and other trademarks in connection with our brand name “eHi” and associated logos that we use or plan to use to market our services or to prevent others from competing with us by using similar logos. In addition, as of December 31, 2017, we registered 219 domain names in connection with our brand name to prevent any dilution of our brand name.

Pursuant to the global affiliation agreement with Enterprise, we have granted Enterprise, in certain designated territories, a royalty free license with the right to grant sublicenses to use certain of our trademarks, service marks, trade names, signages, logos, symbols and designs associated with the name “eHi” for the purpose of pursuing referral business to us, processing such referrals and servicing business referred to Enterprise by us, and Enterprise has granted us, in certain designated territories, a reciprocal royalty free license with the right to grant sublicenses to use certain of its trademarks, service marks, trade names, signages, logos, symbols and designs associated with the names “Enterprise,” “Enterprise Rent-A-Car,” “Alamo,” “Alamo Rent A Car,” “National” and “National Rent A Car” for similar purposes.

Chinese Government Regulations

This section sets forth a summary of the significant regulations or requirements that affect our business activities in China or our shareholders’ rights to receive dividends and other distributions from us.

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Regulations on foreign investment in rental industry

According to the Category of Industry Guideline for Foreign Investment promulgated by MOFCOM and the NDRC, which was revised in 2007, 2011, 2015 and 2017, respectively, foreign investment in general rental business is permitted. The Administration Measures on Foreign Investment in Rental Industry that was promulgated by MOFCOM on February 3, 2005 and subsequently amended on October 28, 2015 by MOFCOM applies to foreign-invested enterprises that operate general rental or leasing businesses in China, including car rental businesses. Under this regulation, foreign investors of a foreign-invested enterprise operating car rental or financial leasing business shall have total assets of not less than US$5 million and the foreign invested rental company shall follow the general requirements of PRC Company Law and obtain approval from MOFCOM or its relevant local counterparts for its incorporation. According to this regulation, a foreign-invested rental company are subject to the following requirements: (i) its registered capital shall comply with the relevant provisions of the PRC Company Law; (ii) it shall comply with the relevant provisions concerning the registered capital and the total amount of investment of a foreign-invested enterprise; and (iii) the duration of operation of a foreign-invested rental company in the form of limited liability company shall generally not exceed 30 years. A foreign-invested financing leasing company shall meet the following requirements: (i) its registered capital shall be no less than US$10 million; (ii) the duration of operation of a foreign-invested financing leasing company in the form of limited liability company shall generally not exceed 30 years; and (iii) it shall have appropriate professionals and its senior management personnel shall have appropriate professional qualification with at least three years of experience in the sector.

Our primary PRC subsidiaries, eHi Rental and eHi Jiangsu, as foreign-invested enterprises that operate car rentals business, and our PRC subsidiaries, Shanghai Taihao and Shanghai Taide, as foreign-invested enterprises that operate financial leasing business, have obtained the approvals from the relevant local branches of MOFCOM pursuant to the above-mentioned regulations.

Regulations on car rental and car service industry

General requirement on vehicles

Regulations applicable to all automotive vehicles generally apply to rental vehicles. According to the Road Traffic Safety Law promulgated by the NPC Standing Committee in October 2003, which was amended in December 2007 and April 2011, respectively, all automotive vehicles are required to be registered with relevant local administration authorities. Vehicle registration certificates, vehicle plates and vehicle licenses shall be obtained from the same authorities, and the compulsory traffic accident insurance shall be purchased for each vehicle. We obtain vehicle registration certificate, vehicle plate and vehicle license and purchase compulsory traffic accident insurance for each vehicle before its operation.

There are additional requirements for rental vehicles. In most cities, the usage stated in the vehicle licenses of such vehicles shall be registered as rental or operational. Some cities require additional licenses or vehicle plates for such vehicles. For instance, in Shanghai, Nanchang, Suzhou, Wuxi, Shenyang, Dalian, Wuhan and Kunming, a special transport license or passenger rental vehicle license is required for each rental vehicle. In Shanghai, special vehicle plates shall be obtained for rental vehicles. In Beijing, Guangzhou, Hangzhou and Chongqing, filing with relevant local authority is required for rental vehicles. However, local practices differ and some of these requirements are not strictly implemented or may be modified or suspended by the local administration authorities in practice. Due to various reasons, we have not met all these requirements, which may subject us to penalties and other administrative actions. See “Risk Factors—Risks related to doing business in China—Failure in obtaining all of the requisite permits, licenses or making all of the requisite filings or registrations or meeting other regulatory requirements for operating car rentals and car services business in China by us or any third-party service provider who cooperates with us may subject us to fines or other administrative actions” for more details.

Car rental related services

As the car rental industry is at an early stage of development in China, the legislation of the car rental industry continues to evolve. The MOT and the NPC, the predecessor of NDRC, promulgated the Interim Rules on Administration of Car Rental Industry in 1998, which was abolished in 2007. Since then, there have been no national laws and regulations in place to specifically regulate the car rental industry in China except the Notice on Promoting the Healthy Development of Car Rental Industry, or the 2011 MOT Notice, promulgated in April 2011 by MOT. The 2011 MOT Notice sets forth general guidelines for the car rental industry in China and requires local government authorities to (i) establish and improve local rules and regulations on car rental business, (ii) promptly formulate local development plans for the car rental industry, (iii) encourage large and well-managed car rental companies of good reputation to set up branches and establish national or regional networks without any restrictions due to local protectionism, (iv) enhance the administration of the car rental business, including requirements to obtain and carry a valid permit or license for each rental car, and prohibitions of car rental companies from engaging in road transportation businesses without appropriate approval, (v) encourage car rental companies to innovate and develop new types of car rental services, (vi) create a favorable environment for the development of the car rental industry, and (vii) enhance the administration and supervision of the car rental industry.

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The Road Transportation Regulation promulgated by the State Council in 2004, amended in 2012 and 2016, regulates road transportation businesses (including road passenger transportation business and road freight transportation business) and other business operations related to road transportation (including operations of transportation terminals (sites), vehicle maintenance and repair businesses and training of drivers). According to the Administrative Provisions for Foreign Investment in the Road Transport Industry promulgated by MOFCOM and MOT in 2001 and amended in 2014, foreign investors are generally prohibited from holding more than 49% of the equity interest in PRC entities engaged in road passenger transportation business. Neither the Road Transport Regulation nor the Administrative Provisions for Foreign Investment in the Road Transportation Industry, however, include any provisions relating to car rental businesses.

The Administrative Rules on Urban Taxis promulgated by the Ministry of Construction and the MPS, which became effective in 1998, regulates the planning, operations, administration and services related to urban taxis, which was abolished in March 2016. MOT promulgated the Administrative Regulations on Operation and Services of Cruise Taxis in September 2014, which became effective on January 1, 2015 and amended in August, 2016. According to such regulations, the term “cruise taxis operating service” refers to operating activities that provide passenger transport services at the direction of the passengers and charge fees according to travel mileage and travel time by means of seven-under seats car with identifications sprayed and installed as a taxi and driving services, which tour and pick up customers on the roads.

The regulatory distinctions between car rental businesses and road transportation businesses or taxi businesses are not clear. As a result, local government authorities in China have imposed different requirements on the operating entities and/or vehicles that are involved in car rental businesses in the respective province or city.

Car rental services not accompanied by driving services

Set forth below is a summary of local rules and regulatory requirements in China regarding the provision of car rental services, which generally do not contemplate the provision of car rental services concurrently with the provision of driving services.

· Some provinces and cities do not have any specific local rules regulating car rental services.

· Some local authorities promulgated local rules specifically regulating the car rental businesses. For example, the relevant local authority of Beijing promulgated specific local rules for car rental operations in Beijing including a notice issued on August 12, 2014. Car rental service providers in Beijing are required to make filings with the local transportation authority before they may commence their car rental businesses and make subsequent filings with the authority for any changes in the number of vehicles for rental and other relevant operational conditions and car rental service providers are strictly prohibited from facilitating to illegal operators. Beijing eHi Car Rental Co., Ltd. and the Beijing branch of eHi Rental duly completed their filings with the local authority in Beijing on December 15, 2010 and renewed their filing certificate on June 19, 2014 and July 25, 2017 respectively. The filing certificate is valid until July 24, 2020.

· Although the Road Transportation Regulation does not include any provisions relating to car rental businesses, the local road transportation rules of certain provinces and cities, such as Shandong, Sichuan and Hubei and Suzhou require car rental service providers to obtain road transportation licenses from local authorities or make filing with local authorities covering their car rental businesses.

· In some provinces and cities, local rules regulating taxi businesses also partially cover car rental operations, which may impose different requirements on car rental service providers from taxi service providers. For example, according to Shanghai Municipal Administrative Rules on Taxis, car rental service providers in Shanghai are required to obtain car rental licenses, which are different from taxi operation licenses, from the local transportation authority before commencing car rental businesses. eHi Rental obtained such a license on April 15, 2009 and renewed such license on December 15, 2014 and December 22, 2017 respectively. The license is valid until December 31, 2020. Under the local rule in Shanghai, the total number of vehicles for rental, parking space, service locations and networks of car rental service providers are subject to the overall planning of the municipal government.

· Some local authorities promulgated local rules, such as those in Beijing, Guangdong Province, Hubei Province, Chongqing, Xi’an and Kunming to require that the owner of a rental vehicle must be the same person operating the rental services.

In addition, among those provinces and cities that have promulgated local rules to regulate car rental business, the actual practice of the local authorities may differ from their local rules.

Primarily as a result of the inconsistency in local rules and practices as described above, we have not met all of the qualifications and regulatory requirements in all of the provinces and cities where we currently operate our car rental businesses.

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Car rental services accompanied by driving services

In addition to the regulatory requirements mentioned above, under the current PRC regulatory environment, our car rental services accompanied by driving services may subject us to additional approvals, licenses, permits or other regulatory requirements.

The Road Transportation Regulation requires an operator of road passenger transportation businesses to have appropriate vehicles, qualified drivers, sound safety systems and obtain a road transportation operation license covering passenger transportation. The 2011 MOT Notice provides that a car rental enterprise must obtain appropriate approval before it may conduct road passenger transportation business. However, neither the Road Transportation Regulation nor the 2011 MOT Notice defines the term “road passenger transportation business.” According to the Administrative Rules on Road Passenger Transportation and Passenger Transportation Terminals promulgated by MOT in 2005 and last amended in 2016, the term “road passenger transportation services” refers to public bus services, chartered bus services and travel bus services, which means transportation services provided to unspecified passengers on fixed routes at fixed rate and stops or to chartered groups of passengers or to tourists from or to a tourist attraction. We do not provide public bus services, chartered bus services or travel bus services. In particular, our car rental services are not provided to any unspecified passengers. Therefore, we do not deem any of our operating subsidiaries as a “road passenger transportation service” provider. According to the Administrative Regulations on Operation and Services of Taxis, “taxis operating service” refers to operating activities that provide passenger transport services at the direction of the passengers and charge fees according to travel mileage and travel time by means of seven-under seats car with identifications sprayed and installed as a taxi and driving services, which tour and pick up customers on the roads. According to such regulations, an enterprise engaged in taxi services is required to obtain a taxi operation license and meet other relevant requirements. Our chauffeured car services, which may include driving services under certain circumstances, charge clients based on a number of factors, such as vehicle model, the type of services, the length of rental period, the specific time and location of pick-up and drop-off and price competition. Therefore, we do not believe any of our operating subsidiaries is a taxi service provider.

At local levels, some provinces and cities, such as Zhejiang, Shanxi, Jilin, Chongqing, Hubei, Sichuan, Guizhou, Shandong, Jiangxi, Hunan and Shaanxi, have promulgated local road transportation regulations, which generally restrict an entity engaged in car rental businesses from concurrently providing driving services. In August 2011, Shanghai Municipal Transport and Port Authority issued Certain Opinions on Standardizing the Regulation of Car Rental Industry, which provides that car rental companies may not provide drivers for the vehicles they rent but may at the requests of their customers sign service agent contracts on behalf of their customers with third-party labor service companies, under which the labor service companies may provide drivers to car rental customers, and the car rental companies are obligated to provide training to drivers provided by the labor service companies. A few local authorities have also imposed qualification requirements on drivers engaged by a car rental service provider.

In order to minimize the uncertainties and potential legal risks caused by the ambiguities of the laws, regulations and rules promulgated by various levels of legislative bodies and authorities in China and their enforcement in practice, we established Shanghai Smart Brand to primarily engage in the provision of driving services in April 2011. We have transferred substantially all of our drivers to Shanghai Smart Brand, its subsidiaries or branches. Our driving services are currently provided solely by Shanghai Smart Brand, its subsidiaries or branches, or at the requests of our customers through third-party driving service providers that cooperate with us, and our car rental services are provided by our other subsidiaries that do not provide driving services. See “Risk Factors—Risks related to doing business in China—Failure in obtaining all of the requisite permits, licenses or making all of the requisite filings or registrations or meeting other regulatory requirements for operating car rentals and car services business in China by us or any third-party service provider who cooperates with us may subject us to fines or other administrative actions” for more details.

Regulations on penalties for violation of traffic laws and regulations

According to Road Traffic Safety Law, penalties for violations of the law on road traffic safety include: disciplinary warning, fine, temporary suspension or revocation of motor vehicle driver’s license and detention. The traffic administration department of the public security authority may, on the basis of the technical traffic monitoring records, impose a penalty on the owner or manager of the motor vehicle involved in violation of law. If the driver can be identified, it may impose a penalty on the driver.

Motor vehicles are subject to periodic inspection. According to Rules on Motor Vehicle Registration promulgated on May 27, 2008 and amended on September 12, 2012 by the MPS, before owners of motor vehicles apply for inspection on their motor vehicles, all the traffic violations related to their motor vehicles shall be settled.

Regulations on vehicle insurance

Pursuant to Road Traffic Safety Law, compulsory third party liability insurance must be purchased for each vehicle. Pursuant to Regulations on Compulsory Traffic Accident Liability Insurance for Motor Vehicles promulgated on March 21, 2006, amended on December 17, 2012 and February 6, 2016 by the State Council, owners or managers of motor vehicles driving on roads within China shall apply for the compulsory traffic accident liability insurance for their motor vehicles.

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Regulations on motor vehicle repair services

The Road Transportation Regulation requires that motor vehicle repair services shall obtain approval from competent road transport administration authority before they start their business.

According to Administrative Rules on Motor Vehicle Repair promulgated on June 24, 2005, amended on August 8, 2015 and April 19, 2016 by the MOT, anyone that applies to engage in operation of motor vehicle repair services shall have (i) an appropriate site for motor vehicle repair; (ii) necessary equipment and facilities; (iii) necessary technical personnel; (iv) a sound system for management of motor vehicle repair; and (v) necessary environmental protection measures.

In addition, motor vehicle repair business shall comply with regulations and rules promulgated by local government authorities of the provinces and cities where such business is operated. Such local regulations and rules may provide additional qualifications and detailed requirements for motor vehicle repair operators.

Regulations on limitation of use and purchase of motor vehicles

Certain cities in China have issued local regulations or rules to control the number of motor vehicles. For example, Beijing imposes an annual quota on the issuance of new vehicle license plates. Potential motor vehicle purchasers need to meet specific criteria and enter into a monthly draw. Only candidates who have been allocated a plate in the draw can apply to have their motor vehicles registered with the local vehicle administration. Shanghai is implemented an auction system for the issuance of new vehicle license plates. Under this system, each applicant is required to submit a “blind” bid for a vehicle license plate. Only successful bidders can apply to have their motor vehicles registered with the local vehicle administration. There are similar policies that restrict the issuance of new vehicle license plates in Guangzhou, Tianjin, Hangzhou and Guiyang.

In addition, some cities in China such as Beijing, Shanghai, Shijiazhuang, Nanjing, Wuhan, Harbin, Nanchang, Chengdu, Guiyang, Hangzhou, Changchun, Lanzhou, Guangzhou and Tianjin also have promulgated regulations or rules to prohibit vehicles with certain license plate from driving on road. For instance, in Beijing vehicles with restricted tail number of license plates are not allowed to drive within five rings road (excluding the fifth ring road) during 7:00 am to 20:00 pm each workday, and the vehicles with non-Beijing license plates shall also be subject to such restrictions. In Shanghai vehicles bearing non-Shanghai license plates are not allowed on certain roads during specified rush hours on workdays.

Regulations on online car hailing businesses

In July 2016, MOT, together with other six governmental authorities, issued the Car Hailing Measures. The Car Hailing Measures require online car-hailing platform operators to obtain licenses from governmental authorities, be capable of providing online and offline services and meet certain conditions. The vehicles and drivers shall also meet certain conditions and obtain the online car hailing vehicle licenses and driver licenses respectively issued by the relevant governmental authorities to engage in online car hailing business. Following the Car Hailing Measures, some local governmental authorities in cities of Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Qingdao, Chongqing city governments and many other cities further adopted policies regarding the online car-hailing business operations and services in their administrative regions. In addition to the conditions set out in the Car Hailing Measures, almost all those local governments require that the vehicles engage in online car hailing business operations must be registered in the city administrative regions and meet certain vehicle conditions such as minimum wheel base, installing GPS system and emergency alarm system. Beijing and Shanghai city governments specially require the drivers engage in online car hailing business operations to have the city census register.

In February 2018, MOT issued the Administration Method on Operation of Supervision Information Interactive Platform of Online Car Hailing Business, which provides that relevant urban transportation authorities shall timely log in and transmit relevant licensing information of the online car hailing platform operators, cars and drivers through the supervision information interactive platform.

Regulations on financial leasing

In September 2013, MOFCOM issued the Administration Measures of Supervision on Financial Leasing Enterprises, or the Financial Leasing Measures, to further strengthen and administer the business operation of financial leasing companies. Under Financial Leasing Measures, financial leasing companies are permitted to operate the following business: direct leasing, subleasing, sales and leaseback, leveraged leasing, trust leasing and joint leasing. In addition, financial leasing companies may also operate business related to financial leasing, such as purchase of leasing property, residual disposal and maintenance of leasing property, consultancy and security for leasing transactions and other business as approved by the competent authority. A financial leasing company shall not engage in: (i) such financial businesses as deposit taking, loan issuing, and loan issuing on commission, (ii) illegal fund-raising activities in the name of financial leasing, and (iii) inter-bank borrowing and other businesses without the approval from relevant authorities.

The PRC Contract Law promulgated on March 15, 1999 sets forth mandatory rules on financial leasing contracts. Under the PRC Contract Law, a financial leasing contract shall be made in written form and shall contain such clauses as the name of the leased object, quantity, specifications, technical performance, inspection method, lease term, composition of rent, payment term, payment method and kind of currency for the payment of rent, and the ownership over the leased object at the expiration of the lease term. The lessor enjoys the ownership over the leased object during lease period. If the lessee goes bankrupt, the leased object shall not fall into the category of bankrupt property. Within the period of possession over the leased object by the lessee, if the leased object causes any personal injury or property loss to a third party, the lessor shall not bear any liability.

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Regulations on Internet content provision service

The Telecommunications Regulations, promulgated by the State Council in 2000, amended in 2014 and 2016, draw a distinction between “basic telecommunication services” and “value-added telecommunication services.” Internet content provision service is a subcategory of value-added telecommunications services. The State Council issued the Administrative Measures on Internet Information Services concurrently with the Telecommunications Regulations in 2000 and subsequently amended it in 2011 to regulate Internet content provision services. According to these measures, commercial Internet content provision service operators must obtain a value-added telecommunication business operating license, or ICP license, from the appropriate telecommunication authorities in order to conduct any commercial Internet content provision operations in China, while non-commercial Internet content provision service operators shall make filings with the appropriate telecommunication authorities before conducting non-commercial internet content provision operations. These measures further stipulate that entities providing Internet content provision services regarding news, publishing, education, medicine, health, pharmaceuticals and medical equipment must procure the approval of the national government authorities responsible for such areas prior to applying for an operating license from the relevant government authorities.

According to the Administrative Rules for Foreign Investments in Telecommunications Enterprises, issued on December 11, 2001 by the State Council and effective as of January 1, 2002, amended on September 10, 2008 and February 6, 2016, a foreign investor is prohibited from owning more than 50% equity interest in a PRC entity providing value-added telecommunications services and the major foreign investor(s) in a foreign invested valued-added telecommunications enterprise is required to be in good standing and have the relevant experience in operating a value-added telecommunications business. On July 13, 2006, the Ministry of Information Industry, or the MIIT publicly released the Notice on Strengthening the Administration of Foreign Investment in Operating Value-added Telecommunications Business, or the MIIT Notice, which reiterates certain provisions under the Administrative Rules for Foreign Investments in Telecommunications Enterprises prohibiting a domestic company that holds an ICP license, from renting, transferring or selling a telecommunications license to foreign investors in any form, or providing any resources, sites or facilities to foreign investors that intend to conduct value-added telecommunication business illegally in China. Trademarks and domain names that are used in the provision of Internet content services must be owned by the ICP license holder.

Our current major operations are not subject to the ICP license requirements. To further expand our Internet and mobile services, in March 2014, we entered into a series of contractual arrangements with eHi Information and its shareholders. In January 2015, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Car Sharing and its shareholders. Both eHi Information and eHi Car Sharing are our variable interest entities in China. eHi Information obtained an ICP license from the relevant telecommunication authorities on September 24, 2014. eHi Car Sharing is currently not yet in operation.

Regulations on information security

The National People’s Congress has enacted legislation that prohibits use of the internet that breaches the public security, disseminates socially destabilizing content or leaks state secrets. Breach of public security includes breach of national security and infringement on legal rights and interests of the state, society or citizens. Socially destabilizing content includes any content that incites defiance or violations of PRC laws or regulations or subversion of the PRC government or its political system, spreads socially disruptive rumors or involves cult activities, superstition, obscenities, pornography, gambling or violence. State secrets are defined broadly to include information concerning PRC national defense, state affairs and other matters as determined by the PRC authorities.

Pursuant to applicable regulations, ICP operators must complete mandatory security filing procedures and regularly update information security and censorship systems for their websites with local public security authorities, and must also report any public dissemination of prohibited content.

On December 27, 2015, the Standing Committee of the National People’s Congress promulgated Anti-Terrorism Law, which took effect on January 1, 2016. According to the Anti-Terrorism Law, telecommunication service operators or internet service providers shall (i) carry out pertinent anti-terrorism publicity and education to society; (ii) provide technical interfaces, decryption and other technical support and assistance for the competent departments to prevent and investigate terrorist activities; (iii) implement network security, information monitoring systems as well as safety and technical prevention measures to avoid the dissemination of terrorism information, delete the terrorism information, immediately halt its dissemination, keep relevant records and report to the competent departments once the terrorism information is discovered; and (iv) examine customer identities before providing services. Any violation of the Anti-Terrorism Law may result in severe penalties, including substantial fines.

In November 2016, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law, which became effective on June 1, 2017. In accordance with the Cyber Security Law, network operators must comply with applicable laws and regulations and fulfill their obligations to safeguard network security in conducting business and providing services. Network service providers must take technical and other necessary measures as required by laws, regulations and mandatory requirements to safeguard the operation of networks, respond to network security effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data.

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In addition, the State Secrecy Bureau has issued provisions authorizing the blocking of access to any website it deems to be leaking state secrets or failing to comply with the relevant legislation regarding the protection of state secrets during online information distribution. Specifically, internet companies in China with bulletin boards, chat rooms or similar services must apply for specific approval prior to operating such services. Furthermore, the Provisions on Technological Measures for Internet Security Protection, promulgated by the Ministry of Public Security, require all ICP operators to keep records of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations. The Network Information Protection Decision states that ICP operators must request identity information from users when ICP operators provide information publication services to the users. If ICP operators come across prohibited information, they must immediately cease the transmission of such information, delete the information, keep relevant records, and report to relevant government authorities.

Regulations on registration of branch companies

According to the amended PRC Company Law, which became effective on March 1, 2014 and the amended Administration Regulations of Company Registration, which became effective on March 1, 2016, a company may establish branch companies, which are entities without the status of a legal person and conduct business outside the domicile of the company. Branch companies must be registered at the competent government agency and obtain a business license. The amended Administration Regulations of Company Registration, set forth the detailed formalities on the registration of branch companies.

Our PRC subsidiaries have registered 513 branches and obtained a business license for each of them as of December 31, 2017.

Regulations on employment contracts

The Labor Contract Law of the PRC was promulgated on June 29, 2007, as amended on December 28, 2012 and effective on July 1, 2013. On September 18, 2008, the PRC State Council issued the PRC Labor Contract Law Implementing Rules, which became effective as of the date of issuance. The Labor Contract Law and its Implementing Rules govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of, and the amendment to employment contracts. To establish an employment relationship, a written employment contract must be signed. In the event that no written employment contract was signed at the time of establishment of an employment relationship, a written employment contract must be signed within one month after the date on which the employer starts to use the employee’s services. An employer may terminate the labor agreement of an employee under certain specified circumstances and in some cases, such termination can only be done after fulfillment of certain procedural requirements, such as 30 days’ prior notice or upon payment of one month’s salary in lieu of such notice. In certain cases, the terminated employee is entitled to receive a severance payment equal to the average monthly salary during the 12-month period immediately preceding to the termination (inclusive of all monetary income such as base salary, bonus, allowances, etc.), for each year of service up to the date of termination. If an employer terminate an labor contract in any circumstance other than those specified under the Labor Contract Law and its implementing rules, including termination without cause, the employer must either reinstate and continue to perform the employee’s employment contract or pay the employee damages calculated at twice the rate for calculating the severance payment, subject to the employee’s own request. In the case that the employee requests for damages, the employer is not required to pay other severance or the remainder of the amount owed under the employment contract unless the employment contract has otherwise provided for.

In addition, according to the Labor Contract Law and its implementing rules, in order to enforce the non-compete provision with the employees after the termination or ending of employment relationship, the employer shall compensate the employees on a monthly basis during the non-competition period after such termination or ending of employment.

On January 24, 2014 the Ministry of Human Resources and Social Security promulgated Interim Provisions on Labor Dispatching, or Circular 22, effective from March 1, 2014, which provides that an employer shall strictly control the number of employees under labor dispatching arrangements and dispatched employees can only be used in temporary, ancillary and replaceable positions. The number of dispatched workers used by an employer shall be reduced to no more than 10% of the total number of its employees within two years after March 1, 2014. However, the labor contract and labor dispatching agreement lawfully concluded prior to the promulgation date of the Decision of the Standing Committee of the NPC on Revising the “Labor Contract Law of the PRC” may continue to be performed until the expiry of the above contract or agreement if expiry date of such contract or agreement is later than the day after two years calculating from March 1, 2014. If the employer fails to reduce the number of dispatched employees as required by Circular 22 and could not correct its practice after receiving warnings from government authority, the employer may be subject to a fine ranging from RMB1,000 to RMB5,000 per dispatched employee.

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Regulation on houses lease

According to Administrative Measures for the Leasing of Commodity Housing promulgated by Ministry of Housing and Urban- Rural Development on December 1, 2010, within 30 days after the execution of the housing lease contract, the parties involved shall handle the filing procedure of the leasing of housing at local competent authorities. Failure to completion of such filing may result in fines up to RMB10,000.

Regulation on PRC business tax and VAT

Prior to January 1, 2012, pursuant to the Provisional Regulation of China on Business Tax and its Implementing Rules, an entity or individual rendering services in China was generally subject to a business tax at the rate of 5% on revenues generated from the provision of such services. Since January 1, 2012, the MOF and the SAT have started to implement the VAT Pilot Program, which imposes VAT in lieu of business tax for certain industries in Shanghai. Since August 1, 2012, the VAT Pilot Program has been expanded to and implemented in other regions, including Beijing, Tianjin, Jiangsu, Zhejiang, Anhui, Fujian, Hubei, Guangdong. On May 24, 2013, the MOF and the SAT jointly issued Notice 37, which expanded the VAT Pilot Program nationwide starting on August 1, 2013. On December 12, 2013, the MOF and the SAT jointly issued Notice 106, effective on January 1, 2014, which replaced Notice 37 and improved some tax policies in the VAT Pilot Program. From May 1, 2016, the VAT were expanded to all business tax taxpayers. As a result of the VAT, an entity or individual rendering services in China is subject to VAT at the rate of 17%, 11% or 6%, as applicable.

Regulations on PRC Enterprise Income Tax on indirect transfer of non-resident enterprises

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the SAT on December 10, 2009 with retroactive effect from January 1, 2008, when a non-PRC resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposing of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, non-PRC resident enterprise, being the transferor, shall report this Indirect Transfer to the competent tax authority of the PRC resident enterprise. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if the Indirect Transfer lacks a reasonable commercial purpose and is arranged for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax at a rate of up to 10%. Circular 698 also provides that in the event that a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than their fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. In addition, SAT released SAT Public Notice (2011) No. 24, or Public Notice 24, which took effect on April 1, 2011, to clarify several issues related to Circular 698. Under Public Notice 24, the term ‘‘effective tax rate’’ refers to the effective tax rate on the gain derived from a disposition of any equity interest of an overseas holding company. There is uncertainty as to the application of Circular 698.

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Certain Issues Concerning the Enterprise Income Tax on the Indirect Transfer of Properties by Non-resident Enterprises, or Circular 7, which abolishes certain provisions of Circular 698 and Public Notice 24 and also provides more guidance on a number of issues in Circular 698. Circular 7 stipulates that when a non-resident enterprise transfers the assets (including equity interests) in an overseas holding company, which directly or indirectly owns PRC taxable properties, including shares in a PRC company (or PRC Taxable Assets), for the purposes of avoiding PRC enterprise income taxes through an arrangement without reasonable commercial purpose, such indirect transfer should be reclassified and recognized to be a direct transfer of the assets (including equity interests) of a PRC resident enterprise in accordance with the Enterprise Income Tax Law, unless the overall arrangements relating to an indirect transfer of PRC Taxable Assets fulfill one of the following conditions: (i) where a non-resident enterprise derives income from the indirect transfer of PRC Taxable Assets by acquiring and selling equity interests of a listed overseas company on a public market; and (ii) where the non-resident enterprise had directly held and transferred such PRC Taxable Assets, the income from the transfer of such PRC Taxable Assets would have been exempted from enterprise income tax in the PRC under an applicable tax treaty or arrangement. On October 17, 2017, the State Administration of Taxation, or the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Pursuant to Circular 7 and SAT Bulletin 37, both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

As Circular 7 and SAT Bulletin 37 were newly implemented, there might be limited precedents regarding the application and enforcement of Circular 7 and SAT Bulletin 37 and other related SAT notices and it remains uncertain whether such exemptions or relevant provisions of Circular 7 and SAT Bulletin 37 will be applicable to the transactions such as our future disposal of subsidiaries, acquisitions of complementary businesses, or restructuring of our organizational structure where non-PRC resident investors and PRC Taxable Assets are involved.

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Torts law

The PRC Torts Law was promulgated by the NPC Standing Committee on December 26, 2009 and became effective on July 1, 2010. According to the Torts Law, in the case of car rental, where the driver is different from the owner of the vehicle, if the driver is held liable for a traffic accident, such liability will first be covered by the insurance company within the coverage of the compulsory traffic accident insurance of the vehicle. If the insurance coverage is not sufficient, the driver shall be responsible for the remaining compensation, and the vehicle owner shall not be liable for compensation unless the owner has fault in such accident. However, if we provide driving services, where the driver is our employee or an employee dispatched by other third-party entity, if the driver causes damages or injuries to others when providing driving service, such liability will first be covered by the insurance company within the coverage of the compulsory traffic accident insurance of the vehicle. If the insurance coverage is not sufficient, we will generally be held liable for the remaining compensation.

Regulations on foreign currency exchange and dividend distribution

Foreign currency exchange

The principal regulations governing foreign currency exchange in China are the Foreign Currency Administration Regulations of 1996, as amended in August 2008 and Administration Rules of the Settlement, Sale and Payment of Foreign Exchange, or the Administration Rules promulgated by PBOC in June, 1996. Under these regulations, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions without SAFE approval except as otherwise explicitly provided by laws and regulations. However, conversion of the Renminbi for capital account items, such as direct investment, loans, repatriation of investment and investment in securities outside China, is subject to approvals of or registration with, SAFE or its competent local branches.

Under the Administration Rules, enterprises may only buy, sell or remit foreign currencies at banks that are authorized to conduct foreign exchange business after the enterprise provides valid commercial documents and relevant supporting documents and, in the case of certain capital account transactions, after obtaining approval from SAFE or its competent local branches. Capital investments by enterprises outside of China are also subject to limitations, which include approvals by the MOFCOM, SAFE and the National Development and Reform Commission, or their respective competent local branches.

On August 29, 2008, the SAFE promulgated a notice, Circular 142, regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, the SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Furthermore, on November 9, 2010, SAFE promulgated the Notice Relating to Strengthening the Administration of Foreign Exchange Businesses, which tightens the regulation on the settlement of net proceeds from overseas offerings , and requires (i) that the settlement of net proceeds must be consistent with the uses stated in the prospectus for the offering, and (ii) the submission of relevant board resolutions for the portion of proceeds that is over-subscripted or fall outside the uses stated in the prospectus. On March 30, 2015, the SAFE promulgated a Circular on Reforming of Administrative Methods Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Companies, or Circular 19, which became effective on June 1, 2015, superseding Circular 142. According to Circular 19, although it restates certain restrictions on use of investment capital in foreign currency by foreign invested company, it specifies that the registered capital of a foreign-invested company in foreign currency can be converted into RMB voluntarily and be allowed to use for equity investment in the PRC subject to certain reinvestment registration with local SAFE made by the invested company. In June 2016, SAFE promulgated SAFE Circular 16, which removed certain restrictions previously provided under several SAFE circulars, including SAFE Circular 19, in respect of conversion by a foreign-invested enterprise of foreign currency registered capital into RMB and use of such RMB capital. However, SAFE Circular 16 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, and providing loans to non-affiliated enterprises except as permitted in the business scope.

We derive substantially all of our revenues in the Renminbi, which is not a freely convertible currency. Under our current structure, our income will be primarily derived from dividend payments from our subsidiaries in China. The value of the Renminbi 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 Renminbi into foreign currencies, including the U.S. dollar, has been based on rates set by PBOC. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a band against a basket of certain foreign currencies. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar.

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Dividend distribution

The principal regulations governing distribution of dividends of a company include the amended Company Law (promulgated on December 28, 2013, effective on March 1, 2014), the amended Wholly Foreign-Owned Enterprise Law (or the WFOE Law, effective on October 31, 2000 and amended on September 3, 2016), and the amended Wholly Foreign-Owned Enterprise Law Implementing Rules (or the Implementing Rules of WFOE Law, effective on March 1, 2014).

Under the above laws and regulations, a company may pay dividends only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations after funding certain reserve funds. Sino-foreign joint venture companies may make such reservation according to the percentage determined by the board of directors. Other companies in China, including wholly foreign-owned enterprises are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of registered capital. These reserves are not distributable as cash dividends.

According to the EIT Law and the Implementing Rules dividends paid by a wholly foreign owned enterprise to non-resident enterprise may be subject to a withholding tax at the rate of 10% unless the non-resident enterprise is entitled to a lower tax rate according to applicable tax treaties or similar tax arrangements.

Under the EIT Law and its Implementing Rules, if a company incorporated outside China has its “de facto management body” located within China, the company would be classified as a resident enterprise and thus would be subject to an enterprise income tax rate of 25% on all of its income on a worldwide basis, with the possible exception of dividends received directly from another Chinese resident enterprise.

Our Chinese subsidiaries are restricted from distributing any dividends to us until they have met these requirements set out in the above laws and regulations.

Regulations on employee share options

Pursuant to the Implementing Rules of the Administration Measure for Individual Foreign Exchange, or the Individual Foreign Exchange Rule, and the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plan of Overseas-Listed Companies, or Share Option Rule, issued in January 2007 and February 2012, respectively, by the SAFE, domestic individuals who have participated in any stock incentive plan including employee stock holding plan, share option plan or similar plan in an overseas-listed company are required to register with the relevant SAFE branch and complete certain other procedures related to the share incentive plan through a PRC agent. Under the Share Option Rule, individuals in PRC including PRC citizens (including of Hong Kong, Macau and Taiwan nationals) and foreign nationals who have continuously resided in China for at least a year who participate in the share incentive plan of a same overseas listed company shall collectively appoint a qualified PRC domestic agent or a PRC subsidiary of such overseas listed company, or the PRC agent, to conduct foreign exchange registration, open bank accounts and transfer and exchange funds and an overseas entity shall be appointed to conduct exercise of option, buying and selling of relevant stocks or equities and transfer of relevant funds. The individuals’ foreign exchange income received from the sale of shares or dividends distributed by the overseas-listed company which is repatriated back to China shall first be remitted into a collective foreign exchange account opened and managed by the PRC agent before distribution to such individuals in a foreign currency or in RMB. We and our employees who are domestic individuals and have participated in our stock incentive plan, or PRC optionees, have been subject to these rules since the listing of our ADSs on the NYSE. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and legal sanctions. In addition, the SAT has issued certain circulars concerning employee share options. Pursuant to these circulars, our employees working in China who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options with relevant tax authorities and withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay and we fail to withhold their income taxes, we may face sanctions imposed by tax authorities or any other PRC government authorities.

Regulations on foreign exchange registration of offshore investment by PRC residents

On July 4, 2014, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange for Overseas Investment and Financing and Reverse Investment by Domestic Residents via Special Purpose Vehicles, or Circular 37, which replaced the Notice on Issues Relating to the Administration of Foreign Exchange for the Financing and Reverse Investment by Domestic Residents via Offshore Special Purpose Vehicles issued by SAFE in October 2005, or Circular 75. Pursuant to Circular 37, any PRC residents, including both PRC institutions and individual residents, are required to register with the local SAFE branch before making contribution to a company set up or controlled by the PRC residents outside of the PRC for the purpose of overseas investment or financing with their legally owned domestic or offshore assets or interests, referred to in this circular as a “special purpose vehicle.” Under Circular 37, the term “PRC institutions” refers to entities with legal person status or other economic organizations established within the territory of the PRC. The term “PRC individual residents” includes all PRC citizens (also including PRC citizens abroad) and foreigners who habitually reside in the PRC for economic benefit. A registered special purpose vehicle is required to amend its SAFE registration or file with respect to such vehicle in connection with any change of basic information including PRC individual resident shareholder, name, term of operation, or PRC individual resident’s increase or decrease of capital, transfer or exchange of shares, merger, division or other material changes. In addition, if a non-listed special purpose vehicle grants any equity incentives to directors, supervisors or employees of domestic companies under its direct or indirect control, the relevant PRC individual residents could register with the local SAFE branch before exercising such options. The SAFE simultaneously issued a series of guidances to its local branches with respect to the implementation of Circular 37. Under Circular 37, failure to comply with the foreign exchange registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including restrictions on the payment of dividends and other distributions to its offshore parent company and the capital inflow from the offshore entity, and may also subject the relevant PRC residents and onshore company to penalties under the PRC foreign exchange administration regulations.

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Regulations on cross-border direct investment in Renminbi

On October 12, 2011, MOFCOM issued the Notice of the Ministry of Commerce on Issues concerning Cross border Direct Investment in Renminbi which was abolished in 2013 and on December 3, 2013 the MOFCOM promulgated the Announcement on Issues relating to Cross-border Direct Investment in RMB, effective from January 1, 2014. Under this announcement, the “cross- border direct investment in RMB “shall refer to the direct investment activities conducted by foreign investors (including the investors from Hong Kong, Macau and Taiwan) in China with offshore RMB funds obtained legally, including, among other things, the establishment of new enterprises, increase of capital, shareholding or merger and acquisition of domestic enterprises. The cross-border direct investment in RMB by a foreign investor or reinvestment by its foreign-invested enterprise shall conform to the requirements of laws, regulations and relevant provisions on foreign investment and comply with the foreign investment industry policies of China and the provisions on security review of foreign investment mergers and acquisitions and anti-monopoly review. No foreign-invested enterprise is allowed to use the funds of cross-border direct investment in RMB for investment, directly or indirectly, in negotiable securities and financial derivatives in China (except for strategic investment in listed companies) or for entrusted loans. On October 13, 2011, the PBOC issued the Management Rules on the Settlement of Foreign Direct Invested Renminbi, which provide that foreign invested enterprises with RMB-dominated foreign direct investment must register with the PBOC or its local branch after obtaining the permit from MOFCOM and the business license.

Regulations on intellectual property rights

China has adopted comprehensive legislation governing intellectual property rights, including copyright, trademark, patents and domain names.

Copyright

The Copyright Law of the PRC was adopted in 1990 and amended in 2001 and 2010. Copyrighted software is protected under the Copyright Law and other regulations. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.

In order to strengthen the protection of the rights and interests of computer software copyright owners, the State Council promulgated the Regulations on the Protection of Computer Software on December 20, 2001, which became effective on January 1, 2002 and amended it in 2011 and 2013, and the State Bureau of Copyright promulgated the Measures on the Registration of Computer Software Copyright on February 20, 2002, which was subsequently amended by the State Council in 2011. For the software copyrights of legal persons or other organizations, the term of protection for the software copyright is 50 years, ending on December 31 of the fiftieth year after the first publication of the software. The software copyright owner may follow registration procedures with the software registration institution authorized by the State Bureau of Copyright and obtain a Registration Certificate of Software Copyright, which is the prima facie proof of the registered copyright ownership. As of December 31, 2017, our PRC subsidiaries had registered the copyrights of 30 computer software in the PRC, and have obtained all Registration Certificates of Software Copyright.

Trademark

As of December 31, 2017, our PRC subsidiaries had registered 321 trademarks, of which 302 trademarks were registered in the PRC and 19 trademarks were registered in other countries. Registered trademarks are protected under the Trademark Law adopted on August 23, 1982 (effective on March 1, 1983) and amended on February 22, 1993 (effective on July 1, 1993), October 27, 2001 (effective on December 1, 2001) and August 30, 2013 (effective on May 1, 2014), the Trademark Office of the State Administration of Industry and Commerce (or the Trademark Office) is responsible for the registration and administration of trademarks throughout China and grants a term of ten years to registered trademarks. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark that has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark shall not prejudice the existing right of others obtained by priority, nor shall any person register in advance a trademark that has already been used by another person and has already gained “sufficient degree of reputation” through that person’s use. After receiving an application, the Trademark Office will make a public announcement if the relevant trademark passes the preliminary examination. Within three months after such public announcement, any person may file an opposition against a trademark that has passed a preliminary examination. The Trademark Office’s decisions on rejection, opposition or cancellation of an application may be appealed to the Trademark Review and Adjudication Board, whose decision may be further appealed through judicial proceedings.

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If no opposition is filed within three months after the public announcement period or if the opposition has been overruled, the Trademark Office will approve the registration, issue a registration certificate and make an announcement, upon which the trademark is registered and will be effective for a renewable ten-year period, unless otherwise revoked. In the case of a trademark infringement, where the actual loss suffered by the right holder as a result of the infringement, the profits gained by the infringer from the infringement and the royalties of the registered trademark concerned are difficult to determine, the people’s court shall render a judgment on awarding damages of up to RMB300.0 million depending on the circumstances of the infringing acts.

Patent

The NPC adopted the Patent Law of the PRC in 1984, and amended it in 1992, 2000 and 2008. The purpose of the Patent Law is to protect and encourage invention, foster applications of invention and promote innovations and the development of science and technology. A patentable invention or utility model must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the State Council is responsible for receiving, examining and approving patent applications. A patent is valid for a term of 20 years in the case of an invention and a term of ten years in the case of a utility model and design, starting from the application date. A third-party user must obtain consent or a proper license from the patent owner to use the patent except for certain specific circumstances provided by law. Otherwise, the use will constitute an infringement of the patent rights.

Domain name

As of December 31, 2017, our PRC subsidiaries had registered 219 domain names. On November 5, 2004, the Ministry of Industry and Information Technology promulgated the Measures for Administration of Domain Names for the Chinese Internet (or the Domain Name Measures, effective on December 20, 2004 and amended on August 16, 2017). The Domain Name Measures regulate the registration of domain names, such as the first tier domain name “cn”. On May 29, 2012, the China Internet Network Information Center, or the CNNIC, issued the Implementing Rules for Domain Name Registration setting forth detailed rules for registration of domain names (effective on the promulgation date). On June 28, 2012, the CNNIC issued the Measures on Domain Name Disputes Resolution (effective on the promulgation date and amended on September 1, 2014), pursuant to which the CNNIC can authorize a domain name dispute resolution institution to decide disputes.

C. Organizational Structure

We commenced our business in 2006, which was initially focused on providing car services to premium corporate clients. In 2008, we began to provide car rentals to individual customers. Our company, eHi Car Services Limited (previously known as Prudent Choice International Limited or eHi Auto Services Limited), was incorporated in the Cayman Islands on August 3, 2007. eHi Car Services Limited is a holding company. Currently we operate our car rental and car services business through our PRC subsidiaries. For our car rental business, we provide vehicles through our PRC subsidiaries eHi Rental and eHi Jiangsu, and their subsidiaries and branches in different cities; and we provide fleet management, information technology support and other car rental related services through eHi Management, which is a subsidiary of eHi Rental. For our car services business, we provide vehicles through eHi Rental, eHi Jiangsu and their subsidiaries and branches, and provide chauffeur services through our PRC subsidiary Shanghai Smart Brand, and its subsidiaries and branches.

In March 2008, eHi Rental was established in China by two nominee shareholders designated by Mr. Ray Ruiping Zhang to engage in, among other things, car rentals. Also in March 2008, we established our first wholly foreign owned subsidiary Shuzhi Information Technology (Shanghai) Co., Ltd., or Shuzhi, in China. In November 2009, Shuzhi acquired the 94.13% equity interest of eHi Rental, and two nominee shareholders designated by Shuzhi acquired the remaining 5.87% equity interest of eHi Rental.

In September 2010, we acquired all the shares of eHi Auto Services (Hong Kong) Holding Limited, or eHi Hong Kong, a then dormant company incorporated in Hong Kong, and became its sole shareholder. In January 2011, Shuzhi and eHi Hong Kong completed a share transfer and capital increase of eHi Rental, upon which eHi Hong Kong acquired the 5.87% equity interest of eHi Rental from the two nominee shareholders. As a result, eHi Rental was converted into a Sino foreign joint venture enterprise. The registered capital of eHi Rental was increased several times and reached US$468 million in 2015. eHi Hong Kong and Shuzhi currently hold 94.24% and 5.76% equity interests of eHi Rental, respectively.

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In December 2011, we established our second wholly foreign owned subsidiary, eHi Jiangsu, in China. eHi Jiangsu is wholly owned by eHi Hong Kong. We have, through eHi Rental and eHi Jiangsu, established and acquired several subsidiaries in various regions in China to expand the geographic coverage of our business operations.

In November 2015, we, through eHi Rental, established a wholly owned subsidiary eHi Management. eHi Management was incorporated to operate car rental management and related software development business. 

In connection with our car services business, we provide vehicles and chauffeur services through different subsidiaries. We provide vehicles through eHi Rental and eHi Jiangsu as well as their subsidiaries and branches, and provide chauffeur services through Shanghai Smart Brand, which was established by Shuzhi in April 2011. Several subsidiaries and branches of Shanghai Smart Brand were also established to provide chauffeur services in various regions in China.

Our current major operations are not subject to the ICP license requirements. In March 2014, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Information, and its shareholders to further expand our Internet and mobile services. Such contractual arrangements enable us to exercise effective control over the operations of eHi Information which resulted in the consolidation of eHi Information by eHi Rental. eHi Information obtained the ICP license from the relevant telecommunication authorities on September 24, 2014. eHi Information currently does not have any material operation. In January 2015, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Car Sharing and its shareholders. eHi Car Sharing is currently not yet in operation.

In October 2013, we established L&L Financial Leasing Holding Limited, or L&L, in Hong Kong through eHi Hong Kong, which is a holding company of Shanghai Taihao Financial Leasing Co., Ltd., or Shanghai Taihao, and Shanghai Taide Financial Leasing Co., Ltd., or Shanghai Taide. Shanghai Taide was incorporated in the Shanghai Free Trade Zone. Shanghai Taihao and Shanghai Taide are authorized to operate financial leasing business in China.

In November 2013, we, through Shuzhi, established a wholly owned subsidiary Shangahi Taihan Trading Co., Ltd., or Shanghai Taihan. Shanghai Taihan was incorporated in the Shanghai Free Trade Zone to operate sales of vehicles and used vehicles business.

In April 2014, we, through our then-wholly owned subsidiary, Elite Plus Developments Limited, or Elite Plus, invested US$25 million for a subscription in series B preferred shares of Travice Inc., which developed and operates the Kuaidi mobile taxi and car hailing service, representing 8.4% of the then outstanding share capital of Travice Inc. Travice Inc. also issued a warrant to Elite Plus to purchase an additional 4,684,074 series C preferred shares of Travice Inc. In January 2015, the Company waived the warrant and received US$3 million in exchange for the waiver of the warrant. In February 2015, Travice Inc. was merged with and into Xiaoju Science and Technology Limited, which developed and operates the Didi mobile taxi and car hailing service. After the completion of such merger, Elite Plus’s investment in Travice Inc. was exchanged to a minority stake of the surviving company Xiaoju Kuaizhi Inc. In June 2015, we transferred 100% of our equity interest in Elite Plus to an independent third party for gross proceeds of US$160.9 million.

In November 2014, we completed an initial public offering of 10,000,000 ADSs at the price of US$12.00 per ADS. Each ADS represents two Class A common shares. On November 18, 2014, our ADSs were listed on the New York Stock Exchange under the symbol “EHIC”. In November 2014, we also issued 5,000,000, 1,666,666 and 1,666,666 Class A common shares to Dongfeng Asset Management Co. Ltd., China Universal Asset Management Co., Ltd. and Ctrip, respectively, at the price of US$6.00 per share (equivalent to US$12.00 per ADS), in a private placement concurrent with the initial public offering.

In December 2015, we completed an offering of US$200 million in aggregate principal amount of senior unsecured notes due 2018. The 2018 Senior Notes were offered by our Cayman holding company, and all of our offshore subsidiaries eHi Hong Kong, Brave Passion Limited and L&L jointly and severally provided guarantees.

In August, 2016, we entered into a US$150 million in principal amount syndicated bank facility, or the 2016 Facility. The 2016 Facility was offered by our Cayman holding company, and our existing and future-established offshore subsidiaries are required to jointly and several guarantee the facility, subject to certain exceptions. The 2016 Facility has been repaid in full in August 2017.

In August 2017, we completed an offering of US$400 million in aggregate principal amount of senior unsecured notes due 2022. The 2022 Senior Notes were offered by our Cayman holding company, and all of our offshore subsidiaries jointly and severally provided guarantees.

In January 2018, the board of directors of our company received a preliminary non-binding proposal letter dated January 1, 2018 from affiliates of MBK and Mr. Ray RuiPing Zhang, our chairman and chief executive officer, and his affiliates, that proposes a “going-private” transaction for US$13.35 in cash per ADS of our company, or US$6.675 in cash per common share. Our board of directors has formed a special committee of independent directors to evaluate the proposal and no decisions have been made by our board nor the special committee with respect to our response to the proposal.

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The following diagram illustrates our principal corporate structure as of the date of this Form 20-F :

(1) eHi Information is a variable interest entity incorporated in China and is 50% owned by Mr. Hongtao Han and 50% owned by Mr. Chun Xie. We effectively control eHi Information through contractual arrangements.

(2) eHi Car Sharing is a variable interest entity incorporated in China and is 70% owned by Mr. Dalu Jiang and 30% owned by Mr. Chengzhu Wang. We effectively control eHi Car Sharing through contractual arrangements.

D. Property, Plant and Equipment

Our corporate headquarters are located in Shanghai, China, where we own a gross floor area of approximately 4,482 square meters and lease an aggregate gross floor area of approximately 2,319 square meters for our general administration. Specifically, in 2017, we acquired an office space in Shanghai with a gross floor area of approximately 2,241 square meters.

As of December 31, 2017, we directly operated a total of 4,463 service locations in 303 cities across China. Our lease agreements for office space of our stores generally have a term of one to three years. All of our service locations have a standardized design, appearance, decoration, color scheme and display. We select locations for our stores and pick-up points based on criteria including convenient access to transportation hubs, major office buildings, shopping centers or universities, which we believe have more potential for sustainable and increasing demand for our services.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. For more information regarding forward-looking statements, see “Forward-Looking Statements.” In evaluating our business, you should carefully consider the information provided under Item 3.D, “Key Information—Risk Factors.” We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

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A. Operating Results

Overview

We provide one-stop comprehensive services to both individual customers as well as corporate and institutional clients. This business model, together with our leading positions in both China’s car service market and car rental market, enables us to cross-sell to different target customers and capture complementary and evolving market opportunities.

Our one-stop comprehensive services include the following:

· Car rentals. We provide self-drive car rental services to both individual customers as well as corporate and institutional clients to meet their travel, leisure, business and ground transportation needs. Our short-term car rentals have a term of less than one year and are primarily provided to individual customers on an hourly, daily, weekly or monthly basis. Our long-term car rentals have a term of one year or longer and are primarily provided to corporate and institutional clients. As of December 31, 2017, our car rental fleet included 62,101 vehicles of over 300 models primarily from major automobile manufacturers. In 2017, we derived approximately 80.2% of our net revenues from car rentals.

· Car services. We provide chauffeured car services primarily to corporate and institutional clients, including many Fortune 500 companies in China. Our car services include routine services such as airport pickup and drop-off, inter-office transfers and other business transportation needs, as well as event-driven activities such as conventions, promotional tours and special events. We generally enter into long-term framework agreements with our corporate and institutional clients pursuant to which our vehicles and chauffeur services are provided by different subsidiaries. With 2,845 vehicles and 3,211 drivers as of December 31, 2017, our car services were offered by us and our contracted service providers in 200 cities across China, with a focus on first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen. In 2017, we derived approximately 19.8% of our net revenues from car services.

Factors Affecting Our Results of Operations

We believe that the most significant macro-level factors affecting our results of operations include:

· health of the global economy and the growth and development of China’s economy;

· overall growth of China’s car services industry;

· automobile ownership penetration rate and the number of driver license holders in China;

· increasing demand for leisure travel and shift in lifestyle in China towards driving as a preferred means of travel;

· growth of transportation infrastructure in China; and

· governmental regulations and measures relating to vehicle purchase, ownership and usage and tax policies.

Our results of operations in any given period are more directly affected by company specific factors, including:

· Fleet utilization. Our ability to effectively utilize our fleet will have a material effect on our results of operations. We view our entire vehicle fleet as one pool of assets that are cross-utilizable, and we re-deploy our fleet to complement different demand cycles. Factors affecting the utilization of our fleet include, among others, our fleet size, the demand for our services, our pricing, our customer experience, the effective management of our operations through our proprietary technology platform, and the competitive landscape of car services market in China. In 2015, 2016 and 2017, the fleet utilization rate of our car rental fleet was 71.4%, 72.4% and 72.2%, respectively.

· Fleet size and geographic coverage. Expansion of our fleet size and geographic coverage is essential to the growth of our business. We had grown our total fleet size from 38,070 vehicles as of December 31, 2015 to 56,916 vehicles as of December 31, 2016 and further to 64,946 vehicles as of December 31, 2017, and expanded our geographic coverage from 151 cities as of December 31, 2015 to 216 cities as of December 31, 2016 and further to 303 cities as of December 31, 2017. We intend to continue to expand our total fleet size, further penetrate our existing markets, and extend our services to selected new cities which have strong growth potential and are close to our existing markets, transportation hubs or tourist spots. Our business and results of operations will depend significantly on our ability to expand fleet size and geographic coverage in a timely manner.

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· Pricing. We have adopted a dynamic pricing mechanism to determine our rental rates for car rentals. This mechanism determines a specific vehicle model’s rental rate based on its purchase price taking into consideration other variables such as pickup/drop-off time and location, the availability of our vehicles during such period at the location, prevailing market prices, demand for such vehicle model and the length of rental period. Operating expenses such as store expenses and other executory costs are not significant considerations in determining our car rental rates. Our management reviews our rental rates for car rentals on a regular basis.

We determine the rates for our car services based on a number of factors, including vehicle model, service type, the length of rental period, time and location of pickup and drop-off, and prevailing market prices. Operating expenses such as store expenses and other executory costs are not significant considerations in determining rates for car services. Our management reviews these rates on a regular basis. Our long-term framework agreements with our corporate and institutional clients provide for predetermined price ranges and, as a result, our rates for car services are generally more stable.

· Finance costs. We use banks and third-party financing companies to finance the procurement of a portion of our fleet. Also, in 2015 we closed a US$200 million note offering and in August 2016 entered into a US$150 million syndicated loan facility which was early repaid in August 2017 and in August 2017 we closed a US$400 million note offering, to fund our fleet procurement activities, refinance existing debt and provides capital for general corporate purposes. Given our large fleet size and procurement needs, our operating results could be materially impacted by any failure to obtain proper financing sources or to properly manage related finance costs.

· Vehicle acquisition and disposition and our ability to control operating expenses. Vehicle purchases have historically accounted for, and are expected to continue to account for, most of our capital expenditures. To provide our customers with vehicles in good condition, we typically hold vehicles in our fleet for three to four years, except for program cars which typically have a holding period of 12 to 24 months. The difference between the disposal price of a used vehicle and the residual book value of such vehicle is recorded as a gain or loss under our depreciation expenses. Therefore, our ability to dispose of retired vehicles at optimal prices will have a material effect on our results of operations.

In addition, our results of operations will be impacted by our ability to control other operating expenses, including without limitation vehicle-related depreciation, payroll-related expenses, vehicle insurance expenses, vehicle repair and maintenance expenses fuel expenses and store expenses. Our large fleet size provides us economies of scale, enabling us to obtain favorable prices and discounts from key players in the vehicle supply ecosystem. We also plan to open additional in-house vehicle repair and maintenance centers in cities where our fleet has achieved economies of scale and additional in-house repair and maintenance centers are expected to be more cost-effective compared to third-party service providers.

· Ability to attract and retain customers. The success of our business hinges on our customer satisfaction level, which in turn depends on a variety of factors. These factors include, among others, our ability to (i) consistently provide high-quality customer experience, (ii) continue to offer comprehensive and complementary services tailored to our customers’ needs, (iii) maintain good vehicle condition, and (iv) provide timely and satisfactory after-sales services.

· Seasonality. We generally experience some effects of seasonality due to increases in leisure travel activities and decreases in business travel activities during the summer season and public holidays in the PRC such as Chinese New Year, Labor Day, and National Day. The seasonal impacts on our car rentals and car services may, to some extent, offset each other. In addition, we typically launch promotions for certain car rentals and car services in selected cities after major holidays in China. Our revenues may also fluctuate due to adverse weather conditions, such as snow or rain storms. Seasonal changes in our revenues do not alter our depreciation and labor costs or certain other expenses, such as rent and insurance, which are fixed in the short run.

Key operating metrics

We utilize a set of key operating metrics which our senior management reviews frequently. The review of these metrics 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. When evaluating business performance and profitability, the assessment is made on our entire business as opposed to separate revenue streams. Spending, budgeting and resource allocation decisions are also made taking into account our entire business.

The following tables set forth our key operating metrics as of the dates and for the periods indicated:

Period-end fleet size^{(1) (2)}

	As of December 31,
	2015 (2)		2016(2)		2017
Car rentals		35,647		53,658		62,101
Car services		2,423		3,258		2,845
Total		38,070		56,916		64,946

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(1) “Period-end fleet size” refers to the aggregate number of vehicles in our car rentals and car services fleets as of the last day of a given period to which we hold legal title, including vehicles that we have written off in accordance with our accounting policy and vehicles that are currently missing but have not been written off.

(2) In 2015, we adopted a revised definition of “Period-end fleet size”, which refers to the aggregate number of vehicles in our car rentals and car services fleets as of the last day of a given period which we hold legal title to and also reflect in our balance sheet, including vehicles that are currently missing but have not been written off. The period-end fleet size as of December 31, 2015 excluded 151 vehicles which we had written off from our balance sheet as of December 31, 2015, and the period-end fleet size as of December 31, 2016 excluded 162 vehicles which we had written off from our balance sheet as of December 31, 2016, and the period-end fleet size as of December 31, 2017 excluded 183 vehicles which we had written off from our balance sheet as of December 31, 2017, in accordance with our accounting policy.

Car rentals and car services

	For the Years Ended
	December 31,
	2015		2016		2017
Average available fleet size(1)		26,460		38,944		47,999
RevPAC (RMB)(2)		150		148		156

Car rentals

	For the Years Ended December 31,
	2015		2016		2017
Average available fleet size(1)		24,573		36,455		45,031
RevPAC (RMB)(2)		123		125		134
Fleet utilization rate (%)(3)		71.4		72.4		72.2
Average daily rental rate (RMB)(4)		172		173		185

Car services

	For the Years Ended December 31,
	2015		2016		2017
Average available fleet size(1)		1,887		2,489		2,968
RevPAC (RMB)(2)		508		490		501

(1) “Average available fleet size” is calculated by dividing the aggregate number of days in which our fleet was in operation during a given period by the total number of days during the same period. In determining the size of our fleet in operation, we include all vehicles in our car rentals and car services fleets except for vehicles that have been written off in accordance with our accounting policy and vehicles that have not been consistently made available for rent and that we may consider to dispose of when appropriate opportunities arise.

(2) “RevPAC” refers to average daily net revenue per available car, which is calculated by dividing the net revenues during a given period by the aggregate number of days in which our fleet was in operation during the same period.

(3) “Fleet utilization rate” refers to the aggregate transaction days for our car rental fleet during a given period divided by the aggregate days our car rental fleet are in operation during the same period. “Transaction days” refer to the aggregate number of days on which a vehicle in our car rental or car services fleet was on rent during a given period.

(4) “Average daily rental rate” refers to RevPAC during a given period divided by the fleet utilization rate during the same period.

There is no industry norm with respect to the calculations of these operating metrics. As a result, our operating metrics may not be comparable to those used by other industry participants.

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Certain income statement line items

Net revenues

Our net revenues represent our gross revenues from operations, less business tax, VAT and other related surcharges. The following table sets forth our net revenues for the periods presented by service type. No single individual customer, corporate or institutional client accounted for more than 5% of our net revenues in any period presented.

	For the Year Ended December 31,
	2015					2016					2017
			% of Net					% of Net							% of Net
	RMB		Revenues			RMB		Revenues			RMB		US$		Revenues
	(in thousands, except percentages)
Car rentals		1,100,579		75.9	%		1,663,546		78.9	%		2,196,456		337,589		80.2	%
Car services		350,051		24.1			445,398		21.1			543,066		83,468		19.8
Total net revenues		1,450,630		100.0	%		2,108,944		100.0	%		2,739,522		421,057		100.0	%

Car rentals

We provide self-drive car rental services to both individual customers as well as corporate and institutional clients. Our short-term car rentals have a term of less than one year and are primarily provided to individual customers on an hourly, daily, weekly or monthly basis. A majority of our revenues derived from short-term car rentals are from our basic car rental service package, the charges for which include an hourly or daily rental fee, a transaction based handling fee and a basic insurance charge. We also derive a small portion of short-term car rentals revenues from fees and charges for premium services such as increased insurance coverage, GPS-based navigation device rentals, charges for inter-city return, and excess mileage charges. Our long-term car rentals have a term of one year or longer and are primarily provided to corporate and institutional clients at a negotiated rental rate under long-term contracts.

Car services

We provide chauffeured car services primarily to corporate and institutional clients. We generally enter into long-term framework agreements with our corporate and institutional clients pursuant to which our vehicles and chauffeur services are provided by different subsidiaries. We usually charge our corporate and institutional clients for car services a negotiated fixed service fee for a specified trip or for services in a certain period of time, which include the provision of chauffeur services. In certain circumstances, based on demand from key corporate and institutional clients, we also cooperate with contracted service providers to provide car services in certain cities where we currently do not provide car services or the demand for such services exceeds our existing capacity. We recognize the revenues derived from such contracted service providers on a gross basis and recognize the costs related to them as part of our cost of revenues.

Cost of revenues

The principal components of our cost of revenues include vehicle-related depreciation, payroll-related expenses, vehicle insurance expenses, vehicle repair and maintenance expenses, car rental expenses, fuel expenses as well as store expenses. The following table sets forth the components of our cost of revenues for the periods indicated:

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	For the Years Ended December 31,
	2015					2016					2017
	RMB		% of Net Revenues			RMB		% of Net Revenues			RMB		US$		% of Net Revenues
	(in thousands, except percentages)
Net revenues		1,450,630		100.0	%		2,108,944		100.0	%		2,739,522		421,057		100.0	%
Cost of revenues:
Vehicle-related depreciation		457,479		31.5			653,347		31.0			732,867		112,640		26.8
Payroll-related expenses		252,015		17.4			361,630		17.1			472,334		72,596		17.2
Vehicle insurance expenses		116,491		8.0			113,490		5.4			160,236		24,628		5.8
Fuel expenses		70,019		4.8			94,508		4.5			98,877		15,197		3.6
Store expenses		76,041		5.2			102,330		4.9			144,706		22,241		5.3
Vehicle repair and maintenance expenses		64,126		4.4			77,843		3.7			122,726		18,863		4.5
Car rental expenses		44,274		3.1			42,405		2.0			56,212		8,640		2.1
Others		57,533		4.0			69,728		3.3			92,390		14,200		3.4
Total cost of revenues		1,137,978		78.4	%		1,515,281		71.9	%		1,880,349		289,004		68.6	%

Vehicle-related depreciation. A significant component of our cost of revenues is vehicle-related depreciation. As our fleet continues to grow, depreciation has become, and will continue to be, a significant portion of our cost of revenues. Our depreciation expenses are also affected by the following factors, some of which may be beyond our control: (i) our average vehicle and in-car equipment acquisition cost, (ii) our management’s periodic review of present and estimated future market conditions and their effect on residual values of our vehicles at the time of disposal, (iii) provision or write-off in connection with our lost or stolen vehicles, and (iv) any gain or loss resulting from vehicle disposals. Depreciation begins when three criteria are met: (i) the license plate for the vehicle is obtained, (ii) insurance for the vehicle becomes effective, and (iii) a GPS-based tracking device is installed on the vehicle, which allows our proprietary technology platform to monitor the location of the vehicle.

Payroll-related expenses. Our payroll-related expenses primarily consist of salaries, social insurance and welfare benefits of our employees directly involved in vehicle operations. Our full-time employees who were directly involved in vehicle operations and services increased from 3,901 as of December 31, 2015 to 4,858 as of December 31, 2016, including 2,735 drivers, and further to 5,849 as of December 31, 2017, including 3,211 drivers. We expect the number of our employees to continue to increase along with the expansion of our operations. As overall wages in China continue to increase, we expect our labor costs to continue to rise in the foreseeable future. We seek to maintain compensation levels in accordance with prevailing trends in our industry.

Vehicle insurance expenses. We purchase motor vehicle damage insurance, third-party liability insurance, compulsory traffic accident insurance, passenger injury insurance, and other insurance coverage that our management considers adequate to protect our assets and operations under different situations. If we have a low accident rate of our fleet, we may benefit from the “no-claim discount” and enjoy lower insurance premiums when purchasing relevant insurance for our fleet. Our fleet size increased from 56,916 as of December 31, 2016 to 64,946 as of December 31, 2017. As our fleet size increases, we expect these expenses to increase.

Fuel expenses. We bear the fuel expenses consumed when we provide car services to our corporate and institutional clients. We also bear the fuel expenses for gasoline in our vehicles when we deliver our rental cars to customers and when we provide vehicle pick-up and drop-off services to them, as well as the fuel expenses of internal fleet dispatching and repair and maintenance.

Store expenses. Our store expenses include rental expenses with respect to our service locations, which include our stores and pick-up points, depreciation of store equipment and leasehold improvements, and other store related expenses. We typically enter into lease agreements for our stores with terms of one to three years. The increase in our store expenses primarily resulted from our continued expansion, the number of our stores increased from 391 as of December 31, 2016 to 449 as of December 31, 2017. And we expect our store expenses will continue to increase as we further expand our nationwide service network.

Vehicle repair and maintenance expenses. Vehicle repair and maintenance expenses are largely a function of our fleet size. As our fleet size increases, we expect these expenses to increase. Vehicle repair and maintenance expenses are also affected by the age and model of vehicles. A new vehicle typically incurs less repair and maintenance expenses than an older one. We also expect that opening more in-house vehicle repair and maintenance centers in cities where we have sizable fleets will help reduce average repair and maintenance expenses per vehicle.

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Car rental expenses. Our car rental expenses primarily consist of fees paid to contracted service providers for car services provided by them to our customers in certain cities where we currently do not provide car services or the demand for such services exceeds our existing capacity.

Other expenses. Other expenses include, among others, tolls, vehicle annual inspection fees and other miscellaneous expenses.

As we continue to expand the scale of our operations, we expect to gradually benefit from economies of scale and increasing operating efficiency, thereby lowering our cost of revenues as a percentage of our net revenues.

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Selling and marketing expenses

Selling and marketing expenses consist primarily of advertising and promotion expenses. We have historically promoted our brand and services primarily through online channels, such as search engines, social network websites and Internet portals. We also utilize offline advertising channels, such as outdoor advertising. Attributable to our commitment to enhanced customer experience, we have built a broad and diverse customer base and are increasingly benefiting from word-of-mouth referrals, thereby lowering the growth rate of our selling and marketing expenses. Selling and marketing expenses also include payroll-related expenses in connection with our sales and marketing force as well as commission fee which refers to commissions paid to sale channels promoting our services. Other selling and marketing expenses include other miscellaneous fees related to our sales and promotion activities.

The following table sets forth the key components of our selling and marketing expenses for the periods indicated:

	For the Years Ended December 31,
	2015					2016					2017
	RMB		% of Net Revenues			RMB		% of Net Revenues			RMB		US$		% of Net Revenues
	(in thousands, except percentages)
Net revenues		1,450,630		100.0	%		2,108,944		100.0	%		2,739,522		421,057		100.0	%
Selling and marketing expenses:
Advertising and promotion expenses		28,947		2.0			38,968		1.8			89,925		13,821		3.3
Payroll-related expenses		16,116		1.1			21,871		1.0			26,437		4,063		1.0
Commission fee		16,616		1.1			29,852		1.4			17,675		2,717		0.6
Others		3,380		0.3			6,497		0.3			4,995		768		0.2
Total selling and marketing expenses		65,059		4.5	%		97,188		4.6	%		139,032		21,369		5.1	%

General and administrative expenses

General and administrative expenses consist primarily of (i) payroll-related expenses relating to our administrative and management functions, (ii) share-based compensation expenses, (iii) professional services fees paid to external advisers, (iv) office rental expenses for our headquarters, (v) bank charge related to service fees charged by payment agencies and banks in connection with payments to us made by our customers, (vi) travel expenses for business trips, (vii) Depreciation, and (viii) other administrative expenses.

The increases in our general and administrative expenses from 2015 to 2017 primarily reflected our business expansion and share-based compensation charges associated with options and restricted share units. We also recorded significant external professional services fees in 2015, 2016 and 2017 in connection with our financing activities. We expect our general and administrative expenses to continue to increase in absolute amounts as our business expands and as we become a public company resulting in significant reporting and compliance costs. We believe our facilities and proprietary technology platform enable us to support a substantial further increase in net revenues without causing a proportionate increase in our general and administrative expenses, and as a result, we expect our general and administrative expenses as a percentage of our net revenues to decline in the long run as we grow our business.

The following table sets forth the key components of our general and administrative expenses for the periods indicated:

	For the Year Ended December 31,
	2015					2016					2017
	RMB		% of Net Revenues			RMB		% of Net Revenues			RMB		US$		% of Net Revenues
	(in thousands, except percentages )
Net revenues		1,450,630		100.0	%		2,108,944		100.0	%		2,739,522		421,057		100.0	%
General and administrative expenses:
Payroll-related expenses		89,955		6.2			108,993		5.1			129,009		19,828		4.7
Share-based compensation		12,727		0.9			14,800		0.7			12,402		1,906		0.5
Professional fees		20,223		1.4			24,977		1.2			35,469		5,451		1.3
Office rental expenses		13,215		0.9			16,030		0.8			19,661		3,022		0.7
Bank charge		10,255		0.7			12,174		0.6			12,019		1,847		0.4
Travel expense		13,017		0.9			13,957		0.7			15,781		2,425		0.6
Depreciation expense		1,790		0.1			2,475		0.1			4,107		631		0.1
Others		22,367		1.6			58,532		2.7			42,222		6,489		1.5
Total general and administrative expenses		183,549		12.7	%		251,938		11.9	%		270,670		41,601		9.9	%

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Other operating income

Other operating income relates primarily to government grants and subsidies that we receive from various level of local governments, including the financial subsidies in relation to the VAT Pilot Program. We recognize such grants and subsidies on a cash basis. Government grants and subsidies are granted from time to time at the discretion of the relevant government authorities. These grants and subsidies are granted for general corporate purposes and to support our ongoing operations in the region.

Share-based compensation expenses

We recognize share-based compensation based on the grant date fair value of equity awards, with compensation expense recognized over the period in which the grantee is required to provide services to our company in exchange for the equity award. Share-based compensation expense is classified in the consolidated statements of comprehensive income (loss) based upon the job function of the grantee. We recognized share-based compensation expenses related to restricted shares, restricted share units or share options granted to certain directors, officers and employees for their services to us in the amount of RMB14.0 million, RMB16.0 million and RMB13.6 million (US$2.1 million) in 2015, 2016 and 2017, respectively.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under the current laws 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.

Hong Kong

Our wholly owned Hong Kong subsidiaries, eHi Hong Kong and L&L, are subject to Hong Kong profit tax on their activities conducted in Hong Kong. No provision for Hong Kong profits tax has been made in the consolidated financial statements as eHi Hong Kong and L&L had no assessable income in 2015, 2016 and 2017. Dividends from our Hong Kong subsidiaries to us are exempt from withholding tax.

PRC

Prior to the effective date of the EIT Law on January 1, 2008, enterprises in China were generally subject to an enterprise income tax at a statutory rate of 33% unless they qualified for certain preferential treatment. Effective as of January 1, 2008, the EIT Law applies a uniform enterprise income tax rate of 25% to all domestic enterprises and foreign-invested enterprises and grants tax incentives for qualified enterprises. Therefore, unless otherwise specified, all of our PRC subsidiaries transitioned from an income tax rate of 33% to 25%, effective January 1, 2008. The EIT Law and its Implementing Rules also permit qualified small-scale enterprises with low profit margins to enjoy a reduced 20% enterprise income tax rate. On November 29, 2011, Circular 117 further provided that if a qualified small-scale enterprise with low profit margins has an annual taxable income of not more than RMB60,000, then 50% of its taxable income can be exempted from enterprise income tax until December 31, 2015, further reducing the effective enterprise income tax rate to 10% until then.

In addition, the EIT Law treats enterprises established outside of China that have “de facto management bodies” located in China as PRC resident enterprises for tax purposes. Under the EIT Law and its Implementing Rules, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and other assets of an enterprise. In addition, Circular 82 provides that certain Chinese-invested enterprises controlled by PRC enterprises or PRC enterprise groups and established outside of China will be classified as resident enterprises only if all the following items are located or resident in China: (i) senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; (ii) key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and (iii) half or more of the senior management or directors with voting rights. Circular 82 also clarified that dividends and other income paid by such resident enterprises will be considered as PRC sourced income and be subject to PRC enterprise income tax. In January 2014, the SAT further issued an amendment to Circular 82 delegating the authority to its provincial branches to determine whether a Chinese-invested established outside China should be considered a PRC resident enterprise. We have not been informed by any PRC tax authorities that we or any of our offshore subsidiaries are treated as a resident enterprise for PRC tax purposes as of the date of this annual report. However, PRC tax authorities could make such a determination in the future, and if considered a resident enterprise for PRC tax purposes, our company would be subject to the PRC enterprise income tax on our global income.

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Since January 1, 2012, the MOF and the SAT have started to implement the VAT Pilot Program, providing that companies which are classified by Shanghai’s local tax authorities as in transportation or certain modern service sectors are required to pay VAT, instead of business tax. Since August 1, 2012, the VAT Pilot Program has been expanded to and implemented in other regions, including Beijing, Tianjin, Jiangsu, Zhejiang, Anhui, Fujian, Hubei and Guangdong. Since August 1, 2013, the VAT Pilot Program has been expanded nationwide. On March 23, 2016, the Ministry of Finance and the SAT jointly issued the Notice on Comprehensive Implementation of the Pilot Program for Imposition of Value-Added Tax to Replace Business Tax, pursuant to which the VAT was implemented comprehensively across the country and extended to all industries, effective from May 1, 2016. As a result of the VAT in general, we are subject to a 17% VAT for car rental services, an 11% VAT for designated driving services and a 6% VAT for qualified management services, respectively. Furthermore, a 3% simplified VAT rate is applied for the rental services provided by an entity or branch who are small-scale VAT payers.

Critical accounting policies

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect: (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the end of each reporting period and (iii) the reported amounts of revenue and expenses during each reporting period. We evaluate these estimates and assumptions based on historical experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available information and reasonable assumptions, which together form a basis for making judgments about matters not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places significant demands on the judgment of our management.

Revenue recognition

We provide car rentals and car services to our customers. Revenues are primarily comprised of vehicle rental fees and insurance charges, which are recognized over the rental period. Revenue from the sale of gasoline is recognized when the vehicle is returned and is based on the actual volume of gasoline consumed or a contracted fee paid by the customer. Payments for our services from individual customers are generally collected in advance and such amounts received are recorded as advances from customers on the consolidated balance sheets, and are recognized as revenue when services are rendered and revenue recognition criteria are met. For corporate and institutional clients who are on credit terms, the initial credit evaluation is conducted before trade credit is extended, and revenue is recognized when collectability is reasonably assured, services are rendered and all other revenue recognition criteria are met.

Based on demand from our corporate and institutional clients, we engage contracted service providers in offering car services to our customers where we currently do not provide such services in certain cities or the demand for such services exceeds our existing capacity. The end customers sign service contracts directly with us in such arrangements and we are the party who is responsible for customers’ acceptance for services rendered. In case of customer disputes, we resolve customer complaints and are solely responsible for refunding customers their payments. Therefore, we are considered the primary obligor. We also determine the service fee and bear the credit risk. As a result, we recognize this type of revenue on a gross basis.

In the consolidated statements of comprehensive income (loss), revenues are presented net of business tax, VAT and other related surcharges. Cost of revenues associated with car rentals and car services have not been presented separately as we cannot reasonably and reliably estimate and allocate expenses to each of the revenue streams.

Customer loyalty program

We established our customer loyalty program, eHi loyalty program, in 2008. Our registered members who have used our car rental services could join this program and earn loyalty membership points upon eligible purchases, and such points can be redeemed for free rental periods, mileage upgrades, and other free gifts. We account for the customer loyalty program using the incremental cost method to estimate the costs associated with the future obligation to our customers, and record such costs as selling and marketing expenses in the consolidated statements of comprehensive income (loss). Unredeemed membership points are recorded in accrued expenses and other current liabilities in the consolidated balance sheets. We adjust the liability associated with our customer loyalty program based on our estimate of future redemption of membership points prior to their expiration, which is three calendar years from the day the membership points are awarded. Our estimate of the rate of future redemptions of membership points is based primarily upon our actual historical redemptions.

Allowance for doubtful accounts

We perform ongoing credit evaluation, and provide for an allowance for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. We review our allowance for doubtful accounts quarterly by assessing individual accounts receivable over a specific aging and amount. Delinquent account balances are written off when we have determined that the likelihood of collection is remote.

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Investments

For investments where we do not have a controlling financial interest, we evaluate if they are investments in debt and equity securities and if they provide us with the ability to exercise significant influence over the operating and financial policies of the investees. Investments in debt and equity securities are classified into one of three categories: (i) “held to maturity” which are reported at amortized cost; (ii) “trading securities” which are reported at fair value with unrealized holding gains and losses recorded in earnings; and (iii) “available for sale” which are reported at fair value with changes in unrealized gains and losses recorded in other comprehensive income. The equity method is used for investments where we do not have a controlling financial interest but has the ability to exercise significant influence over the operating and financial policies of the investee. The cost method is used for investments where we do not have the ability to exercise significant influence over the operating and financial policies of the investee.

Investments are evaluated for impairment when facts or circumstances indicate that the fair value of an investment is less than its carrying value. We review several factors to determine whether a loss is other-than-temporary including, but not limited to, (1) nature of the investment; (2) cause and duration of the impairment; (3) extent to which fair value is less than cost; (4) current economic and market conditions; and (5) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

Property and equipment, net

Property and equipment is stated at cost, less accumulated depreciation and impairment. Depreciation of property and equipment is recorded on a straight-line basis upon the purchase date, which approximates the in-use date, except for vehicles and leasehold improvements, for which the in-use dates are tracked and monitored separately.

Vehicles

The initial cost of a vehicle is comprised of purchase price, plus any costs directly attributable to bringing the vehicle to the location and condition necessary for its intended use. Depreciation of vehicles is recorded on a straight-line basis, after consideration of expected holding periods and estimates of residual values. We expect to hold our vehicles generally for a period of approximately three to four years, except for program cars which typically have a holding period of 12 to 24 months. We estimate residual value of our vehicles which are not subject to the program car arrangements typically based on the current market price for used vehicles we obtained from used vehicles dealers or the used car market of similar models. However, the used vehicle market in China is still relatively premature and the price for similar vehicles could vary in different cities throughout the country depending on local market factors. We monitor accounting estimates relating to our vehicles on a quarterly basis, including the used vehicle market as well as the selling price of our vehicles when disposed of to assess the appropriateness of our estimated residual value. Changes made to estimates such as the estimated useful lives or residual values are reflected in vehicle related depreciation expense on a prospective basis. In addition, depreciation expenses associated with vehicles subject to the program car arrangements are recorded based on their respective contractual repurchase prices and holding periods, and are adjusted if the repurchase conditions of such vehicles are not met or we elect not to sell such vehicles as program cars. A 1% increase or decrease in the estimated residual value of vehicles which are not subject to the program car arrangements would result in a corresponding decrease or increase in the vehicle related depreciation expense by RMB19.6 million (US$3.0 million) for the year ended December 31, 2017. Gain or loss on disposal of vehicles is calculated as the difference between the net sales proceeds and the carrying amount of the vehicle, and such amount is recognized as an adjustment to the vehicle related depreciation expense as part of cost of revenues in the consolidated statements of comprehensive income (loss).

Vehicles that are available or unavailable for immediate rental (such as vehicles under repair and maintenance or vehicles in- transit) are subject to the same accounting treatment including recording of depreciation expense, impairment assessments, and periodic analysis of estimated useful lives and salvage value. We monitor activities and utilization of our vehicles on a regular basis via the installed GPS equipment. Vehicles that cannot be tracked via the installed GPS equipment and cannot be otherwise located are considered missing and/or lost. We have a dedicated department to locate and recover vehicles in this category and have a history of recovering a majority of such vehicles within the first six months after the time they could not be located. We write off the net carrying value of the vehicle and record a loss in our operating results if a vehicle cannot be tracked via the installed GPS system for more than six months and cannot be otherwise located, as we believe that the chance of recovering a vehicle in such circumstances is remote.

Vehicles held for sale

Vehicles held for sale consist of used vehicles subject to signed sales agreements awaiting completion of title transfer to the purchaser. When a vehicle is reclassified as held for sale and transferred from property, plant and equipment, it is not further depreciated and is stated at lower of cost and net realizable value. Cost is the net book value upon the reclassification of the vehicle. Net realizable value is the selling price in accordance with the sales agreement less the estimated costs to be incurred upon the completion of title transfer.

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Impairment of long-lived assets

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, we measure impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the estimated undiscounted future cash flow is less than the carrying amount of the assets, we recognize an impairment loss equal to the excess of the carrying value over the fair value of the assets. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. Our estimates of cash flow are based on the current regulatory, social and economic climates where we conduct our operations as well as recent operating information and budgets for our business. These estimates could be negatively impacted by changes in laws and regulations, economic downturns, or other events affecting our business. If our ongoing estimates of future cash flows are not met, we may have to record additional impairment charges in future accounting periods.

Government grants and subsidy income

We receive government subsidies in the PRC from various levels of local governments from time to time which are granted for general corporate purposes and to support our ongoing operations in the region. We also received financial subsidies in relation to the VAT Pilot Program. These government subsidies are granted at the discretion of the relevant government authorities and, therefore, such amounts are recorded as other operating income on the consolidated statements of comprehensive income (loss) in the period when cash is received.

Share-based compensation

We adopted the 2010 Plan in April 2010, which was amended and restated in December 2010 and August 2014. In October 2014, we adopted the 2014 Plan, which become effective immediately after the completion of our initial public offering in November 2014. These performance incentive plans were adopted to help us recruit and retain key employees, directors or consultants and to motivate such persons to exert their best efforts on behalf of our company by providing incentives through the granting of share-based awards. The plan administrator is our board of directors or a committee appointed and determined by the board. Under the 2010 Plan, we are authorized to issue a maximum of 6,698,470 common shares, and the awards vest upon satisfaction of continuous service, which varies over a period of three to five years from the date of grant. Under the 2014 Plan, we are authorized to initially reserve a maximum of 4,000,000 common shares, provided that the shares reserved shall automatically increase on January 1 of each year during the term of the 2014 Plan, commencing on January 1, 2015, by an amount equal to the lesser of (i) one percent (1%) of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 common shares or (iii) such number of common shares as may be determined by our board of directors. As of the date of this annual report, a total of 3,192,000 options and 1,500 unvested restricted share units granted under the 2010 Plan and the 2014 Plan were outstanding.

We recognize share-based compensation on a straight-line basis based on the grant date fair value of equity awards, with compensation expense recognized over the period in which the grantee is required to provide services to us in exchange for the equity award. Share-based compensation expense is classified in the consolidated statements of comprehensive income (loss) based upon the job function of the grantee. We account for a cancellation or settlement of an equity settled share-based payment award as an acceleration of vesting, and recognize immediately the amount that otherwise would have been recognized for services received over the remainder of the vesting period.

As the share-based compensation expense recognized in the consolidated statements of comprehensive income (loss) is based on awards ultimately expected to vest, such amounts have been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant based on our historical experience and revised in subsequent periods if actual forfeitures differ from those estimates.

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Results of Operations

The following table sets forth our condensed consolidated statements of operations by amount and as a percentage of our total net revenues for 2015, 2016 and 2017:

	For the Years Ended December 31,
	2015						2016						2017
	RMB			% of Net Revenues			RMB			% of Net Revenues			RMB			US$			% of Net Revenues
	(in thousands, except percentages)
Consolidated statements of comprehensive income data
Net revenues		1,450,630			100.0	%		2,108,944			100.0	%		2,739,522			421,057			100.0	%
Cost of revenues(1)		(1,137,978	)		(78.4	)		(1,515,281	)		(71.9	)		(1,880,349	)		(289,004	)		(68.6	)
Gross profit		312,652			21.6			593,663			28.1			859,173			132,053			31.4
Selling and marketing expenses:
Third party		(48,869	)		(3.4	)		(67,788	)		(3.2	)		(122,768	)		(18,869	)		(4.5	)
Related party		(16,190	)		(1.1	)		(29,399	)		(1.4	)		(16,264	)		(2,500	)		(0.6	)
Total selling and marketing expenses(1)		(65,059	)		(4.5	)		(97,188	)		(4.6	)		(139,032	)		(21,369	)		(5.1	)
General and administrative expenses(1)		(183,549	)		(12.7	)		(251,938	)		(11.9	)		(270,670	)		(41,601	)		(9.9	)
Other operating income		10,764			0.7			10,310			0.5			3,763			578			0.1
Total operating expenses		(237,844	)		(16.5	)		(338,816	)		(16.1	)		(405,939	)		(62,392	)		(14.8	)
Income from operations		74,808			5.1			254,847			12.1			453,234			69,661			16.5
Interest income		2,653			0.2			8,414			0.4			14,962			2,300			0.5
Interest expense:
Third party		(109,566	)		(7.6	)		(206,425	)		(9.8	)		(273,589	)		(42,050	)		(10.0	)
Related party		(14,203	)		(1.0	)		(18,534	)		(0.9	)		(6,996	)		(1,075	)		(0.3	)
Total interest expense:		(123,769	)		(8.6	)		(224,959	)		(10.7	)		(280,585	)		(43,125	)		(10.2	)
Gain from waiver of warrants		16,870			1.2			—			—			—			—			—
Gain from sale of cost method investment		803,060			55.4			—			—			—			—			—
Other income, net		10,205			0.7			1,444			0.1			1,957			301			0.1
Early extinguishment of debt costs		—			—			—			—			(19,977	)		(3,070	)		(0.7	)
Income before income taxes		783,827			54.0			39,746			1.9			169,591			26,066			6.2
Provision for income taxes		(87,488	)		(6.0	)		(6,611	)		(0.3	)		(47,375	)		(7,281	)		(1.7	)
Net income		696,339			48.0			33,135			1.6			122,216			18,784			4.5

(1) Include share-based compensation charges of RMB14.0 million, RMB16.0 million and RMB13.6 million (US$2.1 million) in 2015, 2016 and 2017, respectively, allocated as follows:

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$
	(in thousands)
Cost of revenues		(362	)		(840	)		(844	)		(130	)
Selling and marketing expense		(894	)		(401	)		(336	)		(52	)
General and administrative expenses		(12,727	)		(14,800	)		(12,409	)		(1,907	)
Total share-based compensation expense		(13,983	)		(16,041	)		(13,589	)		(2,089	)

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Year ended December 31, 2017 compared to year ended December 31, 2016

Net revenues

Our total net revenues increased by RMB630.6 million, or 29.9%, from RMB2,108.9 million in 2016 to RMB2,739.5 million (US$421.1 million) in 2017, primarily due to our increased fleet size, geographic coverage and increased demand from new and existing customers.

Car rentals. Our net revenues from car rentals increased by RMB532.9 million, or 32.0%, from RMB1,663.5 million in 2016 to RMB2,196.5 million (US$337.6 million) in 2017, primarily as a result of a 23.5 % increase in our growing average available fleet size for car rentals from 36,455 vehicles in 2016 to 45,031 vehicles in 2017 in response to customer demand. RevPAC for car rentals increased from RMB125 in 2016 to RMB134 in 2017, primarily due to the vehicle mix of our operating fleet in 2017 which consisted of more vehicle models with higher rentals. Our fleet utilization rate decreased slightly during these periods from 72.4% in 2016 to 72.2% in 2017, and average daily rental rate slightly increased from RMB173 in 2016 to RMB185 in 2017. In 2017, our net revenues from car rentals accounted for 80.2% of our total net revenues, representing an increase from 78.9% of our total net revenues in 2016.

Car services. Our net revenues from car services increased by RMB97.7 million, or 21.9%, from RMB445.4 million in 2016 to RMB543.1 million (US$83.5 million) in 2017, primarily as a result of an increase in our average daily rental fleet for car services from 2,489 in 2016 to 2,968 in 2017, in response to increased demands from our new and existing customers for car services. RevPAC for car services increased from RMB490 in 2016 to RMB501 in 2017.

Cost of revenues

Our cost of revenues increased by RMB365.1 million, or 24.1%, from RMB1,515.3 million in 2016 to RMB1880.3 million (US$289.0 million) in 2017. The increase in our cost of revenues was primarily due to (i) an increase in payroll-related expenses of RMB110.7 million, as we increased our headcount to support our business expansion; (ii) an increase in vehicle-related depreciation of RMB79.5 million resulted from the expansion of fleet size; and (iii) an increase in vehicle insurance expenses of RMB46.7 million resulted from the expansion of fleet size.

In 2017, we disposed of 13,870 used vehicles, and signed sales contracts for 936 used vehicles pending title transfer. We recorded a disposal gain of RMB24.2 million (US$3.7 million) in aggregate for these 14,806 vehicles. In 2016, we disposed of 4,775 vehicles and recorded a disposal gain of RMB1.8 million. These amounts were included in vehicle related depreciation expense in 2016 and 2017, respectively.

Gross profit

Our gross profit increased by RMB265.5 million, or 44.7%, from RMB593.7 million in 2016 to RMB859.2 million (US$132.1 million) in 2017. Gross profit margin for 2017 was 31.4%, as compared to 28.1% for 2016. The gross profit margin improvement from 2016 to 2017 was primarily attributable to economic of scale resulted from the expansion of fleet size in 2017.

Selling and marketing expenses

Our total selling and marketing expenses increased by RMB41.8million, or 43.1%, from RMB97.2million in 2016 to RMB139.0 million (US$21.4 million) in 2017. This increase was primarily due to a RMB51.0 million increase in expenses regarding our advertising and promotion activities related to NBA and a RMB4.5 million payroll-related expenses in 2017, partially offset by a RMB12.2 million decrease in commissions paid to sales channels.

In December 2016, we entered into a multiyear marketing partnership with the NBA China and an endorsement agreement with NBA star Stephen Curry, which made the NBA China as their official marketing partner and Stephen Curry as their brand ambassador.

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Among the total selling and marketing expenses, our related party selling and marketing expenses decreased from RMB29.4 million in 2016 to RMB16.3 million (US$2.5 million) in 2017. The decrease was primarily due to the lower effective commission rate charged by Ctrip as Ctrip stopped charging minimum referral commission to eHi since November 2016 for the selling and marketing services.

General and administrative expenses

Our general and administrative expenses increased by RMB18.7 million, or 7.4%, from RMB251.9 million in 2016 to RMB270.7 million (US$41.6 million) in 2017, primarily due to RMB20.0 million increase in employee-related costs such as salaries and welfare expenses as a result of increased headcount for our expansion.

Other operating income

We recorded other operating income of RMB10.3 million and RMB3.8 million (US$0.6 million) in 2016 and 2017, respectively, which primarily consisted of government grants and subsidies we received from various levels of local governments in the respective years. See “—Certain income statement line items—Other operating income.”

Interest expense

Our total interest expense increased by RMB55.6 million, or 24.7%, from RMB225.0 million in 2016 to RMB280.6 million (US$43.1 million) in 2017. The increase was primarily due to a RMB62.3 million interest expense increase incurred in connection with our US$400 million senior unsecured notes issued in August 2017.

Among the total interest expense, our related party interest expenses decreased from RMB18.5million in 2016 to RMB7.0 million (US$1.1 million) in 2017, as a result of a RMB300 million loan extended to us in April 2015 by our strategic partner, Ctrip, through its affiliate Ctrip Travel Information Technology (Shanghai) Co. Ltd. In October 2016, we voluntarily repaid RMB200 million to Ctrip Travel Information before the due date, and only RMB100 million loan remained outstanding as of December 31, 2017.

Other income, net

We recorded other income of RMB1.4 million and RMB1.9 million (US$0.3 million) in 2016 and 2017, respectively, which mainly included tax refund and other miscellaneous items.

Early extinguishment of debt costs

On August 15, 2017, we early repaid the US$150 million syndicated bank facility entered into in August 2016 and hence expensed off the unamortized issuance costs of US$ 3.1 million (equivalent to RMB 20 million) incurred for the syndicated bank facility as an early extinguishment cost.

Provision for income taxes

We made provisions for income taxes of RMB6.6 million and RMB47.4 million (US$7.3 million) in 2016 and 2017, respectively. Provision for income taxes made in 2017 comprise withholding tax for interest paid to foreign (non-PRC) entities of RMB17.2 million and deferred income tax expense of RMB30.2 million, which was primarily because we recorded net income of certain PRC subsidiaries in 2017 and such provision was assessed and made based on a 25% enterprise income tax rate for our PRC operating subsidiaries. For the year ended December 31, 2017, the effective tax rate increase was mainly due to less utilization of net operating loss carry forwards, for which valuation allowance was provided in prior year.

Net income

We recorded net income of RMB33.1 million in 2016, and recorded a net income of RMB122.2 million (US$18.8 million) in 2017. Net income margin for the year of 2017 was 4.5%, up 290 basis points from 1.6% for the full year of 2016.

Year ended December 31, 2016 compared to year ended December 31, 2015

Net revenues

Our total net revenues increased by RMB658.3 million, or 45.4%, from RMB1,450.6 million in 2015 to RMB2,108.9 million in 2016, primarily due to our increased fleet size, geographic coverage and increased demand from new and existing customers.

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Car rentals. Our net revenues from car rentals increased by RMB563.0 million, or 51.2%, from RMB1,100.6 million in 2015 to RMB1,663.5 million in 2016, primarily as a result of a 48.4% increase in our growing average available fleet size for car rentals from 24,573 vehicles in 2015 to 36,455 vehicles in 2016 in response to customer demand. RevPAC for car rentals increased from RMB123 in 2015 to RMB125 in 2016, primarily due to the vehicle mix of our operating fleet in 2016 which consisted of more vehicle models with higher rentals. Our fleet utilization rate increased slightly during these periods from 71.4% in 2015 to 72.4% in 2016, and average daily rental rate slightly increased from RMB172 in 2015 to RMB173 in 2016. In 2016, our net revenues from car rentals accounted for 78.9% of our total net revenues, representing an increase from 75.9% of our total net revenues in 2015.

Car services. Our net revenues from car services increased by 95.3 million, or 27.2%, from RMB350.1 million in 2015 to RMB445.4 million in 2016, primarily as a result of an increase in our average daily rental fleet for car services from 1,887 in 2015 to 2,489 in 2016, in response to increased demands from our new and existing customers for car services. RevPAC for car services decreased from RMB508 in 2015 to RMB490 in 2016, as we provide more car services to individual customers in 2016, which generally used economic car models with associated lower market rates compared to car models utilized when we provide car services to traditional corporate and institutional clients.

Cost of revenues

Our cost of revenues increased by RMB377.3 million, or 33.2%, from RMB1,138.0 million in 2015 to RMB1,515.3 million in 2016. The increase in our cost of revenues was primarily due to (i) an increase in vehicle-related depreciation of RMB195.9 million; (ii) an increase in payroll-related expenses of RMB109.6 million, as we increased our headcount to support our business expansion; and (iii) an increase in store expenses of RMB26.3 million, as we expanded our services locations.

In 2016, we disposed of 4,775 used vehicles, and signed sales contracts for 1,890 used vehicles pending title transfer. We recorded a disposal gain of RMB1.8 million in aggregate for these 6,665 vehicles. In 2015, we disposed of 4,140 vehicles and recorded a loss of RMB5.1 million. These amounts were included in vehicle related depreciation expense in 2015 and 2016, respectively.

Gross profit

Our gross profit increased by RMB281.0 million, or 89.9%, from RMB312.7 million in 2015 to RMB593.7 million in 2016. Gross profit margin for 2016 was 28.1%, as compared to 21.6% for 2015. The gross profit margin improvement from 2015 to 2016 was primarily attributable to certain percentage decreases in vehicle insurance expenses as a result of economies of scale as our fleet grew in 2016 and, to a lesser extent, in vehicle repair and maintenance expenses due to certain of our cost control measures to enhance our operating efficiency.

Selling and marketing expenses

Our total selling and marketing expenses increased by RMB32.1 million, or 49.4%, from RMB65.1million in 2015 to RMB97.2 million in 2016. This increase was primarily due to a RMB13.2 million increase in commissions paid to sales channels and a RMB10.0 million increase in expenses regarding our advertising and promotion activities as a result of our increased sales and marketing activities in 2016.

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Among the total selling and marketing expenses, our related party selling and marketing expenses increased from RMB16.2 million in 2015 to RMB29.4 million in 2016. The increase was primarily because we expanded and promoted our car services to a business-to-consumer model through Ctrip’s channels.

General and administrative expenses

Our general and administrative expenses increased by RMB68.4 million, or 37.3%, from RMB183.5 million in 2015 to RMB251.9 million in 2016, primarily due to a RMB19.0 million increase in employee-related costs such as salaries and welfare expenses as a result of increased headcount for our expansion, as well as a foreign exchange loss in 2016 compared with a foreign exchange gain in 2015.

Other operating income

We recorded other operating income of RMB10.8 million and RMB10.3 million in 2015 and 2016, respectively, which primarily consisted of government grants and subsidies we received from various levels of local governments in the respective years. See “—Certain income statement line items—Other operating income.”

Interest expense

Our total interest expense increased by RMB101.2 million, or 81.8%, from RMB123.8 million in 2015 to RMB225.0 million in 2016. The increase was primarily due to a RMB106.8 million interest expense increase incurred in connection with our US$200 million senior unsecured notes issued in December 2015 and our US$400 million senior unsecured notes issued in August 2017.

Among the total interest expense, our related party interest expenses increased from RMB14.2 million in 2015 to RMB18.5 million in 2016, as a result of a RMB300 million loan extended to us in April 2015 by our strategic partner, Ctrip, through its affiliate Ctrip Travel Information Technology (Shanghai) Co. Ltd. In October 2016, we voluntarily repaid RMB200 million to Ctrip Travel Information before the due date, and only RMB100 million loan remained outstanding as of December 31, 2016.

Other income, net

We recorded other income of RMB10.2 million and RMB1.4 million in 2015 and 2016, respectively. Our other income in 2016 primarily consisted of a RMB1.0 million tax refund.

Provision for income taxes

We made provisions for income taxes of RMB87.5 million and RMB6.6 million in 2015 and 2016, respectively. Provision for income taxes made in 2016 was primarily because we recorded net income of certain PRC subsidiaries in 2016 and such provision was assessed and made based on a 25% enterprise income tax rate for our PRC operating subsidiaries. Provision for income taxes made in 2015 was primarily due to a 10% PRC tax assessed on the one-time gain from our sale of our cost method investment.

Net income

We recorded net income of RMB696.3 million in 2015 (including a net gain of RMB736.8 million related to sales of investment assets after transaction costs and tax provision), and recorded a net income of RMB33.1 million in 2016. Net income margin for the year of 2016 was 1.6%.

B. Liquidity and Capital Resources

We generated operating income in 2015, 2016, and 2017. Our operations and our growth have primarily been financed by issuances of shares, bank borrowings and credit arrangements with financing entities of automobile manufacturers, issuance of senior unsecured notes, sale of investments and syndicated bank facility. We expect self-financing from operating income to be an increasing source of our cash flows in future periods.

We had negative working capital at December 31, 2017 primarily due to the maturity of our 2018 Senior Notes in December 2018. Our management believes that our current cash position as of December 31, 2017, the cash expected to be generated from investing activities through our proper management of fleet size, operations and funds available from borrowings under the bank facilities will be sufficient to meet the Company’s working capital and capital expenditure for at least the next twelve months from the date of this annual report. 

As of December 31, 2017, we had RMB1,283.5 million (US$197.3 million) in cash, cash equivalents and restricted cash, among which RMB369.1 million (US$56.7 million) was denominated in RMB, RMB914.3 million (US$140.5 million) was denominated in US dollars and RMB73,597 (US$11,312) was denominated in Hong Kong dollars. We generally transfer cash from our offshore holding companies to PRC operating subsidiaries through: (i) making shareholder loans to PRC operating subsidiaries, (ii) making additional capital contributions to PRC operating subsidiaries; (iii) extending domestic loans through PRC operating subsidiaries while providing security interests for such loans through offshore holding companies, and (iv) transferring cash through cross-border “cash pooling” within our group companies. On the other side, we plan to transfer cash from PRC operating subsidiaries back to offshore holding companies through: (i) repaying shareholder loans to offshore holding companies, (ii) paying dividends to offshore holding companies (iii) extending foreign loans through offshore holding companies while providing security interests for such loans through PRC operating subsidiaries, and (iv) transferring cash through cross border “cash pooling” within our group companies. All of such transfers shall be conducted in compliance with PRC laws, regulations and rules. For examples, “cash pooling” was recently permitted by PRC governments for cross-border cash transfer, subject to restrictions including (i) such transfers shall only be conducted within group companies, and one of which shall be incorporated in a PRC free trade zone, and (ii) proceeds from loans or bonds could not be transferred by using “cash pooling”. For more details regarding restrictions on transferring cash within our corporate structure, please see “Risk Factors - PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds from the offerings of any securities to make loans or additional capital contributions to our PRC operating subsidiaries”, “- Limitations on the ability of our operating subsidiaries to pay dividends or other distributions to us could have a material adverse effect on our ability to conduct our business”, and “- Government control over currency conversion may limit our ability to issue dividends to our shareholders in foreign currencies, and may therefore adversely affect the value of your investment.

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As of December 31, 2017, we had an aggregate of RMB5.6 billion (US$862.9 million) in total debt, including RMB2,657.4 million (US$408.4 million) outstanding short-term debt and RMB2,957.1 million (US$454.5 million) outstanding long-term debt from banks and third-party financing companies and issuance of senior unsecured notes. Among the total debt of RMB5.6 billion (US$862.9 million), RMB254.7 million (US$39.1 million) were collateralized by some of our vehicles and accounts receivable from one of the Company’s wholly-owned subsidiaries. As of December 31, 2017, RMB100.0 million (US$15.4 million) of our outstanding long-term debt represented related party debt provided by our strategic partner, Ctrip, via an entrusted bank loan.

On December 8, 2015, we issued the 2018 Senior Notes with an aggregate principal amount of US$200 million, which have a trading market on the Stock Exchange of Hong Kong Limited. The 2018 Senior Notes bear a fixed interest rate of 7.5% per annum, yielding 7.75%, with interest payable semi-annually in arrears, and will mature on December 8, 2018 unless previously repurchased in accordance with their terms prior to such date. The 2018 Senior Notes are general obligations of our Company and are (i) subordinated to secured obligations of our Company, (ii) senior in right of payment to any existing and future obligations of our Company expressly subordinated in right of payment; (iii) guaranteed by our offshore subsidiaries eHi Hong Kong, Brave Passion Limited and L&L on a senior basis, subject to certain limitations, and (iv) effectively subordinated to all existing and future obligations of our non-guarantor subsidiaries. In addition, under the terms of the 2018 Senior Notes, we are subject to restrictive covenants including, among others, limitations on incurring additional indebtedness or liens, maintenance of a fixed charge coverage ratio, maintenance of our shareholding structure, limitations on consolidation, merger and investment, and limitations on asset sales or use of proceeds. As of the date of this annual report, we have been in continuous compliance with all restrictive covenants under the Indenture in connection with the 2018 Senior Notes.

On August 30, 2016, we issued the 2016 Facility with an aggregate principal amount of US$150 million with a syndicate of banks. Pursuant to the 2016 Facility, 50% of the proceeds has been used to repay our existing indebtedness, and remaining proceeds will be used for fund capital expenditures of our PRC subsidiaries and other general corporate purposes. The 2016 Facility was jointly and severally guaranteed by our existing and future-established offshore subsidiaries, subject to certain exceptions according to terms therein. The 2016 Facility bears a floating interest rate of LIBOR plus 3.50% margin per annum. In August 2017, the Company early repaid all outstanding borrowings under the syndication loan originally due in 2019 using proceeds received from its 2022 Senior Note.

On August 14, 2017, we issued the 2022 Senior Notes with an aggregate principal amount of US$400 million, which have a trading market on the Singapore Exchange Securities Trading Limited. The 2022 Senior Notes bear a fixed interest rate of 5.875% per annum, yielding 6.075%, with interest payable semi-annually in arrears, and will mature on August 14, 2022 unless previously repurchased in accordance with their terms prior to such date. The 2022 Senior Notes are general obligations of our Company and are (i) subordinated to secured obligations of our Company, (ii) senior in right of payment to any existing and future obligations of our Company expressly subordinated in right of payment; (iii) guaranteed by our offshore subsidiaries eHi Hong Kong, Brave Passion Limited and L&L on a senior basis, subject to certain limitations, and (iv) effectively subordinated to all existing and future obligations of our non-guarantor subsidiaries. In addition, under the terms of the 2022 Senior Notes, we are subject to restrictive covenants including, among others, limitations on incurring additional indebtedness or liens, maintenance of a fixed charge coverage ratio, maintenance of our shareholding structure, limitations on consolidation, merger and investment, and limitations on asset sales or use of proceeds. As of the date of this annual report, we have been in continuous compliance with all restrictive covenants under the Indenture in connection with the 2022 Senior Notes. 

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

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
	(in thousands)
Net cash provided by operating activities		296,691			420,744			719,865			110,641
Net cash used in investing activities		(991,917	)		(3,381,959	)		(2,585,661	)		(397,409	)
Net cash provided by financing activities		2,281,227			798,299			2,032,193			312,342
Effect of exchange rate changes on cash and cash equivalents		97,879			82,347			(24,565	)		(3,776	)
Net increase (decrease) in cash and cash equivalent		1,683,880			(2,080,570	)		141,832			21,799
Cash and cash equivalents-beginning of year		926,208			2,610,088			529,519			81,386
Cash and cash equivalents-end of year		2,610,088			529,519			671,350			103,185

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Operating activities

Net cash provided by operating activities consists primarily of our net income, non-cash adjustments including depreciation and amortization, share-based compensation expenses as well as one-time gains from sale of cost method investment and waiver of warrants, and changes in operating assets and liabilities, such as accrued expenses and other current liabilities, accounts receivable, and prepaid expenses and other current assets.

Net cash provided by operating activities in the year ended December 31, 2017 was RMB719.9 million (US$110.6 million), primarily attributable to (i) our net income of RMB122.2 million (US$18.8 million) in 2017, (ii) an add-back of depreciation and amortization expenses of RMB755.1 million (US$116.1 million), which were non-cash item and primarily related to vehicle-related depreciation, and partially offset by (i) an increase of RMB165.2 million (US$25.4 million) in prepaid expenses and other assets, primarily related to value-added tax payments which could be deducted as expenses in the future periods, and (ii) an increase of RMB155.2 million (US$23.9 million) in accounts receivable.

Net cash provided by operating activities in the year ended December 31, 2016 was RMB420.7 million, primarily attributable to (i) our net income of RMB33.1 million in 2016, (ii) an add-back of depreciation and amortization expenses of RMB668.0 million, which were non-cash item and primarily related to vehicle-related depreciation, and partially offset by (i) an increase of RMB251.6 million in prepaid expenses and other assets, primarily related to value-added tax payments which could be deducted as expenses in the future periods.

Net cash provided by operating activities in the year ended December 31, 2015 was RMB296.7 million , primarily attributable to (i) our net income of RMB696.3million in 2015, (ii) an add-back of depreciation and amortization expenses of RMB474.7 million , which were non-cash item and primarily related to vehicle-related depreciation, and partially offset by (i) one-time gains of RMB820.0 million from sale of investment assets and waiver of warrants, which were cash flows generated from our investing activities, and (ii) an increase of RMB166.5 million in prepaid expenses and other assets, primarily related to value-added tax payments which could be deducted as expenses in the future periods.

Investing activities

Our cash used in investing activities is primarily related to investments in property and equipment, mostly vehicle purchases.

Net cash used in investing activities amounted to RMB2,585.7 million (US$397.4 million) in the year ended December 31, 2017, primarily attributable to RMB3,252.5 million (US$499.9 million) associated with purchases of property and equipment, mostly vehicles, as we expanded our fleet size significantly in 2017, and an increase in restricted cash of RMB377.0 million (US$57.9 million), partially offset by RMB1,057.3 million (US$162.5 million) in proceeds from the disposal of property and equipment, mostly used vehicles.

Net cash used in investing activities amounted to RMB3,382.0 million in the year ended December 31, 2016, primarily attributable to RMB3,687.8 million associated with purchases of property and equipment, mostly vehicles, as we expanded our fleet size significantly in 2016, and RMB50.0 million cash paid for loans to a third party, partially offset by RMB410.7 million in proceeds from the disposal of property and equipment, mostly used vehicles.

Net cash used in investing activities amounted to RMB991.9 million in the year ended December 31, 2015, primarily attributable to RMB2,183.4 million associated with purchases of property and equipment, mostly vehicles, as we expanded our fleet size significantly in 2015, partially offset by (i) RMB954.4 million in proceeds from sales of investment assets (net of transaction costs), as we transferred our investment in Travice Inc. in 2015, and (ii) RMB241.8 million in proceeds from the disposal of property and equipment, mostly used vehicles. 

Financing activities

Net cash provided by financing activities consists primarily of proceeds from note offering, equity financings, and borrowings from banks, third-party financing companies and our related party Ctrip. Our financing activities for the periods discussed below were primarily to fund the expansion of our fleet and service network throughout China.

Net cash provided by financing activities amounted to RMB2,032.2 million (US$312.3 million) in the year ended December 31, 2017, primarily attributable to (i) proceeds from issuance of the 2022 Senior Notes (net of issuance costs) of RMB2,611.6 million (US$401.4 million); and (ii) proceeds from borrowings from third parties of RMB1,874.4 million (US$288.1 million), partially offset by (i) repayment of borrowings from third parties of RMB1,441.5 million (US$221.6 million) and (ii) repayment of Syndicated loan of RMB1,000.3 million (US$153.7 million) during the same period.

Net cash provided by financing activities amounted to RMB798.3 million in the year ended December 31, 2016, primarily attributable to proceeds from borrowings from third parties of RMB2,142.4 million, partially offset by (i) repayment of borrowings from third parties of RMB1,166.8 million and (ii) repayment of borrowings from a related party of RMB200.0 million during the same period.

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Net cash provided by financing activities amounted to RMB2,281.2 million in the year ended December 31, 2015, primarily attributable to (i) proceeds from issuance of the 2018 Senior Notes (net of issuance costs) of RMB1,241.3 million, and (ii) proceeds from the issuance of Class A common shares in a private placement to Tiger Fund and SRS Funds (net of issuance costs) of RMB792.9 million, and (iii) proceeds from borrowings of RMB704.1 million from banks and third-party financing companies and borrowings of RMB300 million from our related party Ctrip, and partially offset by repayment of borrowings of RMB741.3 million during the same period.

Capital expenditures

Our capital expenditures are primarily used for vehicle purchases. Our capital expenditures totaled RMB2,183.4 million, RMB3,687.8 million and RMB3,252.5 million (US$499.9 million) in 2015, 2016 and 2017, respectively. We expect the substantial majority of our capital expenditures in 2018 to relate to the planned growth of our fleet. We intend to fund our capital expenditures with existing cash balances, cash generated from our operating activities, and borrowings from banks and third-party financing companies.

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 year-over-year increase in the consumer price index for 2015, 2016 and 2017 was 1.4%, 2.0% and 1.6%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future. If inflation continues to rise, we may experience increases in the wages of our employees as a result of the increasing inflation levels in China or otherwise. See “Risk Factors—Risks related to our business and industry—If the average salary or statutory welfare expenses of our employees increase significantly, our profitability maybe materially adversely impacted.”

C. Research and Development

Not applicable.

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2017 to December 31, 2017 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. 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 that engages in leasing, hedging or research and development services with us.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations, including interest payable, as of December 31, 2017:

	Payments Due by Period
	Total		Within 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(RMB in thousands)
Short-term debt(1)		951,781		951,781		—		—		—
Long-term debt due to third parties(1)		5,563,492		1,923,802		718,903		2,920,787		—
Long-term debt due to a related party(1)		102,262		102,262		—		—		—
Operating leases		99,046		51,631		37,439		9,124		852
Purchase commitments(2)		560,048		550,510		9,538		—		—
Total		7,276,629		3,579,986		765,880		2,929,911		852

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(1) Amounts include (i) principal amounts included in short-term borrowings and long-term borrowings on the consolidated balance sheets, and (ii) estimated interest payments of RMB22.9 million and RMB914.0 million on the outstanding short-term and long-term debt, respectively, based on the contractual borrowing terms and the respective applicable interest rates.

(2) Purchase commitments include vehicle purchase deposits and commitments relate to purchase of rental vehicles and marketing resources.

Our 2018 Senior Notes are in the aggregate principal amount of US$200 million and will mature on December 8, 2018, unless previously repurchased in accordance with their terms prior to such date. The Senior 2018 Notes bear interest at a rate of 7.5% per annum, payable semiannually in arrears on June 8 and November 8 of each year, beginning on June 8, 2016.

Our 2016 Facility is in the aggregate principal amount of US$150 million has been repaid in full in August 2017.

Our 2022 Senior Notes are in the aggregate principal amount of US$400 million and will mature on August 14, 2022, unless previously repurchased in accordance with their terms prior to such date. The Senior 2022 Notes bear interest at a rate of 5.875% per annum, payable semiannually in arrears on February 14 and August 14 of each year, beginning on February 14, 2018.

While the table above indicates our contractual obligations as of December 31, 2017, the actual amounts we are eventually required to pay may be different in the event that any agreements are renegotiated, cancelled or terminated.

G. Safe Harbor

See “Forward-Looking Statements” on page 3 of this annual report.

ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth certain information relating to our directors and executive officers as of the date of this annual report. The business address of each of our directors and executive officers is Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road, Shanghai, 200062, the People’s Republic of China.

Name	Age	Position/Title
Ray Ruiping Zhang	54	Chairman, Chief Executive Officer
Greg Stubblefield	58	Director
Gang Chen	39	Director
Qian Miao	52	Independent Director
Andrew Xuefeng Qian	55	Independent Director
David Jian Sun	53	Independent Director
Ronald Meyers	60	Independent Director
Leo Lihong Cai	54	Executive Vice President of Sales and Marketing
Colin Chitnim Sung	52	Chief Financial Officer
Chun Xie	39	Chief Information Officer
Hongtao Han	49	Vice President of Operations
Nina Yan Wu	46	Director of Human Resource and Training Department
Jane Fengjuan Zheng	35	Director of Corporate Sales and Business Development

Ray Ruiping Zhang is our founder, chief executive officer and chairman of our board of directors. Mr. Zhang has served as our chief executive officer and our director since our inception. Mr. Zhang has over 20 years of experience in vehicle dispatching and fleet management system integration and implementation. Prior to establishing our company, from September 1990 to April 2002, Mr. Zhang was the co-founder and chief executive officer of Aleph, Inc., which is a leading supplier of vehicle dispatching and scheduling systems in the United States based in Berkeley, California. Mr. Zhang received his bachelor’s degree in computer science from Fudan University in 1985, studied in the graduate school of computer science at California State University, Sacramento from 1985 to 1987, and received his executive MBA degree from China Europe International Business School in 2005.

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Greg Stubblefield has served as our director since August, 2016, who was appointed by our board of directors after Mr. William W. Snyder’s resignation and re-elected by our shareholders at the 2016 annual general meeting of shareholders. Mr. Stubblefield has served as executive vice president and chief strategy officer of Enterprise Holdings since 2009, during which period he led Enterprise Holdings’ global business development as well as global sustainability strategy and initiative, including its car-sharing program, its Alamo and National franchise locations and its marketing & communications organization. Mr. Stubblefield joined Enterprise Holdings Inc., or Enterprise Holdings, in 1982. He was named president of Alamo and National franchises in 2007 and president of operations California and Hawaii in 2004. Mr. Stubblefield received his bachelor’s degree in social science from University of California, Berkeley in 1982.

Gang Chen has served as our director since June 2017, and was appointed by our board of directors after Mr. James Jianzhang Liang’s resignation. Mr. Gang Chen is currently a senior vice president of Ctrip and is responsible for its Ground Transport business and Innovation Works. He also helped establish Ctrip’s Bus Ticketing business in 2014 and Train Ticketing business in 2013. Prior to Ctrip, Mr. Chen joined Tieyou Train Ticketing in 2011, which was subsequently acquired by Ctrip. Mr. Chen is a serial entrepreneur and had several start-up experiences. Mr. Chen obtained his master’s and bachelor’s degrees in Computer Science from Zhejiang University.

Qian Miao has served as our independent director since April 2008. Mr. Miao is the general manager and a director of China Network Co., Ltd. From December 1995 to December 2002, Mr. Miao served as a department manager at Wonders Information Co., Ltd., a listed company in China. From July 1987 to December 1995, Mr. Miao was an IT engineer and project manager at Shanghai Institute of Computer Software. Mr. Miao completed his postgraduate study in software engineering from Fudan University in 1987 and received his bachelor’s degree in computer science from Fudan University in 1985.

Andrew Xuefeng Qian has served as our independent director since November 2014. Mr. Qian currently serves as the chairman of New Access Capital, which he founded in 2003. Prior to that, Mr. Qian worked at Softbank China Venture Capital as a vice president from 2000 to 2003. Prior to joining Softbank China Venture Capital, Mr. Qian worked as a corporate attorney at Simpson Thacher & Bartlett LLP, Cleary Gottlieb Steen & Hamilton LLP and Cravath, Swaine & Moore LLP. He is the guest professor of Shanghai Jiaotong University Aetna Graduate School of Business Administration and Nanjing University School of Business Management. He received the awards of “2007 Top 10 New Financiers of China”, “2008 Top 10 Young Investors in China”, “2011 Outstanding Venture Investor” and “2013 Outstanding PE/VC Achievement Award”. He was a former president of Yale Club of Shanghai from 2002 to 2007. He was a visiting fellow at Queen Elizabeth House of Oxford in 1986. Mr. Qian received his juris doctor’s degree from Yale Law School in 1994, his M.A./Ph.D. qualification in political science from University of California Los Angeles in 1991 and his LL.B. degree from Foreign Affairs College in Beijing in 1985.

David Jian Sun has served as our independent director since November 2014. Mr. Sun has over ten years of experience in consumer industry. Mr. Sun has served as an executive director and the general manager of BTG Hotels (Group) Co., Ltd. since September 2016. He served as the executive director and chief executive officer of Home Inns & Hotels Management Inc. from December 2004 to August 2016. Prior to that, Mr. Sun served as a vice president of operations at B&Q (China) Ltd., a subsidiary of Kingfisher plc, the third largest home improvement retail group in the world from 2003 to 2004, overseeing the operation of 15 B&Q superstores in China. From 2000 to 2003, Mr. Sun served as a vice president of marketing at B&Q (China) Ltd., and led B&Q’s market positioning and branding efforts in China. Mr. Sun served as an independent director of Mecox Lane Limited from 2010 to 2013. Mr. Sun has served as an independent director of E-house (China) Holdings Limited (NYSE:EJ) since March 2014 and an independent director of Leju Holdings Limited (NYSE:LEJU) since April 2014. Mr. Sun received a bachelor’s degree from Shanghai Medical University in China in 1987.

Ronald Meyers has served as our independent director since November 2014. Mr. Meyers is a certified public accountant and has 34 years of experience in public accounting. He joined Ernst & Young LLP in 1979 and was promoted to audit partner in 1991. In 2006, Mr. Meyers relocated to Ernst and Young’s Shanghai office as part of the Far East region management team. He was promoted in 2009 to the role of chief operating officer of the Greater China practice. He retired from the firm in 2013. During his career in public accounting, Mr. Meyers served as audit partner for a number of publicly traded clients including those with substantial international operations. He also held numerous other management positions while at Ernst & Young LLP, including the managing partner of the Midwest subarea audit practice. Mr. Meyers graduated summa cum laude from Southern Illinois University with a bachelor’s degree in economics in 1979.

Leo Lihong Cai has served as our executive vice president of sales and marketing since April 2008. Dr. Cai has over 15 years of experience in marketing and IT industry and over ten years of experience in car rental and car service industry. Prior to joining us, Dr. Cai served as a market development director of EMC Corporation, a pre-sales director of Hewlett-Packard Company and an enterprise solution and strategic alliances director of Mercury Interactive Corporation. Dr. Cai obtained a bachelor’s degree in naval architecture from Shanghai Jiao Tong University in 1988, a master’s degree in mechanical engineering from University of Missouri in 1992 and a Ph.D. degree in mechanical engineering from the University of California, Berkeley in 1996.

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Colin Chitnim Sung has served as our chief financial officer since April 2013. Mr. Sung is currently a member of the board of directors and chairman of the audit committee of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) since February 2008. Prior to joining us, Mr. Sung also has served as adviser of NeWorld Education Group, Inc. since August 2012 and served as Chief Financial Officer of NeWorld Education Group since August 2011. Mr. Sung served as the deputy Chief Executive Officer and the Chief Financial Officer of Linktone Ltd. (NASDAQ: LTON), a wireless interactive entertainment service provider in China, from 2008 to 2011. From 2005 to 2008, he was the Chief Financial Officer of Linktone Ltd., where he also served as the acting Chief Executive Officer in 2006 and as its director of board from 2007 to 2008. From 2004 to 2005, Mr. Sung was the Corporate Controller of UTI, United States, Inc., a subsidiary of International Freight Forwarder (NASDAQ: UTIW), and from 2001 to 2004, was a Vice President of finance and Corporate Controller of USF Worldwide, Inc., a subsidiary of US Freightways. From 1997 to 2001, Mr. Sung was Vice President and Corporate Controller for US Operation of Panalpina Welttransport Holding, (PWTN.SW). Mr. Sung received his bachelor’s degree in accounting from William Paterson University in 1992 and his MBA degree from American InterContinental University in 2004. Mr. Sung is a Certified Public Accountant and Chartered Global Management Accountant.

Chun Xie has served as our chief information officer since 2006. Prior to joining us, Mr. Xie served as a senior engineer and an IT manager at Surrey Technology Co., Ltd. from August 2002 to February 2006. Mr. Xie also served as a senior engineer at Chinaquest.com from August 2000 to July 2001. Mr. Xie graduated from the advanced software engineering & project management program of National Institute Information Technology, India, and was certified as a PMP (project management professional) by PMI (Project Management Institute, USA) in 2006 and obtained a bachelor’s degree from Tongji University in 2000.

Hongtao Han has served as our vice president of operation since 2006. Prior to joining us, Mr. Han served as the finance manager at Shanghai Kailun International Trading Co., Ltd. from January 1997 to January 2006. From July 1989 to January 1997, Mr. Han served as an accounting manager at Shanghai Kailun Paper and Printing Group Co., Ltd. Mr. Han received his bachelor’s degree from Shanghai University of Finance and Economics in 1990.

Nina Yan Wu has served as our director of human resource and training department since February 2011. Prior to join us, Ms. Wu served as an operation director at WTM Marketing Services Co., Ltd. from 2008 to 2011. From 2006 to 2008, Ms. Wu served as a human resource director of Shanghai Unisys Technology Company. From 2002 to 2006, Ms. Wu served as a human resource manager at Microsoft (China) Co., Ltd. Ms. Wu received her bachelor’s degree in Chinese language and literature from Shanghai Normal University in 1994.

Jane Fengjuan Zheng has served as our director of corporate sales and business development since April 2011, and has over almost ten years of experience in corporate sales and marketing management in the car rental and car service industry. Ms. Zheng received her bachelor’s degree in business administration from Wuhan University of Technology and has completed the EMBA program from Antai Business School of Economics and Management, Shanghai Jiaotong University.

B. Compensation

Compensation of Directors and Executive Officers

In 2017, the aggregate cash compensation earned by our executive officers and all of our directors was approximately RMB10.3 million (US$1.6 million). For information regarding options granted to officers and directors, see “—Equity Incentive Plans”. We do not pay or set aside any amounts for pensions, retirement or other benefits for our officers and directors.

Employment agreements

We have entered into employment agreements with all of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period. We may terminate an executive officer’s employment for cause at any time, without prior written notice, or without cause with prior written notice, for certain acts of the employee, including but not limited to willful gross misconduct by the employee in connection with his or her employment, or violation of our internal rules. An executive officer may, with prior written notice, terminate his or her employment at any time without cause.

Each executive officer has agreed to hold, both during and subsequent to the terms of his or her agreement, in confidence and not to use, except as required in the performance of his or her duties in connection with the employment, any of our confidential information, technological secrets, commercial secrets and know-how. Our executive officers have also agreed to disclose to us all inventions, designs and techniques resulted from work performed by them, and to assign us all right, title and interest of such inventions, designs and techniques. Moreover, each of our executive officers has agreed during the term of his or her employment with us and two years thereafter, (i) not to engage in any manner in any business that may compete with our business, or own an interest in, manage, operate, join, control, lend money or render financial or other assistance to or participate in or be connected with, as an officer, employee, partner, stockholder, consultant or otherwise, any person that competes with us; (ii) not to refer or attempt to refer to any third party any business in which we currently engage or will likely engage or participate; and (iii) not to solicit or employ any person with whom we maintain employment or consulting relation, or otherwise direct or cause any person to terminate his employment or consulting relationship with us.

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We have also entered into an indemnification agreement with each of our directors and executive officers. Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.

Equity Incentive Plans

We adopted the 2010 Plan in April 2010, which was amended and restated in December 2010 and August 2014. In October 2014, we adopted the 2014 Plan, which came into effect upon completion of our initial public offering. These performance incentive plans were adopted to help us recruit and retain key employees, directors or consultants and to motivate such persons to exert their best efforts on behalf of our company by providing incentives through the granting of share-based awards. The plan administrator is our board of directors or a committee appointed and determined by the board. Under the 2010 Plan, we are authorized to issue a maximum of 6,698,470 common shares, and the awards vest upon satisfaction of continuous service, which varies over a period of three to five years from the date of grant. Under the 2014 Plan, we are authorized to initially reserve a maximum of 4,000,000 common shares, provided that the shares reserved shall automatically increase on January 1 of each year during the term of the 2014 Plan, commencing on January 1, 2015, by an amount equal to the lesser of (i) one percent (1%) of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 common shares or (iii) such number of common shares as may be determined by our board of directors. As of the date of this annual report, a total of 3,192,000 options and 1,500 unvested restricted share units granted under the 2010 Plan and the 2014 Plan were outstanding.

The following paragraphs describe the principal terms of our 2010 Plan:

Plan Administration. Our 2010 Plan will be administered by our board of directors or one or more committees appointed by our board of directors or another committee (within its delegated authority). Any such administrator is authorized and empowered to, subject to the express provisions of the 2010 Plan, do all things necessary or desirable in connection with the authorization of awards and the administration of the 2010 Plan.

Types of Awards. The types of awards that may be granted under our 2010 Plan are:

· Share Options. A share option is the grant of a right to purchase a specified number of common shares during a specified period as determined by the administrator. The maximum term of each option shall be ten years. The per share exercise price for each option granted to any eligible person subject to United States income tax shall be not less than 100% of the fair market value of a common share on the date of grant of the option.

· Share Appreciation Rights. A share appreciation right, or SAR, is a right to receive a payment, in cash and/or common shares, equal to the excess of the fair market value of a specified number of common shares on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and, with respect to any eligible person subject to United States income tax, shall be not less than 100% of the fair market value of a common share on the date of grant of the SAR. The maximum term of a SAR shall be ten years.

· Other Awards. The other types of awards that may be granted under the 2010 Plan include: (i) share bonuses, restricted shares, performance shares, share units, phantom shares, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the common shares, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof; (ii) any similar securities with a value derived from the value of or related to the common shares and/or returns thereon; or (iii) cash awards.

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Acceleration of Awards upon Certain Corporate Transactions. Upon the occurrence of any merger, combination, consolidation or other reorganization; any exchange of common shares or other securities of our company; a sale of all or substantially all the business, shares or assets of our company; a dissolution of our company; or any other event in which our company does not survive (or does not survive as a public company in respect of our common shares); or any change in control event defined in any applicable award agreement, the administrator of the 2010 Plan may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the administrator in the circumstances.

Amendment and Termination of Plan. No amendment, suspension or termination of the 2010 Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of our company under any award granted under the 2010 Plan prior to the effective date of such change. Unless earlier terminated by our board of directors, the 2010 Plan shall terminate at the close of business on the day before the tenth anniversary of April 1, 2010. After the termination of the 2010 Plan either upon such stated expiration date or its earlier termination by our board of directors, no additional awards may be granted under the 2010 Plan, but previously granted awards (and the authority of the administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the 2010 Plan.

The following paragraphs describe the principal terms of our 2014 Plan:

Plan Administration. Our 2014 Plan will be administered by our board of directors or one or more committees appointed by our board of directors or another committee (within its delegated authority). Any such administrator is authorized and empowered to, subject to the express provisions of the 2014 Plan, do all things necessary or desirable in connection with the authorization of awards and the administration of the 2014 Plan.

Eligibility. The plan administrator may select among the following eligible individuals to whom an award may be granted: (i) our officers or employees, (ii) our directors; or (iii) consultants or advisers, who render bona fide services to us (except in connection with the offer or sale of securities in a capital-raising transaction or which directly or indirectly promote or maintain a market for our securities).

Award agreements. Each award under the 2014 Plan shall be evidenced by an award agreement or an electronic notice of award grant.

Types of Awards. The types of awards that may be granted under our 2014 Plan are:

· Share Options. A share option is the grant of a right to purchase a specified number of common shares during a specified period as determined by the administrator. The maximum term of each option shall be ten years. The per share exercise price for each option granted to any eligible person subject to United States income tax shall be not less than the fair market value of a common share on the date of grant of the option.

· Share Appreciation Rights. A share appreciation right, or SAR, is a right to receive a payment, in cash and/or common shares, equal to the excess of the fair market value of a specified number of common shares on the date the SAR is exercised over the “base price” of the award, which base price shall be determined by the administrator and set forth in the applicable award agreement. The maximum term of a SAR shall be ten years.

· Other Awards. The other types of awards that may be granted under the 2014 Plan include: (a) share bonuses, restricted shares, performance shares, share units, phantom shares, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the common shares, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof; (b) any similar securities with a value derived from the value of or related to the common shares and/or returns thereon; or (c) cash awards.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement.

Acceleration of Awards upon Certain Corporate Transactions. Upon the occurrence of any merger, combination, consolidation or other reorganization; any exchange of common shares or other securities of our company; a sale of all or substantially all the business, shares or assets of our company; a dissolution of our company; or any other event in which our company does not survive (or does not survive as a public company in respect of our common shares); or any change in control event defined in any applicable award agreement, the administrator of the 2014 Plan may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the administrator in the circumstances.

Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator.

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Amendment and Termination of Plan. No amendment, suspension or termination of the 2014 Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of our company under any award granted under the 2014 Plan prior to the effective date of such change. Unless earlier terminated by our board of directors, the 2014 Plan shall terminate at the close of business on the day before the tenth anniversary of the effective date. After the termination of the 2014 Plan either upon such stated expiration date or its earlier termination by our board of directors, no additional awards may be granted under the 2014 Plan, but previously granted awards (and the authority of the administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the 2014 Plan.

As of the date of this annual report, outstanding options and unvested restricted share units that we have granted to our directors, executive officers and other individuals are as follows:

Number of

Common

Shares

Underlying

Outstanding

Exercise

Options/

Price

Name

Restricted Share Units

(US$/Share)

Date of Grant

Date of Expiration

Ray Ruiping Zhang

1,673,000

3.11

December 31, 2010

December 31, 2018

(3)

Qian Miao

*

5.35

May 15, 2015

May 14, 2025

Andrew Xuefeng Qian

*

5.35

May 15, 2015

May 14, 2025

David Jian Sun

*

5.35

May 15, 2015

May 14, 2025

Ronald Meyers

*

5.35

May 15, 2015

May 14, 2025

Leo Lihong Cai

*

7.00

August 26, 2014

August 25, 2019

*

7.00

August 26, 2014

August 25, 2019

Chun Xie

*

7.00

August 26, 2014

August 25, 2019

Hongtao Han

*

7.00

August 26, 2014

August 25, 2019

*

5.35

May 15, 2015

May 14, 2025

Nina Yan Wu

*

7.00

August 26, 2014

August 25, 2019

Jane Fengjuan Zheng

*

7.00

August 26, 2014

August 25, 2019

Other individuals as a group

*

(1)

(2

)

(2

)

(2

)

Total

3,193,500

(1)

*The aggregate beneficial ownership of our company held by the grantee is less than 1% of our total outstanding common shares.

(1)     Includes options and restricted share units.

(2)    We granted share options to other individuals on the following dates and at the following exercise prices: (i) on August 26, 2014 with an exercise price of US$7.00 per share, which will expire on August 25, 2019; and (ii) on May 15, 2015 with an exercise price of US$5.35 per share, which will expire on May 14, 2025. On March 24, 2017, we granted restricted share units to certain employees.

(3)    In 2015, our Board approved and extended the expiration dates of options from December 30, 2015 to December 30, 2016. In 2016, our Board further approved and extended the expiration date of options from December 30, 2016 to December 30, 2017. In 2017, our Board further approved and extended the expiration date of options from December 30, 2017 to December 31, 2018.

C. Board

Practices Duties of Directors

Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skills 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, as amended and restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached.

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The functions and powers of our board of directors include, among other things:

· convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;

· issuing authorized but unissued shares and redeeming or purchasing outstanding shares of our company;

· declaring dividends and other distributions;

· appointing officers and determining the term of office of officers;

· exercising the borrowing powers of our company and mortgaging the property of our company; and

· approving the transfer of shares of our company, including the registering of such shares in our share register.

Terms of Directors and Executive Officers

Our executive 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 resign or are removed from office by special resolution passed at a meeting of 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 becomes of unsound mind.

Board Committees

We have established three committees under the board of directors: the audit committee, the compensation committee and the corporate governance and nominating committee.

Audit Committee

Our audit committee consists of Messrs. Ronald Meyers, Andrew Xuefeng Qian and Qian Miao. Mr. Ronald Meyers is the chairman of our audit committee and meets the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Our board of directors has determined that each member of the audit committee is an “independent director” within the meaning of Section 303A of the NYSE Listed Company Manual, or the NYSE Manual, and meets the criteria for independence set forth in Rule 10A-3 of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:

· selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm;

· reviewing the performance of and evaluating the independence of our independent registered public accounting firm;

· reviewing with our independent registered public accounting firm any audit issues or difficulties and management’s response;

· reviewing and discussing the audited financial statements and interim financial statements (if any) with management and our independent registered public accounting firm;

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

· reviewing with the chief executive officer, chief financial officer and our independent registered public accounting firms any significant deficiencies and material weakness in the design or operation of internal control over financial reporting and any fraud, if any, that involves management or other significant employees;

· reviewing and approving all proposed related-party transactions;

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· discussing guidelines and policies governing the process of risk assessment and management;

· meeting with the general counsel and outside counsel to review legal and regulatory matters; and

· such other matters that are specifically delegated to our audit committee by our board of directors from time to time.

Compensation Committee

Our compensation committee consists of Messrs. Greg Stubblefield, Gang Chen and David Jian Sun. Mr. Greg Stubblefield is the chairman of our compensation committee. Our board of directors has determined that Mr. David Jian Sun is an “independent director” within the meaning of Section 303A of the NYSE Manual. Pursuant to Section 303A.05 of the NYSE Listed Company Manual, listed companies must have a compensation committee composed entirely of independent directors. However, the laws of Cayman Islands do not require the compensation committee of our company to be composed entirely of independent directors. Since we are qualified as a foreign private issuer, Section 303A.00 of the NYSE Listed Company Manual permits us to follow home country practice and be exempted from the requirements under Section 303A.05 of the NYSE Listed Company Manual.

Our compensation committee assists the board in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers and overseeing other compensation and employee benefit plans and practices, including incentive-compensation and equity-based plans. Members of the compensation committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:

· reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating our chief executive officer’s performance in light of those goals and objectives, and determining or recommending to the board for its approval our chief executive officer’s compensation level based on this evaluation;

· reviewing and approving or making recommendations to the board for its approval with respect to the compensation level of our other executive officers;

· reviewing and making recommendations to the board with respect to our compensation policies and the compensation of our directors; and

· reviewing and making recommendations to the board with respect to all incentive-compensation and equity-based plans.

Corporate Governance and Nominating Committee

Our corporate governance and nominating committee consists of Messrs. Ray Ruiping Zhang, Greg Stubblefield and Gang Chen. Mr. Ray Ruiping Zhang is the chairman of our nominating and corporate governance committee. Pursuant to Section 303A.04 of the NYSE Listed Company Manual, listed companies must have a nominating and corporate governance committee composed entirely of independent directors. However, the laws of Cayman Islands do not require the nominating and corporate governance committee of our company to be composed entirely of independent directors. Since, we are qualified as a foreign private issuer, Section 303A.00 of the NYSE Listed Company Manual permits us to follow home country practice and be exempted from the requirements under Section 303A.04 of the NYSE Listed Company Manual.

Our nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:

· identifying and recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;

· selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the corporate governance and nominating committee itself;

· developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices;

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· evaluating the performance and effectiveness of the board as a whole; and

· evaluating the performance and effectiveness of the committee itself with the board.

Corporate Governance

Our board of directors has adopted a code of business conduct and ethics, which is applicable to our directors and senior executive and financial officers. Our code of business conduct and ethics is publicly available on our website at http://www.1hai.cn.

In addition, our board of directors will adopt a set of corporate governance guidelines. The guidelines will reflect certain guiding principles with respect to the structure of our board of directors, procedures and committees. These guidelines are not intended to change or interpret any law, or our memorandum and articles of association, as amended or restated from time to time.

Remuneration and Borrowing

The directors may determine remuneration to be paid to the directors. The compensation committee assists the directors in reviewing and approving the compensation structure for the directors. The directors may exercise all the powers of the company to raise or borrow money and to mortgage or charge all or any part of its undertaking, property and assets (present and future) and uncalled capital, and to issue debentures, bonds and other securities whether outright or as security for any debt obligations of our company or of any third party.

Qualification

There is no shareholding qualification for directors.

Summary of Corporate Governance Differences

As a foreign private issuer with shares listed on the NYSE, we are required by Section 303A.11 of the NYSE’s Listed Company Manual to disclose any significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under NYSE listing standards. A summary of the differences between our current corporate governance practices and the NYSE corporate governance requirements applicable to domestic U.S. companies can be found on our website at www.1hai.cn. Please refer to Item 16.G., “Corporate Governance” for further details.

D. Employees

As of December 31, 2017, we had 7,195 full-time employees. We also had 585 part-time employees as of December 31, 2017, who were primarily engaged in direct services, such as the delivery and pick-up of rental vehicles.

We primarily engaged Qian Jin, an independent third-party human resources company, to provide human resources services which include, among other things, managing payrolls, social welfare and benefits contributions and local residency permits of our dispatch employees.

The table below sets forth the number of our full-time employees in each of our areas of operations and as a percentage of our total full-time workforce as of December 31, 2017.

	As of December 31, 2017
	Number of employees		Percentage of all employees
Direct vehicle and operation services		5,849		81.29	%
Fleet management and support		844		11.73
General administration		315		4.38
Sales and marketing		187		2.60
Total		7,195		100	%

We believe that recruiting, retaining and motivating qualified personnel is crucial to our success. We have standardized our human resources policies and procedures in a detailed employee manual that all employees are required to adhere to and we have designed and implemented in-house training programs tailored to each job function and responsibilities to maintain and improve our employees’ performance. Specific training is provided to new drivers at orientation to help them familiarize with our working standards and operating requirements.

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We participate in various employee social security plans that are required by municipal and provincial governments, including pension, unemployment insurance, work-related injury insurance and medical insurance. We are required by PRC laws to make contributions to employee social security plans at specified percentages of the salaries, bonuses and certain allowances of our employees.

E. Share Ownership

The following table sets forth information with respect to the beneficial ownership of our common shares, as of April 26, 2018, by:

· each of our directors and executive officers; and

· each person known to us to own beneficially more than 5% of our common shares.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days of the dates of this annual report, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

The calculations in the table below assume that there are 139,917,575 common shares outstanding as of April 26, 2018, comprising of 74,279,018 Class A common shares (including 1,027,288 Class A common shares, represented by 513,644 American depositary shares, issued and reserved for the future exercise of options or the vesting of other awards under the 2010 Plan and the 2014 Plan), and 65,638,557 Class B common shares.

	Class A Common Shares		Class B Common Shares		Total Common Shares on an As-converted Basis		% of Beneficial Ownership			% of Aggregate Voting Power(1)
Directors and Executive Officers:
Ray Ruiping Zhang and his family trust (2)		—		8,815,432		8,815,432		6.2	%		11.8	%
Greg Stubblefield		*		—		*		*			*
Gang Chen		*		—		*		*			*
Qian Miao(3)		*		—		*		*			*
Andrew Xuefeng Qian(3)		*		—		*		*			*
David Jian Sun(3)		*		—		*		*			*
Ronald Meyers(3)		*		—		*		*			*
Leo Lihong Cai(3)		*		*		*		*			*
Colin Chitnim Sung(3)		—		*		*		*			*
Chun Xie(3)		*		*		*		*			*
Hongtao Han(3)		*		*		*		*			*
Nina Yan Wu(3)		*		*		*		*			*
Jane Fengjuan Zheng(3)		*		*		*		*			*
All Directors and Executive Officers as a group(3)		802,974		9,775,432		10,578,406		7.4	%		13.1	%
Principal Shareholders:
Ctrip(4)		4,300,000		15,168,193		19,468,193		13.9	%		21.4	%
Crawford(5)		—		18,694,003		18,694,003		13.4	%		25.6	%
GS Group(6)		2,405,072		9,081,665		11,486,737		8.2	%		12.8	%
Baring(7)		10,528,160		—		10,528,160		7.5	%		1.4	%
Ocean(8)		538,764		8,599,211		9,137,975		6.5	%		11.9	%
Ray Ruiping Zhang and his family trust (2)		—		8,815,432		8,815,432		6.2	%		11.8	%
Ignition Group(9)		1,126,191		6,187,197		7,313,388		5.2	%		8.6	%

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*Less than 1% of our total outstanding common shares.

(1)     For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B common shares as a single class. Each holder of Class A common shares is entitled to one vote per share and each holder of our Class B common shares is entitled to ten votes per share on all matters submitted to them for a vote. Our Class B common shares are convertible at any time by the holder thereof into Class A common shares on a one-for-one basis.

(2)     Represents (i) 7,142,432 Class B common shares held by L & L Horizon, LLC, which is owned by Ray Ruiping Zhang and Ruiping Zhang 2016 Descendants Trust, of which Ray Ruiping Zhang is the trustee, and (ii) 1,673,000 Class B common shares issuable upon the exercise of 1,673,000 options within 60 days from the date of this annual report. The business address of Mr. Zhang is Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road, Shanghai, 200062, PRC.

(3)     Certain directors and executive officers have been granted options pursuant to the 2010 Plan and the 2014 Plan.

(4)     Represents 4,300,000 Class A common shares and 15,168,193 Class B common shares held by Ctrip Investment Holding Ltd., a company which is 100% owned by C-Travel International Limited, a company which is 100% owned by Ctrip.com International, Ltd., a company listed on the NASDAQ Global Select Market. The registered address of Ctrip is Ugland House, P.O. Box 309, Grand Cayman KY1-1104, Cayman Islands.

(5)     Represents 18,694,003 Class B common shares, held by Crawford, a Missouri corporation. The voting and investment power of shares held by Crawford is shared by Andrew C. Taylor, Jo Ann Kindle, Christine B. Taylor and Carolyn Kindle, as voting trustees under the Jack Taylor Family Voting Trust U/A/D 4/14/99. The business address of Crawford and such individuals is 600 Corporate Park Drive, St. Louis, Missouri 63015.

(6)     Represents (i) 2,405,072 Class A common shares (in the form of 1,202,536 ADSs) held by The Goldman Sachs Group, Inc.; (ii) 7,915,951 Class B common shares held by GS Car Rental HK Limited; and (iii) 1,165,714 Class B common shares held by GS Car Rental HK Parallel Limited. Both of GS Car Rental HK Limited and GS Car Rental HK Parallel Limited are HK companies. We refer to these entities collectively as the GS Entities. GS Car Rental HK Limited is wholly owned by GS Car Rental Lux II Sarl, which is indirectly owned by GS Capital Partners VI Fund, L.P., GS Capital Partners VI Offshore Fund, L.P. and GS Capital Partners VI GmbH & Co. KG. GS Capital Partners VI Fund, L.P. is a Delaware limited partnership, whose general partner is GSCP VI Advisors, L.L.C., a Delaware limited liability company. GS Capital Partners VI Offshore Fund, L.P. is a Cayman limited partnership, whose general partner is GSCP VI Offshore Advisors L.L.C. GS Capital Partners VI GmbH & Co. KG, is a German limited partnership, whose general partner is Goldman, Sachs Management GP GmbH, a German company. GS Car Rental HK Parallel Limited is wholly owned by GS Car Rental Lux Parallel II Sarl, which is indirectly owned by GS Capital Partners VI Parallel, L.P. GS Capital Partners VI Parallel, L.P. is a Delaware limited partnership, whose general partner is GS Advisors VI, L.L.C., a Delaware limited liability company. The voting and investment power of shares held by GS Entities is exercised by the corporate investment committee of the merchant banking division of Goldman, Sachs & Co., which consists of Rich Friedman, Beth Cogan, Tom Connolly, Brad Gross, Adrian Jones, Mike Koester, Scott Lebovitz, Sanjeev Mehra, Eric Muller, Ken Pontarelli, Sumit Rajpal, Oliver Thym, Joe DiSabato, Matthias Hieber, Martin Hintze, James Reynolds, Stephanie Hui, Ankur Sahu, Andrew Wolff, David Thomas, Alex Golten, Yael Levy, Mike Simpson and Mitch Weiss. . Each of the corporate investment committee members disclaims beneficial ownership of the shares owned by GS Entities except to the extent of their pecuniary interests therein. The registered address of the GS Entities is Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

(7)     Represents 10,528,160 Class A common shares represented by 5,264,080 ADSs that are owned by BPEA Teamsport Limited, or Baring. The registered address of Baring is P.O. Box 31119, Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205, Cayman Islands.

(8)     Represents (i) 538,764 Class A common shares, including 438,764 Class A common shares represented by 219,382 ADSs, and (ii) 8,599,211 Class B common shares that may be deemed to be beneficially owned by Ocean General Partners Limited, or Ocean. Ocean General Partners Limited is the general partner of Ocean Voyage L.P., and Ocean Voyage L.P. is the general partner of Ocean Imagination L.P. The business address of Ocean is Unit 1903B-05 Exchange Tower, 33, Wang Chiu Road, Kowloon Bay, Hong Kong.

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(9)   Represents (i) 6,122,993 Class B common shares and 1,114,505 Class A common shares (including 1,077,394 Class A common shares in the form of 538,697 ADSs,), held by Ignition Growth Capital I, L.P.; and (ii) 64,204 Class B common shares and 11,686 Class A common shares (including 11,296 Class A common shares in the form of 5,648 ADSs), held by and Ignition Growth Capital Managing Directors Fund I, LLC. Both of Ignition Growth Capital I, L.P. and Ignition Growth Capital Managing Directors Fund I, LLC., or collectively Ignition Group, are U.S. limited partnerships. We refer to these entities collectively as Ignition Group. Ignition Growth Capital I, L.P.’s general partner is Ignition Growth GP, L.L.C, a Delaware limited liability company. The voting and investment power of shares held by Ignition Growth Capital I, L.P. is exercised by the board of managing directors of Ignition Growth GP, LLC, which consists of Jon Anderson and John Zagula. Each of Mr. Anderson and Mr. Zagula disclaims beneficial ownership of the shares owned by Ignition Growth Capita I, L.P. except to the extent of their pecuniary interests therein. The registered address of Ignition Growth Capital I, L.P. is 3500 South DuPont Highway, City of Dover, County of Kent, Delaware 19901, U.S.A. Ignition Growth Capital Managing Directors Fund I, LLC is controlled by a board of managing directors comprised of Jon Anderson and John Zagula. The registered address of Ignition Growth Capital Managing Directors Fund I, LLC is located at Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801, U.S.A.

According to our register of members for our common shares, as of April 26, 2018, there is one record holder of Class A common shares, which is the depositary of our ADS program, and seven record holders of Class B common shares in the United States. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our common shares in the United States. To our knowledge, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any other natural or legal persons, severally or jointly. We are not aware of any arrangement which may at a later date result in a change of control of our company.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

Please refer to Item 6.E, “Directors, Senior Management and Employees—Share Ownership”.

B. Related Party Transactions

Privatization

On April 6, 2018, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Teamsport Parent Limited (“Parent”) and Teamsport Bidco Limited (“Merger Sub”), a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, Parent will acquire our company for cash consideration equal to US$6.75 per common share of our company or US$13.50 in cash per ADS, each of which represents two Class A common shares of our company, other than Rollover Shares (as defined below) and ADSs representing Rollover Shares, as applicable. Immediately following the consummation of the transactions contemplated under the Merger Agreement, Parent will be beneficially owned by a consortium (the “Consortium”) comprising new investors, including certain affiliates of MBK Partners Fund IV, L.P., Baring Private Equity Asia Limited and Redstone Capital Management (Cayman) Limited, and certain existing shareholders of the Company, including L&L Horizon, LLC, an affiliate of Mr. Zhang, The Crawford Group, Inc. (“Crawford”) and Dongfeng Asset Management Co. Ltd. (collectively, the “Rollover Shareholders”). Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company surviving the merger as the surviving company (the “Surviving Company”) under Cayman Islands law (the “Merger”).

Our company’s board of directors, acting upon the unanimous recommendation of the special committee formed by the board of directors (the “Special Committee”), approved the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Transactions”), including the Merger, and resolved to recommend that our company’s shareholders authorize and approve the Merger Agreement and the Transactions, including the Merger. The Special Committee, which is comprised solely of independent directors of our company who are unaffiliated with Parent, Merger Sub or any member of the Consortium or management of our company, exclusively negotiated the terms of the Merger Agreement with the Consortium with the assistance of its independent financial and legal advisors.

The closing of the Merger is currently expected to occur during the second or third quarter of 2018, and is subject to the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including the requisite approval of the shareholders of our company and the consent of requisite holders of the senior unsecured notes issued by our company in 2015 and 2017, if applicable, as well as certain other customary closing conditions. The Merger Agreement and the Merger must be authorized and approved by (i) a shareholders’ special resolution passed by the affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of our company’s shareholders, (ii) a shareholders’ resolution passed by the affirmative vote of holders of Shares representing a majority of the aggregate voting power of the Shares and (iii) a shareholders’ resolution passed by the affirmative vote of holders of a majority of the total outstanding Class A common shares of our company.

On April 26, 2018, we filed a going private transaction statement on Schedule 13E-3 which attaches as an exhibit a preliminary proxy statement that, subject to completion, will be used in connection with the extraordinary general meeting of our shareholders. Please refer to the preliminary proxy statement for more information about the Merger including the effects of the Merger on our company and the effects on our company if the Merger is not completed.

Ctrip

Under the Additional Series E Preferred Share Purchase Agreement, or the Series E+ SPA, entered into between our Company, Crawford, Ctrip and certain other shareholders on April 16, 2014, Ctrip purchased 2,368,193 Series E preferred shares of our Company for a consideration of US$13,025,062. In addition, pursuant to a covenant in the Series E+ SPA, upon our written request in connection with an initial public offering, Ctrip was obligated to subscribe for our common shares (i) in an exempt private placement or (ii) in an exempt Regulation S offering. Ctrip and we agreed that the purchase price of the common shares in connection with such subscription was the initial public offering price, and such subscription was to be consummated concurrently with the closing of the initial public offering. As a result, we entered into a subscription agreement with Ctrip on October 14, 2014, pursuant to which Ctrip purchased from us 1,666,666 Class A common shares at US$6.00 per Class A common share upon the closing of our initial public offering.

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In April 2015, eHi Rental entered into a framework loan facility agreement with Ctrip Travel Information, an affiliate of Ctrip, pursuant to which Ctrip Travel Information extended, through entrusted bank loans, a RMB300 million loan facility to eHi Rental which has been drawn down in full. The purpose of the loan is to further expand our fleet size and operations. The loan facility has a term of three years and bears an interest rate of 6.9% per annum, payable on a quarterly basis. As current PRC government regulations restrict direct lending between companies, such loans are typically implemented through a loan entrustment agreement where a bank is used as an intermediary agent. Pursuant to the framework loan facility agreement, eHi Rental, Ctrip Travel Information and the Agricultural Bank of China entered into a separate entrusted bank loan agreement to set forth the detailed terms of such loan facility, and several of our PRC subsidiaries provided guarantees. In October 2016, we voluntarily repaid RMB200 million to Ctrip Travel Information before the due date, and only RMB100 million loan remained outstanding as of December 31, 2017. On April 27, 2018, we have repaid all outstanding loan under the framework loan facility agreement on schedule. Our related party interest expenses were RMB18.5 million in 2016 to RMB7.0 million (US$1.1 million) in 2017, respectively, as a result of this entrusted loan extended to us.

We maintain business cooperation with Ctrip in various aspects. We are the designated and preferred business partner of Ctrip in providing car rental services. Ctrip has integrated access to our car rental reservation system on its website since May 2012 and in its mobile applications since June 2014, and we pay a percentage of rental rates as commissions for successful car rental referrals. In addition, in December 2014, we started to expand and promote our chauffeured car services to a business-to consumer model through Ctrip’s website, mobile applications and offline channels. We entered into a service agreement (“Agreement") with Ctrip for car rental and car services referral. Pursuant to the Agreement, we pay a fixed percentage of car rental or car services rates from successful car referrals as commissions to Ctrip (resulting in related party payable balances), and Ctrip collects car rental and car services fees from individual customers on behalf of us.

In order to further promote the Company's car services to individual customers, starting from September 1, 2015, we entered into a supplementary agreement with Ctrip. Pursuant to this supplementary agreement, we need to pay a fixed minimum commission fee of referrals in addition to the fixed commission rates for car rental and car service referral mentioned in the Agreement.

In November 2016, an amendment was entered that the fixed minimum commission fee would no longer charged by Ctrip since then. Our related party selling and marketing expenses were RMB29.4 million in 2016 and RMB16.3 million (US$2.5 million) in 2017, respectively, as a result of these arrangements with Ctrip.

Crawford/Enterprise

Under the Series D Preferred Share Purchase Agreement entered into between Crawford and us on March 26, 2012, we issued, and Crawford was granted, certain warrants to subscribe for and purchase common shares from the Company. On October 31, 2014, Crawford exercised all its 1,500,000 outstanding warrants to purchase 1,500,000 common shares of our Company at a per share purchase price of US$5.50 for a total consideration of US$8,249,993.

In addition, under the Series E+ SPA entered into between our Company, Crawford, Ctrip and certain other shareholders of our Company on April 16, 2014, Crawford Group Inc. purchased 1,764,055 Series E preferred shares of our Company for a consideration of US$9,702,299.

In connection with the Series D Preferred Share Purchase Agreement, we entered into a global affiliation agreement with Enterprise in March 2012, pursuant to which we and Enterprise could refer customers to each other and charge certain referral fees. In 2016, the referral fees we received or paid to Enterprise were both insignificant.

Contractual Arrangements among Our Wholly-foreign Owned Enterprises, Variable Interest Entities and the Variable Interest Entity Equity Holders

Due to PRC legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include the commercial operations of Internet content services, we, similar to all other entities with foreign-incorporated holding company structures operating in our industry in China, entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Information, and its shareholders in March 2014. eHi Information obtained the ICP license from the relevant telecommunication authorities on September 24, 2014. In January 2015, we entered into a series of contractual arrangements with our PRC incorporated variable interest entity eHi Car Sharing and its shareholders. The contractual arrangements collectively enable us to exercise effective control over the variable interest entities and realize substantially all of the economic risks and benefits arising from, the variable interest entities. As a result, we include the financial results of each of the variable interest entities in our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries.

Private Placement and Registration Rights Agreement

On May 22, 2015, we entered into definitive securities purchase agreements with Tiger Fund and SRS Funds pursuant to which we agreed to issue a total of 22,337,924 of our Class A common shares to the buyers at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS), or the Primary Purchased Securities. We raised gross proceeds of approximately US$134.0 million from this private placement transaction. Under the terms of the securities purchase agreements, the Class A common shares were issued in two tranches: (a) the first tranche consisted of 11,437,924 Class A common shares, which were issued on May 22, 2015, and (b) the second tranche consisted of 10,900,000 Class A common shares, which were issued on June 30, 2015. In addition, two of our shareholders, Ctrip and Crawford, also entered into definitive agreements with the buyers for the sale of an aggregate of 2,666,666 Class A common shares (including certain shares represented by ADSs) at a price per Class A common share of US$6.00 (equivalent to US$12.00 per ADS), or the Secondary Purchased Securities, which was also closed on May 22, 2015.

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On June 30, 2015, in connection with the issuance and sale of the Primary Purchased Securities and the Secondary Purchased Securities, or the Purchased Securities, we entered into a registration rights agreement with Tiger Global Mauritius Fund, SRS Partners I Mauritius Limited and SRS Partners II Mauritius Limited, or the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, at any time after the later of (i) November 22, 2015 and (ii) we have become eligible to register the Purchased Securities for resale on Form F-3, the holders of at least a majority of the Purchased Securities may request us to file no more than two(2) shelf registration statements in any twelve (12) month period to register the Purchased Securities and their relevant equity rights, and we are required to have such registration statement declared effective by the SEC no later than ninety (90) calendar days after such registration statement is filed with the SEC, subject to the limitations and conditions provided in the Registration Rights Agreement. We shall not be obligated to take any action to effect any registration unless the aggregate proceeds from the offering that is the subject of the registration exceeds US$5,000,000 or such lesser aggregate proceeds resulting from the sale of the then remaining Purchased Securities and their relevant equity rights. Under certain circumstances, if SEC does not permit the above registration statements to become effective, then we may reduce the number of shares to be included in such registration statement until SEC shall so permit. The Registration Rights Agreement also contains obligations, indemnities, contribution, assignment and amendment that are customary for private placements by public companies, and the registration rights set forth therein shall terminate on November 18, 2017.

Employment Agreements

See Item 6.B, “Directors, Senior Management and Employee—Compensation—Employment Agreements”.

Share Options and Restricted Shares Grants

See Item 6.B, “Directors, Senior Management and Employee—Compensation—Equity Incentive Plans”.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated statements and other financial information.

See Item 18, “Financial Statements”.

Legal Proceedings

On April 13, 2018, Ctrip Investment Holding Ltd. (“Ctrip”), one of our registered shareholders, filed a petition in the Grand Court of The Cayman Islands (the “Court”) seeking alternative relief, including, among other things, requesting that the Court to enjoin the Company from relying upon the board resolutions adopted on April 6, 2018 and April 10, 2018, respectively, in connection with the Merger and requesting that the board and the special committee of the Company review the preliminary non-binding offer from Ocean Link Partners Limited for the purchase of all of the outstanding Shares (including Shares represented by ADSs) for US$14.50 in cash per ADS, or US$7.25 in cash per Share, subject to due diligence and negotiation of the definitive agreement. The Company believes Ctrip’s allegations and the basis for which it is seeking relief in its petition are without merit and intends to vigorously refute the petition.

Save as disclosed elsewhere in this annual report, we are currently not a party to, and are not aware of any threat of, any legal, arbitration or administrative proceedings that, in the opinion of our board of directors, are likely to have a material and adverse effect on our business, financial condition or results of operations. From time to time, we have become, and may in the future become, a party to various legal or administrative proceedings or claims arising in the ordinary course of our business. Regardless of the outcome, legal or administrative proceedings or claims may have an adverse impact on us because of defense and settlement costs, diversion of management attention, and other factors.

Dividend Policy

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

Our board of directors has complete discretion as to whether to declare and pay dividends. 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.

We are a holding company incorporated in the Cayman Islands. In order to pay dividends, if any, to our shareholders, we will 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. Furthermore, 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.

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If we pay dividends, the depositary will pay you the dividends it receives on our Class A common shares, after deducting any withholding taxes and its fees and expenses. Cash dividends on our common shares, if any, will be paid in U.S. dollars.

B. Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

ITEM 9. THE OFFER AND LISTING

A. Offering and listing details Price Range of Our ADSs

Our ADSs are listed for trading on the New York Stock Exchange under the symbol “EHIC”, and have been listed since November 18, 2014. The following table sets forth the high and low daily closing trading prices of our ADSs on the New York Stock Exchange for the periods indicated:

	Price per ADS (US$)
	High		Low
Annual:
2015		18.18		8.37
2016		13.70		8.32
2017		12.20		8.91
Quarterly:
First Quarter, 2016		13.70		10.30
Second Quarter, 2016		12.00		9.47
Third Quarter, 2016		11.72		9.83
Fourth Quarter, 2016		11.35		8.32
First Quarter, 2017		10.78		9.48
Second Quarter, 2017		10.29		9.25
Third Quarter, 2017		10.00		8.91
Fourth Quarter, 2017		12.20		9.46
First Quarter, 2018		12.77		11.33
Monthly
October 2017		12.20		9.75
November 2017		12.06		10.48
December 2017		11.64		10.99
January 2018		12.17		11.79
February 2018		12.00		11.33
March 2018		12.77		11.62
April 2018 (through April 27, 2018)		13.30		12.31

B. Plan of Distribution

Not applicable.

C. Markets

See Item 9.A above.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

We incorporate by reference into this annual report the description of our ninth amended and restated memorandum and articles of association contained in our registration statement on Form F-1 (File No. 333-199150), as amended, originally filed with the Securities and Exchange Commission on October 3, 2014.

At our annual general meeting of shareholders held on December 28, 2015, our shareholders approved, among other things, the amendments to Article 6(c) and Article 7 of our ninth amended and restated articles of association. Please refer to Exhibit 1.1 to this annual report and following summaries of material provisions for the amended articles.

Registered Office and Objects

Our registered office in the Cayman Islands is located at the offices ofVistra (Cayman) Limited, Grand Pavilion, Hibiscus Way, 802 West Bay Road, PO Box 31119, Grand Cayman KY1-1205, Cayman Islands, or at such other place as our directors may from time to time decide. The objects for which our company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law or any other law of the Cayman Islands.

Board of Directors

See “Item 6.C. C. Board - Practices Duties of Directors.”

Common Shares

General. All of our outstanding common shares are fully paid and non-assessable. Our common shares are issued in registered form, and are issued when entered in our register of members. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their common shares.

Common Shares. Our common shares are divided into Class A common shares and Class B common shares. Holders of our Class A common shares and Class B common shares will have the same rights except for voting and conversion rights. Our common shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.

Conversion. Each Class B common share is convertible into one Class A common share at any time by the holder thereof. In addition, (i) if at any time the total number of the issued and outstanding Class B common shares is less than 5% of the total number of the issued and outstanding common shares, each Class B common share shall automatically and immediately be converted into one Class A common share; (ii) if at any time, Mr. Ray Ruiping Zhang, Mr. Leo Lihong Cai or Mr. Colin Chitnim Sung ceases to be an employee, officer or director of our company, each Class B common share held by such person or his affiliate (as defined in our ninth amended and restated memorandum and articles of association) shall be automatically and immediately converted into one Class A common share; and (iii) upon any sale, transfer, assignment or disposition of Class B common shares by a holder thereof to any person or entity which is not an affiliate (as defined in our ninth amended and restated memorandum and articles of association) of such holder, such Class B common shares shall be automatically and immediately converted into an equal number of Class A common shares. Class A common shares are not convertible into Class B common shares under any circumstances.

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

Voting Rights. Our Class A common shares and Class B common shares vote together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law or provided for in our ninth amended and restated memorandum and articles of association. In respect of matters requiring shareholders' vote, each Class A common share is entitled to one vote, and each Class B common share is entitled to ten votes. In addition, the following matters are subject to the approval by the holders representing a majority of the aggregate voting power of our company and also by the holders of a majority of total outstanding Class A common shares: (i) a change of control event (as defined in our ninth amended and restated memorandum and articles of association), (ii) issuance of that number of common shares, or of securities convertible into or exercisable for that number of common shares, equal to or in excess of 20% of the number of all common shares outstanding immediately prior to the issuance of such shares or securities on an as-converted basis, if (x) such common shares are sold at a per share price less than the per share book or market value of the common shares or (y) such securities convertible into or exercisable for the common shares have a per share conversion or exercise price which is less than the per share book or market value of the common share; and (iii) issuance of common shares or of securities convertible into or exercisable for common shares to a director, officer or substantial security holder of our company on an individual basis exceeding either 1% of the total outstanding common shares on an as-converted basis or 1% of the aggregate voting power outstanding before such issuance. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of our board of directors or by any one or more shareholders present in person or by proxy entitled to vote.

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An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the common shares cast by the shareholders who are present in person or by proxy at a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the common shares cast by the shareholders who are present in person or by proxy at a general meeting. A special resolution will be required for important matters such as a change of name or making changes to our memorandum and articles of association. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Law and our ninth amended and restated memorandum and articles of association.

Liquidation. On a return of capital on liquidation, dissolution or winding up (other than on conversion, redemption or purchase of common shares), assets available for distribution among the holders of common shares shall be distributed among the holders of the common 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 common shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The common shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares 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 the board of directors before the issue of such shares. Our company may also repurchase any of our shares (including any redeemable shares) in such manner and on such other terms as our directors may agree with the holder of such shares. Our company may make a payment in respect of the redemption or purchase of its own shares in any manner permitted by the Companies Law, including out of capital. In addition, our company may accept the surrender of any fully paid share for no consideration. Any share redeemed, repurchased or surrendered may be cancelled or held as a treasury share.

Variations of Rights of Shares. All or any of the special rights attached to any class of shares may be varied either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class. Consequently, the rights of any class of shares cannot be detrimentally altered without a majority vote of all of the shares in that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares. The rights of holders of common shares shall not be deemed to be varied by the creation or issue of shares with preferred or other rights which may be affected by the directors as provided in the articles of association without any vote or consent of the holders of common shares.

C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4, “Information on the Company” or elsewhere in this annual report on Form 20-F.

D. Exchange Controls

Foreign exchange in China is primarily regulated by:

· the Foreign Currency Administration Rules (1996), as amended in 2008; and

· the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

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Under the Foreign Currency Administration Rules, Renminbi is convertible for current account items, including the distribution of dividends, interest payments, and trade and service-related foreign exchange transactions. Conversion of Renminbi into foreign currency for capital account items, such as direct investment, loans, investment in securities, and repatriation of funds, however, is still subject to the approval of SAFE.

Under the Administration Rules, foreign-invested enterprises may only buy, sell, and remit foreign currencies at banks authorized to conduct foreign exchange transactions after providing valid commercial documents and, in the case of capital account item transactions, only after obtaining approval from SAFE.

Capital investments directed outside of China by foreign-invested enterprises are also subject to restrictions, which include approvals by SAFE, and the State Reform and Development Commission.

We receive our revenue in Renminbi, which is currently not a freely convertible currency. Under our current structure, our income will be primarily derived from dividend payments from our subsidiaries in China.

The value of the Renminbi 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 Renminbi 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 policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi will be permitted to fluctuate within a band against a basket of certain foreign currencies. This change in policy resulted initially in an approximately 2.0% appreciation in the value of the Renminbi against the U.S. dollar. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

On July 4, 2014, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange for Overseas Investment and Financing and Reverse Investment by Domestic Residents via Special Purpose Vehicles, or Circular 37, which replaced the Notice on Issues Relating to the Administration of Foreign Exchange for the Financing and Reverse Investment by Domestic Residents via Offshore Special Purpose Vehicles issued by SAFE in October 2005, or Circular 75. Pursuant to Circular 37, any PRC residents, including both PRC institutions and individual residents, are required to register with the local SAFE branch before making contribution to a company set up or controlled by the PRC residents outside of the PRC for the purpose of overseas investment or financing with their legally owned domestic or offshore assets or interests, referred to in this circular as a “special purpose vehicle.” Under Circular 37, the term “PRC institutions” refers to entities with legal person status or other economic organizations established within the territory of the PRC. The term “PRC individual residents” includes all PRC citizens (also including PRC citizens abroad) and foreigners who habitually reside in the PRC for economic benefits. A registered special purpose vehicle is required to amend its SAFE registration in the event of any change of basic information including PRC individual resident shareholder, name, term of operation, or PRC individual resident’s increase or decrease of capital, transfer or exchange of shares, merger, division or other material changes. In addition, if a non-listed special purpose vehicle grants any equity incentives to directors, supervisors or employees of domestic companies under its direct or indirect control, the relevant PRC individual residents could register with the local SAFE branch before exercising such options. The SAFE simultaneously issued a series of guidances to its local branches with respect to the implementation of Circular 37. Circular 37 modified certain defined terms un-der Circular 75 to clarify the SAFE registration scope. For example, Circular 37 broadened the definition of special purpose vehicle to offshore entities that were (i) established for the purpose of overseas investments by PRC residents (in addition to for the purpose of financing as defined under Circular 75) and (ii) established by PRC residents with their legally owned offshore assets or interests (in addition to domestic assets or interests as defined under Circular 75); and it also broadened the definition of reverse investment to include establishing new foreign invested entities or projects as a way of domestic direct investment by PRC residents, directly or indirectly, through special purpose vehicle, which was excluded by Circular 75. Furthermore, Circular 37 modified certain SAFE registration procedures and requirements for special purpose vehicles and clarified the SAFE registration procedures for equity incentive awards granted by non- listed special purpose vehicles to directors, supervisors or employees of their controlled domestic companies. The failure of these shareholders and/or beneficial owners to timely register or amend their SAFE registrations pursuant to the SAFE notice or the failure of future shareholders and/or beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such shareholders, beneficial owners and/or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.

The Operating Rules for Foreign Exchange Issues with Regard to Direct Investment under Capital Account, or the Operating Rules, an appendix to the Notice on Further Improving and Adjusting Foreign Exchange Administration Policies on Direct Investment promulgated by SAFE on November 19, 2012 provides in detail the procedures, required documents and review standard of foreign exchange registration regarding financing and round-trip investment by domestic residents through offshore special- purpose companies.

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On February 28, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or Notice 13, which became effective on June 1, 2015. In accordance with Notice 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under the Circular No. 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, shall directly examine the applications from applicants and handle the registration.

As a result of the uncertainties relating to Notice 37, Operating Rules and Notice 13, we cannot predict how these regulations will affect our business operations or strategies. For example, our present or future PRC subsidiaries’ ability to conduct foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, may be subject to compliance with such SAFE registration requirements by relevant PRC residents, over whom we have no control. In addition, we cannot assure you that any such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. We require all shareholders in our Company who are PRC residents to comply with any SAFE registration requirements and we understand that the relevant shareholders have registered their offshore investment in us with Shanghai SAFE, but we have no control over either our shareholders or the outcome of such registration procedures. Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

Dividend Distributions

Pursuant to the Foreign Currency Administration Rules promulgated in 1996 and amended in 1997 and 2008, and various regulations issued by SAFE and other relevant PRC government authorities, the PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China.

The principal regulations governing the distribution of dividends paid by wholly foreign-owned enterprises and Sino-foreign joint equity enterprise enterprises include:

· the Wholly Foreign-Owned Enterprise Law (1986), as amended in 2000 and 2016;

· the Wholly Foreign-Owned Enterprise Law Implementing Rules (1990), as amended in 2001 and 2014;

· the Sino-foreign Joint Equity Enterprise Law (1979), as amended in 2001 and 2016;

· the Sino-foreign Joint Equity Enterprise Law Implementing Rules (1983), as amended in 2001 and 2014; and

· Company Law of the PRC (2005), as amended in 2013.

Under these regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least a certain percentage of its after-tax profit based on PRC accounting standards each year to its general reserves. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to employee welfare and bonus funds. These funds, however, may not be distributed to equity owners except in the event of liquidation.

E. Taxation

The following is a summary of the material Cayman Islands, People’s Republic of China and U.S. federal income tax consequences relevant to an investment in our ADSs and common shares. The summary is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The summary is based on laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change or different interpretations, possibly with retroactive effect. The summary does not address United States state or local tax laws, or tax laws of jurisdictions other than the Cayman Islands, People’s Republic of China and the United States. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Maples and Calder (Hong Kong) LLP, special Cayman Islands counsel to us. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and disposition of our ADSs and common shares.

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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 or withholding tax applicable to us or to any holder of our ADSs and common shares. 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 after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies, except those which hold interests in land in 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.

Pursuant to Section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, we may obtain an undertaking from the Governor-in-Council:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations; and

(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures or other obligations.

People’s Republic of China Taxation

Under the New EIT Law, enterprises organized under the laws of jurisdictions outside China with “de facto management bodies” located within China may be considered PRC tax resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The implementation regulations of the New EIT Law define the term “de facto management body” as a management body that exercises full or substantial control and management authority over the production, operation, personnel, accounts and properties of an enterprise. In addition, Circular 82 provides that certain Chinese-invested enterprises controlled by PRC enterprises or PRC enterprise groups and established outside of China will be classified as resident enterprises only if all the following items are located or resident in China: (i) senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; (ii) key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and (iii) half or more of the senior management or directors with voting rights. Circular 82 also clarified that dividends and other income paid by such resident enterprises will be considered as PRC sourced income and be subject to PRC enterprise income tax. In January 2014, the SAT further issued an amendment to Circular 82 delegating the authority to its provincial branches to determine whether a Chinese-invested established outside China should be considered a PRC resident enterprise. While we do not currently consider our company or any of our overseas subsidiaries to be a PRC resident enterprise, there is a risk that the PRC tax authorities may deem our company or any of our overseas subsidiaries as a PRC resident enterprise, in which case we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. If we are deemed to be a PRC tax resident enterprise, any dividends that we pay to our non-PRC enterprise shareholders or ADS holders, as well as gains realized by such shareholders or ADS holders from the transfer of our shares or ADSs, may be regarded as PRC-sourced income and as a result become subject to PRC withholding tax at a rate of 10%. See “Risk Factors—Risks relating to Doing Business in China—We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders .

U.S. Federal Income Taxation

This discussion describes certain material U.S. federal income tax consequences to U.S. Holders (as defined below) relating to the purchase, ownership and disposition of our ADSs and common shares. This discussion does not address any aspect of U.S. federal gift or estate tax, the Medicare tax or the state, local or non-U.S. tax consequences of an investment in our ADSs and common shares. This discussion does not apply to U.S. Holders who are a member of a class of holders subject to special rules, such as:

· dealers in securities or currencies;

· traders in securities who elect to use a mark-to-market method of accounting for securities holdings;

· banks or other financial institutions;

· insurance companies;

· tax-exempt organizations;

· partnerships and other entities treated as partnerships or other pass through entities for U.S. federal income tax purposes or persons holding ADSs and common shares through any such entities;

· regulated investments companies or real estate investment trusts;

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· persons that hold ADSs and common shares as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;

· persons whose functional currency for tax purposes is not the U.S. dollar;

· persons liable for alternative minimum tax; or

· persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares (including ADSs and common shares) entitled to vote.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, which we refer to in this discussion as the Code, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. In addition, this discussion relies on our assumptions regarding the value of our ADSs and common shares and the nature of our business over time.

Prospective purchasers and U.S. Holders of our ADSs and common shares are urged to consult their own tax advisor concerning the particular U.S. federal income tax consequences to them relating to the purchase, ownership and disposition of our ADSs and common shares, as well as the consequences to them arising under the laws of any other taxing jurisdiction.

For purposes of the U.S. federal income tax discussion below, you are a “U.S. Holder” if you beneficially own our ADSs or common shares as capital assets for U.S. federal income tax purposes and are:

· an individual citizen or resident of the United States for U.S. federal income tax purposes;

· a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

· an estate the income of which is subject to U.S. federal income tax regardless of its source; or

· a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.

For U.S. federal income tax purposes, income earned through a non-U.S. or U.S. partnership or other flow-through entity is attributed to its owners. Accordingly, if a partnership or other flow-through entity holds ADSs or common shares, the tax treatment of the holder will generally depend on the status of the partner or other owner and the activities of the partnership or other flow-through entity.

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, for U.S. federal income tax purposes, you generally will be treated as the owner of the underlying common shares represented by such ADSs.

Accordingly, the conversion of ADSs into common shares will not be subject to U.S. federal income tax.

Dividends on ADSs and common shares

We do not anticipate paying dividends on our ADSs and common shares in the foreseeable future. See Item 8.A, “Financial Information—Consolidated statements and other financial information—Dividend policy”.

Subject to the “Passive Foreign Investment Company” discussion below, if we do make distributions and you are a U.S. Holder, the gross amount of any distributions with respect to your ADSs and common shares (including the amount of any taxes withheld therefrom) will generally be includible in your gross income on the day you actually or constructively receive such income as dividend income if the distributions are made from our current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. To the extent, if any, that the amount of any distribution by us on ADSs and common shares exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will be treated first as a tax-free return of the U.S. Holder’s adjusted tax basis in the ADSs and common shares and thereafter as capital gain. However, we do not intend to calculate our earnings and profits according to U.S. federal income tax principles. Accordingly, distributions on our ADSs and common shares, if any, will generally be reported to you as dividend distributions for U.S. federal income tax purposes. Corporations will not be entitled to claim a dividends-received deduction with respect to distributions made by us. Dividends generally will constitute foreign source passive income for purposes of the U.S. foreign tax credit rules. You should consult your own advisor as to your ability, and the various limitations on your ability, to claim foreign tax credits in connection with the receipt of dividends.

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Under current law and with respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends may be “qualified dividend income” that is taxed at a reduced capital gains rate, provided that certain conditions are satisfied, including: (1) the ADSs or common shares are readily tradable on an established securities market in the United States, (2) we are not a PFIC for both our taxable year in which the dividend is paid and the preceding taxable year, and (3) certain holding period requirements are met. The Internal Revenue Service authority has indicated that common or ordinary stock, or an ADR in respect of such stock, is considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States when it is listed on the New York Stock Exchange. There is no assurance, however, that any dividends paid on our ADSs or common shares will be eligible for the reduced capital gains tax rate. Any dividends paid by us that are not eligible for the preferential rate will be taxed as ordinary income to a non-corporate U.S. Holder. You should consult your tax advisors regarding the availability of the qualified dividend income rate with respect to our ADSs or common shares, including the effects of any change in law after the date of this annual report.

Sales and Other Dispositions of ADSs or Common shares

Subject to the “Passive Foreign Investment Company” discussion below, when you sell or otherwise dispose of ADSs or common shares, you will generally recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ADSs or common shares. Your adjusted tax basis will generally equal the amount you paid for the ADSs or common shares. Any gain or loss you recognize will be long-term capital gain or loss if your holding period in our ADSs or common shares is more than one year at the time of disposition. If you are a non-corporate U.S. Holder, including an individual, any such long-term capital gain will be taxed at preferential rates. Your ability to deduct capital losses will be subject to various limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign withholding tax is imposed on a disposition of our ADSs or common shares, including the availability of the foreign tax credit under their particular circumstances.

Passive Foreign Investment Company

We believe that we were not a “passive foreign investment company,” or PFIC, for our taxable year ended December 31, 2017. However, we cannot be assure you that we will not be a PFIC in 2018 or any future taxable year.

In general, we will be classified as a passive foreign investment company, or the PFIC, in any taxable year if either: (a) the average quarterly value of our gross assets that produce passive income or are held for the production of passive income is at least 50% of the average quarterly value of our total gross assets, or the Asset Test or (b) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties). For purposes of the above tests, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. For purposes of the Asset Test, any cash and cash invested in short-term, interest bearing, debt instruments, or bank deposits that are readily convertible into cash will generally count as producing passive income or held for the production of passive income.

We must make a separate determination each year as to whether we are a PFIC. As a result, it is possible that our PFIC status will change. In particular, in determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (determined by the sum of the aggregate value of our outstanding equity) plus our liabilities. Therefore, a drop in the market price of our ADSs or common shares would cause a reduction in the value of our non-passive assets for purposes of the Asset Test. Accordingly, we would likely become a PFIC if our market capitalization were to decrease significantly while we hold substantial cash.

Based on the market price of our ADSs and common shares, the value of our assets, and the composition of our assets and income, we believe that we were not a “passive foreign investment company,” or PFIC, for our taxable year ended December 31, 2017, and we do not expect to be a PFIC for our taxable year ending December 31, 2018.

If we were to be or become treated as a PFIC for any year during which a U.S. Holder holds our ADS or common shares, our ADSs or common shares generally will continue to be treated as shares in a PFIC as to such U.S. Holder for all succeeding years during which such U.S. Holder holds our ADSs or common shares, unless we cease to be a PFIC and the U.S. Holder makes a “deemed sale” election with respect to the ADSs or common shares. If you make a deemed sale election, you will be deemed to have sold the ADSs or common shares you hold at their fair market value as of the last day of the last year during which we were a PFIC. Any gain from such deemed sale would be taxed as an excess distribution as described below. Any loss from the deemed sale would not be recognized. After the deemed sale election, your ADSs or common shares with respect to which such election was made will generally not be treated as shares in a PFIC unless we subsequently become a PFIC. You are urged to consult your tax advisor regarding the deemed sale election.

If we were a PFIC for any taxable year during which you held our ADSs or common shares and you do not make a deemed sale election described above, certain adverse U.S. federal income tax rules would apply. You would generally be subject to additional taxes and interest charges on certain “excess distributions” we make and on any gain realized on the disposition or deemed disposition of your ADSs or common shares, regardless of whether we continue to be a PFIC in the year in which you receive an “excess distribution” or dispose of or are deemed to dispose of your ADSs or common shares. Distributions in respect of your ADSs or common shares during a taxable year would generally constitute “excess distributions” if, in the aggregate, they exceed 125% of the average amount of distributions with respect to your ADSs or common shares over the three preceding taxable years or, if shorter, the portion of your holding period before such taxable year.

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To compute the tax on “excess distributions” or any gain, (a) the “excess distribution” or the gain would be allocated ratably to each day in your holding period, (b) the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income in the current year, (c) the amount allocated to other taxable years would be taxable at the highest applicable marginal rate in effect for that year, and (d) an interest charge at the rate for underpayment of taxes for any period described under (c) above would be imposed on the resulting taxability on the portion of the “excess distribution” or gain that is allocated to such period.

If we were a PFIC in any taxable year during which your held our ADSs or common shares, under certain attribution rules, you will be deemed to own your proportionate share of lower-tier PFICs, and will be subject to U.S. federal income tax on (a) a distribution on the shares of a lower-tier PFIC and (b) a disposition of shares of a lower-tier PFIC, both as if you directly held the shares of such lower-tier PFIC. In addition, no distribution that you receive from us would qualify for taxation at the reduced rate of taxation discussed in the “—Dividends on ADSs and common shares” section above.

You would generally be able to avoid the “excess distribution” rules described above by making a timely so-called “mark-to- market” election with respect to your ADSs provided our ADSs are “marketable”. Our ADSs will be “marketable” as long as they remain regularly traded on a national securities exchange, such as the New York Stock Exchange. If you make a mark-to-market election for the ADSs, you will include in income for each year that we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of your taxable year over your adjusted basis in such ADSs. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. Any ordinary losses would be limited to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ADSs would be adjusted to reflect any such income or loss. You should consult your own tax advisor regarding potential advantages and disadvantages to you of making a “mark-to- market” election with respect to your ADSs. The mark-to-market election will not be available for any lower tier PFIC that is deemed owned pursuant to the attribution rules discussed above.

Alternatively, you can make a qualified electing fund or QEF election to include annually your pro rata share of our earnings and net capital gains currently in income each year, regardless of whether or not dividend distributions are actually distributed. However, you may make a qualified electing fund election with respect to our company only if we agree to furnish you annually with certain tax information, and we do not presently intend to prepare or provide such information.

You are urged to consult your own tax advisor concerning the making of such a QEF election and in particular with regard to the application of the “excess distribution” rules to you on any gain realized on the disposition or deemed disposition of your ADSs or common shares, regardless of whether we continue to be a PFIC in the year in which you receive an “excess distribution” or dispose of or are deemed to dispose of your ADSs or common shares should you not make the QEF election with respect to the 2017 taxable year.

If we were a PFIC for any taxable year during which you held our ADSs or common shares, you must file IRS Form 8621 for each taxable year in which you recognize any gain on the sale or other disposition of your ADS or common shares, receive deemed or actual distributions from us, or make certain elections (including a QEF and mark-to-market election) with respect to your ADSs or common shares. In addition, unless otherwise provided by the U.S. Treasury, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. You should consult your own tax advisor as to the application of any information reporting requirements to you resulting from our status as a PFIC.

U.S. Information Reporting and Backup Withholding Rules

In general, dividend payments with respect to the ADSs and common shares and the proceeds received on the sale or other disposition of ADSs and common shares may be subject to information reporting to the IRS and to backup withholding. Backup withholding will not apply, however, if you provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with the applicable backup withholding rules. To establish your status as an exempt person, you will generally be required to provide certification on IRS Form W-9. Any amounts withheld from payments to you under the backup withholding rules that exceed your U.S. federal income tax liability will be allowed as a refund or a credit against your U.S. federal income tax liability, provided that you timely furnish the required information to the IRS. Certain individuals holding common shares or ADSs other than in an account at a U.S. financial institution may be subject to additional information reporting requirements.

PROSPECTIVE PURCHASERS OF OUR ADSS AND COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISOR REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY OTHER TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF OUR ADSS AND COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR NON-US JURISDICTION AND INCLUDING ESTATE, GIFT AND INHERITANCE LAWS.

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F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We previously filed with the Securities and Exchange Commission our registration statement on Form F-1 (File No. 333- 199150), as amended.

We have filed this annual report on Form 20-F with the Securities and Exchange Commission under the Exchange Act.

Statements made in this annual report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this annual report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the Exchange Act and file reports and other information with the Securities and Exchange Commission. Reports and other information which the Company filed with the Securities and Exchange Commission, including this annual report on Form 20-F, may be inspected and copied at the public reference room of the Securities and Exchange Commission at 100 F Street, N.E., Washington D.C., 20549.

You can also obtain copies of this annual report on Form 20-F by mail from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, N.E., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the Securities and Exchange Commission’s Internet site at http://www.sec.gov . The Commission’s telephone number is 1-800-SEC-0330.

I. Subsidiaries Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

The conversion of Renminbi is highly regulated. In addition, the value of the Renminbi 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 Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the PBOC. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi will be permitted to fluctuate within a band against a basket of certain foreign currencies. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar.

The Renminbi is the reporting currency for our consolidated financial statements. Since we conduct our operations through our PRC subsidiaries and affiliated companies, the functional currency of our PRC subsidiaries and affiliated entities is Renminbi. Transactions in other currencies are recorded in Renminbi at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are re-measured into Renminbi at rates of exchange in effect at the balance sheet dates.

Substantially all our revenue and related expenses, including cost of revenues and advertising expenses, are denominated and paid in Renminbi, while a portion of our cash and cash equivalents, long-term loans payable and notes payable are denominated in U.S. dollars. Our exposure to foreign exchange risk primarily relates to those financial assets and financial liabilities denominated in U.S. dollars. Any significant revaluation of RMB against the U.S. dollar may materially affect our earnings and financial position, and the value of, and any dividends payable on, our ADS in U.S. dollars. See “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Fluctuations in exchange rate may have a material adverse effect on our results of operations and the value of your investment.” We have not hedged exposures denominated in foreign currencies using any derivative financial instruments.

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The RMB appreciated by 6.16% against the U.S. dollar in 2017. A hypothetical 10% increase in the exchange rate of the U.S. dollar against the RMB would have resulted in an increase of RMB59.0 million (US$9.1 million) in the value of our U.S. dollar-denominated long-term debts as of December 31, 2017.

Interest Rate Risk

Our main interest rate exposure relates to bank borrowings. In addition, our US$150 million syndicated loan bears interest at an applicable LIBOR plus a margin of 3.5% per annum. We also have interest-bearing assets, including cash and cash equivalents and restricted cash. We have not used any derivative financial instruments to hedge interest rate risk. As of December 31, 2017, our outstanding borrowing balance was RMB5,614.5 million, of which approximately 87% was at fixed rates, and the remaining 13% was at floating rates. As of December 31, 2017, if interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount outstanding as of December 31, 2017 that bear floating interest was outstanding for the entire fiscal year, our interest expenses would increase/decrease by RMB7.4 million for the year ended December 31, 2017.

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 1.4%, 2.0% and 1.6% in 2015, 2016 and 2017, respectively.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Fees Payable by ADS Holders

JPMorgan Chase Bank, N.A., the depositary of our ADS program, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary service fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. In the case of cash distributions, the depositary fees are generally deducted from the cash being distributed. In the case of distributions other than cash (e.g., stock dividends, rights, etc.), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or in DRS), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary generally collects its fees through the settlement systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts.

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In the event of refusal to pay the depositary fees the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

Persons depositing or withdrawing shares must pay:	For:
Up to $5.00 per 100 ADSs (or fraction thereof).	Issuance of ADSs.
	Cancellation of ADSs.
	Distribution of cash dividends or other cash distributions.
	Distribution of ADSs pursuant to share dividends or other free share distributions or exercise of rights.
	Depositary Service Fee
	Distribution of securities other than ADSs or rights to purchase additional ADSs.
$1.50 per certificate presented for transfer.	Transfer of ADRs.
Taxes and other governmental charges the depositary or the custodian has to pay on any ADS or common share.	As necessary.
Registration or transfer fees.	Transfer and registration of common shares on the share register to or from the name of the custodian or depositary in connection with the deposit or withdraw of common shares.
Expenses of the depositary.	Cable, telex, fax transmissions and delivery expenses.
	Converting foreign currency to U.S. dollars
Any charges incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to the shares, deposited securities, ADSs and ADRs.	As necessary.
Any charges incurred by the depositary for servicing or delivering the common shares on deposit.	As necessary.

Fees Payable by the Depositary to Us

For the year ended December 31, 2017, we did not receive any reimbursement fee from the depositary.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Material Modifications to the Rights of Security Holders

The rights of securities holders have not been materially modified.

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our chief executive officer and chief financial officer have performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report. Based upon this evaluation, our management has concluded that, as of the end of the period covered by this annual report, our existing disclosure controls and procedures were ineffective, solely due to the material weaknesses in internal control over financial reporting identified below.

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Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our chief executive officer and chief financial officer, our management conducted an assessment of the effectiveness of internal control over financial reporting as of December 31, 2017 based on the criteria established in Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management determined that our internal control over financial reporting was ineffective due to the presence of the material weaknesses discussed in the following paragraph.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following three material weaknesses were identified and included in management’s assessment. Management determined that the material weaknesses are related to (i) insufficient accounting resources and expertise necessary to comply with U.S. GAAP, (ii) lack of sufficient and documented financial closing policies and procedures, specifically those related to period end cut-off, accounts classification and presentation, and (iii) lack of effective risk assessment on acceptance of new type of corporate customers, and lack of effective control over approval and monitoring of credit limit and credit term granted to these corporate customers and collectability assessment on their receivable balances.

Remediation of Material Weaknesses

We have taken measures to address the material weaknesses, including (1) setting up and applied policies and procedures to regulate complex accounting areas; (2) allocating additional review resources for account reconciliations and non-ordinary and complex transactions; (3) engaging external tax advisor on complex tax matters in transfer pricing; (4) providing additional accounting and financial reporting training for our existing personnel. We believe that the actions taken have improved our internal control over financial reporting, and we will continue to take additional remedial steps, including but not limited to: (1) hiring additional qualified accounting personnel with appropriate U.S. GAAP accounting and SEC reporting experience to cope with our business expansion; (2) providing structured and more frequent training courses to our finance staff to enhance their understanding of our policies and procedures and the application of new accounting and reporting pronouncements; (3) formalizing and strengthening financial closing policies and procedures; (4) integrating operation system and accounting system to improve the efficiency and effectiveness of the reconciliation process; (5) strengthening the internal control on credit limit granted to each costumer and regularly review the outstanding accounts receivables balances.

We believe that the actions we are taking, as listed above, will help remedy the material weaknesses referred to above, and help strengthen our general internal controls and procedures over financial reporting. However, the process of designing and implementing an effective financial reporting system represents a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. While we have developed a remediation plan to address these material weaknesses, this remediation plan or any additional plan we plan to implement may be insufficient to address our material weaknesses and additional material weaknesses may be discovered in the future. We plan to continue to address and remediate additional control deficiencies we may identify during our evaluation process in 2018. See “Item 3. Key Information—D. Risk Factors—Risks relating to our business and industry— If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.”

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report by our independent registered public accounting firm. Pursuant to the JOBS Act, we are not required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company, a status which prevails until the earlier of the fifth anniversary from the date of our initial public offering or until certain other specific criteria are met.

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Changes in Internal Control over Financial Reporting

Other than as described above, there were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our audit committee consists of Messrs. Ronald Meyers, Andrew Xuefeng Qian and Qian Miao and is chaired by Mr. Ronald Meyers. Mr. Meyers who has accounting and financial management expertise, is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K under the Securities Act. Each of these directors satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the NYSE and Rule 10A-3 under the Exchange Act.

ITEM 16B. CODE OF ETHICS

Our board of directors has adopted a code of business conduct and ethics that applies to our directors, executive officers and employees Our code of business conduct and ethics is publicly available on our website at http://www.1hai.cn and is filed as an exhibit to our registration statement on Form F-1 (No. 333-199150). We also will post any amendments to or waivers from a provision of our code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions on our website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees by specified category in connection with certain professional services rendered by PricewaterhouseCoopers Zhong Tian LLP, for the periods indicated. We did not pay any other fees to our auditors during the periods indicated below.

(RMB in thousands)	2016		2017
Audit fees(1)		8,500		11,300
Audit-related fees(2)		—		2,850
Total fees		8,500		14,150

(1) “Audit fees” means the aggregate fees billed for each of the fiscal years listed for professional services rendered by our independent registered public accounting firm for the audit of our annual consolidated financial statement and the quarterly reviews of consolidated financial information.

(2) “Audit-related fees” represent aggregate of fees billed for each of the fiscal years listed for the assurance and related service rendered by our independent registered public accounting firm that are reasonably related to the audit or review of our consolidated financial statements that are not reported under “Audit Fees”. They also include fees billed for services that are provided by our independent registered public accounting firm in connection with our 2022 Senior Notes offering and aborted shares offering in 2017.

The policy of our audit committee or our board of directors is to pre-approve all auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act which are approved by the audit committee or our board of directors prior to the completion of the audit).

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

110

ITEM 16G. CORPORATE GOVERNANCE

We are a "foreign private issuer" (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs, each representing two Class A common shares, are listed on the New York Stock Exchange. Under Section 303A of the New York Stock Exchange Listed Company Manual, New York Stock Exchange listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the New York Stock Exchange with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the New York Stock Exchange.

The NYSE Manual requires U.S. domestic listed companies to have a compensation committee and a corporate governance/nominating committee, each composed entirely of independent directors, which are not required under the Companies Law of the Cayman Islands. Currently, our compensation committee and corporate governance and nominating committee are not comprised entirely of independent directors. In addition, the NYSE Manual requires shareholder approval for certain matters, such as requiring that shareholders must be given the opportunity to vote on equity compensation plans, which are not required under the Cayman Islands law. We intend to comply with the requirements of Cayman Islands law and our memorandum and articles of association only in determining whether shareholder approval is required.

We may in the future choose to follow other home country practice permitted by the NYSE’s Listed Company Manual, and our shareholders may be afforded less protection than they otherwise would under the NYSE listing rule applicable to U.S. domestic issuers. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our ADSs— We are exempt from certain corporate governance requirements of the NYSE. This may afford less protection to the holders of our ADSs.”

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

Our consolidated financial statements are included at the end of this annual report.

ITEM 19. EXHIBITS

EXHIBITS INDEX

Exhibit Number	Description
1.1	Ninth Amended and Restated Memorandum and Articles of Association of eHi Car Services Limited, including the amendments thereto approved by a special resolution of shareholders passed on December 28, 2015 (incorporated by reference to Exhibit 1.1 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
2.1	Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form F-1/A (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on November 6, 2014)
2.2	Specimen Certificate for Class A Common Shares (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form F-1/A (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on November 3, 2014)
2.3	Form of Deposit Agreement among eHi Car Services Limited, JPMorgan Chase Bank, N.A., and holders and beneficial owners of American Depositary Shares issued thereunder (incorporated by reference to Exhibit (a) to the Registration Statement on Form F-6 (File No. 333-199819) filed with the Securities and Exchange Commission on November 3, 2014)
2.4	Indenture, dated December 8, 2015 among eHi Car Services Limited, its subsidiary guarantors and Citicorp International Limited, as trustee, constituting US$200 million Senior Unsecured Notes due 2018 (incorporated by reference to Exhibit 4.23 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
2.5*	Indenture, dated August 14, 2017 among eHi Car Services Limited, its subsidiary guarantors and DB Trustees (Hong Kong) Limited, as trustee, constituting US$400 million Senior Unsecured Notes due 2022

111

4.1	Amended and Restated 2010 Performance Incentive Plan (incorporated by reference to Exhibit 10.3 to to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.2	Form of 2014 Performance Incentive Plan (incorporated by reference to  Exhibit 10.4 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.3	Form of Indemnification Agreement between eHi Car Services Limited and its directors and executive officers (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.4	Form of Employment Agreement between eHi Car Services Limited and its executive officers (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.5	Global Affiliation Agreement dated March 28, 2012 between eHi Car Services Limited and Enterprise Holdings (China) LLC (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form F-1/A (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on November 3, 2014)
4.6	Third Amended and Restated Investors' Rights Agreement dated December 11, 2013 among eHi Car Services Limited and its shareholders (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.7	English translation of the Exclusive Technical Services and Consulting Agreement dated March 13, 2014 between Shanghai eHi Car Rental Co., Ltd. and Shanghai eHi Information Technology Service Co., Ltd. (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.8	English translation of the Loan Agreements dated March 10, 2014 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Information Technology Service Co., Ltd. (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.9	English translation of the Equity Pledge Agreements dated June 30, 2014 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Information Technology Service Co., Ltd. (incorporated by to Exhibit 10.9 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.10	English translation of the Call Option and Cooperation Agreement dated March 13, 2014 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Information Technology Service Co., Ltd. (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.11	English translation of the Agreement on Authorization to Exercise Shareholder’s Voting Power dated March 13, 2014 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Information Technology Service Co., Ltd. (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
4.12	Form of Subscription Agreement between eHi Car Services Limited and concurrent private placement investors (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form F-1/A (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on November 3, 2014)
4.13	English translation of the Exclusive Technical Services and Consulting Agreement dated January 25, 2015 between Shanghai eHi Car Rental Co., Ltd. and Shanghai eHi Car Sharing Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.13 to the annual report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 22, 2015)

112

4.14	English translation of the Loan Agreement dated January 16, 2015 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Car Sharing Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.14  to the annual report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 22, 2015)
4.15	English translation of the Equity Pledge Agreements dated January 25, 2015 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Car Sharing Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.15 to the annual report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 22, 2015)
4.16	English translation of the Call Option and Cooperation Agreement dated January 25, 2015 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Car Sharing Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.16 to the annual report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 22, 2015)
4.17	English translation of the Agreement on Authorization to Exercise Shareholder’s Voting Power dated January 25, 2015 between Shanghai eHi Car Rental Co., Ltd. and individual shareholders of Shanghai eHi Car Sharing Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.17 to the annual report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 22, 2015)
4.18	Securities Purchase Agreement dated May 22, 2015 among eHi Car Services Limited, Tiger Global Mauritius Fund, SRS Partners I Mauritius Limited and SRS Partners I Mauritius Limited (incorporated by reference to Exhibit 99.2 to the Form 6-K (File No. 001-36731) filed with the Securities and Exchange Commission on May 26, 2015)
4.19	Registration Rights Agreement dated June 30, 2015 among eHi Car Services Limited, Tiger Global Mauritius Fund, SRS Partners I Mauritius Limited and SRS Partners I Mauritius Limited (incorporated by reference to Exhibit 99.2 to the Form 6-K (File No. 001-36731) filed with the Securities and Exchange Commission on May 26, 2015 and June 30, 2015)
4.20	English translation of the Loan Facility Agreement dated April 28, 2015 between Shanghai eHi Car Rental Co., Ltd. and Ctrip Computer Technology (Shanghai) Co., Ltd. (incorporated by reference to Exhibit 4.20 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.21§	Share Purchase Agreement dated June 2, 2015 and amended on June 20, 2015 relating to share transfer in Elite Plus Developments Limited (incorporated by reference to Exhibit 4.24 to the annual report on Form 20-F/A (File No. 001-36731) filed with the Securities and Exchange Commission on September 30, 2016)
4.22	English translation of the Financing Cooperation Agreement dated July 17, 2015 between Shanghai eHi Car Rental Co., Ltd. and China Development Bank (incorporated by reference to Exhibit 4.21 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.23	Purchase Agreement dated December 1, 2015 for the issuance of US$200 million Senior Unsecured Notes due 2018 (incorporated by reference to Exhibit 4.22 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.24*	Purchase Agreement dated August 3, 2017 for the issuance of US$400 million Senior Unsecured Notes due 2022
4.25	English translation of the Loan Contract dated January 8, 2016 between Shanghai eHi Car Rental Co., Ltd. and Shanghai Chenghuan Car Rental Co., Ltd. (incorporated by reference to Exhibit 4.25 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.26	English translation of the Supplement to Loan Contract dated January 8, 2016 between Shanghai eHi Car Rental Co., Ltd. and Shanghai Chenghuan Car Rental Co., Ltd. (incorporated by reference to Exhibit 4.26 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.27	English translation of the Guarantee Contract between Shanghai eHi Car Rental Co., Ltd. and Chenghuan Group (incorporated by reference to Exhibit 4.27 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)

113

4.28	English translation of the Guarantee Contract between Shanghai eHi Car Rental Co., Ltd., Cheng Rong and Ji Haifeng (incorporated by reference to Exhibit 4.28 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.29	English translation of the Equity Pledge Agreement dated January 8, 2016 between Shanghai eHi Car Rental Co., Ltd. and Cheng Rong (incorporated by reference to Exhibit 4.29 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.30	English translation of the Equity Pledge Agreement dated January 8, 2016 between Shanghai eHi Car Rental Co., Ltd. and Ji Haifeng (incorporated by reference to Exhibit 4.30 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 26, 2016)
4.31	English translation of the  Supplemental Agreements to Loan Contract dated April 20, 2017 between Shanghai eHi Car Rental Co., Ltd. and Shanghai Chenghuan Car Rental Co., Ltd. (incorporated by reference to Exhibit 4.30 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 27, 2017)
4.32	Facility Agreement dated August 30, 2016 among eHi Car Services Limited, Deutsche Bank AG Hong Kong Branch, as Facility Agent, and DB Trustees (Hong Kong) Limited, as Security Agent, and certain banks, for the up to US$150 million syndicate loan facility (incorporated by reference to Exhibit 4.31 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 27, 2017)
4.33	Account Charge Agreement dated August 30, 2016 between eHi Car Services Limited, as Charger, and DB Trustees (Hong Kong) Limited, as Security Agent, for the interest reserve account charge under the up to US$150 million syndicate loan facility (incorporated by reference to Exhibit 4.32 to our Annual Report on Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 27, 2017)
4.34	Agreement and Plan of Merger dated April 6, 2018 among eHi Car Services Limited, Teamsport Parent Limited, and Teamsport Bidco Limited (incorporated by reference to Exhibit 99.2 to the Form 20-F (File No. 001-36731) filed with the Securities and Exchange Commission on April 6, 2018)
8.1*	List of significant consolidated entities
11.1	Code of Business Conduct and Ethics of eHi Car Services Limited (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form F-1 (File No. 333-199150), as amended, initially filed with the Securities and Exchange Commission on October 3, 2014)
12.1*	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**	Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**	Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*	Consent of Maples and Calder (Hong Kong) LLP
15.2*	Consent of Grandall Law Firm (Shanghai)
15.3*	Consent of PricewaterhouseCoopers Zhong Tian LLP
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

114

* Filed with this annual report on Form 20-F.

** Furnished with this annual report on Form 20-F.

§       Confidential treatment has been requested with respect to portions of this exhibit that have been redacted pursuant to Rule 406 under the Securities Act.

115

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	EHI CAR SERVICES LIMITED
		/s/ Ray Ruiping Zhang
	Name:	Ray Ruiping Zhang
	Title:	Chief Executive Officer
Date: April 30, 2018

116

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2016 and 2017	F-3
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2016 and 2017	F-5
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2015, 2016 and 2017	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2016 and 2017	F-8
Notes to the Consolidated Financial Statements	F-10

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of eHi Car Services Limited:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of eHi Car Services Limited and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People's Republic of China

April 30, 2018

We have served as the Company's auditor since 2014.

F-2

EHI CAR SERVICES LIMITED

CONSOLIDATED BALANCE SHEETS

As of December 31, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	As of December 31,
	2016		2017
	RMB		RMB		US$ (Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents		529,518,517		671,350,459		103,184,676
Restricted cash		257,059,302		612,121,936		94,081,419
Accounts receivable, net of allowance for doubtful accounts of RMB9,159,321 and RMB14,447,724 as of December 31, 2016 and 2017, respectively		213,011,929		362,899,878		55,776,690
Receivables from a related party		1,755,889		83,323,718		12,806,621
Prepaid expenses and other current assets		727,787,345		1,505,857,012		231,445,985
Short-term loans receivable		50,000,000		50,000,000		7,684,859
Vehicles held for sale		160,732,289		78,904,246		12,127,361
Deferred tax assets, current		1,839,973		-		-
Total current assets		1,941,705,244		3,364,457,249		517,107,611
Long-term investment		-		10,800,000		1,659,930
Property and equipment, net		5,723,569,175		7,057,045,317		1,084,648,005
Intangible assets		64,101,470		66,505,752		10,221,747
Vehicle purchase deposits		420,922,908		367,839,691		56,535,925
Deferred tax assets, non-current		649,675		-		-
Other non-current assets		10,010,628		61,814,009		9,500,639
Total assets		8,160,959,100		10,928,462,018		1,679,673,857
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		179,877,847		617,870,011		94,964,882
Payables due to a related party		16,083,610		210,833		32,404
Accrued expenses and other current liabilities		268,491,387		433,886,742		66,687,172
Income tax payable		5,436,989		18,180,848		2,794,345
Short-term debt due to third parties		926,219,333		2,557,445,857		393,072,231
Short-term debt due to a related party		-		100,000,000		15,369,719
Total current liabilities		1,396,109,166		3,727,594,291		572,920,753
Long-term debt due to third parties		2,667,822,989		2,957,056,474		454,491,258
Long-term debt due to a related party		100,000,000		-		-
Deferred tax liabilities, non-current		1,061,542		27,638,307		4,247,930
Other non-current liabilities		4,835,862		9,626,177		1,479,516
Total liabilities		4,169,829,559		6,721,915,249		1,033,139,457

Commitments and contingencies (Note 20)

The accompanying notes are an integral part of the consolidated financial statements.

F-3

EHI CAR SERVICES LIMITED

CONSOLIDATED BALANCE SHEETS (Continued)

As of December 31, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	As of December 31,
	2016			2017
	RMB			RMB			US$ (Note 2(d))
Shareholders’ equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized; 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively		878,463			878,663			135,048
Additional paid-in capital		4,474,702,198			4,489,246,326			689,984,527
Accumulated other comprehensive income		43,201,465			121,858,122			18,729,250
Accumulated deficit		(527,652,585	)		(405,436,342	)		(62,314,425	)
Total shareholders’ equity		3,991,129,541			4,206,546,769			646,534,400
Total liabilities and shareholders’ equity		8,160,959,100			10,928,462,018			1,679,673,857

The accompanying notes are an integral part of the consolidated financial statements.

F-4

EHI CAR SERVICES LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2015, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
Net revenues:
Car rentals		1,100,578,473			1,663,546,502			2,196,455,811			337,589,077
Car services		350,051,279			445,397,923			543,066,377			83,467,774
Total net revenues		1,450,629,752			2,108,944,425			2,739,522,188			421,056,851
Cost of revenues		(1,137,978,490	)		(1,515,281,510	)		(1,880,348,975	)		(289,004,346	)
Gross profit		312,651,262			593,662,915			859,173,213			132,052,505
Selling and marketing expenses:
Third party		(48,868,854	)		(67,788,291	)		(122,768,279	)		(18,869,139	)
Related party		(16,190,063	)		(29,399,234	)		(16,263,674	)		(2,499,681	)
Total selling and marketing expenses		(65,058,917	)		(97,187,525	)		(139,031,953	)		(21,368,820	)
General and administrative expenses		(183,548,522	)		(251,938,077	)		(270,670,181	)		(41,601,245	)
Other operating income		10,763,962			10,310,089			3,762,667			578,311
Total operating expenses		(237,843,477	)		(338,815,513	)		(405,939,467	)		(62,391,754	)
Income from operations		74,807,785			254,847,402			453,233,746			69,660,751
Interest income		2,652,636			8,413,945			14,962,132			2,299,638
Interest expense:
Third party		(109,566,064	)		(206,425,222	)		(273,588,999	)		(42,049,859	)
Related party		(14,202,500	)		(18,534,167	)		(6,995,833	)		(1,075,240	)
Total interest expense		(123,768,564	)		(224,959,389	)		(280,584,832	)		(43,125,099	)
Gain from waiver of warrants		16,869,935			-			-			-
Gain from sale of cost method investment		803,059,728			-			-			-
Other income, net		10,205,275			1,444,129			1,957,019			300,788
Early extinguishment of debt costs		-			-			(19,976,776	)		(3,070,374	)
Income before income taxes		783,826,795			39,746,087			169,591,289			26,065,704
Provision for income taxes		(87,487,990	)		(6,610,971	)		(47,375,046	)		(7,281,411	)
Net income		696,338,805			33,135,116			122,216,243			18,784,293

F-5

EHI CAR SERVICES LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued)

For the Years Ended December 31, 2015, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	For the Years Ended December 31,
	2015		2016			2017
	RMB		RMB			RMB		US$ (Note 2(d))
Net income		696,338,805		33,135,116			122,216,243		18,784,293
Change in cumulative foreign currency translation adjustment, net of tax of nil		73,410,193		(31,353,357	)		78,656,657		12,089,307
Comprehensive income		769,748,998		1,781,759			200,872,900		30,873,600
Weighted average number of common shares used in computing net income per share
Basic		126,758,363		137,621,702			138,794,624		138,794,624
Diluted		128,403,877		138,552,031			139,593,917		139,593,917
Net income per common share attributable to common shareholders
Basic		5.49		0.24			0.88		0.14
Diluted		5.42		0.24			0.88		0.13
Net income per ADS*
Basic		10.99		0.48			1.76		0.27
Diluted		10.85		0.48			1.75		0.27

* Each ADS represents two Class A common shares

The accompanying notes are an integral part of the consolidated financial statements.

F-6

EHI CAR SERVICES LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2015, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

							Accumulated other						Total
	Common shares				Additional		comprehensive			Accumulated			shareholders’
	Shares		Amount		paid-in capital		income			deficit			equity
Balance as of December 31, 2014		114,379,243		727,825		3,621,645,725		1,144,629			(1,257,126,506	)		2,366,391,673
Share-based compensation		—		—		13,983,246		—			—			13,983,246
Exercises of share options		416,246		2,617		5,086,403		—			—			5,089,020
Issuance of Class A common shares in private placement, net of issuance costs		22,337,924		136,559		792,723,782		—			—			792,860,341
Net income		—		—		—		—			696,338,805			696,338,805
Foreign currency translation adjustments		—		—		—		73,410,193			—			73,410,193
Balance as of December 31, 2015		137,133,413		867,001		4,433,439,156		74,554,822			(560,787,701	)		3,948,073,278
Share-based compensation		—		—		16,040,947		—			—			16,040,947
Exercises of share options		1,726,874		11,462		25,222,095		—			—			25,233,557
Net income		—		—		—		—			33,135,116			33,135,116
Foreign currency translation adjustments		—		—		—		(31,353,357	)		—			(31,353,357	)
Balance as of December 31, 2016		138,860,287		878,463		4,474,702,198		43,201,465			(527,652,585	)		3,991,129,541
Share-based compensation		—		—		13,588,843		—			—			13,588,843
Exercises of share options		30,000		200		955,285		—			—			955,485
Net income		—		—		—		—			122,216,243			122,216,243
Foreign currency translation adjustments		—		—		—		78,656,657			—			78,656,657
Balance as of December 31, 2017		138,890,287		878,663		4,489,246,326		121,858,122			(405,436,342	)		4,206,546,769

The accompanying notes are an integral part of the consolidated financial statements.

F-7

EHI CAR SERVICES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2015, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
Cash flows from operating activities:
Net income		696,338,805			33,135,116			122,216,243			18,784,293
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		1,641,596			1,548,077			5,288,403			812,813
Depreciation and amortization		474,721,487			668,018,253			755,065,789			116,051,487
Amortization of debt issuance costs and discounts		816,082			17,372,579			27,357,231			4,204,729
Share-based compensation		13,983,246			16,040,947			13,588,843			2,088,567
Gain from waiver of warrants		(16,869,935	)		—			—			—
Gain from sale of cost method investment		(803,059,728	)		—			—			—
Deferred taxes		—			(2,489,648	)		29,066,413			4,467,426
Foreign currency exchange (gain) loss, net		—			11,608,634			(47,372,152	)		(7,280,966	)
Early extinguishment cost		—			—			19,976,776			3,070,374
Cost related to aborted offering		—			—			3,923,420			603,019
Changes in operating assets and liabilities:
Accounts receivable		(69,327,865	)		(35,008,430	)		(155,176,352	)		(23,850,169	)
Receivables due from a related party		(7,346,590	)		5,611,366			(81,567,829	)		(12,536,746	)
Prepaid expenses and other assets		(166,490,292	)		(251,622,358	)		(165,210,245	)		(25,392,350	)
Income taxes payable		81,996,755			(84,281,714	)		12,743,859			1,958,695
Accounts payable		2,449,643			8,750,324			24,613,565			3,783,036
Payables due to a related party		10,082,871			5,329,696			(15,872,777	)		(2,439,601	)
Accrued expenses and other current liabilities		77,754,819			26,731,063			171,224,002			26,316,647
Net cash provided by operating activities		296,690,894			420,743,905			719,865,189			110,641,254
Cash flows from investing activities:
Purchase of property and equipment		(2,183,382,209	)		(3,687,792,595	)		(3,252,477,106	)		(499,896,578	)
Purchase of intangible assets		(6,850,853	)		(12,779,230	)		(2,626,798	)		(403,731	)
Proceeds from disposal of property and equipment		241,754,708			410,717,362			1,057,279,427			162,500,873
Cash paid for cost method investment		—			—			(10,800,000	)		(1,659,930	)
Proceeds from waiver of warrants		18,409,199			—			—			—
Proceeds from sale of cost method investment, net of related transaction costs		954,428,056			—			—			—
Cash paid relating to other investing activities		(2,090,288	)		—			—			—
Increase in restricted cash		(14,185,928	)		(38,874,782	)		(377,036,251	)		(57,949,411	)
Cash paid for a business combination, net of cash acquired		—			(3,229,998	)		—			—
Cash paid for loans to a third party		—			(50,000,000	)		—			—
Net cash used in investing activities		(991,917,315	)		(3,381,959,243	)		(2,585,660,728	)		(397,408,777	)

F-8

EHI CAR SERVICES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Years Ended December 31, 2015, 2016 and 2017

(all amounts in RMB, except share and per share data, or as otherwise noted)

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
Cash flows from financing activities:
Proceeds from exercise of share options		4,891,204			25,431,373			955,485			146,855
Proceeds from issuance of Class A common shares in private placement, net of issuance costs		792,860,341			—			—			—
Proceeds from borrowings from third parties		704,095,594			2,142,363,443			1,874,385,912			288,087,840
Proceeds from borrowings from a related party		300,000,000			—			—			—
Repayment of borrowings to third parties		(741,253,447	)		(1,166,755,309	)		(1,441,476,300	)		(221,550,851	)
Repayment of borrowings to a related party		—			(200,000,000	)		—			—
Payment for property and equipment beyond 3 months after purchase		—			—			(11,212,572	)		(1,723,341	)
Proceeds from issuance of 2018 Senior Notes, net of issuance costs		1,241,289,905			—			—			—
Payment for IPO issuance costs		(20,656,597	)		—			—			—
Payment of professional fees for issuance of 2018 Senior Notes		—			(2,740,945	)		—			—
Payment of professional fees for aborted offerings		—			—			(1,748,969	)		(268,812	)
Repayment of Syndicated loan		—			—			(1,000,335,000	)		(153,748,674	)
Proceeds from issuance of 2022 Senior Notes, net of issuance costs		—			—			2,611,624,352			401,399,313
Net cash provided by financing activities		2,281,227,000			798,298,562			2,032,192,908			312,342,330
Effect of exchange rate changes on cash and cash equivalents		97,880,059			82,346,911			(24,565,427	)		(3,775,637	)
Net increase (decrease) in cash and cash equivalents		1,683,880,638			(2,080,569,865	)		141,831,942			21,799,170
Cash and cash equivalents-beginning of year		926,207,744			2,610,088,382			529,518,517			81,385,506
Cash and cash equivalents-end of year		2,610,088,382			529,518,517			671,350,459			103,184,676
Supplemental disclosure for cash flow information
Cash paid for interest		115,018,836			206,010,610			173,464,046			26,660,936
Cash paid for income taxes		5,491,235			93,382,333			5,564,773			855,290
Supplemental disclosure of non-cash investing and financing activities:
Sales of property and equipment included in receivables		20,366,352			127,915,314			350,629,000			53,890,691
Changes in vehicle purchase deposits		42,543,272			204,195,008			(53,083,217	)		(8,158,741	)
Accounts payable for purchase of property, plant and equipment		777,961,654			163,190,564			576,569,163			88,617,058
Accrued professional fees for issuance of 2018 Senior Notes		2,740,945			—			—			—
Accrued professional fees for aborted offering		—			—			2,174,451			334,207
Subscription receivables related to share option exercises		197,816			—			—			—

The accompanying notes are an integral part of the consolidated financial statements.

F-9

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

On August 3, 2007, eHi Car Services Limited (the “Company”), formerly known as Prudent Choice Limited or eHi Auto Services Limited, was incorporated in the Cayman Islands by Ray Ruiping Zhang (the “Founder”). The Company, through its subsidiaries, provides car rentals and car services to corporate and individual customers in the People’s Republic of China (“PRC”). The Company and its subsidiaries began offering services in 2006 through Shanghai eHi Business Co., Ltd. (“eHi Business”), which was incorporated on January 11, 2006. The Company’s business initially focused on providing car services to premium corporate and institutional clients. In May 2008, the Company began to provide car rentals to individual customers.

To further expand the Company’s internet and mobile services, the Company entered into a series of contractual arrangements in March 2014 with its PRC-incorporated variable interest entity (“VIE”) Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”) and its shareholders. eHi Information obtained a telecommunication business operating license (“ICP license”) from the relevant telecommunication authorities on September 24, 2014. eHi Information currently does not have any material operations.

In January 2015, the Company entered into a series of contractual arrangements with its PRC-incorporated VIE Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”) and its shareholders. eHi Car Sharing is currently testing its new business initiative as an online platform for peer-to-peer car rental between private vehicle owners and individual customers. eHi Car Sharing is currently not yet in operation and the Company does not expect it to contribute a material portion of its net revenues and operations in the foreseeable future.

As of December 31, 2017, the Company and its principal subsidiaries and VIEs are as follows:

	Percentage of ownership or indirect economic ownership	Date of incorporation/ acquisition	Place of incorporation
Parent company and offshore holding companies
eHi Car Services Limited (“Company”)	Parent	August 3, 2007	Caymans
eHi Auto Services (Hong Kong) Holding Limited (“eHi Hong Kong”)	100%	September 24, 2010	Hong Kong
L&L Financial Leasing Holding Limited	100%	October 17, 2013	Hong Kong
Brave Passion Limited (“Brave Passion”)	100%	May 26, 2015	British Virgin Islands
Wholly owned subsidiaries
Shuzhi Information Technology (Shanghai) Co., Ltd. (“Shuzhi”)	100%	March 21, 2008	PRC
Shanghai eHi Car Rental Co., Ltd. (“eHi Rental”)	100%	March 10, 2008	PRC
Beijing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 20, 2008	PRC
Chongqing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	December 5, 2009	PRC
Shanghai Smart Brand Auto Driving Services Co., Ltd (“Shanghai Smart Brand,” subsidiary of Shuzhi)	100%	April 13, 2011	PRC
eHi Auto Services (Jiangsu) Co., Ltd. (subsidiary of eHi Hong Kong)	100%	December 23, 2011	PRC
Shanghai eHi Chengshan Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 16, 2012	PRC
Shanghai Taihan Trading Co., Ltd.	100%	November 10, 2013	PRC
Shanghai Taihao Financial Leasing Co., Ltd.	100%	January 7, 2014	PRC
Shanghai Taide Financial Leasing Co., Ltd.	100%	June 23, 2014	PRC
eHi Car Rental Management Services (Shanghai) Co., Ltd (subsidiary of eHi Rental)	100%	November 10, 2015	PRC
Consolidated variable interest entities (“VIEs”)
Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”)	100%	March 13, 2014	PRC
Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”)	100%	January 12, 2015	PRC

F-10

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)

On November 18, 2014, the Company completed its initial public offering (“IPO”) and became listed on the New York Stock Exchange by issuing 10,000,000 American Depositary Shares (“ADSs”) at the price of US$12.00 per ADS for total gross proceeds of US$120 million. Each ADS represents two Class A common shares. The Company issued additional 8,333,332 Class A common shares in a private placement concurrent with the IPO, at the price of $6.00 per Class A common share for total proceeds of US$50 million. Upon the completion of the IPO, all of the Company’s 77,999,069 then-outstanding preferred shares and 6,096,842 then-outstanding common shares were immediately converted into and/or re-designated as Class B common shares.

On May 22, 2015, the Company entered into definitive securities purchase agreements with Tiger Fund and SRS Funds pursuant to which the Company agreed to issue a total of 22,337,924 of the Company’s Class A common shares at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS). The Company raised gross proceeds of approximately US$134.0 million on the transaction date and incurred transaction costs of approximately US$4.3 million from this private placement transaction which were recorded as a reduction to the equity contribution. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The consolidated financial statements of the Company, its subsidiaries and VIEs are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The Company had negative working capital of RMB 363,137,042 at December 31, 2017 primarily due to the maturity of the 2018 Senior Notes in December 2018. The management believes that the Company's current cash position as of December 31, 2017, the cash expected to be generated through the disposal of the Company's vehicles subject to repurchase programs (note 2(l)), operations and funds available from borrowings under the bank facilities will be sufficient to meet the Company’s working capital and capital expenditure for at least the next twelve months from the date these financial statements were issued. As such, these financial statements are prepared under the going concern assumption which contemplates the realisation of assets and the liquidation of liabilities in the ordinary course of business.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the VIEs for which the Company is the ultimate primary beneficiary. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.

A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity. The VIEs for which the Company is the ultimate primary beneficiary, eHi Information and eHi Car Sharing, have insignificant operations; related balances and transactions are immaterial for all periods presented.

All transactions and balances among the Company, its subsidiaries, and the VIEs have been eliminated in consolidation.

(c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from such estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include the allowance for doubtful accounts, costs related to customer loyalty programs, useful lives of vehicles and other tangible or intangible assets, residual values of vehicles, impairment of intangibles and long-lived assets, certain accruals or contingent liabilities, valuation allowances for deferred tax assets, provisions for uncertain tax positions, valuation of share-based awards and forfeiture rates.

F-11

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d) Foreign currency and foreign currency translation

The Company uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated outside of the PRC is the United States dollar (“US$”), while the functional currency of the PRC entities is RMB as determined based on the criteria of ASC 830, Foreign Currency Matters.

Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the consolidated statements of comprehensive income as general and administrative expenses. Transaction gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature are treated in the same manner as translation adjustments and included in cumulative translation adjustments, which is a separate component of shareholders’ equity in the consolidated financial statements.

Assets and liabilities of the Company and its subsidiaries incorporated outside of the PRC are translated into RMB at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity. The rates of exchange for the U.S. dollar used for translation purposes were RMB6.9370 on December 31, 2016 and RMB6.5342 on December 31, 2017. The average rates of exchange for the U.S. dollar used for translation purposes were RMB6.2284, RMB6.6401, and RMB6.7547 for 2015, 2016, and 2017, respectively.

The unaudited United States dollar (“US$”) amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader. Unless the amounts were from transactions originally denominated in U.S. dollars or otherwise noted, all translations from RMB into U.S. dollars and from U.S. dollars to RMB for the convenience of the reader were calculated at the rate of US$1.00 = RMB6.5063 on December 31, 2017, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

(e) Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company deposits its cash and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that no significant credit risk exists as these banks are major financial institutions with high credit quality.

When providing services, the Company generally requires individual customers to make advance payments, or a deposit from the corporate and institutional clients before services are rendered. Accounts receivable primarily represents those receivables derived in the ordinary course of business in relation to corporate and institutional clients. The Company offers payment terms in the range of 5 — 120 days to the corporate and institutional clients. Substantially all revenue was derived from customers located in China.

Except for Ctrip (Note 21), no single customer accounted for more than 10% of the Company’s consolidated accounts receivable as of December 31, 2016 and 2017, or for more than 10% of the Company’s consolidated net revenues in any of the periods presented. 

F-12

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f) Cash and cash equivalents

Cash and cash equivalents consist of cash in banks, which are unrestricted as to withdrawal or use.

(g) Restricted cash

Restricted cash includes cash and cash equivalents that are not readily available for the Company’s normal disbursements. Restricted cash and cash equivalents are primarily related to cash deposits with banks and financial institutions required as part of the Company’s short-term borrowing arrangements (Note 9).

(h) Investments

The Company’s investments include cost method investments and held to maturity investments.

We use the cost method of accounting for equity investments that are not considered debt securities or equity securities that have readily determinable fair values and over which we have neither significant influence nor control through investments in common stock or in-substance common stock. Under the cost method, we carry the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee’s post-acquisition profits. The investments that we intend and are able to hold to maturity are classified as held-to-maturity investments and are stated at amortized cost. We monitor our investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information.

(i) Accounts receivable, net of allowance for doubtful accounts

Accounts receivable mainly consist of amounts due from the Company’s corporate and institutional clients, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Company performs ongoing credit evaluation of its customers, and assesses the allowance for doubtful accounts based upon expected collection ability based on the age of the receivables and factors surrounding the credit risk of specific customers.

(j) Short term loan receivable

Short-term loan receivables consist of loans extended to third-parties and are recorded at amortized cost. The Company records interest on an accrual basis and recognizes it in "Interest income" as earned in accordance with the contractual terms of the loan agreement, to the extent that such amounts are expected to be collected.

(k) Vehicles held for sale

Vehicles held for sale consist of used vehicles subject to signed sales agreements awaiting completion of title transfer. When a vehicle is reclassified as held for sale and transferred from property, plant and equipment, it is not further depreciated and is stated at lower of cost and net realizable value. Cost is the net book value upon the reclassification of the vehicle. Net realizable value is the selling price in accordance with the sales agreement less the estimated costs to be incurred upon the completion of title transfer. As of December 31, 2017, the vehicles reclassified as held for sale are expected to complete title transfer within one year.

F-13

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(l) Property and equipment, net

Property and equipment is stated at cost, less accumulated depreciation and impairment. Initial cost is comprised of the purchase price, plus any costs directly attributable to bringing the property and equipment to the location and condition necessary for its intended use. Depreciation of property and equipment is calculated on a straight-line basis, after consideration of expected useful lives and estimated residual values. The Company begins depreciating vehicles when they are ready for their intended use. The estimated useful lives of these assets are generally as follows:

Category	Estimated useful lives
Vehicles	1-4 years
In-car equipment	3 years
Office furniture and equipment	5 years
Software	3 - 5 years
Building	39 years
Leasehold improvements	Over the shorter of the lease term or the estimated useful life - 1-5 years

Construction in progress represents offices under construction and newly acquired vehicles which are not yet been placed in service. Construction in progress is transferred to property and equipment and depreciation commences when an asset is ready for its intended use.

Vehicles

A vehicle is considered ready for its intended use generally when the license plate for the vehicle is obtained, the vehicle is insured, and when a GPS tracking device is installed. Expenditures for repairs and maintenance of vehicles are expensed as incurred. The Company expects to hold its vehicles generally for a period of approximately three to four years before their disposal, except for vehicles subject to repurchase programs, which have a holding period that typically ranges from 12 to 24 months. The estimated residual value of vehicles which are not subject to the repurchase programs are typically based on the current market price for used vehicles obtained from used vehicle dealers or the used car market for similar models.

The Company monitors accounting estimates relating to vehicles on a quarterly basis, including the depreciation rates and estimated residual values. Changes made to estimates are reflected in vehicle-related depreciation expense on a prospective basis. In addition, depreciation expense associated with vehicles subject to repurchase programs is recorded based on the contractual repurchase prices and holding periods, and is adjusted if the repurchase conditions are not met. When a vehicle is reclassified as held for sale, it is not further depreciated and is accounted for as held for sale. Gain or loss on disposed vehicles or loss on vehicles held for sale is recognized as an adjustment to depreciation expense as part of cost of revenues. The Company recorded a net loss of RMB5,055,620, a net gain of RMB1,848,313 and a net gain of RMB24,241,209 on disposals of vehicles set off by loss from reclassification of vehicles held-for-sale from property and equipment for the years ended December 31, 2015, 2016 and 2017, respectively. The Company fully writes off the net carrying value of a vehicle if the vehicle cannot be tracked via the installed GPS system for more than six months and cannot be otherwise located, as the Company believes that the chance of recovering the vehicle in such circumstances is remote, such losses are recorded as part of cost of revenues.

(m) Intangible assets

Intangible assets are substantially comprised of car rental operating licenses and vehicle license plates acquired from third parties and local administration authorities. Gross carrying value totaled RMB64,101,470 and RMB66,505,752 as of December 31, 2016 and 2017, respectively.

F-14

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m) Intangible assets (Continued)

The car rental operating licenses are originally assigned a fixed operating period, which can be extended upon expiration without significant additional cost. The Company also believes that there is no significant risk involved in the car rental operating license renewal process. Further, there are no legal, regulatory, or contractual provisions of which the Company is aware that may limit the useful life of such licenses. As such, the Company considers such car rental operating licenses to be indefinite-lived and carries them at cost less any subsequent impairment losses. Vehicle license plates do not expire and require no renewal. Therefore, they are similarly considered to be indefinite-lived and are carried at cost less any subsequent accumulated impairment losses. 

(n) Impairment of intangible assets and long-lived assets

The Company evaluates intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. For long-lived assets, when these events occur, the Company evaluates impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition.  For indefinite lived assets, the impairment test consists of a comparison of the fair value with carrying value. If the carrying value of an intangible asset exceeds its fair value, which is generally determined using the income approach, market approach, or a combination thereof, an impairment loss is recognized. No impairment charges were recognized for the years ended December 31, 2015, 2016, and 2017.

(o)Deposits and advances from customers

Customer deposits:

The Company collects deposits from corporate and institutional clients upon entering into negotiated contracts, and such amount is refundable at the end of the contract period provided no contract violations are noted. For individual customers, the Company collects additional amounts from them upon return of the rental vehicle based on the estimated repair and other relevant costs. In situations where the contract is violated or damage is caused to the vehicle, customer deposits received are used to offset expenses incurred in the period such incidents occur, and the excess amount is returned to customers. The customer deposits are classified as accrued expenses and other current liabilities on the consolidated balance sheets. The Company records a loss in the consolidated statements of comprehensive income if expenses incurred for repair exceed customer deposit amounts.

Advances from customers:

Individual customers pay in advance prior to the rental vehicle pick-up. Payments received from customers are initially recorded as advances from customers and are recognized as revenues when revenue recognition criteria are met.

(p) Revenue recognition

Revenue from car rentals and car services are generally recognized over the rental period. Revenue from the sale of gasoline is recognized when the vehicle is returned and is based on the actual volume of gasoline consumed or a contracted fee paid by the customer. For car rentals, payments are generally collected from customers in advance, and are recorded as advances from customers in the consolidated balance sheets until the revenue recognition criteria are met. Customers who purchase car services are generally on credit terms, and the initial credit evaluation is conducted before credit is extended. Revenue is recognized when collectability is reasonably assured and all other revenue recognition criteria are met.

F-15

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(p) Revenue recognition (Continued)

Occasionally, the Company engages contracted service providers in offering car services to its customers where the Company currently does not provide such services in certain cities or such services exceed the Company’s existing capacity. The end customers sign service contracts directly with the Company in such arrangements and the Company is the party responsible for customers’ acceptance for services rendered. In case of customer disputes, the Company resolves customer complaints and is solely responsible for refunding customers their payments. Therefore, the Company is considered the primary obligor in transactions involving the use of contracted service providers. The Company also determines the service fee and bears the credit risk. As a result, the Company recognizes revenue under contracted service provider arrangements on a gross basis.

In the accompanying consolidated statements of comprehensive income, revenue is presented net of business tax, VAT and other related surcharges. Costs of revenue associated with car rentals and car services have not been presented separately as the Company cannot reasonably and reliably estimate and allocate expenses to each of the revenue streams.

(q) Lease Obligations

In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property's estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The capitalized lease obligation reflects the present value of future rental payments, discounted at the appropriate interest rates. The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized as set out under the property and equipment section of this note.

Operating lease expenses are recognized on a straight-line basis over the applicable lease term.

(r) Net investment in direct financing leases

For leases where the Company is the lessor, a transaction is accounted for as a direct financing lease if the transaction satisfies one of the four capital lease conditions as discussed under the capital lease obligations in note 2(q), the collectability of the minimum lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the Company under the lease.

The net investment in the direct financing leases consists of the minimum lease payments, net of executory costs and profits thereon, unguaranteed residual value, accruing to the benefit of the Company and initial direct costs less unearned income. Over the period of a lease, each lease payment received is allocated between the repayment of the net investment in the lease and financing lease income based on the effective interest method so as to produce a constant rate of return on the balance of the net investment in the lease. The net investment in the direct financing leases is classified as current or non-current assets in the balance sheets based on the duration of the remaining lease terms.

The Company records revenue attributable to direct financing leases so as to produce a constant rate of return on the balance of the net investment in the lease. Total direct financing leases revenues were RMB7,197,316, RMB10,140,216 and RMB3,875,346 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in car rental revenues in the consolidated statements of comprehensive income ..

F-16

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(s)Customer loyalty program

The Company has a customer loyalty program where registered members earn points upon eligible purchases and such points can be redeemed for free rental periods, mileage upgrades, and other free gifts.  The Company estimates the incremental costs associated with the Company’s future obligation to its customers, and records them as selling and marketing expense in the consolidated statements of comprehensive income. Unredeemed membership points are recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company adjusts the liability associated with the customer loyalty program based on the Company’s estimate of future redemption of membership points prior to their expiration, which is three calendar years from the day the membership points are awarded. As of December 31, 2016 and 2017, the accrued liabilities associated with the customer loyalty program were RMB7,185,774 and RMB9,048,815, respectively.

(t) Advertising costs

The Company expenses advertising costs as incurred. Total advertising expenses were RMB28,946,698, RMB38,968,240 and RMB89,925,181 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in selling and marketing expenses in the consolidated statements of comprehensive income.

(u) Taxation

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and tax credits, if any. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period of the enactment of the change. The Company has adopted ASU 2015-17 prospectively since January 1, 2017, deferred tax assets and liabilities are classified as non-current on the consolidated balance sheet.

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected for a company operating in the car rental industry.

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

F-17

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(v) Government grants and subsidy income

The Company receives government grants and subsidies in the PRC from various levels of local governments from time to time which are granted for general corporate purposes and to support its ongoing operations in the regions. These government subsidies are recorded as other operating income in the consolidated statement of comprehensive income in the period cash is received. For government grants that contain certain operating conditions, the amounts are recorded as liabilities when received, and are recognized in the consolidated statements of comprehensive income as a reduction of the related costs for which the grants are intended to compensate when the conditions are met. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the consolidated statements of comprehensive income as reductions to depreciation expense on a straight-line basis over the expected lives of the related assets.

(w) Fair value measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value include:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, short-term loans receivable, accounts payable, advances from customers, certain accrued expenses and other current liabilities, and short-term and long-term debt. The carrying amounts of short-term financial instruments, excluding short-term debt, approximate their fair values due to the short-term maturity of these instruments. The carrying amounts of short-term debt as of December 31, 2016 and December 31, 2017 approximate their fair values as the interest rates they bear reflected the current quoted market yield for comparable debt (Level 2 inputs). The fair value of long-term borrowings is estimated based on quoted market rates as well as borrowing rates currently available for borrowings with a similar term, and the fair value of 2018 Senior Notes and 2022 Senior Notes are estimated based on the average of the bid and ask price as of December 31, 2016 and December 31, 2017 (Level 2 inputs). The fair values of long-term debts including long-term borrowings, 2018 Senior Notes and 2022 Senior Notes were RMB3,214,860,166 and RMB4,770,908,702 as of December 31, 2016 and 2017, as follows:

	As of December 31, 2016				As of December 31, 2017
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
Long-term borrowings, including current portion		1,747,583,173		1,755,993,820		831,202,361		833,969,309
2018 Senior Notes		1,387,400,000		1,458,866,346		1,306,840,000		1,332,252,796
2022 Senior Notes		-		-		2,613,680,000		2,604,686,597
Total long-term debt		3,134,983,173		3,214,860,166		4,751,722,361		4,770,908,702

F-18

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(x) Vehicle purchase deposits

The Company purchases vehicles through car dealers and makes advance payments in the ordinary course of business before title of vehicles are physically transferred to the Company. As the advance payments will be converted into property and equipment, which is a non-current asset, vehicle purchase deposits are accordingly classified as non-current assets on the consolidated balance sheets.

(y) Share-based compensation

The Company recognizes share-based compensation based on the grant date fair value of equity awards, with compensation expense, net of a forfeiture rate, recognized over the period in which the grantee is required to provide services to the Company in exchange for the equity award. Share-based compensation expense is recognized (i) immediately at the grant date for awards with no vesting conditions or (ii) using the straight-line method for awards with graded vesting features and service conditions only. Share-based compensation expense is classified in the consolidated statements of comprehensive income based upon the job function of the grantee. For the years ended December 31, 2015, 2016 and 2017, the Company recognized share-based compensation expense of RMB13,983,246, RMB16,040,947 and RMB13,588,843, respectively, as follows:

	For the years ended December 31,
	2015		2016		2017
Cost of revenues		361,951		839,543		843,761
Selling and marketing expenses		894,680		401,498		336,139
General and administrative expenses		12,726,615		14,799,906		12,408,943
Total		13,983,246		16,040,947		13,588,843

(z) Debt issuance costs and debt discounts

The Company incurs costs in connection with debt issuance, such as legal and accounting fees. Debt issuance costs and debt discounts are initially recorded as direct deduction from the associated debt liability, and are amortized to interest expense over the term of the respective debt using the effective interest method.

(aa) Earnings per share

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between common shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method. Common equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.

Basic and diluted earnings per share are not reported separately for Class A or Class B common shares as each class of shares has the same rights to undistributed and distributed earnings.

F-19

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ab) Segment reporting

In accordance with ASC 280, Segment Reporting, the Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and substantially all of the Company’s revenues are derived from within the PRC. Therefore, no geographical segments are presented.

(ac) Business Combinations

In accordance with ASC 805, Business Combinations, in business combinations not involving entities or businesses under common control, the Company measured the cost of an acquisition as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred and equity instruments issued. The transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of comprehensive income.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to forecast the future cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Although management believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

A non-controlling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Company. Consolidated net income on the consolidated statements of comprehensive income includes the net income attributable to non-controlling interests when applicable. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s consolidated balance sheets. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows when applicable.

(ad) Recently issued accounting standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers," or ASU 2014-09. This update contains new accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for the Company’s fiscal year beginning January 1, 2018, which reflects a one year deferral approved by the FASB in July 2015, with early application permitted provided that the effective date is not earlier than the original effective date (which would be the Company’s fiscal year beginning January 1, 2017). In March 2016, the FASB issued an amendment (ASU 2016-08) to the new revenue recognition guidance clarifying how to determine if an entity is a principal or agent in a transaction. In April (ASU 2016-10), May (ASU 2016-12), and December (ASU 2016-20) of 2016, the FASB further amended the guidance to include performance obligation identification, licensing implementation, collectability assessment and other presentation and transition clarifications. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2014-09 becomes effective for the Company on January 1, 2018. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company is currently in the process of analyzing each of its revenue streams and anticipates that the adoption of ASU 2014-09 will not have significant impact on its financial statements and related disclosures.

F-20

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ad) Recently issued accounting standards (Continued)

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Group has adopted ASU 2015-17 in 2017 using the prospective method and all deferred taxes have been classified as noncurrent in the balance sheet as of December 31, 2017.

In February 2016, the FASB issued ASU 2016-02, “Leases”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The updated guidance also expands the required quantitative and qualitative disclosures surrounding leases. Additionally, ASU 2016-02 aligns key aspects of lessor accounting with the new revenue recognition guidance in ASU 2014-09, “Revenue from Contracts with Customers” (see above). Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases. For lessors, the guidance modifies classification criteria and accounting for sales-type and direct financing leases and requires a lessor to derecognize the carrying value of the leased asset that is considered to have been transferred to a lessee and record a lease receivable and residual asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted; hence, it applies to the Company beginning with calendar 2019. A modified retrospective transition approach is required for both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard would provide a practical expedient for lessors to combine nonlease components with the related lease components if certain conditions are met. This could allow the Company to account for all revenue earned from the operations of rental vehicles and from other forms of rental related activities under the new lease guidance. The Company is in the process of evaluating the impact of the adoption of this update on its consolidated financial statements and related disclosures, and expects the guidance will affect its accounting for certain contracts.

In March 2016, the FASB issued an ASU 2016-09 “Improvements to Employee Share-based Payment Accounting”, which amends ASC Topic 718, Compensation — Stock Compensation. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Group has adopted the standard in 2017 and the impact of adopting this pronouncement was not material to the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses. ASU 2016-13 also changes how entities measure credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, and early adoption is permitted for periods beginning after December 15, 2018. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements and associated disclosures.

F-21

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ad) Recently issued accounting standards (Continued)

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): “Classification of Certain Cash Receipts and Cash Payments”. The standard is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities. The Company is in the process of evaluating the impact of this guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash”. The standard addresses the diversity in practice that exists in the classification and presentation of changes in restricted cash and requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In November, 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), “Statement of Cash Flows”, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The ASU is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. The ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of ASU 2017-01 and anticipates the adoption had no material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifies Goodwill Impairment Test” (“ASU 2017-04”), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of the second step of the goodwill impairment test. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.” The ASU is effective prospectively for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of ASU 2017-04 on its consolidated financial statements.

F-22

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

3. BUSINESS COMBINATIONS

Hangzhou eHi Car Sales and Services Co., Ltd., (Formerly called Hangzhou Deyu Car Dealing Services Co., Ltd., renamed on December 5, 2017)

In March 2016, to expand its operations, the Company acquired 100% of the equity interests in Hangzhou Deyu Car Dealing Services Co., Ltd. (“Deyu”), holding a number of vehicles plates in Hangzhou, where the local government had promulgated policies controlling the number of new local vehicle plates issued. The total purchase price for the transaction was RMB3,229,998 which was funded from the Company’s existing cash resources and fully paid in March 2016. Beginning March 31, 2016, the date of acquisition, Deyu has been fully consolidated into the Company’s financial statements. The allocation of the purchase price at the date of acquisition is summarized as follows:

	RMB
Net assets		45,374
Identifiable intangible assets —vehicles plates		4,246,166
Deferred tax liabilities		(1,061,542	)
Total		3,229,998

The intangible assets acquired through the Company's acquisition of Deyu are considered to be indefinite-lived and are therefore not subject to amortization.

The Company's business combination completed during the year ended December 31, 2016 did not have a material impact on the Company’s consolidated statements of operations and therefore pro forma disclosures have not been presented.

4. ALLOWANCE FOR DOUBTFUL ACCOUNTS

An analysis of the allowance for doubtful accounts receivable for the years ended December 31, 2015, 2016 and 2017 is as follows:

	For the years ended December 31,
	2015		2016		2017
Balance, beginning of the year		5,969,648		7,611,244		9,159,321
Provision for doubtful accounts		1,641,596		1,548,077		5,288,403
Balance, end of the year		7,611,244		9,159,321		14,447,724

5. SHORT-TERM LOAN RECEIVABLE

In January and June 2016, the Company entered into agreements with Shanghai Chenghuan Car Rental Company Limited (“Shanghai Chenghuan”), pursuant to which the Company agreed to extend, through entrusted bank loans, an aggregate amount of RMB50,000,000 to Shanghai Chenghuan. Shanghai Chenghuan is a middle-to-high-end car rentals and car services provider in the local market, and is an independent third party. The loans have a term of one year and bear an interest rate of 7.75% per annum. The loan receivable is fully collateralized with 100% Shanghai Chenghuan’s shares. After one year, the Company has the option to convert its creditor rights into equity interests in Shanghai Chenghuan at a pre-determined valuation.

In January 2017, the Company and Chenghuan entered into supplemental agreements to extend the term of the above loans from 1 year to 2 years and increase the interest rate from 7.75% to 10% which would be applied retroactively covering the entire 2 years term. Other terms remained unchanged.

The Company concluded that the loan should be accounted for as short-term loan receivable in its entirety and compounded accrued interest, as the conversion option is not a derivative and there should be no separate bifurcation of derivative accounting for conversion option. The Company recognized the interest income true-up over the remaining period of contract terms starting from the effective date of the supplemental agreements.

F-23

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	As of December 31,
	2016		2017
Value-added taxes deductible		311,501,214		774,435,385
Receivables from disposal of vehicles		127,915,314		350,629,000
Prepaid insurance expense		115,498,191		197,256,868
Staff advances		18,060,202		36,404,467
Brand Marketing Prepayments		-		30,700,380
Prepaid gasoline and repair supplies		17,481,886		26,685,176
Prepaid rental expenses		13,964,546		17,309,920
Rental deposits		11,137,408		16,301,592
Net investment in direct financing leases, current portion		63,999,571		10,226,920
Others		48,229,013		45,907,304
Total		727,787,345		1,505,857,012

7. INVESTMENTS

Travice Inc.

In April 2014, the Company acquired series B preferred shares of Travice Inc. through its formerly wholly owned subsidiary Elite Plus Developments Limited (“Elite Plus”). Travice Inc. was a private company which developed and operates the Kuaidi mobile taxi and car calling service. The series B preferred shares acquired represented 8.4% of the then outstanding share capital of Travice Inc. Concurrently, Travice Inc. also issued warrants to the Company to purchase additional 4,684,074 series C preferred shares of Travice Inc. The total consideration given for series B preferred shares and warrants was RMB154,251,500 (US$25,000,000). The series B preferred shares are not in substance common stock. The cost method was applied to account for the investment as the equity securities received were not considered as debt or equity securities that have readily determinable fair values. Furthermore, the warrants to purchase series C preferred shares do not meet the definition of a derivative as the contractual terms do not provide for net settlement and the underlying shares are an investment in a private company.

On January 27, 2015, the Company waived its rights under the warrants to purchase 4,684,074 series C preferred shares of Travice Inc. and received RMB18,409,199 (US$3,000,000) in exchange for the waiver of the warrants. The gain of RMB16,869,935 (US$2,749,158) arising from this transaction was recorded as a gain from waiver of warrants in the consolidated statement of comprehensive income for the year ended December 31, 2015. The cost basis of the warrant was correspondingly eliminated from the carrying value of investments.

In February 2015, Travice Inc. was merged with and into Xiaoju Science and Technology Limited, which developed and operates the Didi mobile taxi and car hailing service. After the completion of such merger, the Company’s investment in Travice Inc. was exchanged to a minority stake in the surviving company Xiaoju Kuaizhi Inc.

On June 2, 2015, the Company entered a definitive agreement, pursuant to which the Company transferred its 100% equity interest in Elite Plus to Eagle Legend Global Limited, an independent third party, for gross proceeds of RMB983,621,925 (US$160,875,000). The transaction was closed on June 24, 2015. The gain of RMB803,059,728 (US$131,352,744) arising from this transaction after deducting related transaction costs of RMB29,193,869 (US$4,773,098) was recorded as a gain from sale of cost method investment within non-operating income.

The transactions were originally denominated in U.S dollars and therefore, translations from U.S. dollar to RMB were calculated at the exchange rates prevailing on the transaction dates.  

F-24

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

7. INVESTMENTS (Continued)

Ningbo eHi Ruiji

In November 2017, Ningbo Haichao Investment Management Services Co., Ltd. (“Ningbo Haichao”), a wholly owned subsidiary of the Company, as the Limited Partner, and an independent third party Yinzhou Ningyituiji Investment Management Co., Ltd. (“Yinzhou Ningyituiji”), as the General Partner, entered into a partnership agreement in relation to the establishment and management of Ningbo eHi Ruiji Equity Investment LLP (“Ningbo eHi Ruiji”). Ningbo eHi Ruiji would be established in the PRC as a limited partnership for the purpose of equity investment, investment management and investment consulting.

Pursuant to the Partnership Agreement, the total capital commitment to Ningbo eHi Ruiji by May 1, 2047 is expected to be RMB60,000,000, of which RMB59,990,000 is to be contributed by Ningbo Haichao and RMB10,000 is to be contributed by Yinzhou Ningyituiji. Ningbo eHi Ruiji would be managed by Yinzhou Ningyituiji. As of December 31, 2017, Ningbo Haichao made cash contribution of RMB10,800,000 to Ningbo eHi Ruiji. Ningbo eHi Ruiji did not have business operations in year 2017.

8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

	As of December 31,
	2016			2017
Vehicles		5,926,576,864			7,775,410,903
In-car equipment		37,670,565			52,443,083
Building		55,587,304			55,587,304
Leasehold improvements		32,752,237			44,056,477
Software		12,211,763			14,051,492
Office furniture and equipment		33,463,933			44,782,752
Property and equipment subject to depreciation		6,098,262,666			7,986,332,011
Less: accumulated depreciation		(1,127,934,340	)		(1,358,334,657	)
Subtotal		4,970,328,326			6,627,997,354
Construction in progress		753,240,849			429,047,963
Property and equipment, net		5,723,569,175			7,057,045,317

The Company recorded depreciation expense relating to vehicles and in-car equipment of RMB457,478,811, RMB654,654,545 and RMB742,259,659 for the years ended December 31, 2015, 2016 and 2017, respectively, as costs of revenue in the consolidated statements of comprehensive income .

Depreciation expense of other property and equipment totaled RMB17,242,676, RMB13,363,708 and RMB12,806,130 for the years ended December 31, 2015, 2016 and 2017, respectively, and was recorded in the consolidated statements of comprehensive income as cost of revenue and operating expenses.

As of December 31, 2016 and 2017, vehicles and in-car equipment with a total initial cost of RMB465,073,020 and RMB210,460,414, respectively, were used as collateral in relation to certain long-term borrowing arrangements as disclosed in Note 10.

As of December 31, 2017, vehicles and in-car equipment with a total initial cost of RMB252,985,226 were used as collateral for the unsettled payable balance for the vehicle acquisition due to one of the authorized dealers of SAIC Volkswagen.

F-25

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

9. SHORT-TERM DEBT

	As of December 31,
	2016		2017
Short-term borrowings		620,105,995		928,846,417
Long-term borrowings, current portion (Note 10)		306,113,338		1,728,599,440
Total		926,219,333		2,657,445,857

Short-term borrowings

	As of December 31,
	2016		2017
Notes payable		363,983,800		253,259,200
Short-term bank borrowings guaranteed by the Founder and his spouse		75,000,000		-
Short-term bank borrowings		181,122,195		675,587,217
Total short-term bank borrowings		620,105,995		928,846,417

Notes payable

The Company is required to maintain a certain balance of cash deposit in designated bank accounts for the notes payable outstanding as of December 31, 2017. Such required cash deposit of RMB115,000,000 and US$11,500,000 (equivalent to RMB75,143,300) was classified as restricted cash on the consolidated balance sheet.

Short-term bank borrowings guaranteed by the Founder and his spouse

In February 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB25,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB25,000,000, bearing an interest rate of 4.698% per annum. This short-term borrowing was guaranteed by the Founder of the Company, Ray Ruiping Zhang, and his spouse, Suping Han. This short-term borrowing was fully repaid during the year ended December 31, 2017.

In October 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB50,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB50,000,000, bearing an interest rate of 4.35% per annum. This short-term borrowing was guaranteed by the Founder of the Company, Ray Ruiping Zhang, and his spouse, Suping Han. It was fully repaid during the year ended December 31, 2017.

Short-term bank borrowings

In 2016, the Company entered into four short-term loan agreements with a bank for an aggregate principal amount of RMB100,000,000. As of December 31, 2016, the principal amount outstanding under these agreements were RMB50,000,000, RMB10,000,000, RMB10,000,000 and RMB30,000,000 respectively, bearing same interest rates of 4.35% per annum. These borrowings were fully repaid during the year ended December 31, 2017. During 2017, the Company entered into another five short-term loan facility agreements with the same bank for aggregate principal amounts of RMB150,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB30,000,000, RMB50,000,000, RMB20,000,000, RMB30,000,000 and RMB20,000,000 respectively, bearing interest rates of 4.35%, 4.35%, 4.785%, 4.785% and 4.785% per annum.

In April 2016, the Company entered into a short-term borrowing agreement with a bank for an aggregate principal amount of RMB30,000,000. As of December 31, 2016, the principal amount outstanding under this agreement was RMB30,000,000, bearing an interest rate of 4.1325% per annum. This short-term borrowing was fully repaid during the year ended December 31, 2017. In May 2017, the Company entered into another short-term loan agreement with the same bank for an aggregate principal amount of RMB50,000,000. As of December 31, 2017, the principal amount outstanding under this agreement was RMB50,000,000, bearing an interest rate of 4.35% per annum.

F-26

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

9. SHORT-TERM DEBT (Continued)

Short-term borrowings (Continued)

Short-term bank borrowings (Continued)

In August 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB25,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB25,000,000, bearing an interest rate of 4.35% per annum. This short-term borrowing was fully repaid during the year ended December 31, 2017.

In July 2017, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB240,000,000 was made available to the Company. As of December 31, 2017, the principal amount outstanding under this agreement were RMB45,728,059, bearing an interest rate of 5.0025% per annum.

In November 2017, the Company entered into two short-term borrowing agreements with a bank for an aggregate principal amount of RMB400,000,000. As of December 31, 2017, the principal amount outstanding under these two agreements were RMB200,000,000 and RMB200,000,000 respectively, bearing the same interest rate of 4.1325% per annum. In conjunction with these two loan agreements, the Company needs to deposit US$64,580,000 (equivalent to RMB421,978,636) in the designated bank account during the period of the borrowing, and such deposit was classified as restricted cash as of December 31, 2017.

In 2016, in connection with the purchase of vehicles, the Company entered into short-term borrowing agreements with a third-party financing company for an aggregate principal amount of RMB30,000,000. Principal and interest are payable monthly and these borrowings bear interest at 4.82% per annum. As of December 31, 2016, total principal amounts outstanding under these agreements were RMB26,122,195, which were fully repaid in year ended December 31, 2017. In May 2017, the third-party financing company increased the credit limit to RMB50,000,000. Principal and interest are payable monthly and the borrowings bear interest at 4.82% per annum. As of December 31, 2017, total principal amounts outstanding under these agreements were RMB29,859,158.

The weighted average interest rate on short-term bank borrowings was 3.66% and 4.44% for the years ended December 31, 2016 and December 31, 2017, respectively.

10. LONG-TERM DEBT

	As of December 31,
	2016			2017
Long-term borrowings collateralized by vehicles		292,605,866			213,703,954
Long-term bank borrowings collateralized by receivables		189,427,307			40,995,042
Entrusted long-term borrowing from a related party		100,000,000			100,000,000
Long-term borrowings from banks or financing companies		125,000,000			476,503,365
Syndicated loan		1,010,689,797			-
2018 Senior Notes		1,356,213,357			1,292,029,030
2022 Senior Notes		-			2,562,424,523
Subtotal		3,073,936,327			4,685,655,914
Less: Current portion of long-term debt		(306,113,338	)		(1,728,599,440	)
Total long-term debt		2,767,822,989			2,957,056,474

F-27

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

10. LONG-TERM DEBT (Continued)

Long-term borrowings collateralized by vehicles

In connection with the purchase of vehicles, the Company entered into borrowing agreements from 2013 to 2017 with several third-party financing companies for an aggregate principal amount of RMB744,203,883. Principal and interest are payable monthly. As of December 31, 2016, and 2017, the borrowings bear the interest at a range of 5.20%-9.12% per annum. These borrowings were collateralized by vehicles and in-car equipment with an aggregate initial cost of RMB402,951,830. During 2016 and 2017, the Company early repaid part of these borrowings. Due to the early repayment, as of December 31, 2016 and 2017, total principal amounts outstanding under these agreements were RMB74,605,866, and RMB33,703,954, respectively.

In July 2015, the Company entered into a five-year framework agreement with a bank, which includes various financing products for an aggregate amount of RMB1.5 billion. In January 2016, in connection with purchase of vehicles, the Company drew down an aggregate amount of RMB220 million in bank loans under this framework agreement. The loan bears an initial interest rate of 5.225% per annum and the interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent term. The principal and interest are payable semi-annually over three years from the borrowing commencement date. The borrowing was collateralized by vehicles with an aggregate initial cost of RMB136,290,802. As of December 31, 2016 and 2017, total principal amounts outstanding under these agreements were RMB218,000,000 and RMB180,000,000 respectively, bearing interest at 5.225% per annum.

Long-term bank borrowings collateralized by receivables

In 2014 and 2015, in connection with the purchase of vehicles, a wholly-owned subsidiary of the Company entered into eight long-term loan agreements with a bank. As of December 31, 2016 and 2017, the principal amounts outstanding under these agreements were RMB121,330,685 and RMB10,167,665, respectively. As of December 31, 2016 and 2017, the loans bear interest rates at 5.225% and 4.75% per annum. The interest rates are adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable monthly over three years. This long-term bank borrowing is pledged with receivables due from another wholly-owned subsidiary of the Company.

In September 2014, in connection with the purchase of vehicles, a wholly-owned subsidiary of the Company entered into a long-term loan facility agreement with a bank for which up to RMB155,000,000 was made available to the Company with a floating interest rate. As of December 31, 2016 and 2017, the principal amounts outstanding under this agreement were RMB68,096,622 and RMB30,827,377, respectively with interest rate of 4.9875% per annum. The principal and interest are payable monthly over four to five years. This long-term bank borrowing is pledged with receivables due from another wholly-owned subsidiary of the Company.

Entrusted long-term borrowing from a related party

In April 2015, in connection with the purchase of vehicles, the Company entered into a entrusted long-term loan agreement with related party, Ctrip Travel Information Technology (Shanghai) Co., Ltd. for which a total loan facility up to RMB300,000,000 was made available to the Company. In October 2016, the Company repaid RMB200,000,000 originally due in 2018. Due to the early repayment, the principal amounts outstanding under this agreement were RMB100,000,000 and RMB100,000,000 as of December 31, 2016 and 2017, respectively with interest rate of 6.90% per annum. The remaining principal is payable at the end of the borrowing term, which was three years from the contract date, and interest amounts are payable quarterly over the term of the borrowing arrangement.

Long-term borrowings from banks or financing companies

In December 2016, the Company entered into a long-term loan agreement with a bank which a total loan facility up to RMB300,000,000 was made available to the Company. As of December 31, 2016 and 2017, the principal amounts outstanding under this agreement were RMB125,000,000 and RMB134,670,687, respectively, with interest rate of 4.9875% per annum. The principal and interest are payable quarterly over three years.

F-28

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

10. LONG-TERM DEBT (Continued)

Long-term borrowings from banks or financing companies (Continued)

In May 2017, the Company entered into a long-term loan agreement with a bank for principle amount of RMB100,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB95,000,000 with interest rate of 4.9875% per annum. The interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable quarterly over three years.

In June 2017, the Company entered into a long-term loan agreement with a bank which a total loan facility up to RMB50,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB41,666,667 with an interest rate of 4.9875% per annum. The principal and interest are payable quarterly over three years.

In August 2017, the Company entered into a long-term loan agreement with a bank for principle amount of RMB100,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB90,000,000 with an interest rate of 4.75% per annum. The interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable quarterly over three years.

In September 2017, in connection with the purchase of vehicles, the Company entered into long-term borrowing agreements with a third-party financing company for an aggregate principal amount of RMB123,918,976. Principal and interest are payable monthly over five years and the borrowings bear interest at 6.00% per annum. The principal amounts outstanding under these agreements as of December 31, 2017 were RMB115,166,011.

With respect to all aforementioned arrangements, the undrawn loan facilities available to the Company totaled RMB63,358,721 and RMB202,605,274 as of December 31, 2016 and 2017, respectively.

The Company’s short-term and long-term borrowing arrangements include certain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness or create new mortgages or charges, request the Company to maintain its shareholding structure and make timely reports. Certain borrowing covenants also post restrictions on the use of proceeds and asset sales, and require the Company to provide notice or obtain consent for significant corporate events. The Company’s borrowing agreements contain restrictions on the Company’s ability to transfer cash between the Company’s subsidiaries. As a result of these restrictions, although the Company’s overall liquidity may be sufficient to satisfy the Company’s obligations, the Company may be limited by covenants in some of the Company’s borrowing agreements from transferring cash to other subsidiaries that might require funds. In addition, cross default provisions in the Company’s other indebtedness may be triggered if the Company defaults on any of these debt agreements. The Company did not violate any financial covenants during the years ended December 31, 2016 and 2017. 

US$150 million syndicated loan

In August 2016, the Company signed a three-year syndicated loan agreement (the “Facility Agreement”) with a syndicate of lead arrangers, which provided for a US$110 million facility (the "Initial Facility") and a US$40 million greenshoe facility (the "Greenshoe"). In September 2016, the Company drew down the entire US$150 million including the greenshoe facility under the facility agreement. As of December 31, 2016, the principal amounts outstanding under Facility Agreement were US$150,000,000. The proceeds of the loan are used to (1) refinance existing indebtedness; (2) capital expenditure; (3) to fund interest reserve account; (4) to pay all transaction-related fees; and (5) general corporate purposes. The loan bears a floating interest rate of LIBOR + 3.50% margin per annum and is repayable over a three-year period. The loan was guaranteed by the Company’s offshore subsidiaries. The Company is required to maintain a certain balance of cash deposit in the interest reserve account collateralized in favor of the lenders in connection with these facilities. Such required balance needs to cover the interest payable in 3 month time. As of December 31, 2016, such required cash deposit of US$1,547,240 was classified as restricted cash on the consolidated balance sheet. The loan Agreement contains financial covenants requiring the Company to maintain a certain leverage ratio. The Company was compliant with these covenants as of December 31, 2016. In August 2017, the Company early repaid all outstanding borrowings under the syndication loan originally due in 2019 through directly deducting from the offering proceeds from its issuance of 2022 Senior Note.

F-29

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

10. LONG-TERM DEBT (Continued)

2018 Senior Notes:

On December 8, 2015, the Company issued senior unsecured notes with an aggregate principal amount of RMB1,281,560,000 (US$200,000,000) which will mature on December 8, 2018 (the “Notes”). The issuance price of the Notes was 99.342% of par value. The Notes bear a fixed interest rate of 7.5% per annum, yielding 7.75%, with interest payable semi-annually in arrears. The Notes were issued as unregistered securities to qualified institutional buyers and offshore investors under provisions granting relief from registration under the Securities Act of 1933. The Notes have a trading market on the Stock Exchange of Hong Kong Limited.

The Notes are general obligations of the Company and are (i) subordinated to secured obligations of the Company, (ii) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment; (iii) guaranteed by certain subsidiary guarantors on a senior basis, subject to certain limitations, and (iv) effectively subordinated to all existing and future obligations of the non-guarantor subsidiaries. The Notes have been guaranteed as to payment by the Company’s offshore subsidiaries eHi Hong Kong, L&L Financial Leasing Holding Limited, and Brave Passion Limited.

Redemption

As described below, the Notes may be repurchased prior to the maturity date at the option of the Company. The holders of the Notes may not redeem the Notes prior to the maturity date, except in the case of a change in control.

Contingent redemption option available to holders

If a change of control triggering event, generally defined as a merger or acquisition or other fundamental corporate event, were to occur, the holders have the option to require the Company to purchase all outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the date of repurchase.

Repurchase options available to the Company

The Company may redeem the Notes, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the greater of (1) 1.00% of the principal amount, or (2) the excess, if any, of (i) the present value at such redemption date of the redemption price of such Note on December 8, 2018, plus all required remaining scheduled interest payments due on such Notes (but excluding accrued and unpaid interest to the redemption date) through December 8, 2018, computed using a discount rate equal to a defined US Treasury security rate plus 100 basis points, over (ii) the principal amount of such Notes on such redemption date, and accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more sales of common stock of the Company in an equity offering at a redemption price of 107.50% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.

The Company evaluated the redemption features and concluded that such features did not need to be bifurcated from the Notes and separately accounted for as derivatives.

The Notes contain restrictive covenants including, among others, limitations on liens, consolidation, investment, merger and sale of the Company's assets, maintenance of a fixed charge coverage ratio, and limitations on asset sales or use of proceeds.

The debt issuance costs of RMB34,538,769 and debt discount of RMB8,432,665 associated with the Notes, reflected as a reduction to the face value of the Notes, are being amortized over the three-year contractual life of the Notes under the effective interest method, as the Company concluded that redemption prior to the contractual maturity is not probable. The effective interest rate of the Notes is 8.99%, including the interest charged on the Notes as well as amortization of the debt issuance costs and debt discount. The Senior Notes proceeds were received by the Company’s offshore subsidiary eHi Hong Kong.

F-30

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

10. LONG-TERM DEBT (Continued)

2022 Senior Notes:

On August 14, 2017, the Company issued senior unsecured notes with an aggregate principal amount of RMB2,667,560,000 (US$400,000,000) which will mature on August 14, 2022 (the “2022 Senior Notes”) and early repaid all outstanding borrowings under the syndicated loan concurrently by directly deducting from the issuance proceeds. The issuance price of the 2022 Senior Notes was 100.00% of par value. The 2022 Senior Notes bear a fixed interest rate of 5.875% per annum, yielding 5.875%, with interest payable semi-annually in arrears. The 2022 Senior Notes were issued as unregistered securities to qualified institutional buyers and offshore investors under provisions granting relief from registration under the Securities Act of 1933. The 2022 Senior Notes have a trading market on the Singapore Exchange Securities Trading Limited.

The 2022 Senior Notes are general obligations of the Company and are (i) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment; (ii) guaranteed by certain subsidiary guarantors on a senior basis, subject to certain limitations, (iii) subordinated to secured obligations of the Company, and (iv) effectively subordinated to all existing and future obligations of the non-guarantor subsidiaries. The 2022 Senior Notes have been guaranteed as to payment by the Company’s offshore subsidiaries eHi Hong Kong, L&L Financial Leasing Holding Limited, and Brave Passion Limited.

Redemption

As described below, the 2022 Senior Notes may be repurchased prior to the maturity date at the option of the Company. The holders of the Notes may not redeem the 2022 Senior Notes prior to the maturity date, except in the case of a change in control.

Contingent redemption option available to holders

If a change of control triggering event, generally defined as a merger or acquisition or other fundamental corporate event, were to occur, the holders have the option to require the Company to purchase all outstanding 2022 Senior Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the date of repurchase.

Repurchase options available to the Company

The Company may redeem the 2022 Senior Notes on or after August 14, 2020, in whole or in part, at a redemption price equal to 102.938% and 101.469% of the principal amount during the 12-month period commencing on August 14, 2020 and August 14, 2021, respectively, plus accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem the 2022 Senior Notes prior to August 14, 2022, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount of the 2022 Senior Notes redeemed plus the greater of (1) 1.00% of the principal amount, or (2) the excess, if any, of (i) the present value at such redemption date of the redemption price of such 2022 Senior Note on August 14, 2020, plus all required remaining scheduled interest payments due on such 2022 Senior Notes (but excluding accrued and unpaid interest to the redemption date) through August 14, 2020, computed using a discount rate equal to a defined US Treasury security rate plus 100 basis points, over (ii) the principal amount of such 2022 Senior Notes on such redemption date, and accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem up to 35% of the aggregate principal amount of the 2022 Senior Notes with the net cash proceeds of one or more sales of common stock of the Company in an equity offering at a redemption price of 105.875% of the principal amount of the 2022 Senior Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the 2022 Senior Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.

The Company evaluated the redemption features and concluded that such features did not need to be bifurcated from the 2022 Senior Notes and separately accounted for as derivatives.

F-31

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

10. LONG-TERM DEBT (Continued)

2022 Senior Notes: (Continued)

The 2022 Senior Notes contain restrictive covenants including, among others, limitations on liens, consolidation, investment, merger and sale of the Company's assets, maintenance of a fixed charge coverage ratio, and limitations on asset sales or use of proceeds.

The debt issuance costs of RMB55,935,648 associated with the 2022 Senior Notes, reflected as a reduction to the face value of the 2022 Senior Notes, are being amortized over the five-year contractual life of the2022 Senior Notes under the effective interest method, as the Company concluded that redemption prior to the contractual maturity is not probable. The effective interest rate of the 2022 Senior Notes is 6.46%, including the interest charged on the 2022 Senior Notes as well as amortization of the debt issuance costs. The 2022 Senior Notes proceeds were received by the Company’s offshore subsidiary eHi Hong Kong.

Future principal maturities of long-term debt as of December 31, 2017 are as follows:

Years Ended December 31,	Amount (RMB)
2018		1,743,425,515
2019		238,098,275
2020		156,518,571
2022		2,613,680,000
Total		4,751,722,361

11. ACCOUNTS PAYABLE

Accounts payable consist of the following:

	As of December 31,
	2016		2017
Payables for purchase of property and equipment		163,190,564		576,569,163
Others		16,687,283		41,300,848
Total		179,877,847		617,870,011

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	As of December 31,
	2016		2017
Advance from customers		68,397,492		105,716,286
Customer deposits		55,991,264		78,975,251
Accrued employee payroll and welfare		57,367,892		72,103,194
Interest accrued		8,530,203		63,982,199
Other tax payable		15,471,552		25,092,518
Provision for customer loyalty program		7,185,774		9,048,815
Accrued professional service fees		4,316,185		7,761,195
Accrued advertising and promotion expense		17,306,922		5,785,785
Payable for property related purchase		11,354,874		-
Others		22,569,229		65,421,499
Total		268,491,387		433,886,742

F-32

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

13. TAXATION

(a) PRC VAT

The Company is subject to 17% VAT for revenues from car rental services, 11% VAT for the revenues from designated driving services and 6% VAT for qualified management services, respectively. Furthermore, a 3% simplified VAT rate is applied for the rental services provided by an entity or branch who are small-scale VAT payers.

The qualified VAT input credits generated from purchases of vehicles and other property and equipment can be credited against VAT payable relating to taxable revenues.

(b) Income Taxes

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains in Cayman Islands. Additionally, upon payments of dividends to shareholders, no Cayman Islands withholding tax will be imposed.

Hong Kong

Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% since January 1, 2010. Operations in Hong Kong have incurred net accumulated operating losses for income tax purposes and no income tax provisions are recorded for the periods presented.

PRC

On March 16, 2007, the National People’s Congress of the PRC enacted an Enterprise Income Tax Law (“EIT Law”), under which Foreign Investment Enterprises (“FlEs”) and domestic companies would be subject to EIT at a uniform statutory rate of 25%, unless CIT preferential treatment is eligible. The EIT law became effective on January 1, 2008.

The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its entities registered outside of the PRC should be considered as resident enterprises for PRC tax purposes.

The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a FIE to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where the Company is incorporated, does not have such tax treaty with China. According to the arrangement between the mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006 (the “China-HK DTA”), dividends paid by an FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5%, provided the HK immediate holding company owns directly at least 25% of the shares of the FIE and is qualified for beneficial owner status according to the China tax rules and China-HK DTA .

F-33

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

13. TAXATION (Continued)

(b) Income Taxes (Continued)

PRC (Continued)

All FIEs are subject to the withholding tax from January 1, 2008. Under U.S. GAAP, undistributed earnings are presumed to be transferred to the parent company and are subject to the withholding taxes. The presumption may be overcome if the Company has sufficient evidence to demonstrate that the undistributed dividends will be re-invested and the remittance of the dividends will be postponed indefinitely. The Company did not record any dividend withholding taxes, and the Company has not provided any other taxes in relation to outside basis differences, as it has no retained earnings for any of the periods presented.

In accordance with PRC tax regulations, the Company provided RMB83,103,026 (US$13,587,500) of income tax expense for the gain realized from the disposal of a cost method investment in 2015. The gain (Note 7) arose from the indirect sale of an investment in Xiaoju Kuaizhi Inc., a PRC tax resident enterprise when Eagle Legend Global Limited transferred equity of its wholly-owned subsidiary, Elite Plus. According to Circular 7 issued by the State Administration of Taxation of the PRC on February 3, 2015, if a non-PRC resident enterprise (such as the Company) indirectly transfers PRC taxable properties (including equity investment in a PRC tax resident) without a reasonable business purpose, by disposing of an equity interest of an overseas holding company, such indirect transfer of PRC taxable properties should be re-characterized as direct transfer of PRC taxable properties. And, therefore, the gains derived from such indirect transfer may be subject to the PRC withholding tax at a rate of up to 10%. As Circular 7 was promulgated recently, it is not clear how it will be implemented; however, the Company’s disposal transaction appears to be a taxable event under Circular 7. In light of this uncertainty, the Company accrued for withholding tax at the statutory rate of 10% on the realized gain. In 2016, the Company provided remaining income taxes of RMB 1,881,456 (US$ 270,986) as a true up for the gain realized from the disposal of the cost method according to PRC tax regulation.

Pre-tax income

The following table sets forth the components of pre-tax income:

	For the years ended December 31,
	2015		2016			2017
Pre-tax income from domestic (PRC) entities		5,669,944		248,923,620			261,743,051
Pre-tax income (loss) from foreign (non-PRC) entities		778,156,851		(209,177,533	)		(92,151,762	)
Total pre-tax income		783,826,795		39,746,087			169,591,289

During the year ended December 31, 2015, the Company’s pre-tax income attributable to non-PRC entities mainly resulted from the gain on sale of its investment in Xiaoju Kuaizhi Inc., as discussed in the foregoing paragraph. During the year ended December 31, 2016 and 2017, the Company’s pre-tax loss from non-PRC entities mainly resulted from the interest expenses related to senior notes issued.

The current and deferred portions of income tax expense included in the consolidated statements of operations and comprehensive income during the years ended December 31, 2015, 2016 and 2017 are as follows:

F-34

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

13. TAXATION (Continued)

(b) Income Taxes (Continued)

	For the years ended December 31,
	2015		2016			2017
Current income tax expense
Domestic (PRC) entities		1,408,703		3,049,504			1,152,383
Foreign (non-PRC) entities		-		-			-
Total		1,408,703		3,049,504			1,152,383
Deferred income tax expense
Domestic (PRC) entities		-		(2,489,648	)		29,066,413
Foreign (non-PRC) entities		-		-			-
Total		-		(2,489,648	)		29,066,413
Income tax expense (excluding withholding tax)
Domestic (PRC) entities		1,408,703		559,855			30,218,796
Withholding tax
Foreign (non-PRC) entities		86,079,287		6,051,116			17,156,250
Total income tax expense		87,487,990		6,610,971			47,375,046

Reconciliation of the differences between statutory tax rate and the effective tax rate

The following table sets forth a reconciliation between the statutory PRC EIT rate of 25% and the effective tax rate:

	For the Years Ended December 31,
	2015			2016			2017
Statutory income tax rate		25.0	%		25.0	%		25.0	%
Different tax rates in other jurisdictions		(26.0	)%		90.8	%		13.3	%
Withholding tax		10.6	%		15.2	%		10.1	%
Permanent differences		0.1	%		(17.1	)%		0.9	%
Change in valuation allowance		1.1	%		(97.5	)%		(21.2	)%
Tax holiday		—			0.2	%		(0.2	)%
Other		0.4	%		—			—
Effective tax rate		11.2	%		16.6	%		27.9	%

For the year ended December 31, 2016, the Group’s effective tax rates increase was primarily attributable to the impact of the interest expenses of the syndicated loan, 2018 Senior Notes and foreign exchange loss recorded on certain subsidiaries with preferential tax rates, which led to the increase in effective tax rate of 116.8%. For the year ended December 31, 2017, the effective tax rate increase was mainly due to less utilization of net operating loss carry forwards, for which valuation allowance was provided in prior year, leading to the increase in effective tax rate of 76.3%.

F-35

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

13. TAXATION (Continued)

(b) Income Taxes (Continued)

Deferred tax assets

The following table sets forth the significant components of the deferred tax assets:

	As of December 31,
	2016			2017*
Current*
Deferred tax assets:
Accrued payroll and other expenses		598,246			-
Allowance for doubtful accounts		2,289,830			-
Deferred government grant income		2,151,411			-
Others		11,950			-
Less: valuation allowance		(3,211,464	)		-
Total current deferred tax assets, net		1,839,973			-
Non-current
Deferred tax assets:
Accrued payroll and other expenses		-			38,886,321
Allowance for doubtful accounts		-			3,611,931
Net operating loss carry forwards		55,724,899			40,279,987
Less: valuation allowance		(35,963,269	)		(3,143,454	)
Total non-current deferred tax assets, net		19,761,630			79,634,785
Deferred tax liabilities,
Temporary difference on property and equipment		19,111,955			90,793,841
Deferred revenue		-			15,417,709
Recognition of intangible assets arisen from business combination		1,061,542			1,061,542
Total non-current deferred tax liability		20,173,497			107,273,092

Classification in the consolidated balance sheets:

	As of December 31,
	2016		2017*
Current deferred tax assets, net*		1,839,973		-
Non-current deferred tax assets, net		649,675		-
Non-current deferred tax liability, net		1,061,542		27,638,307

* The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

Movement of valuation allowance

	2015			2016			2017
Balance at beginning of the year		89,697,127			89,738,490			39,174,733
Additions in current year		25,374,784			3,128,771			456,508
Reversals in current year		(25,210,766	)		(53,692,038	)		(36,482,572	)
Expirations in current year		(122,655	)		(490	)		(5,215	)
Balance at the end of the year		89,738,490			39,174,733			3,143,454

F-36

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

13. TAXATION (Continued)

(b) Income Taxes (Continued)

As of December 31, 2015 and 2016, the Company had net operating loss carry forwards of approximately RMB300,376,325 and RMB341,922,125, respectively, of which substantially all arose from its PRC subsidiaries. As of December 31, 2017, the Company had net operating loss carry forwards of approximately RMB167,597,369, which mainly arose from its PRC subsidiaries and to a less extent from its HK subsidiaries. The carry forward period for net operating losses under the EIT law is five years for the PRC subsidiaries. The net operating loss carry forwards will expire in varying amounts between 2018 and 2022 if not utilized. Other than the expiration, there are no other limitations or restrictions upon the Company’s ability to use the operating loss carry forwards.

A valuation allowance is provided against deferred tax assets when the Company determines that it is more likely than not that the deferred tax assets will not be utilized in the future or before their expiration. Establishment and removal of a valuation allowance requires management to consider all positive and negative evidence and to make a judgmental decision regarding the amount of valuation allowance required as of a reporting date. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. In the evaluations, management considers all available evidence, both positive and negative, including but not limited to the following:

· Positive results from continuing operations before income taxes;

· Recent history of generating taxable income which has allowed for the utilization of tax credit carryforwards;

· The three year comprehensive cumulative profitability position;

For the year ended December 31, 2015, the reversal of valuation allowance was all related to the utilization of net operating loss carry forwards for which full valuation allowances was provided in prior years.

For the year ended December 31, 2016, certain valuation allowance were reversed in 2016 when those entities generated sufficient taxable income and are forecasted to continue to be profitable, which management determined provided sufficient positive evidence as of December 31, 2016 to utilize the deferred tax assets.

As of December 31, 2017, valuation allowance of RMB3,143,454 were provided on certain deferred tax assets to the extent that management believed it was more likely than not that such deferred tax assets would not be realized in the foreseeable future, of which substantially all arose from its HK subsidiaries. Valuation allowance related to the Company’s PRC subsidiaries were reversed in 2017 when those entities generated sufficient taxable income and are forecasted to continue to be profitable, which management determined provided sufficient positive evidence as of December 31, 2017 to utilize the deferred tax assets.

If events occur in the future that prevent these entities from realizing some or all of its deferred tax assets, an adjustment to the valuation allowances will be recognized when such events occur. Management will continue to evaluate the ability to realize the Company’s net deferred tax assets and the remaining valuation allowance.

Uncertain tax positions

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2016 and 2017, the Company did not have any significant uncertain tax positions leading to liabilities for unrecognized tax benefits. Interest and penalties related to uncertain tax positions, if any, are included in provision for income taxes.

F-37

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

14. COMMON SHARES

As of December 31, 2017, the Company had an aggregate of 138,890,287 common shares issued and outstanding. These outstanding shares consist of (1) 73,251,730 Class A ordinary shares and (2) 65,638,557 Class B common shares. The terms of Class A ordinary shares and Class B ordinary shares are similar, except that holders of Class A common shares are entitled to one vote per share, while holders of Class B common shares are entitled to ten votes per share. In addition, certain matters including those related to the change of control of the Company require an additional approval by the holders of a majority of Class A common shares voting as a separate class. Each Class B common share is convertible into one Class A common share at any time by the holder thereof. Class A common shares are not convertible into Class B common shares under any circumstances. Class B common shares will be automatically converted into the same number of Class A common shares under certain circumstances, including any transfer of Class B common shares by a holder thereof to any person or entity which is not an affiliate of such holder.

15. FAIR VALUE MEASUREMENTS

The Company’s recurring fair value measurements for financial assets and liabilities are limited to cash and cash equivalents as of December 31, 2016 and 2017. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in an active market.

The Company did not have any Level 2 or Level 3 categorized assets or liabilities as of December 31, 2016 and 2017, respectively.

16. OTHER INCOME, NET

Other income, net consists of the following:

	For the Years Ended December 31,
	2015		2016		2017
American Depositary Receipt reimbursement		9,917,716		-		-
Tax refund		-		979,794		518,171
Others		287,559		464,335		1,438,848
Total		10,205,275		1,444,129		1,957,019

17. EARLY EXTINGUISHMENT OF DEBT COSTS

On August 15, 2017, the Company early repaid the US$150 million syndicated bank facility entered into in August 2016 by a portion of the net proceeds from 2022 Senior Notes (Note 10), and hence expensed off the unamortized issuance costs of US$3.1 million (equivalent to RMB19,976,776) incurred for the syndicated bank facility as an early extinguishment cost in the consolidated statement of comprehensive income for the year ended December 31, 2017.

F-38

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

18. SHARE-BASED COMPENSATION

2010 Performance Incentive Plan

On April 1, 2010, the Company adopted the 2010 Performance Incentive Plan (“2010 Plan”) under which the Company reserved 2,627,730 options to purchase common shares for the issuance of incentive awards to employees. On December 21, 2010, the Company increased the maximum number of options available to 4,300,730. All of the Company’s outstanding options are granted to employees and are equity-classified. These options vest over three to five years of an employee’s continuous service starting from the grant date and have a contractual term of five years.

The Company granted 300,000 options on April 1, 2013 under the 2010 Plan with an exercise price of US$3.11. On August 26, 2014, the Company amended and restated the 2010 Plan whereby the maximum aggregate number of shares issuable under the 2010 Plan increased from 4,300,730 shares to 6,698,470 shares. On the same day, the Company granted 450,000 restricted shares to employees, of which one-quarter vested immediately, and the remaining vest over a period of three years from the date of grant. Additionally, the Company also granted 1,300,000 options to employees with an exercise price of US$7.00, which vest over a period of four years from the date of the grant. No options and restricted shares were granted under the 2010 Plan in the years ended December 31, 2015, 2016 and 2017.

On August 28, 2015, the directors of the Company’s Compensation Committee approved an option modification to extend the contractual term of all outstanding share options granted to employees and a director (excluding the Company’s Founder) under the 2010 Plan on August 31, 2010 by one year. The modified options, totally amounting to 1,588,648 options, are all vested. Other terms of the option grants remain unchanged. The modification resulted in total incremental compensation cost of RMB76,552, all of which was recorded in the consolidated statements of comprehensive income for the year ended December 31, 2015.

On December 26, 2015, the directors of the Company’s Compensation Committee approved an option modification to extend the contractual term of all outstanding share options granted to the Founder, under the 2010 Plan on December 31, 2010 by one year. The modified options, totally amounting to 1,673,000 options, are all vested. Other terms of the option grants remain unchanged. On November 14, 2016 and December 27, 2017, these options were further extended another one year under the approval of the directors of the Company’s Compensation Committee. Other terms of the option grants remain unchanged. The modification resulted in total incremental compensation cost of RMB831,958, RMB1,502,987 and RMB661,926, all of which was recorded in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively.

The following table summarizes the Company’s option activities under the 2010 Plan for the years ended December 31, 2015, 2016 and 2017:

	Number of Options			Weighted Average Exercise Price (US$)		Weighted Average Contractual Term		Aggregate Intrinsic Value (US$)
Options outstanding at December 31, 2014		5,136,900			3.76		1.95		5,425,522
Exercised		(138,700	)		2.20		—		—
Cancelled and forfeited		(98,200	)		6.86		—		—
Options outstanding at December 31, 2015		4,900,000			3.74		1.59		13,356,070
Exercised		(1,726,874	)		2.20		—		—
Cancelled and forfeited		(17,626	)		6.97		—		—
Options outstanding at December 31, 2016		3,155,500			4.57		1.64		2,801,660
Cancelled and forfeited		(51,500	)		7.00		—		—
Options outstanding at December 31, 2017		3,104,000			4.53		1.16		5,277,775
Vested and expected to vest at December 31, 2017		3,103,965			4.53		1.16		5,277,775
Exercisable at December 31, 2017		2,775,000			4.30		1.12		5,144,025

F-39

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

18. SHARE-BASED COMPENSATION (Continued)

2010 Performance Incentive Plan (Continued)

Share options

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market value of the underlying stock at each balance sheet date. The total intrinsic value of options exercised at exercise date during the years ended December 31, 2015 and 2016 were RMB2,577,855 and RMB38,265,778, respectively. Nil options was exercised during the year ended December 31, 2017.

Share-based compensation expense for the share options is recorded on a straight-line basis over the requisite service period, which is generally three to five years from the date of grant. The Company recognized share-based compensation expenses of RMB7,666,182, RMB8,489,631 and RMB7,638,082 for share options granted under the 2010 Plan in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively. The expenses of 2015, 2016 and 2017 include the impacts of the aforementioned option term modifications in August and December 2015, November 2016 and December 2017.

As of December 31, 2017, there was RMB4,039,457 in total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested share options, which is expected to be recognized over a weighted-average period of 0.64 years. The unrecognized compensation expense may be adjusted for future changes in estimated forfeitures.

Restricted shares

A summary of the restricted shares activities under the 2010 Plan for the years ended December 31, 2015, 2016 and 2017 is presented below:

	Number of Restricted Shares			Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2015		337,500			6.99
Vested		(112,500	)		6.99
Unvested at December 31, 2015		225,000			6.99
Vested		(112,500	)		6.99
Unvested at December 31, 2016		112,500			6.99
Expected to vest at December 31, 2016		112,500			6.99
Vested		(112,500	)		6.99
Unvested at December 31, 2017		-			-

The total fair value of restricted shares vested at vesting date during the years ended December 31, 2015, 2016 and 2017 was US$ 537,750, US$590,625 and US$507,938, respectively.

Share-based compensation expense for restricted shares is recorded on a straight-line basis over the requisite service period, which is three years from the date of the grant. The Company recognized share-based compensation expense for restricted shares of RMB4,894,683, RMB5,222,062 and RMB3,504,963 in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively.

F-40

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

18. SHARE-BASED COMPENSATION (Continued)

2014 Performance Incentive Plan

In October 2014, the Company adopted a 2014 Performance Incentive Plan (“2014 Plan”), which became effective immediately after the completion of the Company’s initial public offering in November 2014. Under the 2014 Plan, the Company is authorized to initially reserve a maximum of 4,000,000 common shares, provided that the shares reserved shall automatically increase on January 1 of each year during the term of the 2014 Plan, commencing on January 1, 2015, by an amount equal to the lesser of (i) one percent (1%) of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 common shares or (iii) such number of common shares as may be determined by the Company’s board of directors.

On May 15, 2015, the Company granted 525,000 share options to the Company's employees and directors at an exercise price of US $5.35 per share with contractual term of 10 years from the grant date and a graded vesting period of four years. 25% of the granted options vest on each of the first, second, third and fourth anniversaries of the grant date. There were no option grants in 2016 and 2017.

On March 23, 2017, the Company granted 6,000 restricted share units to the Company’s employee, 50% of which vested immediately, with the remaining 50% vested over the next two years (25% vest on each of the first and second anniversaries of the grant date). There were no restricted share units in 2015 and 2016.

Share options

The following table summarizes the Company’s option activities under the 2014 Plan for the years ended December 31, 2015, 2016 and 2017:

	Number of Options			Weighted Average Exercise Price (US$)		Weighted  Average Remaining Contractual  Term		Aggregate Intrinsic Value (US$)		Weighted Average Grant-date Fair value (US$)
Options outstanding at January 1, 2015		—			—		—		—		—
Granted		525,000			5.35		—		—		2.86
Cancelled and forfeited		(16,000	)		5.35		—		—		—
Options outstanding at December 31, 2015		509,000			5.35		9.38		481,005		—
Cancelled and forfeited		(8,000	)		5.35		—		—		—
Options outstanding at December 31, 2016		501,000			5.35		8.38		—		—
Exercised		(27,000	)		5.35		—		—		—
Cancelled and forfeited		(71,000	)		5.35		—		—		—
Options outstanding at December 31, 2017		403,000			5.35		7.38		175,305		—
Vested and expected to vest at December 31, 2017		396,226			5.35		7.38		172,358		—
Exercisable at December 31, 2017		201,500			5.35		7.38		87,653		—

F-41

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

18. SHARE-BASED COMPENSATION (Continued)

2014 Performance Incentive Plan (Continued)

Share options (Continued)

The grant date fair value of each option is calculated using a binomial option pricing model by the Company. The fair value of each option grant under the 2014 Plan was estimated on the date of grant with the following assumptions:

	For the Year Ended December 31, 2015
Risk-free rate		2.14	%
Option term		10 years
Volatility		55	%
Dividend yield		0.00	%
Exercise multiple		2/2.5
Expected forfeiture rate (post-vesting)		0%/10	%

The Company estimated the expected volatility based on the weighted-average annualized standard deviation of the daily return embedded in historical share prices, considering share prices of the Company and comparable companies. Risk free interest rate was estimated based on the yield to maturity of US treasury bonds denominated in US$. The exercise multiple is estimated as the ratio of fair value of underlying shares over the exercise price as at the time the option is exercised, based on a consideration of research study regarding exercise pattern based on empirical studies on the actual exercise behavior of employees. The Company has never declared or paid any cash dividends on its capital stock, and the Company does not anticipate any dividend payments on its common shares in the foreseeable future. Estimated forfeiture rates are determined based on historical employee turnover rates. Expected forfeiture rates of 0% and 10% were applied for grantees at executive level and non-executive level respectively, and represents the Company’s estimate of the grantee’s forfeiture patterns.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market value of the underlying stock at each balance sheet date. The total intrinsic value of options exercised at exercise date during the years ended December 31, 2017 was RMB52,162.

Share-based compensation expense for options is recorded on a straight-line basis over the requisite service period, which is four years from the date of grant. The Company recognized share-based compensation expense of RMB1,422,381, RMB2,329,254 and RMB2,304,913 in the consolidated statement of comprehensive income for the years ended December 31, 2015, 2016 and 2017.

As of December 31, 2017, there was RMB2,333,324 in total unrecognized compensation expense related to share options, which is expected to be recognized over a weighted average period of 1.37 years.

Restricted Share Units

A summary of the restricted share units activities under the 2014 Plan for the year ended December 31, 2017 is presented below:

Unvested Restricted Share Units	Number of Restricted Share Units			Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2017		-			-
Granted		6,000			5.11
Vested		(3,000	)		5.11
Unvested at December 31, 2017		3,000			5.11
Expected to vest at December 31, 2017		2,502			5.11

F-42

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

18. SHARE-BASED COMPENSATION (Continued)

The total fair value of restricted share units vested at vesting date during the year ended December 31, 2017 was US$15,240.

Share-based compensation expense for restricted share units vested immediately is fully recorded on grant day. The remaining share-based compensation expense is recorded on a straight-line basis over the requisite service period, which is two years from the date of the grant. The Company recognized share-based compensation expense for restricted shares of RMB140,885 granted under the 2014 Plan in the consolidated statements of comprehensive income for the year ended December 31,2017.

As of December 31, 2017, there was RMB49,307 in total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested restricted share units, which is expected to be recognized over a weighted-average period of 1.23 years. The unrecognized compensation expense may be adjusted for future changes in estimated forfeitures.

19. INCOME PER SHARE

Basic and diluted net income per share for each of the years presented are calculated as follows:

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Numerator:
Net income :		696,338,805		33,135,116		122,216,243
Numerator for basic and diluted net income per share		696,338,805		33,135,116		122,216,243
Denominator:
Denominator for basic calculation-weighted average number of common shares outstanding		126,758,363		137,621,702		138,794,624
Dilutive effect of share options		1,593,216		897,122		758,702
Dilutive effect of restricted shares and restricted share units		52,298		33,207		40,591
Denominator for diluted income per share calculation		128,403,877		138,552,031		139,593,917
Basic net income per share attributable to the Company’s common shareholders		5.49		0.24		0.88
Diluted net income per share attributable to the Company’s common shareholders		5.42		0.24		0.88
Basic net income per ADS*		10.99		0.48		1.76
Diluted net income per ADS*		10.85		0.48		1.75

* Each ADS represents two Class A common shares.

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net earnings per share is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period. The effects of outstanding share options, restricted shares and restricted share units of 2,828,588, 2,753,664 and 1,584,581 shares on a weighted average basis were anti-dilutive and excluded from the computation of diluted net income per share for the years ended December 31, 2015, 2016 and 2017, respectively.

The Company does not distinguish between Class A and Class B common shares for purposes of presenting basic or diluted earnings per share as each share class has identical privileges with respect to undistributed and distributed earnings.

F-43

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

20. COMMITMENTS AND CONTINGENCIES

(a) Operating leases

The Company and its subsidiaries have entered into non-cancelable operating leases covering various facilities. Future minimum lease payments under these non-cancellable leases as of December 31, 2017 are as follows:

Year ending December 31,	(RMB)
2018		51,630,688
2019		27,830,356
2020		9,609,139
2021		6,110,999
2022		3,012,326
Thereafter		852,333
		99,045,841

The Company recorded rental expense of RMB50,738,573, RMB57,538,983 and RMB65,405,038 in the consolidated statements of comprehensive income during the years ended December 31, 2015, 2016 and 2017, respectively.

(b) Purchase commitments

In addition to vehicle purchase deposits reflected in the consolidated balance sheet, the Company’s purchase commitments relate to purchase of vehicles and marketing resources. Total purchase commitments contracted but not yet reflected in the consolidated financial statements amounted to RMB560,047,600 as of December 31, 2017, of which RMB550,509,970 will be fulfilled in remainder of 2018, and RMB9,537,630 will be fulfilled in 2019.

Other than those disclosed above, the Company did not have other significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2017.

(c) Contingencies

On May 8, 2017, a company named Shanghai Zhongqi Anhua Car Services Co., Ltd., (“Zhongqi Anhua”), filed a tort liability suit in People’s Court of Jingan District, Shanghai (the “District Court”), against eHi Rental, and involved Shanghai Municipal Transportation Commission (“SMTC), as a third party to the suit. Zhongqi Anhua claimed in their complaint that eHi Rental shall (i) admit the tort (ii) stop using the car rental operation certificate No.3516 issued by SMTC (the “Car Rental Certificate”), alleging the Car Rental Certificate and relevant vehicle operation certificates are possessed by Zhongqi Anhua, (iii) compensate the damages suffered by Zhongqi Anhua in connection with the alleged infringement totaling RMB30 million, and (iv) apologize to Zhongqi Anhua. On July 3, 2017, the District Court rendered a judgment rejecting all the claims raised by Zhongqi Anhua for absence of proof of the claims. On July 19, 2017, Zhongqi Anhua submitted a petition for appeal to Shanghai No.2 Intermediate People’s Court (the “Appellate Court”), and the Appellate Court ruled on September 1, 2017 that the judgment rendered by the District Court be remanded for re-trial as certain facts should be further clarified by the District Court.

As of the date of these consolidated financial statements are issued, the above lawsuit is still pending for judgement and the Company is actively defending the case. Considering the facts that eHi Rental obtained the Car Rental Certificate through regulated procedures set forth by SMTC, which consists of no infringement behavior by eHi Rental, and that eHi Rental has been compliant with all relevant SMTC annual inspection/certificate renewal requirement, the Company believes such claims are without merit and the Company has been advised by Shanghai Hengye Law Firm (“Hengye”), being eHi Rental’s PRC counsel to this suit, that the loss from an unfavorable court decision is reasonably possible but not probable.

F-44

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

21. RELATED PARTY TRANSACTIONS

Crawford/Enterprise

In March 2012, the Company entered into a global affiliation agreement with Enterprise Holdings (China) LLC (“Enterprise China”). Enterprise China is an affiliate of Enterprise Holdings, Inc, a subsidiary of Crawford Group, Inc. (“Crawford”). Crawford was a holder of the Company’s Class A, Series D and Series E Shares and is currently a holder of the Company’s Class B common shares. Pursuant to the global affiliation agreement, the Company and Enterprise China are to direct certain rental referrals to each other via their respective websites, and for each referral received, the Company is liable for a contractually specified amount of referral fees payable to Enterprise China, and vice versa. The Company records referral fees payable to Enterprise China as sales and marketing expenses, and referral fees received as other operating income. Transactions incurred under this arrangement were immaterial for the periods presented.

Under the Additional Series E Preferred Share purchase agreement dated April 16, 2014, Crawford Group Inc. purchased 1,764,055 Series E Preferred Shares for US$9,702,299.

On October 31, 2014, Crawford Group, Inc. (“Crawford”), a parent company of Enterprise Holdings, Inc, exercised all of the 1,500,000 warrants to purchase 1,500,000 Class B common shares at a per share purchase price of US$5.50 for a total consideration of US$8,249,993 (RMB50,705,282).

As of December 31, 2017, Crawford holds 18,694,003 Class B common shares.

Ctrip

Under the Additional Series E Preferred Share purchase agreement dated April 16, 2014, Ctrip Investment Holding Ltd. (‘‘Ctrip’’) purchased 2,368,193 Series E Preferred Shares for US$13,025,062. As part of the Additional Series E share purchase agreement, upon the Company’s written request in connection with a proposed initial public offering, Ctrip shall be obligated to subscribe for the Company’s common shares (i) in an exempt private placement or (ii) in an exempt Regulation S offering. Each of Ctrip and the Company agreed that the purchase price of the common shares in connection with such investments shall be the initial public offering price, and such subscription shall be consummated concurrently with the closing of the initial public offering. On October 14, 2014, the Company entered into a subscription agreement with Ctrip, pursuant to which Ctrip purchased from the Company 1,666,666 Class A common shares at US$6.00 per Class A common share in a private placement concurrent with the closing of the Company’s initial public offering.

In December 2014, the Company entered into a service agreement (“Agreement") with Ctrip for car rental and car services referral. Pursuant to the Agreement, the Company pays a fixed percentage of car rental or car services rates from successful car referrals as commissions to Ctrip (resulting in related party payable balances), and Ctrip collects car rental and car services fees from individual customers on behalf of the Company (resulting in related party receivable balances).

In order to further promote the Company's car services to individual customers, starting from September 1, 2015, the Company entered into a supplementary agreement with Ctrip. Pursuant to this supplementary agreement, the Company needs to pay a fixed minimum commission fee of referrals in addition to the fixed commission rates for car rental and car service referral mentioned in the Agreement.

In November 2016, an amendment was entered that the fixed minimum commission fee would no longer charged by Ctrip since then. Transactions incurred under these service agreements were RMB16,190,063, RMB29,399,234 and RMB16,263,674 for the years ended December 31, 2015, 2016 and December 31, 2017, respectively.

In the end of April 2015, Ctrip extended an entrusted bank loan of RMB300,000,000 to the Company which has been drawn down in full (Note 10). The loan has a term of three years with an interest rate of 6.9% per annum and some of the Company's PRC subsidiaries provided guarantees. In October 2016, the Company repaid RMB200,000,000 originally due in 2018. Interests incurred under this loan agreement were RMB14,202,500, RMB18,534,167 and RMB6,995,833 for the year ended December 31, 2015, 2016, 2017.

Private Placement

On May 22, 2015, the Company entered into definitive securities purchase agreements with Tiger Fund and SRS Funds (the “Buyers”’) pursuant to which the Company agreed to issue, and issued, a total of 22,337,924 of its Class A common shares to the Buyers at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS), resulting in gross proceeds of approximately US$134 million from the private placement transaction. Under the terms of the securities purchase agreements, the Class A common shares were issued in two tranches: (a) a first tranche of 11,437,924 Class A common shares, which were issued on May 22, 2015, and (b) a second tranche of 10,900,000 Class A common shares, which were issued on June 30, 2015. In addition, Ctrip and Crawford also entered into definitive agreements with the Buyers for the sale of 2,666,666 Class A common shares (including certain shares represented by ADSs) to the Buyers at a price per Class A common share of US$6.00 (equivalent to US$12.00 per ADS).

As of December 31, 2016 and 2017, significant balances with related parties were as follows:

	As of December 31,
	2016		2017
Due from a related party, current:
Receivables due from Ctrip		1,755,889		83,323,718
Due to a related party, current:
Payables due to Ctrip		16,083,610		210,833
Due to a related party, current:
Borrowing due to Ctrip		100,000,000		100,000,000

F-45

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

22. SUBSEQUENT EVENTS

On April 6, 2018, the Company has entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Teamsport Parent Limited ("Parent") and its merger sub, that Parent will acquire the Company for US$13.50 in cash per each ADS. Immediately following the consummation of the privatisation, Parent will be beneficially owned by the Consortium, comprising new investors, including certain affiliates of MBK Partners Fund IV, L.P., Baring Private Equity Asia Limited and Redstone Capital Management (Cayman) Limited, and certain existing shareholders of the Company, including Mr. Zhang, The Crawford Group, Inc. ("Crawford") and Dongfeng Asset Management Co. Ltd etc.

On April 13, 2018, Ctrip, one of the Company’s registered shareholders, filed a petition in the Grand Court of The Cayman Islands (the “Court”) seeking alternative relief, including, among other things, requesting that the Court to enjoin the Company from relying upon the resolutions adopted on April 6, 2018 and April 10, 2018, respectively, in connection with the approval of Merger Agreement and requesting that the board and the special committee of the Company review another preliminary non-binding offer from Ocean Link Partners Limited, a private equity firm, for the purchase of all of the outstanding shares of the Company (including shares represented by ADSs) for US$14.50 in cash per ADS or US$7.25 in cash per share. The Company believes Ctrip’s allegations and the basis for which it is seeking relief in its petition are without merit and intends to vigorously refute the petition.

23. RESTRICTED NET ASSETS

Pursuant to laws applicable to entities incorporated in the PRC, the Company’s subsidiaries and VIEs in the PRC are required to make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires an annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulated amount of such reserve fund reaches 50% of a company’s registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of enterprise expansion and staff bonus and welfare and are not distributable as cash dividends.

As the Company’s PRC subsidiaries and VIEs have accumulative losses, they have not started to contribute to the staff welfare and bonus funds. In addition, due to restrictions on the distribution of share capital from the Company’s PRC subsidiaries, up to the amount of net assets held in each subsidiary and VIE, and also as a result of these entities’ unreserved accumulated losses. Total restricted net assets of the Company were RMB3,482,551,773 or 82.8% of the Company’s total consolidated net assets as of December 31, 2017.

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company.

The subsidiaries did not pay any dividends to the Company for the years presented. For the purpose of presenting parent company only financial information, the Company records its investments in its subsidiaries under the equity method of accounting. Such investments are presented on the separate condensed balance sheets of the Company as “Investments (deficit) in subsidiaries and VIEs” and the loss of the subsidiaries and VIEs is presented as “share of loss of subsidiaries and VIEs”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote disclosures contain supplemental information relating to the operations of the Company, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company.

The Company did not have significant capital and other commitments, long-term obligations except for the 2018 Senior Notes, US$150 million syndicated loan, and/or the 2022 Senior Notes (Note 10), other long-term debt, or guarantees as of December 31, 2016 and 2017.

F-46

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

BALANCE SHEETS

	As of December 31,
	2016			2017
	RMB			RMB			US$ (Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents		4,271			4,023			618
Restricted cash		10,733,202			—			—
Amounts due from subsidiaries		6,717,714,285			7,959,314,970			1,223,324,312
Prepaid expenses and other current assets		4,208,266			3,609,637			554,791
Total current assets		6,732,660,024			7,962,928,630			1,223,879,721
Investments in subsidiaries and VIEs		—			192,995,609			29,662,882
Total assets		6,732,660,024			8,155,924,239			1,253,542,603
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt		—			1,292,029,030			198,581,226
Accrued expenses and other current liabilities		8,678,123			78,150,364			12,011,491
Income tax payable		4,169,661			16,773,553			2,578,048
Total current liabilities		12,847,784			1,386,952,947			213,170,765
Long-term debt		2,366,903,154			2,562,424,523			393,837,438
Deficits in subsidiaries and VIEs		361,779,545			—			—
Total liabilities		2,741,530,483			3,949,377,470			607,008,203
Shareholders’ equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized, 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively		878,463			878,663			135,048
Additional paid-in capital		4,474,702,198			4,489,246,326			689,984,527
Accumulated other comprehensive income		43,201,465			121,858,122			18,729,250
Accumulated deficit		(527,652,585	)		(405,436,342	)		(62,314,425	)
Total shareholders’ equity		3,991,129,541			4,206,546,769			646,534,400
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		6,732,660,024			8,155,924,239			1,253,542,603

F-47

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
Operating expenses:
General and administrative expenses		(21,426,624	)		(25,424,596	)		(31,013,301	)		(4,766,657	)
Loss from operations		(21,426,624	)		(25,424,596	)		(31,013,301	)		(4,766,657	)
Interest income:
Third party		—			3,537,155			760			117
Subsidiaries		—			41,696,607			184,327,276			28,330,583
Total interest income		—			45,233,762			184,328,036			28,330,700
Interest expense		(6,905,640	)		(128,065,737	)		(216,816,430	)		(33,324,075	)
Early extinguishment of debt costs		—			—			(19,976,776	)		(3,070,374	)
Gain from sale of cost method investment		803,059,728			—			—			—
Share of gain of subsidiaries and VIEs		(2,227,088	)		147,442,803			222,850,964			34,251,566
Other income		9,917,716			—			—			—
Income before income taxes		782,418,092			39,186,232			139,372,493			21,421,160
Provision for income taxes		(86,079,287	)		(6,051,116	)		(17,156,250	)		(2,636,867	)
Net income		696,338,805			33,135,116			122,216,243			18,784,293
Net income		696,338,805			33,135,116			122,216,243			18,784,293
Changes in cumulative foreign currency translation adjustment, net of tax of nil		73,410,193			(31,353,357	)		78,656,657			12,089,307
Comprehensive income		769,748,998			1,781,759			200,872,900			30,873,600

F-48

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB			US$ (Note 2(d))
Net cash provided by operating activities		—		—		—			—
Net cash used in investing activities		—		—		—			—
Net cash used in financing activities:		—		—		—			—
Effect of exchange rate changes on cash and cash equivalents		230		273		(248	)		(38	)
Net increase (decrease) in cash and cash equivalents		230		273		(248	)		(38	)
Cash and cash equivalents-beginning of year		3,768		3,998		4,271			656
Cash and cash equivalents-end of year		3,998		4,271		4,023			618
Supplemental disclosure for cash flow information:
Cash paid for interest		—		—		—			—
Cash paid for income taxes		—		—		—			—

F-49

EHI CAR SERVICES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

(all amounts in RMB, except share and per share data, unless otherwise stated)

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

STATEMENTS OF CASH FLOWS (Continued)

	For the Years Ended December 31,
	2015			2016			2017
	RMB			RMB			RMB			US$ (Note 2(d))
Supplemental disclosure of non-cash investing and financing activities:
Payment for IPO issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		(20,656,597	)		—			—			—
Proceeds from issuance of Class A common shares in private placement, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		792,860,341			—			—			—
Proceeds from exercise of share options (cash received by a subsidiary of the Company on behalf of the Company)		4,891,204			25,431,373			955,485			146,855
Proceeds of issuance of the 2018 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		1,241,289,905			—			—			—
Repayment of syndicated loan(cash paid by a subsidiary of the Company on behalf of the Company)		—			—			(1,000,335,000	)		(153,748,674	)
Proceeds of issuance of the 2022 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—			—			2,611,624,352			401,399,313
Payment for Senior Notes issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		—			(2,740,945	)		—			—
Proceeds of US$150 million syndicated loan, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—			957,158,701			—			—
Proceeds from sale of cost method investment, net of related transaction costs (cash received by a subsidiary of the Company on behalf of the Company)		954,428,056			—			—			—
Payment of professional fees for aborted offerings (cash paid by a subsidiary of the Company on behalf of the Company)		—			—			(1,748,969	)		(268,812	)
Accrued professional fees for issuance of Senior Notes		2,740,945			—			—			—
Accrued professional fees for aborted offering		—			—			2,174,451			334,207
Subscription receivables related to share option exercise		197,816			—			—			—

F-50

EX-2.5

Exhibit 2.5

EXECUTION VERSION

EHI CAR SERVICES LIMITED

and

THE ENTITIES LISTED ON SCHEDULE I HERETO

as Subsidiary Guarantors

and

DB TRUSTEES (HONG KONG) LIMITED

as Trustee

Indenture

Dated as of August 14, 2017

5.875% Senior Notes Due 2022

TABLE OF CONTENTS

	Page
Article 1
Definitions and Incorporation by Reference
Section 1.01. Definitions	1
Section 1.02. Rules of Construction	31
Article 2
Issue, Execution, Form and Registration of Notes
Section 2.01. Authentication and Delivery of Notes and Subsidiary Guarantees	32
Section 2.02. Execution of Notes and Subsidiary Guarantees	32
Section 2.03. Certificate of Authentication	33
Section 2.04. Form, Denomination and Date of Notes; Payments	33
Section 2.05. Registration, Transfer and Exchange	35
Section 2.06. Book-entry Provisions for Global Notes	37
Section 2.07. [Reserved]	38
Section 2.08. Mutilated, Defaced, Destroyed, Stolen and Lost Notes	38
Section 2.09. Further Issues	38
Section 2.10. Cancellation of Notes; Disposition Thereof	39
Section 2.11. ISIN or Common Code Numbers	39
Article 3
Redemption
Section 3.01. Redemption for Taxation Reasons	39
Section 3.02. Optional Redemption	40
Section 3.03. Method and Effect of Redemption	42
Section 3.04. Repurchases and Cancellation of Notes	42
Article 4
Covenants
Section 4.01. Payment of Notes	43
Section 4.02. Maintenance of Office or Agency	45
Section 4.03. Government Approvals and Licenses; Compliance with Law	45
Section 4.04. Payment of Taxes and other Claims	46
Section 4.05. Limitation on Indebtedness	46
Section 4.06. Limitation on Restricted Payments	51
Section 4.07. Limitation on Liens	55
Section 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	55
Section 4.09. Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries	57
Section 4.10. Limitation on Issuances of Guarantees by Restricted Subsidiaries	58
Section 4.11. Limitation on Sale and Leaseback Transactions	58
Section 4.12. Repurchase of Notes Upon a Change of Control Triggering Event	58

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Section 4.13. Limitation on Asset Sales	59
Section 4.14. Limitation on Transactions with Shareholders and Affiliates	61
Section 4.15. Limitation on Business Activities	62
Section 4.16. Use of Proceeds	62
Section 4.17. Maintenance of Insurance	62
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries	63
Section 4.19. Anti-Layering	64
Section 4.20. Provision of Financial Statements and Reports	64
Section 4.21. Additional Amounts	65
Section 4.22. No Payments for Consents	68
Section 4.23. Suspension of Certain Covenants	68
Article 5
Consolidation, Merger and Sale of Assets
Section 5.01. Consolidation, Merger and Sale of Assets	69
Section 5.02. Successor Corporation Substituted.	71
Article 6
Default and Remedies
Section 6.01. Events of Default	71
Section 6.02. Acceleration	72
Section 6.03. Other Remedies	73
Section 6.04. Waiver of Past Defaults	73
Section 6.05. Control by Majority	73
Section 6.06. Limitation on Suits	73
Section 6.07. Rights of Holders to Receive Payment	74
Section 6.08. Compliance Certificate	74
Section 6.09. Collection Suit by Trustee	74
Section 6.10. Trustee May File Proofs of Claim	74
Section 6.11. Priorities	75
Section 6.12. Restoration of Rights and Remedies	75
Section 6.13. Undertaking for Costs	75
Section 6.14. Rights and Remedies Cumulative	76
Section 6.15. Delay or Omission Not Waiver	76
Section 6.16. Waiver of Stay, Extension or Usury Laws	76
Section 6.17. No Duty of Trustee to Ascertain Default	76
Article 7
The Agents
Section 7.01. General	76
Section 7.02. Certain Rights of Trustee and Other Agents	77
Section 7.03. Individual Rights of Trustee	81
Section 7.04. Trustee’s Disclaimer	81
Section 7.05. Notice of Default	81
Section 7.06. Compensation and Indemnity	81
Section 7.07. Replacement of Trustee	83
Section 7.08. Successor Trustee by Consolidation, Merger, Conversion or Transfer	83
Section 7.09. Money Held in Trust	84

ii 

Section 7.10. [Reserved]	84
Section 7.11. Appointment of Paying and Transfer Agent	84
Article 8
Defeasance and Discharge
Section 8.01. Defeasance and Discharge of Indenture	84
Section 8.02. Covenant Defeasance	85
Section 8.03. Application of Trust Money	86
Section 8.04. Repayment to Company	86
Section 8.05. Reinstatement	87
Article 9
Amendments, Supplements and Waivers
Section 9.01. Amendments without Consent of Holders	87
Section 9.02. Amendments with Consent of Holders	88
Section 9.03. Effect of Consent	89
Section 9.04. Trustee’s and Agent’s Rights and Obligations	90
Article 10
Subsidiary Guarantees
Section 10.01. The Subsidiary Guarantees	90
Section 10.02. Guarantee Unconditional	90
Section 10.03. Discharge; Reinstatement	91
Section 10.04. Waiver by Each Subsidiary Guarantor	91
Section 10.05. Subrogation and Contribution	91
Section 10.06. Stay of Acceleration	91
Section 10.07. Limitation on Amount of Subsidiary Guarantee	91
Section 10.08. Ranking of Subsidiary Guarantees	92
Section 10.09. Further Subsidiary Guarantors	92
Section 10.10. Execution and Delivery of Subsidiary Guarantee	92
Section 10.11. Release of the Subsidiary Guarantees	93
Article 11
Miscellaneous
Section 11.01. [Reserved]	94
Section 11.02. [Reserved]	94
Section 11.03. Notices	94
Section 11.04. Certificate and Opinion as to Conditions Precedent	94
Section 11.05. Statements Required in Certificate or Opinion	95
Section 11.06. Payment Date Other Than a Business Day	95
Section 11.07. Governing Law, Consent to Jurisdiction; Waiver of Immunities	96
Section 11.08. No Adverse Interpretation of Other Agreements	97
Section 11.09. Successors	97
Section 11.10. Duplicate Originals	97
Section 11.11. Separability	97
Section 11.12. Table of Contents and Headings	97
Section 11.13. No Personal Liability of Incorporators, Stockholders, Officers, Directors or Employees	97
Section 11.14. Force Majeure	98
Section 11.15. [Reserved]	98
Section 11.16. Waiver of Jury Trial	98

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EXHIBITS

SCHEDULE I	List of Initial Subsidiary Guarantors
EXHIBIT A	Form of Certificated Note
EXHIBIT B	Form of Global Note
EXHIBIT C-1	Form of Company Authorization Certificate
EXHIBIT C-2	Form of Subsidiary Guarantor Authorization Certificate
EXHIBIT D	Form of Paying and Transfer Agent Appointment Letter
EXHIBIT E	Form of Supplemental Indenture
EXHIBIT F	Form of Compliance Certificate
EXHIBIT G	Trustee, Paying and Transfer Agent and Registrar

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INDENTURE, dated as of August 14, 2017, among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the entities listed in Schedule I hereto collectively as the initial Subsidiary Guarantors and DB Trustees (Hong Kong) Limited, as trustee (the “Trustee”).

RECITALS

WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of up to US$400,000,000 in aggregate principal amount of the Company’s 5.875% Senior Notes Due 2022 and, if and when issued, any Additional Notes as provided herein (collectively, the “Notes”). All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes (in the case of the Additional Notes, when duly authorized), when executed by the Company and authenticated and delivered by or on behalf of the Registrar and duly issued by the Company, the valid obligations of the Company as hereinafter provided.

WHEREAS, each initial Subsidiary Guarantor has duly authorized the execution and delivery of this Indenture as Subsidiary Guarantor of the Notes. All things necessary to make this Indenture a valid agreement of each initial Subsidiary Guarantor, in accordance with its terms, have been done, and each initial Subsidiary Guarantor has done all things necessary to make the Subsidiary Guarantees, when the Notes are executed by the Company and authenticated and delivered by or on behalf of the Registrar and duly issued by the Company, the valid obligations of such initial Subsidiary Guarantor as hereinafter provided.

THIS INDENTURE WITNESSETH

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows:

Article 1
Definitions and Incorporation by Reference

Section 1.01. Definitions.

“Acquired Indebtedness” means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary whether or not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Restricted Subsidiary.

“Additional Amounts” has the meaning assigned to such term in Section 4.21.

“Additional Note” has the meaning assigned to such term in Section 2.09.

“Adjusted Treasury Rate” means, with respect to any redemption date, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three (3) months before or after August 14, 2020, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case, calculated on the third Business Day immediately preceding the redemption date.

“Affiliate” means, with respect to any Person, any other Person (1) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; (2) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (1) of this definition; or (3) who is a spouse or any person cohabiting as a spouse, child or step child, parent or step parent, brother, sister, step brother or step sister, parent in law, grandchild, grandparent, uncle, aunt, nephew or niece of a Person described in clause (1) or (2). For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Affiliate Transaction” has the meaning assigned to such term in Section 4.14.

“Agent” means any Registrar and any Paying and Transfer Agent.

“Agent Member” has the meaning assigned to such term in Section 2.06.

“Applicable Premium” means, with respect to a Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess, if any, of (A) the present value at such redemption date of the redemption price of such Note on August 14, 2020 (such redemption price being described in Section 3.02(a) excluding accrued and unpaid interest), plus all required remaining scheduled interest payments due on such Note through August 14, 2020 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate plus 100 basis points, over (B) the principal amount of such Note on such redemption date.

“Asset Acquisition” means (1) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any Restricted Subsidiary; or (2) an acquisition by the Company or any Restricted Subsidiary of the property and assets of any Person other than the Company or any Restricted Subsidiary that constitute substantially all of a division or line of business of such Person.

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“Asset Disposition” means the sale or other disposition by the Company or any Restricted Subsidiary (other than to the Company or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary; or (2) all or substantially all of the assets that constitute a division or line of business of the Company or any Restricted Subsidiary.

“Asset Sale” means any sale, transfer or other disposition (including by way of merger, consolidation or Sale and Leaseback Transaction) of any of its property or assets (including any sale of Capital Stock of a Subsidiary or issuance of Capital Stock of a Restricted Subsidiary) in one transaction or a series of related transactions by the Company or any Restricted Subsidiary to any Person; provided that “Asset Sale” shall not include:

(1)        any sale, transfer or other disposition of inventory, receivables or other current assets in the ordinary course of business (including, without limitation, the rental of Vehicles);

(2)       any sale, transfer or other disposition of assets constituting a Permitted Investment or Restricted Payment permitted to be made under Section 4.06;

(3)       a sales, transfer or other disposition of assets with a Fair Market Value not in excess of US$3.0 million (or the Dollar Equivalent thereof) in any transaction or series of related transactions;

(4)       any sale, transfer, assignment or other disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or the Restricted Subsidiaries;

(5)       any transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien;

(6)       a transaction covered under Article 5;

(7)       sales or other dispositions of cash or Temporary Cash Investments;

(8)       any transfer, termination, unwinding or other disposition of Hedging Obligations;

(9)       any Financing Disposition;

(10)       a sale, transfer or other disposition to the Company or a Restricted Subsidiary, including, without limitation, an issuance of Capital Stock by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;

(11)        transfers resulting from any casualty or condemnation of property;

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(12)        any sale, lease, transfer or other disposition of Investments in joint ventures to the extent required by any customary buy/sell arrangements entered into in connection with the formation of such joint venture; provided that any cash, Temporary Cash Investments or other consideration received must be applied in compliance with Section 4.13; and

(13)        any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business.

“Attributable Indebtedness” means, in respect of a Sale and Leaseback Transaction, at the time of determination, the present value, discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction, including any period for which such lease has been extended.

“Authorization Certificate” has the meaning assigned to such term in Section 2.02(a)

“Authorized Officer” means, with respect to the Company or a Subsidiary Guarantor, as applicable, any one person, officer or director, who, in each case, is authorized to represent the Company or such Subsidiary Guarantor, as the case may be, as designated in the Authorization Certificate furnished to the Trustee.

“Average Life” means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.

“Bank Deposit Secured Indebtedness” means Indebtedness of the Company or any Restricted Subsidiary that is secured by a pledge of one or more bank accounts or bank deposits of the Company or a Restricted Subsidiary or guaranteed by a guarantee or a letter of credit (or similar instruments) from or arranged by the Company or a Restricted Subsidiary and is used by the Company and its Restricted Subsidiaries to effect exchanges of U.S. dollars, Hong Kong dollars or other foreign currencies into Renminbi or vice versa, or to remit Renminbi or any foreign currency into or outside the PRC.

“Board of Directors” means the board of directors elected or appointed by the stockholders of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee.

“Board Resolution” means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.

“Business Day” means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in The City of New York, London or in Hong Kong (or in any other place in which payments on the Notes are to be made) are authorized or required by law or governmental regulation to close.

4

“Capital Stock” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock, but excluding debt securities convertible into such equity.

“Capitalized Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person.

“Capitalized Lease Obligations” means the discounted present value of the rental obligations under a Capitalized Lease.

“Certificated Notes” means the Notes (with the Subsidiary Guarantees endorsed thereon), in certificated, registered form, executed and delivered by the Company (and each Subsidiary Guarantor) and authenticated by or on behalf of the Registrar in exchange for the Global Notes, upon the occurrence of the events set forth in the second sentence of Section 2.04(e).

“Change of Control” means the occurrence of one or more of the following events:

(1)        the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any ‘‘person’’ (within the meaning of Section 13(d) of the Exchange Act), other than one or more Permitted Holders;

(2)        the Company consolidates with, or merges with or into, any Person (other than one or more Permitted Holders), or any Person (other than one or more Permitted Holders) consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for (or continues as) Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance);

(3)        the Permitted Holders are the beneficial owners (as such term is used in Rule 13d-3 of the Exchange Act) of less than 15% of the total voting power of the Voting Stock of the Company;

(4)         (i) any ‘‘person’’ or ‘‘group’’ (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than one or more Permitted Holders) is or becomes the beneficial owner (as such term is used in Rule 13d-3 of the Exchange Act), directly or indirectly, of greater than 30% of the total voting power of the Voting Stock of the Company and (ii) the Permitted Holders beneficially own (as defined in this clause (4)) in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person or group;

5

(5)        individuals who on the Original Issue Date constituted the Board of Directors, together with any new directors whose election or nomination to the Board of Directors was approved by a vote of at least a majority of the directors then still in office who were either directors on the Original Issue Date or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office; or

(6)        the adoption of a plan relating to the liquidation or dissolution of the Company.

“Change of Control Offer” has the meaning assigned to such term in Section 4.12(a).

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Decline.

“Clearstream” means Clearstream Banking S.A.

“Commodity Hedging Agreement” means any commodities swap agreement, commodities cap agreement, commodities floor agreement, commodities futures agreement, commodities option agreement or any other similar agreement or arrangement which may consist of one or more of the foregoing agreements, designed to protect against fluctuations in commodities prices.

“Common Stock” means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of this Indenture, and includes, without limitation, all series and classes of such common stock or ordinary shares.

“Company” means the party named as such in the first paragraph of this Indenture or any successor obligor under this Indenture and the Notes pursuant to this Indenture.

“Comparable Treasury Issue” means the U.S. Treasury security having a maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities with a maturity comparable to August 14, 2020.

“Comparable Treasury Price” means, with respect to any redemption date, if clause (ii) of the Adjusted Treasury Rate is applicable, the average of three (or such lesser number as is obtained by the Company) Reference Treasury Dealer Quotations for such redemption date.

“Consolidated Assets” means, with respect to any Restricted Subsidiary at any date of determination, the Company and its Restricted Subsidiaries’ proportionate interest in the total consolidated assets of such Restricted Subsidiary and its Restricted Subsidiaries measured in accordance with GAAP as of the last day of the most recent fiscal quarter for which consolidated financial statements of the Company and its Restricted Subsidiaries (which the Company shall use its reasonable best efforts to compile in a timely manner and which may include internal consolidated financial statements) are available.

6

“Consolidated EBITDA” means, with respect to any Person for any period, Consolidated Net Income of such Person for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

(1)       Consolidated Fixed Charges;

(2)       income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets); and

(3)       depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income;

all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in conformity with GAAP; provided that (i) if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any Restricted Subsidiary; and (ii) in the case of any PRC CJV (consolidated in accordance with GAAP), Consolidated EBITDA shall be reduced (to the extent not already reduced in accordance with GAAP) by any payments, distributions or amounts (including the Fair Market Value of any payments, distributions or amounts) required to be made or paid by such PRC CJV to the PRC CJV Partner, or to which the PRC CJV Partner otherwise has a right or is entitled, pursuant to the joint venture agreement governing such PRC CJV.

“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum (without duplication) of (1) Consolidated Interest Expense for such period and (2) all cash and non-cash dividends paid, declared, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of such Person or any Restricted Subsidiary, except for dividends payable in the Company’s Capital Stock (other than Disqualified Stock) or paid to the Company or to a Restricted Subsidiary.

“Consolidated Interest Expense” means, with respect to any Person for any period, the amount that would be included in gross interest expense on a consolidated income statement prepared in accordance with GAAP for such period of such Person and its Restricted Subsidiaries, plus, to the extent not included in such gross interest expense, and to the extent incurred, accrued or payable during such period by such Person and its Restricted Subsidiaries, without duplication, (1) interest expense attributable to Capitalized Lease Obligations and imputed interest with respect to Attributable Indebtedness, (2) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness, (3) the interest portion of any deferred payment obligation, (4) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (5) the net costs associated with Hedging Obligations (including the amortization of fees), (6) interest accruing on Indebtedness of any other Person that is Guaranteed by, or secured by a Lien on any asset of, such Person or any Restricted Subsidiary and (7) any capitalized interest; provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period.

7

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the net income (or loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with GAAP; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):

(1)       the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting, except that:

(a)       subject to the exclusion contained in clause (5) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below; and

(b)       the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent funded with cash or other assets of the Company or Restricted Subsidiaries;

(2)       the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary or all or substantially all of the property and assets of such Person are acquired by the Company or any Restricted Subsidiary;

(3)       the net income (or loss) of any Restricted Subsidiary (other than any Subsidiary Guarantor) if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company by the operation of the terms of such Restricted Subsidiary’s charter, articles of association or other constitutive document or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary (other than restrictions that have been waived or otherwise released), except that the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash or Temporary Cash Investments actually distributed or that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause);

(4)       the cumulative effect of a change in accounting principles;

(5)       any net after tax gains realized on the sale or other disposition of (a) any property or asset of the Company or any Restricted Subsidiary that is not sold in the ordinary course of its business or (b) any Capital Stock of any Person (including any gains by the Company or a Restricted Subsidiary realized on sales of Capital Stock of the Company or of any Restricted Subsidiary);

8

(6)       any non-cash expense, loss, income or gain relating to any change in fair value of convertible securities issued by the Company;

(7)       any non-cash expense, loss, income or gain relating to any change in fair value of share options and other equity-based compensation;

(8)       any translation gains and losses due solely to fluctuations in currency values and related tax effects; and

(9)       any net after-tax extraordinary or non-recurring gains or losses (excluding the effect of all fees and expenses relating thereto).

“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee is principally administered, which at the date of this Indenture is located at DB Trustees (Hong Kong) Limited, Level 52, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong, Attention: Issuer Services, Corporate Trust.

“Crawford” means The Crawford Group, Inc.

“Ctrip” means Ctrip Investment Holding Ltd.

“Currency Hedging Agreement” means any currency swap agreement, currency cap agreement, currency floor agreement, currency futures agreement, commodity option agreement or any other similar agreement or arrangement which may consist of one or more of the foregoing agreements, designed to protect against fluctuations in foreign exchange rates.

“Common Depositary” means Deutsche Bank AG, Hong Kong Branch, as common depositary for Euroclear and Clearstream.

“December 2018 Notes” means the 7.50% Senior Notes due 2018 issued by the Company.

“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“Disqualified Stock” means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the date that is 183 days after the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the date that is 183 days after the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the date that is 183 days after the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the date that is 183 days after the Stated Maturity of the Notes shall not constitute Disqualified Stock if (a) the “asset sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Section 4.12 and Section 4.13 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased pursuant to Section 4.12 and Section 4.13 or (b) the terms of such Capital Stock provide that such Person may not repurchase or redeem such Capital Stock pursuant to such provision unless such repurchase or redemption complies with Section 4.06.

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“Dollar Equivalent” means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the noon buying rate for U.S. dollars in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York on the date of determination.

“Entrusted Loans” means borrowings by a PRC Restricted Subsidiary from a bank that are secured by a pledge of deposits made by another PRC Restricted Subsidiary to the lending bank as security for such borrowings; provided that, such borrowings are not reflected on the consolidated balance sheet of the Company.

“Equity Offering” means (i) any bona fide public or private offering of Capital Stock (other than Disqualified Stock) of the Company other than to Affiliates of the Company after the Original Issue Date or (ii) any bona fide underwritten secondary public offering or secondary private placement of Capital Stock (other than Disqualified Stock) of the Company beneficially owned by the Permitted Holders, after the Original Issue Date, the net proceeds therefrom are contributed to the common equity capital of the Company; provided that the aggregate gross cash proceeds received by the Company as a result of such offering described in clause (i) or (ii) or a combination thereof (excluding gross cash proceeds received from the Company or any of its Subsidiaries) shall be no less than US$25.0 million (or the Dollar Equivalent thereof).

“Euroclear” means Euroclear Bank SA/NV.

“Event of Default” has the meaning assigned to such term in Section 6.01.

“Excess Proceeds” has the meaning assigned to such term in Section 4.13(c).

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution.

“Financing Disposition” means any sale, transfer, conveyance or other disposition of, or creation or incurrence of any Lien on, property or assets by the Company or any Restricted Subsidiary thereof to or in favor of any Special Purpose Entity, or by any Special Purpose Subsidiary, in each case, in connection with the Incurrence by a Special Purpose Entity of Indebtedness, or obligations to make payments to the obligee on Indebtedness, which may be secured by a Lien in respect of such property or assets.

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“Fitch” means Fitch Inc., a subsidiary of Fimalac, S.A., and its successors.

“Fixed Charge Coverage Ratio” means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner and which may include internal consolidated financial statements) are available (the “Four Quarter Period”) to (2) the aggregate Consolidated Fixed Charges during such Four Quarter Period. In making the foregoing calculation:

(A)       pro forma effect shall be given to any Indebtedness Incurred, repaid or redeemed during the period (the “Reference Period”) commencing on and including the first day of the Four Quarter Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period), in each case, as if such Indebtedness had been Incurred, repaid or redeemed on the first day of such Reference Period; provided that, in the event of any such repayment or redemption, Consolidated EBITDA for such period shall be calculated as if the Company or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to repay or redeem such Indebtedness;

(B)       Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate will be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Hedging Agreement applicable to such Indebtedness if such Interest Rate Hedging Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;

(C)       pro forma effect will be given to the creation, designation or redesignation of Restricted Subsidiaries and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;

(D)       pro forma effect will be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and

(E)       pro forma effect will be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period;

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provided that to the extent that clause (D) or (E) of this definition requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation will be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available; and provided further that if any Indebtedness is Incurred or repaid under a revolving credit facility and is being given pro forma effect, the interest on such Indebtedness shall be calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to the pro forma calculation.

“Future Subsidiary Guarantor” has the meaning assigned to such term in Section 10.09.

“GAAP” means United States generally accepted accounting principles, as in effect from time to time.

“Global Note” has the meaning assigned to such term in Section 2.04(c).

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Guaranteed Indebtedness” has the meaning assigned to such term in Section 4.10.

“Hedging Obligation” of any Person means the obligations of such Person pursuant to any Commodity Hedging Agreement, Currency Hedging Agreement or Interest Rate Hedging Agreement.

“Holder” means the Person in whose name a Note is registered in the Note register.

“Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount, the accrual of interest or the accrual of dividends shall not be considered an Incurrence of Indebtedness. The terms “Incurrence,” “Incurred” and “Incurring” have meanings correlative with the foregoing.

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“Indebtedness” means, with respect to any Person at any date of determination (without duplication):

(1)       all indebtedness of such Person for borrowed money;

(2)       all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3)       all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments;

(4)       all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables;

(5)       all Capitalized Lease Obligations and Attributable Indebtedness;

(6)       all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness;

(7)       all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person;

(8)       to the extent not otherwise included in this definition, Hedging Obligations;

(9)       all Disqualified Stock issued by such Person valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price plus accrued dividends; and

(10)       any Preferred Stock issued by (a) such Person, if such Person is a Restricted Subsidiary or (b) any Restricted Subsidiary of such Person, in each case, valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price plus accrued dividends.

Notwithstanding the foregoing, Indebtedness shall not include any capital commitments, deferred payment obligations or similar obligations Incurred in the ordinary course of business in connection with the acquisition, development, construction or improvement of property or assets to be used in a Permitted Business or Entrusted Loans; provided that such items are not reflected on the consolidated balance sheet of the Company and the Restricted Subsidiaries (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected on the balance sheet as borrowings or indebtedness will not be deemed to be reflected on such balance sheet).

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The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided

(1)        that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP;

(2)       that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest; and

(3)       that the amount of Indebtedness with respect to any Hedging Obligation shall be (i) zero if Incurred pursuant to Section 4.05(b)(v) or (ii) equal to the net amount payable by such Person if the Commodity Hedging Agreement, Currency Hedging Agreement or Interest Rate Hedging Agreement giving rise to such Hedging Obligation were terminated at that time due to default by such Person if not Incurred pursuant to Section 4.05(b)(v).

“Indenture” means this indenture (including all Exhibits hereto) as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

“Initial Non-Guarantor Subsidiaries” means PRC Restricted Subsidiaries existing on the Original Issue Date.

“Initial Purchasers” means J.P. Morgan Securities plc and Deutsche Bank AG, Singapore Branch.

“Interest Payment Date” means February 14 and August 14 of each year, commencing February 14, 2018.

“Interest Rate Hedging Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate future contract, interest rate option agreement or any other similar agreement or arrangement which may consist of one or more of any of the foregoing agreements, designed to protect against fluctuations in interest rates.

“Interest Record Date” means the date specified as the interest record date in the forms of the Notes attached hereto as Exhibits A and B.

“Investment” means:

(1)       any direct or indirect advance, loan or other extension of credit to another Person;

(2)       any capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others);

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(3)       any purchase or acquisition of Capital Stock (or options, warrants or other rights to acquire such Capital Stock), Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person; or

(4)       any Guarantee of any obligation of another Person.

For the purposes of the provisions of Section 4.06 and Section 4.18, (1) the Company will be deemed to have made an Investment in an Unrestricted Subsidiary in an amount equal to the Company’s proportionate interest in the Fair Market Value of the assets (net of the Company’s proportionate interest in the liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not Guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary calculated as of the time of such designation, and (2) any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors.

“Investment Grade” means a rating of “AAA,” “AA,” “A” or “BBB,” as modified by a “+” or “-” indication, or an equivalent rating representing one of the four highest rating categories, by S&P or Fitch, or any of their respective successors or assigns, or the equivalent ratings of any internationally recognized rating agency or agencies, as the case may be, which shall have been designated by the Company as having been substituted for S&P or Fitch or both of them, as the case may be.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind).

“Measurement Date” means December 8, 2015.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Net Cash Proceeds” means:

(1)       with respect to any Asset Sale (other than the issuance or sale of Capital Stock), the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of:

(a)       brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment banks) related to such Asset Sale;

(b)       provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and the Restricted Subsidiaries, taken as a whole;

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(c)       payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale; and

(d)       appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and reflected in an Officers’ Certificate delivered to the Trustee; and

(2)       with respect to any Asset Sale consisting of the issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

“Non-Guarantor Subsidiaries” means the Offshore Non-Guarantor Subsidiaries and the PRC Restricted Subsidiaries.

“Notes” has the meaning assigned to such term in the Recitals of this Indenture.

“Offer to Purchase” means an offer to purchase Notes by the Company from the Holders commenced by the Company mailing a notice by first class mail, postage prepaid, to the Trustee and each Holder at its last address appearing in the Note register stating:

(1)       the provision in this Indenture pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis;

(2)       the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Offer to Purchase Payment Date”);

(3)       that any Note not tendered will continue to accrue interest pursuant to its terms;

(4)       that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Offer to Purchase Payment Date;

(5)       that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled “Option of the Holder to Elect Purchase” on the reverse side of the Note completed, to the tender agent (the “Tender Agent”) at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Offer to Purchase Payment Date;

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(6)       that Holders will be entitled to withdraw their election if the Tender Agent receives, not later than the close of business on the third Business Day immediately preceding the Offer to Purchase Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and

(7)       that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$200,000 or any amount in excess thereof which is an integral multiple of US$1,000.

One Business Day prior to the Offer to Purchase Payment Date, the Company shall deposit with the Tender Agent money sufficient to pay the purchase price of all Notes or portions thereof to be accepted by the Company for payment on the Offer to Purchase Payment Date. On the Offer to Purchase Payment Date, the Company shall (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and (b) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers’ Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Tender Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and upon receipt of written order of the Company signed by an Officer, the Registrar shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$200,000 or any amount in excess thereof which is an integral multiple of US$1,000. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Offer to Purchase Payment Date. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase.

To the extent that the provisions of any securities laws or regulations of any jurisdiction conflict with the provisions of the Indenture governing any Offer to Purchase, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue of such compliance. The Company will not be required to make an Offer to Purchase if a third party makes the Offer to Purchase in compliance with the requirements set forth in the Indenture applicable to an Offer to Purchase made by the Company and purchases all Notes properly tendered and not withdrawn under the Offer to Purchase.

The materials used in connection with an Offer to Purchase are required to contain or incorporate by reference information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Company to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.

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“Officer” means one of the executive officers of the Company or, in the case of a Restricted Subsidiary, one of the directors or officers of such Restricted Subsidiary.

“Officers’ Certificate” means a certificate signed by two Officers; provided, however, with respect to the Officers’ Certificate required to be delivered by any Subsidiary Guarantor under this Indenture, Officers’ Certificate means a certificate signed by one Officer if there is only one Officer in such Subsidiary Guarantor at the time such certificate is required to be delivered.

“Offshore Non-Guarantor Subsidiaries” has the meaning assigned to such term in Section 10.09.

“Opinion of Counsel” means a written opinion from legal counsel in form and substance reasonably acceptable to the Trustee.

“Original Issue Date” means the date on which the Notes are originally issued under this Indenture.

“outstanding” when used with respect to the Notes means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

(1)       Notes theretofore cancelled by the Paying and Transfer Agent or accepted by the Paying and Transfer Agent for cancellation;

(2)       Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee (in trust) or any Paying and Transfer Agent for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor reasonably satisfactory to the Trustee has been made; and

(3)       Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture.

A Note does not cease to be outstanding because the Company or any Affiliate of the Company holds the Note; provided that in determining whether the Holders of the requisite amount of outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, Notes owned by the Company or any Affiliate of the Company or beneficially held for the Company or an Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Notes for which the Trustee has received an Officers’ Certificate from the Company or an Affiliate of the Company evidencing such ownership or beneficial holding shall be so disregarded. Notes so owned or beneficially held that have been pledged in good faith may be regarded as outstanding if the pledgee establishes its right to act with respect to such Notes and that the pledgee is not the Company or an Affiliate of the Company.

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“Pari Passu Guarantee” means a Guarantee by the Company or any Subsidiary Guarantor of Indebtedness of the Company (including Additional Notes) or any Subsidiary Guarantor, as the case may be; provided that (1) the Company and such Subsidiary Guarantor were permitted to Incur such Indebtedness under Section 4.05 and (2) such Guarantee ranks pari passu with the Notes or any outstanding Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be.

“Paying and Transfer Agent” means the paying and transfer agent with respect to the Notes appointed pursuant to Section 7.11 or a Paying and Transfer Agent Appointment Letter in the form of Exhibit D.

“Payment Date” has the meaning assigned to such term in Section 4.01(a).

“Permitted Businesses” means any business which is the same as or ancillary or complementary to any of the businesses of the Company and the Restricted Subsidiaries on the Original Issue Date.

“Permitted Holders” means any or all of the following:

(1)       Mr. Ray Ruiping Zhang, Crawford and Ctrip;

(2)       any Affiliate (other than an Affiliate as defined in clause (2) or (3) of the definition of Affiliate) of the Persons specified in clause (1); and

(3)       any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are owned 80% or more by one or more of the Persons specified in clauses (1) and (2) of this definition.

“Permitted Investment” means:

(1)       any Investment in the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Business or will be merged or consolidated with or into, or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business;

(2)       cash or Temporary Cash Investments;

(3)       payroll, travel and similar advances made in the ordinary course of business to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP;

(4)       stock, obligations or securities received in satisfaction of judgments;

(5)       an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

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(6)       any Investment pursuant to a Hedging Obligation designed solely to protect the Company or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates and not for speculation;

(7)       receivables, trade credits or other current assets owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(8)       any securities or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Sales made in compliance with Section 4.13;

(9)       pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under Section 4.07;

(10)       Investments in securities, accounts receivable or other obligations of trade creditors, trade debtors or customers received in compromise or settlement of debts created in the ordinary course of business, or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, trade debtor or customer, or as result of foreclosure of or transfer of title with respect to any secured investment;

(11)       loans or advances to vendors, contractors, suppliers or distributors, including advance payments for equipment and machinery made to the manufacturer or distributor thereof, of the Company or any Restricted Subsidiary in the ordinary course of business and dischargeable in accordance with customary trade terms;

(12)       Investments in existence on the Original Issue Date;

(13)       loans or advances to employees made in the ordinary course of business in an aggregate principal amount not to exceed US$5.0 million (or the Dollar Equivalent thereof) at any one time outstanding;

(14)       deposits made in order to comply with statutory or regulatory obligations to maintain deposits for workers’ compensation claims and other purposes specified by statute or regulation from time to time in the ordinary course of business of the Company or any Restricted Subsidiary;

(15)       Investments in securities of trade creditors, trade debtors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, trade debtor or customer;

(16)        an acquisition of assets, Capital Stock or other securities by the Company or a Subsidiary for consideration to the extent such consideration consist solely of Common Stock of the Company;

(17)       any Guarantees of Indebtedness Incurred in accordance with Section 4.05;

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(18)        repurchases of Notes; or

(19)       other Investments by the Company or any Restricted Subsidiary having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), taken together with all other Investments made pursuant to this clause (19) that are at the time outstanding, not to exceed an amount equal to 30% of Total Assets; provided that if such Investment, together with the aggregate amount of all other Investments made pursuant to this clause (19) that are at the time outstanding exceeds 20% of Total Assets, such Investment must be made in or to a Person that is primarily engaged in any Permitted Business.

“Permitted Liens” means:

(1)       Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(2)       statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(3)       Liens incurred or deposits made to secure the performance of statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds, tenders, bids, leases and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

(4)       leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and the Restricted Subsidiaries, taken as a whole;

(5)       Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person (i) becomes a Restricted Subsidiary or (ii) is merged with or into or consolidated with the Company or any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets of such Person (if such Person becomes a Restricted Subsidiary) or the property or assets acquired by the Company or such Restricted Subsidiary (if such Person is merged with or into or consolidated with the Company or such Restricted Subsidiary); provided further that such Liens were not created in contemplation of or in connection with the transactions or series of transactions pursuant to which such Person became a Restricted Subsidiary;

(6)       Liens in favor of the Company or any Restricted Subsidiary;

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(7)       Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary that do not give rise to an Event of Default;

(8)       (a) Liens securing reimbursement obligations with respect to letters of credit or trade guarantees, performance and surety bonds and similar instruments that encumber documents and other property relating to such letters of credit or trade guarantees, performance and surety bonds and similar instruments and the products and proceeds thereof, in each case, exclusive of obligations for the payment of borrowed money or (b) Liens in favor of any bank having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any Restricted Subsidiary on deposit with or in the possession of such bank;

(9)       Liens existing on the Original Issue Date;

(10)       Liens securing Indebtedness which is Incurred to refinance Secured Indebtedness which is permitted to be Incurred under Section 4.05(b)(iv); provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;

(11)       Liens securing Hedging Obligations permitted to be Incurred under Section 4.05(b)(v); provided that (i) Indebtedness relating to any such Hedging Obligation is, and is permitted under Section 4.07 to be, secured by a Lien on the same property securing such Hedging Obligation or (ii) such Liens are encumbering customary initial deposits or margin deposits or are otherwise within the general parameters customary in the industry;

(12)       Liens securing Attributable Indebtedness that is permitted to be Incurred under this Indenture;

(13)       any interest or title of a lessor under any Capitalized Lease Obligation permitted to be Incurred under this Indenture; provided, however, that the Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;

(14)       Liens with respect to minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, license, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not Incurred in connection with Indebtedness and that do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any Restricted Subsidiary;

(15)       Liens with respect to licenses or leases or subleases as licensor, lessor or sublessor of any of the Company’s or its Restricted Subsidiaries property, including intellectual property, in the ordinary course of business;

(16)       retention of title reserved by any seller of goods or any Lien imposed, reserved or granted over goods supplied by such seller, in each case, in the ordinary course of business;

(17)       Liens in favor of customs and revenue authorities arising by operation of law to secure payment of customs duties in connection with importation or exportation of goods in the ordinary course of business;

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(18)       Liens on the Capital Stock of Unrestricted Subsidiaries or any Person that is not a Subsidiary of the Company solely to secure Indebtedness of Unrestricted Subsidiaries or such Person, in each case, that is non-recourse to the Company or any Restricted Subsidiary, unless the Company or such Restricted Subsidiary could have Incurred such Indebtedness under the Indenture on the date of incurrence of such Lien;

(19)       any interest or title of a lessor in the property subject to any operating lease;

(20)       Liens on deposits made in order to comply with statutory obligations to maintain deposits for workers’ compensation claims, welfare and social benefits, property maintenance and other purposes specified by statute made in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary;

(21)       Liens on deposits securing trade letters of credit (and reimbursement obligations relating thereto) incurred in the ordinary course;

(22)       Liens securing Indebtedness of the type described under Section 4.05(b)(xi)(B); provided that such Lien (i) covers only the equipment, property or assets acquired, developed, constructed or improved with such Indebtedness and (ii) is created within 180 days after such acquisition or the completion of such development, construction or improvement, as the case may be; provided further, that, in the case of clause (i), such Lien may cover other equipment, property or assets (instead of or in addition to such item of property or improvements) if (x) such Lien is incurred in the ordinary course of business and (y) the aggregate book value of equipment, property or assets (as reflected in the most recent available consolidated financial statements of the Company, which may be internal consolidated financial statements) or, if any such equipment, property or assets have been acquired since the date of such financial statements, the cost of such equipment, property or assets (other than, in each case, deposits of loan proceeds securing performance of obligations in relation to the use of such loan proceeds under a loan or similar agreement to which such loan proceeds relate to, entered into by the Company or any Restricted Subsidiary, if the Indebtedness Incurred under such agreement is otherwise permitted under the terms of the Indenture) subject to Liens incurred pursuant to this clause (22) does not exceed 130% of the aggregate principal amount of Indebtedness secured by such Liens;

(23)       Liens consisting of customary transfer restrictions in joint venture agreements, stockholder agreements or other similar agreements applicable to joint ventures permitted to be entered into under the Indenture;

(24)       Liens incurred or deposits made to secure Entrusted Loans;

(25)       Liens on one or more bank accounts or deposits to secure Bank Deposit Secured Indebtedness permitted to be Incurred under Section 4.05(b)(xiv);

(26)       Liens securing Indebtedness permitted to be Incurred under Section 4.05(b)(xvii); provided that in the case such Indebtedness becomes recourse to the Company or any Restricted Subsidiary that is not a Special Purpose Subsidiary (other than with respect to Special Purpose Financing Undertakings) and is classified pursuant to Section 4.05(b)(xvii)(2) by the Company as Incurred at such time (or at the time initially Incurred) under one or more of the other provisions of Section 4.05, the Liens related to such Indebtedness will be deemed to be, and must be classified by the Company as, Incurred at such time (or at the time initially Incurred) under one or more of the other provisions of this ‘‘Permitted Liens’’ definition, for so long as such Indebtedness shall be so recourse; and

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(27)       Liens with respect to obligations of the Company or any Restricted Subsidiary that do not exceed the greater of US$30.0 million (or the Dollar Equivalent thereof using the Original Issue Date as the date of determination) and an amount equal to 2.5% of Total Assets at any one time outstanding.

“Permitted Refinancing Indebtedness” has the meaning assigned to such term in Section 4.05(b)(iv).

“Permitted Subsidiary Indebtedness” means Indebtedness of the Non-Guarantor Subsidiaries; provided that, on the date of Incurrence of such Indebtedness, and after giving effect thereto and the application of the proceeds thereof, the aggregate principal amount outstanding of all such Indebtedness of the Non-Guarantor Subsidiaries taken as a whole (excluding any Indebtedness of any Non-Guarantor Subsidiary permitted under Section 4.05(b)(iii), Section 4.05(b)(v), Section 4.05(b)(vi), Section 4.05(b)(vii), Section 4.05(b)(viii), Section 4.05(b)(ix), Section 4.05(b)(x), Section 4.05(b)(xii) or Section 4.05(b)(xviii) does not exceed an amount equal to 20% of Total Assets (or the Dollar Equivalent thereof).

“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

“PRC” means the People’s Republic of China, excluding, solely for the purpose of this definition, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

“PRC CJV” means any future Subsidiary that is a Sino-foreign cooperative joint venture enterprise with limited liability, established in the PRC pursuant to the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures adopted on April 13, 1988 (as most recently amended on October 31, 2000) and the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures promulgated on September 4, 1995, as such laws and regulations may be amended from time to time.

“PRC CJV Partner” means with respect to a PRC CJV, the other party to the joint venture agreement relating to such PRC CJV with the Company or any Restricted Subsidiary.

“PRC Restricted Subsidiary” means a Restricted Subsidiary organized under the laws of the PRC.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

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“principal” of any Indebtedness means the principal amount of such Indebtedness (or if such Indebtedness was issued with original issue discount, the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness), together with, unless the context otherwise indicates, any premium then payable on such Indebtedness.

“Principal Office” means the office of the Paying and Transfer Agent at which the business of the Paying and Transfer Agent is principally administered, which at the date of this Indenture is located at Level 52, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.

“Rating Agencies” means S&P and Fitch; provided that if S&P or Fitch shall not make a rating of the Notes publicly available, one or more nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Fitch or both, as the case may be.

“Rating Category” means (i) with respect to S&P, any of the following categories: “BB,” “B,” “CCC,” “CC,” “C” or “D” (or equivalent successor categories); (ii) with respect to Fitch, any of the following categories: “BB,” “B,” “CCC,” “CC,” “C” or “D” (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Fitch used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P and Fitch; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “BB-” to “B+,” will constitute a decrease of one gradation).

“Rating Date” means (1) in connection with a Change of Control Triggering Event, that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control or (2) in connection with actions contemplated under Article 5, that date which is 90 days prior to the earlier of (x) the occurrence of any such actions as set forth therein and (y) a public notice of the occurrence of any such actions.

“Rating Decline” means (1) in connection with a Change of Control Triggering Event, the occurrence on, or within three months after, the date, or public notice of the occurrence of, a Change of Control or the intention by the Company or any other Person or Persons to effect a Change of Control (which period shall be extended until the ratings are announced if, during such three-month period, the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below, or (2) in connection with actions contemplated under Article 5, the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below:

(a)       in the event the Notes are rated by both Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by either Rating Agency shall be below Investment Grade;

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(b)       in the event the Notes are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by such Rating Agency shall be below Investment Grade; or

(c)       in the event the Notes are rated below Investment Grade by both of the Rating Agencies on the Rating Date, the rating of the Notes by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories); provided that a Rating Decline otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Rating Decline for purposes of the definition of Change of Control Triggering Event) if the Rating Agency making the reduction in rating to which this definition would otherwise apply do not announce, publicly confirm or confirm to the Company in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Rating Decline). The Company shall request the Rating Agencies to make such confirmation in connection with any Change of Control and shall promptly certify to the Trustee as to whether or not such confirmation has been received or denied.

“Receivable” means a right to receive payment pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay, as determined in accordance with GAAP.

“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. Government securities dealer in The City of New York, selected by the Company in good faith.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined by the Company in good faith, of the bid and asked prices for the Comparable Treasury Issue (expressed, in each case, as a percentage of its principal amount) quoted in writing by such Reference Treasury Dealer at 5:00 p.m. (New York City Time) on the third Business Day preceding such redemption date.

“Register” has the meaning assigned to such term in Section 2.05.

“Registrar” has the meaning assigned to such term in Section 2.05.

“Regulation S Legend” has the meaning assigned to such term in Section 2.04(d).

“Relevant Jurisdiction” has the meaning assigned to such term in Section 4.21(a).

“Relevant Taxing Jurisdiction” has the meaning assigned to such term in Section 4.21(a).

“Replacement Assets” has the meaning assigned to such term in Section 4.13(b)(ii).

“Restricted Payments” has the meaning assigned to such term in Section 4.06.

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“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“S&P” means S&P Global Ratings, a division of S&P Global Inc., and its successors.

“Sale and Leaseback Transaction” means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person.

“Secured Indebtedness” means any Indebtedness of the Company or a Restricted Subsidiary secured by a Lien.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Significant Subsidiary” means any Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would be a “significant subsidiary” using the conditions specified in the definition of significant subsidiary in Article 1, Rule 1-02(w) of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture; provided that in each instance in such definition in which the term ‘‘10 percent’’ is used, the term ‘‘5 percent’’ shall be substituted therefor.

“Special Purpose Entity” means (x) any Special Purpose Subsidiary or (y) any other Person that is engaged in the business of (i) acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code as in effect in any jurisdiction from time to time), other accounts and/or other receivables, and/or related assets, and/or (ii) acquiring, selling, leasing, financing or refinancing Vehicles and/or related rights (including under leases, manufacturer warranties and buy-back programs, and insurance policies) and/or assets (including managing, exercising and disposing of any such rights and/or assets).

“Special Purpose Financing” means any financing or refinancing of assets consisting of or including Receivables and/or Vehicles of the Company or any Restricted Subsidiary that have been transferred to a Special Purpose Entity or made subject to a Lien in a Financing Disposition.

“Special Purpose Financing Undertakings” means representations, warranties, covenants, indemnities, guarantees of performance and (subject to clause (y) of the proviso below) other agreements and undertakings entered into or provided by the Company or any Restricted Subsidiary that the Company determines in good faith (which determination shall be conclusive) are customary or otherwise necessary or advisable in connection with a Special Purpose Financing or a Financing Disposition; provided that (x) it is understood that Special Purpose Financing Undertakings may consist of or include (i) reimbursement and other obligations in respect of notes, letters of credit, surety bonds and similar instruments provided for credit enhancement purposes or (ii) Hedging Obligations entered into by the Company or any Restricted Subsidiary, in respect of any Special Purpose Financing or Financing Disposition, and (y) subject to the preceding clause (x), any such other agreements and undertakings shall not include any Guarantee of Indebtedness of a Special Purpose Subsidiary by the Company or a Restricted Subsidiary that is not a Special Purpose Subsidiary.

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“Special Purpose Subsidiary” means a Subsidiary of the Company that (a) is engaged solely in (x) the business of (i) acquiring, selling, collecting, financing or refinancing Receivables, accounts (as defined in the Uniform Commercial Code as in effect in any jurisdiction from time to time) and other accounts and receivables (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), all proceeds thereof and all rights (contractual and other), collateral and other assets relating thereto, and/or (ii) acquiring, selling, leasing, financing or refinancing Vehicles and/or related rights (including under leases, manufacturer warranties and buy-back programs, and insurance policies) and/or assets (including managing, exercising and disposing of any such rights and/or assets), all proceeds thereof and all rights (contractual and other), collateral and other assets relating thereto, and (y) any business or activities incidental or related to such business, and (b) is designated as a “Special Purpose Subsidiary” by the Company.

“Stated Maturity” means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness.

“Subordinated Indebtedness” means any Indebtedness of the Company or any Subsidiary Guarantor that is contractually subordinated or junior in right of payment to the Notes or to any Subsidiary Guarantee, as applicable, pursuant to a written agreement to such effect.

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity (i) of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person or (ii) of which 50% or less of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and, in each case, which is “controlled” and consolidated by such Person in accordance with GAAP; provided, however, that with respect to clause (ii), the occurrence of any event (other than the issuance or sale of Capital Stock) as a result of which such corporation, association or other business entity ceases to be “controlled” by such Person under the GAAP and to constitute a Subsidiary of such Person shall be deemed to be a designation of such corporation, association or other business entity as an Unrestricted Subsidiary by such Person and be subject to the requirements under Section 4.18(a).

“Subsidiary Guarantee” means any Guarantee of the obligations of the Company under this Indenture and the Notes by any Subsidiary Guarantor.

“Subsidiary Guarantor” means the initial Subsidiary Guarantors named in Schedule I hereto and any other Restricted Subsidiary that Guarantees the obligations of the Company under this Indenture and the Notes; provided that “Subsidiary Guarantor” does not include any Person whose Subsidiary Guarantee has been released in accordance with this Indenture and the Notes.

“Surviving Person” has the meaning assigned to such term in Section 5.01(a)(i).

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“Tax Redemption Date” has the meaning assigned to such term in Section 3.01.

“Temporary Cash Investment” means any of the following:

(1)       direct obligations of the United States of America, Hong Kong, the PRC or any agency of any of the foregoing or obligations fully and unconditionally Guaranteed by the United States of America, Hong Kong, the PRC or any agency of any of the foregoing, in each case, maturing within one year;

(2)       demand or time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof, Hong Kong or the PRC and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$100.0 million (or the Dollar Equivalent thereof) and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

(3)       repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;

(4)       commercial paper, maturing not more than 180 days after the date of acquisition thereof, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s or “A-1” (or higher) according to S&P or Fitch;

(5)       securities maturing within one year of the date of acquisition thereof, issued or fully and unconditionally Guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P, Moody’s or Fitch;

(6)       any money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and

(7)       demand or time deposit accounts, certificates of deposit overnight or call deposits and money market deposits with (i) Hong Kong & Shanghai Banking Corporation, Industrial Bank, Bank of Shanghai, China Construction Bank, Industrial and Commercial Bank of China, China Merchants Bank, China Everbright Bank, Bank of China, Bank of Communications, Ping An Bank, China Citic Bank, China Development Bank, The Bank of East Asia, Shanghai Pudong Development Bank, Agricultural Bank of China, Xiamen Bank, Bank of Zhengzhou, Guangdong Development Bank, Rural Commercial Bank, Rural Cooperative Bank, Bank of Ningxia, Standard Chartered Bank, Bank of Beijing, Industrial Bank Co., Ltd., Bank of Ningbo and Bank of Jiangsu, (ii) any other bank, trust company or other financial institutions organized under the laws of the PRC or Hong Kong whose long-term debt is rated as high or higher than any of those banks listed in clause (i) of this paragraph or (iii) any other bank or other financial institutions organized under the laws of the PRC or Hong Kong; provided that, in the case of clause (iii), such deposits do not exceed US$10.0 million (or the Dollar Equivalent thereof) with any single bank or US$30.0 million (or the Dollar Equivalent thereof) in the aggregate, at any date of determination thereafter.

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“Total Assets” means, as of any date, the total consolidated assets of the Company and its Restricted Subsidiaries measured in accordance with GAAP as of the last date of the most recent fiscal quarter for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner and which may include internal consolidated financial statements) are available; provided that (1) only with respect to Section 4.05(b)(xi)(B) and the definition of “Permitted Subsidiary Indebtedness,” Total Assets shall be calculated after giving pro forma effect to include the cumulative value of all the equipment, property or assets the acquisition, construction or improvement of which requires or required the Incurrence of Indebtedness and calculation of Total Assets thereunder, in each case, as of such date, as measured by the purchase price or cost therefor or budgeted cost provided in good faith by the Company or any Restricted Subsidiary to the bank or other similar financial institutional lender providing such Indebtedness; (2) only with respect to Section 4.05(b)(xvi), with respect to the Incurrence of any Acquired Indebtedness as a result of any Person becoming a Restricted Subsidiary, Total Assets shall be calculated after giving pro forma effect to include the consolidated assets of such Restricted Subsidiary and any other change to the consolidated assets of the Company as a result of such Person becoming a Restricted Subsidiary; and (3) only with respect to any Person becoming a new Non-Guarantor Subsidiary, pro forma effect shall at such time be given to the consolidated assets of such new Non-Guarantor Subsidiary and any other change to the consolidated assets of the Company as a result of such Person becoming a new Non-Guarantor Subsidiary.

“Trade Payables” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“Transaction Date” means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made.

“Trustee” means the party named as such in the first paragraph of this Indenture or any successor trustee under this Indenture pursuant to Article 7.

“Unrestricted Subsidiary” means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided in this Indenture and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Government Obligations” means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

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“Vehicles” means vehicles, including automobiles, trucks, tractors, trailers, vans, sport utility vehicles, buses, campers, motor homes, motorcycles and other motor vehicles.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Wholly Owned” means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person; provided that Subsidiaries that are PRC CJVs shall not be considered Wholly Owned Subsidiaries unless such Person or one or more Wholly Owned Subsidiaries of such Person are entitled to 95% or more of the economic benefits distributable by such Subsidiary.

Section 1.02. Rules of Construction. Unless the context otherwise requires or except as otherwise expressly provided,

(a)       an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(b)       “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Section, Article or other subdivision;

(c)       all references to any Person include the successors and permitted assigns of that Person;

(d)       all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Indenture unless otherwise indicated; and

(e)       references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended, modified or supplemented from time to time (or to successor statutes and regulations).

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Article 2
Issue, Execution, Form and Registration of Notes

Section 2.01. Authentication and Delivery of Notes and Subsidiary Guarantees. Upon the execution and delivery of this Indenture, or from time to time thereafter, Notes may be executed and delivered by the Company, with the Subsidiary Guarantees endorsed thereon by the Subsidiary Guarantors, in an aggregate principal amount outstanding of not more than US$400,000,000 (other than Notes issued pursuant to Section 2.09) to the Registrar for authentication, accompanied by an Officers’ Certificate of the Company directing such authentication and specifying the amount of Notes (with the Subsidiary Guarantees endorsed thereon) to be authenticated, the applicable rate at which interest will accrue on such Notes, the date on which the original issuance of such Notes (with the Subsidiary Guarantees endorsed thereon) is to be authenticated, the date from which interest will begin to accrue, the date or dates on which interest on such Notes will be payable and the date on which the principal of such Notes will be payable and other terms relating to such Notes and the Subsidiary Guarantees. The Registrar shall thereupon authenticate and deliver such Notes (with the Subsidiary Guarantees endorsed thereon) to or upon the written order of the Company (as set forth in such Officers’ Certificate) signed by two Authorized Officers.

The Registrar shall have the right to decline to authenticate and deliver any Notes under this Section if the Trustee reasonably determines that such action may not lawfully be taken or if the Registrar reasonably determines that such action would expose the Registrar to personal liability, unless indemnity and/or security satisfactory to the Registrar against such liability is provided to the Registrar.

Section 2.02. Execution of Notes and Subsidiary Guarantees. (a) The Notes shall be executed by or on behalf of the Company by the signature of an Authorized Officer of the Company. Each of the Subsidiary Guarantors shall execute the Subsidiary Guarantees by the signature of an Authorized Officer of such Subsidiary Guarantor. Such signatures may be the manual or facsimile signature of the present or any future Authorized Officers. With the delivery of this Indenture, each of the Company and the initial Subsidiary Guarantors is furnishing, and, from time to time thereafter, each of the Company and the Subsidiary Guarantors may furnish, to the Trustee a certificate substantially in the form of Exhibits C-1 and C-2 (an “Authorization Certificate”) identifying and certifying the incumbency and specimen signatures of the Authorized Officers. Until the Trustee receives a subsequent Authorization Certificate, the Trustee shall be entitled to conclusively rely on the last Authorization Certificate delivered to them for purposes of determining the Authorized Officers. Typographical and other minor errors or defects in any signature shall not affect the validity or enforceability of any Note which has been duly authenticated and delivered by or on behalf of the Registrar.

(b)       In case the Authorized Officers who shall have signed any of the Notes or any of the Subsidiary Guarantees thereon, as applicable, shall cease to be such Authorized Officers before the Note (with the Subsidiary Guarantees endorsed thereon) shall be authenticated and delivered by or on behalf of the Registrar or disposed of by or on behalf of the Company, such Note (with the Subsidiary Guarantees endorsed thereon) nevertheless may be authenticated and delivered or disposed of as though the Persons who signed such Note and the Subsidiary Guarantees had not ceased to be such Authorized Officers; and any Note may be signed on behalf of the Company and any Subsidiary Guarantee may be signed on behalf of the Subsidiary Guarantors by such Persons as, at the actual date of the execution of such Note and Subsidiary Guarantee, shall be Authorized Officers, although at the date of the execution and delivery of this Indenture any such Persons were not Authorized Officers.

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Section 2.03. Certificate of Authentication. Only such Notes (with the Subsidiary Guarantees endorsed thereon) as shall bear thereon a certification of authentication substantially as set forth in the forms of the Notes in Exhibits A and B hereto, executed by the Registrar by manual or facsimile signature of one of its authorized signatories, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certification by the Registrar upon any Note executed by or on behalf of the Company (with the Subsidiary Guarantees endorsed thereon) shall be conclusive evidence that the Note (with the Subsidiary Guarantees endorsed thereon) so authenticated has been duly authenticated and delivered hereunder and that the Holder thereof is entitled to the benefits of this Indenture.

Section 2.04. Form, Denomination and Date of Notes; Payments. (a) The Notes, the Subsidiary Guarantees and the certificates of authentication shall be substantially in the form set forth in Exhibits A and B hereof. On the Original Issue Date, the Notes shall be issued in the form provided in Section 2.04(c). The Notes (with the Subsidiary Guarantees endorsed thereon) shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with the instructions set forth in the applicable Officers’ Certificate and delivered by the Authorized Officers of the Company executing the same with the approval of the Trustee.

The Notes (with the Subsidiary Guarantees endorsed thereon) may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, with the rules of any securities market in which the Notes are admitted to trading, or to conform to general usage.

(b)       Each Note (with the Subsidiary Guarantees endorsed thereon) shall be dated the date of its authentication. Each Note shall bear interest from the date of issuance thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for and shall be payable on the dates specified on the face of the form of Note set forth as Exhibits A and B hereto. Interest on the Notes shall be calculated on the basis of a 360-day year comprised of twelve 30-day months.

(c)       On the Original Issue Date, an appropriate Authorized Officer will execute and deliver to the Registrar one or more global Notes (each, a “Global Note”), with the Subsidiary Guarantees endorsed thereon, in definitive, fully registered form without interest coupons, in a denomination of US$200,000 or any amount in excess thereof which is an integral multiple of US$1,000, substantially in the form of Exhibit B hereto; all such Global Notes (with the Subsidiary Guarantees endorsed thereon) so executed and delivered to the Registrar pursuant to this subsection (c) shall be in an aggregate principal amount that shall equal the aggregate principal amount of the Notes that are to be issued on the Original Issue Date. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Common Depositary (or its nominee), as hereinafter provided.

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(d)       Each Global Note and each Certificated Note issued in exchange for interests in the Global Note shall bear the following legend (the “Regulation S Legend”), unless such Note has been sold pursuant to a registration statement that has been declared effective under the Securities Act:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR IN A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.”

Each Global Note (i) shall be delivered by or on behalf of the Registrar to the Common Depositary, and shall be registered in the name of DB Nominees (Hong Kong) Limited, or such other nominee of the Common Depositary may specify, and (ii) shall also bear a legend substantially to the following effect:

“UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF DB NOMINEES (HONG KONG) LIMITED, AS THE NOMINEE OF THE COMMON DEPOSITARY, OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE NOMINEE OF THE COMMON DEPOSITARY, HAS AN INTEREST HEREIN.

THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGEABLE IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN THE COMMON DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.”

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Global Notes may be deposited with such other common depositary that is a clearing agency registered under the Exchange Act as the Company may from time to time designate in writing to the Trustee, and shall bear such legend as may be appropriate.

(e)       If at any time the Common Depositary notifies the Company that it is unwilling or unable to continue as Common Depositary for such Global Notes, the Company shall appoint a successor Common Depositary with respect to such Global Notes. If (i) a successor Common Depositary for such Global Notes is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, (ii) either Euroclear or Clearstream, or a successor clearing system, is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so, or (iii) any of the Notes has become immediately due and payable in accordance with Section 6.01 or Section 6.02 and the Company has received a written request from a Holder, the Company will execute, and the Registrar, upon receipt by the Registrar of an Officers’ Certificate of the Company directing the authentication and delivery thereof, will authenticate and deliver, Certificated Notes (which may bear the Regulation S Legend) in any authorized denominations in an aggregate principal amount equal to the principal amount of such Global Notes in exchange for such Global Notes. Persons exchanging interests in the Global Notes for Certificated Notes will be required to provide to the Registrar, through the relevant clearing system, written instructions and other information required by the Company and the Registrar to complete, execute and deliver such Certificated Notes.

(f)       Global Notes shall in all respects be entitled to the same benefits under this Indenture as Certificated Notes authenticated and delivered hereunder.

(g)       The Person in whose name any Note is registered at the close of business on any Interest Record Date with respect to any Interest Payment Date shall be entitled to receive the interest, if any, payable on such Interest Payment Date notwithstanding any transfer or exchange of such Note subsequent to the Interest Record Date and prior to such Interest Payment Date.

Section 2.05. Registration, Transfer and Exchange. The Notes are issuable only in registered form. The Company will keep at the office or agency to be maintained for the purpose as provided in Section 4.02 (the “Registrar”), a register (the “Register”) in which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfers of, Notes as provided in this Article 2. The name and address of the registered holder of each Note and the amount of each Note will be recorded in the Register. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. Such Register shall be open for inspection by or on behalf of the Trustee during normal business hours upon prior written request.

Upon due presentation for registration of transfer of any Note, the Company shall execute and the Registrar shall authenticate and deliver in the name of the transferee or transferees a new Note or Notes in authorized denominations for a like aggregate principal amount.

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A Holder may register the transfer of a Note only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such registration of transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Holder as provided herein, the Company, the Trustee and any agent of any of them shall treat the Person in whose name the Note is registered as the owner and Holder thereof for all purposes (whether or not the Note shall be overdue), and neither the Company, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by Euroclear and Clearstream (or their respective agents) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. At the option of such Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged to the Registrar. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements for such transactions set forth herein are met. To permit registrations of transfers and exchanges, the Company and each Subsidiary Guarantor shall execute and the Registrar shall authenticate the Notes.

Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Registrar) be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the Holder thereof or his attorney duly authorized in writing in a form satisfactory to the Company and the Registrar.

The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Notes (other than any such transfer taxes or other similar governmental charge payable upon exchanges). No service charge to any Holder shall be made for any such transaction.

The Company shall not be required (i) to issue, register the transfer of or exchange any Note for a period of 15 days preceding the first giving of notice of redemption of Notes to be redeemed or, pursuant to an Offer to Purchase, purchased, (ii) to register the transfer of or exchange any Note so selected for redemption or purchase in whole or in part, except, in the case of a partial redemption or purchase, that portion of any Note not being redeemed or purchased, or (iii) if a redemption or a purchase pursuant to an Offer to Purchase is to occur after an Interest Record Date but on or before the corresponding Interest Payment Date, to register the transfer of or exchange any Note on or after the Interest Record Date and before the date of redemption or purchase.

All Notes issued upon any transfer or exchange of Notes shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange.

Claims against the Company for the payment of principal of, premium, if any, or interest on the Notes will become void unless presentation for payment is made as required in this Indenture within a period of six years.

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Section 2.06. Book-entry Provisions for Global Notes. (a) Each Global Note authenticated under this Indenture shall be deposited with the Common Depositary and registered in the name of the Common Depositary or its nominee for the accounts of Euroclear and Clearstream. Ownership of beneficial interests in the Global Notes (the “book-entry interests”) will be limited to persons that have accounts with the Common Depositary or persons that may hold interests through Euroclear and Clearstream, or any member of, or participant in, the Common Depositary (collectively, the “Agent Members”). Book-entry interests will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by the Common Depositary and its participants. Except as provided in Section 2.04(e), the book-entry interests will not be held in definitive form. Instead, the Common Depositary will credit on its book-entry registration and transfer systems a participant’s account with the interest beneficially owned by such participant. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. The foregoing limitations may impair the ability to own, transfer or pledge book-entry interests.

Agent Members shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Common Depositary, or a member of, or participant in, the Common Depositary, or under the Global Notes, and the Common Depositary may be treated by the Company, the Trustee and any agent of any of them as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of any of them, from giving effect to any written certification, proxy or other authorization furnished by the Common Depositary or impair, as between the Common Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Global Note.

(b)       Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Common Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred, and transfers increasing or decreasing the aggregate principal amount of Global Notes may be conducted only in accordance with the rules and procedures of Euroclear and Clearstream. In addition, Certificated Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in any Global Note, only under the circumstances set forth in Section 2.04(e).

(c)       Any beneficial interest in one of the Global Notes that is transferred to a Person who takes delivery in the form of an interest in the other Global Note will, upon transfer, cease to be an interest in such Global Notes and become an interest in the other Global Notes and, accordingly, will thereafter be subject to all transfer restrictions. if any, and other procedures applicable to beneficial interests in such other Global Notes for as long as it remains such an interest.

(d)       In connection with the transfer of an entire Global Note to beneficial owners pursuant to Section 2.06(b), the Global Note shall be deemed to be surrendered to the Paying and Transfer Agent for cancellation, and the Company shall execute, and the Registrar shall authenticate and deliver, to each beneficial owner identified by the Common Depositary in exchange for its beneficial interest in the Global Note, as the case may be, an equal aggregate principal amount of Certificated Notes of authorized denominations.

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(e)       The registered holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

Section 2.07. [Reserved]

Section 2.08. Mutilated, Defaced, Destroyed, Stolen and Lost Notes. (a) The Company shall execute and deliver to the Trustee Certificated Notes in such amounts and at such times as to enable the Trustee to fulfill its responsibilities under this Indenture and the Notes.

(b)       In case any Note shall become mutilated, defaced or be apparently destroyed, lost or stolen, upon the request of the registered holder thereof, the Company in its discretion may execute, and, upon the written request of Authorized Officers of the Company, the Registrar shall authenticate and deliver, a new Note (with each Subsidiary Guarantee endorsed thereon), bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Note, or in lieu of and substitution for the Note so apparently destroyed, lost or stolen. In every case the applicant for a substitute Note shall furnish to the Company, the Subsidiary Guarantors and the Trustee, and any agent of the Company, the Subsidiary Guarantors or the Trustee such security and/or indemnity as may be required by each of them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Note and of the ownership thereof. Upon the issuance of any substitute Note, such Holder, if so requested by the Company, the Subsidiary Guarantors or the Trustee, or any agent thereof, will pay a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent(s)) connected with the preparation and issuance of the substitute Note. The Trustee is hereby authorized, in accordance with and subject to the foregoing conditions in this clause (b), to authenticate and deliver, or cause the authentication and delivery of, from time to time, Notes (with each Subsidiary Guarantee endorsed thereon) in exchange for or in lieu of Notes (with each Subsidiary Guarantee endorsed thereon), respectively, which become mutilated, defaced, destroyed, stolen or lost. Each Note delivered in exchange for or in lieu of any Note shall carry all the rights to principal, premium (if any), interest (including rights to accrued and unpaid interest and Additional Amounts) which were carried by such Note.

(c)       Mutilated or defaced Certificated Notes must be surrendered before replacements will be issued. In the event any such mutilated, defaced, destroyed, lost or stolen certificate has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new certificate, pay such Notes.

Section 2.09. Further Issues. Subject to ‎Article 4 and in accordance with the terms of this Indenture, the Company may, from time to time, without notice to or the consent of the Holders, create and issue additional Notes having the same terms and conditions as the Notes (including the benefit of the Subsidiary Guarantees) in all respects (or in all respects except for the issue date, issue price and the first interest period and, to the extent necessary, certain temporary securities law transfer restrictions) (such Notes, the “Additional Notes”) so that such Additional Notes may be consolidated and form a single class with the previously outstanding Notes and vote together as one class on all matters with respect to the Notes; provided that the issuance of any such Additional Notes shall then be permitted under Section 4.05. In connection with any such issuance of Additional Notes, the Company shall deliver an Officers’ Certificate to the Trustee and the Registrar directing the Registrar to authenticate and deliver Additional Notes in an aggregate principal amount specified therein and the Registrar, in accordance with such Officers’ Certificate, shall authenticate and deliver such Additional Notes. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited.

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Section 2.10. Cancellation of Notes; Disposition Thereof. All Notes surrendered for payment, redemption, registration of transfer or exchange, if surrendered to the Company or the Trustee, shall be delivered to the Paying and Transfer Agent for cancellation or, if surrendered to the Paying and Transfer Agent, shall be canceled by it; and no Notes shall be issued in lieu thereof, except as expressly permitted by any of the provisions of this Indenture. The Paying and Transfer Agent shall dispose of canceled Notes held by it in accordance with its customary procedures, and (upon the written request of the Company) deliver a certificate of disposition to the Company. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are delivered to the Paying and Transfer Agent for cancellation.

Section 2.11. ISIN or Common Code Numbers. The Company in issuing the Notes may use “ISIN or Common Code” numbers (if then generally in use), and, if so, the Trustee and the Paying and Transfer Agent shall use for the Notes “ISIN or Common Code” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee and the Paying and Transfer Agent of any change in the “ISIN or Common Code” numbers.

Article 3
Redemption

Section 3.01. Redemption for Taxation Reasons. (a) The Notes may be redeemed at the option of the Company or a Surviving Person, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to the Holders and the Trustee (which notice shall be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Company or the Surviving Person, as the case may be, for redemption (the “Tax Redemption Date”) if, as a result of:

(1) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction affecting taxation; or

(2) any change in the existing official position or the stating of an official position regarding the application or interpretation of such laws, regulations, or rulings (including a holding, judgment or order by a court of competent jurisdiction),

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which change or amendment is announced and becomes effective (i) except as described in (ii) immediately below, on or after the Original Issue Date, or (ii) with respect to any Future Subsidiary Guarantor or Surviving Person, on or after the date such Future Subsidiary Guarantor or Surviving Person becomes a Subsidiary Guarantor or a Surviving Person (the “Assumption Date”) if such Person’s Relevant Taxing Jurisdiction had not been a Relevant Taxing Jurisdiction prior to the relevant Assumption Date, with respect to any payment due or to become due under the Notes or this Indenture, the Company, a Surviving Person or a Subsidiary Guarantor, as the case may be, is, or on the next Interest Payment Date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the taking of reasonable measures by the Company, a Surviving Person or a Subsidiary Guarantor, as the case may be; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company, a Surviving Person or a Subsidiary Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

(b)       Prior to the mailing of any notice of redemption of the Notes pursuant to Section 3.01(a), the Company (or a Surviving Person) or a Subsidiary Guarantor, as the case may be, will deliver to the Trustee at least 30 days but not more than 60 days before the Tax Redemption Date:

(1) an Officers’ Certificate stating that such change or amendment referred to in Section 3.01(a) has occurred, describing the facts related thereto and stating that such requirement cannot be avoided by the Company (or a Surviving Person) or a Subsidiary Guarantor, as the case may be, by taking reasonable measures available to it; and

(2) an Opinion of Counsel or an opinion of a tax consultant, in either case of recognized standing with respect to tax matters of the Relevant Taxing Jurisdiction, stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in Section 3.01(a).

The Trustee shall be entitled to accept, without liability, such certificate and opinion as conclusive evidence of the satisfaction of the conditions precedent described above, in which event it shall be conclusive and binding on the Holders.

(c)       Any Notes that are redeemed will be cancelled.

Section 3.02. Optional Redemption.

(a)       At any time on or after August 14, 2020, the Company may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, to (but not including) the redemption date, if redeemed during the 12-month period commencing on August 14 of any year set forth below:

Period	Redemption Price
2020		102.938%
2021 and thereafter		101.469%

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(b)       At any time prior to August 14, 2020, the Company may, at its option, redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the Applicable Premium.

(c)       In addition, at any time prior to August 14, 2020, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price of 105.875% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering.

(d)       The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption. If less than all of the Notes are to be redeemed at any time, the Notes will be selected for redemption as follows:

(i)       if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or, if the Notes are held through the clearing systems, in compliance with the requirements of the applicable clearing systems; or

(ii)       if the Notes are not listed on any national securities exchange or held through the clearing systems, on a pro rata basis, by lot or by such other method as the Trustee in its sole and absolute discretion shall deem to be fair and appropriate unless otherwise required by applicable law.

(e)       Notice of redemption may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent.

(f)       No Note of US$200,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. With respect to any Certificated Note, a new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption.

(g)       If the Company elects to redeem the Notes pursuant to the optional redemption provisions of Section 3.02 hereof, the Company shall, at least five Business Days (or such shorter period as agreed between the Company and the Trustee) prior to the date when the notice of redemption is sent to the Holders, notify the Trustee of such proposed redemption date and of the principal amount of the Notes to be redeemed; provided, however, that (1) such notification will be in writing and may be sent to the Trustee via facsimile; (2) such notification shall not be irrevocable; (3) the proposed redemption date and the principal amount of the Notes to be redeemed are subject to further amendment by the Company before notice of redemption is sent to the Holders in accordance with this Indenture; and (4) the Company furnishes to the Trustee along with the notice of redemption, an Officers’ Certificate setting forth:

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(i)       the clause of this Indenture pursuant to which the redemption shall occur;

(ii)       the redemption date;

(iii)       the principal amount of the Notes to be redeemed; and

(iv)       the redemption price.

Section 3.03. Method and Effect of Redemption. (a) The notice of redemption will identify the Notes to be redeemed and will include or state the following:

(i)       the clause of this Indenture pursuant to which the redemption shall occur;

(ii)       the redemption date;

(iii)       the redemption price, including the portion thereof representing any accrued interest;

(iv)       the place or places where Notes are to be surrendered for redemption;

(v)       Notes called for redemption must be so surrendered in order to collect the redemption price;

(vi)       on the redemption date the redemption price will become due and payable on Notes called for redemption, and interest on Notes called for redemption will cease to accrue on and after the redemption date; and

(vii)       if any Note contains an ISIN or Common Code number, no representation is being made as to the correctness of the ISIN or Common Code number either as printed on the Notes or as contained in the notice of redemption and that the Holder should rely only on the other identification numbers printed on the Notes.

(b)       Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the redemption date, and upon surrender of the Notes called for redemption, the Company shall redeem such Notes at the redemption price. On and after the redemption date, interest will cease to accrue on the Notes or portions of them called for redemption. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

Section 3.04. Repurchases and Cancellation of Notes. The Company or any Subsidiary Guarantor may purchase Notes in the open market or by tender or by any other means at any price, so long as such acquisition does not otherwise violate the terms of the Indenture; provided that all Notes redeemed or repurchased by the Company or such Subsidiary Guarantor may not be reissued or resold.

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Article 4
Covenants

Section 4.01. Payment of Notes. (a) The Company will pay the principal of, any premium on (if any) and interest, and Additional Amounts, if any, on the Notes on the dates and in the manner provided in the Notes and this Indenture. Not later than 11:00 a.m. (Hong Kong time) one Business Day prior to the Interest Payment Date, the due date of any principal on any Notes or the Tax Redemption Date pursuant to Section 3.01 (each a “Payment Date”), the Company will pay or cause to be paid to the account of the Paying and Transfer Agent at the Principal Office, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, in immediately available funds, an amount which shall be sufficient to pay the aggregate amount of principal, interest or premium or all of such amounts, as the case may be, becoming due in respect of the Notes on such Payment Date; provided that if the Company or any Affiliate of the Company is acting as Paying and Transfer Agent, it shall, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in this Indenture. In each case, the Company shall promptly notify the Trustee and the Paying and Transfer Agent of its compliance with this Section 4.01. The Company shall procure that, before 9:00 a.m. (London time) on the third Business Day before each Payment Date, the bank effecting payment for it has confirmed by electronic mail and PDF instructions attached to the Paying and Transfer Agent the payment instructions relating to such payment. The Trustee (or the Paying and Transfer Agent) shall not be liable to account for interest on money paid to it by the Company. Monies held by the Trustee or the Paying and Transfer Agent need not be segregated from other funds held by them, except as required by law.

(b)       An installment of principal, premium or interest will be considered paid on the date due if the Paying and Transfer Agent, other than the Company or any Affiliate of the Company, holds on that date money designated for and sufficient to pay the installment. If the Company or any Affiliate of the Company acts as Paying and Transfer Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders.

(c)       The Paying and Transfer Agent, which will include the Company or any Affiliate of the Company if it is acting as Paying and Transfer Agent, will make payments in respect of the Notes represented by the Global Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Global Notes. With respect to Certificated Notes, the Paying and Transfer Agent will make all payments by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing (at the expense of the Company if the Company or any Affiliate of the Company is acting as paying agent) a check to each Holder’s registered address; provided that if the Company or any Affiliate of the Company is acting as Paying and Transfer Agent, it shall make such payment to the Holders as specified above. The Trustee (or the Paying and Transfer Agent) shall not be required to make any payments in respect of the Notes pursuant to this Indenture until it has received full payment of the relevant amounts in immediately available and cleared funds from the Company.

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(d)       At least 30 days prior to the first Payment Date and, if there has been any change with respect to the matters set forth in the below-mentioned certificate, at least 30 days prior to each Payment Date thereafter, the Company shall furnish the Paying and Transfer Agent with an Officers’ Certificate instructing the Paying and Transfer Agent as to any circumstances in which payments of principal of, or interest or premium on, the Notes due on such date shall be subject to deduction or withholding for, or on account of, any Taxes described in Section 4.21 and the rate of any such deduction or withholding. If any such deduction or withholding shall be required and if the Company therefore becomes liable to pay Additional Amounts, if any, pursuant to Section 4.21 then at least 30 days prior to each Payment Date, the Company shall furnish the Paying and Transfer Agent with a certificate which specifies the amount required to be withheld on such payment to Holders of the Notes, and the Additional Amounts, if any, due to the Holders of the Notes, and at least one Business Day prior to such Payment Date, will pay to the Paying and Transfer Agent such Additional Amounts, if any, as shall be required to be paid to such Holders.

(e)       Whenever the Company appoints a Paying and Transfer Agent other than the Trustee for the purpose of paying amounts due in respect of the Notes, it will cause such Paying and Transfer Agent to execute and deliver to the Trustee an instrument substantially in the form of Exhibit D hereof in which such agent shall agree with the Company, among other things, to be bound by and observe the provisions of this Indenture (including the Notes). The Company shall cause each Paying and Transfer Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying and Transfer Agent shall agree with the Trustee,

(i)       that it will hold all sums received by it as such Paying and Transfer Agent for the payment of the principal of, or premium or interest on, the Notes (whether such sums have been paid to it by or on behalf of the Company or by any other obligor on the Notes or the Subsidiary Guarantees) for the benefit of the Holders or of the Trustee;

(ii)       that it will as soon as possible give the Trustee written notice of any failure by the Company (or by any other obligor on the Notes or the Subsidiary Guarantees) to make any payment of the principal of, or premium or interest on, the Notes and any other payments to be made by or on behalf of the Company under this Indenture, when the same shall be due and payable; and

(iii)       that it will pay any such sums so held by it to the Trustee upon the Trustee’s written request at any time during the continuance of a failure referred to in clause (ii) above.

Anything in this Section 4.01 to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held by the Company or any Paying and Transfer Agent hereunder, as required by this Section 4.01 and such sums shall be held by the Trustee upon the trusts herein contained. If the Paying and Transfer Agent shall pay all sums held to the Trustee as required under this Section 4.01, the Paying and Transfer Agent shall have no further liability for the money so paid over to the Trustee.

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Anything in this Section 4.01 to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section 4.01 are subject to the provisions of Section 8.04.

Section 4.02. Maintenance of Office or Agency. (a) The Company will maintain in the Borough of Manhattan, the City of New York or in Hong Kong, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company hereby initially designates the Principal Office as such office of the Company. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served to the Trustee.

(b)       The Company may also from time to time designate one or more other offices or agencies where the Notes may be surrendered or presented for any of such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each place where principal of, and interest or premium on, any Notes are payable. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

(c)       The Company has initially appointed the Paying and Transfer Agent and Registrar listed in Exhibit G.

(d)       So long as any of the Notes remain outstanding, each of the Subsidiary Guarantors will maintain in the Borough of Manhattan, the City of New York or in Hong Kong an office or agency where notices and demands to or upon each of the Subsidiary Guarantors in respect of the Notes and the Subsidiary Guarantee or this Indenture may be served. Each of the Subsidiary Guarantors hereby initially designates the Principal Office as the office or agency for each such purpose. In case any of the Subsidiary Guarantors shall fail to maintain any such office or agency or shall fail to give notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Trustee’s office.

Section 4.03. Government Approvals and Licenses; Compliance with Law. The Company will, and will cause each Restricted Subsidiary to, (a) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Businesses, (b) preserve and maintain good and valid title to its properties and assets (including land-use rights) free and clear of any Liens other than Permitted Liens; and (c) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure so to obtain, maintain, preserve and comply with would not reasonably be expected to have a material adverse effect on (i) the business, results of operations or prospects of the Company and its Restricted Subsidiaries, taken as a whole, or (ii) the ability of the Company or any Subsidiary Guarantor to perform its obligations under the Notes, this Indenture or the relevant Subsidiary Guarantee.

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Section 4.04. Payment of Taxes and other Claims. The Company will pay or discharge, and cause each of its Subsidiaries to pay or discharge before the same become delinquent (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or its income or profits or property and (b) all material lawful claims for labor, materials and supplies that, if unpaid, would by law become a Lien upon the property of the Company or any Subsidiary, other than any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the financial statements of the Company and the Subsidiaries.

Section 4.05. Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness (including Acquired Indebtedness); provided that the Company and any Subsidiary Guarantor may Incur Indebtedness (including Acquired Indebtedness) and any Non-Guarantor Subsidiary may Incur Permitted Subsidiary Indebtedness (including Acquired Indebtedness) if, after giving effect to the Incurrence of such Indebtedness or Permitted Subsidiary Indebtedness and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio would not be less than 2.5 to 1.0. Notwithstanding the foregoing, the Company will not permit any Restricted Subsidiary to Incur any Disqualified Stock (other than Disqualified Stock held by the Company or a Subsidiary Guarantor, so long as it is so held).

(b)        Notwithstanding the foregoing, the Company and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following:

(i)       Indebtedness under the Notes (excluding any Additional Notes) and each Subsidiary Guarantee;

(ii)       Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under Section 4.05(b)(iii); provided that such Indebtedness of Non-Guarantor Subsidiaries under this Section 4.05(b)(ii) shall be included in the calculation of Permitted Subsidiary Indebtedness;

(iii)       Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Restricted Subsidiary; provided that, (1) any event which results in (x) any Restricted Subsidiary to which such Indebtedness is owed ceasing to be a Restricted Subsidiary or (y) any subsequent transfer of such Indebtedness (other than to the Company or any Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this Section 4.05(b)(iii) and (2) if the Company is the obligor on such Indebtedness (and none of the Subsidiary Guarantors is the obligee), such Indebtedness must expressly be subordinated in right of payment to the Notes, and if any Subsidiary Guarantor is the obligor on such Indebtedness (and neither the Company nor any other Subsidiary Guarantor is the obligee), such Indebtedness must be expressly subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor;

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(iv)       Indebtedness (“Permitted Refinancing Indebtedness”) of the Company or any Restricted Subsidiary issued in exchange for, or the net proceeds of which are used to refinance or refund, replace, exchange, renew, repay, redeem, defease, discharge or extend (collectively, “refinance” and “refinances” and “refinanced” shall have correlative meanings), then outstanding Indebtedness (or Indebtedness that is no longer outstanding but that is refinanced substantially concurrently with the Incurrence of such Permitted Refinancing Indebtedness) Incurred under the proviso in Section 4.05(a) above or Section 4.05(b)(i), Section 4.05(b)(ii), Section 4.05(b)(iv), Section 4.05(b)(xi), Section 4.05(b)(xiii), Section 4.05(b)(xiv), Section 4.05(b)(xv), Section 4.05(b)(xvi) or Section 4.05(b)(xix) and any refinancings thereof in an amount not to exceed the amount so refinanced (plus premiums, accrued interest, fees and expenses); provided that (1) Indebtedness the proceeds of which are used to refinance the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or any Subsidiary Guarantee shall only be permitted under this Section 4.05(b)(iv) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or any Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or such Subsidiary Guarantee, as the case may be, or (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or any Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee, as the case may be, at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee, as the case may be, (2) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the earlier of the final maturity date of the Notes and the Stated Maturity of the Indebtedness to be refinanced, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or more than 180 days after the final maturity date of the Notes, and (3) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor;

(v)       Indebtedness Incurred by the Company or any Restricted Subsidiary pursuant to Hedging Obligations designed solely to protect the Company or any Restricted Subsidiary from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

(vi)       any Pari Passu Guarantee;

(vii)       Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, that, this Indebtedness is extinguished within five Business Days of Incurrence;

(viii)       Indebtedness of the Company or any Restricted Subsidiary in respect of workers’ compensation claims and claims arising under similar legislation, regulation or rule or in connection with self-insurance or similar requirements, in each case, in the ordinary course of business;

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(ix)       Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn-out or other similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Company or any Restricted Subsidiary pursuant to such agreements, in each case, Incurred or assumed in connection with the disposition of any business or assets of the Company or of a Restricted Subsidiary, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of any of the Company’s or a Restricted Subsidiary’s business or assets for the purpose of financing an acquisition; provided that the maximum assumable liability in respect of all this Indebtedness shall at no time exceed the gross proceeds actually received by the Company and/or the relevant Restricted Subsidiary in connection with the disposition;

(x)       obligations with respect to letters of credit, bid, performance and surety bonds, completion guarantees or similar instruments provided by the Company or any Restricted Subsidiary securing obligations, entered into in the ordinary course of business, to the extent the letters of credit, bonds, guarantees or instruments are not drawn upon or, if and to the extent drawn upon is honored in accordance with its terms and, if to be reimbursed, is reimbursed no later than 30 days following receipt of a demand for reimbursement following payment on the letter of credit, bond, guarantee or instrument;

(xi)       Indebtedness of the Company or any Restricted Subsidiary incurred in the ordinary course of business:

(A) representing Capitalized Lease Obligations; or

(B) constituting purchase money Indebtedness incurred to finance all or any part of the purchase price of equipment, property or assets (including Vehicles) of the Company or any Restricted Subsidiary (including the purchase of Capital Stock of any Person holding such equipment, property or assets that is, or will upon such purchase become, a Restricted Subsidiary) or the cost of development, construction or improvement of equipment, property or assets to be used in the ordinary course of a Permitted Business by the Company or a Restricted Subsidiary;

provided that, (1) such purchase money Indebtedness shall not exceed the purchase price of such equipment, property or assets so acquired, (2) such purchase money Indebtedness shall be Incurred no later than 180 days after the acquisition of such equipment, property or assets or the completion of the development, construction or improvement of such equipment, property or assets, as the case may be, and (3) on the date of the Incurrence of any Indebtedness permitted by this clause, and after giving effect thereto, the sum of (x) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this Section 4.05(b)(xi) (together with any refinancings thereof) plus (y) the aggregate principal amount outstanding of all Indebtedness Incurred under Section 4.05(b)(xiii), Section 4.05(b)(xiv), Section 4.05(b)(xv) and Section 4.05(b)(xvi) (together with any refinancings thereof) does not exceed an amount equal to 30% of Total Assets;

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(xii)       Guarantees by the Company and any Restricted Subsidiary of any Indebtedness of the Company or any Restricted Subsidiary; provided that, the Indebtedness guaranteed is permitted to be Incurred under this Indenture (including Section 4.10);

(xiii)       Indebtedness of the Company or any Restricted Subsidiary with a maturity of one year or less used by the Company or any Restricted Subsidiary for working capital; provided that, on the date of the Incurrence of any such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this Section 4.05(b)(xiii) (together with any refinancings thereof) plus (2) the aggregate principal amount outstanding of all Indebtedness Incurred under Section 4.05(b)(xi), Section 4.05(b)(xiv), Section 4.05(b)(xv) and Section 4.05(b)(xvi) (together with any refinancings thereof) does not exceed an amount equal to 30% of Total Assets;

(xiv)       Bank Deposit Secured Indebtedness Incurred by the Company or any Restricted Subsidiary; provided that, on the date of the Incurrence of any such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this Section 4.05(b)(xiv) (together with any refinancings thereof) plus (2) the aggregate principal amount outstanding of all Indebtedness Incurred under Section 4.05(b)(xi), Section 4.05(b)(xiii), Section 4.05(b)(xv) and Section 4.05(b)(xvi) (together with any refinancings thereof) does not exceed an amount equal to 30% of Total Assets;

(xv)       Indebtedness Incurred by the Company or any Restricted Subsidiary constituting a Guarantee of Indebtedness of any Person (other than a Restricted Subsidiary) by the Company or such Restricted Subsidiary, provided that, on the date of the Incurrence of any such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this Section 4.05(b)(xv) (together with any refinancings thereof) plus (2) the aggregate principal amount outstanding of all Indebtedness Incurred under Section 4.05(b)(xi), Section 4.05(b)(xiii), Section 4.05(b)(xiv) and Section 4.05(b)(xvi) (together with any refinancings thereof) does not exceed an amount equal to 30% of Total Assets;

(xvi)       Acquired Indebtedness of any Restricted Subsidiary Incurred and outstanding on the date on which such Restricted Subsidiary became a Restricted Subsidiary (other than Indebtedness Incurred (i) to provide all or any portion of the funds utilized to consummate the transaction or series of transactions pursuant to which a Person becomes a Restricted Subsidiary or (ii) otherwise in contemplation of a Person becoming a Restricted Subsidiary or any such acquisition); provided that, on the date of the Incurrence of any such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this Section 4.05(b)(xvi) (together with any refinancings thereof) plus (2) the aggregate principal amount outstanding of all Indebtedness Incurred under Section 4.05(b)(xi), Section 4.05(b)(xiii), Section 4.05(b)(xiv) and Section 4.05(b)(xv) (together with any refinancings thereof) does not exceed an amount equal to 30% of Total Assets;

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(xvii)       Indebtedness (A) Incurred by a Special Purpose Subsidiary secured by a Lien on all or part of the assets disposed of in connection with a Financing Disposition or (B) otherwise Incurred in connection with a Special Purpose Financing; provided that (1) such Indebtedness is not recourse to the Company or any Restricted Subsidiary that is not a Special Purpose Subsidiary (other than with respect to Special Purpose Financing Undertakings), (2) in the event such Indebtedness shall become recourse to the Company or any Restricted Subsidiary that is not a Special Purpose Subsidiary (other than with respect to Special Purpose Financing Undertakings), such Indebtedness will be deemed to be, and must be classified by the Company as, Incurred at such time (or at the time initially Incurred) under one or more of the other provisions of this Section 4.05 for so long as such Indebtedness shall be so recourse;

(xviii)       any customary cash management, cash pooling or netting or setting off arrangements in the ordinary course of business; and

(xix)          Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount outstanding at any time (together with any refinancings thereof) not to exceed the greater of US$35.0 million (or the Dollar Equivalent thereof) and an amount equal to 3.0% of Total Assets.

(c)         For purposes of determining compliance with this Section 4.05, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, including Indebtedness Incurred under the proviso in Section 4.05(a), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness in one or more types of Indebtedness described above.

(d)         For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness this Section 4.05, the Dollar Equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of this Section 4.05, the maximum amount of Indebtedness that may be Incurred pursuant to this Section 4.05 will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

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Section 4.06. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in clauses (i) through (iv) below being collectively referred to as “Restricted Payments”):

(i)       declare or pay any dividend or make any distribution on or with respect to the Company’s or any Restricted Subsidiary’s Capital Stock (other than dividends or distributions payable or paid solely in shares of the Company’s or such Restricted Subsidiary’s Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Restricted Subsidiary;

(ii)       purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Restricted Subsidiary or any direct or indirect parent of the Company (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Persons other than the Company or any Restricted Subsidiary;

(iii)       make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Subordinated Indebtedness (excluding any intercompany Indebtedness between or among the Company and any Restricted Subsidiary); or

(iv)       make any Investment, other than a Permitted Investment;

if, at the time of, and after giving effect to, the proposed Restricted Payment:

(A)       a Default has occurred and is continuing or would occur as a result of such Restricted Payment;

(B)       the Company could not Incur at least US$1.00 of Indebtedness under the proviso in Section 4.05(a); or

(C)       such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and the Restricted Subsidiaries after the Measurement Date, shall exceed the sum (without duplication) of:

(1)       50% of the aggregate amount of the Consolidated Net Income of the Company (or, if the Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter during which the Measurement Date occurred and ending on the last day of the Company’s most recently ended fiscal quarter for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner and which may include internal consolidated financial statements) are available; plus

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(2)       100% of the aggregate Net Cash Proceeds received by the Company after the Measurement Date as a capital contribution to its common equity by, or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including any such Net Cash Proceeds received upon (A) the conversion by a Person who is not a Subsidiary of the Company of any Indebtedness (other than Subordinated Indebtedness) of the Company into Capital Stock (other than Disqualified Stock) of the Company, or (B) the exercise by a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock), in each case, after deducting the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus

(3)       the amount by which Indebtedness of the Company or any Restricted Subsidiary is reduced on the Company’s consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Measurement Date of any Indebtedness of the Company or any Restricted Subsidiary convertible or exchangeable into Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Company upon such conversion or exchange); provided, however, that the foregoing amount shall not exceed the Net Cash Proceeds received by the Company or any Restricted Subsidiary from the Incurrence of such Indebtedness; plus

(4)       an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after the Measurement Date in any Person resulting from (A) payments of interest on Indebtedness, dividends or repayments of loans or advances by such Person, in each case, to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated Net Income) after the Measurement Date, (B) the unconditional release of a Guarantee provided by the Company or a Restricted Subsidiary after the Measurement Date of an obligation of another Person, (C) to the extent that an Investment made after the Measurement Date is sold or otherwise liquidated or repaid for cash, the lesser of (x) cash return of capital with respect to such Investment (less the cost of disposition, if any) and (y) the initial amount of such Investment, (D) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments (other than Permitted Investments) made by the Company or a Restricted Subsidiary after the Measurement Date in any such Person, or (E) such Person becoming a Restricted Subsidiary but only to the extent such Investments made by the Company or any Restricted Subsidiary in such Person prior to such Person becoming a Restricted Subsidiary was a Restricted Payment made to the extent permitted under this Section 4.06(a)(iv)(C).

(b)       The foregoing provision shall not be violated by reason of:

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(i)       the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with Section 4.06(a);

(ii)       the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any Subsidiary Guarantor with the Net Cash Proceeds of, or in exchange for, a substantially concurrent Incurrence of Permitted Refinancing Indebtedness;

(iii)       the redemption, repurchase or other acquisition of Capital Stock of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from Section 4.06(a)(iv)(C)(2);

(iv)       the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any Subsidiary Guarantor in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent capital contribution or a sale (other than to a Subsidiary of the Company) of, shares of the Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from Section 4.06(a)(iv)(C)(2);

(v)       (x) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable or (y) the redemption, repurchase, defeasance or other acquisition by a Restricted Subsidiary of any shares of its Capital Stock (including options, warrants or other rights to acquire such shares of Capital Stock), in each case, on a pro rata basis or on a basis more favorable to the Company, to all holders of any class of Capital Stock of such Restricted Subsidiary, at least a majority of which is held, directly or indirectly through Restricted Subsidiaries, by the Company;

(vi)       (x) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Company; provided that, any such cash payment shall not be for the purpose of evading the limitation of this Section 4.06 (as determined in good faith by the Board of Directors of the Company) and (y) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof;

(vii)       the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary held by an employee benefit plan of the Company or any Restricted Subsidiary, any current or former officer, director, consultant, or employee of the Company or any Restricted Subsidiary (or permitted transferees, estates or heirs of any of the foregoing); provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock may not exceed US$5.0 million (or the Dollar Equivalent thereof using the Original Issue Date as the date of determination) in any calendar year;

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(viii)       any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of (x) Disqualified Stock of the Company made by exchange for or out the Net Cash Proceeds of the substantially concurrent sale of Disqualified Stock of the Company or (y) Preferred Stock of a Restricted Subsidiary made by exchange for or out the Net Cash Proceeds of the substantially concurrent sale of Preferred Stock of a Restricted Subsidiary, that, in each case, is permitted to be incurred pursuant to Section 4.05; provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from Section 4.06(a)(iv)(C); or

(ix)       any Restricted Payment in an aggregate amount, taken together with all other Restricted Payments made in reliance on this Section 4.06(b)(ix), not to exceed US$25.0 million (or the Dollar Equivalent thereof);

provided that, in the case of Section 4.06(b)(ii), Section 4.06(b)(iii) and Section 4.06(b)(iv), no Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein. All Restricted Payments made pursuant to this Section 4.06(b) (other than those made pursuant to Section 4.06(b)(i)) shall be excluded in calculating whether the conditions of Section 4.06(a)(iv)(C) have been met with respect to any subsequent Restricted Payments.

The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this Section 4.06 will be the Fair Market Value. The Board of Directors’ determination of the Fair Market Value of a Restricted Payment (other than cash) or any such assets or securities (other than cash) must be based upon an opinion or an appraisal issued by an accounting, appraisal or investment banking firm of recognized international standing if the Fair Market Value exceeds US$15.0 million (or the Dollar Equivalent thereof).

Not later than the date of making any Restricted Payment (other than those made pursuant to Section 4.06(b)(v), Section 4.06(b)(vi), Section 4.06(b)(vii) and Section 4.06(b)(ix)) in excess of US$10.0 million (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.06 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture.

For purpose of determining compliance with this Section 4.06, in the event that an item of Investment meets the criteria of both Section 4.06(a) and clause (19) of the definition of “Permitted Investment” at any time, the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Investment in any one or more of such paragraphs.

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Section 4.07. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind, whether owned at the Original Issue Date or thereafter acquired, except Permitted Liens, unless the Notes are (or, in respect of any Lien on any Subsidiary Guarantor’s property or assets, any Subsidiary Guarantee of such Restricted Subsidiary is) secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the obligation or liability secured by such Lien, for so long as such obligation or liability is secured by such Lien.

Section 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. (a) Except as provided below, the Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

(i)       pay dividends or make any other distribution on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary;

(ii)       pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary;

(iii)       make loans or advances to the Company or any other Restricted Subsidiary; or

(iv)       sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary;

provided that it being understood that (i) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on Common Stock; (ii) the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary; and (iii) the provisions contained in documentation governing Indebtedness requiring transactions between or among the Company and any Restricted Subsidiary or between or among any Restricted Subsidiary to be on fair and reasonable terms or on an arm’s length basis, in each case, shall not be deemed to constitute such an encumbrance or restriction.

(b)       The provisions of Section 4.08(a) do not apply to any encumbrances or restrictions:

(i)       existing in agreements as in effect on the Original Issue Date, or in the Notes, the Subsidiary Guarantees or this Indenture or under any Pari Passu Guarantee, or any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that, the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(ii)       existing under or by reason of applicable law, rule, regulation or order;

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(iii)       with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(iv)       that otherwise would be prohibited under Section 4.08(a)(iv) if they arise, or are agreed to, in the ordinary course of business, and that (a) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license, (b) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture or (c) do not relate to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of the property or assets of the Company or any Restricted Subsidiary in any material respect;

(v)       with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by Section 4.05, Section 4.09 and Section 4.13;

(vi)       with respect to any Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the Incurrence of Indebtedness permitted under Section 4.05(b)(xi), Section 4.05(b)(xiv), Section 4.05(b)(xv), Section 4.05(b)(xvi), Section 4.05(b)(xvii) and Section 4.05(b)(xix) if, as determined by the Board of Directors, the encumbrances or restrictions are (A) customary for such type of agreement and (B) would not, at the time agreed to, be expected to materially and adversely affect the ability of the Company or any Subsidiary Guarantor to make required payment on the Notes or its Subsidiary Guarantee, as the case may be, and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(vii)       existing in customary provisions in shareholders agreements, joint venture agreements and other similar agreements permitted under this Indenture, to the extent such encumbrance or restriction relates to the activities or assets of a Restricted Subsidiary that is a party to such joint venture and if (as determined in good faith by the Board of Directors) (i) the encumbrances or restrictions are customary for a joint venture or similar agreement of that type and (ii) the encumbrances or restrictions would not, at the time agreed to, be expected to materially and adversely affect (x) the ability of the Company to make the required payments on the Notes, or (y) any Subsidiary Guarantor to make required payments under its Subsidiary Guarantee;

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(viii)       customary provisions contained in agreements evidencing Liens incurred in accordance with Section 4.07 that limit the right of the debtor to dispose of the assets which are subject to the Liens;

(ix)       restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; or

(x)       existing with respect to any Unrestricted Subsidiary or the property or assets of such Unrestricted Subsidiary that is designated as a Restricted Subsidiary in accordance with the terms of this Indenture at the time of such designation and not incurred in contemplation of such designation, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Unrestricted Subsidiary or its subsidiaries or the property or assets of such Unrestricted Subsidiary or its subsidiaries, and any extensions, refinancing, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced.

Section 4.09. Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries. The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including in each case, options, warrants or other rights to purchase shares of such Capital Stock) except:

(a)       to the Company or a Wholly Owned Restricted Subsidiary or, in the case of a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, pro rata to its shareholders or incorporators or on a basis more favorable to the Company;

(b)       to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary;

(c)       the issuance or sale of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such issuance or sale); provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds of such issuance or sale in accordance with Section 4.13 to the extent required thereunder; and

(d)       the issuance or sale of Capital Stock of a Restricted Subsidiary if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer be a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under Section 4.06 if made on the date of such issuance or sale; provided that the Company complies with Section 4.13 to the extent required thereunder.

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Section 4.10. Limitation on Issuances of Guarantees by Restricted Subsidiaries. (a) The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to Guarantee any Indebtedness (“Guaranteed Indebtedness”) of the Company or any Subsidiary Guarantor, unless (1)(x) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for an unsubordinated Subsidiary Guarantee of payment of the Notes by such Restricted Subsidiary and (y) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until the Notes have been paid in full or (2) such Guarantee and such Guaranteed Indebtedness are permitted by Section 4.05(b)(ii), Section 4.05(b)(iii) or Section 4.05(b)(xiv) (in the case of Section 4.05(b)(xiv), with respect to the Guarantee provided by the Company or any Restricted Subsidiary through the pledge of one or more bank accounts to secure any Bank Deposit Secured Indebtedness) or Section 4.05(b)(iv) to the extent such Permitted Refinancing Indebtedness is in respect of a Guarantee and Guaranteed Indebtedness Incurred pursuant to Section 4.05(b)(ii) or Section 4.05(b)(xiv), as applicable.

(b)       If the Guaranteed Indebtedness (i) ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness will rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or (ii) is subordinated in right of payment to the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness will be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary Guarantee.

Section 4.11. Limitation on Sale and Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction; provided that the Company or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:

(a)       the Company or such Restricted Subsidiary, as the case may be, could have (i) Incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction under Section 4.05 and (ii) incurred a Lien to secure such Attributable Indebtedness pursuant to Section 4.07, in which case, the corresponding Indebtedness shall be deemed Incurred and the corresponding Lien will be deemed incurred pursuant to those provisions;

(b)       the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale and Leaseback Transaction; and

(c)       the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company or such Restricted Subsidiary, as the case may be, applies the proceeds of such transaction in compliance with Section 4.13.

Section 4.12. Repurchase of Notes Upon a Change of Control Triggering Event. (a) Not later than 30 days following a Change of Control Triggering Event, the Company will make an Offer to Purchase all outstanding Notes (a “Change of Control Offer”) at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date.

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(b)       The Company will timely repay all Indebtedness or obtain consents as necessary under, or terminate, agreements or instruments that would otherwise prohibit a Change of Control Offer required to be made pursuant to this ‎Section 4.12.

(c)       The Trustee shall not be required to take any steps to ascertain whether a Change of Control Triggering Event or any event which could lead to the occurrence of a Change of Control has occurred and shall not be liable to any person for any failure to do so.

(d)       Notwithstanding the foregoing, the Company will not be required to make a Change of Control Offer following a Change of Control Triggering Event if (i) a third party makes the Change of Control Offer in the same manner, at the same time and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer or (ii) notice of redemption has been given pursuant to Section 3.02, unless and until there is a default in payment of the applicable redemption price.

Section 4.13. Limitation on Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:

(i)       the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of (determined on the date of the contractual arrangement for such Asset Sale); and

(ii)       at least 75% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets (as defined below); provided that in the case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets involving aggregate consideration in excess of US$15.0 million (or the Dollar Equivalent thereof), the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an accounting, appraisal or investment banking firm of recognized international standing. For purposes of this provision, each of the following will be deemed to be cash:

(1)       any liabilities, as shown on the Company’s most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases the Company or such Restricted Subsidiary, as the case may be, from further liability; and

(2)       any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are promptly, but in any event within 180 days of closing, converted by the Company or such Restricted Subsidiary, as the case may be, into cash, to the extent of the cash received in that conversion.

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(b)       Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company or any Restricted Subsidiary may apply such Net Cash Proceeds to:

(i)       permanently repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary or any Indebtedness of a Restricted Subsidiary that was secured by the assets that were the subject of such Asset Sale (and, if such Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) in each case, owing to a Person other than the Company or a Restricted Subsidiary; or

(ii)       develop or acquire properties and assets (other than current assets) that replace the properties and assets that were the subject of such Asset Sale or that will be used in the Permitted Businesses, including any shares of Capital Stock in a Person holding such properties or assets that is primarily engaged in a Permitted Business (‘‘Replacement Assets’’); provided that this Section 4.13(b)(ii) shall be satisfied if the Company or such Restricted Subsidiary (i) enters into a definitive agreement committing to invest the relevant amount to develop or acquire Replacement Assets within 360 days of the receipt of such Net Cash Proceeds and (ii) actually invests such amount to develop or acquire Replacement Assets within 180 days after the 360 day period;

provided further that, pending the application of Net Cash Proceeds in accordance with Section 4.13(b)(i) or Section 4.13(b)(ii), such Net Cash Proceeds may be temporarily invested only in cash or Temporary Cash Investments.

(c)       Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in Section 4.13(b) shall constitute “Excess Proceeds.” Excess Proceeds of less than US$10.0 million (or the Dollar Equivalent thereof) shall be carried forward and accumulated. When accumulated Excess Proceeds exceed US$10.0 million (or the Dollar Equivalent thereof), within ten days thereof, the Company must make an Offer to Purchase Notes having a principal amount equal to:

(i)       accumulated Excess Proceeds, multiplied by

(ii)       a fraction (x) the numerator of which is equal to the outstanding principal amount of the Notes and (y) the denominator of which is equal to the outstanding principal amount of the Notes and all pari passu Indebtedness similarly required to be repaid, redeemed or tendered for in connection with the Asset Sale, rounded down to the nearest US$1,000.

(d)       The offer price in any Offer to Purchase shall be equal to 100% of the principal amount plus accrued and unpaid interest to (but not including) the date of purchase, and shall be payable in cash.

(e)       If any Excess Proceeds remain after consummation of an Offer to Purchase, the Company or any Restricted Subsidiary may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes (and any other pari passu Indebtedness) tendered in (or required to be prepaid or redeemed in connection with) such Offer to Purchase exceeds the amount of Excess Proceeds, the Notes and such other pari passu Indebtedness will be purchased on a pro rata basis based on the principal amount of the Notes and such other pari passu Indebtedness tendered. Upon completion of each Offer to Purchase, the amount of Excess Proceeds shall be reset at zero.

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Section 4.14. Limitation on Transactions with Shareholders and Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (x) any holder (or any Affiliate of such holder) of 10% or more of any class of Capital Stock of the Company or (y) any Affiliate of the Company (each an “Affiliate Transaction”), unless:

(i)       the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary, as the case may be, than those that would have been obtained in a comparable arm’s length transaction by the Company or the relevant Restricted Subsidiary with a Person that is not such a holder or an Affiliate of the Company; and

(ii)       the Company delivers to the Trustee:

(A)       with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10.0 million (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this Section 4.14 and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

(B)       with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$15.0 million (or the Dollar Equivalent thereof) (other than any acquisition of Vehicles by the Company or a Restricted Subsidiary from Crawford, so long as such acquisition is entered into in the ordinary course of business), in addition to the Board Resolution required in clause (A) above, an opinion issued by an accounting, appraisal or investment banking firm of recognized international standing as to the fairness to the Company or such Restricted Subsidiary, as the case may be, of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of recognized international standing.

(b)       The limitation set forth in Section 4.14(a) does not limit, and shall not apply to:

(i)       any employment or compensation agreement (whether based in cash or securities), officer or director indemnification agreement, severance or termination agreement or any similar arrangement entered into by the Company or any Restricted Subsidiary with their respective officers, directors or employees and payments pursuant thereto, including the payment of reasonable fees and reimbursement of expenses, in each case, in the ordinary course of business;

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(ii)       transactions between or among the Company and any Wholly Owned Restricted Subsidiary or between or among Wholly Owned Restricted Subsidiaries;

(iii)       any Restricted Payment (other than a Permitted Investment) not prohibited by Section 4.06;

(iv)       any sale of Capital Stock (other than Disqualified Stock) of the Company; and

(v)       the payment of compensation to officers and directors of the Company or any Restricted Subsidiary pursuant to an employee stock or share option scheme, so long as such scheme is in compliance with the listing rules of the New York Stock Exchange.

In addition, the requirements of Section 4.14(a)(ii) above shall not apply to (A) transactions pursuant to agreements in effect on the Original Issue Date and described in the offering memorandum of the Company dated August 3, 2017 regarding the Notes, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date, and (B) any transaction between or among (1) the Company, any Wholly Owned Restricted Subsidiary and any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary or (2) the Company or a Restricted Subsidiary; provided that, in the case of clause (B), (a) such transaction is entered into in the ordinary course of business and (b) none of the minority shareholders or minority partners of or in such Restricted Subsidiary is a Person described in clauses (x) or (y) of the first paragraph of Section 4.14(a)(other than by reason of such minority shareholder or minority partner being an officer or director of such Restricted Subsidiary).

Section 4.15. Limitation on Business Activities. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than Permitted Businesses; provided that, the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Businesses as long as any Investment therein was not prohibited under Section 4.06.

Section 4.16. Use of Proceeds. The Company shall not, and shall not permit any Restricted Subsidiary to, use the net proceeds from the sale of the Notes issued and sold on the Original Issue Date, in any amount, for any purpose other than (a) as specified under the caption “Use of Proceeds” in the offering memorandum of the Company dated August 3, 2017 (or in the case of Additional Notes, the offering document relating to the sale of such Additional Notes) and (b) pending the application of all of such net proceeds in such manner, to invest the portion of such net proceeds not yet so applied in cash or Temporary Cash Investments.

Section 4.17. Maintenance of Insurance. The Company shall, and shall cause its Restricted Subsidiaries to, maintain insurance with reputable and financially sound carriers against such risks and in such amounts as is customarily carried by similarly situated businesses, including, without limitation, property and casualty insurance.

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Section 4.18. Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that:

(i)       no Default shall have occurred and be continuing at the time of or after giving effect to such designation;

(ii)       such Restricted Subsidiary does not own any Disqualified Stock of the Company or any Subsidiary Guarantor or Disqualified or Preferred Stock of a Restricted Subsidiary that is not a Subsidiary Guarantor or hold any Indebtedness of, or any Lien on any property of, the Company or any Restricted Subsidiary, if such Disqualified or Preferred Stock or Indebtedness could not be Incurred under Section 4.05 or such Lien would violate Section 4.07;

(iii)       such Restricted Subsidiary does not own any Voting Stock of another Restricted Subsidiary, and all of its Subsidiaries are Unrestricted Subsidiaries or are being concurrently designated to be Unrestricted Subsidiaries in accordance with this Section 4.18(a);

(iv)       none of the Company or any Restricted Subsidiary Guarantees or provides credit support for the Indebtedness of such Restricted Subsidiary; and

(v)       the Investment deemed to have been made thereby in such newly designated Unrestricted Subsidiary and each other newly designated Unrestricted Subsidiary being concurrently redesignated would be permitted to be made under Section 4.06.

(b)       The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that:

(i)       no Default shall have occurred and be continuing at the time of or after giving effect to such designation;

(ii)       any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which shall be deemed to have been Incurred by such newly designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred under Section 4.05;

(iii)       any Lien on the property of such Unrestricted Subsidiary at the time of such designation which shall be deemed to have been incurred by such newly designated Restricted Subsidiary as a result of such designation would be permitted to be incurred under Section 4.07;

(iv)       such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary); and

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(v)       if such Restricted Subsidiary is not organized under the laws of the PRC, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental indenture to this Indenture by which such Restricted Subsidiary shall become a Subsidiary Guarantor.

(c)       Any designation by the Board of Directors of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to the designation and an Officers’ Certificate certifying that the designation complied with the foregoing provisions.

Section 4.19. Anti-Layering. The Company shall not Incur, and shall not permit any Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Company or any Subsidiary Guarantor, as the case may be, unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the Subsidiary Guarantees, on substantially identical terms; provided that this requirement does not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or Guarantees securing or in favor of some but not all of such Indebtedness.

Section 4.20. Provision of Financial Statements and Reports. (a) So long as any of the Notes remain outstanding, the Company shall file with the Trustee and furnish to the Holders upon request, as soon as they are available but in any event not more than 10 calendar days after they are filed with the United States Securities and Exchange Commission or the New York Stock Exchange or any other recognized exchange on which the Company’s common shares are at any time listed for trading, true and correct copies of any financial or other report in the English language filed with such commission or exchange; provided that if at any time the Company ceases to be subject to the periodic reporting requirements under the Exchange Act or its Common Stock ceases to be listed for trading on a recognized stock exchange, the Company will file with the Trustee and furnish to the Holders:

(i)       as soon as they are available, but in any event within 90 calendar days after the end of the fiscal year of the Company, copies of the financial statements (on a consolidated basis and in the English language) of the Company in respect of such financial year (including a statement of income, balance sheet and cash flow statement) prepared in accordance with GAAP and audited by a member firm of an internationally recognized firm of independent accountants;

(ii)       as soon as they are available, but in any event within 45 calendar days after the end of the second financial quarter of the Company, copies of the financial statements (on a consolidated basis and in the English language) of the Company in respect of such half-year period (including a statement of income, balance sheet and cash flow statement) prepared in accordance with GAAP and reviewed by a member firm of an internationally recognized firm of independent accountants; and

(iii)       as soon as they are available, but in any event within 45 calendar days after the end of each of the first and third financial quarters of the Company, copies of the unaudited financial statements (on a consolidated basis and in the English language) of the Company, including a statement of income, balance sheet and cash flow statement, prepared on a basis consistent with the audited financial statements of the Company, together with a certificate signed by the person then authorized to sign financial statements on behalf of the Company to the effect that such financial statements are true in all material respects and present fairly the financial position of the Company as at the end of, and the results of its operations for, the relevant quarterly period.

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(b)       In addition, so long as any Note remains outstanding, the Company shall provide to the Trustee (i) within 120 days after the close of each fiscal year ending after the Original Issue Date, an Officers’ Certificate stating the Fixed Charge Coverage Ratio with respect to the four most recent fiscal quarters and showing in reasonable detail the calculation of the Fixed Charge Coverage Ratio, including the arithmetic computations of each component of the Fixed Charge Coverage Ratio, with a certificate from the Company’s external auditors verifying the accuracy and correctness of the calculation and arithmetic computation; provided that the Company shall not be required to provide such auditor certificate if its external auditors refuse to provide such certificate as a result of a policy of such external auditors not to provide such certificate; and (ii) as soon as possible and in any event within 30 days after the Company becomes aware or should reasonably become aware of the occurrence of a Default, an Officers’ Certificate setting forth the details of the Default, and the action which the Company proposes to take with respect thereto.

(c)       [Reserved]

(d)       Delivery of these reports and information to the Trustee is for informational purposes only and the Trustee’s receipt of them will not constitute actual or constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

Section 4.21. Additional Amounts. (a) All payments of principal of, and premium (if any) and interest on the Notes or under the Subsidiary Guarantees shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person or the applicable Subsidiary Guarantor is organized or resident for tax purposes or any political subdivision or taxing authority thereof or therein (each, as applicable, a “Relevant Taxing Jurisdiction”) or any jurisdiction through which payment is made by or on behalf of the Company, a Surviving Person or the applicable Subsidiary Guarantor, as the case may be, or any political subdivision or taxing authority thereof or therein (together with the Relevant Taxing Jurisdictions, the “Relevant Jurisdictions”), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company, a Surviving Person or the applicable Subsidiary Guarantor, as the case may be, shall pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of each Note, of such amounts as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts shall be payable:

(i)       for or on account of:

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(A)       any tax, duty, assessment or other governmental charge that would not have been imposed but for:

(1)       the existence of any present or former connection between the Holder or beneficial owner of such Note and the Relevant Jurisdiction other than merely holding such Note or the receipt of payments thereunder or under a Subsidiary Guarantee, including, without limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;

(2)       the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of, premium, if any, and interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period; or

(3)       the failure of the Holder or beneficial owner to comply with a timely request of the Company, a Surviving Person or any Subsidiary Guarantor addressed to the Holder, to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request would have reduced or eliminated any withholding or deduction as to which Additional Amounts would have otherwise been payable to such Holder;

(B)       any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;

(C)       any tax, duty, assessment or other governmental charge to the extent such tax, duty, assessment or other governmental charge results from the presentation of the Note (where presentation is required) for payment and the payment can be made without such withholding or deduction by the presentation of the Note for payment elsewhere;

(D)       any tax, assessment, withholding or deduction required by sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended (“FATCA”), any current or future U.S. Treasury Regulations or rulings promulgated thereunder, any intergovernmental agreement between the United States and any other jurisdiction to implement FATCA (an “IGA”), any law, regulation or other official guidance implementing FATCA or an IGA, or any agreement with the U.S. Internal Revenue Service under FATCA;

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(E)       any tax, duty, assessment or other governmental charge which is payable other than by deduction or withholding from payments of principal of or interest or any premium on the Notes or payments under the Subsidiary Guarantees; or

(F)       any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (A), (B), (C), (D) and (E); or

(ii)       to a Holder that is a fiduciary, partnership, limited liability company or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included for tax purposes in the income under the laws of a Relevant Jurisdiction of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or limited liability company or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner or beneficial owner been the Holder thereof.

(b)       The Company shall (i) make such withholding or deduction and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. The Company shall make reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any taxes so deducted or withheld from the Relevant Jurisdiction imposing such taxes. The Company shall furnish to the Holders and the Trustee, within 90 days after the date the payment of any taxes so deducted or withheld is due pursuant to applicable law, either certified copies of tax receipts evidencing such payment or, if such receipts are not obtainable, other evidence of such payments.

(c)       At least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, if the Company or any Subsidiary Guarantor shall be obligated to pay Additional Amounts with respect to such payment (unless such obligation to pay Additional Amounts arises after the 30^th day prior to the date on which payment under or with respect to the Notes is due and payable, in which case it will be as soon as practicable thereafter), the Company or such Subsidiary Guarantor shall deliver to the Trustee an Officers’ Certificate stating the fact that such Additional Amounts shall be payable and the amounts so payable and shall set forth such other information necessary to enable the Paying and Transfer Agent to pay such Additional Amounts to the Holders on such payment date.

(d)       In addition, the Company shall pay any stamp, issue, registration, documentary, value added or other similar taxes and other duties (including interest and penalties) payable in any Relevant Jurisdiction in respect of the creation, issue, offering, execution or enforcement of the Notes, or any documentation with respect thereto (other than such taxes imposed on a transfer of Notes other than the initial resale by the Initial Purchasers).

(e)       Whenever there is mentioned in any context the payment of principal of, and any premium or interest on, any Note or under any Subsidiary Guarantee, such mention shall be deemed to include payment of Additional Amounts provided for in this Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

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Section 4.22. No Payments for Consents. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Notes or any Subsidiary Guarantee unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to such consent, waiver or amendment. Notwithstanding the foregoing, in any offer or payment of consideration for, or as an inducement to, any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes in connection with an exchange or tender offer, the Company and any Restricted Subsidiary may exclude (i) Holders or beneficial owners of the Notes that are not institutional “accredited investors” as defined in Rule 501 under the Securities Act, and (ii) Holders or beneficial owners of the Notes in any jurisdiction where the inclusion of such Holders or beneficial owners would require the Company or any Restricted Subsidiary to comply with the registration requirements or other similar requirements under any securities laws of such jurisdiction, or the solicitation of such consent, waiver or amendment from, or the granting of such consent or waiver, or the approval of such amendment by, Holders or beneficial owners in such jurisdiction would be unlawful, in each case, as determined by the Company in its sole discretion.

Section 4.23. Suspension of Certain Covenants. (a) If on any date following the date of this Indenture, the Notes have a rating of Investment Grade from both Rating Agencies and no Default has occurred and is continuing (a “Suspension Event”), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have a rating of Investment Grade from either of the Rating Agencies, the following provisions of this Indenture shall be suspended:

(1)       Section 4.05,

(2)       Section 4.06,

(3)       Section 4.08,

(4)       Section 4.09

(5)       Section 4.10,

(6)       Section 4.11,

(7)       Section 4.13, and

(8)       Section 4.15.

(b)       During any period that the foregoing covenants have been suspended, the Board of Directors may not designate any Restricted Subsidiary as an Unrestricted Subsidiary pursuant to Section 4.18 or the definition of “Unrestricted Subsidiary.”

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(c)       All covenants suspended pursuant to Section 4.23(a) above shall be reinstituted and apply according to their terms as of and from the first day on which a Suspension Event ceases to be in effect. Such covenants shall not, however, be of any effect with regard to actions of the Company or any Restricted Subsidiary properly taken in compliance with the provisions of this Indenture during the continuance of the Suspension Event, and following the reinstatement of the covenants (1) the calculations under Section 4.06 shall be made as if the covenant thereunder had been in effect since the date of this Indenture, except that no Default shall be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended and (2) all Indebtedness Incurred during the Suspension Period will be classified to have been incurred or issued pursuant to Section 4.05(b)(ii). Upon any reinstatement of the covenants, the amount of Excess Proceeds shall be reset at zero.

Article 5
Consolidation, Merger and Sale of Assets

Section 5.01. Consolidation, Merger and Sale of Assets. (a) The Company shall not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) unless each of the following conditions is satisfied:

(i)       (a) the Company shall be the continuing Person, or (b) the Person (if other than it) formed by such consolidation or merger, or with or into which the Company consolidated or merged, or that acquired or leased such property and assets (the “Surviving Person”) shall be (x) a corporation organized and validly existing under the laws of the British Virgin Islands, the Cayman Islands or Hong Kong and (y) shall expressly assume, by a supplemental indenture to this Indenture, executed and delivered to the Trustee, all the obligations of the Company under this Indenture and the Notes, including the obligation to pay Additional Amounts with respect to any jurisdiction (or any political subdivision or taxing authority thereof or therein) in which it is organized or resident for tax purposes or from or through which payment is made, and this Indenture and the Notes shall remain in full force and effect;

(ii)       immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(iii)       immediately after giving effect to such transaction on a pro forma basis the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the proviso in Section 4.05(a);

(iv)       the Company shall deliver to the Trustee (A) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clause (iii)) and (B) an Opinion of Counsel, in each case, stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this Section 5.01(a) and that all conditions precedent provided for in this Indenture relating to such transaction have been complied with;

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(v)       each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Company has entered into a transaction described under this Article 5, shall execute and deliver a supplemental indenture to this Indenture confirming that its Subsidiary Guarantee shall apply to the obligations of the Company or the Surviving Person, as the case may be, in accordance with the Notes and this Indenture; and

(vi)       no Rating Decline shall have occurred.

(b)       No Subsidiary Guarantor shall consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of the properties and assets of the Subsidiary Guarantor and its Restricted Subsidiaries (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor) unless each of the following conditions is met:

(i)       such Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger, or with or into which the Subsidiary Guarantor consolidated or merged, or that acquired or leased such property and assets shall be the Company, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction in accordance with this Indenture;

(ii)       immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(iii)       immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under the proviso in Section 4.05(a);

(iv)       the Company shall deliver to the Trustee (A) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clause (iii)) and (B) an Opinion of Counsel, in each case, stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in this Indenture relating to such transaction have been complied with; and

(v)       no Rating Decline shall have occurred;

provided that this Section 5.01(b) shall not apply to any sale or other disposition that complies with Section 4.13 or any Subsidiary Guarantor whose Subsidiary Guarantee is unconditionally released in accordance with Section 10.11.

(c)       The foregoing requirements in this Section 5.01 shall not apply to a consolidation or merger of any Subsidiary Guarantor with and into the Company or any other Subsidiary Guarantor, so long as the Company or such Subsidiary Guarantor survives such consolidation or merger. Nothing in this Indenture will prevent the Company from consolidating or otherwise combining with or merging into an Affiliate incorporated or organized for the purpose of changing the legal domicile of the Company or reincorporating the Company in another jurisdiction, in each case, in compliance with Section 5.01(a)(i).

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Section 5.02. Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company or a Subsidiary Guarantor in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the Surviving Person or Person formed by such consolidation or into or with which the Company or the relevant Subsidiary Guarantor is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” or such “Subsidiary Guarantor,” as the case may be, shall refer instead to the Surviving Person or such Person and not to the Company or such Subsidiary Guarantor, as the case may be), and may exercise every right and power of the Company or such Subsidiary Guarantor, as the case may be, under this Indenture with the same effect as if such Surviving Person or such Person had been named as the Company or such Subsidiary Guarantor, as the case may be, herein; provided, however, that the predecessor Company or such Subsidiary Guarantor, as the case may be, shall not be relieved from the obligation to pay the principal of and interest on the Notes or the applicable Subsidiary Guarantee, as the case may be, except in the case of a sale of all of the Company’s or such Subsidiary Guarantor’s assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

Article 6
Default and Remedies

Section 6.01. Events of Default. Each of the following events is an “Event of Default”:

(a)       default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

(b)       default in the payment of interest or Additional Amounts on any Note when the same becomes due and payable, and such default continues for a period of 30 consecutive days;

(c)       default in the performance or breach of the provisions of Article 5 or the failure by the Company to make or consummate an Offer to Purchase in the manner described under Section 4.12 or Section 4.13;

(d)       the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in this Indenture or under the Notes (other than a default specified in Section 6.01(a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

(e)       there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$20.0 million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (ii) a failure to make a principal payment when due and payable;

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(f)       one or more final judgments or orders for the payment of money are rendered against the Company or any Restricted Subsidiary and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$20.0 million (or the Dollar Equivalent thereof) (in excess of amounts which the Company’s insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect;

(g)       an involuntary case or other proceeding is commenced against the Company or any Significant Subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for any substantial part of the property and assets of the Company or any Significant Subsidiary and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Company or any Significant Subsidiary under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect;

(h)       the Company or any Significant Subsidiary, (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (iii) effects any general assignment for the benefit of creditors (other than, in each case under (ii), any of the foregoing that arises from any solvent liquidation or restructuring of a Significant Subsidiary in the ordinary course of business that shall result in the net assets of such Significant Subsidiary being transferred to or otherwise vested in the Company or any Restricted Subsidiary on a pro rata basis or on a basis more favorable to the Company); or

(i)       any Subsidiary Guarantor denies or disaffirms in writing its obligations under its Subsidiary Guarantee or, except as permitted by this Indenture, any Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect.

Section 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(g) or 6.01(h)) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the written direction of such Holders, subject to being indemnified and/or secured to its satisfaction, shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest on the Notes shall be immediately due and payable. If an Event of Default specified in Section 6.01(g) or 6.01(h) occurs with respect to the Company or any Significant Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

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Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or, to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.

Section 6.04. Waiver of Past Defaults. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee may on behalf of all the Holders waive all past defaults and rescind and annul a declaration of acceleration and its consequences if: (a) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, and (b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Upon such waiver, the Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05. Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders. In addition, the Trustee will not be required to expend its own funds in following such direction if it does not believe that reimbursement or satisfactory indemnification and/or security is assured to it. Prior to taking any action under this Indenture, the Trustee will be entitled to security and/or indemnification satisfactory to it in its sole and absolute discretion against all losses and expenses caused by taking or not taking such action.

Section 6.06. Limitation on Suits. A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under this Indenture or the Notes unless:

(a)       the Holder has previously given the Trustee written notice of a continuing Event of Default;

(b)       the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;

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(c)       such Holder or Holders offer the Trustee indemnity and/or security satisfactory to the Trustee against any costs, liability or expense, to be incurred in compliance with such written request;

(d)       the Trustee does not comply with the request within (x) 60 days after receipt of the written request pursuant to Section 6.06(b) or (y) 60 days after the receipt of the offer of indemnity and/or security pursuant to Section 6.06(c), whichever occurs later; and

(e)       during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a written direction that is inconsistent with the request.

Section 6.07. Rights of Holders to Receive Payment. Notwithstanding anything to the contrary in this Article 6, the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or any payment under any Subsidiary Guarantee, or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of such Holder.

Section 6.08. Compliance Certificate. The Company shall submit an Officers’ Certificate to the Trustee, in substantially the form attached hereto as Exhibit F, on or before a date not more than 120 days after the end of each fiscal year ending after the Original Issue Date, that a review has been conducted of the activities of the Company and the Restricted Subsidiaries and the Company’s and the Restricted Subsidiaries’ performance under this Indenture and that the Company and each Restricted Subsidiary have fulfilled all of their respective obligations hereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Company shall also be obligated to notify the Trustee in writing of any default or defaults in the performance of any covenants or agreements under this Indenture.

Section 6.09. Collection Suit by Trustee. If an Event of Default in payment specified in Section 6.01(a) or Section 6.01(b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust for the whole amount remaining unpaid, together with interest on overdue principal or premium and, to the extent lawful, overdue installments of interest, in each case, at the rate specified in the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the compensation of and properly incurred expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee hereunder.

Section 6.10. Trustee May File Proofs of Claim. The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Company or any Subsidiary Guarantor or their respective creditors or property, and is entitled and empowered to collect, receive and distribute any money, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee hereunder. Nothing in this Indenture shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

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Section 6.11. Priorities. The Trustee agrees that if it collects any money pursuant to this Indenture, it shall pay out the money in the following order:

First, to the Trustee and the Agents to the extent necessary to reimburse the Trustee and Agents for any fees, costs, charges, liabilities and expenses incurred in connection with the collection or distribution of such amounts held or realized and in connection with carrying out their respective functions under the Indenture (including legal fees and expenses properly incurred) and all the indemnification payments for which the Trustee and the Agents are entitled to under the Indenture;

Second, to the Trustee for the benefit of Holders; and

Third, any surplus remaining after such payments will be paid to the Company or to whomever may be lawfully entitled thereto.

The Trustee, upon written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.11.

Section 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under this Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, any Subsidiary Guarantors, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, any Subsidiary Guarantors, the Trustee and the Holders shall continue as though no such proceeding had been instituted.

Section 6.13. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant (other than the Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.13 does not apply to a suit by a Holder to enforce payment of principal of or interest on any Note on the respective due dates, or a suit by Holders of more than 10% in principal amount of the outstanding Notes.

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Section 6.14. Rights and Remedies Cumulative. No right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or exercise of any other right or remedy.

Section 6.15. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 6.16. Waiver of Stay, Extension or Usury Laws. Each of the Company and Subsidiary Guarantors covenants, to the extent that it may lawfully do so, that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or such Subsidiary Guarantor, as the case may be, from paying all or any portion of the principal of, or premium or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture. Each of the Company and Subsidiary Guarantors hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.17. No Duty of Trustee to Ascertain Default. The Trustee is not obligated to do anything to ascertain whether any Event of Default or Default has occurred or is continuing and will not be responsible to Holders or any other person for any loss arising from any failure by it to do so. The Trustee may assume that no such event has occurred (except when there is a default in payment of principal or interest on any Note or failure by the Company to provide its annual compliance certificate to the Trustee) and that the Company and the Subsidiary Guarantors are performing all of their obligations under this Indenture and the Notes unless the Trustee has received written notice of the occurrence of such event or facts establishing that a Default or an Event of Default has occurred or that the Company and the Subsidiary Guarantors are not performing all of their obligations under this Indenture and/or the Notes.

Article 7
The Agents

Section 7.01. General. (a)The duties and responsibilities of the Trustee are as set forth herein. Whether or not expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article 7.

(b)       Except during the continuance of an Event of Default, the Trustee shall perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise those rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. During the continuance of an Event of Default, the Trustee shall act only upon the written direction of the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding, subject to its receiving indemnity and/or security to its satisfaction.

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(c)       Should the Trustee become a creditor of the Company or any of the Subsidiary Guarantors, rights of the Trustee to obtain payment of claims in certain cases or to realize on certain property received by the Trustee in respect of any such claims as security or otherwise shall be limited. The Trustee is permitted to engage in other transactions with the Company and its Affiliates and profit therefrom, without being obliged to account for such profit; provided, however, that if it acquires any conflict of interest, it must eliminate such conflict or resign.

(d)       No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct or fraud, except that the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02 or 6.05.

(e)       The Trustee shall not be responsible for the recitals, statements, warranties or representations of any party contained in this Indenture or any other agreement or other document entered into in connection herewith or therewith and shall assume the accuracy and correctness thereof and shall not be responsible for the execution, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of any such agreement or other document or any trust or security thereby constituted or evidenced. Each Holder shall be solely responsible for making its own independent appraisal of and investigation into the financial condition, creditworthiness, condition, affairs, status and nature of the Company and any Subsidiary Guarantor, and the Trustee shall not at any time have any responsibility for the same and each Holder shall not rely on the Trustee in respect thereof.

(f)       The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any of the provisions in this Indenture or the financial performance of the Company and the Subsidiary Guarantors, and shall be entitled to assume that the Company and the Subsidiary Guarantors are in compliance with all the provisions of this Indenture, including each of the exhibits attached hereto, unless notified to the contrary in writing.

Section 7.02. Certain Rights of Trustee and Other Agents. Subject to Section 7.01:

(a)       In the absence of bad faith on its part, the Trustee may conclusively rely, and shall be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). The Trustee, in its sole and absolute discretion, may make further inquiry or investigation into such facts or matters as it sees fit.

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(b)       Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and/or an Opinion of Counsel conforming to Sections 11.04 and 11.05 and the Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion.

(c)       The Trustee may act through its delegates, attorneys and agents and shall not be responsible for the misconduct or negligence or acts or omissions or for supervising or monitoring of any delegate, attorney or agent appointed with due care by it hereunder. To the extent an agent has been named by the Trustee in connection with this Indenture, the parties hereto shall cooperate to ensure that such agent can perform the duties for which it was appointed. Upon an Event of Default, the Trustee shall be entitled to require, by notice in writing, all Agents to act solely in accordance with its directions.

(d)       The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the written request or direction of any of the Holders, unless such Holders have offered to the Trustee security and/or indemnity satisfactory to it against any cost, loss, liability or expenses that might be suffered or incurred by it in compliance with such request or direction.

(e)       The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders in accordance with Section 6.02 or 6.05 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

(f)       The Trustee may consult with counsel or other professional advisors of its selection, and the written advice of such counsel or advisors or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(g)       No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of its rights or powers, unless it receives security and/or indemnity satisfactory to it against any loss, liability or expense.

(h)       If any Subsidiary Guarantor makes payments pursuant to Article 10, the Company shall promptly notify the Trustee, the Depositary and the Agent Members through which the Notes are traded of such payments.

(i)       The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate.

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(j)       In connection with the exercise by it of its trusts, powers, authorities or discretions (including, without limitation, any modification, waiver, authorization or determination), the Trustee shall have regard to the general interests of the Holders as a class but shall not have regard to any interests arising from circumstances particular to individual Holders (whatever their number) and in particular, but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers, authorities or discretions for individual Holders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any country, state or territory and a Holder shall not be entitled to require, nor shall any Holder be entitled to claim, from the Company, the Trustee or any other Person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Holders, except to the extent already provided in Section 4.21 and/or any undertaking given in addition to, or in substitution for, Section 4.21 pursuant to this Indenture.

(k)       Subject to Section 6.02, in the event the Trustee receives inconsistent or conflicting requests and indemnity and/or security from two or more groups of Holders, each representing less than a majority in aggregate principal amount of the Notes then outstanding, the Trustee is entitled to (x) follow instructions from Holders representing the larger aggregate principal amount of Notes then outstanding or (y) in the event the aggregate principal amount of Notes then outstanding represented by each of the two or more groups of Holders is equal, the Trustee is entitled to seek and follow instructions from the Holders of a majority in aggregate principal amount of all Notes then outstanding, and, in each such case, the Trustee, in its sole and absolute discretion, may determine what action, if any, will be taken.

(l)       Under no circumstance will the Trustee be liable for any special, indirect, punitive or consequential loss or damage of any kind whatsoever (inter alia, being loss of business, goodwill, opportunity or profit), whether or not foreseeable, even if the Trustee has been advised of such loss or damage and regardless of the form of action. The provisions of this Section 7.02(l) shall survive the termination or discharge of this Indenture, the redemption or maturity of the Notes and the termination of appointment of the Trustee.

(m)       Notwithstanding anything else herein contained, the Trustee may refrain without liability from doing anything that would or might in its opinion be contrary to any law of any state or jurisdiction (including but not limited to the laws of Hong Kong, the United States of America or any jurisdiction forming a part of it and England & Wales) or any directive or regulation of any agency of any such state or jurisdiction and may without liability do anything which is, in its opinion, necessary to comply with any such law, directive or regulation. Furthermore, the Trustee may also refrain from taking such action in any jurisdiction if it would otherwise render it liable to any person in that jurisdiction or if, in its opinion based upon legal advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power.

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(n)       Each of the Company and the Subsidiary Guarantors acknowledges that the Trustee and the Agents and their respective affiliates (together, the “Agent Parties”) may have interests in, or may be providing or may in the future provide financial or other services to, other parties with interests which each of the Company and the Subsidiary Guarantors may regard as conflicting with its interests, and may possess information (whether or not material to the Company and the Subsidiary Guarantors) other than as a result of the Trustee and/or the Agents acting as the Trustee and/or the Agents hereunder that the Trustee and/or the Agents may not be entitled to share with the Company and/or the Subsidiary Guarantors. The Agent Parties will not disclose confidential information obtained from the Company and the Subsidiary Guarantors (without their written consent) to any of the Trustee and/or the Agent’s such other customers or affiliates nor will they use on the Company and/or any Subsidiary Guarantor’s behalf any confidential information obtained from any such other customer. Without prejudice to the foregoing, each of the Company and the Subsidiary Guarantors agrees that the Agent Parties may deal (whether their its own or their customers’ account) in, or advise on, securities of such other customers and that such dealing or giving of advice will not constitute a conflict of interest for the purposes of the Notes, the Subsidiary Guarantees or this Indenture.

(o)       The Trustee will treat information relating to the Company and the Subsidiary Guarantors as confidential, but (unless consent is prohibited by law) the Company and the Subsidiary Guarantors consent to the transfer and disclosure by the Trustee of any information relating to the Company and the Subsidiary Guarantors to and between branches, subsidiaries, representative offices, affiliates and agents of the Trustee and third parties selected by any of them, wherever situated, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes). The Trustee and any branch, subsidiary, representative office, affiliate, agent or third party may transfer and disclose any such information as required by any law, court regulator or legal process, provided that prompt notice is provided to the Company and the Subsidiary Guarantors (except in the case of regulatory inquiry or examination in the ordinary course of business, and otherwise to the extent practical and permitted by Applicable Law, regulation and Authority). For the purposes of this Section 7.02(o), “Applicable Law” means any law or regulation including, but not limited to: (a) any domestic or foreign statute or regulation and (b) any agreement entered into by the Trustee and any Authority or between any two or more Authorities; and “Authority” means any competent regulatory, prosecuting, tax or governmental authority in any jurisdiction, domestic or foreign.

(p)       The Trustee and the Agents may take and instruct any delegate or agent to take any action which it in its sole discretion considers appropriate so as to comply with any applicable law, regulation or request of a public or regulatory authority or any policy of the Trustee or the Agents (including, but not limited to, know your client and other compliance policies) which relates to the prevention of fraud, money laundering, terrorism or other criminal activities or the provision of financial and other services to sanctioned persons or entities. Such action may include but is not limited to the interception and investigation of transactions on the Company’s, or any account of any Holder (particularly those involving the international transfer of funds) including the source of the intended recipient of fund paid into or out of the Company’s account or any account of any Holder. In certain circumstances, such action may delay or prevent the processing of the instructions of the Company, the settlement of transactions over the Company’s account or any account of any Holder or the Trustee’s or the Agents’ performance of its obligations under this Indenture.

(q)       Neither the Trustee nor the Agents shall be responsible for determining whether any such taxes as are referred to in this Indenture are due and payable or for determining the amount of such taxes and neither the Trustee nor the Agents shall be liable to pay, or for any failure of the Company, the Subsidiary Guarantors or any Holder to pay such taxes.

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Section 7.03. Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of the Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee and nothing herein shall obligate the Trustee to account for any profits earned from any business or transactional relationship. Any Agent may do the same with like rights.

Section 7.04. Trustee’s Disclaimer. The Trustee (a) makes no representation as to the validity or adequacy of this Indenture, the Notes or the Subsidiary Guarantee of any Subsidiary Guarantor, (b) is not accountable for the Company’s use or application of the proceeds from the Notes, (c) is not responsible for any statement in the Notes and (d) shall not have any responsibility for the Company’s or any Holder’s compliance with any state or U.S. federal securities law in connection with the Notes.

Section 7.05. Notice of Default. If any Default occurs and is continuing and is known to the Trustee, the Trustee shall send notice of the Default to each Holder within 90 days after it occurs, or, if later, within 15 days after written notice is provided to the Trustee unless the Default has been cured. The Trustee and the Agents shall not be deemed to have knowledge of a Default or Event of Default unless and until it obtains written notification of such Default or Event of Default from the Company or as otherwise contemplated herein describing the circumstances of such, and identifying the circumstances constituting such Default or Event of Default. The Trustee shall not be bound to enforce any provision of this Indenture unless it is directed in writing by the Holders to do so and unless it has received security and/or indemnity satisfactory to it.

Section 7.06. Compensation and Indemnity. (a) Each of the Company and the Subsidiary Guarantors agrees to be jointly and severally responsible for and shall pay the Trustee compensation as agreed upon in writing for its services. The compensation of the Trustee is not limited by any law on compensation of a trustee of an express trust. If an Event of Default shall have occurred and is continuing or if the Trustee is requested by the Company or the Subsidiary Guarantors to undertake duties which are outside the scope of the Trustee’s duties under this Indenture, the Company and the Subsidiary Guarantors shall be jointly and severally responsible for and shall pay such additional remuneration as the Company, the Subsidiary Guarantors and the Trustee may agree. The Company shall reimburse the Trustee upon request for all properly incurred out-of- pocket expenses, costs, disbursements and advances (including costs of collection) incurred or made by the Trustee, including the compensation of and properly incurred expenses, costs and disbursements of the Trustee’s agents and counsel and other Persons not regularly within its employ.

(b)       Each of the Company and the Subsidiary Guarantors agrees to be jointly and severally responsible for and shall indemnify the Trustee or any predecessor Trustee and their respective agents, employees, officers and directors for, and hold it harmless against, any loss, liability, taxes or expense incurred by it without gross negligence or willful misconduct or fraud on its part arising out of or in connection with the acceptance or administration of this Indenture and its duties under this Indenture, the Notes and the Subsidiary Guarantees, as the case may be, including (i) the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes, (ii) the compensation, expenses, costs and disbursements of the Trustee’s agents and counsel and other Persons not regularly within the Trustee’s employ and (iii) all stamp, issue, documentary or such other similar taxes including interest and penalties incurred and paid by the Trustee and the Agents in any such jurisdiction in connection with any action taken by or on behalf of the Trustee or, as the case may be, the Holders, to enforce the Company’s or the Subsidiary Guarantors’ obligations under this Indenture, the Notes or the Subsidiary Guarantees.

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(c)       To secure the Company’s payment obligations in this Section 7.06, the Trustee will have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, and interest on particular Notes.

(d)       All compensation and indemnity payments made by the Company and/or the Subsidiary Guarantors to the Trustee for the sole account of the Trustee under this Indenture shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or other governmental charges of whatever nature (including related penalties, interest and other liabilities) (hereinafter, “Taxes”) imposed or levied by or on behalf of the government of the Relevant Jurisdiction or any political subdivision or any authority or agency therein or thereof having power to tax, or any other jurisdiction in which the Company or each Subsidiary Guarantor is organized or is otherwise resident for tax purposes, or any jurisdiction from or through which payment is made. If the Company or any Subsidiary Guarantor is so required by law or by regulation or governmental policy having the force of law to withhold or deduct any amount for or on account of Taxes imposed by a Relevant Taxing Jurisdiction from any payment made under or with respect to such payments to the Trustee, the Company shall pay such additional amounts as may be necessary so that the net amount received by the Trustee (including such additional amounts) after such withholding or deduction will not be less than the amount the Trustee would have received if such Taxes had not been withheld or deducted.

(e)       The Company and the Subsidiary Guarantors shall jointly and severally indemnify the Trustee, the Agents and the Holders and keep them indemnified against: (i) any liability incurred by any of them arising from the non-payment by the Company or the Subsidiary Guarantors of any amount due to the Trustee, the Agents or the Holders under this Indenture by reason of any variation in the rates of exchange between those used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Company or the Subsidiary Guarantors; and (ii) any deficiency arising or resulting from any variation in rates of exchange between (x) the date as of which the local currency equivalent of the amounts due or contingently due under this Indenture (other than this section) is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Company or the Subsidiary Guarantors and (y) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation. The amount of such deficiency shall be deemed not to be reduced by any variation in rates of exchange occurring between the said final date and the date of any distribution of assets in connection with any such bankruptcy, insolvency or liquidation.

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(f)       This Section 7.06 shall survive the redemption or maturity of the Notes, the termination or discharge of this Indenture, and the termination of the appointment of the Trustee.

Section 7.07. Replacement of Trustee. (a)(i) The Trustee may resign at any time by providing 60 days’ prior written notice to the Company.

(ii)       The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by providing 60 days’ prior written notice to the Trustee.

(iii)       The Company may remove the Trustee if: (A) the Trustee is adjudged a bankrupt or an insolvent; (B) a receiver or other public officer takes charge of the Trustee or its property; or (C) the Trustee becomes incapable of acting.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.07.

(b)       If the Trustee has been removed by the Holders, Holders of a majority in principal amount of the Notes may appoint a successor Trustee with the consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If the successor Trustee does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee may, on behalf of and at the cost of the Company, appoint a successor Trustee of international repute or the retiring Trustee, the Company or the Holders of a majority in the aggregate principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)       Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Company, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.06, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. Upon request of any successor Trustee, the Company shall execute any and all instruments for fully vesting in and confirming to the successor Trustee all such rights, powers and trusts. The Company shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders, and include in the notice the name of the successor Trustee and the address of its Corporate Trust Office.

(d)       Notwithstanding replacement of the Trustee pursuant to this Section 7.07, the Company’s obligations under Section 7.06 shall continue for the benefit of the retiring Trustee.

Section 7.08. Successor Trustee by Consolidation, Merger, Conversion or Transfer. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets (including the administration of the trust created by this Indenture) to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in this Indenture.

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Section 7.09. Money Held in Trust. The Trustee will not be liable for interest on any money received by it, except as it may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds, except to the extent required by law.

Section 7.10. [Reserved].

Section 7.11. Appointment of Paying and Transfer Agent. The Company hereby appoints Deutsche Bank AG, Hong Kong Branch, as the Paying and Transfer Agent and Registrar with respect to the Notes, and Deutsche Bank AG, Hong Kong Branch hereby accepts such appointment. By accepting such appointment, Deutsche Bank AG, Hong Kong Branch agrees to be bound by and to perform the services with respect to itself set forth in the terms and conditions set forth in this Indenture and the Notes.

Article 8
Defeasance and Discharge

Section 8.01. Defeasance and Discharge of Indenture. (a) The Company shall be deemed to have paid and shall be discharged from any and all obligations in respect of the Notes on the 183^rd day after the deposit referred to in Section 8.01(a)(i) below has been made, and the provisions of this Indenture shall no longer be in effect with respect to the Notes (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except as to (1) rights of registration of transfer and exchange of the Notes; (2) substitution of apparently mutilated, defaced, destroyed, lost or stolen Notes; (3) obligations to maintain paying agencies; (4) to pay Additional Amounts; and (5) the rights of the Holders as beneficiaries hereof with respect to the monies so deposited with the Trustee payable to all or any of them; provided that the following conditions shall have been satisfied:

(i)       the Company (A) has deposited with the Trustee, in trust, cash in U.S. dollars, U.S. Government Obligations or a combination thereof that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of this Indenture and the Notes and (B) has delivered to the Trustee an Opinion of Counsel or a certificate of an internationally recognized firm of independent accountants to the effect that the amount deposited by the Company is sufficient to provide payment for the principal of, premium, if any, and accrued interest on, the Notes on the Stated Maturity of such payment in accordance with the terms of this Indenture and an Opinion of Counsel to the effect that the Holders have a valid, perfected, exclusive Lien over such trust;

(ii)       the Company has delivered to the Trustee (A) either (x) an Opinion of Counsel (subject to customary assumptions and exclusions) of recognized standing with respect to U.S. federal income tax matters that is based on a change in applicable U.S. federal income tax law occurring after the Original Issue Date to the effect that beneficial owners will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Company’s exercise of its option under this Section 8.01 and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit, defeasance and discharge had not occurred or (y) a ruling directed to the Company or the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (B) an Opinion of Counsel of recognized standing to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; and

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(iii)       immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default (other than that resulting from the borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness, and, in each case, the granting of Liens in connection therewith), shall have occurred and be continuing on the date of such deposit or during the period ending on the 183^rd day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any Restricted Subsidiary is a party or by which the Company or any Restricted Subsidiary is bound (other than that resulting with respect to any Indebtedness being defeased from any borrowing of funds to be applied to make the deposit required to effect such defeasance and any similar and simultaneous deposit relating to such Indebtedness, and the granting of Liens in connection therewith).

(b)       In the case of either discharge or defeasance of the Notes, each of the Subsidiary Guarantees shall terminate.

Section 8.02. Covenant Defeasance. (a) The Company shall not be obligated to comply with any term, provision or condition set forth in, and this Indenture shall no longer be in effect with respect to (i) Section 5.01(a)(iii), Section 5.01(a)(iv)(A), Section 5.01(a)(vi), Section 5.01(b)(iii), Section 5.01(b)(iv)(A) and Section 5.01(b)(v), (ii) Article 4, other than Section 4.03 and Section 4.19, and (b) Section 6.01(c) with respect to (i) Section 5.01(a)(iii), Section 5.01(a)(iv)(A), Section 5.01(a)(vi), Section 5.01(b)(iii), Section 5.01(b)(iv)(A) and Section 5.01(b)(v) and (ii) the other events set forth in such Section, Section 6.01(d) with respect to such other covenants and agreements specified therein and Sections 6.01(e) and 6.01(f) shall be deemed not to be Events of Default; provided the following conditions have been satisfied:

(a)       The Company has deposited with the Trustee, in trust, of cash in U.S. dollars, U.S. Government Obligations or a combination thereof that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of this Indenture and the Notes;

(b)       The Company has delivered to the Trustee an Opinion of Counsel of recognized standing to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law;

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(c)       immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default (other than that resulting from the borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness, and, in each case, the granting of Liens in connection therewith), shall have occurred and be continuing on the date of such deposit or during the period ending on the 183^rd day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any Restricted Subsidiary is a party or by which the Company or any Restricted Subsidiary is bound (other than that resulting with respect to any Indebtedness being defeased from any borrowing of funds to be applied to make the deposit required to effect such defeasance and any similar and simultaneous deposit relating to such Indebtedness, and the granting of Liens in connection therewith); and

(d)       The Company has delivered to the Trustee an Opinion of Counsel of recognized standing with respect to U.S. federal income tax matters, to the effect that the beneficial owners will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit and defeasance had not occurred.

Section 8.03. Application of Trust Money. Subject to Section 8.04, the Trustee shall hold in trust, the money or, U.S. Government Obligations deposited with it pursuant to Section 8.01 or 8.02, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of and premium or interest on the Notes in accordance with the Notes and this Indenture. Such money and U.S. Government Obligations shall be segregated from other funds.

Section 8.04. Repayment to Company. Subject to Sections 6.11, 7.06, 8.01 and 8.02, the Trustee shall promptly pay to the Company upon written request by the Company in the form of an Officers’ Certificate any excess money held by the Trustee at any time and thereupon be relieved from all liability with respect to such money. The Trustee shall pay to the Company upon written request by the Company in the form of an Officers’ Certificate any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Trustee may at the expense of the Company publish once in a newspaper of general circulation in New York City, or send to each Holder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money shall be repaid to the Company. After payment to the Company, Holders entitled to such money must look solely to the Company for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money shall cease.

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Section 8.05. Reinstatement. If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 8.01 or 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be reinstated as though no such deposit in trust had been made. If the Company makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust. In the event the Company exercises its option to omit compliance with certain covenants and provisions of this Indenture with respect to the Notes as described in Section 8.02 and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of cash in U.S. dollars and/or U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, the Company and the Subsidiary Guarantors shall remain liable for such payments.

Article 9
Amendments, Supplements and Waivers

Section 9.01. Amendments without Consent of Holders. (a) The Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture without the consent of any Holder:

(i)       to cure any ambiguity, defect, omission or inconsistency in this Indenture or the Notes;

(ii)       to comply with Article 5;

(iii)       to evidence and provide for the acceptance of appointment by a successor Trustee;

(iv)       to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;

(v)       to provide collateral or add additional collateral to secure the Notes or any Subsidiary Guarantee;

(vi)       to effect any changes to this Indenture in a manner necessary to comply with the procedures of Euroclear or Clearstream;

(vii)       in any other case where a supplemental indenture to this Indenture is required or permitted to be entered into pursuant to the provisions of this Indenture without the consent of any Holder;

(viii)       to effect any changes to this Indenture in a manner necessary to comply with the procedures of the relevant clearing system;

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(ix)       to add any Subsidiary Guarantor or any Subsidiary Guarantee or release any Subsidiary Guarantor from any Subsidiary Guarantee as provided or permitted by the terms of this Indenture;

(x)       to conform the text of this Indenture, the Notes or the Subsidiary Guarantees to any provision of the “Description of the Notes” section of the offering memorandum of the Company relating to the Notes dated August 3, 2017 to the extent that such provision in the “Description of the Notes” was intended to be a verbatim recitation of a provision of this Indenture, the Notes or the Subsidiary Guarantees; or

(xi)       to make any change that would provide any additional right or benefit to Holders or that does not materially and adversely affect the rights of any Holder.

Section 9.02. Amendments with Consent of Holders. (a) The Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes may amend this Indenture, and the Holders of a majority in principal amount of the outstanding Notes may waive future compliance by the Company with any provision of this Indenture or the Notes; provided, however, that no such modification, amendment or waiver may, without the consent of each Holder affected thereby:

(i)       change the Stated Maturity of the principal of, or any installment of interest on, any Note;

(ii)       reduce the principal amount of, or premium, if any, or interest on, any Note;

(iii)       change the place, currency or time of payment of principal of, or premium, if any, or interest on, any Note;

(iv)       impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note;

(v)       reduce the above-stated percentage of outstanding Notes the consent of whose Holders is necessary to modify or amend this Indenture;

(vi)       waive a default in the payment of principal of, premium, if any, or interest on the Notes;

(vii)       reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of this Indenture or for waiver of certain defaults;

(viii)       release any Subsidiary Guarantor from its Subsidiary Guarantee, except as provided in this Indenture;

(ix)       amend, change or modify any Subsidiary Guarantee in a manner that adversely affects the Holders;

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(x)       reduce the amount payable upon a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from an Asset Sale or change the time or manner by which a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from an Asset Sale may be made or by which the Notes must be repurchased pursuant to a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from an Asset Sale;

(xi)       change the redemption date or the redemption price of the Notes from that stated in Section 3.01 or Section 3.02;

(xii)       amend, change or modify the obligation of the Company or any Subsidiary Guarantor to pay Additional Amounts; or

(xiii)       amend, change or modify any provision of this Indenture or the related definition affecting the ranking of the Notes or any Subsidiary Guarantee in a manner which adversely affects the Holders.

(b)       It is not necessary for Holders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof.

(c)       An amendment, supplement or waiver under this Section 9.02 shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company shall send supplemental indentures to Holders upon request. Any failure of the Company to send such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.

Section 9.03. Effect of Consent. (a) After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver shall bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder.

(b)       If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee so that the Trustee may place an appropriate notation of the changed terms on the Note and return it to the Holder, or exchange it for a new Note that reflects the changed terms. The Trustee may also place an appropriate notation on any Note thereafter authenticated. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Notes in this fashion.

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Section 9.04. Trustee’s and Agent’s Rights and Obligations. Each of the Trustee and the Agents is entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article is authorized or permitted by this Indenture and that such amendment, supplement or waiver constitutes the legal, valid and binding obligations of the party or parties executing such amendment, supplement or waiver, and an Officers’ Certificate stating that all conditions precedent have been complied with. If the Trustee or the Agents, as the case may be, has received such an Opinion of Counsel, it shall sign the amendment, supplement or waiver so long as the same does not adversely affect the rights, duties, liabilities or immunities of the Trustee or the Agents, as the case may be. Each of the Trustee and the Agents may, but is not obligated to, execute any amendment, supplement or waiver that affects the Trustee’s or the Agents’ own rights, duties or immunities under this Indenture. The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be compensated and indemnified are extended to, and shall be enforceable by, the Agent in each of its capacities under this Indenture.

Article 10
Subsidiary Guarantees

Section 10.01. The Subsidiary Guarantees. Subject to the provisions of this Article 10, each of the Subsidiary Guarantors (whether originally a signatory hereto or added pursuant to a supplemental indenture) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Registrar and to the Trustee and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes and this Indenture.

Section 10.02. Guarantee Unconditional. The obligations of each Subsidiary Guarantor hereunder are unconditional and absolute and, without limiting the generality of the foregoing, shall, subject to Section 10.03 and Section 10.11, not be released, discharged or otherwise affected by:

(a)       any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under this Indenture or any Note, by operation of law or otherwise;

(b)       any modification or amendment of or supplement to this Indenture or any Note, except to the extent of such modification, amendment, or supplement that is permitted by the terms of this Indenture;

(c)       any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company, or its assets or any resulting release or discharge of any obligation of the Company contained in this Indenture or any Note;

(d)       the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with this Indenture or any unrelated transactions; provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim;

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(e)       any invalidity, irregularity or unenforceability relating to or against the Company or any other Subsidiary Guarantor for any reason of this Indenture or any Note;

(f)       any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this Section 10.02, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

Section 10.03. Discharge; Reinstatement. Each Subsidiary Guarantor’s obligations hereunder shall remain in full force and effect until the principal of, premium, if any, and interest on the Notes and all other amounts payable by the Company under this Indenture have been paid in full. If at any time any payment of the principal of, premium, if any, or interest on any Note or any other amount payable by the Company under this Indenture is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, each Subsidiary Guarantor’s obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time. All payments under the Subsidiary Guarantees shall be made in U.S. dollars.

Section 10.04. Waiver by Each Subsidiary Guarantor. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Person. In particular, each Subsidiary Guarantor irrevocably waives its right to require the Trustee to pursue or exhaust the Trustee’s legal or equitable remedies against the Company prior to exercising the Trustee’s rights under the Subsidiary Guarantee.

Section 10.05. Subrogation and Contribution. Upon making any payment with respect to any obligation of the Company under this Article 10, the Subsidiary Guarantor making such payment shall be subrogated to the rights of the payee against the Company with respect to such obligation; provided that the Subsidiary Guarantor may not enforce either any right of subrogation, or any right to receive payment in the nature of contribution, or otherwise, from any other Subsidiary Guarantor, with respect to such payment so long as any amount payable by the Company hereunder or under the Notes remains unpaid.

Section 10.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company under this Indenture or the Notes is stayed upon the insolvency, bankruptcy or reorganization of the Company, all such amounts otherwise subject to acceleration under the terms of this Indenture are nonetheless payable by the Subsidiary Guarantors hereunder forthwith on demand by the Trustee or the Holders.

Section 10.07. Limitation on Amount of Subsidiary Guarantee. Notwithstanding anything to the contrary in this Article, each Subsidiary Guarantor, and, by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent conveyance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable law of any other jurisdiction. To effectuate that intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are limited in an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

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Section 10.08. Ranking of Subsidiary Guarantees. The Subsidiary Guarantee of each Subsidiary Guarantor: (a) is a general obligation of such Subsidiary Guarantor; (b) is effectively subordinated to all existing and future secured obligations of such Subsidiary Guarantor, to the extent of the value of the collateral serving as security therefor; (c) is senior in right of payment to all existing and future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to the Subsidiary Guarantee; (d) ranks and will rank at least pari passu in right of payment with all other unsecured, unsubordinated indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated indebtedness pursuant to applicable law); and (e) effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries.

Section 10.09. Further Subsidiary Guarantors. (a) The Company shall, for the benefit of the Holders of the Notes, cause each of its future Restricted Subsidiaries (other than Persons organized under the laws of the PRC) after the Original Issue Date, as soon as practicable and in any event within 30 days after it becomes a Restricted Subsidiary, to execute and deliver to the Trustee a supplemental indenture to this Indenture pursuant to which such future Restricted Subsidiary shall Guarantee the payment of the Notes. Notwithstanding the foregoing sentence, the Company may elect to have any future Restricted Subsidiary organized outside the PRC not provide a Subsidiary Guarantee at the time such entity becomes a Restricted Subsidiary (such Restricted Subsidiaries, “Offshore Non-Guarantor Subsidiaries” and, together with the Initial Non-Guarantor Subsidiaries, the “Non-Guarantor Subsidiaries”); provided that, after giving effect to amount of Consolidated Assets of such Restricted Subsidiary, the Consolidated Assets of all Restricted Subsidiaries organized outside the PRC that are not Subsidiary Guarantors do not exceed 10% of Total Assets.

(b)       If, at any time, the Consolidated Assets of all Restricted Subsidiaries organized outside the PRC that are not Subsidiary Guarantors exceed 10% of Total Assets, the Company must cause one or more Offshore Non-Guarantor Subsidiaries to execute and deliver to the Trustee a supplemental indenture to this Indenture pursuant to which such Offshore Non-Guarantor Subsidiaries will guarantee the payment of the Notes such that the 10% limitation is complied with. Such supplemental indenture must be executed within 30 Business Days from the date of the most recent fiscal quarter for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner and which may include internal consolidated financial statements) are available.

(c)       Each Restricted Subsidiary that Guarantees the Notes after the Original Issue Date is referred to as a “Future Subsidiary Guarantor” and, upon execution of the applicable supplemental indenture to this Indenture, shall be a “Subsidiary Guarantor.”

Section 10.10. Execution and Delivery of Subsidiary Guarantee. The execution by each Subsidiary Guarantor of this Indenture (or a supplemental indenture in the form of Exhibit E) evidences the Subsidiary Guarantee of such Subsidiary Guarantor, whether or not the person signing as an officer of the Subsidiary Guarantor still holds that office at the time of authentication of any Note. The delivery of any Note by the Registrar after authentication constitutes due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of each Subsidiary Guarantor.

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Section 10.11. Release of the Subsidiary Guarantees. (a) A Subsidiary Guarantee given by a Subsidiary Guarantor shall be released upon:

(i)       repayment in full of the Notes;

(ii)       a defeasance or discharge as provided in Section 8.01;

(iii)       the designation by the Company of a Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with the terms of this Indenture; or

(iv)       the sale, disposition or merger of a Subsidiary Guarantor in compliance with the terms of this Indenture (including Section 4.09, 4.13 and 5.01) resulting in such Subsidiary Guarantor no longer being a Restricted Subsidiary, so long as (A) such Subsidiary Guarantor is simultaneously released from its obligations in respect of any of the Company’s other Indebtedness or any Indebtedness of any other Restricted Subsidiary and (B) the proceeds from such sale, disposition or merger are used for the purposes permitted or required by this Indenture.

(b)       In addition, in the case of a Subsidiary Guarantor with respect to which the Company or any of its Restricted Subsidiaries is proposing to sell, whether through the sale of existing shares or the issuance of new shares, no less than 20% of the Capital Stock of such Subsidiary Guarantor, the Company may, concurrently with the consummation of such sale or issuance of Capital Stock, instruct the Trustee in writing to release the Subsidiary Guarantees provided by such Subsidiary Guarantor and each of its Restricted Subsidiaries organized outside the PRC, and upon such release such Subsidiary Guarantor and its Restricted Subsidiaries organized outside the PRC will become new Offshore Non-Guarantor Subsidiaries (such that each new Offshore Non-Guarantor Subsidiary will no longer Guarantee the Notes); provided that, after the release of such Subsidiary Guarantees, the Consolidated Assets of all Restricted Subsidiaries organized outside the PRC that are not Subsidiary Guarantors (including the new Offshore Non-Guarantor Subsidiaries) do not account for more than 10% of Total Assets. A Subsidiary Guarantee of a Subsidiary Guarantor may only be released pursuant to this Section 10.11(b) if, as of the date of such proposed release, no document exists that is binding on the Company or any of the Restricted Subsidiaries that would have the effect of (a) prohibiting the Company or any of the Restricted Subsidiaries from releasing such Subsidiary Guarantee or (b) requiring the Company or such Subsidiary Guarantor to deliver or keep in place a guarantee of other Indebtedness of the Company by such Subsidiary Guarantor.

(c)       No release of a Subsidiary Guarantor from its Subsidiary Guarantee shall be effective against the Trustee or the Holders of Notes until the Company has delivered to the Trustee an Officers’ Certificate stating that all requirements relating to such release have been complied with and such release is authorized and permitted by the terms of this Indenture.

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Article 11
Miscellaneous

Section 11.01. [Reserved]

Section 11.02. [Reserved]

Section 11.03. Notices. (a) All notices or demands required or permitted by the terms of the Notes or this Indenture to be given to or by the Holders are required to be in writing and may be given or served by being sent by prepaid courier or first-class mails of the relevant jurisdiction (if intended for the Company or any Subsidiary Guarantor) addressed to the Company or such Subsidiary Guarantor, to Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road, Shanghai, 200062, the People’s Republic of China, or (if intended for the Trustee) addressed to the Trustee at the Corporate Trust Office or (if intended for any Holder) addressed to such Holder at such Holder’s last address as it appears in the Note register (or otherwise delivered to such Holders in accordance with applicable Euroclear or Clearstream procedures). Copies of any notice or communication to a Holder, if given by the Company, will be mailed to the Trustee and the Agents at the same time. Defect in mailing a notice or communication to any particular Holder shall not affect its sufficiency with respect to other Holders.

(b)       While the Notes are in global form and held through the clearing systems, any notice or demand shall be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of the Depositary. Any such notice shall be deemed to have been delivered on the day such notice is delivered to the Depositary or if by mail, when so sent or deposited. Any notice to the Trustee shall be effective only upon receipt.

(c)       Where this Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver shall be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers.

Section 11.04. Certificate and Opinion as to Conditions Precedent. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the Trustee’s request:

(i)       an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with;

(ii)       an Opinion of Counsel stating that all such conditions precedent have been complied with; and

(iii)       an incumbency certificate giving the names and specimen signatures of Authorized Officers for any such Authorized Officers who have not previously provided specimen signatures to the Trustee.

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(b)       In any case where several matters are required to be certified by, or covered by an Opinion of Counsel of, any specified Person, it is not necessary that all such matters be certified by, or covered by the Opinion of Counsel of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an Opinion of Counsel with respect to some matters and one or more such Persons as to other matters, and any such Person may certify or give an Opinion of Counsel as to such matters in one or several documents.

(c)       Any certificate of an Officer of the Company or any Subsidiary Guarantor may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such Officer knows, or in the exercise of reasonable care should know, that such Opinion of Counsel with respect to the matters upon which his certificate is based are erroneous. Any Opinion of Counsel may be based, and may state that it is so based, insofar as it relates to factual matters, upon a certificate of, or representations by, an officer or officers of the Company or a Subsidiary Guarantor stating that the information with respect to such factual matters is in the possession of the Company or such Subsidiary Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or representations with respect to such matters are erroneous.

(d)       Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include:

(a)       a statement that each person signing the certificate or opinion has read the covenant or condition and the related definitions;

(b)       a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based;

(c)       a statement that, in the opinion of each such person, that person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d)       a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials with respect to matters of fact.

Section 11.06. Payment Date Other Than a Business Day. If any payment with respect to a payment of any principal of, premium, if any, or interest on any Note (including any payment to be made on any date fixed for redemption or purchase of any Note) is due on a day which is not a Business Day, then such payment need not be made on such date, but may be made on the next succeeding Business Day, with the same force and effect as if made on such date, and no interest will accrue for the intervening period.

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Section 11.07. Governing Law, Consent to Jurisdiction; Waiver of Immunities. (a) Each of the Notes, the Subsidiary Guarantees and this Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

(b)       Each of the Company and the Subsidiary Guarantors hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of any New York state or United States federal court located in the Borough of Manhattan, The City of New York, New York, in connection with any suit, action or proceeding arising out of or relating to this Indenture, any Note or any Subsidiary Guarantee or any transaction contemplated hereby or thereby. Each of the Company and the Subsidiary Guarantors irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company or any Subsidiary Guarantor, as the case may be, has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal process with respect to itself or its property, the Company or such Subsidiary Guarantor, as the case may be, irrevocably waives such immunity in respect of its obligations hereunder or under any Note or any Subsidiary Guarantee, as applicable. Each of the Company and the Subsidiary Guarantors agrees that final judgment in any such suit, action or proceeding, brought in such a court shall be conclusive and binding upon the Company or the Subsidiary Guarantor, as the case may be, and, to the extent permitted by applicable law, may be enforced in any court to the jurisdiction of which the Company or the Subsidiary Guarantor, as the case may be, is subject by a suit upon such judgment or in any manner provided by law, provided that service of process is effected upon the Company or the Subsidiary Guarantor, as the case may be, in the manner specified in the following subsection or as otherwise permitted by applicable law.

(c)       As long as any of the Notes remain outstanding, each of the Company and the Subsidiary Guarantors shall at all times have an authorized agent in the City of New York, upon whom process may be served in any legal action or proceeding arising out of or relating to this Indenture, any Note or any Subsidiary Guarantee. Service of process upon such agent and written notice of such service mailed or delivered to the Company or any Subsidiary Guarantor, as the case may be, shall to the fullest extent permitted by applicable law be deemed in every respect effective service of process upon the Company or such Subsidiary Guarantor, as the case may be, in any such legal action or proceeding. Each of the Company and the Subsidiary Guarantors hereby appoints Law Debenture Corporate Services Inc. as its agent for such purpose, and covenants and agrees that service of process in any suit, action or proceeding may be made upon it at the office of such agent at 400 Madison Avenue, 4th Floor, New York, New York 10017. Notwithstanding the foregoing, the Company or any Subsidiary Guarantor may, with prior written notice to the Trustee, terminate the appointment of Law Debenture Corporate Services Inc. and appoint another agent for the above purposes so that the Company or such Subsidiary Guarantor shall at all times have an agent for the above purposes in the City of New York. Each of the Company and the Subsidiary Guarantors hereby agrees to take any and all action as may be necessary to maintain the designation and appointment of an agent in full force and effect until the final maturity date of the Notes (or earlier, if the Notes are prepaid in full).

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(d)       Each of the Company and the Subsidiary Guarantors hereby irrevocably waives, to the fullest extent permitted by applicable law, any requirement or other provision of law, rule, regulation or practice which requires or otherwise establishes as a condition to the institution, prosecution or completion of any suit, action or proceeding (including appeals) arising out of or relating to this Indenture or any Note or any Subsidiary Guarantee, the posting of any bond or the furnishing, directly or indirectly, of any other security.

Section 11.08. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company, and no such indenture or loan or debt agreement may be used to interpret this Indenture. In addition, no other agreement or document may be used to interpret this Indenture with regard to any rights, duties or obligations of the Trustee created hereunder.

Section 11.09. Successors. All agreements of the Company or any Subsidiary Guarantor in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor.

Section 11.10. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

Section 11.11. Separability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.12. Table of Contents and Headings. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and in no way modify or restrict any of the terms and provisions of this Indenture.

Section 11.13. No Personal Liability of Incorporators, Stockholders, Officers, Directors or Employees. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Subsidiary Guarantor in this Indenture, or in any of the Notes or the Subsidiary Guarantees or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of the Company or any Subsidiary Guarantor or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Subsidiary Guarantees.

97

Section 11.14. Force Majeure. Notwithstanding anything to the contrary in this Indenture or in any other transaction document, neither the Trustee nor any Agent shall be liable for any loss or damage, or any failure or delay in the performance of its obligations hereunder if it is prevented from so performing its obligations by any reason which is beyond the control of the Trustee, including, but not limited to, any existing or future law or regulation, any existing or future act of governmental authority, “act of God,” flood, war whether declared or undeclared, terrorism, riot, rebellion, civil commotion, strike, lockout, other industrial action, general failure of electricity or other supply, aircraft collision, technical failure, accidental or mechanical or electrical breakdown, computer failure or failure of any money transmission system or any event where performance of any duty or obligation under or pursuant to this Indenture would or may be illegal or would result in the Trustee or any Agent being in breach of any law, rule, regulation, or any decree, order or judgment of any court, or practice, request, direction, notice, announcement or similar action (whether or not having the force of law) of any relevant government, government agency, regulatory authority, stock exchange or self-regulatory organization to which the Trustee or Agent is subject.

Section 11.15. [Reserved].

Section 11.16. Waiver of Jury Trial. Each of the Company, the Subsidiary Guarantors and the Trustee (solely in its capacity as trustee, which, for the avoidance of doubt, shall not in any way affect any right of any Holder) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Indenture, the notes or the transaction contemplated hereby.

98

SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:
BRAVE PASSION LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED 一嗨汽车服务（香港）控股有限公司 (as a Subsidiary Guarantor)
By:
	Name:
	Title:
L&L FINANCIAL LEASING HOLDING LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:

[Signature Page - Indenture]

DB TRUSTEES (HONG KONG) Limited, as Trustee

Name:

Title:

Name:

Title:

[Signature Page - Indenture]

SCHEDULE I

List of Initial Subsidiary Guarantors

Name of Subsidiary Guarantor	Jurisdiction of Incorporation
Brave Passion Limited	British Virgin Islands
eHi Auto Services (Hong Kong) Holding Limited一嗨汽车服务（香港）控股有限公司	Hong Kong
L&L Financial Leasing Holding Limited	Hong Kong

Sch-I-1

EXHIBIT A

FORM OF FACE OF CERTIFICATED NOTE

EHI CAR SERVICES LIMITED

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR IN A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

A-1

No. -

US$________

EHI CAR SERVICES LIMITED

5.875% SENIOR NOTES DUE 2022

Certificated Note

Unconditionally Guaranteed by

the Signatories listed on the Subsidiary Guarantee hereto

eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), for value received, hereby promises to pay to __________ or registered assigns, upon surrender hereof the principal sum of __________ (US$__________) as set forth on the books and records of the Registrar, on August 14, 2022, or on such earlier date as the principal hereof may become due in accordance with the provisions hereof.

Interest Rate: 5.875% per annum.

Interest Payment Dates: February 14 and August 14 of each year, commencing February 14, 2018.

Interest Record Dates: January 30 and July 30.

Reference is hereby made to the further provisions set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by the Registrar acting under the Indenture.

A-2

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date:

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:

A-3

CERTIFICATE OF AUTHENTICATION

This is one of the 5.875% Senior Notes due 2022 described in the Indenture referred to in this Note.

DEUTSCHE BANK AG, HONG KONG BRANCH, as Registrar

By:
	Name:
	Title
By:
	Name:
	Title

A-4

Subsidiary Guarantee

Each of the undersigned (the “Subsidiary Guarantors”) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Registrar and to the Trustee and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes and the Indenture. The obligations of each Subsidiary Guarantor are unconditional and absolute and, without limiting the generality of the foregoing, shall, subject to Section 10.03 and Section 10.11 of the Indenture, not be released, discharged or otherwise affected by: (1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise; (2) any modification or amendment of or supplement to the Indenture or any Note, except to the extent of such modification, amendment or supplement that is permitted by the terms of the Indenture; (3) any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note; (4) the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with the Indenture or any unrelated transactions; provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim; (5) any invalidity, irregularity, or unenforceability relating to or against the Company for any reason of the Indenture or any Note; or (6) any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

This Subsidiary Guarantee shall not be discharged with respect to any Note, except by payment in full of the principal of, premium, if any, and interest on the Notes and all other amounts payable, in respect of any Subsidiary Guarantor, or as otherwise contemplated in the Indenture. In case of the failure of the Company punctually to pay any such principal of, premium, if any, and interest on the Notes and all other amounts payable, each of the Subsidiary Guarantors hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at the stated maturity, by acceleration, call for redemption or otherwise, and as if such payment were made by the Company.

Each of the Subsidiary Guarantors hereby further agrees that all payments of, or in respect of, principal of, and premium (if any) and interest in respect of this Subsidiary Guarantee shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person (as defined in the Indenture) or the applicable Subsidiary Guarantor is organized or resident for tax purposes or any jurisdiction through which payment is made by or on behalf of the Company, a Surviving Person or the applicable Subsidiary Guarantor (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, each Subsidiary Guarantor severally agrees to pay such additional amounts as will result in receipt by the holder of this Subsidiary Guarantee of such amounts as would have been received by such holder had no such withholding or deduction been required, subject to the exceptions in Section 4.21 of the Indenture.

The obligations of the Subsidiary Guarantors to the holder of this Note and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Article and Indenture for the precise terms of the Subsidiary Guarantee.

A-5

This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is endorsed shall have been executed by the Registrar under the Indenture by manual or facsimile signature of one of its authorized officers.

BRAVE PASSION LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED 一嗨汽车服务（香港）控股有限公司 (as a Subsidiary Guarantor)
By:
	Name:
	Title:
L&L FINANCIAL LEASING HOLDING LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:

A-6

FORM OF REVERSE OF CERTIFICATED NOTE

EHI CAR SERVICES LIMITED

5.875% Senior Notes Due 2022

1.       Principal and Interest.

The Company promises to pay the principal of this Note on August 14, 2022.

The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth on the face of this Note, at the rate of 5.875% per annum.

Interest will be payable semiannually in arrears (to the Holders of record of the Notes at the close of business on January 30 or July 30 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing February 14, 2018.

Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a regular record date and the next interest payment date, from such interest payment date) or, if no interest has been paid, from the Original Issue Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

Interest not paid when due and any interest on principal, premium or interest not paid when due will be paid to the Persons that are Holders on a special record date, which will be the 15th day preceding the date fixed by the Company for the payment of such interest, whether or not such day is a Business Day. At least 15 days before a special record date, the Company will send to each Holder and to the Trustee a notice that sets forth the special record date, the payment date and the amount of interest to be paid. Except as described under Sections 3.01 and 3.02 of the Indenture and as otherwise provided in the Indenture, the Notes may not be redeemed prior to maturity (unless they have been repurchased by the Company). In any case in which the date of the payment of principal of, premium on or interest on the Notes is not a Business Day, then payment of such principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day. Any payment made on such Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest on the Notes shall accrue for the period after such date.

2.       Indenture; Subsidiary Guarantees.

This is one of the Notes issued under an Indenture, dated as of August 14, 2017 (as amended from time to time, the “Indenture”), among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the Subsidiary Guarantors listed in Schedule I thereto and DB Trustees (Hong Kong) Limited, as Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.

A-7

The Notes are general obligations of the Company. The Indenture provides for the issuance from time to time of up to such principal amount or amounts as may from time to time be authorized of the Notes, and the originally issued Notes and any Additional Notes vote together for all purposes as a single class. This Note is guaranteed, jointly and severally, by certain initial Subsidiary Guarantors, as set forth in the Indenture.

The Indenture limits, among other things, the ability of the Company to Incur or guarantee additional Indebtedness and issue disqualified or preferred stock, declare dividends on its Capital Stock or purchase or redeem Capital Stock, make investments or other specified Restricted Payments, issue or sell Capital Stock of Restricted Subsidiaries, guarantee Indebtedness, sell assets, create any Liens, enter into certain Sale and Leaseback Transactions, enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans, enter into transactions with equity holders or affiliates or effect a consolidation or merger.

3.       Optional Redemption.

At any time on or after August 14, 2020, the Company may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, to (but not including) the redemption date, if redeemed during the 12-month period commencing on August 14 of any year set forth below:

Period	Redemption Price
2020		102.938	%
2021 and thereafter		101.469	%

At any time prior to August 14, 2020, the Company may, at its option, redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the Applicable Premium.

In addition, at any time prior to August 14, 2020, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price of 105.875% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering. 

A-8

The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption. If less than all of the Notes are to be redeemed at any time, the Notes will be selected for redemption as follows:

(1)       if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or, if the Notes are held through the clearing systems, in compliance with the requirements of the applicable clearing systems; or

(2)       if the Notes are not listed on any national securities exchange or held through the clearing systems, on a pro rata basis, by lot or by such other method as the Trustee in its sole and absolute discretion shall deem to be fair and appropriate unless otherwise required by applicable law.

Notice of redemption may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent.

A Note of US$200,000 in principal amount or less shall not be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption.

4.       Registered Form; Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in denominations of US$200,000 and any multiple of US$1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

5.       Defaults and Remedies.

If an Event of Default as defined in the Indenture (other than an Event of Default specified in Section 6.01(g) or 6.01(h) of the Indenture) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the written direction of such Holders, subject to being indemnified and/or secured to its satisfaction, shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. If a bankruptcy or insolvency default with respect to the Company or any Restricted Subsidiary occurs and is continuing, the Notes automatically become immediately due and payable. Holders may not enforce the Indenture or the Notes, except as provided in the Indenture. The Trustee may require security and/or indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of remedies.

A-9

6.       Amendment and Waiver.

Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in aggregate principal amount of the outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, or make any other change that does not adversely affect the rights of any Holder.

7.       Authentication.

This Note is not valid until the Registrar signs the certificate of authentication on the other side of this Note.

8.       Governing Law.

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

9.       Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

The Company will furnish a copy of the Indenture to any Holder upon written request and without charge.

A-10

TRANSFER NOTICE

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

_________________________________________________________________

Please print or typewrite name and address including zip code of assignee

_________________________________________________________________

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________________________

attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.

Date: ___________       __________________________________________

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

A-11

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have all of this Note purchased by the Company pursuant to Section 4.12 or 4.13 of the Indenture, check the box: ¨

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.12 or 4.13 of the Indenture, state the amount (in original principal amount) below:

US$_____________________.

Wire transfer instructions for delivery of proceeds from the purchase of the Note are as follows:

[                            ]

Date:____________

Your Signature:__________________________

(Sign exactly as your name appears on the other side of this Note)

Signature Guarantee^⃰: ____________________

^⃰ Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the United States Securities Exchange Act of 1934, as amended.

A-12

TRUSTEE

DB Trustees (Hong Kong) Limited

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

PAYING AND TRANSFER AGENT AND REGISTRAR

Deutsche Bank AG, Hong Kong Branch
Level 52, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

A-13

EXHIBIT B

FORM OF GLOBAL NOTE

EHI CAR SERVICES LIMITED

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR IN A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF DB NOMINEES (HONG KONG) LIMITED, AS THE NOMINEE OF THE COMMON DEPOSITARY, OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE NOMINEE OF THE COMMON DEPOSITARY, HAS AN INTEREST HEREIN.

THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGEABLE IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN THE COMMON DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

B-1

No. S-__

Common Code: 165742044

ISIN Number: XS1657420441

EHI CAR SERVICES LIMITED

GLOBAL NOTE

Principal amount US$________, as revised by the
Schedule of Exchanges of Notes attached hereto

EHI CAR SERVICES LIMITED

5.875% SENIOR NOTES DUE 2022

Global Note

Unconditionally Guaranteed by

the Signatories listed on the Subsidiary Guarantee hereto

eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), for value received, hereby promises to pay to DB Nominees (Hong Kong) Limited as nominee of the common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”), upon surrender hereof the principal sum of ________________ UNITED STATES DOLLARS (US$________), as revised by the Schedule of Exchanges of Notes attached hereto, on August 14, 2022, or on such earlier date as the principal hereof may become due in accordance with the provisions hereof.

Interest Rate: 5.875% per annum.

Interest Payment Dates: February 14 and August 14 of each year, commencing February 14, 2018.

Interest Record Dates: January 30 and July 30.

Reference is hereby made to the further provisions set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by the Registrar acting under the Indenture.

B-2

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date: _______, 20__

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:

[Global Note]

Certificate of Authentication

This is one of the 5.875% Senior Notes due 2022 described in the Indenture referred to in this Note.

DEUTSCHE BANK AG, HONG KONG BRANCH, as Registrar

By:
	Name:
	Title
By:
	Name:
	Title

[Global Note – Certificate of Authentication]

Subsidiary Guarantee

Each of the undersigned (the “Subsidiary Guarantors”) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Registrar and to the Trustee and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes and the Indenture. The obligations of each Subsidiary Guarantor are unconditional and absolute and, without limiting the generality of the foregoing, shall, subject to Section 10.03 and Section 10.11 of the Indenture, not be released, discharged or otherwise affected by: (1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise; (2) any modification or amendment of or supplement to the Indenture or any Note, except to the extent of such modification, amendment or supplement that is permitted by the terms of the Indenture; (3) any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note; (4) the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with the Indenture or any unrelated transactions; provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim; (5) any invalidity, irregularity, or unenforceability relating to or against the Company for any reason of the Indenture or any Note; or (6) any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

This Subsidiary Guarantee shall not be discharged with respect to any Note, except by payment in full of the principal of, premium, if any, and interest on the Notes and all other amounts payable, in respect of any Subsidiary Guarantor, or as otherwise contemplated in the Indenture. In case of the failure of the Company punctually to pay any such principal of, premium, if any, and interest on the Notes and all other amounts payable, each of the Subsidiary Guarantors hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at the stated maturity, by acceleration, call for redemption or otherwise, and as if such payment were made by the Company.

Each of the Subsidiary Guarantors hereby further agrees that all payments of, or in respect of, principal of, and premium (if any) and interest in respect of this Subsidiary Guarantee shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person (as defined in the Indenture) or the applicable Subsidiary Guarantor is organized or resident for tax purposes or any jurisdiction through which payment is made by or on behalf of the Company, a Surviving Person or the applicable Subsidiary Guarantor (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, each Subsidiary Guarantor severally agrees to pay such additional amounts as will result in receipt by the holder of this Subsidiary Guarantee of such amounts as would have been received by such holder had no such withholding or deduction been required, subject to the exceptions in Section 4.21 of the Indenture.

The obligations of the Subsidiary Guarantors to the holder of this Note and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Article and Indenture for the precise terms of the Subsidiary Guarantee.

B-5

This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is endorsed shall have been executed by the Registrar under the Indenture by manual or facsimile signature of one of its authorized officers.

BRAVE PASSION LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED 一嗨汽车服务（香港）控股有限公司 (as a Subsidiary Guarantor)
By:
	Name:
	Title:
L&L FINANCIAL LEASING HOLDING LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:

[Global Note – Subsidiary Guarantee]

FORM OF REVERSE OF GLOBAL NOTE

EHI CAR SERVICES LIMITED

5.875% Senior Notes Due 2022

1.       Principal and Interest.

The Company promises to pay the principal of this Note on August 14, 2022.

The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth on the face of this Note, at the rate of 5.875% per annum.

Interest will be payable semiannually in arrears (to the Holders of record of the Notes at the close of business on January 30 or July 30 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing February 14, 2018.

Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a regular record date and the next interest payment date, from such interest payment date) or, if no interest has been paid, from the Original Issue Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

Interest not paid when due and any interest on principal, premium or interest not paid when due will be paid to the Persons that are Holders on a special record date, which will be the 15th day preceding the date fixed by the Company for the payment of such interest, whether or not such day is a Business Day. At least 15 days before a special record date, the Company will send to each Holder and to the Trustee a notice that sets forth the special record date, the payment date and the amount of interest to be paid. Except as described under Sections 3.01 and 3.02 of the Indenture and as otherwise provided in the Indenture, the Notes may not be redeemed prior to maturity (unless they have been repurchased by the Company). In any case in which the date of the payment of principal of, premium on or interest on the Notes is not a Business Day, then payment of such principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day. Any payment made on such Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest on the Notes shall accrue for the period after such date.

2.       Indenture; Subsidiary Guarantees.

This is one of the Notes issued under an Indenture, dated as of August 14, 2017 (as amended from time to time, the “Indenture”), among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the Subsidiary Guarantors listed in Schedule I thereto and DB Trustees (Hong Kong) Limited, as Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.

B-7

The Notes are general obligations of the Company. The Indenture provides for the issuance from time to time of up to such principal amount or amounts as may from time to time be authorized of the Notes, and the originally issued Notes and any Additional Notes vote together for all purposes as a single class. This Note is guaranteed, jointly and severally, by certain initial Subsidiary Guarantors, as set forth in the Indenture.

The Indenture limits, among other things, the ability of the Company to Incur or guarantee additional Indebtedness and issue disqualified or preferred stock, declare dividends on its Capital Stock or purchase or redeem Capital Stock, make investments or other specified Restricted Payments, issue or sell Capital Stock of Restricted Subsidiaries, guarantee Indebtedness, sell assets, create any Liens, enter into certain Sale and Leaseback Transactions, enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans, enter into transactions with equity holders or affiliates or effect a consolidation or merger.

3.       Optional Redemption.

At any time on or after August 14, 2020, the Company may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, to (but not including) the redemption date, if redeemed during the 12-month period commencing on August 14 of any year set forth below:

Period	Redemption Price
2020		102.938	%
2021 and thereafter		101.469	%

At any time prior to August 14, 2020, the Company may, at its option, redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the Applicable Premium.

In addition, at any time prior to August 14, 2020, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price of 105.875% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering.

The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption. If less than all of the Notes are to be redeemed at any time, the Notes will be selected for redemption as follows:

B-8

(1)       if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or, if the Notes are held through the clearing systems, in compliance with the requirements of the applicable clearing systems; or

(2)       if the Notes are not listed on any national securities exchange or held through the clearing systems, on a pro rata basis, by lot or by such other method as the Trustee in its sole and absolute discretion shall deem to be fair and appropriate unless otherwise required by applicable law.

Notice of redemption may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent.

A Note of US$200,000 in principal amount or less shall not be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption.

4.       Registered Form; Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in denominations of US$200,000 and any multiple of US$1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

5.       Defaults and Remedies.

If an Event of Default as defined in the Indenture (other than an Event of Default specified in Section 6.01(g) or 6.01(h) of the Indenture) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the written direction of such Holders, subject to being indemnified and/or secured to its satisfaction, shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. If a bankruptcy or insolvency default with respect to the Company or any Restricted Subsidiary occurs and is continuing, the Notes automatically become immediately due and payable. Holders may not enforce the Indenture or the Notes, except as provided in the Indenture. The Trustee may require security and/or indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of remedies.

B-9

6.       Amendment and Waiver.

Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in aggregate principal amount of the outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, or make any other change that does not adversely affect the rights of any Holder.

7.       Authentication.

This Note is not valid until the Registrar signs the certificate of authentication on the other side of this Note.

8.       Governing Law.

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

9.       Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

The Company will furnish a copy of the Indenture to any Holder upon written request and without charge.

B-10

TRANSFER NOTICE

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

_________________________________________________________________

Please print or typewrite name and address including zip code of assignee

_________________________________________________________________

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________________________

attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.

Date: ___________         __________________________________________

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

B-11

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have all of this Note purchased by the Company pursuant to Section 4.12 or 4.13 of the Indenture, check the box: ¨

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.12 or 4.13 of the Indenture, state the amount (in original principal amount) below:

US$_____________________.

Wire transfer instructions for delivery of proceeds from the purchase of the Note are as follows:

[                         ]

Date:____________

Your Signature:__________________________

(Sign exactly as your name appears on the other side of this Note)

Signature Guarantee ^⃰:____________________

^⃰ Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the United States Securities Exchange Act of 1934, as amended.

B-12

SCHEDULE OF EXCHANGES OF NOTES

The following changes in the aggregate principal amount of Notes represented by this Global Note have been made:

Date of
Decrease/
Increase Amount of decrease
in aggregate
principal amount of
Notes Amount of increase in
aggregate principal
amount of Notes Outstanding
Balance

B-13

TRUSTEE

DB Trustees (Hong Kong) Limited

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

PAYING AND TRANSFER AGENT AND REGISTRAR

Deutsche Bank AG, Hong Kong Branch
Level 52, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

B-14

EXHIBIT C-1

FORM OF COMPANY AUTHORIZATION CERTIFICATE

I, [Name], [Title], acting on behalf of eHi Car Services Limited, hereby certify that:

(A) the persons listed in Schedule I attached hereto are (i) Authorized Officers of the Company for purposes of the Indenture dated as of August 14, 2017 (as amended, modified or supplemented from time to time, the “Indenture”) among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), certain entities listed on Schedule I thereto (the “Subsidiary Guarantors”) and DB Trustees (Hong Kong) Limited, as trustee (the “Trustee”) in connection with the 5.875% Senior Notes due 2022 with ISIN: XS1657420441 and Common Code: 165742044; and (ii) the duly authorized person who executed or will execute the Indenture and the Notes (as defined in the Indenture) by his manual or facsimile signature or signature in scanned format delivered through e-mail was at the time of such execution, duly elected or appointed, qualified and acting as the holder of the office set forth opposite his name;

(B) each signature appearing on Schedule I attached hereto is the person’s genuine signature;

(C) each call back contact appearing on Schedule II attached hereto is authorized to receive callbacks at the telephone numbers noted on Schedule II in connection with the 5.875% Senior Notes due 2022; and

(D) attached hereto as Schedule III is a true, correct and complete specimen of the certificate representing the Notes (with the Subsidiary Guarantees endorsed thereon).

IN WITNESS WHEREOF, I have hereunto signed my name.

Date:

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:

C-1-1

Schedule I
to Exhibit C-1

Authorized Officers:

Name Company Title Signature

C-1-2

Schedule II
to Exhibit C-1

Call back Contact:

Name Company Title Telephone Number

C-1-3

Schedule III
to Exhibit C-1

SPECIMEN CERTIFICATE OF THE GLOBAL NOTE

C-1-4

EXHIBIT C-2

FORM OF SUBSIDIARY GUARANTOR AUTHORIZATION CERTIFICATE

I, [Name], [Title], acting on behalf of [Name of Subsidiary Guarantor], a Subsidiary Guarantor listed in Schedule I to the Indenture (as defined below) (the “Subsidiary Guarantor”), hereby certify that:

(A) the persons listed in Schedule I attached hereto below are (i) Authorized Officers of the Subsidiary Guarantor for purposes of the Indenture dated as of August 14, 2017 (as amended, modified or supplemented from time to time, the “Indenture”) among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the entities listed on Schedule I thereto (the “Subsidiary Guarantors”) and DB Trustees (Hong Kong) Limited, as trustee (the “Trustee”) in connection with the 5.875% Senior Notes due 2022 with ISIN: XS1657420441 and Common Code: 165742044; and (ii) the duly authorized person who executed or will execute the Indenture and the Subsidiary Guarantee (as defined under the Indenture) endorsed on the Notes (as defined under the Indenture) by his manual or facsimile signature or signature in scanned format delivered through e-mail was at the time of such execution, duly elected or appointed, qualified and acting as the holder of the office set forth opposite his name;

(B) each signature appearing on Schedule I attached hereto is the person’s genuine signature;

(C) each call back contact appearing on Schedule II attached hereto is authorized to receive call backs at the telephone numbers noted on Schedule II in connection with the 5.875% Senior Notes due 2022; and

(D) attached hereto as Schedule III is a true, correct and complete specimen of the certificate representing the Notes (with the Subsidiary Guarantees endorsed thereon).

IN WITNESS WHEREOF, I have hereunto signed my name.

Dated:

[Name of Subsidiary Guarantor]
By:
	Name:
	Title:

C-2-1

Schedule I
to Exhibit C-2

Authorized Officers:

Name Title Signature

C-2-2

Schedule II
to Exhibit C-2

Call back Contact:

Name Company Title Telephone Number

C-2-3

Schedule III
to Exhibit C-2

SPECIMEN CERTIFICATE OF THE GLOBAL NOTE

C-2-4

EXHIBIT D

FORM OF PAYING AND TRANSFER AGENT APPOINTMENT LETTER

August 14, 2017

Deutsche Bank AG, Hong Kong Branch

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

Re:          5.875% Senior Notes Due 2022 of eHi Car Services Limited

Reference is hereby made to the Indenture, dated as of August 14, 2017 (as amended, modified or supplemented from time to time, the “Indenture”), among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the entities listed on Schedule I thereto (the “Subsidiary Guarantors”) and DB Trustees (Hong Kong) Limited (the “Trustee”). Terms used herein are used as defined in the Indenture.

The Company hereby appoints Deutsche Bank AG, Hong Kong Branch, as the paying agent, registrar and transfer agent (the “Paying and Transfer Agent”) with respect to the Notes and the Paying and Transfer Agent hereby accepts such appointment. By accepting such appointment, the Paying and Transfer Agent agrees to be bound by and to perform the services with respect to itself set forth in the terms and conditions set forth in the Indenture and the Notes, as well as the following terms and conditions to all of which the Company agrees and to all of which the rights of the holders from time to time of the Notes shall be subject:

(a) The Paying and Transfer Agent shall be entitled to the compensation to be agreed upon in writing with the Company and the Subsidiary Guarantors for all services rendered by it under the Indenture and the Notes, and the Company and the Subsidiary Guarantors, jointly and severally, agree promptly to pay such compensation and to reimburse the Paying and Transfer Agent for its out-of-pocket costs and expenses (including fees and expenses of counsel) incurred by it in connection with the services rendered by it under the Indenture and the Notes. The Company and the Subsidiary Guarantors jointly and severally hereby agree to indemnify the Paying and Transfer Agent and its officers, directors, agents and employees and any successors thereto for, and to hold it harmless against, any loss, liability or expense (including properly incurred fees and expenses of counsel) incurred without gross negligence or willful misconduct on its part arising out of or in connection with its acting as Paying and Transfer Agent hereunder. Under no circumstance will the Paying and Transfer Agent be liable to any party for any special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of business, goodwill or opportunity of profit) whether or not foreseeable, even if it has been advised of such loss or damage and regardless of the form of action. This provision shall remain in full force and effect notwithstanding the discharge of the Indenture or the Notes and or the resignation or replacement or removal of the Agent. The obligations of the Company and the Subsidiary Guarantors under this paragraph (a) shall survive the payment of the Notes, the termination or expiry of the Indenture or this letter and the resignation or removal of the Paying and Transfer Agent.

D-1

(b) In acting under the Indenture and in connection with the Notes, the Paying and Transfer Agent is acting solely as agent of the Company and does not assume any obligation or fiduciary duty towards or relationship of agency or trust for or with any of the owners or holders of the Notes, except that all funds held by the Paying and Transfer Agent for the payment of principal interest or other amounts (including Additional Amounts) on, the Notes shall, subject to the provisions of the Indenture, be held by the Paying and Transfer Agent as banker and applied as set forth in the Indenture and in the Notes, but need not be segregated from other funds held by the Paying and Transfer Agent, except as required by law.

(c) The Agents may act through their respective delegates, attorneys and agents and shall not be responsible for the misconduct or negligence or acts or omissions or for supervising or monitoring of any delegate, attorney or agent appointed with due care by it hereunder.

(d) The Paying and Transfer Agent may consult with counsel or professional advisers satisfactory to it and any advice or written opinion of such counsel or professional adviser (as the case may be) shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it under the Indenture in good faith and in accordance with such advice or opinion.

(e) The Paying and Transfer Agent shall be fully protected and shall incur no liability for or in respect of any action taken or omitted to be taken or thing suffered by it in reliance upon any Note, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper party or parties.

(f) The Paying and Transfer Agent and any of its Affiliates, in its individual capacity or any other capacity, may become the owner of, or acquire any interest in, any Notes or other obligations of the Company with the same rights that it would have if it were not the Paying and Transfer Agent, and may engage or be interested in any financial or other transaction with the Company, and may act on, or as depository, Trustee or agent for, any committee or body of holders of Notes or other obligations of the Company, as freely as if it were not the Paying and Transfer Agent.

(g) The Paying and Transfer Agent shall give the Trustee written notice of any failure by the Company (or by any other obligor on the Notes or the Subsidiary Guarantees) to make any payment of the principal, or premium or interest on, the Notes and any other payments to be made on behalf of the Company under the Indenture and the Notes, when the same shall be due and payable and at any time during the continuance of any such failure the Paying and Transfer Agent will pay any such sums so held by it to the Trustee upon the Trustee’s written request.

(h) The Paying and Transfer Agent shall not be under any liability for interest on any monies received by it pursuant to any of the provisions of the Indenture or the Notes.

D-2

(i) The Paying and Transfer Agent shall be obligated to perform such duties and only such duties as are in the Indenture and the Notes specifically set forth, and no implied duties or obligation shall be read into the Indenture or the Notes against the Paying and Transfer Agent. The Paying and Transfer Agent shall not be under any obligation to take any action under the Indenture which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. The Paying and Transfer Agent shall have no obligation to expend its own funds or otherwise incur any financial liability in the performance of its obligations hereunder or under the Indenture. Notwithstanding anything contained herein to the contrary, the obligations of the Agents under this Paying and Transfer Agent Appointment Letter are several and not, and shall under no circumstances be deemed to be, joint.

(j) The Paying and Transfer Agent may at any time resign by giving written notice of its resignation to the Company and the Trustee and specifying the date on which its resignation shall become effective; provided that such date shall be at least 60 days after the date on which such notice is given, unless the Company agrees to accept shorter notice. Upon receiving such notice of resignation, if required by the Indenture the Company shall promptly appoint a successor paying agent by written instrument substantially in the form hereof in triplicate signed on behalf of the Company, one copy of which shall be delivered to the resigning Paying and Transfer Agent, one copy to the successor paying agent and one copy to the Trustee. Upon the effectiveness of the appointment of a successor paying agent, the Paying and Transfer Agent shall have no further obligations under this letter or the Indenture.

Such resignation shall become effective upon the earlier of (i) the effective date of such resignation and (ii) the acceptance of appointment by the successor paying agent, as provided below. The Company may, at any time and for any reason, remove the Paying and Transfer Agent and appoint a successor paying agent, by written instrument in triplicate signed on behalf of the Company, one copy of which shall be delivered to the Paying and Transfer Agent being removed, one copy to the successor paying agent and one copy to the Trustee. Any removal of the Paying and Transfer Agent and any appointment of a successor paying agent shall become effective upon acceptance of appointment by the successor paying agent as provided below. Upon its resignation or removal, the Paying and Transfer Agent shall be entitled to the payment by the Company of its compensation for the services rendered hereunder and to the reimbursement of all properly incurred out-of-pocket expenses in connection with the services rendered by it hereunder.

The Company shall remove the Paying and Transfer Agent and appoint a successor paying agent if the Paying and Transfer Agent (i) shall become incapable of acting, (ii) shall be adjudged bankrupt or insolvent, (iii) shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, (iv) shall consent to, or shall have had entered against it a court order for, any such relief or to the appointment of or taking possession by any such official in any involuntary case or other proceedings commenced against it, (v) shall make a general assignment for the benefit of creditors or (vi) shall fail generally to pay its debts as they become due.

D-3

Any successor paying agent appointed as provided herein shall execute and deliver to its predecessor and to the Company and the Trustee an instrument accepting such appointment (which may be in the form of an acceptance signature to the letter of the Company appointing such agent) and thereupon such successor paying agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder or under the Indenture, with like effect as if originally named as Paying and Transfer Agent and such predecessor shall pay over to such successor agent all monies or other property at the time held by it hereunder or under the Indenture.

If no successor is appointed by the Company within 30 days of the resignation or removal of the Paying and Transfer Agent, the retiring Paying and Transfer Agent may, on behalf of and at the cost of the Company, appoint a successor Paying and Transfer Agent of international repute or the retiring Paying and Transfer Agent or the Company may petition any court of competent jurisdiction for the appointment of a successor paying and transfer agent.

(k) Notwithstanding anything contained herein to the contrary, each of the Company and the Subsidiary Guarantors hereby irrevocably agrees that any and all of the rights and obligations of any Agent (except the Trustee) and, to the extent applicable, the obligations of the Company and the Subsidiary Guarantors toward any Agent (except the Trustee) set forth in the Indenture shall be deemed to have been included in this letter.

(l) Each Paying and Transfer Agent shall at all times be a financial institution which is authorized by law to exercise its respective powers and duties hereunder and under the Indenture and the Notes.

(m) Any notice or communication to the Paying and Transfer Agent will be deemed given when sent by facsimile transmission, with transmission confirmed. Any notice to the Paying and Transfer Agent will be effective only upon receipt. The notice or communication should be addressed to the Paying and Transfer Agent at:

Deutsche Bank AG, Hong Kong Branch

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

Attention: Issuer Services, Corporate Trust

Fax: +852 2203 7320

With a copy to:

DB Trustees (Hong Kong) Limited

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

Any notice to the Company or the Trustee shall be given as set forth in the Indenture.

D-4

(n) Any corporation into which the Paying and Transfer Agent may be merged or converted or any corporation with which the Paying and Transfer Agent may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Paying and Transfer Agent shall be a party or any corporation succeeding to the business of the Paying and Transfer Agent shall be the successor to such Paying and Transfer Agent hereunder (provided that such corporation shall be qualified as aforesaid) without the execution or filing of any document or any further act on the part of any of the parties hereto.

(o) Any amendment, supplement or waiver under Sections 9.01 and 9.02 of the Indenture that adversely affects the Paying and Transfer Agent shall not affect the Paying and Transfer Agent’s rights, powers, obligations, duties or immunities, unless the Paying and Transfer Agent has consented thereto.

(p) Notwithstanding anything herein to the contrary, the Paying and Transfer Agent shall have all of the rights, protections, indemnities, immunities and privileges set forth in the Indenture and the Indenture shall govern in the event of any inconsistency between this letter and the Indenture.

(q) Any funds held by the Paying and Transfer Agent are held as banker and will not be subject to the relevant United Kingdom Financial Conduct Authority’s Client Money Rules.

(r) This agreement set forth in this letter and the Indenture contains the whole agreement between the parties relating to the subject matter of this agreement to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this letter.

(s) The Paying and Transfer Agent shall be entitled to refrain (without liability) from taking any action if it receives conflicting, unclear or equivocal instructions.

(t) The Paying and Transfer Agent will not be obliged to do or omit to do anything if, in its opinion, such act or omission (as the case may be) would constitute a breach of any applicable law or regulation.

(u) The Company will pay the principal of, any premium on (if any) and interest, and Additional Amounts, if any, on the Notes on the dates and in the manner provided in the Notes and the Indenture. Not later than 11:00 a.m. (Hong Kong time) one Business Day prior to the Interest Payment Date, the due date of any principal on any Notes, the Tax Redemption Date pursuant to Section 3.01 of the Indenture or the redemption date pursuant to Section 3.02(a) of the Indenture (each a “Payment Date”), the Company will pay or cause to be paid to the account of the Paying and Transfer Agent at the Principal Office, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, in immediately available funds, an amount which shall be sufficient to pay the aggregate amount of principal, interest or premium or all of such amounts, as the case may be, becoming due in respect of the Notes on such Payment Date; provided that if the Company or any Affiliate of the Company is acting as Paying and Transfer Agent, it shall, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in the Indenture. In each case, the Company shall promptly notify the Trustee and the Paying and Transfer Agent of its compliance with this paragraph (u). The Company shall procure that, before 9:00 a.m. (London time) on the third Business Day before each Payment Date, the bank effecting payment for it has confirmed by electronic mail and PDF instructions attached to the Paying and Transfer Agent the payment instructions relating to such payment. The Trustee (or the Paying and Transfer Agent) shall not be liable to account for interest on money paid to it by the Company. Monies held by the Trustee or the Paying and Transfer Agent need not be segregated from other funds held by them, except as required by law.

D-5

An installment of principal, premium or interest will be considered paid on the date due if the Paying and Transfer Agent, other than the Company or any Affiliate of the Company, holds on that date money designated for and sufficient to pay the installment. If the Company or any Affiliate of the Company acts as Paying and Transfer Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders.

The Paying and Transfer Agent, which will include the Company or any Affiliate of the Company if it is acting as Paying and Transfer Agent, will make payments in respect of the Notes represented by the Global Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Global Notes. With respect to Certificated Notes, the Paying and Transfer Agent will make all payments by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing (at the expense of the Company if the Company or any Affiliate of the Company is acting as paying agent) a check to each Holder’s registered address; provided that if the Company or any Affiliate of the Company is acting as Paying and Transfer Agent, it shall make such payment to the Holders as specified above. The Trustee (or the Paying and Transfer Agent) shall not be required to make any payments in respect of the Notes pursuant to the Indenture until it has received full payment of the relevant amounts in immediately available and cleared funds from the Company.

At least 30 Business Days prior to the first Payment Date and, if there has been any change with respect to the matters set forth in the below-mentioned certificate, at least 30 Business Days prior to each Payment Date thereafter, the Company shall furnish the Paying and Transfer Agent with an Officers’ Certificate instructing the Paying and Transfer Agent as to any circumstances in which payments of principal of, or interest or premium on, the Notes due on such date shall be subject to deduction or withholding for, or on account of, any Taxes described in Section 4.21 of the Indenture and the rate of any such deduction or withholding. If any such deduction or withholding shall be required and if the Company therefore becomes liable to pay Additional Amounts, if any, pursuant to Section 4.21 of the Indenture then at least 30 Business Days prior to each Payment Date, the Company shall furnish the Paying and Transfer Agent with a certificate which specifies the amount required to be withheld on such payment to Holders of the Notes, and the Additional Amounts, if any, due to the Holders of the Notes, and at least one Business Day prior to such Payment Date, will pay to the Paying and Transfer Agent such Additional Amounts, if any, as shall be required to be paid to such Holders.

(v) Any notice or demand shall be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of the Depositary. Any such notice shall be deemed to have been delivered on the day such notice is delivered to the Depositary or if by mail, when so sent or deposited.

D-6

(w) All Notes surrendered for payment, redemption, registration of transfer or exchange, if surrendered to the Company or the Trustee, shall be delivered to the Paying and Transfer Agent for cancellation or, if surrendered to the Paying and Transfer Agent, shall be canceled by it; and no Notes shall be issued in lieu thereof, except as expressly permitted by any of the provisions of the Indenture. The Paying and Transfer Agent shall dispose of canceled Notes held by it in accordance with its customary procedures, and (upon the written request of the Company) deliver a certificate of disposition to the Company. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes, unless and until the same are delivered to the Paying and Transfer Agent for cancellation.

(x) Each of the Notes, the Subsidiary Guarantees, the Indenture and this letter shall be governed by, and construed in accordance with, the laws of the State of New York.

Each of the Company and the Subsidiary Guarantors hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of any New York state or United States federal court located in the Borough of Manhattan, The City of New York, New York, in connection with any suit, action or proceeding arising out of or relating to this letter, the Indenture, any Note or any Subsidiary Guarantee or any transaction contemplated hereby or thereby. Each of the Company and the Subsidiary Guarantors irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company or any Subsidiary Guarantor, as the case may be, has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal process with respect to itself or its property, the Company or such Subsidiary Guarantor, as the case may be, irrevocably waives such immunity in respect of its obligations hereunder or under any Note or any Subsidiary Guarantee, as applicable. Each of the Company and the Subsidiary Guarantors agrees that final judgment in any such suit, action or proceeding, brought in such a court shall be conclusive and binding upon the Company or the Subsidiary Guarantor, as the case may be, and, to the extent permitted by applicable law, may be enforced in any court to the jurisdiction of which the Company or the Subsidiary Guarantor, as the case may be, is subject by a suit upon such judgment or in any manner provided by law, provided that service of process is effected upon the Company or the Subsidiary Guarantor, as the case may be, in the manner specified in the following subsection or as otherwise permitted by applicable law.

As long as any of the Notes remain outstanding, each of the Company and the Subsidiary Guarantors shall at all times have an authorized agent in the City of New York, upon whom process may be served in any legal action or proceeding arising out of or relating to this letter, the Indenture, any Note or any Subsidiary Guarantee. Service of process upon such agent and written notice of such service mailed or delivered to the Company or any Subsidiary Guarantor, as the case may be, shall to the fullest extent permitted by applicable law be deemed in every respect effective service of process upon the Company or such Subsidiary Guarantor, as the case may be, in any such legal action or proceeding. Each of the Company and the Subsidiary Guarantors hereby appoints Law Debenture Corporate Services Inc. as its agent for such purpose, and covenants and agrees that service of process in any suit, action or proceeding may be made upon it at the office of such agent at 400 Madison Avenue, 4^th Floor, New York, New York 10017. Notwithstanding the foregoing, the Company or any Subsidiary Guarantor may, with prior written notice to the Trustee, terminate the appointment of Law Debenture Corporate Services Inc. and appoint another agent for the above purposes so that the Company or such Subsidiary Guarantor shall at all times have an agent for the above purposes in the City of New York. Each of the Company and the Subsidiary Guarantors hereby agrees to take any and all action as may be necessary to maintain the designation and appointment of an agent in full force and effect until the final maturity date of the Notes (or earlier, if the Notes are prepaid in full).

D-7

Each of the Company and the Subsidiary Guarantors hereby irrevocably waives, to the fullest extent permitted by applicable law, any requirement or other provision of law, rule, regulation or practice which requires or otherwise establishes as a condition to the institution, prosecution or completion of any suit, action or proceeding (including appeals) arising out of or relating to this letter, the Indenture or any Note or any Subsidiary Guarantee, the posting of any bond or the furnishing, directly or indirectly, of any other security.

(y) The Company undertakes to the Paying and Transfer Agent that it will notify the Paying and Transfer Agent in writing within 30 days of any change that affects the Company’s tax status pursuant to any Applicable Law.

Each party to this letter or the Indenture shall, within ten business days of a written request by another party to this letter or the Indenture, supply to that other party such forms, documentation and other information relating to it, its operations, or any Notes as that other party reasonably requests for the purposes of that other party's compliance with Applicable Law and shall notify the relevant other party reasonably promptly in the event that it becomes aware that any of the forms, documentation or other information provided by such party is (or becomes) inaccurate in any material respect; provided, however, that no party to this letter or the Indenture shall be required to provide any forms, documentation or other information pursuant to this paragraph (y) to the extent that: (i) any such form, documentation or other information (or the information required to be provided on such form or documentation) is not reasonably available to such party and cannot be obtained by such party using reasonable efforts; or (ii) doing so would or might in the reasonable opinion of such party constitute a breach of any: (a) Applicable Law; (b) fiduciary duty; or (c) duty of confidentiality.

The Company shall notify each Agent in the event that it determines that any payment to be made by an Agent under any Notes is a payment which could be subject to FATCA Withholding if such payment were made to a recipient that is generally unable to receive payments free from FATCA Withholding, and the extent to which the relevant payment is so treated, provided, however, that the Company’s obligation under this paragraph (y) shall apply only to the extent that such payments are so treated by virtue of characteristics of the Company, such Notes, or both.

Notwithstanding any other provision of this letter, each Agent shall be entitled to make a deduction or withholding from any payment which it makes under any Notes for or on account of any Tax, if and only to the extent so required by Applicable Law, in which event the Agent shall make such payment after such deduction or withholding has been made and shall account to the relevant Authority within the time allowed for the amount so deducted or withheld or, at its option, shall reasonably promptly after making such payment return to the Company the amount so deducted or withheld, in which case, the Company shall so account to the relevant Authority for such amount.

D-8

If any Taxes become payable with respect to any prior credit to another party by the Paying and Transfer Agent, the Paying and Transfer Agent may debit any balance held for the Company in satisfaction of such Taxes. The Company shall remain liable for any deficiency and agrees that it shall pay any such deficiency upon notice from the Paying and Transfer Agent or any Authority.

In the event that the Company determines in its sole discretion that withholding for or on account of any Tax will be required by Applicable Law in connection with any payment due to any of the Agents on any Notes, then the Company will be entitled to redirect or reorganise any such payment in any way that it sees fit in order that the payment may be made without such deductions or withholding, provided that, any such redirected or reorganised payment is made through a recognised institution of international standing and otherwise made in accordance with this letter and the Indenture. The Company will promptly notify the Agents and the Trustee of any such redirection or reorganisation.

The Agents may transfer information to any other branch, subsidiary or affiliate of the Trustee and the Agent entities (or a service provider to any of the Trustee and the Agents) or to any court, regulator, Authority, auditor or otherwise as required under any Applicable Law, or to persons from whom it receives payments or to whom it makes payments on behalf of the Company and/or the Subsidiary Guarantors. In each case, the information permitted to be transferred, disclosed or used includes any information regarding third parties provided to the Agents by the Company and the Subsidiary Guarantors. The Company and the Subsidiary Guarantor are required to provide any necessary information to, and obtain any necessary consents from, such third parties to allow such transfer, disclosure and use.

For the purposes of this paragraph (y) and paragraph (z) below:

“Applicable Law” means any law or regulation including, but not limited to: (i) any statute or regulation; (ii) any rule or practice of any Authority by which any party to this letter or the Indenture is bound or with which it is accustomed to comply; (iii) any agreement between any Authorities; and (iv) any customary agreement between any Authority and any party to this letter or the Indenture.

“Authority” means any competent regulatory, prosecuting, Tax or governmental authority in any jurisdiction, domestic or foreign.

“FATCA Withholding” means any withholding or deduction required pursuant to an agreement described in section 1471(b) of the Code, or otherwise imposed pursuant to sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or any law implementing an intergovernmental approach thereto.

D-9

“Tax” means any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of any Authority having power to tax.

(z) The Paying and Transfer Agent will treat information relating to the Company and the Subsidiary Guarantors as confidential, but (unless consent is prohibited by law) the Company and the Subsidiary Guarantors consent to the transfer and disclosure by the Paying and Transfer Agent of any information relating to the Company and the Subsidiary Guarantors to and between branches, subsidiaries, representatives offices, affiliates and agents of the Paying and Transfer Agent and third parties selected by any of them, wherever situated, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes). The Paying and Transfer Agent and any branch, subsidiary, representative office, affiliate, agent or third party may transfer and disclose any such information as required by any law, court regulator or legal process, provided that prompt notice is provided to the Company and the Subsidiary Guarantors (except in the case of regulatory inquiry or examination in the ordinary course of business, and otherwise to the extent practical and permitted by Applicable Law, regulation and Authority).

(aa) Notwithstanding anything else herein contained, the Paying and Transfer Agent may refrain without liability from doing anything that would or might in its opinion be contrary to any law of any state or jurisdiction (including but not limited to the laws of Hong Kong, the United States of America or any jurisdiction forming a part of it and England & Wales) or any directive or regulation of any agency of any such state or jurisdiction and may without liability do anything which is, in its opinion, necessary to comply with any such law, directive or regulation.

[Signature page follows]

D-10

The agreement set forth in this letter shall be construed in accordance with and governed by the laws of the State of New York.

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:
BRAVE PASSION LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED 一嗨汽车服务（香港）控股有限公司 (as a Subsidiary Guarantor)
By:
	Name:
	Title:
L&L FINANCIAL LEASING HOLDING LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:

[Signature Page - Paying and Transfer Agent Appointment Letter]

Agreed and accepted:
DEUTSCHE BANK AG, HONG KONG BRANCH,
as Paying and Transfer Agent and as Registrar
By:
	Name:
	Title:
By:
	Name:
	Title:
Acknowledged:
DB TRUSTEES (HONG KONG) LIMITED
as Trustee
By:
	Name:
	Title:
By:
	Name:
	Title:

[Signature Page - Paying and Transfer Agent Appointment Letter]

EXHIBIT E

SUPPLEMENTAL INDENTURE

dated as of __________, 20__

among

EHI CAR SERVICES LIMITED
as the Company

and

The entities listed on Schedule I hereto

as the Subsidiary Guarantors

and

DB Trustees (HONG KONG) Limited
as Trustee

5.875% Senior Notes Due 2022

E-1

THIS SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), entered into as of __________, 20____, among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the existing Subsidiary Guarantors listed on Schedule I hereto (the “Subsidiary Guarantors”) and [insert each new Subsidiary Guarantor executing this Supplemental Indenture and its jurisdiction of incorporation] (each an “Undersigned”) and DB Trustees (Hong Kong) Limited, as trustee (the “Trustee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture (as defined below).

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors party thereto and the Trustee entered into the Indenture, dated as of August 14, 2017 (as amended or supplemented to the date hereof, the “Indenture”), relating to the Company’s 5.875% Senior Notes Due 2022 (the “Notes”).

WHEREAS, pursuant to Sections 10.09 and 10.10 of the Indenture each new Subsidiary Guarantor is required to enter into a supplemental indenture which supplemental indenture may be entered into without the consent of the Holders pursuant to Section 9.01(a)(ix).

WHEREAS, as a condition to the Trustee entering into the Indenture and the purchase of the Notes by the Holders, the Company agreed pursuant to the Indenture to cause any future Restricted Subsidiaries (other than those organized under the laws of the PRC) to provide Subsidiary Guarantees, subject to the conditions and exceptions provided in the Indenture.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows:

Section 1. Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.

Section 2. Each Undersigned, by its execution of this Supplemental Indenture, agrees to be a Subsidiary Guarantor under the Indenture and to be bound by all the terms of the Indenture applicable to Subsidiary Guarantors, including, but not limited to, Article 10 thereof.

Section 3. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York.

Section 4. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument.

Section 5. This Supplemental Indenture is an amendment supplemental to the Indenture and the Indenture and this Supplemental Indenture will henceforth be read together.

E-2

Section 6. The recitals contained herein shall be taken as the statements of the Company, the Subsidiary Guarantors and the Undersigned, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture.

Section 7. Notwithstanding anything contained herein, nothing in this Supplemental Indenture shall relieve the Company, the Subsidiary Guarantors or the Trustee of any of their obligations under the Indenture, as amended and supplemented by this Supplemental Indenture, and the Notes. The Trustee shall not be responsible and shall have no liability for the validity or efficiency of this Supplemental Indenture. The Company and the Subsidiary Guarantors acknowledge and agree that the indemnification and other provisions of Section 7.06 of the Indenture shall apply to this Supplemental Indenture and the transactions contemplated therein as if set forth herein.

Section 8. All of the provisions of the Indenture shall remain in full force and effect as set forth therein.

E-3

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:
BRAVE PASSION LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED 一嗨汽车服务（香港）控股有限公司 (as a Subsidiary Guarantor)
By:
	Name:
	Title:
L&L FINANCIAL LEASING HOLDING LIMITED (as a Subsidiary Guarantor)
By:
	Name:
	Title:

E-4

[New Subsidiary Guarantor]
By:
	Name:
	Title:

E-5

DB TRUSTEES (HONG KONG) Limited,
   as Trustee

Name:

Title:

Name:

Title:

E-6

SCHEDULE I

TO EXHIBIT E

LIST OF SUBSIDIARY GUARANTORS ^⃰

1. Brave Passion Limited

2. eHi Auto Services (Hong Kong) Holding Limited一嗨汽车服务（香港）控股有限公司

3. L&L Financial Leasing Holding Limited

⃰ To be updated as of the date of any Supplemental Indenture.

E-7

EXHIBIT F

FORM OF COMPLIANCE CERTIFICATE

This Compliance Certificate is delivered pursuant to Section 6.08 of the Indenture, dated as of August 14, 2017, as amended, supplemented or modified from time to time (the “Indenture”), among eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), the entities listed on Schedule I thereto (the “Subsidiary Guarantors”) and DB Trustees (Hong Kong) Limited, as trustee (the “Trustee”). Terms defined in the Indenture are used herein as therein defined.

Each of the undersigned hereby certifies to the Trustee as follows:

1.              I am the duly elected, qualified and acting [title] or [title], as the case may be, of the Company.

2.              I have reviewed and am familiar with the contents of this Compliance Certificate.

3.              I have reviewed the terms of the Indenture.

4.              That a review has been conducted of the activities of the Company and the Restricted Subsidiaries and the Company’s and the Restricted Subsidiaries’ performance under the Indenture, in each case, since the Original Issue Date, [and that the Company and each Restricted Subsidiary have been since the Original Issue Date and are in compliance with of their respective all obligations under the Indenture]/[if there has been a default in the fulfillment of any obligation under the Indenture, specifying each such default and the nature and status thereof.]

IN WITNESS WHEREOF, each of the undersigned has executed this Compliance Certificate as of the date set forth below.

EHI CAR SERVICES LIMITED
By:
	Name:
	Title:
By:
	Name:
	Title:

Date: ________, 20__

F-1

EXHIBIT G

TRUSTEE

DB Trustees (Hong Kong) Limited

Level 52, International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

PAYING AND TRANSFER AGENT AND REGISTRAR

Deutsche Bank AG, Hong Kong Branch
Level 52, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong

G-1

EX-4.24

Exhibit 4.24

EXECUTION VERSION

PURCHASE AGREEMENT

August 3, 2017

J.P. Morgan Securities plc

25 Bank Street

Canary Wharf

London E14 5JP

United Kingdom

Deutsche Bank AG, Singapore Branch

One Raffles Quay

#17-00 South Tower

Singapore 048583

As the Initial Purchasers

Ladies and Gentlemen:

Introductory. Subject to the terms and conditions herein contained, eHi Car Services Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability (the “Company”), proposes to issue and sell to the several Initial Purchasers named in Schedule A (the “Initial Purchasers”), acting severally and not jointly, the respective amounts set forth opposite their names in such Schedule A hereto of $400,000,000 aggregate principal amount of the Company’s 5.875% Senior Notes due 2022 (the “Notes”).

The Securities (as defined below) will be issued pursuant to an indenture, to be dated as of August 14, 2017 (the “Indenture”), among the Company, the Guarantors (as defined below) and Citicorp International Limited, as trustee (the “Trustee”). The Notes will be issued only in book-entry form in the name of a nominee of a depositary (the “Common Depositary”) common to Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”).

The payment of principal of, premium, if any, and interest on the Notes will be fully and unconditionally guaranteed on a senior basis, jointly and severally by the following direct and indirect subsidiaries of the Company: Brave Passion Limited, eHi Auto Services (Hong Kong) Holding Limited and L&L Financial Leasing Holding Limited, (collectively, the “Guarantors”) pursuant to their guarantees (the “Guarantees”). The Notes and the Guarantees are herein collectively referred to as the “Securities.”

The date of the completion of the offering of the Notes, as specified in Section 2 below, is referred to herein as the “Closing Date.”

On the Closing Date, the Notes will be guaranteed by each of the Guarantors.

The foregoing is descriptive only and all related matters will be governed by the operative agreements and not the preceding paragraphs.

1

The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Pricing Disclosure Package (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the “Subsequent Purchasers”) on the terms set forth in the Pricing Disclosure Package (the first time when sales of the Securities are made is referred to as the “Time of Sale”). The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933 (as amended, the “Securities Act,” which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors who acquire Securities shall be deemed to have agreed that such Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemption afforded by Regulation S under the Securities Act (“Regulation S”)).

The Company has prepared and delivered to each Initial Purchaser copies of a Preliminary Offering Memorandum, dated July 31, 2017 (the “Preliminary Offering Memorandum”), and has prepared and delivered to the Initial Purchasers copies of a Pricing Supplement, dated August 3, 2017 (the “Pricing Supplement”), attached hereto as Schedule B, describing the terms of the Securities, each for use by the Initial Purchasers in connection with its solicitation of offers to purchase the Securities. The Preliminary Offering Memorandum and the Pricing Supplement, collectively, are herein referred to as the “Pricing Disclosure Package.” Promptly after this Agreement is executed and delivered, the Company will prepare and deliver to each Initial Purchaser a final offering memorandum dated the date hereof (the “Final Offering Memorandum”). “Road Show Communication” means any written communications with investors by the Company, including its directors, officers, agents and representatives (other than the Initial Purchasers) in connection with the road show which occurred between July 31, 2017 and August 3, 2017.

The Company and the Guarantors hereby confirm their agreements with the Initial Purchasers as follows:

Section 1.          Representations and Warranties. Each of the Company and the Guarantors, jointly and severally, hereby represents, warrants and covenants to each Initial Purchaser that, as of the date hereof and as of the Closing Date (references in this Section 1 to the “Offering Memorandum” are to (x) the Pricing Disclosure Package in the case of representations and warranties made as of the date hereof and (y) the Final Offering Memorandum in the case of representations and warranties made as of the Closing Date):

(a)          No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2 hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act,” which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder).

2

(b)          No Integration of Offerings or Directed Selling Efforts. None of the Company, any of its Affiliates (as such term is defined in Rule 501 under the Securities Act) (each, an “Affiliate”), or any person acting on its or any of their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has, directly or indirectly, solicited any offer to buy or offered to sell, or will, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, any of its Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S.

(c)          The Pricing Disclosure Package and Final Offering Memorandum. Neither the Pricing Disclosure Package, as of the Time of Sale, nor the Final Offering Memorandum, as of its date or (as amended or supplemented in accordance with Section 3(a), as applicable) as of the Closing Date, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Pricing Disclosure Package, the Final Offering Memorandum or any amendment or supplement thereto made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser expressly for use in the Pricing Disclosure Package, the Final Offering Memorandum or any amendment or supplement thereto, as the case may be, which information consists solely of the information specified in Section 8(b) hereof. The Company has not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers’ distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than the Pricing Disclosure Package and the Final Offering Memorandum.

(d)          Company Additional Written Communications. The Company has not prepared, made, used, authorized, approved or distributed and will not prepare, make, use, authorize, approve or distribute any written communication that constitutes an offer to sell or solicitation of an offer to buy the Securities other than (i) the Pricing Disclosure Package, (ii) the Final Offering Memorandum and (iii) any electronic road show or other written communications (for the avoidance of doubt, including any Road Show Communication), in each case, used in accordance with Section 3(a). Each such communication by the Company or its agents and representatives pursuant to clause (iii) of the preceding sentence (each, a “Company Additional Written Communication”), when taken together with the Pricing Disclosure Package, did not as of the Time of Sale, and at the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from each such Company Additional Written Communication made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser expressly for use in any Company Additional Written Communication.

3

(e)          The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by each of the Company and the Guarantors.

(f)          Authorization of the Securities. The Notes to be purchased by the Initial Purchasers from the Company will on the Closing Date be in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Company, and when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles, and will be entitled to the benefits of the Indenture. The Guarantees on the Closing Date when issued will be in the respective forms contemplated by the Indenture and have been duly authorized for issuance pursuant to this Agreement and the Indenture; the Guarantees, at the Closing Date, will have been duly executed by each of the Guarantors and, when the Notes have been authenticated in the manner provided for in the Indenture and issued and delivered against payment of the purchase price therefor, the Guarantees will constitute valid and binding agreements of the Guarantors, in each case, enforceable against the Guarantors in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles, and will be entitled to the benefits of the Indenture.

(g)          Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Guarantors and, at the Closing Date, will have been duly executed and delivered by the Company and the Guarantors and, when duly executed and delivered in accordance with its terms by the parties thereto, will constitute a valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.

(h)          Description of the Securities and the Indenture. The Securities and the Indenture will conform in all material respects to the respective descriptions thereof contained in the Offering Memorandum.

(i)          No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum (exclusive of any amendment or supplement thereto), subsequent to the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto): (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the business, properties, management, financial position, results of operations or prospects of the Company and its subsidiaries, as such term is defined under Rule 405 of the Securities Act (the “Subsidiaries”) and consolidated variable interest entities (each, a “VIE” and, together with the Subsidiaries, the “Controlled Entities”) listed in Schedule C hereto, taken as a whole (any such change is called a “Material Adverse Change”); (ii) the Company and its Controlled Entities, taken as a whole, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or any of its Controlled Entities on any class of capital stock or repurchase or redemption by the Company or any of its Controlled Entities of any class of capital stock; (iv) there has not been any material change in the share capital or long term indebtedness of the Company or any of its Controlled Entities; and (v) neither the Company or any of its Controlled Entities shall have sustained a loss or interference with its business that is material to the Company and its Controlled Entities taken as a whole and that is either by strike, fire, flood, explosion, or other calamity, regardless of whether or not such loss shall have been insured, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.

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(j)          Independent Accountants. PricewaterhouseCoopers Zhong Tian LLP, who has audited the financial statements of the Company and its Controlled Entities, is an independent registered public accounting firm with respect to the Company and its Controlled Entities within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.

(k)          Preparation of the Financial Statements. The consolidated financial statements, together with the related schedules and notes, of the Company and its Controlled Entities included in the Offering Memorandum present fairly in all material respects the consolidated financial position of the Company and its Controlled Entities as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set forth in the Offering Memorandum under the captions “Summary Consolidated Financial and Other Data” and “Selected Consolidated Financial and Other Data” fairly present in all material respects the information set forth therein and, except for non-U.S. GAAP measures or otherwise disclosed therein, have been derived from the consolidated financial statements contained in the Offering Memorandum. The non-U.S. GAAP measures set forth in such sections have been properly presented on the bases described thereunder. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act,” which term, as used herein, includes the rules and regulation of the Commission promulgated thereunder) contained in the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

(l)          Operating Data. All operating data of the Company and the Controlled Entities disclosed in the Offering Memorandum, including but not limited to, number of vehicles, utilization rates, average daily rental rates, number of registered members, number of corporate and institutional clients and number of service locations, are true and accurate in all material respects.

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(m)          Incorporation and Good Standing of the Company and its Controlled Entities. The Company has been duly incorporated and is validly existing and in good standing under the laws of the Cayman Islands, is duly qualified to do business and is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses as described in the Offering Memorandum, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, result in a Material Adverse Change. The memorandum and articles of association or other constitutive or organizational documents of the Company comply with the requirements of applicable Cayman Islands law and are in full force and effect. No change will be made to any such constitutive documents on or after the date of this Agreement through and including the Closing Date. The Company does not own or control, directly or indirectly, any corporation, partnership, joint venture, association or other entity, which is a “significant subsidiary” as defined under Rule 1-02 of Regulation S-X under the Exchange Act, other than the Controlled Entities listed in Schedule C hereto. Each Controlled Entity of the Company has been duly incorporated and is validly existing and in good standing under the laws of the jurisdiction of its incorporation, and, except as disclosed in the Offering Memorandum, is duly qualified to do business and is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification and has all power and authority necessary to own or hold its properties and to conduct the businesses as described in the Offering Memorandum, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock or other equity interests of each Controlled Entity of the Company has been duly authorized and validly issued and is fully or timely paid in due course and nonassessable; except as disclosed in the Offering Memorandum, the capital stock or other equity interests of each Subsidiary is owned by the Company, directly or indirectly, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party; the capital stock of each VIE is owned by such individuals as disclosed under the caption “Our Corporate History and Structure” of the Offering Memorandum, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party, except for those encumbrances on the equity interests of the VIE as provided in the Control Agreements (as defined below); and the memorandum and articles of association or other constitutive or organizational documents of each of Controlled Entities of the Company comply with the requirements of applicable laws and regulations in their respective jurisdictions of incorporation and are in full force and effect.

(n)          Capitalization and Other Capital Stock Matters. The Company has an authorized capitalization as set forth in the Offering Memorandum under the heading “Capitalization”; all the issued and outstanding shares of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are not subject to any pre-emptive or similar rights; except as described in or expressly contemplated by the Offering Memorandum, there are no outstanding rights (including, without limitation, pre-emptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares or other equity interest in the Company or any of its Controlled Entities, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any shares of the Company or any of its Controlled Entities, any such convertible or exchangeable securities or any such rights, warrants or options. With respect to the stock awards granted pursuant to the employee performance incentive plans of the Company, (i) each such grant was duly authorized by all necessary corporate action, including, as applicable, approval and/or ratification by the board of directors of the Company (or a duly constituted and authorized committee thereof), (ii) each such grant was made in accordance with the terms of the employee performance incentive plans and all applicable laws and regulatory rules or requirements, and (iii) each such grant was properly accounted for in accordance with U.S. GAAP in the financial statements (including the related notes) of the Company.

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(o)          Corporate Structure and Control Agreements. Except as disclosed in the Offering Memorandum, each of the current contractual arrangements and agreements enabling the Company to exercise effective control over and consolidate the financial statements of the VIEs (collectively, the “Control Agreements”) has been duly authorized, executed and delivered by the parties thereto and constitutes a legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by equitable principles relating to enforceability, and does not violate any requirements of laws of the People’s Republic of China (the “PRC”). Each of the parties to the Control Agreements has the power and capacity (corporate or otherwise) to enter into and to perform its obligations under such Control Agreements and has, to the extent applicable, taken all necessary corporate actions to authorize the performance of the Control Agreements. All required Governmental Authorizations (as defined below) in respect of the Control Agreements to ensure the legality and enforceability of each of the Control Agreements have been duly obtained and no further Governmental Authorizations are required in connection with the Control Agreements or the performance of the terms thereof and no stamp duty or similar tax is required to be paid in connection with the Control Agreements, except that the future exercise of the call options under the Control Agreements shall be approved and/or registered by the relevant Governmental Agencies (as defined below) and the equity pledge under the Control Agreements shall be continually registered with the relevant Governmental Agencies. The execution, delivery and performance of each of the Control Agreements by the parties thereto, and the consummation of the transactions contemplated thereunder, do not and will not (A) result in any violation of the memorandum and articles of association, charter, by-law or other constituent documents (if any) or Governmental Authorizations of any of the parties to the Control Agreements; (B) except as disclosed in the Offering Memorandum, result in any violation of, or penalty under, any PRC laws; or (C) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any other contract, license, indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument to which the Company or any of its Controlled Entities is a party or by which any of them is bound or to which any of their properties or assets is subject, except, in the case of (C) above, as would not, individually or in the aggregate, result in a Material Adverse Change. The corporate structure of the Company (including the shareholding structure of each of its Controlled Entities) as described in the Offering Memorandum does not, and immediately following the offer and sale of the Securities will not violate, breach, contravene or otherwise conflict with any applicable PRC laws. There have been no legal, arbitration, government or other legal proceedings challenging the legality or validity of the corporate structure of the Company pending before or, to the knowledge of the Company and each of the Guarantors, threatened by any court or arbitrator or governmental or regulatory authority (“Governmental Agency”) or any person.

(p)          Termination of Material Contracts. Neither the Company nor any of its Controlled Entities has sent or received any written communication regarding termination of, or intent not to renew, any of the material contracts or agreements referred to or described in the Offering Memorandum or filed (or incorporated by reference) as an exhibit to the Company’s annual report on the Form 20-F filed with the Commission on April 27, 2017, and no such termination or non-renewal has been threatened by the Company or any of its Controlled Entities, or to the knowledge of the Company and each of the Guarantors, by any other party to any such contract or agreement.

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(q)          Management’s Discussion and Analysis of Financial Condition and Results of Operations. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Offering Memorandum accurately and fully, in all material respects, describes (i) accounting policies that the Company believes are the most important in the portrayal of the Company’s financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, (ii) judgments and uncertainties affecting the application of the foregoing critical accounting policies and (iii) the likelihood that materially different amounts would be reported under different conditions or using different assumptions and an explanation thereof. The Company’s directors and management have reviewed and agreed with the selection, application and disclosure of the Company’s critical accounting policies as described in the Offering Memorandum and have consulted with the Company’s independent registered public accounting firm with regard to such disclosure. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and capital resources” in the Offering Memorandum fairly and accurately, in all material respects, describes all trends, demands, commitments, events, uncertainties and risks and the potential effects thereof known to the Company, that the Company believes would materially affect its liquidity and are reasonably likely to occur. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-balance sheet arrangements” in the Offering Memorandum fairly and accurately, in all material respects, describes all off-balance sheet transactions, arrangements, commitments and obligations of the Company or its Controlled Entities that are reasonably likely to have a material effect on the liquidity of the Company and its Controlled Entities or the availability thereof or the requirements of the Company and its Controlled Entities for capital resources.

(r)          No Violation or Default. Neither the Company nor any of its Controlled Entities is (i) in violation of its respective memorandum and articles of association, charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Controlled Entities is a party or by which the Company or any of its Controlled Entities is bound or to which any of the property or assets of the Company or any of its Controlled Entities is subject; or (iii) except as disclosed in the Offering Memorandum, in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, result in a Material Adverse Change.

(s)          No Conflicts. The execution, delivery and performance by the Company and Guarantors of each of this Agreement, the Indenture and the Securities (collectively, the “Transaction Documents”), the issuance and sale of the Securities and the consummation by the Company and Guarantors of the transactions contemplated by the Transaction Documents will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Controlled Entities pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Controlled Entities is a party or by which the Company or any of its Controlled Entities is bound or to which any of the property or assets of the Company or any of its Controlled Entities is subject, (ii) result in any violation of the provisions of the memorandum and articles of association, charter or by-laws or similar organizational documents of the Company or any of its Controlled Entities or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, result in a Material Adverse Change.

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(t)          No Consents Required. No consent, approval, authorization, order, license, permit, registration, declaration, filing or qualification of or with any Governmental Agency (“Governmental Authorizations”) (including, but not limited to, registration with the National Development and Reform Commission) is required for the execution, delivery and performance by the Company and Guarantors of each of the Transaction Documents, the issuance and sale of the Securities and the consummation of the transactions contemplated by the Transaction Documents, except for the approval in-principle for the listing and quotation of the Notes on the Singapore Exchange Securities Trading Limited (the “SGX-ST”).

(u)          Legal Proceedings. Except as disclosed in the Offering Memorandum, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company or any of its Controlled Entities is or may be a party or to which any property of the Company or any of its Controlled Entities is or may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its Controlled Entities, could reasonably be expected to result in a Material Adverse Change; no such investigations, actions, suits or proceedings are, to the knowledge of the Company and each of the Guarantors, threatened or contemplated by any Governmental Agency or threatened by others.

(v)         Intellectual Property Rights. Except as disclosed in the Offering Memorandum, the Company and its Controlled Entities own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the “Intellectual Property Rights”) necessary for the conduct of their respective businesses as currently conducted and as proposed to be conducted, and the conduct of their respective businesses will not conflict in any material respect with any such rights of others. (i) To the knowledge of the Company and each of the Guarantors, there is no infringement, misappropriation or violation by third parties of any such Intellectual Property Rights owned by the Company or any of the Controlled Entities; (ii) there is no pending or, to the knowledge of the Company and each of the Guarantors, threatened action, suit, proceeding or claim by others challenging the rights of the Company or any of its Controlled Entities in or to, or the violation of any of the terms of, any of their Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (iii) there is no pending or, to the knowledge of the Company and each of the Guarantors, threatened action, suit, proceeding or claim by others challenging the validity, enforceability or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (iv) there is no pending or, to the knowledge of the Company and each of the Guarantors, threatened action, suit, proceeding or claim by others that the Company or any of its Controlled Entities infringes, misappropriates or otherwise violates or conflicts with any Intellectual Property Rights or other proprietary rights of others and the Company is unaware of any other fact which would form a reasonable basis for any such claim; and (v) none of the Intellectual Property Rights used by the Company and its Controlled Entities in their businesses has been obtained or is being used by the Company or any of its Controlled Entities in violation of any contractual obligation binding on the Company, any of its Controlled Entities in violation of the rights of any persons, except, in each case, covered by clauses (i) through (v) above such as would not, if determined adversely to the Company or any of its Controlled Entities, individually or in the aggregate, result in a Material Adverse Change.

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(w)          Licenses and Permits. Except as disclosed in the Offering Memorandum, the Company and its Controlled Entities possess all Governmental Authorizations that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, individually or in the aggregate, result in a Material Adverse Change; and neither the Company nor any of its Controlled Entities has received notice of any revocation or modification of any such Governmental Authorizations or has any reason to believe that any such Governmental Authorizations will not be renewed in the ordinary course. In particular, except as disclosed in the Offering Memorandum, the Company and its Controlled Entities have obtained all Governmental Authorizations required under PRC national and local laws, regulations and rules applicable to the provision of car rental and car services including, without limitation, the Notice on Promoting the Healthy Development of Car Rental Industry promulgated by the Ministry of Transport of the PRC in 2011, the Road Transportation Regulation promulgated by the State Council of the PRC in 2004, as amended in 2012 and 2016, and the Administrative Regulations on Operation and Services of Taxis promulgated by the Ministry of Transport of the PRC that became effective in 2015 (collectively, the “Car Rental and Car Service Regulations”) or pursuant to any official clarifications, guidance, interpretations or implementation rules in connection with or related to the Car Rental and Car Service Regulations(collectively, the “Car Rental and Car Service Regulations and Related Clarifications”), except where the failure to possess the same would not, individually or in the aggregate, result in a Material Adverse Change. The Company’s current business arrangement of providing chauffeured car services primarily to its corporate and institutional clients and generally entering into long-term framework agreements with these corporate and institutional clients, pursuant to which its vehicles and chauffeur services are provided by different subsidiaries under separate contracts, does not violate any of the Car Rental and Car Service Regulations and Related Clarifications.

(x)          Title to Real and Personal Property. Except as disclosed in the Offering Memorandum, the Company and its Controlled Entities have good and marketable title in fee simple (in the case of real property) to, or, have valid and marketable rights to lease or otherwise use, all items of real and personal property and assets that are material to the respective businesses of the Company and its Controlled Entities, in each case, free and clear of all liens, encumbrances, claims and defects and imperfections of title, except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its Controlled Entities or (ii) could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change.

(y)          Tax Law Compliance. Except as otherwise disclosed in the Offering Memorandum, the Company and its Controlled Entities have paid all taxes and filed all tax returns required to be paid or filed through the date hereof, except for cases in which the failure to pay or file would not, individually or in the aggregate, result in a Material Adverse Change; and, except as otherwise disclosed in the Offering Memorandum, there is no tax deficiency that has been, or could reasonably be expected to be, asserted against the Company or any of its Controlled Entities or any of their respective properties or assets, except for tax deficiency that would not, individually or in the aggregate, result in a Material Adverse Change. To the knowledge of the Company and each of the Guarantors, no tax investigation is currently pending against the Company or any of its Controlled Entities. The provisions included in the audited consolidated financial statements and unaudited condensed consolidated financial statements as set out in the Offering Memorandum included appropriate provisions required under U.S. GAAP for all taxation in respect of accounting periods ended on or before the accounting reference date to which such audited and unaudited accounts relate for which the Company was then or might reasonably be expected thereafter to become or have become liable.

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(z)          Investment Company Act. Neither the Company nor any Guarantor is and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof received by the Company as described in the Offering Memorandum, will be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder (collectively, the “Investment Company Act”).

(aa)         Insurance. The Company and its Controlled Entities have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks in amounts and of the type as the Company reasonably believes are prudent and customary in the business in which the Company and its Controlled Entities are engaged; and neither the Company nor any of its Controlled Entities has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business. There is no material insurance claim made by or against the Company or any of its Controlled Entities, pending, outstanding, or to the knowledge of the Company and each of the Guarantors, threatened, and no facts or circumstances exist which would reasonably be expected to give rise to any such claim. The Company has had directors and officers insurance policy in place and such policy is in the form satisfactory to its independent directors.

(bb)         No Price Stabilization or Manipulation. None of the Company and its Controlled Entities and, to the knowledge of the Company and each of the Guarantors, any director, executive officer, agent, employee, Affiliate or person acting on behalf the Company and its Controlled Entities, has taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Securities.

(cc)         Solvency. The Company and the Guarantors, on a consolidated basis, are, and immediately after the Closing Date will be, Solvent. As used herein, the term “Solvent” means, with respect to any person on a particular date, that on such date (i) the fair market value of the assets of such person is greater than the total amount of liabilities (including contingent liabilities) of such person, (ii) the present fair salable value of the assets of such person is greater than the amount that will be required to pay the probable liabilities of such person on its debts as they become absolute and matured, (iii) such person is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature and (iv) such person does not have unreasonably small capital.

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(dd)         Company’s Accounting System. The Company and its Controlled Entities, on a consolidated basis, maintain a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that, except as disclosed in the Offering Memorandum, comply with the requirements of the Exchange Act which are applicable to them, and that has been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S.GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Offering Memorandum, there are no material weaknesses in the Company’s internal control over financial reporting. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which have materially adversely affected or are reasonably likely to materially adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

(ee)         Disclosure Controls and Procedures. The Company and its Controlled Entities, on a consolidated basis, have established and maintains a system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act, as applicable, and that is designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

(ff)         Use of Proceeds. The application of the net proceeds received by the Company from the offering of Securities, as described in the Offering Memorandum, will not (i) result in any violation of the provisions of the memorandum and articles of association, charter or by-laws or similar organizational documents of the Company or any of its Controlled Entities, (ii) contravene or violate any applicable laws, (iii) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Controlled Entities pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Controlled Entities is a party or by which the Company or any of its Controlled Entities is bound or to which any of the property or assets of the Company or any of its Controlled Entities is subject or (iv) contravene or violate the terms or provisions of any Governmental Authorization applicable to any of the Company or any of the Controlled Entities, except in the case of clauses (iii) and (iv) above, where such contravention or default would not, individually or in the aggregate, result in a Material Adverse Change.

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(gg)         Compliance with and Liability under Environmental Laws. (i) The Company and its Controlled Entities (a) are, and at all prior times were, in compliance with any and all applicable laws, rules, regulations, requirements, decisions, judgments, decrees and orders relating to pollution or the protection of the environment, natural resources or, with respect to exposure to Hazardous Materials, human health or safety, including those relating to the generation, storage, treatment, use, handling, transportation, Release or threat of Release of Hazardous Materials (collectively, “Environmental Laws”), (b) have received and are in compliance with all Governmental Authorizations required of them under applicable Environmental Laws to conduct their respective businesses, (c) have not received notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any Release or threat of Release of Hazardous Materials, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, (d) are not conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any Environmental Law at any location, and (e) are not a party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law, and (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its Controlled Entities, except in the case of each of (i) and (ii) above, for any such matter, as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change; and (iii) (a) there are no proceedings that are pending, or that are known to be contemplated, against the Company or any of its Controlled Entities under any Environmental Laws in which a governmental entity is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (b) the Company and its Controlled Entities are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws, including the Release or threat of Release of Hazardous Materials, that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its Controlled Entities, and (c) none of the Company and its Controlled Entities anticipates material capital expenditures relating to any Environmental Laws. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into, from or through any building or structure.

(hh)         Hazardous Materials. There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials by, relating to or caused by the Company or any of its Controlled Entities (or, to the knowledge of the Company and each of the Guarantors, any other entity (including any predecessor) for whose acts or omissions the Company or any of its Controlled Entities is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its Controlled Entities, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

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(ii)           No Labor Disputes. No labor disturbance by or dispute with employees of the Company or any of its Controlled Entities exists or, to the knowledge of the Company and each of the Guarantors, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of its or its Controlled Entities’ principal suppliers, contractors or customers, except as would not, individually or in the aggregate, result in a Material Adverse Change.

(jj)           No Undisclosed Benefits. Except as disclosed in the Offering Memorandum, neither the Company nor any of its Controlled Entities has any material obligation to provide retirement, healthcare, death or disability benefits to any of the present or past employees of the Company or any of its Controlled Entities.

(kk)         Related Party Transactions. There are no material relationships or transactions between the Company or any of its Controlled Entities on the one hand and the Company’s respective 5% or greater shareholders, Affiliates, directors or executive officers, or any Affiliates or members of the immediate families of such persons, on the other hand, or any other related party transactions that would be required to be disclosed pursuant to Item 404 of Regulation S-K that are not disclosed in the Offering Memorandum under the heading “Related Party Transactions.” The Company has not, directly or indirectly, including through any of its Controlled Entities: (A) extended credit, arranged to extend credit, or renewed any extension of credit, in the form of a personal loan, to or for any director or executive officer of the Company or any of its Controlled Entities, or to or for any family member or Affiliate of any director or executive officer of the Company or any of its Controlled Entities; or (B) made any material modification, including any renewal thereof, to any term of any personal loan to any director or executive officer of the Company or any of its Controlled Entities, or any family member or Affiliate of any director or executive officer, that (x) is outstanding on the date hereof and (y) constitutes a material violation of any applicable law or regulation.

(ll)           No Unlawful Payments. Neither the Company nor any of its Controlled Entities nor any director, executive officer, or employee of the Company or any of its Controlled Entities nor, to the knowledge of the Company and each of the Guarantors, any agent, affiliate or representative of the Company or any of its Controlled Entities has (i) used any funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government or regulatory official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the Organisation for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption laws; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. The Company and its Controlled Entities have instituted, maintained and enforced, and will continue to maintain and enforce, policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws.

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(mm)       Compliance with Money Laundering Laws. The operations of the Company and its Controlled Entities are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its Controlled Entities conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Agency (collectively, the “Anti-Money Laundering Laws”) and no action, suit or proceeding by or before any Governmental Agency involving the Company or any of its Controlled Entities with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company and each of the Guarantors, threatened.

(nn)         No Conflicts with Sanctions Laws. Neither the Company nor any of its Controlled Entities, directors, executive officers or employees, nor, to the knowledge of the Company and each of the Guarantors, any agent, affiliate, representative or other person associated with or acting on behalf of the Company or any of its Controlled Entities is currently the subject or the target of any sanctions administered or enforced by the United States Government, (including, without limitation, the Office of Foreign Assets Control of the United States Department of the Treasury or the United States Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company, any of its Controlled Entities located, organized or resident in a country or territory that is the subject or the target of Sanctions, including, without limitation, Cuba, Iran, North Korea, Sudan, Crimea and Syria (each, a “Sanctioned Country”); and the Company will not directly or indirectly use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person that, at the time of such funding or facilitation, is the subject or the target of Sanctions, (ii) to fund or facilitate any activities of or business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as initial purchaser, advisor, investor or otherwise) of Sanctions. For the past five years, the Company and its Controlled Entities have not knowingly engaged in, are not now knowingly engaged in, and will not engage in, any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.

(oo)         Statistical and Market-Related Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in the Offering Memorandum is not based on or derived from sources that are reliable and accurate in all material respects.

(pp)         Regulation S. Each of the Company and the Guarantors is a “foreign issuer,” as defined in Rule 902 under the Securities Act.

(qq)         Listing. The Company has received approval-in-principle for the listing and quotation of the Notes on the SGX-ST.

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(rr)          Public Filings. All public notices, announcements and advertisements in connection with the issue of the Securities and all filings and submissions provided by or on behalf of the Company to the New York Stock Exchange and the Commission have complied and will comply in all material respects with all rules and regulations of New York Stock Exchange and the Commission to the extent applicable.

(ss)         No Transfer Taxes. Except as otherwise disclosed in the Offering Memorandum, no stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the Initial Purchasers to the government of the Cayman Islands, the British Virgin Islands, Hong Kong or the PRC, or any political subdivision or taxing authority thereof or therein in connection with (i) the creation, issue and offering of the Notes to or for the account of the Initial Purchasers in the manner contemplated in this Agreement, (ii) the execution and delivery of this Agreement and the Indenture or (iii) the resale of the Securities by the Initial Purchasers, except for Cayman Islands stamp duty payable if this Agreement, the Indenture, the Securities or an instrument of transfer in respect of the Securities is executed in or later brought into the Cayman Islands and assuming no creation, issue or offering of the Notes have been or will be made directly or indirectly within the PRC.

(tt)          No Broker’s Fees. Neither the Company nor any of its Controlled Entities is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or any Initial Purchaser for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Securities.

(uu)         No Restrictions on Controlled Entities; Payment of Dividends. Except for those encumbrances on the VIEs as provided in the Control Agreements and except as disclosed in the Offering Memorandum, no Controlled Entities of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such Controlled Entity’s capital stock, from repaying to the Company any loans or advances to such Controlled Entity from the Company or from transferring any of such Controlled Entity’s properties or assets to the Company or any other Controlled Entity of the Company. Except as disclosed in the Offering Memorandum, under current laws and regulations of the Cayman Islands, the British Virgin Islands, Hong Kong, the PRC and any political subdivision thereof, all dividends and other distributions declared and payable on the share capital of the Company or the Controlled Entities may be paid by the Company or such Controlled Entity to the holders thereof outside the PRC in United States dollars and freely transferred out of the Cayman Islands, the British Virgin Islands, Hong Kong or the PRC; and all such payments made to holders of the share capital who are non-residents of the Cayman Islands, the British Virgin Islands, Hong Kong or the PRC will not be subject to income, withholding or other taxes under laws and regulations of the Cayman Islands, the British Virgin Islands, Hong Kong or the PRC or any political subdivision or taxing authority thereof or therein and will otherwise be free and clear of any other tax, duty, withholding or deduction in the Cayman Islands, the British Virgin Islands, Hong Kong, the PRC or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any Governmental Authorization in the Cayman Islands, the British Virgin Islands, Hong Kong, the PRC or any political subdivision or taxing authority thereof or therein.

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(vv)         Directors and Executive Officers. To the knowledge of the Company and each of the Guarantors, the Company’s directors, director nominees and executive officers are not a party to any legal, governmental or regulatory proceedings that would result in such director, director nominee or executive officer to be unsuitable for his or her position on the Company’s Board of Directors or in the Company.

(ww)       Merger or Consolidation. Neither the Company nor any of its Controlled Entities is a party to any effective memorandum of understanding, letter of intent, definitive agreement or any similar agreements with respect to a merger or consolidation or a material acquisition or disposition of assets, technologies, business units or businesses which is required to be disclosed in the Offering Memorandum.

(xx)          Accurate Disclosure. The statements in the Offering Memorandum under the headings “Summary,” “Risk Factors,” “Use of Proceeds,” “Enforceability of Civil Liabilities,” “Our Corporate History and Structure,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulations Overview,” “Management,” “Related Party Transactions,” “Description of Other Material Indebtedness,” “Description of the Notes,” “Taxation” and “Plan of Distribution,” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings. The preceding sentence, insofar as it relates to statements in the Offering Memorandum under the heading “Plan of Distribution,” does not apply to information furnished to the Company in writing by any Initial Purchaser expressly for use in the Offering Memorandum, which information consists solely of the information specified in Section 8(b) hereof.

(yy)         Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or, to the knowledge of the Company and each of the Guarantors, any of the Company’s directors or executive officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications.

(zz)          SAFE Compliance. Each of the Company and its Controlled Entities has taken all necessary steps to comply with, and to ensure compliance by all of the Company’s direct or indirect shareholders who are, or to the knowledge of the Company and each of the Guarantors, are directly or indirectly owned or controlled by, PRC residents or PRC citizens with any applicable rules and regulations of the State Administration of Foreign Exchange of the PRC (the “SAFE Rules and Regulations”), including, without limitation, requiring each shareholder, that is, or is directly or indirectly owned or controlled by, a PRC resident or PRC citizen to complete any registration and other procedures required under applicable SAFE Rules and Regulations. Subject to the uncertainty as to the application and interpretation of the Notice on Issues Relating to the Administration of Foreign Exchange for Overseas Investment and Financing and Reverse Investment by Domestic Residents via Special Purpose Vehicles which was promulgated by the State Administration of Foreign Exchange of the PRC on July 4, 2014, each Controlled Entity of the Company established in the PRC has completed all relevant registration and other procedures required under SAFE Rules and Regulations. The Company has urged its current shareholders and beneficial owners of the Company who are, to the knowledge of the Company and each of the Guarantors, PRC residents or PRC citizens, to comply with all registration and other procedures required under applicable SAFE Rules and Regulations for his/her ownership interest in the Company.

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(aaa)       No Immunity. None of the Company, its Controlled Entities and any of their properties, assets or revenues is entitled to any right of immunity on the grounds of sovereignty from any legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any court, from services of process, from attachment prior to or in aid of execution of judgment, or from any other legal process or proceeding for the giving of any relief or for the enforcement of any judgment. The irrevocable and unconditional waiver and agreement of the Company and the Guarantors in this Agreement and the Indenture not to plead or claim any such immunity in any legal action, suit or proceeding based on this Agreement and the Indenture is valid and binding under the laws of the Cayman Islands, the British Virgin Islands, Hong Kong and the PRC.

(bbb)      Choice of Law; Submission to Jurisdiction. The choice of the laws of the State of New York as the governing law of this Agreement and the Indenture is a valid choice of law under the laws of the Cayman Islands, the British Virgin Islands, Hong Kong and the PRC and will be honored by courts in the Cayman Islands, the British Virgin Islands, Hong Kong and the PRC, subject to the conditions and restrictions described under the caption “Enforceability of Civil Liabilities” in the Offering Memorandum and subject to applicable provisions of the Civil Procedure Law and the General Principles of Civil Law of the PRC relating to choice of foreign laws. Each of the Company and the Guarantors has the power to submit, and pursuant to this Agreement and the Indenture has submitted, or will have submitted at the Closing Date, legally, validly, effectively and irrevocably, to the jurisdiction of any U.S. Federal or New York State court in the Borough of Manhattan in the City of New York, New York; and each of the Company and the Guarantors has the power to designate, appoint and empower, and pursuant to this Agreement and the Indenture has, or at the Closing Date will have, designated, appointed and empowered, validly, effectively and irrevocably, an agent for service of process in any suit or proceeding based on or arising under this Agreement and the Indenture in any U.S. Federal or New York State court in the Borough of Manhattan in the City of New York, as provided herein and in therein.

(ccc)       Winding Up. No winding up or liquidation proceedings have been commenced in any jurisdiction against any of the Company or its Controlled Entities and no proceedings have been commenced for the purpose of, and no judgment has been rendered declaring any of the Company or its Controlled Entities bankrupt or insolvent in any jurisdiction. Neither the Company nor any of its Controlled Entities has taken any step towards any legal or administrative proceedings for its winding up, dissolution or liquidation or for the suspension, revocation or cancellation of its business licenses.

Any certificate signed by an executive officer of the Company or any Guarantor and delivered to the Initial Purchasers or to counsel for the Initial Purchasers in connection with the offering of the Securities shall be deemed to be a representation and warranty by the Company or such Guarantor to each Initial Purchaser as to the matters set forth therein.

Section 2.          Purchase, Sale and Delivery of the Securities.

(a)           The Securities. The Company agrees to issue and sell to the Initial Purchasers, severally and not jointly, all of the Securities, and the Initial Purchasers agree, severally and not jointly, to purchase from the Company the aggregate principal amount of Securities set forth opposite their names on Schedule A, at a purchase price of 100.0% of the principal amount thereof payable on the Closing Date, in each case, on the basis of the representations, warranties and agreements herein contained, and upon the terms, subject to the conditions thereto, herein set forth. In consideration of the agreement by the Initial Purchasers to severally, and not jointly, purchase the Notes, the Company shall pay to each Initial Purchaser an underwriting, management and selling commission as agreed and set forth in one or more separate fee letters, dated on or before the Closing Date, among the Company and the Initial Purchasers, either collectively or individually (each a “Fee Letter”).

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(b)           The Closing Date. Delivery of certificates for the Securities in definitive form to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Shearman & Sterling LLP, 12th Floor, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong (or such other place as may be agreed to by the Company and the Initial Purchasers at 4:00p.m. Hong Kong time, on August 14, 2017, or such other time and date as the Initial Purchasers shall designate by notice to the Company (the time and date of such closing are called the “Closing Date”). The Company hereby acknowledges that circumstances under which the Initial Purchasers may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Initial Purchasers to recirculate to investors copies of an amended or supplemented Offering Memorandum.

(c)           Delivery of the Securities. The Company shall deliver, or cause to be delivered, to the several Initial Purchasers, the Notes to be purchased by the Initial Purchasers hereunder and to be offered and sold by each Initial Purchaser in reliance on Regulation S in the form of one or more global notes in definitive form (the “Regulation S Global Notes”) and registered in the name of a nominee of the Common Depositary. The Notes shall be delivered by the Company to the Initial Purchasers through the facilities of the Common Depositary to Euroclear and Clearstream against payment by the Common Depositary on behalf of the Initial Purchasers of the purchase price therefor pursuant to Section 2(a) above by means of a wire transfer of immediately available funds. Payment by the Common Depositary on behalf of the Initial Purchasers for the Notes shall be evidenced by a confirmation from the Common Depositary that it has made such payment. The Regulation S Global Notes shall be assigned an ISIN number. The Regulation S Global Notes shall include the legend regarding restrictions on transfer set forth under “Transfer Restrictions” in the Offering Memorandum. Interests in the Regulation S Global Notes shall be held only in book-entry form through Euroclear and Clearstream, except in the limited circumstances described in the Indenture when they may be exchanged for definitive certificated Notes.

Section 3.          Additional Covenants. Each of the Company and the Guarantors further covenants and agrees with each Initial Purchaser as follows:

(a)           Preparation of Final Offering Memorandum; Initial Purchasers’ Review of Proposed Amendments and Supplements and Company Additional Written Communications. As promptly as practicable following the Time of Sale and in any event not later than the second business day following the date hereof, the Company will prepare and deliver to the Initial Purchasers the Final Offering Memorandum. The Company will not amend or supplement the Preliminary Offering Memorandum or the Pricing Supplement without the prior written consent of the Initial Purchasers. The Company will not amend or supplement the Final Offering Memorandum prior to the Closing Date unless the Initial Purchasers shall previously have been furnished a copy of the proposed amendment or supplement a reasonably time prior to the proposed use or filing, and shall not have reasonably objected to such amendment or supplement. Before using, authorizing, approving or distributing any Company Additional Written Communication, the Company will furnish to the Initial Purchasers a copy of such written communication for review and will not use, authorize, approve or distribute any such written communication to which the Initial Purchasers reasonably object.

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(b)           Amendments and Supplements to the Final Offering Memorandum and Other Securities Act Matters. If at any time prior to the Closing Date (i) any event shall occur or condition shall exist as a result of which any of the Pricing Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) it is necessary to amend or supplement any of the Pricing Disclosure Package to comply with applicable law, the Company and the Guarantors will promptly notify the Initial Purchasers thereof and forthwith prepare and (subject to Section 3(a) hereof) furnish to the Initial Purchasers such amendments or supplements to any of the Pricing Disclosure Package as may be necessary so that the statements in any of the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances under which they were made, be misleading or so that any of the Pricing Disclosure Package will comply with all applicable law. If, prior to the completion of the sale of the Securities by the Initial Purchasers with the Subsequent Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Final Offering Memorandum, as then amended or supplemented, in order to make the statements therein, in the light of the circumstances when the Final Offering Memorandum is delivered to a Subsequent Purchaser, not misleading, or if in the judgment of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Final Offering Memorandum to comply with applicable law, the Company and the Guarantors agree to promptly prepare and (subject to Section 3(a) hereof), furnish at its own expense to the Initial Purchasers, amendments or supplements to the Final Offering Memorandum so that the statements in the Final Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Final Offering Memorandum, as so amended or supplemented, is delivered to a Subsequent Purchaser, be misleading or so that the Final Offering Memorandum, as amended or supplemented, will comply with all applicable law.

The Company hereby expressly acknowledges that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, amendment or supplement referred to in this Section 3.

(c)           Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Pricing Disclosure Package and the Final Offering Memorandum and any amendments and supplements thereto as they shall reasonably request.

(d)          Blue Sky Compliance. Each of the Company and the Guarantors shall cooperate with the Initial Purchasers and counsel for  the Initial Purchasers to qualify or register (or to obtain exemptions from qualifying or registering) all or any part of the Securities for offer and sale under the securities laws of any jurisdiction designated by the Initial Purchasers, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. None of the Company or any of the Guarantors shall be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) take any action that would subject it to any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject. The Company will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose.

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(e)           Taxes. The Company and the Guarantors will indemnify and hold harmless the Initial Purchasers against any documentary, stamp or similar issuance or transfer taxes, including any interest and penalties, on the creation, issuance and sale of the Securities and on the execution and delivery of this Agreement and on payment received by the Initial Purchasers under this Agreement; for the avoidance of doubt, this indemnity does not extend to any income tax assessed on the net income of any Initial Purchaser. All payments to be made by the Company or the Guarantors to the Initial Purchasers hereunder shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges whatsoever unless the Company or the Guarantors are compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Company or the Guarantors shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.

(f)            Use of Proceeds. The Company will apply the net proceeds from the sale of the Securities as described in the Pricing Disclosure Package under the heading “Use of Proceeds”. The Company will not invest, or otherwise use the proceeds received by the Company from its sale of the Securities in such a manner (i) as would require the Company or any of its Controlled Entities to register as an investment company under the Investment Company Act, or (ii) that would result in the Company being not in compliance with any applicable SAFE Rules and Regulations. The Company will not, and will cause its Controlled Entities not to, directly or indirectly, use the proceeds of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person to fund or facilitate any activities or business of or with any person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions.

(g)           Euroclear and Clearstream. The Company and the Guarantors will cooperate with the Initial Purchasers to permit the Securities to be eligible for clearance and settlement through the facilities of Euroclear and Clearstream.

(h)           Agreement Not To Offer or Sell Additional Securities. During the period of 30 days following the date hereof, the Company and each of the Guarantors will not, without the prior written consent of the Initial Purchasers (which consent may be withheld at their sole discretion), directly or indirectly, sell, offer, contract or grant any option to sell, issue, pledge, or otherwise dispose of or transfer (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition within 30 days following the date hereof) any debt securities of the Company or such Guarantor having a tenor of more than one year or securities exchangeable for or convertible into such debt securities (except for the Notes sold to the Initial Purchasers pursuant to this Agreement).

(i)            No Integration. The Company agrees that it will not and will cause its Affiliates not to make any offer or sale of securities of the Company of any class if, as a result of the doctrine of “integration” referred to in Rule 502 under the Securities Act, such offer or sale would require the registration of the Securities under the Securities Act.

(j)            No Directed Selling Efforts. Each of the Company and the Guarantors agrees that it will not and will not permit any of its Affiliates or any other person acting on its or their behalf (other than the Initial Purchasers, as to which no covenant is given) to engage in any directed selling efforts with respect to the Securities within the meaning of Regulation S, and the Company and the Guarantors will and will cause all such persons to comply with the offering restrictions requirement of Regulation S with respect to the Securities.

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(k)           No Restricted Resales. During the period of one year after the Closing Date, the Company and its Controlled Entities will not, and will not permit any of their respective Affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Notes that have been reacquired by any of them, except to non-U.S. Persons outside the United States in accordance with Regulation S.

(l)            Legended Securities. Each certificate for a Note will bear the legend contained in the “Transfer Restrictions” in the Final Offering Memorandum for the time period and upon the other terms stated in the Final Offering Memorandum.

(m)          No Stabilization. Neither the Company nor any Guarantor nor any of their respective Affiliates, nor any person acting on its or their behalf will take, directly or indirectly, any action designed to cause or to result in, or that will constitute or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

(n)           Listing on Securities Exchange. The Company will use its reasonable best efforts to cause the Notes, subject to confirmation of issuance, to be listed and quoted on the SGX-ST, and in connection therewith, to furnish from time to time any and all documents, instruments, information, undertakings and confirmations and publish all advertisements or other material and announce all information that may be necessary in order to effect and maintain such listing; and if the Company is unable to maintain such listing having used its reasonable best efforts, to use its reasonable best efforts to obtain and maintain a listing of the Notes on such other stock exchange or stock exchanges as the Company may agree with the Initial Purchasers.

(o)           Press Releases. Except for routine press releases or other communications in the ordinary course of business consistent with past practice, including but not limited to, any quarterly earnings and any announcements regarding the Company’s strategic or business partners, prior to the Closing Date and for 40 days subsequent to the Closing Date, neither the Company nor any of the Guarantors will issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company or any of its Controlled Entities, the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company or any of its Controlled Entities, without the prior consent of the Initial Purchasers (such consent not to be unreasonably withheld, and such consent can be in electronic form), unless in the judgment of the Company and the Guarantors and their counsel, and after notification to the Initial Purchasers, such press release or communication is required by law or except as issued in accordance with the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, and the rules and regulations of the New York Stock Exchange.

(p)           SAFE Compliance. The Company will use its best efforts to comply in all material respects with the SAFE Rules and Regulations, and will use commercially reasonable efforts to cause its shareholders named in the Company’s share register and option holders that are, or that are directly or indirectly owned or controlled by, PRC residents or PRC citizens, to comply in all material respects with the SAFE Rules and Regulations applicable to them in connection with the Company, including without limitation, requesting each shareholder named in the Company’s share register and option holder, that is, or is directly or indirectly owned or controlled by, a PRC resident or PRC citizen to complete any registration and other procedures required under applicable SAFE Rules and Regulations.

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(q)          Compliance with Securities Laws. The Company will use its best efforts to comply with the Sarbanes-Oxley Act, the Securities Act, the Exchange Act, the applicable rules and regulations of the Commission, the auditing principles, rules, standards and practices applicable to auditors of “issuers” (as defined in the Sarbanes-Oxley Act) promulgated or approved by the Public Company Accounting Oversight Board and, as applicable, the rules of the New York Stock Exchange (the “Securities Laws”), and use its best efforts to cause the Company’s directors and executive officers, in their capacities as such, to comply with the Securities Laws.

The Initial Purchasers may, in their sole discretion, waive in writing the performance by the Company or any Guarantor of any one or more of the foregoing covenants or extend the time for their performance.

Section 4.          Payment of Expenses. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company and each of the Guarantors jointly and severally agree to pay or cause to be paid all costs and expenses incident to the performance of their respective obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (ii) the costs incident to the preparation and printing of the Preliminary Offering Memorandum, the Pricing Disclosure Package, any Company Additional Written Communication and the Final Offering Memorandum (including any amendment or supplement thereto) and the distribution thereof in the amount as agreed by the Company; (iii) the costs of reproducing and distributing each of the Transaction Documents; (iv) the fees and expenses of the Company’s and the Guarantors’ legal counsel and independent accountants; (v) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may designate; (vi) any fees charged by rating agencies for rating the Securities and all fees and expenses relating to the rating agency process; (vii) the fees and expenses of the Trustee, any paying agent, any transfer agent and the registrar (including related fees and expenses of any counsel to such parties); (viii) all expenses and application fees incurred in connection with the application for the Securities’ eligibility for clearance and settlement through Euroclear and Clearstream; (ix) all expenses incurred by the Company and the Guarantors in connection with any “road show” presentation to potential investors; (x) all expenses and application fees related to the listing and quotation of the Notes on the SGX-ST; (xi) the fees and expenses of service of process agent; and (xii) the fees and expenses of the Initial Purchasers’ United States and PRC legal counsel, not to exceed US$230,000 in the aggregate. Any claim for such costs and expenses shall be accompanied by evidence of such payment or a copy of the relevant invoice (as the case may be). The Company will pay a rebate of 0.20% of the total principal amount of the Notes sold to private banks in connection with the offering of the Notes, which shall be deducted from the proceeds of the Notes on the Closing Date.

Section 5.          Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company and the Guarantors set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions:

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(a)          Accountants’ Comfort Letter. On the date of this Agreement and on the Closing Date, PricewaterhouseCoopers Zhong Tian LLP shall have furnished to the Initial Purchasers letters, dated the respective dates of delivery thereof and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers, containing statements and information of the type customarily included in accountants’ “comfort letters” to Initial Purchasers with respect to the financial statements and certain financial information contained in the Pricing Disclosure Package and Final Offering Memorandum; provided, that the letter delivered on the Closing Date shall use a “cut-off” date no more than five days prior to such Closing Date.

(b)          No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and to the Closing Date:

(i)          in the judgment of the Initial Purchasers there shall not have occurred or shall exist any Material Adverse Change the effect of which makes or would make it impracticable or inadvisable to proceed with the offering, sale or delivery of the Notes on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Final Offering Memorandum; and

(ii)         there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading nor any initiation of review for a possible downward change, in the rating accorded the Company or any of its Controlled Entities or any of their securities or indebtedness by any “nationally recognized statistical rating organization” as such term is defined in Section 3(a)(62) of the Exchange Act.

(c)          Opinion of U.S. Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of O’Melveny & Myers LLP, U.S. counsel for the Company, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers, to the effect set forth in Annex A hereto.

(d)          Opinion of PRC Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received a copy of the favorable opinion and consent letter of Grandall Law Firm, PRC counsel for the Company, each dated as of the Closing Date and addressed to the Company, with respect to such matters as may be reasonably requested by the Initial Purchasers, to the effect set forth in Annex B hereto.

(e)          Opinion of Cayman Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received the opinion of Maples and Calder (Hong Kong) LLP, Cayman Islands counsel for the Company, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers, to the effect set forth in Annex C hereto.

(f)          Opinion of British Virgin Islands Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received the opinion of Maples and Calder (Hong Kong) LLP, British Virgin Islands counsel for the Company, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers, to the effect set forth in Annex D hereto.

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(g)          Opinion of Hong Kong Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of O’Melveny & Myers LLP, Hong Kong counsel for the Company, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers, to the effect set forth in Annex E hereto.

(h)          Opinion of PRC Counsel for the Initial Purchasers. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of Commerce & Finance Law Offices, PRC counsel for the Initial Purchasers, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers.

(i)           Opinion of U.S. Counsel for the Initial Purchasers. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of Shearman & Sterling, dated as of the Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers.

(j)           Exchange Listing. Approval in-principle shall have been received for the listing and quotation of the Notes on the SGX-ST.

(k)           Officers’ Certificate. On the Closing Date, the Initial Purchasers shall have received a written certificate executed by the chief financial officer of the Company and one additional senior executive officer of the Company who is reasonably satisfactory to the Initial Purchasers, dated as of the Closing Date, to the effect set forth in Section 5(b)(ii) hereof, and further to the effect that:

(i)          for the period from and after the date of this Agreement and prior to the Closing Date there has not occurred any Material Adverse Change;

(ii)         the representations and warranties of the Company and the Guarantors set forth in Section 1 hereof are true and correct as of the Closing Date with the same force and effect as though expressly made on and as of the Closing Date; and

(iii)        each of the Company and the Guarantors has complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.

(l)            Certificate of the Chief Financial Officer. The Initial Purchasers shall have received a certificate, on the date hereof and on the Closing Date, signed by the chief financial officer of the Company certifying as to the preparation, completeness and accuracy of certain financial and operating data relating to the Company contained in the Pricing Disclosure Package and the Final Offering Memorandum.

(m)          Indenture and Securities. The Company and the Guarantors shall have executed and delivered the Indenture and Securities, in form and substance reasonably satisfactory to the Initial Purchasers, and the Initial Purchasers shall have received executed copies thereof.

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(n)          Ratings. The Initial Purchasers shall have received on the Closing Date a letter or release from each of S&P Global Ratings, a division of S&P Global Inc., and its successors or any of its affiliates (“S&P”) and Fitch Ratings Inc. (“Fitch”) to the effect that, on the Closing Date, the Securities are rated at least “BB-” by S&P and “BB-” by Fitch.

(o)          Approval of Issuance and Sale of Securities. The Company shall have provided to the Initial Purchasers copies of the resolutions of the board of directors of the Company, authorizing the execution and delivery of the Transaction Documents to which it is or will be a party, and performance of the Company’s obligations hereby and thereby. Each Guarantor shall have provided to the Initial Purchasers copies of resolutions of the board of directors and shareholders (to the extent required) of such Guarantor, authorizing the execution and delivery of the Transaction Documents to which it is or will be a party, and performance of the Guarantor’s obligations hereby and thereby.

(p)          Euroclear and Clearstream. The Notes shall be eligible for clearance and settlement through Euroclear and Clearstream.

(q)          No Legal Impediment to Issuance and/or Sale. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any Governmental Agency that would, as of the Closing Date, prevent the issuance or sale of the Securities by the Company, the listing and quotation of the Notes on SGX-ST or the consummation of the transactions contemplated by the Transaction Documents; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Securities by the Company, the listing and quotation of the Notes on the SGX-ST or the consummation of the transactions contemplated by the Transaction Documents.

(r)          Good Standing. The Initial Purchasers shall have received on and as of the Closing Date satisfactory evidence of, where applicable, the good standing of the Company and the Guarantors in their respective jurisdictions of organization and, where applicable, their good standing in such other jurisdictions as the Initial Purchasers may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

(s)          Fee Letters. On or prior to the Closing Date, the Company shall have entered into one or more separate Fee Letters with each of the Initial Purchasers, either collectively or individually, setting forth the underwriting, management and selling commissions payable to each of the Initial Purchasers.

(t)          Additional Documents. On or before the Closing Date, the Initial Purchasers or counsel for the Initial Purchasers shall have received such additional information or documents as they may reasonably request

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Section 6.          Reimbursement of Initial Purchasers’ Expenses. If this Agreement is terminated by the Initial Purchasers pursuant to Section 10 hereof, including if the sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company and Guarantors to perform any agreement herein or to comply with any provision hereof, the Company and each of the Guarantors jointly and severally agree to reimburse the Initial Purchasers for all out-of-pocket costs and expenses (including the fees and expenses of their counsel) reasonably incurred by the Initial Purchasers in connection with this Agreement and the offering contemplated hereby.

Section 7.          Offer, Sale and Resale Procedures. Each of the Initial Purchasers, on the one hand, and the Company and each of the Guarantors, on the other hand, hereby agree to observe the following procedures in connection with the offer and sale of the Securities:

(a)          Offers and Sales only outside the United States. Each offer or sale of the Securities made by the Initial Purchasers or Affiliates shall only be made to persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S.

(b)          No Directed Selling Efforts. No directed selling efforts (within the meaning of Regulation S) will be made in connection with the offering of the Securities.

(c)          Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that:

(i)          it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the United Kingdom Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Company or the Guarantors; 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 Securities in, from or otherwise involving the United Kingdom.

(d)          Each Initial Purchaser severally agrees that, in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), it has not made and will not make an offer of the Securities to the public in that Relevant Member State other than:

(i)          to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(ii)         to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the initial purchaser; or

(iii)        in any other circumstances falling within Article 3(2) of the Prospectus Directive.

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For the purposes of this provision, the expression an “offer of the Securities 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 and the Securities to be offered so as to enable an investor to decide to purchase or subscribe the Securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

Section 8.          Indemnification.

(a)          Indemnification of the Initial Purchasers. Each of the Company and the Guarantors, jointly and severally, agrees to indemnify and hold harmless each Initial Purchaser, its affiliates, directors, officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser, affiliate, director, officer, employee or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Pricing Supplement, any Company Additional Written Communication or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the foregoing indemnity agreement shall not apply, with respect to an Initial Purchaser, to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser expressly for use in the Preliminary Offering Memorandum, the Pricing Supplement, any Company Additional Written Communication or the Final Offering Memorandum (or any amendment or supplement thereto), it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the information described as such in subsection 8(b) below. The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have.

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(b)          Indemnification of the Company and the Guarantors. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each Guarantor, each of their respective affiliates, directors, officers and employees and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, any Guarantor or any such affiliate, director, officer, employee or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Pricing Supplement, any Company Additional Written Communication or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Preliminary Offering Memorandum, the Pricing Supplement, any Company Additional Written Communication or the Final Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser expressly for use therein. Each of the Company and the Guarantors hereby acknowledges that the only information that the Initial Purchasers have furnished to the Company expressly for use in the Preliminary Offering Memorandum, the Pricing Supplement, any Company Additional Written Communication or the Final Offering Memorandum (or any amendment or supplement thereto) are the legal and marketing names of the Initial Purchasers set forth in the Pricing Disclosure Package and Final Offering Memorandum and the second paragraph on page i and the fourth paragraph in the section entitled “Plan of Distribution” relating to stabilization. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that the Initial Purchasers may otherwise have.

(c)          Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; provided that the failure to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 8, except to the extent that it has been materially prejudiced by such failure (through the forfeiture of substantive rights and defenses) and shall not relieve the indemnifying party from any liability that the indemnifying party may have to an indemnified party other than under this Section 8. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party’s election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel (in each jurisdiction)), approved by the indemnifying party, representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party.

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(d)          Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, which will not be unreasonably withheld, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by this Section 8, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party’s entitlement to such reimbursement prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (ii) does not include any statements as to or any findings of fault, culpability or failure to act by or on behalf of any indemnified party.

Section 9.          Contribution. If the indemnification provided for in Section 8 hereof is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Securities. The relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company and the Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or inaccuracy.

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The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8 hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8 hereof with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8 hereof for purposes of indemnification.

The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9.

Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the discount received by such Initial Purchaser in connection with the Securities distributed by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers’ obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director, officer and employee of the Company or any Guarantor, and each person, if any, who controls the Company or any Guarantor with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company and the Guarantors.

Section 10.         Termination of this Agreement. This Agreement may be terminated jointly by J.P. Morgan Securities plc and Deutsche Bank AG, Singapore Branch by notice given to the Company, if after the execution and delivery of this Agreement and on or prior to the Closing Date: (i) trading or quotation in any of the Company’s securities shall have been suspended by the Commission or by any exchange or in any over-the-counter market; (ii) trading generally shall have been suspended or materially limited on or by any of the Hong Kong Stock Exchange, the SGX-ST, the New York Stock Exchange, NYSE MKT LLC, The Nasdaq Stock Market, the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade; (iii) a general banking moratorium shall have been declared by any United States or New York, Singapore, Hong Kong or the PRC authorities; or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, either within or outside the United States, that, as in the judgment of the Initial Purchasers is material and adverse and makes it impracticable or inadvisable to proceed with the offering sale or delivery of the Securities in the manner and on the terms described in the Pricing Disclosure Package or to enforce contracts for the sale of securities. Any termination pursuant to this Section 10 shall be without liability on the part of (i) the Company or any Guarantor to any Initial Purchaser, except that the Company and the Guarantors shall be obligated to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, (ii) any Initial Purchaser to the Company or any Guarantor, or (iii) any party hereto to any other party except that the provisions of Sections 8 and 9 hereof shall at all times be effective and shall survive such termination.

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Section 11.         Representations, Indemnities and Contributions to Survive Delivery. The respective indemnities, contributions, agreements, representations, warranties and other statements of the Company, the Guarantors, their respective officers and the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser, the Company, any Guarantor or any of their officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement.

Section 12.         Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered, couriered or facsimiled and confirmed to the parties hereto as follows:

If to the Initial Purchasers:

J.P. Morgan Securities plc
25 Bank Street
Canary Wharf
London, E14 5JP
United Kingdom
Facsimile: +44 20 3493 0682
Attention: Head of Debt Syndicate and Head of EMEA Debt Capital Markets Group

Deutsche Bank AG, Singapore Branch

One Raffles Quay, #17-00 South Tower

Singapore 048583

Facsimile: +65 6883 1769

Attention: Global Risk Syndicate

If to the Company or the Guarantors:

Unit 12/F, Building No. 5, Guosheng Center
388 Daduhe Road
Shanghai, 200062
People’s Republic of China
Attention: Colin Chitnim Sung, Chief Financial Officer

Any party hereto may change the address or facsimile number for receipt of communications by giving written notice to the others.

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Section 13.         Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the indemnified parties referred to in Sections 8 and 9 hereof, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term “successors” shall not include any Subsequent Purchaser or other purchaser of the Securities as such from any of the Initial Purchasers merely by reason of such purchase.

Section 14.         Authority of the Representatives. Any action by the Initial Purchasers hereunder may be taken by J.P. Morgan Securities plc and Deutsche Bank AG, Singapore Branch on behalf of the Initial Purchasers, and any such action taken by J.P. Morgan Securities plc and Deutsche Bank AG, Singapore Branch shall be binding upon the Initial Purchasers.

Section 15.         Partial Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

Section 16.        Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.

(a)          Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for suits, actions, or proceedings instituted in regard to the enforcement of a judgment of any Specified Court in a Related Proceeding a “Related Judgment,” as to which such jurisdiction is non-exclusive) of the Specified Courts in any Related Proceeding. The parties irrevocably and unconditionally waive any objection to the laying of venue of any Specified Proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any Specified Court that any Related Proceeding brought in any Specified Court has been brought in an inconvenient forum. Each of the Company and the Guarantors irrevocably appoints Law Debenture Corporate Services Inc. as its agent to receive service of process or other legal summons for purposes of any Related Proceeding that may be instituted in any Specified Court. Service of any process, summons, notice or document upon such agent and written notice of such service mailed and delivered to such party’s address set forth above shall to the fullest extent permitted by applicable law be deemed effective service of process for any Related Proceeding brought in any Specified Court.

(b)          Waiver of Immunity. With respect to any Related Proceeding, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise be entitled in the Specified Courts, and with respect to any Related Judgment, each party waives any such immunity in the Specified Courts or any other court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of any such Related Proceeding or Related Judgment, including, without limitation, any immunity pursuant to the United States Foreign Sovereign Immunities Act of 1976, as amended.

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(c)          Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder into any currency other than U.S. dollars, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Initial Purchasers could purchase U.S. dollars with such other currency in The City of New York on the business day preceding that on which final judgment is given. The obligations of the Company and each Guarantor in respect of any sum due from them to any Initial Purchaser shall, notwithstanding any judgment in any currency other than U.S. dollars, not be discharged until the first business day, following receipt by such Initial Purchaser of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Initial Purchaser may in accordance with normal banking procedures purchase U.S. dollars with such other currency; if the U.S. dollars so purchased are less than the sum originally due to such Initial Purchaser hereunder, each of the Company and the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Initial Purchaser against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Initial Purchaser hereunder, such Initial Purchaser agrees to pay to the Company and the Guarantors (but without duplication) an amount equal to the excess of the U.S. dollars so purchased over the sum originally due to such Initial Purchaser hereunder.

Section 17.         Default of One or More of the Several Initial Purchasers. If any one or more of the several Initial Purchasers shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on the Closing Date, and the aggregate number of Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Securities to be purchased on such date, the other Initial Purchasers shall be obligated, severally, in the proportions that the number of Securities set forth opposite their respective names on Schedule A bears to the aggregate number of Securities set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Initial Purchasers with the consent of the non-defaulting Initial Purchasers, to purchase the Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on the Closing Date. If any one or more of the Initial Purchasers shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs exceeds 10% of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Initial Purchasers and the Company for the purchase of such Securities are not made within 48 hours after such default, this Agreement shall terminate without liability of any non-defaulting party to any other party except that the provisions of Sections 4, 6, 8 and 9 hereof shall at all times be effective and shall survive such termination. In any such case either the Initial Purchasers or the Company shall have the right to postpone the Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Final Offering Memorandum or any other documents or arrangements may be effected.

As used in this Agreement, the term “Initial Purchaser” shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 17. Any action taken under this Section 17 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement.

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Section 18.         Agreement Among Managers. The execution of this Agreement by or on behalf of the Initial Purchasers will constitute the acceptance by each Initial Purchaser of the International Capital Market Association Standard Form Agreement Among Managers Version 1 (“AAM”), including the New York Law Schedule for Non Equity-Related Issues Governed by New York Law. The Initial Purchasers further agree that references in the AAM to the “Lead Manager”, the “Joint Bookrunners” and the “Managers” shall mean the Initial Purchasers, references in the AAM and this Agreement to the "Settlement Lead Manager" shall mean J.P. Morgan Securities plc and references in the AAM to the "Stabilisation Coordinator" shall mean any of the Initial Purchasers appointed and acting in its capacity as a stabilizing manager (or persons acting on its behalf). The Initial Purchasers agree as between themselves to amend the AAM as follows:

(a)          in Clause 1, the phrase "as agent of the issuer" shall be deemed to be deleted;

(b)          in Clause 3, the term "Lead Manager" shall be deemed to refer to the Settlement Lead Manager;

(c)          the following sentence shall be deemed to be added to the end of Clause 3(2):

"In addition, any profits incurred by the Settlement Lead Manager as a result of any action taken pursuant to this Clause shall be shared among the non-defaulting Managers (including the Settlement Lead Manager) in proportion to their Commitments or on such other basis as the Settlement Lead Manager considers, in its absolute discretion, to be fair.";

(d)          the following clause shall be deemed to be inserted into the AAM as a new Clause 6A:

"6A.           OVERALLOTMENT

Each Manager acknowledges and agrees that, in order to assist in the orderly distribution of the Securities, one or more of the Managers (for the purposes of this Clause, the "participating Managers") may agree to overallot in arranging subscriptions, sales and purchases of the Securities and may subsequently make purchases and sales of the Securities, in addition to their respective underwriting commitments, in the open market or otherwise, on such terms as the participating Managers deem advisable. Such overallotment positions may be allocated among all or some of the participating Managers equally or in such proportions as the participating Managers may agree. The participating Managers shall agree among themselves whether (i) each participating Manager is responsible for managing its own position and is liable for any loss or entitled to any profit arising from the management of such position or (ii) the positions should be aggregated with one or more participating Managers being responsible for managing the combined position and to aggregate profits and losses and share them among all or some of the participating Managers in such proportions as they may agree.  All such purchases, sales and overallotments shall be made in accordance with applicable laws and regulations. Nothing in Clause 6(2) shall prohibit the purchases, sales and overallotments of Securities described in this Clause as such purchases, sales and overallotments shall not, for the purposes of the AAM, be treated as Stabilisation Transactions as defined in the AAM."

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(e)          Clause 7 shall be deemed to be deleted in its entirety and replaced with the following:

"The Managers agree that any fees and expenses that are the joint responsibility of the Managers and payable by the Managers, and any out-of-pocket expenses that are the joint responsibility of the Managers and reimbursable but not reimbursed by the Company or the Guarantors, shall be aggregated and allocated among the Managers pro rata to their respective Commitments and each Manager authorises the Settlement Lead Manager to charge or credit each Manager's account for its proportional share of such fees and expenses.";

(f)          Clause 8 shall be deemed to be deleted in its entirety; and

(g)          references in the AAM to the “Commitments” shall mean the amounts severally underwritten by the Initial Purchasers in the amounts set out in Schedule A to this Agreement.

Within 90 days of the Closing Date, the Settlement Lead Manager shall determine and pay the net commissions due to the other Initial Purchasers. The Initial Purchasers acknowledge that all expenses incurred by each of them and their respective agents in connection with the offering and sale of the Notes will be for their respective account. Interest earned on the aggregate net commissions in connection with the offering and sale of the Notes shall be shared among the Initial Purchasers pro rata by reference to their respective Commitments.

Where there are any inconsistencies between this Agreement and the AAM, the terms of this Agreement shall prevail.

Section 19.         No Advisory or Fiduciary Responsibility. Each of the Company and the Guarantors acknowledges and agrees that: (i) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company and the Guarantors, on the one hand, and the several Initial Purchasers, on the other hand, and the Company and the Guarantors are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Initial Purchaser is and has been acting solely as a principal and is not the agent or fiduciary of the Company, the Guarantors or their respective affiliates, stockholders, creditors or employees or any other party; (iii) no Initial Purchaser has assumed or will assume an advisory or fiduciary responsibility in favor of the Company and the Guarantors with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is currently advising the Company and the Guarantors on other matters) or any other obligation to the Company and the Guarantors except the obligations expressly set forth in this Agreement; (iv) the several Initial Purchasers and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and the Guarantors, and the several Initial Purchasers have no obligation to disclose any of such interests by virtue of any fiduciary or advisory relationship; and (v) the Initial Purchasers have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby, and the Company and the Guarantors have consulted their own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate.

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The Company and the Guarantors hereby waive and release, to the fullest extent permitted by law, any claims that the Company and the Guarantors may have against the several Initial Purchasers with respect to any breach or alleged breach of fiduciary duty.

Section 20.         Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

Section 21.         General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by telecopier, facsimile or other electronic transmission (e.g., a “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart thereof. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

[Signature pages to follow]

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If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.

Very truly yours,
The Company
EHI CAR SERVICES LIMITED
By:
	Name:
	Title:
For and on behalf of each of the following Guarantors
BRAVE PASSION LIMITED
EHI AUTO SERVICES (HONG KONG) HOLDING LIMITED
By:
	Name:
	Title:
For and on behalf of the following Guarantor
L&L FINANCIAL LEASING HOLDING LIMITED
By:
	Name:
	Title:

Signature Page to Purchase Agreement

The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written.

J.P. MORGAN SECURITIES PLC
By:
	Name:
	Title:

Signature Page to Purchase Agreement

DEUTSCHE BANK AG, SINGAPORE BRANCH
By:
	Name:
	Title:
By:
	Name:
	Title:

Signature Page to Purchase Agreement

SCHEDULE A

THE SECURITIES

Initial Purchasers	Aggregate Principal Amount of Securities to be Purchased
J.P. Morgan Securities plc	$	320,000,000
Deutsche Bank AG, Singapore Branch	$	80,000,000
Total	$	400,000,000

Sch - A - 1

SCHEDULE B

PRICING SUPPLEMENT

Sch - B - 1

SCHEDULE C

CONTROLLED ENTITIES

Controlled Entities	Place of Incorporation
Brave Passion Limited	British Virgin Islands
eHi Auto Services (Hong Kong) Holding Limited	Hong Kong
L&L Financial Leasing Holding Limited	Hong Kong
Shuzhi Information Technology (Shanghai) Co., Ltd.	PRC
Shanghai eHi Car Rental Co., Ltd.	PRC
Shanghai Taihao Financial Leasing Co., Ltd.	PRC
Shanghai Taide Financial Leasing Co., Ltd.	PRC
eHi Auto Services (Jiangsu) Co., Ltd.	PRC
Suzhou eHi Car Rental Co., Ltd.	PRC
Shijiazhuang eHi Car Rental Co., Ltd.	PRC
Jiangyin eHi Car Rental Co., Ltd.	PRC
Shanghai Smart Brand Auto Driving Services Co., Ltd.	PRC
Beijing Smart Brand Sunshine Labour Services Co., Ltd.	PRC
Chongqing Smart Brand Auto Driving Technique Services Co., Ltd.	PRC
Jinan eHi Car Rental Co., Ltd.	PRC
Beijing eHi Car Rental Co., Ltd.	PRC
Wuxi eHi Car Rental Co., Ltd.	PRC
Shanghai PingXing Car Rental Co., Ltd.	PRC
Chongqing eHi Car Rental Co., Ltd.	PRC
Shenzhen eHi Car Repair Services Co., Ltd.	PRC
Hainan eHi Car Rental Co., Ltd.	PRC
Guangzhou Shanjing Car Repair Services Co., Ltd.	PRC
Shenyang eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Chengshan Car Rental Co., Ltd.	PRC
Hanghzou eHi Car Rental Co., Ltd.	PRC

Sch - C - 1

Shenzhen eHi Car Rental Co., Ltd.	PRC
Dali eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Electric Car Rental Services Co., Ltd.	PRC
Shanghai Shanjing Car Repair Services Co., Ltd.	PRC
Shanghai Taihan Trading Co., Ltd.	PRC
Shanghai eHi Car Services Information Technology Co., Ltd.	PRC
Sanya Shanjing Car Repair Services Co., Ltd.	PRC
Xi’an eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Chengshan Car Rental Nanjing Co., Ltd.	PRC
Hangzhou Shanjing Car Repair Services Co., Ltd.	PRC
Hefei Shanjing Car Repair Services Co., Ltd.	PRC
Changsha Shanjing Car Repair Services Co., Ltd.	PRC
eHi Car Rental Management Services (Shanghai) Co., Ltd	PRC
Hangzhou Deyu Car Dealing Services Co., Ltd	PRC
Fujian eHi Car Rental Co., Ltd	PRC
Foshan eHi Car Rental Co., Ltd	PRC
Hefei eHi Car Rental Management Services Co., Ltd	PRC
Hefei Smart Brand Auto Driving Services Co., Ltd	PRC
Changzhou eHi Car Rental Co., Ltd	PRC
Nanchang eHi Car Rental Co., Ltd	PRC
Xizang eHi Car Rental Co., Ltd	PRC
Changzhou Shanjing Car Repair Services Co., Ltd	PRC
Chongqing Shanjing Car Repair Services Co., Ltd	PRC
Tianjin Shanjing Car Repair Services Co., Ltd	PRC
Changsha eHi Car Rental Co., Ltd	PRC
eHi Sunan Car Rental Wuxi Co., Ltd	PRC
Ningbo eHi Car Rental Co., Ltd.	PRC
Guiyang eHi Car Rental Co., Ltd.	PRC
Ningbo Haichao Investment Management Co., Ltd.	PRC
Shanghai eHi Information Technology Services Co., Ltd. (variable interest entity)	PRC
Shanghai eHi Car Sharing Information Technology Co., Ltd. (variable interest entity)	PRC

Sch - C - 2

Annex A

Form Opinion of U.S. Counsel for the Company

1. Assuming due authorization by all necessary corporate action by the Company and each Guarantor, the Purchase Agreement has been duly executed and delivered by the Transaction Parties, to the extent such execution and delivery are governed by the laws of the State of New York.

2. Assuming due authorization by all necessary corporate action by the Company and each Guarantor, the Indenture has been duly executed and delivered by the Transaction Parties, to the extent such execution and delivery are governed by the laws of the State of New York and, assuming due authorization, execution and delivery of the Indenture by the Trustee, constitutes the legally valid and binding obligation of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, except as may be limited (i) by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally (including, without limitation, fraudulent conveyance laws); (ii) by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law; (iii) by public policy considerations, statutes or court decisions that may limit the rights of a party to obtain indemnification against its own gross negligence, willful misconduct or unlawful conduct; (iv) by the unenforceability under certain circumstances of broadly or vaguely stated waivers or waivers of rights granted by law where the waivers are against public policy or prohibited by law; and (v) by possible judicial action giving effect to governmental actions or foreign laws affecting creditors’ rights generally (the “Enforceability Exceptions”).

3. Assuming due authorization by all necessary corporate action by the Company, the Notes have been duly executed and delivered by the Company, to the extent such execution and delivery are governed by the laws of the State of New York; and when authenticated by a duly authorized signatory of the Trustee in accordance with the provisions of the Indenture and delivered and paid for in accordance with the terms of the Purchase Agreement, the Notes will constitute legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, except as may be limited by the Enforceability Exceptions.

4. Assuming due authorization by all necessary corporate action by each of the Guarantors, and assuming that the Notes have been issued and authenticated by a duly authorized signatory of the Trustee in accordance with the provisions of the Indenture and delivered and paid for in accordance with the terms of the Purchase Agreement, the Guarantees constitute legally valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as may be limited by the Enforceability Exceptions.

5. No authorization, permit or approval or other action by, and no notice to or filing with, any United Stated federal or New York governmental authority that we have, in the exercise of customary professional diligence, recognized as applicable to the Transaction Parties or to the transactions of the type contemplated by the Transaction Documents is required on the part of the Transaction Parties for (i) the execution, delivery or performance of any Transaction Document; (ii) the issuance and sale of the Securities; or (iv) the listing of the Notes on the Singapore Exchange Securities Trading Limited, in each case, except (a) such as have been obtained and (b) as may be required under applicable state or foreign securities or blue sky laws.

6. The statements in the General Disclosure Package and the Offering Memorandum under the caption “Description of the Notes,” insofar as they summarize the Indenture and the terms of the Securities, and under the caption “Plan of Distribution,” insofar as they summarize certain provisions of the Purchase Agreement, fairly summarize the information disclosed in all material respects.

7. Assuming the validity of such actions under the respective laws of Hong Kong, the Cayman Islands and the British Virgin Islands, and subject to the Enforceability Exceptions, each Transaction Party has, under the laws of the State of New York relating to personal jurisdiction, pursuant to Section 16 of the Purchase Agreement and Section 11.07 of the Indenture, validly submitted to the personal jurisdiction of any state or federal court located in the City and County of New York, New York (a “New York Court”) in any action arising out of or relating to the Purchase Agreement and the Indenture, has validly and irrevocably waived any objection to the venue of a proceeding in any such court; and in any action arising out of or relating to the Purchase Agreement or the Indenture, has validly and irrevocably waived any claim of inconvenient forum; and has validly and irrevocably appointed Law Debenture Corporate Services Inc. as its agent for the purpose described in Section 16 of the Purchase Agreement and Section 11.07 of the Indenture. Service of process in the manner set forth in Section 16 of the Purchase Agreement and Section 11.07 of the Indenture will be effective under the laws of the State of New York to confer valid personal jurisdiction over each Transaction Party in a New York Court.

8. Based upon the representations, warranties and agreements of the Transaction Parties and you in the Purchase Agreement and assuming compliance with the offering and transfer procedures and restrictions described in the Offering Memorandum, it is not necessary in connection with the offer and sale of the Securities to you under the Purchase Agreement or in connection with the initial resale by you of the Securities in the manner contemplated by the Purchase Agreement and the General Disclosure Package to register the Securities under the Securities Act of 1933, as amended (the “Securities Act”), or to qualify the Indenture in respect thereof under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), it being expressly understood that we express no opinion as to the securities laws of any state or foreign jurisdiction and we express no opinion as to any subsequent reoffer, resale or transfer of any of the Securities.

9. None of the Transaction Parties are, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the General Disclosure Package and the Offering Memorandum, none of the Transaction Parties will be, an “investment company” required to register under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

10. The execution and delivery by each of the Transaction Parties of the Transaction Documents, to which it is a party, and the performance of their obligations thereunder will not (a) violate Generally Applicable Law, or (b) assuming that a portion of the net proceeds from the offering of the Notes is used to repay all outstanding borrowings under, and terminate, on the date hereof, the facility agreement, dated August 30, 2016, among the Company, Deutsche Bank AG, Hong Kong Branch, as facility agent, and DB Trustees (Hong Kong) Limited, as security agent, result in a breach of, a default under or the acceleration of (or entitle any party to accelerate) the maturity of any obligation of the Transaction Parties under or result in or require the creation of any lien upon or security interest in any property of the Transaction Parties pursuant to the terms of, any agreement or document listed in Schedule A.

Annex B

Form Opinion of PRC Counsel for the Company

1 Each of the PRC Subsidiaries as set out in Schedule 1 has been duly incorporated and is validly existing as an equity joint venture with limited liability or a limited liability company (as the case may be) under the PRC Laws, and is a separate and independent legal entity capable of suing and being sued, and except as disclosed in the Offering Memorandum, having full legal right, power and authority to own, use, lease and operate properties and other assets as described in the Offering Memorandum. The articles of association and the business license of each of the PRC Subsidiaries comply with the applicable requirements of PRC Laws and are in full force and effect. To the best of our knowledge after due inquiries and as confirmed by the PRC Subsidiaries, except as disclosed in Schedule 2 as attached hereto, the registered capital of each of the PRC Subsidiaries has been fully paid and, except for those disclosed in the Offering Memorandum, all the equity interests and registered capital of the PRC Subsidiaries are free and clear of any liens, charges, transfer or any other encumbrances, or claims, and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, nor agreements or other obligations to issue or other rights to convert any obligation into, any equity interest in any of the PRC Subsidiaries. Each shareholder of the PRC Subsidiaries is liable to such PRC Subsidiaries to the extent of the capital contribution for which it/he subscribed; all approvals, consents, certificates, orders, licenses, permits, declarations, qualifications, authorizations, registrations and filings required under PRC Laws (the “Governmental Authorizations”) for the ownership interest by each of the shareholder of its/his equity interest in such PRC Subsidiary, as the case may be, have been obtained or made, and no other Governmental Authorization is required under PRC Laws for such ownership interest.

2 Each of Shanghai eHi Information Technology Services Co., Ltd. (“eHi Information”) and Shanghai eHi Car Sharing Information Technology Co., Ltd.(“eHi Car Sharing”), together with eHi Information, the “VIE Entities” or the “VIE Entity” for each or any of them has been duly incorporated and is validly existing as a limited liability company under the PRC Laws, and is a separate and independent legal entity capable of suing and being sued, and except as disclosed in the Offering Memorandum, having full legal right, power and authority to own, use, lease and operate properties and other assets as described in the Offering Memorandum. The articles of association and the business license of each of the VIE Entities comply with the applicable requirements of PRC Laws and are in full force and effect. To the best of our knowledge after due inquiries, except as disclosed in Schedule 2 as attached hereto, the registered capital of each of the VIE Entities has been fully paid and except for those disclosed in the Offering Memorandum, all the equity interests and registered capital of the VIE Entities are free and clear of any liens, charges, transfer or any other encumbrances, or claims, and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, nor agreements or other obligations to issue or other rights to convert any obligation into, any equity interest in any of the VIE Entities. Each shareholder of the VIE Entities is liable to such VIE Entities to the extent of the capital contribution for which it/he subscribed; all approvals, consents, certificates, authorizations, registrations and filings required under PRC Laws (the “Governmental Authorizations”) for the ownership interest by each of the shareholder of its/his equity interest in such VIE Entity, as the case may be, have been obtained or made, and no other Governmental Authorization is required under PRC laws for such ownership interest.

3 The ownership structure, insofar as it relates to the PRC Subsidiaries and VIE Entities, as shown in the corporate structure chart set out in the Offering Memorandum under the captions “OUR CORPORATE HISTORY AND STRUCTURE”, is accurate in all material respects and nothing has been omitted from such description which would make it misleading in any material respect. Subject to the description in paragraph 2 and 7 of this Opinion, the ownership structure of the Company, insofar as it relates to the PRC Subsidiaries and VIE Entities, is not in violation of any applicable PRC Laws.

4 The business carried out by the PRC Subsidiaries and VIE Entities as described in the Offering Memorandum complies with its articles of association in effect and is within the business scope described in its current business license, and, except as disclosed in the Offering Memorandum, is in all material respects in compliance with all applicable PRC Laws, except were such non-compliance would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, shareholders’ equity, results of operations or position, business, properties, condition, financial or otherwise, or in the earnings, business affairs or prospects of the Company, the Subsidiary Guarantors and the PRC Group Entities, taken as a whole (a “Material Adverse Effect”).

5 Except as described in the Offering Memorandum, each of the VIE Contracts are legal, valid and is binding on and enforceable against the parties thereto, in accordance with the terms of the VIE Contracts, subject, as to enforceability, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. No Government Authorization is required to be obtained in the PRC as of the date hereof for the transactions contemplated in the VIE Contracts in any material respect, other than those already obtained, provided that the exercise of the call option in the future must be approved and registered by any competent national, provincial or local governmental, regulatory or administrative authority in the PRC (“PRC Authorities”)

6 Each of the relevant PRC Subsidiaries and VIE Entities has full power, authority and legal right to enter into, execute, assume, deliver and perform its obligations under each of the VIE Contracts and has duly authorized, executed and delivered each of the VIE Contracts.

7 The execution and delivery of the VIE Contracts by the parties thereto do not, and the performance by the parties of their respective obligations thereunder, will not (A) except as disclosed in the Offering Memorandum, contravene any provision of the applicable PRC Laws or a violation of any material Governmental Authorization granted by PRC Authorities, as a result of which such VIE Contracts would be determined to be invalid or should be void; (B) contravene the business license or the articles of association of any of PRC Subsidiaries and VIE Entities which is a party to the VIE Contracts; (C), contravene any arbitration award or judgment, order or decree of any court of the PRC having jurisdiction over the parties known to us to the VIE Contracts; or (D) to the best of our knowledge after due inquiries, except which would not have a Material Adverse Effect, conflict with or result in a violation of mortgage, loan agreement or other agreement governed by PRC laws known to us to which any of PRC Subsidiaries or VIE Entities is a party.

8 To the best of our knowledge after due inquiries and as confirmed by PRC Subsidiaries and VIE Entities, there are no legal, administrative, arbitration or other official proceedings known to us in the PRC which has challenged the legality, effectiveness or validity of the VIE Contracts and/or the transactions contemplated thereby, individually or taken as a whole, and, no such proceedings are threatened or contemplated by any PRC Authority.

9 Except as disclosed in the Offering Memorandum and except for the description in paragraph 21 of this Opinion, each of the PRC Subsidiaries and VIE Entities has taken all necessary steps to comply with, and to ensure compliance by all of the Company’s principal shareholders as disclosed in the Offering Memorandum who are PRC residents with any applicable State Administration for Foreign Exchange (“SAFE”) rules and regulations, which insofar as their ownership interests in the PRC Group Entities are subject to, including without limitation, requiring each of such principal shareholders that is, or is directly or indirectly owned or controlled by, a PRC resident to complete any registration and other procedures required under applicable SAFE rules and regulations.

10 Neither the execution and delivery by the Company and the offshore Subsidiary Guarantors of, nor the due performance by the Company and the Subsidiary Guarantors of their obligations under the Transaction Documents will contravene or result in a breach or violation of (i) any material contract set forth hereto in Schedule 4 governed by PRC Laws (the “Material Contracts") of the PRC Subsidiaries, (ii) the articles of association of the PRC Subsidiaries; (iii) the applicable PRC Laws, or (iv) to the best of our knowledge after due inquiries and based on written confirmations from the PRC Group Entities, any judgment, order or decree of any PRC Government Authorities that are known to us having jurisdiction over the PRC Subsidiaries.

11 Assuming no issuance, offering and sale of the Notes have been or will be made directly or indirectly within the PRC, except as disclosed in the Offering Memorandum, no Governmental Authorization (including from the National Development Reform Commission) is required to be obtained by the Company and the Subsidiary Guarantors under the PRC Laws for (A) the issue, sale and listing of the Notes under the Transaction Documents, (B) the authorization, execution and delivery of the Transaction Documents, and (C) the performance by the Company, the Subsidiary Guarantors and the Initial Purchasers of the transactions contemplated by the Transaction Documents.

12 To the best of our knowledge after due inquiries and based on written confirmations from the PRC Subsidiaries and VIE Entities, none of the PRC Subsidiaries and VIE Entities has taken any action nor have any steps been taken or legal or administrative proceedings been started or expressly threatened against any of the PRC Subsidiaries and VIE Entities for (i) the winding-up, liquidation or bankruptcy of such PRC Subsidiaries and VIE Entities, or the appointment of a receiver in respect of any of its property or assets, or (ii) the withdrawal, revocation or cancellation of the business license of such PRC Subsidiaries or VIE Entities.

13 To the best of our knowledge after due inquiries and as confirmed by the PRC Group Entities, (a) the PRC Group Entities have legal and valid title to such real property and buildings which such PRC Subsidiary or VIE Entity is identified as the right owner as set out in Schedule 5, (b) real property and buildings used by PRC Group Entities under lease (the “Leased Real Properties”) in the PRC as set out in Schedule 5 are held by them under valid, subsisting and enforceable leases and rights and is continuing under any of such leases and rights, except (1) as otherwise disclosed in the Offering Memorandum and Schedule 5; or (2) for, in the case of clauses (b) above, the defaults of which would not have a Material Adverse Effect on the PRC Group Entities taken as a whole.

14 To the best of our knowledge after reasonable inquiries and as confirmed by the PRC Subsidiaries and VIE Entities, none of the PRC Subsidiaries and VIE Entities is in breach or in default, as the case may be, under (A) its articles of association or business license,(B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other similar evidence of indebtedness known to us and governed by the PRC Laws, (C) except as disclosed in the Offering Memorandum, any PRC Laws, or (D) any decree, judgment or order of any court in the PRC, applicable to any of the PRC Subsidiaries and VIE Entities that are known to us, except for, in the clauses (B), (C) and (D) above, such violation, breach or default which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

15 To the best of our knowledge after due inquiries and as confirmed by the PRC Group Entities, except as disclosed in the Offering Memorandum, there are no pending or expressly threatened actions, suits or proceedings in writing (legal, administrative, governmental or otherwise) in the PRC against or affecting any PRC Group Entities, whether or not arising in the ordinary course of business, which, if held against the PRC Group Entities, would have a Material Adverse Effect, or would materially adversely affect the ability of the Company and the Subsidiary Guarantors to perform its obligations under the Transaction Documents or the Notes, or which are otherwise material in the context of the offering and distribution of the Notes.

16 Except as disclosed in the Offering Memorandum, including with respect to certain Permits (as defined below) for Kunming No.1 branch of eHi Rental and Haerbin No.2 branch of eHi Rental which incompliance would not, to the best of our knowledge and as confirmed by the PRC Group Entities, in the aggregate, have a Material Adverse Effect, each of the PRC Group Entities has all necessary licenses, authorizations, franchises, consents, concessions, orders, certificates, permits and approvals (collectively, the “Permits”, or the “Permit” for any of them) to conduct its business now operated by it as described in the Offering Memorandum. Based on written confirmations from the PRC Group Entities, as for the already obtained Permits, none of the PRC Group Entities has any reason to believe that it will not be able to renew any Permit when and as such Permit expires; none of the PRC Group Entities is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any Permit except where such violation, default, revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect; and the PRC Group Entities are in compliance in all material respects with all of the provisions of the Permits, except those incompliance would not, individually or in the aggregate, have a Material Adverse Effect.

17 The PRC Subsidiaries and VIE Entities have legal and valid title to such intellectual properties which such PRC Subsidiary or VIE Entity is identified as the right owner as set out in Part A of Schedule 6 (the “Owned Patents”) and Part B of Schedule 6 (the “Owned Trademarks”).To the best of our knowledge after due inquiries and based on written confirmations from the PRC Group Entities, none of the PRC Group Entities has received any written notice of infringement of, or conflict with, asserted rights of others with respect to any Intellectual Property listed in Schedule 6.

18 To the best of our knowledge after due inquiries and as confirmed by PRC Subsidiaries and VIE Entities, there are no outstanding guarantees of any of the PRC Subsidiaries and VIE Entities in respect of indebtedness of third parties (excluding the Company, the PRC Group Entities and other entities controlled by the Company) which, if become absolute obligations, would have a Material Adverse Effect.

19 Except as disclosed in the Offering Memorandum, each of the PRC Subsidiaries that are foreign invested enterprises (the “FIE PRC Subsidiaries”) has full power and authority to declare and effect dividend payments to its shareholders registered outside the PRC in accordance with and subject to the PRC Laws and its articles of association and all dividends and other distributions declared and payable upon the interests in the FIE PRC Subsidiaries held by a shareholder registered outside the PRC may, after payment of corporate income taxes, allocation to the statutory prescribed funds and withholding of requisite withholding tax, be converted into foreign currency that may be freely transferred out of the PRC subject to the requirements imposed by relevant PRC Laws.

20 As disclosed in the Offering Memorandum, the PRC Group Entities outsource substantially all of their employees from an independent third party professional human resources company. Therefore, not all the PRC Group Entities have completed their social insurance registration with relevant PRC Authority, which would not result in a Material Adverse Effect.

21 To the best of our knowledge after due inquiries and based on written confirmation from the PRC Group Entity, except as disclosed in the Offering Memorandum, employees with PRC nationality of the PRC Group Entities who participate in the stock option plans of the Company, have completed the registration as requested by “Notice of the State Administration of Foreign Exchange on Issues Related to Foreign Exchange Administration in Domestic Individuals' Participation in Equity Incentive Plans of Companies Listed Abroad” (Hui Fa [2012] No. 7) issued by any applicable SAFE on February 15, 2012.

22 The statements in each of the Offering Memorandum under the captions entitled “Enforceability of Civil Liabilities”, “Summary”, ”Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Taxation- PRC”, “Regulatory Overview”, “Our Corporate History and Structure”, “Related Party Transactions”, “Taxation”, “Business” and “Description of Other Material Indebtedness” to the extent that they purport to describe the provisions of the PRC Laws or are summaries of legal matters under the PRC Laws, or a reference to our opinions with respect to the compliance with PRC Laws by the PRC Group Entities, are correct and accurate in all material respects and fairly summarize matters referred to therein and we are not aware of any fact which would render any such statement in light of the circumstances under which they were made misleading in any material respect.

23 Subject to any applicable approval procedures or other Governmental Authorizations which may be required by the PRC Laws, the due application of the net proceeds to be received by the Company from the issue and sale of the Notes as contemplated by the Offering Memorandum would not (i) result in violation of any applicable PRC Laws, (ii) result in violation of the articles of association and business license of any of the PRC Subsidiaries and VIE Entities, and (iii) to the best of our knowledge after due inquiry and as confirmed by PRC Subsidiaries and VIE Entities, contravene any material indenture, mortgage, loan agreement, or other agreements known to us and governed by PRC laws which are binding upon any of the PRC Subsidiaries or VIE Entities, except as disclosed in the Offering Memorandum.

24 There are no reporting obligations to any competent national, provincial or local governmental, regulatory or administrative authority in the PRC under the PRC Laws on non PRC holders of the Notes by virtue only of holding the Notes.

25 The submission of the Company and the Subsidiary Guarantors to the non-exclusive jurisdiction of the New York Courts, the waiver by the Company and the Subsidiary Guarantors of any objection to the venue of a proceeding in a New York Court, the waiver and agreement of the Company and the Subsidiary Guarantors not to plead an inconvenient forum, and the agreement of the Company and the Subsidiary Guarantors that the Transaction Documents be construed in accordance with and governed by the laws of the State of New York do not contravene the PRC Laws; under PRC Law and subject to compliance with relevant civil procedural requirements in the PRC, service of process effected in the manner set forth in the Purchase Agreement and the Indenture does not contravene PRC Law, as applicable; and any judgment obtained in a New York Court arising out of or in relation to the obligations of the Company and the Subsidiary Guarantors under the Transaction Documents will be recognized by courts of competent jurisdiction in the PRC, subject to compliance with relevant civil procedural requirements in the PRC and the conditions described under the caption of “Enforceability of Civil Liabilities” in the Offering Memorandum.

26 The indemnification and contribution provisions set forth in the Purchase Agreement do not contravene the PRC Laws, and as far as the PRC Laws are concerned, constitute the legal, valid and binding obligations of the Company, enforceable in accordance with the terms therein, the Purchase Agreement is in proper legal form under PRC Laws for the enforcement thereof against the Company and the Subsidiary Guarantors, subject to compliance with relevant civil procedural requirements; and to ensure the legality, validity, enforceability or admissibility in evidence of the Purchase Agreement in the PRC courts, it is not necessary that any such document be filed or recorded with any court or other authority in the PRC prior to the commencement of any legal procedures with any PRC courts or that any stamp or similar tax be paid on or in respect of any such document.

27 To the best of our knowledge after due inquiries and based on the written confirmation of the PRC Group Entities, except which would not have a Material Adverse Effect, (i) none of the PRC Group Entities has been penalized for any material PRC tax incompliance, which penalty has not been fully performed up to the date hereof; (ii) none of the PRC Group Entities has received any written notice issued by the competent PRC Authorities regarding the investigation of any material PRC tax noncompliance, which investigation is pending as of the date hereof. There are no material PRC fees or taxes that are or will become applicable to the Company, the Subsidiary Guarantors or any of the PRC Group Entities as a consequence of completion of the offering of the Notes that have not been described in the Offering Memorandum.

28 Except as disclosed in the Offering Memorandum, assuming no issuance, offering and sale of the Notes have been or will be made directly or indirectly within the PRC and that none of the Transaction Documents is executed by any party thereto in the PRC, under the existing PRC laws, non-PRC resident holders of the Notes are not subject to withholding tax, income tax or any other taxes or duties imposed by any PRC Authority in respect of (A) any payments, dividends or other distributions made on the Notes or (B) gains made on sales of the Notes between non-PRC residents consummated outside the PRC, unless the holder thereof is subject to such taxes in respect of such Notes by reason of being connected with the PRC otherwise than by reason only of the holding of the Notes or receiving payments in connection therewith as described in the Offering Memorandum.

29 Except as disclosed in the Offering Memorandum, assuming no issuance, offering and sale of the Notes have been or will be made directly or indirectly within the PRC and that none of the Transaction Documents is executed by any party thereto in the PRC, no stamp, registration, documentary or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the Company, Subsidiary Guarantors, or the Initial Purchasers to the relevant PRC tax authority in connection with (i) the issuance, offer, sale and delivery by the Company of the Notes to or for the account of the Initial Purchasers in the manner contemplated in the Purchase Agreement, (ii) the execution and delivery of the Transaction Documents, or (iii) the resale of the Notes by the Initial Purchasers.

30 Based on our review of the Material Contracts set forth in Schedule 4 which are governed by PRC Laws and to which any PRC Subsidiary or VIE Entity is a party or any of its property or assets is subject and as confirmed by PRC Subsidiaries and VIE Entities, we are of the opinion that: (i) all of such Material Contracts have been authorized, executed and delivered by the relevant PRC Subsidiaries and VIE Entities, and the relevant PRC Subsidiaries and VIE Entities have taken all necessary corporate actions to authorize the performance thereof which are required to be performed as of the date of this Opinion, (ii) such Material Contracts are legal, valid and binding on the parties thereto and the enforceable under the PRC Laws in accordance with their respective terms. To the best of our knowledge after due inquiries and based on the written confirmations of the PRC Group Entities, none of the PRC Group Entities is in default in the performance of any material obligation under such Material Contracts which would result in Material Adverse Effect..

31 As far as the PRC Laws are concerned, non-PRC resident holders of the Note will not be subject to any personal liability, or be subject to a requirement to be licensed or otherwise qualified to do business or be deemed domiciled or resident in the PRC, by virtue only of holding such Notes. There are no limitations under the PRC Laws on the rights of holders of the Notes to hold or transfer their Notes, nor any statutory pre-emptive rights or transfer restrictions applicable to the Notes.

32 The entry into, and performance or enforcement of the Transaction Documents in accordance with its respective terms will not subject any of the Initial Purchasers or the Trustee to any requirement to be licensed or otherwise qualified to do business in the PRC, nor will any Initial Purchaser or the Trustee be deemed to be resident, domiciled, carrying on business through an establishment or place in the PRC or in breach of any PRC Laws by reason only of its entry into, performance or enforcement of the Transaction Documents.

33 Under the PRC Laws, none of the Company, the Subsidiary Guarantors and the PRC Group Entities nor any of their respective assets or revenues is entitled to any right of immunity on the grounds of sovereignty from any legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any RPC court, from services of process, from attachment prior to or in aid of execution of judgment, or from other legal process or proceeding for giving of any relief or for the enforcement of any judgment in respect of its obligations under the Transaction Documents.

Annex C

Form Opinion of Cayman Counsel for the Company

1.1 The Company has been duly incorporated as an exempted company with limited liability and is validly existing and in good standing with the Registrar of Companies under the laws of the Cayman Islands. The Company can sue and be sued in its own name under the laws of the Cayman Islands.

1.2 The Company has all the requisite power and authority under the Memorandum and Articles to own, use, lease or operate its properties and conduct its business in accordance with the Memorandum and Articles, and to enter into, execute and perform its obligations under the Transaction Documents and the Notes including the issue and offer of the Notes pursuant to the Transaction Documents, the listing of the Notes on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) and the issue and circulation of the Offering Memorandum.

1.3 The execution and delivery of the Transaction Documents do not, and the issue and offer of the Notes by the Company and the performance by the Company of its obligations under the Transaction Documents will not, conflict with or result in a breach of any of the terms or provisions of the Memorandum and Articles or any law, public rule or regulation applicable to the Company currently in force in the Cayman Islands.

1.4 The execution, delivery and performance of the Transaction Documents have been duly authorised by and on behalf of the Company and, upon the execution and unconditional delivery of the Transaction Documents by any one of Ray Ruiping Zhang or Colin Chitnim Sung for and on behalf of the Company, the Transaction Documents will have been duly executed and delivered on behalf of the Company and will constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms.

1.5 The Notes have been duly authorised by the Company and when the Notes are signed in facsimile or manually by a director of the Company on behalf of the Company and, if appropriate, authenticated in the manner set forth in the Indenture and delivered against due payment therefor will be duly executed, issued and delivered and will constitute the legal, valid and binding obligations of the Company enforceable in accordance with their respective terms.

1.6 No authorisations, consents, approvals, licences, validations, orders, registrations, filings or exemptions are required by law from any governmental authorities or agencies or other official bodies in the Cayman Islands in connection with:

(a) the issue and circulation of the Offering Memorandum;

(b) the execution, creation or delivery of the Transaction Documents by and on behalf of the Company;

(c) subject to the payment of the appropriate stamp duty, enforcement of the Transaction Documents against the Company;

(d) the offering, execution, authentication, allotment, issue or delivery of the Notes;

(e) the performance by the Company of its obligations under the Notes and the Transaction Documents;

(f) the listing of the Notes on the SGX-ST; or

(g) the payment of the principal and interest and any other amounts under the Notes.

1.7 No taxes, fees or charges (other than stamp duty) are payable (either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands under the laws of the Cayman Islands in respect of:

(a) the execution or delivery of the Transaction Documents or the Notes;

(b) the enforcement of the Transaction Documents or the Notes;

(c) payments made under, or pursuant to, the Transaction Documents or the Notes; or

(d) the issue, transfer or redemption of the Notes.

The Cayman Islands currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax.

1.8 The courts of the Cayman Islands will observe and give effect to the choice of the Relevant Law as the governing law of the Transaction Documents and the Notes.

1.9 The obligations of the Company under the Transaction Documents and the Notes rank and will rank at least pari passu with all its other present and future unsecured obligations (other than those preferred by law).

1.10 Based solely on our search of the Register of Writs and Other Originating Process (the "Court Register") maintained by the Clerk of the Court of the Grand Court of the Cayman Islands from the date of incorporation of the Company to the close of business (Cayman Islands time) on [ ] 2017 (the "Litigation Search"), the Court Register disclosed no writ, originating summons, originating motion, petition (including any winding-up petition), counterclaim nor third party notice ("Originating Process") nor any amended Originating Process pending before the Grand Court of the Cayman Islands, in which the Company is identified as a defendant or respondent.

1.11 Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the Relevant Jurisdiction, a judgment obtained in such jurisdiction will be recognised and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment:

(a) is given by a foreign court of competent jurisdiction;

(b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;

(c) is final;

(d) is not in respect of taxes, a fine or a penalty; and

(e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

1.12 It is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents or the Notes that any document be filed, recorded, registered or enrolled with any governmental authority or agency or any official body in the Cayman Islands.

1.13 There is no requirement under Cayman Islands law that the Offering Memorandum be filed, recorded or enrolled with any governmental authority or agency or any official body in the Cayman Islands.

1.14 The statements made in the Offering Memorandum under the headings "Enforceability of Civil Liabilities", "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations – Taxation – Cayman Islands", "Management – Duties of Directors" and "Taxation – Cayman Islands" are correct in so far as such statements are summaries of or relate to Cayman Islands law.

1.15 The Company is not entitled to any immunity under the laws of the Cayman Islands whether characterised as sovereign immunity or otherwise for any legal proceedings in the Cayman Islands to enforce or to collect upon the Transaction Documents.

1.16 There is no exchange control legislation under Cayman Islands law and accordingly there are no exchange control regulations imposed under Cayman Islands law.

1.17 The appointment by the Company in the Transaction Documents of an agent to accept service of process in the Relevant Jurisdiction is legal, valid and binding on the Company assuming the same is true under the Relevant Law.

1.18 None of the parties to the Transaction Documents (other than the Company) or the holders of the Notes will be treated as resident, domiciled or carrying on or transacting business in the Cayman Islands solely by reason of the negotiation, preparation or execution of the Transaction Documents or the issue of the Notes.

1.19 None of the parties to the Transaction Documents (other than the Company) or the holders of the Notes will be required to be licensed, qualified, or otherwise entitled to carry on business in the Cayman Islands in order to enforce their respective rights under the Transaction Documents, or as a consequence of the execution, delivery and performance of the Transaction Documents, or the issue of the Notes.

1.20 The submission by the Company in the Transaction Documents to the exclusive jurisdiction of the courts of the Relevant Jurisdiction is legal, valid and binding on the Company assuming that the same is true under the Relevant Law and under the laws, rules and procedures applying in the courts of the Relevant Jurisdiction.

1.21 There are no usury or interest limitation laws in the Cayman Islands which would limit the recovery of payments from the Company in accordance with the Transaction Documents.

Annex D

Form Opinion of British Virgin Islands Counsel for the Company

1.1 The Company is a company limited by shares incorporated with limited liability under the BVI Business Companies Act (as amended) (the "Act"), is in good standing at the Registry of Corporate Affairs, is validly existing under the laws of the British Virgin Islands and possesses the capacity to sue and be sued in its own name.

1.2 The Company has all requisite power and authority under the Memorandum and Articles to enter into, execute and perform its obligations under the Transaction Documents and to own, use, lease or operate its properties and conduct its business in accordance with the Memorandum and Articles.

1.3 The execution and delivery of the Transaction Documents do not, and the performance by the Company of its obligations under the Transaction Documents will not conflict with or result in a breach of any of the terms or provisions of the Memorandum and Articles or any law, public rule or regulation applicable to the Company currently in force in the British Virgin Islands.

1.4 The execution, delivery and performance of the Transaction Documents have been authorised by and on behalf of the Company and, upon the execution and unconditional delivery of the Transaction Documents by any one of Ray Ruiping Zhang or Colin Chitnim Sung for and on behalf of the Company, the Transaction Documents will have been duly executed and delivered on behalf of the Company and will constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms.

1.5 No authorisations, consents, approvals, licences, validations or exemptions are required by law from any governmental authorities or agencies or other official bodies in the British Virgin Islands in connection with:

(a) the execution, creation or delivery of the Transaction Documents by and on behalf of the Company;

(b) enforcement of the Transaction Documents against the Company; or

(c) the performance by the Company of its obligations under the Transaction Documents.

1.6 With the exception of filing fees charged by the Registry of Corporate Affairs in respect of any optional filings made at the Registry of Corporate Affairs no taxes, fees or charges (including stamp duty) are payable (either by direct assessment or withholding) to the government or other taxing authority in the British Virgin Islands under the laws of the British Virgin Islands in respect of:

(a) the execution or delivery of the Transaction Documents;

(b) the enforcement of the Transaction Documents; or

(c) payments made under, or pursuant to, the Transaction Documents.

Companies incorporated or registered under the Act are currently exempt from income and corporate tax. In addition, the British Virgin Islands does not levy capital gains tax on companies incorporated or registered under the Act. There is no applicable statutory usury or interest limitation law in the British Virgin Islands which would restrict the recovery of payments or the performance by the Company of its obligations under the Transaction Documents.

1.7 The courts of the British Virgin Islands will observe and give effect to the choice of the Relevant Law as the governing law of the Transaction Documents.

1.8 The obligations of the Company under the Transaction Documents rank and will rank at least pari passu with all its other present and future unsecured obligations (other than those preferred by law).

1.9 Based solely on our inspection of the High Court Registry from the date of incorporation of the Company there were no actions or petitions pending against the Company in the High Court of the British Virgin Islands as at the time of our search on [ ] 2017.

1.10 On the basis of our searches conducted at the Registry of Corporate Affairs and at the High Court Registry, no currently valid order or resolution for the winding-up of the Company and no current notice of appointment of a receiver over the Company, or any of its assets, appears on the records maintained in respect of the Company. It is a requirement that notice of appointment of a receiver made under section 118 of the Insolvency Act, 2003 be registered with the Registry of Corporate Affairs under section 118 of the Insolvency Act, 2003. However, it should be noted that there is no mechanism to file with the Registry of Corporate Affairs notice of an appointment of a receiver made under foreign legislation.

1.11 On the basis of our search conducted at the Registry of Corporate Affairs, no charge created by the Company has been registered pursuant to section 163 of the Act.

1.12 Any final and conclusive monetary judgment obtained against the Company in the courts of the Relevant Jurisdiction in respect of the Transaction Documents, for a definite sum, may be treated by the courts of the British Virgin Islands as a cause of action in itself so that no retrial of the issues would be necessary provided that in respect of the foreign judgment:

(a) the foreign court issuing the judgment had jurisdiction in the matter and the Company either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process;

(b) the judgment given by the foreign court was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations of the Company;

(c) in obtaining judgment there was no fraud on the part of the person in whose favour judgment was given or on the part of the court;

(d) recognition or enforcement of the judgment in the British Virgin Islands would not be contrary to public policy; and

(e) the proceedings pursuant to which judgment was obtained were not contrary to natural justice.

1.13 It is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents that any document be filed, recorded, registered or enrolled with any governmental authority or agency or any official body in the British Virgin Islands.

1.14 The Company is not entitled to any immunity under the laws of the British Virgin Islands whether characterised as sovereign immunity or otherwise for any legal proceedings in the British Virgin Islands to enforce or to collect upon the Transaction Documents.

1.15 There is no exchange control legislation under British Virgin Islands law and accordingly there are no exchange control regulations imposed under British Virgin Islands law.

1.16 The statements made in the Offering Memorandum under the heading "Enforceability of Civil Liabilities" are correct in so far as such statements are summaries of British Virgin Islands law.

1.17 The appointment by the Company in the Transaction Documents of an agent to accept service of process in the Relevant Jurisdiction is legal, valid and binding on the Company assuming the same is true under the governing law of the Transaction Documents.

1.18 None of the parties to the Transaction Documents (other than the Company) will be treated as resident, domiciled or carrying on or transacting business in the British Virgin Islands solely by reason of the negotiation, preparation or execution of the Transaction Documents.

1.19 None of the parties to the Transaction Documents (other than the Company) will be required to be licensed, qualified, or otherwise entitled to carry on business in the British Virgin Islands in order to enforce their respective rights under the Transaction Documents, or as a consequence of the execution, delivery and performance of the Transaction Documents.

1.20 The submission by the Company in the Transaction Documents to the exclusive jurisdiction of the courts of the Relevant Jurisdiction is legal, valid and binding on the Company assuming that the same is true under the Relevant Law and under the laws, rules and procedures applying in the courts of the Relevant Jurisdiction.

1.21 On the basis of our search at the Registry of Corporate Affairs, the registered office of the Company is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, British Virgin Islands.

1.22 Service of a document may be effected on the Company by addressing the document to the Company and leaving it at, or sending it by a prescribed method to (a) the Company's registered office or (b) the office of the Company's registered agent. The prescribed methods are:

(a) by properly addressing, preparing and posting an envelope containing the document to the address for service;

(b) by personal service;

(c) by direct delivery to the secretary or clerk of the Company's registered agent; and

(d) by email attaching the document provided that (a) the original of the document shall be sent by post; and (b) it shall not matter whether the document was served in a scanned or other form so long as it is legible and in the form of the original document.

Annex E

Form Opinion of Hong Kong Counsel for the Company

1. Each of the Guarantors:

(i) is incorporated with limited liability under the laws of Hong Kong; and

(ii) has the power to own its assets and carry on its business as it is being conducted.

2. So far as is discoverable from the Searches, (1) no petition, order or resolution for the winding-up of any of the Guarantors, (2) no notice of appointment of a receiver or liquidator in respect of any of the Guarantors or any of their assets has been given, and (3) no law suits or legal proceedings against any of the Guarantors at the High Court and the District Court of Hong Kong.

3. The execution and delivery of the Transaction Document by each of the Guarantors and the performance by each of the Guarantors of its obligations thereunder (1) do not conflict with or result in a violation of any of the provisions in their respective articles of association or any Hong Kong laws having applications generally to Hong Kong incorporated companies or their respective assets; and (2) provided that a portion of the net proceeds from the offering of the Notes is used to repay all outstanding borrowings under, and to terminate, the 2016 Facility Agreement on the same day as the date of issue of the Notes, do not result in a breach of or a default under the 2016 Facility Agreement (as defined in Schedule 1 to this letter).

4. Each Transaction Document to which each of the Guarantors is a party, constitutes legal, valid, binding and enforceable obligations of the respective Guarantor.

5. Each of the Guarantors has the power to enter into, and perform its obligations under, each Transaction Document to which it is a party and has taken all necessary corporate action to authorise the entry into and performance of each such Transaction Document.

6. The obligations of each of the Guarantors under the Transaction Documents will constitute unsecured and unsubordinated obligations of such Guarantor and will rank pari passu with all other unsecured and unsubordinated obligations of such Guarantor, save for such obligations as may be preferred by mandatory provisions of applicable laws.

7. The submission by the Guarantors to the jurisdiction of the courts of New York in the circumstances set out in the Transaction Documents is legal, valid and binding on each of the Guarantors.

8. We are not aware of any reason that the choice of New York law as the governing law of the applicable Transaction Documents would not be upheld by the Hong Kong courts of competent jurisdiction.

9. No official registration or filing is required in Hong Kong and no authorisations, consents or approvals are required from any regulatory or governmental agency or juridical or public body in Hong Kong in relation to the execution and delivery of the Transaction Documents, the performance by any party to the Transaction Documents of its obligations thereunder and the validity, enforceability and admissibility as evidence of the Transaction Documents by any party thereto.

10. No stamp duty, registration or similar tax or charge is payable in Hong Kong in respect of the Transaction Documents or execution and delivery of the Transaction Documents by the Guarantors.

11. All payments by each of the Guarantors under the Transaction Documents may be made free and clear of and without withholding or deduction for or on account of any taxed imposed by or on behalf of any relevant authority in Hong Kong.

12. None of the dividends or other distributions with respect to the share of either of the Guarantors is subject to withholding or other taxes under Hong Kong laws and may be paid to a bank account outside Hong Kong without the necessity of obtaining any governmental authorization in Hong Kong.

13. The offering of the Notes by the Company in Hong Kong as described in the Offering Memorandum (as defined in Schedule 1 to this letter) does not violate or contravene any provisions of any Hong Kong statutes or regulations of any governmental authority in Hong Kong provided that:

(i) none of the Notes have been offered or sold, nor will they be offered or sold, in Hong Kong, by means of any document, other than in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “CO”), or to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” within the meaning of the CO; and

(ii) no advertisement, invitation or document relating to the Notes has been or will be issued, nor has been or will be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Notes 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 SFO and any rules made thereunder.

14. The statements set forth in the Offering Memorandum in the sections "Enforceability of Civil Liabilities”, “Taxation - Hong Kong” and “Plan of Distribution - Hong Kong”, insofar as such statements relate to matters of Hong Kong law, are true and accurate in all material respects.

15. The Guarantors are not entitled to any immunity on the grounds of sovereignty from any Hong Kong legal action, suit or proceeding.

16. Hong Kong has no arrangement for the reciprocal enforcement of judgments with the New York courts. However, a judgment obtained in New York may be enforced by suing on the judgment itself under the common law in the Hong Kong courts so long as such New York judgment:

(i) does not fall within those provisions of the Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance (Cap. 46 of the Laws of Hong Kong) which prevent an overseas judgment from being recognized or enforced in Hong Kong;

(ii) is for a definite sum of money other than a sum payable in respect of taxes or penalties;

(iii) is final and conclusive upon the merits of the claim;

(iv) was not rendered by a foreign court which lacked the appropriate jurisdiction at the time;

(v) was not based on foreign penal, revenue of other public law;

(vi) was not obtained by fraud or obtained in proceedings which were contrary to natural justice;

(vii) is not contrary to public policy in Hong Kong,

and the defendant in the New York proceedings was resident, present or (if corporate) carrying business in New York or submitted or agreed to submit to the jurisdiction of the New York courts. In any Hong Kong proceeding commenced in respect of such New York judgment, summary judgment may be applied for on the ground that the judgment debtor has no defence to the claim, provided that the criteria listed above are satisfied.

17. None of the Company or any of the subsidiaries of the Company that is a party to the Transaction Documents and is not incorporated in Hong Kong (for the avoidance of doubt, except for the Guarantors which were incorporated in Hong Kong) who is not, prior to the execution of the Transaction Documents, resident, domiciled or carrying on business in Hong Kong will be deemed to be resident, domiciled or carrying on business in Hong Kong solely by reason of the execution, delivery, performance and/or enforcement of the Transaction Documents, and such parties are not necessary to be licensed in Hong Kong in order to enforce their respective rights under the Transaction Documents.

EX-8.1

Exhibit 8.1

Exhibit 8.1 List of significant consolidated entities

Subsidiaries	Place of Incorporation
Brave Passion Limited	British Virgin Islands
eHi Auto Services (Hong Kong) Holding Limited	Hong Kong
L&L Financial Leasing Holding Limited	Hong Kong
Shuzhi Information Technology (Shanghai) Co., Ltd.	PRC
Shanghai eHi Car Rental Co., Ltd.	PRC
Shanghai Taihao Financial Leasing Co., Ltd.	PRC
Shanghai Taide Financial Leasing Co., Ltd.	PRC
eHi Auto Services (Jiangsu) Co., Ltd.	PRC
Suzhou eHi Car Rental Co., Ltd.	PRC
Shijiazhuang eHi Car Rental Co., Ltd.	PRC
Jiangyin eHi Car Rental Co., Ltd.	PRC
Shanghai Smart Brand Auto Driving Services Co., Ltd.	PRC
Beijing Smart Brand Sunshine Labour Services Co., Ltd.	PRC
Chongqing Smart Brand Auto Driving Technique Services Co., Ltd.	PRC
Jinan eHi Car Rental Co., Ltd.	PRC
Beijing eHi Car Rental Co., Ltd.	PRC
Wuxi eHi Car Rental Co., Ltd.	PRC
Shanghai Pingxing Car Rental Co., Ltd.	PRC
Chongqing eHi Car Rental Co., Ltd.	PRC
Shenzhen eHi Car Repair Services Co., Ltd.	PRC
Hainan eHi Self Drive Car Service Co., Ltd.	PRC
Guangzhou Shanjing Car Repair Services Co., Ltd.	PRC
Shenyang eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Chengshan Car Rental Co., Ltd.	PRC
Hangzhou eHi Car Rental Co., Ltd.	PRC

Shenzhen eHi Car Rental Co., Ltd.	PRC
Dali eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Electric Car Rental Services Co., Ltd.	PRC
Shanghai Shanjing Car Repair Services Co., Ltd.	PRC
Shanghai Taihan Trading Co., Ltd.	PRC
Shanghai eHi Car Services Information Technology Co., Ltd.	PRC
Sanya Shanjing Car Repair Services Co., Ltd.	PRC
Xi’an eHi Car Rental Co., Ltd.	PRC
Shanghai eHi Chengshan Car Rental Nanjing Co., Ltd.	PRC
Hangzhou Shanjing Car Repair Services Co., Ltd.	PRC
Hefei Shanjing Car Repair Services Co., Ltd.	PRC
Changsha Shanjing Car Repair Services Co., Ltd.	PRC
eHi Car Rental Management Services (Shanghai) Co., Ltd.	PRC
Hangzhou eHi Car Sales and Services Co., Ltd.	PRC
Fujian eHi Car Rental Co., Ltd.	PRC
Foshan eHi Car Rental Co., Ltd.	PRC
Hefei eHi Car Rental Management Services Co., Ltd.	PRC
Hefei Smart Brand Auto Driving Services Co., Ltd.	PRC
Changzhou eHi Car Rental Co., Ltd.	PRC
Nanchang eHi Car Rental Co., Ltd.	PRC
Xizang eHi Car Rental Co., Ltd.	PRC
Changzhou Shanjing Car Repair Services Co., Ltd.	PRC
Chongqing Shanjing Car Repair Services Co., Ltd.	PRC
Tianjin Shanjing Car Repair Services Co., Ltd.	PRC
Changsha eHi Car Rental Co., Ltd.	PRC
eHi Sunan Car Rental Wuxi Co., Ltd.	PRC
Ningbo Haichao Investment Management Co., Ltd.	PRC
Ningbo eHi Car Rental Co., Ltd.	PRC
Guiyang eHi Car Rental Co., Ltd.	PRC
Shanghai Wenhang Auto Technology Co., Ltd.	PRC
Shanghai Wenxing Auto Service Co., Ltd.	PRC
Shanghai eHi Information Technology Services Co., Ltd. (variable interest entity)	PRC
Shanghai eHi Car Sharing Information Technology Co., Ltd. (variable interest entity)	PRC

EX-12.1

Exhibit 12.1

Certification by the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ray Ruiping Zhang, certify that:
1.	I have reviewed this annual report of eHi Car Services Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 30, 2018
By:	/s/ Ray Ruiping Zhang
Name:	Ray Ruiping Zhang
Title:	Chief Executive Officer

EX-12.2

Exhibit 12.2

Certification by the Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Colin Chitnim Sung, certify that:
1.	I have reviewed this annual report of eHi Car Services Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 30, 2018
By:	/s/ Colin Chitnim Sung
Name:	Colin Chitnim Sung
Title:	Chief Financial Officer

EX-13.1

Exhibit 13.1

Certification by the Chief Executive Officer Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Ray Ruiping Zhang, Chief Executive Officer of eHi Car Services Limited (the “Company”), hereby certifies, to the best of his knowledge, that the Company’s annual report on Form 20-F for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 30, 2018
By:	/s/ Ray Ruiping Zhang
Name:	Ray Ruiping Zhang
Title:	Chief Executive Officer

EX-13.2

Exhibit 13.2

Certification by the Chief Financial Officer Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Colin Chitnim Sung, Chief Financial Officer of eHi Car Services Limited (the “Company”), hereby certifies, to the best of his knowledge, that the Company’s annual report on Form 20-F for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 30, 2018
By:	/s/ Colin Chitnim Sung
Name:	Colin Chitnim Sung
Title:	Chief Financial Officer

EX-15.1

Exhibit 15.1

eHi Car Services Limited

Unit 12/F, Building No.5

Guosheng Center

388 Daduhe Road

Shanghai 200062

People's Republic of China

30 April 2018

Dear Sir

eHi Car Services Limited

We have acted as legal advisers as to the laws of the Cayman Islands to eHi Car Services Limited, an exempted company with limited liability incorporated in the Cayman Islands (the "Company"), in connection with the filing by the Company with the United States Securities and Exchange Commission of an annual report on Form 20-F for the year ended 31 December 2017.

We hereby consent to the reference of our name under the heading "Item 10. Additional Information E. Taxation – Cayman Islands Taxation" in the Form 20-F.

Yours faithfully

/s/ Maples and Calder (Hong Kong) LLP

Maples and Calder (Hong Kong) LLP

EX-15.2

Exhibit 15.2

April 30, 2018

eHi Car Services Limited

Unit 12/F, Building No.5, Guosheng Center, 388 Daduhe Road

Shanghai, 200062

The People’s Republic of China

RE: eHi Car Services Limited

Dear Sirs/Madams,

We have acted as legal advisors as to the laws of the People’s Republic of China to eHi Car Services Limited, an exempted limited liability company incorporated in the Cayman Islands (the “Company “), in connection with the filing by the Company with the United States Securities and Exchange Commission of an annual report on Form 20-F for the year ended December 31, 2017.

We hereby consent to the use and reference of our name under the headings “Risk Factors” and elsewhere in the Form 20-F.

In giving this consent we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.

Yours sincerely,

/s/ Grandall Law Firm (Shanghai)

Grandall Law Firm (Shanghai)

EX-15.3

  Exhibit 15.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-204348) and Form F-3 (No. 333-220367) of eHi Car Services Limited of our report dated April 30, 2018 relating to the consolidated financial statements, which appears in this Annual Report on Form 20-F.

/s/ PricewaterhouseCoopers Zhong Tian LLP

PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China
April 30, 2018

XML

Document And Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Document Information [Line Items]
Document Type	20-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Entity Registrant Name	eHi Car Services Ltd
Entity Central Index Key	0001517492
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Parent company
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	139,917,575
Class A Common Shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	74,279,018
Class A Common Shares represented by ADS
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	1,027,288
ADS
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	513,644
Class B Common Shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	65,638,557

XML

CONSOLIDATED BALANCE SHEETS	Dec. 31, 2017 CNY (¥)		Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)
Current assets:
Cash and cash equivalents	¥ 671,350,459		$ 103,184,676	¥ 529,518,517
Restricted cash	612,121,936		94,081,419	257,059,302
Accounts receivable, net of allowance for doubtful accounts of RMB9,159,321 and RMB14,447,724 as of December 31, 2016 and 2017, respectively	362,899,878		55,776,690	213,011,929
Receivables from a related party	83,323,718		12,806,621	1,755,889
Prepaid expenses and other current assets	1,505,857,012		231,445,985	727,787,345
Short-term loans receivable	50,000,000		7,684,859	50,000,000
Vehicles held for sale	78,904,246		12,127,361	160,732,289
Deferred tax assets, current	0		0	1,839,973
Total current assets	3,364,457,249		517,107,611	1,941,705,244
Long-term investment	10,800,000		1,659,930	0
Property and equipment, net	7,057,045,317		1,084,648,005	5,723,569,175
Intangible assets	66,505,752		10,221,747	64,101,470
Vehicle purchase deposits	367,839,691		56,535,925	420,922,908
Deferred tax assets, non-current	0	[1]	0	649,675
Other non-current assets	61,814,009		9,500,639	10,010,628
Total assets	10,928,462,018		1,679,673,857	8,160,959,100
Current liabilities:
Accounts payable	617,870,011		94,964,882	179,877,847
Payables due to a related party	210,833		32,404	16,083,610
Accrued expenses and other current liabilities	433,886,742		66,687,172	268,491,387
Income tax payable	18,180,848		2,794,345	5,436,989
Short-term debt due to third parties	2,557,445,857		393,072,231	926,219,333
Short-term debt due to a related party	100,000,000		15,369,719	0
Total current liabilities	3,727,594,291		572,920,753	1,396,109,166
Long-term debt due to third parties	2,957,056,474		454,491,258	2,667,822,989
Long-term debt due to a related party	0		0	100,000,000
Deferred tax liabilities, non-current	27,638,307	[1]	4,247,930	1,061,542
Other non-current liabilities	9,626,177		1,479,516	4,835,862
Total liabilities	6,721,915,249		1,033,139,457	4,169,829,559
Commitments and contingencies (Note 20)
Shareholders' equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized; 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively	878,663		135,048	878,463
Additional paid-in capital	4,489,246,326		689,984,527	4,474,702,198
Accumulated other comprehensive income	121,858,122		18,729,250	43,201,465
Accumulated deficit	(405,436,342)		(62,314,425)	(527,652,585)
Total shareholders' equity	4,206,546,769		646,534,400	3,991,129,541
Total liabilities and shareholders' equity	¥ 10,928,462,018		$ 1,679,673,857	¥ 8,160,959,100

[1] The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical)	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2017 $ / shares	Dec. 31, 2016 CNY (¥) shares	Dec. 31, 2016 $ / shares	Dec. 31, 2015 CNY (¥)	Dec. 31, 2014 CNY (¥)
Allowance for doubtful accounts | ¥	¥ 14,447,724		¥ 9,159,321		¥ 7,611,244	¥ 5,969,648
Common shares, par value | $ / shares		$ 0.001		$ 0.001
Common shares, shares authorized	500,000,000		500,000,000
Common shares, shares issued	138,890,287		138,860,287
Common shares, shares outstanding	138,890,287		138,860,287
Class A Common Shares
Common shares, shares authorized	407,328,619		407,328,619
Common shares, shares issued	73,251,730		67,547,921
Common shares, shares outstanding	73,251,730		67,547,921
Class B Common Shares
Common shares, shares authorized	92,671,381		92,671,381
Common shares, shares issued	65,638,557		71,312,366
Common shares, shares outstanding	65,638,557		71,312,366

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		12 Months Ended
		Dec. 31, 2017 CNY (¥) ¥ / shares shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 CNY (¥) ¥ / shares shares	Dec. 31, 2015 CNY (¥) ¥ / shares shares
Net revenues:
Total net revenues		¥ 2,739,522,188	$ 421,056,851	¥ 2,108,944,425	¥ 1,450,629,752
Cost of revenues		(1,880,348,975)	(289,004,346)	(1,515,281,510)	(1,137,978,490)
Gross profit		859,173,213	132,052,505	593,662,915	312,651,262
Selling and marketing expenses:
Third party		(122,768,279)	(18,869,139)	(67,788,291)	(48,868,854)
Related party		(16,263,674)	(2,499,681)	(29,399,234)	(16,190,063)
Total selling and marketing expenses		(139,031,953)	(21,368,820)	(97,187,525)	(65,058,917)
General and administrative expenses		(270,670,181)	(41,601,245)	(251,938,077)	(183,548,522)
Other operating income		3,762,667	578,311	10,310,089	10,763,962
Total operating expenses		(405,939,467)	(62,391,754)	(338,815,513)	(237,843,477)
Income from operations		453,233,746	69,660,751	254,847,402	74,807,785
Interest income		14,962,132	2,299,638	8,413,945	2,652,636
Interest expense:
Third party		(273,588,999)	(42,049,859)	(206,425,222)	(109,566,064)
Related party		(6,995,833)	(1,075,240)	(18,534,167)	(14,202,500)
Total interest expense		(280,584,832)	(43,125,099)	(224,959,389)	(123,768,564)
Gain from waiver of warrants		0	0	0	16,869,935
Gain from sale of cost method investment		0	0	0	803,059,728
Other income, net		1,957,019	300,788	1,444,129	10,205,275
Early extinguishment of debt costs		(19,976,776)	(3,070,374)	0	0
Income before income taxes		169,591,289	26,065,704	39,746,087	783,826,795
Provision for income taxes		(47,375,046)	(7,281,411)	(6,610,971)	(87,487,990)
Net income		122,216,243	18,784,293	33,135,116	696,338,805
Change in cumulative foreign currency translation adjustment, net of tax of nil		78,656,657	12,089,307	(31,353,357)	73,410,193
Comprehensive income		¥ 200,872,900	$ 30,873,600	¥ 1,781,759	¥ 769,748,998
Weighted average number of common shares used in computing net income per share
Basic | shares		138,794,624	138,794,624	137,621,702	126,758,363
Diluted | shares		139,593,917	139,593,917	138,552,031	128,403,877
Net income (loss) per common share attributable to common shareholders
Basic | (per share)		¥ 0.88	$ 0.14	¥ 0.24	¥ 5.49
Diluted | (per share)		0.88	0.13	0.24	5.42
Net income per ADS
Basic | (per share)	[1]	1.76	0.27	0.48	10.99
Diluted | (per share)	[1]	¥ 1.75	$ 0.27	¥ 0.48	¥ 10.85
Car rentals
Net revenues:
Total net revenues		¥ 2,196,455,811	$ 337,589,077	¥ 1,663,546,502	¥ 1,100,578,473
Car services
Net revenues:
Total net revenues		¥ 543,066,377	$ 83,467,774	¥ 445,397,923	¥ 350,051,279

[1] Each ADS represents two Class A common shares

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Change in cumulative foreign currency translation adjustment, tax portion	¥ 0	¥ 0	¥ 0

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	CNY (¥) shares	USD ($) shares	Class A Common Shares CNY (¥) shares	Common Shares CNY (¥) shares	Common Shares Class A Common Shares CNY (¥) shares	Additional paid-in capital CNY (¥)	Additional paid-in capital Class A Common Shares CNY (¥)	Accumulated other comprehensive income CNY (¥)	Accumulated other comprehensive income Class A Common Shares CNY (¥)	Accumulated deficits CNY (¥)	Accumulated deficits Class A Common Shares CNY (¥)
Balance at Dec. 31, 2014	¥ 2,366,391,673			¥ 727,825		¥ 3,621,645,725		¥ 1,144,629		¥ (1,257,126,506)
Balance (in shares) at Dec. 31, 2014 | shares				114,379,243
Increase (Decrease) in Stockholders' Equity
Share-based compensation	13,983,246					13,983,246
Exercises of share options	5,089,020			¥ 2,617		5,086,403
Exercises of share options (in shares) | shares				416,246
Issuance of Class A common shares in private placement, net of issuance costs			¥ 792,860,341		¥ 136,559		¥ 792,723,782
Issuance of Class A common shares in private placement, net of issuance costs (in shares) | shares					22,337,924
Net income	696,338,805									696,338,805
Foreign currency translation adjustments	73,410,193							73,410,193
Balance at Dec. 31, 2015	3,948,073,278			¥ 867,001		4,433,439,156		74,554,822		(560,787,701)
Balance (in shares) at Dec. 31, 2015 | shares				137,133,413
Increase (Decrease) in Stockholders' Equity
Share-based compensation	16,040,947					16,040,947
Exercises of share options	25,233,557			¥ 11,462		25,222,095
Exercises of share options (in shares) | shares				1,726,874
Net income	33,135,116									33,135,116
Foreign currency translation adjustments	(31,353,357)							(31,353,357)
Balance at Dec. 31, 2016	¥ 3,991,129,541			¥ 878,463		4,474,702,198		43,201,465		(527,652,585)
Balance (in shares) at Dec. 31, 2016 | shares	138,860,287	138,860,287	67,547,921	138,860,287
Increase (Decrease) in Stockholders' Equity
Share-based compensation	¥ 13,588,843					13,588,843
Exercises of share options	¥ 955,485			¥ 200		955,285
Exercises of share options (in shares) | shares	0	0		30,000
Net income	¥ 122,216,243	$ 18,784,293								122,216,243
Foreign currency translation adjustments	78,656,657							78,656,657
Balance at Dec. 31, 2017	¥ 4,206,546,769	$ 646,534,400		¥ 878,663		¥ 4,489,246,326		¥ 121,858,122		¥ (405,436,342)
Balance (in shares) at Dec. 31, 2017 | shares	138,890,287	138,890,287	73,251,730	138,890,287

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CONSOLIDATED STATEMENTS OF CASH FLOWS	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Cash flows from operating activities:
Net income	¥ 122,216,243	$ 18,784,293	¥ 33,135,116	¥ 696,338,805
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts	5,288,403	812,813	1,548,077	1,641,596
Depreciation and amortization	755,065,789	116,051,487	668,018,253	474,721,487
Amortization of debt issuance costs and discounts	27,357,231	4,204,729	17,372,579	816,082
Share-based compensation	13,588,843	2,088,567	16,040,947	13,983,246
Gain from waiver of warrants	0	0	0	(16,869,935)
Gain from sale of cost method investment	0	0	0	(803,059,728)
Deferred taxes	29,066,413	4,467,426	(2,489,648)
Foreign currency exchange (gain) loss, net	(47,372,152)	(7,280,966)	11,608,634
Early extinguishment cost	19,976,776	3,070,374	0	0
Cost related to aborted offering	3,923,420	603,019
Changes in operating assets and liabilities:
Accounts receivable	(155,176,352)	(23,850,169)	(35,008,430)	(69,327,865)
Receivables due from a related party	(81,567,829)	(12,536,746)	5,611,366	(7,346,590)
Prepaid expenses and other assets	(165,210,245)	(25,392,350)	(251,622,358)	(166,490,292)
Income taxes payable	12,743,859	1,958,695	(84,281,714)	81,996,755
Accounts payable	24,613,565	3,783,036	8,750,324	2,449,643
Payables due to a related party	(15,872,777)	(2,439,601)	5,329,696	10,082,871
Accrued expenses and other current liabilities	171,224,002	26,316,647	26,731,063	77,754,819
Net cash provided by operating activities	719,865,189	110,641,254	420,743,905	296,690,894
Cash flows from investing activities:
Purchase of property and equipment	(3,252,477,106)	(499,896,578)	(3,687,792,595)	(2,183,382,209)
Purchase of intangible assets	(2,626,798)	(403,731)	(12,779,230)	(6,850,853)
Proceeds from disposal of property and equipment	1,057,279,427	162,500,873	410,717,362	241,754,708
Cash paid for cost method investment	(10,800,000)	(1,659,930)
Proceeds from waiver of warrants				18,409,199
Proceeds from sale of cost method investment, net of related transaction costs				954,428,056
Cash paid relating to other investing activities				(2,090,288)
Increase in restricted cash	(377,036,251)	(57,949,411)	(38,874,782)	(14,185,928)
Cash paid for a business combination, net of cash acquired			(3,229,998)
Cash paid for loans to a third party			(50,000,000)
Net cash used in investing activities	(2,585,660,728)	(397,408,777)	(3,381,959,243)	(991,917,315)
Cash flows from financing activities:
Proceeds from exercise of share options	955,485	146,855	25,431,373	4,891,204
Proceeds from issuance of Class A common shares in private placement, net of issuance costs				792,860,341
Proceeds from borrowings from third parties	1,874,385,912	288,087,840	2,142,363,443	704,095,594
Proceeds from borrowings from a related party				300,000,000
Repayment of borrowings to third parties	(1,441,476,300)	(221,550,851)	(1,166,755,309)	(741,253,447)
Repayment of borrowings to a related party			(200,000,000)
Payment for property and equipment beyond 3 months after purchase	(11,212,572)	(1,723,341)
Proceeds from issuance of 2018 Senior Notes, net of issuance costs				1,241,289,905
Payment for IPO issuance costs				(20,656,597)
Payment of professional fees for issuance of 2018 Senior Notes			(2,740,945)
Payment of professional fees for aborted offerings	(1,748,969)	(268,812)
Repayment of Syndicated loan	(1,000,335,000)	(153,748,674)	0	0
Proceeds from issuance of 2022 Senior Notes, net of issuance costs	2,611,624,352	401,399,313
Net cash provided by financing activities	2,032,192,908	312,342,330	798,298,562	2,281,227,000
Effect of exchange rate changes on cash and cash equivalents	(24,565,427)	(3,775,637)	82,346,911	97,880,059
Net increase (decrease) in cash and cash equivalents	141,831,942	21,799,170	(2,080,569,865)	1,683,880,638
Cash and cash equivalents-beginning of year	529,518,517	81,385,506	2,610,088,382	926,207,744
Cash and cash equivalents-end of year	671,350,459	103,184,676	529,518,517	2,610,088,382
Supplemental disclosure for cash flow information
Cash paid for interest	173,464,046	26,660,936	206,010,610	115,018,836
Cash paid for income taxes	5,564,773	855,290	93,382,333	5,491,235
Supplemental disclosure of non-cash investing and financing activities:
Sales of property and equipment included in receivables	350,629,000	53,890,691	127,915,314	20,366,352
Changes in vehicle purchase deposits	(53,083,217)	(8,158,741)	204,195,008	42,543,272
Accounts payable for purchase of property, plant and equipment	576,569,163	88,617,058	163,190,564	777,961,654
Accrued professional fees for issuance of 2018 Senior Notes				2,740,945
Accrued professional fees for aborted offering	2,174,451	334,207
Subscription receivables related to share option exercises				¥ 197,816

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ORGANIZATION AND DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2017

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

On August 3, 2007, eHi Car Services Limited (the “Company”), formerly known as Prudent Choice Limited or eHi Auto Services Limited, was incorporated in the Cayman Islands by Ray Ruiping Zhang (the “Founder”). The Company, through its subsidiaries, provides car rentals and car services to corporate and individual customers in the People’s Republic of China (“PRC”). The Company and its subsidiaries began offering services in 2006 through Shanghai eHi Business Co., Ltd. (“eHi Business”), which was incorporated on January 11, 2006. The Company’s business initially focused on providing car services to premium corporate and institutional clients. In May 2008, the Company began to provide car rentals to individual customers.

To further expand the Company’s internet and mobile services, the Company entered into a series of contractual arrangements in March 2014 with its PRC-incorporated variable interest entity (“VIE”) Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”) and its shareholders. eHi Information obtained a telecommunication business operating license (“ICP license”) from the relevant telecommunication authorities on September 24, 2014. eHi Information currently does not have any material operations.

In January 2015, the Company entered into a series of contractual arrangements with its PRC-incorporated VIE Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”) and its shareholders. eHi Car Sharing is currently testing its new business initiative as an online platform for peer-to-peer car rental between private vehicle owners and individual customers. eHi Car Sharing is currently not yet in operation and the Company does not expect it to contribute a material portion of its net revenues and operations in the foreseeable future.

As of December 31, 2017, the Company and its principal subsidiaries and VIEs are as follows: 

	Percentage of ownership or indirect economic ownership	Date of incorporation/ acquisition	Place of incorporation
Parent company and offshore holding companies
eHi Car Services Limited (“Company”)	Parent	August 3, 2007	Caymans
eHi Auto Services (Hong Kong) Holding Limited (“eHi Hong Kong”)	100%	September 24, 2010	Hong Kong
L&L Financial Leasing Holding Limited	100%	October 17, 2013	Hong Kong
Brave Passion Limited (“Brave Passion”)	100%	May 26, 2015	British Virgin Islands
Wholly owned subsidiaries
Shuzhi Information Technology (Shanghai) Co., Ltd. (“Shuzhi”)	100%	March 21, 2008	PRC
Shanghai eHi Car Rental Co., Ltd. (“eHi Rental”)	100%	March 10, 2008	PRC
Beijing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 20, 2008	PRC
Chongqing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	December 5, 2009	PRC
Shanghai Smart Brand Auto Driving Services Co., Ltd (“Shanghai Smart Brand,” subsidiary of Shuzhi)	100%	April 13, 2011	PRC
eHi Auto Services (Jiangsu) Co., Ltd. (subsidiary of eHi Hong Kong)	100%	December 23, 2011	PRC
Shanghai eHi Chengshan Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 16, 2012	PRC
Shanghai Taihan Trading Co., Ltd.	100%	November 10, 2013	PRC
Shanghai Taihao Financial Leasing Co., Ltd.	100%	January 7, 2014	PRC
Shanghai Taide Financial Leasing Co., Ltd.	100%	June 23, 2014	PRC
eHi Car Rental Management Services (Shanghai) Co., Ltd (subsidiary of eHi Rental)	100%	November 10, 2015	PRC
Consolidated variable interest entities (“VIEs”)
Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”)	100%	March 13, 2014	PRC
Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”)	100%	January 12, 2015	PRC

On November 18, 2014, the Company completed its initial public offering (“IPO”) and became listed on the New York Stock Exchange by issuing 10,000,000 American Depositary Shares (“ADSs”) at the price of US$12.00 per ADS for total gross proceeds of US$120 million. Each ADS represents two Class A common shares. The Company issued additional 8,333,332 Class A common shares in a private placement concurrent with the IPO, at the price of $6.00 per Class A common share for total proceeds of US$50 million. Upon the completion of the IPO, all of the Company’s 77,999,069 then-outstanding preferred shares and 6,096,842 then-outstanding common shares were immediately converted into and/or re-designated as Class B common shares.

On May 22, 2015, the Company entered into definitive securities purchase agreements with Tiger Fund and SRS Funds pursuant to which the Company agreed to issue a total of 22,337,924 of the Company’s Class A common shares at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS). The Company raised gross proceeds of approximately US$134.0 million on the transaction date and incurred transaction costs of approximately US$4.3 million from this private placement transaction which were recorded as a reduction to the equity contribution.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The consolidated financial statements of the Company, its subsidiaries and VIEs are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The Company had negative working capital of RMB 363,137,042 at December 31, 2017 primarily due to the maturity of the 2018 Senior Notes in December 2018. The management believes that the Company's current cash position as of December 31, 2017, the cash expected to be generated through the disposal of the Company's vehicles subject to repurchase programs (note 2(l)), operations and funds available from borrowings under the bank facilities will be sufficient to meet the Company’s working capital and capital expenditure for at least the next twelve months from the date these financial statements were issued. As such, these financial statements are prepared under the going concern assumption which contemplates the realisation of assets and the liquidation of liabilities in the ordinary course of  business.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the VIEs for which the Company is the ultimate primary beneficiary. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.

A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity. The VIEs for which the Company is the ultimate primary beneficiary, eHi Information and eHi Car Sharing, have insignificant operations; related balances and transactions are immaterial for all periods presented.

All transactions and balances among the Company, its subsidiaries, and the VIEs have been eliminated in consolidation.

(c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from such estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include the allowance for doubtful accounts, costs related to customer loyalty programs, useful lives of vehicles and other tangible or intangible assets, residual values of vehicles, impairment of intangibles and long-lived assets, certain accruals or contingent liabilities, valuation allowances for deferred tax assets, provisions for uncertain tax positions, valuation of share-based awards and forfeiture rates.

(d) Foreign currency and foreign currency translation

The Company uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated outside of the PRC is the United States dollar (“US$”), while the functional currency of the PRC entities is RMB as determined based on the criteria of ASC 830, Foreign Currency Matters.

Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the consolidated statements of comprehensive income as general and administrative expenses. Transaction gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature are treated in the same manner as translation adjustments and included in cumulative translation adjustments, which is a separate component of shareholders’ equity in the consolidated financial statements.

Assets and liabilities of the Company and its subsidiaries incorporated outside of the PRC are translated into RMB at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity. The rates of exchange for the U.S. dollar used for translation purposes were RMB6.9370 on December 31, 2016 and RMB6.5342 on December 31, 2017. The average rates of exchange for the U.S. dollar used for translation purposes were RMB6.2284, RMB6.6401, and RMB6.7547 for 2015, 2016, and 2017, respectively.

The unaudited United States dollar (“US$”) amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader. Unless the amounts were from transactions originally denominated in U.S. dollars or otherwise noted, all translations from RMB into U.S. dollars and from U.S. dollars to RMB for the convenience of the reader were calculated at the rate of US$1.00 = RMB6.5063 on December 31, 2017, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

(e) Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company deposits its cash and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that no significant credit risk exists as these banks are major financial institutions with high credit quality.

When providing services, the Company generally requires individual customers to make advance payments, or a deposit from the corporate and institutional clients before services are rendered. Accounts receivable primarily represents those receivables derived in the ordinary course of business in relation to corporate and institutional clients. The Company offers payment terms in the range of 5 — 120 days to the corporate and institutional clients. Substantially all revenue was derived from customers located in China.

Except for Ctrip (Note 21), no single customer accounted for more than 10% of the Company’s consolidated accounts receivable as of December 31, 2016 and 2017, or for more than 10% of the Company’s consolidated net revenues in any of the periods presented. 

(f) Cash and cash equivalents

Cash and cash equivalents consist of cash in banks, which are unrestricted as to withdrawal or use.

(g) Restricted cash

Restricted cash includes cash and cash equivalents that are not readily available for the Company’s normal disbursements. Restricted cash and cash equivalents are primarily related to cash deposits with banks and financial institutions required as part of the Company’s short-term borrowing arrangements (Note 9).

(h) Investments

The Company’s investments include cost method investments and held to maturity investments.

We use the cost method of accounting for equity investments that are not considered debt securities or equity securities that have readily determinable fair values and over which we have neither significant influence nor control through investments in common stock or in-substance common stock. Under the cost method, we carry the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee’s post-acquisition profits. The investments that we intend and are able to hold to maturity are classified as held-to-maturity investments and are stated at amortized cost. We monitor our investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information.

(i) Accounts receivable, net of allowance for doubtful accounts

Accounts receivable mainly consist of amounts due from the Company’s corporate and institutional clients, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Company performs ongoing credit evaluation of its customers, and assesses the allowance for doubtful accounts based upon expected collection ability based on the age of the receivables and factors surrounding the credit risk of specific customers.

(j) Short term loan receivable

Short-term loan receivables consist of loans extended to third-parties and are recorded at amortized cost. The Company records interest on an accrual basis and recognizes it in "Interest income" as earned in accordance with the contractual terms of the loan agreement, to the extent that such amounts are expected to be collected.

(k) Vehicles held for sale

Vehicles held for sale consist of used vehicles subject to signed sales agreements awaiting completion of title transfer. When a vehicle is reclassified as held for sale and transferred from property, plant and equipment, it is not further depreciated and is stated at lower of cost and net realizable value. Cost is the net book value upon the reclassification of the vehicle. Net realizable value is the selling price in accordance with the sales agreement less the estimated costs to be incurred upon the completion of title transfer. As of December 31, 2017, the vehicles reclassified as held for sale are expected to complete title transfer within one year.

(l) Property and equipment, net

Property and equipment is stated at cost, less accumulated depreciation and impairment. Initial cost is comprised of the purchase price, plus any costs directly attributable to bringing the property and equipment to the location and condition necessary for its intended use. Depreciation of property and equipment is calculated on a straight-line basis, after consideration of expected useful lives and estimated residual values. The Company begins depreciating vehicles when they are ready for their intended use. The estimated useful lives of these assets are generally as follows:

Category	Estimated useful lives
Vehicles	1-4 years
In-car equipment	3 years
Office furniture and equipment	5 years
Software	3 - 5 years
Building	39 years
Leasehold improvements	Over the shorter of the lease term or the estimated useful life - 1-5 years

Construction in progress represents offices under construction and newly acquired vehicles which are not yet been placed in service. Construction in progress is transferred to property and equipment and depreciation commences when an asset is ready for its intended use.

Vehicles

A vehicle is considered ready for its intended use generally when the license plate for the vehicle is obtained, the vehicle is insured, and when a GPS tracking device is installed. Expenditures for repairs and maintenance of vehicles are expensed as incurred. The Company expects to hold its vehicles generally for a period of approximately three to four years before their disposal, except for vehicles subject to repurchase programs, which have a holding period that typically ranges from 12 to 24 months. The estimated residual value of vehicles which are not subject to the repurchase programs are typically based on the current market price for used vehicles obtained from used vehicle dealers or the used car market for similar models.

The Company monitors accounting estimates relating to vehicles on a quarterly basis, including the depreciation rates and estimated residual values. Changes made to estimates are reflected in vehicle-related depreciation expense on a prospective basis. In addition, depreciation expense associated with vehicles subject to repurchase programs is recorded based on the contractual repurchase prices and holding periods, and is adjusted if the repurchase conditions are not met. When a vehicle is reclassified as held for sale, it is not further depreciated and is accounted for as held for sale. Gain or loss on disposed vehicles or loss on vehicles held for sale is recognized as an adjustment to depreciation expense as part of cost of revenues. The Company recorded a net loss of RMB5,055,620, a net gain of RMB1,848,313 and a net gain of RMB24,241,209 on disposals of vehicles set off by loss from reclassification of vehicles held-for-sale from property and equipment for the years ended December 31, 2015, 2016 and 2017, respectively. The Company fully writes off the net carrying value of a vehicle if the vehicle cannot be tracked via the installed GPS system for more than six months and cannot be otherwise located, as the Company believes that the chance of recovering the vehicle in such circumstances is remote, such losses are recorded as part of cost of revenues.

(m) Intangible assets

Intangible assets are substantially comprised of car rental operating licenses and vehicle license plates acquired from third parties and local administration authorities. Gross carrying value totaled RMB64,101,470 and RMB66,505,752 as of December 31, 2016 and 2017, respectively.

The car rental operating licenses are originally assigned a fixed operating period, which can be extended upon expiration without significant additional cost. The Company also believes that there is no significant risk involved in the car rental operating license renewal process. Further, there are no legal, regulatory, or contractual provisions of which the Company is aware that may limit the useful life of such licenses. As such, the Company considers such car rental operating licenses to be indefinite-lived and carries them at cost less any subsequent impairment losses. Vehicle license plates do not expire and require no renewal. Therefore, they are similarly considered to be indefinite-lived and are carried at cost less any subsequent accumulated impairment losses. 

(n) Impairment of intangible assets and long-lived assets

The Company evaluates intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. For long-lived assets, when these events occur, the Company evaluates impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition.  For indefinite lived assets, the impairment test consists of a comparison of the fair value with carrying value. If the carrying value of an intangible asset exceeds its fair value, which is generally determined using the income approach, market approach, or a combination thereof, an impairment loss is recognized. No impairment charges were recognized for the years ended December 31, 2015, 2016, and 2017.

(o) Deposits and advances from customers

Customer deposits:

The Company collects deposits from corporate and institutional clients upon entering into negotiated contracts, and such amount is refundable at the end of the contract period provided no contract violations are noted. For individual customers, the Company collects additional amounts from them upon return of the rental vehicle based on the estimated repair and other relevant costs. In situations where the contract is violated or damage is caused to the vehicle, customer deposits received are used to offset expenses incurred in the period such incidents occur, and the excess amount is returned to customers. The customer deposits are classified as accrued expenses and other current liabilities on the consolidated balance sheets. The Company records a loss in the consolidated statements of comprehensive income if expenses incurred for repair exceed customer deposit amounts.

Advances from customers:

Individual customers pay in advance prior to the rental vehicle pick-up. Payments received from customers are initially recorded as advances from customers and are recognized as revenues when revenue recognition criteria are met.

 

(p) Revenue recognition

Revenue from car rentals and car services are generally recognized over the rental period. Revenue from the sale of gasoline is recognized when the vehicle is returned and is based on the actual volume of gasoline consumed or a contracted fee paid by the customer. For car rentals, payments are generally collected from customers in advance, and are recorded as advances from customers in the consolidated balance sheets until the revenue recognition criteria are met. Customers who purchase car services are generally on credit terms, and the initial credit evaluation is conducted before credit is extended. Revenue is recognized when collectability is reasonably assured and all other revenue recognition criteria are met.

Occasionally, the Company engages contracted service providers in offering car services to its customers where the Company currently does not provide such services in certain cities or such services exceed the Company’s existing capacity. The end customers sign service contracts directly with the Company in such arrangements and the Company is the party responsible for customers’ acceptance for services rendered. In case of customer disputes, the Company resolves customer complaints and is solely responsible for refunding customers their payments. Therefore, the Company is considered the primary obligor in transactions involving the use of contracted service providers. The Company also determines the service fee and bears the credit risk. As a result, the Company recognizes revenue under contracted service provider arrangements on a gross basis.

In the accompanying consolidated statements of comprehensive income, revenue is presented net of business tax, VAT and other related surcharges. Costs of revenue associated with car rentals and car services have not been presented separately as the Company cannot reasonably and reliably estimate and allocate expenses to each of the revenue streams.

(q) Lease Obligations

In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property's estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The capitalized lease obligation reflects the present value of future rental payments, discounted at the appropriate interest rates. The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized as set out under the property and equipment section of this note.

Operating lease expenses are recognized on a straight-line basis over the applicable lease term.

(r) Net investment in direct financing leases

For leases where the Company is the lessor, a transaction is accounted for as a direct financing lease if the transaction satisfies one of the four capital lease conditions as discussed under the capital lease obligations in note 2(q), the collectability of the minimum lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the Company under the lease.

The net investment in the direct financing leases consists of the minimum lease payments, net of executory costs and profits thereon, unguaranteed residual value, accruing to the benefit of the Company and initial direct costs less unearned income. Over the period of a lease, each lease payment received is allocated between the repayment of the net investment in the lease and financing lease income based on the effective interest method so as to produce a constant rate of return on the balance of the net investment in the lease. The net investment in the direct financing leases is classified as current or non-current assets in the balance sheets based on the duration of the remaining lease terms.

The Company records revenue attributable to direct financing leases so as to produce a constant rate of return on the balance of the net investment in the lease. Total direct financing leases revenues were RMB7,197,316, RMB10,140,216 and RMB3,875,346 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in car rental revenues in the consolidated statements of comprehensive income .

(s) Customer loyalty program

The Company has a customer loyalty program where registered members earn points upon eligible purchases and such points can be redeemed for free rental periods, mileage upgrades, and other free gifts.  The Company estimates the incremental costs associated with the Company’s future obligation to its customers, and records them as selling and marketing expense in the consolidated statements of comprehensive income. Unredeemed membership points are recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company adjusts the liability associated with the customer loyalty program based on the Company’s estimate of future redemption of membership points prior to their expiration, which is three calendar years from the day the membership points are awarded. As of December 31, 2016 and 2017, the accrued liabilities associated with the customer loyalty program were RMB7,185,774 and RMB9,048,815, respectively.

(t) Advertising costs

The Company expenses advertising costs as incurred. Total advertising expenses were RMB28,946,698, RMB38,968,240 and RMB89,925,181 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in selling and marketing expenses in the consolidated statements of comprehensive income.

(u) Taxation

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and tax credits, if any. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period of the enactment of the change. The Company has adopted ASU 2015-17 prospectively since January 1, 2017, deferred tax assets and liabilities are classified as non-current on the consolidated balance sheet.

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected for a company operating in the car rental industry.

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

(v) Government grants and subsidy income

The Company receives government grants and subsidies in the PRC from various levels of local governments from time to time which are granted for general corporate purposes and to support its ongoing operations in the regions. These government subsidies are recorded as other operating income in the consolidated statement of comprehensive income in the period cash is received. For government grants that contain certain operating conditions, the amounts are recorded as liabilities when received, and are recognized in the consolidated statements of comprehensive income as a reduction of the related costs for which the grants are intended to compensate when the conditions are met. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the consolidated statements of comprehensive income as reductions to depreciation expense on a straight-line basis over the expected lives of the related assets.

(w) Fair value measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value include:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, short-term loans receivable, accounts payable, advances from customers, certain accrued expenses and other current liabilities, and short-term and long-term debt. The carrying amounts of short-term financial instruments, excluding short-term debt, approximate their fair values due to the short-term maturity of these instruments. The carrying amounts of short-term debt as of December 31, 2016 and December 31, 2017 approximate their fair values as the interest rates they bear reflected the current quoted market yield for comparable debt (Level 2 inputs). The fair value of long-term borrowings is estimated based on quoted market rates as well as borrowing rates currently available for borrowings with a similar term, and the fair value of 2018 Senior Notes and 2022 Senior Notes are estimated based on the average of the bid and ask price as of December 31, 2016 and December 31, 2017 (Level 2 inputs). The fair values of long-term debts including long-term borrowings, 2018 Senior Notes and 2022 Senior Notes were RMB3,214,860,166 and RMB4,770,908,702 as of December 31, 2016 and 2017, as follows:

	As of December 31, 2016				As of December 31, 2017
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
Long-term borrowings, including current portion		1,747,583,173		1,755,993,820		831,202,361		833,969,309
2018 Senior Notes		1,387,400,000		1,458,866,346		1,306,840,000		1,332,252,796
2022 Senior Notes		-		-		2,613,680,000		2,604,686,597
Total long-term debt		3,134,983,173		3,214,860,166		4,751,722,361		4,770,908,702

(x) Vehicle purchase deposits

The Company purchases vehicles through car dealers and makes advance payments in the ordinary course of business before title of vehicles are physically transferred to the Company. As the advance payments will be converted into property and equipment, which is a non-current asset, vehicle purchase deposits are accordingly classified as non-current assets on the consolidated balance sheets.

(y) Share-based compensation

The Company recognizes share-based compensation based on the grant date fair value of equity awards, with compensation expense, net of a forfeiture rate, recognized over the period in which the grantee is required to provide services to the Company in exchange for the equity award. Share-based compensation expense is recognized (i) immediately at the grant date for awards with no vesting conditions or (ii) using the straight-line method for awards with graded vesting features and service conditions only. Share-based compensation expense is classified in the consolidated statements of comprehensive income based upon the job function of the grantee. For the years ended December 31, 2015, 2016 and 2017, the Company recognized share-based compensation expense of RMB13,983,246, RMB16,040,947 and RMB13,588,843, respectively, as follows:

	For the years ended December 31,
	2015		2016		2017
Cost of revenues		361,951		839,543		843,761
Selling and marketing expenses		894,680		401,498		336,139
General and administrative expenses		12,726,615		14,799,906		12,408,943
Total		13,983,246		16,040,947		13,588,843

(z) Debt issuance costs and debt discounts

The Company incurs costs in connection with debt issuance, such as legal and accounting fees. Debt issuance costs and debt discounts are initially recorded as direct deduction from the associated debt liability, and are amortized to interest expense over the term of the respective debt using the effective interest method.

(aa) Earnings per share

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between common shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method. Common equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.

Basic and diluted earnings per share are not reported separately for Class A or Class B common shares as each class of shares has the same rights to undistributed and distributed earnings.

(ab) Segment reporting

In accordance with ASC 280, Segment Reporting, the Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and substantially all of the Company’s revenues are derived from within the PRC. Therefore, no geographical segments are presented.

(ac) Business Combinations

In accordance with ASC 805, Business Combinations, in business combinations not involving entities or businesses under common control, the Company measured the cost of an acquisition as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred and equity instruments issued. The transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of comprehensive income.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to forecast the future cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Although management believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

A non-controlling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Company. Consolidated net income on the consolidated statements of comprehensive income includes the net income attributable to non-controlling interests when applicable. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s consolidated balance sheets. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows when applicable.

(ad) Recently issued accounting standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers," or ASU 2014-09. This update contains new accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for the Company’s fiscal year beginning January 1, 2018, which reflects a one year deferral approved by the FASB in July 2015, with early application permitted provided that the effective date is not earlier than the original effective date (which would be the Company’s fiscal year beginning January 1, 2017). In March 2016, the FASB issued an amendment (ASU 2016-08) to the new revenue recognition guidance clarifying how to determine if an entity is a principal or agent in a transaction. In April (ASU 2016-10), May (ASU 2016-12), and December (ASU 2016-20) of 2016, the FASB further amended the guidance to include performance obligation identification, licensing implementation, collectability assessment and other presentation and transition clarifications. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2014-09 becomes effective for the Company on January 1, 2018. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company is currently in the process of analyzing each of its revenue streams and anticipates that the adoption of ASU 2014-09 will not have significant impact on its financial statements and related disclosures.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Group has adopted ASU 2015-17 in 2017 using the prospective method and all deferred taxes have been classified as noncurrent in the balance sheet as of December 31, 2017.

In February 2016, the FASB issued ASU 2016-02, “Leases”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The updated guidance also expands the required quantitative and qualitative disclosures surrounding leases. Additionally, ASU 2016-02 aligns key aspects of lessor accounting with the new revenue recognition guidance in ASU 2014-09, “Revenue from Contracts with Customers” (see above). Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases. For lessors, the guidance modifies classification criteria and accounting for sales-type and direct financing leases and requires a lessor to derecognize the carrying value of the leased asset that is considered to have been transferred to a lessee and record a lease receivable and residual asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted; hence, it applies to the Company beginning with calendar 2019. A modified retrospective transition approach is required for both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard would provide a practical expedient for lessors to combine nonlease components with the related lease components if certain conditions are met. This could allow the Company to account for all revenue earned from the operations of rental vehicles and from other forms of rental related activities under the new lease guidance. The Company is in the process of evaluating the impact of the adoption of this update on its consolidated financial statements and related disclosures, and expects the guidance will affect its accounting for certain contracts.

In March 2016, the FASB issued an ASU 2016-09 “Improvements to Employee Share-based Payment Accounting”, which amends ASC Topic 718, Compensation — Stock Compensation. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Group has adopted the standard in 2017 and the impact of adopting this pronouncement was not material to the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses. ASU 2016-13 also changes how entities measure credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, and early adoption is permitted for periods beginning after December 15, 2018. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements and associated disclosures.

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): “Classification of Certain Cash Receipts and Cash Payments”. The standard is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities. The Company is in the process of evaluating the impact of this guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash”. The standard addresses the diversity in practice that exists in the classification and presentation of changes in restricted cash and requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In November, 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), “Statement of Cash Flows”, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The ASU is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. The ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of ASU 2017-01 and anticipates the adoption had no material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifies Goodwill Impairment Test” (“ASU 2017-04”), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of the second step of the goodwill impairment test. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.” The ASU is effective prospectively for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of ASU 2017-04 on its consolidated financial statements.

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BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

BUSINESS COMBINATIONS

3. BUSINESS COMBINATIONS

Hangzhou eHi Car Sales and Services Co., Ltd., (Formerly called Hangzhou Deyu Car Dealing Services Co., Ltd., renamed on December 5, 2017)

In March 2016, to expand its operations, the Company acquired 100% of the equity interests in Hangzhou Deyu Car Dealing Services Co., Ltd. (“Deyu”), holding a number of vehicles plates in Hangzhou, where the local government had promulgated policies controlling the number of new local vehicle plates issued. The total purchase price for the transaction was RMB3,229,998 which was funded from the Company’s existing cash resources and fully paid in March 2016. Beginning March 31, 2016, the date of acquisition, Deyu has been fully consolidated into the Company’s financial statements. The allocation of the purchase price at the date of acquisition is summarized as follows:

 

	RMB
Net assets		45,374
Identifiable intangible assets —vehicles plates		4,246,166
Deferred tax liabilities		(1,061,542)
Total		3,229,998

The intangible assets acquired through the Company's acquisition of Deyu are considered to be indefinite-lived and are therefore not subject to amortization.

The Company's business combination completed during the year ended December 31, 2016 did not have a material impact on the Company’s consolidated statements of operations and therefore pro forma disclosures have not been presented.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS

12 Months Ended

Dec. 31, 2017

ALLOWANCE FOR DOUBTFUL ACCOUNTS.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

4. ALLOWANCE FOR DOUBTFUL ACCOUNTS

An analysis of the allowance for doubtful accounts receivable for the years ended December 31, 2015, 2016 and 2017 is as follows:

	For the years ended December 31,
	2015		2016		2017
Balance, beginning of the year		5,969,648		7,611,244		9,159,321
Provision for doubtful accounts		1,641,596		1,548,077		5,288,403
Balance, end of the year		7,611,244		9,159,321		14,447,724

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SHORT-TERM LOAN RECEIVABLE

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

SHORT-TERM LOAN RECEIVABLE

5. SHORT-TERM LOAN RECEIVABLE

In January and June 2016, the Company entered into agreements with Shanghai Chenghuan Car Rental Company Limited (“Shanghai Chenghuan”), pursuant to which the Company agreed to extend, through entrusted bank loans, an aggregate amount of RMB50,000,000 to Shanghai Chenghuan. Shanghai Chenghuan is a middle-to-high-end car rentals and car services provider in the local market, and is an independent third party. The loans have a term of one year and bear an interest rate of 7.75% per annum. The loan receivable is fully collateralized with 100% Shanghai Chenghuan’s shares. After one year, the Company has the option to convert its creditor rights into equity interests in Shanghai Chenghuan at a pre-determined valuation.

In January 2017, the Company and Chenghuan entered into supplemental agreements to extend the term of the above loans from 1 year to 2 years and increase the interest rate from 7.75% to 10% which would be applied retroactively covering the entire 2 years term. Other terms remained unchanged.

The Company concluded that the loan should be accounted for as short-term loan receivable in its entirety and compounded accrued interest, as the conversion option is not a derivative and there should be no separate bifurcation of derivative accounting for conversion option. The Company recognized the interest income true-up over the remaining period of contract terms starting from the effective date of the supplemental agreements.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2017

PREPAID EXPENSES AND OTHER CURRENT ASSETS.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	As of December 31,
	2016		2017
Value-added taxes deductible		311,501,214		774,435,385
Receivables from disposal of vehicles		127,915,314		350,629,000
Prepaid insurance expense		115,498,191		197,256,868
Staff advances		18,060,202		36,404,467
Brand Marketing Prepayments		-		30,700,380
Prepaid gasoline and repair supplies		17,481,886		26,685,176
Prepaid rental expenses		13,964,546		17,309,920
Rental deposits		11,137,408		16,301,592
Net investment in direct financing leases, current portion		63,999,571		10,226,920
Others		48,229,013		45,907,304
Total		727,787,345		1,505,857,012

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INVESTMENTS

12 Months Ended

Dec. 31, 2017

INVESTMENTS

INVESTMENTS

7. INVESTMENTS

Travice Inc.

In April 2014, the Company acquired series B preferred shares of Travice Inc. through its formerly wholly owned subsidiary Elite Plus Developments Limited (“Elite Plus”). Travice Inc. was a private company which developed and operates the Kuaidi mobile taxi and car calling service. The series B preferred shares acquired represented 8.4% of the then outstanding share capital of Travice Inc. Concurrently, Travice Inc. also issued warrants to the Company to purchase additional 4,684,074 series C preferred shares of Travice Inc. The total consideration given for series B preferred shares and warrants was RMB154,251,500 (US$25,000,000). The series B preferred shares are not in substance common stock. The cost method was applied to account for the investment as the equity securities received were not considered as debt or equity securities that have readily determinable fair values. Furthermore, the warrants to purchase series C preferred shares do not meet the definition of a derivative as the contractual terms do not provide for net settlement and the underlying shares are an investment in a private company.

On January 27, 2015, the Company waived its rights under the warrants to purchase 4,684,074 series C preferred shares of Travice Inc. and received RMB18,409,199 (US$3,000,000) in exchange for the waiver of the warrants. The gain of RMB16,869,935 (US$2,749,158) arising from this transaction was recorded as a gain from waiver of warrants in the consolidated statement of comprehensive income for the year ended December 31, 2015. The cost basis of the warrant was correspondingly eliminated from the carrying value of investments.

In February 2015, Travice Inc. was merged with and into Xiaoju Science and Technology Limited, which developed and operates the Didi mobile taxi and car hailing service. After the completion of such merger, the Company’s investment in Travice Inc. was exchanged to a minority stake in the surviving company Xiaoju Kuaizhi Inc.

On June 2, 2015, the Company entered a definitive agreement, pursuant to which the Company transferred its 100% equity interest in Elite Plus to Eagle Legend Global Limited, an independent third party, for gross proceeds of RMB983,621,925 (US$160,875,000). The transaction was closed on June 24, 2015. The gain of RMB803,059,728 (US$131,352,744) arising from this transaction after deducting related transaction costs of RMB29,193,869 (US$4,773,098) was recorded as a gain from sale of cost method investment within non-operating income.

The transactions were originally denominated in U.S dollars and therefore, translations from U.S. dollar to RMB were calculated at the exchange rates prevailing on the transaction dates.  

Ningbo eHi Ruiji

In November 2017, Ningbo Haichao Investment Management Services Co., Ltd. (“Ningbo Haichao”), a wholly owned subsidiary of the Company, as the Limited Partner, and an independent third party Yinzhou Ningyituiji Investment Management Co., Ltd. (“Yinzhou Ningyituiji”), as the General Partner, entered into a partnership agreement in relation to the establishment and management of Ningbo eHi Ruiji Equity Investment LLP (“Ningbo eHi Ruiji”). Ningbo eHi Ruiji would be established in the PRC as a limited partnership for the purpose of equity investment, investment management and investment consulting.

Pursuant to the Partnership Agreement, the total capital commitment to Ningbo eHi Ruiji by May 1, 2047 is expected to be RMB60,000,000, of which RMB59,990,000 is to be contributed by Ningbo Haichao and RMB10,000 is to be contributed by Yinzhou Ningyituiji. Ningbo eHi Ruiji would be managed by Yinzhou Ningyituiji. As of December 31, 2017, Ningbo Haichao made cash contribution of RMB10,800,000 to Ningbo eHi Ruiji. Ningbo eHi Ruiji did not have business operations in year 2017.

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PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2017

PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, NET

8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

	As of December 31,
	2016		2017
Vehicles		5,926,576,864		7,775,410,903
In-car equipment		37,670,565		52,443,083
Building		55,587,304		55,587,304
Leasehold improvements		32,752,237		44,056,477
Software		12,211,763		14,051,492
Office furniture and equipment		33,463,933		44,782,752
Property and equipment subject to depreciation		6,098,262,666		7,986,332,011
Less: accumulated depreciation		(1,127,934,340)		(1,358,334,657)
Subtotal		4,970,328,326		6,627,997,354
Construction in progress		753,240,849		429,047,963
Property and equipment, net		5,723,569,175		7,057,045,317

The Company recorded depreciation expense relating to vehicles and in-car equipment of RMB457,478,811, RMB654,654,545 and RMB742,259,659 for the years ended December 31, 2015, 2016 and 2017, respectively, as costs of revenue in the consolidated statements of comprehensive income .

Depreciation expense of other property and equipment totaled RMB17,242,676, RMB13,363,708 and RMB12,806,130 for the years ended December 31, 2015, 2016 and 2017, respectively, and was recorded in the consolidated statements of comprehensive income as cost of revenue and operating expenses.

As of December 31, 2016 and 2017, vehicles and in-car equipment with a total initial cost of RMB465,073,020 and RMB210,460,414, respectively, were used as collateral in relation to certain long-term borrowing arrangements as disclosed in Note 10.

As of December 31, 2017, vehicles and in-car equipment with a total initial cost of RMB252,985,226 were used as collateral for the unsettled payable balance for the vehicle acquisition due to one of the authorized dealers of SAIC Volkswagen.

XML

SHORT-TERM DEBT

12 Months Ended

Dec. 31, 2017

SHORT-TERM DEBT

SHORT-TERM DEBT

9. SHORT-TERM DEBT

	As of December 31,
	2016		2017
Short-term borrowings		620,105,995		928,846,417
Long-term borrowings, current portion (Note 10)		306,113,338		1,728,599,440
Total		926,219,333		2,657,445,857

Short-term borrowings

	As of December 31,
	2016		2017
Notes payable		363,983,800		253,259,200
Short-term bank borrowings guaranteed by the Founder and his spouse		75,000,000		-
Short-term bank borrowings		181,122,195		675,587,217
Total short-term bank borrowings		620,105,995		928,846,417

Notes payable

The Company is required to maintain a certain balance of cash deposit in designated bank accounts for the notes payable outstanding as of December 31, 2017. Such required cash deposit of RMB115,000,000 and US$11,500,000 (equivalent to RMB75,143,300) was classified as restricted cash on the consolidated balance sheet.

 

Short-term bank borrowings guaranteed by the Founder and his spouse

In February 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB25,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB25,000,000, bearing an interest rate of 4.698% per annum. This short-term borrowing was guaranteed by the Founder of the Company, Ray Ruiping Zhang, and his spouse, Suping Han. This short-term borrowing was fully repaid during the year ended December 31, 2017.

In October 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB50,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB50,000,000, bearing an interest rate of 4.35% per annum. This short-term borrowing was guaranteed by the Founder of the Company, Ray Ruiping Zhang, and his spouse, Suping Han. It was fully repaid during the year ended December 31, 2017.

Short-term bank borrowings

In 2016, the Company entered into four short-term loan agreements with a bank for an aggregate principal amount of RMB100,000,000. As of December 31, 2016, the principal amount outstanding under these agreements were RMB50,000,000, RMB10,000,000, RMB10,000,000 and RMB30,000,000 respectively, bearing same interest rates of 4.35% per annum. These borrowings were fully repaid during the year ended December 31, 2017. During 2017, the Company entered into another five short-term loan facility agreements with the same bank for aggregate principal amounts of RMB150,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB30,000,000, RMB50,000,000, RMB20,000,000, RMB30,000,000 and RMB20,000,000 respectively, bearing interest rates of 4.35%, 4.35%, 4.785%, 4.785% and 4.785% per annum.

In April 2016, the Company entered into a short-term borrowing agreement with a bank for an aggregate principal amount of RMB30,000,000. As of December 31, 2016, the principal amount outstanding under this agreement was RMB30,000,000, bearing an interest rate of 4.1325% per annum. This short-term borrowing was fully repaid during the year ended December 31, 2017. In May 2017, the Company entered into another short-term loan agreement with the same bank for an aggregate principal amount of RMB50,000,000. As of December 31, 2017, the principal amount outstanding under this agreement was RMB50,000,000, bearing an interest rate of 4.35% per annum.

In August 2016, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB25,000,000 was made available to the Company. As of December 31, 2016, the principal amount outstanding under this agreement was RMB25,000,000, bearing an interest rate of 4.35% per annum. This short-term borrowing was fully repaid during the year ended December 31, 2017.

In July 2017, the Company entered into a short-term loan facility agreement with a bank for which a total loan facility up to RMB240,000,000 was made available to the Company. As of December 31, 2017, the principal amount outstanding under this agreement were RMB45,728,059, bearing an interest rate of 5.0025% per annum.

In November 2017, the Company entered into two short-term borrowing agreements with a bank for an aggregate principal amount of RMB400,000,000. As of December 31, 2017, the principal amount outstanding under these two agreements were RMB200,000,000 and RMB200,000,000 respectively, bearing the same interest rate of 4.1325% per annum. In conjunction with these two loan agreements, the Company needs to deposit US$64,580,000 (equivalent to RMB421,978,636) in the designated bank account during the period of the borrowing, and such deposit was classified as restricted cash as of December 31, 2017.

In 2016, in connection with the purchase of vehicles, the Company entered into short-term borrowing agreements with a third-party financing company for an aggregate principal amount of RMB30,000,000. Principal and interest are payable monthly and these borrowings bear interest at 4.82% per annum. As of December 31, 2016, total principal amounts outstanding under these agreements were RMB26,122,195, which were fully repaid in year ended December 31, 2017. In May 2017, the third-party financing company increased the credit limit to RMB50,000,000. Principal and interest are payable monthly and the borrowings bear interest at 4.82% per annum. As of December 31, 2017, total principal amounts outstanding under these agreements were RMB29,859,158.

The weighted average interest rate on short-term bank borrowings was 3.66% and 4.44% for the years ended December 31, 2016 and December 31, 2017, respectively.

XML

LONG-TERM DEBT

12 Months Ended

Dec. 31, 2017

LONG-TERM DEBT

LONG-TERM DEBT

10. LONG-TERM DEBT

	As of December 31,
	2016		2017
Long-term borrowings collateralized by vehicles		292,605,866		213,703,954
Long-term bank borrowings collateralized by receivables		189,427,307		40,995,042
Entrusted long-term borrowing from a related party		100,000,000		100,000,000
Long-term borrowings from banks or financing companies		125,000,000		476,503,365
Syndicated loan		1,010,689,797		-
2018 Senior Notes		1,356,213,357		1,292,029,030
2022 Senior Notes		-		2,562,424,523
Subtotal		3,073,936,327		4,685,655,914
Less: Current portion of long-term debt		(306,113,338)		(1,728,599,440)
Total long-term debt		2,767,822,989		2,957,056,474

Long-term borrowings collateralized by vehicles

In connection with the purchase of vehicles, the Company entered into borrowing agreements from 2013 to 2017 with several third-party financing companies for an aggregate principal amount of RMB744,203,883. Principal and interest are payable monthly. As of December 31, 2016, and 2017, the borrowings bear the interest at a range of 5.20%-9.12% per annum. These borrowings were collateralized by vehicles and in-car equipment with an aggregate initial cost of RMB402,951,830. During 2016 and 2017, the Company early repaid part of these borrowings. Due to the early repayment, as of December 31, 2016 and 2017, total principal amounts outstanding under these agreements were RMB74,605,866, and RMB33,703,954, respectively.

In July 2015, the Company entered into a five-year framework agreement with a bank, which includes various financing products for an aggregate amount of RMB1.5 billion. In January 2016, in connection with purchase of vehicles, the Company drew down an aggregate amount of RMB220 million in bank loans under this framework agreement. The loan bears an initial interest rate of 5.225% per annum and the interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent term. The principal and interest are payable semi-annually over three years from the borrowing commencement date. The borrowing was collateralized by vehicles with an aggregate initial cost of RMB136,290,802. As of December 31, 2016 and 2017, total principal amounts outstanding under these agreements were RMB218,000,000 and RMB180,000,000 respectively, bearing interest at 5.225% per annum.

Long-term bank borrowings collateralized by receivables

In 2014 and 2015, in connection with the purchase of vehicles, a wholly-owned subsidiary of the Company entered into eight long-term loan agreements with a bank. As of December 31, 2016 and 2017, the principal amounts outstanding under these agreements were RMB121,330,685 and RMB10,167,665, respectively. As of December 31, 2016 and 2017, the loans bear interest rates at 5.225% and 4.75% per annum. The interest rates are adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable monthly over three years. This long-term bank borrowing is pledged with receivables due from another wholly-owned subsidiary of the Company.

In September 2014, in connection with the purchase of vehicles, a wholly-owned subsidiary of the Company entered into a long-term loan facility agreement with a bank for which up to RMB155,000,000 was made available to the Company with a floating interest rate. As of December 31, 2016 and 2017, the principal amounts outstanding under this agreement were RMB68,096,622 and RMB30,827,377, respectively with interest rate of 4.9875% per annum. The principal and interest are payable monthly over four to five years. This long-term bank borrowing is pledged with receivables due from another wholly-owned subsidiary of the Company.

Entrusted long-term borrowing from a related party

In April 2015, in connection with the purchase of vehicles, the Company entered into a entrusted long-term loan agreement with related party, Ctrip Travel Information Technology (Shanghai) Co., Ltd. for which a total loan facility up to RMB300,000,000 was made available to the Company. In October 2016, the Company repaid RMB200,000,000 originally due in 2018. Due to the early repayment, the principal amounts outstanding under this agreement were RMB100,000,000 and RMB100,000,000 as of December 31, 2016 and 2017, respectively with interest rate of 6.90% per annum. The remaining principal is payable at the end of the borrowing term, which was three years from the contract date, and interest amounts are payable quarterly over the term of the borrowing arrangement.

 

Long-term borrowings from banks or financing companies

In December 2016, the Company entered into a long-term loan agreement with a bank which a total loan facility up to RMB300,000,000 was made available to the Company. As of December 31, 2016 and 2017, the principal amounts outstanding under this agreement were RMB125,000,000 and RMB134,670,687, respectively, with interest rate of 4.9875% per annum. The principal and interest are payable quarterly over three years.

In May 2017, the Company entered into a long-term loan agreement with a bank for principle amount of RMB100,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB95,000,000 with interest rate of 4.9875% per annum. The interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable quarterly over three years.

In June 2017, the Company entered into a long-term loan agreement with a bank which a total loan facility up to RMB50,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB41,666,667 with an interest rate of 4.9875% per annum. The principal and interest are payable quarterly over three years.

In August 2017, the Company entered into a long-term loan agreement with a bank for principle amount of RMB100,000,000. As of December 31, 2017, the principal amounts outstanding under this agreement were RMB90,000,000 with an interest rate of 4.75% per annum. The interest rate is adjusted annually based on the published People’s Bank of China interest rate with equivalent terms. The principal and interest are payable quarterly over three years.

In September 2017, in connection with the purchase of vehicles, the Company entered into long-term borrowing agreements with a third-party financing company for an aggregate principal amount of RMB123,918,976. Principal and interest are payable monthly over five years and the borrowings bear interest at 6.00% per annum. The principal amounts outstanding under these agreements as of December 31, 2017 were RMB115,166,011.

With respect to all aforementioned arrangements, the undrawn loan facilities available to the Company totaled RMB63,358,721 and RMB202,605,274 as of December 31, 2016 and 2017, respectively.

The Company’s short-term and long-term borrowing arrangements include certain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness or create new mortgages or charges, request the Company to maintain its shareholding structure and make timely reports. Certain borrowing covenants also post restrictions on the use of proceeds and asset sales, and require the Company to provide notice or obtain consent for significant corporate events. The Company’s borrowing agreements contain restrictions on the Company’s ability to transfer cash between the Company’s subsidiaries. As a result of these restrictions, although the Company’s overall liquidity may be sufficient to satisfy the Company’s obligations, the Company may be limited by covenants in some of the Company’s borrowing agreements from transferring cash to other subsidiaries that might require funds. In addition, cross default provisions in the Company’s other indebtedness may be triggered if the Company defaults on any of these debt agreements. The Company did not violate any financial covenants during the years ended December 31, 2016 and 2017. 

US$150 million syndicated loan

In August 2016, the Company signed a three-year syndicated loan agreement (the “Facility Agreement”) with a syndicate of lead arrangers, which provided for a US$110 million facility (the "Initial Facility") and a US$40 million greenshoe facility (the "Greenshoe"). In September 2016, the Company drew down the entire US$150 million including the greenshoe facility under the facility agreement. As of December 31, 2016, the principal amounts outstanding under Facility Agreement were US$150,000,000. The proceeds of the loan are used to (1) refinance existing indebtedness; (2) capital expenditure; (3) to fund interest reserve account; (4) to pay all transaction-related fees; and (5) general corporate purposes. The loan bears a floating interest rate of LIBOR + 3.50% margin per annum and is repayable over a three-year period. The loan was guaranteed by the Company’s offshore subsidiaries. The Company is required to maintain a certain balance of cash deposit in the interest reserve account collateralized in favor of the lenders in connection with these facilities. Such required balance needs to cover the interest payable in 3 month time. As of December 31, 2016, such required cash deposit of US$1,547,240 was classified as restricted cash on the consolidated balance sheet. The loan Agreement contains financial covenants requiring the Company to maintain a certain leverage ratio. The Company was compliant with these covenants as of December 31, 2016. In August 2017, the Company early repaid all outstanding borrowings under the syndication loan originally due in 2019 through directly deducting from the offering proceeds from its issuance of 2022 Senior Note.

2018 Senior Notes:

On December 8, 2015, the Company issued senior unsecured notes with an aggregate principal amount of RMB1,281,560,000 (US$200,000,000) which will mature on December 8, 2018 (the “Notes”). The issuance price of the Notes was 99.342% of par value. The Notes bear a fixed interest rate of 7.5% per annum, yielding 7.75%, with interest payable semi-annually in arrears. The Notes were issued as unregistered securities to qualified institutional buyers and offshore investors under provisions granting relief from registration under the Securities Act of 1933. The Notes have a trading market on the Stock Exchange of Hong Kong Limited.

The Notes are general obligations of the Company and are (i) subordinated to secured obligations of the Company, (ii) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment; (iii) guaranteed by certain subsidiary guarantors on a senior basis, subject to certain limitations, and (iv) effectively subordinated to all existing and future obligations of the non-guarantor subsidiaries. The Notes have been guaranteed as to payment by the Company’s offshore subsidiaries eHi Hong Kong, L&L Financial Leasing Holding Limited, and Brave Passion Limited.

Redemption

As described below, the Notes may be repurchased prior to the maturity date at the option of the Company. The holders of the Notes may not redeem the Notes prior to the maturity date, except in the case of a change in control.

Contingent redemption option available to holders

If a change of control triggering event, generally defined as a merger or acquisition or other fundamental corporate event, were to occur, the holders have the option to require the Company to purchase all outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the date of repurchase.

 

Repurchase options available to the Company

The Company may redeem the Notes, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the greater of (1) 1.00% of the principal amount, or (2) the excess, if any, of (i) the present value at such redemption date of the redemption price of such Note on December 8, 2018, plus all required remaining scheduled interest payments due on such Notes (but excluding accrued and unpaid interest to the redemption date) through December 8, 2018, computed using a discount rate equal to a defined US Treasury security rate plus 100 basis points, over (ii) the principal amount of such Notes on such redemption date, and accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more sales of common stock of the Company in an equity offering at a redemption price of 107.50% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.

The Company evaluated the redemption features and concluded that such features did not need to be bifurcated from the Notes and separately accounted for as derivatives.

The Notes contain restrictive covenants including, among others, limitations on liens, consolidation, investment, merger and sale of the Company's assets, maintenance of a fixed charge coverage ratio, and limitations on asset sales or use of proceeds.

The debt issuance costs of RMB34,538,769 and debt discount of RMB8,432,665 associated with the Notes, reflected as a reduction to the face value of the Notes, are being amortized over the three-year contractual life of the Notes under the effective interest method, as the Company concluded that redemption prior to the contractual maturity is not probable. The effective interest rate of the Notes is 8.99%, including the interest charged on the Notes as well as amortization of the debt issuance costs and debt discount. The Senior Notes proceeds were received by the Company’s offshore subsidiary eHi Hong Kong.

2022 Senior Notes:

On August 14, 2017, the Company issued senior unsecured notes with an aggregate principal amount of RMB2,667,560,000 (US$400,000,000) which will mature on August 14, 2022 (the “2022 Senior Notes”) and early repaid all outstanding borrowings under the syndicated loan concurrently by directly deducting from the issuance proceeds. The issuance price of the 2022 Senior Notes was 100.00% of par value. The 2022 Senior Notes bear a fixed interest rate of 5.875% per annum, yielding 5.875%, with interest payable semi-annually in arrears. The 2022 Senior Notes were issued as unregistered securities to qualified institutional buyers and offshore investors under provisions granting relief from registration under the Securities Act of 1933. The 2022 Senior Notes have a trading market on the Singapore Exchange Securities Trading Limited.

The 2022 Senior Notes are general obligations of the Company and are (i) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment; (ii) guaranteed by certain subsidiary guarantors on a senior basis, subject to certain limitations, (iii) subordinated to secured obligations of the Company, and (iv) effectively subordinated to all existing and future obligations of the non-guarantor subsidiaries. The 2022 Senior Notes have been guaranteed as to payment by the Company’s offshore subsidiaries eHi Hong Kong, L&L Financial Leasing Holding Limited, and Brave Passion Limited.

Redemption

As described below, the 2022 Senior Notes may be repurchased prior to the maturity date at the option of the Company. The holders of the Notes may not redeem the 2022 Senior Notes prior to the maturity date, except in the case of a change in control.

Contingent redemption option available to holders

If a change of control triggering event, generally defined as a merger or acquisition or other fundamental corporate event, were to occur, the holders have the option to require the Company to purchase all outstanding 2022 Senior Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the date of repurchase.

Repurchase options available to the Company

The Company may redeem the 2022 Senior Notes on or after August 14, 2020, in whole or in part, at a redemption price equal to 102.938% and 101.469% of the principal amount during the 12-month period commencing on August 14, 2020 and August 14, 2021, respectively, plus accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem the 2022 Senior Notes prior to August 14, 2022, in whole but not in part, at any time at a redemption price equal to 100% of the principal amount of the 2022 Senior Notes redeemed plus the greater of (1) 1.00% of the principal amount, or (2) the excess, if any, of (i) the present value at such redemption date of the redemption price of such 2022 Senior Note on August 14, 2020, plus all required remaining scheduled interest payments due on such 2022 Senior Notes (but excluding accrued and unpaid interest to the redemption date) through August 14, 2020, computed using a discount rate equal to a defined US Treasury security rate plus 100 basis points, over (ii) the principal amount of such 2022 Senior Notes on such redemption date, and accrued and unpaid interest, if any, to (but not including) the redemption date.

The Company may redeem up to 35% of the aggregate principal amount of the 2022 Senior Notes with the net cash proceeds of one or more sales of common stock of the Company in an equity offering at a redemption price of 105.875% of the principal amount of the 2022 Senior Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the 2022 Senior Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.

The Company evaluated the redemption features and concluded that such features did not need to be bifurcated from the 2022 Senior Notes and separately accounted for as derivatives.

The 2022 Senior Notes contain restrictive covenants including, among others, limitations on liens, consolidation, investment, merger and sale of the Company's assets, maintenance of a fixed charge coverage ratio, and limitations on asset sales or use of proceeds.

The debt issuance costs of RMB55,935,648 associated with the 2022 Senior Notes, reflected as a reduction to the face value of the 2022 Senior Notes, are being amortized over the five-year contractual life of the2022 Senior Notes under the effective interest method, as the Company concluded that redemption prior to the contractual maturity is not probable. The effective interest rate of the 2022 Senior Notes is 6.46%, including the interest charged on the 2022 Senior Notes as well as amortization of the debt issuance costs. The 2022 Senior Notes proceeds were received by the Company’s offshore subsidiary eHi Hong Kong.

Future principal maturities of long-term debt as of December 31, 2017 are as follows:

Years Ended December 31,	Amount (RMB)
2018		1,743,425,515
2019		238,098,275
2020		156,518,571
2022		2,613,680,000
Total		4,751,722,361

XML

ACCOUNTS PAYABLE

12 Months Ended

Dec. 31, 2017

ACCOUNTS PAYABLE

ACCOUNTS PAYABLE

11. ACCOUNTS PAYABLE

Accounts payable consist of the following:

	As of December 31,
	2016		2017
Payables for purchase of property and equipment		163,190,564		576,569,163
Others		16,687,283		41,300,848
Total		179,877,847		617,870,011

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2017

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	As of December 31,
	2016		2017
Advance from customers		68,397,492		105,716,286
Customer deposits		55,991,264		78,975,251
Accrued employee payroll and welfare		57,367,892		72,103,194
Interest accrued		8,530,203		63,982,199
Other tax payable		15,471,552		25,092,518
Provision for customer loyalty program		7,185,774		9,048,815
Accrued professional service fees		4,316,185		7,761,195
Accrued advertising and promotion expense		17,306,922		5,785,785
Payable for property related purchase		11,354,874		-
Others		22,569,229		65,421,499
Total		268,491,387		433,886,742

XML

TAXATION

12 Months Ended

Dec. 31, 2017

TAXATION

TAXATION

13. TAXATION

(a) PRC VAT

The Company is subject to 17% VAT for revenues from car rental services, 11% VAT for the revenues from designated driving services and 6% VAT for qualified management services, respectively. Furthermore, a 3% simplified VAT rate is applied for the rental services provided by an entity or branch who are small-scale VAT payers.

The qualified VAT input credits generated from purchases of vehicles and other property and equipment can be credited against VAT payable relating to taxable revenues.

(b) Income Taxes

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains in Cayman Islands. Additionally, upon payments of dividends to shareholders, no Cayman Islands withholding tax will be imposed.

Hong Kong

Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% since January 1, 2010. Operations in Hong Kong have incurred net accumulated operating losses for income tax purposes and no income tax provisions are recorded for the periods presented.

PRC

On March 16, 2007, the National People’s Congress of the PRC enacted an Enterprise Income Tax Law (“EIT Law”), under which Foreign Investment Enterprises (“FlEs”) and domestic companies would be subject to EIT at a uniform statutory rate of 25%, unless CIT preferential treatment is eligible. The EIT law became effective on January 1, 2008.

The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its entities registered outside of the PRC should be considered as resident enterprises for PRC tax purposes.

The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a FIE to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where the Company is incorporated, does not have such tax treaty with China. According to the arrangement between the mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006 (the “China-HK DTA”), dividends paid by an FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5%, provided the HK immediate holding company owns directly at least 25% of the shares of the FIE and is qualified for beneficial owner status according to the China tax rules and China-HK DTA .

All FIEs are subject to the withholding tax from January 1, 2008. Under U.S. GAAP, undistributed earnings are presumed to be transferred to the parent company and are subject to the withholding taxes. The presumption may be overcome if the Company has sufficient evidence to demonstrate that the undistributed dividends will be re-invested and the remittance of the dividends will be postponed indefinitely. The Company did not record any dividend withholding taxes, and the Company has not provided any other taxes in relation to outside basis differences, as it has no retained earnings for any of the periods presented.

In accordance with PRC tax regulations, the Company provided RMB83,103,026 (US$13,587,500) of income tax expense for the gain realized from the disposal of a cost method investment in 2015. The gain (Note 7) arose from the indirect sale of an investment in Xiaoju Kuaizhi Inc., a PRC tax resident enterprise when Eagle Legend Global Limited transferred equity of its wholly-owned subsidiary, Elite Plus. According to Circular 7 issued by the State Administration of Taxation of the PRC on February 3, 2015, if a non-PRC resident enterprise (such as the Company) indirectly transfers PRC taxable properties (including equity investment in a PRC tax resident) without a reasonable business purpose, by disposing of an equity interest of an overseas holding company, such indirect transfer of PRC taxable properties should be re-characterized as direct transfer of PRC taxable properties. And, therefore, the gains derived from such indirect transfer may be subject to the PRC withholding tax at a rate of up to 10%. As Circular 7 was promulgated recently, it is not clear how it will be implemented; however, the Company’s disposal transaction appears to be a taxable event under Circular 7. In light of this uncertainty, the Company accrued for withholding tax at the statutory rate of 10% on the realized gain. In 2016, the Company provided remaining income taxes of RMB 1,881,456 (US$ 270,986) as a true up for the gain realized from the disposal of the cost method according to PRC tax regulation.

Pre-tax income

The following table sets forth the components of pre-tax income:

	For the years ended December 31,
	2015		2016		2017
Pre-tax income from domestic (PRC) entities		5,669,944		248,923,620		261,743,051
Pre-tax income (loss) from foreign (non-PRC) entities		778,156,851		(209,177,533)		(92,151,762)
Total pre-tax income		783,826,795		39,746,087		169,591,289

During the year ended December 31, 2015, the Company’s pre-tax income attributable to non-PRC entities mainly resulted from the gain on sale of its investment in Xiaoju Kuaizhi Inc., as discussed in the foregoing paragraph. During the year ended December 31, 2016 and 2017, the Company’s pre-tax loss from non-PRC entities mainly resulted from the interest expenses related to senior notes issued.

The current and deferred portions of income tax expense included in the consolidated statements of operations and comprehensive income during the years ended December 31, 2015, 2016 and 2017 are as follows:

	For the years ended December 31,
	2015		2016		2017
Current income tax expense
Domestic (PRC) entities		1,408,703		3,049,504		1,152,383
Foreign (non-PRC) entities		-		-		-
Total		1,408,703		3,049,504		1,152,383
Deferred income tax expense
Domestic (PRC) entities		-		(2,489,648)		29,066,413
Foreign (non-PRC) entities		-		-		-
Total		-		(2,489,648)		29,066,413
Income tax expense (excluding withholding tax)
Domestic (PRC) entities		1,408,703		559,855		30,218,796
Withholding tax
Foreign (non-PRC) entities		86,079,287		6,051,116		17,156,250
Total income tax expense		87,487,990		6,610,971		47,375,046

Reconciliation of the differences between statutory tax rate and the effective tax rate

The following table sets forth a reconciliation between the statutory PRC EIT rate of 25% and the effective tax rate:

	For the Years Ended December 31,
	2015			2016			2017
Statutory income tax rate		25.0	%		25.0	%		25.0	%
Different tax rates in other jurisdictions		(26.0)	%		90.8	%		13.3	%
Withholding tax		10.6	%		15.2	%		10.1	%
Permanent differences		0.1	%		(17.1)	%		0.9	%
Change in valuation allowance		1.1	%		(97.5)	%		(21.2)	%
Tax holiday		—			0.2	%		(0.2)	%
Other		0.4	%		—			—
Effective tax rate		11.2	%		16.6	%		27.9	%

For the year ended December 31, 2016, the Group’s effective tax rates increase was primarily attributable to the impact of the interest expenses of the syndicated loan, 2018 Senior Notes and foreign exchange loss recorded on certain subsidiaries with preferential tax rates, which led to the increase in effective tax rate of 116.8%. For the year ended December 31, 2017, the effective tax rate increase was mainly due to less utilization of net operating loss carry forwards, for which valuation allowance was provided in prior year, leading to the increase in effective tax rate of 76.3%.

Deferred tax assets

The following table sets forth the significant components of the deferred tax assets:

	As of December 31,
	2016		2017*
Current*
Deferred tax assets:
Accrued payroll and other expenses		598,246		-
Allowance for doubtful accounts		2,289,830		-
Deferred government grant income		2,151,411		-
Others		11,950		-
Less: valuation allowance		(3,211,464)		-
Total current deferred tax assets, net		1,839,973		-
Non-current
Deferred tax assets:
Accrued payroll and other expenses		-		38,886,321
Allowance for doubtful accounts		-		3,611,931
Net operating loss carry forwards		55,724,899		40,279,987
Less: valuation allowance		(35,963,269)		(3,143,454)
Total non-current deferred tax assets, net		19,761,630		79,634,785
Deferred tax liabilities,
Temporary difference on property and equipment		19,111,955		90,793,841
Deferred revenue		-		15,417,709
Recognition of intangible assets arisen from business combination		1,061,542		1,061,542
Total non-current deferred tax liability		20,173,497		107,273,092

Classification in the consolidated balance sheets:

	As of December 31,
	2016		2017*
Current deferred tax assets, net*		1,839,973		-
Non-current deferred tax assets, net		649,675		-
Non-current deferred tax liability, net		1,061,542		27,638,307

* The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

Movement of valuation allowance

	2015		2016		2017
Balance at beginning of the year		89,697,127		89,738,490		39,174,733
Additions in current year		25,374,784		3,128,771		456,508
Reversals in current year		(25,210,766)		(53,692,038)		(36,482,572)
Expirations in current year		(122,655)		(490)		(5,215)
Balance at the end of the year		89,738,490		39,174,733		3,143,454

As of December 31, 2015 and 2016, the Company had net operating loss carry forwards of approximately RMB300,376,325 and RMB341,922,125, respectively, of which substantially all arose from its PRC subsidiaries. As of December 31, 2017, the Company had net operating loss carry forwards of approximately RMB167,597,369, which mainly arose from its PRC subsidiaries and to a less extent from its HK subsidiaries. The carry forward period for net operating losses under the EIT law is five years for the PRC subsidiaries. The net operating loss carry forwards will expire in varying amounts between 2018 and 2022 if not utilized. Other than the expiration, there are no other limitations or restrictions upon the Company’s ability to use the operating loss carry forwards.

A valuation allowance is provided against deferred tax assets when the Company determines that it is more likely than not that the deferred tax assets will not be utilized in the future or before their expiration. Establishment and removal of a valuation allowance requires management to consider all positive and negative evidence and to make a judgmental decision regarding the amount of valuation allowance required as of a reporting date. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. In the evaluations, management considers all available evidence, both positive and negative, including but not limited to the following:

· Positive results from continuing operations before income taxes;

· Recent history of generating taxable income which has allowed for the utilization of tax credit carryforwards;

· The three year comprehensive cumulative profitability position;

For the year ended December 31, 2015, the reversal of valuation allowance was all related to the utilization of net operating loss carry forwards for which full valuation allowances was provided in prior years.

For the year ended December 31, 2016, certain valuation allowance were reversed in 2016 when those entities generated sufficient taxable income and are forecasted to continue to be profitable, which management determined provided sufficient positive evidence as of December 31, 2016 to utilize the deferred tax assets.

As of December 31, 2017, valuation allowance of RMB3,143,454 were provided on certain deferred tax assets to the extent that management believed it was more likely than not that such deferred tax assets would not be realized in the foreseeable future, of which substantially all arose from its HK subsidiaries. Valuation allowance related to the Company’s PRC subsidiaries were reversed in 2017 when those entities generated sufficient taxable income and are forecasted to continue to be profitable, which management determined provided sufficient positive evidence as of December 31, 2017 to utilize the deferred tax assets.

If events occur in the future that prevent these entities from realizing some or all of its deferred tax assets, an adjustment to the valuation allowances will be recognized when such events occur. Management will continue to evaluate the ability to realize the Company’s net deferred tax assets and the remaining valuation allowance.

Uncertain tax positions

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2016 and 2017, the Company did not have any significant uncertain tax positions leading to liabilities for unrecognized tax benefits. Interest and penalties related to uncertain tax positions, if any, are included in provision for income taxes.

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COMMON SHARES

12 Months Ended

Dec. 31, 2017

COMMON SHARES.

COMMON SHARES

14. COMMON SHARES

As of December 31, 2017, the Company had an aggregate of 138,890,287 common shares issued and outstanding. These outstanding shares consist of (1) 73,251,730 Class A ordinary shares and (2) 65,638,557 Class B common shares. The terms of Class A ordinary shares and Class B ordinary shares are similar, except that holders of Class A common shares are entitled to one vote per share, while holders of Class B common shares are entitled to ten votes per share. In addition, certain matters including those related to the change of control of the Company require an additional approval by the holders of a majority of Class A common shares voting as a separate class. Each Class B common share is convertible into one Class A common share at any time by the holder thereof. Class A common shares are not convertible into Class B common shares under any circumstances. Class B common shares will be automatically converted into the same number of Class A common shares under certain circumstances, including any transfer of Class B common shares by a holder thereof to any person or entity which is not an affiliate of such holder.

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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2017

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

15. FAIR VALUE MEASUREMENTS

The Company’s recurring fair value measurements for financial assets and liabilities are limited to cash and cash equivalents as of December 31, 2016 and 2017. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in an active market.

The Company did not have any Level 2 or Level 3 categorized assets or liabilities as of December 31, 2016 and 2017, respectively.

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OTHER INCOME, NET

12 Months Ended

Dec. 31, 2017

OTHER INCOME (EXPENSE), NET

OTHER INCOME, NET

16. OTHER INCOME, NET

Other income, net consists of the following:

	For the Years Ended December 31,
	2015		2016		2017
American Depositary Receipt reimbursement		9,917,716		-		-
Tax refund		-		979,794		518,171
Others		287,559		464,335		1,438,848
Total		10,205,275		1,444,129		1,957,019

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EARLY EXTINGUISHMENT OF DEBT COSTS

12 Months Ended

Dec. 31, 2017

Extinguishment of Debt Disclosures [Abstract]

Extinguishment of Debt Disclosures [Text Block]

17. EARLY EXTINGUISHMENT OF DEBT COSTS

On August 15, 2017, the Company early repaid the US$150 million syndicated bank facility entered into in August 2016 by a portion of the net proceeds from 2022 Senior Notes (Note 10), and hence expensed off the unamortized issuance costs of US$3.1 million (equivalent to RMB19,976,776) incurred for the syndicated bank facility as an early extinguishment cost in the consolidated statement of comprehensive income for the year ended December 31, 2017.

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SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2017

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

18. SHARE-BASED COMPENSATION

2010 Performance Incentive Plan

On April 1, 2010, the Company adopted the 2010 Performance Incentive Plan (“2010 Plan”) under which the Company reserved 2,627,730 options to purchase common shares for the issuance of incentive awards to employees. On December 21, 2010, the Company increased the maximum number of options available to 4,300,730. All of the Company’s outstanding options are granted to employees and are equity-classified. These options vest over three to five years of an employee’s continuous service starting from the grant date and have a contractual term of five years.

The Company granted 300,000 options on April 1, 2013 under the 2010 Plan with an exercise price of US$3.11. On August 26, 2014, the Company amended and restated the 2010 Plan whereby the maximum aggregate number of shares issuable under the 2010 Plan increased from 4,300,730 shares to 6,698,470 shares. On the same day, the Company granted 450,000 restricted shares to employees, of which one-quarter vested immediately, and the remaining vest over a period of three years from the date of grant. Additionally, the Company also granted 1,300,000 options to employees with an exercise price of US$7.00, which vest over a period of four years from the date of the grant. No options and restricted shares were granted under the 2010 Plan in the years ended December 31, 2015, 2016 and 2017.

On August 28, 2015, the directors of the Company’s Compensation Committee approved an option modification to extend the contractual term of all outstanding share options granted to employees and a director (excluding the Company’s Founder) under the 2010 Plan on August 31, 2010 by one year. The modified options, totally amounting to 1,588,648 options, are all vested. Other terms of the option grants remain unchanged. The modification resulted in total incremental compensation cost of RMB76,552, all of which was recorded in the consolidated statements of comprehensive income for the year ended December 31, 2015.

On December 26, 2015, the directors of the Company’s Compensation Committee approved an option modification to extend the contractual term of all outstanding share options granted to the Founder, under the 2010 Plan on December 31, 2010 by one year. The modified options, totally amounting to 1,673,000 options, are all vested. Other terms of the option grants remain unchanged. On November 14, 2016 and December 27, 2017, these options were further extended another one year under the approval of the directors of the Company’s Compensation Committee. Other terms of the option grants remain unchanged. The modification resulted in total incremental compensation cost of RMB831,958, RMB1,502,987 and RMB661,926, all of which was recorded in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively.

The following table summarizes the Company’s option activities under the 2010 Plan for the years ended December 31, 2015, 2016 and 2017:

	Number of Options		Weighted Average Exercise Price (US$)		Weighted Average Contractual Term		Aggregate Intrinsic Value (US$)
Options outstanding at December 31, 2014		5,136,900		3.76		1.95		5,425,522
Exercised		(138,700)		2.20		—		—
Cancelled and forfeited		(98,200)		6.86		—		—
Options outstanding at December 31, 2015		4,900,000		3.74		1.59		13,356,070
Exercised		(1,726,874)		2.20		—		—
Cancelled and forfeited		(17,626)		6.97		—		—
Options outstanding at December 31, 2016		3,155,500		4.57		1.64		2,801,660
Cancelled and forfeited		(51,500)		7.00		—		—
Options outstanding at December 31, 2017		3,104,000		4.53		1.16		5,277,775
Vested and expected to vest at December 31, 2017		3,103,965		4.53		1.16		5,277,775
Exercisable at December 31, 2017		2,775,000		4.30		1.12		5,144,025

Share options

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market value of the underlying stock at each balance sheet date. The total intrinsic value of options exercised at exercise date during the years ended December 31, 2015 and 2016 were RMB2,577,855 and RMB38,265,778, respectively. Nil options was exercised during the year ended December 31, 2017.

Share-based compensation expense for the share options is recorded on a straight-line basis over the requisite service period, which is generally three to five years from the date of grant. The Company recognized share-based compensation expenses of RMB7,666,182, RMB8,489,631 and RMB7,638,082 for share options granted under the 2010 Plan in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively. The expenses of 2015, 2016 and 2017 include the impacts of the aforementioned option term modifications in August and December 2015, November 2016 and December 2017.

As of December 31, 2017, there was RMB4,039,457 in total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested share options, which is expected to be recognized over a weighted-average period of 0.64 years. The unrecognized compensation expense may be adjusted for future changes in estimated forfeitures.

Restricted shares

A summary of the restricted shares activities under the 2010 Plan for the years ended December 31, 2015, 2016 and 2017 is presented below:

	Number of Restricted Shares		Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2015		337,500		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2015		225,000		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2016		112,500		6.99
Expected to vest at December 31, 2016		112,500		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2017		-		-

The total fair value of restricted shares vested at vesting date during the years ended December 31, 2015, 2016 and 2017 was US$ 537,750, US$590,625 and US$507,938, respectively.

Share-based compensation expense for restricted shares is recorded on a straight-line basis over the requisite service period, which is three years from the date of the grant. The Company recognized share-based compensation expense for restricted shares of RMB4,894,683, RMB5,222,062 and RMB3,504,963 in the consolidated statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017, respectively.

2014 Performance Incentive Plan

In October 2014, the Company adopted a 2014 Performance Incentive Plan (“2014 Plan”), which became effective immediately after the completion of the Company’s initial public offering in November 2014. Under the 2014 Plan, the Company is authorized to initially reserve a maximum of 4,000,000 common shares, provided that the shares reserved shall automatically increase on January 1 of each year during the term of the 2014 Plan, commencing on January 1, 2015, by an amount equal to the lesser of (i) one percent (1%) of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, (ii)  1,000,000 common shares or (iii) such number of common shares as may be determined by the Company’s board of directors.

On May 15, 2015, the Company granted 525,000 share options to the Company's employees and directors at an exercise price of US $5.35 per share with contractual term of 10 years from the grant date and a graded vesting period of four years. 25% of the granted options vest on each of the first, second, third and fourth anniversaries of the grant date. There were no option grants in 2016 and 2017.

On March 23, 2017, the Company granted 6,000 restricted share units to the Company’s employee, 50% of which vested immediately, with the remaining 50% vested over the next two years (25% vest on each of the first and second anniversaries of the grant date). There were no restricted share units in 2015 and 2016.

Share options

The following table summarizes the Company’s option activities under the 2014 Plan for the years ended December 31, 2015, 2016 and 2017:

	Number of Options		Weighted Average Exercise Price (US$)		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (US$)		Weighted Average Grant-date Fair value (US$)
Options outstanding at January 1, 2015		—		—		—		—		—
Granted		525,000		5.35		—		—		2.86
Cancelled and forfeited		(16,000)		5.35		—		—		—
Options outstanding at December 31, 2015		509,000		5.35		9.38		481,005		—
Cancelled and forfeited		(8,000)		5.35		—		—		—
Options outstanding at December 31, 2016		501,000		5.35		8.38		—		—
Exercised		(27,000)		5.35		—		—		—
Cancelled and forfeited		(71,000)		5.35		—		—		—
Options outstanding at December 31, 2017		403,000		5.35		7.38		175,305		—
Vested and expected to vest at December 31, 2017		396,226		5.35		7.38		172,358		—
Exercisable at December 31, 2017		201,500		5.35		7.38		87,653		—

The grant date fair value of each option is calculated using a binomial option pricing model by the Company. The fair value of each option grant under the 2014 Plan was estimated on the date of grant with the following assumptions:

	For the Year Ended December 31, 2015
Risk-free rate		2.14	%
Option term		10 years
Volatility		55	%
Dividend yield		0.00	%
Exercise multiple		2/2.5
Expected forfeiture rate (post-vesting)		0%/10	%

The Company estimated the expected volatility based on the weighted-average annualized standard deviation of the daily return embedded in historical share prices, considering share prices of the Company and comparable companies. Risk free interest rate was estimated based on the yield to maturity of US treasury bonds denominated in US$. The exercise multiple is estimated as the ratio of fair value of underlying shares over the exercise price as at the time the option is exercised, based on a consideration of research study regarding exercise pattern based on empirical studies on the actual exercise behavior of employees. The Company has never declared or paid any cash dividends on its capital stock, and the Company does not anticipate any dividend payments on its common shares in the foreseeable future. Estimated forfeiture rates are determined based on historical employee turnover rates. Expected forfeiture rates of 0% and 10% were applied for grantees at executive level and non-executive level respectively, and represents the Company’s estimate of the grantee’s forfeiture patterns.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market value of the underlying stock at each balance sheet date. The total intrinsic value of options exercised at exercise date during the years ended December 31, 2017 was RMB52,162.

Share-based compensation expense for options is recorded on a straight-line basis over the requisite service period, which is four years from the date of grant. The Company recognized share-based compensation expense of RMB1,422,381, RMB2,329,254 and RMB2,304,913 in the consolidated statement of comprehensive income for the years ended December 31, 2015, 2016 and 2017.

As of December 31, 2017, there was RMB2,333,324 in total unrecognized compensation expense related to share options, which is expected to be recognized over a weighted average period of 1.37 years.

Restricted Share Units

A summary of the restricted share units activities under the 2014 Plan for the year ended December 31, 2017 is presented below:

Unvested Restricted Share Units	Number of Restricted Share Units		Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2017		-		-
Granted		6,000		5.11
Vested		(3,000)		5.11
Unvested at December 31, 2017		3,000		5.11
Expected to vest at December 31, 2017		2,502		5.11

The total fair value of restricted share units vested at vesting date during the year ended December 31, 2017 was US$15,240.

Share-based compensation expense for restricted share units vested immediately is fully recorded on grant day. The remaining share-based compensation expense is recorded on a straight-line basis over the requisite service period, which is two years from the date of the grant. The Company recognized share-based compensation expense for restricted shares of RMB140,885 granted under the 2014 Plan in the consolidated statements of comprehensive income for the year ended December 31,2017.

As of December 31, 2017, there was RMB49,307 in total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested restricted share units, which is expected to be recognized over a weighted-average period of 1.23 years. The unrecognized compensation expense may be adjusted for future changes in estimated forfeitures.

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INCOME PER SHARE

12 Months Ended

Dec. 31, 2017

INCOME(LOSS) PER SHARE

INCOME PER SHARE

19. INCOME PER SHARE

Basic and diluted net income per share for each of the years presented are calculated as follows:

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Numerator:
Net income :		696,338,805		33,135,116		122,216,243
Numerator for basic and diluted net income per share		696,338,805		33,135,116		122,216,243
Denominator:
Denominator for basic calculation-weighted average number of common shares outstanding		126,758,363		137,621,702		138,794,624
Dilutive effect of share options		1,593,216		897,122		758,702
Dilutive effect of restricted shares and restricted share units		52,298		33,207		40,591
Denominator for diluted income per share calculation		128,403,877		138,552,031		139,593,917
Basic net income per share attributable to the Company’s common shareholders		5.49		0.24		0.88
Diluted net income per share attributable to the Company’s common shareholders		5.42		0.24		0.88
Basic net income per ADS*		10.99		0.48		1.76
Diluted net income per ADS*		10.85		0.48		1.75

* Each ADS represents two Class A common shares.

 

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net earnings per share is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period. The effects of outstanding share options, restricted shares and restricted share units of 2,828,588, 2,753,664 and 1,584,581 shares on a weighted average basis were anti-dilutive and excluded from the computation of diluted net income per share for the years ended December 31, 2015, 2016 and 2017, respectively.

The Company does not distinguish between Class A and Class B common shares for purposes of presenting basic or diluted earnings per share as each share class has identical privileges with respect to undistributed and distributed earnings.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2017

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

20. COMMITMENTS AND CONTINGENCIES

(a) Operating leases

The Company and its subsidiaries have entered into non-cancelable operating leases covering various facilities. Future minimum lease payments under these non-cancellable leases as of December 31, 2017 are as follows:

Year ending December 31,	(RMB)
2018		51,630,688
2019		27,830,356
2020		9,609,139
2021		6,110,999
2022		3,012,326
Thereafter		852,333
		99,045,841

The Company recorded rental expense of RMB50,738,573, RMB57,538,983 and RMB65,405,038 in the consolidated statements of comprehensive income during the years ended December 31, 2015, 2016 and 2017, respectively.

 

(b) Purchase commitments

In addition to vehicle purchase deposits reflected in the consolidated balance sheet, the Company’s purchase commitments relate to purchase of vehicles and marketing resources. Total purchase commitments contracted but not yet reflected in the consolidated financial statements amounted to RMB560,047,600 as of December 31, 2017, of which RMB550,509,970 will be fulfilled in remainder of 2018, and RMB9,537,630 will be fulfilled in 2019.

Other than those disclosed above, the Company did not have other significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2017.

(c) Contingencies

On May 8, 2017, a company named Shanghai Zhongqi Anhua Car Services Co., Ltd., (“Zhongqi Anhua”), filed a tort liability suit in People’s Court of Jingan District, Shanghai (the “District Court”), against eHi Rental, and involved Shanghai Municipal Transportation Commission (“SMTC), as a third party to the suit. Zhongqi Anhua claimed in their complaint that eHi Rental shall (i) admit the tort (ii) stop using the car rental operation certificate No.3516 issued by SMTC (the “Car Rental Certificate”), alleging the Car Rental Certificate and relevant vehicle operation certificates are possessed by Zhongqi Anhua, (iii) compensate the damages suffered by Zhongqi Anhua in connection with the alleged infringement totaling RMB30 million, and (iv) apologize to Zhongqi Anhua. On July 3, 2017, the District Court rendered a judgment rejecting all the claims raised by Zhongqi Anhua for absence of proof of the claims. On July 19, 2017, Zhongqi Anhua submitted a petition for appeal to Shanghai No.2 Intermediate People’s Court (the “Appellate Court”), and the Appellate Court ruled on September 1, 2017 that the judgment rendered by the District Court be remanded for re-trial as certain facts should be further clarified by the District Court.

As of the date of these consolidated financial statements are issued, the above lawsuit is still pending for judgement and the Company is actively defending the case. Considering the facts that eHi Rental obtained the Car Rental Certificate through regulated procedures set forth by SMTC, which consists of no infringement behavior by eHi Rental, and that eHi Rental has been compliant with all relevant SMTC annual inspection/certificate renewal requirement, the Company believes such claims are without merit and the Company has been advised by Shanghai Hengye Law Firm (“Hengye”), being eHi Rental’s PRC counsel to this suit, that the loss from an unfavorable court decision is reasonably possible but not probable.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2017

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

21. RELATED PARTY TRANSACTIONS

Crawford/Enterprise

In March 2012, the Company entered into a global affiliation agreement with Enterprise Holdings (China) LLC (“Enterprise China”). Enterprise China is an affiliate of Enterprise Holdings, Inc, a subsidiary of Crawford Group, Inc. (“Crawford”). Crawford was a holder of the Company’s Class A, Series D and Series E Shares and is currently a holder of the Company’s Class B common shares. Pursuant to the global affiliation agreement, the Company and Enterprise China are to direct certain rental referrals to each other via their respective websites, and for each referral received, the Company is liable for a contractually specified amount of referral fees payable to Enterprise China, and vice versa. The Company records referral fees payable to Enterprise China as sales and marketing expenses, and referral fees received as other operating income. Transactions incurred under this arrangement were immaterial for the periods presented.

Under the Additional Series E Preferred Share purchase agreement dated April 16, 2014, Crawford Group Inc. purchased 1,764,055 Series E Preferred Shares for US$9,702,299.

On October 31, 2014, Crawford Group, Inc. (“Crawford”), a parent company of Enterprise Holdings, Inc, exercised all of the 1,500,000 warrants to purchase 1,500,000 Class B common shares at a per share purchase price of US$5.50 for a total consideration of US$8,249,993 (RMB50,705,282).

As of December 31, 2017, Crawford holds 18,694,003 Class B common shares.

Ctrip

Under the Additional Series E Preferred Share purchase agreement dated April 16, 2014, Ctrip Investment Holding Ltd. (‘‘Ctrip’’) purchased 2,368,193 Series E Preferred Shares for US$13,025,062. As part of the Additional Series E share purchase agreement, upon the Company’s written request in connection with a proposed initial public offering, Ctrip shall be obligated to subscribe for the Company’s common shares (i) in an exempt private placement or (ii) in an exempt Regulation S offering. Each of Ctrip and the Company agreed that the purchase price of the common shares in connection with such investments shall be the initial public offering price, and such subscription shall be consummated concurrently with the closing of the initial public offering. On October 14, 2014, the Company entered into a subscription agreement with Ctrip, pursuant to which Ctrip purchased from the Company 1,666,666 Class A common shares at US$6.00 per Class A common share in a private placement concurrent with the closing of the Company’s initial public offering. 

In December 2014, the Company entered into a service agreement (“Agreement") with Ctrip for car rental and car services referral. Pursuant to the Agreement, the Company pays a fixed percentage of car rental or car services rates from successful car referrals as commissions to Ctrip (resulting in related party payable balances), and Ctrip collects car rental and car services fees from individual customers on behalf of the Company (resulting in related party receivable balances).

In order to further promote the Company's car services to individual customers, starting from September 1, 2015, the Company entered into a supplementary agreement with Ctrip. Pursuant to this supplementary agreement, the Company needs to pay a fixed minimum commission fee of referrals in addition to the fixed commission rates for car rental and car service referral mentioned in the Agreement.

In November 2016, an amendment was entered that the fixed minimum commission fee would no longer charged by Ctrip since then. Transactions incurred under these service agreements were RMB16,190,063, RMB29,399,234 and RMB16,263,674 for the years ended December 31, 2015, 2016 and December 31, 2017, respectively.

In the end of April 2015, Ctrip extended an entrusted bank loan of RMB300,000,000 to the Company which has been drawn down in full (Note 10). The loan has a term of three years with an interest rate of 6.9% per annum and some of the Company's PRC subsidiaries provided guarantees. In October 2016, the Company repaid RMB200,000,000 originally due in 2018. Interests incurred under this loan agreement were RMB14,202,500, RMB18,534,167 and RMB6,995,833 for the year ended December 31, 2015, 2016, 2017.

Private Placement

On May 22, 2015, the Company entered into definitive securities purchase agreements with Tiger Fund and SRS Funds (the “Buyers”’) pursuant to which the Company agreed to issue, and issued, a total of 22,337,924 of its Class A common shares to the Buyers at a price of US$6.00 per Class A common share (equivalent to US$12.00 per ADS), resulting in gross proceeds of approximately US$134 million from the private placement transaction. Under the terms of the securities purchase agreements, the Class A common shares were issued in two tranches: (a) a first tranche of 11,437,924 Class A common shares, which were issued on May 22, 2015, and (b) a second tranche of 10,900,000 Class A common shares, which were issued on June 30, 2015. In addition, Ctrip and Crawford also entered into definitive agreements with the Buyers for the sale of 2,666,666 Class A common shares (including certain shares represented by ADSs) to the Buyers at a price per Class A common share of US$6.00 (equivalent to US$12.00 per ADS).

As of December 31, 2016 and 2017, significant balances with related parties were as follows:

	As of December 31,
	2016		2017
Due from a related party, current:
Receivables due from Ctrip		1,755,889		83,323,718
Due to a related party, current:
Payables due to Ctrip		16,083,610		210,833
Due to a related party, current:
Borrowing due to Ctrip		100,000,000		100,000,000

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2017

SUBSEQUENT EVENTS.

SUBSEQUENT EVENTS

22. SUBSEQUENT EVENTS

On April 6, 2018, the Company has entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Teamsport Parent Limited ("Parent") and its merger sub, that Parent will acquire the Company for US$13.50 in cash per each ADS. Immediately following the consummation of the privatisation, Parent will be beneficially owned by the Consortium, comprising new investors, including certain affiliates of MBK Partners Fund IV, L.P., Baring Private Equity Asia Limited and Redstone Capital Management (Cayman) Limited, and certain existing shareholders of the Company, including Mr. Zhang, The Crawford Group, Inc. ("Crawford") and Dongfeng Asset Management Co. Ltd etc.

On April 13, 2018, Ctrip, one of the Company’s registered shareholders, filed a petition in the Grand Court of The Cayman Islands (the “Court”) seeking alternative relief, including, among other things, requesting that the Court to enjoin the Company from relying upon the resolutions adopted on April 6, 2018 and April 10, 2018, respectively, in connection with the approval of Merger Agreement and requesting that the board and the special committee of the Company review another preliminary non-binding offer from Ocean Link Partners Limited, a private equity firm, for the purchase of all of the outstanding shares of the Company (including shares represented by ADSs) for US$14.50 in cash per ADS or US$7.25 in cash per share. The Company believes Ctrip’s allegations and the basis for which it is seeking relief in its petition are without merit and intends to vigorously refute the petition.

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RESTRICTED NET ASSETS

12 Months Ended

Dec. 31, 2017

RESTRICTED NET ASSETS.

RESTRICTED NET ASSETS

23. RESTRICTED NET ASSETS

Pursuant to laws applicable to entities incorporated in the PRC, the Company’s subsidiaries and VIEs in the PRC are required to make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires an annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulated amount of such reserve fund reaches 50% of a company’s registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of enterprise expansion and staff bonus and welfare and are not distributable as cash dividends.

As the Company’s PRC subsidiaries and VIEs have accumulative losses, they have not started to contribute to the staff welfare and bonus funds. In addition, due to restrictions on the distribution of share capital from the Company’s PRC subsidiaries, up to the amount of net assets held in each subsidiary and VIE, and also as a result of these entities’ unreserved accumulated losses. Total restricted net assets of the Company were RMB3,482,551,773 or 82.8% of the Company’s total consolidated net assets as of December 31, 2017.

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

12 Months Ended

Dec. 31, 2017

CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

24. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company.

The subsidiaries did not pay any dividends to the Company for the years presented. For the purpose of presenting parent company only financial information, the Company records its investments in its subsidiaries under the equity method of accounting. Such investments are presented on the separate condensed balance sheets of the Company as “Investments (deficit) in subsidiaries and VIEs” and the loss of the subsidiaries and VIEs is presented as “share of loss of subsidiaries and VIEs”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote disclosures contain supplemental information relating to the operations of the Company, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company.

The Company did not have significant capital and other commitments, long-term obligations except for the 2018 Senior Notes, US$150 million syndicated loan, and/or the 2022 Senior Notes (Note 10), other long-term debt, or guarantees as of December 31, 2016 and 2017.

BALANCE SHEETS

	As of December 31,
	2016		2017
	RMB		RMB		US$ (Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents		4,271		4,023		618
Restricted cash		10,733,202		—		—
Amounts due from subsidiaries		6,717,714,285		7,959,314,970		1,223,324,312
Prepaid expenses and other current assets		4,208,266		3,609,637		554,791
Total current assets		6,732,660,024		7,962,928,630		1,223,879,721
Investments in subsidiaries and VIEs		—		192,995,609		29,662,882
Total assets		6,732,660,024		8,155,924,239		1,253,542,603
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt		—		1,292,029,030		198,581,226
Accrued expenses and other current liabilities		8,678,123		78,150,364		12,011,491
Income tax payable		4,169,661		16,773,553		2,578,048
Total current liabilities		12,847,784		1,386,952,947		213,170,765
Long-term debt		2,366,903,154		2,562,424,523		393,837,438
Deficits in subsidiaries and VIEs		361,779,545		—		—
Total liabilities		2,741,530,483		3,949,377,470		607,008,203
Shareholders’ equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized, 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively		878,463		878,663		135,048
Additional paid-in capital		4,474,702,198		4,489,246,326		689,984,527
Accumulated other comprehensive income		43,201,465		121,858,122		18,729,250
Accumulated deficit		(527,652,585)		(405,436,342)		(62,314,425)
Total shareholders’ equity		3,991,129,541		4,206,546,769		646,534,400
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		6,732,660,024		8,155,924,239		1,253,542,603

STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Operating expenses:
General and administrative expenses		(21,426,624)		(25,424,596)		(31,013,301)		(4,766,657)
Loss from operations		(21,426,624)		(25,424,596)		(31,013,301)		(4,766,657)
Interest income:
Third party		—		3,537,155		760		117
Subsidiaries		—		41,696,607		184,327,276		28,330,583
Total interest income		—		45,233,762		184,328,036		28,330,700
Interest expense		(6,905,640)		(128,065,737)		(216,816,430)		(33,324,075)
Early extinguishment of debt costs		—		—		(19,976,776)		(3,070,374)
Gain from sale of cost method investment		803,059,728		—		—		—
Share of gain of subsidiaries and VIEs		(2,227,088)		147,442,803		222,850,964		34,251,566
Other income		9,917,716		—		—		—
Income before income taxes		782,418,092		39,186,232		139,372,493		21,421,160
Provision for income taxes		(86,079,287)		(6,051,116)		(17,156,250)		(2,636,867)
Net income		696,338,805		33,135,116		122,216,243		18,784,293
Net income		696,338,805		33,135,116		122,216,243		18,784,293
Changes in cumulative foreign currency translation adjustment, net of tax of nil		73,410,193		(31,353,357)		78,656,657		12,089,307
Comprehensive income		769,748,998		1,781,759		200,872,900		30,873,600

STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Net cash provided by operating activities		—		—		—		—
Net cash used in investing activities		—		—		—		—
Net cash used in financing activities:		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents		230		273		(248)		(38)
Net increase (decrease) in cash and cash equivalents		230		273		(248)		(38)
Cash and cash equivalents-beginning of year		3,768		3,998		4,271		656
Cash and cash equivalents-end of year		3,998		4,271		4,023		618
Supplemental disclosure for cash flow information:
Cash paid for interest		—		—		—		—
Cash paid for income taxes		—		—		—		—

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Supplemental disclosure of non-cash investing and financing activities:
Payment for IPO issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		(20,656,597)		—		—		—
Proceeds from issuance of Class A common shares in private placement, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		792,860,341		—		—		—
Proceeds from exercise of share options (cash received by a subsidiary of the Company on behalf of the Company)		4,891,204		25,431,373		955,485		146,855
Proceeds of issuance of the 2018 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		1,241,289,905		—		—		—
Repayment of syndicated loan(cash paid by a subsidiary of the Company on behalf of the Company)		—		—		(1,000,335,000)		(153,748,674)
Proceeds of issuance of the 2022 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—		—		2,611,624,352		401,399,313
Payment for Senior Notes issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		—		(2,740,945)		—		—
Proceeds of US$150 million syndicated loan, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—		957,158,701		—		—
Proceeds from sale of cost method investment, net of related transaction costs (cash received by a subsidiary of the Company on behalf of the Company)		954,428,056		—		—		—
Payment of professional fees for aborted offerings (cash paid by a subsidiary of the Company on behalf of the Company)		—		—		(1,748,969)		(268,812)
Accrued professional fees for issuance of Senior Notes		2,740,945		—		—		—
Accrued professional fees for aborted offering		—		—		2,174,451		334,207
Subscription receivables related to share option exercise		197,816		—		—		—

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

(a) Basis of presentation

The consolidated financial statements of the Company, its subsidiaries and VIEs are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The Company had negative working capital of RMB 363,137,042 at December 31, 2017 primarily due to the maturity of the 2018 Senior Notes in December 2018. The management believes that the Company's current cash position as of December 31, 2017, the cash expected to be generated through the disposal of the Company's vehicles subject to repurchase programs (note 2(l)), operations and funds available from borrowings under the bank facilities will be sufficient to meet the Company’s working capital and capital expenditure for at least the next twelve months from the date these financial statements were issued. As such, these financial statements are prepared under the going concern assumption which contemplates the realisation of assets and the liquidation of liabilities in the ordinary course of  business.

Principles of consolidation

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the VIEs for which the Company is the ultimate primary beneficiary. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.

A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity. The VIEs for which the Company is the ultimate primary beneficiary, eHi Information and eHi Car Sharing, have insignificant operations; related balances and transactions are immaterial for all periods presented.

All transactions and balances among the Company, its subsidiaries, and the VIEs have been eliminated in consolidation.

Use of estimates

(c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from such estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include the allowance for doubtful accounts, costs related to customer loyalty programs, useful lives of vehicles and other tangible or intangible assets, residual values of vehicles, impairment of intangibles and long-lived assets, certain accruals or contingent liabilities, valuation allowances for deferred tax assets, provisions for uncertain tax positions, valuation of share-based awards and forfeiture rates.

Foreign currency and foreign currency translation

(d)

Foreign currency and foreign currency translation

The Company uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated outside of the PRC is the United States dollar (“US$”), while the functional currency of the PRC entities is RMB as determined based on the criteria of ASC 830, Foreign Currency Matters.

Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the consolidated statements of comprehensive income as general and administrative expenses. Transaction gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature are treated in the same manner as translation adjustments and included in cumulative translation adjustments, which is a separate component of shareholders’ equity in the consolidated financial statements.

Assets and liabilities of the Company and its subsidiaries incorporated outside of the PRC are translated into RMB at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity. The rates of exchange for the U.S. dollar used for translation purposes were RMB6.9370 on December 31, 2016 and RMB6.5342 on December 31, 2017. The average rates of exchange for the U.S. dollar used for translation purposes were RMB6.2284, RMB6.6401, and RMB6.7547 for 2015, 2016, and 2017, respectively.

The unaudited United States dollar (“US$”) amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader. Unless the amounts were from transactions originally denominated in U.S. dollars or otherwise noted, all translations from RMB into U.S. dollars and from U.S. dollars to RMB for the convenience of the reader were calculated at the rate of US$1.00 = RMB6.5063 on December 31, 2017, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

Concentration of credit risk

(e) Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company deposits its cash and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that no significant credit risk exists as these banks are major financial institutions with high credit quality.

When providing services, the Company generally requires individual customers to make advance payments, or a deposit from the corporate and institutional clients before services are rendered. Accounts receivable primarily represents those receivables derived in the ordinary course of business in relation to corporate and institutional clients. The Company offers payment terms in the range of 5 — 120 days to the corporate and institutional clients. Substantially all revenue was derived from customers located in China.

Except for Ctrip (Note 21), no single customer accounted for more than 10% of the Company’s consolidated accounts receivable as of December 31, 2016 and 2017, or for more than 10% of the Company’s consolidated net revenues in any of the periods presented. 

Cash and cash equivalents

(f) Cash and cash equivalents

Cash and cash equivalents consist of cash in banks, which are unrestricted as to withdrawal or use.

Restricted cash

(g) Restricted cash

Restricted cash includes cash and cash equivalents that are not readily available for the Company’s normal disbursements. Restricted cash and cash equivalents are primarily related to cash deposits with banks and financial institutions required as part of the Company’s short-term borrowing arrangements (Note 9).

Investments

(h) Investments

The Company’s investments include cost method investments and held to maturity investments.

We use the cost method of accounting for equity investments that are not considered debt securities or equity securities that have readily determinable fair values and over which we have neither significant influence nor control through investments in common stock or in-substance common stock. Under the cost method, we carry the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee’s post-acquisition profits. The investments that we intend and are able to hold to maturity are classified as held-to-maturity investments and are stated at amortized cost. We monitor our investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information.

Accounts receivable, net of allowance for doubtful accounts

(i)

Accounts receivable, net of allowance for doubtful accounts

Accounts receivable mainly consist of amounts due from the Company’s corporate and institutional clients, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Company performs ongoing credit evaluation of its customers, and assesses the allowance for doubtful accounts based upon expected collection ability based on the age of the receivables and factors surrounding the credit risk of specific customers.

Short term loan receivable

(j) Short term loan receivable

Short-term loan receivables consist of loans extended to third-parties and are recorded at amortized cost. The Company records interest on an accrual basis and recognizes it in "Interest income" as earned in accordance with the contractual terms of the loan agreement, to the extent that such amounts are expected to be collected.

Vehicles held for sale

(k) Vehicles held for sale

Vehicles held for sale consist of used vehicles subject to signed sales agreements awaiting completion of title transfer. When a vehicle is reclassified as held for sale and transferred from property, plant and equipment, it is not further depreciated and is stated at lower of cost and net realizable value. Cost is the net book value upon the reclassification of the vehicle. Net realizable value is the selling price in accordance with the sales agreement less the estimated costs to be incurred upon the completion of title transfer. As of December 31, 2017, the vehicles reclassified as held for sale are expected to complete title transfer within one year.

Property and equipment, net

(l) Property and equipment, net

Property and equipment is stated at cost, less accumulated depreciation and impairment. Initial cost is comprised of the purchase price, plus any costs directly attributable to bringing the property and equipment to the location and condition necessary for its intended use. Depreciation of property and equipment is calculated on a straight-line basis, after consideration of expected useful lives and estimated residual values. The Company begins depreciating vehicles when they are ready for their intended use. The estimated useful lives of these assets are generally as follows:

Category	Estimated useful lives
Vehicles	1-4 years
In-car equipment	3 years
Office furniture and equipment	5 years
Software	3 - 5 years
Building	39 years
Leasehold improvements	Over the shorter of the lease term or the estimated useful life - 1-5 years

Construction in progress represents offices under construction and newly acquired vehicles which are not yet been placed in service. Construction in progress is transferred to property and equipment and depreciation commences when an asset is ready for its intended use.

Vehicles

A vehicle is considered ready for its intended use generally when the license plate for the vehicle is obtained, the vehicle is insured, and when a GPS tracking device is installed. Expenditures for repairs and maintenance of vehicles are expensed as incurred. The Company expects to hold its vehicles generally for a period of approximately three to four years before their disposal, except for vehicles subject to repurchase programs, which have a holding period that typically ranges from 12 to 24 months. The estimated residual value of vehicles which are not subject to the repurchase programs are typically based on the current market price for used vehicles obtained from used vehicle dealers or the used car market for similar models.

The Company monitors accounting estimates relating to vehicles on a quarterly basis, including the depreciation rates and estimated residual values. Changes made to estimates are reflected in vehicle-related depreciation expense on a prospective basis. In addition, depreciation expense associated with vehicles subject to repurchase programs is recorded based on the contractual repurchase prices and holding periods, and is adjusted if the repurchase conditions are not met. When a vehicle is reclassified as held for sale, it is not further depreciated and is accounted for as held for sale. Gain or loss on disposed vehicles or loss on vehicles held for sale is recognized as an adjustment to depreciation expense as part of cost of revenues. The Company recorded a net loss of RMB5,055,620, a net gain of RMB1,848,313 and a net gain of RMB24,241,209 on disposals of vehicles set off by loss from reclassification of vehicles held-for-sale from property and equipment for the years ended December 31, 2015, 2016 and 2017, respectively. The Company fully writes off the net carrying value of a vehicle if the vehicle cannot be tracked via the installed GPS system for more than six months and cannot be otherwise located, as the Company believes that the chance of recovering the vehicle in such circumstances is remote, such losses are recorded as part of cost of revenues.

Intangible assets

(m) Intangible assets

Intangible assets are substantially comprised of car rental operating licenses and vehicle license plates acquired from third parties and local administration authorities. Gross carrying value totaled RMB64,101,470 and RMB66,505,752 as of December 31, 2016 and 2017, respectively.

The car rental operating licenses are originally assigned a fixed operating period, which can be extended upon expiration without significant additional cost. The Company also believes that there is no significant risk involved in the car rental operating license renewal process. Further, there are no legal, regulatory, or contractual provisions of which the Company is aware that may limit the useful life of such licenses. As such, the Company considers such car rental operating licenses to be indefinite-lived and carries them at cost less any subsequent impairment losses. Vehicle license plates do not expire and require no renewal. Therefore, they are similarly considered to be indefinite-lived and are carried at cost less any subsequent accumulated impairment losses. 

Impairment of intangible assets and long-lived assets

(n) Impairment of intangible assets and long-lived assets

The Company evaluates intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. For long-lived assets, when these events occur, the Company evaluates impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition.  For indefinite lived assets, the impairment test consists of a comparison of the fair value with carrying value. If the carrying value of an intangible asset exceeds its fair value, which is generally determined using the income approach, market approach, or a combination thereof, an impairment loss is recognized. No impairment charges were recognized for the years ended December 31, 2015, 2016, and 2017.

Deposits and advances from customers

(o)

Deposits and advances from customers

Customer deposits:

The Company collects deposits from corporate and institutional clients upon entering into negotiated contracts, and such amount is refundable at the end of the contract period provided no contract violations are noted. For individual customers, the Company collects additional amounts from them upon return of the rental vehicle based on the estimated repair and other relevant costs. In situations where the contract is violated or damage is caused to the vehicle, customer deposits received are used to offset expenses incurred in the period such incidents occur, and the excess amount is returned to customers. The customer deposits are classified as accrued expenses and other current liabilities on the consolidated balance sheets. The Company records a loss in the consolidated statements of comprehensive income if expenses incurred for repair exceed customer deposit amounts.

Advances from customers:

Individual customers pay in advance prior to the rental vehicle pick-up. Payments received from customers are initially recorded as advances from customers and are recognized as revenues when revenue recognition criteria are met.

Revenue recognition

(p)

Revenue recognition

Revenue from car rentals and car services are generally recognized over the rental period. Revenue from the sale of gasoline is recognized when the vehicle is returned and is based on the actual volume of gasoline consumed or a contracted fee paid by the customer. For car rentals, payments are generally collected from customers in advance, and are recorded as advances from customers in the consolidated balance sheets until the revenue recognition criteria are met. Customers who purchase car services are generally on credit terms, and the initial credit evaluation is conducted before credit is extended. Revenue is recognized when collectability is reasonably assured and all other revenue recognition criteria are met.

Occasionally, the Company engages contracted service providers in offering car services to its customers where the Company currently does not provide such services in certain cities or such services exceed the Company’s existing capacity. The end customers sign service contracts directly with the Company in such arrangements and the Company is the party responsible for customers’ acceptance for services rendered. In case of customer disputes, the Company resolves customer complaints and is solely responsible for refunding customers their payments. Therefore, the Company is considered the primary obligor in transactions involving the use of contracted service providers. The Company also determines the service fee and bears the credit risk. As a result, the Company recognizes revenue under contracted service provider arrangements on a gross basis.

In the accompanying consolidated statements of comprehensive income, revenue is presented net of business tax, VAT and other related surcharges. Costs of revenue associated with car rentals and car services have not been presented separately as the Company cannot reasonably and reliably estimate and allocate expenses to each of the revenue streams.

Lease Obligations

(q)

Lease Obligations

In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property's estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The capitalized lease obligation reflects the present value of future rental payments, discounted at the appropriate interest rates. The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized as set out under the property and equipment section of this note.

Operating lease expenses are recognized on a straight-line basis over the applicable lease term.

Net investment in direct financing leases

(r)

Net investment in direct financing leases

For leases where the Company is the lessor, a transaction is accounted for as a direct financing lease if the transaction satisfies one of the four capital lease conditions as discussed under the capital lease obligations in note 2(q), the collectability of the minimum lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the Company under the lease.

The net investment in the direct financing leases consists of the minimum lease payments, net of executory costs and profits thereon, unguaranteed residual value, accruing to the benefit of the Company and initial direct costs less unearned income. Over the period of a lease, each lease payment received is allocated between the repayment of the net investment in the lease and financing lease income based on the effective interest method so as to produce a constant rate of return on the balance of the net investment in the lease. The net investment in the direct financing leases is classified as current or non-current assets in the balance sheets based on the duration of the remaining lease terms.

The Company records revenue attributable to direct financing leases so as to produce a constant rate of return on the balance of the net investment in the lease. Total direct financing leases revenues were RMB7,197,316, RMB10,140,216 and RMB3,875,346 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in car rental revenues in the consolidated statements of comprehensive income .

Customer loyalty program

(s) Customer loyalty program

The Company has a customer loyalty program where registered members earn points upon eligible purchases and such points can be redeemed for free rental periods, mileage upgrades, and other free gifts.  The Company estimates the incremental costs associated with the Company’s future obligation to its customers, and records them as selling and marketing expense in the consolidated statements of comprehensive income. Unredeemed membership points are recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company adjusts the liability associated with the customer loyalty program based on the Company’s estimate of future redemption of membership points prior to their expiration, which is three calendar years from the day the membership points are awarded. As of December 31, 2016 and 2017, the accrued liabilities associated with the customer loyalty program were RMB7,185,774 and RMB9,048,815, respectively.

Advertising costs

(t)

Advertising costs

The Company expenses advertising costs as incurred. Total advertising expenses were RMB28,946,698, RMB38,968,240 and RMB89,925,181 for the years ended December 31, 2015, 2016 and 2017, respectively, and were recorded in selling and marketing expenses in the consolidated statements of comprehensive income.

Taxation

(u) Taxation

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and tax credits, if any. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period of the enactment of the change. The Company has adopted ASU 2015-17 prospectively since January 1, 2017, deferred tax assets and liabilities are classified as non-current on the consolidated balance sheet.

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected for a company operating in the car rental industry.

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

Government grants and subsidy income

(v) Government grants and subsidy income

The Company receives government grants and subsidies in the PRC from various levels of local governments from time to time which are granted for general corporate purposes and to support its ongoing operations in the regions. These government subsidies are recorded as other operating income in the consolidated statement of comprehensive income in the period cash is received. For government grants that contain certain operating conditions, the amounts are recorded as liabilities when received, and are recognized in the consolidated statements of comprehensive income as a reduction of the related costs for which the grants are intended to compensate when the conditions are met. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the consolidated statements of comprehensive income as reductions to depreciation expense on a straight-line basis over the expected lives of the related assets.

Fair value measurements

(w) Fair value measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value include:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, short-term loans receivable, accounts payable, advances from customers, certain accrued expenses and other current liabilities, and short-term and long-term debt. The carrying amounts of short-term financial instruments, excluding short-term debt, approximate their fair values due to the short-term maturity of these instruments. The carrying amounts of short-term debt as of December 31, 2016 and December 31, 2017 approximate their fair values as the interest rates they bear reflected the current quoted market yield for comparable debt (Level 2 inputs). The fair value of long-term borrowings is estimated based on quoted market rates as well as borrowing rates currently available for borrowings with a similar term, and the fair value of 2018 Senior Notes and 2022 Senior Notes are estimated based on the average of the bid and ask price as of December 31, 2016 and December 31, 2017 (Level 2 inputs). The fair values of long-term debts including long-term borrowings, 2018 Senior Notes and 2022 Senior Notes were RMB3,214,860,166 and RMB4,770,908,702 as of December 31, 2016 and 2017, as follows:

	As of December 31, 2016				As of December 31, 2017
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
Long-term borrowings, including current portion		1,747,583,173		1,755,993,820		831,202,361		833,969,309
2018 Senior Notes		1,387,400,000		1,458,866,346		1,306,840,000		1,332,252,796
2022 Senior Notes		-		-		2,613,680,000		2,604,686,597
Total long-term debt		3,134,983,173		3,214,860,166		4,751,722,361		4,770,908,702

Vehicle purchase deposits

(x)

Vehicle purchase deposits

The Company purchases vehicles through car dealers and makes advance payments in the ordinary course of business before title of vehicles are physically transferred to the Company. As the advance payments will be converted into property and equipment, which is a non-current asset, vehicle purchase deposits are accordingly classified as non-current assets on the consolidated balance sheets.

Share-based compensation

(y)

Share-based compensation

The Company recognizes share-based compensation based on the grant date fair value of equity awards, with compensation expense, net of a forfeiture rate, recognized over the period in which the grantee is required to provide services to the Company in exchange for the equity award. Share-based compensation expense is recognized (i) immediately at the grant date for awards with no vesting conditions or (ii) using the straight-line method for awards with graded vesting features and service conditions only. Share-based compensation expense is classified in the consolidated statements of comprehensive income based upon the job function of the grantee. For the years ended December 31, 2015, 2016 and 2017, the Company recognized share-based compensation expense of RMB13,983,246, RMB16,040,947 and RMB13,588,843, respectively, as follows:

	For the years ended December 31,
	2015		2016		2017
Cost of revenues		361,951		839,543		843,761
Selling and marketing expenses		894,680		401,498		336,139
General and administrative expenses		12,726,615		14,799,906		12,408,943
Total		13,983,246		16,040,947		13,588,843

Debt issuance costs and debt discounts

(z) Debt issuance costs and debt discounts

The Company incurs costs in connection with debt issuance, such as legal and accounting fees. Debt issuance costs and debt discounts are initially recorded as direct deduction from the associated debt liability, and are amortized to interest expense over the term of the respective debt using the effective interest method.

Earnings per share

(aa) Earnings per share

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between common shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method. Common equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.

Basic and diluted earnings per share are not reported separately for Class A or Class B common shares as each class of shares has the same rights to undistributed and distributed earnings.

Segment reporting

(ab) Segment reporting

In accordance with ASC 280, Segment Reporting, the Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and substantially all of the Company’s revenues are derived from within the PRC. Therefore, no geographical segments are presented.

Business Combinations

(ac) Business Combinations

In accordance with ASC 805, Business Combinations, in business combinations not involving entities or businesses under common control, the Company measured the cost of an acquisition as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred and equity instruments issued. The transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of comprehensive income.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to forecast the future cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Although management believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

A non-controlling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Company. Consolidated net income on the consolidated statements of comprehensive income includes the net income attributable to non-controlling interests when applicable. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s consolidated balance sheets. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows when applicable.

Recently issued accounting standards

(ad) Recently issued accounting standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers," or ASU 2014-09. This update contains new accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for the Company’s fiscal year beginning January 1, 2018, which reflects a one year deferral approved by the FASB in July 2015, with early application permitted provided that the effective date is not earlier than the original effective date (which would be the Company’s fiscal year beginning January 1, 2017). In March 2016, the FASB issued an amendment (ASU 2016-08) to the new revenue recognition guidance clarifying how to determine if an entity is a principal or agent in a transaction. In April (ASU 2016-10), May (ASU 2016-12), and December (ASU 2016-20) of 2016, the FASB further amended the guidance to include performance obligation identification, licensing implementation, collectability assessment and other presentation and transition clarifications. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2014-09 becomes effective for the Company on January 1, 2018. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company is currently in the process of analyzing each of its revenue streams and anticipates that the adoption of ASU 2014-09 will not have significant impact on its financial statements and related disclosures.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Group has adopted ASU 2015-17 in 2017 using the prospective method and all deferred taxes have been classified as noncurrent in the balance sheet as of December 31, 2017.

In February 2016, the FASB issued ASU 2016-02, “Leases”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The updated guidance also expands the required quantitative and qualitative disclosures surrounding leases. Additionally, ASU 2016-02 aligns key aspects of lessor accounting with the new revenue recognition guidance in ASU 2014-09, “Revenue from Contracts with Customers” (see above). Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance also expands the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases. For lessors, the guidance modifies classification criteria and accounting for sales-type and direct financing leases and requires a lessor to derecognize the carrying value of the leased asset that is considered to have been transferred to a lessee and record a lease receivable and residual asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted; hence, it applies to the Company beginning with calendar 2019. A modified retrospective transition approach is required for both lessees and lessors for existing leases at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard would provide a practical expedient for lessors to combine nonlease components with the related lease components if certain conditions are met. This could allow the Company to account for all revenue earned from the operations of rental vehicles and from other forms of rental related activities under the new lease guidance. The Company is in the process of evaluating the impact of the adoption of this update on its consolidated financial statements and related disclosures, and expects the guidance will affect its accounting for certain contracts.

In March 2016, the FASB issued an ASU 2016-09 “Improvements to Employee Share-based Payment Accounting”, which amends ASC Topic 718, Compensation — Stock Compensation. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Group has adopted the standard in 2017 and the impact of adopting this pronouncement was not material to the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses. ASU 2016-13 also changes how entities measure credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, and early adoption is permitted for periods beginning after December 15, 2018. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements and associated disclosures.

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): “Classification of Certain Cash Receipts and Cash Payments”. The standard is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities. The Company is in the process of evaluating the impact of this guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash”. The standard addresses the diversity in practice that exists in the classification and presentation of changes in restricted cash and requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In November, 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), “Statement of Cash Flows”, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The ASU is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2016-18 on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. The ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of ASU 2017-01 and anticipates the adoption had no material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifies Goodwill Impairment Test” (“ASU 2017-04”), which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of the second step of the goodwill impairment test. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.” The ASU is effective prospectively for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of ASU 2017-04 on its consolidated financial statements.

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ORGANIZATION AND DESCRIPTION OF BUSINESS (Tables)

12 Months Ended

Dec. 31, 2017

ORGANIZATION AND DESCRIPTION OF BUSINESS

Schedule of company's principal subsidiaries

On August 3, 2007, eHi Car Services Limited (the “Company”), formerly known as Prudent Choice Limited or eHi Auto Services Limited, was incorporated in the Cayman Islands by Ray Ruiping Zhang (the “Founder”). The Company, through its subsidiaries, provides car rentals and car services to corporate and individual customers in the People’s Republic of China (“PRC”). The Company and its subsidiaries began offering services in 2006 through Shanghai eHi Business Co., Ltd. (“eHi Business”), which was incorporated on January 11, 2006. The Company’s business initially focused on providing car services to premium corporate and institutional clients. In May 2008, the Company began to provide car rentals to individual customers.

To further expand the Company’s internet and mobile services, the Company entered into a series of contractual arrangements in March 2014 with its PRC-incorporated variable interest entity (“VIE”) Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”) and its shareholders. eHi Information obtained a telecommunication business operating license (“ICP license”) from the relevant telecommunication authorities on September 24, 2014. eHi Information currently does not have any material operations.

In January 2015, the Company entered into a series of contractual arrangements with its PRC-incorporated VIE Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”) and its shareholders. eHi Car Sharing is currently testing its new business initiative as an online platform for peer-to-peer car rental between private vehicle owners and individual customers. eHi Car Sharing is currently not yet in operation and the Company does not expect it to contribute a material portion of its net revenues and operations in the foreseeable future.

As of December 31, 2017, the Company and its principal subsidiaries and VIEs are as follows: 

	Percentage of ownership or indirect economic ownership	Date of incorporation/ acquisition	Place of incorporation
Parent company and offshore holding companies
eHi Car Services Limited (“Company”)	Parent	August 3, 2007	Caymans
eHi Auto Services (Hong Kong) Holding Limited (“eHi Hong Kong”)	100%	September 24, 2010	Hong Kong
L&L Financial Leasing Holding Limited	100%	October 17, 2013	Hong Kong
Brave Passion Limited (“Brave Passion”)	100%	May 26, 2015	British Virgin Islands
Wholly owned subsidiaries
Shuzhi Information Technology (Shanghai) Co., Ltd. (“Shuzhi”)	100%	March 21, 2008	PRC
Shanghai eHi Car Rental Co., Ltd. (“eHi Rental”)	100%	March 10, 2008	PRC
Beijing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 20, 2008	PRC
Chongqing eHi Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	December 5, 2009	PRC
Shanghai Smart Brand Auto Driving Services Co., Ltd (“Shanghai Smart Brand,” subsidiary of Shuzhi)	100%	April 13, 2011	PRC
eHi Auto Services (Jiangsu) Co., Ltd. (subsidiary of eHi Hong Kong)	100%	December 23, 2011	PRC
Shanghai eHi Chengshan Car Rental Co., Ltd. (subsidiary of eHi Rental)	100%	August 16, 2012	PRC
Shanghai Taihan Trading Co., Ltd.	100%	November 10, 2013	PRC
Shanghai Taihao Financial Leasing Co., Ltd.	100%	January 7, 2014	PRC
Shanghai Taide Financial Leasing Co., Ltd.	100%	June 23, 2014	PRC
eHi Car Rental Management Services (Shanghai) Co., Ltd (subsidiary of eHi Rental)	100%	November 10, 2015	PRC
Consolidated variable interest entities (“VIEs”)
Shanghai eHi Information Technology Service Co., Ltd. (“eHi Information”)	100%	March 13, 2014	PRC
Shanghai eHi Car Sharing Information Technology Co., Ltd. (“eHi Car Sharing”)	100%	January 12, 2015	PRC

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of estimated useful lives of property and equipment

Category	Estimated useful lives
Vehicles	1-4 years
In-car equipment	3 years
Office furniture and equipment	5 years
Software	3 - 5 years
Building	39 years
Leasehold improvements	Over the shorter of the lease term or the estimated useful life - 1-5 years

Schedule of the fair value of financial instruments

	As of December 31, 2016				As of December 31, 2017
	Nominal Unpaid Principal Balance		Aggregate Fair Value		Nominal Unpaid Principal Balance		Aggregate Fair Value
Long-term borrowings, including current portion		1,747,583,173		1,755,993,820		831,202,361		833,969,309
2018 Senior Notes		1,387,400,000		1,458,866,346		1,306,840,000		1,332,252,796
2022 Senior Notes		-		-		2,613,680,000		2,604,686,597
Total long-term debt		3,134,983,173		3,214,860,166		4,751,722,361		4,770,908,702

Schedule of share-based compensation expense

	For the years ended December 31,
	2015		2016		2017
Cost of revenues		361,951		839,543		843,761
Selling and marketing expenses		894,680		401,498		336,139
General and administrative expenses		12,726,615		14,799,906		12,408,943
Total		13,983,246		16,040,947		13,588,843

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BUSINESS COMBINATIONS (Tables)

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

	RMB
Net assets		45,374
Identifiable intangible assets —vehicles plates		4,246,166
Deferred tax liabilities		(1,061,542)
Total		3,229,998

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Tables)

12 Months Ended

Dec. 31, 2017

ALLOWANCE FOR DOUBTFUL ACCOUNTS.

Schedule of movement of the allowance for doubtful accounts receivable

	For the years ended December 31,
	2015		2016		2017
Balance, beginning of the year		5,969,648		7,611,244		9,159,321
Provision for doubtful accounts		1,641,596		1,548,077		5,288,403
Balance, end of the year		7,611,244		9,159,321		14,447,724

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2017

PREPAID EXPENSES AND OTHER CURRENT ASSETS.

Schedule of prepaid expenses and other current assets

	As of December 31,
	2016		2017
Value-added taxes deductible		311,501,214		774,435,385
Receivables from disposal of vehicles		127,915,314		350,629,000
Prepaid insurance expense		115,498,191		197,256,868
Staff advances		18,060,202		36,404,467
Brand Marketing Prepayments		-		30,700,380
Prepaid gasoline and repair supplies		17,481,886		26,685,176
Prepaid rental expenses		13,964,546		17,309,920
Rental deposits		11,137,408		16,301,592
Net investment in direct financing leases, current portion		63,999,571		10,226,920
Others		48,229,013		45,907,304
Total		727,787,345		1,505,857,012

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PROPERTY AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2017

PROPERTY AND EQUIPMENT, NET

Schedule of property and equipment, net

	As of December 31,
	2016		2017
Vehicles		5,926,576,864		7,775,410,903
In-car equipment		37,670,565		52,443,083
Building		55,587,304		55,587,304
Leasehold improvements		32,752,237		44,056,477
Software		12,211,763		14,051,492
Office furniture and equipment		33,463,933		44,782,752
Property and equipment subject to depreciation		6,098,262,666		7,986,332,011
Less: accumulated depreciation		(1,127,934,340)		(1,358,334,657)
Subtotal		4,970,328,326		6,627,997,354
Construction in progress		753,240,849		429,047,963
Property and equipment, net		5,723,569,175		7,057,045,317

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SHORT-TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2017

SHORT-TERM DEBT

Schedule of Debt, Current

	As of December 31,
	2016		2017
Short-term borrowings		620,105,995		928,846,417
Long-term borrowings, current portion (Note 10)		306,113,338		1,728,599,440
Total		926,219,333		2,657,445,857

Schedule of short-term borrowings

	As of December 31,
	2016		2017
Notes payable		363,983,800		253,259,200
Short-term bank borrowings guaranteed by the Founder and his spouse		75,000,000		-
Short-term bank borrowings		181,122,195		675,587,217
Total short-term bank borrowings		620,105,995		928,846,417

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LONG-TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2017

LONG-TERM DEBT

Schedule of long-term borrowings, including current portion

	As of December 31,
	2016		2017
Long-term borrowings collateralized by vehicles		292,605,866		213,703,954
Long-term bank borrowings collateralized by receivables		189,427,307		40,995,042
Entrusted long-term borrowing from a related party		100,000,000		100,000,000
Long-term borrowings from banks or financing companies		125,000,000		476,503,365
Syndicated loan		1,010,689,797		-
2018 Senior Notes		1,356,213,357		1,292,029,030
2022 Senior Notes		-		2,562,424,523
Subtotal		3,073,936,327		4,685,655,914
Less: Current portion of long-term debt		(306,113,338)		(1,728,599,440)
Total long-term debt		2,767,822,989		2,957,056,474

Schedule of future principle maturities of long-term debt

Years Ended December 31,	Amount (RMB)
2018		1,743,425,515
2019		238,098,275
2020		156,518,571
2022		2,613,680,000
Total		4,751,722,361

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ACCOUNTS PAYABLE (Tables)

12 Months Ended

Dec. 31, 2017

ACCOUNTS PAYABLE

Schedule of accounts payable

	As of December 31,
	2016		2017
Payables for purchase of property and equipment		163,190,564		576,569,163
Others		16,687,283		41,300,848
Total		179,877,847		617,870,011

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2017

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities

	As of December 31,
	2016		2017
Advance from customers		68,397,492		105,716,286
Customer deposits		55,991,264		78,975,251
Accrued employee payroll and welfare		57,367,892		72,103,194
Interest accrued		8,530,203		63,982,199
Other tax payable		15,471,552		25,092,518
Provision for customer loyalty program		7,185,774		9,048,815
Accrued professional service fees		4,316,185		7,761,195
Accrued advertising and promotion expense		17,306,922		5,785,785
Payable for property related purchase		11,354,874		-
Others		22,569,229		65,421,499
Total		268,491,387		433,886,742

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TAXATION (Tables)

12 Months Ended

Dec. 31, 2017

TAXATION

Schedule of components of pre-tax income (loss)

	For the years ended December 31,
	2015		2016		2017
Pre-tax income from domestic (PRC) entities		5,669,944		248,923,620		261,743,051
Pre-tax income (loss) from foreign (non-PRC) entities		778,156,851		(209,177,533)		(92,151,762)
Total pre-tax income		783,826,795		39,746,087		169,591,289

Schedule of components of current and deferred portions of income tax expense included in the consolidated statements of operations and comprehensive income (loss)

	For the years ended December 31,
	2015		2016		2017
Current income tax expense
Domestic (PRC) entities		1,408,703		3,049,504		1,152,383
Foreign (non-PRC) entities		-		-		-
Total		1,408,703		3,049,504		1,152,383
Deferred income tax expense
Domestic (PRC) entities		-		(2,489,648)		29,066,413
Foreign (non-PRC) entities		-		-		-
Total		-		(2,489,648)		29,066,413
Income tax expense (excluding withholding tax)
Domestic (PRC) entities		1,408,703		559,855		30,218,796
Withholding tax
Foreign (non-PRC) entities		86,079,287		6,051,116		17,156,250
Total income tax expense		87,487,990		6,610,971		47,375,046

Reconciliation of the differences between statutory CIT rate and the effective tax rate

	For the Years Ended December 31,
	2015			2016			2017
Statutory income tax rate		25.0	%		25.0	%		25.0	%
Different tax rates in other jurisdictions		(26.0)	%		90.8	%		13.3	%
Withholding tax		10.6	%		15.2	%		10.1	%
Permanent differences		0.1	%		(17.1)	%		0.9	%
Change in valuation allowance		1.1	%		(97.5)	%		(21.2)	%
Tax holiday		—			0.2	%		(0.2)	%
Other		0.4	%		—			—
Effective tax rate		11.2	%		16.6	%		27.9	%

Schedule of significant components of deferred tax assets

	As of December 31,
	2016		2017*
Current*
Deferred tax assets:
Accrued payroll and other expenses		598,246		-
Allowance for doubtful accounts		2,289,830		-
Deferred government grant income		2,151,411		-
Others		11,950		-
Less: valuation allowance		(3,211,464)		-
Total current deferred tax assets, net		1,839,973		-
Non-current
Deferred tax assets:
Accrued payroll and other expenses		-		38,886,321
Allowance for doubtful accounts		-		3,611,931
Net operating loss carry forwards		55,724,899		40,279,987
Less: valuation allowance		(35,963,269)		(3,143,454)
Total non-current deferred tax assets, net		19,761,630		79,634,785
Deferred tax liabilities,
Temporary difference on property and equipment		19,111,955		90,793,841
Deferred revenue		-		15,417,709
Recognition of intangible assets arisen from business combination		1,061,542		1,061,542
Total non-current deferred tax liability		20,173,497		107,273,092

* The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

Classification Of Deferred Tax AssetsLiabilities ,Consolidated Balance Sheet

Classification in the consolidated balance sheets:

	As of December 31,
	2016		2017*
Current deferred tax assets, net*		1,839,973		-
Non-current deferred tax assets, net		649,675		-
Non-current deferred tax liability, net		1,061,542		27,638,307

* The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

Schedule of movement of valuation allowance

	2015		2016		2017
Balance at beginning of the year		89,697,127		89,738,490		39,174,733
Additions in current year		25,374,784		3,128,771		456,508
Reversals in current year		(25,210,766)		(53,692,038)		(36,482,572)
Expirations in current year		(122,655)		(490)		(5,215)
Balance at the end of the year		89,738,490		39,174,733		3,143,454

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OTHER INCOME, NET (Tables)

12 Months Ended

Dec. 31, 2017

OTHER INCOME (EXPENSE), NET

Schedule of other income (expense)

	For the Years Ended December 31,
	2015		2016		2017
American Depositary Receipt reimbursement		9,917,716		-		-
Tax refund		-		979,794		518,171
Others		287,559		464,335		1,438,848
Total		10,205,275		1,444,129		1,957,019

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2017

SHARE-BASED COMPENSATION

Schedule of Share-based Compensation, Activity

	Number of Options		Weighted Average Exercise Price (US$)		Weighted Average Contractual Term		Aggregate Intrinsic Value (US$)
Options outstanding at December 31, 2014		5,136,900		3.76		1.95		5,425,522
Exercised		(138,700)		2.20		—		—
Cancelled and forfeited		(98,200)		6.86		—		—
Options outstanding at December 31, 2015		4,900,000		3.74		1.59		13,356,070
Exercised		(1,726,874)		2.20		—		—
Cancelled and forfeited		(17,626)		6.97		—		—
Options outstanding at December 31, 2016		3,155,500		4.57		1.64		2,801,660
Cancelled and forfeited		(51,500)		7.00		—		—
Options outstanding at December 31, 2017		3,104,000		4.53		1.16		5,277,775
Vested and expected to vest at December 31, 2017		3,103,965		4.53		1.16		5,277,775
Exercisable at December 31, 2017		2,775,000		4.30		1.12		5,144,025

Schedule summarizes restricted shares activities

	Number of Restricted Shares		Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2015		337,500		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2015		225,000		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2016		112,500		6.99
Expected to vest at December 31, 2016		112,500		6.99
Vested		(112,500)		6.99
Unvested at December 31, 2017		-		-

2014 Plan

SHARE-BASED COMPENSATION

Schedule of Share-based Compensation, Activity

	Number of Options		Weighted Average Exercise Price (US$)		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (US$)		Weighted Average Grant-date Fair value (US$)
Options outstanding at January 1, 2015		—		—		—		—		—
Granted		525,000		5.35		—		—		2.86
Cancelled and forfeited		(16,000)		5.35		—		—		—
Options outstanding at December 31, 2015		509,000		5.35		9.38		481,005		—
Cancelled and forfeited		(8,000)		5.35		—		—		—
Options outstanding at December 31, 2016		501,000		5.35		8.38		—		—
Exercised		(27,000)		5.35		—		—		—
Cancelled and forfeited		(71,000)		5.35		—		—		—
Options outstanding at December 31, 2017		403,000		5.35		7.38		175,305		—
Vested and expected to vest at December 31, 2017		396,226		5.35		7.38		172,358		—
Exercisable at December 31, 2017		201,500		5.35		7.38		87,653		—

Significant assumptions used for estimating fair value of stock options

	For the Year Ended December 31, 2015
Risk-free rate		2.14	%
Option term		10 years
Volatility		55	%
Dividend yield		0.00	%
Exercise multiple		2/2.5
Expected forfeiture rate (post-vesting)		0%/10	%*

*0%/10% post-vesting forfeiture rate of which the executive level is 0% and the non-executive level is 10% was applied in the valuation model due to the executive position held by the grantee and represents the Company’s estimate of the grantees’ forfeiture pattern.

Schedule summarizes restricted shares activities

Unvested Restricted Share Units	Number of Restricted Share Units		Weighted Average Grant-date Fair Value (US$)
Unvested at January 1, 2017		-		-
Granted		6,000		5.11
Vested		(3,000)		5.11
Unvested at December 31, 2017		3,000		5.11
Expected to vest at December 31, 2017		2,502		5.11

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INCOME PER SHARE (Tables)

12 Months Ended

Dec. 31, 2017

INCOME(LOSS) PER SHARE

Schedule of computation of basic and diluted net income (loss) per share

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB
Numerator:
Net income :		696,338,805		33,135,116		122,216,243
Numerator for basic and diluted net income per share		696,338,805		33,135,116		122,216,243
Denominator:
Denominator for basic calculation-weighted average number of common shares outstanding		126,758,363		137,621,702		138,794,624
Dilutive effect of share options		1,593,216		897,122		758,702
Dilutive effect of restricted shares and restricted share units		52,298		33,207		40,591
Denominator for diluted income per share calculation		128,403,877		138,552,031		139,593,917
Basic net income per share attributable to the Company’s common shareholders		5.49		0.24		0.88
Diluted net income per share attributable to the Company’s common shareholders		5.42		0.24		0.88
Basic net income per ADS*		10.99		0.48		1.76
Diluted net income per ADS*		10.85		0.48		1.75

* Each ADS represents two Class A common shares.

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2017

COMMITMENTS AND CONTINGENCIES.

Schedule of future minimum lease payments

Year ending December 31,	(RMB)
2018		51,630,688
2019		27,830,356
2020		9,609,139
2021		6,110,999
2022		3,012,326
Thereafter		852,333
		99,045,841

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RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2017

RELATED PARTY TRANSACTIONS

Schedule of significant balances with related parties

	As of December 31,
	2016		2017
Due from a related party, current:
Receivables due from Ctrip		1,755,889		83,323,718
Due to a related party, current:
Payables due to Ctrip		16,083,610		210,833
Due to a related party, current:
Borrowing due to Ctrip		100,000,000		100,000,000

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Tables)

12 Months Ended

Dec. 31, 2017

CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

BALANCE SHEETS

BALANCE SHEETS

	As of December 31,
	2016		2017
	RMB		RMB		US$ (Note 2(d))
ASSETS
Current assets:
Cash and cash equivalents		4,271		4,023		618
Restricted cash		10,733,202		—		—
Amounts due from subsidiaries		6,717,714,285		7,959,314,970		1,223,324,312
Prepaid expenses and other current assets		4,208,266		3,609,637		554,791
Total current assets		6,732,660,024		7,962,928,630		1,223,879,721
Investments in subsidiaries and VIEs		—		192,995,609		29,662,882
Total assets		6,732,660,024		8,155,924,239		1,253,542,603
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt		—		1,292,029,030		198,581,226
Accrued expenses and other current liabilities		8,678,123		78,150,364		12,011,491
Income tax payable		4,169,661		16,773,553		2,578,048
Total current liabilities		12,847,784		1,386,952,947		213,170,765
Long-term debt		2,366,903,154		2,562,424,523		393,837,438
Deficits in subsidiaries and VIEs		361,779,545		—		—
Total liabilities		2,741,530,483		3,949,377,470		607,008,203
Shareholders’ equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized, 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively		878,463		878,663		135,048
Additional paid-in capital		4,474,702,198		4,489,246,326		689,984,527
Accumulated other comprehensive income		43,201,465		121,858,122		18,729,250
Accumulated deficit		(527,652,585)		(405,436,342)		(62,314,425)
Total shareholders’ equity		3,991,129,541		4,206,546,769		646,534,400
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		6,732,660,024		8,155,924,239		1,253,542,603

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Operating expenses:
General and administrative expenses		(21,426,624)		(25,424,596)		(31,013,301)		(4,766,657)
Loss from operations		(21,426,624)		(25,424,596)		(31,013,301)		(4,766,657)
Interest income:
Third party		—		3,537,155		760		117
Subsidiaries		—		41,696,607		184,327,276		28,330,583
Total interest income		—		45,233,762		184,328,036		28,330,700
Interest expense		(6,905,640)		(128,065,737)		(216,816,430)		(33,324,075)
Early extinguishment of debt costs		—		—		(19,976,776)		(3,070,374)
Gain from sale of cost method investment		803,059,728		—		—		—
Share of gain of subsidiaries and VIEs		(2,227,088)		147,442,803		222,850,964		34,251,566
Other income		9,917,716		—		—		—
Income before income taxes		782,418,092		39,186,232		139,372,493		21,421,160
Provision for income taxes		(86,079,287)		(6,051,116)		(17,156,250)		(2,636,867)
Net income		696,338,805		33,135,116		122,216,243		18,784,293
Net income		696,338,805		33,135,116		122,216,243		18,784,293
Changes in cumulative foreign currency translation adjustment, net of tax of nil		73,410,193		(31,353,357)		78,656,657		12,089,307
Comprehensive income		769,748,998		1,781,759		200,872,900		30,873,600

STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Net cash provided by operating activities		—		—		—		—
Net cash used in investing activities		—		—		—		—
Net cash used in financing activities:		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents		230		273		(248)		(38)
Net increase (decrease) in cash and cash equivalents		230		273		(248)		(38)
Cash and cash equivalents-beginning of year		3,768		3,998		4,271		656
Cash and cash equivalents-end of year		3,998		4,271		4,023		618
Supplemental disclosure for cash flow information:
Cash paid for interest		—		—		—		—
Cash paid for income taxes		—		—		—		—

	For the Years Ended December 31,
	2015		2016		2017
	RMB		RMB		RMB		US$ (Note 2(d))
Supplemental disclosure of non-cash investing and financing activities:
Payment for IPO issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		(20,656,597)		—		—		—
Proceeds from issuance of Class A common shares in private placement, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		792,860,341		—		—		—
Proceeds from exercise of share options (cash received by a subsidiary of the Company on behalf of the Company)		4,891,204		25,431,373		955,485		146,855
Proceeds of issuance of the 2018 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		1,241,289,905		—		—		—
Repayment of syndicated loan(cash paid by a subsidiary of the Company on behalf of the Company)		—		—		(1,000,335,000)		(153,748,674)
Proceeds of issuance of the 2022 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—		—		2,611,624,352		401,399,313
Payment for Senior Notes issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)		—		(2,740,945)		—		—
Proceeds of US$150 million syndicated loan, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)		—		957,158,701		—		—
Proceeds from sale of cost method investment, net of related transaction costs (cash received by a subsidiary of the Company on behalf of the Company)		954,428,056		—		—		—
Payment of professional fees for aborted offerings (cash paid by a subsidiary of the Company on behalf of the Company)		—		—		(1,748,969)		(268,812)
Accrued professional fees for issuance of Senior Notes		2,740,945		—		—		—
Accrued professional fees for aborted offering		—		—		2,174,451		334,207
Subscription receivables related to share option exercise		197,816		—		—		—

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) $ / shares in Units, $ in Millions			12 Months Ended
	May 22, 2015 USD ($) $ / shares shares	Nov. 18, 2014 USD ($) $ / shares shares	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Organization
Issuance costs						¥ 20,656,597
ADS | IPO
Organization
Shares issued (in shares)		10,000,000
Issue price of shares (in dollars per share) | $ / shares		$ 12.00
Gross proceeds from initial public offering | $		$ 120.0
ADS | Private placements
Organization
Issue price of shares (in dollars per share) | $ / shares	$ 12.00
Class A Common Shares | Private placements
Organization
Shares issued (in shares)	22,337,924	8,333,332
Issue price of shares (in dollars per share) | $ / shares	$ 6.00	$ 6.00
Gross proceeds from private placement | $	$ 134.0	$ 50.0
Issuance costs | $	$ 4.3
Class B Common Shares
Organization
Total outstanding preferred shares (in shares) converted upon initial public offering		77,999,069
Total outstanding common shares (in shares) converted upon initial public offering		6,096,842
eHi Hong Kong
Organization
Percentage of ownership			100.00%	100.00%
L&L Financial Leasing Holding Limited
Organization
Percentage of ownership			100.00%	100.00%
Brave Passion
Organization
Percentage of ownership			100.00%	100.00%
Shuzhi
Organization
Percentage of ownership			100.00%	100.00%
eHi Rental
Organization
Percentage of ownership			100.00%	100.00%
Beijing eHi Car Rental Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
Chongqing eHi Car Rental Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
Shanghai Smart Brand
Organization
Percentage of ownership			100.00%	100.00%
eHi Auto Services (Jiangsu) Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
Shanghai eHi Chengshan Car Rental Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
Shanghai Taihan Trading Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
Shanghai Taihao Financial Leasing Holding Limited
Organization
Percentage of ownership			100.00%	100.00%
Shanghai Taide Financial Leasing Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
eHi Car Rental Management Services (Shanghai) Co., Ltd.
Organization
Percentage of ownership			100.00%	100.00%
eHi Information
Organization
Percentage of ownership			100.00%	100.00%
eHi Car Sharing
Organization
Percentage of ownership			100.00%	100.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Translations of amounts from RMB into US$	6.5342	6.9370
Average translation of amounts from RMB into US$	6.7547	6.6401	6.2284
Minimum
Payment term to corporate and institutional clients	5 days
Maximum
Payment term to corporate and institutional clients	120 days
Parent company
Certificated Exchange Rate for Convenience of Readers	6.5063

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2015 USD ($)
Significant Accounting Policies
Loss on disposal of vehicles and held-for-reclassification	¥ 24,241,209		¥ 1,848,313		¥ 5,055,620
Impairment of intangible assets and long-lived assets
Impairment of long-lived assets | $		$ 0		$ 0		$ 0
Net investment in direct financing leases
Total direct financing leases revenues	3,875,346		10,140,216		¥ 7,197,316
Car rental operating licenses and vehicle license plates
Significant Accounting Policies
Gross carrying value	¥ 66,505,752		¥ 64,101,470
In-car equipment
Significant Accounting Policies
Estimated useful lives	3 years	3 years
Office furniture and equipment
Significant Accounting Policies
Estimated useful lives	5 years	5 years
Building
Significant Accounting Policies
Estimated useful lives	39 years	39 years
Minimum
Significant Accounting Policies
Holding period for vehicles subject to the repurchase programs	12 months	12 months
Minimum | Vehicles
Significant Accounting Policies
Estimated useful lives	1 year	1 year
Minimum | Software
Significant Accounting Policies
Estimated useful lives	3 years	3 years
Minimum | Leasehold improvements
Significant Accounting Policies
Estimated useful lives	1 year	1 year
Maximum
Significant Accounting Policies
Holding period for vehicles subject to the repurchase programs	24 months	24 months
Maximum | Vehicles
Significant Accounting Policies
Estimated useful lives	4 years	4 years
Maximum | Software
Significant Accounting Policies
Estimated useful lives	5 years	5 years
Maximum | Leasehold improvements
Significant Accounting Policies
Estimated useful lives	5 years	5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Customer Loyalty Program
Provision for customer loyalty program	¥ 9,048,815	¥ 7,185,774
Advertising costs
Total advertising expenses	89,925,181	38,968,240	¥ 28,946,698
Fair value measurements
Nominal Unpaid Principal Balance	4,751,722,361	3,134,983,173
Level 2
Fair value measurements
Aggregate Fair Value	4,770,908,702	3,214,860,166
Aggregate Fair Value | Level 2
Fair value measurements
Aggregate Fair Value	4,770,908,702	3,214,860,166
Long-term borrowings, including current portion
Fair value measurements
Nominal Unpaid Principal Balance	831,202,361	1,747,583,173
Long-term borrowings, including current portion | Aggregate Fair Value | Level 2
Fair value measurements
Aggregate Fair Value	833,969,309	1,755,993,820
2018 Senior Notes
Fair value measurements
Nominal Unpaid Principal Balance	1,306,840,000	1,387,400,000
2018 Senior Notes | Aggregate Fair Value | Level 2
Fair value measurements
Aggregate Fair Value	1,332,252,796	1,458,866,346
2022 Senior Notes
Fair value measurements
Nominal Unpaid Principal Balance	2,613,680,000	0
2022 Senior Notes | Aggregate Fair Value | Level 2
Fair value measurements
Aggregate Fair Value	¥ 2,604,686,597	¥ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based compensation
Total	¥ 13,588,843	¥ 16,040,947	¥ 13,983,246
Cost of revenues
Share-based compensation
Total	843,761	839,543	361,951
Selling and marketing expenses
Share-based compensation
Total	336,139	401,498	894,680
General and administrative expenses
Share-based compensation
Total	¥ 12,408,943	¥ 14,799,906	¥ 12,726,615

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BUSINESS COMBINATIONS (Details) - Hangzhou Deyu Car Dealing Services Co Ltd	1 Months Ended
	Mar. 31, 2016 CNY (¥)
Business Acquisition [Line Items]
Net assets	¥ 45,374
Identifiable intangible assets —vehicles plates	4,246,166
Deferred tax liabilities	(1,061,542)
Total	¥ 3,229,998
Business Acquisition, Percentage of Voting Interests Acquired	100.00%
Business Combination, Consideration Transferred	¥ 3,229,998

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Balance, beginning of the year	¥ 9,159,321		¥ 7,611,244	¥ 5,969,648
Provision for doubtful accounts	5,288,403	$ 812,813	1,548,077	1,641,596
Balance, end of the year	¥ 14,447,724		¥ 9,159,321	¥ 7,611,244

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SHORT-TERM LOAN RECEIVABLE (Details) - Shanghai Chenghuan - Short-term notes receivable, through entrusted bank loans - CNY (¥)	1 Months Ended
	Jan. 31, 2017	Jan. 31, 2017	Jun. 30, 2016	Jan. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable from Shanghai Chenghuan, through entrusted bank loans			¥ 50,000,000	¥ 50,000,000
Interest rate	10.00%		7.75%	7.75%
Period of the option to convert its creditor rights into equity interests after commencement	2 years
Loans Receivable Collateral Percentage		100.00%	100.00%

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)
Value-added taxes deductible	¥ 774,435,385		¥ 311,501,214
Receivables from disposal of vehicles	350,629,000		127,915,314
Prepaid insurance expense	197,256,868		115,498,191
Staff advances	36,404,467		18,060,202
Brand Marketing Prepayments	30,700,380		0
Prepaid gasoline and repair supplies	26,685,176		17,481,886
Prepaid rental expenses	17,309,920		13,964,546
Rental deposits	16,301,592		11,137,408
Net investment in direct financing leases, current portion	10,226,920		63,999,571
Others	45,907,304		48,229,013
Total	¥ 1,505,857,012	$ 231,445,985	¥ 727,787,345

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INVESTMENTS (Details)							1 Months Ended		12 Months Ended
	Jun. 24, 2015 CNY (¥)	Jun. 24, 2015 USD ($)	Jun. 02, 2015 CNY (¥)	Jun. 02, 2015 USD ($)	Jan. 27, 2015 CNY (¥) shares	Jan. 27, 2015 USD ($) shares	Apr. 30, 2014 CNY (¥) shares	Apr. 30, 2014 USD ($) shares	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2015 USD ($)
Investment
Proceeds from waiver of warrants												¥ 18,409,199
Gain from waiver of warrants									0	0	0	16,869,935
Gain from sale of cost method investment									¥ 0	$ 0	0	803,059,728
Cost Method Investments, Capital Contribution Description									Pursuant to the Partnership Agreement, the total capital commitment to Ningbo eHi Ruiji by May 1, 2047 is expected to be RMB60,000,000, of which RMB59,990,000 is to be contributed by Ningbo Haichao and RMB10,000 is to be contributed by Yinzhou Ningyituiji. Ningbo eHi Ruiji would be managed by Yinzhou Ningyituiji.	Pursuant to the Partnership Agreement, the total capital commitment to Ningbo eHi Ruiji by May 1, 2047 is expected to be RMB60,000,000, of which RMB59,990,000 is to be contributed by Ningbo Haichao and RMB10,000 is to be contributed by Yinzhou Ningyituiji. Ningbo eHi Ruiji would be managed by Yinzhou Ningyituiji.
Payments To Acquire Cost Method Investment									¥ 10,800,000	$ 1,659,930
Travice Inc | Series B Preferred Stock
Investment
Percentage of shares acquired							8.40%	8.40%
Payments to Acquire Investments							¥ 154,251,500	$ 25,000,000
Travice Inc | Series C Preferred Stock
Investment
Number of warrants acquired to purchase additional shares							4,684,074	4,684,074
Number of warrants waived to purchase additional shares					4,684,074	4,684,074
Proceeds from waiver of warrants					¥ 18,409,199	$ 3,000,000
Gain from waiver of warrants												¥ 16,869,935	$ 2,749,158
Elite Plus
Investment
Equity interest transferred (as a percent)			100.00%	100.00%
Gross proceeds			¥ 983,621,925	$ 160,875,000
Gain from sale of cost method investment	¥ 803,059,728	$ 131,352,744
Transaction costs from sale of cost method investment	¥ 29,193,869	$ 4,773,098

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PROPERTY AND EQUIPMENT, NET (Details)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($)
Property and Equipment, Net
Property and equipment subject to depreciation	¥ 7,986,332,011	¥ 6,098,262,666
Less: accumulated depreciation	(1,358,334,657)	(1,127,934,340)
Subtotal	6,627,997,354	4,970,328,326
Construction in progress	429,047,963	753,240,849
Property and equipment, net	7,057,045,317	5,723,569,175		$ 1,084,648,005
Vehicles
Property and Equipment, Net
Property and equipment subject to depreciation	7,775,410,903	5,926,576,864
In-car equipment
Property and Equipment, Net
Property and equipment subject to depreciation	52,443,083	37,670,565
Building
Property and Equipment, Net
Property and equipment subject to depreciation	55,587,304
Leasehold improvements
Property and Equipment, Net
Property and equipment subject to depreciation	44,056,477	32,752,237
Software
Property and Equipment, Net
Property and equipment subject to depreciation	14,051,492	12,211,763
Office furniture and equipment
Property and Equipment, Net
Property and equipment subject to depreciation	44,782,752	33,463,933
Vehicles and in-car equipment
Property and Equipment, Net
Depreciation expenses	742,259,659	654,654,545	¥ 457,478,811
Collateral to secure certain long-term borrowing arrangements	210,460,414	465,073,020
DebtInstrumentCollateralAmount	210,460,414	465,073,020
Vehicles and in-car equipment | Sale-Back Option Agreement [Member]
Property and Equipment, Net
Collateral to secure certain long-term borrowing arrangements	252,985,226
DebtInstrumentCollateralAmount	252,985,226
Other property and equipment
Property and Equipment, Net
Depreciation expenses	¥ 12,806,130	¥ 13,363,708	¥ 17,242,676

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SHORT-TERM DEBT (Details) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016
SHORT-TERM DEBT
Short-term borrowings	¥ 928,846,417	¥ 620,105,995
Long-term borrowings, current portion (Note 10)	1,728,599,440	306,113,338
Total	¥ 2,657,445,857	¥ 926,219,333

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SHORT-TERM DEBT (Details 1)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Nov. 30, 2017 CNY (¥)	Jul. 31, 2017 CNY (¥)	May 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Oct. 31, 2016 CNY (¥)	Aug. 31, 2016 CNY (¥)	Apr. 30, 2016 CNY (¥)	Feb. 29, 2016 CNY (¥)
Short-term Debt [Line Items]
Short-term borrowings	¥ 928,846,417					¥ 620,105,995
Restricted cash	¥ 612,121,936	$ 94,081,419				¥ 257,059,302
weighted average interest rate on short-term bank borrowings	4.44%	4.44%				3.66%
Amount Needs to Deposit in Designated Bank Account	¥ 421,978,636	$ 64,580,000
Short term bank borrowing interest rate 4.1325 %
Short-term Debt [Line Items]
Interest rate (as a percent)			4.1325%
Notes payable
Short-term Debt [Line Items]
Short-term borrowings	253,259,200					¥ 363,983,800
Short-term bank borrowings guaranteed by the Founder and his spouse
Short-term Debt [Line Items]
Short-term borrowings	0					75,000,000
Short-term bank borrowings guaranteed by the Founder and his spouse | Short-term bank borrowings guaranteed by the Founder and his spouse, interest rate of 4.35%
Short-term Debt [Line Items]
Loan facility maximum borrowing capacity							¥ 50,000,000
Short-term borrowings						¥ 50,000,000
Interest rate (as a percent)						4.35%
Short-term bank borrowings guaranteed by the Founder and his spouse | Short Term Bank Borrowing Interest Rate 4.698%
Short-term Debt [Line Items]
Loan facility maximum borrowing capacity										¥ 25,000,000
Short-term borrowings	¥ 25,000,000
Interest rate (as a percent)	4.698%	4.698%
Short-term bank borrowings
Short-term Debt [Line Items]
Principal amount			¥ 400,000,000
Loan facility maximum borrowing capacity	¥ 150,000,000					¥ 100,000,000
Short-term borrowings	675,587,217					¥ 181,122,195
Interest rate (as a percent)						4.35%
Short-term bank borrowings | Short term bank borrowing interest rate 4.35 %
Short-term Debt [Line Items]
Principal amount					¥ 50,000,000
Short-term borrowings					50,000,000
Short-term bank borrowings | Short term bank borrowing interest rate 4.35 % One
Short-term Debt [Line Items]
Short-term borrowings	¥ 30,000,000					¥ 50,000,000
Interest rate (as a percent)	4.35%	4.35%
Short-term bank borrowings | Short term bank borrowing interest rate 4.35 % Two
Short-term Debt [Line Items]
Short-term borrowings	¥ 50,000,000					10,000,000
Interest rate (as a percent)	4.35%	4.35%
Short-term bank borrowings | Short term bank borrowing interest rate 4.35 % Three
Short-term Debt [Line Items]
Short-term borrowings						10,000,000
Short-term bank borrowings | Short term bank borrowing interest rate 4.35 % Four
Short-term Debt [Line Items]
Short-term borrowings						30,000,000
Short-term bank borrowings | Short term bank borrowing interest rate 4.1325 %
Short-term Debt [Line Items]
Principal amount									¥ 30,000,000
Short-term borrowings	¥ 30,000,000
Interest rate (as a percent)	4.1325%	4.1325%
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 4.785% One
Short-term Debt [Line Items]
Short-term borrowings	¥ 20,000,000
Interest rate (as a percent)	4.785%	4.785%
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 4.785% Two
Short-term Debt [Line Items]
Short-term borrowings	¥ 30,000,000
Interest rate (as a percent)	4.785%	4.785%
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 4.785% Three
Short-term Debt [Line Items]
Short-term borrowings	¥ 20,000,000
Interest rate (as a percent)	4.785%	4.785%
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 5.0025%
Short-term Debt [Line Items]
Loan facility maximum borrowing capacity				¥ 240,000,000
Short-term borrowings				¥ 45,728,059
Interest rate (as a percent)				5.0025%
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 4.1325% One
Short-term Debt [Line Items]
Short-term borrowings			200,000,000
Short-term bank borrowings | Short Term Bank Borrowing Interest Rate 4.1325% Two
Short-term Debt [Line Items]
Short-term borrowings			¥ 200,000,000
Notes payable guaranteed by deposit
Short-term Debt [Line Items]
Restricted cash	¥ 75,143,300	$ 11,500,000				115,000,000
Third-party financing loan payable
Short-term Debt [Line Items]
Principal amount					50,000,000	30,000,000
Short-term borrowings					¥ 29,859,158	¥ 26,122,195
Interest rate (as a percent)					4.82%	4.82%
Short Term Loan [Member]
Short-term Debt [Line Items]
Loan facility maximum borrowing capacity								¥ 25,000,000
Short-term borrowings						¥ 25,000,000
Interest rate (as a percent)						4.35%

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LONG-TERM DEBT (Details)		1 Months Ended				12 Months Ended
	Dec. 08, 2015 CNY (¥)	Oct. 31, 2016 CNY (¥)	Sep. 30, 2016 USD ($)	Aug. 31, 2016 USD ($)	Jan. 31, 2016 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 08, 2015 USD ($)	Jul. 31, 2015 CNY (¥)	Apr. 30, 2015 CNY (¥)	Sep. 30, 2014 CNY (¥)
LONG-TERM DEBT
Undrawn loan facilities						¥ 202,605,274		¥ 63,358,721
Outstanding principal amount
Subtotal						4,685,655,914		3,073,936,327
Less: Current portion of long-term debt						(1,728,599,440)		(306,113,338)
Total long-term borrowings						2,957,056,474		2,767,822,989
Years Ended December 31,
2018						1,743,425,515
2019						238,098,275
2020						156,518,571
2022						2,613,680,000
Total						4,751,722,361		3,134,983,173
Restricted Cash and Cash Equivalents, Current						612,121,936		257,059,302		$ 94,081,419
Repayments of Related Party Debt		¥ 200,000,000						200,000,000
Long-term borrowings collateralized by vehicles
Outstanding principal amount
Subtotal						¥ 213,703,954		292,605,866
Long-term borrowings collateralized by vehicles | China Development Bank [Member]
LONG-TERM DEBT
Interest rate (as a percent)						5.225%				5.225%
Collateral to secure certain long-term borrowing arrangements						¥ 136,290,802
Outstanding principal amount
Subtotal						¥ 180,000,000		¥ 218,000,000
Years Ended December 31,
Long-term Line of Credit					$ 220,000,000								¥ 1,500,000,000
Debt Instrument, Interest Rate, Initial Percentage					5.225%
Long-term borrowings collateralized by vehicles | Several third party financing companies borrowings 2014, 2015 and 2016
LONG-TERM DEBT
Interest rate (as a percent)						9.12%		5.20%		9.12%	5.20%
Collateral to secure certain long-term borrowing arrangements						¥ 402,951,830		¥ 402,951,830
Outstanding principal amount
Subtotal						33,703,954		74,605,866
Years Ended December 31,
Total						744,203,883
Long-term bank borrowings with receivable pledged as collateral
Outstanding principal amount
Subtotal						¥ 40,995,042		¥ 189,427,307
Long-term bank borrowings with receivable pledged as collateral | Bank brrowings september 2014
LONG-TERM DEBT
Interest rate (as a percent)						4.75%		5.225%		4.75%	5.225%
Loan facility maximum borrowing capacity															¥ 155,000,000
Outstanding principal amount
Subtotal						¥ 10,167,665		¥ 121,330,685
Long-term bank borrowings with receivable pledged as collateral | Bank loan facility September 2014
LONG-TERM DEBT
Interest rate (as a percent)						4.9875%				4.9875%
Outstanding principal amount
Subtotal						¥ 30,827,377		¥ 68,096,622
Entrusted long-term borrowing from a related party
LONG-TERM DEBT
Interest rate (as a percent)								6.90%			6.90%
Loan facility maximum borrowing capacity														¥ 300,000,000
Outstanding principal amount
Subtotal						100,000,000		¥ 100,000,000
Years Ended December 31,
Total						¥ 100,000,000		100,000,000
Repayments of Related Party Debt		¥ 200,000,000
Long-Term Borrowings fom Banks or Financing Companies
LONG-TERM DEBT
Interest rate (as a percent)						6.00%				6.00%
Loan facility maximum borrowing capacity | $										$ 123,918,976
Outstanding principal amount
Subtotal						¥ 476,503,365		125,000,000		$ 115,166,011
Syndicated loan
LONG-TERM DEBT
Principal amount | $											$ 150,000,000
Outstanding principal amount
Subtotal						0		1,010,689,797
Years Ended December 31,
Restricted Cash and Cash Equivalents, Current | $											$ 1,547,240
Syndicated loan | Initial Facility [Member]
Years Ended December 31,
Proceeds from Issuance of Long-term Debt | $				$ 110,000,000
Syndicated loan | GreenShoe Facility [Member]
Years Ended December 31,
Proceeds from Issuance of Long-term Debt | $			$ 150,000,000	$ 40,000,000
2018 Senior Notes
LONG-TERM DEBT
Principal amount	¥ 1,281,560,000											$ 200,000,000
Issued value of debt, as a percent to par value	99.342%
Interest rate (as a percent)	7.50%											7.50%
Debt Related Commitment Fees and Debt Issuance Costs						34,538,769
Debt discount						¥ 8,432,665
Effect interest rate (as a percent)	7.75%					8.99%				8.99%		7.75%
Outstanding principal amount
Subtotal						¥ 1,292,029,030		1,356,213,357
Years Ended December 31,
Total						1,306,840,000		1,387,400,000
2018 Senior Notes | Change of control triggering event
LONG-TERM DEBT
Redemption price as a percent to principal amount	101.00%
2018 Senior Notes | Redemption option at the Company's option
LONG-TERM DEBT
Redemption price as a percent to principal amount	100.00%
Percentage of principal amount added to redemption price	1.00%											1.00%
2018 Senior Notes | Redemption from net proceeds of sales of common stock
LONG-TERM DEBT
Redemption price as a percent to principal amount	107.50%
Maximum principal amount that may be redeemed (as a percent)	35.00%											35.00%
Minimum principal amount that should remain outstanding after redemption (as a percent)	65.00%											65.00%
Redemption period after sales of common stock	60 days
2022 Senior Notes
Outstanding principal amount
Subtotal						¥ 2,562,424,523		0
Long-term bank borrowings
LONG-TERM DEBT
Interest rate (as a percent)						4.9875%				4.9875%
Outstanding principal amount
Subtotal						¥ 134,670,687		¥ 125,000,000
Long-Term Borrowings One from Banks or Financing Companies [Member]
LONG-TERM DEBT
Loan facility maximum borrowing capacity						¥ 300,000,000
Long-Term Borrowings Two from Banks or Financing Companies [Member]
LONG-TERM DEBT
Interest rate (as a percent)						4.9875%				4.9875%
Loan facility maximum borrowing capacity						¥ 100,000,000
Outstanding principal amount
Subtotal						¥ 95,000,000
Long-Term Borrowings Three from Banks or Financing Companies [Member]
LONG-TERM DEBT
Interest rate (as a percent)						4.9875%				4.9875%
Loan facility maximum borrowing capacity						¥ 50,000,000
Outstanding principal amount
Subtotal						¥ 41,666,667
Long-Term Borrowings Four from Banks or Financing Companies [Member]
LONG-TERM DEBT
Interest rate (as a percent)						0.00%				0.00%
Loan facility maximum borrowing capacity						¥ 100,000,000
Outstanding principal amount
Subtotal						¥ 90,000,000

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ACCOUNTS PAYABLE (Details)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)
Accounts payable
Payables for purchase of property and equipment	¥ 576,569,163		¥ 163,190,564
Others	41,300,848		16,687,283
Total	¥ 617,870,011	$ 94,964,882	¥ 179,877,847

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)
Advance from customers	¥ 105,716,286		¥ 68,397,492
Customer deposits	78,975,251		55,991,264
Accrued employee payroll and welfare	72,103,194		57,367,892
Interest accrued	63,982,199		8,530,203
Other tax payable	25,092,518		15,471,552
Provision for customer loyalty program	9,048,815		7,185,774
Accrued professional service fees	7,761,195		4,316,185
Accrued advertising and promotion expense	5,785,785		17,306,922
Payable for property related purchase	0		11,354,874
Others	65,421,499		22,569,229
Total	¥ 433,886,742	$ 66,687,172	¥ 268,491,387

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TAXATION (Details)	12 Months Ended
	Dec. 31, 2017 CNY (¥)		Dec. 31, 2016 CNY (¥)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2015 USD ($)
Tax Rate Disclosure [Line Items]
Statutory income tax rate (as a percent)	25.00%		25.00%	25.00%	25.00%	25.00%
Income tax provision for the sales of cost method investment gain recognized according to Circular 7			¥ 1,881,456	$ 270,986	¥ 83,103,026	$ 13,587,500
Increase in Effective Income Tax Rate	76.30%		116.80%	116.80%
Deferred Tax Assets, Valuation Allowance, Noncurrent	¥ 3,143,454	[1]	¥ 35,963,269
Maximum
Tax Rate Disclosure [Line Items]
EIT withholding tax rate	10.00%
PRC
Tax Rate Disclosure [Line Items]
Statutory income tax rate (as a percent)	25.00%
EIT withholding tax rate	10.00%
Maximum EIT withholding tax rate if the foreign investor owns directly at least 25% of the shares of the FIE	5.00%
Minimum percentage the foreign investor owns directly of the shares of the FIE will subject to no more than 5% EIT withholding tax.	25.00%
PRC | Car rental service
Tax Rate Disclosure [Line Items]
VAT rate (as a percent)	17.00%
PRC | Designated Driving Service
Tax Rate Disclosure [Line Items]
VAT rate (as a percent)	11.00%
PRC | Qualified Management Services
Tax Rate Disclosure [Line Items]
VAT rate (as a percent)	6.00%
Hong Kong
Tax Rate Disclosure [Line Items]
Statutory income tax rate (as a percent)	16.50%
Shanghai | Car rental service
Tax Rate Disclosure [Line Items]
VAT rate (as a percent)	3.00%

[1] The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

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TAXATION (Details 1)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest [Abstract]
Pre-tax income from domestic (PRC) entities	¥ 261,743,051		¥ 248,923,620	¥ 5,669,944
Pre-tax income (loss) from foreign (non-PRC) entities	(92,151,762)		(209,177,533)	778,156,851
Income before income taxes	169,591,289	$ 26,065,704	39,746,087	783,826,795
Current income tax expense
Domestic (PRC) entities	1,152,383		3,049,504	1,408,703
Foreign (non-PRC) entities	0		0	0
Total	1,152,383		3,049,504	1,408,703
Deferred income tax expense
Domestic (PRC) entities	29,066,413		(2,489,648)	0
Foreign (non-PRC) entities	0		0	0
Total	29,066,413	4,467,426	(2,489,648)
Income tax expense (excluding withholding tax)
Domestic (PRC) entities	30,218,796		559,855	1,408,703
Withholding tax
Foreign (non-PRC) entities	17,156,250		6,051,116	86,079,287
Total income tax expense	¥ 47,375,046	$ 7,281,411	¥ 6,610,971	¥ 87,487,990

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TAXATION (Details 2)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statutory income tax rate (as a percent)	25.00%	25.00%	25.00%
Different tax rates in other jurisdictions (as a percent)	13.30%	90.80%	(26.00%)
Withholding tax	10.10%	15.20%	10.60%
Permanent differences (as a percent)	0.90%	(17.10%)	0.10%
Change in valuation allowance (as a percent)	(21.20%)	(97.50%)	1.10%
Tax holiday (as a percent)	(0.20%)	0.20%	0.00%
Other (as a percent)	0.00%	0.00%	0.40%
Effective tax rate (as a percent)	27.90%	16.60%	11.20%

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TAXATION (Details 3) - CNY (¥)		Dec. 31, 2017		Dec. 31, 2016
Deferred tax assets, current:
Accrued payroll and other expenses	[1]	¥ 0		¥ 598,246
Allowance for doubtful accounts	[1]	0		2,289,830
Deferred government grant income	[1]	0		2,151,411
Others	[1]	0		11,950
Less: valuation allowance	[1]	0		(3,211,464)
Total current deferred tax assets, net	[1]	0		1,839,973
Deferred tax assets, non-current:
Accrued payroll and other expenses		38,886,321	[1]	0
Allowance for doubtful accounts		3,611,931	[1]	0
Net operating loss carry forwards		40,279,987	[1]	55,724,899
Less: valuation allowance		(3,143,454)	[1]	(35,963,269)
Total non-current deferred tax assets, net		79,634,785	[1]	19,761,630
Deferred tax liabilities,
Temporary difference on property and equipment		90,793,841	[1]	19,111,955
Deferred revenue		15,417,709	[1]	0
Recognition of intangible assets arisen from business combination		1,061,542	[1]	1,061,542
Total deferred tax liabilities		¥ 107,273,092	[1]	¥ 20,173,497

[1] The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

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TAXATION (Details 4)		Dec. 31, 2017 CNY (¥)		Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)
Current deferred tax assets, net	[1]	¥ 0			¥ 1,839,973
Non-current deferred tax assets, net		0	[1]	$ 0	649,675
Deferred tax liabilities, non-current		¥ 27,638,307	[1]	$ 4,247,930	¥ 1,061,542

[1] The Company has adopted ASU 2015-17 prospectively since January 1, 2017.

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TAXATION (Details 5) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Movement of valuation allowance, current
Balance at beginning of the year	¥ 39,174,733	¥ 89,738,490	¥ 89,697,127
Additions in current year	456,508	3,128,771	25,374,784
Reversals in current year	(36,482,572)	(53,692,038)	(25,210,766)
Expirations in current year	(5,215)	(490)	(122,655)
Balance at the end of the year	¥ 3,143,454	¥ 39,174,733	¥ 89,738,490

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TAXATION (Details 6) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating Loss Carryforwards [Line Items]
Net operating loss carry forwards	¥ 167,597,369	¥ 341,922,125	¥ 300,376,325

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COMMON SHARES (Details) - shares	Dec. 31, 2017	Dec. 31, 2016
Class of Stock [Line Items]
Common shares, shares outstanding	138,890,287	138,860,287
Class A Common Shares
Class of Stock [Line Items]
Common shares, shares outstanding	73,251,730	67,547,921
Class B Common Shares
Class of Stock [Line Items]
Common shares, shares outstanding	65,638,557	71,312,366

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OTHER INCOME, NET (Details)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
American Depositary Receipt reimbursement	¥ 0		¥ 0	¥ 9,917,716
Tax refund	518,171		979,794	0
Others	1,438,848		464,335	287,559
Total	¥ 1,957,019	$ 300,788	¥ 1,444,129	¥ 10,205,275

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EARLY EXTINGUISHMENT OF DEBT COSTS (Details)			12 Months Ended
	Aug. 15, 2017 CNY (¥)	Aug. 15, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Repayments of Lines of Credit		$ 150,000,000
Gain (Loss) on Extinguishment of Debt	¥ 19,976,776	$ 3,100,000	¥ (19,976,776)	$ (3,070,374)	¥ 0	¥ 0

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SHARE-BASED COMPENSATION (Details)						1 Months Ended	12 Months Ended
	Dec. 26, 2015 shares	Aug. 28, 2015 shares	May 15, 2015 $ / shares shares	Aug. 26, 2014 $ / shares shares	Apr. 01, 2013 $ / shares shares	Mar. 23, 2017 shares	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Aug. 25, 2014 shares	Dec. 21, 2010 shares	Apr. 01, 2010 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			525,000
Option exercised price, granted (in dollars per share) | $ / shares			$ 5.35
2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment award, maximum number of incentive award available (in shares)				6,698,470						4,300,730	4,300,730	2,627,730
Share Option | August 31, 2010 awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					300,000
Number of awards modified		1,588,648
Modification incremental cost | ¥									¥ 76,552
Share Option | December 31, 2010 awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards modified	1,673,000
Modification incremental cost | ¥							¥ 661,926	¥ 1,502,987	¥ 1,300,000
Share Option | August 26, 2014 awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				1,300,000
Option exercised price, granted (in dollars per share) | $ / shares				$ 7.00	$ 3.11
Restricted shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted to employees				450,000		6,000

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SHARE-BASED COMPENSATION (Details 1)	12 Months Ended
	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 CNY (¥) shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 CNY (¥) shares	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares
Number of Options
Exercised (in shares) | shares	0	0
Weighted Average Exercise Price (US$)
Options outstanding (in dollars per share) | $ / shares		$ 0
Aggregate Intrinsic Value (US$)
Intrinsic value of options exercised | ¥	¥ 52,162
2010 Plan
Number of Options
Options outstanding (in shares) | shares	3,155,500	3,155,500	4,900,000	4,900,000	5,136,900	5,136,900
Exercised (in shares) | shares			(1,726,874)	(1,726,874)	(138,700)	(138,700)
Cancelled and forfeited (in shares) | shares	(51,500)	(51,500)	(17,626)	(17,626)	(98,200)	(98,200)
Options outstanding (in shares) | shares	3,104,000	3,104,000	3,155,500	3,155,500	4,900,000	4,900,000	5,136,900
Vested and expected to vest (in shares) | shares		3,103,965
Exercisable (in shares) | shares		2,775,000
Weighted Average Exercise Price (US$)
Options outstanding (in dollars per share) | $ / shares		$ 4.57		$ 3.74		$ 3.76
Exercised (in dollars per share) | $ / shares				2.2		2.2
Cancelled and forfeited (in dollars per share) | $ / shares		7		6.97		6.86
Options outstanding (in dollars per share) | $ / shares		4.53		$ 4.57		$ 3.74	$ 3.76
Vested and expected to vest | $ / shares		4.53
Exercisable (in dollars per share) | $ / shares		$ 4.30
Weighted Average Contractual Term
Options outstanding (Year)	1 year 1 month 28 days	1 year 1 month 28 days	1 year 7 months 20 days	1 year 7 months 20 days	1 year 7 months 2 days	1 year 7 months 2 days	1 year 11 months 12 days
Vested and expected to vest	1 year 1 month 28 days	1 year 1 month 28 days
Exercisable, contractual term	1 year 1 month 13 days	1 year 1 month 13 days
Aggregate Intrinsic Value (US$)
Options outstanding, intrinsic value | $		$ 2,801,660		$ 13,356,070		$ 5,425,522
Options outstanding, intrinsic value | $		5,277,775		$ 2,801,660		$ 13,356,070	$ 5,425,522
Vested and expected to vest | $		5,277,775
Exercisable, intrinsic value | $		$ 5,144,025
Intrinsic value of options exercised | ¥			¥ 38,265,778		¥ 2,577,855

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SHARE-BASED COMPENSATION (Details 2)		1 Months Ended	12 Months Ended
	Aug. 26, 2014 shares	Mar. 23, 2017 shares	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 CNY (¥) shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 CNY (¥) shares	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares
Weighted Average Grant-date Fair Value (US$)
Recognized share-based compensation expense | ¥			¥ 13,588,843		¥ 16,040,947		¥ 13,983,246
Share Option
Weighted Average Grant-date Fair Value (US$)
Unrecognized compensation expense | ¥			4,039,457
Restricted shares
Number of Restricted Share Units
Granted	450,000	6,000
Weighted Average Grant-date Fair Value (US$)
Restricted shares vested at vesting date | $				$ 507,938		$ 590,625		$ 537,750
Recognized share-based compensation expense | ¥			3,504,963		5,222,062		4,894,683
2010 Plan | Share Option
Weighted Average Grant-date Fair Value (US$)
Recognized share-based compensation expense | ¥			¥ 7,638,082		¥ 8,489,631		¥ 7,666,182
2010 Plan | Restricted shares
Number of Restricted Share Units
Unvested at beginning of year			112,500	112,500	225,000	225,000	337,500	337,500
Vested			(112,500)	(112,500)	(112,500)	(112,500)	(112,500)	(112,500)
Unvested at end of year			0	0	112,500	112,500	225,000	225,000
Expected to vest at end of year						112,500
Weighted Average Grant-date Fair Value (US$)
Unvested at beginning of year (in dollars per share) | $ / shares				$ 6.99		$ 6.99
Vested (in dollars per share) | $ / shares				6.99		6.99		6.99
Unvested at end of year (in dollars per share) | $ / shares				$ 0		6.99		$ 6.99
Expected to vest at end of year (in dollars per share) | $ / shares						$ 6.99
2014 Plan
Weighted Average Grant-date Fair Value (US$)
Recognized share-based compensation expense | ¥			¥ 2,304,913		¥ 2,329,254		¥ 1,422,381
2014 Plan | Restricted shares
Number of Restricted Share Units
Unvested at beginning of year			0	0
Granted			6,000	6,000
Vested			(3,000)	(3,000)
Unvested at end of year			3,000	3,000	0	0
Expected to vest at end of year			2,502
Weighted Average Grant-date Fair Value (US$)
Unvested at beginning of year (in dollars per share) | $ / shares				$ 0
Granted (in dollars per share) | $ / shares				5.11
Vested (in dollars per share) | $ / shares				5.11
Unvested at end of year (in dollars per share) | $ / shares				$ 5.11		$ 0
Expected to vest at end of year (in dollars per share) | $ / shares									$ 5.11
Restricted shares vested at vesting date | $				$ 15,240
Recognized share-based compensation expense | ¥			¥ 140,885

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SHARE-BASED COMPENSATION (Details 3) - $ / shares			1 Months Ended	12 Months Ended
	May 15, 2015	Aug. 26, 2014	Mar. 23, 2017	Dec. 31, 2017	Dec. 31, 2015	Oct. 31, 2014
Share-based compensation
Granted (in shares)	525,000
Option exercised price, granted (in dollars per share)	$ 5.35
Contractual term	10 years
First anniversary
Share-based compensation
Vesting period	25 years
2014 Plan
Share-based compensation
Share-based payment award, maximum number of incentive award available (in shares)						4,000,000
Automatic increase of authorized ordinary shares (in percent)						1.00%
Automatic increase of authorized ordinary shares (in shares)						1,000,000
Granted (in shares)					525,000
Option exercised price, granted (in dollars per share)					$ 5.35
Restricted Stock [Member]
Share-based compensation
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		450,000	6,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights			50% of which vested immediately, with the remaining 50% vested over the next two years (25% vest on each of the first and second anniversaries of the grant date).
Restricted Stock [Member] | 2014 Plan
Share-based compensation
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				6,000

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SHARE-BASED COMPENSATION (Details 4) - USD ($)		12 Months Ended
	May 15, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of Options
Granted (in shares)	525,000
Exercised (in shares)		0
Weighted Average Exercise Price (US$)
Granted (in dollars per share)	$ 5.35
Options outstanding (in dollars per share)		$ 0
2014 Plan
Number of Options
Options outstanding (in shares)		501,000	509,000
Granted (in shares)				525,000
Exercised (in shares)		(27,000)
Cancelled and forfeited (in shares)		(71,000)	(8,000)	(16,000)
Options outstanding (in shares)		403,000	501,000	509,000
Vested and expected to vest (in shares)		396,226
Exercisable (in shares)		201,500
Weighted Average Exercise Price (US$)
Options outstanding (in dollars per share)		$ 5.35	$ 5.35
Granted (in dollars per share)				5.35
Exercised (in dollars per share)		5.35
Cancelled and forfeited (in dollars per share)		5.35	5.35	5.35
Options outstanding (in dollars per share)		5.35	$ 5.35	$ 5.35
Vested and expected to vest		5.35
Exercisable (in dollars per share)		$ 5.35
Weighted Average Contractual Term
Options outstanding, contractual term		7 years 4 months 17 days	8 years 4 months 17 days	9 years 4 months 17 days
Vested and expected to vest		7 years 4 months 17 days
Exercisable, contractual term		7 years 4 months 17 days
Aggregate Intrinsic Value (US$)
Options outstanding, intrinsic value		$ 175,305		$ 481,005	$ 0
Vested and expected to vest		172,358
Exercisable, intrinsic value		$ 87,653
Weighted Average Grant-date Fair Value (US$)
Granted, fair value (in dollars per share)				$ 2.86

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SHARE-BASED COMPENSATION (Details 5)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2015 USD ($)
Share-based compensation
Recognized share-based compensation expense	¥ 13,588,843		¥ 16,040,947		¥ 13,983,246
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value	52,162
Restricted Stock [Member]
Share-based compensation
Recognized share-based compensation expense	¥ 3,504,963		5,222,062		¥ 4,894,683
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $		$ 507,938		$ 590,625		$ 537,750
2014 Plan
Share-based compensation
Risk-free interest rate (as a percent)					2.14%	2.14%
Option term					10 years	10 years
Volatility (as a percent)					55.00%	55.00%
Dividend yield					0.00%	0.00%
Expected weighted-average recognized period	1 year 4 months 13 days	1 year 4 months 13 days
Expected forfeiture rate (post-vesting) of executive level	0.00%	0.00%
Expected forfeiture rate (post-vesting) of non-executive level	10.00%	10.00%
Recognized share-based compensation expense	¥ 2,304,913		¥ 2,329,254		¥ 1,422,381
Total unrecognized compensation expense	2,333,324
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	¥ 2,333,324
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	7 years 4 months 17 days	7 years 4 months 17 days
2014 Plan | Restricted Stock [Member]
Share-based compensation
Recognized share-based compensation expense	¥ 140,885
Total unrecognized compensation expense	49,307
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value | $		$ 15,240
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	¥ 49,307
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	1 year 2 months 23 days	1 year 2 months 23 days

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INCOME PER SHARE (Details)		12 Months Ended
		Dec. 31, 2017 CNY (¥) ¥ / shares shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 CNY (¥) ¥ / shares shares	Dec. 31, 2015 CNY (¥) ¥ / shares shares
Numerator:
Net income :		¥ 122,216,243	$ 18,784,293	¥ 33,135,116	¥ 696,338,805
Numerator for basic and diluted net income per share | ¥		¥ 122,216,243		¥ 33,135,116	¥ 696,338,805
Denominator:
Denominator for basic calculation-weighted average number of common shares outstanding		138,794,624	138,794,624	137,621,702	126,758,363
Dilutive effect of share options		758,702	758,702	897,122	1,593,216
Dilutive effect of restricted shares and restricted share units		40,591	40,591	33,207	52,298
Denominator for diluted income per share calculation		139,593,917	139,593,917	138,552,031	128,403,877
Basic net income per share attributable to the Company’s common shareholders | (per share)		¥ 0.88	$ 0.14	¥ 0.24	¥ 5.49
Diluted net income per share attributable to the Company’s common shareholders | (per share)		0.88	0.13	0.24	5.42
Basic net income per ADS | (per share)	[1]	1.76	0.27	0.48	10.99
Diluted net income per ADS | (per share)	[1]	¥ 1.75	$ 0.27	¥ 0.48	¥ 10.85
Share Options and Restricted Shares
Denominator:
Weighted average basis were anti-dilutive and excluded from the calculation of diluted net income loss per share		1,584,581	1,584,581	2,753,664	2,828,588

[1] Each ADS represents two Class A common shares

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COMMITMENTS AND CONTINGENCIES (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
2018	¥ 51,630,688
2019	27,830,356
2020	9,609,139
2021	6,110,999
2022	3,012,326
Thereafter	852,333
Total	99,045,841
Rental expense	65,405,038	¥ 57,538,983	¥ 50,738,573
Purchase commitments to rental vehicles	560,047,600
Purchase commitments to rental vehicles 2017	550,509,970
Purchase commitments to rental vehicles 2018 and 2019	¥ 9,537,630

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RELATED PARTY TRANSACTIONS (Details)					1 Months Ended	12 Months Ended
	May 22, 2015 USD ($) $ / shares shares	Oct. 31, 2014 CNY (¥)	Oct. 31, 2014 USD ($) $ / shares shares	Apr. 16, 2014 USD ($) shares	Oct. 31, 2016 CNY (¥)	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Dec. 31, 2017 USD ($) shares	Jun. 30, 2015 shares	Apr. 30, 2015 CNY (¥)	Oct. 14, 2014 $ / shares shares
RELATED PARTIES TRANSACTIONS
Interest incurred						¥ 6,995,833	$ 1,075,240	¥ 18,534,167	¥ 14,202,500
Significant balances with related parties
Due from a related party, current - Receivables due from Ctrip						83,323,718		1,755,889		$ 12,806,621
Due to a related party, current - Payables due to Ctrip						210,833		16,083,610		32,404
Due to a related party, current - Borrowing due to Ctrip						0		100,000,000		$ 0
Repayments of Related Party Debt					¥ 200,000,000			200,000,000
Entrusted Bank Loan
RELATED PARTIES TRANSACTIONS
Interest rate (as a percent)												6.90%
Interest incurred | ¥						6,995,833		18,534,167	14,202,500
Series E Preferred Stock
RELATED PARTIES TRANSACTIONS
Number of shares sold				1,764,055
Proceeds from issuance of shares | $				$ 9,702,299
Class A Common Shares
RELATED PARTIES TRANSACTIONS
Number of shares sold													1,666,666
Sale of common shares to related party (dollar per common share) | $ / shares													$ 6.00
Ctrip | Entrusted Bank Loan
Significant balances with related parties
Due to a related party, current - Borrowing due to Ctrip | ¥												¥ 300,000,000
Ctrip | Car rental and car services referrals
RELATED PARTIES TRANSACTIONS
Transaction incurred | ¥						¥ 16,263,674		¥ 29,399,234	¥ 16,190,063
Ctrip | Series E Preferred Stock
RELATED PARTIES TRANSACTIONS
Number of shares sold				2,368,193
Proceeds from issuance of shares | $				$ 13,025,062
Crawford | Class B Common Shares
RELATED PARTIES TRANSACTIONS
Number of shares sold						18,694,003				18,694,003
Number of warrants exercised by related party			1,500,000
Number of common shares sold under warrant			1,500,000
Purchase price (dollar per common share) | $ / shares			$ 5.50
Proceeds from exercise of warrants		¥ 50,705,282	$ 8,249,993
Tiger Fund and SRS Fund | Class A Common Shares
RELATED PARTIES TRANSACTIONS
Number of shares sold in first tranche	11,437,924
Number of shares sold in second tranche											10,900,000
Tiger Fund and SRS Fund | Class A Common Shares | Ctrip and Crawford
RELATED PARTIES TRANSACTIONS
Number of shares sold	2,666,666
Sale of common shares to related party (dollar per common share) | $ / shares	$ 6.00
Tiger Fund and SRS Fund | Class A Common Shares | Private placements
RELATED PARTIES TRANSACTIONS
Number of shares sold	22,337,924
Sale of common shares to related party (dollar per common share) | $ / shares	$ 6.00
Proceeds from issuance of shares | $	$ 134,000,000
Tiger Fund and SRS Fund | ADS | Ctrip and Crawford
RELATED PARTIES TRANSACTIONS
Sale of common shares to related party (dollar per common share) | $ / shares	$ 12.00
Tiger Fund and SRS Fund | ADS | Private placements
RELATED PARTIES TRANSACTIONS
Sale of common shares to related party (dollar per common share) | $ / shares	$ 12.00

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SUBSEQUENT EVENTS (Details) - Scenario, Forecast [Member] - $ / shares	Apr. 13, 2018	Apr. 06, 2018
SUBSEQUENT EVENTS
Business Acquisition, Share Price	$ 7.25
American Depositary Shares [Member]
SUBSEQUENT EVENTS
Business Acquisition, Share Price	$ 14.50	$ 13.50

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RESTRICTED NET ASSETS (Details)	12 Months Ended
	Dec. 31, 2017 CNY (¥)
Required percentage of annual appropriations	10.00%
Limit of statutory reserve fund as a percentage of registered capital, after which allocations to statutory reserve fund are no longer required	50.00%
Total restricted net assets	¥ 3,482,551,773
Percentage of restricted net assets to consolidated net assets	82.80%

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Details)	Dec. 31, 2017 CNY (¥) shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2016 CNY (¥) shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 CNY (¥)	Dec. 31, 2014 CNY (¥)
Current assets:
Cash and cash equivalents	¥ 671,350,459	$ 103,184,676	¥ 529,518,517	$ 81,385,506	¥ 2,610,088,382	¥ 926,207,744
Restricted cash	612,121,936	94,081,419	257,059,302
Prepaid expenses and other current assets	1,505,857,012	231,445,985	727,787,345
Total current assets	3,364,457,249	517,107,611	1,941,705,244
Investments in subsidiaries and VIEs	10,800,000	1,659,930	0
Total assets	10,928,462,018	1,679,673,857	8,160,959,100
Current liabilities:
Short-term debt due to third parties	2,557,445,857	393,072,231	926,219,333
Accrued expenses and other current liabilities	433,886,742	66,687,172	268,491,387
Income tax payable	18,180,848	2,794,345	5,436,989
Total current liabilities	3,727,594,291	572,920,753	1,396,109,166
Long-term debt	2,957,056,474	454,491,258	2,667,822,989
Total liabilities	6,721,915,249	1,033,139,457	4,169,829,559
Shareholders' equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized, 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively	878,663	135,048	878,463
Additional paid-in capital	4,489,246,326	689,984,527	4,474,702,198
Accumulated other comprehensive income	121,858,122	18,729,250	43,201,465
Accumulated deficit	(405,436,342)	(62,314,425)	(527,652,585)
Total shareholders' equity	4,206,546,769	646,534,400	3,991,129,541		3,948,073,278	2,366,391,673
Total liabilities and shareholders' equity	¥ 10,928,462,018	$ 1,679,673,857	¥ 8,160,959,100
Common shares, par value | $ / shares		$ 0.001		$ 0.001
Common shares, shares authorized	500,000,000	500,000,000	500,000,000	500,000,000
Common shares, shares issued	138,890,287	138,890,287	138,860,287	138,860,287
Common shares, shares outstanding	138,890,287	138,890,287	138,860,287	138,860,287
Class A Common Shares
Shareholders' equity:
Common shares, shares authorized	407,328,619	407,328,619	407,328,619	407,328,619
Common shares, shares issued	73,251,730	73,251,730	67,547,921	67,547,921
Common shares, shares outstanding	73,251,730	73,251,730	67,547,921	67,547,921
Class B Common Shares
Shareholders' equity:
Common shares, shares authorized	92,671,381	92,671,381	92,671,381	92,671,381
Common shares, shares issued	65,638,557	65,638,557	71,312,366	71,312,366
Common shares, shares outstanding	65,638,557	65,638,557	71,312,366	71,312,366
Parent company
Current assets:
Cash and cash equivalents	¥ 4,023	$ 618	¥ 4,271	$ 656	¥ 3,998,000	¥ 3,768,000
Restricted cash	0	0	10,733,202
Amounts due from subsidiaries	7,959,314,970	1,223,324,312	6,717,714,285
Prepaid expenses and other current assets	3,609,637	554,791	4,208,266
Total current assets	7,962,928,630	1,223,879,721	6,732,660,024
Investments in subsidiaries and VIEs	192,995,609	29,662,882	0
Total assets	8,155,924,239	1,253,542,603	6,732,660,024
Current liabilities:
Short-term debt due to third parties	1,292,029,030	198,581,226	0
Accrued expenses and other current liabilities	78,150,364	12,011,491	8,678,123
Income tax payable	16,773,553	2,578,048	4,169,661
Total current liabilities	1,386,952,947	213,170,765	12,847,784
Long-term debt	2,562,424,523	393,837,438	2,366,903,154
Deficits in subsidiaries and VIEs	0	0	361,779,545
Total liabilities	3,949,377,470	607,008,203	2,741,530,483
Shareholders' equity:
Common shares, US$0.001 par value, 500,000,000 and 500,000,000 (including 407,328,619 Class A and 92,671,381 Class B) shares authorized, 138,860,287 (including 67,547,921 Class A and 71,312,366 Class B) and 138,890,287 (including 73,251,730 Class A and 65,638,557 Class B) shares issued and outstanding as of December 31, 2016 and December 31, 2017, respectively	878,663	135,048	878,463
Additional paid-in capital	4,489,246,326	689,984,527	4,474,702,198
Accumulated other comprehensive income	121,858,122	18,729,250	43,201,465
Accumulated deficit	(405,436,342)	(62,314,425)	(527,652,585)
Total shareholders' equity	4,206,546,769	646,534,400	3,991,129,541
Total liabilities and shareholders' equity	¥ 8,155,924,239	$ 1,253,542,603	¥ 6,732,660,024
Common shares, par value | $ / shares		$ 0.001		$ 0.001
Common shares, shares authorized	500,000,000	500,000,000	500,000,000	500,000,000
Common shares, shares issued	138,890,287	138,890,287	138,860,287	138,860,287
Common shares, shares outstanding	138,890,287	138,890,287	138,860,287	138,860,287
Parent company | Class A Common Shares
Shareholders' equity:
Common shares, shares authorized	407,328,619	407,328,619	407,328,619	407,328,619
Common shares, shares issued	73,251,730	73,251,730	67,547,921	67,547,921
Common shares, shares outstanding	73,251,730	73,251,730	67,547,921	67,547,921
Parent company | Class B Common Shares
Shareholders' equity:
Common shares, shares authorized	92,671,381	92,671,381	92,671,381	92,671,381
Common shares, shares issued	65,638,557	65,638,557	71,312,366	71,312,366
Common shares, shares outstanding	65,638,557	65,638,557	71,312,366	71,312,366

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Details 1)			12 Months Ended
	Aug. 15, 2017 CNY (¥)	Aug. 15, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Operating expenses:
General and administrative expenses			¥ (270,670,181)	$ (41,601,245)	¥ (251,938,077)	¥ (183,548,522)
Loss from operations			453,233,746	69,660,751	254,847,402	74,807,785
Interest income:
Interest expense			(280,584,832)	(43,125,099)	(224,959,389)	(123,768,564)
Early extinguishment of debt costs	¥ 19,976,776	$ 3,100,000	(19,976,776)	(3,070,374)	0	0
Gain from sale of cost method investment			0	0	0	803,059,728
Income before income taxes			169,591,289	26,065,704	39,746,087	783,826,795
Provision for income taxes			(47,375,046)	(7,281,411)	(6,610,971)	(87,487,990)
Net income			122,216,243	18,784,293	33,135,116	696,338,805
Change in cumulative foreign currency translation adjustment, net of tax of nil			78,656,657	12,089,307	(31,353,357)	73,410,193
Comprehensive income			200,872,900	30,873,600	1,781,759	769,748,998
Parent company
Operating expenses:
General and administrative expenses			(31,013,301)	(4,766,657)	(25,424,596)	(21,426,624)
Loss from operations			(31,013,301)	(4,766,657)	(25,424,596)	(21,426,624)
Interest income:
Third party			760	117	3,537,155	0
Subsidiaries			184,327,276	28,330,583	41,696,607	0
Total interest income			184,328,036	28,330,700	45,233,762	0
Interest expense			(216,816,430)	(33,324,075)	(128,065,737)	(6,905,640)
Early extinguishment of debt costs			(19,976,776)	(3,070,374)	0	0
Gain from sale of cost method investment			0	0	0	803,059,728
Share of gain of subsidiaries and VIEs			222,850,964	34,251,566	147,442,803	(2,227,088)
Other income			0	0	0	9,917,716
Income before income taxes			139,372,493	21,421,160	39,186,232	782,418,092
Provision for income taxes			(17,156,250)	(2,636,867)	(6,051,116)	(86,079,287)
Net income			122,216,243	18,784,293	33,135,116	696,338,805
Net income			122,216,243	18,784,293	33,135,116	696,338,805
Change in cumulative foreign currency translation adjustment, net of tax of nil			78,656,657	12,089,307	(31,353,357)	73,410,193
Comprehensive income			¥ 200,872,900	$ 30,873,600	¥ 1,781,759	¥ 769,748,998

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Details 2)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Net cash used in financing activities:
Net increase (decrease) in cash and cash equivalents	¥ 141,831,942	$ 21,799,170	¥ (2,080,569,865)	¥ 1,683,880,638
Cash and cash equivalents-beginning of year	529,518,517	81,385,506	2,610,088,382	926,207,744
Cash and cash equivalents-end of year	671,350,459	103,184,676	529,518,517	2,610,088,382
Supplemental disclosure for cash flow information:
Cash paid for income taxes	5,564,773	855,290	93,382,333	5,491,235
Supplemental disclosure of non-cash investing and financing activities:
Proceeds of issuance of the 2018 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)				1,241,289,905
Repayment of syndicated loan(cash paid by a subsidiary of the Company on behalf of the Company)	1,000,335,000	153,748,674	0	0
Proceeds of issuance of the 2022 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)	2,611,624,352	401,399,313
Payment of professional fees for aborted offerings(cash paid by a subsidiary of the Company on behalf of the Company)	1,748,969	268,812
Accrued professional fees for issuance of Senior Notes				2,740,945
Accrued professional fees for aborted offering	2,174,451	334,207
Subscription receivables related to share option exercise				197,816
Parent company
STATEMENTS OF CASH FLOWS
Net cash provided by operating activities	0	0	0	0
Net cash used in investing activities	0	0	0	0
Net cash used in financing activities:
Net cash used in financing activities:	0	0	0	0
Effect of exchange rate changes on cash and cash equivalents	(248,000)	(38)	273,000	230,000
Net increase (decrease) in cash and cash equivalents	(248,000)	(38)	273,000	230,000
Cash and cash equivalents-beginning of year	4,271	656	3,998,000	3,768,000
Cash and cash equivalents-end of year	4,023	618	4,271	3,998,000
Supplemental disclosure for cash flow information:
Cash paid for interest	0	0	0	0
Cash paid for income taxes	0	0	0	0
Supplemental disclosure of non-cash investing and financing activities:
Proceeds from exercise of share options (cash received by a subsidiary of the Company on behalf of the Company)	955,485	146,855	25,431,373	4,891,204
Proceeds of issuance of the 2018 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)	0	0	0	1,241,289,905
Repayment of syndicated loan(cash paid by a subsidiary of the Company on behalf of the Company)	(1,000,335,000)	(153,748,674)	0	0
Proceeds of issuance of the 2022 Senior Notes, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)	2,611,624,352	401,399,313	0	0
Payment for Senior Notes issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)	0	0	(2,740,945)	0
Proceeds of US$150 million syndicated loan, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)	0	0	957,158,701	0
Proceeds from sale of cost method investment, net of related transaction costs (cash received by a subsidiary of the Company on behalf of the Company)	0	0	0	954,428,056
Payment of professional fees for aborted offerings(cash paid by a subsidiary of the Company on behalf of the Company)	(1,748,969)	(268,812)	0	0
Accrued professional fees for issuance of Senior Notes	0	0	0	2,740,945
Accrued professional fees for aborted offering	2,174,451	334,207	0	0
Subscription receivables related to share option exercise	0	0	0	197,816
IPO | Parent company
Supplemental disclosure of non-cash investing and financing activities:
Payment for IPO issuance costs (cash paid by a subsidiary of the Company on behalf of the Company)	0	0	0	(20,656,597)
Private placements | Parent company | Class A Common Shares
Supplemental disclosure of non-cash investing and financing activities:
Proceeds from issuance of Class A common shares in private placement, net of issuance costs (cash received by a subsidiary of the Company on behalf of the Company)	¥ 0	$ 0	¥ 0	¥ 792,860,341

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CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Parenthetical) (Details 2) - Syndicated Loan [Member] - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Condensed Cash Flow Statements, Captions [Line Items]
Debt Instrument, Face Amount		$ 150,000,000
Parent Company [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Debt Instrument, Face Amount	$ 150,000,000	$ 150,000,000
Proceeds from Issuance of Long-term Debt	$ 150,000,000