Contents. China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012

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2 China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 Contents China VC/PE Firms Compensation and Performance Appraisal Systems Report Analysis on Compensation and Performance Appraisal System of Overseas VC/PEs Current Compensation System of Overseas VC/Pes Management Fee Income of Overseas VC/PEs Investment Proceeds Allocation System Performance Appraisal of Overseas VC/Pes Positions of Overseas VC/PEs Performance Appraisal Methods of Overseas VC/ PEs Benchmarks and Feedbacks of Performance Appraisal of Overseas VC/PEs Co-investment of Management Teams Experience of Performance Appraisal of Overseas VC/ PEs Illustrations to the 2012 Survey on Compensation and Performance Appraisal of China's VC/PEs by Zero2IPO Research Center Illustrations to the Design of Questionnaires Illustrations on Surveyed Samples Analysis on Results of Survey on China's VC/PE Compensation Basic Compensation Performance-based Compensation Project Exit Proceeds Co-investment Proceeds Results of the Survey on Performance Appraisal Systems of Chinese VC/PEs and Analysis on Current Situation Results of the Survey on Compensation and Performance of VC/PEs Analysis on Current Performance appraisalsystem of Chinese VC/PEs Survey on VC/PE Employees' Satisfaction Degree on Their Compensation and Performance Appraisal Systems Questions and Suggestions to Compensation and Performance Appraisal Systems of Chinese VC/PEs Publisher Founder, Chairman & CEO Gavin Ni English Editors Jarod Ji & Lisa Zhang Layout Designer Camille Zhang Research Contact Tel: +86(10) ext Research@zero2ipo.com.cn Zero2IPO Customer Service Hotline China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012

3 Questions to Compensation and Performance Appraisal Systems of Chinese VC/PEs Suggestions to Compensation and Performance Appraisal Systems of VC/PEs in China China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012

4 China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 Figures Figure Comparison of Organization Modes of Institutions in Survey Figure Comparison of Nature of Institutions in Survey 15 Figure Consideration Range of Institutions in Survey Figure Comparison of Working Duration of Persons in VC/PE Field in Survey 17 Figure Comparison of Working Positions of Persons in Survey 18 Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Comparison of Basic Compensation of Persons in VC/PE Institutions Comparison of the Proportion of Basic Compensation of Persons in VC/PE Institutions to Their Total Income Comparison of the Proportion of Basic Compensation of Persons in VC/PE Institutions to Their Total Expected Income Year-on-year Comparison of Basic Compensation of Person in VC/PE Institutions Comparison of Performance-related Compensation of Persons in VC/PE Institutions Comparison of the Proportion of Annual Bonus of Persons in VC/PE Institutions to Their Total Income Comparison of the Proportion of Annual Bonus of Persons in VC/PE Institutions to Their Expected Income Comparison of the Proportion of Project Bonus of Persons in VC/PE Institutions to Their Total Income Comparison of the Proportion of Project Bonus of Persons in VC/PE Institutions to Their Expected Income Comparison of Modes of Gaining Profit from the Exits of Projects Comparison of Period of Distribution of ROI of Exits of Projects Comparison of ROI of Persons in VC/PE Institutions from Exits of Projects Whether Ex-serving Employees Garner the ROI via Project Exits Whether VC/PE Institutions Permit Employees to Conduct Co-investments China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 Figure Comparison of Co-investment Modes of VC/PE Institutions 32

5 China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Tables Table List of Stepwise Management Fees 3 Table Whether VC/PE Institutions Adopt Regular Performance Appraisal Comparison of Regular Performance Appraisal of VC/ PE Institutions by Frequency Comparison of Structure of Regular Performance Appraisal of Persons in VC/PE Institutions Comparison of Structure of Performance Appraisal of Persons in VC/PE Institutions Content Degree on Present Compensation of Employees in VC/PE Institutions Content Degree on Compensation Raise Range of Employees in VC/PE Institutions Content Degree on Co-investment Mechanism of Employees in VC/PE Institutions Content Degree on Performance Appraisal System of Employees in VC/PE Institutions Evaluation on Compensation by Employees in VC/PE Institutions Main Reasons behind Resignation of Employees of VC/PE Institutions Attitude of VC/PE Institutions towards Suggestions and Viewpoints of Employees on Compensation List of Companion of Working Positions in Overseas PE Institutions

6 2012 China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 PE China VC/PE Firms Compensation and Performance Appraisal Systems Report 2012 In the first half of 2012, VC/PEs active in China s equity investment market raised 150 funds in total. The total amount raised reached US$8.59B. Those funds invested in 653 deals, totaling US$9.83B. In the first half of 2012, 212 funds exited from their investments, 174 of which exited by means of IPO. As compared to the same period of 2011, fundraising, investment and exit activities decreased substantially. At the same time, related VC/PE totaled 5,011. Due to increasing pressure on fundraising and fewer qualified investees, the competition between VC/ PEs intensified. VC/PEs that had deficiency in design and aimed to profit from hot market only now face the risk of being eliminated from the market. In order to sail through the reshuffling period and enhance competitiveness, every market players must focus on their compensation and performance appraisal systems and make full use of human capital. Zero2IPO therefore carried out the second survey on compensation and shifted the focus to internal compensation and performance evaluation. 1.1 Analysis on Compensation and Performance Appraisal System of Overseas VC/PEs VC/PE investment has a history of a few decades in foreign countries and the related systems matured and got improved constantly. VC/PEs has rich experience in relevant areas such as LP relationship management, compensation, etc. and many common practices took shape. Institutional Limited Partners Association promulgated the first version of Principles of Private Equity Investment in September 2009, after continuous improvement based upon feedbacks from various parties in the following year, the second version of Principles of Private Equity Investment (hereinafter referred to as Principles ) was promulgated in January The Principles clarified a few key points such as identical interests with investors and thus established guiding principles of income allocation. 1

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8 Copyright Declaration Produced by Zero2IPO Research Center, this report is strictly protected by all relevant copyright laws.zero2ipo Group reserves final explanation and proprietary rights. Any piece of information contained in the report can only be for reference by the purchaser. Without written consent from Zero2IPO,no copying or translation of the report and/or any piece of information contained in the reports is allowed. Legal actions will be taken in case of plagiarism and/or violation of the above statement. Introduction to Survey and Report Compilation Zero2IPO Research Center has been launching Zero2IPO China Venture Capital Quarterly Surveys since Q12001 by collecting real-time data from 1,000 local and foreign VC funds operating in Mainland China. The quarterly report is an informative, reliable and up-to-date source for professionals in VC industry to trace the development of China venture capital industry. The conclusion and data in the report were mainly based on China venture capital quarterly survey. The report presents readers with informative, precise analysis, and objective conclusions. About Zero2IPO Research Center Founded in November 2001, Zero2IPO Research Center (hereinafter referred to as the Center ) is dedicated to providing professional research reports and customized researches on various sectors for venture capital and private equity funds, governmental authorities, intermediary agencies and venture companies. Its scope of research covers venture capital, private equity, initial public offering, merger & acquisition as well as market research for high-tech sector. By far, the Center has been crowned as the most authoritative research institute in China. In addition, the Center has launched Zero2IPO Database with both Chinese and English versions and China VC&PE Directory. 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