Western XX FMC Business Plan(2004-2007)

1. Western XX FMC Business Plan(2004-2007) to be further discussed (Confidential)

2. Content 1、Profile of Western XX Asset Management Co.,Ltd. 2、Organizational Structure 3、Business Development Strategies 4、Roadmap 5、Assumptions and Forecast 6、Sales Breakdown in 2005

3. 1、 Profile of Western XX Asset Management Co.,Ltd.

4. Registered Capital and Share Structure Registered Capital: RMB 100 million Registered Place: Pudong District, Shanghai, China Proposed Share Structure: Western Securities Co., Ltd. RMB 40 million Other foreign sponsor RMB 33 million Shaanxi Investment Group Co.,Ltd. RMB 27 million

5. Business Scope • Fund management and investment advisory business in China as permitted by the applicable law. (incl. promotion, sale,issuance and management of investment funds) Other asset management business permitted by the applicable law.

6. Vision, Philosophy and Strategy Vision One of the leaders in the great China wealth management Philoshophy Investors‘ benefits are everything Strategy Brand, Service and Product all in one

7. Business Goal • Grow the JV into one of the top 5 FMCs in China, in the following three categories: • Profitability • Fund Performance • Total AUM • Professionalism

8. 2、Organizational Structure

9. FMC‘s Organization Chart (at the beginning) BOD Chairman(1) CEO(1) Head of Compliance(1) CMO(1) CIO(1) CEO/COO(1) Sales& Customer Service (5) Marketing &Product development (3) Auditing& Compliance (2) Fund Account -ing &TA (3) Trader (2) Fund Manager (2) IT (2) Admin &HR (2) R&D (5) 32 persons in the 1st year(proposed)

10. FMC‘s Organizational Chart (in 3 years ) CEO Head of Compliance CMO CIO COO Fund Sales Dept. Compliance office TA Marketing Dept. Fund dealing Dept. Customer Service Dept. IT Dept. Fund Manage -ment Dept. HR& Admin. Dept. R&D Dept. Info. disclosure Market -ing & Product develop -ment Fund Account- ing OA Auditing &Supervis -ing System maintain -ence Strategy research Industry & Company research Central dealing room Finance engineer -ing Call center Agency sale Direct sale

11. Structure of Governance The shareholders’ meeting Board of supervisors Qualification examination and compensation committee Board of directors The compliance committee CEO Head of Compliance

12. Structure of Business Operation CEO Head of Compliance Risk control committee Investment decision committee Fund appraisal group CMO CIO COO

13. 3、Business Development Strategies

14. Distribution Channels Clients base Local market acknowledgement Adding long-term value 22 branches, strategic cooperation with ICBC, CCB etc. 700，000 individual clients, main institutional clients exceed 400 Excellent performance record, good reputation , Strong government support, Opportunities from the development of western China Professionalism International experience Product development International standard in FM. & research Organizational Know How; International management team Fund product innovation& importation

15. Outsourcing Market Segmentation Research and Development Value-added business Product Design Fund Transaction/ Investment Management Promotion/Fund Distribution Risk Control/ Performance evaluation Customer Service HR/ Administration Non value- added business TA/ Fund accounting Compliance IT Maintenance Internal Audit Outsourcing to the reliable third-party

16. Market analysis Market volume 182 billion units in 2003 Growth rate Aver. annual growth rate 50% New opportunities QFII,National Security Funds asset allocation Deregulation in fund issuance procedure Customer segmentation Institutional v.s. Individual clients 40%v.s.60%(estimate) Internal sales package A.M. clients transfer into funds holders … Market Segmentation

17. Customer Needs Anlysis

18. Customer Segmentation Identifying the needs of domestic customers • Institutional clients : Fixed income,low risk,cash flow management • Individuals clients : Growth,Small and middle cap,active management Fee Structure varies according to client base • Institutional clients: Low subscription and redemption fee • Individuals clients: Varies according to the period of holding • Deciding on distribution channels, depending on target groups • Institutional clients : Direct sales/custodian bank recommendation • Individuals clients : Agency sales via banks, securities houses etc.

19. Present fund products Equity,bond,balance,hybrid,index, money market,guaranty etc. Competition products Deposit, fund biding insurance, asset management, trust, underground fund etc. Development plan Meet the needs of main clients group Product frame Based on capital market environment Image/Brand … Product Strategy

20. Product Frame Equity Fund Balance Fund HighRiskLow LowReturn High Bond Fund Money Market Fund Guaranty Fund Fund Type

21. Distribution methods Direct sales to main institutional clients Agency sales through agency banks, securities firms, China Unionpay etc. E-business through website and call center … Distribution channels Present channels banks, securities firms,internet etc. Channels selection 3-4 commercial banks,10 sec. firms Incentive scheme front-load fee kickbacks Binding promotion flight tickets,insurance,credit card,lottery etc. Distrubution

22. Investment Strategies Active / Passive Benchmark Error tracking Performance evaluation/Risk management Reporting system Research Top to down /Bottom up Investment strategies Listed companies research Modeling Stock-based loan … Investment Management

23. IT framework TA (Self-establishment / The third-party supporting) Software and hardware selection Customer service system Company web OA Human resources & General Administration The number of staff Core employees Job description Training Corporate finance and administration Operational management

24. Auditing and supervising Fund and company assets auditing Behavior supervising Risk evaluation Firewall Emergency event handling scheme … Public relationship Relationship with CSRC, the exchanges and securities association Legal affairs, information disclosure, international business … Compliance

25. 4、Roadmap

26. Initial Process in Seting up JVFMC • Sign the Joint Venture agreement and the article • Set up joint preparatory team • Prepare application documents required by CSRC • Obtain the approval of establishment • Recruitment and training • Install the equipment and software of JVFMC’s operation • Fund product development and key clients contact • Setup of contracts with custodian bank and distributors • Promotion • Fund issuance

27. Period The Number of Fund ,Total AUM (in billion unit) The Number of Staff,Location of Branches Short-term (1-2 year) Num of funds: 1-2 Series funds the first year: 6-8 billion the second year: 9-15biliion 32-45 Beijing,Shanghai、Guangzhou、Shenzhen,Xi’an Medium-term (5 year, top 10) Num of funds: 7-8 funds Mutual funds: 30-50 billion Pension funds: 25 billion Mandates: 25 billion 60-85 Major cities in China mainland & Hongkong Long-term (8-10 year, top 5) Mutual funds：80-100billion Pension funds & mandates：60billion International business：10billion Other asset management business: 10billion 100-120 Taiwan 、Singapore and other Asian countries Short-/Medium-/Long Term Target Setting

28. 5、 Assumption and Forecast

29. Macroeconomy • GDP growth rate • 7%-8% annually • Inflation rate • Under 1% • Resident Savings • 20% growth annually

30. Shareholder Concept • Share transfer • Capital Expansion 67% Or Call Option to 49% Maintain33% 33% 2003 2004 2005 2006 2007

31. Earning Distribution Concept Share Capital& Resource Dividends& Service fee JV-FMC Dividends& Service fee Share Capital& Resource Dividends destribution bases on share stucture Service fee based on the shareholders‘ contribution to JVFMC under SLA SLA and the payment method are to be discussed under the real legal enviroment

32. Market Share (By the end of 2003) • Total Mutual Fund The num. Of FMCs The num. Of Funds • 182 billion units 47 112 • Scenario Growth Rate Market Share • (in 3 years) • Optimistic Scenario 60% 5% • Realistic Scenario 45% 3.5% • Pessimistic Scenario 30% 2%

33. Fee rate Structure 0.25% 1-1.5% 1% 1% <=3% 0-1% 0.6-0.75% 0.2% 1% <= 1.5% 0-1% 1% 0.2% 1% <= 1.5% 0-1% 0.33% 0.1% * NA NA * 0.25% sales service fee charged

34. Setup Cost • 2004.3-2005.3 12 months • Space 1000 M2 (Constructional area) • Rent US$0.70/M2 / D (Aver, standard) • Decoration 850 yuan /M2 0.85 million(Aver, standard) • Computer Center 1 million • Furniture/PCs 32 0.80 million • Automobile 3 1.2 million • IT costs 11 million • (TA,OA,hardware,software etc.) • Depreciation method straight line

36. Staff Cost • 7 employees in establishing period aver. RMB10,000 yuan/m per • Operational period • Number of employee 32,45,55 in 2003-2007 • Base salary according to the position • Bonus 30%-120% of base salary • aver. 40% in BP • No compensation for foreign staff by JVFMC

38. Operational Cost(2005-2007) • Rent 2.1 million /y • IT maintenance 1.1 million/y, 10% of IT costs • Traveling and meeting 3.2-6.2 million • Marketing and Promotion 11-21.5 million • Research and development 2.1-3 million • Compliance 1.05-1.25 million • Consulting 5.175 million /y • Administration 0.6-0.84 million • Sales tax 5% • Income tax 15%

40. Revenue,Profit and Cashflow Forecast Optimistic Scenario

41. Realistic Scenario

42. Pessimistic Scenario

43. 6、 Sales Breakdown in 2005

44. Asset allocation of Chinese insurance Company 1999 2000 2001 2002 2003 Bank Deposits 926 1235.4 1930.6 3026.2 4549.6 Bonds 678.5 956 795.8 1107.8 1409.9 Funds 14.8 133.5 209 307.8 463.3 Other Assets 984.8 1049 1655.9 2052.3 1958.7 Total Assets 2604.1 3373.9 4591.3 6494.1 8378.5 Direct Sales Unit: RMB 100 million yuan ASSUME that funds invested by insurance companies increase by 50 percent annually and 1 percent market share taken by JVFMC; around RMB0.7bn units will be sold to insurance companies

45. Potentials from Other Financial Institutions ex Banks • Total assets of finance companies are RMB346bn, net assets are RMB32.2bn by the end of Jun. 2002 • Major finance companies in China : • China Electric Power Finance Co., China Petroleum Finance Co., China Petrifaction Finance Co., HuaNeng Finance Co., Zhongwu Finance Co. etc. • Trust & Securities Co. owns RMB250bn assets by the end of 2002 • Including: Western Trust&Investment Co., JinSin Trust Co., Ping An of China Trust Co., Ai Jian Trust Co., Shangdong Trust Co. ect. ASSUME that 10% of total assets of these institutions are allocated into mutual funds and 1% market share taken by JVFMC; more than RMB0.55bn funds will be sold to these companies

46. NaCSSeF/Houese Reserve/Listed Companies • Total assets of National Council for Social Security Fund (NaCSSeF) are around RMB124.1bn by the end of 2003 which of 40 percent is permitted to flow into securities market • Total assets of National House Reserve are 346.7bn by the end of 2003, and 1.5% of total sum managed by Shaanxi Provincial House Reserve • According to the bulletins of China Securities Journal, trust assets of listed companies managed by securities companies exceed RMB 3bn in 2003 ASSUME that around RMB20bn assets of NaCSSeF allocated into mutual funds and 1 percent market share taken by JVFMC; 0.2bn units funds will be sold to NaCSSeF ASSUME 5% share of Shaanxi Provincial House Reserve taken by JVFMC, that is 0.25bn units

47. State-owned Enterpirise Groups (Strategic partners) • Shaanxi Provincial Investment Group • State-owned investment holding company with a registered capital of RMB3bn; to manage the governmental enterprises, real estate and financial assets more than RMB15bn by the end of 2002 • HanNan Airlines Group • Listed company invested by American Aviation Ltd., and total assets exceeding around RMB20bn; more than sixty thousand employees • Shaanxi Provincial Electric Power Co. • Fully held byNational Electric Power Co., Ltd; total Assets exceeding RMB 24bn and by the end of 2002; sustained long-term growth and abundant cash • China HuaNeng Group, China LuNeng Group, Jiangsu Electric Power Co., Guizhou Electric Power Co., Zhejiang Electric Power Co., China International Traveling Group, Zhong Hai Group … …

48. Non-profit Organization (Good relationship ) • Universities and affiliated companies • Xi’an Jiaotong University, Northwestern University, Northwestern Polytechnical University, Xi’an Fanyi University, Chang’an University, Tongji University, Shanhai Financial University, Fudan University, Xijing University, Ouya University, Zhejiang University Tianjin University, Nankai University, Nanjing University etc. • Hospitals and affiliated institutions • Xi Jing Hospital, Xi’an Dianzi Hospital, Xi’an Wujing Hospital, Eastern Hospital, Huaxi University etc. • Charity funds association • Yanlin Agriculture Development Funds, Yanlin Industry Development funds, Shaanxi Architecture Industry Fund etc.

49. Internal Sales Package • ASSUME • 100,000 units purchased by each top-level manager • 50,000 units purchased by each middle-level manager • 10,000 units purchased by each ordinary employee • Product package should be well designed for individual investor, and the return should be superior to the market benchmark • Employee can purchase JVFMC’s funds at discount front-end fee rate

50. Internal Sales Estimation Unit: RMB Million yuan