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Fra Presentation Final

  1. 1. Jefferies & Company, Inc. China Venture Capital, IPO & M&A Discussion The 2 nd Annual Investing in China & India Summit June 19-20, 2006 CONFIDENTIAL DRAFT
  2. 2. The Global Investment Bank Of Choice For Growth Companies <ul><li>A leading institutional brokerage and investment banking firm – led by one of the most powerful capital markets trading platforms in the industry </li></ul><ul><li>The Leading Sales and Trading platform for NASDAQ stocks </li></ul><ul><li>#1 High Yield underwriter (under $150 million) </li></ul><ul><li>Leading emerging growth equity research </li></ul><ul><li>Most rapidly growing full service investment bank on Wall Street </li></ul><ul><li>Technology Group of Jefferies with over 90 tech bankers </li></ul><ul><li>Highly differentiated approach to the market with dedicated sector teams globally focused on full-service relationship banking </li></ul><ul><li>Jefferies Broadview is the M&A platform of choice in technology </li></ul><ul><ul><li>Since 1998 Jefferies Broadview has advised on 440 technology transactions globally worth approximately $67.3 billion </li></ul></ul>Technology Group (Jefferies Broadview) Jefferies <ul><li>Wall Street Journal, March 2004. </li></ul><ul><li>Market Capitalization as of May 10, 2006. </li></ul><ul><li>Revenue represents FY2005 ending December 31, 2005. </li></ul>Austin San Francisco Los Angeles Dallas Houston New Orleans Chicago Nashville Atlanta Richmond Boston Stamford New York Jersey City Washington London Paris Zurich Tokyo Sydney** Melbourne** Silicon Valley Israel* Waltham Hong Kong* Shanghai New Delhi <ul><li>Publicly-held (NYSE:JEF) </li></ul><ul><li>The #1 performing stock price of investment banks over the past 10 years (1) </li></ul><ul><li>$4.0 billion market capitalization (2) </li></ul><ul><li>$1.5 billion in annual revenue (3) </li></ul><ul><li>Over 2,000 employees in 27 offices worldwide </li></ul><ul><li>50%+ Employee Owned </li></ul>Cities in red indicate Jefferies Broadview locations, * Affiliates $0 $10 $20 $30 $40 $50 $60 4/22/99 11/22/99 6/22/00 1/22/01 8/22/01 3/22/02 10/22/02 5/22/03 12/22/03 7/22/04 2/22/05 9/22/05 3/20/06 1 Investment Dealers Digest 2005 Middle Market Bank of the Year
  3. 3. Jefferies Delivers The Full Spectrum Of Products And Services To Technology Clients <ul><li>Investment Banking </li></ul><ul><li>Leading banking franchise focused on high growth companies with over 400 Investment Bankers (nearly 100 in technology) in over 20 offices worldwide </li></ul><ul><li>Equity Offerings – Completed over 230 IPO and Follow-on offerings, raising over $40B since 2000 </li></ul><ul><li>M&A – Ranked #1 in technology M&A advisory assignments in 2006YTD, 2005 and 2004 (1) </li></ul><ul><li>Private Equity - Regular dialogue and relationships with over 250 financial sponsors </li></ul><ul><li>Restructuring - Restructured approximately $150 billion in securities and liabilities </li></ul><ul><li>Equity </li></ul><ul><li>Over 135 account executives cover over 2,200 institutional accounts; make markets in over 4,000 stocks </li></ul><ul><li>#2 YTD volume trader of NASDAQ and OTC stocks; #3 trader in 2005 (2) ; handle over 10% of NYSE volume; top 5 trader in nearly 2,000 NASDAQ stocks </li></ul><ul><li>Over 100 research analysts covering over 700 companies </li></ul><ul><li>Debt </li></ul><ul><li>Dedicated high yield team of over 40 experienced senior professionals </li></ul><ul><li>Integrated sales, trading, research, capital markets and banking functions </li></ul><ul><li>#1 underwriter of mid-cap high yield debt (3) ; led by team that joined Jefferies Broadview from Drexel Burnham Lambert </li></ul>Investment Banking Equity Asset Management Debt Cash Management Capital Partners High Yield Private Placements Structured Finance Trading Sales Research Capital Markets Industry Coverage Mergers and Acquisitions Financial Sponsors Restructuring Private Client Services Offers A Full Suite Of Investment Banking Products And Services To Serve High Growth Companies Throughout The Corporate Lifecycle (1) Source: SDC, 1/1/2005 - 12/31/2005. (2) Source: Autex, 1/1/2005 - 12/31/2005 (2005), 1/1/2006 – 5/19/2006 (YTD). (3) Source: SDC, 1/1/2005 - 12/31/2005. <ul><li>Asset Management </li></ul><ul><li>Private Client Services / Cash Management – advisory, portfolio management and customized financial solutions </li></ul><ul><li>Jefferies Capital Partners - more than $685 million in private equity funds under management </li></ul>2
  4. 4. Considerable Asian Investment Banking Experience Japan Korea * Transaction completed by team at previous employer Greater China $106,000,000 Initial Public Offering Co-Manager has completed a Series C Round of Financing $37,000,000 has divested its broadcasting equipment subsidiary TV/COM International, Inc., to Confidential Confidential has been acquired by HK$ 882,000,000 Management 速达软件 Superdata Software 速达软件 Superdata Software India has been delisted from the Hong Kong GEM in a management-led buyout sponsored by Initial Public Offering Co-Manager Initial Public Offering Co-Manager Initial Public Offering Co-Manager Sole Placement Agent $13,000,000 Ambow Education has sold a minority stake to $50,000,000 Convertible Notes Offering Sole Manager $160,000,000 has been acquired by 3 CHF80,000,000 Co-Manager Initial Public Offering Joint Book Runner $1,803,000,000 SMIC * $62,000,000 has been acquired by $80,600,000 Initial Public Offering Co-Manager China Finance Online Co. Limited $165,100,000 has divested its Handset Division to has divested certain manufacturing assets to Confidential formerly the graphics unit of Confidential has restructured its Digital Media Business and Merged its Graphics Business with Initial Public Offering Sole Book Runner $92,479,037 * Silicon Motion Initial Public Offering Lead Book Runner $71,454,555 * $30,000,000 has sold certain mobile computing assets to Pequot Capital National Semiconductor Pericom Semiconductor and other investors Och - Ziff Capital has agreed to be acquired by Financial Advisor to the Seller $324,000,000 Access Co. Ltd. Confidential has been acquired by has been acquired by $90,000,000 Financial Advisor to the Seller has been acquired by Confidential Confidential has made a minority investment in Uniccs Co. Ltd. has sold a minority interest to Confidential Confidential has sold a minority stake to $450,000,000 has acquired $38,000,000 has acquired has been acquired by Softbank Kingston Technology Corporation Confidential has been acquired by Softbank $30,000,000 has made a minority investment in SunUp Design Systems, Inc. Electronics Inc. Confidential $34,500,000 Convertible Bond Placement Sole Manager $28,750,000 Convertible Notes Offering Sole Manager $32,200,000 Convertible Notes Offering Sole Manager $38,000,000 Co-Manager $50,000,000 Co-Manager $34,500,000 Convertible Bond Placement Sole Manager $139,800,000 Initial Public Offering (ADS) Co-Manager $80,500,000 Convertible Bond Placement Sole Manager $45,000,000 Convertible Notes Offering Sole Manager Nahar Industrial Enterprises Ltd. $33,000,000 Convertible Notes Offering Sole Manager The Simbhaoli Sugar Mills Limited $50,000,000 Convertible Notes Offering Sole Manager $160,813,125 Initial Public Offering Co-Manager $30,000,000 Convertible Notes Offering Sole Manager ¥11.3 billion $100,000,000 Convertible Notes Offering International Financial Advisor
  5. 5. Representative Asian Investment Banking Services <ul><ul><li>Mergers & Acquisitions Advisory </li></ul></ul><ul><ul><ul><li>Buy-side or sell-side cross border M&A advisory </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Japan: PalmSource/Access, Airborne/Cybird, Zingy/For-Side </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>China: Ross Systems/CDC, Audiovox/UT Starcom </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Korea: Integrant/ADI </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Private equity/hedge fund sponsored buyouts </li></ul></ul></ul><ul><ul><ul><ul><li>Example: Superdata Software delisting from HK stock market </li></ul></ul></ul></ul><ul><ul><li>Equity, Equity-Linked and Debt Financings </li></ul></ul><ul><ul><ul><li>IPO listings: U.S. NYSE/NASDAQ, London AIM/Euronext, Japan Mothers </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>China: China Finance Online (U.S.), Ninetowns (U.S.) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Japan: Gung Ho (Japan), Cybird (Japan) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>India: Patni (India & U.S.) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Convertible financings </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>India: HEG (Euro), GHCL (Euro), Bilcare (Euro) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>High yield and bank debt financing </li></ul></ul></ul>Jefferies provides Asian clients with the same broad range of investment banking services offered to U.S. and European clients 4
  6. 6. China Venture Capital, IPO And M&A Market Overview 5
  7. 7. Why China? <ul><ul><li>Market Opportunity </li></ul></ul><ul><ul><ul><li>Most populous nation in the world </li></ul></ul></ul><ul><ul><ul><li>Fastest growing large scale economy (9%+ annual growth) </li></ul></ul></ul><ul><ul><ul><li>Chinese math: “If I could sell 1 widget for US$1 to each Chinese person…” </li></ul></ul></ul><ul><ul><li>Global Supply China </li></ul></ul><ul><ul><ul><li>Silicon Valley (VCs), Wall Street (Capital Markets), Main Street (Wal-Mart) </li></ul></ul></ul><ul><ul><ul><li>What isn’t “Made in China”? </li></ul></ul></ul><ul><ul><li>Factors of Production </li></ul></ul><ul><ul><ul><li>Land: Grants, loans, subsidies, banquets </li></ul></ul></ul><ul><ul><ul><li>Labor: More engineers than anywhere in the world </li></ul></ul></ul><ul><ul><ul><li>Capital: LPs > GPs > Entrepreneurs </li></ul></ul></ul><ul><ul><ul><li>Entrepreneurship: Little Emperors & Sea Turtles </li></ul></ul></ul>China has all the ingredients to become a dominant force in the global technology food chain 6
  8. 8. Venture Investment In Chinese Companies Remains Hot… Total VC Investment In Chinese Companies Since 2002 (US$millions) Source: Zero2IPO <ul><li>Key Trends </li></ul><ul><li>Technology continues to attract the most investment </li></ul><ul><li>Increase in average deal size </li></ul><ul><li>Money continues to flow into China but demand for quality investment opportunities not being met </li></ul>2005 was a record year in terms of VC money raised with over $4 billion raised to invest in China. 2006 is on pace to be another big year with $904 million raised in Q1 2006. $418 $992 $1,269 $1,173 $334 226 170 253 228 42 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2002 2003 2004 2005 Q1 2006 0 50 100 150 200 250 300 Total Invested Deal Count 7
  9. 9. …With Chinese Technology Leading the Way Announced Chinese Technology VC Investments Year-To-Date Source: SDC; as of May 31, 2006 Within the technology sector, Internet and Digital Media continue to be the hottest areas of interest 8
  10. 10. Where Has The Money Gone? <ul><ul><li>Internet </li></ul></ul><ul><ul><ul><li>#2 Internet market by users </li></ul></ul></ul><ul><ul><ul><li>#1 Mobile Internet with 400MM mobile users (highest ratio to desktop users) </li></ul></ul></ul><ul><ul><ul><li>Broadband penetration and 3G will only accelerate usage </li></ul></ul></ul><ul><ul><li>Software and Services </li></ul></ul><ul><ul><ul><li>#1 growth market opportunity for software /service companies </li></ul></ul></ul><ul><ul><ul><li>Distinction between software and service is unclear </li></ul></ul></ul><ul><ul><ul><li>SaaS primary method of delivery </li></ul></ul></ul><ul><ul><ul><li>Political incentives to promote open source </li></ul></ul></ul><ul><ul><li>Semiconductors </li></ul></ul><ul><ul><ul><li>#1 semiconductor growth market </li></ul></ul></ul><ul><ul><ul><li>Strategically supported by the government </li></ul></ul></ul><ul><ul><ul><li>Value chain established: foundries, packaging, test, assembly, design </li></ul></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><ul><ul><li>#1 communications investment cycle </li></ul></ul></ul><ul><ul><ul><li>3G holds promise as “mother of all upgrade cycles” </li></ul></ul></ul><ul><ul><ul><li>Foundation for Internet, Semis, Software, etc. </li></ul></ul></ul>Capital is flowing to all of the natural segments of the technology value chain; albeit at different rates and stages of development 9
  11. 11. Where Will The Money Go? <ul><ul><li>Internet </li></ul></ul><ul><ul><ul><li>Rich Media, Mobile, Security </li></ul></ul></ul><ul><ul><li>Software and Services </li></ul></ul><ul><ul><ul><li>Financial Services, Healthcare, Energy, Open Source </li></ul></ul></ul><ul><ul><li>Semiconductors </li></ul></ul><ul><ul><ul><li>Digital Media </li></ul></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><ul><ul><li>Optical, Wireless, IPTV </li></ul></ul></ul><ul><ul><li>Healthcare </li></ul></ul><ul><ul><ul><li>Medical Devices, Biotechnology, Services, Facilities </li></ul></ul></ul><ul><ul><li>Energy </li></ul></ul><ul><ul><ul><li>Solar, Wind, Fuels </li></ul></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><ul><li>Schools, Distance Learning </li></ul></ul></ul><ul><ul><li>Defense </li></ul></ul><ul><ul><ul><li>Weapons </li></ul></ul></ul>Capital will continue to flow in past sectors but new ones will emerge 10
  12. 12. Foreign IPOs Outside of Mainland China Continue To Be Exit Of Choice For Chinese Companies Source: Thomson Financial, CapitalIQ; as of June 16, 2006. Dual listed companies listed by primary exchange. Other exchanges includes London AIM, Mothers, Kuala Lumpur, SG SESDAQ and TSXVenture. Total Number Of Chinese IPOs By Exchange Total Amount Raised Through Chinese IPOs By Exchange Hong Kong New York Nasdaq Singapore Shenzhen Shanghai HK GEM Other Avg. IPO Amt. Since 2000 $262 $1,896 $98 $21 $56 $79 $19 $31 (US$Millions) $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2000 2001 2002 2003 2004 2005 2006YTD 0 50 100 150 200 2000 2001 2002 2003 2004 2005 2006YTD 11
  13. 13. But Recent End Of Yearlong Ban On Share Sales Marks Potential Return Of Domestic China IPO Activity Shanghai Stock Exchange IPO Volume 2004-2006YTD Shenzhen Stock Exchange IPO Volume 2004-2006YTD Shanghai and Shenzhen Stock Exchange Relative Performance Source: Thomson Financial, CapitalIQ; as of June 16, 2006 China CAMC Engineering’s $55mn IPO, the first since the moratorium was lifted in May, was 576x and 100x oversubscribed for the retail (80%) and institutional (20%) portions, respectively. Shares begin trading on June 19. The domestic markets in China have been on a rebound in 2006 but have given back some gains recently due to profit taking and concerns over liquidity as new IPOs flood the market Median IPO Proceeds Since 2004: $43mn Median IPO Proceeds Since 2004: $27mn 12
  14. 14. Nasdaq Continues To Be The Listing Venue Of Choice For Technology Companies But Record Is Mixed Source: Thomson Financial, CapitalIQ; as of June 16, 2006 Chinese Technology Nasdaq IPOs Since 2004 (US$Millions) <ul><li>Key Observations: </li></ul><ul><li>YTD06 and FY05 issuances (8) approximately same as FY04 (9) </li></ul><ul><li>Although only 6 IPOs trading below IPO price, aftermarket performance tends to be binary </li></ul><ul><li>IPO Sectors: Software/Internet (11), Media (1), Semis (2), Telecom Equipment (1), Med Devices (1), EMS (1) </li></ul><ul><li>Absent Sectors: Financial Technology, Healthcare/Bio Technology, Education, etc. </li></ul>13
  15. 15. There Continue To Be Few Chinese Technology IPOs On Other Exchanges But We Predict This Will Change Chinese Technology IPOs Ex-Nasdaq Since 2004 (>US$10MM Raised) Note: Includes IPOs >$10MM. Companies listed by primary exchange. (US$Millions) <ul><li>Dual Listed Nasdaq Technology Companies </li></ul><ul><li>Tom Online: Nasdaq / Hong Kong </li></ul><ul><li>Nam Tai: Hong Kong / Nasdaq </li></ul>14
  16. 16. The London AIM Market Has Seen An Increasing Number Of Large, International Companies Over The Last 24 Months 13 80 70 22 28 14 17 7 5 5 5 5 0 25 50 75 100 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Q1/2006 Distribution of AIM Companies by Market Value Number of companies Companies With Equity Capitalization Greater Than US$90MM (UK£50MM) Number of IPOs As of March 31, 2006 Average market capitalizations make UK AIM a viable IPO option for Chinese companies that would be “small or mid-cap” in the U.S. New entrants above UK£50MM create an asset class favored by institutional investors 15
  17. 17. While Overall M&A Activity Has Been Declining, Technology M&A Has Been On the Rise Technology M&A Transactions Involving Chinese Targets With Deal Value >$20mn Since 2000 All M&A Transactions Involving Chinese Targets With Deal Value >$20mn Since 2000 Source: Thomson Financial; as of June 16, 2006. Includes completed deals with announced consideration and involving the acquisition of >50% ownership. Over 40% of these transactions were cross-border deals Over 50% of these transactions were cross-border deals (US$Millions) 16
  18. 18. Summary: Predictions For 2006 And 2007 <ul><ul><li>Chinese Companies Increasingly Looking To List Outside U.S. </li></ul></ul><ul><ul><ul><li>London, Hong Kong, Singapore and Tokyo represent real alternatives with less stringent listing requirements </li></ul></ul></ul><ul><ul><ul><li>Hong Kong, in particular, will continue to attract Chinese IPOs given proximity to Mainland and relatively lax disclosure requirements for exchange of its size </li></ul></ul></ul><ul><ul><ul><li>Growing number of Chinese technology companies below the US$300MM valuation range will choose to either list in London/Hong Kong or grow to larger scale before listing in U.S. </li></ul></ul></ul><ul><ul><ul><li>Variety will continue to grow, reflecting diversity of Chinese economy </li></ul></ul></ul><ul><ul><li>M&A Will Increasingly Be Deemed a Viable Exit Strategy </li></ul></ul><ul><ul><ul><li>Uncertain, volatile capital markets environment </li></ul></ul></ul><ul><ul><ul><li>Will IPO valuations reflect China “premium” or “emerging market discount”? </li></ul></ul></ul><ul><ul><ul><li>Realization that being public is only the “beginning” </li></ul></ul></ul><ul><ul><li>Accelerating Cross Border M&A as China’s Global Impact Grows </li></ul></ul><ul><ul><ul><li>China is top strategic priority for many international firms </li></ul></ul></ul><ul><ul><ul><li>Overseas investors (particularly U.S.) increasingly looking to make acquisitions and strategic investments in China – in several cases at “IPO-level” valuations! </li></ul></ul></ul>17
  19. 19. Contact Information <ul><li>David A. Liu 刘大伟 </li></ul><ul><li>Managing Director </li></ul><ul><li>US Tel: 650-573-4803 </li></ul><ul><li>China Tel: 86-1371-823-9325 </li></ul><ul><li>Email: dliu@jefferies.com </li></ul><ul><li>Wei Z. Hopeman 张晨为 </li></ul><ul><li>Vice President & Chief Representative </li></ul><ul><li>US Tel: 650-573-4883 </li></ul><ul><li>China Tel: 86-1391-830-6556 </li></ul><ul><li>Email: whopeman@jefferies.com </li></ul><ul><li>Randy C. Wang 王鸿宇 </li></ul><ul><li>Shanghai Representative </li></ul><ul><li>China Tel: 86-1368-198-5889 </li></ul><ul><li>Email: rwang@jefferies.com </li></ul>18

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