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Transforming to be an Emerging Force in China's “Internet Economy”

Transforming to be an Emerging Force in China's “Internet Economy”. July 5, 2000. Mr. Zhuo Fu Min Chief Executive Officer. Partner: Shanghai Information Investment Inc. ("SII") Cross Investment: SIHL will pay US$120 MM for 20% of the enlarged share capital of SII

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Transforming to be an Emerging Force in China's “Internet Economy”

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  1. Transforming to be an Emerging Force in China's “Internet Economy” July 5, 2000

  2. Mr. Zhuo Fu MinChief Executive Officer

  3. Partner: Shanghai Information Investment Inc. ("SII") Cross Investment: SIHL will pay US$120 MM for 20% of the enlarged share capital of SII SII’s major existing shareholder’s wholly owned subsidiary has an option to acquire 50 MM shares of SIHL at HK$15.90 Governance / Management: SIHLappoints two directors to SII's Board SII’s major shareholder appoints one director to SIHL’s Board SII seconds a Chief Technology Officer to SIHL Joint Initiatives: Cooperate in the existing Shanghai Infoport projects Jointly participate in future investments Access to the international capital markets Transaction Summary

  4. SII Highlights • Investor and project manager of Shanghai Infoport • Owner of Shanghai’s key Internet infrastructure resources • Innovator of Internet-based business applications • Partner of international Internet and telecom players • Leading player in Shanghai and China’s Internet economy

  5. Leading player in China's Internet economy Pilot projects with national implications Unique core competence Strategic investors / partners International capital markets experience Overseas brand name recognition Public company management expertise Enterprise operating capability The "Win - Win" Partnership

  6. Strategic Repositioning - The Steps Formed Partnership with SII Formed S.I. Tech JV Fund with Temasek and Vertex Agreed to form Shanghai High-Tech VC Fund with SVCC Acquired Sunway Biotech Co. & Merger Ltd. Invested in Shanghai Optical Communications Development Co. 11/98 1/99 8/99 3/00 7/00

  7. Local Incubation Interactive cable services Certificate authority Credit infobank Bottleneck Solutions Internet exchange National Implications Over 100 MM cable subs in China China's e-commerce potential China's urban consumer population Global Internet Connection Facilitator of China's Internet economy Participating in Shanghai and China's “Internet Economy” - The Window of Opportunities Shanghai China

  8. 20% SIHL Joining the Unmatched Partners 8% SRFT 8% SOPC 5% SGEG 35% SAIL 35% SAIL 24% SPT

  9. Mr. Fan XipingPresident and DirectorShanghai Information Investment Inc. (SII)

  10. SII History Mature Growth Early Stage Development • Founded SII • Initiated ATM backbone project • Initiated CA project • Signed agreement with SFRT to upgrade cable network • Launched SIN, SCN & SHECA • Alliance with CMGI & Compaq • Launched a news portal (Eastday.com) • Signed JV contracts with AT&T and SPT • Took control over Cablenet and initiated Interactive Cable Services (ICS) • Strategic alliance with Gartner Group • Signed LOI with Microsoft to develop advanced web services • Initiated Shanghai broadband fiber network • Initiated SHIX project • Signed with TI to provide broadband access solutions (DigiVision) • Launched Credit Infobank (CIS) Milestones Timeline 9/97 3/98 6/98 10/98 12/98 8/99 11/99 1/00 5/00 6/00

  11. Strategic Advantages • Uniquely positioned to invest in "bottleneck" projects • Ability to create synergies among investments • World class partners (e.g., CMGI, AT&T, IBM, Microsoft, Texas Instruments, Gartner Group & GTE) • Financing capability • Strong government / shareholder sponsorship

  12. Operating Strategies • Focus on value creation • Build and operate • Seek strategic partners • Apply advanced technologies and management skill sets • Incubate in Shanghai and apply in nationwide scale

  13. In Operation In Development Business Focus Telecom / Internet Infrastructure Value-Added Services E-Commerce Enabler 51% ICS (2) (Interactive Cable Services) SHECA SCN Converged offerings of Internet access, VoIP, e-commerce and VoD Certificate Authority for E-Commerce Cable network with 3 MM subs 51% 45% Broadband Fiber Network AT&T JV(TelecomVAS) CIS Broadband fiber network builder and operator IP-based applications for MNCs Credit Infobank 15% 35% 100% Infonet EastDay.com Community Network 800 community Internet access points ATM / IP backbone 30% 10% 12.5% News portal SHIX (1) SII IPS (3) 100% Internet professional services Internet exchange DigiVision (1)SII has 100% operating rights (2) SCN owns 100% of ICS project (3) SII’s ownership in IPS varies among projects Broadband access solution provider 50%

  14. SPT / China Telecom owns the remaining 70% The only ATM backbone in Shanghai, one of the largest metropolitan area ATM backbones in the world 1,545 fiber km length 8 Core Nortel Passport 15K switches, 41 Concoder ATM switches expanding to 268 Carriers' carrier for ISPs and national telecom carriers entering the Shanghai market LQA revenue of US$ 0.26 MM North District South West District Pudong District Shanghai Online ChinaNet ATM Platform South District National Broadband Backbone Infonet - ATM Backbone - Carriers' Carrier

  15. SCN - 2-Way Broadband Alternative Cable network before upgrading One-way and analog 49-450 MHz transmitting 36 analog TV signals Cable network after upgrading Two-way, digital and interactive Set-Top Box 5-860 MHz transmitting 90 digital & analog TV signals TV PC Tel

  16. Bank ICS - Next Gen. Converged Offering E-Commerce Multimedia Voice over Cable Broadband Internet Access

  17. Network Profile First pilot telecom service project in China open to foreign investors Connected to AT&T Global Network Facilities-based AT&T managed Services to be launched late 2000 Targeted Customers MNCs Services / Applications VPN Other IP-based value-added services AT&T Pudong JV AT&T JV - Next Generation Telecommunication Operator

  18. Bank ISP Internet Certificate Center(SHECA) Customer / Consumer SHECA - E-Commerce Enabler

  19. Only Internet exchange in Shanghai Connected to international backbones Solve traffic bottleneck and facilitate China's Internet development Aim to become a major regional and national Internet exchange center Unicom Jitong ICS CNC SHIX - Local and International Internet Exchange Overseas Internet Shanghai Router Router Router Router SHIX

  20. Business Objective VAS Enabler Cable Network DigiVision ATM/IP Backbone Internet Exchange Infrastructure Synergistic Investment Shareholder Value Interactive Cable Services AT&T JV EastDay.com Certificate Authority Credit Infobank Community Network Internet Professional Services Broadband Fiber Network

  21. Capital Requirements (US$ MM) 2000 2001 2002 Infonet (ATM / IP Backbone) $ 8.7 $ 3.1 n.a. SCN 74.6 63.9 18.4 Network Upgrading 66.2 49.6 n.a. Interactive Cable Services 8.4 14.3 18.4 Broadband Fiber Network 55.6 52.9 n.a. Internet Exchange Center 2.4 0.5 n.a. AT&T JV Capital Contribution 9.0 5.5 4.9 Total $ 150.3 $ 125.5 $ 23.3 * Exchange rate: US$ 1 = RMB 8.2

  22. Infonet ATM Revenue Projection CAGR 80% * Exchange rate: US$ 1 = RMB 8.2

  23. ICS Revenue Projection CAGR 188% * Exchange rate: US$ 1 = RMB 8.2

  24. Leading player in China's Internet economy Unique core competence Pilot projects with national implications Strategic investors / partners International capital markets experience International brand name recognition Public company management expertise Enterprise operating capability The "Win - Win" Partnership

  25. Mr. Zhuo Fu MinChief Executive Officer

  26. SIHL's Strategy • Committed to full-scale transformation • Cultivate new high-growth businesses through acquisitions • Upgrade and transit selected traditional businesses to e-commerce based by leveraging SII’s investments and new technologies • Divest non-core and stagnant businesses • Achieve substantial repositioning through forming partnership with SII • Identify and seek synergies between SII's and SIHL's investments

  27. SIHL and SII Joint Initiatives • SII seconds a Chief Technology Officer to SIHL • SIHL invests directly in existing projects • Jointly participate in future investments • Co-operate in promoting businesses in China • Seek international partners to participate in SII’s projects • Access to the international capital markets

  28. E-Commerce Meets The "Old Economy" Case Study - Shanghai Bright Dairy and Food • A 200-plus convenience store network • Scope of products available for delivery is currently over 1,300 • Over 232,000 subscribers and 25% of the total volume is delivered through its distribution network

  29. The Perfect Match Shareholders value creation

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