1. PGray® China Mid Quality Market Model Historically China’s market structure has been premium-end served by MNC’s, and low-end served by local companies China’s economic development has enabled local producers to evolve developing “adequate quality” products to serve the rapidly developing and price sensitive mid market segment Local Chinese, Chinese JV and MNC customers are becoming less willing to accept a 70% to 100% price premium for established international brands. At most they may accept a 20% price premium based on the brands perceived uniqueness and value. Consequently, China’s mid market segment is growing faster than both the premium-end and low-end segments The development of the mid market segment is coming from 2 directions, local Chinese customers are trading upward from low-end products to “adequate quality” products, and premium-end Chinese JV and MNC customers willing to accept less expensive, locally produced alternative products of “adequate quality” Definitions The US and Europe are fully developed economies and highly sophisticated markets. These are the primary export markets for Chinese mid market products. China is arguably a developing economy and less sophisticated. Is it really reasonable to expect that Chinese customers and consumers will accept higher priced US or EU imported premium products considering Chinese mid market products are accepted internationally? Premium-end market (Narrow) Mid market (Rapidly expanding) Low-end market (Evolving) High-end products purchased by discerning customers Products of adequate quality, produced by local companies for a rapidly expanding group of value-seeking / price sensitive customers Products of lower quality, meeting basic needs, produced by local companies for a large group of highly price sensitive customers Peter Gray Consulting Strategic International Marketing http://www.petergrayconsulting.net/

2. PGray® China Mid Quality Market Model 13% 62% 25% The structure of China’s market for televisions Leading Producers: Panasonic, Philips, Sony Product Features: LCD and plasma screens, many state-of-the art user features, priced according to their status as international brands. Leading Producers: Hisense, Skyworth, TCL Product Features: LCD, plasma, and large cathode-ray tube screens, with limited user features, priced to undercut foreign brands. Leading Producer: Konka Product Features: Cathode-ray tube screens with basic standard user features and low-cost components, priced to sell. Is the Chinese “adequate quality” mid market segment attractive? MNC’s need to consider the long term attractiveness of the premium segment and their current market position, capabilities, and profit contributions versus the emerging mid market segment opportunity Peter Gray Consulting Strategic International Marketing http://www.petergrayconsulting.net/

3. PGray® China Mid Quality Market Model Premium Mid Low 10% 30% 60% 9% 32% 59% A “This year” B “Next Year” The structure of China’s market for PVC / CPVC Piping Adhesives Is the Chinese “adequate quality” mid market segment attractive? MNC’s need to consider the long term attractiveness of the premium segment and their current market position, capabilities, and profit contributions versus the emerging mid market segment opportunity Market Value $US’000 Premium market share Mid market share Low market share A - Base $10,000 $1,000 $3,000 $6,000 B = A+10% AGR $11,000 $990 $3,520 $6,490 Actual segment GR% -1% +17% +8% Peter Gray Consulting Strategic International Marketing http://www.petergrayconsulting.net/