By SAATCHI & SAATCHI& TEAM ONE

September 13, 2006

Establishing LDA in China

China – Basic geographic information

3Source : China Statistics Yearbook, Nielsen, SAIC

China – Geographic overview by income level

Hubei

Hunan

Guangxi

Sichuan

Yunnan

Tibet

Hainan

Xinjiang Uygur

ShaanxiAnhui

GansuShandong

Jiangsu

Zhejiang

Fujian

Guangdong

BeijingTianjin

Shanghai

Upper : Rmb 10 000 +

Above Average : Rmb 7500 - 9999

Lower : < Rmb 6500

Medium : Rmb 6500 - 7499

Disposable Income

Inner Mongolia

Shaanxi

Jilin

Heilongjiang

Anhui

Jiangxi

Henan

ShanxiQinghai

Guizhou

Gansu

Hebei

Liaoning

Chongqing

4Source : China Statistics Yearbook, Nielsen, SAIC

Tier 1 markets

Shandong

Jiangsu

Zhejiang

Fujian

Guangdong

BeijingTianjin

Shanghai

Tier 156% of Adspend

30% of Population

5Source : China Statistics Yearbook, Nielsen, SAIC

Hubei

Hunan

Guangxi

Sichuan

Yunnan

Tibet

Hainan

Xinjiang Uygur

Hebei

Liaoning

Chongqing

Tier 222% of Adspend

37% of Population

Tier 2 markets

6Source : China Statistics Yearbook, Nielsen, SAIC

ShaanxiAnhui

Gansu

Inner Mongolia

Shaanxi

Jilin

Heilongjiang

Anhui

Jiangxi

Henan

ShanxiQinghai

Guizhou

Gansu

Tier 321% of Adspend

33% of Population

Tier 3 markets

Media environment in China

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Medium National Provincial City/County Total

Newspaper 2,137 2,137

Magazine 9,029 9,029

1 368(31) (1,636) (1,668 stations)

367TV

2 306(31) (1,663) (1,696 stations)

304Radio

Internet 595,550 RegisteredDomain Names 595,550

Outdoor Millions …. billboards, buses,illuminated signs, MTR, bus shelters

Millions

Media overview in China

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TV categories in China

National network (CCTV)Provincial cable stations

Provincial stations

Local city stations

National coverage

Provincial coverage

Local city coverage

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Media Coverage

93%TV

Local TV

Provincial TVNational

Provincial Sat.

Foreign Sat.CCTV

Provincial TerrestrialCCTV-1CCTV-2CCTV-3CCTV-4CCTV-5CCTV-6CCTV-7CCTV-8

CCTV-9CCTV-10CCTV-11CCTV-12CCTV-13CCTV-14

Coverage 70%+

Coverageless than

70%

KEY FACTS1. 1,668 TV stations among 31 provinces in total.2. Except for the 27 approved foreign channels,

all owned by the government.3. Foreign National Satellite TV include ESPN, BBC

World, HBO, Phoenix Movie, etc. They areall charged by government.

TV - Overview

Three kinds of provincial TV channels: Satellite, Terrestrial, Cable

Provincial Satellite: The signal covers the whole country, but it depends

on whether local cable operators broadcast it Viewership is usually low outside home province

Provincial Terrestrial: Usually covers most area of a province. But the

penetration varies from channels to channels.Provincial Cable:

Penetration is usually low outside the capital cities.

Provincial TV

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2 ways of distribution: terrestrial Vs. cable

All households can receive the terrestrialchannels. For cable channels, subscription is

required.

In major cities, cable subscription rates are high (more than 90% in the urban are of 3 primary

markets)

Local TV

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77%Local CoverageNational Coverage

KEY FACTS:

2,150 registered titles Can also be classified into national, provincial, and city-level Local papers are still dominant Launch of regular supplement (e.g. automobile) or weekend edition All titles’ circulation are un-audited and their claimed circulations are grossly

inflated

Newspaper

Media Coverage

Newspaper- Overview

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Magazine- Overview

48%

Media CoverageKEY FACTS:

1. 9,029 registered titles skewed to key urban areas2. Many “new” titles are launched by using an existing registered numbers3. Over the past years, many new titles on computer, commercial, leisure were launched4. Foreign publishers rush in to gain share in this market by investing in existing local titles e.g. Fortune China, Globe, etc.5. More flexible in execution method6. Similar to newspaper, nearly all titles are un-audited and their claimed circulations are grossly inflated

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KEY FACTS:

Local governments influence is large Increasing used by international/JV advertisers, e.g. Shanghai GM, Nokia, Coke Good locations are always high in demand and premiums are often levied on sites Regulations vary by city Very limited research data

Outdoor

Individual siteOutdoor network

owned and managed by professional company which can cover a certain areae.g. MTR, bus shelters, bus body, etc.

owned and managed by individual vendor. e.g. Unipole, neon sign, etc.

Outdoor - Overview

92%

Media Coverage

Lexus in China – Dealer Locations

Lexus Dealer Locations – Present (as of August 2006)

Lexus Dealer Locations – Phase 3 (within 2007)

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Consideration points for building LDA in China

Designated marketing areas (DMA): AllocationsFuture plan

Advertising revenue: Cost structure of MSRP

Matching fund from TMCI

Cost allocations for DMA

Operation: Operation structureResponsibilitiesFinancial managementProceduresMedia/production

planning

Others: Future plan for CPO

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