Merger Plan between Phatra Capital Public Company Limited and Kiatnakin Bank Public Company Limited ( Merger Plan )

Merger Plan between Phatra Capital Public Company Limited and Kiatnakin Bank Public Company Limited (“Merger Plan”) The Board of Directors of Phatra C...
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Merger Plan between Phatra Capital Public Company Limited and Kiatnakin Bank Public Company Limited (“Merger Plan”) The Board of Directors of Phatra Capital Public Company Limited (“Phatra Capital” or “the Company”), at meeting no. 2/2012, held on 27 February 2012, passed the following resolutions: 1. Approved the merger with Kiatnakin Bank Public Company Limited (“Kiatnakin Bank”), in accordance with the Company’s merger plan; 2. Approved the delisting of the Company’s securities from the Stock Exchange of Thailand (“SET”) and proposed the matter to the meeting of shareholders for consideration. Kiatnakin Bank will make the delisting tender offer and provide the Company’s shareholders who accept the offer with consideration in the form of newlyissued ordinary shares of Kiatnakin Bank, at a swap ratio of 1 share of the Company to 0.9135 shares of Kiatnakin Bank, provided that, upon expiration of the tender offer period, the number of shareholders accepting the tender offer must represent not less than 75% of the total shares sold in the Company. 3. Approved the acceptance of the transfer of shares in Kiatnakin Securities Co., Ltd. (“KKS”) and Kiatnakin Fund Management Co., Ltd. (“KKF”) from Kiatnakin Bank (“Share Purchase Transactions”). According to the merger plan, the Share Purchase Transactions will occur if the shareholders’ meeting of the Company approves the delisting of the Company’s securities from the SET and the delisting tender offer results in Kiatnakin Bank holding 90% or more of the Company’s total shares sold. The matter is proposed to the meeting of shareholders for consideration. 4. Approved the Company’s borrowing from Kiatnakin Bank as consideration for the purchase of all shares in KKS and KKF. According to the Company’s Board of Director’s resolution, the merger plan, including the relevant transactions and the assessments on the impact to the Company’s shareholders, are as described below: Merger Plan between the Company and Kiatnakin Bank 1.

Objectives and Reasons in Restructuring the Shareholding and Management Structure

The Company and Phatra Securities Public Company Limited (“Phatra Securities”), which is a subsidiary of the Company, and Kiatnakin Bank are organizations which are each highly competitive and have considerable expertise in their respective lines of business. The Company and Phatra Securities are one of the leading market players for the comprehensive securities services, including institutional securities brokerage, private wealth management, investment banking, principal investment business, and derivatives business. Kiatnakin Bank is one of the leading financial institutions for leasing and hire-purchase lending services, which have enjoyed high growth

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rates, and it is experienced in loans for medium-sized and small-sized companies including real estate operators as well as it is also one of the leaders in the asset management business, which generates profits continuously. The Company and Kiatnakin Bank foresee increasing business opportunities from a merger between the Company and Kiatnakin Bank that would combine their business operation potential and strengths in order to increase their business competitiveness and accommodate continued growth in all sectors of Thailand’s macro economy. The merger is also a response to the continuous development of the capital market, and it will enhance competitiveness under changed business operation conditions, increased competition, and changes in rules and supervision in relation to relevant industries. As such, the Company and Kiatnakin Bank have proposed a business plan in the form of a merger with the Company to establish a Kiatnakin-Phatra financial group by a share swap. Kiatnakin Bank will make the delisting tender offer and provide consideration in the form of newly-issued ordinary shares of Kiatnakin Bank at a swap ratio of 1 share of the Company to 0.9135 shares of Kiatnakin Bank, provided that, upon expiration of the tender offer period, the number of shareholders accepting the tender offer must represent not less than 75% of the total shares sold in the Company. After the tender offer, Kiatnakin Bank and the Company will manage the Kiatnakin-Phatra financial group together by using their expertise in the commercial banking business and securities & capital markets business to enhance the overall value of the organization. In addition, part of the restructure includes an acceptance of the transfer of shares in KKS and KKF currently held by Kiatnakin Bank to be under the Company to increase efficiency in the business management in relation to the securities & capital markets business. The purchase price of KKS’s shares in the amount of 64,999,993 shares at 99.99% of all shares will be transferred at a price equivalent to the book value of the shareholders’ equity of KKS based on the latest financial statements before entering into the transaction which is expected to be as of 30 June 2012. As of 31 December 2011, the book value of shareholders’ equity of KKS, is THB 850.9 million at THB 13.09 per share, which, when calculated with the 64,999,993 shares that the Company will purchase from Kiatnakin Bank, will have a value of THB 850.9 million. However, such value may be subject to adjustment due to the results of the operations including any dividends paid between 31 December 2011 and the date of the latest financial statements before entering into the transaction. The purchase price of KKF’s shares in the amount of 18,000,000 shares, representing 60% of all shares, is equal to THB 234 million. The Company will be able to accept the transfer of the shares in both companies when the shareholders of the Company approve the delisting of the Company’s securities from the SET and the delisting tender offer results in Kiatnakin Bank holding 90% or more of the Company’s total sold shares. After the merger, both Kiatnakin Bank and the Company will use their former names in operating their businesses to utilize the brand equity and image of both companies, which consists of different customer bases. However, both Kiatnakin Bank and the Company will be under the Kiatnakin-Phatra financial group, which will be the overall image of the organization, showing the close cooperation between Kiatnakin Bank and the Company.

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2.

Merger Plan

At present, the structure of the Company and its subsidiary, and Kiatnakin Bank and the companies under its supervision, is set forth below in Table 1. Table 1 the structure of Kiatnakin Bank and the Company before the merger.

Kiatnakin Bank Public Company Limited

Phatra Capital Public Company Limited

Shareholders of Kiatnakin Bank

Shareholders of Phatra Capital

Kiatnakin Bank Phatra Capital

Erawan Law Office

KKS

KKF

Phatra Securities

Kiatnakin Bank, which is a company listed on the SET, undertaking commercial banking business, has three subsidiaries, which are KKS (Kiatnakin Bank holds 99.99% of the shares), undertaking securities business, KKF (Kiatnakin Bank holds 60% of the shares), undertaking fund management business, and Erawan Law Office Co., Ltd. (“Erawan”) (Kiatnakin Bank holds 99.9% of the shares), providing legal services to Kiatnakin Bank. Subsidiaries of Kiatnakin Bank include its subsidiary funds: Asia Recovery 1 Fund (Kiatnakin Bank holds 99.95% of the units), Asia Recovery 2 Fund (Kiatnakin Bank holds 99.59% of the units), Asia Recovery 3 Fund (Kiatnakin Bank holds 99.97% of the units), Thai Restructuring Fund (Kiatnakin Bank holds 98.91% of the units), Asia Recovery Property 1 Fund (Kiatnakin Bank holds 99.50% of the units), Asia Recovery Property 3 Fund (Kiatnakin Bank holds 98.77% of the units), Bangkok Capital Fund (Kiatnakin Bank holds 95.72% of the units), and Gamma Capital Fund (Kiatnakin Bank holds 94.03% of the units). The Company is a company listed on the SET, undertaking investment business. The Company holds shares in Phatra Securities, which provides comprehensive securities services, and whereby, as of 31 December 2011, the Company holds 99.74% of the shares in Phatra Securities. Under the merger plan, the following transactions are to be entered into:

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1)

The Delisting of the Company’s securities from the SET by Kiatnakin Bank

Kiatnakin Bank will make a delisting tender offer of all of the Company’s securities from all of the Company’s shareholders, provided that, upon expiration of the tender offer period, the number of shareholders accepting the tender offer must represent not less than 75% of the total shares sold in the Company. Under the merger plan, Kiatnakin Bank provide the Company’s shareholders who accept the offer consideration in the form of newly-issued ordinary shares of Kiatnakin Bank, at a swap ratio of 1 share of the Company to 0.9135 shares of Kiatnakin Bank, and the consideration will not be in a form of cash, in accordance with the relaxation from the takeover panel, granted on 4 November 2011. The merger plan must be approved by a shareholders’ meeting, with a vote of not less than three-fourths of the total shares of shareholders attending the meeting and having the right to vote, and the delisting tender offer must be approved with a vote of not less than three-fourths of the total shares sold of the Company, and there is no objection from more than 10% of the total shares sold of the Company with regard to the delisting of the securities of the Company. After entering into the transaction, all shareholders of the Company who accept the offer and consideration in the form of newly-issued ordinary shares of Kiatnakin Bank will become shareholders in Kiatnakin Bank, and Kiatnakin Bank will hold shares in the Company, in accordance with the proportion of the shares whose holders have accepted the offer. In that regard, RPIC Pte Ltd. (“RPIC”), which is the major shareholder of the Company, and some of the executives of the Company, collectively hold shares in the amount of 44.6% of the Company’s total shares sold, have agreed to sell all of the shares held by RPIC and the executives of the Company to Kiatnakin Bank via a tender offer under a share purchase agreement, subject to conditions precedent, between the major shareholders of Kiatnakin Bank, Kiatnakin Bank, group of major shareholders of the Company (RPIC and some of the executives of the Company), and the Company. The shareholding structure of Kiatnakin Bank after the expiration of the tender offer will be as set forth in Table 2, as follows:

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Table 2 Structure of Kiatnakin Bank after the expiration of the tender offer. Shareholders of Kiatnakin Bank

Shareholders of Phatra Capital

Kiatnakin Bank

KKS

KKF

Erawan Law Office

Phatra Capital

Phatra Securities

The shareholding ratio of Kiatnakin Bank after the tender offer will depend on the results of the tender offer, whereby the top ten shareholders, including the proportion before the tender offer and after the tender offer, when calculating with the results of the tender offer, if Kiatnakin Bank holds the shares after the tender offer at 75% and 100% of the total shares sold of the Company, will be as set forth below: Table 3 Top ten shareholders of Kiatnakin Bank before the tender offer

Shareholders

Before the Tender Offer (According to the Share Registrar as of 12 September 2011) Number of Shares

Percentage

1. Thai NVDR Company Limited

71,542,822

11.28

2. Miss Thitinan Wattanavekin

34,782,761

5.48

3. Eastern Sugar Company Limited

34,750,804

5.48

4. Mrs. Wansamorn Wannamethee

31,785,003

5.01

5. CHASE NOMINEES LIMITED 42

29,669,800

4.68

6. CHASE NOMINEES LIMITED 30

22,466,422

3.54

7. Chodthanawat Company limited

20,693,600

3.26

8. HSBC BANK PLC-CLIENTS GENERAL A/C

20,370,474

3.21

9. Miss Yapha Thepkarnjana

17,199,900

2.71

10. NORTRUST NOMINEES LIMITED-NTGS

16,543,300

2.61

Other shareholders

334,843,378

52.76 5

Before the Tender Offer (According to the Share Registrar as of 12 September 2011)

Shareholders

Number of Shares

Percentage

634,648,264

100.00

Total Table 4 Top ten shareholders of Kiatnakin Bank after the tender offer

After the Tender Offer If Kiatnakin Bank has made an offer with acceptance of 75% of the shares(2)(3)

If Kiatnakin Bank has made an offer with acceptance of 100% of the shares

Number of Shares

Percentage

Number of Shares

Percentage

1. Thai NVDR Company Limited

81,266,481

10.44

81,266,481

9.83

2. CREDIT SUISSE, HONG KONG BRANCH(1)

71,618,397

9.20

71,618,397

8.66

3. Miss Thitinan Wattanavekin

34,782,761

4.47

34,782,761

4.21

4. Eastern Sugar Company Limited

34,750,804

4.46

34,750,804

4.20

5. Mrs. Wansamorn Wannamethee

31,785,003

4.08

31,785,003

3.84

6. CHASE NOMINEES LIMITED 42

29,669,800

3.81

29,669,800

3.59

7. CHASE NOMINEES LIMITED 30

22,466,422

2.88

22,466,422

2.72

8. Chodthanawat Company limited

20,693,600

2.66

20,693,600

2.50

9. HSBC BANK PLC-CLIENTS GENERAL A/C

20,370,474

2.62

20,370,474

2.46

10. Ramkhamhaeng Hospital Public Company Limited

19,017,243

2.44

19,017,243

2.30

Other shareholders

412,316,082

52.95

460,345,683

55.68

Total

778,737,067

100.00

826,766,668

100.00

Shareholders

Note:

(1) (2)

(3)

2)

The shares held by CREDIT SUISSE, HONG KONG BRANCH are shares held on behalf of RPIC Pte Ltd. On the assumption that the major shareholders of the Company, including the Thai NVDR Company Limited, CREDIT SUISSE, HONG KONG BRANCH and Ramkhamhaeng Hospital Public Company Limited have accepted the tender offer for all their shares held. List of shareholders of the Company as of 9 September 2011.

The Company will Proceed to Purchase Shares in KKS and KKF from Kiatnakin Bank after the Expiration of the Tender Offer

According to the merger plan of the Company, after the completion of the merger between the Company and Kiatnakin Bank, Kiatnakin Bank will be a main entity undertaking commercial banking business, whereas the Company will be a main entity undertaking securities business and business in connection with capital markets. To 6

implement the merger plan, the Company, therefore, will accept the transfer of the shares in KKS and KKF to be under the Company so that the shareholding structure of the company in the Kiatnakin-Phatra financial group will be in accordance with the policy to manage the business under the merger plan. However, the purchase of the shares in KKS and KKF will be subject to the following conditions: 1)

The shareholders of the Company approve the delisting of the Company’s securities from the SET; and

2)

after the expiration of the delisting tender offer, Kiatnakin Bank holds 90% or more of the Company’s total shares sold.

If the conditions above are satisfied, Kiatnakin Bank will proceed to transfer all of the shares held in KKS and KKF to the Company. The transaction will occur after the expiration of the tender offer. The purchase prices for the shares in KKS and KKF will be as follows: 1.

Purchase of Shares in KKS

The Company will purchase shares in KKS from Kiatnakin Bank for a total of 64,999,993 shares, amounting to 99.99% of all of the shares in KKS. The purchase price will be paid per share at the book value of the shareholders’ equity per share of KKS, as taken from the latest financial statements of KKS before entering into the transaction which is expected to be 30 June 2012. As of 31 December 2011, the book value of the shareholders’ equity of KKS was THB 850.9 million, at THB 13.09 per share, which, when calculated with the 64,999,993 shares that the Company will purchase from Kiatnakin Bank, will have a total value of THB 850.9 million. However, such value may be subject to adjustment due to the result of the operation, including any dividends paid between 31 December 2011 and the date of the latest financial statements before entering into the transaction. 2.

Purchase of Shares in KKF

The Company will purchase the shares in KKF from Kiatnakin Bank for a total of 18,000,000 shares, amounting to 60.0% of all of the shares in KKF. The total purchase price will be THB 234.0 million. However, in order for Kiatnakin Bank to be able to transfer the shares in KKF to the Company, Kiatnakin Bank must have obtained a consent from the Government Pension Fund, which is also a shareholder in KKF, and holds shares in the amount of 40% of all the shares, which Kiatnakin Bank is in the process of obtaining such consent from the Government Pension Fund. The source of funds for the Company to use in purchasing the shares in KKS and KKF may derive from the cash of the Company as of the transaction date. Some of the funds may also come from a borrowing transaction, which may include borrowing from Kiatnakin Bank to pay the purchase price or from the both sources. This will depend on the cash flow, liquidity, investment plan and cash flow plan of the Company as of the transaction date. The borrowing will have conditions and interest rates based on an arm’s-length basis as if the Company has

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borrowed from a non-related party, and is a transaction approved in principle by the Board of Directors. As such, the Company is not required to obtain approval from the shareholders in entering into the borrowing transaction. Therefore, if Kiatnakin Bank is able to hold shares in the Company after the expiration of the tender offer for more than 90% of the Company’s total shares sold, the shareholding structure of the Kiatnakin-Phatra financial group will be as follows: Table 5 Structure of Kiatnakin Bank if the Company has purchased shares in KKS and KKF Shareholders of Kiatnakin Bank

Shareholders of Phatra Capital

Kiatnakin Bank

Erawan Law Office

KKS

3.

Phatra Capital

KKF

Phatra Securities

Business Supervision and Management

After the merger, the management of the business of Kiatnakin Bank and the Company will target the cooperation of the business, whether with regard to the financial institution business and securities & capital markets business, or the existing business or new business. The companies will utilize the positive potential of both companies in adding the value to the economy to maximize the benefits to the overall organization, regardless of whether the operation of the business will be under any company in the group. However, before the merger, Kiatnakin Bank and the Company will proceed with seeking approvals in relevant matters in connection with the restructuring of the management e.g. the change of the structure of the financial group, investments in KKS and KKF, the change of major shareholders, directors, executives, and persons with management power with the relevant supervisory authority, including the Office of the Securities and Exchange Commission (the “Office of the SEC”) and the Bank of Thailand. Nevertheless, in order to be able to manage the group as a whole, the Company’s and Kiatnakin Bank’s executives have discussed and determined preliminary management guidelines as set forth in Table 6 as follows:

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Table 6 Structure of the group management after the merger. Kiatnakin Bank’s Board of Directors

Group Executive Committee

Group CEO

Commercial Banking Group

Securities & Capital Markets Group

CEO

CEO

Management Committee

Management Committee

The preliminary guideline for the structure of the management and supervision of the business will be the cooperation between the executives of Kiatnakin Bank and the Company. The Board of Directors of Kiatnakin Bank will determine the policy and strategic plan in the business of Kiatnakin Bank and companies under its supervision. The Group Executive Committee, which will consist of representatives from Kiatnakin Bank and the Company, will be responsible for determining the policy, strategic plan, and operational goal of Kiatnakin Bank and companies under its supervision. The Committee will also set the business plan and annual budget of Kiatnakin Bank and companies under its supervision to be proposed to the Board of Directors of Kiatnakin Bank. The management of the KiatnakinPhatra financial group will consist of a Group CEO, as appointed by the Group Executive Committee, whose power and responsibilities will include setting a detailed business plan. The management of Kiatnakin Bank will be in accordance with the policies and consolidation supervision rules, including the corporate governance of financial institutions and other rules and regulations of the Bank of Thailand. In addition, the merger will increase the business opportunities of both groups, i.e. the commercial banking group and the securities & capital markets group. Preliminary details of the committees are as follows: Board of Directors

Will consist of not more than 15 directors, whereby the major shareholders of Kiatnakin Bank will propose the names of not more than 5 persons to be appointed as directors, RPIC will propose the names of not more than 2 persons to be appointed as directors, 6 persons will be independent directors, the CEO of commercial bank group, the CEO of securities & capital markets group. The directors of Kiatnakin Bank must have obtained approval from the Bank of Thailand. 9

Group Executive Committee Board of Directors of the Company

Will consist of 6 persons, with 3 representatives from major shareholders of Kiatnakin Bank and 3 representatives from RPIC. Will consist of not more than 13 directors, with 3 representatives from the major shareholders of Kiatnakin Bank whose names will be proposed to be appointed, 4 representatives from RPIC whose names will be proposed to be appointed, 4 independent directors, the CEO of commercial bank group, the CEO of securities & capital markets group. The directors of the Company must have obtained approval from the Office of the SEC.

In connection with the executives of Kiatnakin Bank, if they have been approved by the Bank of Thailand, the executives of the Company and other companies under the Kiatnakin-Phatra financial group will be as follows: Group CEO Chief CEO of Commercial Bank Group Chief CEO of Securities & Capital Markets Group

Mr. Banyong Pongpanich Mr. Tawatchai Sudtikitpisan Mr. Aphinant Klewpatinond

However, if the Company does not purchase the shares in KKS and KKF because the conditions are not fulfilled, if any, the management of KKS and KKF will be as disclosed above in order to implement the business plan to use the positive potential of both organizations to establish an economically value-added entity to maximize the benefit of the overall organization, regardless of whether the operation of the business will be under any company in the group. The Board of Directors of the Company and the Board of Directors of Kiatnakin Bank before the transaction are as follows: Board of Directors of Kiatnakin Bank before the Restructure and Management. 1. 2. 4. 5. 6. 7. 8. 9. 10. 11.

Name-Surname Mr. Supol Wattanavekin Mr. Tawatchai Sudtikitpisan Mr. Tarnin Chirasoonton Mr. Suraphol Kulsiri Mr. Pracha Chumnarkitkosol Miss Thitinan Wattanavekin Mr. Pichai Dachanapirom Assoc. Prof. Manop Bongsadadt Mr. Chet Pattrakornkul Mr. Pravit Varutbangkul

Position Chairman of the Board Of Directors Director / Chief Executive Officer/ President Director Director Director Director Independent Director Independent Director Independent Director Independent Director

Board of Directors of the Company before the Change of the Structure and the Management 1.

Name Mr. Banyong Pongpanich

Position Chairman 10

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 4.

Mr. Suvit Mapaisansin Mr. Veravat Chutichetpong Mr. Supavud Saicheua Mrs. Patchanee Limapichat Mr. Norachet Sangruji Mr. Anya Khanthavit Mr. Aphinant Klewpatinond Mr. Anumongkol Sirivedhin Mr. Varakorn Samakoses Mrs. Uthai Tanlamai Mr. Pongtep Polanun

Director Director Director Director Director Director Director Independent Director Independent Director Independent Director Independent Director

Restructuring Procedure

The main procedures for restructuring can be summarized as follows: Operation Period 27 February 2012

Restructuring Procedures Major Shareholders of Kiatnakin Bank and Major Shareholders of Phatra Capital and Phatra Kiatnakin Bank Capital  The Board of Directors approves the matters related to the merger

 The Board of Directors approves the matters related to the merger

 Sign all relevant agreements, including other documents and agreements necessary for the merger to be completed. 15 March 2012

 The record date for determining which  The record date for determining which shareholders have the right to attend the shareholders have the right to attend the 2012 Annual General Meeting of 2012 Annual General Meeting of Shareholders Shareholders

16 March 2012

 The book-closing date for shareholders who  The book-closing date for shareholders who have the right to attend the Annual General have the right to attend the Annual General Meeting of Shareholders Meeting of Shareholders

10 April 2012 Not less than 7 days prior to the Annual General Meeting of Shareholders At least 14 days prior to the Annual General Meeting of Shareholders 25 April 2012

 The briefing meeting for investors on the restructuring plan and the delisting of the Company’s securities from the SET  Kiatnakin Bank delivers the invitation to the  The Company delivers the invitation to the meeting, including the opinions of the meeting, including the opinions of the independent financial advisor, to the independent financial advisor, to the shareholders of Kiatnakin Bank shareholders of the Company  Annual General Meeting of Shareholders of the year 2012 to consider and approve the matters related to the merger

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Operation Period

Restructuring Procedures Major Shareholders of Kiatnakin Bank and Major Shareholders of Phatra Capital and Phatra Kiatnakin Bank Capital

26 April 2012

 Annual General Meeting of Shareholders of the year 2012 to consider and approve the matters related to the merger

8 May 2012

 The record date for determining which  The record date for determining which shareholders have the right to receive shareholders have the right to receive dividends dividends

9 May 2012

 The book-closing date for shareholders who  The book-closing date for shareholders who have the right to receive dividends of have the right to receive dividends of the Kiatnakin Bank Company

After the Annual General Meeting of Shareholders of the Company and Kiatnakin Bank

 Request permission and approval from the  Request permission from the Office of the relevant regulatory authorities, including: SEC to change the major shareholder, Board of Directors and executives of Phatra 1. Permission from the Bank of Thailand Securities with regard to related matters 2. Permission from the Office of the SEC to  Provide reasonable support to Kiatnakin Bank in requesting permission and approval offer for sale newly-issued ordinary from the relevant regulatory authorities shares to the shareholders of the Company as consideration for the tender  Permission to amend the conditions or offer restrictions that affect the parties with regard to the merger from commercial partners or 3. Approval of the restructuring plan from other contractual parties as mutually agreed the Office of the SEC and the SET 4. Permission from the Office of the SEC to change the major shareholders, ฺ Board of Directors and executives of KKS and KKF 5. Permission to amend the conditions or restrictions that affect the parties with regard to the merger from commercial partners or other contractual parties, as mutually agreed

Within the 3rd quarter of 2012

 Commence the tender offer after Kiatnakin Bank has obtained permission from the relevant regulatory authorities and all conditions precedent under the share purchase agreement have been fulfilled or waived

After the tender offer

 Transfer the shares in KKS and KKF in accordance with the conditions to be agreed upon in the related agreements

 Accept the transfer of the shares of KKS and KKF in accordance with the conditions to be agreed upon in the related agreements

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5.

Expected Benefits to the Company

After the merger, Kiatnakin Bank and the Company will collaborate their positive potential, expertise and strengths of the two organizations, which will in turn increase their overall business value. Expected benefits are: 5.1 Enhance the strength in the Capital Base and the Income Diversification After the merger, the size of Kiatnakin Bank’s business will be larger, which its capital will be increased by the issuance of new ordinary shares to make the tender offer of the Company’s securities. Currently, the Company has a low level of debt and few loans, which will contribute to Kiatnakin Bank’s capital base increase, improve its ability to absorb risks, and can be utilized to expand into additional business operations. Moreover, the merger will enable Kiatnakin Bank and the Company to diversify their income. Currently, Kiatnakin Bank’s income is mostly interest income from its commercial banking business and profit from its asset management business, whereas the Company’s income is mostly derived from fees and profits from investment. Since Kiatnakin Bank and the Company have different business risks, when they merge, their income bases will be more diversified, which will reduce the risks associated with relying on income from any one business. 5.2 Cooperation between the Experienced and Knowledgeable Executive Teams and Employees of Kiatnakin Bank and the Company Kiatnakin Bank and the Company will cooperate and use the capabilities and experiences of their executives and employees to maximize the benefit of the organization. The executives of Kiatnakin Bank and the Company are knowledgeable, capable and experienced in their lines of business. This is evident from the fact that the operations of the two companies have been continuously successful. Moreover, there is almost no overlap between the businesses of Kiatnakin Bank and the Company, which means that the executives and employees of each company can continue to concentrate on their specialties and cooperate to develop the new business according to the business plan of the KiatnakinPhatra financial group. 5.3 Expansion of Services and Products by Cooperative Business After the merger, the Company and Kiatnakin Bank will be able to cooperate to develop their potential, enhance their business opportunities and overcome the restrictions of their former businesses, in order to achieve a competitive edge. The executives of Kiatnakin Bank and the Company will cooperate to create a new business development plan that will integrate the individual strengths and potentials of each company, whether the bank’s strong capital base, the Company’s experience in the capital market business, and the customers networks of each company. The preliminary business plan is divided into 6 groups as follows: 1. Private Bank Business 13

The Company and Kiatnakin Bank will jointly develop the organizations’ investment advisory business, in terms of both the size of assets under their supervision and the income generated, by combining customer base and consider clear client segmentation. Each client segment will be served and advised by a different working team in order to increase the efficiency of the advice and services provided to customers. Moreover, all financial products of the Kiatnakin-Phatra financial group will be combined, including current products and new products, to be offered to customers of the group. 2. Lending and Debt Instruments Business for Medium and Large Size Businesses The Company and Kiatnakin Bank will jointly develop a lending business for medium and large company customers with the objective of increasing the diversity of income sources and enabling the joint potential of Kiatnakin Bank and the comprehensiveness of Company’s investment banking business by focusing on the development on granting credit in relation to advisory services e.g. M&A financing and leveraged buyouts, bridge loans, mezzanine financing, etc. Furthermore, the Company and Kiatnakin Bank will aim to develop a comprehensive debt instruments business, including setting up a unit to trade and invest in commercial debt instruments in order to widen the channels of debt instruments distribution and enhance the efficiency of debt asset services to the high net worth individuals group. 3. Investment Business The Company and Kiatnakin Bank will jointly develop the investment business, utilizing their positive potential, to generate profit from the capital at an appropriate risk level. Furthermore, the investment business will be the basis to develop fund management business with the company’s capital. The Company and Kiatnakin Bank will provide a center to allocate investment funds to investment ports in accordance with the return and risk appropriate for the purpose of the group’s investment, such as long-term investments in shares, arbitrage trading, and a commercial debt securities investment port, and will study and develop additional forms of investment in order to enhance the potential for long-term investment business. 4. Derivatives Business The Company and Kiatnakin Bank jointly develop the derivatives products to offer to customers of Kiatnakin Bank, the Company and affiliated companies, the option of investing in derivatives, for example Principal Protected Notes and OTC Derivatives Warrants. The Company and Kiatnakin Bank foresee growth potential for the derivatives business; therefore, sufficient resources must be allocated in order to expand the business to an appropriate size and increase profits.

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5. Fund Management Business The Company and Kiatnakin Bank will jointly develop the fund management business, making full use of their joint positive potential, to increase the competitiveness, size and profits of the fund management business, which will be one of the main businesses of the organization in the future. 6. Securities Business for Retail Customers The Company and Kiatnakin Bank will jointly develop the securities business for retail customers in order to maximize their full joint positive potential and achieve low cost leadership that facilitates business expansion by increasing market share, using new marketing channels such as via banks and the internet. 6.

Impact on Financial Status and Overall Performance

6.1

Impact on the Financial Status and Overall Performance of Kiatnakin Bank

Since Kiatnakin Bank will make a delisting tender offer for the securities of all of the Company’s shareholders and provide the Company’s shareholders who accept the offer with consideration in the form of newly-issued ordinary shares of Kiatnakin Bank, if shareholders of the Company accept Kiatnakin Bank’s offer after the expiration of the tender offer, they will hold shares of Kiatnakin Bank instead of shares of the Company. Therefore, the impacts of the merger that would be material to shareholders of the Company who accept the tender offer will be the impacts on the financial status and overall performance of Kiatnakin Bank as a result of the restructuring. The relevant transactions in connection with the merger plan are set forth below: ● The overall performance of Kiatnakin Bank will increase or decrease as a result of combining it with the operation of the Company. This is because, after the tender offer, Kiatnakin Bank will hold at least 75% of the shares in the Company. Therefore, it is necessary to have consolidated financial statements which represent the combined financial position of the Company and Kiatnakin Bank. ● Kiatnakin Bank will need to record the assets and liabilities of the Company in the consolidated financial statements of Kiatnakin Bank, which will result in an increase of assets and liabilities in the consolidated financial statements of Kiatnakin Bank. ● Kiatnakin Bank will record the difference between the purchase price and fair value of the Company as goodwill in the consolidated financial statements of Kiatnakin Bank in accordance with relevant accounting standards. The goodwill will be subject to impairment test in accordance with accounting standards, which may affect overall future performance.

15

● Kiatnakin Bank will issue new shares to shareholders of the Company, resulting in an increase in the number of shares used to calculate earnings per share, while the shareholders’ equity of Kiatnakin Bank will increase. Table 7 below shows the estimated impact on the overall performance of Kiatnakin Bank as a result of the restructuring. The table is based on the following assumptions: ●

Kiatnakin Bank is able to purchase 100% of the Company’s shares from the tender offer.

● Kiatnakin Bank issues 192,118,404 new ordinary shares, par value of THB 10 per share, at THB 32.20 per share which is a price proposed by Board of Directors of Kiatnakin Bank resolution No. 2/2012 for the approval of the shareholders’ as consideration for the tender offer. ● The pro forma statements is based on the audited consolidated financial statements of Kiatnakin Bank and the Company for the year ended 31 December 2011. ● There is no elimination of related party transactions between Kiatnakin Bank and the Company as the transactions are minor and have no material impact on the overall operation. ● The fact that the Company will accept the transfer of KKS and KKF shares will not affect the consolidated financial statements of Kiatnakin Bank in the event that Kiatnakin Bank holds 100% of the Company’s shares after the tender offer as the transaction will be a transfer of shares within the group. Table 7 Estimated impact on the overall performance of Kiatnakin Bank using the consolidated financial statements of the Company Unit: Baht Million

Audited Consolidated Financial Statements of Kiatnakin Bank for Fiscal Year 2011

Net profit (loss)

2,859.0 (1)

Share amount (million) Profit (loss) per share (Baht per share) (1) Total assets Goodwill

634.6

Audited Consolidated Estimated impact of the Financial Statements of the Transaction, using the Audited Company for Fiscal Year 2011 Consolidated Financial Statements of Kiatnakin Bank for Fiscal Year 2011 3,693.7 834.7 826.8 210.3

4.50

3.97

189,326.7

6,356.0

198,266.2 2,583.5

(2) (3)

Total debt

4.47

165,731.4

2,745.3

168,476.7

29,789.5 Shareholders Equity 23,595.3 3,610.7 Note: (1) Calculated from the number of shares as of 24 February 2012 (info: SetSmart) (2) Goodwill is calculated based on the difference between the total value of newly-issued ordinary shares of Kiatnakin Bank allocated to the shareholders of the Company as a consideration for the tender offer pursuant to Board of Directors resolution No.2/2012 of Kiatnakin Bank at THB 32.20 per share, and the fair value of the Company, as of 31 December 2011 (3) Only the accounting goodwill derived from this merger

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6.2

Impact on the Financial Status and Overall Performance of the Company In the event that certain shareholders of the Company reject the tender offer from Kiatnakin Bank, but Kiatnakin Bank is able to acquire 75% or more of the total shares sold in the Company through the tender offer, the shareholders of the Company who rejected the offer will remain shareholders of the Company, which will no longer be a listed company. The impacts that the tender offer will have on the financial status and overall performance of the Company according to the merger plan can be divided into 2 scenarios, as follows: 1) If the conditions for the Company to purchase the shares in KKS and KKF are fulfilled and the Company purchases the shares in KKS and KKF 2) If the conditions for the Company to purchase the shares in KKS and KKF are not fulfilled, resulting in the Company not being able to purchase the shares in KKS and KKF. However, in order for Kiatnakin Bank to be able to transfer the shares in KKF to the Company, Kiatnakin Bank must first obtain consent from the Government Pension Fund, which is a shareholder holding 40% of the total number of shares in KKF. Kiatnakin Bank is in the process of negotiating with the Government Pension Fund. 6.2.1

The Company Purchases the Shares in KKS and KKF

If the shareholders of the Company approve the delisting of the Company’s securities from the SET and, after the expiration of the delisting tender offer, Kiatnakin Bank holds 90% or more of the Company’s total sold shares, the Company will purchase 99.99% of the shares in KKS and 60% of the shares in KKF. The funds that the Company will use for this will be derived from the cash of the Company as of the transaction date. Part of the funds may also come from a borrowing transaction, which may include a borrowing from Kiatnakin Bank. The impact of that these transactions will have on the overall performance of the Company are as follows: 





The overall performance of the Company will increase or decrease depending on the performances of KKS and KKF. This is because, after the tender offer, the Company will hold 99.99% of the shares in KKS and 60% of the shares in KKF. Therefore, it is necessary to have consolidated financial statements that combine the performances of KKS and KKF with that of the Company. The Company will need to record the assets and liabilities of KKS and KKF in the consolidated financial statements of the Company, which will result in an increase of assets and liabilities in the consolidated financial statements of the Company. The Company will record the difference between the purchase price and fair value of KKS and KKF as goodwill in the consolidated financial statements of the Company in accordance with relevant accounting standards. The goodwill will be subject to 17

impairment test in accordance with recognized accounting standards, which may affect overall future performance. 

If the Company borrows from Kiatnakin Bank, the Company will have to pay the interest of such loan to Kiatnakin Bank, which will increase the interest expenses and decrease the profits of the Company.

Table 8 below shows the estimated impact from the restructuring on the overall performance of the Company, which has been prepared in accordance with the following assumptions: 







The Company purchases the shares in KKS for a total price of Baht 850.9 million (which is the book value of the shareholders’ equity of KKS as of 31 December 2011) and shares in KKF for a total price of Baht 234.0 million. The estimates use the audited consolidated financial statements of the Company, KKS and KKF for the year ended as of 31 December 2011. All funds for the share transfers are derived from a borrowing transaction with a financial institution, with an interest rate of 5.0%. There is no exclusion of related party transactions between the Company, KKS and KKF as the transactions are minor and have no material impact on the overall operation.

Table 8 Estimated impact on the overall performance of the Company using the consolidated financial statements of KKS and KKF Audited Consolidated Audited Consolidated Audited Consolidated Estimated impact from the Unit: Baht Million Financial Statements of KKS for Fiscal Year 2011

Financial Statements of KKF for Fiscal Year 2011

Financial Statements of the Company for Fiscal Year 2011

Transaction, using the Audited Consolidated Financial Statements of the Company for Fiscal Year 2011

Net profit (loss)

55.6

(4.7)

834.7

847.7

Share amount (million)(1) Profit (loss) per share (Baht per share) (2) Total assets

65.0

30.0

210.3

210.3

0.86

(0.16)

3.97

4.03

1,357.7 -

298.5 -

6,356.0 -

8,034.7 60.4

Total debt(1)

506.8

9.2

2,745.3

4,346.2

Shareholders Equity

850.9

289.4

3,602.7

3,688.5

Goodwill

(3) (4)

Note:

(1) Calculating from the number of shares as of 24 February 2012 (info: SetSmart) (2) On assumption that the Company utilizes the loan to pay for the purchase price of KKS and KKF shares at the rate of 5.0 % (3) The Goodwill is calculated on the difference between the purchase price of KKS’s shares (using book value as of 31 December 2011) and KKF’s shares using the acquisition cost of Kiatnakin Bank and fair value of KKS and KKF, as of 31 December 2011. (4) Only Goodwill from the purchase of the shares in KKS and KKF

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6.2.2

The Company Does Not Purchase Shares in KKS and KKF If the Company does not purchase the shares in KKS and KKF, the impact on the financial statements and overall performance of the Company will be indirect, that is, the financial statements and overall performance of the Company will depend on the future management policy of the Company as one of the companies in the Kiatnakin-Phatra financial group. However, in order to implement a business plan that maximizes the potential of both organizations to establish an economically value added entity to maximize the benefits of the overall organization regardless under which company in the group the operation of the business will be, if the Company does not purchase the shares in KKS and KKF, the Company and Kiatnakin Bank will restructure the business management to be consistent with the business supervision and management plan disclosed in Section 3 Business Supervision and Management.

7.

Impact on the Shareholders 7.1

Impact on the Shareholders Who Accept the Tender Offer

Shareholders of the Company who accept the tender offer of Kiatnakin Bank will hold Kiatnakin Bank’s shares instead of the Company’s after the completion of the tender offer. The methods and risks involved in Kiatnakin Bank’s business operations are different from the Company’s. The financial status and overall performance of Kiatnakin Bank will change, as disclosed in Section 6.1 Impact on the Financial Status and Overall Performance of Kiatnakin Bank. Moreover, future dividends that the Company’s shareholders who accept the tender offer will receive will be dividends from Kiatnakin Bank, whose dividend policy stipulates that dividends are not to exceed 60% of the annual net profit shown in the consolidated financial statements of Kiatnakin Bank and approved by the Bank of Thailand. Kiatnakin Bank will still be listed on the SET, so the Company’s shareholders who accept the tender offer will still have liquidity to trade Kiatnakin Bank shares on the SET. The share swap is deemed a sale of shares in the Company to Kiatnakin Bank, as consideration for the shares in Kiatnakin Bank; therefore, the shareholders will be responsible for tax on the profits generated by trading shares of the Company. Shareholders who are individuals will be exempted from such tax, but shareholders who are juristic persons will be subject to tax calculated based on the capital base of each juristic person. The tax burden of a foreign juristic person will depend on the conditions in the applicable Double Tax Treaty between Thailand and the country in which such foreign juristic person is registered (if any).

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7.2

Impact on the Shareholders Who Do Not Accept the Tender Offer

The shareholders of the Company who do not accept the tender offer of Kiatnakin Bank will bear the risk of holding securities that do not have liquidity, since the Company’s shares will be delisted from the SET after the restructuring. Moreover, individual shareholders will be deprived of the tax exemption on any profits generated by a transfer of shares after the delisting. The Company’s dividend policy after the restructuring might be changed since the Company will be under the Kiatnakin-Phatra financial group and the Company’s dividend policy will have to rely on the group’s business plan and overall appropriateness considering the group’s financial status. If the company accepts the transfer of shares in KKS and KKF, the financial status and overall performance of the Company will change, as disclosed in Section 6.2 Impact on the Financial Status of the Company. And, if the Company borrows from Kiatnakin Bank, the Company will have to pay the interest on such loan to Kiatnakin Bank, which will increase the interest expenses and decrease the profits of the Company resulting from the payment of the interest on such loan. 8.

Major Shareholders and the Proportion of the Shareholdings 8.1

Major Shareholders of the Company

The shareholders of the Company after the tender offer by Kiatnakin Bank will depend on the tender offer result. If successful, Kiatnakin Bank will hold at least 75% of the Company’s shares, since such shareholding ratio is a condition of Kiatnakin Bank’s offer. RPIC, which is the major shareholder of the Company, and some of the executives of the Company, who collectively hold 44.6% of the Company’s shares sold, have agreed with Kiatnakin Bank and the major shareholders of Kiatnakin Bank under a share purchase agreement to sell all of their shares in the tender offer. 8.2

Major Shareholders of Kiatnakin Bank

After the tender offer, the shareholding proportions in Kiatnakin Bank will depend on the results of the tender offer. The shareholding proportions if calculating from the result of the tender offer in the case Kiatnakin Bank holds 75% of the shares after the tender offer, and Kiatnakin Bank holds 100% after the tender offer will be as follows.

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Table 9 Top Ten Major Shareholders of Kiatnakin Bank before the Tender Offer Before the Tender Offer (According to the Share Register as of 12 September 2011) Shareholders

Number of Shares

Percentage

1. Thai NVDR Company Limited

71,542,822

11.28

2. Miss Thitinan Wattanavekin

34,782,761

5.48

3. Eastern Sugar Company Limited

34,750,804

5.48

4. Mrs. Wansamorn Wannamethee

31,785,003

5.01

5. CHASE NOMINEES LIMITED 42

29,669,800

4.68

6. CHASE NOMINEES LIMITED 30

22,466,422

3.54

7. Chodthanawat Company limited

20,693,600

3.26

8. HSBC BANK PLC-CLIENTS GENERAL A/C

20,370,474

3.21

9. Miss Yapha Thepkarnjana

17,199,900

2.71

10. NORTRUST NOMINEES LIMITED-NTGS

16,543,300

2.61

Other shareholders

334,843,378

52.76

Total

634,648,264

100.00

Table 10 Top Ten Major Shareholders of Kiatnakin Bank after the Tender Offer After the Tender Offer Kiatnakin Bank’s tender offer results in acceptance of 75% of the shares (2)(3) Shareholders

Kiatnakin Bank’s tender offer results in acceptance of 100% of the shares

Number of Shares

Percentage

Number of Shares

Percentage

1. Thai NVDR Company Limited

81,266,481

10.44

81,266,481

9.83

2. CREDIT SUISSE, HONG KONG BRANCH(1)

71,618,397

9.20

71,618,397

8.66

3. Miss Thitinan Wattanavekin

34,782,761

4.47

34,782,761

4.21

4. Eastern Sugar Company Limited

34,750,804

4.46

34,750,804

4.20

5. Mrs. Wansamorn Wannamethee

31,785,003

4.08

31,785,003

3.84

6. CHASE NOMINEES LIMITED 42

29,669,800

3.81

29,669,800

3.59

7. CHASE NOMINEES LIMITED 30

22,466,422

2.88

22,466,422

2.72

8. Chodthanawat Company limited

20,693,600

2.66

20,693,600

2.50

9. HSBC BANK PLC-CLIENTS GENERAL A/C

20,370,474

2.62

20,370,474

2.46

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After the Tender Offer Kiatnakin Bank’s tender offer results in acceptance of 75% of the shares (2)(3) Shareholders

Kiatnakin Bank’s tender offer results in acceptance of 100% of the shares

Number of Shares

Percentage

Number of Shares

Percentage

10. Ramkhamhaeng Hospital Public Company Limited

19,017,243

2.44

19,017,243

2.30

Other shareholders

412,316,082

52.95

460,345,683

55.68

Total Note:

9.

778,737,067 100.00 826,766,668 100.00 (1) The shares held by CREDIT SUISSE, HONG KONG BRANCH are shares held on behalf of RPIC Pte. Ltd. (2) Assuming that the major shareholders of the Company, including the Thai NVDR Company Limited, CREDIT SUISSE, HONG KONG BRANCH and Ramkhamhaeng Hospital Public Company Limited, have accepted the tender offer for all the shares held. (3) List of shareholders of the Company as of 9 September 2011.

Risk Factors, Procedure for Listing and Delisting Securities and Approvals of Other Parties and Relevant Supervisory Authorities Risk factors in connection with completion of the transaction, procedures for listing and delisting the securities, and seeking consents from other contractual parties and relevant supervisory authorities The completion of the merger between the Company and Kiatnakin Bank depends on many factors, which the Company is unable to control i.e. (i) the merger plan must be approved by the shareholders’ meeting with votes of not less than three-fourths of the total shares of shareholders attending the meeting and having the right to vote (ii) the delisting tender offer must be approved with votes of not less than three-fourths of the total shares sold of the Company and there must be no objection by shareholders representing more than 10% of the shares sold of the Company (iii) the merger plan must be approved by other contractual parties and relevant supervisory authorities, such as the Bank of Thailand, the Office of the SEC and the SET (iv) the conditions precedent of the SPA, specified in Section 10.1, must be fulfilled or agreed in writing to extend, waive or amend by all parties. Furthermore, the tender offer is made on the condition that when the period of the tender offer expires, the number of shareholders who have accepted the tender offer must represent not less than 75% of the total shares sold in the Company. The risks as a result of the tender offer for all shares in the Company According to the merger between the Company and Kiatnakin Bank, Kiatnakin Bank will make tender offer for all shares in the Company to delist the Company’s securities from the SET. The result of the tender offer may impact the combination of the profits between the total profits of the Company and the total profits of Kiatnakin Bank because if the result of the tender offer is less than 100%, it may cause the shareholders equity of minor shareholders of the Company who do not accept the tender offer to gain small portion of the net profits (loss). 22

Furthermore, if after the tender offer, Kiatnakin Bank holds less than 90% of the total shares sold in the Company, Kiatnakin Bank and the Company will not proceed with a sale and purchase of the shares in KKS and KKF from Kiatnakin Bank, which will result in the shareholding structure of Kiatnakin-Phatra financial group to be inconsistent with the information disclosed herein. However, the Company and Kiatnakin Bank will manage the business of KKS and KKF in accordance with the information disclosed above. To ensure conformity with the business plan and to use the full positive potential of the companies to maximize the benefits for the overall organization, regardless of which company in the group the operation falls. The Risks in relation to the merger and business integration between the Company and Kiatnakin Bank, and the benefits which are expected from the merger The merger and business integration may not necessarily yield the benefits described in the proposed plan as a result of the general risks associated with merger plan, which may be due to the differences in the business operations of the two companies as well as differences in standards, procedures and operational processes, management style, and organizational culture. In addition, the business plan after the merger between Kiatnakin Bank and the Company that has been disclosed may need to be changed to accommodate the circumstances in order to take full advantage of the benefits of the merger. The risk arising from the differences between the Company’s and Kiatnakin Bank’s business operations Core business of the Company are securities and investment business, while core business of Kiatnakin Bank is a commercial banking business which are different and the risks associated with the Company’s operation from the operations of the Company are due to circumstances and fluctuations of the SET, and changes in the supervisory rules of the SET and the Office of the SEC. The risks for Kiatnakin Bank’s operation are due to circumstances in relation to interest, repayment of interest and principal by debtors of Kiatnakin Bank, and changes in the supervisory rules of the Bank of Thailand. After the tender offer, the Company’s shareholders will become Kiatnakin Bank’s shareholders, so the risks in connection with the change in shareholdings will change. Meanwhile, Kiatnakin Bank will hold the shares in the Company, Kiatnakin Bank will experience a change in its business operations after the tender offer. In other words, performance of Kiatnakin Bank will have a proportion of income and profit arising from the Company’s operation and financing status and Kiatnakin will include the assets and liabilities of the Company. The risks from the financial effects and the results of operation of the Company and Kiatnakin Bank After the merger, the performance and financial status of the Company and Kiatnakin Bank will change, as disclosed in Section 6 Impact on Financial Status and Overall Performance.

23

10.

Summary of Material Agreement

The Share Purchase Agreement between the group of major shareholders of the Company, the Company, Kiatnakin Bank and the group of major shareholders of Kiatnakin Bank. (“SPA”) 10.1

Parties Between And

10.2

10.3

The group of major shareholders of Phatra Capital Public Company Limited as the Seller and Phatra Capital Public Company Limited Kiatnakin Bank Public Company Limited as the Purchaser and the major shareholders of Kiatnakin Bank Public Company Limited

Share Sale and Purchase though the Tender Offer 

The Purchaser agrees to purchase and the Seller agrees to sell the shares in the amount of 93,827,224 shares, which is considered 44.6% of the total shares sold of the Company.



The Purchaser will make a tender offer for the delisting of the Company’s securities from the SET in accordance with the Capital Market Supervisory Board Notification No.ThorJor. 12/2554, when the conditions precedent are fulfilled. The Seller will offer to sell the shares though the tender offer on the last day of the delisting tender offer.



The Purchaser is able to cancel the delisting tender offer, if upon the expiration of the tender offer period, the Purchaser can not purchase the Company’s shares from 75% of the total shares sold of the Company.



The swap ratio is 1 share in the Company per 0.9135 shares in Kiatnakin Bank, unless there arises any circumstance that may have a material adverse effect on the financial condition, assets or business operations, including efficiency in operating business, of the Company, Phatra Securities, Kiatnakin Bank and/or the companies under Kiatnakin Bank’s supervision.

Material Conditions Precedent The SPA contains conditions precedent. That is, the shares purchase shall occur under fulfillment of some conditions except for those conditions that have been waived, cancelled, amended or change by written confirmation of the parties, including, among others, the following material conditions: 

Kiatnakin Bank obtains the Bank of Thailand’s approval to enter into the merger according to the plan mutually agreed upon by all parties; and the consolidated supervision plan of Kiatnakin Bank as agreed by all parties is approved by the Bank of Thailand;

24



RPIC is granted approval by the Board of Directors’ and the shareholders’ meeting, with regard to the sale and purchase of shares, the merger and relevant acts as necessary under the relevant laws and regulations;



Kiatnakin Bank obtains the approval from the Office of the SEC to issue and offer for sale newly issued ordinary shares to the public and to become a major shareholder of Phatra Securities;



Representatives of the major shareholders of Kiatnakin Bank obtain the approval from the Office of the SEC to become a major shareholder, director or manager of Phatra Securities;



Representatives of the group of major shareholders of the Company obtain the approval from the Bank of Thailand to become a major shareholder, director, manager or person with the management power of Kiatnakin Bank;



Representatives of the group of major shareholders of the Company obtain the approval or approval in principal (as the case may be) from the Office of the SEC to become a director or a manager of KKS and KKF;



The Company obtains the approval or approval in principal (as the case may be) from the Office of the SEC to become a major shareholder of KKS and KKF;



Kiatnakin Bank and the Company are granted approval by the Board of Directors meeting or the shareholders’ meeting to enter into the merger and the relevant acts necessary in implementing the merger;



Kiatnakin Bank and/or the Company obtain approvals, consents or waivers from the parties or third parties under any documents, agreements to which Kiatnakin Bank and the companies under its supervision and the Company and Phatra Securities are parties or which relate to them, including Phatra Securities obtaining approval under the Business Cooperation Agreement from Merrill Lynch International Incorporated with regard to the change of shareholding structure of Phatra Securities;



Kiatnakin Bank is granted approval by the annual general meeting of the year 2012 to appoint the 5 new directors nominated by the group of major shareholders of the Company;



There are no circumstances having a material adverse effect on the financial condition, assets or business operations of Kiatnakin Bank and the companies under its supervision or the Company and Phatra Securities (as the case may be);



There are no circumstances or changes in any relevant laws, regulations or rules that would make it impractical to lawfully consummate the merger; no changes in any relevant 25

laws, regulations or rules that could materially and adversely effect the operations or condition of Kiatnakin Bank and/or the companies under its supervision or the Company and/or Phatra Securities; and no circumstances or changes in any relevant laws, regulations or rules that could materially and adversely effect the merger or cause substantial burdens in the performance of duties under the SPA; and  10.4

There is no material breach of contact in the form of an act or omission by any party as specified in the SPA.

Other Material Conditions 

The Company and Kiatnakin Bank agreed to omit some actions, which may cause the change in the business’ value or the type of business’ operation, which is not in the normal course of business including dividend payment or declaration to pay the dividend, except in the event that Kiatnakin Bank and the Company pay or declare to pay the annual dividend in the amount which is consistent with swap ratio at 0.9135 share of Kiatnakin to 1 share of the Company.



The parties under SPA provide the representations and warranties including indemnities, if there is a breach of a representation and warranty, which is customary for this type of transaction.



After the payment of the purchase price and the transfer of the shares, Kiatnakin Bank agrees to sell all KKS’s shares in the price equivalent to book value of KKS and all KKF’s shares in the price equivalent to cost price of Kiatnakin Bank to the Company, if , after the delisting tender offer, Kiatnakin Bank holds shares in the Company for 90% or more of the total shares sold of the Company and the shareholders meeting of the Company approves the delisting of the Company’s securities from the SET.

10.5 Material termination Event 

There is an event or a change in the relevant law, rules or regulations which may result in the merger could not be legally implemented or there is a change in the relevant law, rules or regulations which may have material adverse effect to the operation or status of Kiatnakin Bank and/or companies under its supervision or the Company and/or Phatra Securities or there is an event or a change in the relevant law, rules and regulations which may have material adverse effect to the merger or may create burden in performing the obligations under the SPA significantly.



A party does not perform its obligations under the SPA and does not correct the breach of the representations and warranties and/or the non-performance of the SPA within 7 days from the date such party has received a written notice from the other party.

26

11.



The representations and warranties of the parties are not true and correct in material aspects.



The conditions precedent are not fulfilled within the specified period.

Information and Conditions of the Tender Offer Kiatnakin Bank will increase the registered capital and make a tender offer to all shareholders of the Company by a share swap with the newly issued ordinary shares of Kiatnakin Bank. The information and conditions of the tender offer are as follow: Category and Characteristic of the Tender Offered Securities 

All ordinary shares of the Company in the amount of 210,310,240 shares.

Swap Ratio and Price 

The swap ratio is 1 shares in the Company per 0.9135 in Kiatnakin Bank. The consideration will not be in a form of cash.

Tender Offer Period 

Not less than 25 business days, the final period is not extendable.

Conditions for a Change of the Tender Offer. 

There may be some conditions for a change of the tender offer in case that i) the tender offeror might discount the tender offer price or extend the tender offer period, if there arises any circumstance that has a material adverse effect to the financial condition or assets of the business during the tender offer period or ii) the tender offeror might amend the offer or extend the tender offer period to compete with a third party, if there is any third party making an offer to purchase the securities of the business during the tender offer period.

Conditions for cancelling the Tender Offer 





On the last day of the period of the tender offer, the number of shareholders including the group of the major shareholders of the Company accepting the tender offer must represent not less than 75% of the total shares sold of the Company. There arises any circumstance or acts, after filling the tender offer to the SEC and the tender offer period has not expired, and such circumstance and acts may have a material adverse effect on the financial condition or assets of the Company and which are not caused by Kiatnakin Bank or acts which Kiatnakin Bank is responsible for. Any conducts by the Company after filling the tender offer to the Office of the SEC and the tender offer period has not expired, which may affect the Company’s share value to be decreased significantly.

27



Any conducts by the Company which may have a material adverse effect to the tender offer significantly in accordance with the Notification of the Capital Market Supervisory Board No. ThorJor.14/2554 re: Actions or omissions that may have effect to the tender offer of a business.

The Period which a person, who intends to sell the securities, is able to cancel their intent. 

12.

The person, who intends to sell the securities, is able to cancel their intent within the first 20 days of the tender offer period.

Summary of the Companies 12.1

Kiatnakin Bank Public Company Limited

Kiatnakin Bank started its commercial banking business on 3 October 2005 after successfully upgrading Kiatnakin Finance Public Company Limited (“Kiatnakin Finance”) to a commercial bank. Kiatnakin group was founded in 1971 by Mr. Kiat and Mrs. Chansamorn Wattanavekin with initial registered capital of THB 10 million under the name “Kiatnakin Finance and Securities Company Limited,” undertaking a finance and securities business and becoming member number 19 of the SET in 1982. The Bank was listed on the SET in 1988 before converting its status to a public limited company in 1993. At present, Kiatnakin group has Kiatnakin Bank as the parent company of the group, undertaking commercial banking business, KKS undertaking securities business, KKF undertaking fund management business, and Erawan Law Office Co., Ltd., providing legal services to companies in the group, as subsidiaries. In addition, the Banks also holds units in mutual funds for resolving financial institution problems. Overview of the Business of Kiatnakin Bank Divided into 4 segments, as follows: 1.

Retail Banking

Operated by Kiatnakin Bank, this service is to provide hire purchase lending with regard to new and used cars, housing loans, macro SMEs loans, retail deposits, car-for-cash, life insurance, and insurance for Kiatnakin Bank’s retail customers. 2.

Corporate Lending

Operated by Kiatnakin Bank, this service is to extend credit for commercial purposes to corporate customers, limited partnership customers or individual customers having a business as required by Kiatnakin Bank, including other related services, e.g. issuance of guarantee, aval, etc. Corporate lending consists of real estate loans and SME loans, which the Bank provides to 4 groups of industries i.e. apartment loans, logistics loans, floor plan loans, and printing and packaging loans. 3.

Wealth Management

This service is a cooperation among the 3 KKs, i.e. Kiatnakin Bank, KKS, and KKF, to provide financial and investment services to customers. The service is divided into the following 3 segments: 28







4.

Private Banking: Operated by the Bank, this service is to provide financial management services, investment advice, and fund units selling and redemption agency service to meet the needs of high-net worth-individual customers. Securities: Operated by KKS, this service is to provide securities brokerage service to retail and institutional customers by providing services via marketing officers and internet trading accounts, whether it is a cash or margin account (credit balance system). In addition, KKS also provides derivatives agency services via Thailand Future Exchange (TFEX). Fund Management: Operated by KKF, undertaking provident fund management, private fund management and mutual fund management under mutual fund management license and private fund management license, issued by Ministry of Finance.

Special Asset Management

Proceed with debt restructuring of debtors auctioned from the Financial Sector Restructuring Authority (FRA) and the Legal Execution Department, including the management of nonperforming assets, whether for residential or investment purposes. The abovementioned business groups have supporting groups which consist of IT, operations, strategics and HP development, finance and budgetary, compliance, internal audit, risk management, corporate communication, and directors office, which support the work of the business groups in various aspects, including corporate control and supervision. Erawan Law Office Co., Ltd. also provides legal services and advice only to companies in the group. The top ten shareholders of Kiatnakin Bank with the right to receive dividends according to the closure of the company registration book as of 12 September 2011 are as follows: No. List of Shareholders Number of Shares Held Shareholding Ratio (Percentage) 1. Thai NVDR Company Limited 71,542,822 11.28 2. Miss Thitinan Wattanavekin 34,782,761 5.48 3. Eastern Sugar Company Limited 34,750,804 5.48 4. Mrs. Wansamorn Wannamethee 31,785,003 5.01 5. CHASE NOMINEES LIMITED 42 29,669,800 4.68 6. CHASE NOMINEES LIMITED 30 22,466,422 3.54 7. Chodthanawat Company limited 20,693,600 3.26 8. HSBC BANK PLC-CLIENTS GENERAL 20,370,474 3.21 A/C 9. Miss Yapha Thepkarnjana 17,199,900 2.71 10. NORTRUST NOMINEES LIMITED-NTGS 16,543,300 2.61

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Note 1) Inclusive of related persons under Section 258 Board of Directors of Kiatnakin Bank At present, Kiatnakin Bank has a total of 10 directors, of which 4 are independent directors, 3 are executive directors, 3 are non-executive directors, as follows: 1. Mr. Supol Wattanavekin Chairman of the Board Of Directors / Non-executive Director 2. Mr. Pichai Dachanapirom Independent Director 3. Mr. Manop Bongsadadt Independent Director 4. Mr. Chet Pattrakornkul Independent Director 5. Mr. Pravit Varutbangkul Independent Director 6. Mr. Tarnin Chirasoonton* Non-executive Director 7. Mr. Suraphol Kulsiri* Non-executive Director 8. Mr. Tawatchai Sudtikitpisan* Executive Director 9. Mr. Pracha Chumnarkitkosol* Executive Director 10. Miss Thitinan Wattanavekin* Executive Director Note* Director who has the power to sign to bind Kiatnakin Bank. Executive Committee At present, the Executive Committee consists of 13 members, of which Mr. Supol Wattanavekin is a consultant, as follows: 1. Mr. Tawatchai Sudtikitpisan Chairman of the Executive Board/ Chief Executive Officer and President 2. Mr. Pracha Chumnarnkitkosol Director 3. Ms. Thitinan Wattanavekin President of the Investment Banking Division 4. Mr. Sarawut Charuchinda Present of the Debt Management Division 5. Mr. Patom Amorndechawat President of the Operation Division 6. Mr. Chavalit Chindavanig President of Finance and Budgetary, Strategic and Organization Development 7. Ms. Nujaree Sithasrivong President of the Human Resources Division 8. Mr. Siri Senajak President of the Retail Banking Division 9. Mrs. Piradee Chongsiriwanchai Vice President 10 Mr. Somkiat Pongjunyakul Vice President, Directors Office 11. Mr. Verasak Tantinikorn Vice President, Branch Sale Office 12. Mr. Sathit Bovornsantisuth Vice President, Investment Planner 13. Mrs. Suwannee Wattanavekin Vice President, NPA Management

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12.2

Phatra Capital Public Company Limited

Overview of the Business of the Company The Company operates as an investment holding company. Its subsidiary, Phatra Securities, conducts a securities business. The investment business operation of the Company includes investments in all type of assets under a management framework of Board of Directors of the Company. Investment Committee, appointed by Executive Committee has power to consider and approve the investments including determine the rate of return and appropriate level of risk. The investment are focused on equity securities or equity-linked securities, whether on- or off- exchange having the investment periods of 1-5 years. The Company will invest in the securities of businesses, which are considered as undervalued stocks. Such businesses must have the experienced executives and good business model. Furthermore, such businesses must have good prospect and potential to create return on invested capital. In addition, the businesses must also have sustainable competitive advantage. Overview of the Business of the Subsidiary The Company’s subsidiary, Phatra Securities, is licensed by the Ministry of Finance to conduct 8 types of securities business, i.e. securities brokerage, securities dealing, securities underwriting, investment advisory service, securities borrowing and lending, mutual fund management, private fund management and venture capital management. To date, Phatra Securities has not commenced the last 3 businesses. In addition, Phatra Securities is licensed by the Office of the SEC to conduct 4 types of derivatives businesses, i.e. derivatives agency, derivatives dealing, derivatives advisor and derivatives fund management, although Phatra Securities has not yet commenced the last 2 businesses. Phatra Securities became a member of the TFEX in 2005. In addition to the above, Phatra Securities is registered as a Type A advisor, providing financial advisory services to the Ministry of Finance, and it has obtained approval from the Office of the SEC to act as a financial advisor and unit selling and redemption agent. As of 31 December 2011, Phatra Securities operates the following 4 main businesses: 1.

Securities Brokerage

Phatra Securities provides securities brokerage services in connection with both on- and off- stock exchange and on the MAI. Phatra Securities is member No. 6 of the SET. The main customers of Phatra Securities are: 1.1

Institutional Customers in the Equity & Derivatives Markets Group

Institutional customers of Phatra Securities are financial institutions and foreign funds, domestic financial institutions including commercial banks, insurance companies and fund management companies. The Equity & Derivatives Markets Group will have discussions with customers to identify their investment needs, present research products, marketing information and other advice, and send orders to the marketing officer of

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Phatra Securities to execute the trades on the SET. In addition, the Equity & Derivatives Markets Group also provides securities borrowing and lending services for customers of Phatra Securities. 1.2

High Net Worth Individuals in the Private Client Group

The Private Client Group takes care of high net worth individuals and provides investment advice in connection with equity instruments, debt instruments, derivatives and fund units. Also, the Group provides securities brokerage/derivatives agency services upon customers’ orders. In addition, the Private Client Group provides securities brokerage services via internet trading under PhatraDirect to support the expansion of the highnet-worth-individuals customer base. 2.

Investment Banking

Phatra Securities conducts an investment banking business, providing financial advisory services and securities underwriting services. The Investment Banking & Equity Capital Markets Group is responsible for these services. Phatra Securities provides financial advisory services on various issues, i.e. funding a business and listing the shares of a business on the SET, mergers and acquisitions, searching for business partners, corporate restructuring and financial instruments. 3.

Investment Services

Phatra Securities provides investment services via securities dealing division, which have 2 groups to operate the investment business: the Equity & Derivatives Trading Department) and the Hedge Fund Department. 3.1

Equity & Derivatives Trading Department

The Equity & Derivatives Trading Department will invest in equity or equity-linked securities on the SET and TFEX, by focusing the making of profits from margin between securities’ value on the SET and TFEX (Arbitrage Business), whereby the investment periods will be short periods not exceeding 1 year, in order to receive returns at the rate set by the Investment Committee. Furthermore, the Equity & Derivatives Trading Department is also responsible for issuance of financial products e.g. derivatives debentures and derivatives warrants to offer to investors. 3.2

Hedge Fund Department

Hedge Fund Department focuses on investments in equity securities on the SET, which will be investments having risk management tailored to the specific investment strategy. The investments will combine both basic and technical signals in order to make profits from the margin from two or more securities (Pair Trading). 4.

Derivatives Agency Business

Phatra Securities has obtained a license to operate a derivatives agency business from the Office of the SEC and is a derivatives member and SET50 Index Option agent member of the TFEX and the Thailand Clearing House Co., Ltd. In addition, the Company has working groups that support the work of the Company, including a research group, compliance and internal audit unit, risk management group and IT team. 32

As of 31 December 2011, the Company has registered capital of THB 1,067,510,000.00, of which THB 1,051,551,200.0 is paid up, divided into 210,310,240 shares at THB 5 per share. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Note

The list of top ten shareholders as of 9 September 2011 is as follows: List of Shareholders Number of Shares (Shares) Credit Suisse, Hong Kong Branch 78,399,997 Ramkhamhaeng Hospital Public Company Limited 20,818,000 Thai NVDR Co., Ltd. 10,644,400 Nortrust Nominees LTD. 6,892,300 Mr.Suvit Mapaisansin 5,505,645 Somers (U.K.) Limited 4,579,800 Aberdeen Long Term Equity Fund 4,030,100 Ms. Rirkkajee Karnchanapitak 3,637,200 BNP Paribas Securities Services Singapore Branch 3,509,100 Aberdeen Growth Fund 3,294,900 (1)

Shareholding Ratio (Percentage)(1) 37.28 9.90 5.06 3.28 2.62 2.18 1.92 1.73 1.67 1.57

Calculated based on the 210,310,240 ordinary shares issued and sold

Credit Suisse, Hong Kong Branch holds shares on behalf RPIC Pte. Ltd., which as of 30 December 2011 has the following persons as beneficial shareholders: Shareholding Ratio Name Shares (Percentage) Mr. Banyong Pongpanich 1,840 10.14 Mr. Suvit Mapaisansin 1,700 9.37 Mr. Supavud Saicheua 1,400 7.71 Mrs. Patchanee Limapichat 1,000 5.51 Mr. Aphinant Klewpatinond 1,000 5.51 Mr. Veravat Chutichetpong 850 4.68 Mr. Norachet Sangruji 800 4.41 Mrs. Patraporn Milindasuta 800 4.41 Mr. Krittiya Veeraburus 600 3.31 Mr. Trairak Tengtrirat 600 3.31 Mr. Therapong Vachirapong 600 3.31 Others 6,960 38.35 Total 18,150 100.00

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Board of Directors At present, the Company’s Board of Directors consists of the following 12 persons: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Name-Surname Mr. Banyong Pongpanich Mr. Suvit Mapaisansin Mr. Veravat Chutichetpong Mr. Supavud Saicheua Mrs. Patchanee Limapichat Mr. Norachet Sangruji Mr. Anya Khanthavit Mr. Aphinant Klewpatinond Mr. Anumongkol Sirivedhin Mr. Varakorn Samakoses Mrs. Uthai Tanlamai Mr. Pongtep Polanun

Position Chairman Director Director Director Director Director Director Director Independent Director Independent Director Independent Director Independent Director

Executive Committee At present, the following persons are members of the Company’s Executive Committee: Name Position 1. Mr. Banyong Pongpanich Chairman of the Executive Committee 2. Mr. Suvit Mapaisansin Member of the Executive Committee 3. Mr. Veravat Chutichetpong Member of the Executive Committee 4. Mr. Aphinant Klewpatinond Member of the Executive Committee and Chief Executive Offer 5. Mr. Supavud Saicheua Member of the Executive Committee 6. Mrs. Patchanee Limapichat Member of the Executive Committee 7. Mr. Norachet Sangruji Member of the Executive Committee 8. Mr. Anumongkol Sirivedhin Independent Director / Chairman of the Audit Committee 9. Mr. Varakorn Samakoses Independent Director / Member of the Audit Committee 10. Mrs. Uthai Tanlamai Independent Director / Member of the Audit Committee 11. Mr. Pongtep Polanun Independent Director / Member of the Audit Committee 12. Mr. Anya Khanthavit Director 13. Mrs. Patraporn Milindasuta Managing Director and Chief Administrative Officer 14. Mr. Trairak Tengtrirat Managing Director 15. Mr. Krittiya Veeraburus Managing Director 16. Mr. Therapong Vachirapong Managing Director

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