My thoughts on investment opportunities in China despite the current global crisis!

1. “ Opportunity in China’s Consumer Economy – A Safe Bet in the Current Financial Crisis” PROPRIETARY & CONFIDENTIAL Nov 2008

2. PROPRIETARY & CONFIDENTIAL THE TOP 10 - How China is learning to love spending! Increasingly affluent consumers are playing a significant role in turning China into a market economy, with department stores and supermarkets tipped to benefit the most as disposable incomes grow. It comes as little surprise, then, that the country is well represented in our look at the top 10 retail companies across the region in terms of return on equity. Chris Wright fashions the facts from the fiction. There is a consumption revolution happening in China", says HSBC analyst Matt Marsden. It's a key component of the country's broader economic and social development, and its pace is accelerating. "It's all part of the process of China becoming a market economy, and the consumer plays a very important part in this," he says. "There's a very interesting fundamental story and the equity market is there and ready to finance it." Take, for example, shoes. Even if we look only at Chinese companies listed in Hong Kong, there was one listed shoe company in early 2007; now there are five. "There is a whole sub-sector of footwear stocks that didn't exist a year ago," says Marsden. "If you look at the evolution of the department store sector you've got a similar story." Indeed, the growth of this sector in China is the area that has had the greatest impact on Asiamoney's monthly Top 10 chart of Asian companies with the highest return on equity, which for March focuses on the retail sector. Golden Eagle, Parkson and Lifestyle International all feature in our top 10. They are all growing dramatically. Golden Eagle, profiled on page 80, logged a 64.1% year-on-year increase in profits attributable to shareholders in the first half of last year, to Rmb195.8 million (US$27.4 million). Parkson, the China arm of the Malaysian Lion Group's retail business, is growing almost as fast: its profit went up 54.7% over the same period, to RM303.5 million (US$94.3 million). It manages 39 stores in 26 Chinese cities today and in the first half of last year alone executed new lease agreements to add 40,000 square metres of retailing space to its portfolio. And Lifestyle International, best known in Hong Kong for the Sogo stores in Causeway Bay and Kowloon, has launched the same model in China through its Jiuguang Department Store, which opened in September 2004. Flush with the success of that approach, in October it bought 59.4% of the equity in a sino-foreign joint-venture which owns the Xian Tian Xia Square retail shopping complex in Shijiazhuang, Hebei Province, for Rmb538 million (US$75m). It is also building and redeveloping properties elsewhere in China: complexes should open this year in Suzhou, Dalian and Tianjin, with others to follow in Shengyang, Qingdao and Harbin. Wealth of evidence The Chinese retail sector is attracting more and more attention. ABN Amro analyst Katherine Chan spent part of October visiting 20 department stores in the country and seeing the management of groups including Golden Eagle, Parkson, Intime, Peace Mark and Seagull Watch. "We walked away with more confidence in the Chinese department store sector," she says, noting that the wealth effect of strong stock markets pushed national retail sales up 17.1% year-on-year on the first half of 2007. "Historical data suggests that people tend to spend less on food and other necessities as disposable income grows. We believe department stores will benefit most in this environment since they do not sell daily necessities, apart from a tiny proportion of sales from supermarket food items." Whether that remains the case given the more recent turmoil in stock markets remains to be seen. But even if that dampens the top-end department stores, there is also a growing supermarket sub-sector in China, with listed companies including Wumart, Times Supermarkets and Jiahua. "Supermarkets are a robust business," says Marsden. "They don't fall off a cliff. People need food, they will always shop for consumer staples. A more modern supermarket format offers them more choice, sometimes at lower prices, in a clean, modern, air-conditioned or heated environment for Mr and Mrs average consumer China." And if the good times do continue to roll in China, then the presence of luxury retail names will be maintained. Our top 10 list includes two groups in this category: Ports Design, a fashion and luxury goods company, and Xinyu Hengdeli, which represents 50 international watch brands in China. Peace Mark, also in the watch industry, falls just outside our list, in 11th place . 2008 Issue (Pre-Crisis) “ There is a Consumer Revolution Happening in China….”!!

3. Convergence of Critical Factors- Foundation laid by Government Consumer-focused Stimulus of USD586 Billion Market Opportunity : Why China? Timing Opportunity : Why Now? Govt Stimulus : Drive Growth Recent equity market corrections to multi-year lows presents buying opportunity at lower valuations! China “few” global bright spots – focus of Global Co Consumerism extend to 3/4 th tier cities Established record of successful exits Deliberate Drive to Domestic Economy Few growth sectors remaining Internet “pushing” consumer knowledge Reduction of taxes; incentives for pvt investment Infrastructure spending to create jobs Improve social network-push use of savngs Update

4. Govt Stimulus – Can it Drive Consumer Spending? PROPRIETARY & CONFIDENTIAL

7. Market Opportunity – Change in Chinese Consumer? PROPRIETARY & CONFIDENTIAL

9. People Opportunity PROPRIETARY & CONFIDENTIAL China’s Domestic Retail Sales Continues to Grow even in 2008 Retail Sales Increase of 22% yoy in Oct 2008 ; Wage growth may sustain spending – rural income increase at faster rate of 11% in first 9 mths 2008 Update 1H2008 domestic consumption contrinuted 50.2% to econpmic growth Becoming increasingly important driver for economic growth

10. People Opportunity PROPRIETARY & CONFIDENTIAL Typical Profile of China’s Emerging Middle-Class China’s Consumers Have Unique Characteristics Cash-Driven Consumer Economy Consumer Behaviour in the Inner Cities can differ significantly

11. People Opportunity PROPRIETARY & CONFIDENTIAL Economic boom has seen growth in domestic consumer brands Chinese Domestic Consumer Brands are Building Own Strengths Domestic brands ranked higher than foreign brands in trust Recent survey shows domestic brands’ strength in service; price appears less valued by consumers Update Offering Opportunities to Invest and Grow Local Brands Superior Service Quality & Response Customised to local tastes & habits Long historical heritage Established distribution network

12. PROPRIETARY & CONFIDENTIAL Internet is an Integral Part of the Chinese Consumer Economy helping to drive various sectors eg. Domestic travel, shopping.. Update China already has world’s largest internet population of over 260M Steady growth in cyber economy /online shopping supported by boom in online payment services Online clothing will be largest segment with sales of RMB 17B in 2008 Internet companies has significant role in consumer economy

13. Timing Opportunity – Foreign PE Continues to Invest PROPRIETARY & CONFIDENTIAL

16. Recent Transactions in China Consumer/Retail Remains Active Fund Invested Company Deal Size (USD M) Remarks Beijing Hotpot Actis $50 For over 50% stake in a hotpot chain with 60 stores in Beijing and Tianjin Ambow Educational Co. Actis $103 Chinese educational provider targeting middle school WoWo Convenience Chain ARC $10 Marketing 7-Day Inn Actis $65 Best Roast Chicken Shenzhen Venture NA 2008 Top ten fast-food chain in China. Revenues over RMB 680M 老百姓大药房 EQT Partners NA Chamate Tea House Oak $23 60 stores across Bejing, Shanghai, Hangzhou,Nanjing Jiaguang Mart Co. Carrefour RMB40M Acquisition of hypermarket chain Xi'an Aijia Commerce Co China Resources RMB600M Acquisitition of supermarket chain Metersbowen IPO Raised RMB1.38B Casual wear apparel chain with over 2000 stores and overseas outlets Little Lamb Hotpot IPO Raised HKD780M Well-known nation-wide hotpot chain invested by 3i Fujian New Hua Du Supermart IPO Raised HKD2.55B

17. Investment Strategy – Immediate & Longer Term PROPRIETARY & CONFIDENTIAL

21. Investment – Potential Cases PROPRIETARY & CONFIDENTIAL

25. 2 Case Quick Datasheet for Hongguo Recent Share Price (SGX, SGD) Results for FY2007 Key Financial Ratios vs Peers (HKD) Invest USD10-15M for 10-15% stake, partner with existing institutional shareholders to drive “Value-Creation” Consistently under-valued by >50%; strong growth opportunity as retail network still small and brand is well-recognised Hongguo Prime Success Belle Key Brands CBanner, EBanner Daphne Belle, Staccato, Teenix Retail Network 700+ 2000+ >3000 Exchange SGX HKEX HKEX Revenue (2007) 740M 3B 6B EPS 0.05 0.18 0.15 P/E 7X 20X 44X Market Cap. 0.8B 6B 55B Shareholders UBS, Templeton, Morgan, NewSmith - -

27. 2 Case Quick Datasheet for Glorious Sun (JeansWest) Recent Share Price (HKEX, HKD) Results for FY2007 Key Financial Ratios vs Peers (HKD) Potential Management/Shareholder “Buy-out” from existing family. Significant opportunity to leverage on brand, distribution network in China plus cash “warchest” to create value. Consistently under-valued by 20%-30%; growth and margins by could be improved by 5-10% with professional management; substantial cash reserves of HKD1Bn under-utilised Glorious Sun Giordano LiNing Key Brands JeansWest Quiksilver/Roxy Giordano LiNing, Kappa Retail Network 1400+ 1000+ >3000 Revenue (2007) 4.5B 4.3B 4.4B EPS 0.26 0.14 0.5 P/E 14X 20X 40X Cash 1 BN 720M NA Market Cap. 3.9B 3.9B 20B

29. 3 Case Quick Datasheet for Beauty China Recent Share Price (SGX, SGD) Results for FY2007 Key Financial Ratios vs Peers (HKD/RMB) Invest USD15-20M for 15-20% stake, @7X ;partner with management to “Create-Value” Consistently undervalued player in China’s growing cosmetic market, with substantial cash-in-hand (HKD200M+) Beauty China Shanghai Jahwa GZ Softto Key Brands Colorzone, Charming Lady Chinhei, cocool, maxam, etc Softto Retail Network 1500+ >3000 >2000 Exchange SGX Shanghai EX (600315) SZSE Revenue (2007) 650M 2.3B 500M EPS 0.45 0.6 0.3 P/E 7X 50X 26X Market Cap. 1.2B >50B 2.4B