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BcInvestmentDueDiligenceAssessment23December1999bcSNG2Z5112OSFDisclaimerTheinvestmentopportunitydescribedbelowhasnotbeenrecommendedorapprovedbyBain&Company,Inc.oranyofitssubsidiaries.Norepresentationorwarrantyismadeastotheaccuracyorcompletenessoftheinformationcontainedinthismemorandum.OliverStrattonandJimHildebrandtaredistributingthismemorandumintheirindividualcapacitiesandnotasrepresentativesofBain&Company,Inc.oranyofitssubsidiaries.Anyinvestmentin51net.comwillnotbeguaranteedbyBain&Company,Inc.oranyofitssubsidiaries.bcSNG3Z5112OSFAgenda•ExecutiveSummary•DetailedBusinessAssessment–USMarketBenchmarks–ChinaMarketDynamics–51net.comFinancialsbcSNG4Z5112OSF•AttractiveonlinerecruitmentmarketspaceinChinawithhighgrowthpotential•Differentiatedclick-and-mortarbusinessmodel(onlineandnewspaper)witha16monthoperatinghistoryand~US$1Min1999revenue•Current#1or#2positionin3keycitymarkets(0.7RMSinBeijing,5.5RMSinShanghaiand0.3RMSinGuangzhou)•Nocompetitorhaslockedupexclusiverelationshipswithkeyportals-maintaining#1or#2positionappearstobearealisticgoal•CapablemanagementincludingheadofBain’sChinapracticeand3formerBainconsultants•Realisticbusinessplantargets(inPrivatePlacementMemorandum)withadditionalupsideiftimingofadjacentbusinessroll-out(eBay,Buy.combusinessmodelsforChina)isaccelerated(businessplanfinancialsare99%drivenbycorerecruitingbusiness)•ExposuretopotentiallysignificantsovereignriskgivenChina’sunclearregulationsonforeignownershipandoperationofinternetbusinesses•ExpectedinvestmentreturnsbasedonbusinessplanforecastsandcomparableUSonlinerecruitmentvaluationmultiplesareattractive(basecase:3.8Xreturnonmoney,57%IRR),butnotblockbuster(highcase:7.9Xreturnonmoney,99%IRR)ProsConsSummaryInvestmentEvaluationExecutiveSummarybcSNG5Z5112OSFExecutiveSummarySource:OneSource;SGCowenSecurities;AnalystReports;CompanyWebsites•51net.comisaChina-basedstart-upcompanyestablishedin1998focusedontheonlinerecruitmentmarket•Itskeypartnerteamincludes1Bainpartner(RickYan)and3formerBainconsultants•51net.comisseekingtoraiseUS$3Minexchangefora5%equitystakeinthebusiness•UnderlyingChinaonlinerecruitingmarketgrowthandpenetration(includedinbusinessplantargets)•Adjacente-businessopportunities(notincludedinbusinessplantargets)•51net.comhasaclick-and-mortarbusinessmodelforjobplacements,consistingof–anewspaper,CareerPostWeekly,launchedinOct1998–awebsite,51job.com,launchedinJan1999•Itiscurrentlyoneoftheleadingplayersineachofthehigh-endmultinationalrecruitmentadvertisingmarketsofBeijing,ShanghaiandGuangzhou–500,000readership–relationshipwith5,000HRmanagers–resumebankhas50,000subscribers(highlyeducatedprofessionalsandmiddlemanagers:relativelyaffluent,highlypaidcustomerbase)•51net.comistargetinggrowththroughacombinationofinitiatives:–growthofcoreonlinerecruitingbusinessinexistingandnewcitymarkets–embarkingonadjacente-businessopportunitiestoserveitscoreaffluentcustomerbase(ebay,buy.combusinessmodelsforChina)–developing51net.comintoanumbrellabrandwithastrongportfolioofverticalapplications–establishingane-commercebusinessincubatorBackgroundStrategyandbusinessmodelInvestmentupside•China-specificlegalandregulatoryrisk•Intrinsicallylowentrybarriers•SpeedinreachingscaleKeyrisksInvestmentOverviewbcSNG6Z5112OSFBainroleBusinessPlanDevelopmentAccountingAdvisoryBoardRecruitingSupportCreativeSeedFundingTemporaryManagementTechnicalFundraisingSupportLegalFacilities/SpaceStrategicPartnerIntroductionsCriteriaMarketpotentialBusinessconceptLeadershipopportunityTeamBainvalueaddedBainlearningBaincompensationCompany:51net.comProposedTerms:ToinvestUS$0.5Minexchangefor0.83%equitystakeincompanyRequiredresources:OverviewSeeattachedRecommendationSeeattachedCurrentinvestors:Contact/principals:RickYanXXScoring44442.523.5Comments•China’sinternetgrowthpotentialisveryhighgivenitscurrentembryonicstage(internetpenetrationfrom4%in1998to16.5%in2002)•IntheUS,theonlinerecruitingmarketisoneofthemostsuccessfulB2Cbusinessmodels(US$265Mmarketrevenuein1999)•InChina,theonlinerecruitingmarketisinearlystagesbuttheunderlyingpotentialishigh(opportunitytoimprovecurrentlyinefficientrecruitingprocesses/channels)•Uniqueclick-and-mortarbusinessmodelwithnewspaperandonlinemedia•Opportunitytoleverageemployerandjobseekercustomerbaseintoadjacentbusinessopportunities•51net.comiscurrently#1or#2inBeijing(0.7RMS),Shanghai(5.5RMS)andGuangzhou(0.3RMS)•NocompetitorhaslockedupexclusiverelationshipswithleadingChinaportals•TheseniormanagementteamhashadseveralyearsworkexperienceinChinawithBain&Companyandhaveworkedtogetherformorethan3years•SomepotentialforBaincaseteaminvolvement•Relativelylowownershipstake(0.83%)yieldslimitedinfluenceonmanagementdirection•Potentialtoexploremultiplee-businessopportunitiesinChina•ComparedwithUSandChinabenchmarks,51net.com’spre-moneyvaluationisrelativelyhigh•Potentialtounlockhighervaluationmultiplelongtermbyspinningoffonlinebusinessinthefuture•However,investmentisexposedtoconsiderableChina-specificregulatoryriskontopofstandardoperatingrisk•NoindicationofpotentialparticipationinsubsequentfinancingroundsOp