Beijing Youth Daily Newspaper Agency - 65.75

Company Subsidiaries:

• Beijing XiaoHongMao Newspapers And Periodicals Distribution Services Co., Ltd. Distribution of domestic newspapers, magazines and books
• Beijing Youth Daily Logistics Co., Ltd. 50.5% Warehousing logistics, printing and sales of print-related materials Media Online
• Beijing Youth Daily (¡§BYD Net¡¨) 57% Information and web transmission technology service
• Shanghai Beiqing Printing Machinery Limited 35.35% Sales of print-related materials
• Beijing Youth & Ynet Advertising 29.07% Design and production of advertisement and advertising agency service

The Group is a PRC media company principally engaged in the sale of advertising space, production of newspapers and trading of print-related materials, and they have recently expanded into event organising.

The principal advertising medium is the Beijing Youth Daily, the second-ranked newspaper in Beijing based on circulation level in 2002. The controlling shareholder is BYD (Beijing Youth Daily Newspaper Agency), which is owned and operated by the Beijing Municipal Government.

The Group aims to become the leading media company in the PRC. They ranked first in Beijing and among the top three in the PRC in the first half of 2004 in terms of advertising revenue generated from a newspaper according to Beijing Huicong Media Research Centre.

They sell advertising space in the BYD Papers, in particular the Beijing Youth Daily. The customers consist primarily of domestic and international advertising agents with a small proportion of direct advertisers.

They are responsible for layout, one of the areas of production of the BYD Papers, which consists of arranging and organising different sections of a newspaper and each page of a newspaper. They perform the layout duties through the centralised computer system.

Separate from the Printing Business, BYD Logistics also trades in print-related materials. BYD Logistics enters into supply agreements with various printers, including but not limited to the 20 printers responsible for printing the BYD Papers, pursuant to which the printers purchase the print-related raw materials consisting of newsprint (for printing publications other than the BYD Papers), ink, PS boards, lubricants and films from BYD Logistics on a non-exclusive basis, essentially for the printing of publications other than the BYD Papers.

As part of the strategy to widen the service offering, they have recently expanded into event organising by organising the 2004 China Open.

The Group is one of the top media companies in the PRC based on newspaper advertising turnover. The principal strengths include:

• strengths of the Beijing Youth Daily platform;
• support from the Beijing Municipal Government;
• established relationships with key customers and large customer base;
• rights to organise and market the China Open; and
• experienced and market oriented management team.

• Reliance on the BYD Papers and Advertising Business Agreement with BYD
• Reliance on advertising and the Beijing real estate and property market
• Reliance on support from the Beijing Municipal Government
• Increasing competition in the print media advertising industry and from other advertising media
• Uncertainty of the profitability of organising the China Open
• Implementation of strategies
• Fluctuations in the cost of newsprint
• Uncertain title to certain properties leased by them
• They are controlled by a small group of the existing shareholders, whose interests may differ from other shareholders
• Payment of dividends is subject to restrictions under PRC law
• The prior dividend policy differs from that which will be in effect after the Global Offering, and past dividends are not likely to be indicative of future dividends
• They have a limited operating history
• The current rate of the BYD Fee is higher than the historic rate
• Recent negative operating cash flow
• Taxation

The primary business objective is to become the leading PRC media company. To meet this objective, they seek to grow and expand the business organically and to make selective acquisitions, investments and/or form strategic alliances in targeted segments of the media industry.

They seek to further strengthen the existing advertising business from the BYD Papers. In particular, they aim to develop the advertising business for a weekend edition of the Beijing Youth Daily.

They seek to further strengthen the market position and expand the existing business by making selective acquisitions and investment in other segments of the media industry.

They seek to further grow the print media business by investing in a number of weekly and/or monthly topic-focused magazines that focus on the management of personal financial affairs, lifestyle and cultural information.

They seek to expand into other segments of the media industry including the television industry. They believe the television industry of the PRC presents opportunities that complement the existing business. They are exploring a number of investment opportunities including the production of non-restricted television programmes and contents in exchange for airtime on selected television channels. The airtime received from these television channels would include advertising airtime which thee can sell to their advertising customers. They believe the entry into the television industry will enable them to expand the offerings to both existing and future customers.

The Group estimates the net proceeds of the Global Offering accruing to them (after deduction of underwriting fees and estimated expenses payable by them in relation to the Global Offering, assuming the Over-allotment Option is not exercised and assuming an offer price of HK$16.95 per H Share, being the midpoint of the proposed offer price range of HK$14.95 to HK$18.95 per H Share) to be approximately HK$677 million (HK$778 million if the Overallotment Option is exercised in full).