22

VIP

1966

1993 1995 --1998

1998

1972 1997

1970

EFE IFE
BCG SWOT SPACE

A
B

Investment Bank, A firm which markets new issues

of stock, bonds, etc., usually in association with other such firms, as by purchasing
an entire issue and selling it , at a profit, to investors(

Financial Service Industry

non-banking
non-insurance
Financial Service Industry

PrudentialTravelers Equitable
Travelers Salomon Smith Barney

,
Merrill Lynch Credit CorporationMLCC 1997
MLCC 99
1997 230

Investment
banking is what investment banks do

 1-1:

Investment Bank

Revenue-general Activities

Primary market making

Support Activities

Clearing

Corporate finance
Municipal finance
Treasury and agency

Secondary market making

Research

Internal finance(Funding)

Dealer activity
Brokerage activity

Information services

Trading
Speculation
Arbitrage
Corporate restructuring
Expansion
Contraction
Ownership and control

Finance engineering
Zero coupon securities
Mortgage-backed securities
Asset-backed securities
Derivative products
Other revenue-generating activities
Advisory services
Investment management
Merchant banking
Venture capital
Consulting

Financial Intermediator

15

John F.Marshall M.E.Ellis Investment Banking & Brokerage The McGraw-Hill Companies,Inc1994

19
20 30
50 60-70
80

70

1994

Wall street

Investment Bank
Securities Firm
Brokerage Firm Dealer and Trader
Financial
Industry
Securities Industry
Financial Advisor
Market-Maker
Underwriter Asset-Manager
Financial
Intermediator Wall Street company
Investment Bank
Securities Firm Wall Street company
Investment-Banking IPO
M&A Wall Street company Securities Firm

1997

1-2 12

SEC CFTC

Merrill Lynch & Co., Inc.

Broker/Dealer,Investment

Commission Merchant

Morgan Stanley, Dean Witter & Co. Broker/Dealer,Investment

Commission Merchant

Adviser,Futures

Adviser,Futures

Salomon Smith Barney Holding Inc. Broker/Dealer,Investment

Commission Merchant

Goldman Sachs Group, L. P.

Broker/Dealer,Investment

Commission Merchant

Credit Suisse First Boston Corp. Broker/Dealer,Investment

Commission Merchant

Lehman Brothers Inc.

Broker/Dealer,Investment

Commission Merchant

Bear Stearns & Co.Inc.

Broker/Dealer,Investment

Adviser,Futures

Adviser,Futures

Adviser,Futures

Adviser,Futures

Adviser,Futures

Commission Merchant
Prudential Securities Inc.

Broker/Dealer,Investment

Commission Merchant

Paine Webber Inc.

Broker/Dealer,Investment

Commission Merchant

J. P. Morgan & Co.

Broker/Dealer,Investment

JP

Commission Merchant

Bankers Trust New York Corp.

Broker/Dealer,Investment

Commission Merchant

Donaldson, Lufkin & Jenrette Broker/Dealer,Investment

Adviser,Futures

Adviser,Futures

Adviser,Futures

Adviser,Futures

Adviser,Futures

Commission Merchant
SEC
Securities and Exchange CommissionCFTC
Commodity Futures Trading Commission

1-2
Prudential Securities
Inc.

J. P. Morgan & Co.

John Pierpont Morgan 1929
Stanley J. P. Morgan & Co.
Morgan Stanley Merrill Lynch & Co. 1915
Charles E. Merrill Edmund C. Lynch
1910 1 Arthur, Herbert Percy Salomon
, Salomon Brothers
Lehman brothers Inc. Glodman, Sachs & Co.
Donaldson, Lufkin & Jenrette

1940 E.A. Pierce & Co.Merrill Lynch & Co.

Merrill Lynch, E.A. Pierce & Cassatt1941 Fenner & Beane
Merrill Lynch, Pierce, Fenner & Beane. 1958
Winthrop Smith Merrill Lynch,
Pierce, Fenner & Smith. 1973
Merrill Lynch & Co.

Morgan Stanley Dean Witter Discover Morgan

Stanley,Dean Witter,Discover & Co.

1994 Kidder, Peabody & Co.

129 PaineWebber Inc.PaineWebber
Inc. Kidder, Peabody
Kidder, Peabody & Co.
PaineWebber Inc. Kidder,
Peabody 129
1997 Travelers Group Smith
Barney Inc. Salomon Brothers
Salomon Smith Barney Holding Inc.

Smith Barney Salomon Brothers

SEC Brokerage-Dealer(
)
MLPF&S
SEC Broker/Dealer MLPF&SMLAM
MLIP SEC Investment Adviser MLIP
CFTC Commodity Pool Operator Commodity Trading Advisor

1-3Merril Lynch & Co.,Inc.

1998

1997

Net Revenues

$17,547

$16,256

Net Earnings ()

$1,259

$1,935

Return On Average Common

Shareholders' Equity

13.4%

26.5%

Basic

$3.43

$5.57

Diluted

$3.00

$4.79

Common Share Dividend

$0.92

$0.75

Earnings Per Share()

1998 12 31
Shareholders' Equity:

$100.1

Book Value per Common Share:

$26.89

Common Shares Outstanding():

3.612

Client Assets():

$1.442

Assets Under Management():

$5010

Employees Worldwide():

63,800

175 , 1500 20 , 160

1 .4 , GDP 1.5 5000
GDP 2/3

1980 1987
10 1980 5200 1987 9500
1987 1994 7600
2000 26 1991 213000
1996 7600
900 70%

Bulge Bracket Special Bracket

Bulge Bracket
Special Bracket

Fortune500

Major Bracket
Bulge Bracket
DLJBear
StearnsBanker Trust Smith Barney
Submajors Regionals

Charles SchwabE*trade

 Internet (Discount Brokers)

Specialty Shops
Boutiques

Bulge Bracket Special BracketSpecialty Shops Boutiques

Full-Service Shops
are largely issuer driven
Bear Stearns (are largely
investor driven)(Trading)
Paine WebberSmith Barney
Wirehouses
Wirehouse

Smith Barney

1993 American Express Shearson Lehman Brothers

Shearson Primerica Primerica Lehman Brothers
Shearson Lehman Brothers Bear Stearns
clearing operations 1200 broker/dealers
specialistsmarket makersmoney managers arbitrageurs
Bear Stearns Bear Stearns

(Wall Street Journal)

(Institutional Investor)

Securities Data Com.

Merger & Acquisiton, M&A

80

IPO

VIP

VIP

94

1 1/3

1
2
Synergy
3

19 20
20 70
1974
ESB

1976
1979 18
70

80

LBO
MBOJunk Bond
Poison pillScorched earth
pac man80

 KKR
BTR
Dunlop

Tire 80

Private Company
90 LBO

1993 6
10 SGWarburg 48 230
90
1998
50%
1998

1-4
1-41998 Securities Data

309

9101

303

6271

361

6164

287

4298

237

3955

80 90

80

70

1 70 1-5

70

1-5

1898-1903

1898-1902

(1),

2653 ,

.(2)

63

,,
,
.

20

1919-1930 ,19611

(1),

, 5282 ,

.(2)

2750 , 1060

, 10519

.(3)
,,
,.(4)
()
,.

50

1960-1970 ,

(1).(2)

,60

25598 ;1953-1968 ,

,,

.(3),

21%;

1960

15.3 1968
125.5
4

70

1985 3000

(1),

,88-89

;80

.(2),

2350 ,

.(3),

2800

.(4).(5)
.(6),
.

90

(1).(2)
.(3).(4)
.(5)
.(6)
,.

270

70

90

3 80
1983 1190 1993 5360 1998

 1.442 5000

480

-- 1985

---

1
2
3
4

5
6

8
9
1

/B

10
11
12

13

14
15

1
2
3 1-6 1-7

5
6
7
8
9
10
1-6

1-6 1-7 Mirril Lynch & co.,Inc

10

11

12

13

14

15

16

17

18

19

2
3

4
5

6
7

Private Company

1-8

1-9
1-10

 1-8

 1-9

1-10

80

1
2
3

9798
5
12-15
30

80
300 90
70
15 25

Tombstone
advertising
1-11
1-11

August,1990

WYNDHAM
FOODS.INC.
Wyndham Foods.Inx.

Has been acquired by

President Enterprises Corp.

We initiated this transaction,

Assisted in the negotiations and
Acted as financial advisor to Wyndham Foods.Inc.
Paine Webber Incorporated
In coorperation with
Pu Wei Inc.

DlNK

----

1984

800

80
1500

45 1985

1 8

1983

5000

----
8

12
34

Green Mail

success

Fee
Transaction

Success fee

AG

30
120 100
150 300

1
23
4
3 25 3
3 2
1-12 1997

International mergers
Purchases
Sales

Developing
countries

Developed
countries

Source:UNCTAD
1

1997,$bn 0

100

200

300

400

/B 133~138

 1-13 1997

Mergers and acquisitions

Cross-border deals
U n ite d S ta te s
B rita in
S w iz e rla n d
N e th e rla n d s
C anada
F ra n c e
S p a in
G e rm a n y
J apan
A u s tra lia

$bn

, 1997

20

40

60

80

Purchases
Sales

Source:KPMG

5 1-121-13 1997
2 5

Lehman
Formula15 4 3
2 1 100 5
100 4 100 3 100 2
1
1 500 7 6 5 4
410 8 6 4 22
200 5 2 200 42

Reverse Lehman Formula1 2

3 4 5

KKR 1988
RJR 35

1987

1987 5

2500

1
1987
4
2


1987 3
3000

1-14

1990 200
6 1991 1000
05% 5

3
1-14

1-14 1990

40
30
27
24
20
13
12
12
9
8

5
20 500 5

80

1986 1987
1987 3 16

1987
4

70 80 37

1987 4

80

80
---- Wasserstein Perella
WassersteinPerella & CO

Corporate Restructuring

Acquisitions(Mergers and Consolidations)

Divestitures
(Liquidations)(Battles for Corporate Control)
Corporate Restructuring
(Ownership and Control)
Expansions
mergers and consolidationsacquisitions tender offers
joint ventures
Mergers and Consolidations merger

consolidation

184

merger consolidation
2-11998
1998
Exxon/Mobil
Travelers/Citicorp
SBC/Ameritech
Bell Atlantic/GTE
AT&T/TCI

Value $bn.
( 10 )
86.4
72.6
72.4
71.3
69.9

NationalBank/BankAmerica
BP/Amoco
Diamler-Benz/Chrysler
Norwest/Wells Fargo
Zeneca/Astra

61.6
55.0
40.5
34.4
31.8

Securities Data Company

1998 1997
50% 2.4 2/3 1/4
Exxon/Mobil(/) 12
Diamler-Benz/Chryler
Rhone-Poulenc
Hoechst Zeneca Astra
Travelers/Citicorp
NationalBank/BankAmerica
Bankers TrustDeutche
Bank 100
PC Compaq Digital
Equipment CorporationAmerican Online 42
Netscape
WorldCom MCI AT&T TCI
BT Universal Studio
Seagram 106 Philips
Polygram
Bertelsmann Random House
Economist-02/01/1999

acquisition-acquiring firm
(-target firm)

100%51%
50% 20-25%

1Purchase of AssetsPurchase
of Stock

1(Corporate Property)

(2)
(Accumulated Losses)

(Stamp Duty)0.6

20
5

,
(Tolling)


3/

friendly takeover
(hostile takeover)
bear
hug

tender offer

78

Speculation

1
-

=/=*/
1
1

----

1969--197535000
2-2
2-2

1.0

0.5

2-3

2-4

Tender offer

78

1934Securities Exchange Act of

193419681970

The Williams Act

1934Securities Exchange Act of 1934

1934
Securities Exchange Act of 193413D
E214D
EF3
1934
Securities Exchange Act of 193413DSEC
13D-GRegulation 13D--G of the 1934 ActGroup
5%Beneficial Ownership5%10
SEC13DSchedule 13D,
1934
Securities Exchange Act of 193414DSEC
14D-GRegulation 14D--G of the 1934 Act

5%SEC14D-1
Schedule 134D-1

193413ESEC
13D-G3Rules
1934
14FSEC14F-1Rule 14F of the 1934 Act

193414E
(Material Misstatement)
(Misleading Omission)
Fraudulent or Manipulative Acts

Mandatory Offer

30%35%

26

81

30%
8281

30
60
75%90%

joint ventures

1993J. BleekeD. Ernst50

150%A
B
2

3
60%31%
4

A
--B
575%

Contractions)
sell-offs, spin-offs, divestitures, equity carve-outs, abandonment
of assetsliquidation
sell-offsspin-offs
divestitures equity carve-outs
spin-offs

AT&T
spin-offs split-off split-up split-off
split-up

divestituresequity
carve-outs

equity carve-outs

(Ownership and Control)

going private

Proxy Battle

Leveraged Buyout--LBO

80
60 80
q-ratio q-ratio
q-ratio 1 1965
1981 q-ratio 1.3 0.5

1981
ERTApermitted
old assets to be stepped up for depreciation purposes upon purchase by another firm and
for higher basis to be depreciated at an accelerated rate
ESOP
80

1982

(junk bonds)(bridge financing)private
placements(venture capital)(merchant banking)

Drexel Burnham Lambert Michael Milken

Drexel Burnham Lambert Bulge-Bracket
1989 2000
2000 800
reset provision deferred-payment instruments

reset provision

deferred-payment instruments payment-in-kind(PIK)

deferred-coupon bond payment-in-kind(PIK)

deferred-coupon bond

SEC

mezzanine money

 equity equity kicker

80 Campeau Allied Stores,Inc.

venture capital

buyout
groupmerchant banking

90%

2-5

1 60%

7 3 4 80%
50% 25%

 2-5

60%

30%

PIK

10%

2
30%

8
15
200

50

Deferred Pay Secruities

Pay-In-Kind Securities PIKSs

100

15% 20%


RIR 80 110
1994
1989
KKR KJR

1982

1000
1982

3
10%

acquiring group
(public company)private company

cashing out

50%

-

80

--
2

Wealth
Transfer

Stakeholders

Lichtenberg Siegel
1990 1981--1982
1983--1986

1986
Fraudulent Conveyance

XR 1987 2-6
$400 $1200 $200
$1000 $150
$250 $200 100

2-6 XR 1987 12 31

0.25
0.75
0.50

1.5
2.5

12.00
12.00
0.00
2.00
2.00

0.50
1.50
2.00

6.00

6.00

0.20
1.55
1.75
0.50
4.00

XR
10% 12% 1987
2-7
2-7XR 1987

Sales
Cost of goods sold
Gross profit
Selling and administrative
Operating profit before depreciation

Depreciation
Operating profit
Interest expense
Earning before taxes
Taxes(40 %) 40%
Earning after taxes

15.00
8.00
7.00
5.50
1.50
0,00
1.50
0.35
1.15
0.46
0.69

John F>Marshall M.E.Ellis Investment Banking & BrokerageThe McGraw-Hill companies,Inc.1994

Cash flow()= Earning after taxes+ Depreciation= $0.69

+ $0.00 = $0.69

1987 XR $0.69$8 11.6

1987 XR
XR ---XR
XR

XR 17.4 $12 XR
XR XR
XR XR $12/5 100 = $1200
$500 12%$400 18%$120
40%$180 60%
5 40%
120 40%$645

XR $1000
2-8
2-8XR --1987

0.25
0.75
0.50

1.5
11.5

10.00
0.00
10.00
2.00
12.00

3.00
0.00
3.00

16.00

16.00

0.20
1.55
1.75
0.5
4.00

150
XR 4
5 XR
5 6 1993 2-9
5 645 40%
93 15
Secondary Initial Public Offering--SIPO

 2385 15 P/E5 93 159

2225 40% 645
1580 180
54%
2-9

XR

Sales
Cost of goods sold
Gross profit
Selling and administrative

Operating profit before

depreciation

Depreciation
Operating profit

Interest expense

Earning before taxes

Taxes(40 %) 40%
Earning after taxes
Dividend
Cash flow
Debt remaining:
Short term
Long-term bank
Bonds
Cumulative retained earnings

1988
15.00
8.00
7.00
4.00

1989
15.00
8.00
7.00
4.00

1990
15.00
8.00
7.00
4.00

1991
15.00
8.00
7.00
4.00

1992
15.00
8.00
7.00
4.00

1993
15.00
8.00
7.00
4.00

3.00

3.00

3.00

3.00

3.00

3.00

2.50
0.50

2.50
0.50

2.25
0.75

2.00
1.00

0.75
2.25

0.00
3.00

1.67

1.35

0.99

0.72

0.46

0.35

(1.17)

(0.85)

(0.24)

0.28

1.79

2.65

(0.47)
(0.70)
0.00
1.80

(0.34)
(0.51)
0.00
1.99

(0.10)
(0.14)
0.00
2.10

`0.11
0.17
0.00
2.17

0.72
1.07
0.00
1.82

1.06
1.59
1.27
1.59

0.50
7.50
2.20
(0.70)

0.50
7.50
0.21
(1.21)

0.50
5.61
0.00
(1.35)

0.50
3.44
0.00
(1.18)

0.50
2.50
0.00
0.64

0.50
2.50
0.00
0.96

1
2(buyout group)
34
5
20
financial engineering

fairness opinion

90
corporate workout department(M&A Department)

1997-1999

97 12 31 74.69%

98 6 31
1997 12 31
14028
14330

12

 98 26

30 95

97 12 29 1050
7.42 53.80%
98 4 8 4262
48.37% 2.08
98 6 6
98 7 29 7854 33%
659 500
98 1423 28
7.4%

66

96 9310 97 12388
98 13187

P 93
H A
9697 10%

98
P A P
A
P
P 5.5 1
3000 99 10% 97 0.11
99 0.23

98

97 0.0023


5.29 ()

() 3.75 1.54
1.2 5.15
2.2 3.7

98
1.12

1998 11 17 1.8:1, 1.8

1
15,172,328 :9,567,884 5,604,444
,


123

45

1 /

A BC
A BC
C B
10% 10%
A
C

1 B
A 10%
A /<10 /

2 B

3 B

3-1

3-2
3-1

/PotterM.E.1997.1

3-2

3-3

3-3

1
2
3
4
5
1
2

3
4
1
2
3
4
5
6
1
2
3
4
1
2
3
4
5

3-3

1overall cost leadership

2(differentiation)
3(focus)

Harnischfeger
15

15
Harnischfeger25

3-4
3-4

Trusthouse Forte

/R1998.6

 12

3-5

3-5

1995 500

60 70

MCI
Internet
2000 MCI 1995

Venezia

80 90

1998
38
20

FVC ,

1994
226 20.2%
1.5%

liquidation

3-6

CPM
IFE

SWOT
SPACE
BCG

EFE

QSPM

IE

3-6

EFE

CPM

SPACE

IFE

BCG

SWOT

IE

QSPM

EFE
IFE

SWOT
SPACE

BCG
E

QSPM QSPM
QSPM

EFE
EFE
1 1020

2 0 1

1
3 1-4
4
3
2
1

4
5

EFE
4 1 2.5 4

3-7 EFE 1.9

37

EFE

1 20

3/21

3/21

2/21

6/21

4/21

12/21

3/21

6/21

2/21

4/21

3/21

3/21

2/21

2/21

2/21

4/21

1
1.90

143
21
2 1.9
3
EFE

CPM
CPM EFE
CPM EFE
CPM CPM
38

CPM

0.4

0.4

1.6

1.6

0.2

0.4

1.6

0.2

0.1

0.3

0.3

0.3

0.2

0.4

1.6

0.6

0.1

0.1

0.4

0.2

1.0
1.2
5.5
2.9

11234
2

CPM
EFE CPM

IEF

IFE
1 1020

2 0 1

31 2 3 4

4
5
IFE 1 4, 2.5
2.5 2.5
IFE

IFE
IFE
IFE

1.89
39

IFE

1
2/37
3
6/37
2
2/37
3
6/37
3
1/37
3
3/37
4
2/37
2
4/37
5
3/37
3
9/37
6
4/37
3
12/37

1 20
4/37
1
4/37
2 33
3/37
1
3/37
3
2/37
2
4/37
4
4/37
1
4/37
5
4/37
1
4/37
6
2/37
2
4/37
7
2/37
2
4/37
8 70
3/37
1
3/37

1
1.89

11234
2

70

1 1
310

 310

70%

20

strengths-weaknesses-opportunties-threats
SWOT
SO ST WO WT SWOT

SWOT
SWOT 9 311 SWOT
8
311

SWOT
S

O
1
2
3

T
1
2
3

1
2
3

W
1
2
3

SO
1
2
3

WO
1
2
3

ST
1
2
3

WT
1
2
3

SO
ST
WO
WT
SWOT S1S2O1

SWOT

SO
SO
WOST WT SO

ST

WO

WT

312 SWOT 4 IFE EFE

 312

SWOT
S
1
2
3
4
5
6

O
1 20

2
3

4
T
1

SO
1S1
S2S3S5O1O2
2
S1S2S3O3

ST
1
S1S2S5S6O1
2

S5S6O2

W
1
20
2 33
3
4

5
6
7

8 70
WO
1
S8O2

WT
1S2
S3S5O1
2
S1S5O2
3
S1S2S3
S4S5S6S7S8O1
O2O3O4O5

strategic position and action evaluation matrix

( SPACE ) 3
134 SPACE
FS CA ES
IS

SPACE EFE IFE

SPACE 37

SWOT SPACE
SPACE
SPACE
FS CA ES IS
FS IS 16 ES CA
16
FSCAISES


FSCAISES
X X Y Y
XY
SPACE XY SPACE

313

SPACE

FS

CA

IS

ES

SPACE
SPACE 314151617

SPACE

SPACE

 3-14

FS

FS

CA

IS

CA

ES

IS

ES

FS

FS

CA

IS

CA

ES

IS

ES

SPACE

3-15

FS

CA

FS

IS

CA

ES

IS

ES

SPACE

FS

CA

FS

IS

CA

IS

ES

3-16

ES

3-17SPACESPACE,
5
3-17

SPACE

FS

70

30

IS

ES

CA

IS

133 4.3

CA -175-3.4
FS

85 1.6

ES -105 2

2
2
2
1
1
8
5
4
4
13
3
1
1
2
3
10
5
1
4
2
5
17

X-3.4+4.3=0.9

y-2+1.6=-0.4

3-18
318

SPACE

6 FS

CA -6

ES

-6

IS

SPACE
SPACESPACE1

Boston Consulting Group Matrix

BCG

BCG
BCGBCG

2850.18(5%/28%=0.18)
BCG38XX
0.50YY
-20%+20%0.0XY

BCG

319

BCG

1.0

0.5

BCG
BCG

39BCGBPVCD

320

BCG

1.0

0.5
B
A

A BP

C
C VCD

BCG
BCG
BCGBCG

internal-external matrix
IE3109
IEBCG
BCGIE
IE

BCGIEIE
BCG
BCGIEBCG
IE
IEXIFEYEFE
IFEEFE
IEIEXIFE1.0-1.99
2.0-2.993.0-4.0YEFE
1.0-1.992.0-2.993.0-4.0

321 IE

IFE

4.0

3.0

2.0

1.0

EFE

3.0

2.0

1.0

IE
124grow and
build

357hold and
maintain
689
IE124

IFE1.9IFE1.89
IE3-21IESWOT
WTIE

grand

strategy matrix

3-22
3-22

3-22

QSPMQSPM


quantitative

strategic

planning

matrix

QSPM
QSPMQSPM

QSPM
EFEIFESWOTSPACE
BCGIE
QSPM
QSPM
QSPM
QSPM3-22QSPMSWOTSPACEBCG
IE
QSPM
QSPMQSPM

QSPMEFEIFE
EFEIFEQSPM
QSPM

322

QSPM

1
2
3

1
2

3-23QSPMSWOT
QSPM
QSPM
323 QSPM

AS

TAS

AS

TAS

1 20

3/21

12/21

6/21

2/21

8/21

8/21

4/21

8/21

12/21

3/21

2/21

8/21

4/21

3/21

6/21

12/21

2/21

8/21

4/21

2/21

8/21

6/21

2/37

6/37

8/37

2/37

4/37

8/37

1/37

2/37

4/37

2/37

4/37

6/37

3/37

6/37

12/37

4/37

12/37

12/37

1 20

4/37

8/37

8/37

2 33

3/37

3/37

9/37

2/37

4/37

12/37

4/37

8/37

8/37

4/37

4/37

8/37

2/37

4/37

4/37

2/37

4/37

4/37

8 70

3/37

3/37

6/37

4.7

5.4

1ASTAS
21=
2=3=
4=
3
2 8 2 5

1 QSPM
EFEIFE
2 EFEIFE

3
QSPM
4

1=2=
3=4=

2
4

6 QSPM

QSPM
-

23-224.75.4

QSPM
QSPM
QSPM

QSPMQSPM
QSPM
QSPM
QSPM

QSPM


QSPM

1.

2.

A B VAVB VAB
V
4-1

 4-1

VA

VB

VAB

1. C: 0 VAVB
V=VAB=VABVA=VBV

2.
1

{ VA
VA

}
1 ,

VBV VABVA

Shannon P.Pratt

Valuation,measuring and managing the value of companies/Tom Copeland ,Tim Koller, Jack Murrin ,second edition
1998.p.451

Valuing A Business:The Analysis and Appraise of Closely Held Companies/Shannon P.Pratt,2nd

edition ,1989 ,P.35 and p.68
1


future benefit,

a stream of future returns

Pratt
FRt
V=
(1i)t
V
FRt t Future Returns
i
Pratt (),
,:

(1)
(2)
(3)
CF.,MalkielShannon
P.Pratt

()

Valuation,measuring and managing the value of companies/Tom Copeland ,Tim Koller, Jack Murrin ,second edition
1998.p.73-97
1

1.

AB 4-2
4-2 AB
A

1
1000
(700)
(200)
100
1
1000
(700)
(200)
100

2
1050
(745)
(200)
105

1100
(790)
(200)
110

1200
(880)
(200)
120

1050
(745)
(200)
105

1100
(790)
(200)
110

6
1300
(970)
(200)
130

1450

(1105)
(200)
145

5
1200
(880)
(200)
120

6
1300
(970)
(200)
130

1450
(1105)
(200)
145

AB

AB 4-3
4-3

AB
A

1
100
200
(600)
(250)
(550)

2
105
200
0
(13)
292

3
110
200
0
(13)
297

4
120
200
(600)
35
(245)

5
130
200
0
45
375

145
710
200
1200
0
(1200)
(23)
(219)
322
491

1
100
200
(200)
(150)
(50)

2
105
200
(200)
(8)
97

3
110
200
(200)
(8)
102

4
120
200
(200)
(15)
105

5
130
200
(200)
(15)
115

145
710
200
1200
(200) (1200)
(23)
(219)
122
491

10% A 6
212 B 323B
A

(1) 6
B A

B
(2)A B
A 200/600
A

A B

2.

1
Tom
Copeland 35
0.94

2
1974 10 1

LIFOFIFO
LIFO

FIFO
LIFO

FIFO LIFO
LIFO FIFO

Biddle Lindahl1 LIFO

Kaplan Roll
2

Kaplan
Roll

3.

0
+ 0

2Watts Zimmerman
1

DCF

G.Biddle and F.Lindahl, Stock price reactions to LIFO adoptions: the association between excess returns and LIFO tax
savings,551-548
2 KaplanR.S. and R.Ross,1972,Investeror Evaluation of Accounting InformationSome Empirical Evidence
1
R.L.J.L.p.168-171
2 Valuation,measuring and managing the value of companies/Tom Copeland ,Tim Koller, Jack Murrin ,second edition
1998.
1


1.

4-4
4-4

130
90

160

140

150

74

80

85

66

70

75

100

70

69

20

36

43

50

54

57

61

=+
=+

*1-+-

NOPLAT

=
=++
=

=
+
=

++
+
=

WACC

MARRMARR
MARR

DCF

WACC
WACC=Kb(1-Tc)*B/V +Ks*S/V

Kb =
Tc =
B=
V=V=B+S
Ks=
S=

FCFt
=
t
(1WACC)
FCFt t
DCF a going concern
t
100

=+

DCF Joseph

H.Marren

510

CV=FCFt(1+g)/WACC-g
CV
FCFt
t
g
WACC

g<WACC
g g g

50%
GNP
2
CV=[NOPLATt+1(1- g/ROIC)]/WACC-g
NOPLATt+1=
g=
ROIC=
CV=
t=
WACC=

g/ROIC
1


8% 15% 5%
11%
NOPLATT+11-gA/ROICA

CV =

1+gA

1-

WACC-gA
+

N-1

1+WACC

NOPLATT+11+gA N-1(1-gB/ROICB )
(WACC-gB )(1+WACC)N-1

CV=
N=
gA=
gB=
ROICA=
ROICB=

g
WACC

=CV/1+WACC

5 10

=+

n
FCFt
CV
= +
t=1 (1WACC)t
(1WACC)n

FCFt t

n
WACC
CV

DCF

William D. Rifkin

DCF

Free

Cash

Flow to Equity FCFE

1 MM

MM

MM
=+

NOPLAT
WACC

1
2

K(NOPLAT)N

ROICWACC
WACC(1WACC)

Merger ,Acquisitions, Leveraged Buyouts,p.40

Divident Policy ,Growth and the Valuation of Shares / M.Miller, and F .Modigliani, journal of business ,1985.september,1031-1051

NOPLAT=
WACC=
ROIC=
K= NOPLAT
N= ROIC

2Rappaport Model
.Alfred

Rappaport

Creating Shareholder Value1986

=*1-+-+

CFt=St-1(1+gt)(pt)(1-Tt)-(St-St-1)(ft+wt)
CFt
S
g
p
T
f
w
t t

3Weston Model

V0 = X0 (1-T)(1-bS)

t=1

(1+g S)t
(1+k)t

X0 (1-T)(1+gS)n+1
K(1+k)n

V0 X g k
K b n T

VBV VABVA

1.

VABVA

a. A A
A
VA

b. AB

VAB

c.VABVA
2.

VBV V
B Vb
A
Va VB
+Vb+Va

a.

VB +Vb

b. A VA+Va A VAVa
c.VB +Vb+Va

NIt
V=
t
(1i)
V
NIt t Net Income
i

Expected Average-normal Income-

=/
VB +VbVa
Va=0

2
1.

1maitainable income

2withdrawabel free income

1

1997

economy
incomebook income or accounting income

zero-based methodcontinuance method

2.

a.

b.
c.

shannon P.Pratt
1

Normal StandardAttainable Current

Standard

1Valuing

A BusinessThe Anaiysis and Apprasisal of Closely Held Companiess/Shannon P.Pratt2th editionRICHARD.IRWININC

1989P35 and P68


Continunity principle

a.
b.
1

business cycle

Aextraodinary itemsnonrecurring items

30 1973
unusuallinfrequent

ongoing earning power

Non-recurring
Nonoperating items

Billusory profit

aLIFO
illusory inventory profits
b

closely held companyprivate

corporation

arm s-length price

normalized

=/=/
=/1/=
/
1/
1
1

1997 5 21

P/E

1.

2.premium to market

Copeland
Weston 20%
35% Mergerstat Review 1990 185
42% 1988
1

1%

1997

1989 7 1 8087

3
1
2

1 comparable firm

2
3 Valuation
Ratio
a price/earnings ratio
P/E
b price/book value ratio P/B
cprice/sales ratio P/S
4

5 V
a V= P/E
b V= P/B
cV= P/S
6
=
2

1
2

Mergerstat Review 20%

50%

3.marketability discount

marketability/liquidity

5
lack of marketability
Shannon PPratt

35%
Leslie Livens

50%~75%
25% 15%
75%~90%
15% 7.5% 90% 5% 10%

4.
1

5 P/E
1

Mergerstat Review 19901991pp1100101

Valuing A Business:The Anaysis and Appraisal of Closely Held Companies/Shannon P.Pratt,2th edition,RICHARD.IRWIN.INC,1989,
p118
2
Share Valuation HandbookHandbookTechniques for The Valuatio of Shares in Private Companiess/Leslie LivensPublished by
Fourmat Publishing.P.42
1

DCF

2 AP

AP/AP/AP/
3

4
=
2

1996 8 20

1.
2.
3.

=-

11=2

1
2

1989 7 1 63

1997 4 5

1.

2.

3.

=---
=

4.

5.

22

1.
2.
50%
50%

3. Fair value

4.

Purchase method

3
4

IASC322
040

66


50

66

664
4

66466

45%

4
1 1998 12 31 A B B A
B 5-1
A 2000000 1 2 B
1 1200000 A

45000

55000

100000

200000

5-1

1998 12 31

2200000

450000

450000

900000

500000

400000

-100000

1200000

450000

480000

30000

1600000

600000

800000

200000

2800000

2000000

2300000

300000

800000

500000

600000

100000

9500000

4500000

5030000

1000000

500000

500000

2000000

1000000

1000000

2100000

500000

400000

5100000

2000000

1900000

-100000

2000000

1200000

200000

800000

2200000

500000

9500000

4500000

1A
2000000
B

4000000

2000000

2000000

100000

10000045000+55000

200000

450000

400000

480000

800000

2300000

600000

970000

500000

1000000

400000

4100000

2 B

500000

1000000

500000

1200000

800000

500000

450000

500000

450000

600000

2000000

500000

2 1 B
A 1 B
B A
A B
A B B
A B

3AB 5-1 1998 12 31 A 3062000

B 39000 B
1A
B
B

3062000

3062000

B
B

39000

39000

A 3101000 3130000
29000
5-2
5-2

2300000

23000

2277000

600000

6000

594000

2900000

29000

2871000

29000*2300000/2300000+600000=23000
29000*600000/2300000+600000=6000

29000

450000

400000

480000

800000

2277000

594000

500000

1000000

400000

3101000

2B
1 B

Pooling of interests

1
2
3
4
5
2
41A
B

450000

500000

450000

600000

2000000
500000
500000

1000000

500000

2000000

500000

200000

200000

2 B 1 B
5 2
B A
B
B

2500000

2000000

500000

200000
200000

6 1998 12 31 A B B B
5-1
AB 5-3
5-3

2000000

1200000

3200000

200000

800000

1000000

2200000

2000000

4200000

2200000

500000

2700000

4400000

2500000

6900000

A 1200000 1
B A
B

2500000
1200000

800000

500000

A 1000000 1

 B A
B

2500000

1000000

1000000

500000

A 2000000 1
B A
B

2500000

2000000

500000

A 2200000 1
B A
B

2500000
200000

2200000

500000

A 2800000 1
B A
B

2500000

200000

100000

2800000

7 1998 12 31 B 5-1
A 1080000 1
B 90% B A

22500000

1080000

2000000*0.9-1080000 720000
500000*0.9

450000

1997

Exchange Ratio

AB
A
BAB
AB

22
1

AB

E1

E2

E12

S1

S2

EPS1

EPS2

EPS12

P1

P2

P12

P/E

M1

M2

M12

S1*P1M1*E1

S2*P2(M2*E2)

ERERAA
ERBB

1
earning
power

1
ER=/=EPS2/EPS1

stock-price

determination

model

2
ER=/

15

Ag1Bg2n

ER=EPS21+g2n/EPS1(1+g1)n

1
2

3
4
2EPS
a.EPS
b

EPS
BreakEven
Exchange

Ratios

AB

EPSa.
b

1EPS
I%10%
10%
1 ABEPS12

EPS12=/
=E1+E21+I%/S1+ER*S2
2AERA
AEPS1AEPS12
EREPS12A
AERA
EPS1EPS12
EPS1E1+E2
1+I%/S1+ER*S2
ERA=[E1+E21+I%-E1]/EPS1*S2

EPS12
EPS12 =

E1+E2 1+I%
S1+ERS2

EPS1

ER

ERA

EREPS12
PPA
AEPS
AOERA
3BERB
BEPS2ERB
EREPS12B
B
EPS2=ER*EPS12
EPS2=ER*[E1+E21+I%/S1+ER*S2]
ERB=EPS2*S1/[E1+E2
1+I%-E2]

EPSAER
ERBAERERA
2EPS
I%
g1g2g12
n

(1)nEPS12
n

EPS12 =n/
n

=E1+E21+I%
1+g12 /(S1+ER*S2)
n

(2)AnEPS1
n

EPS1 =EPS1(1+g1)
n

3EPS12 = EPS1 AERA

n

E1+E21+I%1+g12 /(S1+ER*S2)=EPS11+g1
n

ERA=[E1+E21+I%1+g12 -E1(1+g1) ]/ EPS1*S2*(1+g1

(4BnEPS2

EPS2n=EPS21g2 n
n

5 EREPS2=ER* EPS12 BERB

n

EPS21g2 =ER*[E1+E21+I%
1+g12 /( S1+ER*S2)]
ERB = EPS2*S1*(1+g2 n/[E1+E21+I%1+g12n-E21g2 n]
n
ARE ERBAERERA
3
ER=/=P2/P1

a
ctive1y traded

4
ER=/

2
3

1
2
34

1.

2.

3.

2
3.

1993 22 16


1970 16

12 12 12

1.Attributes of the combining companies

(1)

(2)
2Manner of combining ownership interest

7
(1)

(2)

(3)

(4)

(5)

(6)

(7)

3Absence of planned transactions

12

10% Accounting Trends &Techniques1990p.49

Statement of standard accounting practice 23

1
Offeror
2 90%
Offeree 90%
3
20% 20%
4 Equity share capital
90%
Voting nonequity share capital
90%/

12
34
5

1996

1997

1998

66

66

1.

2.

3.

4.

5.

6.

7.

50
8.

1.

(1)
(2)

(3)
(4)
(5)

2.
1

1.
1

2.

10

10 10
10 10

2
3

23

15172328

1998 6 30 1998 10 29
2

95 96 97

98 1-6

=/
*1+
1998 6 30
2.49 3.32

35% 1.81[=3.32*(1+35%)/2.49]
1.8 1

Hostile Take Over

51%

Green mail

--

1970 1980 80 90

1993

123

4
5
6

94 45 A 5432615 7.79% 9.8%

10.2%
51%
25%
50%

51% 51%

2
A B 10%B A
10% A B A
B A
B A
1994
----80

40% 40%

51% 35%

- 10%

1983 13
80%

 AB 20% A B

3Placing Shares In Friendly Hands

Employee Stock Ownership Plan ESOP

----
ESOP 1981

ESOP
1998 1998 IPO

2 3

1/10

EDS E
EDS
A B A
B

130

11

Shark-Repellant
Anti-takeover Amendment
1 Staggered Board
1/4 1/3

A 12 B
A A A
1/4 3 B 3 A
9 B A

 112115
5-19 3
117 1/2

104 10%
103

2 (Super-majority Provisions)

(Lock-in Provisions)

2/3 3/4
2/3 3/4 2/3 3/4
106

2/3
1

2
3
45
2/3
2/3
2/3

(Cumulative Voting)

102106

4(Fair Price Amendments)


(Two-tier Offer) 51%
49%1982 3

85
88

002 1 50

002 010 50 5
25 15 25 /

Scorched Earth

PolicyPoison Pill

Crown

Jewels
,

,(Crown Jewels)
Know how

Crown

Jewels

1982 1 49
Crown Jewels 4
25 1982 3

Share holder Rights Plans

1 2 5
A
20 4 80 B A
B A C AB
40 A 80 4 B
C 4 *40 160
2 20

3

Poison Put

Bonds

Poison

Provision

leveraged recapitalizations
recap poison puts LCO
leveraged
cash-out
1985 Multimedia,Inc.
(outside shareholders)
(inside shareholders)

20

ASSET RESTRUCTURING

80

300

Golden Parachute(Penson Parachute)(Tin

Parachute)

Golden Parachute
(Penson
Parachute)(Tin Parachute)

/
CEO

1980

500 85 6 (Revlon
Inc.)(Pantry Pride)1985

Allied Co. Signal Co.

126 2280 25
28003000

16

1986 9200
2300
250 1984

20%

20003000
(Severance Pay)

Golden Parachute(Penson Parachute)

(Tin Parachute)

(Pac-man Defense)
80

1
23
80
GAF
4

1982

1982

13.348
20 4
6.75 13 9.3
14 8 20
15 2 3
4 3

White Knight

Lockup Option
Assets Lock-up

Assets Lock-up
Option

1985 Carl Ichan TWA

TWA
19.625 TWA 640 1985 10
Vicks Unilever P&G
Vicks P&GLockup Option

Lockup Option1 Unilever

Vicks Vicks Vicks
51%
2 Vicks
Vicks
Lockup Option Vicks
Vicks

 Vicks Vicks

3 20

6-11978--1984

1978
1079
1980
1981
1982
1983
1984

14
17
8
15
12
4
8

6
9
5
9
2
3
2

70 80 80

Shark Watcher

Defensive Merger

12

1970

34

5
1981 6
1981 42.9% 450% 1984
11 22 1984
1985 40 40%
1.5

1984
1984 1 2
121% 1980 1984 116%
Green Mail----

1980
PredatorsSeagullVulturesLiars
Grave Dancers
Sharks
Targeted Share RepurchasesDead Swap

1
149
1

2
t > g(1-b)+bt
g b 30%
30% 51%
3

4Green Mail
greenmail target block repurchase
standstill agreement
target block
repurchase
standstill agreement

Management Buyout---MBO

(Management Leveraged Buyout---MLBO)

1980

Recapitalization

---MBO

1
2
Williams Act


1
Sherman Act,1890

2
Federal Trade Commission Act,1914

3Clagton Act,1914
-
1936-

1950

Clagton Act,1914 7

-
1936
Clagton Act,1914
-
1950
Clagton Act,1914 7

Clagton Act,1914 1980

4Hart-Scott-Rudino Antitrust Improvement Act,1976

Notification
(Waiting)(Clearance)
5Merger Guidelines of the Department of Justice

1
2
3

1985 Unilever Richardson

Vicks
2/3
Unilever Richardson Vicks
Unilever Vicks Richardson


1
1984
2000

GAF 1985 GAF

10%

1985 12 7 GAF 68
85 GAF
GAF 1
GAF 2
GAF3 85 25 60 35%

KKR GAF
KKR

GAF GAF

AGF -
GAF

1985 GAF 74
78
GAF
GAF

55%
GAF
1986 1

1/4

2
1981 14
1981 5 50

1981 5
65 13%

73 41%

87.5 40% 60%

1.6
85 /
85 / 11.7
90
50% 50% 90

105115 120
98 92

98
3
1

1995 6 16

198548Mesa546400
Unocal
60
72
PoisonPill

Revlon Inc.
19856
Pantry Pride,842-43

20%
65
12%
47.50
47.5011.75%
56.25Forstman
(White Knight)
(Golden
Parachute)

56
57.2540%

Crown
Jewel

4CA CSC 1

CA CSC
CA 500
95%
CSC

1999.1.7, 3

 25%

20 CA

20 CA 50 CSC
CA CSC CA CA IBM
CSC CA

CA 1997 12 CSC
1998 2 CA
108 CSC 30% 90
CA
CA

CA CA
1 CSC
2 CSC 3CSC CA

4 CSC
5 CA CSC
6
CA CA CSC CA
CA 114 CSC CSC CSC
CSC
CA CSC 1998 8 CA

CSC
CSC CSC CA

1 20
2
17 3 50
904
5
5000 CA 6
CA CSC
CSC 3 2 CSC CA 3 6 CA
3 16 CA
CSC

CA CA CSC
30 CSC CSC
CSC CSC CSC

 108 30%
CSC 130
CA
CA

CA
CSC CSC
CSC

CA CSC

A A
B45%A 5000
X B X BA
X 8000 B
B
B 3000
A
55% 1650 B

ST
//
A X
X B B X A
B A 500
2000 B A
2100 100 A B

ST

A X Y
Y A
Y A
X
Y

A X B Y X A
B Y B

6
20

Scorched Earth Policy

--Crown Jewels

A Y A --- Y
3000 5000 A A 7000 5000
Y A 4000

A A

X A 10000
1/5000 4000
X 4000 1/5000 8000 A 30
A 0.2 A 6 /
X 10000 60000

---

 100 300

----

30%

30% 45
1

 12 2 30

Proxy(Voting)

In Good Faith
(Honestly)(Reasonably),

In Good Faith(Honestly)
(Reasonably),
(The Duty Of Care)The Duty Of Loyalty

Faithlessness and Self-dealing

6
106

7
10% 25%

111

63

10

11
1
2

12

13

1
23
4

1997

1. 3.5 266.41 85 86
3.5 91 74.66 61.24 95
393.83 266.41 1986-1995
262.91 1

91 95

1991
1159
5752
555
7466
242
1100
6124

1992
5097
4431
3286
12814
1882
807
10125

1993
5951
17258
3539
26748
2438
2970
21340

1994
8884
24397
4305
37586
3346
9144
25096

1995
9045
26424
3914
39383
3000
9742
26641

2. 1.5 21.3 8 14
3. 154%1991 1.3-1.6 11
2.47 92 2.15 -2.2 92 1
2.3 1997 40 96
12 31 44.9 11.225 91
1.3 10 5 2 /
154% 2
4.93 33
96 12 957.8 2.76% 20
10 3

 3 96 12
12
20 Leading companies in market capitalization-December 1996

Rank

Company

HSBC Holding plc

Issued capital(Sh)

Closing
price
(HKD)

Market capitalization
HKD

1,790,628.607 HKD

165.50

440,845,022.951

12.68

870,457.762 GBP
2,389,540.301

166.00
94.75

Sun Hung Kai Properties Ltd

226,408,943.520

6.51

Huichison Whampoa Ltd

3,617,727.950

60.75

219,776,972.963

6.32

Hang Segn Bank Ltd

1,931,501.436

94.00

181,561,134.984

5.22

Cheung Kong(Holdings)Ltd

2,297,556.240

68.75

157,956,991.500

4.54

HK Telecommunication Ltd

11,500,978.973

12.45

143,187,188.214

4.12

Henderson Land Dev Co Ltd

1,699,240.000

78.00

132,540,720.000

3.81

Swire Pacific Ltd

970,009.385 A

73.75

107535655.515

3.09

3,076,706.271 B
1,864,376.923

11.70
52.25

New World Development Co Ltd

97,413,694.227

2.80

CITTIC Pacific Ltd

2,133,186.160

44.90

95,780,058.584

2.76

Whart(Holdings)Ltd

2,273,059.917

38.60

87,740,112.796

2.52

China Light&Power Co Ltd

1,990,656.000

34.40

68,478,566.400

1.97

HK Electric Holding Ltd

2,020,334.691

25.70

51,922,601.559

1.49

HK&China Gas Co Ltd

2,989,834.052

14.95

44,698,019.077

1.29

Wheelock and Co Ltd

2,021,252.899

22.05

44,568,626.423

1.28

Cathay Pacific Airways Ltd

3,437,413.848

12.20

41,936,448.946

1.21

Bank of East Asia Ltd

1,100,758.422

34.40

37,686,452.028

1.09

Hysan Development Co Ltd

Cheung Kong Infra Holdings Ltd

1,028,780.910
1,368,000.000

30.80
20.50

31,686,452.028
28,044,000.000

0.91
0.81

Amoy Properties Ltd

2,501,232.547

11.15

27,888,742.899

0.80

Total

2,267,836,042.303

65.24

Total

3,475,965,396.014

100.00

1985 1986 Sun King Fung

Dev.Ltd 2 2.7
64.7%

49% 41.92%91
1985
--Tylfull Co Ltd. 1
1986
*

2 Sun King Fung Dev,Ltd.

Hong Kong Macau Intl Inv.Co Ltd acquired a controlling stake in the Co.

1990
*

On completion of a series of transactions .the Co acquired from China Intl Trust

& Inv.Corp Hong Kong (Moldings)Ltd (CITIC HK) approx.38.3% of Hong Kong Dragon Airlines

ltd and two industrial buildings .Concurrently ,CITIC HK became a major shareholder of
the Co through acquisition of 51% shs. from Mr. Chao Kuang Piu.
1991
*

Acquired from CITIC HK 12.5% shs.in locally listed Cathay Pacific Airways Ltd for

$ 2.86 bn and 20% interest in Companhiu de Teleco-municacoes de.Macau S.A.R.Lfor

250M.These acquisitions were mainly financed by the cos placement of 1.492 bn new shs.and
$ 500M bonds.As a result,Kuok Hoek Nien and Li Ku Shing held minority shs.of the Co.
Changed its name to present one on 22 Aug.
1992
*

Acquired Hang chong Inv.Co Ltd.holding company of motor vehicles dealer,Dah Chong

Hong Ltd.
1993
*

Further developed its business and diversified its earning base by acquiring 12% stake

of Hang Kong Telecommunications Ltd from CITIC HK:the Tsing Yi lsland chemical waste
treatment plant and interests in two power station projects in Jiangsu and
Zhengzhou,China.
*

Joined with Cheung Kong to make an unsuccessful take-over offer for listed Miramur

Hotel & Inv.Co Ltd.

*

Westvn Harbour Tunnel Co Ltd(WHTCL).in which the Co has 10% interest was granted

a franchise to construct and operate the Western Harbour Crossing project.

*

Established a vehicle distribution joint venture in China for Isuzu franchise.

Acquired 10% interest in Hong Kong Air Cargo Terrninals Ltd,Which holds the franchise

for air cargo handing at Kai Tak Intl Airport.

*

Acquired 55% stake in each of four manufacturing operations in China specializing

in the production of steel ,telecommunication cables .precision pipes and motors

respectively .The precision pipe manufacturing joint venture was dissolved in 1994.
1994
Took a 20% interest in locally listed Manhattan Card Co Ltd.
*

Acquired a 50% interest in the development of Discovery Bay,Lantau Island for $ 3.4bn.

Further enlarged its earnings base by acquiring from CITIC HK,an additional 25%

interest in

WHTCL (thus increasing the Cos holding in WHTCL to 35%),interests in HKS

Eastem Harbour Crossing and Chinas Shanghai Yanan East Road Tunnel,and certain
properties in HK.
*

Acquired through a 45% owned joint venture ,an exclusive franchise to operate the

Nan Pu Bridge ,the Yang Pu Bridge and the Da Pu Road Tunnel in Shanghai ,China .In late
1995 & early 1996,similar franchises were granted over Hu Jiu Toll Road& Xu Pu Bridge
in Shanghai.

Acquired interests in two more power station projects in Henan & Shanghai, China.

1995
*

Teamed up with CITIC HK,Kerry Trading and Dev.Bank of Singapore to develop an office

building of 52,200M2 at the Tamar site,HK.

*

To realize funds to assist the expulsion of its infrastructure & other projects, the

Co reduced its shareholdings in Cathay Pacific & HK Telecom to 10% respectively.

1996
*

Reduced its interest in Dragonair to 28.5% following the disposal to China National

Aviation Corp (Group) Ltd which now is the alrgest sharcholder of dragonair.At the same
time.the Co

increased its shareholding Cathay Pacific to 25%.

1.
1.

1985 1986

2
2.7 64.7%

2.7
64.7%

2.
2.

2 X%
X%

3.
191 9
36%92 1
64%A

B
69

2 25 36% 2.57
4500 2.12
37% 31 64%
31+25=56 11.7
56-11.7=44.3 52 44.3
52 15.4%
3
38% 1.32
1.53 / 1.83

4 36%
330 / 160 /
330-160=170 / 230 /
230-170=60
388 38860=2.32 2.2

9800 8500 4900

1200

4.
4.

86 1.1 91
9.072 2.24

7 10

456

CITIC PACIFIC LIMITED

GROUP STRUCTURE(Cont)
China Lita Trst&Corp Hong Kong(Holdings) Ltd
41.92%
THE COMPANY
Infrustucture

Aviat ion
25%

Cathay P acific
Airways Ltd

56.3%
50.0%

28.5%
10%

Environment

Power Generation in China

HK Dragon
Airlines Ltd

25%

HK Air Cargo
Terminals Ltd

50%

Lighang Power Station in

jiangs u

25%
Enviropace Ltd

Zhengzhou Xinji Power

Station in Henan

30%

Green Valley
Landfill Ltd

30%

South China.
WM I Trans fer
Ltd

Pudong Power
Station in Shanghai
Kaifeng Power
Station in Henan

Telecommunications
Aviation
10%
Hongkong Telecommunications Ltd
20%
Companhia de Tel ecommunicacoes de Macau S.A.R.L.
10%

35%
Western Harbour Tunnel Co Ltd
Construction&Opertion of
Western Harbour Crossing in HK
(scheduled to be contpleted in the
Ist half of 1997)

Eastern Harbour Crossing

Co Ltd
operation of rail works
through the Eastern
Harbour Crossing in HK

45%
Shanghai Huang Pu River
Tunnel&Bridges Dev.Co Ltd
franchised operation of Nan Pu Bridge
Yang Pu Bridge Da Pu Road Tunnel
and Xu Pu Bridge in shanghai ,China

50%

28.48%
New Hong Kong Tunnel Co Ltd
operation of read turnel through the
Eastern Harbour Crossing in HK

Rond & Tunnel

Shanghai Citio Tunnel Dev Co Ltd

Operation of Shanghai Yanan East Road
Tunnel,Shanghai China
construction&mgrnt.of on adjacent
new Tunnl

++locally listed
++joint interest of Calhay Pacific&Swire Pacific Ltd

45%
Shanghai Jian Tai Co Ltd
franchised operation of Hu Jia
Toll Road in Shanghai,China

GROUP STRUCTURE
China Lita Trst&Corp Hong Kong(Holdings) Ltd
41.92%
THE COMPANY

Industrial Manufacturing

Trading&
Distribution

Property

100%
20%
Dah Chong
Hong

Dustribution of
motor vehicle
in HK,Macau
&China

Property

50%

Property
Investment&
development
HK Resort Co Ltd
property
development
at Discovery
Bay,Lantau
Island,HK

55% in each of
-Jiang Xingcheng
Special Steel Works Co Ltd
-Jiangyin Xingcheng Steel
Works Co Ltd
-Wuxi Huads Motors Co Ltd
-Wuxi Tong Ling Cable
Corp Ltd

Property
Investment&
development

50%

40%
Importing ratailing&
exporting of foodstuff.
Electrical appliances,
cosmetics, fresh
produce&other
products

HK Resort Co Ltd
property
development
at Discovery
Bay,Lantau
Island,HK
Goldon Inv.Ltd
property
development
at Tamar
Site,HK

CTTIC PACLEIC LIMITED

BUSINESS
Investment holding airline operation , trading & distribution , warchousing property investment &
development , telecommunication , power generation , chemical waste treatment and infrastructure.
Year ended 31-12-95
By activity:
Trading & Distribution
*motor vehicles&related service
*trading
Joint Ventures
Property
*property investment
*godown & cold storage
Others
*sale of investment
*interest income
*others
By area:
HK
China
Japan
Singapore
Others

Turnover
$10,836M

Profit
$1,439M

45.8%
36.3%
5.3%

19.8%
13.0%
40.1%

1.7%
0.5%

11.5%
2.3%

0.9%
9.5%

5.3%
8.0%

50.5%
34.9%
5.5%
5.4%
3.7%

7190 2 1.2
3.11 3.7 38.3%
291 8

 12.5% 20%, 14.9

1.35 20 5
1.55
3 56 1.55
12.9 20 5 1994 8
1.55 3.22 6 25
36% 64% 92
3 4 0.1 0.4 8.8
292141000 103527000 CITIC HK55361000 Kerry 133253000

25.7
56

86 2
86 2
86 3
88 10
90 2
91 8

91 9
91 10

92 2
92 3

93 3

94 3
94 5
94 9
95 1-5
96 1

$0.1
Sun King Fung Dev.Ltd.

$0.715
China Dev.&Inv.(HK)Ltd
$1.2 38.3%
$1.35 CITIC HK
$1.35 Kerry Trading Co Ltd
$1.35 Hechfield Co Inc
$1.35
$1.55
$1.55 CITIC HK
$1.55 Kerry
$1.55
$1.55
4 1 $0.4
$8.8 CITIC HK
$8.8 Kerry
$8.8
$13 CITIC HK
$13 Kerry
$13 Peregrine Borkerage Ltd
$6.2
$23 CITIC HK
$23 CITIC HK
$23 CITIC HK

$27 CITIC HK

152343165

152343165

117364598
54940000
311612350
731207587

549428063
604368063
915980413
2408240000

481648000
130000000
149404000
64516129
632472000
232337000
425951000
96774191

2472756129
3763516129

3860290320
965072580

103527000
55361000
133253000
420464000
53847000
77500000

1809024580

40322580
45276000

1849347160
1994623160

100000000
20997000
(2434000)
120000000

2015620160
2013186160
2133186160


10
1

86 3.5 91 3040 96 12
957.8 ,

A 1000
1.5 0.2 A
1000 1.5 /=1500 A
30 A 6 /A 6 /1000 =6000

6000 A 1500 A

 A B B A 1000
A 0.1 A 0.3 / 30
A 6 / 9 /A 6000 9000
B A 0.1 /A 3000
3

70%

5000 50000

Know-how

1986-1995
, 1991 1997 1.3 11 --
6 10 2

70 97 20

19961215(Boeing199347)
(McDonnell Douglas83)
0.65
133(19961213)

100MD-95

19972
20500101997480
(projected _ revenues)(Skapinker
996a,1996b,Waters 1996)

11990-1995
()Skapinker 1996b

??

2210(Parkes 1996b)1996
40199610300MD-11400747
12440MD-11(sub-contractor)
550(stretched)747(Skapinker 1996a1996b)
F-15FA-18(Harrier jump jetBAe)
199611(Joint strike fighter)
1116(LockheedMartin)
(Parkes 1996b)
(Skapinker 1996a)
199412265760132(
1996403)199611996
346(Airbus)110
106(SkapinkerGray 1996)(Lufthnsa)
MD-11701000FA-18
2019961-930
19
(Parkers 1996a1996b)
(SkapinkerGray 1996)

100550
50
55074780-100550A330(Economist 1996a)
(SkapinkerGray 1996)
1994(Lockheed)
(Martin Marieta)(Lokheed Martin)1996
91(Loral)
300
(Economist 1996bParkes 1996b)
3000

(Parkes 1996b)
(Skapinker Gray 1996)

(Skapinker1996a)199668.5
7371997110421(Skapinker 1996c)

1997
(Skpinker Gray 1996)1999
(consortium)(Economist 1996a)

1970
90

100-200

8090
(Neven Seabright 1995)25
1995130030(Economist
1995c)199448(46Economist
1995b)
(Economist 1996d)
200050400

35001995
800-1000
450-650747-400777
502000550747
80-1002003550A330

550(
30)

1996781999
(Economist 1996c)

1996711
(Alenia)AE-100

(Economist 1996a)

21995-2014
-31996-2015(Projected)

B-52
-707(RuigrokTulder 1995)
20(Economist 1995a)
198923(Ruigrok Tulder 1995)
20(Economist 1995a)
25

(Skapinker Gray 1996Jonquieres Baker 1996)

(Lockheed)(Martin Marrieta)(Loral)

DASA(Daimler-Benz Aerospace)70
199634(
)(199015Owen 1996a)
BAeDASACASAAlenia6242000
(Eruofighter)250
2002-2005(Rafale)
(Gripen)1700
2010(Gray 1996aEconomist 1996dParkes 1996a)
(Economist 1996d)

(Sea Harrier)Rolls-RoyceDASA

(SkapinkerGray)

(Skapinker Gray 1996)

(Economist 1996b)

(Skapinker 1996a)

(Hart-Scott-Rodino Act)
1800(Anti-trust
Division of Justice Department)(Federal TradeCommission)
(Baker 1996)-1(6060)(1515)3825(60
603600)30
(Rockwell)(Gray1996a)
1994

(Baker 1996b)

70
BAe Morthrop Grumman 199611
(must win)
F-15FA-18
FA-1820

50

1116
11
(Parkes1996a1996b)1215

200MD-11
-747(Parkes 1996c)

(Financial Time19961217
17)19942

(Economist 1995c)

(Gray 1996b)
BAeDSAS
(1998)

STN199514.550
1996BAeSTN49(Lindemann 1996)
(Thomson) (Thomson-CSF)(Thomson Nultimedia)
199636511140(Gray Owen 1996)
916(Daewoo)

124
(Financial Time 19961022125Buchan 1996
Buchan 1996)

()

()