Shanda Interactive Entertainment (SNDA) SINA Corporation (SINA) Shanda acquires % of Sina; we view a swap ratio of : as fair Note Summary: Shanda announced in a SEC filing after the market close on Feb 18 that it has acquired February 20, 2005 % of Sina's shares using cash on hand, the vast majority immediately following Sina's 4Q2004 results release on Feb 8. The transaction itself is earnings accretive - we raise our Shanda 2005 fully Shanda Interactive Entertainment diluted (FD) EPS estimate by 8% to US$ and 2006 by 7% to US$ to reflect Shanda equity In-Line/Neutral accounting its stake and thus booking % of Sina's earnings ($13 mn boost), offsetting foregone Stock data interest income ($4 mn reduction). A full acquisition would be earnings dilutive given Shanda is at 23X PriceUS$ our 2005 FD EPS while Sina is at 25X; we view Sina's earnings quality (60% wireless) as lower, though Price target US$ Shanda might boost Sina's earnings through leveraging its prepaid card network. We assume Shanda 52-week range US$ - will wait and watch Sina's share price next week, and consider a share swap acquisition at a ratio of not Dividend yield % more than 1: have an IL rating on Shanda and a 12 month target price of $33 based on 21X our 2006 forecast EPS; risks include loss of massive multiplayer game players to rival game World of Capitalization Warcraft. We have an IL rating on Sina and a 12 month target price of $26 based on 20X our 2006 fully Market cap US$2,092 mn diluted EPS; risks include over-reliance on wireless and specifically SMS/MMS products. Enterprise value US$1,715 mn Net debt/equity NM Shares outstanding mn Forecasts and valuation - Shanda Interactive Entertainment SINA Corporation In-Line/Neutral Net Income EPS EPS Growth P/E EV/EBITDA Div. Yield Fiscal year ended US$ mn US$ % X X Stock data 12/, -- PriceUS$ 12/ -- Price target US$ 12/04E 52-week range US$ - 12/05E New -- Dividend yield -- 12/05E Old -- -- -- -- Capitalization 12/06E New Market cap US$1,287 mn 12/06E Old -- -- -- -- Enterprise value US$1,111 mn Net debt/equity NM Forecasts and valuation - SINA Corporation Shares outstanding mn Net Income EPS EPS Growth P/E EV/EBITDA Div. Yield Fiscal year ended US$ mn US$ % X 12/02A()()(2,)--12/ -- 12/04E -- 12/()--12/ -- Source: Company data, Goldman Sachs Research estimates The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research James Mitchell, CFA reports. As a result, investors should be aware that the firm may have a conflict of interest that could @ affect the objectivity of this report. Investors should consider this report as only a single factor in making Hontheir investment decision. g Kong: +852-2978-1450 Customers of The Goldman Sachs Group, Inc. in the United States can receive independent, third-party Ada Ho research on the company or companies covered in this report, at no cost to them, where such research is @ available. Customers can access this independent research at or Hong Kong: +852-2978-1261 can call 1-866-727-7000 to request a copy of this research. For Reg AC certification, see the text preceding Appendix 1. For other important disclosures, refer to Goldman Sachs Appendix 1, go to or contact your investment representative. Global Investment Research
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 • Shanda has in the past traded out of some investments (. the Rmb41 mn investment income it booked in 4Q2004, which may have been from a prior foray into Sina shares) and moved to full control of others (. buying 29% then a further 9% in Actoz in 4Q2004). • We believe Sina's stock price may initially trade up strongly, then fall back if Shanda does nothing and no alternate acquirers emerge. Shanda's stock price may take an initial hit on fears of it issuing stock to pay for a bigger stake in Sina and on investor concern that Shanda will now face wireless service risk, then rebound if Shanda does nothing. If Shanda's share price does not rise, we would thus be sellers of Sina above $31 (same price as Shanda's current price and 25X Sina's 2006 FD EPS). Netease, Tencent, and Sohu may trade up on hope that they too could be acquisition targets, but: (1) we do not view them as targets given they each - unlike Sina - have a controlling shareholder unlikely to sell at anywhere close to current prices; (2) a merged Shanda-Sina entity could prove a formidable competitor, especially to Sina's traditional rival Sohu. RECENT EVENTS SUMMARY Shanda disclosed in its 4Q2004 results that it had made an investment profit of Rmb41 mn trading shares in another listed company, which may have been Sina - Sina's share price varied between $21 and $40 during that quarter. Shanda has now disclosed that its unlisted parent entities bought mn Sina shares for $19 mn (or $25-$30 per share) in January, and that Shanda itself bought mn Sina shares for $211 mn (or around $23 per share) on February 8-9. Shanda expects to purchase the shares belonging to its parent entities at cost. The 13D filing states that 'The Securities have been acquired for strategic investment purposes... Depending upon various factors... [Shanda may consider] increasing its stake... seeking to acquire or influence control of the Issuer... seeking a merger, consolidation, or other business combination... [Shanda] may engage in discussions with the Issuer to explore the possibility of a business combination transaction.' Although Shanda's parent entities paid as much as $30 per Sina share in January, we do not think that Shanda would necessarily pay much more than $30 in the future, given: 1. We believe Shanda is more likely to use shares than cash for acquisitions henceforward (see below). 2. Shanda's share price has recently declined. 3. Sina's 4Q2004 results caused analysts to cut their 2005 earnings estimates by 20%-40%. COMBINED ENTITY ("MERGECO") WOULD DOMINATE CHINA INTERNET LANDSCAPE... Combining our stand-alone models, we estimate a merged Shanda-Sina entity (what we call "mergeco") would generate about $470 mn of revenues in 2005 (53% Shanda, 47% Sina), $185 mn of EBITDA (59% Shanda, 41% Sina), and $176 mn of net income (62% Shanda, 38% Sina). Mergeco would thus not only dwarf any one of the other Chinese Internet stocks - . Tencent (2005E $160 mn revenue, $65 mn EBITDA, $58 mn net income), Netease (2005E $156 mn revenue, $74 mn EBITDA, $67 mn net income), Sohu (2005E $111 mn revenue, $40 mn EBITDA, $35 mn net income) - but also any two of them put together. The aggregated market capitalization of Shanda and Sina together is currently $ bn. ...BUT FACE SOME EARNINGS HEAD-WINDS Neither company discloses EBIT by product line. Looking at the revenue mix, we estimate massive multiplayer games would contribute 37% of the group total; wireless services 26%; online advertising 19%; casual games 11%; other diversified 8%. We believe most observers would agree that mergeco's wireless services would face a difficult 2005 given mergeco's 4Q2004 wireless service revenue would have relied 80% on SMS (hit in the short term by bans on TV advertising, and in the medium term by consumers shifting to newer products) and 12% on MMS (hit in the short term by policy changes). We estimate mergeco's advertising business could grow at a decent (%) rather than a spectacular pace in 2005 given industry fragmentation and the Sina management team's readiness to invest in content in order to open up a traffic lead over Sohu. We would like mergeco's massive multiplayer online game business structurally but fear that both Shanda's 2D games (Mir 2, World of Legends) and Sina's 3D game (Lineage 2) could show slowing growth from 2Q2005 due to people instead playing rival game World of Warcraft. Earnings growth in 2005-2006 would thus rely to some extent on business lines that are not currently major revenue drivers. MERGECO WOULD ENJOY SUBSTANTIAL FINANCIAL, CROSS-MARKETING, MANAGERIAL FIREPOWER What we see as perhaps the most appealing feature of mergeco is that it could use Shanda's prepaid card distribution system to better monetize Sina's various Internet applications (portal, e-commerce, Instant Messaging, etc.). Shanda has already demonstrated this ability to leverage its payment network - which matters in China due to lack of credit cards - through its casual games. We believe this process would take 12-24 months to ramp up. SYNERGY BENEFITS FROM REVENUES RATHER THAN COSTS There are few business overlaps between Shanda and Sina. We assume mergeco would consolidate: 1. Its stake in the NCsina game company into its massive multiplayer game division. 2. Advertising sales on the poptang game portal with advertising sales on the Sina general portal. Goldman Sachs Global Investment Research 2
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 Mergeco would likely maintain a two city (Shanghai and Beijing) headquarters strategy, since the Beijing office is useful for interacting with China Mobile and China Unicom. DIFFICULT TO ARGUE MERGECO WOULD TRANSFORM SINA'S WIRELESS BUSINESS We believe Sina's wireless difficulties stemmed from industry-wide challenges more than Sina-specific mistakes. Shanda offers some wireless games but these are generally single player only due to bandwidth and screen constraints. LINEAGE 2 MIGHT SUPPORT SHANDA'S GAME BUSINESS Sina has around 65,000 average users for its 3D game Lineage 2, which would help update Shanda's largely 2D game portfolio. However NCsoft collects 30% of the revenue and 50% of the earnings from Lineage 2, and World of Warcraft appears to be decisively overshadowing Lineage 2 in other markets ex-Korea. FITS SHANDA'S SELF-DESCRIPTION AS ENTERTAINMENT COMPANY Shanda has always taken pains to describe itself as a broad entertainment rather than a narrow computer game business, so we believe acquiring Sina would be in-step with its self image. BID LIKELY UNINVITED, PROBABLY NOT HOSTILE There is no evidence that Sina solicited the transaction. However we assume that Shanda management had informed Sina management of its investment. MANAGEMENT SHOULD MESH We believe the management fit between Shanda and Sina could be straightforward given Shanda's CEO, as the largest shareholder in a combined entity, would presumably receive a group-wide leadership position, while the bulk of Sina's management could receive divisional leadership roles in the wireless and portal businesses. COUNTER-BID POSSIBLE, NO OBVIOUS CANDIDATES At this stage we do not see an obvious alternate bidder for Sina. Part of Sina's portal popularity flows from its priority access to local news, and we believe that China's news agencies might adopt a less preferential attitude if a foreign company were to acquire Sina. The other listed local Internet stocks are typically of a size where they would likely be targets rather than acquirers of Sina. SHANDA COULD WALK AWAY FROM ANY BIDDING WAR WITH A PROFIT Shanda would not be a weaker company than it is today if someone else acquired Sina, unless that bidder were a game rival such as Netease or The9 - which appears unlikely, in our view. We therefore believe that if a bidding war broke out, Shanda could sell its % stake and collect a substantial profit. TRANSACTION DOES NOT MEAN THAT SHANDA NEEDS TO BUY GROWTH Acquisitions often represent a means for the acquirer company to "buy" earnings growth at a time when its own business is slowing down. This may not be a fair characterization of Shanda's situation since Sina arguably faces more growth constraints (especially in 2Q2005) than Shanda, and since Shanda could have bought a smaller but "growth-ier" target to achieve the same result more efficiently. TAKING A CONTROLLING STAKE WOULD REQUIRE SHANDA ISSUES EQUITY / DEBT Shanda ended 2004 with cash and investments of $440 mn. Its debts were limited to a convertible bond issue of $275 mn. The acquisition of mn shares in Actoz for $92 mn closed in January. Its cash on hand prior to the Sina investment was thus $348 mn. Shanda itself spent $211 mn on Sina shares and has stated it will soon acquire the shares which its unlisted parent entities hold for $19 mn. We estimate Shanda has around $120 mn cash on hand left, sufficient for a further 7% stake in Sina. SHARE SWAP IN OUR VIEW MORE LIKELY THAN DEBT FINANCED ACQUISITION We estimate for Shanda to acquire the residual 80% of Sina at (for example) $30 per share would require incremental debt financing of around $ bn. Shanda and Sina already have a combined $374 mn of convertible debt outstanding that we believe could be put back to mergeco in 2007. A total debt burden of $ bn (net of convertibles and Sina's existing cash balance) would represent 7X mergeco cash flow and EBITDA. WE ESTIMATE SHANDA DESERVES A 2 POINT (10%) P/E PREMIUM OVER SINA We usually view a mid-teens P/E multiple as fair for wireless services; 22X for online games; and mid-20s for online advertising. Our target 2006 P/Es are thus 22X for Shanda (ex Sina stake) and 20X for Sina. Shanda's purchase of mn shares at $ appears rational to us, since Sina's P/E was then 18X while Shanda's was 22X. ECONOMICS FAVOR SINA SHAREHOLDERS IF SWAP RATIO IS SHANDA : SINA OR MORE If Shanda believes it can grow Sina's earnings 20% above where they would otherwise have been through use of its prepaid card network and through combined marketing muscle, then we believe Shanda could theoretically be willing to pay a 2 multiple point premium to buy Sina, even though our stand-alone fair values indicate a 2 point discount. We forecast Sina's 2006 FD EPS at $ on a stand-alone basis, Goldman Sachs Global Investment Research 3
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 and Shanda's at $ prior to the % associate contribution from Sina. We provisionally assess that a fair share swap ratio could be about between (if synergy benefits flow to Shanda investors) and (if benefits to Sina investors) Shanda shares per Sina share. AT SHANDA : SINA, SHANDA'S 2006 EPS COULD BE $-$ There are 51 mn Sina shares outstanding (59 mn fully diluted), and Shanda already owns mn. If Shanda purchased the remaining Sina shares at a : ratio then Shanda's FD ADR count (including dilution for Shanda and Sina convertible bonds, and for share options) would increase by 47 mn to 130 mn. Adding our Shanda and Sina stand-alone net income forecasts and assuming no synergies, we estimate mergeco would earn $202 mn net income in 2006 and its EPS would be $ (3% dilution). Assuming $20 mn (after tax) of synergies (10% earnings enhancement), we estimate mergeco's EPS would be $ (6% accretion). If Shanda purchased the remaining Sina shares at a : ratio then Shanda's FD ADR count would increase to 135 mn, for an estimated mergeco EPS of $ (7% dilution) to $ (3% accretion). Shanda buying 20% of Sina was around 8% earnings accretive; however Shanda buying 100% of Sina may or may not be earnings accretive because: 1. Sina's share price has risen since Shanda's investment. 2. Shanda could finance the 20% acquisition using cash on hand which generated a minimal level of interest income, whereas the residual 80% would require debt or equity financing. SHAREHOLDINGS IN MERGECO Tianqiao Chen (the CEO of Shanda) and his family own 57% of Shanda, so a : swap ratio would result in their FD stake in mergeco being 32%. IN SHANDA'S INTERESTS TO WAIT IF WORLD OF WARCRAFT IS NOT DISRUPTIVE Shanda's recent share price performance suggests some investors are concerned about its 1Q and 2Q2005 results, whereas the sell-side consensus view is that casual games will propel Shanda's earnings momentum through the year. If the consensus view is correct then we believe it may be in Shanda's interests to wait before any share swap proposal, since we believe Sina's 2Q2005 guidance will be uninspiring (we estimate that Sina will collect around $5 mn revenue from fortune telling SMS in 1Q2005 because the ban on TV advertising only took effect in February, whereas in 2Q2005 it should feel the full impact). WE BELIEVE SINA TRADING RANGE SHOULD BE $25-$31 We believe the probability of Shanda paying more than $31 per share for Sina if Shanda's share price is below $31 is low, since Shanda in our view is both capable of generating a higher absolute EPS in 2005 and 2006 and deserving of a higher P/E multiple. Conversely the fact that Shanda purchased Sina shares at $23 suggests to us that Shanda is comfortable with Sina valuations at that level, so investors who buy Sina shares at $25 may face a modest 10% downside risk. EXECUTION RATHER THAN TRANSACTION PER SE CATALYST TO MORE MERGERS We believe an acquisition per se would not prompt the controlling shareholders of other large Chinese Internet companies to merge, since they all believe that their shares are worth more than where they are currently trading. If a mergeco were to start muscling aside its smaller rivals in the future, then consolidation might follow. We believe the most feasible challenger on paper would be a Tencent-Netease combination, which would produce a potent Instant Messaging-online games-portal entity anchored in Guangdong province. For the immediate future, however, the dominant story is that a company that did not exist during the 1999-2000 China Internet boom appears ready to take control of a company that was the pace-setter during that boom. I, James Mitchell, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in this report. Goldman Sachs Global Investment Research 4
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 Exhibit 1: MERGECO pro forma profit statement (US$ mn) 2005E2006EMMOG173193WVAS121139Advertising89112Casual games 54 74Others3541Total revenues471558Cost of revenues(165)(190)Gross profit306369Total other expenses(141)(171)Operating profit166197Total others2832Pretax profit194230Income taxes(18)(27)Net profit176202 Source: Company data, Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 5
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 APPENDIX 1: DISCLOSURES Company-specific regulatory disclosures The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of Goldman Sachs and referred to in this research. Goldman Sachs has received compensation for investment banking services in the past 12 months: Shanda Interactive Entertainment ($) Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Shanda Interactive Entertainment ($) and SINA Corporation ($) Goldman Sachs has received compensation for non-investment banking services in the past 12 months: Shanda Interactive Entertainment ($) and SINA Corporation ($) Goldman Sachs had an investment banking services client relationship during the past 12 months with: Shanda Interactive Entertainment ($) Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Shanda Interactive Entertainment ($) and SINA Corporation ($) Goldman Sachs has managed or co-managed a public offering in the past 12 months: Shanda Interactive Entertainment ($) Goldman Sachs makes a market in the securities: Shanda Interactive Entertainment ($) and SINA Corporation ($) Goldman Sachs is a specialist in the securities (including derivative securities): Shanda Interactive Entertainment ($) and SINA Corporation ($) Distribution of ratings/investment banking relationships Goldman Sachs Investment Research global coverage universe Rating Distribution Investment Banking Relationships OP/Buy IL/Hold U/Sell OP/Buy IL/Hold U/Sell Global 24% 59% 17% 66% 57% 53% As of 01/01/2005, Goldman Sachs Global Investment Research had investment ratings on 1,716 equity securities. Goldman Sachs uses three ratings - Outperform, In-Line, and Underperform - reflecting expected stock price performance relative to each analyst's coverage universe, on an unweighted basis with regard to market capitalization and with a 12-month time horizon. On a global basis, Goldman Sachs seeks to limit Outperform ratings to approximately 25% of ratings and to have at least 10% of ratings Underperform; however, variations from such percentages in certain analysts' ratings and in geographic regions may exist from time to time. Each analyst also assigns a coverage view - Attractive, Neutral, or Cautious - representing the analyst's investment outlook on the coverage group. NASD/NYSE rules require a member to disclose the percentage of its rated securities to which the member would assign a buy, hold, or sell rating if such a system were used. Although relative ratings do not correlate to buy, hold, and sell ratings across all rated securities, for purposes of the NASD/NYSE rules, Goldman Sachs has determined the indicated percentages by assigning buy ratings to securities rated Outperform, hold ratings to securities rated In-Line, and sell ratings to securities rated Underperform, without regard to the coverage views of analysts. Goldman Sachs Global Investment Research 6
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 SINA Corporation (SINA)Currency: . DollarGoldman Sachs rating and stock price target history502,200352,00027401,8004228301,6003220281,400101,20001,000Jan 22Mar 17NAILFMAMJJASONDJFMAMJJASONDJFMAMJJASOND200220032004Source: Goldman Sachs Investment Research for ratings and price targets; Reuters for daily closing prices as of 12/31/ 22, 2002 to NA from MPRatingCovered by James Mitchell, CFA,as of Mar 9, 2004Price targetNot covered by current analystPrice target at removalNew rating system as of 11/4/02NASDAQ Composite;pricing by FactSetThe price targets shown should be considered in the context of all prior published Goldman Sachs research, which may ormay not have included price targets, as well as developments relating to the company, its industry and financial markets. Shanda Interactive Entertainment (SNDA)Currency: . DollarGoldman Sachs rating and stock price target history502,2002,000401,80029301,600231,40020201,200101,000Jun 22Aug 27OPILFMAMJJASONDJFMAMJJASONDJFMAMJJASOND200220032004Source: Goldman Sachs Investment Research for ratings and price targets; Reuters for daily closing prices as of 12/31/ by James Mitchell, CFA,as of Jun 15, 2004Price targetNot covered by current analystPrice target at removalNew rating system as of 11/4/02NASDAQ Composite;pricing by FactSetThe price targets shown should be considered in the context of all prior published Goldman Sachs research, which may ormay not have included price targets, as well as developments relating to the company, its industry and financial markets. Goldman Sachs Global Investment Research 7Stock PriceStock PriceIndexIndexPricePrice
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 Regulatory disclosures Disclosures required by United States laws and regulations See company-specific disclosures above for any of the following disclosures required as to covered companies referred to in this report: acting as a financial advisor, manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; market making and/or specialist role. The following are additional required disclosures: Ownership and Material Conflicts of Interest: Goldman Sachs policy prohibits its analysts, persons reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as Officer or Director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Distribution of ratings: See the distribution of ratings disclosure above. Price Chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at Additional disclosures required under the laws and regulations of jurisdictions other than the United States The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. Canada: Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it relates to equity securities of Canadian issuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for such visits. Germany: See company-specific disclosures above for (i) any net short position or (ii) management or co-management of public offerings in the last five years as to covered companies referred to in this report. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs (Asia) . Japan: See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities Finance Company. Korea: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (Asia) ., Seoul Branch. Singapore: Further information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). United Kingdom: Persons who would be categorized as private customers in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risk warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request. Ratings and other definitions/identifiers Rating system Definition of ratings Outperform (OP). We expect this stock to outperform the median total return for the analyst's coverage universe over the next 12 months. In-Line (IL). We expect this stock to perform in line with the median total return for the analyst's coverage universe over the next 12 months. Underperform (U). We expect this stock to underperform the median total return for the analyst's coverage universe over the next 12 months. Other definitions Coverage view. The coverage view represents each analyst or analyst team's investment outlook on his/her/their coverage group(s). The coverage view will consist of one of the following designations: Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation. Current Investment List (CIL). We expect stocks on this list to provide an absolute total return of approximately 15%-20% over the next 12 months. We only assign this designation to stocks rated Outperform. We require a 12-month price target for stocks with this designation. Each stock on the CIL will automatically come off the list after 90 days unless renewed by the covering analyst and the relevant Regional Investment Review Committee. Goldman Sachs Global Investment Research 8
Shanda Interactive Entertainment / SINA Corporation February 20, 2005 Other ratings/identifiers Not Rated (NR). The investment rating and target price, if any, have been suspended temporarily. Such suspension is pursuant to Goldman Sachs policy in circumstances when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded. Previous rating system definition (prior to November 4, 2002) RL = Recommended List. Expected to provide price gains of at least 10 percentage points greater than the market over the next 6-18 months. LL = Latin America Recommended List. Expected to provide price gains at least 10 percentage points greater than the Latin America MSCI Index over the next 6-18 months. TB = Trading Buy. Expected to provide price gains of at least 20 percentage points sometime in the next 6-9 months. MO = Market Outperformer. Expected to provide price gains of at least 5-10 percentage points greater than the market over the next 6-18 months. MP = Market Performer. Expected to provide price gains similar to the market over the next 6-18 months. MU = Market Underperformer. Expected to provide price gains of at least 5 percentage points less than the market over the next 6-18 months. Global product; distributing entities The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs JBWere Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs Canada Inc. regarding Canadian equities and by Goldman Sachs & Co. (all other research); in Germany by Goldman Sachs & Co. oHG; in Hong Kong by Goldman Sachs (Asia) .; in Japan by Goldman Sachs (Japan) Ltd; in the Republic of Korea by Goldman Sachs (Asia) ., Seoul Branch; in New Zealand by Goldman Sachs JBWere (NZ) Limited on behalf of Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman, Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union. General disclosures in addition to specific disclosures required by certain jurisdictions This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. We may seek investment banking or other business from the covered companies referred to in this research. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. We and our affiliates, officers, directors, and employees, excluding equity analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of the investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Current options disclosure documents are available from Goldman Sachs sales representatives. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Our research is disseminated primarily electronically, and, in some cases, in printed form. Electronic research is simultaneously available to all clients. Disclosure information is also available at or from Research Compliance, One New York Plaza, New York, NY 10004. Copyright 2005 The Goldman Sachs Group, Inc. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc. Goldman Sachs Global Investment Research 9
