Hi-Tech Wealth Inc (OTCBB: HITW) May 2007 Information contained herein is believed to be reliable, however Broadband Capital Management LLC does not warrant its completeness or accuracy and disclaim any liability relating to such material The information contained herein is confidential and recipients shall not reproduce or distribute the information contained herein to any third parties Opinions and estimates contained herein constitute our judgment and are subject to change without notice Past performance of some of the companies mentioned herein is not a guarantee of future results for such companies which may hereinafter be formed Disclosure This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, including HITW’s statements regarding future growth in the business of HTW (as defined below) and trends in the market for mobile communications devices in the People’s Republic of China (“PRC”) Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions are intended to identify forward-looking statements You should not place undue reliance on these forward-looking statements Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including our good faith assumptions being incorrect, our business expenses being greater than anticipated due to competitive factors or unanticipated development or sales costs; revenues not resulting in the manner anticipated due to a slow down in consumer technology spending, particularly in the mobile telecommunications market; our failure to generate investor interest or successfully integrate the operations of HTW The forwardlooking statements may also be affected by the additional risks faced by HITW as described in reports and filings with the Securities and Exchange Commission Table of Contents Page Executive Summary …………………………………………….……… Key Facts Market Overview ………………………………………….…………… Business Strategy & Opportunity …………… …………………….… Value Chain Proven Product Innovation Nationally Recognized Brand Premier Multi-Channel Distribution Network Unit Level Economics Business Model Summary 10 Company Detail ……….…………………………………… ……… Company History Management Team 20 Investment Merits ……………………………………………………… 23 Q&A ……………….…………………………………………………… 25 Executive Summary Executive Summary Hi-Tech Wealth Inc (OTCBB: HITW) is a leading integrated multi-channel sales & marketing company in China with a proven track record of developing and selling proprietary-branded digital mobile devices Experienced Management Team Dr Zhang (CEO) is an experienced entrepreneur with history of introducing innovative products to market On January 28, 2007 Li Ming (COO) won the honor of CCTV "Year 2006 China Top Ten Business Women" Proven Product Innovation Process A rigorous and systematic approach to product selection and market testing drives revenue-generating opportunities with minimal cost and product failure risk Nationally Recognized Brands “Hi-Tech Wealth” and “Shang Wu Tong”, are nationally recognized premium brands in China Over $150m invested in brand building Premier Multi-Channel Distribution • Strong sales growth fueled by a strategic relationship with the largest TV direct sales operator in China • Nationwide retail network reaches over 4,000 retail stores through about 1,000 exclusive distributors Key Facts Company Facts • Location: • 10F, Block C, Intell-Center, 18 Zhongguancun East Road, Haidian Beijing PRC 100083 Employees: 113 Stock Data • • • • • • Ticker (OTCBB): HITW Price (5/16/2006): $3.55 Market Cap: $209m Ave Volume (3m): 12.2k Shares Basic: 59m Shares Diluted: 77.4m Financials • 2006 • Revenue: $62m • Net Income: $7.5m (pro-forma) • Net Income Margin: 12% • 2007 Q1 • Revenue: $16.1m • Net Income: $0.1m • Net Income Margin: 6% Market Overview Strong Economic Growth China's GDP & Disposable Income Growth (Per Capita) 18% 16% 14% 12% 10% Inc isposable Urban D R 9% ome CAG 8% 6% 4% 2% 0% 1998 GDP 1999 2000 2001 Disposable Income Urban Households 2002 2003 2004 Disposable Income Rural Households Source: National Bureau of Statistics • • China’s GDP growth provides an unparalleled opportunity to sell to the Chinese consumer Increases in disposable income encourages Chinese consumers to purchase branded products Rapid Adoption of Digital Mobile Device Drives Growth Handset Subscriber Penetration Rate • • 100% Mobile subscriber penetration and growth is a good indicator of demand for HTW products 90% 80% 70% 60% AG China C 50% China’s handset penetration rate is low compared to that of developed countries R 17% 40% 30% 20% 10% 0% 2002 China 2003 2004 2005 Eastern Europe 2006E 2007E 2008E North America 2009E 2010E Western Europe Source: UBS, Dataquest, CLSA Asia Pacific Markets • Growth in the penetration rate combined with the sheer size of the population (1.3B) will continue to drive substantial unit growth China's Handset Unit Sales (millions) 250 200 150 100 50 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E Source: UBS Estimates Business Strategy & Opportunity 10 HTW’s Value Chain HTW Only Focuses on High Margin Areas High From Concept to Consumer HTW Med Low High HTW High HTW 11 Product Timeline S116 Solar Power Phone F88 Upgraded Information Secure Phone V668 Stock Trading Phone U8 Lady’s Smart Phone w/ Music Player F8 Information Secure Phone 2006 Q1 Q2 Q3 2007 Q1 Q2 Q3 2008 12 Product Detail Information Secure Phone • Target consumer: High end business user / Government officials • Features: • • • • Privacy: Code accessed message account Security: Ability to remotely destroy all information on a lost phone Safety: Ability to remotely copy all information from a lost phone to a new phone Concealment: Temporary or permanent protection from receiving certain phone calls Solar-Powered Mobile Phone • Target consumer: Global appeal • Features: • • When exposed to direct sunlight for 60 minutes, the S116 battery allows for 40 minutes of talk time • Phone can be used for several months without charging • Supports a T-Flash card and features a 1.3 megapixel camera Successfully launched with 50,000 units pre-ordered Stock Trading Phone • Target consumer: High end user • Features: • Ability to trade stocks through phone with most brokerage firms 13 A Dominant Premium Brand for Digital Mobile Devices • From 1999-2002 Shang Wu Tong was ranked the No PDA Vendor in China and the 5th largest PDA Vendor in the world (IDC 2002) The brand is widely recognized and has won the trust of high-end Chinese consumers • Over $150MM invested in advertising since 1999 • HTW has a proven record of developing unique products to meet underserved consumer needs • Chinese consumers are increasingly receptive to brand-based product differentiation HTW intends to strengthen its brand by focusing on distinct quality products • Premier brand recognition coupled with unique product features enables HTW to charge a substantial premium over similar products in China • Most Chinese consumer electronics companies are fiercely competing for the low cost segment of the market while HTW is positioned as a premium brand similar to Nokia, Motorola, Apple and Research in Motion 14 Premier Multi-Channel Distribution Network HTW has developed a unique multi-channel marketing & distribution network based on a deep understanding of Chinese consumer behavior and the market environment HTW carefully manages the network to eliminate channel conflicts and requires products to be priced uniformly across the country 2006 Revenue Direct to Consumer: Approximately 25% of HTW’s 2006 revenue was generated through direct response TV These infomercials are also HTW’s primary advertising medium 25% Traditional Retail: Retail sales are fueled by product awareness generated through direct response TV Consumers exposed to TV advertising can purchase HTW products through about 1,000 exclusive distributors extending across all PRC provinces covering more than 500 cities and reaching over 4000 retail stores The local distributors are responsible for local advertising and marketing 75% Q1 2007 Online Sales: Online sales will leverage the fragmented Chinese consumer market and supplement the other channels by providing BTB, BTC and government agencies additional convenience http://www.htwchina.com 15 Strengths of HTW Direct Response TV • Overview of the television industry in China According to the National Statistics Bureau: • TV stations have combined coverage of 95.3% of the population, implying a reach of over 1.2 billion viewers • Product infomercials & commercials are broadcast to over 300m households • HTW has over 50 hours per week of TV broadcasting • Telephone ordering available 24 hours a day, seven days a week 16 The Power of the Distribution Network Units Sold 120,000 103,140 100,000 80,000 59,762 60,000 40,000 20,000 54,197 38,307 19,419 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 • Distribution network sells large volumes of product quickly and efficiently • Relationship with TV network accelerates both retail and direct to consumer sales • Approximately 220,000 units sold in 2006 17 Unit Level Economics Average Average Retail Unit Price (USD) $510 Average Wholesale Unit Price $301 Average Cost per Unit $154 Average Gross Profit per Unit $147 Average Gross Margin 49% Exchange rate USD/RMB =7.9 18 Flexible and Scalable Business Model • Proven Product Innovation & Strong Product Pipeline • Outsourced design provides access to the best teams for each new product • HTW retains the critical intellectual property in each product developed by independent design • houses Contract manufacturing with best of breed partners enables rapid time-to-market, scalability and allows HTW to compete despite shortened product life cycles • Nationally Recognized Brand • Superb brand recognition is a valuable long-term asset and ensures premium pricing • Standardized pricing across multi-channel distribution network reinforces premium positioning • Premier Multi-Channel Distribution • Leverage nationwide exposure of TV to drive direct sales and in-store sales • Chinese TV direct response and online sales supplement the traditional retail network • Exclusivity of the distributors guarantees focus and increases likelihood of success • Large number of distributors gives company the power in the channel • Company Designed to Support Hyper-Growth • Capital efficient model (outsourced manufacturing and R&D) • Distribution network can sell a wide variety of products 19 Company Detail 20 Company History HTW founded 1998, 2000, Started JV with Siemens to develop an integrated PDA & phone June 2000, HTW cooperated with Microsoft to enter high end PDA market 2001, HTW was one of 10 non-state owned companies awarded the “Most Influential Enterprise” April 2001, Windows CE based “Shang Wu Tong” PDA launched and over million units sold 2002, HTW awarded Microsoft’s “Year 2002 Best Co-operative Partner” 2002, Launched integrated PDA & phone developed by JV with Siemens 2002, Started development of light energy phone 2003, HTW cooperated with ZTE and launched 1st color PDA and pen-based smart phone February 2006, HTW spin-off of software design business to Warburg Pincus to focus on core competencies April 2006, TV shopping network relationship established October 2006, HITW completes acquisition of Magical Insight and its subsidiaries 2006, Approximately 220k units sold in 2006 December 2004, F6 launched 1999-2002, HTW was the No PDA provider in China years in a row with a peak market share of 70% 21 Management Team with Record of Entrepreneurial Success Dr Zhang ZhengYu – CEO & Founder, 48 • • • President & CEO of Legend Silicon, a venture backed California hi-tech company 1987-1997, Founder of Beijing Star Technology Development Center Established exclusive PRC dealerships for: Casio, Dell Computers, Group Sense International and Meijin – HK electronic dictionary and PDA company’s, Tulip Computer – A commodore branded Dutch clone computer manufacturing company 1989 – Finished PhD in Artificial Intelligence from Beijing University of Aeronautics & Astronautics Ms Li Ming – Director & COO, 42 • • • • • • January 28, 2007 - Won the honor of CCTV "Year 2006 China Top Ten Business Women" 1997 – Joined HTW as Director and Vice President 1997 – 1999 – MBA from Murdoch University, Australia 1988 – Finished BS in Chemical Engineering from Chinese People's Liberation Army Command Institute 1993 – 1997 – Hong Kong Department head at Beijing Star Technology Development Center 1977 – 1993 – Served in Chinese People's Liberation Army, communications division One of few women to be promoted from rank of Private to Commandant Awarded two silver crosses ensuring an early retirement Mr Ma Qing – Director & CFO, 44 • • • • 1999 – Joined HTW as CFO 1990 – 1999 – Trader and corporate banker focused on arbitrage and derivative strategies for DeltaBank and Dresdner Kleinwort Benson (Manager) 1986 – Master of Science (DEA) in Artificial Intelligence, University of Paris BS from Beijing University 22 Investment Merits 23 Investment Merits • • • • Exposure to high growth segment of China’s consumer economy • • • • Leading market position and history as an industry pioneer • • • Experienced and cohesive team with a proven track record Opportunity to leverage distribution channels to drive new products Premier Chinese brand Flexible and scalable business model to support growth Revenue $62m 2006A Net Income $7.5m 2006A Approximately 220,000 units sold in 2006 Combination of marketing and engineering disciplines Unique ability to create visionary products 24 For more information contact: Jacques Qing MA CFO China: (+86) (010)8260-1010 China Cell: (+86) 139-113-25025 US Cell: (+1) (917)-327-7882 maqing@htwchina.com 25