(chinese) 111905 ling long board of directors presentation

8/2/2019 (Chinese) 111905 Ling Long Board of Directors Presentation

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Shandong Linglong Rubber Co., LTDBuilding For a Successful Future

Proposal for a $US 100 Million Pre-IPO Recapitalization

By Grand Avenue Capital and Etech Securities, Inc.Members NASD SIPC

November 20, 2005


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Confidential Presentation to the Board of Directors oftheShandong Linglong Rubber Company, LTD

This document is for informational purposes only, and information is not intended tobe complete. The statements of fact, information, and opinion contained in this

document have been obtained, compiled, or arrived at in good faith from brief

meetings with shareholders, but no representation or warranty, expressed or implied, is

made as to their accuracy, completeness or correctness. This suggested proposals and

comments and recommendations contained herein will be modified when and if

confidential financial documents and forward-looking business plans of the Shandong

Linglong Rubber Company have been reviewed by Etech Securities on a confidentialbasis and Etech Securities has been engaged as Shandong Linglong Rubber

Companys investment banker.


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Presentation Outline to Linglong Board of Directors

1. Purpose of Investment Banking Engagement

2. Proper capitalization

3. Scope of Investment Banking Work Proposed

4. Financing Strategy5. Timeline

6. Example of Pre-IPO Recapitalization of Actual Project in

Process (November, 2005)

7. Valuation Parameters

8. Prospective Investor Categories

9. Elements of Engagement Agreement and Cost of

Engagement

10. Etech Responsibilities and Capabilities


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()1.

2.

3. 4.

5.

6. (2005)

7.

8. 9.

10.


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1. Purpose of Investment Banking Engagement

To provide valuation, financial analytical services and

presentation materials in order to raise $100 million

equity for growth capital from a strategic or financial

investor.


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2. Proper capitalizationEtech Securities believes that a properly recapitalized balance sheetwith an appropriate equity infusion can insure Linglongs continued

profitable growth in its market, while providing an avenue forshareholder liquidity through an IPO at the appropriate time.

An important element of the appropriate structure recognizes that

continued infrastructure development cannot come entirely from debt

or internally generated funds. Etech is prepared to raise the

necessary equity capital from financial or strategic sources eager

to invest in profitable manufacturing companies in China.


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3. Scope of Investment Banking Work Proposed

All necessary and appropriate investment banking activities to achieve

a transaction that is acceptable to the shareholders on a best efforts

basis, including:

Preparation of a Confidential Investor Memorandum outlining

the company, history, operations, financial analysis of

performance, and forecast of financial proformas

Valuation of the Company under various growth assumptions

Design and execution of the marketing of the Investor

Memorandum to approved strategic and financial investors

Solicitation of financing proposals after thorough management

screening, facility visits and interviews

Negotiation of financing proposals and Letters of Intent

Advice and recommendation to the board regarding the optimum

private placement proposal received

Supervision of due diligence process

Assistance and overview of legal document review Closing of a transaction


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4. Financing StrategyEtech Securities would evaluate several financing scenarios that would include,

but not be limited to:

1. recapitalization involving new equity infusion involving $ US 100 million

through private placement from strategic or financial investor

2. structuring of an offshore holding company which would initially be the

recipient of the private placement, and ultimately is the IPO vehicle for theexit for the private placement investor providing offshore liquidity for the

Chinese shareholders


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1. 2.


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5. Timeline


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6. Example of Pre-IPO Recapitalization of Actual Project in Process(November, 2005)ELEMENTS

$US 140 million being raised for specialty chemical company in Chongqing

Shareholders are diverse: SOE, US, Saudi Arabia

Valuation of company matched shareholders expectations

World-wide search of over 250 financially qualified private equity groups (US, HK,Singapore, Japan, UK) with over 40 responding initially positive and receiving financialmaterials.10 facility meetings with highly qualified investors, each with funds in excess of

$US 1 billion

Client limited Etech to only 3 strategic prospectsone in active discussions

ETECH is selling only a substantial minority interest in effort to keep primaryshareholder in control situation for financial consolidation purposes.


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(2005)

25040()10


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7. Valuation ParametersEtech has suggested that a value for Linglong would be in the range of4-6 times EBITDA, adjusted for non-recurring expenses of the last 2 years.An Enterprise Valuation (debt plus equity) of 3.6 Billion RMB is possible based on EBITDAreported to Etech of:200 million RMB after tax income

150 million RMB income taxes160 million RMB depreciation

70 million RMB interest

580 million RMB EBITDA

Valuation could be in the range: 3.6 billion RMB

short and long term debt (1.3 billion RMB)

Equity value of business 2.3 billion RMB

An 800 million RMB post-acquisition value could result in an equity participation on the part of

the new investor of 25% to 40%. Etechs responsibility is to maximize shareholder value andminimize dilution.

Note that the ultimate valuation is based on a thorough review of financials and

assessment of Linglongs financial plan.Etech has had an opportunity to review neither at

this time.


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EBITDA()

36

EBITDA ()

4.536

36 13

23

825%40%


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8. Prospective Investor CategoriesStrategic Investors

--- tire related companies not already in China,

--- tire related companies in China already, interested in further

consolidation opportunities.

---automotive parts companies manufacturing in China, or ( like WL

Ross, moving auto parts businesses to China )

Financial Investors

(those with investment funds in excess of $US 1 Billion looking to make

minority investments in Chinese manufacturing companies..particularly

those with automotive interests)


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WL Ross

10


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Elements of Engagement Agreement and Cost of EngagementEtech Investment Banking Proposed Engagement

Etech Securities Investment Banking Division is competitive in cost, andis highly focused on value-added, consultative services to our clients.We are not deal-centric, focused on the transaction fee as some ofour competitors are focused.

Exclusive engagement for 12 months

Responsibility for raising $US 100 million Success fee (at closing of satisfactory transaction): 6.5% of transaction value Retainer: $300,000.50% at start of work (after execution of contract) and 50%

when Investor Memorandum is complete Reasonable and customary travel (coach) expenses Warrants equal to 3% of the equity raised at a value equal to the investors value

with a 5 year life


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6.5%

301515

3%5


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Focus ofEtechs Financial Advisory Services: Mergers, Acquisitions & Divestitures Corporate Finance (Recapitalizations)

Corporate Valuations Equity / Mezzanine / Debt Placements

The individuals comprising Etech Securities have consulted in transactions having a totalvalue in excess of $5 Billion. The Etech team members have over 125 years of businessexperience as owners, consultants and investment bankers.


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Etech Securities Investment Bankers

highly skilled in orchestrating a confidential financing designed to create

a competitive environment

creative deal makers who maximize financial and non-financial objectives of

our clients

have experience in a wide variety of industrial projects and have specific

understanding of the automotive products (tires, etc) markets

Etech Partners have owned / operated / managed companies to the companies

we seek as clients. Very few investment bankers have operating experience andwithout access to their research departments, they have little understanding of

their clients industries.


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Etech Investment Banking TeamN. Jay LiangChairman, CEO and PresidentJay Liang has successfully led the firm and acquired several stock brokerage firms. He

has built Etech into the largest Chinese owned financial service provider in SouthernCalifornia. Etech has purchased Hanmi Securities, a Korean broker dealer in Los

Angeles. Mr. Liang is a recognized speaker with expertise in the areas of economy

and stock market, and can be heard on many radio and television stations in Southern

California.


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Etech Investment Banking TeamAngel Y. WangCo-Chairwoman

Ms. Wang is one of the most successful leaders in the U.S. financial industry. She hasbuilt Etech into the largest Chinese owned financial service provider in Southern

California. Very active in the financial industry, business communities, and even the

political arena, Ms. Wang initiated and organized the World Capital Forum with the

China Council of Promotion for International Trade (CCPIT) and the China Capital

Association.


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Etech Investment Banking TeamThomas R. KorzeneckiPrincipal Managing Director

Mr. Korzenecki has 14 years diversified operating and financial experience in theoil and chemical industry, with four years of merger, acquisition and divestiture

work for ARCO and Occidental Petroleum. His responsibilities included

divesting major assets in Europe and he was a key adviser in domestic

acquisitions/divestitures involving businesses in the oil, gas, chemical, coal and

food processing industries. He then initiated, financed and managed for 13 years

four corporate acquisitions of manufacturing companies for his own account, one

of which was involved in vulcanized rubber products. Since 1998, as afounding member of Grand Avenue Capital Partners, he has advised primarily

private companies in the energy, engineered products, and a wide variety of

manufacturing companies.


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Etech Investment Banking TeamMichael MarevichManaging DirectorMike Marevich has been involved in mergers and acquisitions most of his working

career as a principal, agent and chief financial officer with this responsibility. For thelast five years, he was Managing Director ofGardiner & Rauen, a boutiqueinvestment banking firm focusing on middle market, primarily private, transactions.

Prior to this time, Mike was CFO of DSL Transportation Services, SVP/CFO for

Hollytron (a $60 million revenue chain of electronics retail stores), and CFO for

Millers Outpost/Millers for Kids. During his tenure the chain grew from 31 to 330

stores and revenues grew from $60 million to over $700 million. Mike was also a

shareholder and president of Hinshaws Department Stores, with prior experience as

Director of Operations of the Bullocks-Wilshire chain. Mike has a BS in

Finance/Accounting and an MBA in Finance, both from U. of Southern California.


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Etech Investment Banking TeamTheodore C. NevinsExecutive Director

Twenty-one years of trading, sales, and client management experience with debt and debt-

derivative products. Overseas responsibilities with Merrill Lynch, Lehman Brothers, and Bear

Stearns in New York, Tokyo, and Hong Kong. Built Asia s number one ranked business for

Lehman Brothers Asia, Ltd. for U.S. Treasury bond Repo trading. Opened and managed

Lehmans Tokyo Capital Markets department with two other colleagues. Credited with first

time placements for Bear Stearns Asia, Ltd of Collateralized Bond Obligations into parts of

Southeast Asia. Introduced and placed U.S. Mortgage Neutral Duration structures intoSoutheast Asia.


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Etech Investment Banking TeamBradford W. AllenExecutive Director

Mr. Allen has over twenty-five years of investment banking and private banking

experience including mergers, acquisitions, public and private financings and

individual and institutional fund management in the both the US and Asian markets.

Mr. Allen spent four years residing in Hong Kong and was most recently Managing

Director for Bear Stearns Asia prior to founding his own firm, Pacific Investment

Advisors, in 2002. Pacific Investment Advisors is an investment advisory and

consulting firm focused on capital raising for emerging market, small to mid-capcompanies with an emphasis in Asia, in particular Hong Kong and China. The firm has

completed numerous share placement transactions as well as private equity

investments and joint ventures. The company has offices in Los Angeles, Hong Kong

and Shanghai. Mr. Allen is the founder and Managing Director of the company.


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Etech Investment Banking TeamDaniel L. De TourManaging Director

Daniel L. De Tour, Managing director of Etech Securities, Inc.Vice President of FirstWilshire Securities. First Wilshire often ranks as one of the best performing U.S.

money managers. He is a Member of the Investment Committee and is Managing

Director of Capital Markets. First Wilshire Securities Management is operated by a

group of experienced money manager professionals dedicated to the pursuit of superior

performance for their equity accounts. As a stock market portfolio manager First

Wilshire has often out performed market indicators like the Russell 2000 and the S&P

500. The history of First Wilshire discovering unique stocks is well known on WallStreet. Major media over the years has consulted the company for its market analysis

and opinions. First Wilshire specializes in the management of equity, concentrating in

the area of Small Capitalization and Emerging Companies.


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Etech Investment Banking TeamTom WangManaging DirectorTom Wang became a member of the Board of Directors of Werke in

December 2000. Mr. Wang is currently President of Shengyang SaiaoHealthy Products Company, Ltd, U Mart and Meyyang International Group

Corporation. Mr. Wang is also Vice-Chairman of Shengyang Municipal

Commission of Foreign Economic Relations and Trade.

(chinese) 111905 ling long board of directors presentation

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