Stock DividendsBenefits for the company

Issue for consideration

A stock dividend is a dividendpayment in the form of newly-issued shares. It is anotheralternative for companies inpaying returns to shareholders,rather than the cash dividendsgenerally paid. The number ofshares paid as dividends is inproportion to each investor’sshareholding. Subsequently,a listed company has to registera capital increase.

Payment of stock dividendswill not impact shareholders'equity in the financial statements.However, retained earningswill decrease, while the numberof ordinary shares and/or sharepremium will increase by anequivalent amount.

Public Companies Limited ActB.E.2535 Section 115 and 117

Stoc

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Being able to keep cash for investment andbusiness expansion without the need to seekadditional capital from external sources whichmight have costs of financing. If the companypays cash dividends, its cash liquidity willdecrease.

Maintaining financial liquidity

Maintaining a debt to equity ratio

Maintaining the firm’s attractiveness as aninvestment despite having no cash dividend

Adding free float shares, boosting stockliquidity and consequently benefiting futurefund-raising

Maintaining returns on investment to shareholders

Impact on the company’s share price, which may falldue to the higher number of shares

Stock Dividends

Relevant notification

joins withThanachart Securities Pcl.,

“The company has opted to pay stock dividends twice since 2009 asHMPRO aimed to boost the trading liquidity of our stock. If we had chosen to increasecapital, our existing shareholders would have had to seek cash in order to maintain theirownership proportions. Stock dividends will also enable us to maintain our financialliquidity.

Another key factor causing the company to pay stock dividends is that the companyhas been able to maintain consistent a profit growth rate. Thus, the dilution effect froma stock dividend has been minimal, which means higher returns for shareholders”

“The company paid dividends with both cash and stock dividends, whichwill boost the company’s cash flows and keep shareholders happy. But the drawbackis that the value of stock dividends must be included in withholding tax payments.Thus, amount of cash dividends must be paid at least enough to cover the withholdingtax.

Mr. Khunawut Thumpomkul,Managing Director of Home Product Center Plc.(HMPRO)

Stock Dividends

GOH KOK CHENG (Dickson),CEO/President of BGT Corporation Plc(BGT)

10% withholding tax

10% withholding tax

Listed Company Development Department, The Stock Exchange of Thailand62 The Stock Exchange of Thailand Building, Ratchadapisek road, Klongtoey, Bangkok 10110

Company

Shareholders

2. Taxation for foreign investors doing business outside of Thailand

Income from directinvestment in commonstocks via the Exchange

Tax rate

Dividends :

Individual Investor

Juristic investor

Stock Dividends Stock Dividends

Taxation of dividend payments

1. Taxation of Thai and foreign investors doing business in Thailand

Income from direct investment in thecommon stocks viathe Exchange

Tax rate

Dividends :

Individual Investor

Juristic investor

Summary of procedures in paying stock dividends

TIPS

10% withholding tax on dividends paid by listed or limited companies

Investor is given option of (a) paying the 10% withholding tax or (b) reportingthe dividends for year-end tax payment

Taxes are waived for dividends paid by companies granted tax privileges fromthe Board of Investment.

There is a 10% withholding tax if the taxpayer is not listed company

If a juristic shareholder: (a) holds at least 25% of outstanding shares of thedividend-paying firm, and (b) the shares have been held for at least 3 monthsbefore and after the dividend payment and (c) the company paying dividendsdoes not hold any shares of the juristic shareholder receiving those dividendstaxes are waived

If a Thai company or a mutual fund is the shareholder in question, taxes are waivedif the shares are held at least 3 months before and after the dividend payment date.

Taxes are waived for dividends paid by firms granted tax privileges from theBoard of Investment, except such firm is Thai NVDR company Ltd.

The company should consider paying stock dividends together with cash dividends to cover the cost ofwithholding taxes which the company needs to deduct from total value of dividend paid. Transferringretained earnings at par value will be subject to lower withholding tax costs than a transfer based on themarket price.

Section 115 of the Public Companies Limited Act (B.E. 2535) stipulates that dividend payment mustbe made within one month from the date that the shareholders or directors, as the case may be passedsuch a resolution.

If the company intends to schedule the record date for the right to attend the shareholders’ meetingand approve dividend payment to be on the same day as the record date to receive dividends, it shouldbe aware of the risk that the shareholders’ meeting may vote against these agenda items.The shareholders and investors will be impacted from the change of rights. To avoid such a risk,the company should schedule the two record dates to be at least five business days apart.

Paying an interim dividend can be made only when such a payment is already prescribed in thecompany’s articles of association.

- The board of directors can approve the interim cash dividend payment without approval from a shareholders’ meeting, but the board must notify shareholders in the next shareholders’ meeting.

- The board of directors must seek approval from a shareholders’ meeting for a capital increase to support an interim stock dividend payment.

The Board of Directors resolves to pay stock dividends,increase capital and schedule a meeting of shareholders

Within 2 months

> 14 days

< 14 days > 5 business days

Listed Company Development Department The Stock Exchange of Thailand

Determine the list of shareholders’ names as of the book-closingdate who have the right to attend the upcoming shareholders’meeting (XM) and receive dividend payment (XD) (in case

the XM and XD are scheduled for the same date)

Hold shareholders’ meeting: Resolution to approve capitalincrease requires approval by > 3/4 of attending shareholders

who have voting rights and resolution to approve dividend payment

Provide list of shareholder names as of therecord date who have the right to receivedividends (XD) (in case XD is not on the

same date as XM)

Register the capital increasewith the Ministry of Commerce

- Register the paid-up capital with the Ministry of Commerce

- Report the results of capital increase share allotment and submit to the SET for listing the increased shares

TIPS