Private Equity in Asia & China October 2005

Jefferies BroadviewA division of Jefferies & Company, Inc.

Private Equity In Asia And China

October, 2005

CONFIDENTIAL DRAFT

Member, SIPC

Table of Contents

Private Equity In Asia 1

Private Equity In China 16

Venture Capital In China 22

State Of The Chinese Technology Capital Markets 46

i

Private Equity In Asia

1

Headlines

$5.67 billion of fresh capital came into Asian private equity (excluding Australia and New Zealand), a 55.5% increase over the first half of 2004

– CVC Capital Partners announced closing of a $1.98 billion Asia Pacific Fund in May 2005

– J.P. Morgan Partners Asia closed a $1.58 billion regional fund in September 2005

Buyout funds accounted for $3.2 billion or 56% of the new capital, followed by $1.7 billion growth / expansion capital and $850 million technology funds

Corporations and public pension funds contributed 37% and 25% of the total, respectively, compared to 30% and 3% in the first half of 2004

Over 50% of new funds will be invested across Asia with the residual to be disbursed in country specific investments

98 investments worth $5.1 billion were transacted, a 19% increase over the first half of 2004

87 divestments were recorded, a 32% increase over the same period last year

The Greater China Region* attracted the largest of the region specific funds, reaching $875 million or 15% of the total

China is the most-favored market, accounting for $566.6 million new private equity money and $765 million investments through 22 transactions

2005 Year To Date

* The Greater China Region includes Taiwan, Hong Kong, and People’s Republic of ChinaSource: Asia Private Equity Review, 2005

2

Private Equity Trends In Asia

Annual Fund Pool

$5.1

$1.1$2.2

$2.8

$5.1

$1.0

$1.5

$2.1

$3.7

$0.5

$0.9

$0.6

$0.5

$1.2

0

1

2

3

4

5

6

7

8

9

2001 2002 2003 2004 Jun-05

Australia & New Zealand Japan Asia (excluding Japan)

Source: Asia Private Equity Review, 2005

(US $Billions)

3

Geographical Focus Of New Asian Private Equity Funds

GCR*

China

Japan

S. Korea

India

Taiwan

Buyout Growth / Expansion Technology

$2.73

$0.20

$0.15

$0.10

$0.05

$0.71

$0.28

$0.21

$0.30

$0.10

$0.07

$0.17

$0.29

$0.31

$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00

$0.01

* The Greater China Region includes Taiwan, Hong Kong, and People’s Republic of China** Pan-Asia funds are those not limited to investing in particular regions or countries in AsiaSource: Asia Private Equity Review, 2005

January - June 2005(US $Billions)

Country-Specific

Region-Specific

Across-Asia Pan-Asia**

Total: $5.67 Billion

4

Distribution Of New Funds By Type*

Japan Only

$0.00 $1.00 $2.00 $3.00

Asia / Pacific Excluding Japan

$0.00 $2.00 $4.00 $6.00

Jan - Jun 2005

Buyout

Growth / Expansion

Technology

Debt

Infrastructure

(6) (12) (8)

(1) (13) (3) (3) (1)

* Numbers in ( ) denote number of fundsSource: Asia Private Equity Review, 2005

(2) (3)

(7) (2)

(US $Billions)

Total: $5.15B

Total: $1.58BJan - Jun 2004

Jan - Jun 2005

Jan - Jun 2004Total: $2.03B

Total: $0.52B

5

Fundraising – Source Of Funds

By Geography

49%

36%

14%

1%100% Europe

US

Japan

Asia

By Organization

38%

25%

17%

12%

3%

1%1%

5%

Corporates

Public Pensions

Financial Institutions

Government Organizations

Insurance Companies

Fund of FundsMultilaterals

Others


80%

60%

40%

20%

0%

January - June 2005

6

Invested Asian Private Equity

By Geography

$1.53

$0.77

$0.74

$0.60

$0.53

$0.35

$0.19

$0.06

$0.01

$0.01

$0.003

$0.30

$0.003

$0.00 $0.50 $1.00 $1.50 $2.00

Japan

China

S. Korea

USA

India

Australia

Singapore

Malaysia

Thailand

Vietnam

Taiwan

UK

Switzerland

By Industry

IT & Telecom

Healthcare

Infrastructure

Consumer Goods

Industrial Manufacturing Goods

Services

Banking and Finance

Food and Beverage

Construction

Energy / Natural Resources

$1.17

$1.02

$0.51

$0.46

$0.46

$0.41

$0.30

$0.30

$0.25

$0.10

$0.10

$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40

Media


January - June 2005(US $Billions)

Total: $5.09B

7

Exits

Divestment Profile: Asia (January – June 2005)

Number of Divestments: 87

IPO38%

Trade Sale57%

Others5%

IRRs Range*

449%1st Quartile

101%

97%2nd Quartile

54%

52%3rd Quartile

24%

23%4th Quartile

-38%

* Excluding Xinyi GlassSource: Asia Private Equity Review, 2005

8

Hong Kong

Taiwan

India

China

Representative Private Equity Investments In Asia

Date Announced Target Name Acquirer Name

Transaction Value

(US $Millions)

Jan-05 Hanfeng Power Plant CITIC Group; Huaneng PowerInternational Inc.

$450

Aug-05 China Pacific Life Insurance The Carlyle Group $400

Mar-05 Lenovo Group Ltd TPG, GA, Capstar, GapCo, Newbridge $350

Mar-05 MediaNation Inc JCDecaux Pearl & Dean Ltd $52

Aug-05 Hopson Development Holdings Limited

Aranda Investments Pte Limited; Tiger Global LP (formerly Tiger Technology LP)

$126

Aug-05 Best Quality Ltd Ace Level Investments Ltd $66

Sep-05 Media Partners Intl Hldg Inc JCDecaux Pearl & Dean Ltd $92

Sep-05 Top Regent(Asia)Ltd Ace Cosmos Finance Ltd $103

Aug-05 First Securities Co Ltd Taiwan Intl Securities Corp $80

Aug-05 Global Securities Finance CorpTaiwan Intl Securities Corp $257

Sep-05 Taiwan Yunda Sec Invest TrustYuanta Core Pacific Sec Co Ltd $68

Jul-05 Aircel Ltd Clarity Partners LP $75

Jul-05 Associated Cement-Refractory ICICI Venture Funds Mgmt Co $59

Jul-05 BPL Communications Ltd Essar Teleholdings Ltd $997

Sep-05 Shriram Hldgs(Madras)Pvt Ltd Newbridge Capital LLC $100

Deal Type

Minority Investment

Minority Investment

Minority Investment

Acquisition

Minority Investment

Control Investment

Control Investment

Acquisition

Acquisition

Acquisition

Control Investment

Minority Investment

Acquisition

Control Investment

Minority Investment

Source: MergerMarket / Thomson One Banker

9

South Korea

Singapore

Japan

Representative Private Equity Investments In Asia

(US $Millions)


Transaction Value Deal Type

Jan-05 BENEX Corp Tokio Marine Capital Co Ltd $97 AcquisitionJan-05 Daikyo Inc ORIX Corp $223 Minority InvestmentFeb-05 Sankei MKS Partners Ltd $153 Control InvestmentFeb-05 Seibu Railway Co Ltd M&A Consulting $4,113 AcquisitionMar-05 Daiei Inc Marubeni Retail Investment, DRF $590 Minority InvestmentMar-05 SDS Biotech KK SDS Biotech Holdings $96 AcquisitionMay-05 Recruit Co Ltd Advantage Partners, Aozora Bank $511 Minority InvestmentMay-05 Recruit Cosmos Co Ltd 13 investors led by Unison Capital Partners $339 Control InvestmentMay-05 SMBC Capital NIF Ventures Co Ltd $131 AcquisitionJun-05 Fujita Corporation Goldman Sachs Capital Partners,

Mori Trust Co. Ltd$384 Control Investment

Jul-05 Gakken Credit Corp NIF Capital Partners B $71 Control InvestmentAug-05 Shionogi Qualicaps Group The Carlyle Group, LLC $227 AcquisitionAug-05 Pokka Corp Advantage Holdings and management $209 AcquisitionSep-05 World Co Ltd Harbor Holding Alpha Co $1,960 Acquisition

Jan-05 Fila Korea Ltd Yoon Yoon-soo and management $130 AcquisitionJul-05 Hyundai Autonet Company Hyundai Motor Corporation; Siemens AG $233 Minority Investment

May-05 Parkway Holdings Ltd Newbridge, TPG-Axon Capital $188 Minority InvestmentJul-05 Raffles Holdings Ltd Colony Capital, LLC $1,014 AcquisitionJul-05 BIL International Ltd Guoco Group Ltd $707 Acquisition

Aug-05 MobileOne Limited SunShare Investments Sdn. Bhd. $157 Minority InvestmentAug-05 Asia General Holdings Ltd Southern Bank Bhd $551 Minority InvestmentSep-05 Mentor Media Ltd MM Holdings Ltd $100 Acquisition

Source: MergerMarket / Thomson One Banker 10

* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporate** Pan-Asia funds are those not limited to investing in particular regions or countries in Asia*** Started by Michael Kim, Carlyle Group's former co-head of buyouts in AsiaSource: Asia Private Equity Review, 2005

Fund Raising / Raised

Target 1st Close2nd/ Final

Close Captive* Buyout TechnologyGovernment Sponsored

Pan-Asia**

ADM Capital Adam Maculus Fund $500 $138Crest Capital Partners Value Monetization Fund $100 $33CVC Asia Pacific Ltd CVC Capital Partners Asia Pacific II, LP $1,000 $1,975

General Enterprise ManagementServices Ltd.

GEMS III Fund $300-500

H&Q Asia Pacific Asia Pacific Growth Fund V $500 $100HSBC Private Equity (Asia) HSBC Technology Asian Ventures Fund

Ltd $40-80 $40

Inter-Asia Venture Management InterAsia Capital $150JAIC Asia Capital Pte Ltd & UOBBioventures Management

UOB JAIC Venture Bio Investments $20 $12

Kendall Court Capital Partners Kendall Court Mezzanine (Asia) Fund I

$75 $35

MBK Partners*** MBK Partners LP $1,000 $750 Morgan Stanley Private Equity $500

Navis Capital Partners Navis Asia Fund IV, LP $250-300 Undisclosed Olympus Capital Holding Asia Olympus Asia Regional Fund $500 $180Pangaea Capital Management Pangaea Asia Special Investor Fund

$300

Pangaea Capital Management Pequot Pangaea Asia Opportunities Fund

$300

Pangaea Capital Management $900

TaiAn Technology Corp. Qi Hang Venture Capital

NT$1B (US$32m)

NT$1B (US$32m)

SEAVI Advent Corp SEAVI Advent IV Fund $100 $18 $70

1st FundLaunched

2005Fund NameGeographical Focus & Firms

Fund NatureStatus

January - June 2005(US $Millions)

11





Greater ChinaAsiaTech Ventures Ltd AsiaTech Knowledge IV $100 AsiaVest Partners TCW/YFY AsiaVest Opportunities Fund IV $300 $100 $270 London Asia Capital & GlobalEmerging Markets

Creater China Fund $200

SAIF Advisors SAIF II $500 $640

Shaw, Kwei & Partners Asian Value Investment Fund II $50 $25 $50WI Harper Group WI Harper INC Fund VI $100-150

1st FundLaunched


Fund NatureStatus

* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporateSource: Asia Private Equity Review, 2005

12





ChinaActis Capital Actis China Fund $200 undisclosedBioVeda Capital BioVeda China Fund $40 $40 CDH Investments CDH China Growth Capital Fund II $310 $162

China Enterprise Capital Ltd. China Enterprise Capital Fund $100 $30 $70

China Renaissance Capital Investment Inc. $1,000

Colony Capital / Shanghai IndustrialInvestment Corp

Yangtze Special Situations Fund $500 $100

Fortune Venture Investment Group Nanjing Fortune Communications Fund RMB200m(US$24m)

RMB30m(US$3.5m)

Gobi Partners, Inc. Gobi Fund, Inc. $75 $30 Infinity Venture Capital Fund Infinity-CSVC Ventures LP $75 Intel Capital Intel Capital China Technology Fund $200 Kingsway Group Golden China Resources Corporation $50 $17

MVC Corp $28 $28 SAIF Advisors Ltd. SAIF Growth Venture Capital $20 $20 Shenzhen Capital Group Co. China Dragon Fund $100-150 Shenzhen Capital Group Co. / Platium Neuron Ventures

China Isreal Venture Capital

$80

Softbank Investment Corp / TemasekHoldings

New Horizon Fund

$100 $100

SZVC-UOB Venture Management Co. SZVC II $50 Tsinghua Venture Corp. China Environment Fund 2004

1st FundLaunched


Fund NatureStatus


$30 $15

13





KoreaBogo Fund $988

H&Q Asia Pacific $400 $200 Hana Bank, Cambridge Capital PartnersIMM Private Equity

Hana-Cambridge-IMM Private Equity Partners $100-150

$50

Ilshin Investment Global Star Korea Fund $100-200 $50 JAFCO Asia Korea SME Fund $50 Mirae Asset Venture Investment Mirae Asset Partners No. 1 Private

Equity $96

Shinhan Private Equity $150

STIC Ventures STIC Pioneer Fund $19.2 $9.6Woori Capital Woori No. 1 Private Equity Fund $201

1st FundLaunched


Fund NatureStatus

Individuals Investors**

* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporate** Led by Byeon Yang Ho, a former official from the Ministry of FinanceSource: Asia Private Equity Review, 2005

14





JapanArise Capital Partners, Inc. Arise No. 1 LP $96 Biofrontier Partners Biofrontier Global II Investment

Enterprise Partnership$48-95

Biotech-Healthcare Partners $50-70 Biovision Capital Corp Biovision Lifescience Fund No. 1 $25 CITIC Provident Capital Management Ltd. CITIC Japan Partners LP $190 $140 $168 DLIBJ Asset Management & PolarisPrincipal Finance

$287

Dowa Mining Co. Dowa Techno Fund $45 Globis Capital Partners Globis Fund III LP $181 Japan Asia Investment Co. JAIC - Bio No. 2 LP $28.2 $20 Japan Asia Investment Co. JAIC Corporate Rehabilitation No. 1 $16.6 $8.3 JBF Partners $96 Longreach Group Longreach Capital Partners $500 $170 Mizuho Capital Co. Ltd. Mizuho Capital No. 2 LP $191 $149 NIF-PAMA Management NIF-PAMA Japan Private Equity Fund $300-500 $125 $132

SBI Ventures KK SBI BB Media Investment Corp Limited

Liability Fund $463 $185

Technology Alliance Investment Ltd. Innovation Carve Out Fund $138 $138

1st FundLaunched


Fund NatureStatus


15

Private Equity In China

16

Market Dynamics

SOEs

Hundreds of SOEs are considering selling, restructuring, or privatizing portions of their assets

This sector is dominated by insiders and difficult for foreigners to penetrate

Established Private Businesses

Typically manufacturing companies for export or for domestic markets

Entrepreneurs open to foreign capital for expansion or exit

Similar to foreign investors’ typical investment targets

The Technology Sector

China’s world-class universities, talented scientists, and strong research provide technical staff and knowledge

Typical exit is through foreign listing

Lack of sophisticated capital markets and investors makes (foreign) private equity favored option

17

M&A In China

The Number of M&A & MBO Deals in China Listed Companies

No. of M&A

No. of MBO

Source: 21st Century Business Herald

103 119168 172

94

12

5 8

8

020406080

100120140160180200

2000 2001 2002 2003 Q3'2004

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

Q12003 2004

Announced Mergers and Acquisitions - China

Value US $Millions

No. of Deals

Q2 Q3 Q4 Q1 Q2 Q3 Q42003 2003 2003 2004 2004 2004

0

10

20

30

40

50

60

70

Source: Thomson Financial / 21st Century Business Herald, 2005

18

Leading Private Equity Firms in China*

* In alphabetic orderSource: Zero2IPO, 2005

Foreign

Domestic Millennium Ark Investment Co

19

Representative Private Equity Investments In China

(US $Millions)


Transaction Value Deal Type

Jan-05 Hanfeng Power Plant CITIC Group; Huaneng PowerInternational Inc.

$450 Minority Investment

Mar-05 Huishan Dairy CLSA Private Equity, Japan AsiaInvestment

$15 Acquisition

Mar-05 Sichuan New HopeAgribusiness

IFC $45 Minority Investment

Apr-05 Inner Mongolia Yili Indl Co Huhehaote Investment Co Ltd $36 Minority Investment

Apr-05 Zhengzhou Yutong Bus Co Zhengzhou Yutong Group Co Ltd $13 Minority Investment

Jun-05 Shanghai Hongxing Optical HAL Investment Asia BV $26 Control Investment

Jun-05 Zhejiang Conba Pharm Co Zhejiang Zhongye Invest Co Ltd $12 Minority Investment

Aug-05 China Pacific Life Insurance The Carlyle Group $400 Minority Investment

Aug-05 Hunan Liuyang Fireworks CoLtd

Guangzhou Panda Intl Invest Co $7 Minority Investment

Aug-05 Insigma Technology Co Hangzhou Funeng Indl Co Ltd $9 Minority Investment

Aug-05 Liuzhou Liangmianzhen Co Led by Shantou Guangda $9 Minority Investment

Sep-05 Jiangsu Kanion Pharm Co Lianyungang Tianshi Investment $7 Minority Investment

Sep-05 Hans Laser Technology Co Shenzhen Dazu Indl Co Ltd $6 Minority Investment

Sep-05 Ningbo Beifa Group Standard Chartered Private Equity Ltd. $17 Minority Investment

Sep-05 Shanghai Feilo Acoustics Co Shenzhen Tsinghua Lihe Venture Capital Investment Co

$32 Minority Investment

Sep-05 Wuxi Worlbest Treeful Pharma Pharmaniaga Pegasus Seychelles $6 Minority Investment

Sep-05 Yuetan Supermarket China Resources Entrp Ltd $16 Acquisition

Sep-05 Zhejiang CikelongSupermarket

China Resources Entrp Ltd $35 Acquisition

Oct-05 Team & Sports Ltd Umbro PLC $12 Minority Investment

Source: MergerMarket / Thomson One Banker

20

Representative Strategic Investments In China


Transaction Value

(US $Millions)

Jan-03 PuDong Development Bank Citigroup $72

Dec-03 Industrial Bank Hang Seng Bank $208

Aug-04 Bank of Communications HSBC $1,750

Jan-05 Huaan Securities Merrill Lynch $32

Mar-05 Bank of Beijing ING Group $215

Apr-05 China Dragon Fund Management UBS Asset Management NA

Jun-05 China Construction Bank Bank of America $3,000

Sep-05 Beijing Securities UBS Warburg $210

Sep-05 Bank of China UBS Warburg $500

Sep-05 Bank of China Temasek Holdings $3,100

Sep-05 Bank of China Royal Bank of Scotland, Merrill Lynch, Li Ka Shing Foundation

$3,100

Sep-05 Industrial and CommercialBank of China

Goldman Sachs, Allianz, American Express

$1,100

Sep-05 Tianjin Bohai Bank Standard Chartered Bank $123

Sep-05 Huaxia Bank Deutsche Bank $330

Source: WSJ.com / Forbes.com

21

Venture Capital In China

22

Venture Capital Investment Trend In China

$542.53

$332.21

$438.06 $466.71$402.45

111

8180

51

66

$0

$100

$200

$300

$400

$500

$600

2003H1 2003H2 2004H1 2004H2 2005H1

0

20

40

60

80

100

120

Amount InvestedNumber of Deals

Source: Zero2IPO, 2005

(US $Millions)

23

What Are Investors Looking For In China…

Telecom, Media, and Technology (TMT)

– Web2.0 Blog, SNS, Online Dating/Community, RSS, Podcasting, IM, P2P, Search

– IPTV

– Mobile Contents/Applications Mobile Gaming, Mobile TV/Video/Radio, Flash Clips, Mobile Blog, Mobile

Dating/Community, Mobile Search, Mobile Commerce, Mobile Advertising

– E-Commerce B2B, C2C, B2C, C2B, Online/Mobile Payment

– Media Contents

Traditional Industries

– Fast Moving Consumer Goods/Health Products

– Financial services

– Chain Stores

– Education/Training

– Others…


24

Investments By Industry

Other High-tech7.4%

Services9.9%

Traditional14.8% IT

63.0%

Healthcare4.9%

Healthcare0.4%Other High-

tech21.5%

Services13.6%

Traditional11.5%

IT53.0%

By Number of Deals By Amount Invested


January - September 2005

25

Investments By Deal Stage

Pre-IPO2.5%

Start-up28.4%

Growth38.3%

Expansion12.3%

Mature6.2%

Unknown12.3%

Unknown9.6%

Pre-IPO20.3%

Mature27.1%

Expansion19.2%

Growth17.0%

Start-up6.8%

Number of Deals Amount Invested



26

Invested Capital By Industry

$0.05

$1.21

$1.50

$1.77

$3.37

$6.40

$7.00

$30.57

$40.40

$46.15

$51.28

$80.00

$129.27

0 $20 $40 $60 $80 $100 $120 $140

Environmental Protection

Computer Hardware & Peripherals

Software

IT Services

Internet

Services

Telecommunications

New Energy

Traditional

IC

New Materials

Healthcare

Opto-electronics


January - September 2005(US $Millions)

27

Number Of Deals By Industry

1

1

1

1

2

4

4

5

7

8

12

16

19

0 2 4 6 8 10 12 14 16 18 20

IT Services

Computer Hardware & Peripherals


New Energy

Opto-electronics

New Materials

Healthcare

Software

IC

Services

Traditional

Telecommunications

Internet



28

Average Deal Size By Industry

$0.44

$0.60

$0.67

$1.50

$1.60

$2.38

$3.85

$4.37

$6.84

$7.00

$8.62

$80.00

0 $10 $20 $30 $40 $50 $60 $70 $80 $90


Healthcare

Opto-electronics

Software

Computer Hardware&Peripherals

New Materials

Internet

Traditional

IC

Services

IT Services

Telecommunications

New Energy



29

Invested Capital By Geography

$38.93

$0.60

$0.93

$1.00

$1.29

$7.08

$17.55

$23.09

$24.33

$25.03

$90.87

$171.75

0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200

Unknown

Anhui

Hubei

Chongqing

Zhejiang

Hunan

Shandong

Shenzhen

Guangdong (excluding Shenzhen)

Shanghai

Jiangsu

Beijing



30

Number Of Deals By Geography

5

1

1

1

2

5

6

7

8

10

13

22

0 5 10 15 20 25

Unknown

Hubei

Hunan

Chongqing

Anhui

Jiangsu

Zhejiang

Shenzhen

Guangdong(Shenzhen excluded)

Shanghai

Shandong

Beijing



31

Investments By Fund “Nationality”

Type of VCNumber of

Deals Percentage

Number of Deals with Disclosed Amount

Disclosed Amount Percentage

Average Deal Size

Foreign 35 43.20% 32 $262.95 65.30% $8.22

Domestic 39 48.10% 39 $81.07 20.10% $2.08

Sino-Foreign Co-Investment

7 8.60% 7 $58.43 14.50% $8.35

Total 81 100.00% 78 $402.45 100.00% $5.16



32

Representative Chinese Venture Capital Deals

CompanyAmount Invested Business Investors

SunTech $80 Solar Cell and Module Actis, Goldman Sach, DragonTech, Natexis

Harbour Networks $37 Telecom Equipment TVG, Warburg, DragonTech

Acorn International

$35 TV Shopping SAIF Partners

ChannelSoft $31.5 Telecom SoftwareWalden International, China Science & Merchants

Allyes.com $30 Online Advertising IDGVC, Oak Investment Partners

JoyMedia $20 Media Contents SAIF Partners

ATA $14 Testing Service SAIF Partners

Bokee $10 Blog ServiceGGV, SAIF Partners, BVP, Mobius Venture Capital



33

Select Emerging Venture-Backed Companies

Ganji.comThe leading classified localized information service in China

TianyaClub.comThe largest online community in China.

XiaoIThe leading intelligent information search engine service provider.

BlogCN.comThe leading blog hosting service provider in China.

HeiYouThe leading Social Networking Service Provider in China.

Qikan.comThe leading online magazine subscription service provider in China.

ME-YOUThe leading mobile multimedia instant messenger service provider.

Panorama StockThe content provider of professional international photos

FonenetThe wireless value-added service provider.


34

Fundraising And Exit Performance

7 VCs closed new funds in the first half of 2005.The total amount raised was US$1.65billion, more than twice that of last year

17 VCs accomplished 19 exits from16 companies in the first half of 2005.The amount total exit is US$153million, lower than that of the first half of 2004


35

Exit Of Venture Investments In China

Exit Route Number of Exits Percentage Amount Exited Percentage

IPO 65 26% $574.63 51%

M&A 19 8% $151.67 13%

Trade Sale 122 49% $296.97 26%

MBO 13 5% $6.28 1%

Liquidation 2 1% $1.75 0%

Other 11 4% $31.75 3%

Unknown 18 7% $62.55 6%

Total 250 100% $1125.6 100%


2002 - 2004(US $Millions)

36

$ Value Of Those Exits

$218

$106

$802

106%

268%

0

100

200

300

400

500

600

700

800

900

2002 2003 2004

0%

50%

100%

150%

200%

250%

300%

Amount Exited Growth Rate


2002 - 2004(US $Millions)

37

Venture Capital Return Rate In China

IRR Number of Exits Percentage

Very High (Above100%) 22 11%

High (Between 30% to 100%) 28 15%

Average (Between 20% to 30%) 28 15%

Below Average (Between 10% to 20%)

31 16%

Low (Between 0%to 10%) 37 19%

Very Low (Between -10% to 0%) 10 5%

Poor (Below -10%) 3 2%

Unknown 33 17%

Total 192 100%


2003 - 2004

38

Venture-backed IPOs In 2005

CompanyListing Date Market Industry

Amount Raised Investors

Baidu.com 08/2005 NASDAQ Internet $109 DFJ, IDG, TDF, etc

Focus Media 07/2005 NASDAQ Media $171CDH, SoftBank, DFJ, , TDF, WI Harper, 3i,etc

GST 06/2005 HK Main Board Software $44 3i, etc.

Asia Silk 05/2005 SESDAQ Traditional $5 Sun Ventures

Longcheer 05/2005 SGX Telecom $18.37 DFJ, etc

TechFaith 05/2005 NASDAQ Telecom $141.8Intel Capital, Qualcomm Ventures, etc.

Hurray! 02/2005 NASDAQ Telecom $70.52 GGV, Fidelity, etc



39

IPO Pipeline

2002 2003 2004 2005 Strong IPO Pipelines

……2006-2008


40

http://www.qq.com/

http://www.51job.com/

http://www.bokee.com/

http://www.soufun.com/

Acquirer Acquiree

Venture-Backed M&A In China

Index Corporation



41


http://www.alibaba.com/

Potential Acquirers

Type I:China-based Public Companies

Type II:Private Venture-backed Companies

Type III:Foreign Giants


42

http://www.tom.com/


http://www.qq.com/

http://www.linktone.com/

http://www.hurray.com/chinese/index.htm

http://www.soufun.com/

Active VC Firms Year To Date

GSR Ventures

Localization of Top International VC Firms

New Emerging VCs in China

Rising Stars in Year 2005

Strong Investment Activities As Ever

The IPO Winners


43

http://www.sbaif.com/default.asp

http://www.dcmvc.com/default.asp?sID=home&lID=1&tid=

http://www.venturetdf.com/index.php

http://www.3i.com/index.html

http://www.venturetdf.com/index.php

2004 Zero2IPO Top 10 VCs

Eight of the Top 10 VCs in the year 2004 have raised new funds

The Top 10 ranking list in the year 2005 are expected to have significant changes from that in 2004

Domestic VCs may still lag behind in the next one or two years

1 Softbank Asia Infrastructure Fund

2 IDG Technology Venture Investment

3 Doll Capital Management

4 CDH Investment

5 New Margin Ventures

6 The Carlyle Group Asia

7 Warburg Pincus Asia

8 Legend Capital

9 Acer Technology Ventures

10 Shandong Hi-Tech Investment


44

Regulations And Industry Dynamics

SAFE circulars imposed negative effects on overseas IPO and the venture capital industry in China

Investment volume might slightly decline in 2005

Foreign VCs still dominate China venture capital industry at least in the next five years

Venture-backed IPO and M&A activities are expected to be more active in China

TMT industry became a primary focus for China venture capital industry and healthcare is under-invested but has great potential

Competition among VCs will be stronger especially on expansion and later stage deals; the top 10 VC rankings may have significant changes in 2005

More VC firms compete on experienced VC fund managers and investment professionals


45

State Of The Chinese Technology Capital Markets

46

5

10

15

20

2000 2001 2002 2003 2004 2005

Number of M&A Exits

0

5

10

15

20

2000 2001 2002 2003 2004 2005

OtherDual ListingSingaporeNasdaqHK GEMHong Kong

Chinese Technology Companies Have Historically Gone Public On The NASDAQ

IPO M&A

2000 19 20

2001 2 10

2002 2 4

2003 1 7

2004 16 5

2005 6 8

Total 46 54

Exit Strategy

In 2004, Nearly 50% Of Chinese Technology Companies Listed Solely On The NASDAQ

IPO Exit

M&A Exit

Dual Listing includes all companies listed on more than 1 exchangeOther includes Shenzhen, Tokyo, Shanghai and New YorkSource: SDC. Excludes transactions where IPO gross proceeds and M&A deal values were < $25 million

0

47

U.S. Listed Chinese Technology Companies Are Growing Rapidly

The Number Of NASDAQ And NYSE-Listed Companies In China Have Doubled Since December 2003

11 1112

13

26*

30*

0

10

20

30

40

50

60

70

80

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Current

0

5

10

15

20

25

30

35

Num

ber of C

ompanies

(Mar

ket C

ap in

$B

)

* 5 companies are listed on the NYSE. The remaining are listed on the NASDAQ

Aggregate Market Cap: Telecom

Aggregate Market Cap: Non-Telecom

Number of NASDAQ and NYSE-listed Companies in China

48

Chinese Technology Capital Markets Activity In 2004 and 2005 YTD

* As of 5/30/05. Source: Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ

Issue Date Name Offering TypeOffering Amount

TTM Revenue

TTM Revenue Growth

Quarters of Profitability

TTM EBITDA Margin

% Change From

Offering*TMC / TTM Revenue TTM P/E

8/5/05 Baidu.com IPO 109.1 16.8 253% 6 34% 169% NM NM

7/13/05 Focus Media Holding IPO 197.5 43.8 1,067% 8 42% 35% 14.73 x 22.86 x

5/5/05 China Techfaith Wireless IPO 141.8 59.0 510% 6 47% (39%) 14.60 x 31.30 x

2/3/05 Hurray! IPO 70.5 54.4 131% 6 37% (2%) 2.85 x NM

12/16/04 Ctrip.com Follow-On 92.8 36.6 121% 10 44% 37% 18.29 x 52.92 x

12/14/04 The9 IPO 103.3 3.4 183% 7 11% 19% 92.11 x 76.96 x

12/2/04 Ninetowns IPO 105.6 21.1 43% 15 66% (54%) 14.14 x 23.70 x

11/10/04 China Netcom Group IPO 1,141.1 7,663.4 10% 14 52% 40% 1.74 x 9.70 x

10/27/04 eLong IPO 62.1 13.3 94% 0 4% (6%) 20.48 x NM

10/22/04 Shanda Convertible Debt 275.0 102.7 161% 10 43% NA 15.56 x 48.43 x

10/15/04 China Finance IPO 80.6 3.5 122% 8 1% (56%) 37.08 x 77.84 x

10/7/04 Hutchison Telecom. IPO 808.7 1,597.8 32% 2 27% 31% 3.32 x 67.84 x

9/28/04 51job IPO 73.5 45.9 77% 10 25% (4%) 21.14 x 143.43 x

7/8/04 Kongzhong IPO 100.0 14.3 3,798% 5 41% 34% 12.67 x 30.00 x

5/13/04 Shanda IPO 152.4 72.6 84% 8 43% 150% 26.27 x 59.82 x

3/12/04 SMI IPO 1,712.9 365.8 627% 1 48% (55%) 7.89 x NM

3/5/04 TOM Online IPO 175.0 77.1 157% 4 30% 24% 5.60 x 13.90 x

3/4/04 Linktone IPO 86.0 15.5 285% 4 31% (20%) 3.94 x 22.60 x

High 1,712.9 7,663.4 3,798% 15 66% 169% 92.11 x 143.43 xMedian 107.4 44.9 144% 6.5 41% 19% 14.60 x 39.87 xLow 62.1 3.4 10% 0 4% (56%) 1.74 x 9.70 x

(US $Millions)

49

Typically, Chinese Technology IPOs Have U.S. Comparables…But With Unique Chinese Attributes

Valuation Drivers U.S. Comparable Exists Strong Revenue Growth Higher Customer Retention Recurring Revenue Streams Higher Operating Margins

Total Projected 2005 Enterprise Value / Revenue

Total Projected 2005 P/E

Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial

Intelligence

Wireless Value-Added

Services

11.71 x

6.18 x

0.66 x

14.96 x

4.66 x 2.61 x 3.45 x 3.72 x 4.44 x6.49 x

4.77 x 5.70 x 6.38 x3.02 x

Yahoo Sina Expedia Ctrip TSMC SMIC Monster 51Job EA Shanda Factset China Finance

JAMDAT Linktone Google Baidu

Online Search

21.76 x

54.96 x

Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial

Intelligence

Wireless Value-Added

Services

56.85 x

29.95 x16.18 x

42.20 x

14.80 x

NM

32.72 x

54.33 x

35.95 x

17.58 x24.64 x

29.33 x 27.28 x20.39 x

Yahoo Sina Expedia Ctrip TSMC SMIC Monster 51Job EA Shanda Factset China Finance

JAMDAT Linktone Google Baidu

Online Search

54.43 x

267.11 x

50

(US $Millions)

Private Equity / VC Investment Activity For Chinese Technology Companies Continues To Be Strong

Date Company Capital Raised Investor(s)Sep-05 Allyes $30.0 IDG, Oak Investment PartnersSep-05 Actions Semiconductor $80.0 (secondary) NEA, Intel Capital, HSBC, GIC, Shanghai Industrial, RimAsiaSep-05 Bokee NA Granite, Softbank, Bessemer, MobiusAug-05 Oriental Wisdom $8.0 Granite, TDFAug-05 SmartPay NA RRE Ventures Jul-05 A-Max Technology $60.0 General AtlanticJul-05 Mopsite $10.0 AccelJun-05 BeyondSoft $6.0 Japan-China BridgeJun-05 Target Media $20.0 Carlyle GroupJun-05 Fiberxon $20.0 Apax, GreylockJun-05 Worksoft $6.0-7.0 Legend, Doll CapitalMay-05 9you $5.0 Dragon GrooveMay-05 Tengwu Digi-Tech NA IDG, SumitomoMay-05 163888.net $0.2 IDGMay-05 Netmovie $4.0 IDGApr-05 Digital Media Group $6.0 Gobi Partners, NTT DoCoMo, DentsuApr-05 Zhongsou $16.0 Legend, Fidelity, IDGApr-05 Emay Softcom $10 IDGMar-05 Gasoft $7.6 Union Fortune InvestmentMar-05 Zhongsou $6.0 IDG, Legend CapitalMar-05 Lenovo $350 TPG, General Atlantic, NewbridgeMar-05 wap.3g.net.cn NA IDGMar-05 Pollex Mobile NA Jafco, IntelMar-05 HiChina / MyMai $12.1 IDG, NewbridgeMar-05 Harbour Networks $37.0 TVG Capital, Temasek, Warburg Pincus, DragonTechFeb-05 Easyeb NA Carlyle GroupJan-05 PRCEdu NA McGraw-Hill, TigerJan-05 Blogchina $0.6 Softbank, ShandaJan-05 V516.com $3.0 Rensheng FundJan-05 LinkRich $3.0 Siemens Mobile Acceleration, Morningside TechDec-04 Dangdang $11.0 Tiger TechDec-04 9you $14.0 Carlyle, China Merchants, Fortune, Sino-Korea WirelessDec-04 eFriendsNet / Yeeyoo $0.5 KongzhongDec-04 GST $20.0 3iDec-04 Huaya Microelectronics $13.0 Carlyle, Chengwei Ventures, Pacific VentureNov-04 Focus Media $30.0 Goldman Sachs, 3iNov-04 Soutec $16.9 NAOct-04 HiSoft $20.0 Granite, Intel, International Finance, JAFCOOct-04 Any8.com $5.0 IDGSep-04 Target Media $15.0 CarlyleAug-04 Smartpay $8.3 2b Holdings, strategic investorsAug-04 Great Wall Software $3.5 IDG, Qualcomm, Tom Online

Representative Chinese Technology Investments Over The Past 12 Months

While the majority of investment activity has been in the sub-$20 range, investors are increasingly gaining a higher level of comfort and looking to put more money into larger enterprises

VC firms raised nearly US$700 million in 2004 for investing in Mainland China

51

While Cross Border M&A Market In China Is Nascent, Deal Frequency Is On The Rise

Representative Chinese Technology M&A/Strategic Investments

Date Announced Target Name Acquiror Name

Transaction Value M&A Type

Sep-05 Chinasoft International Microsoft and International Finance Corp 35.0 Minority Investment

Sep-05 Langchao Group Microsoft 25.0 Minority Investment

Aug-05 Alibaba.com Yahoo! 1,000.0 Minority Investment

Jul-05 Soufun Trader Classified Media 22.5 Minority Investment

Jun-05 Longshine Amdocs 30.0 Acquisition

Apr-05 PCHome CNET Networks Inc. 11.0 Acquisition

Mar-05 Three-Five System International DisplayWorks 10.4 Acquisition

Feb-05 ChinaHR Monster.com 50.0 Minority Investment

Jan-05 PRCInvestment.com Reed Elsevier Conf. Acquisition

Jan-05 PRCEDU Corporation McGraw-Hill Education 18.0 Minority Investment

Jan-05 C-Valley THQ Wireless Conf. Minority Investment

Dec-04 Digital Media Group NTT DoCoMo 4.2 Minority Investment

Dec-04 eLong IAC/InterActiveCorp 167.0 Control Investment

Nov-04 Konka Thomson 18.9 Minority Investment

Oct-04 Zhongguancun On Line Corp CNET Networks Inc. 15.0 Acquisition

Oct-04 Fengniao Photography On LineCNET Networks Inc. 1.0 Acquisition

Aug-04 Joyo.com Ltd Amazon.com Inc 75.0 Acquisition

Jun-04 Ctrip.com Rakuten, Inc. 109.6 Minority Investment

Jun-04 Baidu.com Google Inc. 10.0 Minority Investment

Nov-03 3721 Network Software Co Ltd Yahoo! 120.0 Acquisition

Jun-03 EachNet.com eBay Inc 150.0 Acquisition

Key issues Few “willing” sellers Price expectations Post-acquisition

management and integration Cultural fit

(US $Millions)

52

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